Red Hawk Casino hit a jackpot of its own Friday, fending off a $30 million court judgment that once threatened its existence.
Nearly six years after a jury said Red Hawk’s tribal owners owed millions to its former business partner, a state appeals court wiped the verdict off the books. The 3rd District Court of Appeal ruled that the ex-partner’s claims weren’t valid because his contract with the tribe was never approved by the federal agency that oversees Indian casinos.
Red Hawk opened off Highway 50 near Shingle Springs in late 2008, during the depths of the recession, and struggled mightily in its early years to win customers. The 2011 court verdict, which drew considerable attention in the Indian casino industry, almost put it over the edge. An El Dorado Superior Court jury ruled against the casino’s owner, the Shingle Springs Band of Miwok Indians, in a breach-of-contract case against former partner Chris Anderson, a Southern California casino entrepreneur.
The tribe said it couldn’t afford to pay Anderson’s company, Sharp Image Gaming Inc., the $30 million ordered by the jury. In court papers filed a few months after the verdict, the tribe’s lawyers sketched a “doomsday scenario” under which lenders could seize the casino’s cash and put the $535 million facility out of business.
“Any efforts to presently execute on the judgment would likely have catastrophic consequences for the tribe and all who depend on the casino for their livelihood,” the lawyers wrote.
Doomsday was averted when Gov. Jerry Brown renegotiated the tribe’s state gambling compact. The original agreement forced the tribe to pay the state 25 percent of its slot machine winnings. The new deal gave the tribe a three-year breather on making any payments; after that, payments were slashed to 15 percent.
The tribe said the appeal court’s reversal was a vindication. “I always believed the tribe was in the right,” tribal chairman Nick Fonseca said in a prepared statement. “This is a victory for all tribes in California.” With interest, the tribe said the payout to Sharp Image would have totaled $49 million.
The lawsuit stemmed from the Shingle Springs tribe’s earliest attempts to build a casino, two decades ago. The tribe opened a tent-like gambling hall in 1996, when tribal gambling laws in California were still evolving, and ran it sporadically before closing up in 1997 amid uncertainties about the casino’s legal status.
Sharp Image, a slot machine manufacturer from outside Los Angeles, was the tribe’s partner in that ill-fated venture but hasn’t played a role in equipping Red Hawk with slots. In its lawsuit, Sharp Image claimed it was the rightful supplier of machines to Red Hawk because of its earlier work with the tribe.
The tribe argued that the original agreement with Sharp Image should have been voided because the contract didn’t get the needed approvals from the National Indian Gaming Commission. The court of appeal agreed.