Progressive Gaming International Corp. agreed Tuesday to settle a federal antitrust lawsuit rather than fight a verdict in which it could be liable for more than $39 million.
The Las Vegas-based gaming equipment company, which has transformed itself over the past few years into a casino technology supplier, said it would pay table games developer Derek Webb $20 million plus his legal fees, rather than appeal a verdict reached in February by a federal jury in Mississippi.
In a federal antitrust trial, a jury found that Progressive Gaming, previously known as Mikohn Gaming, had engaged in anti-competitive conduct in a decade-old lawsuit brought by Webb, the developer of Three Card Poker. The jury awarded Webb $13 million and attorneys fees but the judgment was tripled based on federal antitrust laws. Last month, a Mississippi federal judge rejected Progressive’s post-trial motions and the company planned an appeal.
However, the company shifted its focus.
“We concluded that a settlement now will eliminate the cost and management resources involved in an extended legal process, and allow the company and its personnel to move forward with an undivided focus on further expanding our slot management and table management systems,” Progressive President and Chief Executive Officer Russel McMeekin said in a statement.
Webb said Tuesday he didn’t want to discuss the settlement.
“There is a story here, but I don’t think now is the right time to go into it,” Webb said.
Progressive Gaming will pay Webb $20 million within one day after the agreement is executed. The company will reimburse Webb’s attorney fees within 30 business days of the agreement’s execution.
Progressive said it pay the settlement from available cash on hand. The company had said it would post a $20 million bond in order to appeal the verdict.
Last week, Progressive Gaming said the company had a net loss of 12 cents a share in its recently completed third quarter while its revenues grew 29 percent. The settlement means the company will have to revise its financial statements to reflect the payment. In September, Progressive sold its table games division, including Caribbean Stud Poker, to Shuffle Master Gaming for $30 million.
“(With) the sale of our table games division and substantial progress in strengthening our balance sheet, we believe we will be in a better position to end 2007 strongly and enter 2008 well positioned to benefit from our recurring revenue business model,” McMeekin said.
The settlement caused CIBC World Markets gaming analyst David Katz to change his rating on shares of Progressive Gaming from “hold” to “buy.”
“Given the sale of noncore assets and settlement of the pending legal judgment, the story has become progressively clearer,” Katz said in a note to investors. “While financial and execution risks remain, we believe these risks are heavily discounted.”
Gaming analysts had speculated that the lawsuit could financially cripple the company.
Progressive shares, traded on the Nasdaq National Market, closed Tuesday at $4.76, up 66 cents, or 16.1 percent. The company announced the settlement before the market opened.
Webb claimed Progressive tried to create a monopoly in the table game business in Mississippi in 1998 and 1999. Progressive had sued Webb, claiming Three Card Poker infringed on certain patents owned by the company. However, Webb sued Progressive, saying the original patent infringement case was a sham lawsuit and kept him from getting his games in the market.
An eight-person jury agreed with Webb on all counts, including the questions concerning whether Progressive Gaming misrepresented facts to the U.S. Patent and Trademark Office. The jury ruled that Webb suffered $13 million in lost profits.
Contact reporter Howard Stutz at firstname.lastname@example.org or (702) 477-3871.