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Indiana Supreme Court: Court Revisits Gaming License Issues
Posted in Litigation

In City of East Chicago v. East Chicago Second Century, Inc., the Indiana Supreme Court again revisited the gaming license requiring economic development payments in the City of East Chicago, this time addressing what governmental agency had the authority to amend the terms attached to the license. 

In 1996, the Indiana Gaming Commission issued a gaming license to Showboat Marina Partnership.  One of the conditions upon which the license was issued was that Showboat would contribute a percentage of its adjusted gross receipts to a number of non-profit foundations and Second Century, a for-profit company that promised to undertake development activities at sites within East Chicago. 

This case began when Second Century filed an action requesting a declaration that Resorts (the most recent owner of the gaming license initially granted to Showboat) would be required to continue making payments to Second Century.  During the course of the suit, the City filed a number of counterclaims and cross-claims against Second Century.  The defendants moved to dismiss the City’s claims because the various statutes of limitations had expired.  Meanwhile, the City moved for summary judgment on the basis that the economic development agreement was void and unenforceable.  The trial court denied the City’s motion for summary judgment and dismissed most of the City's claims on the basis of statutes of limitation violations.  The City appealed. 

On transfer, Indiana Supreme Court first considered whether the trial court erred in dismissing eight of the City's nine claims for statutes of limitation violations.  The Court affirmed the trial court's dismissal of three counts and reversed the trial court's dismissal of the other five finding that the counts as pled may cover events recent years, not just the 1990s.  It was error to dismiss those claims without further development of the facts.  Further, the Court found that the doctrine of fraudulent concealment did not apply because the claims challenged actions taken “in full glare of the public arena.”

The Indiana Supreme Court next reviewed the summary judgment order and found that the City was entitled to summary judgment in part.  First, the Court affirmed the trial court’s finding that the City was not entitled to summary judgment on the basis that the agreements were unenforceable.  The Court held that “[t]he City does not have the authority unilaterally to terminate or alter the terms and conditions of a license issued by the Gaming Commission."  "Such alterations lie within the duties and powers [of] the Gaming Commission." 

However, the Court found that the trial court erroneously concluded that “the agreements implied a contract to run as long as there was a license . . . creating a permanent flow of economic development funds.”  A “third-party beneficiary . . . need only be provided with reliance damages to be made whole.”  While the recipients of the funds “can be said to have justifiably relied on the revenue that has flowed as a result of the local development agreements . . . , that reliance should not be a permanent bar to altering the methods employed to further economic development," if the City goes through the Gaming Commission's administrative process.   Thus, the City was entitled to a holding that the license agreement terms could be altered.  Though the agreement “may not be terminable at the City’s will,” it was “not immutable.”

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