Caesars Massachusetts Management Co., LLC v. Crosby

The Massachusetts Gaming Commission (the commission) was responsible for licensing casinos in Massachusetts. The governing statute gave the commission full discretion regarding whether to grant or deny casino-license applications. The statute further provided that applicants had no right to seek review of unfavorable licensing decisions. Sterling Suffolk Racecourse, LLC (SSR) applied for a casino license and proposed that Caesars Entertainment Corporation and three Massachusetts-based affiliates (collectively, Caesars) (plaintiffs) would operate SSR’s casino. Pursuant to Massachusetts law, the commission’s Investigation and Enforcement Bureau (IEB) investigated Caesars to determine whether Caesars had demonstrated the integrity, honesty, good character, reputation, and financial responsibility necessary to be a suitable casino operator. The IEB found that Caesars had some questionable business relationships, prior litigation alleging unethical conduct, and a potentially precarious financial position. The IEB thus publicly recommended that the commission find that Caesars had not demonstrated its suitability to serve as SSR’s operator. As a consequence of the IEB’s recommendation, the commission likely would have denied SSR’s casino-license application if SSR had continued to partner with Caesars. Therefore, at SSR’s request, Caesars withdrew from its contractual relationship with SSR. Caesars sued commission chairman Stephen Crosby and IEB director Karen Wells (defendants) in federal court under 42 U.S.C. § 1983, asserting that Caesars had been deprived of property without due process in violation of the Fifth and Fourteenth Amendments. Specifically, Caesars claimed that its contract with SSR had given rise to a protected property interest based on the expectation that the commission would grant SSR’s license application. Caesars also asserted an equal-protection violation, claiming that Crosby and Wells had acted to force Caesars out of the licensing process to favor a competing license application for a casino located on property owned by one of Crosby’s longtime acquaintances. The district court dismissed Caesars’ complaint for failure to state a claim, and Caesars appealed.