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Judge: Lawsuit to reclaim Duluth casino money can go forward

A decision issued by a federal judge in Washington, D.C., on Wednesday could spell new hope for the city of Duluth in its quest to reclaim about $6 million per year that it used to receive from video slot machines at the Fond-du-Luth Casino in downtown Duluth.

U.S. District Judge Colleen Kollar-Kotelly rejected the Department of Justice’s motion for the city’s lawsuit to be dismissed.

As a result, it appears that attorneys representing Duluth will be allowed to make their case that the National Indian Gaming Commission wrongly struck down a revenue-sharing agreement which once provided the city with a 19 percent share of the money that Fond-du-Luth patrons pumped into video games of chance.

The Fond du Lac Band of Lake Superior Chippewa, which operates the casino, stopped sharing casino revenue with the city in 2009 after deeming the payments excessive and inappropriate.

That assessment was affirmed in July 2011 when the National Indian Gaming Commission (NIGC) issued a notice of violation finding that the payments were not in keeping with the Indian Gaming Regulatory Act.

In turn, the band was ordered to cease sharing any casino revenue with the city. Continuing the payments would have run counter to a requirement that the casino be operated for the “sole proprietary interest of the band,” according to the commission.

When the city attempted to appeal the determination, the commission said it lacked standing to do so. Duluth was told that only the band could appeal the notice of violation.

“Of course the band didn’t want to appeal. They got exactly what they asked for,” Duluth City Attorney Gunnar Johnson said, noting that the commission reviewed a 1994 revenue-sharing agreement at the band’s request.

Until the commission’s ruling, Johnson said the band lacked a solid legal leg on which to stand.

He pointed out that in April 2010, a district court granted the city’s motion for summary judgment, holding the band to the 1994 revenue-sharing agreement and requiring that it enter into arbitration to hash out the details of a 25-year extension of the agreement when the first contract expired in 2011.

It was during those arbitration proceedings that the commission issued its notice of violation, which proved a game changer.

In the opinion Wednesday, Kollar-Kotelly wrote: “But for the notice of violation, the city would have been entitled to enforcement of the 1994 contracts and consent decree in the manner determined by the Minnesota District Court prior to the NIGC’s decision.”

Band Chairwoman Karen Diver noted that the band is not a party to the litigation now playing out in Washington.

In an emailed response to a request for comment Wednesday, she observed: “The court only determined that the case could proceed.”

Diver contends that the decision to cut off payments to the city of Duluth was based on careful analysis.

“We believe that the NIGC (National Indian Gaming Commission) would have exercised extraordinary caution and reviewed the legality of its actions before issuing the NOV (Notice of Violation),” she said.

But Johnson questioned the objectivity of federal policy makers.

“Unfortunately, we’ve seen at every turn and every level, political appointees in the federal government, at the NIGC and with the BIA (Bureau of Indian Affairs), who are more than willing to almost act as an advocate or an instrument of the band,” he said.

“We don’t have the political clout the band does, so we need to seek redress in the courts,” Johnson said. “It’s a slow and difficult process, but we’re going to put our shoulder and our back into this and push forward as hard as we can.”

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