Representing Clients with Gambling Debts to Casinos

As a young associate at McManis Faulkner & Morgan, Eric Sidebotham was put in charge of a $4-$6 million gaming dispute between a Silicon Valley executive and a New Jersey casino. The four-year bicoastal battle on behalf of client Omar Siddiqui ' a former Fry's Electronics employee whose massive money problems were covered last winter in the Los Angeles Times, resulted in a confidential settlement.

“My sense ' because no one else wanted to deal with it ' was that it had a taint to it, nobody wanted to work on a gambling case,” says Sidebotham, who recalls other associates jockeying much more aggressively for positions on the firm's civil rights and IP matters.

The case was Sidebotham's introduction to the colorful and complex world of litigation between high rollers like his client ' who reportedly lost $8 million in a day at one point ' and the casinos that court them.

Little did he know then that the negotiation skills and casino-related expert witness contacts he picked up at McManis Faulkner would help keep his own two-lawyer firm afloat through one of the deepest recessions in recent memory. Sidebotham left McManis in 2004 to open EJS-Law, a San Jose-based firm focusing on business disputes, IP litigation and gaming. In 2009, five casino and gaming matters made up more than 80% of EJS-Law's revenue, compared to less than half when he launched the firm. (Sidebotham, who charges up to $350 per hour, declined to share revenue figures.)

It's not the simplest practice area to build up, though. The need for discretion makes marketing to clients a challenge: “We have to be ubiquitous and anonymous at the same time,” Sidebotham notes ' and out-of-town counsel aren't always well received in gambling towns.

Sidebotham has focused the gaming piece of his practice on gamblers, which he says distinguishes his outfit from other firms in the field that tend to play both sides. His work can come before litigation is filed, in behind-the-scenes negotiations with casinos, which frequently issue gambling credit to high rollers. He can try to contest, minimize or eliminate a client's debt, or to head off threats of criminal prosecution or the possibility of negative publicity.

None of his gaming cases so far has reached trial ' like regular civil cases, most settle quietly. “We litigate the case in a way to obtain leverage so the client can negotiate a settlement that's favorable to them,” he says. “What we have a great deal of influence on is 'when' and 'how much.'”

David Chesnoff, a Las Vegas attorney who's represented both casinos and gamblers, notes that Sidebotham has been involved in some of “the more celebrated cases” in recent years. “He always associates with criminal lawyers for the criminal parts of these things, and he's a very accomplished civil practitioner,” Chesnoff says. “He has a complete understanding of how the civil side of collection ' or noncollection ' works.”

At EJS-Law, most new matters come in from experts and consultants in the casino field, such as I. Nelson Rose, a gaming law professor at Whittier Law School in Los Angeles. Sidebotham says Rose hooked him up with Terrance Watanabe, a businessman who lost nearly $127 million in Las Vegas in 2007, according to a story the Wall Street Journal ran recently. In a civil lawsuit filed in Clark County District Court in November, the Journal reported, Watanabe alleges the casinos bear some responsibility for the unpaid portion of his debt, saying casino staff regularly supplied him with alcohol and pain medication to keep him gambling. Sidebotham is not counsel of record, but says he's part of a behind-the-scenes team of criminal and civil lawyers advising Watanabe on legal strategies.

EJS-Law's second most frequent source of new gaming work comes from business lawyers who have no experience with casino disputes, but who have clients with gambling debt. Sidebotham hopes to begin tapping into referrals from casino counsel. “It's a pretty narrow group,” he says.

The fact that casino patrons prefer to keep their habit out of the public eye makes marketing a gaming practice directly to clients tricky. “What's been really hard to do is try and sell our credibility, that we're the guys who know what's going on, while at the same time getting across the message that we are discreet,” he says.

Being a California-based lawyer dealing with judges and opposing counsel in out-of-state jurisdictions has put Sidebotham in an outsider position that he says he's still wrestling with. He encounters this especially in Las Vegas, Atlantic City and Connecticut. One effective strategy has been to connect with lawyers on the ground, someone who's not going to get that “out-of-towner” look when they step into a courtroom.

Often, EJS-Law's participation is stealth, the firm working behind the scenes, devising strategy and writing arguments, without appearing as counsel of record. “We'd be in court, but sitting next to the client in the peanut gallery,” he says. “Our names wouldn't be on briefs.” But having to stay out of the spotlight is no fun. “As a lawyer, I always want to be in front of the judge, and it's hard to give that up.”