JLLJ Dev., LLC v. Kewadin Casinos Gaming Auth.
| Decision Date | 30 March 2021 |
| Docket Number | Case No. 1:20-cv-231 |
| Parties | JLLJ DEVELOPMENT, LLC, et al., Plaintiffs, v. KEWADIN CASINOS GAMING AUTHORITY, Defendant. |
| Court | U.S. District Court — Western District of Michigan |
HON. ROBERT J. JONKER
This case arises out of two casino development contractual disputes between JLLJ Development, LLC, and Lansing Future Development II, LLC (collectively "Developers") and the Kewadin Casinos Gaming Authority (the "Gaming Authority"). The purpose of the contracts was the development of two new tribal casinos on two new parcels in Michigan's Lower Peninsula. Nearly a decade after entering into the contracts, there is no new casino on either parcel and each side blames the other for the failures. The parties designated the District Court for the Western District of Michigan as the forum to resolve any contractual disputes, and so the Developers initiated this action seeking a declaratory judgment and alleging nine state law contract, quasi-contract, and tort claims. (ECF No. 5.) The Gaming Authority filed a motion to dismiss based on tribal sovereign immunity. (ECF No. 14.) After reviewing the record, the Court questioned the basis for its own subject matter jurisdiction and invited supplemental briefing. After considering the supplemental briefing and argument, the Court dismisses this action for lack of jurisdiction.
The Sault Ste. Marie Tribe of Chippewa Indians (the "Tribe"), a federally recognized tribe, created the Gaming Authority as a separate entity to run the Tribe's casino and gaming operation. The Gaming Authority operates the Tribe's five existing casinos, which are all located in the Upper Peninsula of Michigan. In 2011, the Gaming Authority sought to expand the Tribe's gaming operation by developing casinos in the Lower Peninsula of Michigan. With that goal in mind, the Gaming Authority identified parcels of land in Lansing and Huron Charter Township where it intended to build two Class III casinos. To assist in the development, financing, and construction of the new casinos, the Gaming Authority entered into separate, but nearly identical, casino development agreements (the "Turn-Key Agreements") with the Developers. The Turn-Key Agreements provided that the Gaming Authority "intend[ed] to develop, operate and maintain a licensed gaming establishment . . . on mutually acceptable real estate . . . on Indian lands pursuant to and in accordance with the terms and provisions of the Indian Gaming Regulatory Act (IGRA)." (ECF No. 5-2 at PageID.239; ECF No. 5-3 at PageID.285.) The Tribe was to purchase the identified land with funds from the Tribe's self-sufficiency fund, as contemplated by the Michigan Indian Land Claims Settlement Act ("MILCSA"), Pub. L. No. 105-143, 111 Stat. 2652 (1997), and then convey it to the United States to be held in trust for the Tribe.
As part of the agreements, the Developers agreed to advance millions of dollars for the purpose of acquiring the land. These funds, referred to as pre-construction expenses, were to be used consistent with a budget that had been approved in writing by each party. The Gaming Authority was to repay the Developers using the casinos' operating profits once the casinos were opened. Another provision required the Gaming Authority to appoint a fully functioning development committee, which, in turn, would appoint a development coordinator to coordinate"all aspects" of the casinos and assist in making "informed decisions regarding any and all relevant matters." (ECF No. 5-2 at PageID.244-245; ECF No. 5-3 at PageID.288-289.) As a development fee, the Gaming Authority was to pay the Developers 14% of the casinos' monthly operating profits for seven years after opening. The parties did not intend for the Turn-Key Agreements to be considered management contracts, and the Developers did not have any proprietary interest in the gaming facilities. In the event of default, the Turn-Key Agreements outlined the rights and remedies of the parties. The parties agreed to litigate any dispute arising from the agreements in the United States District Court for the Western District of Michigan.
The development of the casinos has not gone smoothly. The Developers allege that the Gaming Authority refused to agree on a budget and failed to appoint a development committee. The Gaming Authority acquired the land and submitted the required applications to the Department of the Interior to have the land held in trust. After the Interior requested additional information and the Tribe failed to respond, the Interior denied the applications. The Gaming Authority, over the Developers' objections, then filed a lawsuit against the Interior. On March 5, 2020, the United States District Court for the District of Columbia granted in part and denied in part the parties' cross-motions for summary judgment. Sault Ste. Marie Tribe of Chippewa Indians v. Bernhardt, 442 F. Supp. 3d 53, 87 (D.D.C. 2020). The case is now on appeal. The Developers say they have paid the Gaming Authority approximately $9 million so far, and construction has not started on either casino. Obviously there are no new gaming operations generating revenue, let alone operating profits.
In the nine-count Complaint, the Developers assert the following claims: (1) Request for Declaratory Relief; (2) Breach of Contract; (3) Negligent or Innocent Misrepresentation; (4) Recission due to Mutual Mistake of Fact and Failure of Consideration; (5) Demand for anAccounting by the Gaming Authority; (6) Promissory Estoppel; (7) Equitable Lien; (8) Constructive Trust; and (9) Contract Implied in Law. The claims all arise under state law. They rest primarily on factual allegations (1) that the Gaming Authority refused to comply with the budgeting provisions of the Turn-Key Agreements and overspent; and (2) that the Gaming Authority failed to complete the process of obtaining the land and transferring into trust so the casinos could be built and begin to operate. Among the requested relief, the Developers seek repayment of the money they already distributed to the Gaming Authority and an allocated share of revenue generated by any casino eventually constructed on the land.
The Gaming Authority moved to dismiss based on tribal sovereign immunity. (ECF No. 14.) The parties briefed the issue based on general principles of tribal sovereign immunity and the particular limited waiver language, and related provisions, in the Turn-Key Agreements. In reviewing this briefing, the Court came to question the basis for its own subject matter jurisdiction and summarized its concerns for the parties. (ECF No. 32.) After considering the supplemental briefing and argument of the parties, the Court is satisfied that it lacks subject matter jurisdiction and must therefore dismiss the case.
As courts of limited jurisdiction, federal courts may exercise only those powers authorized by the Constitution and statute. Hale v. Morgan Stanley Smith Barney LLC, 982 F.3d 996, 997 (6th Cir. 2020) (citing Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994)). Thus, "[b]efore a federal court takes up a case's merits, it must assure itself of its jurisdiction over the case's subject matter." Miller v. Bruenger, 949 F.3d 986, 990 (6th Cir. 2020). It is presumed that a cause of action lies outside the court's limited jurisdiction, and "[t]he burden of establishing the contrary rests upon the party asserting jurisdiction." Vander Boegh v. EnergySolutions, Inc.,772 F.3d 1056, 1064 (6th Cir. 2014). Federal subject matter jurisdiction "cannot be consented to or waived[.]" Firstenberg v. City of Santa Fe, 696 F.3d 1018, 1022 (10th Cir. 2012). "[I]f jurisdiction is lacking, dismissal is mandatory." Campanella v. Commerce Exchange Bank, 137 F.3d 885, 890 (6th Cir. 1998) (citing Fed. R. Civ. P. 12(h)(3)).
Federal courts generally have subject matter jurisdiction either through diversity jurisdiction, 28 U.S.C. § 1332, or federal question jurisdiction, 28 U.S.C. § 1331. Diversity jurisdiction exists when (1) the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and (2) there is complete diversity of citizenship between the disputing parties. 28 U.S.C. § 1332(a). Here, the parties agree that diversity jurisdiction does not apply because Indian tribes are not considered a citizen of any State. See Cohen's Handbook of Federal Indian Law, § 7.04[1][c] at n.65 (collecting cases).
This leaves federal question jurisdiction under 28 U.S.C. § 1331 as the only other possibility. "Federal-question jurisdiction exists when the cause of action arises under federal law." Miller, 949 F.3d at 990 (citing Estate of Cornell v. Bayview Loan Servicing, LLC, 908 F.3d 1008, 1011 (6th Cir. 2018)). In determining whether a cause of action arises under federal law, courts must apply "the 'well-pleaded complaint rule,' which provides that federal jurisdiction exists only when a federal question is presented on the face of the plaintiff's properly pleaded complaint." Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987). In other words, "[a] defense that raises a federal question is inadequate to confer federal jurisdiction." Merrell Dow Pharm. Inc. v. Thompson, 478 U.S. 804, 808 (1986). "A claim arises under federal law, for purposes of federal-question jurisdiction, when the cause of action is (1) created by a federal statute or (2) presents a substantial question of federal law." Miller, 949 F.3d at 991.
The most common way federal question jurisdiction is established is when federal law creates the cause of action. Merrell Dow Pharm. Inc., 478 U.S. at 808. Here, the Developers did not assert any cause of action created by a federal statute. Breach of contract, misrepresentation, promissory estoppel, as well as the other contract-related claims are state law claims. Although the Developers seek declaratory relief in Count I, the Declaratory Judgment Act, 28 U.S.C. § 2201, does...
To continue reading
Request your trial