Catskill Development v. Park Place Entertainment

• Decision Date: 14 May 2001
• Docket Number: No. 00 CIV. 8660 CM GAY.,00 CIV. 8660 CM GAY.
• Citation: 144 F.Supp.2d 215
• Parties: CATSKILL DEVELOPMENT, L.L.C., Mohawk Management, L.L.C., and Monticello Raceway Development Company, L.L.C., Plaintiffs, v. PARK PLACE ENTERTAINMENT CORP., Defendant.
• Court: U.S. District Court — Southern District of New York

Page 215

144 F.Supp.2d 215

CATSKILL DEVELOPMENT, L.L.C., Mohawk Management, L.L.C., and Monticello Raceway Development Company, L.L.C., Plaintiffs, v. PARK PLACE ENTERTAINMENT CORP., Defendant.

No. 00 CIV. 8660 CM GAY.

United States District Court, S.D. New York.

May 14, 2001.

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Herbert F. Kozlov, Parker, Duryee, Rosoff & Haft, Thomas P. Puccio, New York City, John P. Gallagher, Stites & Harbison, Atlanta, GA, William W. Hopson, J.D. Humphries, III, Stites & Harbison, PLLC, Atlanta, GA, for Plaintiffs.

David Boies, Boies, Schiller & Flexner, L.L.P., Armonk, NY, for Defendant.

MEMORANDUM AND DECISION GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS

McMAHON, District Judge.

Plaintiffs Catskill Development, L.L.C. ("Catskill"), Mohawk Management, L.L.C. ("Mohawk") and Monticello Raceway Development Co., L.L.C. ("Monticello") (collectively, the "Catskill Group"), bring this action in diversity against Park Place Entertainment Corp. ("Park Place"), claiming tortious interference with contractual relations, interference with prospective business relationships, unfair competition, and violations of the Donnelly Act, N.Y. Gen. Bus. Law § 340. Plaintiffs allege that defendant, one of the world's largest casino companies, wrongfully induced officials of the St. Regis Mohawk Nation ("Mohawks") to terminate the Mohawks' contractual agreements and business relationships with plaintiffs relating to the development and management of a proposed $500 million Native American casino at the Monticello Raceway in Sullivan County, New York (the "Casino Project").

The case is before me on defendant's motion to dismiss. For the reasons below, I grant defendant's motion to dismiss plaintiffs' claims for tortious interference with contractual relations, for unfair competition, and for violations of the Donnelly Act. The motion to dismiss plaintiffs' claim for interference with prospective business relations is denied.

I. BACKGROUND

The factual allegations below are taken from plaintiffs' complaint and documents relied on within or attached to the complaint.

A. Tribal Gaming in New York

Casino gambling is illegal in New York State. However, a federal statute, the Indian Gaming Regulatory Act ("Gaming Act" or "IGRA"), 25 U.S.C. § 2701—2721 (1988), permits different types of gaming, including casino gambling, on Native American land under specified conditions.

The act classifies gaming activities into three different categories. Tribes have exclusive jurisdiction over Class I gaming, which includes social games and traditional forms of Indian gaming connected to tribal ceremonies. 25 U.S.C. §§ 2703(6), 2719(a)(1). Class II gaming, defined by the Gaming Act to include "the game of chance commonly known as bingo (whether or not electronic, computer or other technologic aids are used in connection therewith) ... including (if played in the same location) pull-tabs, lotto, punch boards, tip jars, instant bingo, and other games similar to bingo ...," are regulated by the National Indian Gaming Commission (NIGC).¹ All other gaming activity (including both electronic gaming devices and traditional casino games, such as card tables, craps, roulette, and slot machines) is Class III gaming.

The Gaming Act permits Native American tribes to petition the Governor of their host state for a so-called "compact" that would allow Class III gaming on reservation lands and/or on lands to be acquired and held in trust by the United States Government for the benefit of the tribe. 25 U.S.C. § 2710(d)(3). These compacts define which types of Class III gaming activities the Tribes can conduct, and usually provide that a portion of the gaming revenues will go to the State. (Compl. at 26-28.) Any compact between the state and the Tribe must be approved by the Secretary of the Interior. § 2710(d)(3)(B).

To date, only two tribes in New York have successfully petitioned the Governor for compacts: the Oneida Nation received its compact in 1992, and the St. Regis Mohawk Tribe in 1993. The Oneidas opened a casino in western New York, near Syracuse, and sometime after 1996, the Mohawks opened a small casino on their Akwesasne Reservation near the Canadian border. (Compl. at 26-30.) See also Hearing on Indian Gambling Before the Senate Comm. on Indian Affairs, 1994 WL 377835 (F.D.C.H. July 19, 1994) (statement of Ray Halbritter, Nation Representative, Oneida Indian Nation of New York); Robert D. McFadden, Cuomo Accepts Mohawk Plan for a Casino, N.Y. Times, Oct. 16, 1993, at 125; James Dao, Accord Signed for a Casino in New York State, N.Y. Times, Mar. 11, 1993, at B1.

In May 1999, the Mohawks' amended their compact with New York State to allow for the use of electronic gaming devices on the Akwesasne reservation casino. This authorization was set to expire on May 27, 2000. Defendant contends that the State and the Mohawks negotiated another electronic gaming amendment, which would be effective until May 27, 2005. (See Carpinello Decl. at Ex. 5.) They claim, however, that the amendment was twice rejected by the Secretary of the Interior, and is not currently in effect. (See Carpinello Decl. at Ex. G.) Plaintiffs do not dispute this. They argue, however, that while such an amendment "would have added electronic terminals," it would not have precluded approval of the [agreements made between Catskill and the Tribe] and Catskill's legal ability to open the [Monticello] facility. The agreements ... do not legally require electronic terminals. (Mem. in Opp. to Def.'s Mot. to Dismiss at 25.) As the parties have not provided a copy of the existing compact between the Mohawks and New York State, I can not determine whether the compact would have to be amended in order for the Mohawks to even build a new casino somewhere other than on the Akwesasne reservation. However, it is clear that without an amendment, no Mohawk casino, whether at Monticello or somewhere else, could run electronic games.

In a decision of some significance to this case, New York State Supreme Court Justice Joseph C. Teresi held, on April 20, 2001, that because the New York State Constitution does not grant residual powers to the executive to bind the State to an Indian Gaming Compact, the Governor of New York was not empowered to enter into these compacts without legislative concurrence.² Saratoga County Chamber of Commerce, Inc. v. Pataki, Index No. 11971-99 (Sup.Ct. N.Y., April 10, 2001). Accordingly, Justice Teresi declared the 1993 Compact signed by the Governor and the Mohawks void and unenforceable. Moreover, Justice Teresi enjoined the Governor from entering into any future gaming compacts without prior legislative concurrence.

B. The Catskill Deal

In 1995, leaders of the Mohawk tribe opened discussions with Sullivan County businessmen who were looking to develop a gambling facility, using the Monticello Raceway in Monticello, New York, as a cornerstone for the operation. In October 1995, these businessmen formed Catskill to pursue the Casino Project and seek federal approval for the plan. (Compl. at ¶ 33-37.) Catskill planned to donate 30 acres to the Tribe, which would transfer the land to the U.S. Government to hold in trust for the Mohawks. Catskill would help the Mohawks operate the casino, and in return take a share of the revenues.

Catskill acquired the Monticello Raceway for $10,000,000 on June 3, 1996. Of the real property purchased, 29.31 acres adjacent to the Raceway were set aside for the casino. Catskill created Mohawk Management, a subsidiary of Alpha Hospitality, Inc., to provide technical and financial expertise to assist the Mohawks in obtaining financing and to manage, operate, and maintain the casino. Catskill also created Monticello Raceway Development to develop the casino property, and to assist the Mohawks in obtaining a loan to finance the construction, equipping, and operation of the casino. As the coordinating entity, Catskill acted for all plaintiffs in seeking the necessary local, state and federal approvals needed to build and operate the casino. (Compl. at 38-42.)

On July 31, 1996, the Mohawks and plaintiffs allegedly entered into a number of agreements, which plaintiffs claim were re-executed and affirmed a number of times through the year 2000 (although they do not attach copies of those agreements to the complaint). The agreements are as follows:

(1) A Land Purchase Agreement between the Regis Mohawk Gaming Authority and Catskill Development contemplating the transfer of the Raceway property from Catskill to the United States government to be held in trust for the Mohawks, in exchange for which the Mohawks would pay Catskill $10 million, the purchase price of the property. (Carpinello Aff. at A.)

(2) A Mortgage Agreement which would, upon execution, provide for a mortgage on the Mohawks' leasehold of the subject property. Defendant provides in its papers an unsigned copy of this agreement, claiming that it was never executed because it was dependent on the consummation of the land transfer described in the Land Purchase Agreement. Plaintiffs do not dispute that this agreement was never executed. (Id. at B.)

(3) A Gaming Facility Management Agreement granting Mohawk Management LLC the exclusive right to manage the day-to-day operations of the contemplated casino. Under the agreement, the parties are to establish a Management Business Board, with two members from Mohawk Management and two from the Tribe, to oversee the operations. Any action by the Board requires three of the four members to agree. Under the agreement, Mohawk Management is to negotiate and to enter into contracts for operation of the casino on behalf of and in the name of the Tribe, although contracts over $25,000 must be approved by the Board. The Tribe agrees to pay Catskill 35% of Net Revenues. (Id. at C.) (4) A Shared Facilities Agreement between the Tribe and Catskill Development, LLC, under which the...