Crissman v. Dover Downs Ent., Inc

Opinions of the United

2001 Decisions States Court of Appeals

for the Third Circuit

6-5-2001

Crissman v. Dover Downs Ent., Inc

Precedential or Non-Precedential:

Docket 00-5178

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Filed January 29, 2001

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 00-5178

CHARLES CRISSMAN; WENDY CRISSMAN;

*CHRISTINE CRISSMAN,

Appellants

v.

DOVER DOWNS ENTERTAINMENT INC.;

DOVER DOWNS, INC.

* (Dismissed as Party per Court's 11/8/2000 Or der)

On Appeal From the United States District Court

for the District of Delaware

(C.A. No. 99-cv-00755)

District Judge: Honorable Roderick R. McKelvie

Argued: December 5, 2000

Before: McKEE, ROSENN, and CUDAHY,*

Circuit Judges.

(Filed: January 29, 2001)

Jeffrey J. Clark (Argued)

Noel E. Primos

Schmittinger & Rodriguez

414 South State Street

P.O. Box 497

Dover, DE 19903

Counsel for Appellants

_________________________________________________________________

* Hon. Richard D. Cudahy, Senior Judge, United States Court of Appeals

for the Seventh Circuit, Sitting by Designation.

Thomas P. Preston (Argued)

Reed Smith

1201 Market Street

Suite 1500

Wilmington, DE 19801

Counsel for Appellees

OPINION OF THE COURT

ROSENN, Circuit Judge.

In this appeal, we return to familiar terrain to determine

whether the expulsion of three state-licensed horse-trainers

and horse owners by a privately owned harness racing

association from its racetrack without a hearing constitutes

state action for purposes of 42 U.S.C. S 1983. 1 The District

Court concluded that no state action was present and

granted summary judgment in favor of Dover Downs, the

racetrack operator. Because the plaintif fs presented

conclusive evidence that the track enjoyed a symbiotic

relationship with the State of Delaware, we reverse.

I.

Appellee, Dover Downs, Inc. (Dover Downs), is a

subsidiary of Dover Downs Entertainment Inc., a publicly

held corporation operated for profit. Dover Downs is

licensed by the Delaware Harness Racing Commission

(HRC) to conduct harness races at its track in Dover,

Delaware. It conducts harness racing meets six months out

of every year, during which time no other track in Delaware

holds harness racing meets.2 Dover Downs also operates

_________________________________________________________________

1. 42 U.S.C. S 1983 provides: "Every person who, under color of any . . .

regulation . . . of any state . . . subjects, or causes to be subjected,

any

citizen of the United States . . . to the deprivation of any rights,

privileges, or immunities secured by the Constitution and laws, shall be

liable to the party injured in an action at law, suit in equity, or any

other

proper proceeding for redress."

2. Harrington Raceway, the only other licensed harness racing facility in

Delaware, conducts races during the six months each year that Dover

Downs does not.

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video lottery gambling and other entertainment activities at

its facility.

Harness racing is a heavily regulated business in

Delaware, as it is in most states. The State of Delaware

plays an active role in the management of the harness

racing operation at Dover Downs. The State r equires that

14 harness racing officials assigned to Dover Downs, with

titles ranging from "equipment checker" to "state

veterinarian," be licensed by the HRC. Although Dover

Downs pays and supervises these officials, HRC rules set

forth their duties and job descriptions in detail. Moreover,

HRC rules require Dover Downs to "enfor ce the [Harness

Racing] Act and the rules and orders of the Commission."

In 1993, Delaware passed the "Horsemen's Revitalization

Act," whose stated purpose was to rejuvenate the declining

Delaware horse-racing industry. See 29 Del. C. S 4801(b)(1).

To achieve this goal, the legislature authorized harness

racetracks such as Dover Downs to operate "video lottery

machines", commonly known as slot machines, on the

premises. The State, rather than Dover Downs, owns or

leases the slot machines, which are dir ectly connected to

the Delaware State Lottery Office for monitoring and

control. See 29 Del. C. S 4819. Dover Downs, as a "video

lottery agent," is responsible for securing and operating the

machines, and is free to determine the number of machines

it chooses to house, up to the statutory maximum of 1000

machines. See 29 Del. C. S 4820. Nonetheless, a Delaware

statute plainly states that the video lottery is operated "by

the State Lottery Office." 29 Del. C. S 4815(b)(2).

The State also exercises complete contr ol over the

distribution of revenue from the slot machines. A Delaware

statute requires Dover Downs to send all r evenue from the

lottery machines, net of payouts to patrons, to an account

controlled by the State Lottery Office. See Del. C. S 4815(b).

The funds received by this account are then distributed in

accordance with Delaware statute, which is painstakingly

specific. First, the State pays administrative costs

associated with the operation of the lottery, including the

salaries of state lottery personnel. Next, Gamblers

Anonymous and similar programs receive a share. The

State then receives a large percentage share of the money

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that remains. The statute then directs that a percentage of

the remaining funds be given to racetracks such as Dover

Downs "to be applied under the direction of the Delaware

Harness Racing Commission to purses for races conducted

at such agent's racetrack." 29 Del. C. S 4815. Finally, Dover

Downs, as a video lottery agent, receives a statutorily

designated "commission." See 29 Del. C. S 4815(b)(4) c & d.

Charles, Wendy, and Christine Crissman ar e, and at all

relevant times have been, duly licensed by the state of

Delaware to own and train race horses. In October 1997,

Charles Lockhart, the newly-appointed general manager of

Dover Downs, informed the Crissmans that they were no

longer welcome at Dover Downs and that Dover Downs

would no longer permit them to race horses there. Lockhart

offered the Crissmans no explanation for their exclusion

and no opportunity to be heard. Lockhart's deposition in

this proceeding discloses that he expelled the Crissmans

because he had heard unconfirmed rumors that the HRC

was investigating Charles Crissman for certain alleged

improprieties. Lockhart decided to exclude W endy and

Christine Crissman only because they had applied jointly

with Charles Crissman to race at Dover Downs. The

Crissmans, however, were all licensed in good standing and

there is no indication of record that they had violated

Delaware's harness racing rules.3

The Crissmans filed suit against Dover Downs under 42

U.S.C. S 1983 in the United States District Court for the

District of Delaware. The complaint alleged that Dover

Downs had denied the plaintiffs due pr ocess of law in

violation of the Fourteenth Amendment to the United States

Constitution. The plaintiffs sought damages, as well as

preliminary and permanent injunctive r elief restraining the

defendants from denying them access to the racetrack.

When they filed their complaint, the Crissmans moved for

a temporary restraining order. The District Court denied the

motion, holding that the Crissmans were unlikely to prevail

on the merits. Dover Downs then moved for summary

judgment. The District Court granted the motion, holding

_________________________________________________________________

3. On or about November 1, 2000, Christine Crissman stipulated to a

dismissal of her appeal with prejudice.

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that the Crissmans had failed to adduce sufficient evidence

that Dover Downs acted under color of state law as

required by 42 U.S.C. S 1983.

II.

The primary question presented by this lawsuit is

whether Dover Downs' exclusion of the Crissmans

constituted state action, a necessary element of a

successful section 1983 suit. The starting point for our

state action analysis is the seminal case of Burton v.

Wilmington Parking Authority, 365 U.S. 715, 81 S.Ct. 856

(1961). In that case, the plaintiff sued a privately owned

restaurant for racial discrimination. The r estaurant leased

the land on which it stood from a state agency, which ran

the adjacent public parking garage. After examining the

close relationship between the restaurant and the state

agency, the Supreme Court concluded that state action was

present. The Burton Court enunciated a"symbiotic

relationship" test. It provides that when the state has not

clearly directed the private act of discrimination, but it "has

so far insinuated itself into a position of inter dependence"

with the private actor, the state "must be recognized as a

joint participant in the challenged activity." Id. at 725;

Fitzgerald v. Mountain Laurel Racing, Inc. , 607 F.2d 589,

594 (3d Cir. 1979). The Court emphasized that"only by

sifting facts and weighing circumstances can the

nonobvious involvement of the state in private conduct be

attributed its true significance." Id. at 722.

The Court later refined the symbiotic r elationship test in

Moose Lodge No. 107 v. Irvis, 407 U.S. 163, 92 S.Ct. 1965

(1972). There, the Court held state action to be absent in a

case challenging racial discrimination by a private club that

was heavily regulated by the Pennsylvania Liquor Control

Board. The essence of the Court's holding was that

extensive and detailed regulation of a private entity is

generally insufficient to convert that entity into a state

actor. See id. at 176-177. The Court distinguished the

situation in Moose Lodge from that in Burton on the ground

that, unlike the private restaurant in Burton, the Moose

Lodge was a private club operating on private land and that

the regulation of the Moose Lodge, detailed as it was in

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some particulars, could not be said "to in any way foster or

encourage racial discrimination." Id. at 176-177. In

addition, the court noted that, in spite of the r egulation to

which the State subjected the Moose Lodge, the State could

not be said to be "a partner or even a joint venturer in the

club's enterprise." Id. at 177.

III.

Summary judgment is appropriate only when the r ecord

could not lead a reasonable jury to find for the non-moving

party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242,

248-49 (1986). The court making this determination must

view the evidence in the light most favorable to the non-

movant. See Matsushita Elec. Indus. Co. v. Zenith Radio

Corp., 475 U.S. 574, 587-88 (1986).

Dover Downs attempts to portray its relationship to the

State as one consisting solely of "regulations and revenue."

Such a relationship is generally insufficient to constitute a

symbiotic relationship under Burton. See Jackson v.

Metropolitan Edison Co., 419 U.S. 345, 350 (1974); Hadges

v. Yonkers Racing Corp., 918 F.2d 1079, 1082 (2d Cir.

1990). However, we believe that the r ecord in this case

shows that the affairs of the State and the racetrack were

much more than a regulatory relationship between the

State and a private gambling enterprise. For instance, the

slot machines used by Dover Downs, like the leased

restaurant building in Burton, ar e the property of, or leased

by, the State. Cf. Fulton v. Hecht, 545 F.2d 540, 542-43

(5th Cir. 1977)(finding symbiotic r elationship absent and

emphasizing that private party was not a lessee of state

property). The State maintains control over these slot

machines by directly connecting them to the central

computer system at the State Lottery Office. In addition,

and perhaps most important to the symbiotic r elationship

analysis, Dover Downs is the State's agent in the video

lottery enterprise. Because of this agency r elationship, the

State stands to gain or lose substantial revenue as a result

of business decisions made by Dover Downs.4 The situation

_________________________________________________________________

4. As it turns out, the stakes are quite high. In 1998, slot machines from

Delaware's three video lottery agents br ought $206 million into

Delaware's General Fund.

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here is even more striking than the symbiotic relationship

found in Burton, where the State primarily acted as

landlord to the privately-owned restaurant and had no

direct stake in its financial success beyond its ability to pay

rent.

Dover Downs urges this court to view the video lottery

operation in which, Dover Downs concedes, the State is

heavily involved, as separate from its har ness-racing

activities. It argues that, because the Crissmans were

banned from participating in harness races, this court

should only analyze the State's connection to Dover Downs'

harness racing operation. This argument misses the point

of the symbiotic relationship test,5 which predicates state

action not merely on its participation in the challenged

conduct, but on the overall involvement of the State in the

affairs of the private entity. See Braden v. University of

Pittsburgh, 552 F.2d 948, 958 (3d Cir. 1977)(holding that

symbiotic relationship test does not require that the state

be involved in the challenged action). The purpose behind

the Burton decision was to recognize a state as "a joint

participant in the challenged activity" when it has

"insinuated itself into a position of inter dependence with"

the private actor. Burton, 365 U.S. at 725. When such a

relationship of interdependence exists, aS 1983 plaintiff

need not show state participation in the challenged activity.

See id. at 958.

Moreover, Dover Downs' contention that we should ignore

the State's involvement in the video lottery is not persuasive

because the record reflects that video lottery is inextricably

linked with Dover Downs' harness-racing operation. The

State of Delaware created the video lottery for the express

purpose of providing "assistance in the for m of increased

economic activity and vitality for Delaware's harness and

thoroughbred horse racing industries, which activity and

vitality will . . . cause increased employment." See 29 Del.C.

_________________________________________________________________

5. Dover Downs' argument is more in tune with the "close nexus" test,

articulated by the Supreme Court in Jackson v. Metropolitan Edison Co.,

419 U.S. 345 (1974), which held that, in the absence of a symbiotic

relationship, state action may be found if the state was a participant in

the challenged activity.

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S 4801(b)(1). Under Delaware law, Dover Downs would not

be permitted to operate a video lottery if it did not conduct

harness racing meets. See 29 Del. C.S 4819(a). To

effectuate the stated purpose of the statute, Delaware gives

a portion of the lottery's revenue to Dover Downs to be

applied to harness racing purses "under the direction of the

Delaware Harness Racing Commission." 29 Del. C.

S 4815(b)(3) b.2. Thus, the recipients of harness racing

purses are direct beneficiaries of r evenues derived from the

video lotteries jointly operated by the State and the race

track. Furthermore, Dover Downs also specifically

participates in the revenues generated by the video lottery.

Finally, we note that the State of Delaware is involved in

Dover Downs' harness racing activities. Ther e are many

positions which Dover Downs is not permitted to fill

without State approval. The HRC requir es no fewer than 14

harness racing officials to be licensed 6 and it reserves the

right to designate other positions that requir e licenses.

Although Dover Downs pays and supervises these officials,

HRC rules describe their duties and responsibilities in

detail. Most importantly, HRC rules requir e Dover Downs

not only to abide by, but also to "enfor ce the [Harness

Racing] Act and the rules and orders of the Commission."

(App. at 67)(emphasis added). In Jackson, the Supreme

Court stated that the petitioner's case for state action

would have been stronger if the private actor had

"exercise[d] . . . some power delegated to it by the State

which is traditionally associated with sover eignty." Jackson,

419 U.S. at 352-53. The power to enforce laws is one such

power, the delegation of which converts Dover Downs into

an executive arm of the HRC. Of course, heavy state

regulation alone of a private entity does not necessarily give

rise to a Burton symbiotic relationship. However, the

undisputed facts here show such a deliberate entwining

and interdependence between the State and Dover Downs,

not only in the operation of the State Lottery but also in the

_________________________________________________________________

6. The following individuals must be licensed by the HRC: state steward,

board of judges, racing secretary, paddock judge, horse identifier and

equipment checker, clerk of the course, official starter, official

charter,

official timer, photo finish technician, patrol judge, program director,

State veterinarian, and LASIX veterinarian. (App. at 59).

8

harness racing operations at the track. The State's

concerns in the "economic activity and vitality" of the

racetrack operation is a matter of statutory expr ession. The

overall involvement of the State in the affairs of the race

track is manifest. We reject, ther efore, Dover Downs'

arguments that the State specifically must be involved in

the challenged activity or that the lottery activities can be

insulated from the race track operations.

For all of the reasons discussed above, the Crissmans

have established that a symbiotic relationship exists

between Delaware and Dover Downs. The District Court's

grant of summary judgment for Dover Downs on the state

action issue will therefore be reversed.

IV.

Our inquiry does not end with the state action analysis

because, even if state action is present, the Crissmans

must also demonstrate a triable issue of material fact as to

whether their constitutional right to Due Pr ocess was

violated. We must now consider whether the Crissmans

made such a showing, a question which the District Court

did not address.

In Fitzgerald v. Mountain Laurel Racing , supra, this Court

held that a horse trainer who had been summarily evicted

from the track where he previously raced had made out a

case of deprivation of due process. This court recognized

that "Fitzgerald had a liberty interest in his employment

reputation protected by the Due Pr ocess Clause of the

fourteenth amendment." Id. The court further noted his

liberty interest in earning a livelihood, stating,

Mountain Laurel had officially recognized Fitzgerald's

status as a state licensed trainer and driver by allowing

him to perform these activities at the track. His

summary expulsion significantly altered a`status

previously recognized by state law' and denied him the

opportunity of earning a livelihood. W e, therefore, agree

that Fitzgerald has a cognizable liberty inter est.

Id., quoting Paul v. Davis, 424 U.S. 693, 711 (1976).

9

The facts of this case bear considerable similarity to

those in Fitzgerald. Like Fitzgerald, the Crissmans are and

have been at all relevant times, licensed by the state of

Delaware to train and race horses. Prior to the challenged

expulsion, Dover Downs had recognized that status by

allowing them to race their horses there. Mor eover, the

expulsion "significantly altered a status previously

recognized by state law" by prohibiting them from using

their Delaware racing licenses during the six months each

year when Dover Downs conducts the only harness racing

meets in the state.

Dover Downs argues that it "has not taken any action to

impede Appellants from pursuing their employment at any

other track."7 However, it is not necessary under Fitzgerald

for the Crissmans to prove that they can no longer race

anywhere in order to make out a S 1983 case. Fitzgerald,

like the Crissmans, was only evicted from one track. There

is nothing in the opinion to indicate that he was banned

from racing anywhere or even that he was banned from

racing throughout Pennsylvania. Although the Crissmans

are still free to race their horses at Harrington Raceway and

at tracks in other states, their Delaware racing licenses are

of no use to them for half of every year because of Dover

Downs' summary expulsion.

Dover Downs also disputes whether the Crissmans'

reputations were damaged by their exclusion from the

_________________________________________________________________

7. Dover Downs cites Greene v. McElr oy, 360 U.S. 474 (1959) as support

for the proposition that the denial of an employment opportunity does

not amount to a liberty or property right unless the plaintiff is entirely

deprived of his ability to earn a living in his chosen profession.

However,

Greene erects no such barrier to Due Process claims based on the denial

of employment opportunities. Rather, it mer ely noted that in that case,

the plaintiff 's career had been "seriously affected, if not destroyed" by

the government's action. Id. at 492. It then stated that the right "to

follow a chosen profession free fr om unreasonable governmental

interference comes within the liberty and property concepts of the Fifth

Amendment." Id. at 492. It is consistent with Greene to hold that eviction

from a track in a state where one is licensed to race constitutes an

unreasonable interference with the pursuit of one's chosen profession,

particularly when that track is the only place in the state that one can

practice one's profession from November through April.

10

track. It accurately points out that, in Fitzgerald, a

Pennsylvania Racing Commission Rule requir ed the track to

notify the Commission of all people excluded ther efrom.

Delaware, it seems, has no comparable r egulation. Dover

Downs seizes on this distinction and maintains that, except

to the extent that the Crissmans themselves publicized

their exclusion, their reputations have not been damaged

by this incident. On the other hand, their exclusion in all

probability would be known to the other owners and

trainers of race horses at the Dover Downs track, and those

associated with them. In our view, the Crissmans have

presented sufficient evidence to warrant trial on this issue.

Dover Downs acknowledges that the HRC was notified

orally of the Crissmans' expulsion. Although Dover Downs

tries to downplay the significance of this notification,

Fitzgerald held that the notification of the r elevant

regulatory agency amounts to a deprivation of the

plaintiff 's liberty interest in his employment reputation. See

Fitzgerald, 607 F.2d at 602. Moreover, Charles Lockhart's

deposition reveals that this notification was only given after

an HRC employee asked him whether Mr. Crissman had

been excluded from the track. Apparently, the HRC agent

asked "because he had heard that [Crissman] had been

[excluded]." (App. at 260). This testimony demonstrates that

the expulsion of the Crissmans from Dover Downs has, at

some point, been the subject of conversation in Delaware

harness racing circles. Although it r emains possible that

the Crissmans themselves are primarily r esponsible for the

publicity surrounding their exclusion, we believe, viewing

the evidence in the light most favorable to the Crissmans,

that there is a genuine issue of fact as to whether Dover

Downs' expulsion adversely affected their r eputation.

We conclude that the Crissmans have pr esented a triable

issue of fact as to whether their expulsion fr om Dover

Downs amounted to a deprivation of a liberty inter est

cognizable under S 1983 and an injury to their liberty

interest in employment reputation. The question then

remains whether they received due pr ocess of law. Under

Fitzgerald, a suspended harness racing trainer is entitled,

at the very least, to a reasonably prompt post-suspension

hearing. See Fitzgerald, 607 F.2d at 603. It is undisputed

11

that the Crissmans never received any hearing.

Accordingly, the District Court erred in granting summary

judgment for Dover Downs and we will remand this case for

trial.

V.

Finally, the Crissmans ask this court to reverse the

District Court's denial of their motion for a pr eliminary

injunction. A court ruling on a motion for a pr eliminary

injunction must consider the following four factors:

1) whether the movant has shown a reasonable

probability of success on the merits; 2) whether the

movant will be irreparably injured by denial of the

relief; 3) whether granting preliminary r elief will result

in even greater harm to the nonmoving party; and 4)

whether granting the preliminary relief will be in the

public interest.

Allegheny Energy, Inc. v. DQE, Inc., 171 F.3d 153, 158 (3d

Cir. 1999). We review the denial of a preliminary injunction

only for "an abuse of discretion, a clear error of law, or a

clear mistake on the facts." Id.

In light of our determination that a symbiotic relationship

existed between the State of Delaware and Dover Downs

and based on substantial evidence presented by the

Crissmans that they were denied due process of law, we

believe they had a reasonable chance of succeeding on the

merits.

The other three factors also cut in favor of the

Crissmans. The Crissmans have suffered irreparable harm

due to the denial of the injunction "because the nature of

harness racing is such that no adequate r emedy exists at

law to compensate [them] for losses to income and

reputation sustained from an unlawful suspension."

Fitzgerald, 607 F.3d at 601. Ther e is no evidence that Dover

Downs would be harmed if the Crissmans wer e allowed to

race. Finally, there is no evidence that the public would be

adversely affected if the Crissmans wer e reinstated at Dover

Downs. Thus, the District Court's denial of the Crissmans'

motion for preliminary injunctive relief will be reversed.

12

VI.

Accordingly, for the reasons set forth above, summary

judgment in favor of Dover Downs, Inc. will be r eversed and

the case remanded to the District Court, with directions to

grant plaintiffs' motion for preliminary injunctive relief, and

for such further proceedings as are consistent with this

opinion.

A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

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