Appeals Court Sends Casino Dispute Back to District Court, Again

Appeals Court Sends Casino Dispute Back to District Court, Again

A long-running dispute over revenues from the Fond du Luth Casino is headed back to U.S. District Court after a ruling Friday by a three-judge panel from the 8th Circuit U.S. Court of Appeals.

Updated: 05/08/2015 3:48 PM
Created: 05/08/2015 3:46 PM WDIO.com 
                 
For the second time, a federal appeals court has sent a dispute over Duluth casino payments back to district court, saying the district court did not rule on all of the six factors it had been ordered to consider.

Friday's ruling from a panel of three judges on the 8th District Court of Appeals is the latest in the six-year-old dispute between the City of Duluth and the Fond du Lac Band of Lake Superior Chippewa. This case deals specifically with payments of revenue from the Fond du Luth Casino that the city says should have been made from 2009 to 2011.

The band stopped making payments to the city in 2009 after concluding that its agreement with the city violated federal law. In 2011, the National Indian Gaming Commission issued a notice of violation confirming that the agreement was illegal, but a federal judge ruled in 2011 that the band should still pay nearly $10.4 million for the years 2009, 2010, and 2011.

The band appealed the 2011 ruling, and in 2013 the appeals court sent the case back to U.S. District Court for Minnesota to consider six factors. However, the appeals court now says the district court did not consider one of the factors: the question of whether Congress intended "to ensure that the primary beneficiaries of Indian gaming operations are to be the tribes themselves."

The appeals court has now sent the case back to district court to consider the sixth factor.

Though the notice of violation said federal law requires tribes to be the sole beneficiary of casinos, the City of Duluth has argued that federal law does allow Indian gaming revenues to be used to fund local government operations. However, the appeals court says there is nothing in the record to suggest that the agreement between the city and the band was ever intended to solely cover the cost of city services.

The ruling said that the record indicates property taxes for a non-Indian owner of the casino property would have been $180,930 for 2010, far less than the $6 million the city is seeking for that year. The ruling also said the city has provided almost no evidence regarding the costs of services to the casino and admitted during oral arguments that it had never calculated the costs.

The band had paid 19 percent of gross revenue, totaling $75 million, to the City of Duluth from 1994 to 2009. Mayor Don Ness and other city leaders have repeatedly expressed frustration with the loss of revenue for the city.

Earlier this year, U.S. District Court Judge Colleen Kollar-Kotelly denied the city's attempt to have the NIGC's 2011 notice of violation overturned. The city also lost a federal lawsuit that had tried to prevent the band from placing the Carter Hotel property adjacent to the casino into trust.

Sometimes, A Tribal Agreement Isn't

For what it's worth: Too many of Indian Gambling disputes have taken many years to resolve and require major investments in legal expenses and appeals.

Our view: City, band both benefit from casino cooperation

The Fond du Lac Band may have prevailed this week, mostly, in the latest twist of the ongoing tussle with the city over tribal-run gambling in downtown Duluth. But the issue remains far from resolved, and that’s good.

The Fond du Lac Band may have prevailed this week, mostly, in the latest twist of the ongoing tussle with the city over tribal-run gambling in downtown Duluth. But the issue remains far from resolved, and that’s good. That means there’s still time — plenty of it, in fact — for both sides to see and to embrace the mutual benefit of working together rather than butting heads, with millions of dollars at stake.

A federal judge ruled this week the band no longer has to make payments to the city for the right to operate the downtown Fond-du-Luth Casino. The band had been making the annual, multimillion-dollar payments since striking a deal with the city in 1986. The deal allowed the casino to open. But the band stopped making the payments in 2009, taking advantage of a window of renegotiations to argue the deal was unlawful.

The judge also ruled that the band must pay the city for those missed payments since 2009, so there’s the band’s “mostly prevailed.”

And here’s the “far from resolved.”

First, another court will decide just how much the band owes in missed payments since 2009. Thrown around has been $14 million, but the court will settle “an accounting dispute,” in the words of Duluth Mayor Don Ness, that could change the number.

Second, watch for both the city and the band to appeal this week’s decision, the city to the 8th District Court of Appeals.

“We have to appeal,” Ness said in a meeting with News Tribune editorial board members this week (Tribal Chairwoman Karen Diver declined to comment for this editorial). “It doesn’t make sense that a political appointee can invalidate a contract approved by the federal courts. There had been 10 other (prior) decisions by the federal courts (and) we prevailed on all 10.”

Before this week.

“It’s very confusing to us,” the mayor continued. “The court put a tremendous amount of weight on an opinion by a political appointee.”

It’s easy to see why the city would fight this week’s ruling and why it’s eager to negotiate a compromise and a new deal. The city has been receiving 19 percent of revenues from Fond-du-Luth Casino, totaling about $6 million a year, money it has been using mostly to fix streets.

But the band should want to negotiate, too. If the 1986 agreement becomes null and void what would stop the city and state from negotiating with another tribe to put a casino at the bayfront or at the Duluth Entertainment Convention Center. Either location would promise to be a huge draw — and hugely detrimental to the bottom line of Fond-du-Luth Casino.

The band and city both stand to benefit from working together.

“I’ve always been open to that, to finding a true win-win,” Ness said. “We’ve demonstrated our willingness to be flexible and creative and to think outside the box. I haven’t seen a similar willingness from Fond du Lac.

“I don’t want to take a punitive approach to this,” the mayor continued. “We need to protect the interests of taxpayers. And we need to protect the interests of the city.”

The band, it would seem, has similar interests to protect.