Jdc Management, LLC v. Reich, Case No. 1:08-cv-760.

Decision Date24 July 2009
Docket NumberCase No. 1:08-cv-760.
Citation644 F.Supp.2d 905
PartiesJDC MANAGEMENT, LLC, Plaintiff, v. Tom REICH, Michael G. Petersen, and Scott Bowen, the Commissioner of State Lottery, an officer of the State of Michigan, Defendants.
CourtU.S. District Court — Western District of Michigan

Gregory R. Todd, David T. Bowen PC, Muskegon, MI, for Plaintiff.

Jessica L. Hodgson, MI Dept. Attorney General, Lansing, MI, for Defendants.

Denying the Plaintiff's Application for a Preliminary Injunction; Granting the FRCP 12(b)(6) Motion to Dismiss the Complaint for Failure to State a Claim

Denying w/o Prejudice as Moot the FRCP 12(b)(1) Motion to Dismiss for Lack of Standing; Terminating and Closing the Case

PAUL L. MALONEY, Chief Judge.


This civil-rights action arises out of the Michigan Lottery Commission ("Commission")'s denial of temporary charitablegaming event license applications. Invoking 42 U.S.C. § 1983, JDC Management, LLC ("JDC") claims that the Commission violated its constitutional right to the equal protection of the laws by denying the application of anyone who indicated a plan to hire JDC or JDC's premises for its event. Unlike most equal-protection plaintiffs, JDC does not claim to be a member of a readily-cognizable group, such as a racial or ethnic group. Instead, JDC necessarily relies on the "class of one" theory of equal protection recognized in Village of Willowbrook v. Olech, 528 U.S. 562, 120 S.Ct. 1073, 145 L.Ed.2d 1060 (2000) (p.c.) and refined in Engquist v. Oregon Dep't of Ag., 553 U.S. ___, 128 S.Ct. 2146, 170 L.Ed.2d 975 (2008) (Roberts, C.J.).

The Commission has persuaded the court that there existed a manifestly rational basis for employing this policy of license denials to further a legitimate State interest: protecting the public and the integrity and reputation of charitable gaming in Michigan. Accord Durham v. Louisiana State Racing Comm'n, 458 So.2d 1292, 1295 (La.1984) ("Louisiana has a genuine and legitimate interest in regulating horse racing.") (citing Barry v. Barchi, 443 U.S. 55, 99 S.Ct. 2642, 61 L.Ed.2d 365 (1979) (White, J.) (N.Y. statute authorizing summary suspension of harness-racing trainers without a pre-suspension hearing did not violate the Equal Protection or Due Process Clauses)). Cf. Wojcik v. Mass. State Lottery Comm'n, 300 F.3d 92, 105 (1st Cir.2002) (affirming dismissal of class-of-one selective-enforcement claim) ("As for appellee's allegedly irrational and arbitrary motivation, Wojcik contends that they made the decision to terminate him in order to protect the `public perception' of the Lottery. [T]here is simply nothing irrational about acting on that basis. The . . . Lottery depends on a widely held belief that the game is fairly and honestly administered. People will not play the game (and no lottery revenues will be raised) if everyone believes that `the fix is in.' Thus, when Lottery Commission officials were notified that one of their offices appeared to be rife with scandal and corruption, the responsible officials rationally decided to take swift and visible action to restore the public's confidence.").

It is "`constitutionally irrelevant whether this reasoning'"—protecting public confidence in the honesty and regularity of Michigan gaming—"in fact underlay the . . . decision,'" Craigmiles v. Giles, 312 F.3d 220, 224 (6th Cir.2002) (quoting R.R. Ret. Bd. v. Fritz, 449 U.S. 166, 179, 101 S.Ct. 453, 66 L.Ed.2d 368 (1980) (quoting Flemming v. Nestor, 363 U.S. 603, 612, 80 S.Ct. 1367, 4 L.Ed.2d 1435 (1960))) (emphasis added), so long as a rational basis existed, in theory, for finding that the challenged decision was rationally related to some legitimate governmental interest. See, e.g., Thurmond v. Block, 640 F.Supp. 588, 594 (W.D.Tenn.1986) (Todd, J.) ("[I]t appears to this Court that plausible reasons for the nonprofit requirement of § 2012(I) exist. Because it is constitutionally irrelevant whether this reasoning in fact underlay that requirement, this Court's inquiry need go no further.") (internal citations & quote marks omitted).1

The record conclusively shows a rational basis to believe that a policy of denying all applications listing JDC as operator/lessor for an event furthered the Commission's legitimate interest in protecting the public, protecting charities, and preserving public confidence in the integrity of charitable gaming in Michigan. JDC is owned by Jennifer Allen, who was married to Mike Allen during the relevant time period (and is, so far as the record reflects, still married to him).2 The Commission viewed that relationship against the backdrop of Mike Allen's recent history as an operator of charitable-gaming events in Michigan. An investigation of his former company, All-In Entertainment ("All-In"), had revealed evidence that Mike and his employees repeatedly (and sometimes knowingly or intentionally) violated Michigan's Traxler-McCauley-Law-Bowman Bingo Act ("the Bingo Act"), M.C.L. § 432.101 et seq., and attendant regulations, in 2006 and 2007. The Commission sent Mike "Notices of Intent to Commence Formal Proceedings" against All-In in October and November 2007, laying out in detail the evidence of the alleged violations, and All-In's counsel met with Commission officials in December 2007. The meeting led to an agreement wherein the Commission refrained from adverse legal or administrative action, in exchange for All-In's voluntary surrender of its Michigan charitable-gaming license. In January 2008, Mike signed the agreement, surrendering All-In's license effective May 31, 2008.3

In addition, the Commission considered Mike Allen's own statements to Commission officials, shortly before the license denials. Significantly, he repeatedly asked the officials whether his wife or other relatives could take over operation of All-In or operate a successor company to do the same charitable-gaming work in Michigan. He indicated his desire to stay involved in the field himself, rather than leaving All-In's costly gaming equipment unused.

Moreover, the timing of certain key events naturally heightened the Commission's suspicion that Mike Allen was using JDC as a way of operating charitable-gaming events in Michigan despite his surrender of his license to operate such events through All-In. Just one month before All-In's license surrender date, Jennifer incorporated JDC, on April 30, 2008. Over the next week, two charitable organizations applied for temporary gaming licenses and listed JDC / Deuces Wild as the intended location of the event. Sixteen days before the surrender, JDC leased the Grand Rapids establishment known as "Deuces Wild", on May 14, 2008. If the licenses had been approved, JDC's first gaming events were scheduled to take place just days after the termination of All-In's license.

For the reasons that follow, the court will deny JDC's application for a preliminary injunction and dismiss the complaint under FED.R.CIV.P. 12(b)(6) for failure to state a claim.4

First, the court holds that the "class of one" theory does not apply in this situation, where the Commission had to make a decision that was necessarily "subjective and individualized, resting on a wide array of factors that are difficult to articulate and quantify." Engquist v. Oregon Dep't of Agriculture, 553 U.S. ___, 128 S.Ct. 2146, 170 L.Ed.2d 975 (2008), nominally held only that the class of one theory does not apply to decisions made by government in its role as employer. But its rationale strongly suggests that the class-of-one theory is also unavailable in other contexts where government officials must make subjective discretionary decisions, e.g., in its role as a sovereign and regulator.

Sister courts around the country are increasingly taking this view, as in Crippen v. Town of Hempstead, 2009 WL 803117 (E.D.N.Y. Mar. 25, 2009), which declared without qualification,

In addition to the two elements set forth [in Willowbrook v. Olech, 528 U.S. 562, 120 S.Ct. 1073, 145 L.Ed.2d 1060 (2000)], the Supreme Court recently set forth another requirement for plaintiffs bringing class of one claims. [S]pecifically . . . such plaintiffs must show that the differential treatment received resulted from non-discretionary state action.

Crippen, 2009 WL 803117 at *4 (emphasis added). See also Seymour's Boatyard, Inc. v. Town of Huntington, 2009 WL 1514610 (E.D.N.Y. June 1, 2009) (extending Engquist to bar use of the class-of-one theory to challenge town's revocation of license to operate a moor and launch from a town beach); Tarantino v. City of Hornell, 615 F.Supp.2d 102, 117 and n. 11 (W.D.N.Y.2009) (extending Engquist to bar class-of-one challenge to town code provisions governing rental property, due to the degree of discretion involved); Upthegrove v. Holm, 2009 WL 1296969, *1 (W.D.Wis. May 7, 2009) (Crabb, J.) (holding that Engquist's rationale precludes application of class-of-one theory in context of prison employee's decision regarding whether inmate could wear jacket at a particular time); Bissessur v. Indiana Univ. Bd. of Trustees, 2008 WL 4274451, *9 (S.D.Ind. Sept. 10, 2008) (extending Engquist to bar use of the class-of-one theory to challenge school's decision to expel student); Siao-Pao v. Connolly, 564 F.Supp.2d 232, 245 (S.D.N.Y.2008) (extending Engquist to bar class-of-one challenge to parole board's decision to deny parole, because of the necessarily subjective and individualized nature of such decisions); Harmon v. St. Louis Cty., 2009 WL 880024 (E.D.Mo. Mar. 30, 2009) (dismissing claim that county violated equal protection by treating plaintiff worse than others who had been in automobile accidents with a county police officer, stating broadly, "a `class of one' theory of equal protection is inapplicable in a context that involves discretionary decisionmaking.").5 6

On this view, JDC's class-of-one equal protection claim is barred as a matter of law, without reference to...

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