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Intralot, Inc v. John W. Mccaffrey

September 21, 2012

INTRALOT, INC., PLAINTIFF,
v.
JOHN W. MCCAFFREY, ET AL.
DEFENDANTS.



The opinion of the court was delivered by: Judge Robert M. Dow, Jr.

MEMORANDUM OPINION AND ORDER

Plaintiff Intralot Inc., ("Intralot") filed a three-count first amended complaint [16] against Defendants John McCaffrey and Sheila Washburn*fn1 alleging equal protection violations under 42 U.S.C. § 1983 (Count I), defamation (Count II), and commercial disparagement (Count III). Plaintiff's claim arises out of its application to serve as the private manager of the state lottery. Defendants' filed a motion to dismiss [18] Plaintiff's complaint pursuant to Fed. R. Civ. P. 12(b)(6). For the following reasons, Defendants' motion [18] is granted.

I. Background*fn2

In July 2009, the Illinois General Assembly enacted legislation that directed the Illinois Department of Revenue ("IDOR") to hire a private manager to run the Illinois Lottery. In particular, the statute required the IDOR to "select a private manager through a competitive request for qualifications" and directed that in doing so the IDOR "shall take into account" several criteria: "(1) the offeror's ability to market the Lottery . . ., (2) the offeror's ability to address the State's concern with the social effects of gambling on those who can least afford to do so, (3) the offeror's ability to provide the most successful management of the Lottery . . ., and (4) the offeror's poor or inadequate past performance in servicing, equipping, operating or managing a lottery on behalf of Illinois, another State of foreign government and attracting persons who are not currently regular players of a lottery." 20 ILCS 1605/9/1(e). Another statute, 30 ILCS 500/1-10(c), exempted the private manager bidding process from most provisions of the Illinois Procurement Code.

To implement the statutory directive, in 2010 the IDOR initiated a process through which it hoped to hire the private manager that would run the Illinois Lottery. Pursuant to the published procedures, Intralot issued a formal expression of interest and a subsequent official response to the state's Request for Proposal ("RFP"). The steps required of the would-be lottery manager under the RFP were two-fold: Step One required each interested party to submit information on a number of topics about their business and their experience in lottery management; Step Two was offered only to finalists and included a possible probity investigation. For its part, the IDOR was to use Step One of the RFP process "to identify Offerors that possessed the qualifications, experience and resources necessary to assume the responsibilities of the Private Manager" and to determine at Step Two "which finalist offered the best overall value to the State of Illinois."

Three companies competed in Step One of the RFP: Intralot, Camelot Illinois LLC ("Camelot") and Northstar Lottery Group ("Northstar"). Northstar is a consortium of three companies, all of whom had existing lottery contracts with the State of Illinois. Both Northstar and Camelot were selected to advance to Step Two of the procedure, and on September 15, 2010, Northstar was selected to run the Illinois lottery. Intralot was disqualified at Step One as a result of an unacceptably low score. On September 21, 2010, Intralot filed a formal protest based on its elimination from the selection process at Step One, asserting that the low score that it received was inexplicable and contending that the evaluators received inaccurate or incomplete information or were inadequately trained in the process of reviewing proposals.

On October 12, 2010, McCaffrey, who was then the IDOR's General Counsel, met with Intralot's outside counsel, John E. Stevens ("Stevens"). At that meeting, McCaffrey advised that he had ordered a background check of Intralot during Step One, that the background check contained damaging information which resulted in the low score, and that, if the protest continued, the background check would be reduced to writing and made available to the public under the Freedom of Information Act. Intralot did not withdraw its protest, and on November 12, 2010, McCaffrey filed a written response (the "Response") to the protest with the IDOR. The Response contained a number of details about Intralot and its managers; these details were obtained from a report prepared by Kroll Associates (the "Kroll Report"), which was provided to the State. The facts in the Kroll Report and the subsequent Response are in dispute. A written response was not required by the Illinois Procurement Code, the law governing many aspects of the Illinois Lottery. Nor did the RFP provide for a response to a formal protest; a response was not barred from the process, but to date had been unprecedented.

Intralot's class-of-one complaint is comprised of two parts. First, Intralot claims that McCaffrey unlawfully inquired into Intralot's background and initiated a probity examination during Step One of the RFP instead of waiting to undertake those tasks during Step Two, as discussed in the RFP language. According to Intralot, this deviation from standard procedures constituted an unfair application of the process that disadvantaged its firm. Second, Intralot claims that McCaffrey's decisions to reduce the probity findings to writing, incorporate the Kroll Report findings in the Response, and file the Response for public access under the Freedom of Information Act were inappropriate and done for the purposes of harming Intralot. Intralot seeks damages for the perceived abuse of the procedural steps during the RFP process, and further seeks to have the Response removed from the record. Intralot also would like an injunction prohibiting release of the Response to those who may request it under Illinois's Freedom of Information Act.

II. Legal Standard

A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency of the complaint, not the merits of the case.See Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). To survive a Rule 12(b)(6) motion to dismiss, the complaint first must comply with Rule 8(a) by providing "a short and plain statement of the claim showing that the pleader is entitled to relief" (Fed. R. Civ. P. 8(a)(2)), such that the defendant is given "fair notice of what the * * * claim is and the grounds upon which it rests." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). Second, the factual allegations in the complaint must be sufficient to raise the possibility of relief above the "speculative level," assuming that all of the allegations in the complaint are true. E.E.O.C. v. Concentra Health Servs., Inc., 496 F.3d 773, 776 (7th Cir. 2007) (quoting Twombly, 550 U.S. at 555). "[O]nce a claim has been stated adequately, it may be supported by showing any set of facts consistent with the allegations in the complaint." Twombly, 550 U.S. at 563. The Court accepts as true all of the well-pleaded facts alleged by the plaintiff and all reasonable inferences that can be drawn therefrom. See Barnes v. Briley, 420 F.3d 673, 677 (7th Cir. 2005).

III. Analysis

A. Class-of-One Equal Protection Claim

Count I of Plaintiff's complaint alleges a class-of-one equal protection violation under the Fourteenth Amendment. A class-of-one claim differs from the typical equal protection claim in that the plaintiff is not claiming to have been discriminated against because of its membership in an identifiable group; rather, a plaintiff "states a class-of-one equal protection claim by alleging that he 'has been intentionally treated differently from others similarly situated and that there is no rational basis for the difference in treatment."" LaBella Winnetka, Inc. v. Village of Winnetka, 628 F.3d 937, 942 (7th Cir. 2010) (citing Village of Willowbrook v. Olech, 528 U.S. 562, 564 (2000)). To establish liability for a class-of-one violation, Plaintiff must allege that: (1) it was part of a class of individuals or groups that were similarly situated; (2) it was intentionally treated differently from its peers in a context where there were clear and defined standards governing the state's actions; (3) it suffered harm as a result of the state's actions; and (4) the difference in treatment was not rationally related to a legitimate state interest. Village of Willowbrook, 528 U.S. at 564 (2000); Engquist v. Oregon Dept. of Agr., 553 U.S. 591, 603 (2008). Essentially, a class-of-one complaint alleges that the plaintiff was treated arbitrarily worse than others who were identically situated. Lauth v. McCollum, 424 F.3d 631, 633 (7th Cir. 2005).

Importantly, class-of-one equal protection claims are not cognizable with regard to all state decisions. In Engquist v. Oregon Department of Agriculture, 553 U.S. 591, 603 (2008), the Supreme Court held that class-of-one claims are prohibited when the state action occurs in the context of discretionary decision making that ...


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