Hadges v. Yonkers Racing Corp.

• Court: U.S. Court of Appeals — Second Circuit
• Writing for the Court: Before OAKES, Chief Judge, MESKILL, Circuit Judge, and RESTANI; OAKES
• Citation: Hadges v. Yonkers Racing Corp., 918 F.2d 1079 (2nd Cir. 1990)
• Decision Date: 19 November 1990
• Docket Number: No. 202,D,202
• Parties: George HADGES, Plaintiff-Appellant, v. YONKERS RACING CORPORATION, Defendant-Appellee. ocket 90-7380.

Page 1079

918 F.2d 1079

George HADGES, Plaintiff-Appellant, v. YONKERS RACING CORPORATION, Defendant-Appellee.

No. 202, Docket 90-7380.

United States Court of Appeals Second Circuit.

Argued Sept. 19, 1990.

Decided Nov. 19, 1990.

Mark S. Arisohn, New York City (Arthur M. Neiss, Goodkind, Labaton & Rudoff, of counsel) for plaintiff-appellant.

Frederick J. Martin, White Plains, N.Y. (William P. Harrington, Bleakley Platt & Schmidt, of counsel), for defendant-appellee.

Before OAKES, Chief Judge, MESKILL, Circuit Judge, and RESTANI, Judge. ^*

OAKES, Chief Judge:

This appeal is from a judgment of the United States District Court for the Southern District of New York, Gerard L. Goettel, Judge, denying George Hadges's motion for a preliminary injunction and granting the cross-motion of Yonkers Racing Corporation ("YRC") for summary judgment. It presents an issue of first impression for this court: whether Yonkers Racing Corporation, as the private owner of a racetrack licensed by the State of New York (the "State" ) to conduct parimutuel wagering on harness races, ¹ engaged in state action for the purposes of 42 U.S.C. Sec. 1983 when it denied appellant's request to work at appellee's racetrack. We believe that the challenged action was not attributable to the State, and therefore affirm.

Appellant George Hadges ("Hadges") is a journeyman harness racehorse driver, trainer, and owner. Hadges filed the instant action pursuant to section 1983 alleging that appellee Yonkers Racing Corporation violated Hadges's Fourteenth Amendment right to due process when it denied Hadges's request to work at its racetrack in September, 1989. At the time Hadges made his request, he was licensed by New York and several other states to participate in harness racing. New York requires such a license before one can work at the racetracks in the State. N.Y.Comp.Codes R. & Regs. tit. 9, Sec. 4101.24(b) (1985) (promulgated pursuant to N.Y.Rac. Pari-Mut. Wag. & Breed. Law Sec. 309 (McKinney 1984 & Supp.1990)). During his racing career, Hadges has worked at all the New York harness racetracks, ² but primarily at Yonkers Raceway.

YRC, a closely held corporation, owns Yonkers Raceway. The corporation has invested $65 million in Yonkers Raceway since it purchased the racetrack in 1970. YRC operates the racetrack pursuant to a one-year renewable license issued by the New York State Racing and Wagering Board (the "Racing Board" ). See N.Y.Rac. Pari-Mut. Wag. & Breed. Law Sec. 307(1) (McKinney 1984). Yonkers Raceway is currently the only operating New York harness racetrack in the New York metropolitan area, although the Meadowlands in New Jersey often has harness, as opposed to flat, racing.

Prior to YRC's denial of Hadges's application, Hadges's racing career suffered two significant interruptions. First, the Racing Board suspended Hadges's license from 1974 to 1976 because Hadges had not reported his criminal record on his license application. Thereafter, in 1989, the Racing Board once again suspended Hadges's license after determining that Hadges had illegally passed wagering information to a patron at Roosevelt Raceway on a race in which Hadges was participating. Specifically, the Racing Board found that, as Hadges approached the starting gate, he trailed behind the other horses and shouted, "Get the '7'," to someone in the stands. Hadges's horse, the number 2, finished behind the victor--the number 7.

The Racing Board reinstated Hadges's license in July, 1989. Soon thereafter, Hadges applied to YRC for racing and training privileges at Yonkers Raceway. YRC denied the application. Upon Hadges's request, representatives of YRC met with him to explain the denial. YRC's General Manager informed Hadges that YRC did not grant Hadges's application because of Hadges's involvement in litigation over the ownership of horses, as well as his lack of integrity as evidenced by the incident at Roosevelt Raceway.

Hadges contends that YRC's denial of his application amounted to state action under section 1983 because YRC was subject to pervasive State statutory and regulatory control, and because it generated significant tax revenues for the State, received State tax credits, and held a monopoly over harness racing in the New York metropolitan area. In response, YRC asserts that it rejected Hadges's application pursuant to its statutory right as private owner to exclude persons from its racetrack without reason, provided that the exclusion is not based upon race, creed, or national origin. See N.Y.Comp.Codes R. & Regs. tit. 9, Sec. 4119.8 (1985). YRC further contends that its private right exists independently from the Racing Board's power to suspend or revoke licenses. See N.Y.Rac. Pari-Mut. Wag. & Breed. Law Sec. 309 (McKinney 1984 & Supp.1990).

DISCUSSION

To maintain a cause of action under 42 U.S.C. Sec. 1983, a plaintiff must establish that he suffered a violation of a constitutional right and that the violation was committed under color of state law. 42 U.S.C. Sec. 1983. Private conduct qualifies as state action when "[t]he State has so far insinuated itself into a position of interdependence with [the private party] that it must be recognized as a joint participant in the challenged activity," Burton v. Wilmington Parking Auth., 365 U.S. 715, 725, 81 S.Ct. 856, 862, 6 L.Ed.2d 45 (1961), or when "there is a sufficiently close nexus between the State and the challenged action" that the private party's action "may be fairly treated as that of the State itself," Jackson v. Metropolitan Edison Co., 419 U.S. 345, 351, 95 S.Ct. 449, 453, 42 L.Ed.2d 477 (1974).

Appellant argues that YRC's denial of his request to work at Yonkers Raceway qualifies as state action under both the symbiotic relationship test under Burton, and the close nexus test set forth in Jackson. Neither of these tests lends itself to formulaic applications. Instead, both of these inquiries require us to sift through and weigh the facts to determine whether the alleged ties between the State and the private actor are sufficiently strong to attribute the private actor's conduct to the state. See Burton, 365 U.S. at 722, 81 S.Ct. at 860. The factual record, specifically YRC's actions within the context of the harness racing industry in the State, necessarily determines the contours and limits of our decision.

A. Symbiotic Relationship

In arguing that the State was a joint participant in YRC's enterprise, Hadges takes us on a guided tour of Yonkers Raceway, highlighting instances of the State's allegedly pervasive presence: at the door, State law requires YRC to collect an admission tax, N.Y.Rac. Pari-Mut. Wag. & Breed. Law Sec. 306 (McKinney 1984), and regulates the price of admission, N.Y.Comp.Codes R. & Regs. tit. 9, Sec. 4101.26 (1985); at the betting windows, the Racing Board supervises all gambling activities, N.Y.Rac. Pari-Mut. Wag. & Breed. Law Sec. 305 (McKinney 1984), and the State Tax Commission oversees the financial aspects of gambling, id., Secs. 306, 316 (McKinney 1984 & Supp.1990); on the track and in the stands, the State has exclusive power to issue licenses to all track personnel, from vendors to veterinarians, id., Sec. 309; and, at the finish, YRC generates significant tax revenues for the State, and the State awards YRC tax credits.

Armed with these examples of the State's fiscal and regulatory links to YRC, Hadges erroneously allies the instant case with Burton. In Burton, the owner of a private restaurant that leased space in a state-owned building refused to serve an African-American man. See Burton, 365 U.S. at 720, 81 S.Ct. at 859 (1961). The Supreme Court found that the restauranteur's action qualified as state action because the state owned the building, paid the building's maintenance, owned an adjacent parking lot and therefore had a direct financial interest in the restaurant's success, and dedicated the building for public purposes, thereby conferring tax exempt status on the building. See id. at 723-24, 81 S.Ct. at 860-61.

While Burton cautions courts to search for "nonobvious involvement of the State in private conduct," id. at 722, 81 S.Ct. at 860, we do not believe that appellant's tour of Yonkers Raceway reveals the nature or extent of state involvement that was present in Burton. In contrast to Burton, the State in the instant case does not have a proprietary interest in Yonkers Raceway. See id. at 723, 81 S.Ct. at 860-61; see also Moose Lodge No. 107 v. Irvis, 407 U.S. 163, 175, 92 S.Ct. 1965, 1972, 32 L.Ed.2d 627 (1972) (symbiotic relationship test not satisfied where site of challenged action owned by private party). Yonkers Raceway was purchased and is maintained by private, not public, dollars. The State in the instant case also does not own a neighboring, interlinked business, and consequently lacks as direct a financial stake in YRC's success as was present in Burton. See Burton, 365 U.S. at 724, 81 S.Ct. at 861.

Similarly, on a fiscal score, while YRC receives tax credits from the State, YRC does not enjoy the State's tax-exempt status. Indeed, much of the revenue that the State gains from YRC is derived from taxes paid by YRC, its patrons, and its workers. To be sure, the State gains greater revenues if YRC prospers. If this link were sufficient to forge a symbiotic relationship between YRC and the State, however, the actions of every successful corporation within the State would qualify as state action. See Roberts v. Louisiana Downs, Inc., 742 F.2d 221, 225 (5th Cir.1984) (receipt of substantial revenues by state from private actor's business does not create symbiotic relationship between private actor and state).

Lastly, Hadges argues that the State's regulatory control over YRC satisfies the symbiotic relationship test. Subsequent to Burton, however, the Supreme Court enunciated the close nexus test as the standard for determining whether state regulatory control qualifies as state action. See Jackson, 419 U.S. at 351, 95...