MEC Files Suit over Rejected Slots Bid

Magna Entertainment Corp. has filed a lawsuit over its rejected bid for a slots license in the state of Maryland, and is asking a state circuit court to grant injunctions stopping the process from going forward until its legal challenges have been resolved.

The 141-page complaint and accompanying documents were filed in Maryland’s Anne Arundel Circuit Court Feb. 12, the same day the seven-member Video Lottery Facility Location Commission rejected MEC’s application bid because it did not include a $28.5-million licensing fee.

MEC, through its Maryland slots subsidiary, Laurel Racing Association, claims in the complaint that the license fee was non-refundable, and therefore unlawful and unconstitutional under state law. Accompanying documents suggest Laurel Racing submitted its application proposal by the Feb. 2 deadline, but withheld its application fee until “certain challenges and protests” were heard.

“(Laurel Racing) was correct in not submitting its initial license fee with its proposal because the payment of the ... fee could be viewed as waiving LRA's right to fair resolution of its protest, or acquiescing to an unlawful condition,” the complaint alleges.

Laurel Racing contends the state’s request for proposal “failed to provide clear, reasonable, and enforceable provisions of the initial license fee,” claiming “after good faith efforts, (the licensee) may be unable to obtain all proper zoning and permits, and thus, be denied a license.”

The complaint seeks a temporary restraining order to “maintain the status quo and enjoining the Location Commission from voting to disqualify LRA for not including the unconstitutional initial license fee,” and asks for temporary and permanent injunctions barring further state action in the licensing process until the complaint’s request for declaratory judgment is resolved.

A Feb. 26 hearing is scheduled in Anne Arundel Circuit Court. Other defendants named in the lawsuit are the Maryland State Lottery Commission and the State Lottery Agency.

Laurel Racing claims an escrow account set up by the state to hold the application fee is unconstitutional. Instead, the applicant deposited the funds in a separate escrow account established with PNC Bank, according to court documents.

William Ford, the secretary for both Laurel Racing and MEC, in a filed court affidavit said the initial fee was not included because of questions about refund issues. Ford said he asked the Video Lottery Facility Commission in a questionnaire if the fee could be refunded if zoning and/or permitting issues blocked development of a slots facility.

Ford claims the response from the commission said, at its “discretion,” the panel would “consider such a request under extraordinary circumstances.” Ford claims that after reviewing pertinent Maryland law, he could not determine “what facts or events” would constitute “extraordinary circumstances.”

“When an applicant submits a good faith proposal to do business with the state, it ought not to be required to guess as to whether its multi-million dollar earnest money will be refunded or forfeited,” the complaint said.

The Video Lottery Facility Commission rejected two of six total bids for five slot machine licenses Feb. 12, the same day the lawsuit was filed. The other rejected bid was by New York-based Empire Resorts, which also did not include the application fee. Empire Resorts is asking to put slot machines at Rocky Gap State Park in western Maryland.

According to the Associated Press, the commission made its decision based on the assessment of Robert Howells, the procurement officer for the Maryland Lottery Agency, and Bonnie Kirkland, a Maryland assistant attorney general, who concluded state law did not appear to allow for bid consideration without licensing fees.

"Therefore, it's our view that this was intended to be mandatory, and the commission does not have the discretion to waive it or modify that very clear mandatory provision in the statute that was passed by the legislature," Kirkland said in the Associated Press article.