Zula and Sportzino, two operators of popular social casinos, have lodged a summons and complaint against two law firms in the New York Supreme Court. We reported on this story previously, but the lawsuit has now been officially filed in New York after being dismissed by a DC court for lack of jurisdiction.
Through advertisements on social media, Kind Law and Ben Travis Law solicited hundreds of individuals to file claims against Zula and Sportzino. Those claims, made before the American Arbitration Association, argued that the casinos were illegal operations.
However, many of the supposed customers were not even registered users, or were using the platform as social players, rather than making purchases. On top of this, of the individuals who were registered users, many had signed up to terms and conditions that required arbitration to be handled by Canada’s ADR Chambers, not by the AAA.
How Did the Law Firms Plan to Profit?
By filing hundreds of claims, Kind Law & Ben Travis Law planned to force Zula and Sportzino to rack up potentially massive arbitration fees. Companies facing hundreds of arbitration claims often settle quickly (strike-suit settlement) because the cost of fighting each case could be more expensive than paying a lump sum.
If Kind Law & Ben Travis Law secured settlements, they could then have taken a cut of each payout.
Some Customers Didn’t Authorize Law Firms
According to Zula and Sportzino’s recent complaint, filed on February 25th, the casinos argue that many customers didn’t even authorize Kind Law and Ben Travis Law to file on their behalf.
Of those who were registered users, when Zula and Sportzino suspended their accounts, some customers claimed to have no knowledge of the claim, or that they had been misled. Zula and Sportzino therefore argue that many of the cases were simply “sham arbitrations”, highlighting a reckless and unethical approach.
In terms of numbers, Zula and Sportzino were bombarded in August 2024 with 667 and 299 arbitration demands respectively. However, from the casinos’ own investigations, it was found that 186 claimants were not even registered, and 464 had accepted terms stating disputes would be handled by ADR Chambers, not the AAA. Kind Law and Ben Travis Law then voluntarily dismissed 209 claimants, admitting they had received no proper authorization.
The two casinos claim the law firms failed to perform their due diligence, making their cases unreliable.
Mass Arbitration as a Tactic
Mass arbitration is becoming a more frequent tactic in legal disputes. Lawyers have used this method successfully against companies like DoorDash and Amazon, but some exploit the system for profit. If claims are legitimate, mass arbitration is legal, but if the law firms are filing fake or unauthorized claims, it’s illegal.
For now, Kind Law and Ben Travis Law have a limited time to respond to the lawsuit.
The whole case takes place against the backdrop of other sweepstakes and social casinos being challenged by past customers who claim sweepstakes operations are illegal. VGW, operator of Chumba Casino, is engaged in multiple such cases. However, no precedent against sweepstakes sites has been set, and many cases are dismissed or settled without a firm ruling.
We’ll keep you updated with any developments.
Author: Mike F.
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