are projected to siphon nearly an additional $1 billion dollars out of the
Massachusetts economy every year. That’s 1 billion dollars that normally is
spent on local businesses, instead spent on casinos whose owners live out of
Now ask yourself these two questions:
1. Where is that $1 billion
dollars a year being spent now?
2. What happens to those businesses and
their employees, once it no longer is?
With these kind of losses to already
established local businesses, they will start laying off employees, or closing
down altogether. Are you ready to lose your job? Are you ready to see a loved
one lose their job? Are you ready to watch your favorite local businesses close
This is the amount of additional money your neighbors will stop
spending at nearby businesses, and start spending at the casinos. All
calculations are based upon the Massachusetts Gaming Commission's own
This is how much money the businesses in YOUR city or town will
lose to the casinos every year.
The Supreme Judicial Court of Massachusetts recently cleared the way for gaming opponents to appeal directly to Massachusetts voters by allowing the measure to repeal the Massachusetts gaming law to be placed on the November 2014 ballot.[i] The initiative, known as Question 3, seeks to repeal the expanded gaming law by prohibiting the Massachusetts Gaming Commission from issuing any additional gaming or slots parlor licenses and prohibiting any casino or slots parlor that already has received a license from operating.
Both sides of the issue are committed to achieving victory with the voters on November 4, 2014.
Obviously, the companies that already have succeeded in securing licenses under the 2011 gaming law—Penn National Gaming, MGM Resorts and Wynn—are keen on protecting their investment, which already has cost them a great deal of money: license fees alone cost tens of millions of dollars, not including application fees and other expenses incurred in contemplation of opening a casino or slots parlor (e.g., site permits, professional consulting services).
So what happens if the repeal effort succeeds, however unlikely its chances may seem now? In particular, what will that mean for the companies that planned to open casino and slot gaming establishments in Massachusetts and the various counterparties (including the Commonwealth and the communities that were supposed to host them)? What will happen to the money that the winning licensees have already paid or still are due to pay to these parties, with the expectation of operating facilities that the voters may very well decide to outlaw? This article seeks to answer these questions and to explore what options may be available to would-be casino and slots parlor operators and their owners in the (perhaps unlikely) event that the Massachusetts gaming repeal effort carries the day on November 4th.
Opening a gaming establishment in Massachusetts is an extremely expensive proposition. In addition to paying a nonrefundable minimum $400,000 application fee to the Massachusetts Gaming Commission,[ii] a successful applicant also must pay a substantial license fee: $85 million for a casino license and $25 million for a slots parlor license.[iii] And of course, additional expenses are necessary to open and operate any planned casino or slots parlor as well: in addition to construction costs, local zoning and other permits must be obtained—a process which requires significant sums to be spent, years before ground-breaking, on expert consultants to address aesthetic, noise, traffic, environmental, and other issues. Additionally, applicants are required to obtain agreements with host or surrounding communities.[iv] These agreements are required to include “community impact fees” which are intended to compensate those communities for adverse impacts the development and operation of the casino may introduce (e.g., traffic, noise, public safety).[v]
Thus far, the single slots parlor license and two out of three casino licenses have been awarded. Subject to the outcome of the election, the Southeastern Massachusetts commercial casino license is expected to be awarded in August 2015.[vi]
Remedies and Defenses Available to Gaming Companies
To date, only Penn has paid the statutorily required license fee of $25 million for its slots parlor license. [vii] The Commission allowed MGM and Wynn to delay paying the $85 million casino license fee for their respective casino licenses.[viii] But there is little doubt that all applicants have already expended large sums of money hiring private counterparties, including professional consultants to support their applications for local zoning and other site approvals. And as already discussed, they also have negotiated contracts with other private parties, including host and surrounding communities, which contemplate future payments, all in anticipation that the planned gaming establishments will soon open for business and that the rising tide of these establishments’ profits will lift all boats. If that assumption is in jeopardy, what is to become of these agreements? And who will potentially be left holding the bag? The answers to these questions are found in Massachusetts’s law of contracts and unjust enrichment, construed against the reasonable expectations created by the gaming law’s statutory scheme, and they depend on the type of payment at issue, and the identity of the person to whom it is owed.
Against the Commonwealth.
It is quite clear that, no matter what happens, applicants will not be able to recover any application fees they have paid, which the statute expressly makes nonrefundable.[ix] The Supreme Judicial Court’s decision in Abdow expressly holds that the statute’s clear language precludes the existence of any “implied contractual right [against the Commonwealth] to a final determination” of one’s application.[x] The reason is simple: the statute makes clear that the application fee is nonrefundable, even if the application ultimately is denied. So the applicant cannot have any reasonable expectation of ever getting its application fee back. The same logic precludes an unjust enrichment claim as well as a contract claim.[xi]
Whether the license fee that Penn has paid could be recovered is a much closer question. The Supreme Judicial Court left that issue open in Abdow, noting that while the Commission’s regulations had initially declared that such fees are nonrefundable, a later amendment eliminated the key language, rendering the regulations now silent on the issue.[xii] Thus, there may be a plausible argument that the license fee should be recoverable via an unjust enrichment claim (if not on a contract theory), because the applicant’s reasonable expectation was that the fee would be paid in exchange for being allowed to operate a slots parlor; should the voters frustrate that expectation in November. The argument is that the applicant should be allowed to recover the benefit it conferred on the Commonwealth, now that the reason for paying the money has been destroyed.[xiii] Denying recovery would allow the Commonwealth an improper windfall of tens of millions of dollars.[xiv]
On the other hand, the Commonwealth has a response: the applicant reasonably should have anticipated the possibility that the gaming law would be repealed, destroying the value of the applicant’s investment, so the applicant should have reasonably expected that it might ultimately wind up with less than it hoped (or nothing at all) in exchange for the license fee. Indeed, the Abdow Court expressly noted that “the possibility of abolition is one of the many foreseeable risks that casinos, slots parlors, and their investors take when they choose to apply for a license and invest in a casino or slots parlor.”[xv] And the equities arguably do not weigh that strongly in Penn’s favor here. Although the Commission’s regulations now are silent as to whether the license fee is refundable because of an emergency amendment that became effective only days before Penn was awarded its license,[xvi] the prior version of the regulations, which were in effect during much of the time that Penn’s application was pending, made the license fee nonrefundable.[xvii]
Against Private Counterparties.
With respect to private counterparties, who either have already been paid or expect to be paid substantial amounts of money in exchange for professional services, mostly in connection with site-specific studies needed to support various zoning and other regulatory approvals, the analysis proceeds along similar lines. In the event the repeal effort succeeds, whether would-be casino operators can recover money they have already paid, or unwind deals with various counterparties to avoid paying more money, depends on the contents of the contracts and what the parties’ reasonable expectations are vis-à-vis the risk of repeal. Would-be casino operators have a plausible argument that, having paid these sums to others in contemplation of building, and eventually of operating, its casino, they have grounds to unwind these deals and to recover at least some (though probably not all) of what they have paid, as well as avoid paying future amounts that still may be due. The first step is to set aside the bargain it made with the private third parties in question. Massachusetts courts have long recognized that contractual arrangements are subject to avoidance where “an event neither anticipated nor caused by either party, the risk of which was not allocated by the contract, destroys the object or purposes of the contract, thus destroying the value of performance.”[xviii] In such cases, both parties are excused from further performance of the contract and released from their respective contractual obligations.
In avoiding the contract, the key threshold issue is whether the parties to the contract may be said to have allocated the risk of the supervening event—here the risk that Massachusetts voters might repeal the gaming law that made these casino projects possible in the first place. A risk allocation may be explicit in the contract itself, or it could be implicit from the circumstances as a whole. As to the latter possibility, “[t]he question is, given the commercial circumstances in which the parties dealt:
Was the contingency which developed one which the parties could reasonably be thought to have foreseen as a real possibility which could affect performance? Was it one of that variety of risks which the parties were tacitly assigning to the promisor by their failure to provide for it explicitly? If it was, performance will be required. If it could not be so considered, performance is excused.”[xix]
If the casino operators’ contracts with third parties did not explicitly allocate the risk to the operators, there is an argument that they also did not implicitly assume that risk in the circumstances.
On the other hand, while foreseeability is relevant to the issue of risk allocation,[xx] foreseeability of the risk alone is not sufficient.[xxi] And in any event, the question here is whether the risk of repeal was allocated to the casino operators, as between it and its private counterparties. If the casino operators win on the risk allocation point, the third-party contracts should be easily avoided under the other elements needed for frustration of purpose. If successful, the repeal effort will have destroyed the purpose of both the third-party contracts and the value of those contracts to operators, through no fault of theirs. This will mean that the counterparties will not have to do anything beyond what they already have done, and the would-be casino operators likewise will not have to pay anything more than they already have.
The question that then arises is whether the parties are to be left where these supervening circumstances have placed them, or whether the operators may demand rescission of the arrangement altogether and seek a return to the pre-contract status quo. To the extent that the operators have already paid money to their private counterparties under the frustrated third-party contracts, they may recover that money back, via the remedy of rescission, to the extent that the counterparty has not already earned the money through its performance.[xxii] The object of rescission is to restore both parties to the position they occupied before they entered into the contract. But that is not always feasible, particularly where (as here) the performance of one of the parties consists of professional services rendered, which cannot be given back and which may be harder to value than money or property.[xxiii] While rescission is not per se unavailable in such cases, courts do retain significant discretion to deny relief.[xxiv]
Against Host and Surrounding Communities.
If the gaming repeal effort succeeds, it is possible that host and surrounding communities may demand that licensees nonetheless continue to pay the “community impact fees” provided for in their agreements, as the Town of Middleborough demanded of the Mashpee Wampanoag Tribe after the Tribe failed in its efforts to open a tribal gaming facility in that town. Applying the same principles discussed above to these “community impact fees” provisions, it seems unlikely that the casino operators would still be on the hook for those fees if the repeal effort succeeds. The whole purpose behind those fees is to compensate host and surrounding communities for adverse impacts caused by development and operation of the proposed gaming establishment. But if the voters repeal the gaming law, there would be no adverse impacts to compensate. The fees in that event would not serve the purpose that the parties had in mind, but would instead represent only a windfall to the host and surrounding communities, which principles of equity disfavor.[xxv] Accordingly, should the would-be host or surrounding communities seek to enforce the community impact fee provisions as a result of the repeal, the would-be casino operators have a fairly strong argument that the agreements should be avoided, and both sides released from the agreements’ obligations, based on frustration of purpose.[xxvi]
As Massachusetts voters consider whether to ratify or veto the Legislature’s decision to allow casino gambling, the gaming companies should keep in mind what recourse they may have in the event the cards turn out not to be in their favor on Election Day. While these companies obviously have every intention of winning the electoral battle, a number of arguments may be available which might mitigate the potential downside risk in the event that the worst-case scenario—repeal of the Massachusetts gaming law—comes to pass.
[i]See generally Abdow v. Attorney Gen., 468 Mass. 478 (2014).
[ii] Mass. Gen. Laws c. 23K, § 15(11); 205 Code Mass. Regs. § 118.08.
[iii] Mass. Gen. Laws c. 23K, §§ 10(d), 11(b); 205 Code Mass. Regs. § 121.04.
[iv]See Mass. Gen. Laws c. 23K, §§ 2, 15(8) & (9), 17(a).
[xi]See Cmty. Builders, Inc. v. Indian Motocycle Assocs., 44 Mass. App. Ct. 537, 560 (1998) (entitlement to restitution requires the conferral of an “unjust” benefit, “a quality that turns on the reasonable expectations of the parties”).
[xxi]Id. at 378 n.8 (citing W. L.A. Inst. for Cancer Research v. Mayer, 366 F.2d 220, 225 (9th Cir. 1966)).
[xxii]See Restatement (Third) of Restitution and Unjust Enrichment §§ 34, 54 (2011).
[xxiii] The amount that could be recovered would likely be equal to the proportion of the contractual fee that has been paid for the work which corresponds to the portion of the defendant’s performance that remained undone at the time demand for rescission was made. See id. § 34(2)(a). In essence, the amount recoverable is the amount paid, offset by whatever the counterparty is entitled to recover on a quantum meruit theory.
[xxiv]Id. § 54 comment b. See alsoBellefeuille v. Medeiros, 335 Mass. 262, 266 (1957) (allowing rescission even though plaintiff could not return exact property defendant had transferred, but could restore its monetary equivalent).
In a Chelsea neighborhood of steep hills and big dogs, a persistent woman in a Wynn Resorts baseball cap knocked on a dozen doors until she found that elusive election-season prize, an undecided voter.
“Have you thought about the jobs a casino would bring?” asked 66-year-old LouAnne Zawodny, referring to the Wynn casino plan for her hometown of Everett. Some of those jobs would go to Chelsea residents, she suggested to the voter, maybe to residents of this very neighborhood.
Not far away, in Charlestown, resident Dianne Ludy recently heard a very different take on the promises of the casino industry, and whether they could be trusted.
Canvasser Stephen Eisele, a spokesman for the Repeal the Casino Deal campaign, spoke to Ludy about the industry’s expansion into his home state of Missouri.
“They say, ‘Oh, this is going to solve education funding forever,’ ” he said. “My tuition went up every year I was in state school there.”
For underfunded casino opponents who cannot afford a massive advertising campaign, house-to-house canvassing for votes is a necessity. And even with a multimillion dollar TV budget, procasino canvassers have been knocking on doors and hustling for votes.
“The most effective election motivator is still personal contact,” said Jerold Duquette, associate professor of political science at Central Connecticut State University and a Western Massachusetts resident. “We give people credit for taking the time to show up and to talk to us.”
Both sides of the debate have tried to educate voters about the counterintuitive wording of the repeal question.A “yes” vote would block casinos; a “no” vote would allow casinos to open.
Elizabeth Fitzgerald, 26, addressed more than a dozen canvass volunteers at the campaign headquarters of Repeal the Casino Deal recently, to lay down the ground rules for door-to-door campaigning.
Wendy Maeda/Globe Staff
John Rogers (left) and Joseph Catricala took to High Street in Charlestown to talk to residents about supporting Question 3.
Find out where voters stand on Question 3, Fitzgerald told them, but don’t get into arguments.
“I had an 86-year-old woman try to push me down the stairs when we were talking about casinos,” she said. “It can get a little aggressive.”
The theme the anticasino canvassers took to the streets is that the gambling industry cannot be trusted.
“They come in with these beautiful drawings, promises of jobs . . . all these benefits,” said casino opponent Rob Pyles, who said his research into the industry convinced him that the promises just don’t come true.
Pyles, of East Boston, said casino proposals are “very seductive” and he was undecided about the gambling industry for a long time before becoming an opponent. Now, he’s a coordinator for Faith for Repeal, a coalition of Christian, Jewish, and Muslim groups fighting casinos here.
In 2011, state lawmakers legalized up to three resort casinos and one slot parlor in Massachusetts. Casino regulators have so far chosen three winning projects: a $1.6 billion Wynn Resorts proposal for the Mystic River waterfront, an $800 million MGM Resorts proposal for downtown Springfield, and a Plainville slot parlor project by Penn National Gaming. The final license, for Southeastern Massachusetts, is not due to be awarded until next year.
If passed, Question 3 would block all casino development in the state.
Jonathan Wiggs/Globe Staff
Ryan Holmes and LouAnne Zawodny canvassed in Chelsea to encourage voters to oppose the referendum.
Both sides of the debate have tried to educate voters about the counterintuitive wording of the repeal question. A “yes” vote would block casinos; a “no” vote would allow casinos to open.
While Everett residents overwhelmingly supported the Wynn project in a referendum last year, residents of nearby Charlestown have raised concerns about casino traffic coming through Sullivan Square.
Peter Thompson of Charlestown complained to the canvassers that no one lives in the section of Everett where Wynn plans to build the casino, leaving Somerville and Charlestown residents to deal with its drawbacks.
Thompson said he favored repealing the casino law, though he is sympathetic to residents who approved casinos in other communities. “I have no problem with Plainville, Springfield; they should be able to get casinos. The fact that it’s all or nothing, it’s just not right.”
Canvassing against the repeal in Chelsea, Zawodny stuck to the overriding theme of the procasino campaign: jobs. Her backup argument is that the Wynn proposal would clean up a site that has been polluted for years.
“We see all the surrounding communities coming into their own,” Zawodny said, speaking as an Everett resident. “When this thing happened with Wynn, we said that it was finally our time. There is very little here. It gave people hope.”
Chelsea resident Paul Lydon, a 49-year-old pipefitter, told Zawodny that he supports casinos — and opposes repeal — for the sake of casino jobs. Maybe even a job for himself. “Having a second job is always good these days,” he said.
Down the street, Patricia Quatieri told Zawodny she was leaning against casinos in Massachusetts.
Zawodny asked her to consider the benefits of a project that would clean and redevelop the polluted Everett property: “No one has touched that piece of land down there for years.”
Quatieri said a few minutes later that she was “a little bit” persuaded to oppose the repeal, after speaking with Zawodny. “I didn’t know how bad [the land] was over there,” she said.
The dogged canvasser was on her way to the next house.
"If it can happen to me and my girls, it can happen to you and your
family. It's vicious industry. By voting yes on Question 3, you'll protect your
family and your community." In an emotional retelling of the loss of her husband
Scott to gambling addiction, Ohio resident Stacy Stevens encourages
Massachusetts voters to think twice before allowing the predatory nature of
casinos to come into our Commonwealth.
August 13, 2012, Scott Stevens, described as a successful business executive,
husband, and father of three daughters, took his own life in a park he raised
funds to build. He had lost hundreds of thousands of dollars at a casino opened
up across the river in nearby West Virginia.
it's easy to get lost in the statistics; the number of gamblers will rise in
Massachusetts by the tens of thousands and gambling addicts maintain some the
highest rates of suicide. The personal stories of those who struggle are also
important. The predatory tactics of the casino industry have real consequences
for real people.
know the facts are on our side. The empty promises of the casino industry fail
to pan out in state after state, community after community. Please share Stacy's
video, make sure that her voice is heard. We may not have the millions of the
casino bosses, but we have the voices of hundreds of thousands of casino repeal
supporters across the state. Lend yours.
Groton- Plainfield Police Chief Michael Surprenant said his understanding of problem gambling and its connection to crime first "clicked" in the wake of a 2009 bank robbery.
Detectives were working the case without a lead when Mohegan Sun Casino security pulled up surveillance footage of the female suspect. Just 26 minutes after the robbery, and still wearing the same clothes, the woman was captured on video gambling.
Surprenant said it takes between 20 and 25 minutes to reach the casino from Plainfield. The suspect turned out to be a well-regarded 49-year-old New Hampshire middle school teacher wanted in two other robberies.
"The detectives hadn't even started their investigation and she was already gambling away the stolen money," Surprenant said. "This is where I learned a lot about addiction ... problem gamblers."
Surprenant was among a panel of law enforcement officials to discuss the behaviors of pathological gamblers from a law enforcement perspective as part of the annual conference of the Connecticut Council on Problem Gambling. The daylong event was held Wednesday at Mystic Marriott. This year's theme was "Bridging the Gap to Recovery-Community-Prevention-Treatment," and featured treatment providers, prevention specialists and recovering gamblers.
Dr. Kevin McCauley, from the Institute of Addiction Study in Salt Lake City, Utah, delivered the keynote address, "Addiction: A Disease of Decision-Making and Why That's So Controversial."
The law enforcement panel featured Mohegan Tribal Police Chief Jeffrey Hotsky, Mashantucket Pequot Tribal Police Sgt. Andre Parker and retired state police Sgt. Joseph Froehlich, the law enforcement coordinator for the Connecticut Coalition Against Domestic Violence.
All told stories about their experiences with problem gamblers and the addiction's impact on others.
Hotsky, former commander of the eastern division of the statewide narcotics taskforce, recalled a stint with the casino unit in which he encountered a man repeatedly slamming a shoe against his head. The man had gambled away his kids' college tuition and rent money.
"That was an eye opener for me personally," Hotsky said. "Up until then I was dealing with people addicted to narcotics or alcohol."
Parker told a story about a gambler who had forgotten to pick up his children from day care. Police, relatives and the Department of Children and Families were notified and the man was eventually tracked down to one of the casinos, where he had fallen asleep while gambling. He had been at it for two days straight, unaware of how much time had passed.
Parker said the man was steered by tribal police into signing a self-exclusion document which bars him from entering the casino for either five years or life. Both Hotsky and Parker said the self-exclusion option is one tool used to address the greater problem. The man in Parker's story hadn't returned to the casino in more than a decade.
"Someone in law enforcement took that extra step," Parker said.
A person who has signed a self-expulsion document is likely to be warned the first time they are discovered at the casino but face criminal trespassing charges thereafter.
Both casinos prominently display hotlines for problem gamblers.
Problem gambling can also lead to domestic violence, according to Froeh lich, citing studies that show wives of problem gamblers are 10.5 times more likely to be assaulted.
What happens when the problem gambler, who controls the money in the household, is on a losing streak, Froehlich asked. It can lead to financial abuse, emotional and psychological abuse in which spouses are unable to leave because of a lack of resources to go off on their own.
"It does overflow into family violence," he said.
The Connecticut Problem Gambling Helpline is toll-free at (888) 789-7777.
Jobs, jobs, jobs! Economic development! We hear these words shouted at us many times a day. Of course these are major concerns in Rhode Island and throughout the country. But Citizens Concerned About Casino Gambling do not think that the introduction of casino gambling in Newport is a satisfactory response to these concerns. Therefore we oppose statewide Questions 1 and 2.
We believe that true economic development should provide goods and needed services that will benefit the residents. Gambling is a dead-end proposition with no added wealth for the community. One needs only to look at the closing of four casinos in Atlantic City in one month and the lessening of revenue in so many casinos nationwide, including Rhode Island.
CCACG believes that all the energy, time and money spent over the last few years in trying to expand a slots parlor into a full-scale casino in Newport could be better spent finding other ways to increase employment.
A good start would be with the North End Master Plan prepared for Newport in 2006. It should be given more attention and action for continued crucial development of the North End and the pursuit of high-quality technical and marine research jobs.
Gaming is an oversaturated industry. It seems that anyone who has ever wanted to try a casino has done so. The market is not expanding. Only the venues meant to cater to a finite number of gamblers is growing, oftentimes to close within a few years and lay off faithful employees.
Eventually, unless the anti-casino vote prevails in Massachusetts and on-line gambling continues to grow, there will be a further loss of gambling revenue for Rhode Island. We think it would be wise to overcome the ever-increasing losses by finding new areas of development in Rhode Island instead of just going blindly to the trough of gambling revenue.
The University of Rhode Island’s new and beautiful School of Pharmacy and the outstanding Oceanographic Institute along with all the possibilities of medical and educational districts in Providence are good signs that we can once again have a growing economy without casinos. Our flourishing tourist industry can also be further expanded without the branding of “casino” hanging over our heads.
Worse, Newport and the other communities in Rhode Island could easily lose control over any casino with the General Assembly legislating exceptions to zoning or alcohol laws as it did with a smoking ban.
Rhode Island has been receiving more revenue from gambling per capita than any other state in the country. The introduction of full casino gambling could even increase the frightening number of problem and addicted gamblers in Rhode Island with the attendant social costs caused by problem gambling, namely embezzlement, theft, bankruptcies, mortgage defaults, divorce and even suicides.
Baylor University Professor Earl L. Grinols, an expert on the costs and benefits of casino gambling, shows that for every dollar of casino revenue gained for the state, there are social costs of three dollars.
Revenue could also drop for Rhode Island if full casino games are allowed at Newport Grand, because the share for the state would only be 16 percent to 18 percent from the table games whereas the state now receives about 61 percent from the Twin River and Newport Grand slot machines. Surely not a winning proposition.
Therefore we encourage all Rhode Islanders to reject Questions 1 and 2 on Nov. 4, so that Rhode Island will not become an even more dangerous predator on its residents, very often on the very people least able to afford gambling losses.
The Rev. Eugene J. McKenna is president of Citizens Concerned About Casino Gambling.