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Edson R. Arneault, et al v. Kevin T. O'toole

March 28, 2012


The opinion of the court was delivered by: McLAUGHLIN, Sean J., District J.,


This civil action arises out of events surrounding the creation and operation of a gaming facility located in Erie County and known as Presque Isle Downs. The Plaintiffs are Edson R. Arneault, an accountant and businessman experienced in the gaming industry, Gregory J. Rubino, a real estate agent and developer in Erie County, Pennsylvania, and Passport Realty, LLC ("Passport Realty"), a limited liability company organized under the laws of Pennsylvania whose day-to-day operations are handled by Rubino. Passport Realty is the successor in interest to Tecnica Development Corp. ("Tecnica"), a real estate development company formed by Rubino.

Named as Defendants are numerous individuals and/or corporate entities which can be delineated into the following groups. The first includes Kevin F. O'Toole, the Executive Director of the Pennsylvania Gaming Control Board ("PGCB") and R. Douglas Sherman, the PGCB's Chief Counsel. Plaintiffs refer to these individuals collectively as the "PGCB Employee Defendants," and this Court will as well.

The second group of Defendants consists of eight present and former members of the Pennsylvania Gaming Control Board of Commissioners (collectively, the "Board") -- namely, Gregory C. Fajt, Raymond S. Angeli, Jeffrey W. Coy, James B. Ginty, Kenneth T. McCabe, Gary A. Sojka, Kenneth I. Trujillo, and Sanford Rivers. At times, these individuals will be referred to as the "Commissioner Defendants."

The third group of Defendants includes E. Barry Creany (Deputy Chief Enforcement Counsel for the PGCB), Philip J. Rendin (Regional Director of the PGCB's Western Regional Office), Thomas J. Brletic (a Supervisor in the Western Regional Office of PGCB's Bureau of Investigation and Enforcement ("BIE")), Gary Tallent (an agent in the BIE's Western Regional Office), and David Smith (also an agent in the BIE's Western Regional Office). This group of individuals will be collectively referred to as the "BIE Defendants."

The fourth group of Defendants includes MTR Gaming Group, Inc. ("MTR"), its wholly-owned subsidiary Presque Isle Downs, Inc. ("PIDI"), James v. Stanton (a director of MTR who has also served as a member of MTR's Audit, Succession, Compensation, Nominating and Gaming Compliance Committees), John Bittner (Chief Financial Officer of MTR), Narciso Rodriguez-Cayro (Secretary of MTR and also its Vice President of Regulatory Affairs and General Counsel), and Vincent Azzarello (at relevant times, the Human Resources Manager for MTR as well as a compliance officer and member of MTR's Gaming Compliance Committee). This group of Defendants will be collectively referred to as the "MTR Defendants."

The other remaining Defendants are Robert Griffin (the past President and CEO of MTR from approximately September 26, 2008 until September 30, 2010), David Hughes (a former Chief Financial Officer and/or administrator of MTR), Leonard Ambrose (an attorney licensed to practice law in Pennsylvania), and, finally, Nicholas C. Scott and Scott's Bayfront Development, Inc. (collectively, the "Scott Defendants").

Each of the foregoing groups of Defendants have filed motions to dismiss, in whole or in part, the Plaintiff's Amended Complaint (Doc. #50), which is the operative pleading in this case. For the reasons set forth below, this Court will dismiss Plaintiffs' federal claims with prejudice and will dismiss the remaining state law claims without prejudice to be reasserted in state court.*fn1


This action was commenced on April 15, 2011 when the Plaintiffs filed their complaint in federal district court. The Amended Complaint ("AC") is quite lengthy, consisting of some 147 pages and 469 paragraphs. Because we are writing primarily for the benefit of the parties, who are well-acquainted with the allegations in the Amended Complaint, we will not recite all of the averments in that pleading except as necessary to address the pending motions. Instead, we will summarize the gist of Plaintiff's allegations as well as their various claims.

Defendant MTR, formerly known as Mountaineer Park, is a corporation organized under the laws of Delaware and located in West Virginia. (AC ¶ 25, 39, 41.) From 1995 through October 31, 2008, Arneault served as CEO of MTR, during which time the company's revenues grew from $24.9 million to $407 million and expanded its operations in six states. (AC ¶ 42.) PIDI is a Pennsylvania corporation physically located in Summit Township, Erie County, Pennsylvania. (Id. at ¶ 26.) PIDI is a wholly-owned subsidiary of MTR. (Id.)

The allegations in this case arise out of efforts by MTR and PIDI to develop a racetrack and casino in Erie, Pennsylvania, known as the Presque Isle Downs. In early 2001 MTR (through Arneault) and Tecnica (through Rubino) met to discuss the prospects of horse racing and gaming in the Erie market. At that time, Tecnica was a company that provided real estate development and consulting services. (AC ¶ 56.)

As a result of these discussions, MTR and Tecnica entered into a consulting agreement, pursuant to which Tecnica was responsible for all development activity including the acquisition of land, development, zoning and environmental permits, and the coordination of all other professionals involved in the development of a racetrack (and, ultimately, a casino) in Erie County. (AC ¶ 57.) In May of 2002, the consulting agreement was amended to include the acquisition of other potential sites and to add PIDI as a party. (Id. at ¶ 58.) This agreement provided compensation to Tecnica in the amount of an initial $50,000 fee, an additional $250,000 fee when property for the racetrack was acquired, and a $10,000 per month retainer while work was ongoing. In addition, once the race track opened, Tecnica was to earn a fee equal to 3% of the racetrack's earnings. (Id. at 59.)

On December 28, 2005, MTR and PIDI applied to the PGCB for a Category 1 Gaming License. (AC ¶ 62.) Thereafter, Tecnica and Rubino were notified by representatives of MTR and PIDI that both Tecnica and Rubino would need to file applications for licensure with the PGCB because of the fact that Tecnica had a financial interest in PIDI's gaming profits. (Id. at ¶ 66.)

On March 7, 2006, Rubino's counsel wrote to Lisa McClain of the PGCB, stating his view that neither Rubino nor Tecnica were required to register with the PGCB or submit any filing under the Gaming Control Act and applicable regulations. This letter also asked that PGCB confirm its agreement with the position outlined by Rubino's counsel. (AC ¶ 67.)

By letter dated March 21, 2006, Susan Hensel, the Director of the PGCB's Bureau of Licensing, refused to "provide such confirmation" and reiterated the PGCB's position that both Rubino and his wife, along with Tecnica, needed to either file Key Employee Qualifier forms, terminate Tecnica's consulting agreement with MTR and PIDI, or seek a waiver or declaratory judgment that they were not required to be licensed. (AC ¶ 68.) In this letter, Hensel materially miscalculated Rubino's potential proceeds from the consulting agreement and further indicated that PIDI's license application would be delayed in the event Rubino (or his wife) were to seek a waiver or petition the PGCB for a declaratory determination that their own licensure was not required. Hensel concluded her letter with a request that Rubino direct his future communications through the attorneys for PIDI. (Id.)

Despite their view that neither the Gaming Act nor the applicable administrative regulations required them to do so, Tecnica and Rubino filed Key Employee Qualifier Waiver forms on June 1, 2006, allegedly under "duress" and with the intent of expediting PIDI's licensure. (AC ¶ 70.) Despite this, the PGCB informed counsel for MTR/PIDI, via letter dated July 7, 2006, that Rubino and his wife were required to submit Key Employee Qualifier forms and Multi-Jurisdictional Applications and that Tecnica would have to submit a Conditional/ Category 1 Application as an affiliate of PIDI. (Id. at ¶ 71.)

Further, these documents were required to be submitted no later than July 14, 2006 in order to "ensure continued processing" of PIDI's license application -- a task that Plaintiffs allege was "onerous, practically impossible to complete in seven days, and without precedent for a [realtor] in Mr. Rubino's situation." (Id.) Rubino and Tecnica filed the requested forms in late July or early August 2006, despite their belief that no legal or logical basis existed for the imposition of this requirement. (Id. at ¶¶ 73-74.)

Approximately two months later, Arneault contacted Rubino to inform him that PGCB was forcing MTR/PIDI to terminate its consulting agreement with Tecnica. (AC ¶ 75.) Under what Rubino claims was "extreme duress," (id. at ¶ 79), he agreed to terminate the consulting agreement because he understood that a refusal to do so would result in further delays in the approval of PIDI's slot machine license and this, in turn, would cause PIDI to lose tens of millions of dollars and potentially affect the employment of some 700 individuals. (AC ¶¶ 75, 79.) The result was a "buyout" agreement dated October 23, 2006, pursuant to which Rubino and Tecnica received a payment of $4.2 million -- a sum which Rubino claims is $12.7 million less than he stood to make under the consulting agreement. (Id. at ¶¶ 79, 81.)

In executing the buyout agreement, Rubino believed he would still be able to engage in other business matters with MTR in Erie and elsewhere. (AC ¶¶ 85-86.) However, Rubino was subsequently informed by MTR/PIDI that the PGCB was taking a contrary position, requiring MTR and PIDI from doing any business with Tecnica or Rubino. (AC ¶ 84.)

On November 7, 2006, the PGCB unanimously approved PIDI's application for a Conditional/Category 1 License to build its facility in Summit Township and, on February 27, 2007, the PGCB unanimously voted to allow PIDI to commence operations. (AC ¶¶ 87-88.) Some six months later, on August 20, 2007, PIDI was required by the PGCB to execute a mandatory "Statement of Conditions to its Category 1 Slot Operator License" ("SOC"), which included the following provision, known as "SOC 58":

To ensure at all times after December 20, 2006, that MTR Gaming Group, Inc. and its affiliates, including Presque Isle Downs, Inc., not enter into or engage in any business activity or transaction with Gregory Rubino or any of his affiliates in the Commonwealth of Pennsylvania (except with respect to the arrangements concerning the Green Shingle Property as set forth in the October 23, 2006 buyout Agreement entered among Presque Isle Downs, Inc., MTR Gaming Group, Inc., and Tecnica Development Corp.) (AC ¶ 89.)

In early January of 2008, MTR and PIDI filed a petition with the PGCB to amend and/or strike SOC 58. (AC ¶ 138.) However, after Defendant Creany, Deputy Chief Enforcement Counsel for the PGCB's Office of Enforcement Counsel ("OEC"), informed MTR and PIDI that Rubino would be the appropriate party to seek relief form SOC 58, MTR and PIDI withdrew their petition. (Id. at ¶ 139.)

Rubino and Passport Realty then filed a petition seeking relief from SOC 58 on February 13, 2008. (AC ¶140.) The petition sought a declaration that Rubino and Passport were exempt from vendor certification and/or registration and that there was no valid reason for the existence of the ban. The petition further sought permission for Rubino and Passport to provide professional real estate services to PIDI with regard to two proposed transactions which would have resulted in commissions of $900,000 and $1,000,000 to Passport and Rubino. (AC ¶ 141.) The transactions contemplated the sale of excess, non-productive properties which were not strategic to MTR's or PIDI's businesses, including a property known as the Green Shingle, which had been neglected and was falling into disrepair. (Id. at ¶¶ 142-43.)

On March 4, 2008 Creany filed an answer to Rubino's petition wherein, in direct contravention to his previous statements to MTR and PIDI, Creany now took the position that Rubino lacked standing to seek relief from SOC 58. (AC ¶ 144.) The hearing officer disagreed and found that Rubino did have standing to assert his challenge to SOC 58. The hearing officer further found that PIDI should be joined in the matter, since the terms of its gaming license were at issue. (AC ¶ 145.)

A hearing on Rubino's petition was subsequently held on November 25, 2008. Plaintiffs claim that, at this hearing, Rubino provided undisputed testimony concerning his unique knowledge of the two PIDI properties and why he was the real estate agent best suited to facilitate the sale of those properties. (AC ¶ 146.) Although PIDI's counsel -- including Defendant Rodriguez-Cayro -- were present throughout the hearing, they failed to offer any support or affirmation of Rubino relative to his petition when given the opportunity to do so. (Id. at ¶147.)

On February 13, 2009, Hearing Officer Linda Lloyd issued a Report and Recommendation in which she recommended that the Board of Commissioners deny the relief requested by Rubino. (AC ¶ 148.) This recommendation was based, in part, on Ms. Lloyd's finding that counsel for MTR/PIDI (Defendant Rodriguez-Cayro and Attorney Robert Ruben), by their silence, did not support any change to SOC 58. (Id.) In fact, it is alleged, MTR and PIDI had previously confirmed their support of Rubino and the removal of SOC 58 in writing on numerous prior occasions. (Id.)

During the pendency of this matter, Rubino was contacted by a prospective buyer for the Green Shingle property, but he was unable to formulate a proposal solely because of the confusion created by SOC 58. (AC ¶ 149.) On June 11, 2009, Rubino's attorney wrote the OEC's Chief Enforcement Counsel, Cyrus Pitre, as well as Defendant Creany to request the PGCB grant a limited exception to SOC 58 allowing Rubino to represent this potential buyer. (Id. at ¶ 150.) The correspondence emphasized that time was of the essence and that neither Rubino nor Passport Realty "would have any influence on PIDI's gaming or business operations, nor would they be employed or compensated by PIDI." (Id.) This letter was followed by numerous phone calls to Chief Enforcement Counsel Pitre, who assured Rubino's lawyer that Creany would get back to him. On or around July 8, 2009, Creany left a voicemail for Rubino's attorney in which he refused to assent to Rubino's representation of potential buyers of PIDI properties and stated that, in the event Rubino was seeking relief from the PGCB relative to SOC 58, Rubino "would need to file for specific relief with the Board." (AC ¶ 151.)

Meanwhile, Rubino had appealed Hearing Officer Lloyd's R&R to the Board, and a vote on the matter was scheduled for September 2, 2009. Just hours before the scheduled hearing and vote, the PGCB Commissioners unilaterally decided to change the agenda and remove the matter from consideration. (AC ¶ 152.) Rather than conduct the hearing as scheduled and proceed to a vote on Rubino's petition for relief, the Commissioners met privately and voted to hold their decision in "abeyance" pending the submission by Rubino and Passport Realty of new vendor licensing applications sponsored by MTR and PIDI. (Id. at ¶¶ 153-54.)

According to the Plaintiffs, this "abeyance" ruling intentionally placed Rubino in an impossible "catch-22" situation because, as the PGCB and its Commissioners well knew, great animosity had developed between Rubino and the MTR/PIDI Defendants such that the latter would never sponsor an application by Rubino and/or Passport Realty for new vendor licenses. (Id. at ¶¶ 154-55.) Plaintiffs claim that this "catch 22" situation was intentionally created by the PGCB Commissioners in order to keep Rubino and his company from being able to submit the required licensing applications. (Id.)

Plaintiffs further aver that this "abeyance" has continued for over 21 months and continued even as of the filing of the Amended Complaint. (AC ¶ 154.) They contend that PGCB's ban on Rubino doing business with MTR and PIDI has been widely reported by various media outlets and those reports have been disseminated over the internet, thus casting Rubino (and, by extension, Arneault) in an unfavorable light, damaging their personal and business reputations, and resulting in lost business opportunities. (AC ¶¶ 160-61.)

Plaintiffs claim that the PGCB has repeatedly refused to allow Rubino and/or his attorney an opportunity to review the Board's files on Rubino and Tecnica. (AC ¶¶156-57.) Further, the PGCB has never informed Rubino as to why SOC 58 was originally imposed, why it remained in place, or how the integrity of the gaming industry is protected by that condition. (ID. at ¶ 158.)

Despite this, Plaintiffs claim that the real reason Rubino and his companies have been forced out of the consulting agreement and precluded from doing any business with MTR or PIDI is because of false information supplied to the PGCB's Bureau of Investigation and Enforcement ("BIE") by Defendant Ambrose. Specifically, Plaintiffs allege that Ambrose had a long-standing vendetta against Rubino and that Ambrose -- aware of SOC 58, its negative and punitive effects on Rubino, and Rubino's determination to have the restrictions of SOC 58 stricken -- met with Defendant Brletic (a supervisor in the BIE) and Defendant Tallent (a BIE agent) on several occasions in July or August 2006, at which time Ambrose supplied these individuals with false and derogatory information about Rubino. (AC ¶¶ 116-18.)

In particular, Ambrose allegedly informed Brletic and Tallent that Rubino was a member of the mafia and was protected from arrest because of his ongoing role as a confidential informant -- information which Rubino denies as untrue. (Id. at ¶¶ 119-20.) It is averred that Brletic then improperly relied upon the misinformation supplied by Ambrose to reach unfounded conclusions about Rubino in a November 18, 2008 memorandum entitled "Presque Isle Downs, Inc., Unresolved Issues and Concerns" as well as a May 21, 2010 Report of Investigation. (Id. at ¶¶ 121.) Among the false conclusions reached by Brletic are the following: (a) Rubino compromised an ongoing FBI drug investigation by tipping off a target of the probe, after agreeing to cooperate in order to avoid arrest; (b) Rubino was an unindicted co-conspirator in a large drug investigation in the 1980s; (c) Rubino was an FBI informant on at least six occasions; (d) Rubino lied to BIE regarding the employment of and money paid to a Las Vegas gaming executive by the name of "Charlie Sack"; and (e Rubino lied to the BIE regarding circumstances surrounding the Green Shingle property. (Id. at ¶ 122, 182.) According to Plaintiffs, these conclusions are irreconcilable with a statement made by then-PGCB Chairman Tad Decker in October of 2006 to the effect that there was "'no indication of any kind of background unsuitability' on the part of Tecnica or Rubino."

(AC ¶ 125.) Plaintiffs contend that one of the reasons Rubino was forced out of his consulting agreement with MTR and PIDI was because Defendants Brletic, Tallent, Rendin, and possibly Rivers "intentionally and knowingly relied upon false and negative information provided by Defendant Ambrose" and "reached an understanding" to force Rubino out of business with MTR and PIDI for reasons unrelated to protecting the integrity of gaming. (Id. at ¶ 126.)

Meanwhile, Arneault and MTR were having their own issues with the PGCB. In November of 2006, while Arneault was still CEO of MTR, Defendant Tallent requested from MTR the creation of a report, in electronic searchable form, detailing payments made to any vendor of goods or services, as well as employees, contractors, etc. for the years 2000-2005 and through October 31 of 2006. (AC ¶ 127.) In his letter requesting this information, Tallent claimed that the report was "necessary" as part of an "ongoing analysis regarding the financial status of [MTR]." According to Plaintiffs, this statement was false because: (i) the PGCB had already approved PIDI and MTR for a Conditional Category 1 License during a public hearing held the month before; and (ii) during the hearing, the PGCB's then-Director of Finance, Denyse Miskin, had publically detailed the Financial Task Force evaluation and had reported to the PGCB that MTR and PIDI were financially suitable. (AC ¶ 128.) When counsel for MTR/PIDI inquired of Miskin if a less burdensome report than that requested by Tallent would satisfy the Financial Task Force's needs, Miskin responded that the investigation of MTR's and PIDI's financial status had been completed, that she was not aware of Tallent's request for information, and that the request was neither made by nor authorized by the Financial Task Force. The following day, Tallent's request was formally withdrawn. (AC ¶ 129.)

Subsequently, on May 25, 2007, counsel for MTR and PIDI met with members of the PGCB's executive staff, which included Creany as well as a number of individual not named as Defendants in this lawsuit. (AC ¶ 130.) The purpose of this meeting was to discuss the future relationship between MTR/PIDI and the regulators at PGCB in light of two prior incidents involving Creany. (Id. at ¶¶ 130-31.) The first incident had involved a subpoena served upon MTR/PIDI by Creany ostensibly for the purpose of conducting a personal background investigation of PIDI's interim Director of Security, who was scheduled to remain at PIDI only for another month. (Id. at ¶ 131.) The subpoena did not request a single document related to the interim Director of Security's background, experience or qualifications for the position, but instead requested hundreds of documents including all incident reports generated by the security department from its inception, personnel files of all sixteen security guards, and all reports of personal counseling sessions between management and employees of PIDI. (Id.) The second incident had involved a threat by Creany to bring two formal enforcement actions against PIDI over minor technical violations which had been self-reported and corrected. (Id.)

During the May 25, 2007 meeting, PGCB officials stated that PIDI continued to be a model of casino operations and that there were no incidents warranting enforcement actions. PGCB officials further indicated that BIE agents had been instructed that the investigation phase had closed and that BIE agents were in the enforcement phase. According to Plaintiffs, PGCB officials also made clear that PIDI would no longer be the subject of BIE subpoenas and that there would be no more clandestine inquiries into the backgrounds of individuals who had already received Key Employee Qualifier clearance. (AC ¶ 132.)

Despite these assurances, Plaintiffs claim, various Government Defendants have continued to engage in intimidation and coercive conduct. (AC ¶ 133.) Plaintiffs claim, for example, that on July 26, 2007, Defendants Tallent, Brletic, and Smith interviewed a prospective PIDI vendor by the name of Gregory Beight. During this interview, it is alleged, the BIE agents falsely accused Arneault of violating federal and state election laws by surreptitiously funneling money to political candidates, and they tried to intimidate Beight into providing false testimony about Arneault and other individuals related to MTR/PIDI in exchange for approving Beight's vendor certification. (Id.)

Counsel for MTR and PIDI responded to this incident by writing a letter to the Chairman and Executive Director of the PGCB on September 25, 2007 complaining of the "actionable tortuous conduct as well as possible criminal conduct" on the part of the BIE agents. (AC ¶ 134.) Subsequently, on April 29, 2008, David J. Kwait, Director of the BIE, wrote to Mr. Beight and apologized for the agents' actions. In that same letter, Kwait represented that he had undertaken a "thorough review of all of the relevant information and resources available to the BIE" and had concluded that "BIE has no actionable information that would support the allegations that were made against Messrs. Arneault, Ruben and Blatt." (AC ¶¶ 135-36.) Kwait further acknowledged that he had "no reason to question the good character, honesty and integrity required of Messrs. Arneault and Blatt as licensed principals." (Id. at ¶ 136.)

Arneault's primary complaint against the Government Defendants, however, concerns various actions taken by the PGCB and the BIE Defendants in connection with Arneault's attempt to renew his gaming license. As of April 2008, Arneault was still serving as CEO of MTR and Chairman of its Board of Directors. Accordingly, on April 21, 2008, he filed an application to renew his Category 1 Gaming License as an officer, director and principal shareholder of MTR -- a license which had originally been approved by the PGCB on June 10, 2007. (AC ¶¶ 171-73.)

As of October 31, 2008, however, Arneault had voluntarily retired as an officer, director or employee of MTR. He continued to serve as a consultant to MTR from November 1, 2008 until February 17, 2010 (AC ¶¶ 174-75), but by March of 2010, Arneault was no longer serving as a consultant to MTR and his stock ownership in the Company had fallen to less than 5 percent of MTR's total outstanding shares. (Id. at ¶ 175.)

Nevertheless, the PGCB continued to treat Arneault as a "principal" of PIDI with respect to licensing matters. After PIDI had filed an application to renew its gaming license on December 29, 2008, the PGCB continued to require that Arneault also maintain his license as a "principal" of PIDI. (AC ¶¶ 173, 176, 288.)

Meanwhile, after Arneault had filed his application for license renewal in April of 2008, the Western Regional Office of the BIE ("BIE-West") prepared a Report of Investigation ("ROI") dated May 21, 2008 in which, Plaintiffs claim, BIE-West "intentionally and improperly found falsehoods to contest the suitability of Mr. Arneault to be renewed for licensure and to recommend the denial of Mr. Arneault's Principal license renewal." (AC ¶ 178.)

One of these alleged falsehoods involved the accusation that Arneault had provided false and misleading information to the BIE concerning Charlie Sack, a Las Vegas gaming executive who had had prior legitimate business dealings with both MTR and Tecnica. (AC ¶¶ 182-84, 186.) Plaintiffs claim that, after their business relationships with Sack ended, Sack began an "unrelenting campaign with the PGCB to get even" with Plaintiffs. (AC ¶185.) This resulted in Sack providing Brletic false information that MTR and PIDI had used Tecnica as a conduit to funnel illegal payments to Sack. (Id.) According to Plaintiffs, the BIE -- and particularly Brletic -- had information indicating that Sack lacked credibility and should not be relied upon as a witness, and Brletic also had received unverified information that Sack might have ties to organized crime. (AC ¶¶ 187-89.) Nevertheless, Plaintiffs claim, Sack and Brletic had an understanding whereby "Sack would tell the story about Arneault and Rubino that the PGCB wanted to hear, and Defendant Brletic would reciprocate by placing Sack in a high-profile executive position with another PGCB licensee." (AC ¶ 190.)

Also contributing to these false allegations, Plaintiffs allege, was information unlawfully obtained and provided to the BIE agents by Defendant Ambrose. According to Plaintiffs, Ambrose came into possession of certain proprietary information that had been misappropriated from Tecnica and Rubino via a former employee. This included records from Tecnica and Rubino that accounted for legitimate payments to Sack as well as various legal and contractual payments from MTR and PIDI to Tecnica for real estate development and management services rendered. (AC ¶¶ 192-93; see also id. at ¶¶ 94-117.)

Plaintiffs aver that, based upon various misrepresentations made by Sack, Ambrose, and others, and without any independent verification or consultation with Plaintiffs, BIE adopted the view that the payments from MTR to Tecnica were a sham intended to cover up a continuing illicit relationship between MTR and Sack and that Arneault had given perjured statements concerning these payments. (AC ¶ 194.) Plaintiffs insist there was no legitimate reason for the Government Defendants to question MTR's and Tecnica's respective relationships with Sack because: (i) Sack's relationship with those companies had expired prior to the enactment of the Pennsylvania Race Horse Development Act; (ii) Sack's relationship with MTR and Tecnica were legal and commercially reasonable in all respects; and (iii) Sack's relationships with MTR and Tecnica had previously been reviewed and approved by the Nevada Gaming Commission. (AC ¶ 195.)

Nonetheless, based upon the information contained in BIE-West's ROI, the PGCB's Office of Enforcement Counsel issued a notice of recommendation that Arneault's license renewal application be denied (the "Recommendation of Denial"). (AC ¶ 179.) This Recommendation of Denial, dated January 22, 2010, declared that "the BIE background investigation revealed inaccuracies or inconsistencies between the statements [Arneault] made to investigators and the Board which called into question [his] character, honesty and integrity." (AC ¶ 180.) The Recommendation of Denial indicated twelve "areas of concern" relative to Arneault's suitability for licensure. (Id.)

Arneault subsequently requested a hearing on the Recommendation of Denial, and a hearing date was set for May 20, 2010. (AC ¶¶ 196, 213.) On or about February 1, 2010, Arneault's attorney in the licensing matter contacted Defendant Rodriguez-Cayro and requested that MTR provide him certain information related to the matters at issue in Arneault's appeal of the Recommendation of Denial. (AC ¶ 197.)

Thereafter, Plaintiffs allege, and for a period of several months leading right up to the May 2010 licensing hearing, Defendant Rodriguez-Cayro delayed and stonewalled Arneault in his attempts to obtain documents and depositions of MTR employees that were relevant to his licensing hearing. (AC ¶¶198-221.) To the extent Rodriguez-Cayro did provide documentation to Arneault's counsel, he made clear that copies would also be shared with the opposing counsel at the OEC. (AC ¶ 204.) Plaintiffs claim that Arneault ultimately had to obtain the vast majority of relevant documentation from Rubino and his companies at great effort and expense to Arneault. (Id. at ¶¶ 222-27, 230-34.) They further assert that most, if not all, of the documents provided by Tecnica and Rubino were in the care, custody, and control of MTR/PIDI and Defendants Griffin, Hughes, Bittner, Azzarello, Rodriguez-Cayro, and MTR's legal counsel, but these documents were intentionally withheld from Arneault. (Id. at ¶ 228.)

Eventually, hearings on Arneault's appeal of the Recommendation of Denial were held on May 20, 21, 24, 25, and 26 of 2010. (AC ¶ 235.) According to the Amended Complaint, Arneault demonstrated in the course of those hearings that certain BIE-West agents had intentionally failed to conduct a fair and impartial investigation of his suitability for licensure and, in fact, had conducted a biased and unfair investigation resulting in the unsupportable recommendation that Arneault be stripped of his gaming license. (Id. at ¶ 236.) Plaintiffs aver that, during the course of the hearings, Chief Enforcement Counsel Pitre and "certain other Government defendants" concluded that BIE-West had intentionally and improperly targeted Arneault, principally through the Recommendation of Denial and reports authored by Brletic. (Id. at ¶ 237.) Pitre thus sought to bring the licensing hearing to an immediate conclusion that would avoid publication of the BIE agents' wrongful conduct by initiating a settlement conference with Arneault's counsel and Defendants O'Toole and Sherman. (AC ¶ 238.)

At the ensuing settlement conference, the OEC agreed to settle the matter on the following terms: (a) Arneault's counsel would depose Brletic; (b) immediately thereafter, and without regard to the outcome of that deposition, OEC would recommend to the Bureau of Licensing that Arneault's gaming license be immediately renewed; and (c) the OEC would also recommend to the PGCB that SOC 58 be terminated. (AC ¶ 239.) The first two conditions were fulfilled and, to that end, Pitre authored a letter dated September 14, 2010 in which he stated that Arneault had proved "by clear and convincing evidence" that his associations in gaming were proper and appropriate. (Id. ¶¶ 240-41.) Furthermore, Pitre's correspondence stated that Arneault had "established, by clear and convincing evidence, [his] good character, honesty, and integrity in order to be found suitable for licensure under the Act." (Id. at ¶ 242.) Arneault's license application was subsequently approved by a unanimous vote of the PGCB on November 18, 2010. (Id. at ¶ 243.)

On the other hand, Plaintiffs claim, Pitre and the OEC failed to perform the third condition of settlement -- namely to recommend to the Board that it terminate SOC 58. (AC ¶ 244.) Moreover, the PGCB officials engaged in what Plaintiffs consider "yet another unconscionable act" by attempting, after Arneault's gaming license had already been renewed, to unilaterally impose upon Arneault certain measures in the form of a newly-requested Statement of Conditions. (AC ¶ 245.) These new "SOCs" basically sought from Arneault an agreement to reimburse the Board for all costs and/or to hold the Board and other parties harmless for any liabilities incurred in connection with Arneault's licensing proceedings -- actions which Plaintiffs construe as an attempt to disenfranchise Arneault of his right to petition the government for redress and recover his legal costs. (Id. at ¶¶ 245-46.)

Meanwhile, Plaintiffs contend, news of the January 22, 2010 Recommendation of Denial has been widely reported by various media outlets and distributed over the internet, causing damage to Arneault's reputation as well as lost business opportunities in the gaming industry. (AC ¶¶ 248-51.)

The Amended Complaint alleges that the MTR Defendants were complicit in the Government Defendants' decision to recommend the denial of Arneault's application for licensure renewal. In broad brush, Plaintiffs aver that Arneault had a falling out with MTR as a result of several developments. One factor, they allege, was the effort of Defendants Hughes (MTR's Chief Financial Officer) and Defendant Azzarello (MTR's Human Resource Director) to purge MTR employees that were perceived as being loyal to Arneault following his departure from the company. (AC ¶¶ 254-55.) Another factor, Plaintiffs claim, was the cumulative effect of Defendant Ambrose's campaign against Arneault and Rubino, which stemmed from collateral matters and which resulted in a "tectonic shift" in the way certain MTR Board members, attorneys, and PGCB staff members viewed Arneault. (Id. at ¶ 256.) Plaintiffs claim that this shift in attitude on the part of MTR is demonstrated by the way the company failed to honor the terms of its deferred compensation agreement with Arneault. (Id. at ¶¶ 257-61.)

Plaintiffs also posit another motive for MTR's alleged conspiratorial activities: after rumors began to circulate sometime in 2009 that Arneault might be plotting a return to an active role in the company, Defendants Griffin, Hughes, Azzarello, and Rodriguez-Cayro became particularly motivated to prevent Arneault's return because they knew Arneault would not tolerate their practice of submitting incomplete and misleading financial disclosures to the investing public and regulators. (Id. at ¶¶ 263-68.) According to Plaintiffs, MTR has played "fast and loose" with its reporting obligations by failing to disclose that: (i) PIDI's gaming license renewal application has been pending for some 26 months and (ii) the license renewal application has been objected to by Rubino relative to the continued pendency of SOC 58 as a condition of PIDI's gaming license. (Id. at ¶¶ 264-68, 269.) In Plaintiffs' view, MTR's post-Arneault financial disclosures "cannot be properly stated unless there is a financial disclosure relating to the genuine risk that PIDI's gaming license may not be renewed" (id. at ¶ 266 (footnote omitted)), yet the PGCB has tacitly condoned MTR's practices by failing to require the company to make these material disclosures. (Id. at ¶ 269.)

Plaintiffs aver that various officers, attorneys, agents and employees of MTR and PIDI knew that they were in custody of documentation that would undermine the false claims made by Charles Sack and demonstrate the legitimacy of the monthly $13,000 fees MTR was to pay Tecnica under the consulting agreement entered into by those companies. (AC ¶¶275-83.) Nevertheless, Plaintiffs contend, these Defendants failed to produce these documents or otherwise support Arneault against the PGCB and BIE Defendants because they wanted to curry favor with and intentionally help the Government Defendants and at the same time prevent Arneault from returning to MTR and "clean[ing] house." (AC ¶ 284.)

Based on the foregoing averments,*fn2 Plaintiffs have asserted ten claims. In Count 1, Arneault asserts a claim under 42 U.S.C. § 1983 against O'Toole, Sherman, and the BIE Defendants for the alleged violation of his First Amendment Rights. In Count 2, Rubino asserts a §1983 claim against Defendants O'Toole, Sherman, the BIE Defendants, and the Commissioner Defendants for the alleged violation of his First Amendment rights. In Counts 3 and 4, Arneault and Rubino respectively assert §1983 claims against these same Defendants for alleged violations of their due process rights. In Count 6,*fn3 Arneault and Rubino jointly assert a §1983 claim against the Commissioner Defendants based on a theory of supervisory liability for the alleged violation of the Plaintiffs' respective due process rights. In Count 7, Arneault and Rubino jointly assert a §1983 claim against Griffin, Hughes, and the MTR Defendants based upon their alleged involvement in conspiring to violate the Plaintiffs' First Amendment and due process rights. Counts 8 and 9 assert claims by Arneault and Passport Realty, respectively, against MTR and PIDI for unjust enrichment.*fn4 Count 10 asserts a joint §1983 claim by Arneault and Rubino against Ambrose and the Scott Defendants based upon their alleged involvement in conspiring to violate the Plaintiffs' First Amendment and due process rights. Finally, Count 11 asserts a joint claim by Arneault and Rubino against Ambrose and the Scott Defendants for alleged slander and defamation.

The Defendants have all filed motions to dismiss the foregoing claims. The pending motions have been fully briefed and argued and are now ripe for consideration.


Rule 12(b)(6) of the Federal rules of Civil Procedure permits a party to seek dismissal of a claim based on the defense that the averments fail to state a claim upon which relief can be granted. A Rule 12(b)(6) motion tests the sufficiency of the complaint against the pleading requirements of Fed. R. Civ. P. 8(a). Rule 8(a)(2) requires that a complaint contain a short and plain statement of the claim showing that the pleader is entitled to relief, "in order to give the defendant fair notice of what the ... claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). A complaint attacked by a Rule 12(b)(6) motion to dismiss need not contain detailed factual allegations, but it must contain "sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, --------, 129 S. Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 570)).

To survive a motion to dismiss, a civil plaintiff must allege facts that "raise a right to relief above the speculative level...." Victaulic Co. v. Tieman, 499 F.3d 227, 234 (3d Cir.2007) (quoting Twombly, 550 U.S. at 555). Accordingly, to satisfy the plausibility standard, the complaint must indicate that a defendant's liability is more than "a sheer possibility." Iqbal, 129 S. Ct. at 1949. "Where a complaint pleads facts that are 'merely consistent with' a defendant's liability, it 'stops short of the line between possibility and plausibility of entitlement to relief.'" Id. (quoting Twombly, 550 U.S. at 557).

Under the two-pronged approach articulated in Twombly and later formalized in Iqbal, a district court must first identify all factual allegations that constitute nothing more than "legal conclusions" or "naked assertions." Twombly, 550 U.S. at 555, 557. Such allegations are "not entitled to the assumption of truth" and must be disregarded for purposes of resolving a 12(b)(6) motion to dismiss. Iqbal, 129 S. Ct. at 1950. Next, the district court must identify "the 'nub' of the ... complaint-the well-pleaded, nonconclusory factual allegation[s]." Id. Taking these allegations as true, the district judge must then determine whether the complaint states a plausible claim for relief. See id. In reviewing a motion to dismiss, we consider the "complaint, exhibits attached to the complaint, matters of public record, as well as undisputedly authentic documents if the complainant's claims are based upon these documents." Mayer v. Belichick, 605 F.3d 223, 230 (3d Cir.2010).


A. Plaintiffs' Federal Claims

We first consider Plaintiffs' federal claims, which are brought pursuant to 42 U.S.C. § 1983. That statute provides a private right of action as against [e]very person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws .

42 U.S.C. § 1983.

Section 1983 does not create substantive rights; instead, it provides a remedy for the violation of federal constitutional or statutory rights. Dique v.New Jersey State Police, 603 F.3d 181, 185 (3d Cir. 2010) (citation omitted). To properly assert a claim under §1983, the plaintiff must allege facts sufficient to show (1) the violation of a right secured by the Constitution or laws of the United States and (2) that the alleged deprivation was committed by a person acting under color of state law. Lomax v. U.S. Senate Armed Forces Service Committee, No. 11-3303, 2011WL 6016945 at *1 (3d Cir. Dec. 5, 2011) (citing West v. Atkins, 487 U.S. 42, 48 (1988)).

In addition, each Defendant's potential liability must be predicated on the basis of his or her own personal actions relative to the Plaintiffs, because liability under § 1983 cannot be premised on theories of vicarious liability or respondeat superior. See Iqbal, 129 S. Ct. at 1948 (noting that, because vicarious liability is inapplicable in a § 1983 suit, "a plaintiff must plead that each Government-official defendant, through the official's own individual actions, has violated the Constitution").

Initially, then, we must determine whether Plaintiffs have pleaded facts which would establish the deprivation of a federal right. In this case, Plaintiffs have alleged violations of their First Amendment rights to free speech and to petition the government for redress as well as their Fourteenth Amendment rights to substantive and procedural due process. These substantive claims are set forth in Counts 1 through 4 of the Amended Complaint. In addition, Plaintiffs have asserted a claim against the Commissioner Defendants in Count 6 based on their status as policy-makers. In counts 7 and 10, Plaintiffs assert claims against the MTR Defendants, Griffin, ...

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