Sterling Suffolk Racecourse, LLC v. Wynn Resorts, Ltd.

• Decision Date: 03 March 2021
• Docket Number: No. 20-1512,20-1512
• Citation: 990 F.3d 31
• Parties: STERLING SUFFOLK RACECOURSE, LLC, Plaintiff, Appellant, v. WYNN RESORTS, LTD.; Wynn MA, LLC ; Stephen Wynn ; Kimmarie Sinatra; Matthew Maddox; FBT Everett Realty, LLC, Defendants, Appellees, Paul Lohnes, Defendant.
• Court: U.S. Court of Appeals — First Circuit

990 F.3d 31

STERLING SUFFOLK RACECOURSE, LLC, Plaintiff, Appellant,

v. WYNN RESORTS, LTD.; Wynn MA, LLC ; Stephen Wynn ; Kimmarie Sinatra; Matthew Maddox; FBT Everett Realty, LLC, Defendants, Appellees,Paul Lohnes, Defendant.

No. 20-1512

United States Court of Appeals, First Circuit.

March 3, 2021

Steven Storch, with whom Edward Dolido, New York, NY, Storch Byrne LLP, David A. Russcol, Inga S. Bernstein, Boston, MA, and Zalkind Duncan & Bernstein LLP were on brief, for appellant.

Peter A. Biagetti, with whom Samuel M. Starr, Boston, MA, Mintz, Levin, Cohn, Ferris, Glovsky, and Popeo, P.C., Mark Holscher, Los Angeles, CA, and Kirkland & Ellis LPP were on brief, for appellees Wynn Resorts Ltd., Wynn MA, LLC, and Matthew Maddox.

Aaron M. Katz, with whom Joshua S. Levy, Ropes & Gray LLP, Christopher Weld, Boston, MA, Christian Kiely, and Todd & Weld LLP were on brief, for appellee FBT Everett Realty, LLC.

James N. Kramer, San Francisco, CA, with whom Douglas H. Meal, Christine E. Hanley, Seattle, WA, and Orrick, Herrington & Sutcliffe LLP were on brief, for appellee Kimmarie Sinatra.

Joshua C. Sharp, with whom Brian T. Kelly, Boston, MA, and Nixon Peabody LLP were on brief, for appellee Stephen Wynn.

Before Lynch, Thompson, and Barron, Circuit Judges.

LYNCH, Circuit Judge.

In 2014, the Massachusetts Gaming Commission (the "Commission") granted a gaming license pursuant to state law to Wynn MA, LLC, a wholly owned subsidiary of Wynn Resorts, Ltd. (collectively "Wynn"). That license said Wynn would construct a casino in Everett, Massachusetts. Mohegan Sun Massachusetts ("Mohegan") was the disappointed alternative applicant. Mohegan had proposed a casino facility in East Boston. Sterling Suffolk Racecourse, LLC ("Sterling"), which owned that East Boston site, was also disappointed by the Commission's licensing decision.

On September 17, 2018, Sterling brought this action under the civil portion of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1964(c), against: (1) Wynn MA, LLC, (2) Wynn Resorts, Ltd., (3) Stephen Wynn, the founder and former CEO of Wynn Resorts, (4) Kimmarie Sinatra, the former General Counsel and Executive Vice President of Wynn Resorts, (5) Matthew Maddox, the former Wynn Resorts President and CFO and its current CEO, and current President and Treasurer of Wynn, MA, and (6) FBT Everett Realty, LLC, the owner of the Everett site for the Wynn casino. Sterling alleged these parties conspired to deprive Mohegan of a gaming license, costing Sterling the opportunity to lease its East Boston property to Mohegan.¹

The district court granted defendants' motion to dismiss. Sterling Suffolk Racecourse, LLC v. Wynn Resorts, Ltd., 419 F. Supp. 3d 176, 196 (D. Mass. 2019). We conclude that the case was properly dismissed, but for different reasons. Sterling has not and cannot meet the causation of injury requirements set forth at 18 U.S.C. § 1964(c).

I.

The district court's memorandum opinion and order comprehensively describes Sterling's allegations and the Massachusetts gaming licensing process.²

Sterling Suffolk Racecourse, LLC, 419 F. Supp. 3d at 180-89. Briefly, in 2011 Massachusetts created a competitive application process for exclusive licenses to operate casinos in Massachusetts. An Act Establishing Expanded Gaming in the Commonwealth, 2011 Mass. Acts ch. 194 (largely codified at Mass. Gen. Laws ch. 23K). It gave the Commission the authority to grant a single exclusive gaming license for each of three regions in Massachusetts. Mass. Gen. Laws ch. 23K §§ 2, 19. Under the Massachusetts law, applicants must first show they meet the statutory and regulatory qualifications to operate a casino. See id. § 19 ; 205 C.M.R. 110.01, 115.00. Then, in a second step, they must demonstrate that their project better serves the interests of the local area and the Commonwealth of Massachusetts compared to the proposals of any other qualified applicants. See Mass. Gen. Laws ch. 23K § 15. If none of the applications in a given region adequately demonstrate their benefit to the local area and the Commonwealth, state law directs the Commission not to approve any application. Id. § 19(a).

In 2013 Mohegan and Wynn both applied for an exclusive license to construct a casino in Eastern Massachusetts. Wynn reached a tentative agreement with FBT Everett Realty, LLC to use its Everett property for Wynn's proposed casino. Mohegan entered into an agreement that it would in the future lease Sterling's East Boston location if Mohegan won the exclusive license and other conditions were met.

The Commission found that Wynn MA, LLC and Wynn Resorts were qualified to operate a casino. It also found that the eleven individuals responsible for managing the project, including defendants Stephen Wynn, Kimmarie Sinatra, and Matthew Maddox, were qualified and had demonstrated good moral character. The Commission made the same finding for Mohegan and the individuals listed on its application. In a 35-page report, the Commission then concluded Wynn's proposal better served the interests of the local area and the Commonwealth. On or about November 7, 2014, it granted Wynn a license and denied Mohegan's application.

Later, the Commission revoked Stephen Wynn's good character determination, and imposed a 35 million dollar fine against Wynn Resorts when sexual misconduct allegations against Stephen Wynn came to light. None of the other individuals listed on Wynn's application were affected, and the Wynn project continued without Stephen Wynn's involvement.

Sterling subsequently brought this RICO action to recover the rents and other revenues it alleged it would have earned from a future lease from Mohegan had Mohegan been granted the license. Sterling alleges that to meet the strict regulatory requirements that Massachusetts places on casino operators, defendants concealed the sexual misconduct allegations against Wynn, failed to disclose the criminal records of project participants, provided false or misleading information about the true ownership of the project location, and paid kickbacks to local officials. Sterling claims that if defendants had acted lawfully during the application process, the Wynn application would have been denied and the Mohegan application likely would have been approved. Assuming nothing triggered the provisions that excused performance in Mohegan's agreement to lease Sterling's East Boston site if Mohegan received the gaming license, Sterling states it would then have earned at least $3.465 billion in rental revenue over a period of 99 years.

The district court granted defendants' motion to dismiss on the grounds that Sterling had failed to allege a continuous pattern of racketeering behavior by any of the defendants. Sterling Suffolk Racecourse, 419 F. Supp. 3d at 194-95. Sterling brought this timely appeal.³

II.

This court "review[s] the grant of a motion to dismiss de novo." Abdisamad v. City of Lewiston, 960 F.3d 56, 59 (1st Cir. 2020) (quoting Starr Surplus Lines Ins. Co. v. Mountaire Farms Inc., 920 F.3d 111, 114 (1st Cir. 2019) ). "We are not bound by the district court's reasoning but, rather, may affirm an order of dismissal on any ground evident from the record." MacDonald v. Town of Eastham, 745 F.3d 8, 11 (1st Cir. 2014) (citing Haley v. City of Bos., 657 F.3d 39, 46 (1st Cir. 2011) ).

Because Sterling has failed to make a threshold showing that it suffered any direct injury entitling it to RICO relief, we affirm the dismissal of the complaint.

RICO allows a private civil claim by "[a]ny person injured in his business or property by reason of a violation of [the criminal RICO provisions]." 18 U.S.C. § 1964(c). Three Supreme Court cases interpret "by reason of" to require that a plaintiff in a civil RICO action show that the defendant's actions were "not only ... a ‘but for’ cause of [plaintiff's] injury, but ... the proximate cause as well." Holmes v. Sec. Inv. Prot. Corp., 503 U.S. 258, 268, 112 S.Ct. 1311, 117 L.Ed.2d 532 (1992) ; see Hemi Group, LLC v. City of N.Y., 559 U.S. 1, 9, 130 S.Ct. 983, 175 L.Ed.2d 943 (2010) (citing Holmes, 503 U.S. at 268, 271, 274, 112 S.Ct. 1311 ); Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 461, 126 S.Ct. 1991, 164 L.Ed.2d 720 (2006). The "central question" in evaluating proximate causation in the RICO context "is whether the alleged violation led directly to the plaintiff's injuries." Anza, 547 U.S. at 461, 126 S.Ct. 1991.

The Supreme Court's most recent decision in this area, Hemi, states, "[a] link [between the RICO predicate acts and plaintiff's injuries] that is ‘too remote,’ ‘purely contingent,’ or ‘indirec[t]’ is insufficient" to show proximate cause. 559 U.S. at 9, 130 S.Ct. 983 (quoting Holmes, 503 U.S. at 271, 274, 112 S.Ct. 1311 ). This requirement reflects "[t]he general tendency of the law, in regard to damages at least, ... not to go beyond the first step." Id. at 10, 130 S.Ct. 983 (quoting Holmes, 503 U.S. at 271-72, 112 S.Ct. 1311 ). Relatedly, the Hemi court found it highly "relevant to the RICO ‘direct relationship’ requirement ... whether better situated plaintiffs would have an incentive to sue." Id. at 11-12, 130 S.Ct. 983 (citing Holmes, 503 U.S. at 269-70, 112 S.Ct. 1311 ).

This court has identified in these Supreme Court cases "three functional factors with which to assess whether proximate cause exists under RICO." In re Neurontin Mktg. & Sales Pracs. Litig., 712 F.3d 21, 35-36 (1st Cir. 2013) (citing Holmes, 503 U.S. at 269-70, 112 S.Ct. 1311 ). These are (1) "concerns about proof" because "the less direct an injury is, the more difficult it becomes to ascertain the amount of a plaintiff's damages attributable to the violation, as distinct from other, independent, factors," id. at 36 (quoting Holmes, 503 U.S. at 269, 112 S.Ct. 1311 ); (2) "concerns about administrability and the avoidance of multiple recoveries," id.; and (3) "the societal interest in deterring illegal conduct and whether that interest would be served in a...