Opposition Brief — Doug Grant, Inc. v. Greate Bay Casino Corp.

Zz | APR 19 2m

No. 00-1502

IN THE

Supreme Court of the United States

DOUG GRANT, INC., et al.,

Petitioners,

v.

GREATE BAY CASINO CORPORATION, et al.,

Respondents.

On PETITION FOR A Writ OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

BRIEF IN OPPOSITION FOR RESPONDENT

GREATE BAY HOTEL AND CASINO, INC.

T/A “SANDS HOTEL & CASINO”

FREDERICK H. KRAUS

Attorney for Respondent

Greate Bay Hotel and Casino, Inc.

t/a “Sands Hotel & Casino”

Sands Hotel & Casino

Indiana Ave. & Brighton Park

Atlantic City, NJ 08401

(609) 441-4517

166454 g

c sce

(R00) 274-3321 © (800) 399-5859

i

STATEMENT PURSUANT TO RULE 29.6

Respondent, Greate Bay Hotel and Casino, Inc.

t/a “Sands Hotel & Casino” (“Sands”), is owned by

GB Holdings, Inc., a Delaware Corporation, which is traded

on the American Stock Exchange (“GBH”). By virtue of a

certain repurchase agreement, American Real Estate Partners, |

L.P., a Delaware Limited Partnership, which is publicly

traded on the New York Stock Exchange, might be

considered to have more than a 10% beneficial interest in

the stock of GBH. In addition, certain high yield investment

funds managed by affiliates of Merrill Lynch may own

collectively more than 10% of the stock of GBH.

il

TABLE OF CONTENTS

Statement Pursuant to Rule Bee soe

Table of Cometh. osses ce ee

Table of Cited Authorities 4.0 kc de ndecedcncve

Reasons for Denying the Writ .................

I. The Court Should Decline The Invitation To

Render An Advisory Opinion On The Section

455 Queeeeh. |. 6635355 eee

II. The Motion Was Meritless. .............

Ill. There Is No Conflict With This Court’s

PreCenemh. .6.kk¥ac cea hee cee en

IV. The Misrepresentations Continue Unabated

FEOUG,. ss ous sc ee a

Conmceiee... .. desks ee

Page

ill

TABLE OF CITED AUTHORITIES

Page

Cases:

Campione v. Adamar, 274 N.J. Super. 63 (Law. Div.

De RE Re Se ne fey Pees ee 3

Campione v. Adamar, 302 N.J. Super. 99 (App. Div.

ELS stan bn da des 5d REEREKTRA TAREE OD 3

Campione v. Adamar, 155 N.J. 245 (1998) ....... 3

Doug Grant Inc. v. New Jersey Casino Control

Commission, Nos. A-3605-98T3, A-999-99T3

(N.J. Super. App. Div., Apri! 16, 2001) ....... 7

Easley v. University of Michigan, 853 F.2d 1351

8 Ee A rrr rrr ere eee ee ee eee 6, 8,9

Health Serv. Acquisition Corp. v. Liljeberg, 796 F.2d

796 (5th Cir. 1986), aff'd, 486 U.S. 847 (1988) ... 9

In re Elsinore License Renewal, 11 N.J.A.R. 382

ee | reper rereer rere reer ia

In re: Elsinore Shore Associates, 102 B.R. 958

I a ee Peer ee eee ee ee 5

Liljeberg v. Health Services Acquisition Corp., 486

es sy San eden ecko ake wet4 oe

Uston v. Resorts Int'l Hotel, Inc., 89 N.J. 163 (1982)

iv

Cited Authorities

Page

Statutes:

ERE ee | eer Perr rey er rt ro ay eS

ee Shs Oe EY 55.4554 4 0 d54 sdb Rees capes 6, g

Boe ef Sere err rere re 3

ee eR > rrr ery eee eT rr ee are 5

eR errr Ere rr rrr r frre re 7

N.J.S.A. 5:12-55 ey PS Eee Te Pee ee eet ee 4

a RE: 66 aR ACAE SAO ERED ee eRe‘ 4

ee Rs ey: ere Seen ree yer 3

IRA SCONE os oa asec 4

es 2 Br ere ery er ree eo 4

Re rer rere eee err ery ee 5, 10

Fi. SO cA sev ise canes enant baas chee 5

FE SPE Pe ere eT eet eee TE Cre TT EP 10

Picks PERO 00s nc ov ienneseasdina ees 7

ee ee eer rere rer ere re ee ee 3

ee ne ee ee

v

Cited Authorities

Page

PEIS.A: S:02- BOO on ck iv cnck densa ata eeeeaws 6

WEILB A. 5:02-306. WORD 8 oe os ees 6

NIS.A:. 3324S 66 cc een mae 6

WLIS.A: DiRRSS 6 i senda eae canes aoe 6

WAG A. StS 6k. chess awe eieee oa es cee 6

ae rer eye eres 6

Rules:

fF Boe By | Berry eres ere 2,8

Fae. CV: POD inca ckcawsenn en exesd ean 2

Pe Pe sk oceae dr Guekekeaseeeass 2

Other Authorities:

ae Sem ek) | a erererer eres 4

TAA. VOCE i ck oes ieicaasateces 4

OO We oe a oo Seer Breen 7

PT AA. SOO ae bs oxo a hod when eee a,

vi

Cited Authorities

Page

Ns. TORS TORRE 66 w0nnbesenseete 7

OD eee! te! rr ee 7

cpa. FROSTED «awed ales enedueneneee 7

31 N.J. Reg. $56 (Feb. 16, 1999) ............... 3

REASONS FOR DENYING THE WRIT

1. Petitioners seek an advisory opinion regarding the

disqualification issue under 28 U.S.C. § 455 (“Section 455”)

because the Third Circuit affirmed the granting of the motion

to dismiss, exercising plenary review. Review of the Section

455 question would not disturb the legal basis for the

judgment of the courts below unless review was expanded

to cover the underlying legal issues of the validity of

countermeasures utilized against blackjack card counters

despite New Jersey Supreme Court and Casino Control

Commission (“CCC”) rulings against the interests of

Petitioners. Note 1, infra.

2. The “emergency” motion for a remand for an

evidentiary hearing on the Section 455 question lacked merit.

3. Neither novel legal issues nor conflicting decisions

are presented because the Third Circuit also concluded that

the “emergency” motion was “without merit.” Pet. App. at

34. Thus, Petitioners are not asking this Court to review a

conflict with Liljeberg v. Health Services Acquisition Corp.,

486 U.S. 847 (1988) or its progeny, but a decision that the

allegations of the “emergency” motion raised no concerns

under Liljeberg.

4. The disposition of the Petitioners to couch “their

arguments in dramatic hyperbole obfuscating the real issues”

and “mischaracteriz[ing] the facts”, which disturbed the

Third Circuit, continues here unabated. Pet. App. at 24.

2

THE COURT SHOULD DECLINE THE

INVITATION TO RENDER AN ADVISORY

OPINION ON THE SECTION 455 QUESTION.

Just before argument in the Third Circuit, Petitioners

filed an “Emergency Motion for Evidentiary Hearing to

Determine Whether the Hon. Joseph E. Irenas Had or Has

an Undisclosed Conflict of Interest or Financial Interest in

the Outcome of the Case” (the “Motion”). The Third Circuit

“considered [the Motion] carefully and [denied it] as ...

without merit” (Pet. App. at 34) and, in exercising plenary

review where no factual issues were decided by the District

Court, agreed with the legal basis for the F.R. Civ. P. 12(b)(6)

dismissal.

Suppose instead that the Third Circuit had remanded for

an evidentiary hearing and that another District Judge had

concluded that Judge Irenas should have recused himself

pursuant to Section 455. Under Liljeberg v. Health Services

Acquisition Corp., 486 U.S. 847 (1988), the next question

for the District Court would have been whether to vacate the

judgment pursuant to F.R. Civ. P. 60(b)(6). 486 U.S. at 863.

In addressing this issue, this Court noted, “there is surely

room for harmless error” (486 U.S. at 862) and that

“Rule 60(b) relief is . . . neither categorically available nor

categorically unavailable for all Section 455 violations.”

486 U.S. at 864. Rule 60(b) relief would be categorically

unavailable here because the Third Circuit determined that

the judgment was correct as a matter of law. Accordingly,

given the legal determination by the Third Circuit, and the

limitation of the Petition to the Section 455 question, the

decision on the merits by the Third Circuit would be

a a a Ree |

3

unaffected by any purely advisory opinion this Court might

render limited to the Section 455 question. !

Il.

THE MOTION WAS MERITLESS.

Turning to the Motion, nearly two years after the decision

by Judge Irenas, Petitioners wrote to Judge Irenas on March

14, 2000, asked if he had performed consulting work for the

CCC or the Division of Gaming Enforcement (“DGE”),

basing the inquiry on an “unconfirmed report” by an

undisclosed individual, and if he or his former firm

1. No reason exists to expand review to include the blackjack

questions. An array of authority has rejected Petitioners’ central

claim (Pet. App. 53) that the use of the shuffle at-will after

any round of play card counter countermeasure authorized by

N.J.A.C. 19:47-2.5(a) violates N.J.S.A. 5:12-115, which prohibits

use of cards that have “been marked . . . or placed in a condition . . .

which tends to ... alter the normal random selection .. .”

The contention is that shuffling after a round of play when the

remaining cards in the deck are favorable to card counters alters the

odds of the game. Pet. App. at 42-43. Petitioners overlook that the

game is how the CCC defines it under the Casino Control Act,

N.J.S.A. 5:12-1 et seq. (the “Act”), which gives the CCC plenary

authority to define and limit the rules of games. N.J.S.A. 5:12-70/(f).

The authorities rejecting that claim originating in Petitioners

“test case” brought by Anthony Campione (Amended Complaint,

Paragraph 447) include the Superior Court, Law Division, Campione

v. Adamar, 274 N.J. Super. 63, 80 (Law. Div. 1993) (branding the

argument “specious”), the Appellate Division, See Campione v.

Adamar, 302 N.J. Super. 99, 113-114 (App. Div. 1997), the Supreme

Court, See Campione v. Adamar, 155 N.J. 245, 250, 256, 259 (1998),

the District Court (Pet. App. 53-54), the Third Circuit (Pet. App.

at 11-25), and the CCC, branding it “absurd”. 31 N.J. Reg. 556

(Feb. 16,-1999); n.4 infra.

4

(the “Firm”) had represented any of the defendants,

mentioning that Petitioners had seen no such information in

his biography in Martindale-Hubble. Motion, Exhibit A.

The question concerning consulting work for the CCC

or DGE was essentially frivolous given the nature of those :

agencies. The CCC has quasi-legislative and quasi-judicial |

jurisdiction under the Act to promulgate regulations and to |

decide all contested matters. N.J.S.A. 5:12-63. Other than 7

the release of certain financial information, virtually all other

information in the possession of the CCC is confidential.

N.J.S.A. 5:12-74(d-e); N.J.A.C. 19:40-4.1 et seg. The CCC

also has its own “Office of General Counsel, which shall

render legal advice to the Chairman and the [CCC and]

represent the Commission in litigation . . .” N.J.A.C. 19:40-

2.1(c)(5)(ii). Similarly, the DGE is vested with the quasi-

executive power to prosecute all violations of the Act before

the CCC (N.J.S.A. 5:12-76), is supervised by a Director,

reporting to the Attorney General (N.J.S.A. 5:12-55), and is

staffed from the Department of Law and Public Safety and

the State Police as determined by the Attorney General. Any

reasonable person would have known it was extremely

remote that the CCC or DGE with plenary legal staff and

confidential documents would have retained Judge Irenas

as a consultant when he was in private practice.

Judge Irenas responded promptly on March 16, 2000,

advising that he had not performed consulting work for the

CCC or DGE or represented either agency or their individual

members. Motion, Exhibit B at 1. Although stating that he

could not say for sure given the size of the Firm,’ Judge

2. By this time, Judge Irenas had been on the bench for nearly

eight years.

Se nr nen

5

Irenas also stated that no member of the Firm represented

either the CCC or DGE or their members other than one

member of the CCC approximately 20 years earlier. Jd.

Finally, Judge Irenas stated that he was unaware of any

conflict that had arisen due to his membership in the Firm,

but mentioned that he had represented Playboy Enterprises,

Inc. (“PEI”) before the CCC in connection with the

divestiture of its interest in a casino after PEI had become

unlicensable. Jd. at 1-2.°

The Motion also included letters dated May 5 and 10,

2000 between a Ken Wiseman and a partner at the Firm.

Motion, Exhibits E-F. The subject matter was the possible

representation by the Firm of Wiseman’s business

in obtaining a license to conduct business with casinos.

An entity providing goods or services to a casino is a casino

service industry (N.J.S.A. 5:12-12) (“CSI”) subject to

licensing pursuant to N.J.S.A. 5:12-92 in contrast to casinos,

whose license requirements are set forth at N.J.S.A. 5:12-

82-88. The partner at the Firm extolled the expertise of the

Firm in an effort to get the work. Inthe first letter, the partner

mentioned prior work for gaming companies to obtain casino

licenses and for several CSI licensees. The second letter was

written in response to a message from Wiseman to provide

further information. The prior casino licensee work was

described as the unsuccessful efforts to obtain licensure for

PEI; the CSI licensing work was described as about one

3. In April 1982, the CCC ordered PEI to divest its interest in

the Playboy Casino and approved the divestiture agreement in

March 1984. Jn re Elsinore License Renewal, 11 N.J.A.R. 382, 396

(CCC, April 14, 1986). The casino, renamed the “Atlantis”, was

ordered closed by the CCC in May 1989 and shortly thereafter

the principal assets of the bankruptcy estate were sold to a third

party. /n re: Elsinore Shore Associates, 102 B.R. 958, 960 n.3

(D.N.J. 1989).

6

a year; and work “on several occasions” for lenders to

casino licensees was mentioned. Motion, Exhibit F at 1-2.

This correspondence including the unsuccessful efforts for

PEI was consistent with Judge Irenas’ letter of March 16,

2000 and presented no basis for disqualification because no

person with whom Judge Irenas previously practiced law

“served during such association as a lawyer concerning the

matter” in controversy. Section 455(b)(5); Easley v.

University of Michigan, 853 F.2d 1351, 1358 n.5 (6th Cir.

1988) (in matter concerning law school, patently insufficient

that judge’s sons were member of judge’s former firm whose

clients included University of Michigan Hospital).

Bond work performed on behalf of the Casino

Reinvestment Development Authority (“CRDA”’) was also

identified in the Firm resume on Public Finance attached to

the Motion as Exhibit G. Casinos pay an 8% gross revenue

tax to the CCC (N.J.S.A. 5:12-144(a)), which is dedicated

to certain programs for the benefit of senior citizens and the

disabled. N.J.S.A. 5:12-145. Quarterly deposits of 1.5% of

gross revenues are made to the State Treasurer for the benefit

of the CRDA (N.J.S.A. 5:12-144.1(a)(2)), a separate

administrative agency (N.J.S.A. 5:12-153), whose purpose

is sponsoring redevelopment projects with that revenue

stream (N.J.S.A. 5:12-160), and which takes the funds on

deposit and issues its bonds to casino licensees in return.

N.J.S.A. 5:12-162. Thus, the bond work for the CRDA put

the Firm on the other side of the table from casinos.

The Motion also included the Financial Disclosure form

for Judge Irenas for 1997 as Exhibit H. That disclosure was

unremarkable, listed holdings of certain New Jersey State

and Municipal Bonds at 2-4 and explained at 5-6 that a

KEOGH Retirement Plan had been maintained on his behalf

7

by the Firm, but that upon his withdrawal from the Firm his

interest in the Plan was segregated into a separate account

managed by Judge Irenas until 1996 when the account was

required to be deposited and managed by funds offered by

Fidelity Investments. -

Petitioners also mentioned in their Brief in Support of

the Motion at 7-8 and repeat here (Pet. at 7-8) that Judge

Irenas’ blackjack playing prior to becoming a judge may have

been a source of extra-judicial knowledge regarding the case.

That Judge Irenas played blackjack prior to becoming a judge

meant only that he might have been more familiar with New

Jersey law than another judge. “It is no exaggeration to state

that the Commission’s regulation of blackjack is more

extensive than the entire administrative regulation of many

industries.” Uston v. Resorts Int'l Hotel, Inc., 89 N.J. 163,

169 (1982); N.J.A.C. 19:47-2.1-2.22. As stated by Judge

Irenas at Pet. App. at 81, the rules require the dealer to take

a hit at 16 and hold at 17. N.J.A.C. 19:47-2.12(b).* In sum,

the reasons the Third Circuit denied the Motion are apparent.

4. The contention that Respondents violated the Act by not

providing Petitioners with complimentaries is a frivolous assertion,

requiring only logic to reject. Pet. at 7; Pet. App. at 25,44,64. Given to

induce play, complimentaries are items or services provided free or at

a reduced cost (N.J.S.A. 5:12-14a) such as rooms, food and beverages.

N.J.S.A. 5:12-102(m). Respondents had no interest in inducing the play

of these admitted card counters. Pet. App. 38-39. Here, the regulations

of the CCC authorized the Respondents to engage in counter-measures

to discourage their play. N.J.A.C. 19:47-2.5(a) (shuffle at-will after

any round of play); N.J.A.C. 19:47-2.14 (discretion to limit player

to one betting spot); N.J.A.C. 19:47-8.2(b) (discretion to limit a

card counter to the posted table limit and let others bet above the

limit); Doug Grant Inc. v. New Jersey Casino Control Commission,

Nos. A-3605-98T3, A-999-99T3 (N.J. Super. App. Div., April 16, 2001)

(no basis for challenge to these regulations).

8

Il.

THERE IS NO CONFLICT WITH THIS

COURT’S PRECEDENTS.

Liljeberg v. Health Services Acquisition Corp.,

486 U.S. 847 (1988) is procedurally and factually distinct.

Procedurally, the District Court tried the case without a

jury. /d. at 850. Here, only legal issues were presented on a

F.R. Civ. P. 12(b)(6) motion over which the Third Circuit

exercised plenary review. Factually, the Respondent learned

10 months after the original judgment had been affirmed that

the District Judge had been a member of the Board of

Trustees of a university, which was interested in the outcome

of the case. 486 U.S. at 850. Here, the Third Circuit found

the Motion “without merit.”

Easley v. University of Michigan, 853 F.2d 1351

(6th Cir. 1988) supports the legal result reached here and

differs markedly on the facts. First, as noted above, the work

revealed in the Firm’s letters would not warrant

disqualification of Judge Irenas based on Section 455 or

Easley. Disqualification would have been required only if

the lawyer with whom Judge Irenas “previously practiced

law served during such association as a lawyer concerning

the matter” in controversy. Section 455(b)(5); Easley, 853

F.2d at 1358 n.5. No such prior associations were

demonstrated here. Second, although some claims were

dismissed by the District Court on motion, the District Court

conducted a bench trial prior to dismissing plaintiff's

equitable claims. /d. at 1354-55. Also, unlike here where

the Motion was found to be “without merit”, the Judge in

Easley was a member of the law school defendant’s

“Committee of Visitors”, which the Court found “most

9

potentially troublesome”. /d. at 1357. Under these facts, the

Court determined that the fact that the legal decision “might”

be legally correct would not moot the matter. /d.; Accord

Health Serv. Acquisition Corp. v. Liljeberg, 796 F.2d 796,

801 (Sth Cir. 1986), aff'd, 486 U.S. 847 (1988) (appearance

of impropriety not lessened by fact litigation would have

come out the same anyway). Here, there was no legal doubt

expressed by the Third Circuit, the state courts or the CCC

in rejecting the core claim regarding shuffling at will.

IV.

THE MISREPRESENTATIONS CONTINUE

UNABATED HERE.

The Petition should also be denied due to factual

misrepresentations. The misrepresentations begin with the

“Question Presented” and in the statement of “Constitutional

and Statutory Provisions”. There were neither “serious

conflicts” that “only became known during the pendency of

an appeal ...” nor a “conflict of interest arising from the

prior representation of defendants . . .” No such record was

presented to the Third Circuit, which found the Motion

“without merit” and that Petitioners had otherwise engaged

in “dramatic hyperbole” and “mischaracterized the facts.”

Pet. App. 24, 34. Second; the letters from the Firm did not

contradict Judge Irenas and did not reveal that the Firm was

engaged in a “wide range of casino related issues”. Pet. at 3.

Petitioners inquired whether Judge Irenas had represented

the Respondents or performed consulting work for the CCC

or DGE. Judge Irenas responded in the negative and

mentioned old work related to the defunct Playboy Casino.

Motion, Exh. A,B. Petitioners know that the Firm’s prior

work on behalf of PEI, one case a year on behalf of CSI

10

applicants or work on behalf of lenders neither pertained to

this case nor could be described as wide ranging. Third, trying

to link their case to non-existent casino licensing advice given

by the Firm, Petitioners state (Pet. at 5) that their complaint

alleged violations of “Section 99” and refer to the record at

Pet. App. 14a, 48a. Here were two misrepresentations.

N.J.S.A. 5:12-99 requires certain internal controis regarding

casino operations to be submitted to the CCC for approval.

This prior approval requirement for internal controls is

world’s apart from the licensing requirements set forth at

N.J.S.A. 5:12-82-88, but sounds good coupled with a false

insinuation that the Firm provided casino licensing advice

to the Respondents. The citation to the record also misleads

because the reference is to a conclusion that Respondents

had implemented a countermeasure through approved

internal controls. Fourth, despite Petitioners’ contention

(Pet. at 8), Judge Irenas’ disclosure that he had played

#lackjack had nothing to do with the receipt of the Firm’s

letters. That advice was provided by Judge Irenas in April

1998 (Pet. App. at 81) and was unrelated to the type of work

performed by the Firm. This is by no means an exhaustive

list, but is enough to show that the pattern recognized by the

Third Circuit (Pet. App. at 24) continues here.

11

CONCLUSION

For the foregoing reasons, the Sands respectfully

requests that this Honorable Court deny the Petition.

Respectfully submitted,

FREDERICK H. KRAus

Attorney for Respondent

Greate Bay Hotel and Casino, Inc.

t/a “Sands Hotel & Casino”’

Sands Hotel & Casino

Indiana Ave. & Brighton Park

Atlantic City, NJ 08401

(609) 441-4517