Game manufacturer Sharp Image seeks $107M from Shingle Springs tribe after bankrolling failed casino

The $100 million civil suit brought by Sharp Image Gaming against the Shingle Springs Band of Miwok survived the tribe's attempts to have the case dismissed.

Sharp Image Gaming Inc., a Chatsworth video gaming machine manufacturer, bankrolled the Shingle Springs tribe's first, and failed, foray into a casino operation a decade ago.

The tribe is now working with Minneapolis-based Lakes Entertainment Inc. (Nasdaq: LACO) on a $200 million Foothill Oaks Casino, along with a $45 million freeway overpass. Foothill Oaks is now seeking a compact with the governor to operate 2,000 slot machines, along with 100 table games such as poker and blackjack.

In its suit filed May 21, 2007, Sharp Image said it still has a valid contract and partnership with the tribe. It sued for the $7 million it spent 12 years ago, and it also wants $100 million for damages.

The tribe's attorneys had sought to dismiss the case in El Dorado County Superior Court on the grounds that the tribe has sovereignty and can't be sued under the contract.

El Dorado County Superior Court Judge Daniel Proud denied the tribe's motion to dismiss the case after a hearing in December. The ruling means the suit survives, and a case management conference is set for March 5.

Lawsuits against tribes can be difficult because the tribes are sovereign domestic nations; often state and local laws don't apply to them.

Sharp Image had a contract with the tribe to provide 400 slot machines in an exclusive agreement in 1996. The gaming machine company lent the tribe money to build Crystal Mountain Casino in an enormous white tent on a concrete foundation on Shingle Springs Rancheria land.

The tribe had the right to have some gaming on its land, but it didn't have a compact with the governor for the kind of electronic machines that were installed. More important, the tribe had no public access to the rancheria.

The ill-fated 20,000-square-foot casino opened Nov. 2, 1996, and closed the same day.

To get to the rancheria, visitors must drive about four miles through private residential roads. The two homeowners associations that owned the roads and El Dorado County sued and closed the roads to commercial traffic. In the single day Crystal Mountain was open, its slot machines never accepted money. Sharp Image, in its contract with the tribe, was supposed to get 30 percent of the net revenue of the casino. But there never was any revenue.

Most of the machines were left unused in the tent for months. Some of the games, considered illegal under California law, were put in storage off the reservation where they were eventually confiscated in a raid by El Dorado sheriff's deputies. Sharp Image eventually got all its machines back.

The Sharp Image suit alleges the tribe waived its sovereign immunity to enter into its contracts.

The tribe's attorneys had sought to dismiss the case outright.

"The tribe has made it clear that they have disavowed the contract with Sharp Image, and they are not honoring it," said Matt Jacobs, Sharp Image's attorney with the Sacramento office of DLA Piper US LLP.

David Gutierrez, with Dresner Corporate Services Inc. of Chicago, spokesman for Foothill Oaks Casino and the tribe, said the tribe cannot comment on pending litigation.

The Shingle Springs Band of Miwok is planning for an October opening of the first phase of the Foothill Oaks Casino, Gutierrez said.

The tribe for six years battled El Dorado County and neighbors to get the right to build the casino. The rancheria will open to commercial traffic when Foothill Oaks Boulevard opens in a few months. Two years ago, the tribe agreed to pay the county $87 million over 20 years in exchange for the county supporting the casino. The tribe is also paying more than $104 million for the construction of carpool lanes on Highway 50.




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