Aqueduct Entertainment Group has asked a state Supreme Court judge for permission to sue the New York State Division of Lottery and other elected officials, including Gov. David Paterson. A decision from the judge could come as soon as Tuesday.

AEG, which earlier this year had won the previous round of bidding to operate and develop an Aqueduct racino, was subsequently denied a gaming license and a new bidding process was launched by the Lottery Division two months ago.
AEG and its chairman, Richard Mays, in their court filing cite “injury they presently suffer as a result of the arbitrary, capricious, unauthorized and discriminatory actions taken against them by Lottery, Gov. David Paterson, Senate President Malcolm Smith and Assembly Speaker Sheldon Silver.”

A Lottery Division spokeswoman declined to comment, noting that the Lottery Division has not been served. “We have not seen the lawsuit,” she said.

“We seek a temporary restraining order until we have a hearing or trial,” said Daryl Davis, a partner at Doman Davis, the law firm representing AEG. “We did the research, our claims are valid, and I expect the judge to grant our application.”

The lawsuit was filed with the state Supreme Court in Schenectady County and claims that the gambling license rules were changed after AEG was selected as the winner of the lucrative Aqueduct contract. Therefore the Lottery Division's decision to declare AEG ineligible for a gaming license had “no rational basis, was arbitrary and capricious, and was an abuse of discretion.”

Separately, the botched AEG selection is still under investigation by the state's inspector general office. However, AEG's attorney and the court filing claim: “Absolutely no one associated with AEG has been accused of any wrongdoing since they did nothing improper.”

Meanwhile, the Lottery Division is expected to recommend a new winning bid on Aug. 3. Last week, the Lottery Division disqualified SL Green and Penn National Gaming, formerly seen as frontrunners in winning the latest bid. The disqualifications left one bidder, Genting New York, a relatively unknown entity that is part of a giant Malaysian company which operates casinos across the country, to win the race. Genting's proposal is still being vetted by the Lottery Division.

If the judge rules in favor of AEG, the latest contest could well be halted. AEG filed the suit so it can move forward with its plans to build the Aqueduct facility, said Mr. Davis, adding that the company will also pay the $300 million upfront licensing fee that it was required to pay in the earlier contract.

“They are asking to be restored as the rightful contract winner; they want to break ground and do what they were ordered to do,” he said. “The opportunity was unlawfully taken away from them.”