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FBT Everett Realty, LLC v. Massachusetts Gaming Commission

Superior Court of Massachusetts, Suffolk

May 14, 2018



          Mitchell H. Kaplan, Justice of the Superior Court

         The plaintiff, FBT Everett Realty, LLC (FBT), owned a parcel of land in Everett, Massachusetts (the Everett Parcel). It entered into an Option Agreement dated December 19, 2012 (Option Agreement) with Wynn MA, LLC (Wynn), an affiliate of Wynn Resorts, for the purchase of the Everett Parcel. The Option Agreement recited that Wynn "desires to develop a hotel gaming resort on the Everett Parcel." If Wynn exercised its option, its obligation to close the transaction was still subject to its having obtained a license to operate a casino on the property from the defendant, Massachusetts Gaming Commission (the Commission). In this action, FBT contends that it suffered monetary damages of at least $40 million as a result of wrongful actions by the Commission. FBT claims that the Commission exerted unlawful pressure on Wynn by telling Wynn that it could be awarded a license only if it renegotiated the Option Agreement to reduce that purchase price from $75 million to $35 million, thereby preventing FBT from receiving any so-called "casino-related premium" from the sale.

         FBT’s Amended Complaint (Complaint) is pled in four counts: tortious interference with contract (Count I); a per se taking in violation of the Fifth and Fourteenth Amendments to the U.S. Constitution, art. 10 of the Massachusetts Declaration of Rights, and G.L. c. 79, § 10 (Count II); a regulatory taking in violation of the Fifth and Fourteenth Amendments to the U.S. Constitution, art. 10 of the Massachusetts Declaration of Rights, and G.L. c. 79, § 10 (Count III); and impairment of contract right in violation of the Contract Clause, Article I, § 10, Clause 1 of the U.S. Constitution (Count IV). In a previous decision, the court dismissed the tortious interference with contract claim because it was barred by the Massachusetts Tort Claims Act. See FBT Everett Realty, LLC v. Massachusetts Gaming Comm’n, 34 Mass.L.Rptr. 340 (Mass. Super. Ct. June 8, 2017) (Kaplan, J.). In a subsequent decision, the court held that the taking claims were timely filed within the applicable three-year statute of limitations. See FBT Everett Realty, LLC v. Massachusetts Gaming Comm’n, 2017 WL 7053907 (Mass. Super. Ct. Nov. 7, 2017) (Leibensperger, J.).

         The case is now before the court on the Commission’s motion to dismiss Counts II, III, and IV of the Complaint pursuant to Mass.R.Civ.P. 12(b)(6) for failure to state a claim on which relief may be granted. On March 23, 2018, the court convened a hearing on the motion. In consideration of the parties’ memoranda of law and oral arguments, for the reasons that follow, the Commission’s motion to dismiss is ALLOWED in part and DENIED in part.


         The following facts are drawn from the allegations in the Complaint (assumed to be true for the purposes of this motion), the Gaming Act, the regulations promulgated pursuant thereto, the Option Agreement, and certain public records submitted by the Commission with its motion.

         The Gaming Act and its Regulations

         In November, 2011, the Legislature enacted the Gaming Act, which is codified at G.L. c. 23K. The Gaming Act permits casino gambling in the Commonwealth and establishes a system for regulating it. The Act establishes the Commission as the agency to implement casino gambling pursuant to the Act’s terms and regulate it. G.L. c. 23K, §§ 3(a) and 5. Among other things, the Act empowers the Commission to award a license to operate a casino with gaming tables and slot machines (the Category 1 Licenses) in each of three regions of the Commonwealth (Regions A, B, and C). Id. at § 19.

         The Gaming Act and the regulations promulgated by the Commission to implement it establish a two-phase application process for Category 1 Licenses. Id. at § 12; 205 Code Mass. Regs. § 110.01. The first phase is known as the "Request for Application Phase 1" (RFA-1). 205 Code Mass. Regs. § 110.01(1). In this phase, an applicant submits a Phase I application to the Commission in which the applicant is required to make a number of disclosures about itself and its personnel that pertain to an applicant’s "suitability." Id. at § 111.00 et seq. The Investigations and Enforcement Bureau (IEB), a law enforcement agency established within the Commission, then conducts an investigation of the applicant and submits a written report to the Commission containing findings and recommendations concerning the suitability of the applicant for a gaming license. G.L. c. 23K, § 12(a); 205 Code Mass. Regs. § 115.03. After the IEB submits its report, the Commission holds either a public hearing or an adjudicatory proceeding, and then issues a written determination of "negative" or "positive" suitability. 205 Code Mass. Regs. § 115.04-05. Only applicants that have received a "positive suitability determination" may proceed to the second phase of the application process, known as the "Request for Applications Phase 2" (RFA-2). Id. at § 110.01(2). In RFA-2, the applicant submits an application that focuses on the site, design, operation and other attributes of the gaming establishment, including the mitigation of adverse impacts. In this second phase of the application process, the Commission considers the merits of the proposal.

         Wynn’s Agreement with FBT

         According to a deed on file at in the Middlesex South District Registry of Deeds, FBT purchased the Everett Parcel on October 15, 2009 for $8 million. It was the site of a former Monsanto Chemical plant and contaminated by past operations. After the Gaming Act passed, Wynn decided to apply for a license to build the Region A resort casino on the Everett Parcel. To that end, in December, 2012, FBT and Wynn entered into the Option Agreement (attached to the Complaint as Exhibit A) pursuant to which Wynn agreed to pay FBT $100, 000 per month for the right to purchase the Everett Parcel for $75 million, in the event Wynn was awarded a Category 1 license for Region A. At the time the Option Agreement was executed, FBT’s members were Paul Lohnes, Anthony Gattineri, and Dustin DeNunzio.

         In January, 2013, Wynn filed its RFA-1 application, and the IEB began its suitability investigation. During the investigation, the IEB learned of a series of phone calls between Charles Lightbody and Darin Bufalino, then an inmate in state prison, that were recorded by state and federal law enforcement personnel who were monitoring Bufalino’s conversations. The IEB believed that Lightbody was a person who should not be involved in gaming because this would discredit the licensing process. According to the IEB, during these recorded conversations, Lightbody made statements suggesting that he retained some manner of ownership interest in FBT and would therefore benefit from the sale of the Everett Parcel. The recordings prompted the IEB to initiate an investigation into the transaction between Wynn and FBT. The Wynn application only referenced FBT as the owner of the Everett Parcel on which it held an option to purchase, not as a party that would have any ongoing role in the proposed casino. Before these jail house conversations surfaced, no one associated with FBT had been the focus of the application or, apparently, IEB’s investigation of it.

         As part of the investigation, the IEB interviewed Lightbody, Lohnes, Gattineri, and DeNunzio. The IEB also sought to interview Gary DeCicco, another former member of FBT, but he refused to speak with the IEB. During the interviews, Lohnes, Gattineri, and DeNunzio each maintained that Lightbody no longer had any ownership interest in FBT. The IEB, however, did not believe them. It concluded, mistakenly, that Lohnes, Gattineri, and DeNunzio were attempting to conceal Lightbody’s ownership interest in FBT.

         The IEB told Wynn about its conclusions and warned that the perceived untruthfulness of the FBT members regarding Lightbody’s relationship to FBT created a significant risk that the IEB would find Wynn unsuitable to receive a casino license. As a means of solving this potential problem, the IEB recommended that Wynn force FBT to accept a dramatically reduced price for the Everett Parcel, one that would remove any so-called "casino-related premium" from the purchase price.[1]

         In response to the IEB’s recommendation, Wynn obtained an appraisal of the Everett Parcel that assumed the land was free of environmental contamination, but could not be used for a casino resort. The appraisal valued the parcel at $35 million. Wynn then informed FBT that the purchase price must be reduced to $35 million because otherwise, the Commission would not grant Wynn a license. Wynn also told FBT that if FBT did not agree to the price reduction, it would sue FBT for having impeded its ability to obtain a casino license.

         FBT acquiesced and executed a Ninth Amendment to Option Agreement dated November 26, 2013 (attached to the Complaint as Exhibit D) which, among other things, reduced the purchase price to $35 million. In the amendment, Lohnes, DeNunzio, and Gattineri represented that they were the sole owners of FBT and would be the only beneficiaries of the proceeds from the sale of the Everett Parcel.

         On January 2, 2015, FBT and Wynn closed on the sale of the Everett Parcel for $34 million in accordance with the Ninth Amendment to the Option Agreement.[2] The closing of the sale is not alleged in the Complaint, but the deed recorded in the Middlesex Country Registry is attached to the Commission’s memorandum as Exhibit C. See Reliance Ins. Co. v. Boston, 71 Mass.App.Ct. 550, 555 (2008) (noting that "while the allegations of the complaint generally control in evaluating a motion under rule 12(b)(6), ‘matters of public record, orders, items appearing in the record of the case, and exhibits attached to the complaint, also may be taken into account’ ") (citations omitted). In addition, the Commission has attached a copy of the recorded deed into FBT which states that FBT purchased the Everett Parcel for $8 million in October, 2009.

         Counts II, III, and IV of the Complaint

         In Count II of the Complaint, FBT asserts a claim against the Commission for a per se taking, and alleges that:

8. FBT and Wynn Resorts executed a binding contract in which Wynn Resorts agreed to pay FBT $75 million to purchase the Everett Parcel in order to construct a casino thereon.
9. This contract to sell the Everett Parcel for its highest and best use, i.e., a casino site, was a property interest that belonged to FBT.
10. The Gaming Commission destroyed this property interest by insisting that the contract be modified to exclude $40 million in value-more than half its value based on the highest and best use.
11. The Gaming Commission maintains that destruction of FBT’s property was for a public purpose-preserving the integrity of the gaming industry in Massachusetts.
12. The Gaming Commission concedes that it does not have eminent domain power. See Memorandum in Support of ...

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