Green v. Racing Ass'n of Cent. Iowa

• Decision Date: 05 May 2006
• Docket Number: No. 04-0758.,04-0758.
• Citation: 713 N.W.2d 234
• Parties: Brain GREEN, Jerry Vaughan, Tad Leggett, and Rodger Smith, Appellants, v. RACING ASSOCIATION OF CENTRAL IOWA, d/b/a Prairie Meadows Racetrack & Casino, Appellee.
• Court: Iowa Supreme Court

713 N.W.2d 234

Brain GREEN, Jerry Vaughan, Tad Leggett, and Rodger Smith, Appellants, v. RACING ASSOCIATION OF CENTRAL IOWA, d/b/a Prairie Meadows Racetrack & Casino, Appellee.

No. 04-0758.

Supreme Court of Iowa.

May 5, 2006.

COPYRIGHT MATERIAL OMITTED

Rick L. Olson, Des Moines, for appellants.

Thomas W. Foley and Debra L. Hulett of Nyemaster, Goode, West, Hansell & O'Brien, P.C., Des Moines, for appellee.

CADY, Justice.

Four jockeys sued the Racing Association of Central Iowa, d/b/a Prairie Meadows (hereinafter RACI), alleging a violation of their due process rights and interference with their existing and prospective contracts when RACI excluded the jockeys from Prairie Meadows Racetrack & Casino. The district court granted RACI's motion for summary judgment, finding RACI was not a state actor, and that the jockeys' claim of tortious interference was insufficient as a matter of law. We affirm.

I. Background Facts and Proceedings

This case arose from allegations by a RACI employee, Ray Famous,¹ that four jockeys, Brian Green, Jerry Vaughn, Tad Leggett, and Rodger Smith, racially harassed him on August 6, 2002 at Prairie Meadows. The exact nature of the allegations does not affect this appeal, but they involved extremely offensive and threatening conduct. After Famous reported the incident to RACI human resources personnel, RACI notified the jockeys that they were "denied entrance and access to the facility of Prairie Meadows pending the outcome of a stewards hearing on the incident."² Furthermore, they were informed if they attempted to enter Prairie Meadows, they would be deemed trespassers and would be subject to arrest or citation. The Board of Stewards conducted an investigation into the claim of misconduct. It interviewed Famous, the jockeys, and other witnesses. On August 19, the Board concluded "the investigation did not reveal evidence of a rule violation committed by an IRGC licensee." Immediately following the Board decision, RACI gave the jockeys notice that they were denied entrance or access to Prairie Meadows "pending an independent investigation by Prairie Meadows of alleged harassment."

RACI completed its investigation of the alleged incident on August 20. RACI concluded Jerry Vaughn would be allowed to re-enter Prairie Meadows with no further action taken. It decided Tad Leggett could re-enter if he apologized to Famous. However, Rodger Smith was banned from Prairie Meadows for the remainder of the season and could not return for the 2003 season unless he completed a diversity class. RACI permanently banned Brian Green from Prairie Meadows. The different actions were taken based on the different roles of the jockeys in the incident as determined by the investigation.

The jockeys filed a petition against RACI asserting a claim of intentional interference with contractual relations. On August 30, 2002, they amended their petition to add a claim that RACI violated their due process rights under the Iowa and United States Constitutions.³ Following a hearing, the district court issued a temporary injunction on September 30, enjoining RACI from excluding Green and Smith from Prairie Meadows. RACI then moved for summary judgment. On April 7, 2004, the district court granted summary judgment in favor of RACI and dissolved the temporary injunction. The jockeys appeal.

II. Standard of Review

We have previously defined our standard of review from orders granting summary judgment. Our review is for correction of errors at law. Otterberg v. Farm Bureau Mut. Ins. Co., 696 N.W.2d 24, 27 (Iowa 2005). In reviewing the record, we are mindful that

[a] motion for summary judgment should only be granted if, viewing the evidence in the light most favorable to the nonmoving party, "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law."

Id. (citations omitted).

III. Due Process

The jockeys claim RACI deprived them of procedural due process when it excluded them from Prairie Meadows without prior notice and a hearing. They claim this action violated their rights under the Fourteenth Amendment to the United States Constitution and article I, sections 1 and 9 of the Iowa Constitution. Both constitutions prohibit the State from depriving a person of "property, without due process of law." U.S. Const. amend. XIV, § 1; Iowa Const. art. I, § 9. Yet, the provisions only limit state action. Jensen v. Schreck, 275 N.W.2d 374, 384 (Iowa 1979). They do not refer to individual activity. Id. Thus, RACI can only be liable under a due process claim if it was a state actor.⁴

It is undisputed that RACI is a private, nonprofit corporation, licensed to do business in Iowa and licensed by the Iowa Racing and Gaming Commission to conduct racing and gaming activities at Prairie Meadows Racetrack & Casino in Altoona, Iowa. Nevertheless, "`when it can be said that the State is responsible for the specific conduct of which the plaintiff complains,'" conduct of a private actor may be deemed state action and subjected to constitutional standards. Brentwood Acad. v. Tenn. Secondary Sch. Athletic Ass'n, 531 U.S. 288, 295, 121 S.Ct. 924, 930, 148 L.Ed.2d 807, 816-17 (2001) (quoting Blum v. Yaretsky, 457 U.S. 991, 1004, 102 S.Ct. 2777, 2786, 73 L.Ed.2d 534, 546 (1982)).

If the Fourteenth Amendment is not to be displaced, . . . its ambit cannot be a simple line between States and people operating outside formally governmental organizations, and the deed of an ostensibly private organization or individual is to be treated sometimes as if a State had caused it to be performed. Thus, we say that state action may be found if, though only if, there is such a "close nexus between the State and the challenged action" that seemingly private behavior "may be fairly treated as that of the State itself."

Id. (quoting Jackson v. Metro. Edison Co., 419 U.S. 345, 351, 95 S.Ct. 449, 453, 42 L.Ed.2d 477, 484 (1974)); accord Principal Cas. Ins. Co. v. Blair, 500 N.W.2d 67, 70 (Iowa 1993) ("Our inquiry must be whether there is a sufficiently close nexus between the state and the challenged action of the regulated entity so that the action of the latter may be fairly treated as the action of the state." (citing Jackson, 419 U.S. at 358, 95 S.Ct. at 457, 42 L.Ed.2d at 488)).

The Supreme Court has held that a sufficiently close nexus between the State and the challenged conduct to establish state action exists when the State and a private corporation are joint participants in the challenged activity based on their interdependence. Burton v. Wilmington Parking Auth., 365 U.S. 715, 81 S.Ct. 856, 6 L.Ed.2d 45 (1961). In Burton v. Wilmington Parking Authority, an African-American man claimed his rights under the Fourteenth Amendment were violated when a coffee shop in a city parking garage denied him service. Id. at 720, 81 S.Ct. at 859, 6 L.Ed.2d at 49. The Wilmington Parking Authority, an agency of the State of Delaware, leased space in one of its parking garages to the business, a private corporation called Eagle Coffee Shoppe, Inc. Id. at 716, 81 S.Ct. at 857, 6 L.Ed.2d at 47. The Authority provided gas and heat to Eagle and provided various repairs. Id. at 719-20, 81 S.Ct. at 858, 6 L.Ed.2d at 49. In addition, improvements Eagle made to the premises were tax-exempt. Id. The Authority benefited from the lease arrangement by virtue of the $28,700 in rent it received annually from Eagle. Id. at 723, 81 S.Ct. at 861, 6 L.Ed.2d at 51. Without the rent received from commercially leased portions of the parking buildings, they would have been an "`unprofitable enterprise.'" Id.

The Supreme Court found state action, reasoning,

The State has so far insinuated itself into a position of interdependence with Eagle that it must be recognized as a joint participant in the challenged activity, which, on that account, cannot be considered to have been so "purely private" as to fall without the scope of the Fourteenth Amendment.

Id. at 725, 81 S.Ct. at 862, 6 L.Ed.2d at 52. The Court observed that "the relationship of the restaurant to the parking facility in which it is located confers on each an incidental variety of mutual benefits." Id. at 724, 81 S.Ct. at 861, 6 L.Ed.2d at 51. In a later case, the Court called the arrangement between the parking authority and the coffee shop in Burton a "symbiotic relationship." Moose Lodge No. 107 v. Irvis, 407 U.S. 163, 175, 92 S.Ct. 1965, 1972, 32 L.Ed.2d 627, 638 (1972).

It is under this "symbiotic relationship" theory that the jockeys argue RACI is a state actor to which the Constitution applies. The jockeys claim RACI has a symbiotic relationship with Polk County because: (1) Prairie Meadows operates on public property leased from Polk County; (2) some members of RACI's board of directors are "appointed by and are intended to represent the Polk County Board of Supervisors"; (3) RACI "pays property taxes only by way of agreement with Polk County"; (4) Polk County receives lease payments in amounts the jockeys believe are excessive; (5) "The stated primary purpose of the operation of Prairie Meadows is to stimulate the economy of Polk County and the surrounding area"; and (6) Polk County depended on RACI "for revenue to pay off existing bonds that financed the purchase and building of" Prairie Meadows, which Polk County owns as realty.

RACI submitted several exhibits along with its statement of undisputed material facts showing the relationship between RACI and Polk County. Although RACI and Polk County initially functioned under an operating agreement, it was terminated in 1998 and replaced with a lease agreement. In the lease agreement, Polk County leased the Prairie Meadows premises (real estate and improvements) to RACI in exchange for $1 million per month in rent for five years. In addition, RACI was to pay to Polk...