Waukegan Gaming v. City of Waukegan

229 N.E.3d 516

2023 IL App (2d) 220426

WAUKEGAN GAMING, LLC, Plaintiff-Appellant,

v.The CITY OF WAUKEGAN, Defendant-Appellee.

No. 2-22-0426

Appellate Court of Illinois, Second District.

Filed August 8, 2023

Modified Upon Denial of Rehearing September 12, 2023

Appeal from the Circuit Court of Lake County. No. 22-LA-66, Honorable Luis A. Berrones, Judge, Presiding.

Michael H. Moirano, of Moirano Gorman Kenny, LLC, of Chicago, and Mark A. Van Donselaar, of Churchill, Quinn, Hamilton & Van Donselaar, of Grayslake, for appellant.

Glenn E. Davis and Charles N. Insler, of HeplerBroom LLC, of St. Louis, Missouri, for appellee.

OPINION

JUSTICE JORGENSEN delivered the judgment of the court, with opinion.

¶ 1 In a three-count complaint, plaintiff, Waukegan Gaming, LLC (Waukegan Gaming), sought compensatory damages and costs against defendant, the City of Waukegan (City), for breach of contract, promissory estoppel, and equitable estoppel. The City moved to dismiss, and the circuit court dismissed all three counts. See 735 ILCS 5/2-619(a)(9) (West 2020). Waukegan Gaming appeals, arguing that (1) Public Act 101-31 (eff. June 28, 2019), the 2019 amendments to the Illinois Gambling Act (Act) (230 ILCS 10/1 et seq. (West 2020)), did not render void the redevelopment agreement between Waukegan Gaming and the City, (2) its obligations under the redevelopment agreement were not illusory, (3) the City had the authority to grant Waukegan Gaming exclusive authority to develop a casino in Waukegan, (4) the redevelopment agreement was not terminable at will, and (5) the complaint stated valid estoppel claims. Because we determine that the City lost the authority to enter into the redevelopment agreement, and estoppel is not available because the agreement was void, we affirm the circuit court's order dismissing Waukegan Gaming's complaint.

¶ 2 I. BACKGROUND

¶ 3 A. Predevelopment Agreement

¶ 4 In 1992, Alan Ludwig, the principal of Waukegan Gaming, was approached by the City about redeveloping the City’s downtown, lakefront property because the City was not selected by the General Assembly as an authorized site for a riverboat casino. Ludwig joined with Richard Stein to form SL Waukegan, LLC (SL), to investigate and pursue the possibility of developing and operating a casino in the City. To pursue this project, Ludwig retained John O’Connell, a registered lobbyist, to represent SL’s interests in expanding riverboat gambling to the City. SL also acquired options to purchase approximately 40 acres of land near the City’s lakefront, and it prepared and submitted a "Riverboat Gambling Report," which outlined the proposed development.

¶ 5 On September 20, 1993, SL entered into a "pre-development agreement" with the City. Therein, the City agreed to "neither encourage, assist nor promote, either directly or indirectly, during the term of [the predevelopment agreement], any gaming facility development activities proposed by any other person or entity other than [SL]." In exchange, SL agreed that it would (1) continue investigating the viability of developing a riverboat casino on the City’s lakefront, (2) consult with the City when SL determined it was appropriate to do so, and (3) continue pursuing legislation to expand gaming to Waukegan. This agreement was amended and renewed several times until 2004.

¶ 6 B. Redevelopment Agreement

¶ 7 On January 16, 2004, SL and the national casino operating company Harrah’s Operating Company (Harrah’s) entered into a "redevelopment agreement" with the City. This agreement was executed in anticipation of the public auction of Emerald Casino, Inc.’s, gambling license, so that SL and Harrah’s could bid on the license and develop a casino in the City. In relevant part, the agreement stated that the City would contribute 35 acres of land to the project and the developer, SL, would rely on the agreement in incurring expenses related to funding the casino project. The agreement also provided:

"A. Grant of Right. City grants to Developer the right to develop and operate a casino in the City (the ‘Exclusive Right’). The Exclusive Right shall continue for so long as Project is operating, provided however, that, if the law of the State of Illinois requires that the Exclusive Right have a definite term, the term of the Exclusive Right shall be limited to twenty (20) years, subject, at the option of the Developer, to extension for three additional consecutive terms, each of ten (10) year duration. Each extension term shall be deemed to have been exercised unless the Developer provides written notice to the City that it does not elect to extend the Exclusive Right.

City shall not, while the Exclusive Right is effective:

1. negotiate or discuss with any other person or entity the development or operation of a casino within the City; or

2. authorize or assist any person or entity other than the holder of this Agreement to develop or operate a casino within the City." (Emphasis in original.)

¶ 8 Ultimately, the joint venture between Harrah’s and SL was not successful in obtaining the Emerald Casino gambling license; however, the developers agreed, pursuant to the redevelopment agreement, to continue to pursue the casino project. Under the agreement, the City agreed to support the developers in securing another riverboat gambling license.

¶ 9 On January 10, 2005, SL and Harrah’s formed Waukegan Gaming to pursue the casino project in the City. Four days later, Harrah’s assigned the redevelopment agreement to Waukegan Gaming and later withdrew from the joint venture. On March 1, 2006, Waukegan Gaming and the City entered into an amended agreement, recognizing Waukegan Gaming as the sole developer.

¶ 10 Approximately 11 years later, Ludwig had lunch with the City’s mayor. The mayor purportedly encouraged Ludwig to continue pursuing a gambling license for the City, and he never indicated that the agreement expired or was void.

¶ 11 C. 2019 Amendments to the Act and Litigation

¶ 12 On June 2, 2019, the General Assembly amended the Act (Pub. Act 101-31 (eff. June 28, 2019), authorizing the Illinois Gaming Board (Gaming Board) to grant the City a license to operate a casino (hereinafter, 2019 amendments to the Act). 230 ILCS 10/7 (West 2020). Nearly one month after the amendments’ passage, corporate counsel for the City notified Waukegan Gaming that the redevelopment agreement was "not a valid, enforceable contract at this point in time."

¶ 13 Thereafter, the City sued Waukegan Gaming, seeking a declaratory judgment that the redevelopment agreement was no longer valid, based on the passage of the amendments. On July 3, 2019, the City issued a request for proposals (RFP), soliciting developers for the development and operation of a Waukegan casino. The deadline for filing a proposal was August 5, 2019. On July 18, 2019, Waukegan Gaming answered the complaint and filed a counterclaim. Prior to the RFP deadline, Ludwig entered an agreement with Rush Street Gaming and Churchill Downs Incorporated to submit a joint proposal. In this agreement, Rush Street Gaming was granted final decision-making authority over the City’s lawsuit against Waukegan Gaming, and the corresponding counterclaim.

¶ 14 On October 21, 2019, Ludwig’s joint proposal was selected as one of three finalists to be certified to the Gaming Board. Rush Street Gaming thereafter agreed with the City to dismiss the lawsuit against Waukegan Gaming, and the corresponding counterclaims, without prejudice. Rush Street Gaming later withdrew its Waukegan casino application to the Gaming Board in order to pursue a casino opportunity in Chicago.

¶ 15 D. Waukegan Gaming 2022 Litigation

¶ 16 On March 3, 2022, Waukegan Gaming filed a three-count complaint for breach of contract, promissory estoppel, and equitable estoppel, alleging breach of the exclusivity provision of the redevelopment agreement.

¶ 17 Thereafter, the City moved to dismiss (735 ILCS 5/2-619(a)(9) (West 2020)). It alleged, inter alia, that the redevelopment agreement was not a valid and enforceable contract, because the City lacked the authority to enter into the agreement and the amendments to the Act invalidated the agreement. The City also asserted that the estoppel claims should be dismissed because the agreement was made in violation of a statutory provision and, therefore, estoppel did not apply.

¶ 18 On October 25, 2022, the circuit court granted the City’s motion to dismiss, finding that the amendments invalidated the redevelopment agreement because the General Assembly intended for the process of granting casino licenses to be open, competitive, and transparent. Despite finding the remainder of the City’s arguments moot, it went on to find that (1) Waukegan Gaming’s promises were illusory, (2) the City lacked the authority to grant Waukegan Gaming an "open-ended, irrevocable, and exclusive right" to develop a casino in the City, (3) it was not clear that the exclusivity provision in the agreement was ever triggered, (4) the agreement was terminable at will, and (5) an unenforceable contract cannot be the underlying basis for estoppel claims. Waukegan Gaming appeals.

¶ 19 II. ANALYSIS

¶ 20 Waukegan Gaming argues that the circuit court erred in dismissing its complaint on the basis that the 2019 amendments to the Act invalidated the redevelopment agreement. It contends that (1) the agreement was a proper exercise of the City’s home rule powers, (2) the Act does not require an open and competitive bidding process to select a developer, (3) there was nothing untoward about the agreement, (4) its promises under the agreement were not illusory, (5) the agreement was not terminable at will, and (6) the claims of estoppel were valid. For the following reasons, we reject Waukegan Gaming’s arguments.

[1–4] ¶ 21 Section 2-619 of the Code of Civil Procedure permits a party to file a motion to dismiss where "the claim asserted *** is barred by *** affirmative matter avoiding the legal effect of or defeating the claim."...