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Empress Casino Joliet Corp. v. Blagojevich

December 7, 2009

EMPRESS CASINO JOLIET CORP., DES PLAINES DEVELOPMENT LTD. P'SHIP, HOLLYWOOD CASINO-AURORA, INC., AND ELGIN RIVERBOAT RESORT - IVERBOAT CASINO, PLAINTIFFS,
v.
ROD BLAGOJEVICH,FRIENDS OF BLAGOJEVICH, JOHN JOHNSTON, BALMORAL RACING CLUB, INC., MAYWOOD PARK TROTTING ASS'N, INC., ARLINGTON PARK RACECOURSE, LLC, FAIRMOUNT PARK, INC., AND HAWTHORNE RACE COURSE, INC., DEFENDANTS.



The opinion of the court was delivered by: Matthew F. Kennelly, District Judge

MEMORANDUM OPINION AND ORDER

The plaintiffs in this case own and operate riverboat gambling casinos in Elgin, Joliet, and Aurora, Illinois. They have sued former Illinois governor Rod Blagojevich, his campaign committee Friends of Blagojevich ("FOB"), five entities that operate horse racing tracks in Illinois (Balmoral Park, Maywood Park, Arlington Park, Fairmount Park, and Hawthorne, collectively, "the racetracks"), and John Johnston, the owner of Balmoral Park and Maywood Park. The casinos' complaint includes two claims: a claim against Blagojevich, FOB, Johnston, Balmoral Park, and Maywood Park under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1964(c), and a state law constructive trust claim against the five horse racing tracks.

The defendants have moved to dismiss the complaint. Plaintiffs have moved for a preliminary injunction preventing the distribution of disputed funds to the defendant racetracks. The preliminary injunction motion is premised exclusively on the state law constructive trust claim. The Court previously entered a temporary restraining order to preserve the status quo pending determination of the motion for preliminary injunction. For the reasons stated below, the Court declines to dismiss the RICO claim (Count 1), dismisses the constructive trust claim (Count 2) for lack of subject matter jurisdiction, and denies the motion for preliminary injunction because it is premised on a claim over which the Court lacks jurisdiction.

Facts

The casinos allege that while Blagojevich was governor, he systematically exchanged and attempted to exchange his official actions as governor for benefits to himself and his family and contributions to FOB. See Compl. ¶¶ 29 & 59(h) (alleging "broad[ ] scheme" and incorporating indictment in United States v. Blagojevich, No. 08 CR 888); Compl., Ex. 1 (indictment) ¶¶ 9-11. That course of conduct, the casinos allege, included a scheme that they say affected them directly. This alleged scheme concerned two legislative enactments, one in 2006 and one in 2008, that required Illinois casinos to pay a percentage of their revenues into a fund for distribution to Illinois horse racing tracks.*fn1 The rationale for the legislation was that riverboat gambling had cut into the business of the Illinois horse racing and breeding industry, which the legislature estimated provides 37,000 jobs to Illinois residents.

The casinos allege that Blagojevich directly importuned a number of Illinois legislators to vote in favor of the 2006 legislation (the "2006 Racing Act"), which the legislature passed as a result and Blagojevich then signed into law. Compl. ¶¶ 22-28. Blagojevich did this, they allege, because Johnston had agreed on behalf of the racetracks that they would contribute a total of $125,000 to FOB in exchange for Blagojevich ensuring the adoption of the 2006 Racing Act and signing it into law. Id. ¶¶ 29-30. Johnston fulfilled his end of the deal, plaintiffs allege, about a month after Blagojevich signed the legislation. Id. ¶¶ 31-34.

Under the 2006 Racing Act, the casinos were required to pay three percent of their adjusted gross receipts to the state of Illinois. The Act provided that the state would deposit those funds into the newly-created Horse Racing Equity Trust Fund and that the Illinois Racing Board, as administrator of the Fund, would disburse the proceeds to the racetracks. The racetracks were required to spend sixty percent of the money to increase purses for horse races and the rest on improving and operating their facilities.

In May 2006, the casinos sued Illinois' Treasurer and the Illinois Racing Board in state court in Will County. They alleged that the 2006 Racing Act violated the Takings and Due Process Clauses of the federal constitution and the public purpose, uniformity, equal protection, and special legislation provisions of the Illinois Constitution. The casinos invoked the State Officers and Employees Money Disposition Act (the Protest Monies Act), 30 ILCS 230/2a, which allows a taxpayer that challenges the legality of a state tax to pay the disputed sums into a protest fund, with the money eventually returned to the taxpayer with interest if the challenge succeeds. In June 2006, the Will County court issued a preliminary injunction requiring the Treasurer to deposit the payments from the casinos into a protest fund and prohibiting the Treasurer from transferring those sums to the Horse Racing Equity Trust Fund while the case was pending. Several racetracks intervened in the case on behalf of the defendants to protect their interest in the funds. They did not, however, assert any claims of their own, nor did the casinos assert any claims against them.

The state trial court found that the 2006 Racing Act violated the Illinois Constitution's uniformity clause. In June 2008, the Illinois Supreme Court overturned the trial court's decision and found the 2006 Act constitutional under each of the state and federal constitutional provisions the casinos had cited. Empress Casino Joliet Corp. v. Giannoulias, 231 Ill. 2d 62, 896 N.E.2d 277 (2008).

The 2006 Racing Act, by its terms, was to expire after two years. In 2008, a bill was introduced in the Illinois legislature to extend the Act for three years (the "2008 Racing Act"). In the latter part of 2008, the casinos allege, Blagojevich and Johnston agreed that Johnston would pay Blagojevich or FOB $100,000 in return for the adoption of the legislation. Compl. ¶¶ 35-36. A number of conversations concerning the agreement, plaintiffs say, were captured on a court-ordered wiretap that provided part of the evidence that led to the filing of a federal criminal complaint against Blagojevich in December 2008. Id. ¶¶ 37-39, 41-45. The legislature passed the 2008 Racing Act in or about November 2008 and sent it to Blagojevich for signature. Blagojevich then took steps to make sure that Johnston would live up to his end of the deal. Id. ¶¶ 44-45. Blagojevich was arrested on December 9, 2008 after federal prosecutors filed a criminal complaint against him. He signed the 2008 Racing Act on December 16, 2008. Id. ¶¶ 46-47.

On January 8, 2009, the casinos filed suit in Will County state court to challenge the constitutionality of the 2008 Racing Act. They noted in their complaint that they were about to file a petition for certiorari in the United States Supreme Court to challenge the Illinois Supreme Court's decision concerning the 2006 Racing Act. In their lawsuit concerning the 2008 Racing Act, the casinos asserted (similar to their allegations in the first suit) that the Act violated the Takings and Due Process Clauses of the federal constitution and the Illinois Constitution's public purpose and uniformity requirements. The casinos included in their complaint an allegation, based on the then-pending criminal complaint against Blagojevich, that he had pressured an unnamed person to contribute money to FOB in return for signing the 2008 Racing Act. The casinos alleged that this newly-obtained evidence supported their contentions that the Illinois legislature's findings of a public purpose for the Act were "'evasive' and designed to mask the fact that the primary purpose of the legislation is to benefit the racetracks' private interests . . . ." Arlington Park Mem. in Supp. of Mot. to Dismiss, Ex. F (state court complaint) ¶ 7.

On June 8, 2009, the United States Supreme Court denied the casinos' petition for certiorari in the case concerning the 2006 Racing Act. Two days later, on June 10, 2009, the casinos returned to the Will County court and filed a petition for relief from judgment under 735 ILCS 5/2-1401. They contended that newly-available evidence regarding the alleged pay-to-play scheme involving Blagojevich and Johnston showed that the 2006 Racing Act did not satisfy the Illinois Constitution's public purpose requirement, contrary to the Illinois Supreme Court's ruling.

Two days after that, on June 12, 2009, the casinos filed this suit. This was their first suit in which they asserted claims against the racetracks. As noted earlier, the casinos assert a civil RICO claim against Blagojevich, FOB, Johnston, Balmoral Park, and Maywood Park. In that claim, the casinos allege that they were the victim of a payto-play scheme among those defendants. The casinos also assert a state law constructive trust claim against the racetracks who are the beneficiaries of the 2006 and 2008 Racing Acts. In that claim, the casinos seek imposition of a constructive trust over the funds they were required to pay under the two Acts, alleging that "as a direct result of illegal and/or fraudulent activity, [the racetracks] have been substantially and unjustly enriched such that it would be inequitable and contrary to law to allow them each to keep any of this money or any claim to it." Compl. ¶ 68. In late August 2009, the defendants filed motions to dismiss the casinos' claims.

In late June 2009, after the present case was already pending, Arlington Park moved to intervene in both state court suits; it had not previously sought to intervene in either case. In September 2009, Balmoral and Maywood Park moved to intervene in the casinos' case challenging the 2008 Racing Act. Fairmount never moved to intervene in either case.

On August 17, 2009, the Will County court denied the casinos' section 2-1401 petition in the case concerning the 2006 Racing Act and ordered the Illinois Treasurer to transfer the disputed funds relating to that Act from the protest fund to the Horse Racing Equity Trust Fund. The casinos have sought a stay of the latter order pending appeal. In mid-November 2009, the Will County court dismissed the casinos' federal and state constitutional challenges to the 2008 Act.

Discussion

1. RICO ...


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