12/06/2011 4:42PM

Suffolk OTB has bankruptcy petition dismissed


A U.S. court has dismissed a bankruptcy petition by Suffolk Off-Track Betting Corp. of New York State, ruling that the county-owned company cannot file for Chapter 9 bankruptcy without approval from the state legislature.

Judge Carla Craig of the U.S. Bankruptcy Court for the Eastern District of New York issued the ruling on Friday, nearly 10 months after Suffolk submitted a bankruptcy petition to the court. Suffolk petitioned for bankruptcy protection under Chapter 9 of the code - a rarely used section reserved for municipalities and locally owned entities -- following approval from the Suffolk County Legislature in mid-March.

In her ruling, Craig said that the county legislature's approval was not sufficient to entitle Suffolk OTB to protection under the code, and that the OTB would need explicit approval from the state government, which legalized county-owned OTB's in the early 1970's.

Suffolk immediately filed a request for a stay of the ruling in order to prepare an appeal, according to court records. When Suffolk submitted its petition, the company said that it could no longer continue to operate profitably unless statutes governing the distribution of revenue from bets at the company's OTB's were changed in the company's favor. Its parlors have remained open since it filed for bankruptcy.

Suffolk was the second New York offtrack betting company to file for bankruptcy, following New York City OTB, which closed its doors permanently last December. New York City OTB had obtained approval from the state legislature for its filing, but it was dissolved after the legislature declined to pass a bill granting the company breaks.