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

587 F.3d 314, 2009 U.S. App. LEXIS 23973, 2009 WL 3491611
CourtCourt of Appeals for the Fifth Circuit
DecidedOctober 30, 2009
Docket08-30289
StatusPublished
Cited by120 cases

This text of 587 F.3d 314 (Jebaco, Inc. v. Harrah's Operating Co., Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fifth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Jebaco, Inc. v. Harrah's Operating Co., Inc., 587 F.3d 314, 2009 U.S. App. LEXIS 23973, 2009 WL 3491611 (5th Cir. 2009).

Opinion

EDITH H. JONES, Chief Judge:

Jebaco Inc. appeals the dismissal of its federal antitrust claims against Pinnacle Entertainment and Harrah’s Operating Company, Inc., along with five Harrah’s subsidiaries (“Harrah’s”). 1 The district *316 court dismissed the claims under Fed. Rule Civ. Proc. 12(c) as barred by the state action doctrine and Noerr-Pennington petitioning immunity. We affirm on the alternate ground, fully briefed below and on appeal, that Jebaco’s complaint fails to allege antitrust standing.

After dismissing the federal antitrust claims, the district court declined to exercise supplemental jurisdiction over Jebaco’s pendent state law claims. The appellees move, on appeal, to amend Harrah’s answer for the purpose of alleging diversity jurisdiction and reinstating the state law claims in federal court. This motion is dismissed.

I. BACKGROUND

The facts, viewed in the light most favorable to Jebaco, the nonmovant, are as follows. Jebaco does not own or operate any casinos. Players Lake Charles, Inc., did, 2 and in May 1993, it leased two berths in Lake Charles, Louisiana, from the Beeber Corporation to conduct riverboat gambling. Under a separate March 1993 agreement, Jebaco was entitled to receive a portion of the rent, which was a per-patron fee. The parties had a dispute that was resolved in a 1995 settlement agreement, under which Jebaco, again, had a right to receive a per-patron fee. In 2000, Harrah’s purchased Players and assumed this payment obligation. Jebaco’s rights under the 1995 settlement agreement are its only asset described in the record.

Hurricane Rita struck Lake Charles in September 2005, damaging at least one of Harrah’s riverboats and the docking area. Harrah’s then ceased operating at this location, halted its per-patron fee payments to Jebaco, and solicited bids for the two riverboats, the gaming licenses associated with the riverboats, and the real property associated with the berths. Jebaco placed a bid, but Harrah’s sold to Pinnacle instead for $70 million, a sum Jebaco asserts is much greater than the property’s reasonable value. The purchase agreement between Harrah’s and Pinnacle initially contained a clause that required Pinnacle to pay Harrah’s $100 million if Pinnacle attempted to transfer the operations, assets, or licenses acquired in the sale to the New Orleans or Shreveport markets. This provision was removed before completion of the sale, however.

According to Jebaco, Harrah’s and Pinnacle hold six of the fifteen riverboat gambling licenses in Louisiana and the only land-based gambling license in the state. Jebaco contends that, together, they earn approximately 60 percent of all gaming revenue generated in Louisiana, including 80 percent of the gambling revenue in the New Orleans metropolitan statistical area (MSA), 62 percent of the revenue in the Lake Charles MSA, and 50 percent in the Shreveport/Bossier City MSA.

Gambling is heavily regulated in Louisiana. See La.Rev.Stat. Ann. § 27:1, et seq. (titled the “Louisiana Gaming Control Law”). The Louisiana Gaming Control Law’s explicit purpose is “to protect the general welfare of the state’s people by keeping the state free from criminal and corrupt elements.” § 27:2(A). Consequently, the law “strictly” regulates “persons, locations, practices, associations, and activities related to the operation of licensed and qualified gaming establishments,” id., by requiring permitting, licensing, and reporting, §§ 27:21.1, 29-29.5, *317 65, 71, 74, 75, 86; providing for enforcement, §§ 27:19-20; criminalizing certain gambling related activities and violations of gambling regulations, §§ 27:30-30.6; and establishing other rules, qualifications, and procedures.

The law also creates the Louisiana Gaming Control Board (“LGCB”), which has “all regulatory, enforcement, and supervisory authority under the Law,” §§ 27:11, 15, including determining whether permit and license applicants are “suitable,” 3 §§ 27:28, 70. The law limits to fifteen the number of licenses available for operating a riverboat casino in the state, with no more than six licenses to be used on any designated waterway at a time. 4 § 27:65. These licenses must be used at a specific berth, § 27:65(12), and are non-transferrable, § 27:68.

Harrah’s and Pinnacle agreed they would cooperate to secure the LGCB’s approval to transfer the licenses. Pinnacle also applied to use one of the licenses at another location in Lake Charles, a berth in which Jebaco does not have an interest. Further, at a July 18, 2006 public hearing, Pinnacle told the LGCB that it was exploring using the second license at another location, which would deprive Jebaco of all revenue. On August 15, 2006, the LGCB approved both applications, but the second license remains in place.

In the wake of this transaction, but before the LGCB ruled on the petitions, Jebaco sued Pinnacle and Harrah’s in federal court seeking monetary and injunctive relief. Jebaco’s complaint alleged that Harrah’s and Pinnacle violated the Sherman Act, 15 U.S.C. §§ 1-2, by dividing the Louisiana casino market and by monopolizing, attempting to monopolize, and conspiring to monopolize that market. Jebaco asserts this alleged anticompetitive conduct deprived it of both the revenue from a casino operating at Jebaco’s berths and the ability to purchase Harrah’s assets.

Pinnacle and Harrah’s moved for a judgment on the pleadings, Fed. R. Civ. P. 12(c). 5 Both motions argued that Jebaco failed to allege antitrust standing and that Jebaco’s claims were barred by the state action doctrine and Noeyr-Pennington petitioning immunity. The district court dismissed the antitrust claims, ruling on the latter two arguments without addressing antitrust standing. Jebaco appeals.

Jebaco’s complaint also alleged seven Louisiana law causes of action against Harrah’s, 6 over which the district court *318 originally exercised supplemental jurisdiction. See 28 U.S.C. § 1367. After it dismissed the federal claims, the district court declined to exercise jurisdiction over the pendent state law claims. Harrah’s moves, on appeal, to amend its answer to allege diversity jurisdiction over the state law claims.

II. STANDARD OF REVIEW

We review de novo motions to dismiss and motions for judgment on the pleadings. Doe v. MySpace, Inc., 528 F.3d 413, 418 (5th Cir.2008).

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587 F.3d 314, 2009 U.S. App. LEXIS 23973, 2009 WL 3491611, Counsel Stack Legal Research, https://law.counselstack.com/opinion/jebaco-inc-v-harrahs-operating-co-inc-ca5-2009.