Fond du Lac band, Duluth back in court over casino payments

Talk about it

Casino contract talks between the city of Duluth and the Fond du Lac Band of Lake Superior Chippewa have been on hold since the National Indian Gaming Commission called the previous contract illegal in mid-July.

Attorneys for both parties, however, have been busy.

Since the ruling, the band, which owns and

operates Fond-du-Luth Casino in downtown Duluth, has filed a motion in federal court asking for relief from paying $10 million in back payments awarded to the city after the band stopped making payments in 2009. The band also wants to be relieved of making any future payments to the city and wants to operate the casino without the consent or approval of the city, according to court documents.

Attorneys for the city have filed a number of motions in opposition.

Both parties will head to federal court Wednesday when a judge will hear the band’s latest motions and presumably about the gaming commission opinion. It remains to be seen how much weight that opinion has in court, but a larger issue might be what value the band gets for its payments to the city.

“It’s frustrating that the band is trying to walk away from agreements that the federal government and NIGC put together in a very careful and knowing manner,” said Duluth City Attorney Gunnar Johnson.

The 1994 agreements included terms in which the band, operating the casino on designated tribal land in downtown Duluth, paid 19 percent of its gross revenues, or about $6 million per year, to the city for 25 years.

In August 2009, Fond du Lac Chairwoman Karen Diver said the 1994 agreements were unlawful and ceased payments. In July, the gaming commission backed up her claim when they issued a notice of violation, telling the band to stop paying the city and to stop sharing financial records with them.

Whether the violation notice has any sway in federal court has yet to be determined.

The gaming commission, made up of a chairman appointed by the president and two other commissioners appointed by the Secretary of the Interior, was established to enforce the Indian Gaming Regulatory Act, passed in 1988. The commission approved the original contract between the city of Duluth and the Fond du Lac band.

But William Rice, associate law professor and co-director of the Native American Law Center at the University of Tulsa College of Law, said he’s not surprised the commission would change its original opinion about the legality of the agreements.

“I think people have learned quite a bit since those days,” he said. “It could have been that they viewed it as something on the edge of what they could approve and just said it was OK and didn’t really consider whether it would have been prohibited.”

On the other hand, Rice also said in his estimation the gaming commission has broadened its view over time of the authority it holds.

“Like any government agency, they tend to wield their power to the extent they can,” he said. “And the courts have struck them down a couple times.”

Bob Maki, one of the attorneys for the city, said he doesn’t think the gaming commission’s opinion will sway the court because a judge already ruled in favor of the city in the lawsuit over back payments. In that case, the court denied the band’s request to put the lawsuit on hold until the gaming commission could finish its review of the 1994 agreements.

Johnson also said the city hired an expert who looked at more than 200 gaming contracts and, although most are between casinos and states, the 1994 agreements seemed in line.

“We found that the compensation the city of Duluth is receiving is not outside the norm,” he said.

Rice said while the amount of compensation may be similar, the case probably will hinge on what the casino is getting for its $6 million per year.

“It’s going to depend on the specifics of what that deal was, but you have to answer the question, ‘What’s the tribe getting for its huge payment to the city?’” he said. “The tribe can reimburse the city for certain costs, but what’s the budget of the police department?”

For her part, Diver has said she must comply with the gaming commission or risk fines and a possible shuttering of the casino.

“We will continue to protect the band’s interests in whatever venue is necessary, i.e., direct negotiations, arbitration or the courts,” she said.

Rice didn’t think the final court decisions would extend beyond the city of Duluth because off-reservation casinos are so rare.

“There’s probably not a greater impact here,” he said, noting that other agreements usually have specified services they receive for payments. “Compacts made with states have something that makes it quid pro quo.”

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