By Todd Shriber
Churchill Downs and Aristocrat Leisure reached, in principle, an agreement to settle a pair of lawsuits stemming from the racetrack operator’s sale of Big Fish Games to the gaming machine producer in 2018.
The companies are close to settling the Kater v. Churchill Downs, Inc., and Thimmegowda v. Big Fish Games, Inc., but the accords must be approved by the U.S. Federal District Court for the Western District of Washington.
Aristocrat has agreed to specifically release CDI of any and all indemnification obligations under the Stock Purchase Agreement dated November 29, 2017, between CDI, Aristocrat, and Big Fish Games, Inc. arising from or related to the Kater and Thimmegowda Litigations, including any claims of diminution of value of Big Fish Games, Inc. and any claims by any person who opts out of the proposed class settlement,” according to a statement.
Under the terms of the agreement, Churchill Downs will pay $124 million to end the litigation while Australia-based Aristocrat will dole out $31 million.
Big Fish Backstory
At the time of Churchill’s 2014 acquisition of Big Fish, then valued at as much as $885 million, Big Fish Games was one of the largest producers of online and mobile games while Big Fish Casino was a leader in social gaming and internet casinos.
In January 2018, Kentucky-based Churchill Down closed on the $990 million sale of Big Fish to Aristocrat. Some of those proceeds were used by the racetrack operator to repurchase its own stock.
Over the past couple of years, Big Fish and other social gaming companies faced mounting suits from customers that claimed they were duped into spending large amounts of money on the apps or web sites in what amounted to – in the plaintiffs’ views – illegal gambling.
In 2018, Judge Milan D. Smith of the Ninth Circuit US Court of Appeals ruled that the virtual chips used in Big Fish games had value. In his opinion, Smith mocked Churchill’s claims that it was surprised about the element of illegal gambling.
The Kater v. Churchill Downs, Inc. suit was filed in Cheryl Kater in 2015. She claimed that Big Fish’s offerings violated at least two Washington State laws – the Recovery of Money Lost at Gambling Act (RMLGA) and the Washington Consumer Protection Act.
Manasa Thimmegowda’s suit against Big Fish is more than a year old. Both Kater and Thimmegowda and another presumed litigant – Suzie Kelly – are specifically named in the online gaming company’s terms of service. Thimmegowda claims to have lost $3,000 playing Big Fish games on her iPhone starting in 2017.
“By operating Big Fish Casino and other similar online gambling games, defendants have violated Washington law and illegally profited from tens of thousands of customers,” according to her suit. “Accordingly, [the] plaintiff, on behalf of herself and a class of similarly situated individuals, brings this lawsuit to recover her losses and to obtain the appropriate relief.”