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Churchill Downs Gaming Suit Heads to N.J. Federal Court

A suit by Churchill Downs racetrack alleging that it was shut out of New Jersey’s online gambling market after signing a deal to partner with the Showboat casino hotel (l.) in Atlantic City that failed to materialize has been moved to a New Jersey federal court by a Kentucky federal judge.

Churchill Down’s suit against a New Jersey company that failed to provide the racetrack’s operators with a partner to begin online gambling in New Jersey has been moved to federal court in that state by a Kentucky federal judge.

The Kentucky court ruled it lacked jurisdiction over the dispute.

Churchill Downs signed an agreement it thought would result in an online partnership with the Showboat Atlantic City Hotel and Casino. The deal was with a company headed by former Trump casino executive Nicholas Ribis that planned to buy the casino.

Online gaming sites in New Jersey must be partnered with an existing Atlantic City casino. The deal to buy the casino never went through, however, and thus neither did the online gambling partnership.

U.S. District Judge John Heyburn II, who sits in Louisville, Kentucky, said the case must be tried in New Jersey.

“After reviewing this matter quite carefully, the question of this court’s personal jurisdiction over defendants does not appear to be a close call,” Heyburn said. “Because New Jersey is the district in which defendants reside, both venue and the exercise of personal jurisdiction over defendants are proper.”

Ribis, the principal of NLR Entertainment LLC, was planning to buy Showboat from Caesars Entertainment and reached out to Churchill Downs for a possible partnership.  In August Churchill Downs made a $2.5 million good-faith payment, according to court documents.

The next month, they entered a licensing and operating agreement, which required the purchase to be finalized by January. Churchill Downs then hired 30 employees and licensed $10 million in software to launch the site.

When the casino purchase fell through, Churchill Downs filed suit alleging breach of contract and fraud, and claiming NLR refused to pay back the $2.5 million. The suit was filed in Kentucky state court and removed to the Western District of Kentucky.

NLR moved to dismiss the suit or move the case to New Jersey, but Churchill Downs moved the keep the case in Kentucky.