All the case of PRBA versus HMS, all solids. Mr. Daly. Yes. Good morning. Good morning. Just a little note that we're going to running short on time this morning. So we're going to pay close attention to the flux of please budget your time accordingly. Yes. I was early time. Yes. Three minutes please. Yes
. Let me say it initially. It is my position that the applicable theory that I'm proceeding on is the in is the employment case. Now, or the employment, you explicitly limited yourself to produce an employment by virtue of a stipulation of the district court. Correct. Yes. And by what I believe I argue here, as set forth in my summary of legal argument, yes, in your in your response and grief to the summary judgment motion before the district court, I believe you explicitly limited your argument. Yes. Yes. Yes. So nothing was wrong. Although I raised that argument in prior motions on the for preliminary injunction and in regard to a summary judgment initially filed by the defense. So how was the authority pervasively entwined with the operation of the service facility? Yes
. As I understand the test, I have to demonstrate that there's an authority. And so further to be pervasive employment, you would agree with you, not that a mere government, less or private lease arrangement would not by itself be enough under the current law. Yes, it wasn't often burdened, but burdened no longer applies. All right. So what else do you have besides lean or tenant relationship? Okay. First, there's the first there's the policy. A comedian once said something of which is actually very true that the highest honor of New Jersey bestows upon a citizen is to be is to have a rest area in the New Jersey turn pipe named after that. That Pennsylvania is the highest honor bestowed upon a politician who has somehow evaded conviction or had a national return. I haven't. Which is not far gone. Oh, no, you lead. I think now that the down the down the policy is that these facilities give the appearance or these facilities are a statement of the government policies
. You walk in the door. Do you really think that perception is a inadequate, insufficient, they assisted the term in state action? I do not think that by standing alone, it is. I think when you were there cases, are there cases that set forth any kind of test for perception? I know you've argued perception in your briefs, but I'm struggling to find out where in the jurors' prudence there is any test of perception. We're talking about an objective test. Do we talking about subjective test? Because I found nothing to support the existence of such a test. Well, there's the there's the opinion regarding the airport where there was a discussion whether whether patrons would would perceive that what that the met that the materials that were being sold were a statement of the government. You're talking about the Gnett case. Yes, but there's no test late in that opinion. No, there is however that that factor is discussed. So the court obviously cooking into consideration, although it didn't set forth the test. Does the authority have any hand in the day-to-day operations of host? Yes. Why? Well, they they well first of all they have a booth there that they set up and they give that information in the booth at the foreign advisor
. How does that impact on policy management or control? Well, as to management and control, it demonstrates that the lobby area where the communicative information and materials is provided, the the state has control over it. There's also a contractual provision that in the contract between host and the vendor sets out the brochures. That contract first it states that host is acting as the agent of the landlord and the landlord but there's nothing running from the landlord is there's nothing in the contract between the authority and host that gives the authority any kind of say in the placement of brochures or marketing materials. Is that well if we reduce the scope of the analysis to brochures, no there is there is because the less he can't convey to anybody else something it doesn't have. So the authority would have to convey to host some power property interest that it was then able to convey or subwrestle to someone else. Well, I agree with that however I believe that any contracts that host executes sort of like subleases with the vendor for the raxon things that those require the approval of the of the authority but even if they don't, it would seem to me that a fair inference is that when host puts something in a contract with the vendor that requires the vendor to make available a certain number of slots for information to be pervaded by the authority. You made that decision. In the contract. In the contract. In the contract between between host and the vendor. CMT. Yes
. But the state was not a party to that contract. So this is a unilateral decision of HMS host isn't it? Well, I think it's a fair inference that they wouldn't be putting that in unless the authority let me get to this point because I wanted to ask you a question regarding Brentwood and this is a statement of Justice Souder in Brentwood. He said, state action may be found if though only if there is a close nexus between the state and the challenge action. In other words, between the authority and the room in this case, between the authority and the removal of the brochures. But I don't see that close nexus. Meam. I see it in terms of the communications that are there. What communications? Physically, I see the client. The state did not physically remove, did not tell anybody to remove, did not direct anybody to remove the brochures. That would serve as a close nexus. No, nor did the authority acting as the state as far as I can tell from the record. Suggest to the authority anything with respect to what it could or should display or how it should do so
. Isn't that correct? Excuse me. Is there anything in the record to suggest that the authority provided any kind of guidance or suggestions to host concerning the types of brochures or marketing materials it could set out at the plaza? No. There's no, there's no memory of the... So, the authority found it worked on that. And what if anything that the state do with respect to placing the brochures in the host area or removing their brochures? Well, they provided a hoat. My position is that the area where the brochures are placed is controlled by both host and the state. My house is controlled by the state. Because they go in and they put in there whatever they want. This is the authority. Is there any evidence that they did that? Well, yes
. There's notices of the meetings of the authority that are posted in there. They would have to be those notices would have to be transferred to host or the authority itself goes and puts them off. What is the effect or impact of that posting on anything having to do with the day-to-day operations of the plaza? The effect is that it's not being operated as the lessy doing its business just by itself. In Brickwood, you're familiar with Brickwood. There was an economic relationship between the plucking authority and the restaurant that was located in the parking area. By the building burden. I stand correct in Brickwood. Now, just to draw a comparison, there was no economic relationship here between the authority and the service center. How did they divide the profits? Who did? The authority, the lease, said that the authority got a percentage of the funds and profits that host received from operating the rest area. That's the lease. There was a basic rent and then the rent was over and over and above that there was a percentage of the profits. But that was the profits
. The profits were operating in the service area, but with regard to the brochures, there was a profit that host was receiving. But that was between CMG and HMS Host. Well, I would assume that that was profit derived from the operation of the service area, so that the state would be receiving a percentage of that too. I think that by recollection of the lease was that all profits that host derived, the net profits that it derived. There wouldn't be any profit to the authority in this case. Would there be by the challenge section? After all, the brochures are being removed, not placed there, so there wouldn't be any profit by the challenge section in this case, by the authority. Well, considering the content of the brochures, the reason that they were removed, I take the position that is a very reasonable inference, is you wouldn't have removed them if you didn't feel that certain customers might not like them and therefore would not use host services. I believe that the profit motive was what came into play here for removing the brochures. You didn't like that you got a coupon for free lap dance. The entire time is up. Mr. Daly, we'll get you back on the rebuttal
. Thank you. Mr. Metson. May it please, Court, Catherine Fletz on behalf of the Appleese? I am assilling from the Court's questions and Mr. Daly's responses that the Court will not consider his argument that their state action under the Burton symbiotic relationship test or the public function test that he raises for the first time in his reply brief by citing West versus Atkins. Could you describe the economic relationship that the authority has with HMS host and which host has with CMT, the CTM? Certainly. It is a variation of a standard landlord tenant relationship. They have a similar situation. So basically, to their presence there and with regard to the brochures? Yes. Host enters into long-term leases with the authorities and pays the authorities as rent the greater of a stated annual rent or a percentage of the gross profits from the operation of the service. Whichever is higher. Whichever is higher
. And that is because of the brochures. And that does not have anything to do with the brochures except to the extent. No, but HMS host does receive money for the placement of the brochures. That's correct. We're suing to its contract and CMT. Does that money somehow travel to the authorities? Well, to the extent it contributes to the profits that host profits from the operation of the service centers and those profits in gross are greater than the stated annual rent in the lease agreement. However, even if there is some flow of money back to the authorities from the operation of the service pluses, that is not sufficient to constitute state action as this court made clear in the Christman case. As you were calling that case, there was a harness racing facility that was run by Doverdowns. It was a private corporation. It was licensed. Yes, that was clear because it was a private entity that engaged in the challenge conduct. That's correct, as is host. And in that case, the private entity did share profits from the state lottery and video and from the harness racing with the state. But this court found that was not sufficient to constitute state action or to convert the private entities conduct into state action. I would say that this case is clear. It looks like not only at revenue and profit, but at personnel, do any host employees have any role in the operation or the conduct of business of the authority or vice versa? No, there is no connection. Anything in the record can happen. Nothing in the record. In fact, I think the evidence is undisputed that the authorities play no role in the updated day operation and maintenance of the service pluses. Would you position with respect to the role of perception by members of the public? Yes, I think the court has made it very clear that entwinement has to be actual entwinement of the government in the policies, management, or control of the entity engaged in the complaint of conduct and that the perception of entwinement is not enough. And there are two things I would point to. Brentwood Academy, the court says specifically, you must look at reality and not form. And in the GANIC case, which Mr. Daley cites for the proposition that the public's perception is relevant to the state action inquiry, the court made a comment about this public's perception in the context of discussing the burdens and biotic relationship test
. And in that case, the private entity did share profits from the state lottery and video and from the harness racing with the state. But this court found that was not sufficient to constitute state action or to convert the private entities conduct into state action. I would say that this case is clear. It looks like not only at revenue and profit, but at personnel, do any host employees have any role in the operation or the conduct of business of the authority or vice versa? No, there is no connection. Anything in the record can happen. Nothing in the record. In fact, I think the evidence is undisputed that the authorities play no role in the updated day operation and maintenance of the service pluses. Would you position with respect to the role of perception by members of the public? Yes, I think the court has made it very clear that entwinement has to be actual entwinement of the government in the policies, management, or control of the entity engaged in the complaint of conduct and that the perception of entwinement is not enough. And there are two things I would point to. Brentwood Academy, the court says specifically, you must look at reality and not form. And in the GANIC case, which Mr. Daley cites for the proposition that the public's perception is relevant to the state action inquiry, the court made a comment about this public's perception in the context of discussing the burdens and biotic relationship test. However, as the court knows, the burden case has been narrowed and confined to its unique facts. You know, there are some comparable facts, so because in Burtonley parking authority and the restaurant were sharing funds as a result of a the channel interaction, which was discriminating against African Americans. But similarly here, wasn't the authority sharing some of the profits with HMS Host as a result of the variation? Sotomayor, but I would suggest that, first of all, you should not consider the Burton symbiotic relationship test. Two, I would say Burton has been narrowed to its unique facts. Three, I would say that's fine. There are some comparable facts. There are some comparable facts, but more recent precedent has said that the factors, many of the factors that the Burton Court relied upon are no longer a basis for funding state action, and the courts have made clear that the critical element in Burton was that the complaint of conduct, that is, the refusal of the South African American customers, was indispensable to the operation of the collaboration between the State and the Bloomington Parking and the private entities. Despite the fact that Burton has been limited to its facts, in fact, Burton itself limited itself to, or self-referentially mentioned the limitation of its peculiar facts, but that aside, either test, pervasive in twine, that were what's been characterized as symbiotic pursuant to Burton, are exquisitely facts sensitive tests. That's correct. I would say that the conclusion is that. Following up then on Judge Fuentes' question, if we have, as we had in Burton, a recognition of the fact that profits or revenues, perhaps derived from the sale of food at the restaurant, were enhanced because of the discriminatory conduct of the owner and operator of the restaurant, i.e
. However, as the court knows, the burden case has been narrowed and confined to its unique facts. You know, there are some comparable facts, so because in Burtonley parking authority and the restaurant were sharing funds as a result of a the channel interaction, which was discriminating against African Americans. But similarly here, wasn't the authority sharing some of the profits with HMS Host as a result of the variation? Sotomayor, but I would suggest that, first of all, you should not consider the Burton symbiotic relationship test. Two, I would say Burton has been narrowed to its unique facts. Three, I would say that's fine. There are some comparable facts. There are some comparable facts, but more recent precedent has said that the factors, many of the factors that the Burton Court relied upon are no longer a basis for funding state action, and the courts have made clear that the critical element in Burton was that the complaint of conduct, that is, the refusal of the South African American customers, was indispensable to the operation of the collaboration between the State and the Bloomington Parking and the private entities. Despite the fact that Burton has been limited to its facts, in fact, Burton itself limited itself to, or self-referentially mentioned the limitation of its peculiar facts, but that aside, either test, pervasive in twine, that were what's been characterized as symbiotic pursuant to Burton, are exquisitely facts sensitive tests. That's correct. I would say that the conclusion is that. Following up then on Judge Fuentes' question, if we have, as we had in Burton, a recognition of the fact that profits or revenues, perhaps derived from the sale of food at the restaurant, were enhanced because of the discriminatory conduct of the owner and operator of the restaurant, i.e., the owner simply wanted to have only white customers there. And here we have reflected a desire not to upset patrons of the plaza for fear that they otherwise might not patronize the plaza, hardly really talking about the same thing, about an impact on the flow of revenues to host, in our case or to the restaurant in Burton. No, Your Honor, I don't think we are, and that is because in Burton, the complaint of conduct, the discrimination based on race, was indispensable to the success of the enterprise. Here hosts unilateral decision made without any input from the authorities to exclude a single commercial brochure from the brochure labs, cannot have been indispensable to the success of the service plazas, such as to convert host conduct, private conduct into state action. And I would say the record has nothing in it to say that the removal of the single brochure had any financial impact on hosts or the authorities. Much less was indispensable to the success. And I would say that, you know, while it's conceivable that a racially integrated restaurant in 1961 would not have survived, it is hard to imagine that so many travelers would be offended by the various brochure brochure as to scuttle the success of the service plazas had it remained in the brochure racks. And I would suggest that recent authority, including Chrisman, suggest that the private leasing of public space, the sharing of products with the state, eating the substation by the state of the private entities, enterprise, is not sufficient to constitute state action. Isn't there a sign of where the brochures were placing that the display racks be general of the mission and open to the public at large? There was something in the contract between host and CTM media. And it's contract between HMS host and..
., the owner simply wanted to have only white customers there. And here we have reflected a desire not to upset patrons of the plaza for fear that they otherwise might not patronize the plaza, hardly really talking about the same thing, about an impact on the flow of revenues to host, in our case or to the restaurant in Burton. No, Your Honor, I don't think we are, and that is because in Burton, the complaint of conduct, the discrimination based on race, was indispensable to the success of the enterprise. Here hosts unilateral decision made without any input from the authorities to exclude a single commercial brochure from the brochure labs, cannot have been indispensable to the success of the service plazas, such as to convert host conduct, private conduct into state action. And I would say the record has nothing in it to say that the removal of the single brochure had any financial impact on hosts or the authorities. Much less was indispensable to the success. And I would say that, you know, while it's conceivable that a racially integrated restaurant in 1961 would not have survived, it is hard to imagine that so many travelers would be offended by the various brochure brochure as to scuttle the success of the service plazas had it remained in the brochure racks. And I would suggest that recent authority, including Chrisman, suggest that the private leasing of public space, the sharing of products with the state, eating the substation by the state of the private entities, enterprise, is not sufficient to constitute state action. Isn't there a sign of where the brochures were placing that the display racks be general of the mission and open to the public at large? There was something in the contract between host and CTM media. And it's contract between HMS host and... And CTM media, the vendor? And the reason we raised that point is that technically hosted the right to object to the bare exposure brochure because it limited access to the gentleman's nightclub to people who were 18 years old. It was not general admission. And that language was not with the consideration of the authority? No, the authorities were not a party to the contract between host and CTM media. And there's no evidence in the record that they reviewed the contract, that they approved the contract, that they controlled the contract. In fact, the evidence is undisputed that the contract between the authorities' host was utterly silent as to the placement of brochures in the racks and that there was no evidence that the authorities ever directed HMS host with respect to the placement of brochures. That's the first amendment doctrine they probably couldn't. That is the authority could not tell HMS host what it could display and what it could not display. That's correct, Your Honor. I would like to return to the perception point. So Mr. Bailey argues that a visitor coming into the service classes might think that the state runs the service classes. It's a good argument, though
. And CTM media, the vendor? And the reason we raised that point is that technically hosted the right to object to the bare exposure brochure because it limited access to the gentleman's nightclub to people who were 18 years old. It was not general admission. And that language was not with the consideration of the authority? No, the authorities were not a party to the contract between host and CTM media. And there's no evidence in the record that they reviewed the contract, that they approved the contract, that they controlled the contract. In fact, the evidence is undisputed that the contract between the authorities' host was utterly silent as to the placement of brochures in the racks and that there was no evidence that the authorities ever directed HMS host with respect to the placement of brochures. That's the first amendment doctrine they probably couldn't. That is the authority could not tell HMS host what it could display and what it could not display. That's correct, Your Honor. I would like to return to the perception point. So Mr. Bailey argues that a visitor coming into the service classes might think that the state runs the service classes. It's a good argument, though. I think because if you've been on that roadway and you've seen New Jersey Turnipike and this is a service center, there are signs all over that seem to involve that facility with the state, the state of New Jersey. I don't know if Pennsylvania is the same way, but I suspect you'll see signs for maybe Pennsylvania State Police and so forth. I think Your Honor would be hard to find any case that supports the proposition that the public's perception of entwiment is enough. I would respectfully suggest in the Gannock Court this court rejected that very notion. It said it really rejected out of hand any danger that the public would attribute the conduct of the concessionaire. So you need something more than perception. Absolutely, you need something more. It has to be actual entwiment in the management or control of the private entity. Well, one of the incidents, if you will, of entwiment that is argued by your opponent is the looming presence of portraits of the governor and Senator Farley. What do you make of that? And number two, unless I miss something, I didn't see any provision in the contract that required host to do that. I don't remember any provision in the contract that required that either, Your Honor. And once again, I don't think there's any support for the proposition that perception is enough
. I think because if you've been on that roadway and you've seen New Jersey Turnipike and this is a service center, there are signs all over that seem to involve that facility with the state, the state of New Jersey. I don't know if Pennsylvania is the same way, but I suspect you'll see signs for maybe Pennsylvania State Police and so forth. I think Your Honor would be hard to find any case that supports the proposition that the public's perception of entwiment is enough. I would respectfully suggest in the Gannock Court this court rejected that very notion. It said it really rejected out of hand any danger that the public would attribute the conduct of the concessionaire. So you need something more than perception. Absolutely, you need something more. It has to be actual entwiment in the management or control of the private entity. Well, one of the incidents, if you will, of entwiment that is argued by your opponent is the looming presence of portraits of the governor and Senator Farley. What do you make of that? And number two, unless I miss something, I didn't see any provision in the contract that required host to do that. I don't remember any provision in the contract that required that either, Your Honor. And once again, I don't think there's any support for the proposition that perception is enough. In the Gannock case, which involved the Newark International Airport, presumably there were governmental messages, legal notices, photographs of public officials. And the court didn't see any risk that the public would attribute the actions of the private concessionaires who are leasing the news stands to the port authority. And I would respectfully suggest that the same is true here, that there's no danger that the public would perceive it. And even if they did, it's not enough under the law. And I think the district court was correct in finding that there was nothing beyond near argument to support the proposition that a reasonable person would think that all the messages were communicated by the state. They did not submit any consumer surveys. They really just made the ball assertion. And it's a little absurd for a person to think that the state is the sole source of brochures about local restaurants, local venues when they're side by side with national chains in the context of the service plaza. So I think both the law does not support perception as entwiment, and I think the facts do not support that a reasonable person would think that this was the service plaza was run by the state. Unless you don't..
. In the Gannock case, which involved the Newark International Airport, presumably there were governmental messages, legal notices, photographs of public officials. And the court didn't see any risk that the public would attribute the actions of the private concessionaires who are leasing the news stands to the port authority. And I would respectfully suggest that the same is true here, that there's no danger that the public would perceive it. And even if they did, it's not enough under the law. And I think the district court was correct in finding that there was nothing beyond near argument to support the proposition that a reasonable person would think that all the messages were communicated by the state. They did not submit any consumer surveys. They really just made the ball assertion. And it's a little absurd for a person to think that the state is the sole source of brochures about local restaurants, local venues when they're side by side with national chains in the context of the service plaza. So I think both the law does not support perception as entwiment, and I think the facts do not support that a reasonable person would think that this was the service plaza was run by the state. Unless you don't... Is it true that there's an information booth inside the service plaza that is for public or is it something that is run or at the behest of the state? In one of the plazas, the farly plaza, I believe there is an information booth that was set up by the state. By the state? That's correct. And it is service by state employees? I believe that's correct. I would also point to the fact that there is case law out there suggesting that highway rest stops and service plazas are neither public for nor designated public for. We cited those in our reply and support of the summary judgment motion below in response to the public function test. And I would direct your attention to those. Those appear at pages 14 through 17 of our reply brief, 15 through 17. Specifically, the federal courts have uniformly held that highway rest areas are neither traditional or designated public for. Okay, Ms. Mooselleth, there's nothing further. Okay, thank you, Your Honor. Well, take your argument into account
. Is it true that there's an information booth inside the service plaza that is for public or is it something that is run or at the behest of the state? In one of the plazas, the farly plaza, I believe there is an information booth that was set up by the state. By the state? That's correct. And it is service by state employees? I believe that's correct. I would also point to the fact that there is case law out there suggesting that highway rest stops and service plazas are neither public for nor designated public for. We cited those in our reply and support of the summary judgment motion below in response to the public function test. And I would direct your attention to those. Those appear at pages 14 through 17 of our reply brief, 15 through 17. Specifically, the federal courts have uniformly held that highway rest areas are neither traditional or designated public for. Okay, Ms. Mooselleth, there's nothing further. Okay, thank you, Your Honor. Well, take your argument into account. And get back to Mr. Daly. It's just just briefly. As Judge Smith pointed out, these are very fact-sensitive cases. And a couple of the facts in the Gata case and the New York airport case. Factual difference. The patrons of the airport are patrons of the airlines. The airlines are private entities. That's why they're going to the airport. In this case, virtually every patron who walked into the rest area is a toll-paying patron of the governmental entity. It's a toll is a pay to use the highway. And if they don't pay it
. And get back to Mr. Daly. It's just just briefly. As Judge Smith pointed out, these are very fact-sensitive cases. And a couple of the facts in the Gata case and the New York airport case. Factual difference. The patrons of the airport are patrons of the airlines. The airlines are private entities. That's why they're going to the airport. In this case, virtually every patron who walked into the rest area is a toll-paying patron of the governmental entity. It's a toll is a pay to use the highway. And if they don't pay it. And because of that, you say that the authorities are involved in state action for incentives that occur. I'm not saying solely because of that. I'm saying that this is another fact going into the overall residual facts involved in making that the normative judgment as to whether state action should be applied in this case. I am getting the impression, Mr. Daly, that your strongest argument is the one involving perception. And now you've added another one which is that the patrons of the service bosses pay a toll. Is that accurate? Is there something more than that we should consider than perception and the payment of a toll? Well, the economic factors, the perception factor, the overall situation of who are the patrons of HMS? You do not argue that the state is entwined in any way with the operation of the service boss. Well, they are entwined to the or HMS is entwined with the state to the extent that HMS is entwined enough that it doesn't have to pay local real estate taxes, which is why I grew it up the Actions case of the New Jersey Supreme Court that held that they did not. The fact that the state provides a tax exemption or a tax benefit to a private entity doesn't mean that it's entwined with that. Not at all, but that's not the situation here. This is at the situation where the legislature said this category of private businesses will receive its tax benefit. This is a situation where the New Jersey Supreme Court, analyzing the situation, said the function that is being performed here is the equivalent, is so close to what the authorities are given the duty to engage in that the private entity that does this portion, providing this portion of the services that the authorities are to provide, it doesn't have to pay local real estate taxes
. Thank you very much for your argument and I wish you a lot of luck