MA court orders further scrutiny of regulator’s steps in licensing Wynn

The Massachusetts Supreme Judicial Court has ordered a lower court to examine more closely what it called the “highly unusual” actions of the state’s Gaming Commission around the granting of a licence to Wynn Resorts to operate a casino in the state.


The court’s statement came in response to a lawsuit filed by FBT Everett Realty against the regulator, which began in 2016 and stems from a land deal between FBT Everett and Wynn Resorts.

Wynn and FBT Everrett had agreed a deal that granted Wynn the option to acquire a parcel of land from Everett, on which Wynn intended to develop a casino. However, if Wynn exercised its option, its obligation to make the purchase was still subject to it obtaining a licence for a casino from the Commission.

FBT Everett, however, alleges that the commission “exerted unlawful pressure on Wynn by telling Wynn that it could be awarded a licence only if it renegotiated the option agreement to reduce that purchase price from $75m to $35m”. The $35m figure was based on an appraisal for the land’s “best non-casino use”.

This, according to the complaint, was because the Commission determined that FBT Everett should not receive a “casino-use premium” from the sale of the land. The Commission said Wynn’s licence application may be “jeapordised” if Wynn allowed FBT Everett to receive this premium.

As a result, the business said it incurred $40m worth of damages from the Commission’s actions. In addition, FBT Everett argued, the value of the premium was effectively transferred from itself to Wynn.

FBT Everett therefore sued the Commission, alleging tortious interference with contract and a regulatory taking. This is defined as when regulations limit the use of property to the extent that a landowner is effectively deprived of all economically reasonable use or value of their property.

The case initially began in the Superior Court Department, but was raised to the Supreme Judicial Court. The Superior Court had dismissed the tortious interference claim - which it said did not apply to a public body such as a regulator - as well as the regulatory taking claim, by summary judgement before holding a full case.

The Supreme Judicial Court agreed on the tortious interference claim. However, on regulatory taking, it said the matter could not be decided by summary judgement.

It heard that the Commission “became concerned about, and investigated whether, there were hidden criminal ownership interests in FBT”. Specifically, the regulator had suspicions that  Charles Lightbody, “a convicted felon with apparent connections to organized crime, had a hidden ownership interest in FBT”.

This, it determined, played a major role in its decision to encourage Wynn to bring down the price for the land.

In particular, FBT Everett claims that the Commission’s actions were based mostly on “what they perceived as the FBT principals' lack of candor and obstructiveness” in regard to the investigation, though the regulator denies this.

“Viewing the evidence in the light most favorable to FBT, the commission caused a $40m reduction in the value of FBT's property by coercing action on the part of a third party,” Wynn, the court said. “Given that this represents a more than fifty percent diminution in value, the economic impact of the commission's actions here was substantial.”

In addition, the court noted that the Commission’s actions were “highly unusual”.

“When confronted with the possibility that someone with a criminal background had an undisclosed ownership interest in the parcel of land that a gaming license applicant intended to purchase to develop a casino, the commission did not continue to investigate until it could confidently determine whether there was in fact some undisclosed criminal ownership,” the court noted.

It could not be determined whether the Commission “directed” Wynn to only pay $35m or if it “merely accepted it as a cure to its concerns about undisclosed criminal ownership interests”, the court added.

However, it determined that there was enough reason to suspect regulatory taking that FBT Everett’s lawsuit could not be dismissed by summary judgement.

As a result, it ordered the Superior Court to continue “further proceedings” in order to fully determine whether the Commission committed regulatory taking.

The court decision comes soon after Wynn Resorts founder Steve Wynn became the subject of a lawsuit from the US Department of Justice, alleging he acted as a foreign agent of the Chinese government without registration.

The complaint alleges that between June 2017 and August 2017, Wynn spoke to then-US president Donald Trump and members of his administration regarding a businessman that left China in 2014. Wynn allegedly suggested the individual be removed from the US or have their visa cancelled. They were later changed by corruption by the Chinese authorities.

Steve Wynn stepped down from Wynn Resorts in 2018, following accusations of sexual harrassment which he has consistently denied.