Fond du Lac Band asked for return of $75 million from city of Duluth
DULUTH - In a move that could conceivably bankrupt the city of Duluth, the Fond du Lac Band of Lake Superior Chippewa is asking a federal court to return the $75.5 million it has given the city since 1994 as part of its agreement to open the Fond-du-Luth Casino.
As a comparison, the city's general operating fund next year -- money that goes to pay for services including police and fire protection, road repairs and snow plowing -- is projected to be $75 million. The city has only $1 million in its reserve fund.
The request is part of a counter-claim to a late-September lawsuit that the city filed in U.S. District Court after the band stopped sharing its casino revenue.
Even before the band made its request, the possibility of the city
losing its suit over revenue sharing from the casino carried high stakes: Duluth depends on the casino money for road repairs and to keep its credit rating high.
"The band's demand that we pay them $75 million would have a devastating impact on our community and public services," Mayor Don Ness said. "Obviously, it is an extreme position for the band to present to the federal court."
Band chairwoman Karen Diver declined to comment.
"The legal paperwork speaks for itself," she said.
In its suit, the band claims "key provisions" of the contract signed with the city in 1994 don't comply with the federal Indian Gaming Regulatory Act and should be voided.
"They are the product of a mutual mistake of the parties because the city's consent was not necessary to permit the band to conduct gaming at the Fond-du-Luth casino," the lawsuit states.
The city also failed to offer the band "sufficient consideration in exchange for receiving rental and other payments for the band," and thus the 1994 contracts are "void, unenforceable and unconscionable," according to the suit.
"The city has no legal right to retain any portion of the rental and other payments that was not directly tied to an actual service or good that the city provided to the band," the lawsuit said.
The city's suit sought to compel the band to resume its past practice of sharing 19 percent of its gross slot machine revenue with the city. This year, that slice of gambling revenue was expected to pour about $6.6 million into city coffers.
The city continues to view the 1994 contract as valid, said lawyer Bob Maki, who is representing the city in the case.
The contract was scheduled to be renegotiated next year. Despite the legal battling, Ness expressed optimism that the two sides still could reach an agreement.
"We are focused on maintaining a positive and constructive long-term relationship with the Fond du Lac band," he said. "This will soon be resolved, and we look forward to rebuilding our working relationship."