Litigation | NIGC

7th Circuit issues ruling in Lac du Flambeau gaming debt case

Tuesday, September 6, 2011

The Lac du Flambeau Band of Lake Superior Chippewa Indians can't be sued under an agreement that was never approved by the National Indian Gaming Commission, the 7th Circuit Court of Appeals ruled today in a closely-watched case.

The tribe defaulted on a $50 million bond that was used to finance a casino on the reservation and an out-of-state gaming project that failed. Wells Fargo Bank sued Lake of the Torches Economic Development Corporation, the tribe's business entity, on behalf of the bondholders.

But the 7th Circuit said the agreement constitutes a management contract because it gave bondholders "the opportunity to exert significant control over the management operations" of the tribe's casino. Since the agreement was never submitted to the NIGC, it can't be enforced.

"Consequently, Lake of the Torches’ waiver of sovereign immunity contained in that document is also void," the 7th Circuit said.

The court, however, said Wells Fargo can submit other documents and information that could provide a waiver of the tribe's immunity. The case will continue on remand.

7th Circuit Decision:
Wells Fargo v. Lake of the Torches Economic Development Corporation (September 8, 2011)

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