A federal bankruptcy court judge has recommended ruling in favor of Islandia and Jake’s 58 Hotel & Casino in a lawsuit filed by village residents over Long Island’s first video gambling operation.
Judge Carla E. Craig last week proposed concluding the case without a trial. The lawsuit was filed by four residents seeking to shut down the casino and overturn a village law allowing gambling facilities.
The lawsuit alleges the village board engaged in illegal zoning practices, among other allegations, by approving a code change allowing “hotel/gaming” facilities in office and zoning districts in 2017.
Plaintiffs said the board used spot zoning — zoning a single parcel differently than the surrounding area for the benefit of the property owner — and contract zoning — making a deal with a developer to grant exemptions to zoning code.
Jennifer Tomasino, Kevin Montano, Richard Meyer and Apryl L. Meyer filed the lawsuit against Jake's 58 owner Delaware North, the village and its board of trustees in State Supreme Court in Riverhead in December 2017.
The case moved to bankruptcy court in March 2018 because casino revenue plays a major role in the reorganization of Suffolk OTB, which operates the gambling parlor and declared bankruptcy in 2012. A federal district court judge will hear the case after both sides are given an opportunity to file objections to the recommendation.
The recommendation by Craig, chief judge of the U.S. Bankruptcy Court Eastern District of New York in Brooklyn, will be considered when the case moves to federal district court.
Bankruptcy court is considered a unit of federal district court, and cases stay in federal jurisdiction once they enter it.
Craig's recommendation responded to the defendants' motion for a summary judgment — a ruling without a trial. She rejected the residents' allegations and recommended denying a request for a permanent injunction against the casino's operation.
Craig wrote that the gambling law “serves the general welfare of the community” and is consistent with the village’s comprehensive plan.
“We are pleased that Judge Craig has confirmed that the Village of Islandia acted legally and in the best interests of its residents,” Delaware North spokesman Glen A. White said in a statement, calling the case “without merit.”
Mayor Allan Dorman echoed that sentiment in a statement: "I have always said I am more than confident that we would prevail in this litigation because we followed all the correct procedures."
Anton Borovina, who represents the residents, said the bankruptcy judge "misstated the law" regarding contract zoning and spot zoning.
“The plaintiffs are disappointed in the bankruptcy court’s recommendation, and we believe that the bankruptcy court made erroneous findings of act,” Borovina said.
The residents filed a related lawsuit in 2016 after the village board approved the casino operation through a special use permit. The permit was nullified through a State Supreme Court decision that sided with plaintiffs. An appeal is pending.
Delaware North, which is based in Buffalo, agreed in August 2016 to pay $47 million to the village in tax relief payments over 20 years. The company also paid the village $2.5 million in 2017, including funding for a new ballfield.
The casino opened in February 2017.
"It’s a good step for us, and we continue to do a really good job at that location and people are enjoying themselves there every single day," Suffolk OTB president Phil Nolan said of the judge's decision.