Edson Arneault v. Kevin O'Toole

NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

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No. 12-1972

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EDSON R. ARNEAULT;

GREGORY J. RUBINO;

PASSPORT REALTY, LLC,

Appellants

v.

KEVIN F. O’TOOLE; R. DOUGLAS SHERMAN; E. BARRY CREANY;

PHILIP J. RENDIN; THOMAS J. BRLETIC; GARY TALLENT; DAVID SMITH;

GREGORY C. FAJT; RAYMOND S. ANGELI; JEFFREY W. COY;

JAMES B. GINTY; KENNETH T. MCCABE; GARY A. SOJKA;

KENNETH T. TRUJILLO; SANFORD RIVERS; ROBERT GRIFFIN;

DAVID HUGHES; JAMES V. STANTON; JOHN BITTNER; NARICISO A.

RODRIGUEZ-CAYRO; VINCENT AZZARELLO; MTR GAMING GROUP, INC.;

PRESQUE ISLE DOWNS , INC.; LEONARD G. AMBROSE, III;

NICHOLAS C. SCOTT; SCOTTS BAYFRONT DEVELOPMENT

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Appeal from the United States District Court

for the Western District of Pennsylvania

(D.C. Civil Action No. 1-11-cv-00095)

District Judge: Honorable Sean J. McLaughlin

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Argued January 8, 2013

Before: SCIRICA, AMBRO, and FUENTES, Circuit Judges

(Opinion Filed: February 7, 2013)

Joseph M. Kanfer, Esquire

John F. Mizner, Esquire (Argued)

Mizner Law Firm

201 German Street

Erie, PA 16507

Counsel for Appellants

Lee A. Rosengard, Esquire (Argued)

David E. Somers, Esquire

Andrew K. Stutzman, Esquire

Stradley, Ronon, Stevens & Young

2600 One Commerce Square

2005 Market Street

Philadelphia, PA 19103

John A. Goodman, Esquire (Argued)

Gregory A. Miller, Esquire

Mariah L. Passarelli, Esquire

Buchanan Ingersoll & Rooney

301 Grant Street

One Oxford Centre, 20th Floor

Pittsburgh, PA 15219

Krista K. Beatty, Esquire

Henry F. Siedzikowski, Esquire (Argued)

Frederick P. Santarelli, Esquire

Elliott Greenleaf & Siedlkowski

925 Harvest Drive, Suite 300

Union Meeting Corporate Center V

Blue Bell, PA 19422

John M. Donnelly, Esquire

Levine, Staller, Sklar, Chan, Brodsky & Donnelly

3030 Atlantic Avenue

Atlantic City, NJ 08401

Harry P. Litman, Esquire

Litman Law Firm

One Oxford Centre, 34th Floor

Pittsburgh, PA 15219

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Tina O. Miller, Esquire

Farrell & Reisinger

200 Koppers Building

436 Seventh Avenue

Pittsburgh, PA 15219

Jeanette H. Ho, Esquire

Robert R. Leight, Esquire

William A. Pietragallo, II, Esquire

Peter S. Wolf, Esquire (Argued)

Pietragallo, Gordon, Alfano, Bosick & Raspanti

301 Grant Street

One Oxford Centre, 38th Floor

Pittsburgh, PA 15219

Ronald A. DiNicola, Esquire (Argued)

1001 State Street, Suite 1400

Erie, PA 16501

Counsel for Appellees

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OPINION

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AMBRO, Circuit Judge

Appellants Edson Arneault, Gregory Rubino, and Passport Realty brought this

lawsuit alleging wrongdoing by a variety of government officials and third parties during

the creation and licensing of Presque Isle Downs, a casino in Erie, Pennsylvania. The

District Court dismissed all of Appellants’ federal claims under Federal Rule of Civil

Procedure 12(b)(6) for failure to state a claim, and declined to exercise jurisdiction over

their state-law claims. They challenge the dismissal of three counts and the Court’s

determination that further amendment of their complaint would be futile.

I.

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Because we write only for the parties, and in the shadow of Judge McLaughlin’s

thorough opinion, we recite only those facts necessary to our decision. Arneault is a

gaming executive and the former President and CEO of MTR Gaming Inc. (―MTR‖).

Rubino is a real estate agent and developer, and the owner of several businesses including

Passport Realty.

A. Facts Relating to Rubino’s Claim

When MTR applied to the Pennsylvania Gaming Control Board (―PGCB‖) for a

gaming license, the PGCB required Rubino and his affiliated companies to apply for

gaming licenses because of a 2001 Consulting Agreement between Rubino and MTR that

gave Rubino an interest in MTR’s profits. After contesting the licensing requirement,

Rubino eventually submitted the applications. Faced with a possible delay of MTR’s

gaming license because of Rubino’s applications, MTR and Rubino agreed to a buyout of

the latter’s interests under the Consulting Agreement, and Rubino’s applications were

withdrawn.

After the buyout, the PGCB added a statement of condition—known as SOC 58—

to MTR’s gaming license that prohibited MTR and its subsidiaries from engaging in

business with Rubino or his affiliates. Several attempts to have SOC 58 removed from

MTR’s license ended in 2009 when the PGCB Commissioners voted to hold Rubino’s

request to lift SOC 58 in abeyance until Rubino applied for a gaming license.

B. Facts Relating to Arneault’s Claims

While Arneault was CEO of MTR, he directed MTR’s counsel to lodge several

complaints concerning the PGCB’s investigatory arm, the Bureau of Investigation and

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Enforcement (―BIE‖). When Arneaul later submitted a renewal application for his

personal license, the BIE prepared a May 2008 Report of Investigation recommending his

license renewal be denied (―Report of Investigation‖). Based in part on that Report, the

Office of Enforcement Counsel issued a Notice of Recommendation in January of 2010

also recommending that the PGCB deny Arneault’s application (―Denial

Recommendation‖). At a hearing, Arenault presented evidence in support of his

application, and his license was ultimately renewed. Both documents, however, were

made public prior to the hearing, allegedly harming Arneault’s reputation in the gaming

industry.

II.

We exercise plenary review over a district court’s dismissal under Federal Rule of

Civil Procedure 12(b)(6).1 Byers v. Intuit, Inc., 600 F.3d 286, 291 (3d Cir. 2010).

Although we accept all factual allegations as true and construe the complaint in the light

most favorable to the plaintiff, McTernan v. City of York, 577 F.3d 521, 526 (3d Cir.

2009), ―we are not compelled to accept unsupported conclusions or unwarranted

inferences, or a legal conclusion couched as a factual allegation.‖ Baraka v. McGreevey,

481 F.3d 187, 195 (3d Cir. 2007) (internal quotation marks omitted). In order to survive

a motion to dismiss under Rule 12(b)(6), a plaintiff must plead a ―plausible claim for

relief.‖ Fowler v. UPMC Shadyside, 578 F.3d 203, 210–11 (3d Cir. 2009) (quoting

Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009)).

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The District Court had jurisdiction pursuant to 28 U.S.C. §§ 1331 and 1367. We have

appellate jurisdiction under 28 U.S.C. § 1291.

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III.

Appellants appeal portions of the District Court’s rulings that the actions against

them were retaliatory and that, in Arneault’s case, he was denied procedural due process.

Appellants also argue the Court erred when it dismissed their complaint with prejudice.

A. Arneault’s Retaliation Claim

―In order to plead a retaliation claim under the First Amendment, a plaintiff must

allege: (1) constitutionally protected conduct, (2) retaliatory action . . . , and (3) a causal

link between the constitutionally protected conduct and the retaliatory action.‖ Thomas,

A.W.T., Inc. v. Independence Twp., 436 F.3d 285, 296 (3d Cir. 2006). Arneault asserts

that he engaged in four instances of protected conduct: (1-2) in November of 2006 and

May of 2007, he directed MTR’s counsel to object to two burdensome investigatory

requests made on MTR by BIE agents; (3) in May of 2007 he directed MTR’s counsel to

complain about an interview between BIE agents and a third-party vendor where BIE

agents alleged that Arneault engaged in election law violations and the agents solicited

the vendor to provide false testimony about Arneault; and (4) in January of 2008, he

sought to have SOC 58 removed from MTR’s license. He alleges five adverse actions by

state actors in escalating retaliation for his conduct: (a) the burdensome 2007 document

request; (b) the defamatory statements at the May 2007 interview; (c) the

recommendation in the Report of Investigation; (d) the Denial Recommendation; and (e)

an attempt by the PGCB to impose conditions on his renewed license.

Although we are not persuaded by the District Court’s reasoning that three of

Arneault’s alleged exercises of constitutionally protected activities—(1), (2), and (4)

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above—should be excluded from his claim because they are attributable to MTR as a

corporation and not Arneault individually,2 we agree with the Court’s conclusion that

Arneault has not pled the causational element of a retaliation claim. A causal connection

can be shown by ―either (1) an unusually suggestive temporal proximity between the

protected activity and the alleged retaliatory action, or (2) a pattern of antagonism

coupled with timing to establish a causal link.‖ Lauren W. v. Deflaminis, 480 F.3d 259,

267 (3d Cir. 2007). Alternately, the trier of fact can infer causation based on evidence

gleaned from the record as a whole. Id. Five retaliatory actions, undertaken by several

different defendants over the course of four years allegedly in response to complaints

against several different defendants, are not sufficient in this case to satisfy these tests.

B. Arneault’s Procedural Due Process Claim

To state a claim for a procedural due process violation, a plaintiff must allege that

(1) he was deprived of a liberty interest encompassed within the Fourteenth Amendment

and (2) the procedures used did not provide due process of law. Hill v. Borough of

Kutztown, 455 F.3d 225, 234 (3d Cir. 2006). Arneault asserts that his right to procedural

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The First Amendment guarantees ―the right of the people . . . to petition the Government for a

redress of grievances.‖ U.S. Const., amend. I. It is related to the protection afforded to speech,

and ―is an assurance of a particular freedom of expression.‖ McDonald v. Smith, 472 U.S. 479,

482 (1985). ―[T]he right to petition extends to all departments of the Government,‖ including

―administrative agencies,‖ California Motor Trans. Co., v. Trucking Unlimited, 404 U.S. 508,

510 (1972), and encompasses formal and informal complaints, McDonald, 472 U.S. at 484,

about matters of public and private concern. City of Columbia v. Omni Outdoor Adver., Inc., 499

U.S. 365, 379–80 (1991). MTR’s complaints qualify as an exercise of that right. See E. R.R.

Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 137 (1961). Appellees do not

cite, nor can we find, case law supporting the distinction drawn by the District Court between

retaliation against an individual for exercising his rights under the First Amendment or directing

the company of which he is a fiduciary to do so.

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due process was violated when the Report of Investigation and Denial Recommendation

were published without first affording him a hearing.

Loss of reputation is a liberty interest when accompanied by deprivation of some

additional right or interest; this is known as the ―stigma-plus test.‖ Id. at 236. Although

the District Court assumed for the sake of argument that this prong was met, Arneault has

not alleged that publication of the reports cost him an additional right or interest. He did

not lose his gaming license, nor does he allege that he lost any particular job or job

prospect. Instead, he alleges that he lost possible career prospects and that his legal status

changed because he was required to disclose the denial recommendation on future

gaming license applications. These are part of the stigma alleged and not an additional

lost interest or right. Even if Arneault could make out a liberty interest deprivation, he

was able to present his suitability for a gaming license at a hearing, and his license was

ultimately reviewed. Under the balancing inquiry of Mathews v. Eldridge, 424 U.S. 319,

335 (1976), this was sufficient process.

C. Rubino’s Retaliation Claim

Rubino contends that the PGCB Commissioners held his petition for relief from

SOC 58 in abeyance as retaliation for the exercise of his First Amendment rights. The

District Court concluded that the Commissioners were entitled to absolute, quasi-judicial

immunity under our recent holding in Keystone Redevelopment Partners, LLC v. Decker,

631 F.3d 89 (3d Cir. 2011). Quasi-judicial immunity ―attaches to public officials whose

roles are functionally comparable to that of a judge.‖ Id. at 95 (internal quotation marks

omitted); Butz v. Economou, 438 U.S. 478, 513 (1978). In Keystone, we held that the

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PGCB Commissioners enjoyed immunity from suit concerning the grant or denial of

licenses. Although the procedures used with regard to Rubino’s challenge to SOC 58 are

different from those at issue in Keystone, we do not think that the Commissioners here

acted outside of the functional capacity we determined was entitled to quasi-judicial

immunity in that decision.

D. Leave to Amend

Finally, Appellants argue that they should have been given leave to amend their

complaint when the District Court dismissed their claims. Our standard of review is

abuse of discretion. United States v. United Health Grp., 659 F.3d 295, 302 (3d Cir.

2011). Generally, a plaintiff should be allowed to amend a complaint unless doing so

would be inequitable or futile. Alston v. Parker, 363 F.3d 229, 235 (3d Cir. 2004).

Appellants do not explain how amendment would correct any of the deficiencies found

by the Court. Based on the 147-page amended complaint and a thorough briefing on the

motions to dismiss, the District Court determined that amendment would be futile. We

do not think this was an abuse of discretion.

* * * * *

Though we suspect a back story for what occurred in the licensing process,

nothing in the record before us gives reason to overturn Judge McLaughlin’s ultimate

judgment.

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