Borgata, Ocean Casino “Executive Poaching” Lawsuit Heats Up

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What began as a relatively straightforward lawsuit over whether Ocean Casino illegally hired away a half-dozen executives from rival Atlantic City casino Borgata has grown more complicated.

For example, on Monday, Ocean’s attorneys asked a federal judge in Nevada to ignore a reprise of a request by their Borgata counterparts to have sanctions — including disqualification from the case — imposed on Ocean due to alleged improper communications with a Borgata executive.

And for the past week, a series of filings have shown that the two sides have been unable to work out a schedule to allow each side to perform “discovery” of possible pertinent evidence.

The lawsuit, filed by Borgata on Aug. 27, specifically names William Callahan and Kelly Ashman Burke among former high-ranking Borgata employees who were hired away by Ocean earlier this year.

Last week, a judge ruled that Burke must temporarily postpone any work with Ocean and that she must destroy any Borgata-related marketing materials in her possession. Callahan, meanwhile, has to turn over a personal cell phone to see if it had any Borgata trade secrets on it.

The warring casinos react

A Borgata spokeswoman told The Associated Press: “We appreciate that the court took into consideration the hundreds of employees at Borgata, and the economic damage that could have been done had these individuals been permitted to misappropriate customer information and other trade secrets in violation of their employment agreements and while working for a competing casino.”

An Ocean official responded that it was pleased that Callahan can continue with his work, and that Burke might be shifted to a non-marketing role.

U.S. District Court Judge Gloria Navarro set limits on the personal cell phone review, writing, “The Court will not turn over Callahan’s cellphone for [Borgata] to engage in a fishing expedition.”

Instead, she ordered the two sides to choose a “third-party forensic expert” who will determine if any such trade secrets exist on that phone. Also, Borgata attorneys must inform the expert of the names of big-spending clients — known as “whales” in the gambling community — that the expert should seek during his review.

The late-night call

Ocean attorneys this week responded to renewed allegations made by Borgata last night about an “insidious” phone call made by an Ocean lawyer to Borgata executive Jason Lyons, who replaced Callahan in a key marketing role, the night before a court hearing in mid-September.

As Borgata describes it, an Ocean attorney made a 10 p.m. phone call to Lyons and coaxed him into making an immediate statement — that he recalled a meeting in which Callahan’s superiors told him that he could keep a Borgata cell phone upon leaving the company.

“So [Lyons] gave a late night statement, which after sleep and further consideration, he now believes is incomplete and requires correction,” Borgata’s counsel told the court.

“The prohibition against ex parte contact with a represented party is hornbook law. First year law students learn it. Third year law students are tested on it before they are allowed to sit for the bar exam.

“Yet Defense Counsel violated that rule, knowingly and intentionally, using the impression of legal authority to improperly obtain a declaration about a material fact at 10:00 p.m. at night. There is no conceivable justification for this misconduct. ”

Case dismissed — with a raised eyebrow

In an eight-page ruling on Sept. 30, U.S. Magistrate Judge Brenda Weksler dismissed the motion by Borgata.

Weksler wrote, “[T]he Court is troubled by defense counsel contacting Mr. Lyons. He is an executive of an opposing party, and a purely factual analysis of the issue suggests this contact was impermissible. However, the Court is required to not just look at the facts, but also to apply Nevada law.”

In this case, Weksler said, it would have to be proven that Lyons was a “managing-speaking-agent” for Borgata, meaning that statements he made could be binding on the casino.

The new effort to seek the same sanctions produced vehement objection by Ocean’s counsel.

“In a bold attempt at not just a second, but a third bite at the apple, Borgata and its counsel have again sought to do exactly what [a previous federal Nevada court ruling]clearly said they should not do.”

That is, the attorneys said, attempting to renew that request for sanctions of Lyons as a “do-over” just because Lyons subsequently hired his own attorney — “as if Borgata and the organization’s attorneys have a right to control, or take issue with, an individual employee’s decision to retain his own attorney.”

“A mere puppet of defense counsel”

“They even go so far,” the Ocean attorneys said, “as to accuse Mr. Lyons’ attorney, Steve Harvey, of unethical conduct, insinuating he is a mere puppet of defense counsel simply because, in zealously representing his own client, he did not acquiesce to Borgata’s unreasonable attempts to invade his own privileged communications with his client or his work product.

“In any event, despite the smoke generated by counsel’s fevered imagination, there simply is no fire to go with it,” Ocean’s attorneys added.

Instead, they laid out what was described as a routine legal referral — with Lyons asking defendant Callahan’s attorney to recommend a suitable lawyer for Lyons.

That attorney then called back and recommended Harvey, who responded that he would have no conflict in representing Lyons.

Despite what Ocean attorney’s called “Borgata counsel’s breathless efforts to craft an appearance of impropriety,” the attorneys are asserted to have not had any contact with Lyons’ attorney since he was hired by Lyons.

Discovering a failure to communicate

Discussions on a timetable for evidentiary discovery — which could take six months — also have devolved.

In a filing on Wednesday, Ocean claimed that Borgata in a recent meeting “already had its plan in mind, did not meet and confer in good faith, and has unreasonably insisted that discovery against Ocean proceed immediately.”

But if there is a “current crisis,” they wrote, it has been caused by Borgata’s own actions.

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John Brennan

John Brennan has covered NJ and NY sports business and gaming since 2002 and was a Pulitzer Prize Finalist in 2008, while reporting for The Bergen County Record.

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