1. Appellant, the Indiana Department of Revenue (“Indiana DOR”), Appellee, Centaur Acquisition, LLC (“Centaur”), as successor herein to Indianapolis Downs, LLC (“Indianapolis Downs”), and Intervenor-Appellee, Hoosier Park, LLC (“Hoosier Park” and, together with Indiana DOR and Centaur, the “Movants” or “Settlement Parties”), hereby respectfully request that the Court (i) stay this appeal, and (ii) remand for the limited purpose of allowing the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) to consider approval of the Settlement (defined below) and also whether or not to vacate the Bankruptcy Court’s order granting the Motion of Debtor Indianapolis Downs, LLC for a Determination of the Legality of Certain Taxes (the “Tax Order”).
2. The Bankruptcy Court entered the Tax Order—the order subject to this appeal (the “Appeal”)—on October 26, 2011. On December 1, 2011, Indiana DOR appealed the Tax Order, and on January 10, 2012, the Bankruptcy Court entered an order certifying the Appeal for a direct appeal to this Court. Briefing in this Appeal has been completed and argument had been scheduled for April 23, 2013.
3. Subsequently, on October 31, 2012, the Bankruptcy Court entered an Order (the “Sale Order”) granting the motion of Indianapolis Downs to sell
substantially all of its assets (the “Assets”) to Centaur, an affiliate of Hoosier Park (the “Acquisition”). No appeal of the Sale Order was taken within the time prescribed by Federal Rule of Bankruptcy Procedure 8002(a), and the Sale Order is therefore a final, non-appealable order.
4. In addition, the Settlement Parties have reached a settlement (the “Settlement”) that, subject to certain conditions, may moot this Appeal. The Settlement was subject to the closing of the Acquisition, which occurred on February 20, 2013. Further, the Settlement Parties agreed to (i) request that the Settlement be “so ordered” by the Bankruptcy Court, and (ii) request that the Tax Order be vacated as moot by order of the Bankruptcy Court or this Court. The Settlement provides that, upon satisfaction of these conditions, Indiana DOR would voluntarily dismiss this Appeal.
5. As a result of the closing of the Acquisition on February 20, 2013, Centaur owns the Assets, including, but not limited to, those rights, claims and monies necessary to consummate the Settlement as to Indianapolis Downs. Following the closing of the Acquisition, Centaur was substituted for Indianapolis Downs with respect to, among other things, this Appeal.
6. Because implementation of the Settlement may moot, and will result in the voluntary dismissal of, this Appeal, the Movants jointly move the Court for (i) a stay of this Appeal pending the Bankruptcy Court’s decision whether or not to
approve the Settlement and also vacate the Tax Order, and (ii) remand of this Appeal for the limited purpose of allowing the parties to seek approval of the Settlement from the Bankruptcy Court and also vacatur of the Tax Order, as contemplated by the Settlement.
7. A stay of this Appeal and remand for the limited purpose of allowing the Bankruptcy Court to consider approval of the Settlement and also vacatur of the Tax Order is warranted here. See, e.g., Ohio Willow Wood Co. v. Thermo-Ply, Inc., 629 F.3d 1374 (Fed. Cir. 2011) (granting joint motion to remand appeals for the limited purpose of the district court’s consideration of the parties’ motion for vacatur and holding appeals in abeyance pending resolution in the district court); Interactive Health, LLC v. King Kong USA, Inc., Nos. 2009-1141, 2009-1155, 2009-1401, 2010 WL 2653287 (Fed. Cir. July 2, 2010) (granting motion to remand appeal to district court for further proceedings where settlement agreement between the parties contemplated vacatur of certain district court orders and amendment to judgment); see also Fairchild Aircraft Corp. v. Campbell (In re Fairchild Aircraft Corp.), 220 B.R. 909, 910 (Bankr. W.D. Tex. 1998) (recognizing that, where vacatur of an order is sought, “[t]he court issuing an opinion has a ‘vested interest’ in determining whether to vacate the opinion.”) (citing U.S. Bancorp Mortgage Co. v. Bonner Mall P’ship, 513 U.S. 18, 29 (1994)).
8. This motion for a stay and remand for the limited purpose described herein is made in good faith and not for the purpose of delay. Rather, it is being presented to conserve judicial and attorney resources that would be expended unnecessarily in light of the Settlement. Moreover, having previously considered and entered the Tax Order, the Bankruptcy Court has extensive background and knowledge of the matter necessary to consider the additional relief to be sought in connection with the Settlement. See Thermo-Ply, 629 F.3d at 1375 (noting that the court remanded “so that the court that rendered the decision [could] decide whether to vacate it, based on [its] conclusion that the district court is in the better position to make that ruling, indeed to consider all of the legal and equitable considerations as may be brought to its attention by those favoring and opposing the motion.”). Thus, remand is appropriate under these circumstances.
9. Finally, while Centaur expects to seek relief from the Bankruptcy Court as expeditiously as possible in order that this Appeal may be voluntarily dismissed, the Movants suggest that Centaur file a status report with the Court every 60 days to apprise the Court of the status of the remanded proceedings in the Bankruptcy Court.
WHEREFORE, the Movants—all of the parties to this Appeal—respectfully request that the Court (i) stay this Appeal pending the Bankruptcy Court’s determination whether or not to approve the Settlement and also vacate the Tax
Order, and (ii) remand this Appeal to the Bankruptcy Court for the limited purpose of allowing the Bankruptcy Court to consider approval of the Settlement and also vacatur of the Tax Order.
The parties explain:
April 19, 2013
BY ELECTRONIC CASE FILING
The Honorable Marcia M. Waldron
Clerk of CourtUnited States Court of Appeals
21400 United States Courthouse
601 Market Street
Philadelphia, PA 19106-1790
Re: Indiana Department of Revenue v. Indianapolis Downs, LLC, Case No. 12-1582
Dear Madam:
Appellant Indiana Department of Revenue (the “Department”), Appellee Centaur Acquisition, LLC (“Centaur Acquisition”), and Intervenor-Appellee Hoosier Park, LLC (f/k/a Hoosier Park, L.P.) (“Hoosier Park”), respectfully submit this joint letter response to the Court’s Order entered April 10, 2013 (the “April 10 Order”) by which the Court, among other things, granted the agreed motion of the former appellee, Indianapolis Downs, LLC (“Downs”), for substitution of Centaur Acquisition as the appellee in the above-captioned appeal (the “Appeal”) and directed the parties to file letter responses within ten days from the date of the April 10 Order addressing the existence of a settlement between the parties and whether the Appeal is now moot. That settlement was first disclosed to the Court in the motion for substitution filed eight days after the closing of the sale of substantially all the assets of Downs to Centaur Acquisition, the event upon which the settlement was conditioned. Now that the Court has permitted substitution, the parties have filed contemporaneously herewith a motion for stay and remand for the limited purpose of requesting that the bankruptcy court consider whether to “so order” the settlement and whether to vacate the order appealed from as moot (the “Remand Motion”).
I. Brief Background
Only two “racinos” are permitted by applicable law in the State of Indiana. See Ind. Code § 4-35-5-1. The first racino was owned and operated by Downs until February 20, 2013, the date on which Centaur Acquisition acquired substantially all the assets of Downs. That racino is now owned and operated by Centaur Acquisition. The second racino has at all relevant times been, and continues to be, owned and operated by Hoosier Park. Centaur Acquisition and Hoosier Park are both owned, directly or indirectly, by Centaur Holdings, LLC.
The graduated “slot machine wagering tax” imposed by section 4-35-8-1(a) of the Indiana Code (the “Graduated Wagering Tax”) applies only to the two statutorily-authorized racinos. See Ind. Code §§ 4-35-5-1; 4-35-8-1(a). Therefore, the central question in the Appeal—which the Court stated succinctly as whether “the funds that racinos must distribute pursuant to Ind. Code § 4-35-
7-12 [are] included in ‘adjusted gross receipts received’ for purposes of the Graduated Wagering Tax, Ind. Code § 4-35-8-1”—is an issue that impacts only the current parties to the Appeal, the Department (the taxing authority), on the one hand, and Centaur Acquisition and Hoosier Park (the only two taxpayer-racinos), on the other.
II. Existence of a Settlement Between the Parties
During the pendency of the Appeal, the Department, Centaur Acquisition and Hoosier Park (the “Settlement Parties”) undertook to negotiate a settlement to resolve by agreement—rather than further litigation—how the Graduated Wagering Tax would apply, both retroactively and
prospectively, to taxpayer-racinos. Downs chose not to join in those negotiations or the resultingsettlement. This created a substantial obstacle to the settlement, given that the Department could
not settle with one taxpayer-racino and not the other. This obstacle could be overcome, however,
by Centaur Acquisition acquiring the assets of Downs, including, but not limited to, the claims
underlying the Appeal and, in turn, the right to settle the Appeal, through the bankruptcy court supervised auction and sale process occurring at that time in Downs’ chapter 11 bankruptcy case.
The agreement ultimately reached among the Settlement Parties contemplated a settlement as to both taxpayer-racinos. The entire settlement was conditioned, however, upon the closing of the sale of Downs’ assets to Centaur Acquisition. The agreements that contain the terms of the settlement (the “Settlement Agreements”) state specifically that the effectiveness of the provisions that dictate how the Graduated Wagering Tax is to be applied, retroactively and prospectively, to the taxpayer-racinos are contingent upon the closing of the sale of Downs’ assets to Centaur Acquisition. That closing occurred on February 20, 2013, and those provisions of the Settlement Agreements became effective and binding on that date.
Although the Settlement Agreements are operative in terms of dictating how the Graduated Wagering Tax is to be applied to the taxpayer-racinos, the obligation of the Department to voluntarily dismiss the Appeal pursuant to Federal Rule of Appellate Procedure 42(b) is not yet effective. The Settlement Agreements provide that, “the parties will seek to have each of [the Settlement Agreements] ‘so ordered,’ and to have the [bankruptcy court order subject to the Appeal] vacated as moot, by an order of the Bankruptcy Court or the United States Court of Appeals for the Third Circuit; and promptly after the entry of such order, the Department will voluntarily dismiss [the Appeal] . . . .” In the negotiation of the Settlement Agreements, the Department insisted that the order subject to the Appeal be vacated and, in response, Centaur Acquisition and Hoosier Park insisted that the settlement be “so ordered”. The Department did so because of its concern that the bankruptcy court order subject to the Appeal could be cited as authority in Indiana courts with respect to the question of what level of “use or control” a party collecting receipts must have in order for the receipts collected to be taxable as income of the collecting party. Putting it another way, the bankruptcy court’s interpretation of the term “receipts received” as used in the Graduated Wagering Tax statute could be cited as authority adverse to the Department in Indiana court proceedings involving other forms of gross receipts tax.
III. Whether the Appeal Is Now Moot
By the settlement, the Settlement Parties reached a compromise as to what portion of “the funds
that racinos must distribute pursuant to Ind. Code § 4-35-7-12 [will be] included in ‘adjusted gross receipts received’ for purposes of the Graduated Wagering Tax[.]” Stated another way, the settlement is an economic agreement as to how the Graduated Wagering Tax is to be applied to the taxpayer-racinos. The Settlement Parties agree that, at some point, the settlement moots the appeal, but the Settlement Parties disagree as to whether that point has already passed or has yet to pass. Centaur Acquisition and Hoosier Park believe the appeal is already moot, because there is no longer any judgment to be made by the Court on the merits of the Appeal. See Salovarra v. Jackson Nat. Life Ins. Co., 246 F.3d 289, 296 (3d Cir. 2001) (“An appeal is moot when there is no ‘subject matter upon which the judgment of the court can operate to make a substantive determination on the merits.’”) (quoting Harris v. City of Phila., 47 F.3d 1325-26 (3d Cir. 1995)). The Department believes the appeal is not yet moot, because the settlement is not effectuated fully in accordance with its terms.
Regardless of this disagreement, the Settlement Parties remain obligated to seek to have the settlement “so ordered” and to have the order subject to the Appeal vacated as moot. Now that Centaur Acquisition has been substituted for Downs by the April 10 Order, the Settlement Parties have taken the first step in doing so by filing the Remand Motion. If that relief cannot be obtained following remand, then it will be up to the Department to waive the conditions precedent and file a dismissal agreement pursuant to Federal Rule of Appellate Procedure 42(b), or Centaur Acquisition and Hoosier Park to move (after having first sought that relief consistent with the Settlement Agreements) to have the Appeal dismissed as moot.
Respectfully submitted,
Gregory F. Zoeller
Indiana Attorney GeneralThe Indiana Supreme Court Docket had this entry:
| 4/24/13 | JOINT NOTICE OF SETTLEMENT AGREEMENT (6) CERTIFICATE OF SERVICE |
| (6) BY MAIL 04/23/13 ENTERED ON 04/24/13 LH |
http://hats2.courts.state.in.us/ISC3RUS/ISC2detail.jsp?row=8
For background on this litigation see the following entry:
