FBT Everett Realty, LLC v. Mass. Gaming Comm'n

• Citation: 489 Mass. 702,187 N.E.3d 373
• Decision Date: 23 May 2022
• Docket Number: SJC-13196
• Parties: FBT EVERETT REALTY, LLC v. MASSACHUSETTS GAMING COMMISSION.
• Court: United States State Supreme Judicial Court of Massachusetts

489 Mass. 702

187 N.E.3d 373

FBT EVERETT REALTY, LLC

v.MASSACHUSETTS GAMING COMMISSION.

SJC-13196

Supreme Judicial Court of Massachusetts, Middlesex.

Argued February 4, 2022.

Decided May 23, 2022.

Christopher Weld, Jr., Boston, for the plaintiff.

Melissa C. Allison, Special Assistant Attorney General, for the defendant.

Present: Budd, C.J., Gaziano, Lowy, Cypher, Kafker, & Wendlandt, JJ.

KAFKER, J.

The plaintiff, FBT Everett Realty, LLC (FBT), bought land in Everett (Everett parcel) before the legalization of casino gaming in Massachusetts. After legalization, FBT contracted to sell Wynn MA, LLC (Wynn), the property for $75 million if Wynn could secure a license to develop and operate a casino on the Everett parcel. During the license application process, the defendant Massachusetts Gaming Commission (commission) became concerned about, and investigated whether, there were hidden criminal ownership interests in FBT. Without resolving the criminal ownership issue, the commission determined that FBT should not be allowed to receive a "casino-use premium" on the sale of the Everett parcel. The commission communicated this concern to Wynn, warning that its casino license application might be jeopardized if this issue was not addressed. In response, Wynn reappraised the Everett parcel for its best non-casino use and pressured FBT to agree to lower the parcel's price to the newly appraised value of $35 million. The result of the commission's refusal to allow FBT to receive a casino-use premium was to transfer the value of that premium to Wynn. FBT later sued the commission to recover the lost $40 million premium, alleging various claims, including tortious interference with contract and a regulatory taking.

We conclude that FBT's tortious inference claim was properly dismissed because the commission is a public employer immune from suit for intentional torts under the Massachusetts Tort Claims Act (MTCA), G. L. c. 258. We reverse, however, the motion judge's decision to grant summary judgment on the regulatory takings claim. The regulatory takings inquiry is a fact-intensive evaluation that should consider multiple factors, including not only reasonable investment-backed expectations but also the economic impact and character of the challenged regulatory action. The motion judge here limited his analysis to the investment-backed expectations factor. This was error, as he also should have considered the significant $40 million economic impact and the highly unusual character of the government action here -- conditioning the award of a casino license to Wynn on FBT not receiving a casino-use premium on the sale of the Everett parcel, thus effectively compelling the transfer of this economic benefit to Wynn. As there are material disputed facts on exactly what the commission expected or required Wynn to do, and what Wynn did on its own initiative, summary judgment cannot be granted on this record.

Background. 1. Facts. As appropriate in reviewing a grant of summary judgment, we "recite the material facts in the light most favorable to ... the party who opposed the motion for summary judgment," here FBT. Sarkisian v. Concept Restaurants, Inc., 471 Mass. 679, 680, 32 N.E.3d 854 (2015), citing Augat, Inc. v. Liberty Mut. Ins. Co., 410 Mass. 117, 120, 571 N.E.2d 357 (1991). We summarize the facts based on the parties’ agreed statement of facts and the documents in the summary judgment record. Ajemian v. Yahoo!, Inc., 478 Mass. 169, 171, 84 N.E.3d 766 (2017). See Mass. R. Civ. P. 56 (c), as amended, 436 Mass. 1201, 764 N.E.2d 343 (2002).

In 2009, FBT bought the Everett parcel for approximately $8 million. Because the site was heavily contaminated, it required extensive environmental cleanup. At the time of FBT's purchase, casino gambling was illegal in Massachusetts. See Abdow v. Attorney Gen., 468 Mass. 478, 483, 11 N.E.3d 574 (2014). FBT explored different potential uses for the site, including developing the property as a "big box" retail store or storage facility.

Two years after FBT purchased the Everett parcel, the Expanded Gaming Act (gaming act), St. 2011, c. 194, was enacted, which created the commission, G. L. c. 23K, § 3, and legalized casino gambling at establishments operated by entities holding a category 1 license issued by the commission, G. L. c. 23K, §§ 2, 19. This legislation authorized the commission to issue a single category 1 license for each of three regions of the Commonwealth. G. L. c. 23K, § 19 (a ). To operate a casino in Everett, a licensee would need to hold the category 1 license for "region A," the region encompassing the counties of Suffolk, Middlesex, Essex, Norfolk, and Worcester. Id.

After the gaming act passed, Wynn became interested in developing and operating a casino on the Everett parcel. In late 2012, it accordingly entered into an option agreement with FBT, which provided that Wynn would pay FBT $100,000 per month for the right to buy the parcel for $75 million if it were to be awarded the category 1 license for region A. FBT also agreed to spend up to $2.5 million to obtain an easement to improve vehicular access to the property and to perform baseline environmental remediation on the site to bring it into compliance with applicable environmental laws.

In January 2013, Wynn filed an application for a category 1 license for region A. When the commission receives an application for a gaming license, the commission's enforcement agency, the Investigations and Enforcement Bureau (IEB), is to investigate the "suitability" of the applicant and its affiliates to hold a gaming license. G. L. c. 23K, § 12 (a ). 205 Code Mass. Regs. § 115.01 (2018). In the course of this suitability investigation, IEB officers uncovered evidence leading them to suspect that Charles Lightbody, a convicted felon with apparent connections to organized crime, had a hidden ownership interest in FBT. This evidence included recorded telephone calls between Lightbody and an inmate in Massachusetts State prison, as well as discrepancies in FBT's financial documents.¹

When FBT's principals, Dustin DeNunzio, Anthony Gattineri, and Paul Lohnes, were questioned by the IEB about Lightbody's connection with the company, they explained that while Lightbody once had an ownership interest, this interest had been transferred to Gattineri before the option agreement with Wynn was signed. The IEB continued to suspect, however, that Lightbody retained an ownership interest, and that FBT's principals were concealing his continuing interest in FBT and hence in the transaction with Wynn.

The commission was troubled by what it believed to be a lack of candor by FBT's principals and their failure to fully cooperate with the IEB's investigation. It was also anxious that individuals with a criminal background and associations with organized crime should not profit from the award of a casino license to Wynn for the Everett parcel.

FBT alleges -- and the commission denies -- that the commissioners were angered by what they perceived as the FBT principals’ lack of candor and obstructiveness, and sought to punish them by exacting a financial penalty on FBT. The record, which is based on the limited discovery that has occurred so far, reveals some evidence supporting FBT's allegation. At the commission's public meeting on Wynn's application and the FBT ownership issue, Commissioner James McHugh declared it "intolerable" for "people to tell [the commission] things that aren't true" or to "hide things" from IEB investigators. McHugh insisted on the importance of sending a message that dishonesty or lack of cooperation with the IEB's work would not be tolerated, remarking: "[W]e've got to demonstrate that point early, and we've got to demonstrate that point often." He also voiced his concern that "none of the appreciation of [the Everett parcel] that came from the sale" should "go[ ] to somebody who's been dishonest." The IEB's director, Karen Wells, also testified during a related Federal criminal proceeding against Lightbody, DeNunzio, and Gattineri that the commission was concerned that if organized crime figures reaped a windfall from selling the Everett parcel to be developed into a casino facility, it would undermine public confidence in the casino licensing process.²

Wells communicated the commission's concerns directly to Wynn's executives. Indeed, as Wells subsequently stated at the commission's meeting on the FBT ownership issue, she informed Wynn that "their position regarding [FBT] receiving a financial windfall as a result of the gaming facility was something the IEB would report on regarding [Wynn's] suitability." Upon being advised by Wells of the commission's concerns, and of the risk that the IEB would find it unsuitable for a license unless it took action responsive to these concerns, Wynn acted quickly to preserve its chances of receiving a gaming license, commissioning an appraisal of the Everett parcel based on its highest and best non-casino use. The appraiser valued the parcel at $35 million, based on the determination that the most valuable non-casino use was likely as "large box retail." Wynn then entered into negotiations with FBT regarding the purchase price. Fearing that the commission would otherwise find Wynn unsuitable, dooming Wynn's license application and FBT's sale of the Everett parcel to Wynn, FBT agreed in November 2013 to amend the option agreement to reduce the price from $75 million to $35 million, thus eliminating FBT's casino-use premium, while also capping FBT's obligations for environmental remediation at $10 million.

While it is disputed to what extent the commission was involved in directing or otherwise influencing the actions Wynn took to address the commission's concerns,³ the record discloses evidence that the commission's staff worked with Wynn in shaping its response. In particular, Wynn's general counsel testified at the commission's meeting on the FBT ownership issue that the commission had "hel...