In re Will Rogers Jockey & Polo Club, Inc.
| Decision Date | 13 March 1990 |
| Docket Number | Bankruptcy No. 89-00070-C,Adv. No. 89-0290-C. |
| Citation | 111 BR 948 |
| Parties | In re WILL ROGERS JOCKEY & POLO CLUB, INC., Debtor. WILL ROGERS JOCKEY & POLO CLUB, INC., Plaintiff, Caveat Capital Corporation, Intervening Plaintiff, v. OKLAHOMA HORSE RACING COMMISSION, Defendant. |
| Court | U.S. Bankruptcy Court — Northern District of Oklahoma |
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James R. Hicks and Leslie A. Kissinger, Tulsa, Okl., for plaintiff.
Neal Leader, Asst. Atty. Gen., Oklahoma City, Okl., for defendant.
On March 2, 1990, the Court heard the cross motions for summary judgment filed by Will Rogers Jockey & Polo Club, Inc. ("Will Rogers"), Plaintiff herein, and the Oklahoma Horse Racing Commission ("Racing Commission"), Defendant herein. After considering the evidence and the arguments and authorities submitted by counsel, the Court makes the following findings of fact and conclusions of law.
On January 17, 1989, Will Rogers filed its petition for relief under Chapter 11 of the Bankruptcy Code commencing this bankruptcy case. Will Rogers owns and operates a facility in Claremore, Oklahoma, consisting in large part of a horse racing track ("Will Rogers Downs"). On May 18, 1989, Will Rogers filed in this case a plan of reorganization which the Court has neither approved nor disapproved. On June 1, 1989, pursuant to the proposed plan of reorganization, Will Rogers submitted an application to the Racing Commission for approval of an organizational license to conduct pari-mutuel horse racing at Will Rogers Downs in 1990. After hearings before the Racing Commission on July 19 and 20, 1989, Will Rogers was allowed to amend its racing application. Will Rogers submitted its amended racing application to the Racing Commission on July 31, 1989. On August 17, 1989, the Racing Commission conducted a hearing on the amended racing application and orally denied the application. On September 21, 1989, the Racing Commission issued its written denial of the racing application. On September 29, 1989, Will Rogers initiated this adversary proceeding by filing a Complaint for Injunctive and Declaratory Relief against the Racing Commission, which Complaint has subsequently been amended.
In its Amended Complaint, Will Rogers requests that the Court enter judgment declaring that the Racing Commission's denial of its racing application (1) violated 11 U.S.C. § 525,1 (2) unduly interfered with the aims and intents of Will Rogers' reorganization and rehabilitation, and (3) was void as not authorized by the Oklahoma Horse Racing Act. The Amended Complaint further requests that the Court order the Racing Commission to grant Will Rogers' racing application or that the Court itself approve the application. Finally, the Amended Complaint requests that the Court enjoin the Racing Commission from arbitrary, capricious and unduly burdensome conduct designed to hinder Will Rogers' reorganization and rehabilitation.
In its motion to dismiss the Amended Complaint, converted by the Court to a motion for summary judgment, the Racing Commission seeks denial of the Amended Complaint on the grounds that the Court lacks both personal and subject matter jurisdiction and, further, that the action of the Racing Commission did not violate any provision or policy of the Bankruptcy Code. In its cross motion for summary judgment, Will Rogers requests that the Court grant the relief sought in its Amended Complaint on the grounds stated therein, except that Will Rogers does not ask this Court to rule on whether the Racing Commission exceeded its statutory authority in denying its racing application.
The Court must first address the issue of its personal jurisdiction to hear the claims brought against the Racing Commission. More precisely, the issue is whether the Racing Commission, an agency of the State of Oklahoma, is immune from suit on these claims in federal court under the Eleventh Amendment of the United States Constitution. U.S. CONST. amend. XI;2 Hans v. Louisiana, 134 U.S. 1, 10 S.Ct. 504, 33 L.Ed. 842 (1890).
The Court holds that it does not have personal jurisdiction to hear Will Rogers' claim that the Racing Commission exceeded its statutory authority in denying Will Rogers' racing application. This claim is founded on state law and, as such, may not be heard in federal court under the Eleventh Amendment. Pennhurst State School and Hospital v. Halderman, 465 U.S. 89, 121, 104 S.Ct. 900, 919, 79 L.Ed.2d 67 (1984); In re Begley, 46 B.R. 707, 717 (E.D.Pa.1984).
The Court holds that it does have personal jurisdiction to hear Will Rogers' claim brought under 11 U.S.C. § 525. It is undisputed that the Racing Commission is a "governmental unit" as defined in 11 U.S.C. § 101(26) and as employed in 11 U.S.C. § 106(c) and § 525. While the issue is not free of doubt, the Court believes that Congress has the authority to limit the Eleventh Amendment immunity of the states pursuant to 11 U.S.C. § 106(c).3Hoffman v. Connecticut Dept. of Income Maintenance, ___ U.S. ___, 109 S.Ct. 2818, 106 L.Ed.2d 76 (1989);4Pennsylvania v. Union Gas Co., ___ U.S. ___, 109 S.Ct. 2273, 105 L.Ed.2d 1 (1989), wherein a plurality held that Congress acting under the Commerce Clause may abrogate Eleventh Amendment immunity; and Atascadero State Hospital v. Scanlon, 473 U.S. 234, 105 S.Ct. 3142, 87 L.Ed.2d 171 (1985), wherein a majority held that Congress acting under the 14th Amendment may abrogate Eleventh Amendment immunity. In Hoffman, the plurality construed 11 U.S.C. § 106(c) and held that Congress's abrogation of state's Eleventh Amendment immunity thereunder did not extend to suits for money recovery where the state had not filed a claim in the bankruptcy case. The Supreme Court reasoned that the provisions of § 106(c)(1) were limited by (c)(2), which speak only of determination of issues and do not mention monetary recovery. Hoffman, 109 S.Ct. at 2822-23. The Supreme Court went on to say that "the language of § 106(c)(2) is more indicative of declaratory and injunctive relief than of monetary recovery." Id. at 2823. In the instant case, Will Rogers seeks only declaratory and injunctive relief under 11 U.S.C. § 525 and, therefore, the Court finds that it has personal jurisdiction over the Racing Commission with regard to this claim. See also Elsinore Shore Associates v. New Jersey Division of Alcoholic Beverage Control, 66 B.R. 708, 714 (Bankr.D.N.J.1986).
The Court also has personal jurisdiction to hear Will Rogers' claim that the Racing Commission's denial of its racing application unduly interfered with its reorganization and rehabilitation under Chapter 11 in violation of the Supremacy Clause of the United States Constitution. U.S. CONST. art. VI, cl. 2;5 Perez v. Campbell, 402 U.S. 637, 91 S.Ct. 1704, 29 L.Ed.2d 233 (1971); Ex Parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908); Edelman v. Jordan, 415 U.S. 651, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974); and Elsinore Shore, 66 B.R. at 714. In Perez, the Supreme Court held an Arizona statute unconstitutional because it violated the fresh start policy of the federal bankruptcy laws by withholding driving privileges from bankruptcy debtors who had not paid certain discharged debts.
Secondly, the Court must address its jurisdiction over the subject matter of Will Rogers' Amended Complaint. The Court need not discuss the claim that the Racing Commission exceeded its statutory authority since, as stated above, the Court has no personal jurisdiction to hear this claim. The Court holds that it has core jurisdiction under 28 U.S.C. § 157(b)(2)(A) and (O) to hear and decide Will Rogers' claims under 11 U.S.C. § 525 and the Supremacy Clause. Elsinore Shore, 66 B.R. at 713-14.
Finally, the Court reaches the merits of Will Rogers' claims under 11 U.S.C. § 525 and the Supremacy Clause. The parties agree and the Court finds that summary judgment is appropriate because the parties do not dispute any material facts but simply disagree over the legal conclusions to be drawn from the facts. The parties have submitted the transcripts of all relevant hearings before the Racing Commission and much additional undisputed evidence. The Court must determine, in light of such evidence, if the Racing Commission's denial of Will Rogers' racing application violated 11 U.S.C. § 525 or conflicted with the purposes of the Bankruptcy Code in violation of the Supremacy Clause.
The Court finds that the Racing Commission denied Will Rogers' racing application on two principal grounds: (1) Will Rogers lacked financial integrity and apparent hope of financial success because it would not be able to consummate its proposed plan of reorganization,6 and (2) the Oklahoma horse racing market was "saturated". While the Racing Commission mentioned additional grounds for its decision, the Court finds that but for the two grounds stated above the Racing Commission would have granted the racing application. The Court further finds that the Racing Commission would have denied the racing application on either of the two grounds stated above, notwithstanding the existence of any other ground.
Given the conclusions stated above, the Court holds that the Racing Commission did not violate 11 U.S.C. § 525 in denying Will Rogers' racing application. In essence, 11 U.S.C. § 525 prohibits the Racing Commission from denying or discriminating against Will Rogers' racing application solely because Will Rogers (1) is a debtor-in-possession in this case, (2) has been insolvent, or (3) has not paid a discharged or dischargeable debt. As explained below, the Racing Commission did not deny or discriminate against Will Rogers' racing application in any of these ways.
The Racing Commission properly examined the financial integrity and hope of financial success of Will Rogers. Both the legislative history and case law are quite clear that, under 11...
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