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Sterling Suffolk Racecourse, LLC v. Wynn Resorts, Ltd.

United States District Court, D. Massachusetts

November 15, 2019

STERLING SUFFOLK RACECOURSE, LLC, Plaintiff,
v.
WYNN RESORTS, LTD., WYNN MA, LLC, STEPHEN WYNN, KIMMARIE SINATRA, MATTHEW MADDOX, and FBT EVERETT REALTY, LLC, Defendants.

          MEMORANDUM AND ORDER

          HON. PATTI B. SARIS CHIEF UNITED STATES DISTRICT JUDGE

         This lawsuit arises from the quest for a gaming license in the Greater Boston area. Plaintiff Sterling Suffolk Racecourse, LLC (“SSR”) alleges that the Defendants corrupted the Massachusetts Gaming Commission's (“MGC”) application process for the Region A, Category 1, License (the “License”) conducted in 2013 and 2014 in order to secure the only available license for Defendant Wynn MA, LLC (“Wynn MA”). SSR would have been the landlord of the other applicant for the License, Mohegan Sun Massachusetts (“MSM”), and it claims that Defendants' conduct denied MSM the License as well as the resulting profits from operating the only casino in the greater Boston area, some of which would have been owed to SSR. SSR's Amended Complaint asserts claims for substantive violations of and conspiracy to violate the Racketeer Influenced Corrupt Organization Act (“RICO”), violations of Massachusetts Chapter 93A, and tortious interference with contract and business relations.

         Defendants have moved to dismiss the Amended Complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6) on multiple grounds. Three of the Defendants -- Wynn Resorts, Ltd., Wynn MA, and Michael Maddox -- also have moved to dismiss the state law claims as impermissible under Massachusetts' anti-SLAPP statute because they arise out of protected petitioning activity.

         After hearing, and review of the extensive briefing, the Court ALLOWS the Defendants' motions to dismiss for failure to state a claim (Dkt. Nos. 72, 75, 77, 79, 83). The Court concludes that the viable alleged predicate acts of racketeering activity arising from the alleged “corruption” of the license application process do not constitute a pattern sufficient to support a RICO claim because the alleged scheme has neither open-ended nor closed continuity. The Court dismisses SSR's federal RICO claims with prejudice but dismisses the state law claims without prejudice to being re-filed in state court. The Court also DENIES AS MOOT the Wynn entities and Maddox's motion to dismiss pursuant to the anti-SLAPP statute (Dkt. No. 80).

         BACKGROUND

         Unless otherwise noted, the following factual background comes from the Amended Complaint and must be taken as true at this stage. See Foley v. Wells Fargo Bank, N.A., 772 F.3d 63, 71 (1st Cir. 2014).

         I. The Parties

         SSR is a Massachusetts limited liability company which owned the Suffolk Downs Racecourse located in Revere and East Boston until May 2017. SSR contracted with MSM to lease the Suffolk Downs Racecourse to MSM for a percentage of its annual casino revenues, subject to a $35 million minimum annual payment.

         Wynn Resorts is a Nevada corporation with its principal place of business in Las Vegas, Nevada. Wynn Resorts operates casinos in Nevada, Macau, and, as of recently, Massachusetts. Wynn MA is a Massachusetts limited liability company with its principal place of business also in Las Vegas, Nevada. Wynn MA is a wholly owned subsidiary of Wynn Resorts, which was formed for the purpose of applying for a Massachusetts Category 1 gaming license.

         Steve Wynn was the CEO of Wynn Resorts until his resignation in February 2018. Steve Wynn also served as the CEO of Wynn Resorts' majority-owned subsidiary Wynn Macau, Ltd. from September 2009 to February 2018.

         Kimmarie Sinatra was the General Counsel and an Executive Vice President of Wynn Resorts and a director of Wynn Macau, Limited until July 2018. After Steve Wynn, Sinatra was functionally the senior most member of Wynn Resorts' management team.

         Maddox has been the President and Chief Financial Officer of Wynn Resorts since 2013, and he has been the Chairman of Wynn Resorts since Steve Wynn's resignation in February 2018. Maddox also served as the President and Treasurer of Wynn MA at all relevant times. Since March 2003, Maddox has held various positions at Wynn Resorts' Macau-related subsidiaries.

         FBT Everett Realty, LLC (“FBT”) is a Massachusetts limited liability company with its principal place of business in Cambridge, Massachusetts. Although the ownership of FBT has changed over time, originally Paul Lohnes owned a 50% interest, Gary DeCicco owned a 19.5% interest, Anthony Gattineri owned a 15% interest, Charles Lightbody owned a 12.5% interest, and Dustin DeNunzio owned a 3% interest. In 2009, FBT acquired a parcel of land in Everett, Massachusetts (the “Everett Site”). Then, in November 2014, FBT sold the Everett Site to the Wynn entities for $35 million. Wynn Resorts opened the “Encore Boston Harbor” casino at the Everett Site in June 2019.

         II. Procedural History

         SSR filed an Initial Complaint on September 7, 2018. Defendants subsequently moved to dismiss the Initial Complaint. Instead of responding to Defendants' motions to dismiss directly, SSR then filed an Amended Complaint on February 15, 2019. Defendants renewed their motions to dismiss the Amended Complaint on March 8, 2019. SSR then opposed Defendants' motions. The Court held a hearing on the pending motions to dismiss on May 6, 2019.

         III. Alleged Facts

         The Amended Complaint alleges the following facts, many of which are disputed.

         A. The Application Process

         In 2011, Massachusetts passed the Massachusetts Gaming Act, which established a process for the development of three destination resort casinos in Massachusetts, one in each of three geographic regions. Region A covered the greater Boston area, including Suffolk, Middlesex, Essex, Norfolk, and Worcester Counties. In order to operate a casino, a prospective operator was required to apply to the newly formed Massachusetts Gaming Commission (“MGC”) for a “Category 1 License.”

         The License application process was broken into two phases. In Phase I, the MGC's Investigations and Enforcement Bureau (the “IEB”) investigated the applicants' suitability in matters related to finance and integrity. The applicants, anyone with a financial interest in the applicants' business, close associates of the applicants, and all persons owning 5% or more of common stock of any applicant were subject to the suitability investigation. Once the IEB and MGC determined that an applicant was a suitable candidate for the License, the applicant would move on to Phase II of the application process. In Phase II, the applicants submitted to the MGC a site-specific proposal addressing issues related to finances, economic development, building and site design, and mitigation for the proposed casino project. The MGC considered these materials, sought additional information from the applicants as necessary, and, ultimately, held a vote to award the License to the applicant with the best proposal.

         B. FBT Background

         In 2009, FBT purchased the Everett Site. Of FBT's five original equity owners, two of those owners had criminal histories. Lightbody was convicted of grand larceny and identity theft in 2007. Over the years, he separately has been charged with ten assaults, three counts of illegal weapons possession, and two counts of witness intimidation. Lightbody also is known to be associated with the mafia. Meanwhile, DeCicco was convicted of multiple counts of mail fraud related to insurance claims he filed in connection with suspicious fires on his personal property.

         Lightbody has close ties to the Mayor of Everett, Carlo DeMaria. In the fall of 2009, at the suggestion of Mayor DeMaria, the owners of FBT gave a 3% non-equity interest in the company to Jamie Russo. Russo was an “affiliate” of Lightbody and a consultant for Mayor DeMaria. Dkt. No. 71 ¶ 59. The purpose of giving Russo an interest in FBT was to pass on to Mayor DeMaria some of the proceeds from any future sale of the Everett Site. Russo also had a criminal history. In 1992, Russo pleaded guilty to a charge of fourth-degree larceny -- a misdemeanor -- after being caught using forged and stolen credit card numbers at a casino in Connecticut.

         C. Wynn-FBT Partnership

         Wynn Resorts was interested in obtaining a Massachusetts gaming license from at least 2012. Originally, Wynn Resorts partnered with Robert Kraft, the principal owner of the New England Patriots, to seek a license for a casino in Foxborough, Massachusetts. This partnership fell apart in May 2012 when it became clear that the Town of Foxborough would not approve the prospective casino project.

         In late summer or fall 2012, Wynn Resorts began to explore a partnership with FBT. Representatives for Wynn Resorts and FBT met at the Everett Site for the first time in November 2012. At that meeting, FBT owner DeNunzio informed Sinatra and Maddox that “an individual with a checkered past” was then an owner of FBT but that he was taking steps to give up his interest. Id. ¶ 81. Later that same month, Wynn Resorts agreed to pay $100, 000 per month for an option to purchase the Everett Site for $75 million if and when Wynn MA received the License. During the legal due diligence process conducted in December 2012, Mayor DeMaria informed a lawyer/lobbyist for Wynn Resorts that Lightbody had a criminal history. FBT's lawyers separately told Wynn Resorts' lawyers that at least one FBT owner had a criminal history. And, on December 14, 2012, the Boston Business Journal reported that DeCicco was a convicted felon and that he appeared on FBT corporate paperwork that had been publicly filed earlier in 2012. Wynn Resorts took no further steps at this point to investigate the ownership history of the Everett Site after DeCicco's criminal record was publicized.

         On or about December 19, 2012, Wynn Resorts and FBT formalized their option agreement in writing (the “Option Agreement”). In addition to setting the purchase price for the Everett Site, the Option Agreement provided that FBT would collaborate with Wynn Resorts and Wynn MA in the development of the property, including with respect to obtaining subdivision approvals, permits, and a permanent road easement and performing environmental remediation. The Option Agreement also contained the representation that “[t]o the best of [FBT's] knowledge, neither [FBT] nor any Person associated with [FBT] has ever engaged in any conduct or practices which any of the foregoing Persons should reasonably believe would cause such Person to be” deemed unsuitable by the MGC. Id. ¶ 90. Defendants knew that this representation was false due to FBT's association with Lightbody, DeCicco, and, possibly, Russo. Around the same time, Defendants reached “a mutual understanding” that FBT would create whatever false and backdated paperwork might be necessary for purposes of Wynn MA's License application. Id. ¶ 88. Maddox and Sinatra consulted directly with Steve Wynn before making this deal with FBT.

         In January 2013, DeNunzio created a backdated 2012 operating agreement for FBT (the “Backdated Operating Agreement”) which falsely indicated that DeCicco did not have an ownership interest in FBT as of January 2012. The Backdated Operating Agreement claimed that DeCicco had transferred his interest to Gattineri. However, prior to the creation of the Backdated Operating Agreement, DeCicco already had executed a Memorandum of Transfer dated “April 2012, ” in which he transferred the entirety of his interests to Lightbody. Id. ¶ 92. On January 17, 2013, DeNunzio emailed Sinatra purporting to confirm that the only equity holders of FBT were himself, Lohnes, and Gattineri. Eleven days later, on January 28, 2013, DeNunzio arranged for Gattineri and Lightbody to execute a Memorandum of Transfer, backdated to December 14, 2012, memorializing Lightbody's transfer of his interest in FBT to Gattineri for a $1.7 million promissory note.

         D. Wynn MA's License Application

         On or about January 15, 2013, Wynn MA submitted its initial suitability application materials for the License to the MGC. Maddox, Sinatra, and Steve Wynn were each involved in preparing, submitting, and/or directing the preparation and submission of the application materials.

         1. Lightbody's Involvement

         Shortly after Wynn MA submitted its application materials to the MGC, the IEB began investigating the Everett Site's ownership as part of assessing the suitability of Wynn MA. In the course of that investigation, the MGC was tipped off by the FBI that wiretaps in an unrelated case suggested that Lightbody maintained a concealed ownership interest in FBT. When FBT learned in July 2013 that the IEB was investigating Lightbody's ownership interest in FBT, DeNunzio created a new backdated Memorandum of Transfer showing that Lightbody had transferred his interest in FBT to Gattineri as of August 15, 2012, four months before Defendants entered into the Option Agreement. Pursuant to their “mutual understanding, ” however, Sinatra and the other Wynn Defendants knew that these documents had been falsified for the purposes of Wynn MA's License application.

         In July 2013, Sinatra and Maddox also sat for under oath interviews with the IEB. In those interviews, both Sinatra and Maddox claimed to have never heard of Lightbody. They also claimed to be unaware of any owners of FBT other than Lohnes, DeNunzio, and Gattineri. Maddox testified that it was “Not my job” to know whether a person with a criminal background was involved in the deal with FBT. Id. ¶ 100. Later, in his September 9, 2013 interview with IEB, Steve Wynn claimed that both Maddox and he had “zero” knowledge of the fact that certain members of the FBT ownership group had criminal backgrounds. Id. Sinatra also testified that she had “zero” knowledge of that fact. Id. During the same interview, Steve Wynn stated, “Criminal activity is criminal activity . . . . And there's no place for it in a relationship with us. And if we're sloppy and we allow people who are engaged in criminal activity to do business with us, we should be criticized for it and held responsible.” Id.

         Yet the Wynn Defendants maintained a relationship with Lightbody throughout 2012, 2013, and even into 2014. In the spring of 2013, the Wynn Defendants were attempting to purchase a small piece of property adjacent to the Everett Site. The owner of the property was reluctant to sell and told Maddox that he would only deal with Lightbody. Maddox requested that DeNunzio help, and DeNunzio in turn reached out to Lightbody. Maddox then met with Lightbody at least twice in the spring of 2013, and DeNunzio and Lightbody eventually convinced the owner in June 2013 to agree to an option on a long-term lease of the property to an affiliate of Wynn Resorts. Also, in June 2013, Lightbody worked with Wynn employees to generate public support in Everett for Wynn MA's casino proposal. Maddox and Sinatra had primary responsibility within the Wynn organization for overseeing the Everett referendum process and knew of Lightbody's involvement. On June 22, 2013, Everett voters approved Wynn MA's public proposal. And, throughout 2013 and 2014, Lightbody campaigned against the MSM casino project, spending thousands of dollars of his own money on signs and advertising supporting the anti-SSR side of the public referendum in Revere and donating to the “No Eastie Casino” campaign that sought to block the MSM casino project. Id. ¶ 101. Lightbody was even arrested in October 2013 for physically assaulting a participant at a pro-MSM rally in Revere.

         On November 21, 2013, the Boston Globe published a story revealing Lightbody's concealed interest in the Everett Site. On the same day, Defendants announced that they had negotiated an amendment to the Option Agreement that reduced the exercise price from $75 million to $35 million to eliminate the so-called “casino premium.” Id. ¶ 112. However, the Option Agreement shifted other financial obligations from FBT to Wynn MA and Wynn Resorts, which offset the reduction in exercise price.

         2. MGC Suitability Hearings

         On December 13, 2013, the MGC held a hearing to address concerns about the ownership of FBT. At the hearing, Sinatra testified that she had been “shocked” and “surprised” when she learned in the summer of 2013 that FBT's ownership included convicted criminals and she complained that “it's awfully hard if people are running around and not telling you the truth.” Id. ΒΆ 111. The Wynn Defendants claimed that they had acted in good faith and had not learned of the criminal element in FBT's ownership until after they entered into the Option Agreement. To cure the problem, Defendants renegotiated the Option Agreement ...


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