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A Curious Case Of Stolen Par Value

The concept of par value has largely fallen into desuetude.  Thus, I was surprised to see a Nevada Supreme Court opinion dealing with stolen par value.  I can understand stealing par value shares, but how does anyone steal par value and why would anyone want to?

It turns out "par value" isn't just about shares of stock.  In the gaming industry, the term "par value" refers to the theoretical percentage of money retained by a casino for each slot machine played.  Apparently, this information can be valuable to a competitor, but does it constitute a "trade secret" under Nevada's Uniform Trade Secrets Act?

The NTSA defines a "trade secret" as information that "[d]erives independent economic value, actual or potential, from . . . not being readily ascertainable by proper means by the public or any other persons who can obtain commercial or economic value from its disclosure or use . . . ".  NRS 600A.030. 

In MEI-GSR Holdings, LLC v. Peppermill Casinos, Inc., 134 Nev. 31 (2018), an employee of the defendant casino was caught using a slot machine key to gain access to the plaintiff's machines.  Following an investigation, the Nevada Gaming Control Board determined that the employee was accessing the slot machines to obtain the par value information and that the defendant casino had condoned these actions.  The defendant stipulated to a $1 million fine and the plaintiff casino filed suit.  After a jury trial ended with a defense verdict, the plaintiff casino appealed, arguing that the defendant should not have been allowed to demonstrate that the information was readily ascertainable (and therefore not a trade secret) when the defendant acquired the information by improper means. 

The Nevada Supreme Court disagreed finding that while a defendant's acquisition of information by proper means is a relevant consideration (because that demonstrates the information is readily ascertainable), the acquisition of the information by improper means does not preclude the defendant from showing that the information is readily ascertainable by other persons.  The Supreme Court's decision concerns the version of NRS 600A.030 at the time of the events in question.  The statute was amended effective October 1, 2017, 2017 Nev. Stat., ch. 592, § 9, but the Court found that those amendments did not affect its analysis.

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30172DBAB0084D3A8F39D7AF0A8E79BC.ashx Keith Paul Bishop
Partner at Allen Matkins
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