CAESARS MASSACHUSETTS MANAGEMENT COMPANY, LLC, CAESARS MASSACHUSETTS DEVELOPMENT COMPANY, LLC, CAESARS MASSACHUSETTS INVESTMENT COMPANY, LLC, and CAESARS ENTERTAINMENT CORPORATION, Plaintiffs, Appellants,
STEPHEN P. CROSBY and KAREN WELLS, Defendants, Appellees
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APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS. Hon. Nathaniel M. Gorton, U.S. District Judge.
Joan A. Lukey, with whom C. Thomas Brown, Eugene L. Morgulis, Ropes & Gray LLP, Justin J. Wolosz, and Choate Hall & Stewart LLP, were on brief, for appellants.
John M. Stephan, Assistant Attorney General, with whom Martha Coakley, Attorney General of Massachusetts, Janna J. Hansen, Assistant Attorney General, and Julia Kobick, Assistant Attorney General, were on brief, for appellees.
Before Lynch, Chief Judge, Souter,[*] Associate Justice, and Selya, Circuit Judge.
SOUTER, Associate Justice.
The plaintiff-appellant Caesars Entertainment Corporation and three Massachusetts affiliates (collectively, Caesars) were subject to an investigatory report by the Massachusetts Gaming Commission finding them unsuitable as proposed operators of a casino for which Sterling Suffolk Racecourse, LLC (SSR) sought a license. This action brought by Caesars under 42 U.S.C. § 1983 includes counts with (a) official capacity claims charging denial of Fifth and Fourteenth Amendment procedural and substantive due process and equal protection of the laws by the Commission's chairman, Stephen Crosby, and Karen Wells, Director of the Commission's Investigations and Enforcement Bureau (IEB), and seeking withdrawal of the report and cessation of any further reliance on it by the Commission; (b) individual capacity claims against Crosby on the same grounds, seeking compensatory and punitive damages; and (c) a claim subject to supplemental jurisdiction for liability under Massachusetts law for tortious interference with a contract between Caesars and SSR. The district court dismissed the federal claims under Federal Rule of Civil Procedure 12(b)(6) as beyond the scope of federal affordable relief, and consequently exercised its discretion to dismiss the state law claim as standing alone. This appeal touches on a multiplicity of legal and factual issues including Eleventh Amendment state immunity, qualified immunity of individuals, control of IEB by Crosby as chairman of the Commission, and theories of protected property, among others. In our review de novo, however, we affirm the dismissal on two pivotal grounds: Caesars has alleged no cognizable protected property interest said to have been infringed in violation of Fifth and Fourteenth Amendment due process, and class-of-one Fourteenth Amendment equal protection does not extend to redress action taken under state law authorizing the exercise of highly discretionary judgment in response to an application to license activity carrying substantial risks of commercial and social harm.
Caesars' third amended complaint, together with documents incorporated by reference and matters of public record subject to judicial notice, see Giragosian v. Ryan, 547 F.3d 59, 65 (1st Cir. 2008), disclose the following facts as of relevant times, to be taken as true under Rule 12(b)(6). Under the authority of the Massachusetts Expanded Gaming Act, 2011 Mass. Acts ch. 194 (largely codified at Mass. Gen. Laws ch. 23K), the Commonwealth of Massachusetts is in the throes of licensing casinos, one for each of three regions of the state. The statute assigns that responsibility to a Gaming Commission of five members, of which the defendant-appellee Stephen Crosby is chairman. The IEB is the Commission's investigatory arm for examining the suitability of applicants for a casino license and of persons and corporations affiliated with an applicant to exercise the license sought (spoken of as " qualifiers" ). As noted, the applicant for one such license is SSR, a corporation doing business in Massachusetts and not a party to this action, and Caesars is a qualifier. SSR wishes to place a casino in Revere and East Boston.
The IEB's enquiry into Caesars' conduct of business in Nevada and elsewhere led to a public report recommending that the Commission find that Caesars had not carried its burden to demonstrate its suitability by clear and convincing evidence; a near-certain consequence of the report would be denial of SSR's application. The IEB gave four reasons: (1) through a subsidiary, Caesars entered into a licensing
agreement with Gansevoort Hotel Group, LLC, which is partially owned by an individual with alleged ties to Russian organized crime; (2) Caesars hired Mitchell Garber, who had formerly served as the chief executive officer of two internet gambling companies that entered into non-prosecution agreements with the United States Attorney's Office for the Southern District of New York; (3) Caesars had a history with Terrance Watanabe, a former high roller, who sued Caesars for allegedly encouraging him to ...