FBT Everett Realty, LLC v. Massachusetts Gaming Commission (Lawyers Weekly No. 12-082-17)
COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss SUPERIOR COURT
CIVIL ACTION
- 2016-03481-BLS1
FBT EVERETT REALTY, LLC
vs.
MASSACHUSETTS GAMING COMMISSION
MEMORANDUM OF DECISION AND ORDER ON
DEFENDANT’S MOTION TO DISMISS FBT EVERETT, LLC’S COMPLAINT
PURSUANT TO MASS. R CIV. P. 12(b)(1) AND 12(b)(6)
Plaintiff FBT Everett Realty, LLC (FBT) entered into an Option Agreement with Wynn MA, LLC (Wynn), an affiliate of Wynn Resorts, pursuant to which Wynn acquired the option to purchase a parcel of land in Everett, Massachusetts owned by FBT (the Everett Parcel), if Wynn was awarded a casino license by the defendant Massachusetts Gaming Commission (the Commission). In this action, FTP alleges that it suffered losses as result of the Commission’s tortious interference with that Option Agreement. Its Complaint pleads a single count of intentional interference with contract in which it claims that, as a result of unlawful pressure exerted on Wynn by the Commission, Wynn insisted that FBT renegotiate the purchase price of the Everett Parcel, reducing that purchase price from $ 75 million to $ 35 million. The case is now before the court on the Commission’s motion to dismiss FBT’s complaint pursuant to Mass. R. Civ. P. 12(b)(1) and 12(b)(6). In particular, the Commission contends that it is a “public employer” under § 1 of the Massachusetts Tort Claims Act (G. L. c. 258, §§ 1 et seq., the MTCA), and, therefore, under § 10(c) it is immune from suits for intentional torts, including intentional interference with contractual relations. For the reasons that follow, the motion is 2
ALLOWED.1
1 Because theCourt concludes that the Commission is immune from suit under G. L. c. 258, § 10(c), the Court does not address the Commission’s contention that, even if the Commission were subject to such claims, the complaint fails to plead a claim for intentional interference with contractual relations on which relief may be granted.
BACKGROUND
The following facts are drawn from the allegations in the Complaint (assumed to be true for the purposes of this motion), the Gaming Act,the regulations promulgated pursuant thereto, and the materials attached to the Complaint.
The Gaming Act and its Regulations
In November 2011, the Legislature enacted the Gaming Act, which is codified at G. L. c. 23K. The Gaming Act permits casino gambling in the Commonwealth and establishes a system for regulating it. The Act establishes the Commission as the agency to implement casino gambling pursuant to the Act’s terms and regulate it. G. L. c. 23K, §§ 3(a) and 5. Among other things, the Act empowers the Commission to award a license to operate a casino with gaming tables and slot machines (the Category 1 Licenses) in each of three regions of the Commonwealth (Regions A, B, and C). Id. at § 19.
The Gaming Act and the regulations promulgated bythe Commission pursuant to its authority establish a two phase application process for Category 1 Licenses. Id. at § 12; 205 Code Mass. Regs. § 110.01. The first phase is known as the “Request for Application Phase 1” (RFA-1). 205 Code Mass. Regs. § 110.01(1).In this phase, an applicant submits a Phase I application to the Commission in which it is required to make a number of disclosures about itself and its personnel that pertain to an applicant’s “suitability.” Id. at § 111.00 et seq. The Investigations and Enforcement Bureau (IEB), a law enforcement agency established within the Commission, then conducts an investigation of the applicant and submits a written report to the 3
Commission containing findings and recommendations pertaining to the suitability of the applicant for a gaming license. G. L. c. 23K, § 12(a); 205 Code Mass. Regs. § 115.03. After the IEB submits its report, the Commission holds either a public hearing or an adjudicatory proceeding, and then issues a written determination of “negative” or “positive” suitability. 205 Code Mass. Regs. § 115.04-05. Only applicants who have received a “positive suitability determination” may proceed to the second phase of the application process, known as the “Request for Applications Phase 2” (RFA-2). Id. at § 110.01(2). In RFA-2, the applicant submits an applicationthat focuses on the site, design, operation and other attributes of the gaming establishment, including the mitigation of adverse impacts. In this second phase of the application process, the Commission considers the merits of the proposal.
Wynn’s Agreement with FBT
After the Gaming Act passed, Wynn determined that it would apply for a license to build the Region A resort casino on the Everett Parcel, which was the site of a former Monsanto Chemical plant in Everett, now owned by FBT, a Massachusetts limited liability company. To that end, in December 2012, FBT and Wynn entered into the Option Agreement pursuant to which Wynn agreed to pay FBT $ 100,000 per month for the right to purchase the parcel for $ 75 million, in the event Wynn was awarded a Category 1 license for Region A. At the time the Option Agreement was executed, FBT’s members were Paul Lohnes, Anthony Gattineri, and Dustin DeNunzio.
In January 2013, Wynn filed itsRFA-1 application and the IEB began its suitability investigation. During the investigation, the IEB learned of a series of phone calls between Charles Lightbody and Darin Bufalino, then an inmate in state prison, that were recorded by state and federal law enforcement personnel who were monitoring these conversations. The IEB 4
believed that Lightbody was a person who should not be involved in gaming because this would discredit the licensing process. According to the IEB, during these recorded conversations Lightbody made statements suggesting that he retained some manner of ownership interest in FBT and would therefore benefit from the sale of the Everett Parcel. The recordings prompted the IEB to initiate an investigation into the transaction between Wynn and FBT. The Wynn application only referenced FBT as the owner of the Everett Parcel on which it held an option to purchase, not as a party that would have any ongoing role in the proposed casino. Before these jail house conversations surfaced, no one associated with FBT had been the focus of the application.
As part of the investigation, the IEB interviewed Lightbody, Lohnes, Gattineri, and DeNunzio. TheIEBalso sought to interview Gary DeCicco, another former member of FBT, but he refused to speak with the IEB. During the interviews, Lohnes, Gattineri, and DeNunzio each maintained that Lightbody no longer had any ownership interest in FBT. The IEB, however, did not believe them. It concluded, mistakenly, that Lohnes, Gattineri, and DeNunzio were attempting to conceal Lightbody’s ownership interest in FBT.
The IEB told Wynn about its conclusions and warned that the perceived untruthfulness of the FBT members regarding Lightbody’s relationship to FBT created a real risk that the IEB would find Wynn unsuitable to receive a casino license. As a means of solving this potential problem, the IEB recommended that Wynn force FBT to accept a dramatically reduced price for the Everett Parcel, one that would remove any so-called “casino-related premium” from the purchase price.
In response to the IEB’s recommendation, Wynn obtained an appraisal of the Parcel that assumed the land was free of environmental contamination, but could not be used for a casino 5
resort. The appraisal valued the parcel at $ 35 million. Wynn then informed FBT that the purchase price must be reduced to $ 35 million because otherwise the Commission would not grant Wynn a license. Wynn also told FBT that if FBT did not agree to the price reduction, it would sue FBT for having impeded its ability to obtain a casino license.
FBT acquiesced and executed an amendment to the option agreement, which reduced the purchase price. In the amendment, Lohnes, DeNunzio, and Gattineri represented that they were the sole owners of FBT and wouldbe the only beneficiaries of the proceeds from the land sale.
Following the amendment, the Commission issued a favorable Phase I Suitability Decision regarding Wynn. Wynn filed its RFA-2 application and was eventually awarded a Category 1 License forRegion A.
DISCUSSION
Under the MTCA public employers are not subject to suit on “any claim arising out of an intentional tort, including . . . interference with advantageous relations or interference with contractual relations.” G. L. c. 258, § 10(c). Public employers include:
the commonwealth and any county, city, town, educational collaborative, or district, including the Massachusetts Department of Transportation, the Massachusetts Bay Transportation Authority, any duly constituted regional transit authority and the Massachusetts Turnpike Authority and any public health district or joint district or regional health district or regional health board established pursuant to the provisions of [G. L. c. 111, §§ 27A or 27B], and anydepartment, office, commission, committee, council, board, division, bureau, institution, agency or authority thereof including a local water and sewer commission including a municipal gas or electric plant, a municipal lighting plant or cooperative which operates a telecommunications system pursuant to [G. L. c. 164, § 47E], department, board and commission, which exercises direction and control over the public employee . . . . (emphasis added).
Id. at § 1. However, public employers do not include “a private contractor with [a] public employer, the Massachusetts Port Authority, or any other independent body politic and corporate.” Id. (emphasis added). In its motion, the Commission asserts that it is a public 6
employer and therefore immune from FBT’s tortious interference claim under G. L. c. 258, § 10(c). FBT, in turn, argues that the Commission is an “independent body politic and corporate” and therefore properly subject to its claim for intentional interference with contractual relations.
Determining whether the Commission—or any other governmental or quasi-governmental entity—is a public employer or an independent body politic and corporate within the meaning of Chapter 258 is not a simple assignment. The statute does not define ‘independent body politic and corporate’ and the first appellate decision to tackle this task and suggest a framework for categorizing the characteristics of such entities provides questionable guidance and may no longer be a useful tool. See Kargman v.Boston Water & Sewer Comm’n, 18 Mass. App. Ct. 51, 56-59 (1984). As discussed below, the Legislature has repeatedly amended the definition of “public employer” by expanding the list of public entities expressly included and narrowing the list of excluded entities. These amendments and a subsequent decision by the Supreme Judicial Court, although they do not expressly overrule Kargman, have made its suggested approach to determining when a commission is an independent body politic and corporate less useful.
In Kargman, the Appeals Court had to decide whether the Boston Water & Sewer Commission (BWSC) was an independent body politic and corporate and therefore not covered by the MTCA. 18 Mass. App. Ct. at 54-55.It first reviewed the history of the term, which shed little light on its meaning within the context of the MTCA. To establish a framework for its analysis, the Court then examined the characteristics of the entities expressly exempted from the definition of public employer by the statute as it then existed, which at that time included the Massachusetts Port Authority (Massport) as well as the Massachusetts Bay Transportation Authority (MBTA), and the Massachusetts Turnpike Authority (MTA). Id.at 56-57. Based on 7
this review, it posited that there were two factors that characterized independentbodies politic and corporate –financial independence and political independence –and identified certain indicia of these two types independence exhibited by Massport, the MBTA and the MTA. Id.In terms of financial independence, the Court noted that, pursuant to their enabling acts, each authority had the power to fix, charge, and collect revenues from projects under its control without regulation by the Commonwealth, and each had the power to issue bonds without consent from the Commonwealth. Id.at 56.2 With regard to political independence, the Court observed that the governing bodies of each authority had considerable autonomy in their decision-making, and that each authority could: sue and be sued in its own name; acquire, hold, and dispose of real and personal property; make contracts; engage employees and agents and fix their compensation; exercise the power of eminent domain; and exercise such other powers as are necessary to carry out its purposes. Id.at 57 & n. 7.
2 The Court also noted that all expenses of Massport and the MTA were payable solely with proceeds from the sale of bonds or from project revenues, and that expenses of the MBTA were paid for by fare collection, issuance of bonds and notes, provisions for assessment of cities and towns, and contract and Federal assistance. Kargman, 18 Mass. App. Ct. at 57.
3 The following year, the Legislature added municipal gas and electric plants to the definition of public employer. St. 1993, c. 110, § 227. In 2000, the definition was again amended to add municipal lighting plants and cooperatives. St. 2000, c. 12, § 9.
Evaluating the BWSC in light of these indicia, the Court concluded that the BWSC was sufficiently politically and financially independent to be an independentbody politic and corporate. Id.at 58-59. However, a few years later, the Legislature amended the MTCA expresslyto include local water and sewer commissions, like the BWSC, in the definition of public employer. See St. 1992, c. 343, § 5.3
Fourteen years after Kargman, in Lafayette Place Assocs. v. Boston Redev. Auth.(“Lafayette”), the Supreme Judicial Court recognized that the framework for addressing this 8
issue adopted by the Appeals Court was an imperfect one. 427 Mass. 509, 529-530 (1998). It observed that while “the Kargmananalysis at least has the virtue of disaggregating the term [independent body politic and corporate] into two possibly more manageable units . . . the norm is still defined by reference to itself, and that is a problem.” Id.at 529. It also noted that “[a]ny analysis that relies heavily on the Kargmanfactors must cope with the embarrassment that . . . the factors that are discerned in Kargmanas the indicia of independence of [Massport, the MBTA, and the MTA] are present with at least as much force in the case of Boston, other cities and towns, and the Commonwealth itself -all of which are designated at the beginning of s. 1 as public employers.” Id.at 530. The Court, however, did not expressly overrule Kargman, at least in so far as the decision instructed courts to assess the political and financial independence of a public entityto determine whether it was a public employer. See id.at 529-531.
The SJC went on to hold that the Boston Redevelopment Authority (BRA) was a public employer and that therefore, pursuant to G. L. c. 258, §10(c), the plaintiff could not bring its tortious interference claim. Id. at 533. In reaching this conclusion, the Court observed that applying the Kargmanframework yielded a close result. Id.at 529-530. In some ways the BRA lacked political and financial independence but in other ways it exhibited such independence. Id. The Court, however, ultimately appeared to put aside its Kargmananalysis and simply “rely on analogy, that logically imperfect but inveterate tool of the law in tight corners.” Id. The Court held that the BRA was a public employer because it functioned in a manner similar to local housing authorities, entities which it had previously held to be public employers in Commessov. Hingham Hous. Auth., 399 Mass. 805, 808 (1987). Id.at 531-532. The court went on to observe that:
whatever indeterminacy this analysis may leave in favor of subjecting the BRA to the general regime of c. 258. . . . Any doubts about the BRA’s status under the 9
difficult and uncertain designation of ‘independent body politic and corporate’ should be resolved against such a designation, because of the desirability of making the c. 258 regime as comprehensive as possible, thus avoiding reintroducing the ‘crazy quilt’ of immunities . . . which the Act was meant to replace. This is particularly so because any decision taking a governmental entity out of the category of ‘public employers’ has the effect not only, as here, of making that entity liable for intentional torts, but also of removing the immunities provided by the other provisions of s. 10.
Id. at 532-533.
Following Lafayette,the Legislature again amended G. L. c. 258, §1. The amendment added the MBTA and the MTA—two of the three entities upon which Kargmanrelied in formulating its tests for financial and political independence—to the list of authorities expressly defined to be public employers. St. 2009, c. 25, §§ 123-124; St. 2009, c. 120, § 40.4 As a result, Massport is now the only public entity that the MTCA explicitly excludes from the definition of public employer. This amendment to the definition of public employer, together with the others that preceded it, and the SJC’s admonition in Lafayette, suggest that an agency like the Gaming Commission will rarely be held to be an independentbody politic and corporate. In fact,it appears that no court since Kargman has found an authority or commission to be anything other than a public employer.
4 The amendment also added the Massachusetts Department of Transportation and “any duly constituted regional transit authority” to the definition of public employer. See St. 2009, c. 25, § 123.
As in Lafayette, the issue of whether the Commission is a public employer presents a difficult analytical question. The court begins with theproposition that the Legislature established a “commission” in the Gaming Act, as the entity to issue licenses and regulate gaming in the Commonwealth. The MTCA specifically lists commissions as one of the entities that are “public employers.” Additionally, the legislative history of the Act reveals that an early version of the legislation (S.B. 168) would have named the regulatory body “the Massachusetts 10
Gaming Control Authority” and expressly made it “liable in tort in the same manner as a private person.” None of that language appears in Chapter 23K, as enacted. In analyzing a statute a court should be “mindful that . . . ‘it . . . must be presumed that the Legislature knew pre-existing law and the decisions of [the Supreme Judicial Court].’” First Nat’l Bank of Boston v. Judge Baker Guidance Center, 13 Mass. App. Ct. 144, 151 (1982) quoting Condon v. Haitsma, 325 Mass. 371, 373 (1950). In consequence, the Legislature is presumed to have been aware that (i) the only governmental authority still excluded from the definition of public employer in the MTCA at the time the Gaming Act was debated and enacted was Massport, and (ii) in Lafayette,the SJC had expressly stated that any doubts as to whether a commission was a public employer should be resolved in favor of including that commission within the MTCA. Especially where an early version of the bill would have excluded the Commission from the MTCA, the choice of the term commission and the failure to add any words to the Act suggesting that the Commission was not a public employer are significant.
In any event, when a Kargmantype analysis is performed, it appears that the Commission has attributes that fall on either side of the financial and political independence ledger. The Commission certainly exhibits a degree of financial independence. It is completely self-funded through the Gaming Control Fund and is free to set its own budgets. G. L. 23K, §§ 56-57.5 The Commission likewise exhibits a certain level of political independence: the Commissioners are not state officials; the state has no formal supervisory powers over the Commission; the Commission can appear on its own behalf before state and federal agencies; and it can enter into
5 The Gaming Control Fund receives the proceeds from initial application fees, slot machine annual fees, and fees “assessed annually on gaming licensees . . . in proportion to the number of gaming positions at each gaming establishment” to cover “[a]ny remaining costs of the commission necessary to maintain regulatory control over gaming establishments” that are not covered by other fees assessed under G. L. c. 23K or other designated sources of funding. G. L. c. 23K, §§ 56-57. Appropriations, bond proceeds, and other monies authorized by the Legislature can also be credited to the Fund. Id. at 57. Such monies, however, have yet to be provided to the Commission. 11
agreements in its own name. See id.at §§3(a), 4(4), 4(5).
The Commission, however, has a number of characteristics that fall on the other side of the “public employer/independent body politic and corporate” ledger. While the Commission sets its own budget, its finances are subject to the state finance law, and most of the taxes and fees it collects are expressly subject to appropriation by the Legislature or are immediately transferred to the control of other agencies or entities. See G. L. c. 23K, §§56(e), 57, 59; St. 2011, c. 194, §93(a).6 The Commission’s autonomy is likewise limited by the fact that it must provide the Executive and Legislative branches with an annual finance plan and various other reports on its revenues, disbursements, expenses, activities, and audits of gaming licenses. See G. L. c.23K, §§57(b), 65, 69, 70.7,8
6 The monies received by the Commission generally go into three funds: the Gaming Revenue Fund, which receives funds collected from the tax on gaming revenues paid by licensees; the Gaming Licensing Fund, which receives all licensing fees collected from licensees (with the exception of initial application fees); and the Gaming Control Fund, which is discussed above. See G. L. c. 23K, §§57, 59; St. 2011, c. 194, §93(a). The Commission is required to transfer monies from the Gaming Revenue Fund and the Gaming Licensing Fund to sixteen smaller funds. Of these smaller funds, only two (the Race Horse Development Fund and the Community Mitigation Fund) are administered by the Commission and not subject to appropriation. Both the Race Horse Development Fund and the Community Mitigation Fund are subject to statutory requirements. See G. L. c. 23K, §§60-61.
7 The Commission must also report to the Executive and Legislative branches on certain gambling related issues.For example, the Commission is tasked with the study of problem gambling in the Commonwealth. See G. L. c. 23K, § 71(1).
8 The Court also notes that the Commissioners’ salary are set with reference to the salary of the commissioner of administrative and finance, and that the Commissioners are subject to the State Ethics Act (G. L. c. 268A), the state’s Financial Disclosure Law (G. L. c. 268B), and an enhanced code of ethics is established specifically for the Commission. G. L. c. 23K, §3(e) & (m).
Notably, §3(x) of the Act expressly states that the Commission “shall be a commission for the purposes of section 3 of chapter 12.” That statute provides that: “The attorney general shall appear for . . . commissions in all suits and other civil proceedings . . . in which the official acts and doings of said . . . commissions are called in question in [all tribunals]. All such suits and proceedings shall be prosecuted or defended by [her] or under [her] direction.” See id. at G. 12
- c. 12, §3.9 Indeed, the Commission is not authorized to bring litigation in its own name. See G. L. c. 23K, § 4. This limitation on the Commission’s functional independence is notable and distinguishes it from authorities that have such autonomous rights, including authorities that are now expressly defined to be public employers in the current version of the MTCA.
9 The IEB, however, isauthorized to “bring an action in the superior court to restrain, prevent or enjoin any conduct prohibited by [Chapter 23K] or to compel action to comply immediately and full with any order issued by the bureau.” G. L. c. 23K, § 35(c). This limited authority to enforce regulatory action, but not to bring suit in its own name over policy questions is notable.
Moreover, the Commission bears little resemblance to Massport, the only public entity now expressly exempted from the definition of public employer. Massport is a proprietary enterprise that operates transportation facilities and real estate for its own purposes. See St. 1956, c. 465, as amended, §3(g). The fees it collects from users are almost exclusively for Massport’s own operations. See id.at §§3(i), 14.Massport also holds title to real property, can exercise eminent domain, and can issue bonds. See id. at §§ 3(h), 3(j), 3(k), 3(s), 4, 8-11. As indicated above, the Commission, which functions primarily as a regulatory and licensing body, exhibits none of these characteristics.
For these reasons, the Commissioncannot be categorized as an independentbody politic and corporate without a significant level of uncertainty. While it has some characteristics which demonstrate autonomy, it also has a great number of characteristics suggesting that its independence is limited. Lafayetteinstructs that: “Any doubts about the [Commission’s] status under the difficult and uncertain designation of ‘independent body politic and corporate’ should be resolved against such a designation.” 427 Mass. at 532. In the present case, this direction is also consistent with the Legislature’s several amendments to the MTCA, which have repeatedly expanded the definition of public employerand narrowed,to only Massport, the public entity expressly excluded from it. Accordingly, the court holds that the Commission is a “public 13
employer” under G. L. c. 258, § 1 and therefore, under G. L. c. 258, §10(c), it is not subject to claims asserting intentional interference with contractual relations. The court therefore does not have subject matter jurisdiction over the claims asserted in this action, and the Commission’s motion to dismiss pursuant to Mass. R. Civ. P. 12(b)(1) is allowed.
ORDER
For the foregoing reasons, the defendant’s motion to dismiss is ALLOWED. Final judgment shall issue dismissing the complaint with prejudice.
______________________________
Mitchell H. Kaplan
Justice of the Superior Court
Dated: June 7, 2017