U.S. Eighth Circuit - The FindLaw 8th Circuit Court of Appeals Opinion Summaries Blog

Gaming Company on the Hook for $5M to NIGC, 8th Cir. Rules

The Eighth Circuit backed up a lower court decision in finding that Bettor Racing, Inc. had operated its business in violation of the Indian Gaming Regulatory Act and that it was rightfully ordered to pay up $5 million in fines.

If only they'd agree to an earlier offer to make this go away for for $4.5 million ...

Approval First, Please

The defendant in this case, Bettor Racing, Inc., is a non-Indian gaming company that entered into a contract with Royal River Casino (an Indian gaming establishment) in which the former would run a pari-mutuel racing enterprise. Unfortunately for Bettor, under federal law (specifically, IGRA), the authority to approve all gaming operating at tribal sites is vested to the National Indian Gaming Commission (NIGC).

Additional language within the ambit of the federal law pretty much nixes the legal recognition of any contract that is executed with regards to gaming on tribal ground without first getting the greenlight from the NIGC.

In the case at bar, Bettor Racing executed a contract with the owners of the Royal Rover Casino, the Flandreau Santee Sioux Tribe (FSST). NIGC did not bless the contract at that time. The parties then later modified the contract under a check-swap arrangement. The NIGC didn't bless that arrangement either. What's worse, the check-swap scheme also resulted in Bettor obtaining control of 40 percent net revenues -- yet another violation of IGRA.

Notice of Violation

NIGC issued a "Notice of Violation" and sent it to Bettor. In the Notice, NIGC listed off all the alleged violations of federal law and said all would be forgiven for the low, low price of $4,544,755 -- an amount partially accounted for by supposedly unlawful collection of monies by Bettor under the now multi-year arrangement with the FSST. When Bettor rebuffed the notice, NIGC shouted louder with a $5 million number. The Office of Hearing Examiners granted summary judgment in favor of NIGC.

Re 'Scienter' and Standard of Review

Bettor challenged NIGC's various theories and also included a defense of scienter -- that is, claiming that Bettor's lack of willfulness in its supposed violations of federal law precluded NIGC's suit against it. But the Circuit decided to adopt a more "four corners" stance with the Act -- agreeing with NIGC did not require a mens rea element when assessing an actual violation.

At most, mens rea would only factor into the picture when assessing the amount of appropriate fines. Further, the $5 million number was neither "arbitrary [n]or capricious" in comparison to the damages first demanded and the Circuit found no reason to overturn the lower decision.

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