Debary v. Harrah's Operating Co., Inc.

465 F. Supp. 2d 250, 2006 U.S. Dist. LEXIS 88674, 2006 WL 3513114
District Court, S.D. New York·Decided November 20, 2006·No. 06 CIV. 6365(CM)·Published·Cited by 17 cases

Opinion

DECISION AND ORDER ON REMAND FROM THE SECOND CIRCUIT, REINSTATING THIS COURT’S PRIOR JUDGMENT GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT

MCMAHON, District Judge.

Catskill Development, L.L.C. (“Catskill”), Mohawk Management, L.L.C. (“Mohawk”) and Monticello Raceway De *253 velopment Co., L.L.C. (“Monticello”) (collectively, “Original Plaintiffs”), originally brought this action in diversity against Park Place Entertainment Corp. (“Park Place”), alleging that defendant, one of the world’s largest casino companies, wrongfully induced officials of the St. Re-gis Mohawk Indian Nation (“Tribe”) to terminate the Tribe’s contractual agreements and business relationships with plaintiffs relating to the development and management of a proposed $500 million Native American casino at the Monticello Raceway in Sullivan County, New York (the “Casino Project”). Plaintiffs sought damages based on defendant’s alleged tortious interference with contractual relations, tortious interference with prospective business advantage, unfair competition, and Donnelly Act violations.

Following this court’s dismissal of plaintiffs’ unfair competition and Donnelly Act claims in Catskill Dev., L.L.C. v. Park Place Entm’t Corp., 144 F.Supp.2d 215 (S.D.N.Y.2001) (“Catskill I”) and granting of defendant’s motion of summary judgment on the two remaining claims in Catskill Dev., L.L.C. v. Park Place Entm’t Corp., 217 F.Supp.2d 423 (S.D.N.Y.2002) (“Catskill III ”), plaintiffs appealed to the Second Circuit.

The Second Circuit remanded this case so that this court could determine whether federal jurisdiction properly existed if non-diverse parties Catskill and Mohawk were dismissed, whether the remaining plaintiff — Monticello—was a third-party beneficiary to the Land Purchase Agreement, and, if so, whether New York law permitted third-party beneficiaries to recover damages for defendant’s alleged tortious interference with contract.

For the reasons stated below, this court finds that it has subject matter jurisdiction over this case now that the non-diverse parties have been dismissed. While New York law permits recovery by third-party beneficiaries for tortious interference with contract, Monticello is not a third-party beneficiary of the LPA.

This court’s prior decision granting defendant summary judgment and dismissing the case in its entirety, is reinstated.

I. The Relevant and Undisputed Facts

The factual background to the dispute between the parties is set forth in greater detail in this court’s earlier opinions. See, e.g., Catskill III, 217 F.Supp.2d at 425-28; Catskill Dev., L.L.C. v. Park Place Entm’t Corp., 154 F.Supp.2d 696, 698-701 (S.D.N.Y.2001) (“Catskill II”); Catskill I, 144 F.Supp.2d at 218-229. This court assumes familiarity with these opinions.

Briefly, the original plaintiffs are entities created by a group of businessmen and developers 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 activities are illegal in New York State unless conducted on Native American lands, under certain legal conditions, plaintiffs partnered with the Tribe to pursue development of the Casino Project.

On June 3, 1996, original plaintiff Catskill acquired, from entities that are not parties or in any way connected to the Tribe, 230 acres of land that contained the Monticello Raceway. Of the property purchased, 29.31 acres adjacent to the Raceway (the “Raceway property”) were set aside for the Casino Project. Catskill created the other two original plaintiffs, Mohawk and Monticello, to provide various services for the Raceway and the casino; Catskill entered into an agreement with the latter which granted Monticello “ the exclusive right to develop, lease and manage” the entire 230 acre tract. (See Declaration of Sanford I. Weisburst (“Weisburst Deck”), Ex. T at 1.) Catskill acted for all three entities in seeking the local, state *254 and federal endorsements necessary to build, and operate the proposed casino.

On July 31,1996, the Tribe and plaintiffs entered into five separate agreements: the Land Purchase Agreement (the “LPA”), the Gaming Facility Development and Construction Agreement (the “DCA”), the Gaming Facility Management Agreement (the “Management Agreement”), the Shared Facilities Agreement (the “SFA”), and the Mortgage Agreement. 1

A. The Land Purchase Agreement

The LPA, which is the focus of this remand, was an agreement between Catskill and the St. Regis Mohawk Gaming Authority (the “Authority”), “an instrumentality of the Tribe, to which it has assigned its authority over the development and conduct of Gaming ... on the Property.” (Weisburst Deck, Ex. I, Recitals.) The express purpose of the LPA was to convey the Raceway property from Catskill to the United States Government, to be held in trust for the Tribe. The LPA stated that the Tribe intends to “use the Real Estate to improve the economic conditions of its members ... and directly benefit the Tribe.” (Weisburst Deck, Ex. H, Recitals.) In exchange for the trust conveyance, the Tribe agreed to pay Catskill $10 million, which was the price Catskill had paid to the prior owners in order to acquire the entire 230 acre tract. (Id. at § 2.02(a).)

Although the primary contractual obligations articulated in Article II of the LPA, entitled “THE TRANSACTION,” involved the trust conveyance in exchange for reimbursement of the purchase price explained above, Article II also required the Authority to “perform certain covenants as provided herein.” (Id. at § 2.02(b).) These covenants, enumerated in Article VIII of the LPA, included the following:

Section 8.02. BIA Approval. The Authority shall (and shall cause the Tribe to) cooperate with Seller [Catskill] and any of its Affiliates and use Authority’s reasonable best efforts in good faith to assist in obtaining the approval of the [Bureau of Indian Affairs (“B.I.A.”) ] of the Trust Conveyance and any other documents or transactions related thereto....
Section 8.04. Use of Proceeds. The Authority shall use the net proceeds from the sale of the Senior Secured Notes 2 only for the acquisition, construction, development and operation of the Project....

(Id. at §§ 8.02 and 8.04.) § 1.01, in turn, defined an “Affiliate” of any specified person in the LPA as

any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person.... “[Cjontrol” ... shall mean the possession, directly *255 or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise....

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Debary v. Harrah's Operating Co., Inc., 465 F. Supp. 2d 250, 2006 U.S. Dist. LEXIS 88674, 2006 WL 3513114 (S.D.N.Y. 2006).

465 F. Supp. 2d 250 (Debary v. Harrah's Operating Co., Inc.) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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