# PHILADELPHIA ENTERTAINMENT AND DEVELOPMENT PARTNERS, LP v. COMMONWEALTH OF PENNSYLVANIA DEPARTMENT OF REVENUE

> District Court, E.D. Pennsylvania · September 30, 2020

URL: https://www.frixlaw.com/law-library/cases/10399755

## Case

- **Court:** District Court, E.D. Pennsylvania
- **Decided:** September 30, 2020
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10399755

## How later opinions describe it (automated extraction)

- finding that the plaintiff did “not have a protected property right under state law to engage in the gaming industry, since Pennsylvania law expressly makes the granting of a gaming license a revocable privilege” (citing 58 Pa. Code § 421a.1(a)
- holding that if conflicting provisions of statutes are irreconcilable, the specific provisions shall prevail over general provisions”
- holding that “[p]roceedings affecting the res are within the [bankruptcy] court’s jurisdiction; proceedings not affecting the res are not” (internal citations omitted

## Opinion text

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF PENNSYLVANIA
__________________________________________

IN RE: PHILADELPHIA ENTERTAINMENT :
AND DEVELOPMENT PARTNERS, LP, : Bankruptcy No. 14-12482
Debtor :
__________________________________________
:
IN RE: PHILADELPHIA ENTERTAINMENT :
AND DEVELOPMENT PARTNERS, LP, :
d/b/a FOXWOODS CASINO PHILADELPHIA, :
Plaintiff :
:
v. : Civil Action No. 2:20-cv-00295
: Adversary No. 14-00255
COMMONWEALTH OF PENNSYLVANIA :
DEPARTMENT OF REVENUE, and :
COMMONWEALTH OF PENNSYLVANIA, :
Defendants
__________________________________________

O P I N I O N
Appeal of Bankruptcy Court’s Order dated December 31, 2019- Affirmed

Joseph F. Leeson, Jr. September 30, 2020
United States District Judge

I. INTRODUCTION
Persil Mangeur LLC, in its capacity as the trustee of the Liquidation Trust for the estate
of the debtor Philadelphia Entertainment and Development Partners, LP d/b/a Foxwoods Casino
Philadelphia (“PEDP”), the plaintiff in the above-captioned adversary action, appeals from the
order granting the Commonwealth Defendants’ Motion to Dismiss Adversary Complaint or, in
the Alternative, to Abstain, entered by the United States Bankruptcy Court for the Eastern
District of Pennsylvania on December 31, 2019. After de novo review, the Bankruptcy Court’s
decision is affirmed.
1
II. BACKGROUND
In a 2018 opinion, the Third Circuit Court of Appeals described the background1 of this
case as follows:
We trace this case to 2006 when the Pennsylvania Gaming Control Board (the
“Board”) awarded a slot machine license to PEDP, which paid a $50 million fee to
the Commonwealth for the license. The Board, however, eventually revoked the
license when PEDP failed to meet certain of its requirements for its maintenance.
[It did not return any part of the $50 million license fee.] PEDP unsuccessfully
appealed from the revocation order to the Pennsylvania Commonwealth Court,
following which the Supreme Court of Pennsylvania denied PEDP’s application to
review that decision. After the Pennsylvania courts upheld the revocation, thereby
exhausting PEDP’s remedies through state procedures to challenge the revocation,
it filed a petition in bankruptcy. During the bankruptcy proceedings, it brought an
adversary action against the Commonwealth alleging that the license revocation
should be avoided because it was a fraudulent transfer[2] under §§ 544 and 548 of
the Bankruptcy Code and under Pennsylvania law. Citing the Rooker-
Feldman doctrine, the Bankruptcy Court concluded that it lacked subject matter
jurisdiction over the fraudulent transfer claims in light of the proceedings in the
state courts which had upheld the revocation order. By that time Persil had been
appointed Trustee, and it appealed to the District Court which affirmed the
Bankruptcy Court order. Persil then appealed to this Court. We will reverse because
the Bankruptcy Court erred when it held that the Rooker-Feldman doctrine barred
its review of the fraudulent transfer claims. We are satisfied that in a review of those
claims the Bankruptcy Court did not need to review or reject the Commonwealth
Court’s judgment. We, however, do not reach a conclusion on the question of
whether any of PEDP’s fraudulent transfer claims are meritorious, so our opinion
should not be overread as we only address the Rooker-Feldman issue.

Phila. Entm’t & Dev. Partners, LP v. Dep’t of Revenue (In re Phila. Entm’t & Dev. Partners,
LP), 879 F.3d 492, 494-95 (3d Cir. 2018) (“PEDP IV”). The matter was remanded to this Court,
which at its option, remanded the matter to the Bankruptcy Court for further proceedings to
address:

1 Additional factual background was provided by the Third Circuit Court of Appeals, as
well as in prior opinions of this Court, the Bankruptcy Court, and the state courts, and will not be
repeated here. See, e.g. In re Phila. Entm’t & Dev. Partners, LP, d/b/a Foxwood Casinos
Philadelphia, 569 B.R. 394, 396 (E.D. Pa. 2017) (“PEDP III”).
2 It was clarified for the first time in the Circuit Court that the transfer PEDP seeks to avoid
is the revocation of the License without receiving value in return.
2
(1) whether claim or issue preclusion bars judicial review of the Trustee’s claim
that the license revocation was a constructively fraudulent transfer under §
548(a)(1)(B) or § 544(b) and the PUFTA;[3] and if not (2) whether the Trustee has
stated a claim that the license revocation constitutes a fraudulent transfer under §
548(a)(1)(B) or § 544(b) and the PUFTA; and (3) whether the Eleventh
Amendment bars judicial review of the Trustee’s claim that the license revocation
was a constructively fraudulent transfer under § 548(a)(1)(B) or § 544(b) and the
PUFTA.

Id. at 504; PEDP III, No.: 16-cv-01992, Order dated April 19, 2019, at ECF No. 29. On remand,
the Bankruptcy Court concluded:
(1) the Plaintiff’s Fraudulent Transfer Claims are not barred by claim or issue
preclusion; (2) the Plaintiff’s Fraudulent Transfer Claims are barred by sovereign
immunity, and (3) even if sovereign immunity were inapplicable to the Fraudulent
Transfer Claims, the Plaintiff has failed to state a claim against the Defendants
under §§548(a)(1)(B), 544, and 550 of the Bankruptcy Code and the PUFTA
because the License did not constitute the property or an asset of the Debtor under
applicable Pennsylvania state law.

Phila. Entm’t & Dev. Partners, LP v. Pa. (In re Phila. Entm’t & Dev. Partners, L.P.), 611 B.R.
51, 57 (Bankr. E.D. Pa. 2019) (“PEDP V”). That decision is the subject of the instant appeal.
The Trustee asserts that the Bankruptcy Court, relying on definitions in the Gaming Act4
rather than in the PUFTA, erred in holding that the License did not constitute property, an
interest in property, or an asset of PEDP for purposes of the fraudulent transfer claims. This
determination was essential in the Bankruptcy Court’s conclusions that the fraudulent transfer
claims are barred by sovereign immunity and that PEDP failed to state a claim for fraudulent
transfer under the Bankruptcy Act and the PUFTA. Because this Court, after de novo review,
holds that the License was not the property of PEDP, the Bankruptcy Court’s decision is
affirmed.

3 Pennsylvania Uniform Fraudulent Transfer Act, 12 Pa.C.S. §§ 5104-5105 (“PUFTA”)
4 Pennsylvania Race Horse Development and Gaming Act, 4 Pa.C.S. §§ 1101-1904
(“Gaming Act”)
3
III. STANDARD OF REVIEW
On appeal, a district court reviews a Bankruptcy Court’s findings of fact applying a
“clearly erroneous” standard of review. See Am. Flint Glass Workers Union v. Anchor Resolution

Corp., 197 F.3d 76, 80 (3d Cir. 1999). A district court reviews the Bankruptcy Court’s legal
determinations de novo.5 See Sovereign Bank v. Schwab, 414 F.3d 450, 452 (3d Cir. 2005).
IV. ANALYSIS
This case essentially revolves around whether PEDP had a property interest in the
License. The Bankruptcy Court concluded that it did not. Consequently, the court determined
that sovereign immunity barred the fraudulent transfer claims and PEDP failed to state a claim.
For the reasons set forth below, because the Gaming Act makes clear that the issuance of the
License was a revocable privilege, see 4 Pa.C.S. § 1311(d), this Court finds after de novo review
that the License was not the property of PEDP and the Adversary Complaint was properly
dismissed.

A. The License was not the property of PEDP.

PEDP asserted fraudulent transfer claims against the Commonwealth based on the
revocation of the License. These claims were brought under § 548(a)(1)(B) of the Bankruptcy
Code and under the PUFTA, by virtue of § 544 of the Bankruptcy Code. A threshold
requirement for each of the claims is that the License was the property of PEDP. See 11 U.S.C.
§ 548(a)(1) (allowing the trustee to avoid any transfer “of an interest of the debtor in property. .
.”); 12 Pa.C.S. §§ 5104-5105 (providing for voidable transfers); 12 Pa.C.S. § 5101 (defining

5 The Trustee asserts that the issues in this appeal involve disputes concerning the legal
conclusions reached by the Bankruptcy Court and that de novo review is required.
4
“transfers” as “[e]very mode, direct or indirect, absolute or conditional, voluntary or involuntary,
of disposing of or parting with an asset or an interest in an asset;” and “asset” as “[p]roperty of a
debtor”). The Bankruptcy Code does not define “property” or an interest in property. “Congress
has generally left the determination of property rights in the assets of a bankrupt’s estate to state

law.” Butner v. United States, 440 U.S. 48, 54 (1979).
1. The Bankruptcy Court’s Opinion and issues on appeal
In looking to state law, the Bankruptcy Court found that the Gaming Act, which governs,
inter alia, the creation, issuance, maintenance, and revocation of slot machine licenses, “is the
appropriate source of Pennsylvania state law for determining the Debtor’s interest in the
License.” See PEDP V, 611 B.R. at 70. The court noted that § 1102, which sets forth the
Pennsylvania General Assembly’s stated legislative intent in enacting the Gaming Act, states:
Participation in limited gaming authorized under this part by any licensee,
permittee, registrant or certificate holder shall be deemed a privilege, conditioned
upon the proper and continued qualification of the licensee, permittee, registrant or
certificate holder and upon the discharge of the affirmative responsibility of each
licensee, permittee, registrant and certificate holder to provide the regulatory and
investigatory authorities of the Commonwealth with assistance and information
necessary to assure that the policies declared by this part are achieved.

4 Pa.C.S. §1102(7). The Bankruptcy Court “view[ed] this as an unequivocal statement that the
Pennsylvania legislature intended that the License constitutes a revocable privilege.” PEDP V,
611 B.R. at 70 (citing In re Williams, 2014 Bankr. LEXIS 330, at *9 (Bankr. D.N.J. Jan. 24,
2014) (explaining that the starting point to discern legislative intent is the existing statutory
text)). The court found that the legislative intent that the License is a revocable privilege is also
supported by other provisions of the Gaming Act. See id. (citing 4 Pa.C.S. §§ 1311(d), 1327-
1328; 58 Pa. Code § 421a.1(a)). It further determined that the “Pennsylvania legislature included
express statutory language in §1327 of the Gaming Act that not only barred the sale, transfers or
5
assignment of the License, but also prevented the formation of a property interest by precluding
any entitlement to a license.” PEDP V, 611 B.R. at 75-76. The Bankruptcy Court concluded
that “the Debtor’s interest in the License was not an ‘interest of the debtor in property’ under
§548(a) of the Bankruptcy Code.” Id. at 70-71.

The Bankruptcy Court considered PEDP’s argument that the PUFTA, pursuant to which
PEDP seeks to avoid the transfer, rather than the Gaming Act, should be used to determine
whether the License was property. See id. at 71-72. But the court rejected the suggestion that
the legislative history of the PUFTA trumps the statutory provisions of the Gaming Act. See id.
(explaining that PEDP argued “that the legislative history of the PUFTA shows that the
definition of the term ‘property’ under that statute was intended to be construed broadly” and
that government licenses that contribute to the value of the holder should be deemed “property”
regardless of whether they are transferable or are deemed property for other purposes (citing 12
Pa.C.S. § 5101, Committee Cmt. — 1993, No. 9)). It also rejected PEDP’s argument that “there
is no irreconcilable conflict between the PUFTA’s articulation of property for fraudulent transfer

purposes and the Gaming Act’s provisions with respect to the License,” reasoning that the
Gaming Act “addresses the nature of a gaming license as a revocable privilege that did not create
an entitlement in any party.” See id. The court reasoned that “the PUFTA does not ‘clearly’
address gaming licenses specifically, but rather addresses government-issued licenses
‘generally,’ [and that] the general nature of the PUFTA’s commentary, in the face of a specific
statute related to gaming licenses, makes it less than ‘clear’ that the License is property under the
PUFTA.” See id. The Bankruptcy Court further commented that the PUFTA predates the
amendments to the Gaming Act that authorized the issuance of slot machine licenses and,
therefore, PUFTA’s “reference to government-issued licenses clearly did not include slot

6
machine licenses such as the License issued to the Debtor.” See id. Consequently, the court
concluded that “the specific provisions of the Gaming Act providing that the License is a
revocable privilege and not intended to create an entitlement for the benefit of any person
supersede the general provisions of the PUFTA’s legislative history, and support the conclusion

that the Debtor did not hold a property or ownership interest in the License for purposes of either
§544 of the Bankruptcy Code or §§5104 and/or 5105 of the PUFTA.” Id. at 73.
In this appeal, PEDP reasserts it arguments that the PUFTA’s legislative history
establishes the License is property and that the rules of statutory construction provide that the
definition of property in the PUFTA, as opposed to the Gaming Act, should control.
Additionally, PEDP argues that under the plain language of the PUFTA the License was
“property.” PEDP further contends that the Bankruptcy Court erred in finding that the PUFTA
and the Gaming Act were irreconcilable and that, regardless, the PUFTA is the “special statute”
as to the question of whether the License constitutes “property.”
2. The License is not property.

“In determining the meaning of a statutory provision, ‘[the courts] look first to its
language, giving the words used their ordinary meaning.’” Artis v. District of Columbia, 138 S.
Ct. 594, 603 (2018) (quoting Moskal v. United States, 498 U.S. 103, 108 (1990)). “Generally,
where the text of a statute is unambiguous, the statute should be enforced as written and ‘[o]nly
the most extraordinary showing of contrary intentions in the legislative history will justify a
departure from that language.’” In re Phila. Newspapers, LLC, 599 F.3d 298, 314 (3d Cir. 2010)
(quoting United States v. Albertini, 472 U.S. 675, 680 (1985)).
Contrary to PEDP’s claim, the License is not property under the plain language of the
PUFTA. PEDP argues that under the plain language of the PUFTA, which defines “Asset” as

7
“Property of a debtor” and defines “Property” as “Anything that may be the subject of
ownership,” see 12 Pa.C.S. § 5101(b), and that “Ownership” is defined by its “common and
approved usage” by the Black’s Law Dictionary as “the right to possess a thing,” the License
was “property” because PEDP had the right to, and in fact did, possess the License. See 1

Pa.C.S. § 1903(a); Black’s Law Dictionary Pocket Edition (5th ed. 2016). The Commonwealth
disputes this contention, asserting that because the PUFTA defines property as anything “that
may be the subject of ownership” and because the License was revocable, conditional, and
nontransferable privilege, it could not be the subject of ownership. This Court agrees with the
Commonwealth and the Bankruptcy Courts’ decisions. Although PEDP did possess the License,
there is nothing to support PEDP’s contention that it had a “right” to possess the License. See
Arneault v. O’Toole, 864 F. Supp. 2d 361, 395 (W.D. Pa. 2012) (finding that the plaintiff did
“not have a protected property right under state law to engage in the gaming industry, since
Pennsylvania law expressly makes the granting of a gaming license a revocable privilege” (citing
58 Pa. Code § 421a.1(a)).

If the text of the PUFTA is unambiguous, as PEDP asserts, there is no need to consider
the legislative history. Nevertheless, PEDP has presented this argument on appeal so it will be
addressed. The legislative history, as reflected in the commentary to the PUFTA, states that
“[t]he definition of ‘property’ is intended to be construed broadly, to include any right or interest
that contributes to the value of a person.” See 12 Pa.C.S. § 5101, cmt, 9. Although this language
supports PEDP’s property claim, this Court agrees with the Bankruptcy Court that the legislative
history of the PUFTA does not trump the statutory provisions of the Gaming Act. See PEDP V,
611 B.R. at 72; see also 1 Pa.C.S. § 1921(b) (“When the words of a statute are clear and free
from all ambiguity, the letter of it is not to be disregarded under the pretext of pursuing its

8
spirit.”). The Statutory Construction Act provides that the “object of all interpretation and
construction of statutes is to ascertain and effectuate the intention of the General Assembly.
Every statute shall be construed, if possible, to give effect to all its provisions.” 1 Pa.C.S. §
1921(a). “Whenever a general provision in a statute shall be in conflict with a special provision

in the same or another statute, the two shall be construed, if possible, so that effect may be given
to both. If the conflict between the two provisions is irreconcilable, the special provisions shall
prevail and shall be construed as an exception to the general provision. . . .” 1 Pa.C.S. § 1933;
Winterberg v. Transp. Ins. Co., 72 F.3d 318, 324 (3d Cir. 1995) (holding that if conflicting
provisions of statutes are irreconcilable, the specific provisions shall prevail over general
provisions”). In light of the comments in the PUFTA that “[t]here are few reported cases in any
jurisdiction dealing with fraudulent transfer of property that does not constitute an ‘asset’ as
defined in this chapter,” see 12 Pa.C.S. § 5101(2), this Court finds that regardless of whether the
PUFTA is irreconcilable with the Gaming Act, whether the License is property is best
determined under the narrower definitions in the Gaming Act. PEDP’s suggestion that because

the comments of the PUFTA include the words “in particular,” it is the more specific statute is
misplaced. Further, the Gaming Act’s purpose is not simply to protect the public, as is evident
upon review. Because the Gaming Act is the more specific statute, the fact that it may have been
passed later in time is irrelevant. See 1 Pa.C.S. § 1933 (providing that “unless the general
provision shall be enacted later and it shall be the manifest intention of the General Assembly
that such general provision shall prevail”).
The Gaming Act provides: “[p]articipation in limited gaming authorized under this part
by any licensee, permittee, registrant or certificate holder shall be deemed a privilege.” 4 Pa.C.S.
§ 1102(7). “Nothing contained in [the Gambling Act] is intended or shall be construed to create

9
in any person an entitlement to a license.” 4 Pa.C.S. § 1327. Further, “a license . . . granted or
renewed pursuant to this part shall not be sold, transferred or assigned to any other person; nor
shall a licensee . . . grant a security interest in or lien on the license.” 4 Pa.C.S. § 1327. The
Board has the “discretion [to] suspend, revoke or deny renewal of any . . . license.” Id.

Considering these provisions and for the reasons further explained in the Bankruptcy Court’s
decision, the License is not property of PEDP. The Bankruptcy Court’s determination that PEDP
failed to state a fraudulent transfer claim is affirmed.
B. Sovereign immunity bars the fraudulent transfer claims.
The Bankruptcy Court found “that, in general, the States have waived their sovereign
immunity to suit in fraudulent transfer actions in bankruptcy court.” PEDP V, 611 B.R. at 68
(citing Cent. Va. Cmty. Coll. v. Katz, 546 U.S. 356 (2006)). The court explained:
Actions seeking the return of a debtor’s fraudulently transferred property or,
alternatively, the value of such property, were the types of actions with respect to
which States would have contemplated narrowly waiving their sovereign immunity
when ratifying the Constitution. This is because such actions implicate the res of
the bankruptcy estate and were part of the fabric of debtor-creditor law at the time
of ratification.

Id. at 68 (citing In re La Paloma Generating, Co., 588 B.R. 695, 701 (Bankr. D. Del. 2018);
Zazzali v. Swenson (In re DBSI, Inc.), 463 B.R. 709, 719 (Bankr. D. Del. 2012)).
However, the Bankruptcy Court concluded that the fraudulent transfer claims “at issue in
this case do not fall under that waiver, and the Defendants’ sovereign immunity serves as a
defense to those claims.” PEDP V, 611 B.R. at 68. The court reasoned that, in contrast to Katz
and DBSI, because the License did not constitute the property or an asset of PEDP, it did not fall
under the Bankruptcy Court’s in rem jurisdiction to administer the res of the bankruptcy estate.
See id. For this reason, the court found that the fraudulent transfer claims “are, in essence, a suit
for money damages” and “sovereign immunity serves as a defense to those claims.” Id.
10
PEDP asserts that the Bankruptcy Court correctly concluded that sovereign immunity
generally does not bar fraudulent transfer actions. But the court erred in concluding that the
License was not the property of PEDP and, therefore, that sovereign immunity had not been
waived. Conversely, the Commonwealth agrees with the Bankruptcy Court’s finding that the

License was not the property of PEDP and its conclusion that because the License is not res the
fraudulent joinder claims seek only a money judgment. The Commonwealth therefore asserts
that the License does not invoke the Court’s in rem jurisdiction. The Commonwealth further
contends that the narrow exception to state sovereign immunity carved out in Katz does not
apply to fraudulent transfer claims against a non-creditor, non-claimant.6
The Commonwealth’s suggestion that it is entitled to sovereign immunity because
PEDP’s fraudulent transfer claims are asserted against a non-creditor, non-claimant, is rejected
for the reasons set forth by the Bankruptcy Court.7 See PEDP V, 611 B.R. at 67 n.21 (holding
that Katz “support(s) the conclusion that a fraudulent transfer action against a state actor is
ancillary to the bankruptcy court’s in rem jurisdiction where it seeks recovery of the alleged

fraudulent transfer or, alternatively, its value, because that recovery promotes the marshalling of
the entirety of the debtor’s estate for distribution to creditors, whether or not the state actor is a
creditor itself” (emphasis added)). Regardless, because, for the reasons previously stated, the
License was not the property of PEDP, the Bankruptcy Court correctly concluded that sovereign

6 Because the License was not property, there is no need to address the Commonwealth’s
alternative arguments that: (1) PEDP received reasonably equivalent value for the license
transfer, and (2) the fraudulent transfer claims are barred by res judicata.
7 Because this Court adopts Judge Coleman’s opinion after de novo review, it need not
provide further discussion. See, e.g. Edge Petroleum Operating Co. v. GPR Holdings, L.L.C. (In
re TXNB Internal Case), 483 F.3d 292, 297 (5th Cir. 2007) (“The district court affirmed the
bankruptcy court without separate opinion.”); In re Lucas, 924 F.2d 597, 599 (6th Cir. 1991)
(same).

11
immunity has not been waived. See Torkelsen v. Maggio (In re Guild & Gallery Plus), 72 F.3d
1171, 1182 (3d Cir. 1996) (holding that “[p]roceedings affecting the res are within the
[bankruptcy] court’s jurisdiction; proceedings not affecting the res are not” (internal citations
omitted).

V. CONCLUSION
After de novo review, this Court concludes that the Bankruptcy Court correctly
determined that PEDP did not have a property interest in the License because the Gaming Act
clearly provided that the License was a revocable privilege. The court’s determination that
sovereign immunity barred the fraudulent transfer claims and that PEDP failed to state a claim
was also correct. Accordingly, the decision of the Bankruptcy Court dated December 31, 2019,
dismissing the Adversary Complaint is affirmed.
An appropriate Order follows.

BY THE COURT:

/s/ Joseph F. Leeson, Jr.___________
JOSEPH F. LEESON, JR.
United States District Judge

12

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10399755. Public record. Not legal advice.