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Culinary Services of Delaware Valley, Inc. v. Borough of Yardley

August 21, 2009

CULINARY SERVICES OF DELAWARE VALLEY, INC. AND MARTIN CAPLAN, PLAINTIFFS,
v.
BOROUGH OF YARDLEY, PENNSYLVANIA, ET AL. DEFENDANTS.



The opinion of the court was delivered by: Tucker, J.

MEMORANDUM AND ORDER

Presently before this Court are Defendants' Motions to Dismiss Plaintiffs' Complaint. For the reasons stated below, this Court will grant Defendants' Motions.

BACKGROUND

Plaintiffs in this case are Culinary Services, a Pennsylvania corporation, and its President, Martin Caplan ("Caplan"). Compl. ¶¶ 2-3. Culinary Services has developed games for establishments licensed by the Pennsylvania Liquor Control Board ("PLCB") pursuant to 40 Pa. Code § 5.32. Compl. ¶¶ 12, 14. Plaintiffs allege that the games in question are predominately games of skill, as opposed to traditional gambling slot machines. Plaintiffs make this distinction because the games do not include a random number generator, do not have predetermined outcomes, nor do they require the player to successfully complete a task. Unlike traditional gambling slot machines, the games also result in a void game or refund if the player fails to apply skill. Compl. ¶ 18.

On March 7, 2008, Plaintiffs executed a written Pennsylvania Revenue Share Agreement ("Agreement") with the Knowles-Doyle American Legion ("American Legion"), whereby Plaintiffs would lease two of its games to the American Legion in return for fifty percent of the net revenue generated by the games. Compl. ¶¶ 20-21. The Agreement provides that it terminates immediately upon notice by authorities that the games are prohibited for any reason. Compl. ¶ 22. The Agreement was Plaintiffs' first in Pennsylvania, but Plaintiffs allege that they intended to expand to other establishments licensed by the PLCB. Compl. ¶ 23.

Prior to entering into the Agreement, Plaintiffs requested the opinion of the Pennsylvania Gaming Control Board ("PGCB") and the Pennsylvania State Police, Bureau of Liquor Code Enforcement ("BCLE") regarding the legality of the games. Both entities declined to comment on the legality of the games. Compl. ¶¶ 25-27. Plaintiffs also informed Defendant James O'Neill ("O'Neill"), the Yardley Chief of Police, of its intention to install the games and informed O'Neill that the BCLE decline to comment. Compl. ¶ 28.

Defendant O'Neill investigated the legality of the machines and consulted with Commander Rackovich ("Rackovich") of the Quakertown Barracks of the Pennsylvania State Police and Special Investigator Smith ("Smith") of the Pennsylvania State Police. After these consultations, Defendant O'Neill concluded that the games were illegal. Compl. ¶ 36. Plaintiffs allege that neither Defendant O'Neill, Smith nor Rackovich had any training or expertise to make such a conclusion and that none had seen or played the games prior to concluding that they were illegal. Compl. ¶¶ 45-47. Defendant O'Neill relayed this conclusion to Defendant C. William Winslade ("Winslade"), the Yardley Borough Manager. Compl. ¶ 33.

On or about April 4, 2008, Plaintiff Caplan met with Defendants Winslade and O'Neill to discuss Defendant O'Neill's conclusion. Defendant O'Neill informed Plaintiff Caplan that he had concluded the games were illegal based on the advice of Rackovich and Smith. Compl. ¶ 35.

On or about April 13, 2008, Defendant Winslade sent a letter to the American Legion stating that Yardley Borough, Yardley Borough Police, and the Pennsylvania State Police officially declared the machines illegal. Compl. ¶ 36. The letter triggered the termination clause contained in the agreement, which the American Legion memorialized in a letter dated April 15. Compl. ¶¶ 41-42. The American Legion subsequently refused to provide Plaintiffs with a letter of recommendation to other PLCB licensed establishments. Compl. ¶ 43.

Plaintiff Caplan again met with Defendants Winslade and O'Neill on August 27, 2008 to request rescission of the April 13, 2008 letter, and produced a formal letter the following day reasserting the request. Compl. ¶¶ 50-51. Defendants Winslade and O'Neill refused to rescind the April 13, 2008 letter without providing Plaintiffs any explanation. Compl. ¶ 52. Plaintiff Caplan subsequently appeared at the September 2, 2008 meeting of the Yardley Borough Council demanding: "(1) rescission of the April 13, 2008 letter, (2) production of evidence, or (3) direction to O'Neill to arrest him so that Plaintiffs may obtain benefit of due process." Compl. ¶ 53. Defendant Joseph Hunter ("Hunter"), Council President, refused to comply with Plaintiffs' demands, and supported the decision of Winslade and O'Neill. Compl. ¶¶ 54, 57. Hunter's statement was published in the Council minutes and is publicly available on the Borough website. Compl. ¶ 58.

At the Council meeting, Defendant James McNamara ("McNamara"), Borough Solicitor, agreed to further investigate the games. Compl. ¶ 59. On September 5, Defendant McNamara sent Plaintiffs' counsel a letter stating that the Borough had no authority to declare the games were illegal and suggested Plaintiffs seek the advice of the Bucks County District Attorney's Office, to which Yardley Borough would defer. Compl. ¶ 60. In response, Plaintiffs again requested the rescission of the April 13, 2008 letter, to no avail. McNamara instead suggested waiting for a response from Bucks County District Attorney's Office. Compl. ¶¶ 62-63. Bucks County Assistant District Attorney Waltz met with Plaintiff Caplan and Plaintiffs' counsel on September 23, 2008. On October 23, 2008, Waltz notified Plaintiffs' counsel that he would not give Plaintiffs an opinion regarding the games . Compl. ¶¶ 65-66.

Plaintiffs allege that the Defendants' conclusion that the games are illegal has served as a complete bar to Plaintiffs conducting their business in Pennsylvania. Compl. ¶ 70. The Ninth District American Legion, which represents over 45 American Legion posts, distributed information to all of its posts declaring the machines illegal. Compl. ¶ 71. Several other potential customers have informed Plaintiffs that, but for Defendants' declarations that the games were illegal, they would engage in business with Plaintiffs. Compl. ¶ 72. Plaintiff has since been unable to obtain any other customers in Pennsylvania. Compl. ¶ 73.

Plaintiffs subsequently filed this action seeking damages for alleged violations of their procedural due process rights under the Fourteenth Amendment, tortious interference with contract, and commercial disparagement, alleging that Defendants have willfully, deliberately, and intentionally caused Plaintiffs harm. Compl. ΒΆΒΆ 75-76, 83, 89. Plaintiffs are also requesting that the Court issue a declaratory judgment that the games are legal under Pennsylvania law, and punitive damages for the alleged Constitutional ...


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