(CN) - An Indian casino that lost its operating contract in 2011 may be off the hook for the previous two years' worth of rent, the 8th Circuit ruled.
The city of Duluth, Minn., and the Fond du Lac Indian Band of Lake Superior Chippewa entered into a contract in 1986 to establish Fond-du-Luth casino.
Two years later, the federal government passed the Indian Gaming Regulatory Act, which requires that an Indian tribe have "sole proprietary interest" in any Indian gaming, as well as exclusive control.
In accordance with the new federal law, the band and the city entered into a new contract establishing the band as sole owner of the casino, and stipulating that it would pay the city 19 percent of the casino's revenues until 2011. The contract deferred stating a rate for the second rental term, 2011-36.
Consistent with this agreement, the band paid Duluth $75 million from 1994 until 2009. It stopped making payments, however, because it claimed that the 19 percent rate failed to offset certain expenses against casino revenues.
Duluth sued for breach of contract shortly after, and the National Indian Gaming Commission (NIGC) found the 1994 consent degree illegal under the Indian Gaming Rights Act. It ordered the band to cease operating under the consent degree or face sanctions.
A federal judge in Minneapolis ordered the band to pay Duluth rent owed through 2011. The ruling also let the band off the hook as to negotiations for rent through 2036.
A three-judge panel of the 8th Circuit partly reversed Monday, saying the violation finding undermined continued enforcement of the consent decree.
"In the situation here, the NIGC's change in the law governing Indian gaming made illegal what the earlier consent decree was designed to enforce," Judge Diana Murphy wrote for the St. Louis, Mo.-based panel.
"That determination provides ample support for the district court's decision to grant prospective relief from continued enforcement of the 1994 consent decree," Murphy added.
The band has no obligation to pay the rent withheld from 2009 to 2011.
"A change in governing law can represent so significant an alteration in circumstances as to justify both prospective and retrospective relief from the obligations of a court order," Murphy wrote.
"By the time the band began withholding rent in 2009, the city was on notice that the NIGC's views on the validity of the 1994 agreement might well have changed," she added.
Both parties likely had access to intervening commission decisions, "and they may well have relevance in ascertaining whether retrospective relief should be granted," the ruling states.
The issue of possible overpayments from 1994 to 2009 is scheduled for trial and not a subject of appeal.
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