Empress Casino Joliet Corp. v. John Johnston, Balmoral Racing Club, Inc.

• Decision Date: 15 August 2014
• Docket Number: No. 13–2972.,13–2972.
• Citation: 763 F.3d 723
• Parties: EMPRESS CASINO JOLIET CORP., et al., Plaintiffs–Appellants, v. John JOHNSTON, Balmoral Racing Club, Inc., and Maywood Park Trotting Ass'n, Inc., Defendants–Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

763 F.3d 723

EMPRESS CASINO JOLIET CORP., et al., Plaintiffs–Appellants,

v.John JOHNSTON, Balmoral Racing Club, Inc., and Maywood Park Trotting Ass'n, Inc., Defendants–Appellees.

No. 13–2972.

United States Court of Appeals, Seventh Circuit.

Argued March 31, 2014.

Decided Aug. 15, 2014.

Robert Andalman, A & G Law LLC, Chicago, IL, for Plaintiffs–Appellants.

William J. McKenna, Jr., Attorney, Martin J. Bishop, Attorney, Foley & Lardner LLP, Chicago, IL, for Defendants–Appellees.

Before WOOD, Chief Judge, and WILLIAMS and HAMILTON, Circuit Judges.

WOOD, Chief Judge.

Deals are the stuff of legislating. Although logrolling may appear unseemly some of the time, it is not, by itself, illegal. Bribes are. This case requires us once again to decide whether some shenanigans in the Illinois General Assembly and governor's office crossed the line from the merely unseemly to the unlawful. It involves a subject we have visited in the past: two industries that compete for gambling dollars. See Empress Casino Joliet Corp. v. Balmoral Racing Club, Inc., 651 F.3d 722 (7th Cir.2011) (en banc). In 2006 and 2008, former Governor Rod Blagojevich signed into law two bills (to which we refer as the '06 and '08 Acts) that imposed a tax on certain in-state casinos of 3% of their revenue and placed the funds into a trust for the benefit of the horseracing industry. Smelling a rat, the plaintiff casinos brought suit under the federal Racketeering Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1964, alleging that the defendants, all members of the horseracing industry, had bribed the governor to ensure that the bills were enacted. Viewing the evidence in the light most favorable to the plaintiffs (and of course not vouching for anything), we conclude that there was enough to survive summary judgment on the claim that the governor agreed to sign the '08 Act in exchange for a bribe. We therefore reverse in part and remand for further proceedings on that part of the case.

I

Illinois legalized riverboat casino gambling in 1990. Ever since, the state's once-thriving horseracing industry has been in decline. In late 2005 and early 2006, the state General Assembly considered legislation to help the horseracers. One bill would have imposed a 3% tax on casinos earning more than $50 million annually and deposited the proceeds into a fund for the benefit of the horseracing industry. It was modeled on similar initiatives in three other states. Lobbying on all sides was intense. On the first few votes in the General Assembly, the bill failed to garner a majority.

The bill's fortunes changed later in the spring of 2006. For one thing, it was modified so that the tax applied only to casinos earning more than $200 million annually, thereby limiting its effect to the large casinos in northern Illinois near Chicago. For another, Governor Blagojevich began to take an interest in the matter after his senior aide and alleged pay-to-play facilitator, Christopher Kelly, met with a horseracing executive, John Johnston. On the floor of the General Assembly, the bill's opponents cried foul. “Why are some of you called down to the Governor's office, then you come back up and change your vote?” asked Representative William Black. Added Representative Brent Hassert, “The Governor has weighed in on [the '06 bill] ... heavily in the last night or so, calling people and asking people to vote on this. It is my understanding ... that there's promises have been made to support this bill.” Soon after, the '06 Act cleared the House by a vote of 70–32; a week later, the Senate passed it 40–16. Governor Blagojevich signed the bill into law the next day. Johnston and other racing executives thanked the governor for his support of the bill in a personal letter. Using various subsidiaries, they then contributed $125,000 to his campaign fund.

The '06 Act contained a two-year sunset provision. In early 2008, the General Assembly began to consider its renewal. Meanwhile, horseracing executive Johnston met with Governor Blagojevich and his chief of staff Alonzo Monk. Blagojevich gave no indication whether he would support the renewed bill, telling Johnston, “Appreciate your support in the past, hope you can continue to support me in the future.” In the fall, with the bill stalled in the General Assembly, Blagojevich called Johnston to solicit campaign donations. Johnston pledged to give $100,000, but he did not send the money. Over the next few months, Monk repeatedly needled Johnston about following through on the pledge. In one conversation recorded by federal authorities, Johnston told Monk: “Look, tell the big guy [Blagojevich] I'm good for it.... I'm just figuring out which accounts to pull the checks from.”

In November, the General Assembly voted to renew the Racing Act by a vote of 83–28; the Senate likewise did so by a vote of 37–13. Representative Robert Molaro, a sponsor of the original Racing Act legislation, testified later that Governor Blagojevich played no role in the passage of the '08 Act. But in contrast to his immediate signing of the '06 Act, the governor initially did nothing with the '08 Act. Johnston complained to Monk in a recorded conversation that the governor's delay in signing the bill was costing him $9,000 per day. “This is getting goofier,” Johnston told a colleague in an email, “We are going to have to put a stronger bit in his mouth!?!” In another recorded conversation, Monk told the governor that Johnston was breathing down his neck about the bill. The governor replied that the bill would be signed, but it was a “timing issue.” Possibly alluding to Johnston's $100,000 commitment, the governor explained that he would “like some separation between that and signing the bill.”

By December, Johnston still had not ponied up the $100,000 and Governor Blagojevich still had not signed the '08 Act into law. In recorded conversations, the governor and Monk strategized about “how [Monk] [could] approach John Johnston to get the donation of one hundred thousand dollars.” Monk made clear that Johnston was desperate to have the Racing Act renewal signed into law. He told the governor: “Look, I want to go to [Johnston] without crossing the line and say, give us the fuckin' money ... give us the money and one has nothing to do with the other.... But give us the fuckin' money, because they're losing 9,000 a day ... for every day it's not signed.” Monk then met with Johnston to deliver a message, as he later recalled it, that “once [Johnston] made the contribution, the act would be signed.” Johnston asked Monk: “Do you want me to make some of the payment now and some of the payment after the beginning of the year?” Asked whether Johnston ever directly promised to deliver the money, Monk later testified: “I think he did to me.” After the meeting, Monk called the governor to report that Johnston would soon pay up.

A few days later, federal authorities arrested Blagojevich. Despite the arrest, Blagojevich later signed the '08 Act into law. The charging documents against Blagojevich alleged that the governor had linked signage of the '08 Act to a commitment to donate $100,000 in discussions with an unnamed representative of the horseracing industry. Regarding that charge, Johnston admitted, “I didn't know if anybody else had given $100,000, but I knew I did.” (Despite this statement, Johnston never actually delivered the money.) Johnston signed an immunity agreementwhich represented that he “may have information relevant to the [Blagojevich] investigation” and acknowledged “that such information may tend to incriminate [himself].” Later, an investigative report by the General Assembly found that Blagojevich traded state action for campaign contributions, including from “Race Horse Executive 1,” later revealed to be Johnston, in exchange for enactment of the '08 Act.

The appellants here are Empress Casino Joliet Corporation, Des Plaines Development Limited Partnership, Hollywood Casino–Aurora, Inc., and Elgin Riverboat Resort–Riverboat Casino (the Casinos). They are all Illinois casinos taxed under the '06 and '08 Acts. Their first move was to challenge the validity of the Acts in state court. The Illinois Supreme Court rejected their challenge to the '06 Act under the state and federal constitutions. Empress Casino Joliet Corp. v. Giannoulias, 231 Ill.2d 62, 324 Ill.Dec. 491, 896 N.E.2d 277 (2008), cert. denied556 U.S. 1281, 129 S.Ct. 2764, 170 L.Ed.2d 270 (2009) ( Empress I ). Illinois courts later rejected a similar challenge to the '08 Act. Empress Casino Joliet Corp. v. Giannoulias, 406 Ill.App.3d 1040, 347 Ill.Dec. 580, 942 N.E.2d 783 (2011), app. denied,351 Ill.Dec. 2, 949 N.E.2d 1097 (Ill.2011) ( Empress II ). The appellees here—horseracing tracks and executives that benefitted from the '06 and '08 Acts (the Racetracks)—intervened and participated in both state actions.

The Casinos then filed a federal RICO suit against the Racetracks and former Governor Blagojevich seeking damages and a constructive trust over the tax money received by the Racetracks under the '06 and '08 Acts. A panel of this court held that legislative immunity barred the suit against Blagojevich but that the Tax Injunction Act permitted the constructive trust. Empress Casino Joliet Corp. v. Blagojevich, 638 F.3d 519 (7th Cir.2011) ( Empress III ). Sitting en banc, we rejected the position that the panel had taken with regard to the Tax Injunction Act. Empress Casino Joliet Corp. v. Balmoral Racing Club, 651 F.3d at 726 ( Empress IV ). On remand, the district court granted summary judgment for the Racetracks on the Casinos' claims of a conspiracy to exchange campaign contributions for state action in violation of RICO, 18 U.S.C. § 1962(d). The district court found that the Casinos had offered evidence from which a reasonable jury could find that there was a pattern of racketeering activity. It also found that a jury could find that an enterprise-in-fact,...