Opinion
SUCV20163481BLS1
11-07-2017
FBT EVERETT REALTY, LLC v. MASSACHUSETTS GAMING COMMISSION
MEMORANDUM AND ORDER ON DEFENDANT’S MOTION TO DISMISS AMENDED COMPLAINT
Edward P. Leibensperger, Justice
This is a claim for damages by plaintiff, FBT Everett Realty, LLC (" FBT"), arising from an alleged taking of property by the Massachusetts Gaming Commission (" Commission"). FBT’s amended complaint asserts three counts: Count II (" Per Se Taking"), Count III (" Regulatory Taking"), Count IV (" Impairment of a Contract Right"). All three counts claim that as a result of conduct by the Commission, FBT is entitled to compensation under either the Massachusetts Declaration of Rights or the United States Constitution, or both. The Commission moves to dismiss pursuant to Mass.R.Civ.P. 12(b)(1) and 12(b)(6).
Count I of the amended complaint has been dismissed, as described in the Background section of this memorandum.
BACKGROUND
The amended complaint alleges the following facts, accepted for this motion as true.
FBT was the owner of a parcel of land (the " parcel") in Everett, Massachusetts. On December 19, 2012, FBT entered into an Option Agreement with Wynn MA, LLC concerning the possible sale of the parcel to Wynn. Wynn anticipated applying for approval from the Commission to build and operate a casino gambling facility on the parcel.
Under the Option Agreement, Wynn agreed to pay FBT $100,000 per month for the right to purchase the parcel for $75 million in the event that Wynn was awarded the Category 1 destination resort casino license. The Option Agreement granted to Wynn " the option, but not the obligation, to purchase [the parcel]" from FBT. Amended Complaint, Ex. A. In connection with Wynn’s application to the Commission, FBT agreed to " reasonably cooperate with [Wynn] with respect to any information it reasonably requires to complete the Casino Application and respond to any such inquiries throughout the licensing process." Id.
In November 2011, the Legislature enacted the Massachusetts Gaming Act, which is codified at G.L.c. 23K. The Act establishes the Commission as the agency to implement and regulate casino gambling. The Act, and the regulations promulgated thereunder, establish a two-phase application process for a Category 1 license. The first phase is known as the " Request for Application Phase 1." In this phase, the applicant is required to make disclosures regarding itself and affiliates. The Investigations and Enforcement Bureau (" IEB") of the Commission then conducts an investigation of the applicant and provides findings and recommendations to the Commission regarding the suitability of the applicant and its affiliates and business associates. Only those applicants found suitable to receive a license may proceed to the second phase of the process, known as Request for Application Phase 2, during which the Commission reviews the merits of suitable applicants.
In January 2013, Wynn filed an application with the Commission for a license to operate a Category 1 destination casino resort on the parcel. The IEB began its investigation of the Wynn application. According to the amended complaint, the Commission did not identify FBT as a party subject to investigation and did not request information from FBT. Nevertheless, the IEB became aware of a recorded telephone conversation between an inmate in state prison (Darin Bufalino) and Charles Lightbody, a convicted felon. The recording suggested to IEB that Lightbody had an ownership interest in FBT. The principals of FBT told IEB that Lightbody was only a former owner of FBT. The investigators at IEB concluded that the principals of FBT were lying. At that point, the amended complaint alleges, IEB and the Commission decided to impose a financial penalty on FBT.
The IEB " intentionally embarked on a course of conduct designed to prevent FBT from receiving any casino-related profit from its contract with Wynn Resorts." Amended Complaint ¶ 36. In October 2013, the IEB told Wynn that it needed to find a " solution" to the FBT issue or risk a finding that Wynn would be deemed unsuitable to proceed to the next phase of the application process. The " solution" suggested by IEB was that Wynn force FBT to accept a dramatic reduction in the purchase price of the parcel so as to remove the " casino premium" reflected in the $75 million price. Wynn then contracted for an appraisal of the parcel assuming that it could not be used as a casino resort. The appraisal concluded that the parcel was worth $35 million, on that assumption.
Wynn informed FBT that the purchase price of the parcel had to be reduced to $35 million. Wynn told FBT that it must agree to the price reduction or it would sue FBT on the theory that it would be FBT’s fault if Wynn were to be found unsuitable.
On November 26, 2013, FBT formally agreed with Wynn to lower the price of the parcel to $35 million. A Ninth Amendment to the Option Agreement was executed to effect the new price. On January 2, 2015, FBT and Wynn closed on the sale of the parcel for $34 million in accordance with the Ninth Amendment.
The closing of the sale is not alleged in the amended complaint. The public record showing the deed as recorded in the Middlesex County Registry is attached to defendant’s memorandum. It does not appear that FBT contests this fact.
On November 14, 2016, FBT commenced this action. FBT’s original complaint asserted a single count against the Commission for intentional interference with contract. On June 7, 2017, this court (Kaplan, J.) dismissed that count on the ground that the Commission is immune from suit under the Massachusetts Tort Claims Act because the claim alleged an intentional tort by the Commission’s employees. FBT then filed, as a matter of right, the amended complaint that is the subject of this motion. Count I of the amended complaint re-asserts the tortious interference claim that had been dismissed. Pursuant to the June 7, 2017, order of the court, Count I remains dismissed for failure to state a claim.
DISCUSSION
A motion to dismiss for failure to state a claim upon which relief may be granted under Mass.R.Civ.P. 12(b)(6) permits " prompt resolution of a case where the allegations in the complaint clearly demonstrate that the plaintiff’s claim is legally insufficient." Harvard Crimson, Inc. v. President & Fellows of Harvard Coll., 445 Mass. 745, 748 (2006). To survive a motion to dismiss, a complaint must set forth the basis for the plaintiff’s entitlement to relief with " more than labels and conclusions." Iannacchino v. Ford Motor Co., 451 Mass. 623, 636, quoting Bell A. Corp. v. Twombly, 550 U.S. 544, 555 (2007). At the pleading stage, Mass.R.Civ.P. 12(b)(6) requires that the complaint set forth " factual ‘allegations plausibly suggesting (not merely consistent with)’ an entitlement to relief ..." Id., quoting Bell A. Corp., 550 U.S. at 557. The court must, however, accept as true the allegations of the complaint and draw every reasonable inference in favor of the plaintiff. Curtis v. Herb Chambers I-95, Inc., 458 Mass. 674, 676 (2011). With respect to a statute of limitations defense at the Rule 12(b)(6) stage, the facts in the complaint must " clearly reveal that the action was commenced beyond the time constraints of the statute of limitations." Epstein v. Seigel, 396 Mass. 278, 279 (1985).
The Commission contends that Counts II and III of the amended complaint, alleging a wrongful taking of FBT’s property for which FBT seeks compensation, is barred by the applicable statute of limitations. Even if those claims were not barred by the statute of limitations, the Commission avers that the claims must be dismissed because the uncontested facts show that FBT is not entitled to relief. Likewise, FBT’s claim under the Contract Clause of the United States Constitution (Count IV) fails on the facts alleged.
Statute of Limitations
In the amended complaint, FBT acknowledges that the Commission has no power of eminent domain. Nevertheless, FBT avers that it possessed a property interest to sell the parcel for a price reflecting its highest and best use, i.e. a casino resort (" the property interest") and that the property interest was destroyed by the Commission. The property interest is monetized at $40 million- the difference between the original option price ($75 million) and the price after removing the casino premium from the valuation ($35 million). FBT seeks compensation for the destruction of its property interest in Counts II and III. FBT expressly claims that it is proceeding on those Counts pursuant to G.L.c. 79, § 10. Section 10 applies when the taking or damage " was not effected by or in accordance with a formal vote or order of the board of officers of a body politic or corporate duly authorized by law." Id. Such a taking is known as a taking in pais (the section is labeled " Damages for injuries to property caused by acts in pais ") or as " inverse condemnation." Gilberti 932 F.2d 51, 64, cert. den. 502 U.S. 866 (1991).
Counts II and III allege an unconstitutional taking under the Massachusetts Declaration of Rights. The Commission argues, and FBT appears to concede, that G.L.c. 79 " embodies rights guaranteed under art. 10 of the Declaration of Rights, " Bromfield v. Treasurer & Receiver Gen., 390 Mass. 665, 671 n.11 (1983), and " creates a comprehensive scheme that defines the rights and obligations of parties involved in property takings." Locator Services Group., Ltd. v. Treasurer & i 443 Mass. 837, 854 (2005). Thus, c. 79 provides the applicable procedure and statute of limitations for claims for compensation under the Declaration of Rights resulting from a taking by eminent domain or by a taking in pais. The question becomes which section of c. 79 provides the statute of limitations for FBT’s claim of taking in pais under § 10 of c. 79?
The Commission answers that question by contending that § 10 contains its own statute of limitations. The section provides that " a petition for an award of damages under this section may be filed within one year." The Commission notes that a panel of the Appeals Court, in an unpublished, Rule 1:28, decision, held that a claim for compensation for a taking in pais under § 10 is barred when the claim was not asserted in Superior Court until more than one year after the claim arose. Grasso v. City of New Bedford, 55 Mass.App.Ct. 1116, 2002 WL 31039718 at *12-*13 (2002) (unpublished opinion), rev. den., 438 Mass. 1102 (2002). ‘The Commission also cites three Superior Court decisions applying the one-year statute of limitations for claims based on a taking in pais under § 10. Nicolopoulos v. Town of Dracut, 2007 WL 4958813 (2007) (noting distinction between eminent domain statute of limitations of three years in § 16, from the taking in pais limitation period of one year in § 10); Hurton v. Puorro, 20 Mass.L.Rptr. 501, 503 (2006); Govoni v. Town of Acushnet, 1995 WL 1146894 (1995) (applying § 16 to eminent domain claim, but § 10 to taking in pais claim).
The alleged destruction of FBT’s property interest occurred on January 2, 2015, when the sale of the parcel occurred, or earlier, on November 26, 2013, when FBT entered into the Ninth Amendment to the Option Agreement. This action was filed on November 14, 2016, more than one year after both of those dates. Thus, the Commission asserts that Counts II and III are untimely and must be dismissed.
FBT maintains that it is § 16 of c. 79, not § 10, that provides the applicable statute of limitations period for its claim. Section 16 states that " [a] petition for the assessment of damages under section fourteen may be filed within three years after the right to such damages has vested." Section fourteen provides, in turn, that " [a] person entitled to an award of his damages under this chapter ..., whether a petition has or has not been filed or award made under section six, seven, nine or ten, may petition for the assessment of such damages to the superior court ..." FBT contends that it is petitioning under § 14 by the commencement of this action. Thus, a three-year statute of limitations should apply.
FBT cites a Superior Court decision for its argument that a three-year statute of limitations should apply. In Meldon v. Town of Barnstable, 2006 WL 200100234 (2006) the court acknowledged that the claim at issue involved a taking in pais under § 10. The court focused on the word " award" in § 10 and concluded that the one-year limitation period in § 10 referred to the time by which a person could petition " the appropriate body politic as to what it determines is voluntarily to be paid to the property owner." Id. at *2. If the person wishes to go to Superior Court, he may proceed under § 14. Id. FBT argues that this interpretation of the statutes makes sense because § 14 expressly notes that the petition for assessment of damages filed in Superior Court may be filed " whether a petition has or has not been filed or award made under section ... ten ..." To apply the one-year limitation of § 10 to FBT’s petition to Superior Court, FBT contends, would make the reference to § 10 in § 14 superfluous.
It is a well-settled canon of statutory interpretation that, where possible, a court should construe the various provisions of a statute in harmony with one another. The Locator Services Group, Ltd. v. Treasurer & Receiver Gen., 443 Mass. 837, 859 (2005). In doing so, I find that it is the three-year statute of limitations in § 16 that governs FBT’s claims in Counts II and III. I reach this conclusion respectfully noting the Rule 1:28 decision of the panel in Grasso, but recognizing that such decision is not binding precedent. I am more persuaded by the decision of the Superior Court judge in Meldon .
Section 10 provides the remedy for a person aggrieved by a taking in pais . The section provides that if " the injury was caused by or on behalf of the commonwealth ... the officer or board of officers under whose direction or control the injury was caused shall award damages upon the petition of any person entitled thereto." Id. Thus, § 10 anticipates an administrative finding by the governmental body to award damages. When a later sentence in § 10 references " a petition for an award of damages therefore under this section, " id. (emphasis added), it appears to be referencing the petition to the board of officers who caused the injury. That petition must be filed within one year. Section 10 makes no express reference to a petition or an action in Superior Court.
This interpretation harmonizes § 10 with § 14. Section 14 provides the express remedy of going to Superior Court. Section 14 provides that remedy to a person entitled to an award of damages " under this chapter." Id. " Under this chapter" means, of course, all sections of the chapter, including the sections for eminent domain takings as well as for takings in pais. See Gilbert, 932 F.2d at 64 (recognizing that § 14 provides the remedy in Superior Court for in pais taking under § 10). Moreover, § 14 expressly allows a petition to Superior Court " whether a petition has or has not been filed or award made under section six, seven, nine or ten ." Id. (Emphasis added). That language suggests that a person entitled to an award of damages may, or may not, opt for the administrative remedy provided in § 10 to petition the taking authority. Regardless, the petitioner may go to Superior Court for an assessment of damages.
Having concluded that FBT’s claim in this court for damages as a result of a taking in pais is governed by § 14 of c. 79, the analysis moves to § 16 of that chapter. Section 16 provides that " [a] petition for the assessment of damages under section fourteen may be filed within three years after the right to such damages has vested." As described above, FBT entered into the Ninth Amendment to the Option Agreement on November 26, 2013. It was on that date that FBT suffered the alleged taking or destruction of the casino premium. Because this action was filed on November 14, 2016, a date within three years of Ninth Amendment, the action is timely.
Jurisdictional Question
The conclusion that FBT’s claims in Counts II and III are brought pursuant to § 14 of c. 79 raises another set of issues that may have jurisdictional consequences. Section 14 provides that the petition to the Superior Court for assessment of damages must be filed in the " county in which the property taken or injured was situated." Id. A question arises as to where FBT’s " property interest" is situated. FBT is located in Cambridge, Middlesex County. If the alleged property interest arises from the land that is the subject of the Option Agreement, then the property interest appears to be situated in Everett, Middlesex County. These issues were not addressed by the parties in their memoranda submitted in connection with this motion to dismiss.
A review of the Option Agreement attached to the amended complaint, including Exhibit B, raises the possibility that some portion of the Land may be in Boston, Suffolk County. This must be addressed by the parties.
As a result, I defer action on the Gaming Commission’s motion to dismiss. The jurisdictional questions must be addressed before going further with regard to the Commission’s substantive grounds for dismissal. Where is FBT’s claimed property interest situated? May the requirement that the petition for assessment of damages be filed in the " county in which the property taken or injured was situated" be waived or is it a mandate of exclusive, subject matter, jurisdiction? Also, if jurisdiction is required to be founded upon a petition filed in Middlesex County, what is the effect, particularly with respect to the application of the statute of limitations, of FBT’s filing of its claims in Suffolk County? May the action now be transferred to Middlesex County? If a new action is required to be filed in Middlesex County, should that complaint " relate back" to the date of filing of this action? The fundamental questions of subject matter jurisdiction must be answered before a definitive ruling is made on the Commission’s motion to dismiss.
CONCLUSION
As described above, I find FBT’s amended complaint is brought under, and governed by, § 14 of c. 79. As a result, a question of subject matter jurisdiction arises. I request that the parties address in supplemental memoranda of not more than twenty pages the issues I have raised concerning jurisdiction. These memoranda shall be filed and served at the same time. The memoranda are due by no later than December 7, 2017. In the meantime, action on the Commission’s motion to dismiss is deferred.