United States ex rel. Shakopee v. Pan American Management

Decision Date09 August 1985
Docket NumberCiv. No. 4-85-231,4-85-880.
Citation616 F. Supp. 1200
PartiesUNITED STATES of America ex rel. SHAKOPEE MDEWAKANTON SIOUX COMMUNITY, Plaintiff, v. PAN AMERICAN MANAGEMENT COMPANY; New England Entertainment Company: Dennis Courtney d/b/a New England Entertainment Company; Alan Arbogast d/b/a New England Entertainment; John Panetta d/b/a New England Entertainment Company; Michael Forschette d/b/a New England Entertainment Company; Little Enterprise; Alfred Estrada, Defendants. LITTLE SIX ENTERPRISES, Plaintiff, v. Donald P. HODEL, Secretary United States Department of Interior, and John W. Fritz, Deputy Assistant Secretary of Indian Affairs, Defendants, and Shakopee Mdewakanton Sioux Community, Intervenor.
CourtU.S. District Court — District of Minnesota



Reid Peyton Chambers, Sonosky, Chambers & Sachse, Washington, D.C., and Larry B. Leventhal and James Townsend, Minneapolis, Minn., for Shakopee Mdewakanton Sioux Community.

George F. McGunnigle, Leonard, Street & Deinard, Minneapolis, Minn., and Aidan D. Jones, Finley, Kumble, Wagner, Heine, Underberg, Manley & Casey, Washington, D.C., for Pan American Intern. Management Co., New England Entertainment Co., John Panetta, Little Six Enterprises, Alfred Estrada.

Peter C. Monson, Dept. of Justice, Washington, D.C., and Mary Carlson, Asst. U.S. Atty., Minneapolis, Minn., for Secretary of Interior.


DIANA E. MURPHY, District Judge.

These related cases arise out of a dispute over the management agreements for bingo facilities operating on tribal trust lands of the Shakopee Mdewakanton Sioux Community (Community) near Prior Lake, Minnesota.

In the first filed action, Civ. No. 4-85-231, the Community seeks injunctive relief, declaratory judgment, damages, and an accounting, against defendants, several companies that have entered into or been assigned rights in agreements to manage the plaintiffs' two bingo operations and individuals employed by those companies, alleging that the management agreements have not been approved by the Secretary of Interior as required by 25 U.S.C. §§ 81 and 415, and breach of contract. Jurisdiction is alleged under 28 U.S.C. §§ 1331 and 1362. Defendants Pan American Management Co., Inc.,1 New England Entertainment Company, John Panetta, Little Six Enterprises (Little Six), Alfred Estrada, and Robert Page have filed an amended answer and counterclaim.2 The counterclaim seeks damages and declaratory and injunctive relief alleging breach of contract, unjust enrichment, detrimental reliance, tortious interference with business relationships, and tortious breach of contract. Presently before the court are the parties' cross-motions for partial summary judgment and the defendants' motion for a stay. The Community seeks summary judgment on the issue of whether the management contracts are null and void under 25 U.S.C. § 81 because they have not been approved by the Secretary of Interior. The defendants, with the exception of Little Six, seek summary judgment on the complaint based on lack of subject matter and personal jurisdiction. The defendants also seek a stay of the proceedings pending disposition of the related case before the court, Little Six Enterprises v. Hodel, Civ. No. 4-85-880.

The court has also consolidated before it Civ. No. 4-85-399, an action brought by Little Six Enterprises in state court and removed to federal court by the Community and the individual defendants who are members of the Community. Little Six Enterprises seeks relief similar to that prayed for in the defendants' counterclaim in this action, but in addition asserts that the members of the Community have made false and malicious statements. It also seeks punitive damages.

In the third related action, Civ. 4-85-880, Little Six seeks mandamus and declaratory and injunctive relief against defendants, Secretary of the Interior Donald P. Hodel, and Deputy Assistant Secretary-Indian Affairs John W. Fritz, (the government), alleging that the June 17, 1985 decision of Fritz disapproving the bingo management contracts was arbitrary and capricious and that the defendants have a ministerial duty to approve the 1983 management agreement. Jurisdiction is alleged under 28 U.S.C. § 1331. The action was filed June 25, 1985 in the district of the District of Columbia and subsequently transferred to this court. The Community sought and was granted leave to intervene as a party-defendant. Presently before the court is the motion of Little Six for preliminary injunctive relief, which has been consolidated with a hearing on the merits under Fed.R.Civ.P. 65(a)(2), and cross-motions by the government and Little Six for summary judgment.


The Community is a federally recognized Indian tribe which has adopted and operates under a Constitution approved by the Secretary of the Interior pursuant to the provisions of the Indian Reorganization Act of 1934, 25 U.S.C. § 476. It is a small Indian community occupying less than 300 acres of tribal land.

On April 10, 1982, defendant New England Entertainment Co. (New England) signed a management agreement with the Community to develop and run a bingo operation on tribal lands.3 The agreement was negotiated over a three day period. Although Department of the Interior and Bureau of Indian Affairs (BIA) officials were consulted about the agreement, they did not formally approve or reject it at that time.

Counsel for New England who negotiated the contract states that the BIA officials present at the negotiating session represented that the agreement did not require BIA approval and that it was the government's position that 25 U.S.C. § 81 did not apply to contracts of this type.4 Mariana Shulstad participated in the negotiations in her role as First Assistant Field Solicitor for the United States Department of the Interior. She states that it was her opinion at the time that, under applicable law, neither she nor the representatives of the BIA had any authority to approve or disapprove the contract. Norman Crooks who signed the agreement as chairman of the community states that he also believed at the time, based on the representations of the government officials, that no approval of the contract was necessary. The agreement specifically notes at the outset that the Community is an organized and federally recognized Indian community. The agreement contains a legal description of the property located on tribal trust land and allows the management company to record the agreement "in any Public Records". The opening section of the agreement states that the Community is the owner of the described property which it seeks to develop to enhance its economic self-sufficiency and self-government. The Community is also said to be "desirous of vesting in the management company the exclusive right and obligation to finance, construct, improve, develop, manage, operate, and maintain the property in conformance with the terms and conditions of this Management Agreement."

Under the terms of the agreement, the management company was engaged for a term of 15 years "to finance and/or assist the Community in obtaining financing, to construct, improve, develop, manage, operate and maintain the property as a facility for the conduct of bingo games and to create other revenue producing activities upon said property as mutually agreed upon." Furthermore, the Community:

specifically warrants and represents to the management company that Community shall not act in any way whatsoever, either directly or indirectly, to cause this Management Agreement to be altered, amended, modified, cancelled, terminated and/or attempt to assign or transfer this Management Agreement or any right to or interest in said Agreement, without consent of the management company. Further, Community warrants and represents it shall take all actions necessary to insure that the Management Agreement shall remain in good standing at all times.

Two provisions specifically limit liens or encumbrances on the property. In the section where the management company is given responsibility to supervise the completion of all the construction and development, the agreement provides that "in no case shall liens or encumbrances attach to the land or structures thereon, which shall at all times remain the property of the Community." Later in the agreement a provision specifically binding the Community states that the:

Community hereby specifically warrants and represents to the management company that Community shall not act in any way whatsoever, either directly or indirectly to cause any party to become an encumbrancer of the property subject to this Agreement without the prior written consent of the management company except as provided in this Agreement.

In return for providing the duties contained in the management agreement, New England was to receive "forty-five percent (45%) of the net operating profits for each fiscal year resulting from and in connection with any business activities upon the property." Initially, however, 100% of the net operating profits was to be applied to retire the debt incurred in constructing and developing the facilities. The management company also has the right to compel the Community to enter into a new management agreement under the same terms and conditions if the Community elects to establish any other bingo activities on other property on its Reservation during the 15 year period of the current agreement.

The bingo operation has operated at a large profit since commencing business and is the major source of revenue and jobs to the Community. The initial debt was repaid within the first year of operation. To date the Community has received approximately $3,321,000 in profit distributions. The parties managing the operations have received approximately $2,685,000 in management fees.

In 1982 New England assigned its interests in the agreement to New...

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    ...Cir.1986); Wisconsin Winnebago Business Committee v. Koberstein, 762 F.2d 613 (7th Cir.1985); United States ex rel. Shakopee v. Pan American Management Company, 616 F.Supp. 1200 (D.Minn.1985), app. dismd. 789 F.2d 632 (8th Cir.1986). These cases indicate quite clearly that the Management Ag......
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