Philadelphia Entertainment and v. Pennsylvania Department of Rev

NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
______________

No. 20-3171
______________

In re PHILADELPHIA ENTERTAINMENT AND DEVELOPMENT PARTNERS LP,
d/b/a Foxwoods Casino Philadelphia,
Debtor

v.

COMMONWEALTH OF PENNSYLVANIA DEPARTMENT OF REVENUE;
COMMONWEALTH OF PENNSYLVANIA

PERSIL MANGEUR LLC, in its capacity as the trustee of the Liquidation Trust for the
estate of debtor Philadelphia Entertainment & Development Partners, LP d/b/a Foxwoods
Casino Philadelphia,
Appellant
______________

Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 2-20-cv-00295)
District Judge: Honorable Joseph F. Leeson, Jr.
______________

Submitted under Third Circuit L.A.R. 34.1(a)
May 24, 2021
______________

Before: GREENAWAY, JR., SHWARTZ, Circuit Judges, and KANE, District Judge. *

(Filed: June 29, 2021)
______________

*
The Honorable Yvette Kane, Senior United States District Judge for the Middle
District of Pennsylvania, sitting by designation.
 OPINION ∗*
______________

SHWARTZ, Circuit Judge.

Philadelphia Entertainment and Development Partners, LP (“PEDP”) obtained a

slot machine license from the Pennsylvania Gaming Control Board (“Board”) in

exchange for a $50 million fee. PEDP failed to satisfy the conditions of the license, so

the Board revoked it. PEDP thereafter filed for Chapter 11 bankruptcy and commenced

an adversary action against the Commonwealth for fraudulent transfer pursuant to 11

U.S.C. §§ 544(b), 548, 550, and 551, and the Pennsylvania Uniform Fraudulent Transfer

Act (“PUFTA”), 12 Pa. Cons. Stat. §§ 5101 et seq., seeking to recover the value of the

license. 1

The Bankruptcy Court dismissed the adversary action because, among other

things, it was barred by sovereign immunity. The District Court affirmed. We agree and

will also affirm.

I

A

As we explained in In re Philadelphia Entertainment & Development Partners, LP,

879 F.3d 492, 495 (3d Cir. 2018) (“Phila. Ent. I”), the Board awarded a slot machine

license to PEDP, for which PEDP paid $50 million. The “Board required PEDP to open

*∗
This disposition is not an opinion of the full Court and, pursuant to I.O.P. 5.7,
does not constitute binding precedent.
1
The Complaint was filed by PEDP, but is now being prosecuted by Persil
Mangeur LLC, the Trustee of PEDP’s liquidation fund. For simplicity, we refer to the
plaintiff as PEDP.
2
its facility and commence the operations by May 2009, but PEDP did not meet this

deadline and has never opened the facility. . . [and] the Board . . . revok[ed] PEDP’s slot

machine license[.]” Id. The Pennsylvania courts rejected PEDP’s challenges to the

revocation orders. See Phila. Ent. & Dev. Partners, LP v. Pa. Gaming Control Bd., 34

A.3d 261, 268-80 (Pa. Commw. Ct. 2011); Phila. Ent. & Dev. Partners, LP v. Pa. Gaming

Control Bd., 41 A.3d 852 (Pa. 2012).

Thereafter,

PEDP filed a petition in bankruptcy under Chapter 11 of the Bankruptcy
Code, . . . and [an] adversary complaint against the Commonwealth. . . .
PEDP asserted claims to avoid what it claimed was a constructively
fraudulent transfer under 11 U.S.C. §§ 548(a)(1)(B) and 544(b) and under
[PUFTA], . . . [and sought to] recover payment from the Commonwealth of
the full value of the transfer, which PEDP estimated to be $50 million, the
amount of the license fee it had paid.
...
[T]he Bankruptcy Court dismissed the adversary complaint [based on the
Rooker-Feldman doctrine,] In re Phila. Ent. & Dev. Partners, L.P., 549 B.R.
103, 110-11 (Bankr. E.D. Pa. 2016)[,] . . . [and] the District Court affirmed.

Phila. Ent. I, 879 F.3d at 495-98. We reversed, concluding that the Rooker-Feldman

doctrine did not bar the Bankruptcy Court’s review of the fraudulent transfer claims, id.

at 502-03, and remanded for the District Court to address, among other things, “whether

the Eleventh Amendment bars judicial review of the Trustee’s claim that the license

revocation was a constructively fraudulent transfer under § 548(a)(1)(B) or § 544(b) and

the PUFTA.” Id. at 504.

B

On remand, the Bankruptcy Court dismissed Plaintiff’s fraudulent transfer claims

with prejudice. In re Phila. Ent. & Dev. Partners, L.P., 611 B.R. 51, 57, 77 (Bankr. E.D.

3
Pa. 2019) (“Phila. Ent. II”). The Court concluded, among other things, that sovereign

immunity barred the claims because they (1) did not invoke the Court’s in rem

jurisdiction nor were they ancillary to that jurisdiction since the license did not constitute

property or an asset of PEDP, id. at 68; and (2) sought only to recover the purported

value of the license, making it a suit for money damages, which is not subject to the

narrow sovereign immunity exception set forth in Central Virginia Community College v.

Katz, 546 U.S. 356 (2006), Phila. Ent. II, 611 B.R. at 67. 2 The District Court affirmed,

see In re Phila. Ent. & Dev. Partners, LP, 623 B.R. 114, 123 (E.D. Pa. 2020) (“Phila. Ent.

III”), holding, among other things, that sovereign immunity bars the fraudulent transfer

claims because the license was not the property of PEDP.

PEDP appeals.

II 3

A

2
Both the Bankruptcy and District Courts also explained that establishing a
property interest in the license was a threshold requirement for Plaintiff’s claim under §
548 and establishing that the license was an asset of the debtor was a threshold
requirement for a claim under PUFTA, which Plaintiff asserted via § 544(b). Phila. Ent.
II, 611 B.R. at 68-69; see also In re Phila. Ent. & Dev. Partners, LP, 623 B.R. 114, 120
(E.D. Pa. 2020) (“Phila. Ent. III”). Because these courts found that the license was a
revocable privilege under Pennsylvania law, they held that it did not constitute a property
interest under § 548 or asset under PUFTA. Phila. Ent. II, 611 B.R. at 68-73; see also
Phila. Ent. III, 323 B.R. at 118, 120-21.
3
The Bankruptcy Court had jurisdiction to hear the adversary proceeding under 28
U.S.C. § 157(b). The District Court had jurisdiction to hear the appeal of the Bankruptcy
Court’s order under 28 U.S.C. § 158(a). We have jurisdiction over the appeal from the
District Court’s order under 28 U.S.C. §§ 158(d)(1) and 1291.
“Because the District Court acted as an appellate court, we review its
determinations de novo.” In re Titus, 916 F.3d 293, 299 (3d Cir. 2019). We review the
Bankruptcy Court’s legal conclusions de novo as well. Id.
4
 Because sovereign immunity limits our jurisdiction, see In re Hechinger Inv. Co.

of Del., 335 F.3d 243, 249 (3d Cir. 2003), we must first determine whether the

Commonwealth has waived the sovereign immunity that would otherwise bar PEDP’s

suit. “Waivers of the Government’s sovereign immunity, to be effective, must be

‘unequivocally expressed,’” and are narrowly construed. United States v. Nordic Vill.

Inc., 503 U.S. 30, 33-34 (1992) (citation omitted). In the bankruptcy context, we have

determined that the sovereign immunity defense is unavailable for causes of action that

“further[] a bankruptcy court’s in rem jurisdiction.” 4 See In re Venoco LLC, 998 F.3d

94, 104 (3d Cir. 2021) (citing Katz, 546 U.S. at 370-78). As a result, if PEDP cannot

show it had a property interest in the license, then this adversary proceeding does not

concern PEDP’s bankruptcy estate and is barred by sovereign immunity because it does

not further the Bankruptcy Court’s in rem jurisdiction. See id. at 104-05 & n.12 (noting

that sovereign immunity is not foreclosed in fraudulent conveyance proceedings where

the purported transfer is not of the debtor’s property (citing Phila. Ent., 549 B.R. at 123)).

Accordingly, we must determine whether the license was PEDP’s property.

B

4
Section 106(a)(1) of Title 11 also embodies a waiver of sovereign immunity.
Section 106(a) provides that “sovereign immunity is abrogated as to a governmental unit
to the extent set forth in this section with respect to . . . Sections 544, . . . 548, . . . 550,
[and] 551 . . . of this title.” 11 U.S.C. § 106(a). “[E]nactment of [§ 106, however,] was
not necessary to authorize the Bankruptcy Court’s jurisdiction over [in rem] preference
avoidance proceedings” against states, Katz, 546 U.S. at 361, so a discussion of § 106 is
unnecessary to determine whether the Commonwealth waived its sovereign immunity
defense.
5
 We generally “look to state law to determine the nature of a debtor’s interest in

property.” In re Net Pay Sols., Inc., 822 F.3d 144, 158 n.13 (3d Cir. 2016); see also

Butner v. United States, 440 U.S. 48, 55 (1979) (“Property interests are created and

defined by state law . . . [u]nless some federal interest requires a different result.”).

Because Pennsylvania statutes govern this dispute, and we must interpret them to

determine whether PEDP had a property interest in the license, we “apply the

[Pennsylvania] Statutory Construction Act [“SCA”], which directs us to ascertain and

effectuate the intent of the General Assembly.” Johnson v. Phelan Hallinan & Schmieg,

LLP, 235 A.3d 1092, 1097 (Pa. 2020) (citing 1 Pa. Cons. Stat. § 1921(a)). According to

the SCA, “[t]he best indication of legislative intent is the plain language of a statute.”

Commonwealth by Shapiro v. Golden Gate Nat’l Senior Care LLC, 194 A.3d 1010, 1027

(Pa. 2018). “Words and phrases ordinarily should be understood according to their

common and approved usage.” Id. at 1027-28 (citation omitted). “Only when the words

of a statute are ambiguous will we resort to other considerations to discern legislative

intent.” Johnson, 235 A.3d at 1097 (citing 1 Pa. Cons. Stat. § 1921(c)).

We must decide whether the Pennsylvania Horse Racing Development and

Gaming Act (“Gaming Act”) or PUFTA grants PEDP a property interest in the license.

The Gaming Act provides that “[t]he issuance or renewal of a license . . . shall be a

revocable privilege.” 4 Pa. Cons. Stat. § 1311(d); see also id. §§ 1102(7) (“Participation

in limited gaming authorized under this part by any licensee . . . shall be deemed a

privilege.”), 1326(b) (“[T]he board may at its discretion . . . revoke . . . any . . . license . .

. issued under this part if it receives any information from any source that the applicant . .

6
. is in violation of any provision of this part.”). Moreover, the Gaming Act provides that

a license issued by the Board “shall not be sold, transferred or assigned,” and that the

Gaming Act should not be construed “to create in any person an entitlement to a license.”

Id. § 1327. Thus, under its plain language, the Gaming Act grants only a revocable,

discretionary, non-transferable privilege to operate a facility with slot machines. A

licensee therefore does not own the license, and, accordingly, it is not the property of the

licensee.

PUFTA defines “[p]roperty” as “[a]nything that may be the subject of ownership.”

12 Pa. Cons. Stat. § 5101(b). 5 Ownership, in turn, is “the right to possess a thing.”

Ownership, Black’s Law Dictionary (5th ed. 2016). Although PEDP possessed the

license, the Gaming Act makes clear that there is no entitlement to a license and that a

license is a conditional, revocable, and non-transferable privilege. See 4 Pa. Cons. Stat.

§ 1327; see also Arneault v. O’Toole, 864 F. Supp. 2d 361, 395 (W.D. Pa. 2012)

(Plaintiff “d[id] not have a protected property right under state law to engage in the

gaming industry, since Pennsylvania law expressly makes the granting of a gaming

license a revocable privilege.”). Thus, under the text, the license is not something a

licensee owns and hence it is not property under PUFTA.

PUFTA’s legislative history, viewed in light of the tools of statutory

interpretation, compels the same result. A committee comment to § 5101(b) provides

that “[t]he definition of ‘property’ is intended to be construed broadly, to include any

5
PUFTA’s definition of “[a]sset” includes certain exceptions to “[p]roperty of the
debtor,” but that definition did not include licenses, so it does not inform this dispute.
7
right or interest that contributes to the value of a person.” 6 Id. at cmt. 9. Further, the

comment states that “‘property’ in general includes licenses . . . whether or not

transferable,” and “[i]n particular, but without limitation, governmental licenses . . . that

contribute to the value of the holder in general should be deemed ‘property’ of the holder,

whether or not transferable, regardless of whether such items are deemed ‘property’ for

other purposes.” Id. Thus, § 5101 of PUFTA, read together with its comments, 7

conflicts with the Gaming Act concerning whether PEDP’s slot machine license

constitutes PEDP’s property. While the Gaming Act provides that a slot machine license

is revocable, non-transferable, and not an item to which a party may claim entitlement,

see, e.g., 4 Pa. Cons. Stat. § 1311(d), PUFTA’s commentary provides that governmental

licenses constitute property even if not transferable, 12 Pa. Cons. Stat. § 5101, cmt. 9. In

6
The committee commentary notes that “[t]his chapter, and the comments to this
chapter, were drafted by a committee . . . of the Section on Corporation, Banking and
Business Law of the Pennsylvania Bar Association, with the assistance of the Joint States
Government Commission. The comments are part of the legislative history of this
chapter under 1 Pa. Cons. Stat. § 1939.” 12 Pa. Cons. Stat. § 5101, cmt. 1 (1993).
Because these comments “were before the legislature at the time of enactment and are
appended to the statutory text, we may treat them as evidence of legislative intent.” In re
Tr. Under Deed of David P. Kulig Dated January 12, 2001, 175 A.3d 222, 230 (Pa. 2017)
(citing 1 Pa. Cons. Stat. § 1939 (“The comments . . . of the . . . committee . . . which
drafted a statute may be consulted in the construction . . . of the original provisions of the
statute if such comments or report were published or otherwise generally available prior
to the consideration of the statute by the General Assembly.”)).
7
Although the legislature crafted the Gaming Act presumably aware of PUFTA
and its legislative history concerning licenses, Birth Ctr. v. St. Paul Cos., 787 A.2d 376,
404 (Pa. 2001) (“In enacting a statute, the legislature is presumed to have been familiar
with the law, as it then existed[.]”), it used precise language concerning slot machine
licenses in addition to the fact that they were non-transferable. First, the Gaming Act
specifically calls the license a privilege. 4 Pa. Cons. Stat. § 1311(d). Second, the
Gaming Act makes clear that there is no entitlement to licenses, that they are issued at the
discretion of the Board, and that they are revocable.
8
other words, the Gaming Act is clear that a slot machine license cannot be a licensee’s

property while PUFTA’s commentary states that a governmental license is property.

Where two statutes conflict irreconcilably, the “more specific provisions control

over the general ones.” Commonwealth, Dep’t of Pub. Welfare v. Eiseman, 125 A.3d 19,

32 (Pa. 2015) (citing 1 Pa. Cons. Stat. § 1933). 8 Because the Gaming Act includes the

more specific provision, it controls. 9 The Gaming Act specifically relates to the issuance

and revocation of slot machine licenses and discusses a licensee’s conditional, revocable,

and non-transferable interest in such license. See 4 Pa. Cons. Stat. § 1102. PUFTA, on

the other hand, generally discusses fraudulent transfers of any kind, and, although its

commentary mentions governmental licenses, it does not specifically mention gaming

licenses. See 12 Pa. Cons. Stat. § 5101; id. at cmt. 9. 10 Accordingly, the Gaming Act’s

8
Title 1 Pa. Cons. Stat. § 1933 provides in full that:
Whenever a general provision in a statute shall be in conflict with a special
provision in the same or another statute, the two shall be construed, if
possible, so that effect may be given to both. If the conflict between the two
provisions is irreconcilable, the special provisions shall prevail and shall be
construed as an exception to the general provision, unless the general
provision shall be enacted later and it shall be the manifest intention of the
General Assembly that such general provision shall prevail.
9
The Pennsylvania legislature enacted the more specific Gaming Act after the
more general PUFTA, compare 12 Pa. Cons. Stat. § 5101 (1993), with 4 Pa. Cons. Stat.
§ 1102 (2004), so we cannot presume that the General Assembly intended for PUFTA’s
general provision to prevail over the Gaming Act’s specific statements that the license
constitutes a revocable privilege.
10
PUFTA’s commentary’s use of the word “particular” does not change the result,
see 12 Pa. Cons. Stat. § 5101, cmt. 9 (“In particular, but without limitation, governmental
licenses and permits that contribute to the value of the older in general should be deemed
‘property’ of the holder, whether or not transferable. . .”), because the “governmental
licenses” governed in PUFTA are more general than the specific slot machine licenses
subject to the Gaming Act, see, e.g., 4 Pa. Cons. Stat. § 1311 (titled “Additional slot
machine license requirements”).
9
specific description of the slot machine license as a privilege, and hence not property, is

an exception to PUFTA’s general commentary providing a licensee has a property

interest in a governmental license for purposes of fraudulent conveyances. See 1 Pa.

Cons. Stat. § 1933; see also Vill. of Rosemont v. Jaffe, 482 F.3d 926, 936 (7th Cir. 2007)

(holding that a gaming license is not “a res with respect to which the bankruptcy court

had the authority to displace the state’s police power”). Because the license is a

revocable, non-transferable privilege, it is not property that the debtor owns and hence

not res of the bankruptcy estate. As a result, the Commonwealth retains its immunity

from a suit seeking to recover a license’s value and, accordingly, the adversary

proceeding requesting such relief was correctly dismissed.

III

For the foregoing reasons, we will affirm.

10