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Firm persuades SJC to revive $40M regulatory taking claim involving Encore casino

Christopher Weld Jr. and Christian G. Kiely persuaded the Massachusetts Supreme Judicial Court to reverse a lower court’s dismissal on summary judgment of their client’s regulatory taking claim involving the site of the Encore casino.

The trial court judge failed to consider all relevant factors required to fully assess a claim for a regulatory taking of real property, the SJC ruled. Because material factual issues remain in dispute the court remanded the case to the trial court for further discovery and resolution.

The firm’s client, FBT Everett Realty, LLC, purchased the Everett, Mass., property in 2009 prior to the legalization in casino gaming in Massachusetts. It eventually agreed to sell the property for $75 million to a casino gaming applicant, Wynn MA, LLC. 

The Massachusetts Gaming Commission – due to its stated concern over suspected hidden criminal ownership interests in the property – conditioned the award of a casino license on Wynn pressuring FBT to accept only $35 million for the property, thereby eliminating the premium the property commanded as a casino site. The lower price was based on an appraisal of the most valuable non-casino use of the property (large-box retail).

The trial court judge denied FBT’s subsequent regulatory taking claim after determining it had no reasonable investment-backed expectation in a casino-use purchase premium because it had purchased the property prior to the legalization of casino gaming in Massachusetts.

The SJC, however, ruled that the trial court judge failed to address two additional essential factors in assessing FBT’s regulatory taking claim – the economic impact of the challenged governmental action and the character of that action.  U.S. Supreme Court precedent requires an assessment of these two factors, the SJC noted.

By effectively coercing Wynn to demand that FBT reduce the purchase price of the property by more than 50 percent ($75 million to $35 million), the Gaming Commission imposed a “substantial” economic impact on FBT, according to the SJC.

The court also observed that the Gaming Commission’s action – conditioning the award of a casino license to Wynn on FBT not receiving a casino-use premium – was “highly unusual.”

“Government-compelled transfers of economic benefits from one private party [FBT] to another [Wynn] in this context raise significant regulatory taking concerns,” the SJC wrote.

The SJC’s ruling is significant because it makes clear that a court evaluating a regulatory taking claim using the multi-factor test established by the Supreme Court in Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978), may not regard the absence of one factor as dispositive, but must instead engage in a weighing and balancing of all factors.