Jump to the main content.
Two separate investor groups have been awarded a total of $88.9 million by a court order, to be paid by Kewadin Casinos Gaming Authority. The payment is a result of the authority’s unsuccessful attempts to construct two retail casinos in Michigan.
Over a decade ago, KCGA formulated intentions to construct new casinos in New Boston and Lansing. Unfortunately, these plans crumbled, resulting in legal disputes initiated by JLLJ Development LLC and Lansing Future Development II LLC.
This past Tuesday, the ruling was made by Ingham County Circuit Court Judge Joyce Draganchuk after years of court battles.
What led to Kewadin Casino trial?
KCGA operates Kewadin Casinos, which are retail casinos situated in Sault Ste. Marie, St. Ignace, Manistique, Christmas, and Hessel. The Sault Ste. Marie Tribe of Chippewa Indians is the casino operator.
Kewadin had plans in 2011 to extend its operations by constructing retail casinos in New Boston, situated near Detroit Metropolitan Airport, as well as in Lansing.
At the time, the tribe received a sum of $9 million from the two investor groups to initiate the construction of the casinos.
Although the tribe had obtained land for constructing the casinos, their efforts to secure the land in trust with the U.S. Department of Interior were unsuccessful as their requests were denied. The Department of Interior must grant approval for the establishment of an off-reservation casino, consequently preventing the construction of the casinos.
Afterwards, the tribe made the decision to file a lawsuit against the Department of Interior.
Initially, the tribe emerged victorious in the U.S. District Court for the District of Columbia’s verdict. Nevertheless, the District of Columbia Court of Appeals later overturned this ruling.
Both investment groups sought a return on their investments, but neither casino was built. The lawsuit was initiated because the KCGA failed to provide the expected return.
Kewadin ruled to have lost sovereign immunity
Due to the KGCA’s failure to adequately address the investors’ inquiries, a bench trial ensued against the tribe.
The tribe submitted a motion seeking the dismissal of the complaint, contesting the court’s authority over a sovereign tribe.
The circuit court concluded that the tribe had relinquished its sovereign immunity by entering into a contractual agreement with the two investment groups.
After careful consideration, the court ultimately issued a default order against the Sault Ste. Marie Tribe of Chippewa Indians, holding them accountable for both breaching the contract and engaging in fraudulent misrepresentation, thereby causing damages.
Why does Kewadin have to pay $88.9 million?
The investment groups claimed in the lawsuit that KCGA had misrepresented their legal rights to the land, which ultimately resulted in the placement of a $9 million loan.
Kewadin contended that the contract agreement restricted liability to operational profits and equipment damages. As the casinos were not constructed and operational, they asserted that they could not be held responsible for any sum surpassing the initial amount.
Nevertheless, Judge Draganchuk determined that the investor groups had the right to receive compensation due to the breach of contract and the misrepresentation.
CPA Robert Levine estimated the precise value of the profit losses experienced by the groups, which resulted from the expected shared revenue from the upcoming construction of the casinos.
Based on those factors, including interest, Levin determined that the two investment groups were eligible to receive a total of $88.9 million.
Approximately $60 million of the overall amount was allocated for the casino that was never constructed in New Boston, while $28.8 million was intended for the unbuilt Lansing casino.
Although the judge’s decision this week may have satisfied both investment groups, it is anticipated that the tribe will file an appeal.
