Bailiff: SJC-13196, FBT Everett Realty, LLC
v. Massachusetts Gaming Commission.
-: Okay. Attorney Weld?
You're on mute.
-: My apologies. Not a good start.
May it please the Court.
My name is Christopher Weld.
I represent FBT Everett Realty, LLC,
who is the plaintiff in the appellant.
There are two primary issues,
core issues I would call them,
presented to the Court by this appeal.
The first one relates to a regulatory taking
and whether any one of the three Penn Central factors
is an essential element of making out a takings claim
or whether you must read all those three factors
as well as other circumstances (audio feedback playing)
into the entire analysis. (audio feedback playing)
-: Okay, Attorney Weld.
Hold on one second, let's see if we can-
You're on mute.
-: I'm not- -: Hold on one second.
There's a problem with the feedback.
Bailiff: The issue is is that there is a Suffolk feed
that's live in someone's office right now.
So they need to mute the Suffolk feed.
Mr. Weld, if you have that on right now,
just turn that off.
(audio feedback playing)
-: Do you have the Suffolk feed on right now?
-: I don't think so.
Let me find out.
(audio feedback playing)
I apologize, apparently I did.
-: Okay. No problem.
-: Again, not a good start.
I think I've lost a minute or so of time.
-: Well?
No, just joking, go ahead, just go ahead.
-: Well why don't we just get into it
and tell us why Justice O'Connor's confirms in Palozzolo
and the very, very, very narrow exception
in Hodel vs. Irving helps you as it relates to whether
reasonable investment backed expectation is dispositive.
-: Your Honor, I think the fundamental distinction here
is whether reasonable investment backed expectations
can be dispositive,
can overweigh the other two items or elements,
but what the court below held is that
as a matter of law, not fact, as a matter of law,
if you don't present evidence on one of the three elements,
you do not have a regulatory takings claim.
And I would submit to the Court
that even beginning with Monsanto,
that is not the holding of the Court.
Monsanto Court repeatedly said,
this is an ad hoc factual determination.
It also said that the Penn Central , quote,
"Should be taken into account.", close quote.
-: But they also said that
a reasonable investment backed expectation
might be so overwhelming that it's dispositive of the issue.
And quite honestly,
this circumstance is not a situation
where Native Americans are not able
to leave their land to their heirs.
-: I agree with you, Your Honor,
that they can overweigh or outweigh the other factors.
But what Hodel tells us is that
even with no investment backed expectations,
the nature of the governmental action
and the economic impact
can in fact outweigh the other factor.
The court below did not even consider
the nature of the governmental action
and did not even consider the economic impact
as factual elements to be weighed against
the investment backed expectations,
and in this case-
-: Well why don't we them then.
On the first one, on your client's economic impact,
the profit margin from the initial purchase
to the sale for $35 million
was in the hundreds of percentile of profit.
-: Your Honor, that goes to the element of economic impact,
which there was no evidence of in the court below,
other than what you've just said,
but we did not have any opportunity to-
-: Well, isn't that number precise?
I mean, in your favor,
we know exactly what the negative economic impact is
because we know what your original deal was
and what it was reduced.
So we do know that number, right?
-: Right.
-: And this is summary judgment, right?
So we don't really care about the judge's analysis,
as long as we have disputed facts established
or undisputed facts established, right?
-: I disagree with that, Your Honor
because the basis of the court's holding,
the basis of the motion,
was we don't have to address the other two factors at all.
And the premise of the motion was-
-: No, I understand that Mr. Weld,
and I actually am sympathetic to your point,
'cause I look at these cases
and it does seem like you're supposed to,
including our cases,
the cases by Justice Cordy, the case by Justice Cowin,
we sort of look at all three factors each time.
And Palozzolo tells us
that even when there's no reasonable expectation,
it looks like investment expectation,
certain types of extraordinary takings can still qualify.
So I get it, but I'm just trying to get a sense of-
We know the number of your loss.
I mean, I don't think there's any dispute about it,
whether the judge weighed it, I understand.
You're saying we have to have the benefit
of the judge's weighing of these things,
we don't do that ourselves?
-: I don't believe you do, Your Honor.
And the reason is because we have not had a chance
to develop a full record.
If you look at virtually all these cases,
when they hit the Appellate Court
or they hit the Supreme Court,
there has been a full trial on the merits,
and therefore there's a full record.
Here, the nature of the governmental action
is the critical element from the plaintiff's point of view.
-: But don't we have,
when we're talking about disputed facts,
putting aside that we know the $40 million issue,
isn't it an issue of law
as to whether we evaluate the economic impact
based on the time of purchase,
or as you would suggest, later on in the process
as Wynn becomes a serious applicant.
Isn't that an issue alone?
Whatever your position is Mr. Weld, whatever it is,
isn't that an issue of the law?
-: The question of when the court
is considering the factual elements
of weighing the three Penn Central factors,
that they have to include evidence
about all of those factors.
And I would agree with you that it's a question of law
as to when one assesses the investments backed expectations
on a given facts of the case.
Virtually all the cases cited by the defendant
involve preexisting regulations
that were there when a landholder purchased the land.
So it's an entirely different factual situation.
Here, the chronology is important.
FBT purchased the property in 2009.
The Gaming Act passes in November, 2011.
-: So in 2009, the preexisting regulation
was no gaming in Massachusetts, right?
-: That's correct.
-: [Justice Wendlandt] Okay.
-: And our argument isn't that
we had investment backed expectations
for a highest and best use sale as a casino use in 2009.
-: And so are there any cases that you have found
where there's free market value diminution
is the investment backed expectation
that you're suggesting your client might have?
-: I don't think there are any cases
anywhere close to the factual.
The problem is with the temporal line here.
So 2011 is gaming, early 2000-
-: I know, but I wanna stick with my question,
which is in 2009, the preexisting regulatory scheme
did not allow gaming in Massachusetts.
And so you're saying this case is different in kind,
because in Monsanto, the preexisting regulations said,
hey, if you disclose the data,
we're gonna use it to measure competitive bids
and disclose it.
And I'm wondering why that's different
than this case?
Why we don't measure it at the time of the action?
Here your purchase of property in Monsanto
was the time which Monsanto decided to disclose its debt.
-: For two reasons, Your Honor.
First of all, the owner of property
has a right to sell the property
for the highest and best lawful use.
The highest and best lawful use,
the value of that was enhanced
by the passage of the Gaming Act,
but that landowner still has that same right.
And the highest and best lawful use as in November, 2011,
was for a casino.
At that point-
-: Doesn't that prove way too much?
You're basically gonna wipe out regulatory taking law
if you have the right
to the highest and best use of your property
and any subsequent regulation's gonna-
It just seems like-
I think Justice Wendlandt's point
is there are no cases that ever do that
because you basically,
it's inconsistent with regulatory taking law.
-: I disagree, Your Honor.
I do agree with you that the government has a right
to enact prospective regulatory actions
without affecting a taking.
And if that action is within constitutional boundaries,
then the land owner is bound by it,
and it falls into the cases that are land use cases,
rent control cases, etc.
But here, the critical element is
that you have a regulatory action,
a reduction in the purchase price,
targeted to one citizen of the Commonwealth,
one, FBT.
The regulation is not regulatory
because, in fact a casino was built on this property.
It didn't say you couldn't-
-: I get that point.
And I understand you may have a strong argument
on that third prong,
that the character of this action is unique,
and we're gonna need to probe Ms. Allison
on what the justification of that is.
But I still have some trouble with-
Gambling, you're relying on the fact
that you get a gambling premium,
and you have a right to that,
but gambling is heavily regulated,
and when you bought the property,
the gambling was illegal in Massachusetts.
So you've got an uphill climb
that you have a reasonable investment based expectation
in this sort of gambling premium, don't you?
That's a real-
-: Let me give you a hypothetical.
So I buy land and its zoned agricultural.
The zoning changes, and it's now residential.
I then invest millions of dollars into infrastructure,
I put in a road, I put in utilities, etc.
Whatever the regulatory body turns around and says,
you know what, I am going to change the zoning
just for your property,
nobody else subject to that zoning area,
but just for your property.
And all of a sudden I'm telling you,
it's now only used for agricultural,
and all of your infrastructure that you built is gone,
all of your plans to build 25 tracked houses is gone.
And I would suggest that that type of taking
would be a compensatory taking, illegal.
-: Well why wouldn't that type of a taking
satisfy the character of the government action prong
rather than be dispositive?
-: It would satisfy the character.
-: I'm giving you that. I'm giving you that.
-: Yes, so but here, I would suggest,
and I really think this is an analysis
that should be done at the trial court
with a full record,
but even on the record we have,
that the governmental action is so overwhelming
in this case as to carry the day.
It's much closer to the Hodel situation,
the Indian rights situation,
than it is to any other of these takings cases,
which are much different.
They involve regulatory takings
that involve large groups of people
that are making a sacrifice for the benefit of the whole.
And there's no question that that can be done,
but here, the targeting and the punitive action,
this was not a regulatory action, it was a punitive action.
And if you look at Exhibit C to the complaint-
-: Do we have enough factual-
And there I have a question for you, Mr. Weld
'cause I get it.
This is very unusual that you would basically
direct a lowering of price for a parcel like this
by government,
but are there any unclear facts here?
I'm just trying to get a sense of,
so from what I understand a commissioner
directed Wynn not to pay more than the non-casino premium
for this property.
And he did so, or the commission did so
because it was concerned that a felon of some sort
had an investment interest in that property,
an organized crime figure.
I don't know exactly what the concern was.
Are there disputed facts on this?
'Cause again, we have a summary judgment decision here.
Normally we do that kind of analysis.
-: You will see in the record,
the statement of undisputed facts,
that the other two prongs are not subject
of the facts put before the court,
because the premise, the entire premise of the motion
was that you don't have to look at those other two factors.
We do know some facts, but for example,
we believe that a deposition, the depositions of the-
-: I'm sorry to interrupt you.
Your point is that on summary judgment,
the other side did not argue the other two prongs,
and so as an appellate court,
we're confined to the arguments made,
that the issue de jure is only whether or not
this one prong is dispositive.
And if it's not dispositive,
we don't get to de novo review the other two prongs
because they didn't argue it.
They waived it basically at this point.
-: It's both that they didn't argue it,
and that there's an insufficient record
on the other two prongs.
There is some evidence, but it's insufficient.
So for example,
we maintain that the sole basis
of the actions by the commission
was to punish, was to fine.
And even in the Exhibit C of the amended complaint,
you'll see that the IEB uses the term,
"Should we reveal the fine?", the $40 million.
And this is a shift of private wealth
between two private parties by a public entity.
-: Mr. Weld, I apologize,
but you're only halfway through your argument
and you're one minute over here.
So I'm gonna throw a lot into one question,
under the Mass. Tort Claims Act,
you wanna overrule Kargman,
we've got Lafayette saying,
tie goes to the Mass. Tort Claims Act every time.
We've got Mass Tort clearly distinguishable as an entity,
you wanna overrule Kargman.
There's a lot going on here
for you to succeed on the intentional tort not being covered
by the Mass. Tort Claims Act based on existing law.
Why is it that you think we should pivot
and change our law here?
-: I think there are two primary reasons, Your Honor,
First there is language in the statute,
Chapter 258, Section 1 in the definition of public employer
that says that an independent body politic incorporate
and it is exempt, is not covered by Chapter 258.
And effectively what Lafayette does
is it writes those words out of the statute
because virtually every public private entity
with mixed elements is going to have factors
on both sides of the Kargman test.
And if the default is, if there's any unclarity at all,
it defaults to, you're within the statute,
you've effectively written that language out of the statute.
Secondly, and I think more importantly,
is the underlying reason for immunity in Chapter 258,
and it goes back to the Morash decisions and Cormier
when the Court was ready to abolish immunity
and the legislature steps in.
But the two underlying policies for the statute
are one, to balance between the right of private citizens
to get redress for harms caused by public entities.
The second is to balance that
with protecting public fisc
against, quote, "catastrophic impacts", so-
-: Well, but what do you do with the-
So not only do we have to have a shift here in the law,
but we also have some tough legislative history
because there was a bill actually considering
what you are asking for
and having the commission be subject to suit,
and that iteration didn't pass.
-: So let me take,
I think there's two parts to your question.
The first one is the legislative history.
And as everyone knows,
there essentially is no legislative history
in Massachusetts.
It's a guesswork.
The prior bill was months before the final bill was passed.
There was no conference committee of the prior bill
that had the language that you mentioned, Justice Lowy,
and in the final bill,
that bill contained certain things
that came out of the final bill
that would suggest independence.
For example, the State Auditor
would serve as a commissioner,
the final bill, that was excluded.
The Commissioner of Revenue
would collect all of the licenses and fees,
under the final bill that was excluded.
The MGC, the commission itself, now collects the taxes.
And there is no conference committee report
to give us any guidance as to why
some things were taken out and others were put in,
basically weighing on the same factor
in a conflicting manner.
So I suggest that that legislative history
is not as constructive,
but what it is I think important here
is that you have a situation
where the legislature set up the Gaming Commission
to act as a financially independent entity.
-: Well, it's not a financially independent entity,
the way Massport is,
which generates hundreds of billions of dollars
and operates and charges fees.
It pays for itself, right?
But it's not an independent sort of entity
creating financial wealth out there.
It's paying its operating costs through certain fees, right?
-: It has two components.
There's Sections 56 and 57 of Chapter 23K
addresses how you fund the operations of the commission.
And the way way you fund the operations of the commission is
the commission has taxing authority as to the licensees,
and whatever the necessary operating budget is
for the commission,
the licensees pay for it.
-: What is that number?
I'm just trying to get a rough sense of what that number is
'cause I remember 20 years ago,
Massport would have $500 million
or something to that effect.
-: My recollection- I'm sorry, I interrupted.
-: What is the number for the commission here?
What number are we talking about
that they generate for themselves?
-: My recollection,
and I couldn't cite to the record appendix
right this minute,
but I believe it's in the vicinity of $20-25 million.
And so they run their own operation,
they also produce revenue that goes and funds public entity,
public good, if you will.
And the statute has a structure,
where there are dedicated funds,
generated from revenue from gaming,
that go to social causes designated by the legislature.
But the core of the operation of the commission itself,
which is what's the commission is being sued here
is funded by private parties,
private money, casino operators.
So that money goes into a fund.
If there's too much money at the end of the year,
the commission can either retain it
or they can credit it back to the licensees.
It does not go back to the general fund,
does not go to the Commonwealth.
So here, if there were a judgment against the commission,
it would arise out of the operations
of the Gaming Commission, 'cause after all,
this is part of the Gaming Commission's purposes
is to vet licensees.
Therefore that judgment would be
part of the operations of the Gaming Commission
and they would tax the licensees
for the value necessary to pay the judgment.
It's a self-sufficient, it's designed to be self-sufficient
with regards to the operations of the entity itself.
And therefore in this case,
there is no risk to the public fisc.
So in our going back to our policy,
balancing of citizens right
to sue the government for harm
against the protection of the public fisc,
if you have no risk to the public fisc,
where the balancing test weighs in favor
of giving the right to have redress against the entity,
and therefore Chapter 258 shouldn't apply.
The rationale for the statute
does not even come into question.
-: Well, a $40 million judgment
is going to ultimately impact how much state agencies
and ultimately the general fund does receive.
There's a cost to running this,
and there's a point in time where
it impacts the general fund
and $40 million is a lot of money.
-: No, I disagree with you, Your Honor,
If you look at Chapter 23K, Sections 56 and 57,
that if the funding of the operations of the commission
are entirely private,
they do not involve the general fund.
If there were $150 million judgment,
the assessment would go against the licensees.
It's not an indemnity like the Regents case cited,
it is a tax that the commission can assess on the licensees,
and the licensees will foot the bill.
And if you look at the Encore Casino,
it's a $3 billion operation.
They are well able to fund whatever that judgment is.
And that's the way the statute is set up.
There is no threat to the public fisc
from a private judgment against the Gaming Commission,
because it will be funded by the casino operators.
-: Okay, any other questions?
Okay, thank you.
Attorney Allison?
-: Ms. Allison, would you mind responding to that last point?
I'm sorry to throw you off your outline.
If there's a $40 million judgment,
does that have no impact on other state agencies
or the general fund?
-: No, Your Honor, not necessarily.
It might.
So the provision which Mr. Weld refers to,
which provides that costs of overseeing
the Gaming Act and regulations
and the cost associated with that
can be assessed to licensees.
If not assessed to the licensees,
or if such costs are unable to be recovered,
then such costs are appropriate under Section 57.
So while, the commission has made the point
that it's arguable and it would take the position
that such a judgment could be assessed
against the licensees as a cost
under the Gaming Control Fund,
the Gaming Control Fund explicitly provides
that another source of funds to cover such costs
is appropriation.
So in that respect, it's entirely different
from the Oberg case that FBT has cited to,
and much more like the Regents case
that the commission has cited to.
It's really, the liability is with the commission.
And at the end of the day, the taxpayers could hold the bag.
-: On your licensing scheme,
can you assess them for an intentional tort
that you committed?
Do you have the power to assess for intent?
If there's a verdict against you for an intentional tort
intentional contractual interference,
can you assess that as a fee?
-: The Gaming Control Fund refers to
assessments for cost or expenses.
If the commission were subject to a judgment in this case,
it would take position that that could be assessed
as a cost and expense to all of the licensees
to be shared equally.
The licensees, certainly the licensees other than Wynn
might object to that.
We would argue that they wouldn't have standing to
under the Gaming Act.
So that's certainly the position the commission would take,
but if such a judgment could not be assessed as a cost,
an operational cost of the commission,
the Gaming Control Fund explicitly provides
that such amounts can be appropriated.
-: Has the commission ever paid out any verdicts?
'Cause usually you need to pass legislation
to pay for a Commonwealth verdict?
Has that happened where-
-: As far as I'm aware, Your Honor, no,
the commission has not paid out a verdict
or had to reach a determination
as to this question under the Gaming Control Fund.
-: Ms. Allison, can I ask you something?
-: No, go ahead please, Justice Kafker.
-: I wanted to switch to the sort of the main event
if we could.
So if we don't agree with the idea
that the investment based expectation is dispositive,
is this a reversal or do we have to,
is there any way that's not a reversal?
-: So the commission has argued,
and I'd like to expand on that,
that the failure of proof
on reasonable investment backed expectations is dispositive,
that that's the clear ruling under Monsanto
and the federal cases that follow Monsanto.
And in fact,
given that the question under a regulatory taking is,
has the regulation gone too far?
The fact that a plaintiff fails, utterly fails,
to show any interference with investment backed expectations
necessarily establishes that.
-: I have a little problem with that
because, not just Hodel, but Palazzolo or whatever,
I'm probably mispronouncing it,
basically says, even if there's no reasonable expectation,
meaning they bought after the regulation was in effect,
they still said that if the regulation goes too far,
there's certain things that are beyond the pale essentially.
And then almost every SJC case
always interconnects the factors
when it's talking about them and uses this too far language,
Justice Cowin uses it at one point
and Justice Cordy talks about them as interlocking factors
in the case.
So I'm just a little concerned
that we've always looked at all three,
and so do the feds now.
But go ahead.
-: So let me start with Palazzolo.
The Palazzolo concurrence does not overrule Monsanto.
It doesn't even refer to Monsanto
and it does not alter the effect of Monsanto.
What the Palozzolo concurrence does is make the point
that in the factual scenario that you just described,
Justice Kafker,
that these categorical rules that were proposed in that case
cannot replace the Penn Central analysis.
But Monsanto did not impose a categorical rule.
-: When you're talking about the concurrence,
are you talking about Justice Kennedy's decision,
the opinion of the Court?
'Cause I'm relying on Kennedy, not on Justice O'Connor.
He wrote the majority decision, right?
-: Right, and I'm referring to the FBT's argument
that I think looking to Justice O'Connor's concurrence,
which becomes.
-: I don't even need Justice O'Connor's concurrence.
I'm looking right at what Justice Kennedy writes
for the majority.
He has this sentence about Hobbesian sticks
and Lockeian whatever, and then he goes,
even if you bought after the regulation,
that's not a get outta jail free.
If the government sort of does something too much,
you're still outta luck.
-: Well, what he's saying there,
is that you cannot impose a categorical rule
to decide if investment backed expectations
were met in the takings analysis.
But that's not what Monsanto does.
Monsanto does not impose a categorical rule.
Monsanto speaks to an evidentiary failure.
Monsanto says, looking,
it's not imposing any categorical rule.
It's looking at the evidence
available on reasonable investment backed expectations.
-: I get Monsanto's distinguishable on the facts.
I get that, but can I ask you another question, which is,
the U.S. Supreme Court has not adopted
your timing point directly, right?
I understand the Federal Circuit has said,
we look at reasonable expectations
at the moment of purchase,
but the U.S. Supreme Court has not been that definitive,
have they?
And let me give you a hypothetical that concerns me,
and it's something similar with Mr. Weld,
so I buy this property,
and then there's a change in regulation
after I buy the property, just what he says,
that allows me to build houses.
I build a subdivision with roads and other things.
So I've made a subsequent investment based expectation,
investments,
based on a change in regulation after the purchase.
And then there's another change in regulation.
Don't we consider the investments you made
after the first change prior to the second one?
-: No, Your Honor.
And let me explain why.
So first with respect to your question
about Supreme Court precedent,
the cases I across the board, you can see from the facts,
they're looking to the regulatory regime,
the regulatory status at the time of purchase
in these cases.
And I think, though this isn't a Supreme Court case,
the 9th Circuit in the Bridge Aina Le'a case
made that standard or that principle really clear
when it said that what's relevant and important
under all of these cases, citing to Supreme Court precedent,
is the regulatory environment
at the time of the acquisition,
not when the regulation is challenged.
And the reason that's important,
and it makes perfect sense,
as to reasonable investment backed expectations,
is that a regulatory taking claim
must be premised upon the interest taken
in the property as a whole.
This comes back to the fundamental problem
with FBT's argument.
As the commission argued below and the Supreme Court found,
FBT can't base a taking claim
on a loss of a particular development right of a parcel.
And the scenario you just described,
that's precisely what it allows it to do.
This is why you have to measure
reasonable investment backed expectations
from the time of the acquisition.
And in fact,
and this is what FBT's sort of fair market value argument,
this is why it's so fundamentally flawed too,
they argue that fair market value
essentially equates to investment backed expectation.
-: I don't buy into that,
but I still don't see why, if you've, again,
you bought some property 50 years ago
and there's a regulatory change.
And then you make all these huge investments
based on that regulatory change,
and then there's a subsequent one.
That's irrelevant?
You're stuck
even though the government's changed its mind twice?
I mean, I'm just, I'm confused.
I understand why you may have a diminished expectation,
but you still got some expectation, don't you?
You've invested money based on
what the government was doing.
-: I think it, you can look to the Penn Central test itself,
the Penn Central case itself,
to see how strongly it applies this principle.
There it rejected a regulatory taking claim
based on the alleged restriction
on some particular use or some particular development right.
And it said, no, you look to the property as a whole.
You don't get to carve up your distinct development rights
and say, ah, I've lost all of one development right,
so it's a regulatory taking.
That is fundamentally inconsistent
with what a regulatory taking is.
You look at the property as a whole.
And so this is why the requirement
that you look to the time of the acquisition makes sense.
It's the only way to reconcile what Penn Central
is trying to establish it as a regulatory taking.
-: Can I ask one more question? -: Ms. Allison, can I-
Go ahead, Justice Kafker.
-: So, can you talk to me about the conduct?
Because my reading of the U.S. Supreme Court
says that certain kinds of governmental behavior
is beyond the pale.
And this is very unusual.
This is targeted at one entity.
Tell me how do we justify this?
Tell me what the logic is of this.
'Cause I have real trouble following it.
-: Well, so first you don't even need to look to
the character of the action.
Again, and we touched on Monsanto,
but Monsanto remains good law, Palozzolo-
-: Help me out though.
-: Assume you do. Just assume you do for the purposes.
Just assume you do for the purpose of the question
and why this isn't Hodel vs. Irving.
They're taking $40 million out of the pocket
based on a jailhouse call of one individual
who may or who may not
have an ownership interest in the property.
So assuming that it's not dispositive.
-: So this case is entirely different from Hodel.
Hodel was, courts and commentators across the board
say that was a very unique case with respect to the taking,
an extraordinarily unusual taking
of the rights to pass on property to your heirs.
And the Superior Court below noted the same thing.
It's sort of equivalent to the line of cases,
which say if there's a physical invasion of your property,
it's necessarily a regulatory taking.
It's sort of so unusual that it's on that level.
This is not Hodel.
This is not those special circumstances.
-: Well, but what is this?
'Cause again, I don't get this yet.
I understand the Gambling Commission
wants to keep organized crime outta gambling.
I get it.
But all this does is reduce the amount of money
the owners of this get.
I mean, if there actually is
an organized crime figure in this,
the person's still getting money.
They're just getting less.
I just don't understand exactly what is this reg.,
what is going on here that we should give it some deference?
-: So let me start with.
-: Can I piggyback on Justice Kafker's question,
in all of these cases, there is actually a regulation.
Congress has passed something.
What is the regulation here?
It seems like there was an ask by the Gaming Commission
to take out the casino premium,
but there's, for this particular targeted consideration,
not like a regulation
in the ordinary context of a regulatory taking.
-: Well, the way that FBT describes the regulatory action
is the commission's acceptance or the decision
to reduce the purchase price.
Now, again, I don't think the Court
needs to turn to any of these facts,
but the facts are that FBT and Wynn
agreed to reduce the purchase price
by amending their auction agreement
based on the fact that Wynn had expressed concerns
about its suitability with FBT involved in the case,
and the commission expressed that it had concerns
about the transparency of the transaction,
giving its paramount obligation
to ensure the integrity and the transparency
of the Gaming Act.
So again, but the Court does not need to turn to
the facts as to the action,
or the facts as to the commission's acceptance
of this amended auction agreement.
-: What do we do with the fact that the commission was wrong
or very well was wrong, given the federal criminal case?
It's that this Lightbody Buffalino thing
was jailhouse banter or whatever,
they're acquitted of it,
and now clearly the commission squeezed the parties,
I think, to be polite,
so no harm, no foul?
-: Well, the fact that they were found,
you're right, they were indicted
and they were found to be not guilty.
But the fact that there was reasonable doubt
is not equivalent to the commission's reasonable doubt
in the criminal matter,
is not equivalent to the commission's concerns
about ensuring the integrity of the Gaming Act.
I mean, those two things can't be equated.
So the commission's concerns, which were never resolved,
had to do with-
-: How does this regulatory action,
if it is a regulatory action,
protect the integrity of the commission of the act?
Explain to me how it does that.
-: So the commission's concerns
about whether it was given the full facts
with respect to ownership and FBT,
whether it was provided false information
when it began asking about that,
raised concerns for the commission
that there would not be transparency
in the licensing process.
-: How does reaching into the plaintiff's pocket
for $40 million provide enhanced integrity?
-: So, again, I mean, respectfully,
this was not sort of squeezing anyone.
This was the commission accepting a revised option agreement
between Wynn and FBT because Wynn was aware-
-: I thought the commission told Wynn,
we may not accept your proposal if you include FBT
who has a potential organized crime figure
or something involved in it.
But then it added this qualifier,
unless you only pay FBT big box amounts,
as opposed to big casino amounts.
-: No, those are allegations,
but those facts are not undisputed.
-: But that leads us then back to my original question is,
if we have to get into any of this,
you lose summary judgment,
because if we do, we've got this disputed facts
on the nature of the regulatory behavior here.
-: Those facts are not in the record.
And that's why I would like to return to
the argument we've made,
which is the Court does not have to get into those facts
to decide this motion for summary judgment.
Monsanto does hold that a failure,
a complete failure of proof
on investment backed expectations is dispositive.
And there are many cases after Monsanto that hold that.
And to Mr. Welds argument,
these cases do not consider,
these cases do not consider the other factors.
I would point you to Monsanto itself to begin.
-: But in Monsanto, it's a disclosure of permit
of environmental information, right?
-: It's a disclosure of what-
-: There's no suggestion of anything,
in Justice Gaziano's words, squeezing
or any sort of odd regulatory conduct
that could go too far, right?
The regulation there is a perfectly normal,
standard type of regulation.
Every one of these cases, except for Hodel,
we're just dealing with a different animal here, aren't we?
-: Well, the point is,
as to Monsanto and all of the subsequent cases,
is that it doesn't even look at any of those other factors.
That's the very point that Monsanto holds you don't have to.
-: It doesn't have to
because we're not dealing with something
that may be too far in the words of the Supreme Court,
or like Palozzolo, what Justice Kennedy talks about.
There could be some kind of governmental action
that really, even when you don't have an expectation
can be just too much and intolerable.
-: Well, so that's not what any of these,
none of the cases, Monsanto and post Monsanto,
including Mehaffy and Cablevision and Good,
and the ones we've cited,
even suggest that they should be
looking to these other factors if there's a failure,
regardless of what they are,
if there's a failure of proof
on reasonable investment backed expectations.
And I would also like-
-: I see your point that this gambling premium
was really a reach
and these guys made a lot of money on this.
So it just doesn't seem like a classic regulatory taking.
The problem is the regulatory behavior
is just extremely odd.
And I just don't know if that can kick you over
into problematic territory,
even though Mr. Weld's client made a huge amount of money,
and he was counting on this gambling premium,
which, is something he shouldn't be counting on.
-: Our position is it doesn't kick you over, Your Honor,
not under Monsanto.
And the fact that this case
can be easily distinguished from Hodel.
The additional thing that you have to take into account
in this case, given the gaming,
giving that we're talking about gaming,
is that the law in the Caesars case and Abdow
is clear that no one, the FBT, an applicant,
can't have any reasonable expectation
that depends on the award of a gaming license.
The Caesars case said that there's no,
to use the quote from Justice Souter,
"expectation of value...",
that could support any constitutional property right
in a gaming license.
That seeking a gaming license
is nothing more than hope alone.
And if that's the case,
with respect to an applicant for a gaming license,
then it necessarily follows
that under the regulatory taking analysis,
FBT can have no expectation of value
in the award of the gaming license.
Because we're talking about the gaming context,
the commission's discretion here is virtually plenary.
That's what-
-: There are no rules in gaming?
I mean, that can't.
There's gotta be some standards of behavior
that even in gambling is intolerable, right?
-: Well, in the Caesars case,
with a point that Justice Souter makes
is that the gaming commission's discretion
is virtually plenary.
So to the extent that its exercising its discretion
to determine how it needs to meet its obligations
under the Gaming Act,
what Caesars found is Wynn, an applicant,
has no expectation of value whatsoever
in light of that discretion,
and the same analysis applies here.
-: But the reality is there were two applicants in play.
One municipality had already voted approval,
Wynn was on a much greater scale of ability.
I don't know about-
I mean, no expectation in the facts of this case?
-: That's right, Your Honor.
I think that's precisely how you would have to apply
Caesars to this case,
which is that there can be no expectations.
-: Caesars is a 9th Circuit case, is that right?
I can't remember.
-: Caesars is a 1st Circuit case, Your Honor.
Justice Kafker: Caesars is a 1st Circuit case.
-: Yes.
And that's precisely what it says,
that there can be no expectation of the value
tied to the potential award of a gaming license.
And this was with respect to an applicant, Wynn,
and the same would hold here.
There can be no expectation of value
sufficient to support
a reasonable investment backed expectation as to FBT.