The AmTote totalizator company has filed a federal lawsuit that claims Kentucky Downs, its principals, and a company that is now providing tote services to the Franklin, Ky., track misappropriated trade secrets and breached a contract.
The suit, filed April 3 in U.S. District Court in Bowling Green, Ky., also alleges the defendants with "tortuous interference with an existing contract."
In addition to Kentucky Downs, defendants are Kentucky Downs president Corey Johnsen, track general manager and senior vice president Nicholas Hughes, Encore Gaming, and Rayford T. Reid, a Kentucky Downs executive and an officer of Encore, which was incorporated in Indiana.
Johnsen said April 6 that since the suit was filed on Good Friday, the defendants had not had sufficient time to review it and would not have a comment at this time.
On April 7 Encore released the following statement: "It is unfortunate that AmTote decided to file a lawsuit without obtaining facts or opening a dialogue with Encore. Encore was established in 2012, and working in conjunction with experienced talent from related industries was able to develop a state-of the-art HHR system from the ground up.
"The allegations in the lawsuit are 100% false, and Encore will vigorously defend itself in this action."
The suit is related to the decision by Kentucky Downs to begin using Encore rather than AmTote to manage its totalizator system that includes wagering on historical racing. Historical racing, a form of electronic gaming based on previously run horse races, is modeled after the Instant Racing gaming conceived at Oaklawn Park.
AmTote, which developed and installed the first electromechanical totalizator system in 1933 at Arlington Park, notes how it has invested energy and resources in the creation and continual development of totalizator systems and the steps taken to ensure confidentiality among its personnel and customers.
In the suit, AmTote says it entered into an agreement to provide tote equipment and services at Kentucky Downs and that the company provided extensive training to the track's personnel, including access to its totalizator system reports.
AmTote alleges that Reid, Johnsen, and Hughes, established Encore as a competing totalizator service in 2013 at a time when in their capacities as Kentucky Downs executives had access to AmTote reports and other confidential and proprietary information.
"On information and belief, Encore has invested insufficient time, money, and ingenuity to be able to independently produce a fully operational totalisator system that is capable of properly handling the processing of pari-mutuel wagers for live or historical racing and that meets regulatory requirements," the suit states.
"On information and belief, Reid, Johnsen, and Hughes with full knowledge of Kentucky Downs' contractual obligations to AmTote, provided AmTote's confidential and proprietary information to Encore, and misused that information in the development of a totalizator system for Encore," the suit continues.
Noting that Encore announced Feb. 12 of this year it would be entering the historical horse race wagering market as a systems, platform, totalizator, and game provider, AmTote alleges "Encore could not feasibly have developed these products and services using available time and resources except with reference to and reliance on AmTote's confidential and proprietary information."
Further, the suit says that on March 18 of this year, the same date that AmTote and Kentucky Downs amended their agreement until Dec. 31 of this year, Johnsen notified the Kentucky Horse Racing Commission the track would no longer be using the Race Tech system for which AmTote was providing totalizator services, as of the close of business March 29.
Among other demands, AmTote is seeking to be awarded the costs and expenses related to the lost investment in its development of its confidential and proprietary information improperly received by the defendants and compensatory damages in excess of $75,000 as well as punitive and exemplary damages for "willful and malicious conduct."