Trump Hotels & Casino Resorts v. Mirage Resorts

• Decision Date: 02 April 1998
• Docket Number: No. 97-5281.,97-5281.
• Citation: 140 F.3d 478
• Court: U.S. Court of Appeals — Third Circuit
• Parties: TRUMP HOTELS & CASINO RESORTS, INC., Appellant, v. MIRAGE RESORTS INCORPORATED; The State of New Jersey; The New Jersey Department of Transportation; The South Jersey Transportation Authority; The Casino Reinvestment Development Authority; The New Jersey Transportation Trust Fund Authority; John J. Haley, Jr., in his capacity as Acting Commissioner of the New Jersey Department of Transportation; James A. Crawford, in his capacity as Executive Director of the South Jersey Transportation Authority; James B. Kennedy, in his capacity as Executive Director of the Casino Reinvestment Development Authority; Steven Hansen, in his capacity as Executive Director of the New Jersey Transportation Trust Fund Authority.

140 F.3d 478

TRUMP HOTELS & CASINO RESORTS, INC., Appellant, v. MIRAGE RESORTS INCORPORATED; The State of New Jersey; The New Jersey Department of Transportation; The South Jersey Transportation Authority; The Casino Reinvestment Development Authority; The New Jersey Transportation Trust Fund Authority; John J. Haley, Jr., in his capacity as Acting Commissioner of the New Jersey Department of Transportation; James A. Crawford, in his capacity as Executive Director of the South Jersey Transportation Authority; James B. Kennedy, in his capacity as Executive Director of the Casino Reinvestment

Development Authority; Steven Hansen, in his capacity as Executive Director of the New Jersey Transportation Trust Fund Authority.

No. 97-5281.

United States Court of Appeals, Third Circuit.

Argued February 11, 1998.

Decided April 2, 1998.

Herbert J. Stern (Argued), Stern & Greenberg Roseland, NJ, for Appellant.

Peter Verniero, Jeffrey J. Miller, Office of Atty. Gen. of New Jersey, Division of Law, Trenton, NJ, for Appellees, The State of New Jersey, New Jersey Department of Transp., The New Jersey Transp. Trust Fund Authority, John H. Haley, Jr., and Steven Hansen.

Guy P. Ryan, Gilmore & Monahan, Toms River, NJ for Appellees, The South Jersey Transportation Authority and James A. Crawford.

Kevin J. Coakley (Argued), Marc D. Haefner (On Brief), Connell, Foley & Geiser LLP, Roseland, NJ, Michael R. Cole, Riker, Danzig, Scherer, Hyland & Perretti LLP, Morristown, NJ, for Appellees, Casino Reinvestment Development Authority and James B. Kennedy.

Before: GREENBERG, NYGAARD and McKEE, Circuit Judges.

OPINION OF THE COURT

McKEE, Circuit Judge:

Trump Hotels & Casino Resorts, Inc., appeals from the district court's Rule 12(b)(6) dismissal of this action which Trump brought under Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Securities and Exchange Commission Rule 10b-5, 17 C.F.R. § 240.10b-5. Trump also appeals the district court's subsequent refusal to exercise supplemental jurisdiction over state law claims. For the reasons that follow we agree with the district court's conclusion that Trump lacks standing, and we will therefore affirm.

I.

Mirage Resorts, Inc., and Trump Hotels and Casino Resorts, Inc. own competing casinos in Atlantic City, New Jersey. Although Trump brought this action under the securities laws, the seeds of this dispute were sown when a real estate development was planned in Atlantic City. Although our inquiry does not need to address the details of the planned development, a brief discussion of it is necessary to place the dispute in context.

The action arises from a dispute involving the redevelopment of a parcel of land known as the Huron North Redevelopment Area ("H-Tract"). The H-Tract is located in the Marina District of Atlantic City and is comprised of approximately 178 acres, 150 of which are owned by Atlantic City. The tract consists of wetlands that were used as a municipal landfill until the 1960's. Trump claims that the H-Tract is highly contaminated with hazardous substances and is vacant except for a few municipally maintained facilities.

In November of 1994, the City Council of Atlantic City authorized the City Planning Board to prepare a Redevelopment Plan for the H-Tract. On April 12, 1995, the City Council of Atlantic City adopted the Redevelopment Plan proposed by the Planning Board and began seeking a developer for the H-Tract pursuant to that Redevelopment Plan. Mirage emerged as a potential developer and proposed to build a casino complex on the H-Tract. Thereafter, Mirage entered into a series of agreements with the City (including a Redevelopment Agreement, and a Memorandum of Understanding) regarding the proposed development of the H-Tract as a multi-casino resort. The Redevelopment Agreement gave Mirage an option to acquire and develop the H-Tract as a multi-casino resort in exchange for Mirage's undertaking to remediate environmental contamination and to pay for the relocation of the City's existing facilities on the site.

Shortly before the execution of the Memorandum of Understanding between Mirage and the City, the Atlantic City delegation to the New Jersey State Legislature introduced legislation known as the Municipal Landfill Site Remediation & Redevelopment Act, N.J.S.A. 13:1E-116.1-116.7 (the "Remediation Act"). The Remediation Act was subsequently enacted into law. According to Mirage, the Remediation Act allows Mirage to be reimbursed for the majority of the closure and remediation costs associated with its clean-up of the H-Tract.¹

The Redevelopment Agreement conditioned Mirage's obligations to develop the H-Tract upon a number of contingencies. The most significant contingency for purposes of this dispute was the approval and funding by the State of New Jersey of a roadway called the "Westside Connector." The plans for the Westside Connector include the construction of a 2.2 mile long highway connecting the Atlantic City Expressway to Brigantine Boulevard, and a 2,000 foot long tunnel. Trump claims that construction of the tunnel portion of the Westside Connector requires the acquisition and destruction of nine private homes and more than 200 units of federally-assisted low income housing, 47 of which are currently occupied. Trump also claims that the Westside Connector will provide direct access to the HTract, that its primary purpose is to facilitate the development of the H-Tract by Mirage, and that Mirage will not proceed with the development of the H-Tract in the absence of the Westside Connector.

On September 17, 1996, the New Jersey Department of Transportation ("DOT") and Mirage entered into a Memorandum of Understanding regarding the design and construction of the Westside Connector. The Memorandum of Understanding was followed by the execution of a Road Development Agreement between Mirage, the State of New Jersey, acting through the DOT, and the South Jersey Transportation Authority ("SJTA").

The Road Development Agreement reflects a commitment by the parties to move forward with the proposed Westside Connector, and it defines the respective obligations of the parties regarding the proposed construction and details various conditions to the closing of the Road Agreement. It also sets forth the funding sources for the project, which include $65 million in proceeds from bonds issued through the South Jersey Transportation Authority ("SJTA") repayable from, and collateralized by, parking and investment funds collected for use by the Casino Reinvestment Development Authority ("CRDA") and $55 million in the proceeds of bonds issued through the SJTA repayable from, and collateralized by, alternative investment tax obligations of all casinos that will be located on the H-Tract.

Trump currently owns three of the thirteen casinos in Atlantic City. One of Trump's casinos, "Trump's Castle," is located in the Marina District near the H-Tract. Trump claims that it will be adversely affected by the construction of the Westside Connector and the development of the HTract in a number of ways. The Westside Connector will significantly reduce access to Trump's Castle. During construction it will effectively block access to Trump's Castle for a year or more, and make it difficult for persons from within and without the City to get to Trump Hotels' Atlantic City casinos. Trump claims that its business will thus be seriously injured. In addition, Trump claims that the new road will increase traffic flow into the city and therefore worsen local air quality conditions and traffic congestion which already adversely affect Trump's patrons and employees. Trump also alleges that the development will endanger the community because the H-Tract is highly contaminated. Trump alleges that since the Westside Connector will bisect the city, the H-Tract development will cause permanent injury to the City's entire Boardwalk area, including Trump's Taj Mahal and Palace casinos, into which Trump has invested enormous amounts of money.

On March 14, 1997, Trump filed a complaint against Mirage, the State of New Jersey, the New Jersey DOT, the SJTA, the CRDA and the New Jersey Transportation Trust Fund in the United States District Court for the District of New Jersey. Trump sought declaratory and injunctive relief which would effectively bar the construction of the Westside Connector and the development of the H-Tract by halting the sale of the bonds that are a necessary component of the funding scheme. Trump alleged that the funding scheme for the planned construction of the Westside Connector and the development of the H-Tract would violate numerous statutes,² state law³ and the New Jersey Constitution. However, we are only concerned with Trump's allegations that the funding mechanism violates the Securities and Exchange Act of 1934, 15 U.S.C. § 78j(b), Securities and Exchange Commission Rule 10b-5, 17 C.F.R. § 240.10b-5, and Article IV, § 7, ¶ 2 of the New Jersey Constitution.

The defendants initially moved to dismiss Trump's complaint under Fed.R.Civ.P. 12(b)(6) alleging that the complaint failed to state a claim. Simultaneously, they filed a complaint in the Law Division of the Superior Court of New Jersey naming Trump as a defendant and seeking a declaration that the statutory provisions which allowed for CRDA funding of various projects were constitutional.⁴ State of New Jersey and the Casino Reinvestment Development Authority v. Trump Hotels and Casino Resorts, Inc., No. ATL-L-1373-97 ("State Litigation").

On May 1, 1997, the district court dismissed all of the federal claims under Fed. R.Civ.P. 12(b)(6) and declined to exercise supplemental jurisdiction over the state law claims. Trump Hotels & Casino Resorts, Inc. v. Mirage Resorts, Inc., 963 F.Supp. 395 (D.N.J.1997). This appeal followed. However, Trump only appeals from the district court's dismissal of its 10b-5 claim and the refusal to exercise supplemental jurisdiction over...