Internet Giants Now Face Civil Suit for Online Gambling Ads

While last week's USD $31.5 million settlement with U.S. Federal authorities over the running of online gambling ads may have absolved Yahoo! and Google from charges at a federal level, the Internet giants now face a class action suit in California courts, which besides liability asks that the companies be restricted from similar actions in the future, according to a statement from the legal partnership Hagens Berman Sobol Shapiro (HBSS).

The class-action lawsuit, filed August 2004 and now set to begin February 11 in a California Superior Court, alleges that Yahoo! and Google, along with a handful of other websites, made hundreds of millions of dollars via advertisements "for illegal online gambling Web sites" appearing on their search engine pages.

Worth noting, is that in the December 19, 2007 settlement reached with federal authorities, Google and Yahoo! did NOT contest nor admit that they received payments from Internet gambling advertisers, according to published reports (click here for related article).

"We believe these companies have been profiting from this illegal practice for more than a decade, and we believe the agreement with the government does not go far enough," said Reed Kathrein, lead attorney in the case and partner at HHBS.

"The settlements are a great victory and a tacit admission by these online advertisers, but there is still more work to do in holding these companies accountable for the harm they have done to Californians, and to keep them and others from continuing these practices," Kathrein added.

"Given the amounts the huge profits we believe they made, we believe these relatively small forfeiture penalties will not deter them or others in the future."

Kathrein says he intends to argue for injunctive and declaratory relief at the February trial, hoping to stop Google and Yahoo! from running the ads on their sites in the future, and forcing the companies to acknowledge that the practice is illegal.

The complaint also calls for disgorgement of profits the companies earned from online advertisers looking to attract gamblers to their Web sites, whose total is expected to exceed hundreds of millions of dollars. The complaint seeks the disgorged profits to benefit education and rehabilitation efforts aimed at gambling addiction. The court previously decided, however, that state laws prohibit the court from aiding gamblers in recovering money, an issue HBSS plans to appeal after the trial.

Under the Federal aiding and abetting statute, procuring participants for illegal activity, such as online gambling, is unlawful.

HBSS has a longstanding reputation for handling class-action suits and complex litigations. Their recent successes include a $300 million settlement in the DRAM memory antitrust litigation; a $340 million recovery on behalf of Enron employees; a $150 million settlement involving charges of illegally inflated charges for the drug Lupron, and served as co-counsel on the Visa/Mastercard litigation which resulted in a $3 billion settlement, the largest anti-trust settlement to date. The firm also served as counsel in an $850 million Washington Public Power Supply settlement and represented Washington and 12 other states against the tobacco industry that resulted in the largest settlement in history.

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