Karen Diver discusses another recent court decision against Duluth

At risk of setting off an avalanche of flaming comments here on PDD I am going to post this interview that I worked on today.

The City of Duluth’s request for an appeal of the 8th Circuit Court of Appeals full panel has been denied. Karen Diver came in to the WGZS studios today to discuss her take on that decision and the way forward. In addition to all of the legal wrangling and tribal sovereignty issues that she takes up in this interview, I also thought it was interesting when (toward the end) she addressed a desire to cooperate with Duluth businesses and establishments including the NorShor which is much beloved by many a PDDer. I have divided interests in this matter personally and even if I did have a fully formed opinion about what would be “right” I am not really in a position to express it here. And anyway, I don’t have a fully formed opinion. And that’s where you come in PDD:

What do you think the FDL Band should do going forward? What do you think Duluth should do?

(Please note that the video may provide some context, but really this is a radio interview, not television, the lines are blurred on social media).

49 Comments

BadCat!

about 10 years ago

As I understand (which may be wrong), federal law says that a tribal casino can only be owned by the tribe with no other non-tribal owners. If that's true, the case seems pretty cut and dry.
Also, 27th Avenue West was on the street repair schedule up until the casino decided to stop paying. Screw you casino, and screw you persistant potholes!

[email protected]

about 10 years ago

At about 5:40, does she accuse Ness of "hate-mongering" and "inflammatory rhetoric"? 

How someone can in such an even tone complain that _someone else_ uses inflammatory rhetoric right after you have called that person a "hate monger" is beyond me.  

I don't know enough about the facts of the case (although I would guess that this is the latest of a series of mis-steps going back decades, and I would guess some would say hundreds of years).  So I can't speak to the right way forward.

But as a rhetoric teacher, I gotta say:  there are problems here.

Nobody

about 10 years ago

I just looked up the case to refresh myself on the timeline ... others may need this as well.
This is from City of Duluth v. Fond du Lac Band of Lake Superior Chippewa, 708 F. Supp. 2d 890, 893 (D. Minn. 2010).  (If you search Google for the case citation ("708 F. Supp 2d 890") you can see the entire decision)

-The City of Duluth (the "City") and the Fon du Lac Band of Lake Superior Chippewa (the "Band") enter into agreements in 1986.

-The 1986 Agreements, approved by the United States Secretary of the Interior, provided that the Band purchase land in downtown Duluth and, with the City's approval, transfer the land to *894 the United States, which would hold the land in trust for the Band, declare it a reservation, and authorize the operation of gaming activities on the land. 

-The 1986 Agreements also created the Duluth-Fond du Lac Economic Development Commission ("the Commission"), comprised of four appointees by the Band and three appointees by the City, to manage gaming operations at the casino, named the Fond du Luth Casino.

-The revenue ... was to be split between the Band, the City, and the Commission, which were to receive 25.5%, 24.5%, and 50%, respectively.

-On October 17, 1988, President Ronald Reagan signed the Indian Gaming Regulatory Act ("IGRA" or "the Act")

-The Band filed suit in federal court (case number 5-89-163) the following year, seeking a declaration that the 1986 Agreements with the City violated a provision of the IGRA, 25 U.S.C. § 2710(b)(2)(A), which requires that an Indian tribe "have the sole proprietary interest and responsibility for the conduct of any gaming activity" on Indian lands.

-The City and the Band requested the Associate Solicitor of Indian Affairs review the arrangement between the City and the Band, which resulted in a November 1990 opinion letter that the City's share of net profits under the Commission Agreement amounted to a violation of the sole proprietary interest and responsibility requirement of § 2710(b)(2)(A).
 
-In December 1990, United States District Judge Paul A. Magnuson dismissed the Band's action without prejudice on the ground that "the public interest is best served by allowing the Federal regulatory authority established by the IGRA," the National Indian Gaming Commission ("NIGC"), to review the arrangement regarding the Fond du Luth Casino and give its recommendations

-The NIGC reviewed the 1986 Agreements and, in September 1993, concluded that "the current operation of the [Fond du Luth Casino] violates the Indian Gaming Regulatory Act" because "the Band does not have the sole ownership or control of the ... Casino." 

-The NIGC Chairman advised the parties that "unless the Band and the City are able to settle the pending dispute, [the NIGC] will be initiating an enforcement action to bring the Fond du Luth [Casino] into compliance with IGRA." 

-The parties' settlement negotiations produced an agreement in June 1994.

-The NIGC reviewed the settlement agreement, concluded that it "returns full ownership and control of the Fond du Luth Casino to the Band and is consistent with the requirements of IGRA," and issued a report and recommendation to Judge Magnuson that the settlement agreement be approved.

-Accordingly, seven new agreements were executed on June 20, 1994 ("the 1994 Agreements"), which, among other things, (1) abrogated two of the 1986 agreements; (2) modified the Commission Agreement to restructure the Commission as being comprised of two people, the Mayor of the City and the Chair of the Band; (3) provided that the *895 Band would sublease the Fond du Luth Casino from the Commission; and (4) provided that through March 30, 2011, the rent paid by the Band would equal 19% of the gross revenue from "Video Games of Chance" and would be permanently assigned to the City (the parties were to meet by January 1, 2010, to negotiate in good faith regarding the percentage of revenue owed to the City for the 25 year term beginning on April 1, 2011). 

-The parties returned to federal court on a new civil action (case number 5-94-82) filed by the Band for injunctive relief and a declaration that the 1986 Agreements are invalid as contravening § 2710(b)(2)(A). 

-Guided by the new arrangement set forth in the 1994 Agreements, the parties entered into a stipulation, agreeing that (1) dismissal of the Band's action with prejudice was warranted; (2) the 1994 Agreements complied with the sole proprietary interest requirement of § 2710(b)(2)(A); (3) the NIGC reviewed the 1994 Agreements and concluded that they are in conformance with the IGRA; and (4) the 1994 Agreements and all of its attachments "are in their entirety expressly incorporated into this Stipulation and Consent Order, and are hereby expressly made a part of it."

-The parties also informed Judge Magnuson that they "jointly desire the Court's approval in order to ensure binding implementation of the settlement agreement." 

-Judge Magnuson issued a consent decree approving the parties' stipulation, dismissing the Band's complaint with prejudice, and ordering that the court retain jurisdiction over the matter for purposes of ensuring the parties' compliance with the 1994 Agreements. 

-On August 6, 2009, the Band sent the City a letter and a resolution that had been passed by the Band's Business Committee, announcing that the Band was ceasing all payments to the City under the 1994 Agreements. The Band asserted the City has no legally assertable proprietary interest in the Fond du Luth Casino, the parties' agreements were premised on the erroneous assumption that the City's approval in 1986 of the creation of the reservation had legal effect, and the City has received more than $80 million under the arrangement but has provided no valuable consideration in return.

-The City responded on August 12, 2009, declaring that the Band's August 6 letter and resolution constituted a default or breach of the 1994 Agreements and requesting that the Band cure its default or breach within thirty days.

-The Band did not respond, and the City filed this action on September 29, 2009.

What bothers me is the breaking of a deal.  Don't sign up for a certain deal and then decide later that it doesn't work for you. (Or if you don't like it, you can grumble about it but should continue to perform under the agreement for the full term).
 
This is why we have contracts.  If you are unhappy with the deal, when the contract ends renegotiate it.  Or, if you are lucky, the other party may agree to ink a new contract before the old one has expired. 
Breaching the contract before the full term has run is dishonest and illegal.  I believe the Band should make the payments up through 2011 - what the 1994 agreements required.

gluvin

about 10 years ago

Fond Du Lac is not to blame here and neither is the City.  The NIGC is the organization that has "changed its interpretation" of the agreement they once agreed to in 1994.  At the end of the day, if Fond Du Lac is not going to be able to pay anything to the city of Duluth, it leaves the city little choice but to attempt to shut it down.  There will surely be a legal fight on that issue but, you can't have something for nothing.  It is unfortunate that the NIGC has changed their minds on the agreement and now the City and the Tribe are going to both lose out in the end.

Chris

about 10 years ago

I'd cut off all city services to the building.  Gas, water, steam, etc....But I may be a little pettier than a city government should be. 

  I have no clue how an existing agreement, agreed upon by both parties, wouldn't be grandfathered in and allowed to stand.  The entire fact there is even a casino in the middle of downtown Duluth in the first place, is because the City agreed to it.  Based on conditions approved by both the Band and the City.  While the courts may have stated the Band no longer has to pay the City, I don't get how that non-payment doesn't violate the 1994 or the original agreement.  If nothing else it should void the land transfer.

Dorkus

about 10 years ago

Well.. it seems rather simple. 

If the band isn't willing to hold up their end of the bargain, then they should cede the rights of the property to the city. 

If I make an agreement to buy a car and I stop making my payments, they take the car back. 

If I buy a house and stop making the payments, they take the house. 

If I put something on layaway and stop making the payments, they take it and put it back in inventory. 

Obviously this is putting US-Native history aside and looking at this from a purely business matter. They made an agreement to pay a certain amount of money for the rights to have a casino within the city limits. Having the casino where it is currently located is a HUGE benefit and is the main reason why they negotiated for that spot of land in the first place. 

The casino provides no benefit to the city. People do not come to Duluth to gamble. The only reason it is there is because we, as a city, needed the money.

We need the money now more than ever. 

Looks like the only option is to build our own charity casino in a much better location.

Joel

about 10 years ago

I agree. The casino is most definitely NOT a tourist destination for Duluth. I think we should pull the plug and revoke their license to operate. Why should Duluth have to deal with the problems that accompany any casino, increased crime, drugs, and gambling addictions, if we don't receive any benefit? Let the band reopen the casino in the middle of their town, we don't want it. If they won't or can't share the revenue, then begone! Begone I say!

Don Ness

about 10 years ago

I can't tell you how upsetting this is to me.

Chairwoman Diver has really crossed a line with her characterizations here.  She completely fabricates several points.  

- She falsely claims that we never initiated conversations with the Band.  I have the correspondence to prove that we did several times.  

-  She falsely claims I said, "we'll see you in court".  Complete fabrication - I would never say something like that.

- She falsely claims that the arbitrator closed the arbitration because we refused to put an offer on the table.  The fact is that we put two offers on the table only to get their "best and final offer" which was that they keep the $12 million they owe us, we get ZERO going forward, AND we give them our parking ramp for nothing in return.  It was ridiculous.

-  The hate mongering comment is way out of line and she should apologize for making that statement.

Throughout the course of this conflict, I have always stayed focused on the issue.  However, time and time again, she attacks me personally.  Well, I'm tired of it.

Let's look at the facts:   There are over 90 other agreements between Bands and state and local government across the nation - some of which have way more than 6 million a year in revenue sharing.   And yet, ours is the only agreement that has been deemed illegal.

Why?  Because in this case (unlike the other 90+ agreements) this Band actively lobbied the federal government to find our contract in violation.   I was with Chairwoman Diver and her attorneys when the "notice of violation" was handed down.   They were hugging each other in celebration.  Why?  Because by asking the government to find them in violation, they were then able to strip away the rights of the city under this contract.

The Band stopped payment before ever hearing from the federal government in clear violation of the terms of our contract.  Only after they stopped payment did they ask the federal government to find them in violation.  So clearly this has always been about the money - the support of the feds for their position is only to the tool to accomplish their goal. 

The Band initiated this conflict, they sought the legal battle, and they have been actively working to undercut the city's contractual rights.  The city's position has always been to comply protect the contract that we've had with the Band - the ONLY thing we want is for the agreement that allowed the establishment of the casino in downtown Duluth to be honored.  With that, there is tremendous room to find compromise (including on revenue) and a win-win for both communities.

But why would the Band give us anything when they have the full weight and influence of the federal government on their side?

In summary:  Chairwoman Diver made the decision to withhold payment, she sought to remove the city's rights under the contract, and her position is that the residents of Duluth should get less than a hundred thousand dollars a year.  This despite the fact that without the full support and partnership of the city of Duluth in the mid-80s, this casino (which has brought 100s of millions to the FDL Band) would never have been established.

Ramos

about 10 years ago

I have never heard the mayor make any statements about the Band that could be remotely considered hate-mongering. Diver's name-calling, however, does seem to play well with her constituents, or at least with the person interviewing her, who doesn't question it at all, and in fact repeats it a little later on.

I am always discouraged when I see power and influence smash through legal contracts and agreements. The Band could not have built the Fond-du-Luth Casino without the city; the city could not have a casino downtown without the Band. It was always a symbiotic relationship. But now, because the Band has lobbying power in Washington and the city does not, that relationship has been destroyed.

A weird consequence of this that I have been wondering about involves the Carter Hotel. If the band converts the Carter Hotel property into reservation land, as it is looking like they might be able to, what is to stop them from buying up more adjacent properties and expanding the size of their Duluth reservation even more? Why not buy the trashed-out Kozy and convert it to reservation land? Why not the NorShor? If the city is powerless to stop these conversions, the Band can theoretically expand their presence in Duluth as much as they care to.

Normally, I am in favor of reservations increasing their holdings. In this case, however, where an old Sears store was converted to reservation land for the sole purpose of building a casino in a non-reservation city, the whole process seems bizarre and a little disturbing.

"Hate-mongering."  Ptooey!

Brandon L

about 10 years ago

It's near comical to hear Ness speak of, lets say fair minded approach.  He has spent the last 2 years down talking the Casino, and by hand the Reservation. Polarizing the Duluth Community vs. it's own folk. I get sick of hearing it myself. Subtle but race-baiting. Attempting to correlate Duluth s Ill's to the Fond Du Luth block. It does not go unnoticed. What also goes unnoticed is how the ruling was out of Fond Du Lacs hands. The perpetual hammering down on the Heads of the Fond Du Lac Reservation utterly uncalled for. I perverse this as nothing but misguided.  The results have spoken for themselves.

Ramos

about 10 years ago

I don't feel like our communities are polarized, Brandon L. I don't think less of the Band's citizens because of this issue. I'm just really, really irritated by the Band's leadership. The only downtalk that I've heard has come from Karen Diver (and not just in this interview). Nothing that the mayor has said even comes close to race-baiting, as far as I'm concerned. If you would care to cite a few examples, I will certainly consider them.

[email protected]

about 10 years ago

I don't know.  When my wife and I fight about something, sometimes, it's better to let that thing go than to keep hammering at the object that divides us.  The Casino seems to be dividing the political leadership of the tribe from the political leadership of the town, and if Brandon is right, that is simmering down to the level of the people.

How essential is the casino to the health of the tribe or the city?  If essential to neither (especially since the renovations at Black Bear?), let this bone of contention go (shutter the casino) and restore harmony.  If it is essential to either, then let's work out some way to make this work.

JimJ

about 10 years ago

Karen Diver articulated her position well. This is a contract dispute that has been litigated and the Tribe has prevailed. Big fan of Mayor Ness but on this issue he's been a huge disappointment and embarrassment.  His apparent naivete with respect to Tribal law is astounding.  Comparing the validity of the Duluth compact to the other 190+ agreements nationwide is absurd.  The other agreements typically exchange money for exclusivity or rights to additional avenues of gambling.  With huge money at stake on both sides, every agreement is drafted by the best legal teams to make sure their interests are protected.  The Mayor may want to look internally and hold accountable the lawyers who drafted these poor agreements and who upset the apple cart by litigating over a couple million in overpayments.  

The NIGC members change over the years and the Tribes have the resources to hire the best attorneys.  This isn't the old days when Tribes would kowtow to whatever the Bureau of Indian Affairs decided.  

One unsolicited suggestion for Mayor Ness, the City lost, accept it and move on.  Spend an hour with a top-flight national law firm specializing in Tribal law and have them explain why this contract is finished and who is accountable for drafting this invalid agreement that incompatible with federal law. Educate yourself as to the differences between Duluth's agreement and other valid ones.  The Tribe is simply protecting their interests, the City did a horrific job in protecting the taxpayers.

Ramos

about 10 years ago

You speak sensibly, JimJ. However, none of it seems to match up with the newspaper pictures from the Eighties where tribal and city leaders stood grinning together in triumph at being able to establish the only Indian casino in the nation located in a city off the reservation. The tribe and the city needed each other, and worked tirelessly together, to make it happen. That is why the revenue-sharing agreement makes intuitive sense to me. The Band and the city are, or were, partners.

I don't advocate closing the casino. Even if the city isn't making anything from it, such a move would throw a lot of people out of work and further harm relations between the Band and the city. That is another source of aggravation for me, actually: When a powerful business uses the threat of lost jobs as a way to get the city to bend to its will.

I don't know why the Band couldn't renegotiate the contracts and agree to pay the city a smaller amount for the next 25 years. I don't know why they had to have it all. It seems very greedy to me.

Ramos

about 10 years ago

It's just another example of something I've been noticing throughout my life: When people gain the economic high ground, they tend to lose the moral high ground. It's too bad.

Ramos

about 10 years ago

Fond du Lac Reservation Chairman Bill Houle and Duluth Mayor John Fedo were sitting in the mayor's office one day in early 1983, mulling over tough times and a shrinking job market when one of them came up with a crazy idea. "John said, 'What is it we can do together?'" Houle explained in the same office last week. The answer will bring, among other things, at least one national television crew to Duluth this weekend for the grand opening of what is arguably the most unique approach to economic development the city has ever taken. That's when the Fond-du-Luth Gaming Casino, a high-stakes bingo and pull-tab hall, will open its doors with a glitzy gala promoters say will be packed with "Las Vegas excitement." The parlor is unique because it's a first-of-its-kind commercial union between city and Indian officials.
Duluth News Tribune and Herald, Sept. 11, 1986

vicarious

about 10 years ago

Glitz and Las Vegas-style entertainment: Always a good bet for a long-term Northern Minnesota economic investment.

Herzog

about 10 years ago

I noticed the Reader has an ad for Ladies Night a la Fondulac.  It looks so glamorous,  but I know that when I got there, instead of hotties, I would be pummeled by the unpleasant aroma of people either half dead by age, or ethics, with a thousand yard stare. And I would have an indescribably bad feeling about a certain, I don't know what...

I'm a closet numerologist as much as Lundgren, so the irony of the date of the article, 15 years short to the day of you know what ... Well do you, Mr. Ness? 

It's curious civilizations may self destruct in the same way that people do.

Kodiak

about 10 years ago

Unfortunately, this debacle has taken on an air of a squaring off of Mayor Ness v Chairwoman Diver. Karen Diver is UMD and Harvard educated and highly articulate. I think she rather likes to flex the muscle of her legal acumen and basks in the glory like some kind of heroine for the persecuted American Indians.
 
Don Ness' entire persona is antithetical to self-aggrandisement and polemic. He's process driven, consensus-seeking and results oriented. I, therefore do not believe that he would stoop to hatemongering or token racism to win popular opinion.

Such is the character-assassinating rhetoric of Diver and I for one, see through the smokescreen. Say what you like, but Diver is running a PR campaign and bona fide negotiations with the City of Duluth are merely a sideshow. That is really sad and ultimately very destructive.  The sum of such an equation is Lose:Lose.

There is every reason to expect a Win:Win result but Diver and her cohorts are hiding behind the veil Federal bureaucracy to default on their contractual obligations.

So, if it is merely a legal requirement to desist from making future payments to the City, then what prevents Diver from discussing "gifting" the retroactive proceeds, and offering to devise a new arrangement henceforth that would recompense the City for its part in establishing the casino?

The radio interview was revealing about Diver but woefully inadequate from a journalistic standpoint. The interviewer allowed Diver to dance all over him and did not actively or knowingly seek to uncover the truth or the answers that we all need to know. Instead his inexperience allowed Diver to use the air space to hammer home her untrampled rhetoric and that is unfortunate for all of us.

gluvin

about 10 years ago

JimJ,  The city wrote a contract with the tribe that the NIGC agreed to and signed off on back in 1994.  The NIGC changed their view of the legality of the contract in '08-'09.  There is no way that Duluth could have seen that coming.

What is Fond Du Lac's end game here?  Karen D. seems to be running a lot of talk out there but, what are they going to settle on in the end?  I don't see how insulting the opposition is going to lead to an agreeable situation in the long run.  Is Fond Du Lac looking to get out of the Duluth city limits but wants someone else to blame for the job cuts?  It would make it easier for them if someone shut down their casino for them.

JimJ

about 10 years ago

Tony, several good points made.  The Band would argue that the nearly $80 million in revenue sharing has fulfilled their financial obligations in full and then some.  You suggest Chairwoman Diver renegotiate the contracts and pay a smaller amount for the next 25 years.  Clearly her responsibility is to her Band members who elected her.  Even if she wanted to forgo some revenue to benefit Duluth taxpayers, she could expect to lose her job if she tried - she'd be replaced next election by a Chairperson who would restore the Band's best interests as the top priority. 

Let's say Chairwoman Diver decided to sacrifice profit for the benefit of Duluth taxpayers.  She's essentially imposing a tax on her own Band members and arbitrarily deciding how that money should be spent. In that sense she's usurping here role as an elected government official.

If you compare the hardships suffered and all of the resulting social ills that come from poverty and oppression on the reservation, Fon du Lac clearly needs the money more than Duluth.  Over 14% unemployment and 37% of the Band's members are not in the work force.  Casinos have created jobs and done something meaningful to help mitigate the depth and breadth of poverty.  

Contract disputes are litigated in this county every day.  The winners don't hand over spoils especially to a losing party.  Time to move on...

JimJ

about 10 years ago

Gluvin, with a contact generating $6 to $8 million a year, a proactive annual review has some merit.  If Duluth had top-flight legal counsel and knew they're in danger of not being compliant they may have had a chance to renegotiate a valid agreement for less money.  They were caught completely off-guard.  Everyone's a genius in hindsight though.  

What's most astounding is Mayor Ness' complete lack of understanding of the legal decision.  Read in the Star Tribune that he stated all the other compacts with the Bands nationwide are in jeopardy as a result of the Duluth ruling.  The statement would be funny if it wasn't so sad and frighteningly stupid.

Fon du Lac's endgame is maximizing profits and revenue by expanding and upgrading the Duluth casino.  The Band has won every recent Court battle convincingly and Duluth has no leverage in the negotiations.  It's business as usual and Mayor Ness may want to change his attitude toward the Band and view the downtown Casino as an asset, tourist draw and major employer.

Ramos

about 10 years ago

"If we tie [the casino] in with the convention and development in the city, this could really take off. That's why we want to work closely with the city."
FDL Executive Director Robert Peacock, in the News Tribune and Herald, June 18, 1985
Once Duluth and Fond du Lac decided the idea was worth pursuing, officials untangled red tape for more than two years. The idea, which was based on the assumption that city land could be bought by and held in trust for the Fond du Lac reservation, was unprecedented.
The Duluthian magazine, July/August 1986
The first problem: persuading skeptics at the Bureau of Indian Affairs to declare the casino Indian country.....[Duluth Mayor] Fedo and [FDL Chairman] Houle said BIA officials finally approved that step in June 1985 because the two convinced administrators it was in keeping with President Reagan's budget-cutting policies: It would promote economic development without spending a dime of federal money.
Duluth News Tribune and Herald, Sept. 11. 1986
"There never was a relationship with the city of Duluth - only payments."
FDL Chairwoman Karen Diver, in the Cloquet Pine Journal, Jan. 18, 2013

Ramos

about 10 years ago

If the city made $80 million from its share of slot-machine revenues, then the band made $320 million. I guess that wasn't enough.

gluvin

about 10 years ago

$80 million is a significant sum but, we must look at that cost over time and the continued services that Fond Du Lac is receiving.  The City has spent millions on infrastructure and continues to pay millions on street repair, snow removal, and city development.  Other companies in Duluth pay taxes and other bills to the city to help with these costs.  Fond Du Lac now pays next to nothing from what I have found and has for a few years now.  Karen D said they had offered to pay the city some money but, there were no numbers referenced in her comment.  Also, the new NIGC definitions might forbid any payment to the city from Fond Du Lac in the future.  

This makes a very hard situation for all that are involved.  We must remember that the stated $80 million is roughly 19% of the profits from certain types of gambling.  Meaning Fond Du Lac has made somewhere around $420 million over the same time period.  Why anyone in the Tribe would want to jeopardize this is really a head-scratcher. My hope is that rational thoughts would prevail and some of the true motivations would come forward.

Don Ness

about 10 years ago

Jim, I went to DC last year and spoke to Senate committee staff and asked them why our contract was being cancelled and not any of the other contracts across the nation.

The answer was "those other bands have not made it an issue." If it is true that the sole proprietor standard is violated because of revenue sharing (which is Karen Diver's position) -- then there are 90 other agreements that could also be deemed illegal -- because each one of them has revenue sharing.  In some cases, in dollar amounts much larger than Duluth.  

What makes our case any different? The FDL Band sought to strip away our rights under this contract by getting a political appointee to adopt their position.  

If the courts hold that a band is able to strip away the rights of the other party in a contract because of the revenue sharing element of the contract -- then, yes, I believe that each one of those other contracts are in danger. 

Without the action of the band to seek a notice of violation from the NIGC, we would still be operating under this contract.  The process to determine the next 25 years of the contract would have been completed and we would not be debating this issue right now.

If, on the other hand, we agree that it is possible to find agreement that includes revenue sharing and complies with the law (like the other 90+ agreements do), then both the city and the band should be committed to do just that.  

It's either one or the other.   Either 1) there is a legal way to share revenue or 2) all of those other agreements are also illegal.  That was the point I was making in the Star Tribune article and I stand behind it.

I strongly believe the first case is true -- I strongly believe that we can come to a reasonable agreement in which both parties benefit and we feel represents the spirit of the partnership which established the casino in downtown Duluth in the first place.

Here is the final comment that I will make at this time: I am absolutely convinced that it is possible for the city and the band to come to a compromise on this matter in which the city receives some share of revenue.  

It wouldn't be $6 million a year, but it would be a number in which the citizens of Duluth could feel that the spirit of partnership and common cause to establish this casino was honored. I am convinced that with this agreement in hand, the NIGC would approve it.   

If the NIGC did not approve that agreement, then they would have to also take action against every other contract that have terms that include revenue sharing.

Herzog

about 10 years ago

Gambling is stupid.

-Berv

about 10 years ago

+1 Herzog.  If gambling is legal, marijuana should be too.

[email protected]

about 10 years ago

What is the relationship between the skywalk and the casino?  Do we have any specific obligation to the casino in terms of skywalk maintenance and construction?  Or is the casino just "something between the Wieland Block and the hospital?  If we do have specific obligations, how do they look in this climate -- rock solid or negotiiable?

JimJ

about 10 years ago

Ramos & Gluvin, Gross revenue and profits are confused here.  The deal cut was to pay the City nineteen percent of the casino's 'gross revenues' as rent.  Gross Revenues from Video Games of Chance is defined as total revenues minus pay-outs to players.  Thus the Band has to pay its 250 employees, utilities, slot machines and all other expenses from it's remaining share of the Gross revenue.

Ramos

about 10 years ago

If the city made $80 million from its share of slot-machine revenues, then the band had $320 million in gross revenues. Apparently that wasn't enough.

JimJ

about 10 years ago

Mayor Ness, as mentioned earlier have the utmost respect for the impressive work you've done.  On this issue still having difficulty understanding your position.

Dan Browning's Star Tribune article read 'Ness said the 8th Circuit's ruling should concern more than 200 other local governments in the country that have similar contracts with tribes.'

In the Notice of Violation (NOV) Chairwoman Stevens rejected the Duluth's claim that payments to the City are legally comparable to payments tribes make to states in tribal-state compacts.  'The City's comparison of the 1994 Agreements with tribal-state compacts is misplaced and unpersuasive. Under IGRA, tribal-state compacts are fundamentally different than the agreements at issue here.'

Tribes are permitted to trade revenue for something of tangible value, normally an exclusive zone to run a gambling business without commercial competition.  

This case has substantially different fact situation.  The NIGC held that the $75 million paid in rent over the life of the agreement had no 'rational relationship' to actual services provided. In order to be legitimate, payments to another governmental entity need to be of  'tangible economic benefit justifying a share of gaming revenue.' The contract absurdly was structured as 'rent' on a building that that City did not even own.  

After a couple of years of litigation expectations are the leaders have a crystal clear understanding of why Duluth's agreement is invalid and many other agreements nationwide are in full force and effect.  Disagree wholeheartedly with the contention that the other agreements with will vanish overnight.  They were carefully constructed by legal teams with a thorough understanding of Indian Gaming law.  Duluth spent a considerable sum litigating and lost every single issue thus far.  The tendency to hire Duluth law firms and rely on the City Attorney's office may not be the wisest course of action when litigating in a highly specialized area.

Ramos

about 10 years ago

I'm not denying that the city made out well on that deal; the city did. When the band agreed to pay 19 percent of video games of chance to the city back in 1994, I don't think anybody realized how popular video games of chance would become. That is why I have always thought it would be fair for the city to take a smaller percentage in the future, say 6 or 7 percent. My problem is with the band behaving as if there was never a partnership. 

The casino was a gamble entered into jointly by the city and the band, and the gamble paid off. I think it makes perfect sense that both the city and the band should continue to enjoy the rewards.

Of course, I know that my thoughts will have no impact whatsoever on the issue. They rarely have an impact on any issue. I just like saying them.

Ramos

about 10 years ago

I'm sure if the Band's "top-flight legal counsel" that JimJ seems so enamored of were given the task of finding a way to legally share revenue with the city, instead of finding ways to screw the city over, they could do it. It's a matter of priorities.

Dorkus

about 10 years ago

"Tribes are permitted to trade revenue for something of tangible value, normally an exclusive zone to run a gambling business without commercial competition."

Is this not what the current FDL location is? An exclusive zone where they run a gambling business without commercial competition?

"This case has substantially different fact situation. The NIGC held that the $75 million paid in rent over the life of the agreement had no 'rational relationship' to actual services provided."

The money is not being paid solely for the services the city provides. It is being paid so that the tribe can have a casino on non-reservation land.

"In order to be legitimate, payments to another governmental entity need to be of 'tangible economic benefit justifying a share of gaming revenue.'"

Being in the middle of a city the size of Duluth is not a "Tangible economic benefit" for the Tribe? I find that hard to believe.



Though, I agree that we likely should have retained some attorneys who are specialists in Tribal and gaming laws.

JimJ

about 10 years ago

Dorkus, the points you make were litigated for the past 2 years and the Court ruled in the Tribe's favor on every count.  

Duluth's downfall began when a federal agency, the National Indian Gaming Commission (NIGC), was tasked with interpreting and enforcing a statute enacted by Congress (the Indian Gaming Regulatory Act (IGRA)).    

NIGC reviewed Duluth's Agreement and the main issue boiled down to the 'sole proprietary interest' requirement.  When NIGC was first formed, there was limited time spent scrutinizing agreements.  As the Commission evolved and personnel changed they definined the vague 'sole proprietary interest' language.  There are case law and administrative rulings which examines three criteria to determine if the gaming agreements are valid: 1) the term of the relationship; 2) the amount of revenue paid to the third party; and 3) the right of control provided to the third party over the gaming activity.  NIGC stated that since their inception, neither the NIGC Chair nor the Commission had approved any agreement, management or otherwise, under terms similar to the agreements to the Duluth case.  Read the Notice of Violation (NOV) issued by the NIGC and it's apparent this Agreement had zero chance of surviving.

The Band successfully argued that not only is it paying rent on a parcel it owns but that the rental payment far exceeds rental rates in Duluth and the casino does not receive services  from the City above the services received by any other commercial businesses. Additionally, the Band highlighted the long term of the agreement (1 25 year term, 1 25 year renewal), the fact that rent is paid before expenses are paid, and that the City offered no meaningful services in exchange for the rent. Finally, the Band pointed out that the City holds veto authority over any amendments to the gaming ordinance that applied to the casino.

According to the Court, the City's condemnation of the land, construction of a parking garage, and support of the trust acquisition all occurred well before the 1994 Agreements. Such actions by the City are not continuing and do not amount to quantifiable  'services' bearing a rational relationship to the $75 million dollars provided by the Tribe over the past 13 years.  In another case on point, Vinton, Louisiana offered free land in exchange for revenue sharing and Indian Affairs ruled the intangible value of the State's support for the Band's application to take land in trust is not the type of quantifiable economic benefit that would justify their approval of the revenue-sharing payments.

Note the City assumed no financial or other risk in the development of the casino.  If Duluth had provided financing and assumed risk the original Agreement had some chance of surviving for less money and at a shorter duration.   

The City's reliance on the exclusivity granted under the 1994 Agreements was noted as particularly dubious. The 250 mile area of exclusivity could not prevent another Indian tribe or a non-Indian entity from operating gaming because the City's jurisdiction does not extend beyond the City's limits. A city cannot step into a state's shoes for purposes of a compact, as it simply lacks the authority to do so.   A Minnesota compact followed which essentially provided no revenue sharing to the State.

In sum, Duluth suffered a crushing defeat.  The perplexing part is going forward Duluth may be able to negotiate for fire, ambulance, service, etc.  This will result in a paltry 6 figure yearly sum paid by the Band.  There's a misguided belief that the Band morally owes Duluth but the Court has ruled overwhelmingly in their favor.  With the fiduciary responsibility of Chairman Diver she'll rightfully take care of her own Band and further the NIGC won't approve paying Duluth much more than a pittance.  Duluth taxpayers will absorb a $6 million a year deficit and hopefully the City wakes up from their stupor and faces reality.

Ramos

about 10 years ago

What is legal is not always what is moral. I believe that Native Americans are aware of this.

Anyway, I have nothing more to say on the matter. If the Band wants to write Duluth out of its history, I can't stop them. I just won't trust agreements with the Band any more, that's all.

And if the city had listened to me a few years ago, we'd still have that $80 million...

Dorkus

about 10 years ago

I will submit to the fact that the amount of payments made to the city exceeded the amount of benefit they received from the location of the casino. 

But that does not change the fact that the Casino benefits immensely from residing within the downtown area, and that was the underlying reason why this agreement was made in the first place. 

The fact that the city does not provide any additional services to the casino than it would for any other business in the area is irrelevant. The Casino benefits from being in the city, and the city should in turn receive a benefit from the Casino. This is not misguided, this is reality. 

It was the spirit of the original agreement, and the relationship is symbiotic. If Duluth starts to falter from a lack of income, partially due to the loss of these payments, then the casino will falter as well. 

Personally, I am the kind of guy who believes that if there is an agreement made it should be honored. If the agreement is found to be lop-sided then the first step should be renegotiation, not an all out attempt at voiding it. 

But then again, I might be a little old fashioned in that sense.

The Big E

about 10 years ago

Diver just seems really shortsighted to me.

[email protected]

about 10 years ago

So, hypothetical here:

What if the city just passed an ordinance, a tax, on gambling winnings?  We would not be the first locality to do so (see: "Orange Village Council passes law to tax gambling winnings").

As I understand it, the Feds tax anything over a certain amount, and in fact, they make the casino take a cut before the individual exits the building.  

Adding a local tax would sadly burden the tribe with extra bureaucracy, something no one wants.  And no doubt it would net less than the former amounts enjoyed by the city.  But it does shift the burden from the tribe to the player in a way that seems appropriate.  

Whether such a tax would decrease gambling behaviors is an interesting question.   

What do you think?  Because the IRS already taxes, the mechanism is probably in place already.

gluvin

about 10 years ago

JimJ - Your comments, while well thought out, are disappointing.  You refer to lawyers in Minnesota as incompetent and the citizens of Duluth as fools.  

We are not in court of law here.  Law has decided that a contract is invalid.  What the people in Duluth are concerned about is how can we trust a neighbor that enters into a risky development deal with us and then fights to cut us out of the deal once they are making all the reward.  No court of law or interpretation of "vague" policy will ever change the hearts and minds of a lot of the people in this town.  You may think us "misguided" with our morals and sitting in a "stupor" but, we are able to see greed.

JimJ

about 10 years ago

Gluvin - thanks for the comment.  Allow me to clarify a few issues.  The NIGC sent a violation notice to Fon du Lac which stated the Duluth Agreement was illegal.  Fon du Lac was forbidden from making additional payments to the City or be subjected to heavy fines or closure.  The City of Duluth initiated a lawsuit and the contract was incompatible with federal law.  This doesn't appear 'greedy' but simply following the mandate of the NIGC and the court system. 

Contracts are continually subject to review.  The Band mentioned the contract lawsuit between the City of Duluth and the Retirees is very similar to this case.  The City disputed language in the retirees' contract that had been interpreted a certain way for many years.  The Courts reviewed the language and agreed with the City's construction.  One could argue the City reneged or the language was misconstrued for many years to the benefit of the retirees and the wrong was corrected.  Same outcome here, a long-standing contract was reviewed by the Court and deemed illegal.

As far as the 'risky' development deal, the City gave up a condemned building in a blighted part of town and received $75 million.  The Feds would argue Duluth didn't have the authority or ability to approve the tribe's application for placing the land in trust, and therefore did not give anything tangible to the Band. Thus, the assistance was an illusory or symbolic benefit. Also, the City didn't provide financing making the upside potential much greater than any potential downside. 

The comment 'hopefully the City wakes up from their stupor and faces reality' was directed at the Duluth City government.  After 2 years the Administration indicated the deal was nixed because of a political appointment and all revenue sharing agreements across the country were similarly situated.  Even with the utmost respect I have for Mayor Ness this position can't be reconciled with the facts of this case.  Duluth's revenue sharing is dramatically different than compacts with states that offer gaming exclusivity or other deals in which risky financing mechanisms are in place to protect the investors.   Gaming in one of the most highly regulated areas (concern about organized crime, money laundering, etc.).  Spend a few minutes on the NIGC website will shed a lot of light on what conforms and what doesn't conform to the IGRA.  Chairperson Diver astutely indicated in the interview there appears to be a 'gross misunderstanding' of Indian Law and the regulations on the part of the Administration.  

With respect to recommending hiring a large national law firm - if one were to get divorced one would hire a family law lawyer, if one were charged with a crime, one would hire a criminal attorney.  In this case, over $100+ million was at stake if one believed the next 25 years of a contract was in jeopardy.  With stakes this large, it would behoove one to hire a large law firm with specialists in this area rather than stick with the good ol' boy network mentality.  The large firms have the crucial experience & resources, know the area intimately, are familiar with the precedents, can size up the case and provide invaluable guidance moving forward.   They may provide a percentage chance of prevailing.  What I recall is the local firm collected over $1 million in fees and felt they had a good case.  There's no intent to assail local counsel, if they were a large firm with substantial resources and foremost authorities in Indian Law they'd be a good choice.  Don't believe that was the case here unfortunately.

Mayor Ness was kind enough to respond in the Perfect Duluth Day comments and indicated that last year in DC he spoke to Senate committee staff and asked them why our contract was being cancelled and not any of the other contracts across the nation.  This was a question much better addressed to the Duluth legal team.  Which brings us back again to your comment 'you refer to lawyers in Minnesota as incompetent'.  Believe the Duluth firm negotiated the first Agreement between the City and Band and we know how that turned out.  If Duluth enlisted a large law national firm specialist in Indian Law say from the Twin Cities (for example Dorsey and Whitney) the outcome and litigation expense and understanding of this area of the law may have been dramatically different.  The facts weren't on Duluth's side so they were not going to prevail in Court but at least they'd know that upfront.  A firm like Dorsey may be in a better position to size up the case quickly and their advice as experts carries a lot of weight with the Mayor and City Council.  In any case, the Mayor and Council could have leveraged their experience to help guide the negotiations and educate themselves in this complex area.  Clearly that didn't happen very well -     Duluth wasted over a million dollars in attorney fees and we're still subjected to blaming a political appointee for this debacle - uggh.  Time to recognize the gravy train is over, accept the circumstances and move on.

[email protected]

about 10 years ago

JimJ,

Everything you says lucid, clear, and maybe even right.

But it presumes that federal law necessarily turned a partnership into an opposition, one that could only be resolved in a winner-take-all style.

I think the line of counter-argument here is: it didn't need to happen that way.

...

Why can't we find ways to be partners again?

Makoons

about 10 years ago

I have a really hard time believing that this matter would have been handled any more diplomatically if the positions between the city and tribe were reversed. Up until this case all I heard from Duluth officials and residents alike is how dangerous the area around the casino is, how it is the source of many of downtown's problems, and how it's nothing more than an eyesore. I find it comical that now the city is saying "Hey ... I thought we were friends!"


I'm Native and an FDL descendent and I by no means feel that just because First Nations people have been subject to underhanded dealings throughout the entire history of America that we have every right to kick others in the balls when we get the chance. But I do feel asking the tribe to overlook such a huge legal loophole and, let's face it, violation for the sake of "friendship" is goofy. The city was still holding the tribe to an illegal deal we had no reason to honor. If FDL were doing that to the city, wouldn't it be considered ridiculous for city leaders and politicians to not seek to get out of it? A terrible double standard in my humble opinion.

[email protected]

about 10 years ago

Makoons:

You mean the way that the city held the retirees accountable for the overpayments they received in their retirements?

The city did not hold the retirees accountable for overpayments, though legally they could have.  (I'll admit, I wanted them to bill the retirees to return the money.  Donny Ness spoke on these pages to convince me that the right thing to do was to take the hit, financially, rather than pursue our legal right to the funds.)

Sometimes, the government does the right thing, not the legal thing.

Makoons

about 10 years ago

Rhetoricguy,

Thanks for pointing this out to me...it makes me just a little bit prouder to be a part of this city. However, I don't feel the same kindness would have been shown to FDL in a reverse of the current situation. It would have caused a huge uproar and would have been a public relations nightmare if they tried to charge elderly citizens for the city's mistake. Maybe I'm wrong, but I feel like the city, officials and public included, are not big fans of FDL in general.

waferdog

about 10 years ago

Makoons, that's a pretty broad stroke you are painting with that last statement, although I would bet they had more fans before this debacle.

[email protected]

about 10 years ago

Makoons,

The retiree payments error was not the City's mistake, but instead the miscalculation of the agency that represents the retirees, which overcharged the city.  So the city looks even more like it did the right thing in that context.

As for whether they would have acted differently in this case, I guess you'd have to show me some evidence.  And you would need to separate whether "the city, officials and public included, are not big fans of FDL in general"  vs. the very complicated feelings that the city might have about any institutionalized legal gambling.  I may have very mixed feelings about legal institutionalized gambling, but I can separate those from feelings about FDL as a community.

Makoons

about 10 years ago

And I'm glad that you can make that separation, rhetoricguy.

Beyond anecdotal evidence I'm not sure there's much documented I can show you to support my feelings. Hence my qualifying it with "I could be wrong." This is simply my impression of how I've seen interactions between officials and FDL as a government employee with FDL, a citizen, and former roommate of a county commissioner. I think a lot of it MAY come from the complicated feelings regarding gambling that we don't culturally share with Duluth. Native peoples have been gambling since before contact so it's not an issue for us. I suppose if the city randomly bought a piece of tribal land and opened a bar on it we'd have complicated feelings about it.

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