Showdown

On July 8, US District Court Judge William M. Skretny published his order vacating the ruling of the National Indian Gaming Commission (NIGC) that the Seneca Nation of Indians (SNI) could legally operate a gambling casino on property they owned in downtown Buffalo. The Senecas’ land fit the legal definition of “Indian country,” and they could do anything on it the law permitted, which did not include gambling.

The Senecas immediately said the decision had no practical effect on them. They were not a party to the lawsuit, they were not ordered to do or not do anything in Judge Skretny’s opinion. Until there was a final determination in the courts they would, they said, continue operating slot machines in the blue shed that is their temporary Buffalo casino and would continue constructing the $330 million casino/hotel/entertainment complex they would use for a permanent casino. As far as they were concerned, it was “business as usual.”

On July 8 and 9, Cornelius Murray, the Albany attorney representing the Buffalo plaintiffs, contacted Assistant US Attorney Mary Pat Fleming, both times asking if the chairman of the NIGC intended to shut down the Buffalo casino. Fleming never replied to either letter.

Instead, Penny Coleman, who identified herself as an attorney for the NIGC, called Murray, told him Fleming had forwarded Murray’s letters to her, and told him that the NIGC was still thinking things over. Fleming, Coleman said, would not respond directly to Murray about the matter. In the legal world, Coleman’s call was out of order, since she was an employee of the defendants in the case—technically one of the clients on the other side. Once a lawsuit is in process, attorneys don’t talk to clients on the other side; they talk only to opposing attorneys. From Murray’s point of view, Coleman shouldn’t have called him at all; the call should have been made by Mary Pat Fleming or someone else in the US Department of Justice, which has represented the NIGC in the lawsuit.

After that call from Coleman, Murray again wrote to Mary Pat Fleming, telling her about the conversation. That letter got no response either.

On July 14, Murray went back to court, this time asking the judge to issue “an order directing the Defendants, and in particular the Chairman of the NIGC, to order the SNI immediately to close all Class III gambling operations at the Buffalo Parcel site and, in the event of the Chairman’s failure to do so, directing the U.S. Marshal’s Office to take such action as may be reasonably necessary to ensure the immediate and permanent cessation of such activity.”

The gambling operation in Buffalo, wrote Murray, is illegal, and the court has “the inherent power and authority…to issue such orders and commands as may be necessary or appropriate to effectuate and prevent the frustration of such orders which the Court has previously issued in its exercise of jurisdiction otherwise obtained.”

Or, in ordinary English: If the Justice Department and the NIGC are going to continue stonewalling, the judge can and should shut down the gambling operation himself.

Without such action, Murray wrote, “The Defendants’ action in the face of this clear and unambiguous order frustrates the purpose and intent of the Court’s ruling and renders it a mere pyrrhic victory for the Plaintiffs…Unless and until the SNI cease their illegal Class III gambling operation, the SNI will continue to act as if this Court’s decision was an irrelevant academic exercise and the Defendants, including the NIGC Chairman, will continue to fail to take any steps to enforce their compliance. Accordingly, to give effect to this Court’s Decision, the requested order is necessary and should be granted.”

Upping the ante

In their lawsuit, the plaintiffs—the group of individuals and citizens’ groups represented by Citizens for Better Buffalo, which organized the funding and devised the legal strategy for the case—had “requested declaratory and injunctive relief for the purpose of halting the illegal gambling on the Buffalo Parcel.” The judge’s July 8 order vacating the NIGC ordinance satisfied the first of those requests. In light of inertia at the NIGC and the total disregard of the judge’s order by the SNI, the plaintiffs are now asking the judge to give them the second part—a court order telling the NIGC to shut it down and, if the NIGC doesn’t obey, an order directed to the US Marshals to shut it down.

Sending the US Marshals in to terminate gambling at the Buffalo site would for the first time directly involve the Seneca Nation in this lawsuit, which entered federal court on January 3, 2006. It would be their gambling operation that the marshals would be blocking off and shutting down. If the marshals come in, it’s no longer business as usual. It’s no longer business of any kind.

Is Seneca Niagara at risk?

Perhaps. It may depend on whether or not the Senecas decide to cut their losses and walk away from the Buffalo project.

By design, the Buffalo lawsuit was narrowly defined and carefully focused. The plaintiffs argued that the planned Buffalo casino was illegal and shouldn’t go into operation. There was no mention of the Senecas’ other gambling operations in the Buffalo lawsuit, nor were the Senecas themselves defendants. When Judge Skretny sent the whole case back to the NIGC for serious consideration and the NIGC flipped it without serious reconsideration, the Senecas started their slot machine operation in the blue shed. Recently, even though they knew this suit might go against them, they’ve started work on their large Buffalo casino/hotel/entertainment complex.

It is possible for the Buffalo lawsuit to apply only to the Buffalo situation and for the Seneca Niagara Casino and Hotel to continue just as it has been. But what if the Senecas push this all the way to the Supreme Court and the Supreme Court rules that the entire gambling compact former Governor George Pataki negotiated was illegal, that turning the former Niagara Falls Convention Center over to the Senecas was as illegal as the planned casino in downtown Buffalo? Could that happen?

Yes, it could. It’s not likely, but it’s a possibility. That might be why the Senecas hired Harvard constitutional lawyer Laurence Tribe—to ask him if pursuing this all the way might put more at risk than they can afford to lose.

(The local press made a big fuss over Tribe’s participation in this case, but he is part of the team that has represented Seneca gambling interests since 2001. In December 2006, Tribe hired on as a consultant to Akin Gump Strauss Hauer & Feld, a Washington, DC law firm that specializes, among other things, in American Indian casino lobbying, financing and litigating. In 2001, when it was trying to get its gambling compact passed, the Seneca Nation of Indians put Akin Gump on a $500,000 annual retainer to be one of its gambling lobbyists. If the SNI is ever a defendant or a plaintiff in any of these anti-casino actions, it will be represented by Akin Gump.)

A great deal of law is based on balancing rather than finding absolutes, and it is not uncommon for both sides in a lawsuit to have some justice on their sides. The judge’s job, in such situations, is to find a solution that is fair to all parties without ignoring the law. That isn’t always possible. Sometimes people get screwed in court because the other guy used a law in a way that was legal but hurtful.

If someone were to raise the issue of the Niagara Falls casino being illegal for exactly the same reasons as the Buffalo casino, the Senecas might respond, “Yes, but we set that casino up because we were told by the governments of New York State and the United States that the Niagara Falls casino was legal, and now we have thousands of employees dependent on us and we’ve driven so many Niagara Falls restaurants and motels out of business that the economy of Niagara Falls depends on us to keep operating. We set up that casino in good faith so even though the law says we were wrong, we ought to get a pass. It’s not like there’s no other gambling in New York State (the state itself runs a huge gambling operation that focuses primarily on milking the state’s poor) and there are slots in all the racetracks.”

That might work.

Laches

They might also bring up the legal doctrine of “laches,” which is a defense that is based in equity and not in statute. It holds that people who wait too long to claim a legal right lose their entitlement to compensation. Laches is a balancing question: If the plaintiff waited so long before filing a complaint that the defendant had every reason to believe there was no objection to the conduct in question, should the defendant have to pay the price? (Laches comes from an 1874 British case, Lindsay Petroleum Co. V. Hurd 1874 LR5.) No one sued when the casino came to Niagara Falls. By the time people in Niagara Falls realized there would be virtually no economic development as a result of the casino (other than the casino itself), they were waist deep in the Big Muddy, in too deep to back out.

Laches was not a reasonable defense in Buffalo. The Citizens for Better Buffalo lawsuit in opposition to the proposed casino was filed before the Seneca Gaming Corporation (SGC) began construction on the blue shed or its proposed $330 million building. The SGC went ahead and put up the shed and brought in slot machines in the dark of night in full knowledge that a federal judge was considering the legality of the entire operation. They began the construction knowing they might not be able to put a gambling joint on that property. They could have waited to see how things turned out in court but they didn’t want to wait. They gambled and, as things stand now, they lost. The courts do not reward gamblers for faulty choices.

Casinos mint money, but…

…you’ve got to have one before you can start minting anything.

Few businesses have a higher or more consistent gain on investment than casinos. The profit margin is part of the design. Individual gamblers might have a lucky streak but the gambling public cannot go home with more money than the house takes in. Casino operators like to refer to their industry with the euphemism “gaming,” but there’s no game at all (except in the street sense of playing someone for a fool or sucker): It’s a lock, pure and simple. As long as the house keeps its operating expenses below the profit from the house edge at the machines, tables, and wheels, there is no way the owners can do anything but make money.

Without the casino, it’s just talk, words on air, mere vapors.

According to the SGC’s February 14, 2008 quarterly filing with the SEC (the most recent 10-Q posted on its Web site), the Seneca gambling operation is planning to spend $330 million on the big building it hopes will replace its current blue metal slot machine shed. The new building would contain 2,000 slot machines, 45 table games, four restaurants, and a 22-story all-suite hotel.

The 10-Q says that the Senecas expect to fund the Buffalo Creek Casino and Hotel “one-third from operating cash flow and two-thirds through debt financing. The successful completion of the permanent Seneca Buffalo Creek Casino and Hotel will depend upon our cash flow from operations and our ability to secure necessary financing on acceptable terms.”

Which is to say, they need $220 million in loans to put up that gambling/entertainment complex.

Two years ago, there would have been no question about their ability to get that kind of financing. They made so much money from the Niagara Falls casino they’d been able to retire and refinance their usurious startup loan within a few years of opening day. Couldn’t they expect the same from Buffalo?

Maybe; maybe not.

Two things have changed since they got their Niagara Falls refinancing, one general, the other local. The general change is in the finance industry worldwide: Banks everywhere are in trouble. Money is tight, the dollar is sinking, the markets are declining. The housing bubble was just the early visible part of what is turning into a global financial disaster. There is less money to lend and lenders are far more cautious about whom they lend that money to and under what terms those loans are made.

The local change may have a profound influence on the decisions made by those outside lenders. Two years ago the Buffalo anti-casino lawsuit was just passion, talk and a bit of paper. Now it is a specific, well argued, and carefully researched judicial opinion saying the Buffalo Creek casino is illegal, that the Senecas can use the land for a wide range of purposes but gambling is not one of them. And now the plaintiffs have filed a new motion asking the judge to light a fire under the Washington agencies or send in the marshals so this illegal operation doesn’t keep doing business in downtown Buffalo.

Hotels, restaurants, and theaters in towns like Buffalo don’t make the kind of money necessary to cover a $330 million startup bill. Gambling might. Unless the Senecas can convince the financial industry that it will, at the end of the legal process, prevail, construction might grind to a halt at the Buffalo Creek site long before all legal maneuvering connected with the current lawsuit comes to final resolution in the Second Circuit in Manhattan or the US Supreme Court in Washington.

Maintaining momentum

Cornelius Murray was the attorney in the successful case against the Oneidas’ Turning Stone Casino, which a New York State judge four years ago ruled was illegal. That casino is still operating and the legal wrangling is still going on.

But the Buffalo casino case is in federal court, which means it is before a judge with far more power than state court judges, a judge who is not connected to or mired in state politics.

There is another important difference in the Turning Stone and Buffalo cases: Turning Stone has been in operation since 1993; it was already doing business when the lawsuit that resulted in the 2004 decision was initiated. The Buffalo casino was just a plan when the Buffalo lawsuit was initiated, and even now it’s only a blue steel shed and a bunch of pilings driven into the ground.

The key thing Murray may have learned from Turning Stone is the necessity of maintaining legal momentum. His team won a big victory in Judge Skretny’s court on July 8. The task now, and the point of Murray’s current motion in federal court, is to make sure Judge Skretny’s order vacating the NIGC authorization of the Buffalo casino has specific consequences in the real world.

Bruce Jackson is SUNY Distinguished Professor and Samuel L. Capen Professor of American Culture at UB. His Pictures from a Drawer: Prison and the Art of Portraiture will be published next spring by Temple University Press. He edits the Web magazine BuffaloReport.com.