Concord Assocs., L.P. v. Entm't Props. Trust

Decision Date18 March 2016
Docket NumberDocket No. 13–3933–cv.
Citation817 F.3d 46
Parties CONCORD ASSOCIATES, L.P., Concord Raceway Corporation, Concord Kiamesha Casino, LLC, Concord Kiamesha Capital Corp., Concord Resort, LLC, Concord Kiamesha, LLC, Concord Kiamesha Hotel, LLC, Plaintiffs–Appellants, v. ENTERTAINMENT PROPERTIES TRUST, EPT Concord, LLC, EPT Concord II, LLC, Empire Resorts, Inc., Monticello Raceway Management, Inc., Genting New York LLC, John Does 1–5, Kien Huat Realty III Limited, Defendants–Appellees.
CourtU.S. Court of Appeals — Second Circuit

Scott A. Martin, (James I. Serota & Carmen Beauchamp Ciparick, on the brief), Greenberg Traurig, LLP, New York, New York, and Alfred E. Donnellan, DelBello Donnellan Weingarten Wise & Wiederkehr, L.L.P., White Plains, NY, for PlaintiffsAppellants Concord Associates, L.P., Concord Raceway Corporation, Concord Kiamesha Casino, LLC, Concord Kiamesha Capital Corp., Concord Resort, LLC, Concord Kiamesha, LLC and Concord Kiamesha Hotel, LLC.

Moses Silverman (Joshua D. Kaye, Jason L. Meizlish, & Elana R. Beale, on the brief), Paul, Weiss, Rifkind, Wharton & Garrison LLP, New York, New York, for DefendantsAppellees Empire Resorts, Inc. and Monticello Raceway Management, Inc.

Y. David Scharf, (Kristin T. Roy, & Gayle Pollack, on the brief) Morrison Cohen LLP, New York, New York, for DefendantAppellee Entertainment Properties Trust, EPT Concord, LLC, and EPT Concord II, LLC.

Howard Zelbo (Leah Brannon, on the brief), Cleary Gottlieb Steen & Hamilton LLP, New York, NY, for DefendantsAppellees Kien Huat Realty III Limited and Genting New York LLC.

Before: JACOBS, POOLER, and HALL, Circuit Judges.

HALL

, Circuit Judge:

PlaintiffsAppellants are seven entities who are collectively attempting to develop a casino-resort complex in the Catskills region of New York State. DefendantsAppellees are three groups of investors and business owners with an interest in the casino industry and horse racing in the Catskills who, the plaintiffs claim, entered into an anti-competitive scheme to obstruct the plaintiffs' resort development project. Underlying this antitrust dispute is a threshold question that is ultimately dispositive of this appeal: For the purposes of an antitrust claim, whether the plaintiffs have alleged a plausible relevant geographic market for their casino-related products and services.

Facts and Procedural History

The facts of this case, which we view in the light most favorable to the plaintiffs, are set out in the district court's Order and Opinion in detail and are briefly summarized as follows. The plaintiffs, including Concord Associates, L.P. ("Concord Associates"), Concord Raceway Corporation, Concord Kiamesha Capital Corporation, Concord Resort, LLC ("Concord Resort"), Concord Kiamesha, LLC, and Concord Kiamesha Hotel, LLC, are collectively attempting to develop a casino gambling resort and race track known as the New Concord Casino Resort at the site of the former Concord Resort Hotel, located in the Catskills Mountains in Thompson, New York. The defendants, including Entertainment Properties Trust, EPT Concord, LLC, and EPT Concord II, LLC (collectively, "EPT"); Empire Resorts, Inc. and Monticello Raceway Management, Inc. (collectively "Empire"); Kien Huat Realty III Limited ("Kien Huat Realty"); Genting New York LLC and John Doe entities 1–5 (collectively "Genting" or "Genting defendants"), are real estate developers and casino and gambling facility operators.

The plaintiffs intend to develop racing and casino gambling facilities, known as "racinos," on two adjoining properties, including 140 acres at the site of the Concord Resort Hotel, which was once a world-famous vacation destination for visitors to the Catskills Mountains until its closing and bankruptcy in 1998, and also 1,500 acres of adjacent land containing golf courses, residential properties, and vacant land. In 1999, plaintiff Concord Associates purchased these land parcels from the Concord Resort Hotel bankruptcy estate. In furtherance of their development efforts, the plaintiffs have conducted an environmental review, obtained necessary preliminary licensing approvals and development permits, and performed substantial work at the construction site.

In June 2010, as part of a legal settlement intended to resolve several lawsuits between defendant EPT and plaintiff Concord Associates, the plaintiffs transferred the 1,500 acre parcel to defendant EPT Concord II. Under the settlement, the plaintiffs retained the right for exclusive use and exploitation of the property, including the right to develop the proposed resort. Accordingly, Concord Associates entered into an agreement with EPT Concord II that specifically reserved the right for the plaintiffs to lease a tract for a "racino" on the property along with additional easements, leases, and other rights related to development of the property. In addition, the terms included a restrictive covenant pursuant to which EPT Concord II agreed that its successors or assignees would not own or operate any competing casino, racino, racing or gaming facility on the property.

In addition to entering the agreement with EPT Concord II, the plaintiffs entered into a contractual relationship with Empire to further the development of their resort. Since 1993, Empire had owned and operated the Monticello Raceway, located approximately four miles from the plaintiffs' proposed resort. In 2004, the Monticello Raceway began offering casino gaming, and since that time it has been the only race track or casino in the Catskills. The closest racinos are eighty miles away in Pennsylvania, and 100 miles away in Yonkers. Monticello Raceway also claims that it "does not compete directly with other harness racing tracks in New York State for live racing patrons." Am. Compl. ¶ 131. Thus, according to the plaintiffs, Empire's position as the sole operator of casino gaming in the Catskills makes it "the only game in town" for local consumers and tourists. Am. Compl. ¶ 133.

Empire was initially supportive of the plaintiffs' proposed resort, and in March 2009 it entered into an agreement with Concord Associates to provide management services at the plaintiffs' proposed Raceway. But in November 2009, defendant Kien Huat Realty—which, together with other Genting defendants makes up one of the world's largest gaming conglomerates—acquired a majority interest in Empire. According to plaintiffs, Kien Huat Realty has since worked to undermine plaintiffs' resort project. Shortly after November 2009, Empire ceased cooperating with the plaintiffs and opened a rival "racino" in collaboration with Genting at the site of the Aqueduct Race Track, approximately 100 miles from the site of the plaintiffs' proposed Resort. In addition, in April 2011 EPT and Empire entered into an exclusive agreement to develop their own "racino" project adjacent to the plaintiffs' proposed resort and repudiated the lease and restrictive covenants promised to Concord Associates. The plaintiffs claim that Genting, EPT and Empire are all members of an anti-competitive scheme to undermine the plaintiffs' resort development project.

After bringing actions for breach of contract in the New York state court without success,1 the plaintiffs commenced this federal antitrust action on March 7, 2012. In response to the defendants' motions to dismiss, the plaintiffs filed a First Amended Complaint (the "Amended Complaint") that purported to define the relevant geographic market for the products the plaintiffs' resort would have to offer. As pleaded, that relevant market includes the area within a radius of approximately 100 miles from the Town of Thompson, with a total population of more than 18–20 million people, of whom almost ninety percent reside in the New York City metropolitan area ("NY Metro area"). In response to the Amended Complaint, the defendants moved to dismiss it on the basis that the plaintiffs had not defined a plausible geographic market. Ultimately, the district court granted the motions to dismiss as to all defendants without considering the additional materials the plaintiffs submitted or a proposed Second Amended Complaint.2 See Concord Assocs., L.P. v. Entm't Props. Tr., et al., No. 12–1667, 2014 WL 1396524, at *27 (S.D.N.Y. Apr. 9, 2014)

. Further, the court dismissed the plaintiffs' state law claims, declining to exercise supplemental jurisdiction under 28 U.S.C. § 1367(c)(3).3

Id. The plaintiffs filed a motion for reconsideration, which the district court denied, reasoning that it could not consider materials not presented as part of the Amended Complaint and that, in any event, the plaintiffs' additional arguments failed to rectify their fatally flawed market definitions. See Concord Assocs., L.P. v. Entm't Props. Tr., No. 12–1667, 2014 WL 5643240, at *6–7 (S.D.N.Y. Nov. 3, 2014).

On appeal, the plaintiffs contend that the district court erred in deciding that the Amended Complaint failed to allege a plausible relevant geographic market and that the factual allegations were insufficient to connect certain of the defendants to the alleged conspiracy. The plaintiffs also claim the district court erred in denying them leave to amend the Amended Complaint. Because we agree with the district court that the plaintiffs' proposed market definition is inherently implausible, we find that the plaintiffs failed to allege adequate facts to state a violation of the Sherman Act. Therefore, we affirm the judgment of the district court dismissing the complaint.

Analysis

This court "review[s] de novo a district court's dismissal of a complaint pursuant to Rule 12(b)(6)

, construing the complaint liberally, accepting all factual allegations in the complaint as true, and drawing all reasonable inferences in the plaintiff's favor." Chambers v. Time Warner Inc., 282 F.3d 147, 152 (2d Cir.2002).

"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief...

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