(CN) - A federal judge lacked the authority to confirm a $93 million arbitration award to the partial owner of a California card club, after the club was forfeited to the government for its involvement in a drug-trafficking ring, the 9th Circuit ruled.
According to the ruling, Park Place entered into a joint-venture agreement with LCP Associates to run the Bell Gardens Bicycle Club, a legal card-playing club in Bell Gardens, Calif. Park Place was unaware that LCP had financed more than $12 million dollars of the initial investment using the proceeds of a drug-trafficking ring.
Law enforcement officials discovered the fraudulent activity following a money laundering investigation, and in 1987, indicted several individuals, including some LCP partners.
A federal court in Florida entered an order forfeiting the club to the United States, but found Park Place an "innocent owner" and returned its 35 percent interest in the club. From 1990 to 1999, the government managed its interest in LCP and the club through a series of forfeiture trustees.
In 1998, Park Place filed a $150 million lawsuit against the United States in federal court in Los Angeles, accusing the government of mismanaging the club during its eight years of control.
Park Place was awarded $93 million, and the government appealed. The Court of Federal Claims denied Park Place's motion to confirm the award, and the Federal Circuit granted the government's motion to dismiss the plaintiff's appeal.
Judge Bybee declined to confirm the arbitration award, ruling that the United States retained sovereign immunity by maintaining interest in the club.
"Our reversal of the district court's judgment confirming the arbitration award essentially returns Park Place to the Court of Federal Claims, the only forum in which its contract claims may plausibly be said to belong," Bybee wrote. "We recognize that the Federal Circuit has seemingly suggested, albeit in a somewhat opaque disposition, that neither it nor the Court of Federal Claims may confirm the arbitration award. We express no opinion on whether this decision was correct, but we acknowledge the frustrating nature of this result for Park Place.
"Although we sympathize with Park Place's apparent jurisdictional predicament, we simply cannot waive sovereign immunity where Congress has not, and we cannot exercise jurisdiction where none exists."
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