The apparent end of the deal between the Atlantic Club (pictured) in New Jersey and PokerStars is headed into the New Jersey courts. PokerStars has won a preliminary injunction to block the Atlantic Club from courting other potential suitors, but the Atlantic Club and its current owner, Colony Capital, have struck back with legal arguments.

According to John Brennan’s Meadowlands Matters blog, Colony Capital issued a response to the temporary restraining order currently in place that prevents the casino from finding another buyer. In the brief, Colony Capital asserts that it did not know about the alleged “criminal activities” that the ownership behind PokerStars, the Rational Group, supposedly engaged in.

“After Plaintiffs made their initial filings with the (New Jersey Casino Control) Commission (NJCCC) and the Department of Gaming Enforcement (DGE), significant information emerged publicly that Plaintiff’s principals were associated with serious criminal activities more extensive and unresolved than previously disclosed,” Brennan quoted from court records.

The brief says the Atlantic Club’s Chief Financial Officer, Eric Matejevich, “was not fully aware” of the legal issues that PokerStars has faced over the last couple of years. “(Matejevich) did not know that (Isai) Scheinberg and another officer of PokerStars, P.T., were fugitives from the American courts,” the filing contends.

As is well known by pretty much the entire gaming community, Scheinberg and Tate were two of the 11 men charged in the Black Friday indictments in 2011. The brief also contends that Scheinberg is still a major player in the company’s operations. In the brief, Colony Capital contends that Matejevich was in contact with Scheinberg as recently as the end of April and was able to fully discuss the pending sale and licensing issues that were active at the time.

In addition to that statement, Colony Capital also said that it “couldn’t wait” for the ongoing debate over whether PokerStars and the Rational Group would receive a New Jersey casino license to be over. At this time, the application with the NJCCC and the DGE is in limbo due to objections from the American Gaming Association, which filed said objection in March.

If the continued debate lasts through the next few months (it has been stated by the NJCCC and the DGE that it could be until August that any decision would be made) and ends in a rejection, Colony Capital contends that it would be severely impacted by the inability to move forward.

“If that happens (PokerStars/Rational Group rejection), there would be no regulatory approvals to complete the contemplated transaction and Sellers (Colony Capital) would almost certainly miss the opportunity to pursue other options during the critical summer season and prior to the November 2013 launch of online gaming in New Jersey,” Colony Capital stated in its brief, according to Brennan.

As to the argument that PokerStars/Rational Group has already invested $11 million in the Atlantic Club and should be allowed to move forward with the purchase, Colony Capital has little sympathy. The filing states, “That was the risk they took for the opportunity of being at the forefront of online gaming in New Jersey.”

In the conclusion of its brief to overturn the temporary restraining order, Colony Capital contends, “It would be a catastrophic result for the Atlantic Club if the temporary restraining order is not vacated and the request for a preliminary injunction is not denied. As it currently stands, Plaintiffs – who have breached the Agreement – have been granted a unilateral, exclusive option to purchase [the Atlantic Club] and seek to extend that grant for many months in the face of serious doubt that they will ever obtain [regulatory approval] in New Jersey.”

This obviously only starts what could be quite an intriguing and nasty court battle in the state of New Jersey. PocketFives will continue to monitor the situation as news develops.

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