Scientific Games said Wednesday it will pay $151.5 million to settle a federal lawsuit with four companies after a jury in Chicago ruled in August the gaming equipment supplier initiated sham litigation to keep a rival automatic card shuffler out of the market.
The settlement, announced after the stock markets closed, negates a jury verdict, which awarded the four companies $105 million. A federal judge tripled the award, and, with attorney’s fees and costs, Scientific Games owed $335 million.
“While we firmly believe that the jury decision was wrong, we are pleased with the outcome of the settlement and that this matter will be resolved for good,” Scientific Games Chief Legal Officer James Sottile said in a statement. The settlement was 45 percent of the original judgement.
Deutsche Bank gaming analyst Carlo Santarelli told investors the settlement represents roughly 32 percent of the company’s net cash from operating activities. He said the company reserved $335 million related to the jury award.
“While Scientific Games noted in the press release (that) they disagreed with the initial jury award, we understand the litigation and appeals processes could have continued into late 2020,” Santarelli said. “Thus (the company) preferred to settle so that management could focus on operating the business going forward.”
Chicago-based Shuffle Tech filed an antitrust lawsuit against Scientific Games in 2014, which came out a 2012 patent-infringement lawsuit filed in Nevada by SHFL Entertainment – which is now part of Scientific Games – against DigiDeal Corp., Aces Up Gaming Inc. and Poydras-Talrick Holdings LLC, all of whom Shuffle Tech worked with in 2012 to launch its first automatic card-shuffler.
The jury verdict awarded $45 million to Shuffle Tech, $25 million to Poydras, $15 million to Aces Up and $20 million to DigiDeal, which assigned its rights in the suit to Shuffle Tech.
The judge tripled those awards.
It is unclear how much each company will receive from the settlement.
In a statement, Scientific Games said the settlement is conditioned on the trial court entering an order vacating the judgment entered on the jury’s verdict. The company anticipates that the trial court will enter such an order.
Upon satisfaction of the condition described above, the settlement ends all litigation related to this matter and all pending motions and filings will be dropped.
While the settlement resolves the disputed claims, Scientific Games has not admitted any liability.
According to testimony during the trial, Shuffle Tech collaborated with gambling equipment manufacturer DigiDeal on a card-shuffling machine the company would market to casino operators. DigiDeal would manufacture the products and pay Shuffle Tech a royalty to use its technology and patents, according to the deal described in the company’s complaint.
The companies debuted the device at the Global Gaming Expo in Las Vegas. However, SHFL Entertainment filed a patent infringement suit against DigiDeal. Shuffle Tech said the company knew the patents were unenforceable.
SHFL Entertainment was acquired by Bally Technologies in 2013 for $1.3 billion. A year later, Scientific Games acquired Bally for $5.1 billion.
Shuffle Tech had planned to make and sell 800 shufflers during their first year on the market and 1,200 every year after, with a nearly $7,500 profit on each shuffler, the company’s attorney claimed during the trial.
Shuffle Tech CEO Rick Schultz did not return a phone call seeking comment.
In an interview with CDC Gaming Reports in August, Schultz said legal fees consumed the company’s investment money it planned to use to develop the games. DigiDeal agreed to stop making and selling the card shuffler.
Shares of Scientific Games closed at $15.76 on the Nasdaq Thursday, down $1.32 or 7.73 percent. The shares were up briefly in after-hours trading after news of the settlement was announced, but fell back to their Thursday closing price.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter
