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A new lawsuit has generated additional questions about the future of e-games, which already are under tremendous pressure.

GLEN STUBBE • gstubbe@startribune.com,

Marv Reynolds played an e-pulltab game at CR’s Sports Bar in Coon Rapids. He won, then lost $2. The e-games have been questioned as a reliable source of revenue.

GLEN STUBBE • gstubbe@startribune.com,

Electronic pulltabs gross sales in Dec.:

$1,922,810

Top vendors:

Express Games: $1,548,353

3 Diamond: $122,933

M Peters: $94,718

All charitable gambling in Minnesota:

$98,000,000 monthly average

Jan. to Aug. 2013

Source: MN Gambling Control Board

Feb. 6: Court battle threatens to disrupt e-gambling

  • Article by: Jean Hopfensperger
  • Star Tribune
  • February 10, 2014 - 9:23 AM

Minnesota’s ill-fated experiment with electronic pulltab games has hit another roadblock, this time a fight between two key players that is threatening to disrupt e-gambling across the state.

The state’s largest distributor of electronic pulltab games — games initially destined to fund the Minnesota Vikings stadium — has won a temporary restraining order against the games’ manufacturer, Acres 4.0.

Acres threatened to disconnect its computer servers at bars and restaurants across the state if the distributor, Express Games MN, didn’t make its overdue payments.

Express Games had withheld payments and sued Acres 4.0 in December, claiming that the Nevada manufacturer had refused to get appropriate licenses for its Apple products. That eroded Express’ ability to bring on new devices and new customers, the lawsuit claims.

The clash marks a major falling out between two parties that had been instrumental in Minnesota’s rollout of the e-games. John Acres, CEO of Acres 4.0, and Jon Weaver, CEO of Express Games MN, had stood side by side at the State Capitol during the legislative hearings on the Vikings stadium and during the first day’s rollout of the games in 2012. Their companies were consulted by the Minnesota Gambling Control Board as it devised its predictions for how much money charitable gambling would contribute to the state’s share of the $1 billion Vikings stadium.

Since those happier days, state officials were forced to find a new stadium funding source. Projections for e-pulltab sales were slashed from $35 million a year to less than $2 million.

‘What else?’

The lawsuit in U.S. District Court in Minneapolis, is the latest disappointment for dozens of charities that have signed contracts for the electronic games — from youth hockey groups to VFW and Lions clubs.

“People will just go, ‘Oh man! What else can go wrong?’ ” said Al Lund, executive director of Allies Charities of Minnesota.

Tom Barrett, executive director of the Minnesota Gambling Control Board, said the board is concerned about the conflict.

Express Games Minnesota is the first and largest provider of e-games in the state. Of the $1.9 million in e-pulltab sales in December, $1.5 million were from Express Games.

“It’s a dispute their lawyers need to work out with Apple,” said Barrett.

That said, the “integrity and operations” of the electronic games were not compromised, Barrett said.

“The servers weren’t shut down: It’s business as usual,” Barrett said. “Let’s let these two vendors work out their differences.”

John Acres said the charges are “without merit.”

“We sincerely believe the claims against Acres 4.0 are without merit and we will vigorously assert our position in the appropriate court of law,” said Acres.

The fight begins

Underlying the lawsuit is a loss of exclusive distributorship that Express Games MN has held for Acres’ e-pulltabs — the lightweight iPad games with colorful graphics that rolled out in September 2012.

Express Games MN filed a lawsuit Dec. 13, laying out what it considered a violation of its agreement with Acres 4.0. It states that Acres had agreed to an exclusive contract with Express Games in Minnesota, that it agreed to introduce new game titles based on input from Weaver, that it would absorb all costs related to software, server maintenance, etc.

Express Games said it received a “communication from Apple” in May, “advising that the [system] being sold by Acres did not have a proper or approved software license for its intended use.”

The lawsuit said that Acres refused to obtain the proper software. As a result, Express Games cannot distribute the games without fear of getting sued by Apple. In addition, Acres 4.0 has not provided new game titles since early 2013, the lawsuit said.

This has hurt Express Games’ ability to meet performance criteria in its exclusive sales agreement with Acres, said the lawsuit, which seeks monetary compensation “in excess of $50,000” on two counts and a continuation of the exclusivity agreement for “an additional reasonable period.”

Sales far short: Acres

Lawyers for Acres 4.0, meanwhile, state the company does have the appropriate software license with Apple and is meeting its obligations to Express Games. They said it is Express Games MN that is violating its agreement for exclusive distributorship in Minnesota.

Express Games “will be responsible for providing Acres with $925,000 in revenue for year 1,” according to a contract included in court documents. Actual revenue was $258,435, documents said.

Court documents include a Jan. 7 letter from Roy Corby, COO of Acres 4.0, to John Weaver, giving him until Jan. 16 to pay the November and December invoices.

If not, “Acres 4.0 will suspend operations of its server in Minnesota, which will make the iPad devices you have distributed unplayable.”

On Jan. 22, U.S. District Judge Michael Davis issued a temporary restraining order, enjoining Acres 4.0 from “shutting down, threatening to shut down, rendering inoperable … or otherwise interfering with the operation of any and all servers” used to provide service to Express Games.

He also ordered Express Games to put the money it owed Acres 4.0 for the months of October and November in a court escrow account, and other provisions. A March 11 hearing was set.

Most charities offering the e-pulltabs to customers aren’t aware of the details of the lawsuit, or its potential impact.

“I heard there was something going on with Express Games, but I wasn’t sure what, “ said Jerry Johnson, owner of CR’s Sports Bar in Coon Rapids, which offers the e-games. “Sounds like we’ve got another can of worms.”

That concerns charity leaders such as Lund, who notes: “We don’t need any more negativity surrounding electronics [games].”

 

Jean Hopfensperger • 612-673-4511

© 2014 Star Tribune