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Frustrated Duluth Loses Casino Challenge in D.C.

WASHINGTON (CN) - Regulators that blocked Duluth, Minn., from collecting Indian gaming revenue did not act arbitrarily, a federal judge ruled Tuesday.

U.S. District Judge Colleen Kollar-Kotelly begins the 15-page decision by noting that the case at hand is part of "a long saga" over the Fond-du-Luth, a casino that Duluth created by contract with the Fond du Lac Indian Band of Lake Superior Chippewa in 1986.

With the passage two years later of the Indian Gaming Regulatory Act, which requires that an Indian tribe have "sole proprietary interest" in any Indian gaming, as well as exclusive control, the band and the city entered into a new contract.

Though this 1994 deal established the band as sole owner of the casino, it required the band to pay Duluth 19 percent of the casino's revenues as rent until 2011.

Duluth reaped $75 million from 1994 until 2009 when the band stopped making payments because it claimed that the 19 percent rate failed to offset certain expenses against casino revenues.

As Duluth sued for breach of contract, the National Indian Gaming Commission (NIGC) found the 1994 consent degree illegal under the Indian Gaming Regulatory Act. The commission issued a notice of violation with respect to the rent that Duluth had collected from the band, and it ordered the band to cease operating under the consent decree.

With the rent fight still bouncing between a Minneapolis federal judge and the 8th Circuit, Duluth filed suit in D.C. to challenge the 2011 notice of violation.

Judge Kollar-Kotelly granted summary judgment Tuesday to the commission, a regulatory agency under the U.S. Department of the Interior, finding that its issuance of the notice of violation was neither arbitrary nor capricious.

Regardless of its approval of the contract in 1994, the commission has enforcement authority to issue notices of violations such as the one at issue, Kollar-Kotelly found, calling Duluth's arguments to the contrary "less than wholly clear."

"Plaintiff points to no source of authority that would foreclose the agency's 2011 enforcement action based solely on the previous actions it took," she wrote.

Duluth's "halfhearted[]" challenge to the commission's interpretation of "sole proprietary interest" also falls flat, according to the ruling, giving deference to the commission's interpretation of its regulations.

Though Duluth claimed that the notice of violation carried impermissible retroactive effects, Kollar-Kotelly found that the city missed the mark.

"Any frustrated expectations on the part of the city of Duluth do not transform the prospective relief granted by the District Court into impermissible retrospective relief," Kollar-Kotelly wrote.

Duluth already persuaded the court in Minneapolis that the band is not entitled to "retrospective belief," i.e. return of the rent it paid the city between 1994 and 2009, according to the ruling.

The 8th Circuit is considering an appeal of that finding. Back in 2013, it was this federal appeals court that cleared the band on the rent it started withholding in 2009.

M. Alison Lutterman represented Duluth in the D.C. case, while Laura Louise Maul represented the commission.

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