Community Action Agency of Siouxland v. Belle of Sioux City, L P et al
ORDER denying 10 Motion to Dismiss by Defendant Belle of Sioux City, L P. Signed by Judge Linda R Reade on 04/18/2017. (jjh)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF IOWA
COMMUNITY ACTION AGENCY OF
BELLE OF SIOUX CITY, L.P. and
IOWA GAMING COMPANY, LLC,
TABLE OF CONTENTS
INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RELEVANT PROCEDURAL HISTORY. . . . . . . . . . . . . . . . . . . . . . . . . 2
SUBJECT MATTER JURISDICTION. . . . . . . . . . . . . . . . . . . . . . . . . . 2
RELEVANT FACTUAL BACKGROUND.. . . . . . . . . . . . . . . . . . . . . . . 3
ANALYSIS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Parties.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Overview of the Dispute. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Standard of Review. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Unjust Enrichment Claim. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Enriched by a benefit. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Community Actions’s expense. . . . . . . . . . . . . . . . . . . . . . 10
CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
The matter before the court is Defendants Belle of Sioux City (“Belle”) and Iowa
Gaming Company’s (“Iowa Gaming”) (collectively, “Defendants”) “Motion to Dismiss”
(“Motion”) (docket no. 10).
II. RELEVANT PROCEDURAL HISTORY
On November 30, 2016, Plaintiff Community Action Agency of Siouxland
(“Community Action”) filed a Petition (docket no. 3) in the Iowa District Court for
Woodbury County. On December 27, 2016, the matter was removed, bringing the case
before the court.
See Notice of Removal (docket no. 1).
On January 25, 2017,
Defendants filed the Motion. On February 15, 2017, Community Action filed a Resistance
to the Motion (“Resistance”) (docket no. 13). On March 3, 2017, Defendants filed a
Reply (“Reply”) (docket no. 16). Defendants request oral argument, but the court finds
that oral argument is unnecessary. The matter is fully submitted and ready for decision.
III. SUBJECT MATTER JURISDICTION
Community Action is an Iowa non-profit corporation organized and existing under
the laws of the State of Iowa with its principal place of business in Woodbury County,
Iowa. Petition ¶ 1. A corporation is “deemed to be a citizen of every State . . . by which
it has been incorporated and of the State . . . where it has its principal place of business.”
28 U.S.C. § 1332(c)(1). Therefore, Community Action is a citizen of Iowa.
Iowa Gaming is a limited liability company. Notice of Removal ¶ 13. “An LLC’s
citizenship, for purposes of diversity jurisdiction, is the citizenship of each of its
members.” OnePoint Sols., LLC v. Borchert, 486 F.3d 342, 346 (8th Cir. 2007). Iowa
Gaming’s “sole member is CRC Holdings, Inc.,” which “is a Florida corporation with its
principal place of business in Pennsylvania.” Notice of Removal ¶¶ 12-13. Therefore,
Iowa Gaming is a citizen of Florida and Pennsylvania.
Belle is a limited partnership with two partners: CRC Holdings, Inc. and Iowa
Gaming. Id. ¶ 14. “In determining diversity of citizenship, the citizenship of each limited
partner must be considered.” Weltman v. Silna, 879 F.2d 425, 427 (8th Cir. 1989).
Because Belle’s citizenship is based upon the citizenship of its two partners, it is a citizen
of Florida and Pennsylvania.
Accordingly, the court has diversity jurisdiction over the claims because complete
diversity exists between the parties and the amount in controversy exceeds $75,000. See
Notice of Removal ¶¶ 8-10, 15; see also 28 U.S.C. § 1332(a)(1) (“The district courts shall
have original jurisdiction of all civil action where the matter in controversy exceeds the
sum or value of $75,000 . . . and is between . . . citizens of different States . . . .”).
IV. RELEVANT FACTUAL BACKGROUND
Accepting all factual allegations in the Petition as true and drawing all reasonable
inferences in favor of Community Action, the relevant facts are as follows:
Community Action is an Iowa non-profit corporation organized and existing under
the laws of the Sate of Iowa with its principal place of business in Woodbury County,
Iowa. Petition ¶ 1. Belle is a limited partnership and is a citizen of Pennsylvania and
Florida. Notice of Removal ¶ 9. Iowa Gaming is a limited liability corporation and is a
citizen of Pennsylvania and Florida. Id. ¶ 10. Defendants are partners that at all times
material hereto were doing business as Argosy Casino Sioux City. Petition ¶ 2-3.
B. Overview of the Dispute
The “Missouri River Historical Development, Inc.” (“MRHD”), an Iowa nonprofit corporation, is licensed by the “Iowa Racing and Gaming Commission” (“IRGC”)
to conduct gaming in Woodbury County. Id. ¶ 4; see also Iowa Code § 99F.5(1) (“A
qualified sponsoring organization may apply to the commission for a license to conduct
gambling games on an excursion gambling boat or gambling structure as provided in this
chapter.”). At all times material hereto, Belle “was the owner and operator of the Argosy
Casino Sioux City.” Petition ¶ 2; see also Iowa Code § 99F.4(2) (granting the IRGC
power “to license the operators of excursion gambling boats”). MRHD acted as the
qualified sponsoring organization (“QSO”) in an operating agreement with Belle permitting
Belle’s operation of the Argosy Casino Sioux City. Petition ¶ 4.
A QSO is a “nonprofit corporation organized under the laws of [Iowa].” Iowa
Code § 99F.1(21). “A [QSO] may apply to the [IRGC] for a license to conduct gambling
games . . . .” Iowa Code § 99F.5(1). “Once licensed, the QSO may operate the gambling
games itself or it may contract with another person or entity to operate the games.” Belle
of Sioux City, L.P. v. Iowa Racing & Gaming Comm’n, 883 N.W.2d 536, 2016 WL
1129935, at *1 (Iowa Ct. App. 2016) (unpublished table decision) (citing Iowa Admin.
Code r. 491-1.5(1)). Thus, the Iowa Code permits two different scenarios: (1) a QSO
both conducts and operates gambling and (2) a QSO is licensed to conduct gambling and,
pursuant to an operating agreement, partners with an operator. See Iowa Code § 99F.1(2)
(differentiating between a “person . . . applying for a license to operate an excursion
gambling boat” and “the officers and members of the board of directors of a [QSO] . . .
applying for a license to conduct gambling games”).
Under the first scenario, that is, where a QSO is “licensed to operate gambling
games . . . [it] [must] distribute the receipts of all gambling games, less reasonable
expenses . . . as winnings to players . . . or shall distribute the receipts for educational,
civic, public, charitable, patriotic, or religious uses.” Iowa Code § 99F.6(4)(a)(2). Under
the second scenario, that is, where a QSO contracts with another person or entity to
operate the games, the operating agreement “[must] provide for a minimum distribution
by the [QSO] for educational, civil, public, charitable, patriotic or religious uses . . . that
averages at least [3%] of the adjusted gross receipts for each license year.” Iowa Code
§ 99F.5(1); see also Iowa Code § 99F.6(4)(a)(2) (“[A] licensee to conduct gambling games
. . . shall, unless an operating agreement . . . otherwise provides, distribute at least [3%]
of the adjusted gross receipts for each license year for education, civic, public, charitable,
patriotic, or religious uses . . . .”). “The operating agreement must be approved by the
IRGC, and the operator must also be licensed by the IRGC.” Belle of Sioux City, 2016
WL 1129935, at *1 (internal citation omitted) (citing Iowa Code §§ 99F.7(3), 99F.5(1)).
The operating agreement between Belle and MRHD expired on July 6, 2012.
Petition ¶ 4. Despite the expiration of the agreement, Belle continued to operate the
Argosy Casino Sioux City until July 30, 2014. Id. ¶ 5. Because of the expiration of the
operating agreement, Belle did not have a license to operate the casino from July 6, 2012
through July 30, 2014. See id. ¶ 4; see also Belle of Sioux City, 2016 WL 1129935, at *8.
At all times “[p]rior to April 1, 2013,” MRHD received monthly distributions from Belle
representing [3%] . . . of Belle’s adjusted gross receipts” pursuant to Iowa Code
§§ 99F.5(1) and 99F.6(4)(a)(2). Petition ¶ 6. Belle continued to make payments for eight
months in the absence of an operating agreement. Compare id. ¶ 4, with id. ¶ 6. After
April 1, 2013, Belle stopped making distributions. From April 1, 2013 until the Argosy
Casino Sioux City ceased operation on July 30, 2014, Belle made over $64 million in gross
receipts. Id. ¶ 15. Three percent of these receipts amounts to approximately $1.9 million.
Community Action filed the instant action alleging that Defendants were unjustly
enriched because they failed to remit 3% of their gross receipts to MRHD, which would
in turn distribute such receipts to educational, civic, public, charitable, patriotic or
religious uses during the time period at issue.
A. Standard of Review
The Federal Rules of Civil Procedure provide for the dismissal of a complaint for
“failure to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6).
When analyzing a Rule 12(b)(6) motion, the court must accept all of the factual allegations
in the complaint as true. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). To survive a
motion to dismiss under Rule 12(b)(6) “a complaint must contain sufficient factual matter
. . . to ‘state a claim to relief that is plausible on its face.’” Id. (quoting Bell Atl. Corp.
v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff
pleads factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Varga v. U.S. Bank Nat. Ass’n, 764 F.3d
833, 838-39 (8th Cir. 2014) (quoting Iqbal, 556 U.S. at 678). This standard requires a
complaint to “contain factual allegations sufficient ‘to raise a right to relief above the
speculative level.’” Parkhurst v. Tabor, 569 F.3d 861, 865 (8th Cir. 2009) (quoting
Twombly, 550 U.S. at 555).
Although a plaintiff need not provide “detailed” facts in support of his or her
allegations, the “short and plain statement” requirement of Federal Rule of Civil Procedure
8(a)(2) “demands more than an unadorned, the-defendant-unlawfully-harmed-me
accusation.” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555); see also
Erickson v. Pardus, 551 U.S. 89, 93 (2007) (“Specific facts are not necessary [under Rule
8(a)(2)].”). “A pleading that offers ‘labels and conclusions’ or ‘a formulaic recitation of
the elements of a cause of action will not do.’” Iqbal, 556 U.S. at 678 (quoting Twombly,
550 U.S. at 555). “Where the allegations show on the face of the complaint [that] there
is some insuperable bar to relief, dismissal under Rule 12(b)(6) is appropriate.” Benton
v. Merrill Lynch & Co., 524 F.3d 866, 870 (8th Cir. 2008) (citing Parnes v. Gateway
2000, Inc., 122 F.3d 539, 546 (8th Cir. 1997)).
B. Unjust Enrichment Claim
Defendants argue that Community Action has failed to state a claim for unjust
enrichment because it “does not allege that Belle received a benefit” by retaining the 3%
of its gross receipts to which Community Action asserts Defendants were not entitled.
Brief in Support of Motion (docket no. 10-1) at 5. Specifically, Defendants contend that
Community Action “identifies no legally plausible basis through which Belle was obligated
. . . to ‘remit monthly 3% payments to charity.’” Id. (quoting Petition ¶ 20). Defendants
argue that Iowa Code § 99F.5(1) is inapplicable because “Belle did not have an operating
agreement during the period at issue” and “[Iowa Code] § 99F.6(4)(a)(2) is not applicable
. . . because it applies only to a QSO.” Id. Defendants also claim that “there is no
plausible basis by which . . . [Community Action] can show that [Defendants were]
enriched ‘at . . . [Community Action]’s expense.’” Id. at 6.
Community Action asserts that for two years Belle operated “the Argosy Casino
without an operating agreement or valid license” and for sixteen of those months “Belle
failed to remit any of the 3% payments to charity.” Brief in Support of Resistance (docket
no. 13-1) at 5. According to Community Action, retention of 3% of its gross receipts “is
an advantage no other Iowa casino enjoys.” Id. Additionally, Community Action
contends that “it is irrelevant whether [it] has a statutory or contractual right to any
payments” because it “seeks recovery in equity.” Id. at 6.
“Unjust enrichment is an equitable principle mandating that one shall not be
permitted to unjustly enrich oneself at the expense of another or to receive property or
benefits without making compensation for them.” W. Branch State Bank v. Gates, 477
N.W.2d 848, 851-52 (Iowa 1991) (citing Johnson v. Dodgen, 451 N.W.2d 168, 175 (Iowa
1990)). “To recover on a theory of unjust enrichment under Iowa law, a plaintiff must
plead and prove three elements: ‘(1) defendant was enriched by the receipt of a benefit;
(2) the enrichment was at the expense of the plaintiff; and (3) it is unjust to allow the
defendant to retain the benefit under the circumstances.’” Brown v. Kerkhoff, 504 F.
Supp. 2d 464, 543-44 (S.D. Iowa 2007) (quoting Dep’t of Human Servs. ex rel Palmer v.
Unisys Corp., 637 N.W.2d 142, 154-55 (Iowa 2001)). “The requirements of proof are
neither technical nor complicated. ‘[I]t is essential merely to prove that a defendant has
received money which in equity and good conscience belongs to plaintiff.’” Iconco v.
Jensen Const. Co., 622 F.2d 1291, 1295 (8th Cir. 1980) (quoting In re Estate of Stratman,
1 N.W.2d 636, 642 (Iowa 1942)). Unjust enrichment may “serve as independent grounds
for restitution in the absence of mistake, wrongdoing, or breach of contract.” Lakeside
Feeders, Inc. v. Producers Livestock Mktg. Ass’n, 827 F. Supp. 2d 893, 910 (S.D. Iowa
Enriched by a benefit
Although a plaintiff must plead that “defendant was enriched by the receipt of a
benefit,” this does not “require the benefit to be conferred directly by the plaintiff.”
Unisys Corp., 637 N.W.2d at 154-55; see also Iconco, 622 F.2d at 1302 (finding “no
requirement . . . that the plaintiff itself must have conferred the benefit sought to be
recovered from the defendant”). “[B]enefits can be direct or indirect, and can involve
benefits conferred by third parties.” Unisys Corp., 637 N.W.2d at 155.
Defendants emphasize that both parties agree Belle had neither a valid operating
agreement nor a valid license during the time it failed to make charitable disbursements.
Brief in Support of Motion at 5; Brief in Support of Resistance at 5; Reply at 3 n.3. Iowa
law merely requires that the defendant received money that in equity belongs to the
plaintiff. Iconco, 622 F.2d at 1302; see also Okoboji Camp Owners Coop. v. Carlson,
578 N.W.2d 652, 654 (Iowa 1998) (finding benefit was conferred where “[t]here [was] no
express agreement between the parties”).
“The underlying policy . . . for unjust
enrichment is, regardless of the legal position of the parties, a situation has arisen making
it inequitable or unjust not to order restitution.” Iowa Waste Sys., Inc. v. Buchanan Cty.,
617 N.W.2d 23, 31 (Iowa Ct. App. 2000). Because unjust enrichment is an equitable
principle, Defendants’ focus on lack of a legal obligation to distribute 3% of Belle’s
receipts and, thus, absence of any alleged benefit, is unpersuasive.
However, Defendants correctly assert that “unjust enrichment does not exist in a
vacuum.” Reply Brief at 5; see also Iconco, 622 F.2d at 1296 (“Unjust enrichment does
not occur in the abstract.”). “One is unjustly enriched only by reference to some standard
of justice and fairness.” Iconco, 622 F.2d at 1296. Courts are “free to look to the
provisions of a state statute defining legal rights and responsibilities to discern whether
one’s enrichment at the expense of another had been unjust.” Id.; see also id. at 1299
(concluding that Iowa could “use the Small Business Act as a standard in determining
whether [the defendant] ha[d] . . . been unjustly enriched at the expense of [the plaintiff]”
but recognizing that the act itself did not provide for a private right of action by an
Iowa Code Chapter 99F delineates the legal rights and responsibilities of licensed
gaming conductors and gaming operators. If a QSO partners with an operator, the QSO,
must “distribute at least [3%] of the adjusted gross receipts . . . for educational, civic,
public, charitable, patriotic, or religious uses.” Iowa Code § 99F.6(4)(a)(2); see also Iowa
Code § 99F.5(1). Iowa imposes the requirement to remit a minimum of 3% of the
adjusted gross receipts on all casinos operating lawfully under Iowa Code Chapter 99F.
See Iowa Code § 725.15 (excepting from criminal prosecution “a game, activity, ticket,
or device . . . lawfully possessed, used, conducted, or participated in pursuant to [C]hapter
. . . 99F”). Because a casino operator must either be, or be partnered with, a QSO and
Defendants admit that Belle was neither Belle was operating unlawfully. See Brief in
Support of Motion at 5 (“Belle did not have an operating agreement during the period at
issue here. . . . [Iowa Code] § 99F.6(4)(a)(2) is not applicable . . . because it applies only
to a QSO . . . not a casino manager like Belle.”).
Community Action’s theory of recovery is that Defendants cannot escape their
financial obligations by operating outside the law. Had Belle been operating lawfully, as
it and the IRGC believed, Belle would have been partnered with a QSO and the QSO
would have been required to distribute 3% of Belle’s gross receipts. See Brief in Support
of Motion at 6 (“[Belle] believed in good faith that it had a valid operating agreement with
MRHD and that MRHD would . . . ultimately be statutorily obligated to pay the 3% to
charities.”); Belle of Sioux City, 2016 WL 1129935, at *5 (describing the IRGC’s
determination that any “err[or] in allow[ing] gambling to continue at the Argosy Casino
. . . was harmless” in part because “[3%] of the adjusted receipts continued to be
distributed for educational and charitable purposes”). By failing to comply with the Iowa
Code, Belle enjoyed the retention of the 3% of its receipts to which it would normally not
have been entitled as a casino operator. As a result, Community Action has pled sufficient
facts to support a claim that Defendants’ failure to remit 3% of its receipts conferred a
benefit on Defendants. Cf. Plymouth Cty., Iowa ex rel. Raymond v. MERSCORP, Inc.,
886 F. Supp. 2d 1114, 1125-26 (N.D. Iowa 2012) (dismissing unjust enrichment claim
based “on an alleged but nonexistent legal requirement,” concluding that “because the
legal proposition [was] wrong, there is no circumstance pleaded that makes it ‘unjust to
allow the defendant to retain the benefit under the circumstances’” (quoting Lakeside
Feeders, Inc. v. Producers Livestock Mktg. Ass’n, 666 F.3d 1099, 1112 (8th Cir. 2012))).
Community Action’s expense
A plaintiff must also plead that the enrichment was at its expense. See Unisys
Corp., 637 N.W.2d at 155. Because unjust enrichment is an equitable principle, it is
unnecessary for Community Action to establish a binding legal right to the funds. Rather,
it is merely necessary to prove the money belongs to the plaintiff in equity. See Iconco,
622 F.2d at 1302. As addressed above, courts are “free to look to the provisions of a state
statute defining legal rights and responsibilities to discern whether one’s enrichment at the
expense of another had been unjust.” Id. at 1296.
Defendants assert that Community Action “is no different than any other charity that
has a desire for but no legally cognizable interest in receiving charitable funds.” Brief in
Support of Motion at 9.
Defendants emphasize that, although MRHD enumerated
Community Action as an “eligible recipient of the funds,” such list is not legally binding.
Id. at 7, 9; see also Petition ¶ 17 (pleading that Community Action was designated as an
eligible charity by MRHD). Further, according to Defendants, Community Action did not
“establish that MRHD had the binding authority to decide, in advance of any legal right
to such charitable funds, which charities were eligible recipients of these funds.” Brief in
Support of Motion at 7.
Three percent of the adjusted gross receipts must be distributed for “educational,
civic, public, charitable, patriotic, or religious uses.” Iowa Code § 99F.5(1). Iowa Code
§ 99B.1(14) defines “educational civic, public, charitable, patriotic, or religious uses” as:
uses benefiting a society for the prevention of cruelty to animals or
animal rescue league; uses benefiting an indefinite number of persons
either by bringing them under the influence of education or religion
or relieving them from disease, suffering, or constraint, or by
erecting or maintaining public buildings or works, or otherwise
lessening the burden of government; and uses benefiting any bona
fide nationally chartered fraternal or military veterans’ corporation or
organization which operates in Iowa . . . .
Community Action alleges that it is a “non-profit organization which [is an] eligible
recipient of the” undistributed funds. Petition ¶ 17. In Count II, Community Action
seeks to bring the action “on behalf of all others similarly situated, to wit: All charitable
entities who are entitled to receive payments.” Petition ¶ 26. Insofar as Defendant does
not dispute Community Action is a qualifying charitable entity, the court will assume for
purposes of the Motion that Community Action so qualifies.
Under such assumption, Community Action would be an entity eligible to receive
the undistributed funds. Although MRHD created the particular list of eligible recipients
and Belle was no longer partnered with MRHD during the period in dispute, a casino is
“statutorily required to partner with a QSO.” Belle of Sioux City, 2016 WL 1129935, *4.
MRHD was the only QSO licensed in Woodbury County. Petition ¶ 4. Additionally, at
all times prior to April 1, 2013, Belle remited 3% of its adjusted gross receipts to MRHD.
Petition ¶ 6. Belle admits that it “believed in good faith that it had a valid operating
agreement with MRHD and that MRHD would . . . ultimately be statutorily obligated to
pay the 3% to charities.” Brief in Support of Motion at 6. Community Action’s presence
on MRHD’s list sufficiently establishes it as a potential recipient of the funds to survive
a motion to dismiss. See Parkhurst, 569 F.3d at 865 (requiring a complaint to “contain
factual allegations sufficient ‘to raise a right to relief above the speculative level’” (quoting
Twombly, 550 U.S. at 555)). Community Action’s claim is more than merely speculative
when asserted on behalf of all similarly situated charitable entities, one of which was
entitled to receive the funds at issue.1
In light of the foregoing, the Motion to Dismiss (docket no. 10) is DENIED. All
counts against Defendants remain and shall proceed to trial.
IT IS SO ORDERED.
DATED this 18th day of April, 2017.
The court notes that Community Action has not yet applied for class certification
pursuant to Federal Rule of Civil Procedure 23. See Luiken v. Domino’s Pizza, LLC, 705
F.3d 370, 372 (8th Cir. 2013) (“In order to obtain class certification, a plaintiff has the
burden of showing that the class should be certified and that the requirements of Rule 23
are met.” (quoting Coleman v. Watt, 40 F.3d 255, 258 (8th Cir. 1994))). The court takes
no position as to the potential merits of any future application for class certification.
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