A judge has ruled that a tribal gaming authority must pay more than $88 million in damages to investors for failed plans to build an off-reservation casino near Detroit Metro Airport and another in downtown Lansing.
The Ingham County Circuit Court judge ruled this week that the Kewadin Casinos Gaming Authority was responsible not only for repaying, with interest, $9 million in loans from two groups of investors, but also for loss by investors of potential future profits from unbuilt casinos.
The total damages bill against Kewadin, which is owned by the Sault Ste. Marie Tribe of Chippewa Indians, is $60 million for the unbuilt casino in Huron Township near Detroit Wayne County Metropolitan Airport and $28.8 million for the unbuilt casino in Lansing, according to court documents.
Judge Joyce Draganchuk has yet to issue a final judgment, although her rulings on Monday entitle investors to damages for breach of contract and fraudulent misrepresentation by Kewadin. The judgment will likely be appealed to the Michigan Court of Appeals.
A representative for Kewadin and the Sault Tribe declined to comment for this story on Thursday.
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In both casino plans, the Sault Tribe failed to convince the U.S. Department of the Interior to put the land for the sites in trust, a necessary step for building off-reservation casinos.
The Huron Township Casino reportedly operated out of a vacant 71,000 square foot mega-church building in the woods near I-275 that was slated for redevelopment. The plan has drawn opposition from Detroit’s three casinos and several Michigan tribes that operate their own casinos.
The Sault Tribe is Michigan’s largest tribe by membership and currently operates five small Kewadin casinos in the UP. It’s the same tribe that opened Detroit’s Greektown Casino as a non-tribal business before losing it to bankruptcy in 2008.
Both groups of non-tribal investors for the Huron Township and Lansing plans sued the Kewadin Gaming Authority for breach of casino development contracts. Under these contracts, investors were to fund the temporary casinos that Kewadin would operate, and Kewadin was to repay the funding through a portion of the casinos’ operating profits.
The investor groups claim in their lawsuit that the tribe made false claims that they could easily acquire the land for the casinos and put it in trust.
The Department of the Interior ultimately rejected the tribe’s application for the Huron Township site, saying the Sault had failed to prove how the proposal would satisfy a legal requirement that the new trust lands improve or improve tribal lands, especially because Wayne County is far from the existing lands of Sault in UP
The tribe then sued the Department of the Interior. The U.S. District Court for the District of Columbia sided with the tribe, but the decision was overturned last year by the District of Columbia Court of Appeals.
In the Ingham County case brought by the investors, Kewadin argued that it should not compensate anything due to sovereign immunity and an exclusion clause in development contracts.
However, the judge’s ruling indicates that the development agreements included clear waivers of sovereign immunity and that the non-recourse provisions of the contract do not apply to the investors’ claim for damages for fraudulent misrepresentation.
The investor groups suing Kewadin are JLLJ Development, which funded the Huron Township casino and has 38 members, and Lansing Future Development II, which has 18 members.
Contact JC Reindl: 313-378-5460 or jcreindl@freepress.com. Follow him on Twitter @jcreindl.
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