Maloney Gaming Management, L.L.C. v. St. Tammany Parish

Case: 10-31259 Document: 00511674901 Page: 1 Date Filed: 11/23/2011
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
No. 10-31259 November 23, 2011
Lyle W. Cayce
MALONEY GAMING MANAGEMENT, L.L.C. Clerk
Plaintiff - Appellant
v.
ST. TAMMANY PARISH,
Defendant - Appellee
Appeal from the United States District Court
for the Eastern District of Louisiana
USDC No. 2:10-CV-1582
Before JONES, Chief Judge, HAYNES, Circuit Judge, and CRONE, District
Judge.*
MARCIA A. CRONE, District Judge:**
Maloney Gaming Management, L.L.C. (“MGM”) appeals the district court’s
order dismissing, with prejudice, its claims brought against St. Tammany
Parish, Louisiana (the “Parish”), pursuant to the Fifth and Fourteenth
Amendments to the United States Constitution. Specifically, MGM contends
that the district court erred in rejecting its assertion that certain commercial
lessor and occupational licenses MGM obtained for the purpose of opening two
electronic video bingo gaming facilities constitute “property” protected under the
Takings Clause of the Fifth Amendment and the Due Process Clause of the
Fourteenth Amendment. MGM also challenges the summary dismissal of its
state law cause of action for detrimental reliance, without prejudice, complaining
*
District Judge of the Eastern District of Texas, sitting by designation.
**
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not be
published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
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that the court failed to articulate the reasons for dismissing the claim. We
affirm the district court in all respects.
I. BACKGROUND
On May 27, 2010, MGM filed suit under 42 U.S.C. § 1983, alleging that it
was deprived of property without due process of law and without just
compensation in violation of the Fifth and Fourteenth Amendments. In its
complaint, MGM averred that, despite obtaining various licenses and certificates
and expending significant funds to remodel its facilities located in Covington and
Lacombe, Louisiana, for the purpose of providing electronic video bingo, the
Parish Council passed Ordinance 12-025.10 (the “Ordinance”) on June 4, 2009,
making it unlawful for “any person, association, organization, or corporation” to
“hold, operate, or conduct” electronic video bingo in the unincorporated areas of
the Parish.
MGM also alleged that, prior to passage of the Ordinance, it obtained (for
both locations): (1) commercial lessor licenses “to lease the premises to
charitable organizations” from the Office of Charitable Gaming; (2) occupational
licenses from the Parish Department of Planning; and (3) Certificates of
Completion from the Parish Department of Permits and Regulatory. According
to MGM, these licenses and permits constitute property within the meaning of
the Fifth and Fourteenth Amendments. MGM further claimed that it relied to
its detriment on these licenses and permits as well as on a November 2007 legal
opinion letter issued by the St. Tammany Council Attorney, which advised that
electronic video bingo was permitted within the unincorporated areas of the
Parish at that time.
Additionally, MGM complained that the Parish invoked a policy of
prohibiting electronic video bingo before passing the Ordinance. MGM
contended that, as a consequence, the Parish denied it due process by failing to
provide notice and an opportunity to be heard before taking action affecting
MGM’s “established property interests.”
On July 19, 2010, the Parish filed a motion to dismiss MGM’s takings and
due process claims pursuant to FED. R. CIV. P. 12(b)(6). It attached various
documents, which were referenced in MGM’s complaint, to the motion. The
district court noted in its opinion the following additional facts included in
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MGM’s response to the Parish’s motion to dismiss, but which MGM failed to
allege in its complaint:
• That on the planned opening day of [MGM’s] facilities, April
15, 2009, all of its video bingo machines had been tested and
permitted as required by the Louisiana statutory scheme
related to charitable gaming and that [MGM’s] license as a
commercial lessor had been obtained and properly posted and
that, in spite of these facts, the Parish denied [MGM]
permission to open its facilities on April 15, 2009, well in
advance of the passage of the Ordinance.
• That [the Parish] issued all licenses and permits to [MGM]
with full knowledge of [MGM’s] intent to operate a video bingo
parlor at its two facilities. [MGM] argues that the Parish
relied on documents which clearly identified the facilities as
bingo parlors in issuing building permits and Certificates of
Completion . . . .
• That [the Parish] acted arbitrarily and capriciously in passing
the Ordinance. In support of this proposition, [MGM] cites an
article from [an online news source] which credits complaints
and protests from Parish residents as the motivating factor
behind enact[ment] [of] the Ordinance.
• That [MGM] relied on an Opinion Letter issued to [it] on
November 16, 2007, by Neil C. Hall, III, the “Council
Attorney” for the Parish, which advised [MGM] that video
bingo machines may be used in the unincorporated areas of
the Parish so long as [MGM] complies with applicable state
laws.
On September 9, 2010, the district court granted the Parish’s motion
pursuant to FED. R. CIV. P. 12(b)(6) and dismissed MGM’s takings claim,
reasoning that (1) MGM’s licenses permitted it to “lease premises to charitable
organizations” and to make “commercial, industrial, and institutional business”
use of the properties, but did not grant MGM the right to operate electronic
video bingo at any of its facilities, and (2) MGM, as a commercial lessor, was not
in possession of any property interest for purposes of the Takings Clause because
LA. REV. STAT. ANN. § 4:718(F) expressly provides that any license or permit
issued pursuant to the Charitable Raffles, Bingo, and Keno Licensing Law (the
“Act” or the “Charitable Licensing Law”) is “a pure and absolute revocable
privilege and not a right, property or otherwise,” and “no holder of any license
or permit acquires any vested interest or right therein or thereunder.” The
district court disposed of MGM’s due process claim for the same reason—lack of
a protected property interest. MGM’s detrimental reliance claim was not
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addressed in the court’s opinion but was later dismissed without prejudice in an
amended judgment dated December 7, 2009. This appeal followed.
II. DISCUSSION
A. FED. R. CIV. P. 12(b)(6)
The Fifth Circuit reviews the decision to grant a Rule 12(b)(6) motion to
dismiss de novo. Harold H. Huggins Realty, Inc. v. FNC, Inc., 634 F.3d 787, 795-
96 (5th Cir. 2011); Elsensohn v. St. Tammany Parish Sheriff’s Office, 530 F.3d
368, 371 (5th Cir. 2008). “‘To survive a motion to dismiss, a complaint must
contain sufficient factual matter, accepted as true, to “state a claim to relief that
is plausible on its face.”’” Harold H. Huggins Realty, Inc., 634 F.3d at 796(quoting Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937, 1949 (2009) (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007))). “‘Factual allegations
must be enough to raise a right to relief above the speculative level, on the
assumption that all the allegations in the complaint are true (even if doubtful
in fact).’” Elsensohn, 530 F.3d at 371 (quoting Iqbal, 129 S. Ct. at 1965); In re
Katrina Canal Breaches Litig., 495 F.3d 191, 205 n.10 (5th Cir. 2007)
(recognizing that the Fifth Circuit no longer applies the minimal standard of
adequate pleading set forth in Conley v. Gibson, 355 U.S. 41 (1957)). “A claim
for relief is plausible on its face ‘when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the defendant is liable for
the misconduct alleged.’” Harold H. Huggins Realty, Inc., 634 F.3d at 796(quoting Iqbal, 129 S. Ct. at 1949). “A claim for relief is implausible on its face
when ‘the well-pleaded facts do not permit the court to infer more than the mere
possibility of misconduct.’” Harold H. Huggins Realty, Inc., 634 F.3d at 796(quoting Iqbal, 129 S. Ct. at 1950).
MGM first challenges the district court’s refusal to convert the Parish’s
motion into one for summary judgment, complaining that the Parish
inappropriately referred to “matters outside the pleadings” in its motion to
dismiss. In its opinion, however, the district court correctly summarized
controlling law on this issue, stating that when considering a Rule 12(b)(6)
motion, a court may consider documents outside the complaint when they are:
(1) attached to the motion; (2) referenced in the complaint; and (3) central to the
plaintiff’s claims. See In Re Katrina Canal Breaches Litig., 495 F.3d at 205(finding consideration of insurance contracts unattached to the complaint
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permissible where they were attached to the motions to dismiss, referred to in
the complaint, and central to the plaintiffs’ claims); see also Tellabs, Inc. v.
Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2008) (directing courts to
“consider the complaint in its entirety, as well as other sources courts ordinarily
examine when ruling on Rule 12(b)(6) motions to dismiss, in particular,
documents incorporated into the complaint by reference, and matters of which
a court may take judicial notice”) (citing 5B CHARLES ALAN WRIGHT ET AL.,
FEDERAL PRACTICE AND PROCEDURE, § 1357 (3d ed. 2004 & Supp. 2007)); Causey
v. Sewell Cadillac-Chevrolet, Inc., 394 F.3d 285, 288 (5th Cir. 2004); Kane
Enters. v. MacGregor (USA) Inc., 322 F.3d 371, 374 (5th Cir. 2003).
The items attached to the Parish’s motion included: (1) the Ordinance;
(2) documents dated March 27, 2009, indicating that the Parish’s Department
of Planning had no objection to MGM receiving occupational licenses with the
handwritten annotation “assembly hall” under MGM’s name; and (3) two Class
“O” Occupational Business Licenses issued to MGM by the Parish Sheriff’s Office
Occupational License Department.
As noted by the district court, all of these documents were referenced in
MGM’s complaint. Paragraph ten refers to the Ordinance, and paragraph seven
mentions occupational licenses issued on March 27, 2009, by the Parish’s
Department of Planning. MGM’s claims undoubtedly pertain to the Ordinance
and the commercial lessor and occupational licenses, as MGM asserts that the
Parish deprived it of its licenses without just compensation or due process of law
by passing the Ordinance and prohibiting the facilities’ openings prior to its
passage. Thus, the district court correctly determined that such attachments
were central to MGM’s claims and, as such, it was permitted to consider them
without converting the motion to dismiss into one for summary judgment. See
In Re Katrina Canal Breaches Litig., 495 F.3d at 205.
B. Takings and Due Process Claims
“The Takings Clause of the Fifth Amendment, made applicable to the
States through the Fourteenth Amendment, directs that ‘private property’ shall
not ‘be taken for public use, without just compensation.’” Urban Devs. LLC v.
City of Jackson, 468 F.3d 281, 292 (5th Cir. 2006) (quoting U.S. CONST. AMEND.
V). “The Fourteenth Amendment provides that no person shall be deprived of
life, liberty, or property, without due process of law.” Stokes v. Gann, 498 F.3d
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483, 485 (5th Cir. 2007) (quotations omitted); see U.S. CONST. AMEND. XIV, § 1,
cl. 3.
To succeed under a takings claim, a plaintiff “must first demonstrate a
constitutionally protected property interest.” Severance v. Patterson, 485 F.
Supp. 2d 793, 803 (S.D. Tex. 2007), aff’d, 566 F.3d 490 (5th Cir. 2009). Similarly,
“[t]o state a Fourteenth Amendment due process claim under § 1983, ‘a plaintiff
must first identify a protected life, liberty or property interest and then prove
that governmental action resulted in a deprivation of that interest.’” Gentilello
v. Rege, 627 F.3d 540, 544 (5th Cir. 2010) (quoting Baldwin v. Daniels, 250 F.3d
943, 946 (5th Cir. 2001)).
MGM contends that the district court erred when it considered state,
rather than federal, law in determining whether MGM asserted a protected
property interest. Citing Cleveland v. United States, 531 U.S. 12, 26 (2000),
MGM argues that federal law defines a party’s property interests. Id. In
footnote 4 of the Cleveland opinion, the Court stated:
Notwithstanding the State’s declaration that “[a]ny license issued
or renewed . . . is not property or a protected interest under the
constitutions of either the United States or the state of Louisiana,”
LA. REV. STAT. ANN . § 27:301(D) (West Supp. 2000), [t]he question
whether a state-law right constitutes ‘property’ or ‘rights to property’
is a matter of federal law . . . .
531 U.S. at 26 n.4 (emphasis added) (quotations and citations omitted). The
Court cited Drye v. United States, 528 U.S. 49 (1999), and United States v. Nat’l
Bank of Commerce, 472 U.S. 713 (1985), in support of its statement that federal
law governs whether a state-law right constitutes property. Cleveland, 531 U.S.
at 26 n.4. Both Drye and Nat’l Bank of Commerce involved whether the nature
of a given state right or interest constituted property subject to a federal tax lien
under 26 U.S.C. § 6321, and Cleveland addressed whether the State of Louisiana
parted with “property” within the meaning of the federal mail fraud statute
when it issued a license to operate video poker machines, issues different from
those presented in this case. See Cleveland, 531 U.S. at 26; Drye, 528 U.S. at 58;
Nat’l Bank of Commerce, 472 U.S. at 727. In any event, the Drye court
explained:
We look initially to state law to determine what rights the taxpayer
has in the property the Government seeks to reach, then to federal
law to determine whether the taxpayer’s state-delineated rights
qualify as “property” or “rights to property” within the compass of
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the federal tax lien legislation. Cf. Morgan v. Comm’r, 309 U.S. 78,
80 (1940) (“State law creates legal interests and rights. The federal
revenue acts designate what interests or rights, so created, shall be
taxed.”).
Drye, 528 U.S. at 58. This explanation is not inconsistent with settled case law
directing courts to look to an independent source of law to determine whether
property interests exist in the takings and due process contexts. See
Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1003-04 (1984) (takings); United
States v. 131.68 Acres of Land, 695 F.2d 872, 875 (5th Cir. 1983) (takings); see
also Whiting v. Univ. of S. Miss., 451 U.S. 339, 346 (2006) (due process).
“The Constitution does not create property interests.” Leis v. Flynt, 439
U.S. 438, 441 (1979) (citing Roth, 408 U.S. at 577); accord Town of Castle Rock
v. Gonzales, 545 U.S. 748, 756 (2005). Rather, “the existence of a property
interest is determined by reference to ‘existing rules or understandings that
stem from an independent source such as state law.’” Phillips v. Wash. Legal
Found., 524 U.S. 156, 164 (1998) (quoting Roth, 408 U.S. at 577); Bryan v. City
of Madison, 213 F.3d 267, 275 (5th Cir. 2000). Therefore, “[i]f a property interest
exists under state law, then the state cannot appropriate that interest without
providing due process and just compensation.” Severance, 485 F. Supp. 2d at
803.
While a state’s pronouncement that a given interest is a privilege and not
a right is not necessarily determinative, binding precedent clearly teaches that
courts should consider state law in determining whether a property interest
exists. See Bd. of Regents v. Roth, 408 U.S. 564, 577 (1972); Hudson v. Tex.
Racing Comm’n, 455 F.3d 597, 599 n.4 (5th Cir. 2006); see also Phillips, 524 U.S.
at 164; Bryan, 213 F.3d at 275. As such, the district court did not err when it
considered LA. REV. STAT. ANN. § 4:718(F), which states that a license or permit
issued pursuant to the Charitable Licensing Law is “a pure and absolute
revocable privilege and not a right, property or otherwise,” and “no holder of any
license or permit acquires any vested interest or right therein or thereunder.”
A reading of the complaint reveals that MGM asserts a property interest
in its commercial lessor and occupational licenses. Although a license “may well
be ‘property’ once issued, insofar as the [licensee] is concerned,” Cleveland, 531
U.S. at 20 n.3 and Bell v. Burson, 402 U.S. 535, 539 (1971), where the alleged
property interest does not authorize the licensee to engage in the proposed
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activity, a protected property interest will generally not exist. See, e.g., Shaboon
v. Duncan, 252 F.3d 722, 731 (5th Cir. 2001) (reasoning that plaintiff did not
have a property interest in medical clinical privileges because she did not hold
a medical license; rather, she held an institutional permit authorizing her to
work as an unlicensed doctor contingent on her participation in a residency
program); M & J Coal Co. v. United States, 47 F.3d 1148, 1153 (Fed. Cir. 1995)
(rejecting plaintiff’s takings claim where an “inquiry into the nature of the
owner’s estate shows that the proscribed use interests were not part of his title
to begin with”).
In this instance, the licenses held by MGM authorized it “to lease the
premises to charitable organizations” and to engage in commercial, industrial,
and institutional businesses. They did not authorize MGM to conduct electronic
video bingo. In fact, LA. REV. STAT. ANN. § 4:727(E)(2)(b) expressly provides that
“[n]o person licensed as a commercial lessor . . . shall . . . [h]old, operate, conduct,
or assist in the holding, operating, or conducting of a charitable game of chance
at the commercial premises.” Under these circumstances, therefore, MGM never
possessed the requisite stick in the proverbial bundle of property rights that
would allow it to conduct electronic video bingo. See Minneapolis Taxi Owners
Coalition, Inc. v. City of Minneapolis, 572 F.3d 502, 509 (8th Cir. 2009), cert.
denied, 130 S. Ct. 1570 (2010) (“Even if there is a property interest in a
particular license, a takings claim cannot be supported by asserting ownership
in a property interest that is different and more expansive than the one actually
possessed.”).
In addition to asserting a property interest in its commercial lessor and
occupational licenses, MGM also contends that the Parish “impeded the issuance
of certain licenses thereby impacting MGM’s role as a recognized statutory
lessor” and that “the Parish arbitrarily prohibited the planned opening by
arbitrarily refusing to release Parish charitable licenses to state approved
charities.” These statements suggest that MGM is attempting to assert a
property interest in local Parish permits or licenses that were not issued to third-
party charities.
In JDC Mgmt., LLC v. Reich, the district court rejected a plaintiff
company’s assertion that it had a cognizable liberty or property interest for due
process purposes in two charities’ applications for charitable gaming licenses.
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644 F. Supp. 2d 905, 944-45 (W.D. Mich. 2009). The court stated that the
charities themselves “had no constitutionally cognizable property interest in a
license that they did not hold; a fortiori, [the plaintiff company] could have no
constitutionally cognizable property interest in those third parties’ would-be
licenses (less still a property interest in any profit they expected or hoped to earn
doing business with the licensees after their approval).” Id. at 944. MGM’s
assertion that it held a constitutionally protected property interest in local
permits unissued to the lessee charities, therefore, is without merit. Cf. Am.
Int’l Gaming Ass’n, Inc. v. La. Riverboat Gaming Comm’n, 00-2864, p. 14 (La.
App. 1 Cir. 9/11/02), 838 So. 2d 5, 16 (“[Louisiana] state law affords a license
applicant no individual entitlement to a license that he seeks . . ., [and] we find
no due process violation because neither [applicant] had a protected property
interest in the benefits conferred by a license that they did not actually hold.”).
MGM’s takings claim fails in any event because it did not allege a
complete deprivation of the economically viable use of its property. See Agins v.
City of Tiburon, 447 U.S. 255, 160 (1980) (stating that a “land use regulation
does not effect a taking if it . . . does not deny an owner economically viable use
of his land”);1 see also First Eng. Evangelical Church of Glendale v. Los Angeles
Cnty., 482 U.S. 304, 313, 318, 321 (1987); Del Monte Dunes at Monterey, Ltd. v.
City of Monterey, 95 F.3d 1422, 1428 (9th Cir. 1996).
MGM alleged the following: (1) it expended “significant funds” to remodel
its facilities into two video bingo parlors; (2) it was prevented from operating
these facilities by passage of the Ordinance, resulting in the loss of past, present,
and future income; (3) it was prevented from opening the facilities “under threat
of citation” before the Ordinance was passed and, therefore, deprived of the
revenue that could have been earned in April and May 2009; and (4) the Parish
“arbitrarily and unreasonably” “revoked authorized licenses and permits without
just compensation.” Although these factual averments address the economic loss
purportedly sustained by MGM, they do not allege that MGM was deprived of
all or even most of the economically viable use of its property. See Matagorda
Cnty. v. Russell Law, 19 F.3d 215, 223 (5th Cir. 1994) (“In order for a regulatory
1
The Agins standard also required consideration of whether the government regulation
“substantially advanced” legitimate state interests. 477 U.S. at 260. This requirement,
however, was abrogated by the Supreme Court in Lingle v. Chevron U.S.A. Inc., 544 U.S. 528,
548 (2005).
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taking to rise to the level of an unconstitutional taking, there must be a complete
deprivation of the owner’s economically viable use of his property.”). This court
has affirmed the dismissal of a takings claim where the plaintiff fails to assert
in its complaint that the property would lose all economically viable use as a
result of a city ordinance. See Adolph v. Fed. Emergency Mgmt. Agency, 854 F.2d
732, 740 (5th Cir. 1988); see also Van Way v. City-Parish Council of La., 67 F.
App’x 251, 251 (5th Cir. 2003) (per curiam); Sakla v. City of New Orleans, 216
F.3d 1079, 1079 (5th Cir. 2000) (per curiam). In this instance, it is apparent that
MGM did not lose all economically viable use of its property, as it was not
prohibited from leasing its premises to organizations that could conduct lawful
forms of charitable gaming, such as regular bingo or keno, or for any other
commercial purpose. See LA. REV. STAT. §§ 4:701-740 (contemplating the
allowance of other forms of charitable gaming, including charitable raffles and
keno).
C. Detrimental Reliance
MGM’s detrimental reliance claim is now moot, having been litigated
through the state courts to final judgment and appeal to the highest state court.
See Maloney Gaming Management, LLC v. Parish of St. Tammany, 2011-CC-
1319, p.1 (La. 9/30/11); ___ So.3d ___, ___, 2011 WL 4790932.
III. CONCLUSION
Consistent with the foregoing analysis, the district court did not err when
it dismissed MGM’s takings and due process claims. MGM failed to allege a
constitutionally protected property interest and was not deprived of all
economically beneficial use of its property. Further, the detrimental reliance
claim is moot in light of the Louisiana Supreme Court’s denial of MGM’s writ
application. The judgment of the district court, therefore, is AFFIRMED.
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