In a devastating setback for the Indian tribe that owns Red Hawk Casino, a jury has awarded $30 million to the tribe's former business partner.

The jury award represents a potentially nightmarish turn for the Shingle Springs Band of Miwok Indians, which dreamed of getting rich from gambling. The tribe vowed to appeal the verdict.

With the 3-year-old casino struggling financially, it's not clear whether the tribe can afford to pay millions to its former partner, Sharp Image Gaming Inc. If it can't, it's uncertain what happens next.

The tribe and Sharp Image could get drawn into a tangled legal battle involving the company that manages the casino as well as the bondholders who financed the $530 million venue off Highway 50.

Complicating matters is the legal doctrine of sovereign immunity, which generally shields Indian tribes against legal claims. The immunity defense hasn't worked so far for the Shingle Springs tribe but could have a bearing on what happens next.

"This is all very tricky," said Dennis Whittlesey, a Washington lawyer who specializes in tribal gaming issues.

"It's a mess," said Nelson Rose, an Indian gaming law expert at Whittier College.

Late Thursday, an El Dorado Superior Court jury awarded $30 million to Sharp Image, a Chatsworth company that briefly operated a casino for the tribe in the mid-1990s. The award includes a slice of the revenue from Red Hawk, even though Sharp Image had been dismissed years earlier.

The tribe and its lawyers said Friday that they're confident the verdict will be overturned on appeal. Attorney Paula Yost said the jury wasn't allowed to see critical evidence supporting the tribe's decision to cut ties in 1999 with Sharp Image – including a federal agency's finding that the contract was illegal.

"We will never stop defending ourselves against Sharp's effort to enrich itself through an illegal contract, which the tribe canceled in 1999," said tribal Chairman Nick Fonseca in a news release.

But Matthew Jacobs, an attorney for Sharp Image, said he'll make sure his client gets paid. "If we need to, we're going to put a lien on (the tribe's) bank account."

About the only thing that is clear is that the 500-member Shingle Springs tribe hasn't gotten rich owning a casino. Red Hawk has fallen far short of the tribe's expectations since opening in December 2008. The casino is doing so poorly, it often doesn't generate enough profit to meet the $500,000 a month minimum guaranteed to the tribe. When that happens, the casino's management firm, Lakes Entertainment Inc., has to loan the tribe money.

Red Hawk takes in more than $200 million a year in gambling revenue, according to trial testimony. But a plethora of financial obligations has sapped the casino of much of its profitability. The tribe pays the state up to 25 percent of its slot-machine winnings, the most of any gaming tribe in California. It pays several million dollars a year to El Dorado County, and owes $450 million on a construction bond.

Lakes Entertainment gets up to 30 percent of the casino's profits. The tribe owes Lakes about $66 million for a startup loan but has stopped making principal payments.

The $30 million jury award to Sharp Image makes the tribe's financial picture even muddier. An effort to collect on the award could put Sharp Image at odds with the casino's bondholders or with Lakes Entertainment.

Normally, bondholders would have first rights among creditors to the casino's revenue stream. But Jacobs said he believes his client has a higher priority.

Yost, the tribe's lawyer, said that isn't true. Officials with Lakes couldn't be reached.

Companies struggling to pay their debts can always file for bankruptcy protection. But experts Whittlesey and Rose said it's not clear if Indian tribes can go bankrupt.

The tribe had argued that because of sovereign immunity it couldn't be sued. The court disagreed, and the lawsuit went ahead. Jacobs said the tribe had signed away its immunity in the contract with Sharp Image.

Despite that, the tribe isn't without legal safeguards. By law, Whittlesey said, Sharp Image can't collect any money before the tribe gets its guaranteed $500,000 monthly profit. And he said Sharp Image, because of federal laws governing Indian reservations, can't seize tribal property, including the casino itself. "You can't grab their land, you can't take over the business," said Rose.

On the other hand, Rose said, the tribe can't simply escape Sharp Image's claim. If tribes don't honor their financial commitments, he said, lenders would hesitate to lend money to Indian casinos. If that happens, he said, "the entire Indian bond market falls apart."

When a big Indian casino in Connecticut defaulted on a $2 billion debt two years ago, the tribal chairman frightened lenders by saying their debts weren't as important as members' dividend checks. The tribe removed him as chairman and began debt-restructuring talks.

Sharp Image and the Shingle Springs band briefly ran a small gambling hall called Crystal Mountain Casino. It closed in 1997, when a judge said customers couldn't use the only road leading in. Federal and state regulators also raised questions about the legality of the operation and Sharp Image's slot machines.

After firing Sharp Image in 1999, the tribe hired Lakes to build and operate Red Hawk.

But Christopher Anderson, the owner of Sharp Image, told the jury he still had the exclusive right to supply the tribe with slot machines. He said he was entitled to 30 percent of the machines' winnings for five years – a total of about $250 million.

Yost said federal officials had invalidated Sharp Image's contract. But the judge in El Dorado County kept that decision secret from the jury, after deciding the federal agency's ruling was improper.

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