A final victory for the plaintiffs
Aristocrat Leisure Ltd and Churchill Downs Incorporated (CDI) have finalized a $155m settlement for two class-action lawsuits related to the online social gaming company Big Fish Games Incorporated. Both cases saw plaintiffs claiming that they lost money using ‘free’ virtual casino chips on Big Fish games.
Aristocrat paid $31m of the settlement, while CDI agreed to fork out $124m
In a statement released Tuesday morning, Aristocrat announced that a Washington judge had provided final approval for the settlement. The Australian-based company acquired Big Fish from US gaming operator Churchill Downs in 2018 for $990m. Because of the historical nature of the lawsuits, Aristocrat paid $31m of the settlement, while CDI agreed to fork out $124m.
The two companies created the $155m pool last year after reaching an agreement to settle with the plaintiffs in May. Now that a US federal court has approved the settlement, gamblers who lost money playing on Big Fish games can reclaim their cash. The games were played on the online social gaming platforms Big Fish Casino, Epic Diamond Slots, and Jackpot Magic Slots, all offered by Big Fish.
History of the Big Fish case
Although Aristocrat only announced settlement approval on Tuesday, the case itself dates back more than five years. It began with Cheryl Kater, a Big Fish customer who allegedly had lost $1,000 playing on the games. The 2015 lawsuit claimed that the free chips offered on Big Fish had monetary value because the site required a deposit when the chips ran out.
case itself dates back more than five years
A district court judge dismissed Kater’s lawsuit just one year later. However, the case gained momentum again after the plaintiff appealed the ruling. In 2018, the US Court of Appeals for the Ninth Circuit ruled that the Big Fish online casino games constituted illegal gambling in Washington State. It classified the virtual chips as “something of value” – constituting a gambling stake under state law.
Following this ruling, another Big Fish customer, Manasa Thimmegowda, filed her own class-action suit in February 2019. She claimed she had lost $3,000 purchasing the virtual chips, which cost around $1 to $250 for a bundle.
Bad timing for struggling companies
The $155m approval of last year’s settlement agreement has come at a difficult time for both Aristocrat and CDI, who struggled last year partially as a result of the COVID-19 pandemic.
For the full fiscal year ending September 2020, Aristocrat saw profit after tax and before amortisation decline by 47% year-on-year, to a total of AU$476.6m (US$373.3m). Total revenue fell 6% to AU$4.14bn (US$3.24bn) for the same period. Despite this, the company said it was able to maintain strong momentum, with its digital segment generating 57% of total revenue.
As a mainly land-based gambling operator, Churchill Downs felt the impact of lockdowns and restrictions. CDI’s net loss increased to $81.9m for 2020, a dramatic shift from net income of $137.5m in the prior year. However, CDI said the Big Fish Games settlement worsened this, constituting a payment of $95m after-tax. Full-year net revenue totaled $160.5m, a substantial decline of 45% year-on-year.