Trump Hotels & Casino Resorts v. Mirage Resorts

• Citation: 963 F.Supp. 395
• Decision Date: 01 May 1997
• Docket Number: Civil Action No. 97-1371.
• Parties: TRUMP HOTELS & CASINO RESORTS, INC., Plaintiff, v. MIRAGE RESORTS INC., et al., Defendants.
• Court: U.S. District Court — District of New Jersey

963 F.Supp. 395

TRUMP HOTELS & CASINO RESORTS, INC., Plaintiff, v. MIRAGE RESORTS INC., et al., Defendants.

Civil Action No. 97-1371.

United States District Court, D. New Jersey.

May 1, 1997.

Herbert J. Stern, Stephen M. Greenberg, Stern & Greenberg, Roseland, NJ, for Plaintiff.

Benjamin Clarke, DiCotiis, Fitzpatrick & Gluck, Teaneck, NJ, for Mirage Resorts, Inc.

Peter Verniero, Attorney General of New Jersey, Jeffrey J. Miller, Assistant Attorney General of New Jersey, Richard J. Hughes, Justice Complex, Trenton, NJ, for State of N.J., N.J. Dept. of Transp., N.J. Transp. Trust Fund Authority, John J. Haley, Jr., Steven Hansen.

Theodore W. Geiser, Kevin J. Coakley, Connell, Foley & Geiser, L.L.P., Roseland, NJ, Michael R. Cole, Riker, Danzig, Scherer, Hyland & Perretti, L.L.P., Morristown, NJ, for Casino Reinvestment Development Authority, James B. Kennedy.

George R. Gilmore, Guy P. Ryan, Gilmore & Monahan, Toms River, NJ, South Jersey Transportation Authority and James A. Crawford

ORLOFSKY, District Judge:

Plaintiff, Trump Hotels & Casino Resorts, Inc. ("Trump"), has brought this action against Mirage Resorts Inc. ("Mirage"), the State of New Jersey, various state agencies, and the individuals in charge of those agencies in their official capacities, seeking a declaratory judgment and an injunction barring the construction of a highway and tunnel project, and the development of the Huron North Redevelopment Area (the "H-Tract"), both of which are, or are planned to be located in Atlantic City, New Jersey. The proposed highway, to be known as the Westside-Connector, is intended to link the Atlantic City Expressway with Brigantine Boulevard, and will, if completed, access to, and the development of, the H-Tract.

Based, in part, upon the promised completion of the Westside Connector, defendant, Mirage Resorts, Inc., plans to build a resort complex, including several casinos, on site of the H-Tract. Plaintiff owns three casino hotels in Atlantic City, one of which, Trump's Castle, "is located in the Marina District, in close proximity to the H-Tract." Complaint ¶ 6.

On April 10, Defendants moved to dismiss the complaint for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6). On that same day, defendants filed a complaint in the Law Division of the Superior Court of New Jersey, Atlantic County, seeking a declaratory judgment approving the funding mechanism which Trump challenges in this court as violative of the casino gambling amendment to the New Jersey Constitution. Indeed, Trump seeks declaratory relief on this same state constitutional issue in the seventh count of the complaint filed in this court. Because of the importance and novelty of the issues presented, as well as the pendency of a related state court proceeding in which the same state constitutional issue, one of first impression, is raised, this court established an expedited briefing and argument schedule in this case to decide defendants' motion to dismiss.¹

I. Summary of Trump's Claims

Plaintiff alleges that the defendant, South Jersey Transportation Authority ("SJTA"), will fund the Westside Connector, in part, through the issuance of bonds "repayable from and collateralized by parking tax proceeds collected for use by the [Casino Reinvestment Development Authority (`CRDA')] from all casinos to be located on the H-Tract." Complaint ¶ 48. In addition, plaintiff alleges that SJTA will issue bonds repayable from the "alternative investment tax obligations of all casinos located on the H-Tract." Id.

Trump contends that the contemplated funding scheme for the SJTA bonds violates the New Jersey Constitution, specifically, article IV, section 7, paragraph 2, which governs casino gambling.² Plaintiff further alleges that CRDA and SJTA will not disclose this alleged constitutional infirmity to potential purchasers of the bonds. Therefore, plaintiff claims, in the first count of its complaint, that the issuance of the proposed bonds constitutes an impending violation of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Securities and Exchange Commission Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5.³ Plaintiff seeks a permanent injunction barring the sale of these bonds, absent full disclosure of the alleged state constitutional infirmities of the proposed repayment plan.

Trump alleges in the second count of the complaint that the defendants have failed to comply with the permit requirements of Section 404 of the Clean Water Act ("CWA"), 33 U.S.C. § 1344, and the regulations promulgated thereunder, in connection with the proposed development of the H-tract and the Westside Connector. Similarly, in the third count, Trump alleges that the defendants have not complied with the permit requirements set forth in the Rivers and Harbors Appropriation Act of 1899, 33 U.S.C. § 403, and its associated regulations.

In the fourth count of its complaint, Trump alleges that defendants have not complied with the environmental assessment requirements of the Federal-Aid Highway Act ("FHA"), 23 U.S.C. § 109, and the regulations promulgated thereunder, 23 C.F.R. Part 771. Plaintiff's fifth count claims that the defendants have not met the requirements of the Clean Air Act. 42 U.S.C. § 7506. All federally funded highway projects must comply with the "Transportation Conformity" provisions of 50 C.F.R. Parts 51 and 93 which mandate general compliance with the Regional Transportation and Transportation Improvements Plans adopted pursuant to the Clean Air Act.

On each of the second through fifth counts of the complaint, Trump seeks both a declaratory judgment that compliance with these federal statutes is required, and injunctive relief barring any development until such time as full compliance with these statutes is accomplished.

Trump's final two claims are based on New Jersey law. The sixth count of the complaint alleges violations of the Coastal Area Facility Review Act ("CAFRA"). N.J. Stat. Ann. §§ 13:19-1 to 13:19-21 (West 1991 & Supp. 1997). The seventh and final count of the complaint alleges that the funding scheme for the development of the H-Tract and the construction of the Westside Connector violates the New Jersey Constitution. N.J. Const. art. IV, § 7, ¶ 2. Trump seeks declaratory and injunctive relief under both of its state law causes of action. More specifically, under the final count of the complaint, Trump seeks a declaration that the funding mechanism planned for the SJTA bonds is barred by the New Jersey Constitution.

Defendants have moved to dismiss the complaint for failure to state a claim upon which relief can be granted pursuant to Fed. R.Civ.P. 12(b)(6). Because Trump has not stated a claim for relief under any federal statute or regulation identified in its complaint, those claims will be dismissed. In the interest of comity, this court will decline to exercise supplemental jurisdiction over the plaintiff's state law causes of action. Accordingly, plaintiff's state law claims will be dismissed without prejudice.

II. Standards Governing Dismissal Under Rule 12(b)(6).

On a motion to dismiss pursuant to Fed. R.Civ.P. 12(b)(6), this court must accept all well-pleaded allegations of the complaint as true, and construe those allegations in the light most favorable to the plaintiff. Gomez v. Toledo, 446 U.S. 635, 636 n. 3, 100 S.Ct. 1920, 1921 n. 3, 64 L.Ed.2d 572 (1980); Piecknick v. Pennsylvania, 36 F.3d 1250, 1255 (3d Cir.1994); Jordan v. Fox, Rothschild, O'Brien & Frankel, 20 F.3d 1250, 1261 (3d Cir.1994). Nevertheless, a complaint should be dismissed if, accepting as true all of the facts alleged in the complaint, and drawing all reasonable inferences in the plaintiff's favor, no relief could be granted under any set of facts consistent with the allegations of the complaint. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957). See also Gasoline Sales, Inc. v. Aero Oil Co., 39 F.3d 70, 71 (3d Cir.1994); Markowitz v. Northeast Land Co., 906 F.2d 100, 103 (3d Cir.1990).

III. Discussion

A. The "Purchaser-Seller" Requirement of Rule 10b-5

Defendants contend that Trump's claim under § 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 must be dismissed for lack of standing. In order to bring an action for a violation of Rule 10b-5, a plaintiff ordinarily must be an actual purchaser or seller of the securities at issue. Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 95 S.Ct. 1917, 44 L.Ed.2d 539 (1975) (adopting the rule of Birnbaum v. Newport Steel Corp., 193 F.2d 461 (2d Cir. 1952), in private damages actions under Rule 10b-5). Trump contends that the purchaser-seller rule is inapplicable in suits seeking purely injunctive relief.

The several Circuit Courts of Appeals which have addressed this issue, like the parties before this court, disagree about whether the rule of Blue Chip Stamps applies to suits seeking only injunctive relief. Prior to the Supreme Court's decision in Blue Chip Stamps, the Third Circuit had carved out an exception to the Birnbaum purchaser-seller rule in an action seeking only injunctive relief. Kahan v. Rosenstiel, 424 F.2d 161 (3d Cir.1970). In one post-Blue Chip Stamps case, the Third Circuit noted that "the `purchaser-seller' rule of [Blue Chip Stamps] would now preclude the Kahan suit." Sharp v. Coopers and Lybrand, 649 F.2d 175, 186 n. 15 (3d Cir.1981), overruled in part, on other grounds, In re Data Access Systems Securities Litigation, 843 F.2d 1537 (3d Cir.1988) (in banc). In an earlier case, however, a different panel of the Third Circuit had assumed, without deciding, that a narrow exception to the Birnbaum purchaser-seller requirement might have survived Blue Chip Stamps, "where only injunctive relief is sought to prevent incipient 10b-5 violations." Tully v. Mott Supermarkets, Inc., 540 F.2d 187, 194 (3d Cir.1976) (citing Thomas v. Duralite Co., 524 F.2d 577 (3d Cir.1975)).

The Fifth Circuit has also recognized an...