Opinion
No. 00-5178.
Argued: December 5, 2000.
Filed June 5, 2001.
On Appeal From the United States District Court for the District of Delaware (C.A. No. 99-cv-00755) District Judge: Honorable Roderick R. McKelvie
On February 12, 2001, Dover Downs, Appellee, filed a petition for rehearing and/or rehearing en banc. One week later (February 20, 2001) the Supreme Court of the United States rendered its decision in Brentwood Academy v. Tennessee Secondary Schools Athletic Association, 121 S.Ct. 924 (2001), which also presented an issue of state action. We entered an order directing the appellants to file an answer to the petition for rehearing, especially commenting on the Brentwood Academy case, and granting the petitioners ten days to reply thereto. The parties have responded and with supporting briefs. After carefully considering them, the panel denies the petition for rehearing.
Unlike this case, which specifically deals with joint participants in the operation of a race track, Brentwood Academy concerned only the regulatory activities of a statewide association, the Tennessee Secondary School Athletic Association (TSSAA), incorporated to regulate interscholastic competition among public and private secondary schools. The Association, according to the Court, includes most secondary public schools in the State and "has historically been seen to regulate in lieu of the State Board of Education's exercise of its own authority." Id. at 927.
The majority in Brentwood Academy made no references in its opinion to Burton v. Wilmington Parking Authority, 356 U.S. 715 (1961), or to a symbiotic relationship between the parties. This omission can be explained by the regulatory nature of the challenged action, which raised a question more akin to that presented in Jackson v. Metropolitan Edison Co. than in Burton. The Court held that the Association's regulatory activity may and should be treated as state action owing to the pervasive entwinement of state officials in the activities of the Association. See id. at 927. This holding appears to expand the nexus test announced in Jackson v. Metropolitan Edison Co., where the Court held that regulation of a private electric utility was not sufficient "to connect the State of Pennsylvania with [the Utility's] action so as to make the latter's conduct in terminating a customer's electricity account attributable to the State for purposes of the Fourteenth Amendment." Id. at 358.
419 U.S. 345 (1974).
The Court in Brentwood Academy never negated the vitality of Burton. Even the dissent pointed out that in Brentwood there was no `symbiotic relationship' between the State and the TSSAA." (citing Burton v. Wilmington Parking Auth.). Id. at 939 (Thomas, J. dissenting). The dissent criticized the majority's "new entwinement test," id. at 940, stating that "there is no suggestion in this case, as was the case in Burton, that the State profits from the TSSAA decision to enforce its recruiting rule." Id. at 939.
Brentwood makes clear that the "entwinement test" for state action in that case is not the only test. It notes that the Court has identified "a host of facts" in other cases that bear on the fairness of attributing the challenged action to the State, including "the operation of a private actor as a willful participant in joint activity with the State or its agents." Id. at 930. (quoting Lugar v. Edmondson Oil, 451 U.S. 922 (1982)) The majority also refers to various situations in other cases which, in the past, the Court treated as state action. Examples include the State's exercise of "coercive power", or when the State provides "significant encouragement, either overt or covert." Id. at 929 (quoting Blum v. Yeretsky, 457 U.S. 991, 1004 (1982)). The Court also has treated a nominally private entity as a state actor "when it is controlled by an `agency of the State,'" when it has been delegated a public function by the State, or where conduct that is "formally" private is "entwined with governmental policies or the government is entwined in its management or control." Id. at 930 (citations omitted). Thus, Brentwood makes clear that the entwinement test for state action in that case is only one of many. Burton v. Wilmington Parking Auth. is not rejected, abandoned, or modified. The dissent acknowledges that "[a]lthough we have used many different tests to identify State action, they all have a common purpose. Our goal in every case is to determine whether an action `can be fairly attributed to the State.'" (citations omitted). Id. at 936.
The petitioner asserts that Brentwood's entwinement test supplants Burton. They attempt now to characterize the case before us as a regulatory action "which has never been sufficient to support a conclusion of `state action.'" Reply Brief at 7. They argue that "there can be no contention that the State of Delaware, through either the State Lottery Commission or the Harness Racing Commission, is entwined with Dover Downs in a fashion which is even remotely similar to that prevailing in Brentwood." Reply Brief at 7. We agree. These are two different cases subject to two different tests. Nevertheless, in both cases the activity reviewed constituted state action under the Fourteenth Amendment. Brentwood Academy concerned only regulatory activities of an athletic association. In this case, we specifically noted that "[h]eavy state regulation alone of a private entity does not necessarily give rise to a Burton symbiotic relationship." Slip op. at 8. We also noted that the undisputed facts in this case show "a deliberate intertwining and interdependence between the State and Dover Downs, not only in the operation of the state lottery at the race track but also in the harness racing operations at the track. The State's concern in `the economic activity and vitality' of the race track operation is a matter of statutory expression." Slip op. at 8-9.
Petitioner's argument that "the only connection between the State and Dover Down is regulatory" has no basis whatsoever on the record before us and we reject it.
The petition for rehearing also discusses cases never cited in the oral argument before us. They are inapposite. The first of these cases is San Francisco Arts and Athletics, Inc. v. United States Olympic Committee, 483 U.S. 522 (1987). That case involved an allegation that the Olympic Committee had violated the Fifth Amendment by enforcing its trademark over the word "Olympic" in a discriminatory manner. The entire state action discussion focused on the extent to which the government controlled the Olympic Committee's enforcement decisions. The court never undertook a symbiotic relationship analysis because there was no evidence in that case that the federal government was a joint participant in the Olympic Committee's enterprise. The record in Crissman, by contrast, was replete with evidence of joint participation in a business by the State of Delaware and Dover Downs.
Because the Olympic Committee was alleged to be a federal government actor, rather than a state actor, the Fifth Amendment's prohibition of discrimination applied, rather than the prohibition applied to the states by the Fourteenth Amendment.
Dover Downs argues that footnote 29 of San Francisco Arts "reformulates" Burton in a way that requires state participation in the challenged action as a sine qua non of state action. This reading is incorrect. The footnote simply rejects the argument that the federal government was a "joint participant" in the Olympic Committee's enforcement decisions and cites Burton for the proposition that joint participation is one way in which a private actor can be converted into a state actor. See id. at 546 n. 29. This footnote does not modify Burton's central holding in any way. It simply underscores Burton's inapplicability to that case.
The second case, American Manufacturers' Mutual Insurance Co. v. Sullivan, 526 U.S. 40 (1999), is even less germane here. In that case, the Court held that private insurers who provide workers' compensation coverage are not state actors even though they are subject to heavy regulation by the state. In so holding, the Court repeated the long settled proposition that extensive regulation alone does not convert a private entity into a state actor under Burton. Id. at 57. This language does not affect the holding of Crissman, where the evidence showed that the State did not simply regulate Dover Downs but also jointly participated in its enterprise and set up a financing scheme for Dover Downs from which it profited handsomely.
Finally, we also see no merit to Dover Downs's argument that this Court exceeded the scope of review by holding that the record evidence led conclusively to a finding of state action. Although Dover Downs argues that this court improperly "decide[d] disputed issues of material fact," it does not mention a single fact that was actually disputed. There was never any dispute over the facts in this case. The sole issue was whether the undisputed facts supported a finding of state action and whether the District Court correctly applied the law to the facts.
The petition for panel rehearing is denied.