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CATSKILL DEVELOPMENT v. PARK PLACE ENTERTAINMENT

July 23, 2001

CATSKILL DEVELOPMENT, L.L.C., MOHAWK MANAGEMENT, L.L.C., AND MONTICELLO RACEWAY DEVELOPMENT COMPANY, L.L.C., PLAINTIFFS,
v.
PARK PLACE ENTERTAINMENT CORP., DEFENDANT.



The opinion of the court was delivered by: Mcmahon, District Judge.

 
MEMORANDUM DECISION AND ORDER GRANTING PLAINTIFF CATSKILL DEVELOPMENTS MOTION FOR RECONSIDERATION

Plaintiff Catskill Development, LLC ("Catskill Development") asks that the Court reconsider its May 14, 2001 Memorandum Decision and Order granting in part and denying in part defendant Park Place's motion to dismiss. Specifically, plaintiff requests reconsideration of that portion of the May 14 decision in which I held that plaintiffs had failed to state a claim for tortious interference with one of the contracts at issue in the lawsuit, the Land Purchase Agreement.

For the reasons stated below, Catskill Development's motion to reconsider is granted, and upon reconsideration, the motion to dismiss the claim for tortious interference with the Land Purchase Agreement is denied.

BACKGROUND

Catskill Development and the other plaintiffs in this suit — Mohawk Management LLC ("Mohawk Management") and Monticello Raceway Development Co. LLC ("Monticello") — are members of a group of businessmen and developers (hereinafter the "Catskill Group") who, beginning in 1995, sought to build and operate a casino at a site adjacent to the Monticello Racetrack in Monticello New York. Because gambling is illegal in New York State except on Native American lands and under certain conditions, the Catskill Group partnered with the St. Regis Mohawk Tribe on the project.

The full history of the relationship between the developers and the Tribe is outlined in the May 14 decision. Catskill Development LLC v. Park Place Ent. Corp., 144 F. Supp.2d 215 (S.D.N.Y. 2001) (no page refs avail.). Catskill Development contends that I did not accurately describe plaintiffs' deal with the Tribe in that opinion, and that, once the inaccuracies are corrected, my conclusion that the Land Purchase Agreement is a voidable collateral agreement is demonstrably erroneous.

It appears that the Court was laboring under certain misapprehensions about the particulars of the various transactions. Plaintiffs are partly responsible for the Court's failure to understand fully the details of the project, since they submitted precious little background information and I had to glean what I could from project documents provided by the defendant Plaintiffs have used this motion to fill in the gaps in their earlier papers. It now appears that the deal was structured as follows:

The Catskill Group created a separate entity, plaintiff Monticello Raceway Development Co. LLC ("Monticello") to develop and build the casino and the real property surrounding the casino site. Plaintiff represents that Monticello is owned "by a minority of Catskill Development members." (See Pl. Brief in Supp. of Mot. for Reconsid. at 7.) The terms of Monticello's involvement were set out in another agreement, the Development and Construction Agreement, under which Monticello would receive a "development fee" of 5% of the costs of the development and construction. Monticello agreed to use commercially reasonable efforts to assist the Tribe in obtaining financing for the development, construction, and start-up of the casino.

The Catskill Group also created a third entity, plaintiff Mohawk Management, to manage, opecate and maintain the casino for seven years. Plaintiff Catskill Development has a 50% voting interest in plaintiff Mohawk (the other 50% is controlled by Alpha Hospitality Corp. ("Alpha"), a publicly traded corporation). Under the Gaming Facility Management Agreement ("Management Agreement"), plaintiff Mohawk was to receive 35% of annual profits (net of debt service). Mohawk also agreed to help the Tribe obtaining financing to build and operate the casino.

As plaintiff now makes clear, the activities of Mohawk Management under the Management Agreement were limited to those gaming activities defined under the Indian Gaming Regulatory Act (IGRA) as "Class III," which include (but are not limited to): table games (such as baccarat and blackjack), casino games (such as roulette and craps), slot machines, and electronic gaming terminals. See 25 U.S.C. § 2703 (7)(A); 25 C.F.R. § 502.4. The Management Agreement did not cover Class II games (bingo, lotto, and games similar to bingo or lotto), which were to be managed by the Tribe. 25 U.S.C. § 2703 (7); 25 C.F.R. § 502.4.

While the Tribe and plaintiff Mohawk were to operate the casino, plaintiff Catskill Development was to operate the adjoining racetrack facility separately. The Tribe was not to have any role in the operation of the racetrack. Thus, Catskill Development and the Gaming Authority also executed a Shared Facilities Agreement, to ensure that the racetrack and the casino would be properly maintained and repaired, and to allocate responsibility for the upkeep and repair of common areas.

Catskill Development argues that, in determining the validity of the separate agreements between the Tribe and the plaintiffs, the Court erroneously viewed the plaintiffs as a single entity and "commingled" the distinct rights and obligations of each of these the three plaintiffs, whom Catskill Development argues are "related but independently own and controlled." (Br. in Supp. of Mot. for Reconsid. at 6.) In their response to the motion to dismiss, plaintiffs did not bother to refer to the individual plaintiffs in discussing the separate agreements.*fn1 However, as the complaint contains separate allegations of tortious interference with each of the four agreements, with the appropriate entity named as the party plaintiff, I agree that it was confusing to adopt plaintiffs' use of the amalgamated term "Catskill" and in this opinion I will take care to differentiate among the three plaintiffs. I note, however, that the individual plaintiffs do not operate as independently as Catskill Development now claims in the motion foe reconsideration. In particular, I find disingenuous plaintiffs attempt to characterize the land transfer as a separate transaction by an indepentent entity (Catskill Development) whose post-closing involvement in the casino would be tangential or non-existent.

The casino project was subject to extensive federal and state regulatory oversight under the Indian Gaming Regulatory Act (IGRA), codified at 25 U.S.C. ยง 2701 et seq. First, before a Tribe can operate a gaming establishment on newly-acquired trust lands, the Secretary of the Bureau of Indian Affairs (BIA) has to determine that "a gaming establishment on the newly acquired trust lands would not in the test interest of the Indian tribe and its members, and would not be detrimental to the surrounding community," but only after obtaining ...


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