As was reported in this publication on January 26, a federal judge in Wisconsin refused to put the Lac du Flambeau tribal casino into receivership after the tribe defaulted on a $50 million bond indenture sold in 2008, based on his conclusion that the principal financing document gave the trustee illegal management control over the gaming operations. Thus, it was deemed to be a “management contract” under the Indian Gaming Regulatory Act which was void and unenforceable because it was not approved by the National Indian Gaming Commission (“NIGC”). The initial ruling was rendered on January 6 and was followed five days later with a 12-page Decision and Order.

The judgment came in litigation filed by Wells Fargo Bank, acting as Trustee for the bondholder, Saybrook Capital of Santa Monica, and seeking to invoke provisions of the bond agreement which provided for a receivership proceeding in the event of default. (The case is Wells Fargo Bank, N.A. v. Lake of the Torches Economic Development Corporation (W.D.Wisc.).)

The result is that the tribe has defaulted on bonds worth $46.6 million for which it has no legal obligation to pay.

On February 8, the Wells Fargo lawyers filed Motions to (1) Vacate the Judgment and (2) Amend the Complaint. These pleadings were somewhat expected and the specific arguments easily predicted (“everything was done right and the document is not a management contract”).

This case and the recently-filed motions were the subject of extensive discussion last week at the 14th Annual Gaming Law Minefield sponsored by the American Bar Association. Attendees and panel members included attorneys and corporate executives working in gaming law, including Indian gaming law and the financing of tribal casino projects. While two nationally prominent Indian Gaming attorneys expressed their belief that the Lac du Flambeau decision may not have much impact on other tribal financings, the prevailing sentiment was to the contrary. Indeed, a number of professionals asserted that the financial community and its attorneys almost certainly are already reviewing existing transactions documents, the litigation pleadings and the Decision and Order to determine the extent to which they may need to revise their Indian casino financing agreements.

In any event, there was no dissent among members of the three Gaming Law Minefield panels dealing with tribal gaming law that this case is far from over and the fallout is far from known.

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Disclaimer: Gaming Legal News is published by Dickinson Wright PLLC to inform our clients and friends of important developments in the fields of gaming law and federal Indian law. The content is informational only and does not constitute legal or professional advice. We encourage you to consult a Dickinson Wright attorney if you have specific questions or concerns relating to any of the topics covered in Gaming Legal News.