Tomasino v. Inc. Vill. of Islandia (In re Suffolk Reg'l Off-Track Betting Corp.)

Decision Date27 September 2018
Docket NumberCase No. 12-43503-CEC,Adv. Pro. No. 18-1033-CEC
Citation591 B.R. 127
Parties IN RE SUFFOLK REGIONAL OFF-TRACK BETTING CORPORATION, Debtor. Jennifer Tomasino, Kevin Montano, Richard Meyer, and Apryl L. Meyer, Plaintiffs, v. Incorporated Village of Islandia, Board of Trustees of the Incorporated Village of Islandia, Delaware North Islandia Properties, LLC aka Delaware North, and Suffolk Regional Off-Track Betting Corporation, Defendants.
CourtU.S. Bankruptcy Court — Eastern District of New York

Anton J. Borovina, Esq., Law Office of Anton J. Borovina, 225 Broadhollow Road, Ste. 303, Melville, NY 11747, Paul Sabatino II, Esq., 1617 New York Ave., Huntington Station, NY 11746, Attorney for Plaintiffs

Christopher F. Graham, Esq., Kelly Robreno Koster, Esq., Sarah H. Morrissey, Esq., Eckert Seamans Cherin & Mellott, LLC, 10 Bank St Suite 700, White Plains, NY 10606, Attorneys for Suffolk Regional Off-Track, Betting Corporation

Jarrett M. Behar, Esq., Michael Stanton, Esq., Sinnreich Kosakoff & Messina, LLP, 267 Carleton Avenue, Ste. 301, Central Islip, NY 11722, Attorneys for Incorporated Village of Islandia and Board of Trustees of the Incorporated Village of Islandia

Charles W. Malcomb, Esq., Daniel A. Spitzer, Esq., Richard L. Weisz, Esq., Carmine J. Castellano, Esq., Hodgson Russ, LLP, 140 Pearl Street, Buffalo, NY 14202, Attorneys for Delaware North Islandia Properties, LLC

Anthony S. Guardino, Esq., John C. Stellakis, Esq., Farrell Fritz, P.C., 1320 RXR Plaza, Uniondale, NY 11556, Attorneys for Delaware North Islandia Properties, LLC

DECISION DISMISSING THIRD CAUSE OF ACTION

CARLA E. CRAIG, Chief United States Bankruptcy Judge

This matter comes before the Court on the joint motion of the Incorporated Village of Islandia (the "Village"), the Board of Trustees of the Incorporated Village of Islandia (the "Board"), Delaware North Islandia Properties, LLC aka Delaware North ("Delaware North"), and Suffolk Regional Off-Track Betting Corporation ("Suffolk OTB"), seeking to dismiss the third cause of action of a complaint filed by Jennifer Tomasino, Kevin Montano, Richard Meyer, and Apryl L. Meyer (collectively, the "Plaintiffs"), alleging that the Board violated Municipal Home Rule Law ("MHRL") § 23(2)(f) by adopting Local Law No. 3-2017 without a mandatory referendum. For the reasons below, Local Law 3-2017 does not abolish, transfer, or curtail the power of any elective officer, and therefore was not subject to mandatory referendum requirement imposed by MHRL § 23(2)(f). As such, that claim must be dismissed.

JURISDICTION

This Court has jurisdiction of this proceeding pursuant to 28 U.S.C. § 1334(b), and the Eastern District of New York standing order of reference dated August 28, 1986, as amended by order dated December 5, 2012. This non-core proceeding is related to these bankruptcy cases. Publicker Indus. Inc. v. United States (In re Cuyahoga Equip. Corp.), 980 F.2d 110, 114 (2d Cir. 1992) ("The test for determining whether litigation has a significant connection with a pending bankruptcy proceeding is whether its outcome might have any ‘conceivable effect’ on the bankrupt estate."). A bankruptcy judge may hear a non-core proceeding that is related to a bankruptcy case. 28 U.S.C. § 157(c)(1). Absent consent of the parties to entry of a final order, the bankruptcy judge is directed to submit proposed findings of fact and conclusions of law to the district court, and any final order or judgment shall be entered by the district judge after considering the bankruptcy judge's proposed findings of fact and conclusions and after reviewing de novo those matters to which any party has timely and specifically objected. Id.

Although the Plaintiffs have not consented to entry of judgment by this Court (see the Plaintiff's Statement of Non-Consent to Entry of Judgment (ECF. No. 45) )1 , this Court may enter an order dismissing Plaintiff's third cause of action because such an order is interlocutory. See O'Toole v. McTaggart (In re Trinsum Group, Inc.), 467 B.R. 734, 738 (Bankr.S.D.N.Y.2012) ("[B]oth before and after Stern v. Marshall, [564 U.S. 462, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011) ] it is clear that the bankruptcy court may handle all pretrial proceedings, including the entry of an interlocutory order dismissing fewer than all of the claims in an adversary complaint.").

BACKGROUND

On May 11, 2012, Suffolk OTB filed a petition for relief under Chapter 9 of the Bankruptcy Code. Suffolk OTB is a public benefit corporation organized under Articles V and VI of the New York Racing, Pari-Mutuel Wagering and Breeding Law (the "Racing Law"). (Disclosure Statement at 13, Case No. 12-43503-CEC, ECF No. 298.)

On September 11, 2014, Suffolk OTB filed a second amended plan and second amended disclosure statement (the "Disclosure Statement"). (Case No. 12-43503-CEC, ECF Nos. 297, 298.) On that same date, the Disclosure Statement was approved. (Case No. 12-43503-CEC, ECF No. 300). Following a hearing on October 22, 2014, the Second Amended Plan for the Adjustment of Debts of Suffolk Regional Off-Track Betting Corporation (the "Plan") (Case No. 12-43503-CEC, ECF No. 318) was confirmed (Case No. 12-43503-CEC, ECF No. 326).

The Plan provides for construction of a video lottery terminal facility (the "VLT Facility"), and the funding and feasibility of the Plan depends on its revenues. (Plan at 1-2, Case No. 12-43503-CEC, ECF No. 318.) The Plan contemplated that the VLT Facility would be constructed in Medford, New York. (Plan at 1-2, Case No. 12-43503-CEC, ECF No. 318.) However, Suffolk OTB subsequently decided to build the VLT Facility in Islandia, New York at the site of the former Marriott Hotel located at 3635 Express Drive North, Islandia, New York 11749 (the "Location"). (Status Ltr., Case No. 12-43503-CEC, ECF No. 496.)

On February 12, 2018, the Plaintiffs commenced this action in New York State Supreme Court, Suffolk County (the "State Court"), against the Village, the Board, and Delaware North, challenging Local Law No. 3-2017, a zoning amendment enacted by the Village and the Board, which provided the statutory basis for Delaware North (Suffolk OTB's operating partner) to obtain a permit for the construction and operation of the VLT Facility. Suffolk OTB moved to intervene in the action, and upon the State Court's decision and order authorizing Suffolk OTB to intervene as a defendant, Suffolk OTB removed the action to this Court.

The following are the relevant allegations of the complaint.

In November 1994, the Board approved and adopted a zoning master plan entitled the "Comprehensive Plan for the Village of Islandia, Suffolk County, New York," (the "Master Plan") which was applicable to the territorial jurisdiction of the Village, and which modified the existing zoning designations into new specialized zones, zoning districts, and district boundaries. (Compl. ¶¶ 11, 13, ECF No. 10-1.) One new district created by the Master Plan was the office/industrial district (the "District"), to permit office uses and accessory facilities. (Compl. ¶ 14, ECF No. 10-1.) Hotels were "a permitted use by special exception approved by the [ ] Board" and were not permitted to have multiple uses. (Compl. ¶¶ 14, 15, ECF No. 10-1.)

The Board also adopted Article X of Chapter 177 of the Village of Islandia Code (the "Village Code") in furtherance of the Master Plan, which prescribed permitted and non-permitted office and industrial uses of land within the District. (Compl. ¶ 17, ECF No. 10-1.) Chapter 177 of the Village Code provided that land in the District may be used as a hotel if the Board issued a special permit, which was subject to a public hearing. (Compl. ¶ 17, ECF No. 10-1.) It also prohibited any land in the District to be used for a gaming purpose. (Compl. ¶ 18, ECF No. 10-1.)

In 1989, the Board approved a special permit authorizing the construction and operation of a hotel (the "Hotel") at the Location. (Compl. ¶ 19, ECF No.10-1.) Delaware North is the current owner of the Hotel and the Location. (Compl. ¶ 20, ECF No. 10-1.)

The complaint alleges that, in 2016, the Board and Delaware North "conspired amongst themselves to formulate a plan and scheme to enter into a contract whereby the Village would agree to permit Delaware North [and its affiliates] to use the Hotel as a video lottery terminal ... facility in exchange for Delaware North agreeing to make substantial annual payments to the Village." (Compl. ¶ 22, ECF No. 10-1.) On March 28, 2016, Delaware North applied for a special permit authorizing the construction and use of the VLT Facility, including an off-track betting simulcast facility, as an accessory use of the Hotel (the "Special Permit Application"). (Compl. ¶ 22, ECF No. 10-1.) Although Delaware North intended for the payments to be a gift to the Village, the Village accepted these payments in exchange for the approval of Delaware North's Special Permit Application. (Compl. ¶¶ 24-27, ECF No. 10-1.)

On August 12, 2016, the Board approved the Special Permit Application and issued the special permit to Delaware North (the "Special Permit"). (Compl. ¶ 28, ECF No. 10-1.) On August 16, 2016, Delaware North and the Village entered into an agreement entitled The Taxpayer Relief Agreement Between the Village of Islandia and Delaware North Islandia Properties, LLC (the "Agreement"), memorializing the agreement of Delaware North to make annual payments to the Village. (Compl. ¶ 30, ECF No. 10-1.)

On September 13, 2016, the Plaintiffs and others commenced an Article 78 proceeding in State Court, Index. No. 2016-8907, challenging the Special Permit granted by the Board to Delaware North. (Compl. ¶ 33, ECF No. 10-1.) On September 7, 2017, the State Court issued a decision and order which, among other things, vacated the Special Permit, finding that the VLT Facility, including the off-track betting simulcast facility, is not a permitted accessory use of a hotel in the District under Chapter 177 of the Village Code. (Compl. ¶ 35...

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