NEWS
Illinois Standardbred tracks suing Churchill over Youbet deal
Posted: Tuesday, March 08, 2011 4:09 PM
by Frank Angst
Churchill Downs Inc.’s 2010 purchase of advance-deposit wagering provider Youbet.com, as well as its transfer of former Youbet customers to its TwinSpires.com ADW, is creating some legal tangles.
Standardbred tracks Balmoral Park, Maywood Park, and the Illinois Harness Horsemen’s Association have filed a lawsuit in U.S. District Court accusing new Youbet owner Churchill of breach of contract. In the suit filed last month in the Northern District of Illinois, Eastern Division, the Illinois tracks and horsemen are suing for $3.6-million, claiming the transfer of customers from Youbet.com and YoubetIllinois.com to TwinSpires constitutes a breach of contract.
The tracks contend they had worked with Youbet on a cross-marketing effort in which they had agreed to special fees that were discontinued when Churchill moved participating customers from the Youbet platforms to TwinSpires.com. Bets through the Youbet sites by participating players were to return an agreed upon percentage and fees to the tracks. The two Standardbred tracks said they have not received these fees since November, when Churchill moved all Youbet players to TwinSpires.
The $3.6-million figure is based on the expected return of those fees for the entirety of the four-year contract. It was unclear how a two-year option to that contract figured in calculating the $3.6-million figure.
A Churchill Downs spokeswoman declined to comment, citing a policy in which the company does not comment on ongoing litigation.
The tracks said they spent $750,000 to compile and market the list of players who wagered on their tracks. They accuse Churchill of breaching confidentiality provisions by sharing the customer lists with TwinSpires and other third parties, violating the Illinois Trade Secrets Act. The tracks said they should be able to recover that amount based on reliance damages.
Lawsuits from other tracks could follow as Balmoral and Maywood said the agreement with Youbet.com was made in December 2007 and included “other race tracks.”
Included in the lawsuit is an outline of the agreement which called for Youbet to pay a 4% fee on handle by the list customers when they wagered on the participating tracks. Based on provisions in the agreement, that fee could increase to 6%.
Furthermore, the agreement called for Youbet to pay one-third of its net commissions, the amount retained by Youbet after all fees were paid including customer rebates, to the tracks on the qualifying wagers. These are the fees the tracks say Churchill is no longer paying now that the list customers have been moved from Youbet to TwinSpires.
The agreement also required Youbet to return 10% of its profits from wagers made by players on the list on participating tracks to the players, in the form of “Youbet Advantage Points.” On promotional days, those points could double.
Judge John F. Grady has scheduled a status hearing in the case for April 27.
Frank Angst is senior writer for Thoroughbred Times
