SL Green, in a lurid lawsuit, has accused sports and entertainment operator Delaware North of “[h]aving sabotaged the efforts of SL Green and Empire” in their team’s pursuit of the lucrative right to operate video lottery terminals (or VLTs) at the dilapidated Queens Aqueduct.
The suit, filed by SL Green and Aqueduct Development Partners on April 17 in New York State Supreme Court, names “Delaware North Companies Gaming and Entertainment Inc.” as the defendants.
The allegations are shocking (read the whole lawsuit below).
In 2006, Delaware North (DNC) joined SL Green’s “Empire” team vying for statewide racetrack rights (the process was later revised to allow for standalone bids for the Aqueduct VLT rights). SL Green alleges that, “Among other provisions, DNC agreed to non-competition, confidentiality, and exclusivity restrictions, as well as a termination provision that could only be exercised by DNC under limited circumstances and upon 30 days’ written notice.”
DNC ultimately abandoned the SL Green effort, but not before “SL Green gave DNC access to confidential and proprietary business information… “[S]ince at least October 2007, DNC has improperly competed with both Empire and SL Green for the Rights…Having sabotaged the efforts of SL Green and Empire, DNC pursued the VLT Rights for itself alone and, in October 2008, was awarded the VLT Rights at Aqueduct. By wrongfully competing with Empire and SL Green for the right to operate VLTs at Aqueduct, DNC deprived Empire and SL Green of that opportunity. The damaging effect of DNC’s wrongful actions is highlighted by the fact that after having misappropriated Empire and SL Green’s opportunity, DNC squandered it.”
This marks just the latest development in a long and horribly torturous process to redevelop the languishing Queens Aqueduct. In October, following an epic competitive bidding process dating back to former Governor Pataki, the Patterson administration gave Delaware North the right to operate a “racino”—a racing track–cum–casino. In so doing, Delaware North vanquished two competitors, including a consortium of SL Green and Hard Rock, and another including Capital Play, Extell Development, Mohegan Sun and Plainfield Asset Management. “All of the groups had valid proposals, but Delaware North presents the strongest financial proposal with an upfront payment of $370 million,” said Governor Paterson in a statement at the time.
If only it were that simple. In March, Delaware North’s plans for the racino collapsed, after it was unable to get the $370 million to pay the state. This month, the state reopened the bidding process (bids are now due on May 8).
Meanwhile, SL Green is planning on rebidding for the racino rights. In a statement, the firm said: “SL Green is still interested in developing the Aqueduct project, and is reviewing the State’s instructions released last week in anticipation of responding with a new proposal. We are in the best position to move forward with the project right away, especially given that we already have been fully vetted. If given the go-ahead, we could be producing revenue for New York’s taxpayers within six months.”
Update 12:55 p.m.: William J. Bissett, President of the Buffalo-based Delaware North Companies Gaming & Entertainment, issued the following statement:
We were made aware of the litigation yesterday but have not yet been officially served. Based on what we have read in the press reports, it appears to be a desperate attempt by SL Green to try to enhance their standing in the re-bid process. We would hope the lawsuit does not complicate or delay the process further. Our sole focus is on the re-bid process and ensuring that we put forward the best possible proposal to the State. The re-bid allows all bidders the opportunity to address the changing economic climate. As has been reported, conditions changed dramatically from the time of the original RFP to its award almost two years later. Despite these changes, we stood by our $370 million offer with a proposed change in timing based on the delays in the award. It has been widely reported that we withdrew from the project. Nothing could be further from the truth. Our issue was solely based on timing and changing conditions as we finalized the legal operating agreements. In fact, even with the changes, our proposal would have had the VLTs up and running faster than any of the other bidders. We remain further along because of the investments we have made during the initial project work and the finalization of the MOU. Again, we have already made a significant investment in the project and remain enthusiastic about its value to the community and the State of New York.