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Federal Judge Allowing Trump's Keystone Redevelopment Partners Suit
Against the Pennsylvania Gaming Control Board to Move Forward
 
Action Claims State Denied Casino Application Because of Ties to Atlantic City

By Matt Birkbeck, The Morning Call, Allentown, Pa.McClatchy-Tribune Regional News

Dec. 30, 2009--A federal judge is allowing the company behind the ill-fated TrumpStreet Casino project to continue with its lawsuit against the Pennsylvania Gaming Control Board.

In allowing the suit by Keystone Redevelopment Partners to move forward, U.S. District Judge John Jones declined to give immunity to current and former gaming board members who made the December 2006 decision to reject three applicants, including Keystone, for two available Philadelphia casino licenses. Two other applicants, HSP Gaming and Foxwoods, were awarded the licenses.

"It's what we had hoped for," said Robert Pickus, an attorney representing Trump Entertainment Resorts, a majority partner in Keystone. "It was the first time anything involving Pennsylvania gaming laws were brought before a federal judge, and we were hopeful he would see the logic of the issues we put forth and it seems that he did."

Previous appeals on gaming-related issues by other unsuccessful gaming applicants have been denied by the state Supreme Court. Keystone filed suit in December 2008 in federal court in Harrisburg claiming the board discriminated against its application for a Philadelphia casino because of Donald Trump's ties to Atlantic City casinos.

The board said in its 2006 decision that a lower tax rate in Atlantic City could prompt a successful applicant with a casino in Atlantic City to steer customers there from Philadelphia.

Trump was board chairman of Trump Entertainment Resorts until last February, when he resigned after the company filed for bankruptcy.

The gaming board filed a motion to dismiss the entire lawsuit. Jones last week dismissed two counts that sought future damages, which could have forced the gaming board to rescind the licenses for SugarHouse and Foxwoods and reopen the application process. Jones also declined to rule on a part of the state Gaming Act that allows the board to deny applicants if they are involved in litigation against the board.

But in addition to declining immunity to the gaming board, which could open former and current board members to depositions and discovery, Jones said lawyers for Trump Entertainment Resorts sufficiently argued that the gaming board awarded licenses in 2006 in a way that unfairly protected in-state business. Jones allowed the suit to continue based on the alleged harm the board's decision caused the TrumpStreet project.

Keystone, if successful, could potentially receive money damages from the board.

Doug Sherman, the gaming board's chief counsel, said in a statement that the board was "pleased that the court has ruled in its favor on three of the five claims and dismissed those claims at this early stage of the proceedings. As to the two remaining counts, on which the court did not grant judgment in the individual board members' favor, we believe that significant ground exists to support an immediate appeal of those issues.

"Accordingly, the board has appealed the denial of both qualified and quasi-judicial immunity holdings to the 3rd Circuit Court of Appeals and looks forward to presenting these issues to that court."

The gaming board filed the appeal last week.

HSP Gaming, owner of the planned SugarHouse Casino, joined the suit in support of the gaming board, alleging the suit is an opportunistic attempt to delay construction of the Philadelphia casinos.

A February 2009 letter from Philadelphia attorney Richard Sprague, whose firm represents HSP Gaming, to Harrisburg attorney John Krill demanded that Keystone drop the lawsuit, saying it lacked merit.

"A cursory review of your filings in this case and of the facts known to you and your client reveals the absence of any meritorious claim," Sprague wrote.

The letter, obtained by The Morning Call, called on Keystone to drop its suit or face a Dragonetti action for "the wrongful filing and continuation of this lawsuit." A Dragonetti action is filed to dismiss "meritless" lawsuits.

Sprague is also a minority owner of SugarHouse.

"Mr. Sprague is a well-known attorney in Pennsylvania and is known as a bully," Pickus said. "We don't file frivolous lawsuits, and we don't file lawsuits to waste anyone's time or money."

Sprague, reached Tuesday, said "some people see me as a bully, others see me as a saint. It's in the eye of the beholder."

Sprague also said he was pleased with the decision to dismiss three counts of the lawsuit, particularly the removal of future damages and potential loss of HSP's gaming license.

"This is now really about money damages against the past board, but we're going to [remain a defendant]. I don't want to walk away from the board, which has appealed. The fat lady hasn't sung yet," Sprague said.

The gaming board has paid $92,503 thus far in legal fees to defend itself against the suit, according to gaming board records obtained by The Morning Call through a Right to Know Law request.

Andrew Bender, the board's open records officer, said legal fees are capped at $100,000, after which all defense costs will be paid by the board's insurance carrier.

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