Inside Look: MGM Sues Department of Interior Over Connecticut Tribal Casino Plans

Flushdraw continues a busy weekend of interesting updates with a look at the ongoing legal battle concerning the Connecticut land-based casino scene. It’s all about MGM Resorts International filing suit against the US Department of Interior a little over a week ago in an attempt to derail the state’s plans to allow the state’s two prominent gaming-operating tribes to build a joint-venture commercial casino venue in northeast Connecticut.

Onlookers following the Connecticut gambling-expansion tale have understood that the state’s actions were likely to draw more legal fire from MGM Resorts, which operates a casino just over the border from Connecticut in Springfield, Massachusetts. However, after losing a previous legal battle in Connecticut over one of the statutes passed to pave the way for the joint-tribal casino venture, set to be built in East Windsor, Connecticut, MGM instead sued the US Department of the Interior over a highly irregular approval process that appears to give Connecticut’s Mohegan and Mashantucket Pequot tribes an expanded monopoly over gambling in the state.

Connecticut StampSince that expanded gambling exclusivity is also likely to include sports betting and several forms of online gambling, it’s become a battle over far more than just Connecticut’s desires to keep more of its residents’ gambling funds from rolling across the Massachusetts border to East Springfield. However, the very strange and likely federal-rules-breaking way in which Connecticut and the two tribes sought to green-light the joint casino project gave MGM Resorts a weakest-link opportunity to kill the whole deal by making it a federal case.

That’s now become reality. On August 8, MGM Resorts International sued the Department of the Interior, which includes the Bureau of Indian Affairs. That department is in turn responsible for oversight and administration of the 1988 Indian Gaming Regulatory Act, under which the entirety of US tribal gaming operates. And that’s exactly the issue that MGM Resorts hopes to litigate.

According to MGM’s 33-page complaint, the partnership that Connecticut has approved to operate the East Windsor casino venue isn’t a tribal gaming operation at all, as defined under IGRA, and thus the Bureau of Indian Affair’s approval — which itself occurred in an incomplete and suspect manner — was an illicit process. The licensing of the joint partnership between the Mohegan and Mashantucket Pequot tribes came about after they lobbied Connecticut’s legislator to create a unique vehicle (called Special Act 15-7), which in turn gave the two tribes the right to create a joint commercial and non-tribal entity called MMCT Venture, LLC (MMCT).

The problem, according to MGM, is that such a commercial, non-tribal venture should never go through an Interior / Indian Affairs approval process. First, IGRA allows for the approval of tribal casino operations only on reservations or on so-called “land in trust”, a special designation through which certain off-reservation acreage can be deemed tribal lands for the purpose of operating gaming operations under IGRA. However, such land-in-trust designations can’t be applied everywhere — there are distance-related and other limitations — and IGRA in its entirety has no provisions for governing joint commercial (non-tribal) ventures as that created by the Mohegan and Mashantucket Pequot tribes for the purposes of the East Windsor casino.

All that led to MGM Resorts being effectively locked out of the potential Connecticut casino market; the casino giant had proposed a large casino elsewhere in the state, in Bridgeport, though that proposal went nowhere in the face of intense tribal lobbying. Then came the strange creation of the MMCT entity and the suspect legal avenue supporting it. According to MGM’s counsel, “Interior’s approval decisions are unexplained, unprecedented, and unlawful. Binding precedent dictates that ‘IGRA affords tools … to regulate gaming on Indian lands, and nowhere else.'”

The complaint adds, “The proposed East Windsor casino would be operated on private property and would not be on ‘Indian lands’ under IGRA. As a result, operation of the proposed East Windsor casino would not be governed by IGRA, but would instead be governed by state law.”

Connecticut’s Special Act 15-7 was soon buttressed by another measure, Public Act 17-89, which was designed to ensure that revenues due the state from the tribes’ existing Connecticut casinos — Mohegan Sun and Foxwoods — would continue being paid to the state despite the MMCT being a commercial rather than a tribal entity. Of course, granting that exclusivity to the proposed East Windsor casino project shows the severe uphill slope faced by “outsider” MGM. From the complaint: “Connecticut Lieutenant Governor Nancy Wyman likewise told supporters that there are ‘three letters we don’t
want to talk about … Let them stay out of our state’ — remarks news reports interpreted to be ‘[c]learly … referring to M-G-M.'”

MGM previously filed a case in Connecticut in the face of the legislated monopoly. However, Connecticut’s presumptive misuse of the IGRA approval channel gives MGM another way to fight. At the least, it may slow down the MMCT casino development project by several years.

The lawsuit also focuses the strange way in which the Connecticut tribes obtained the IGRA approval, even though MGM can find no evidence that the MMCT proposal was either properly approved or is valid even if such proper approval exists. Through multiple Freedom of Information Act (FOIA) requests, MGM put together an alleged timeline of events that claims IGRA’s stated approval was improper.

First, in July 2017, Interior returned, without either approving or disapproving, four key agreements to the tribes and Connecticut for further work after finding them not suitable. Those four amendments were the Mohegan Compact, the Mohegan MOU (Memo of Understanding), the Mashantucket Procedures, and the Mashantucket MOU. According to MGM, ” In short, the purpose and function of the amendments is to facilitate off-reservation, commercial gaming by MMCT, a private limited liability company.”

Instead, according to MGM’s lawsuit, “Despite Interior’s September 15, 2017 orders, the Tribes asserted that Interior had
a duty to issue a deemed-approval notice with respect to the Amendments.” This led to MGM, which had participated as a party of interest in the tribes’ filing, to counter with its initial claims of IGRA being misapplied for the MMCT project.

Then the two tribes and the State of Connecticut filed their own lawsuit against the Department of the Interior in late 2017. In the face of that lawsuit and intense pressure from Connecticut and the tribes, Interior published a notice in June 2018 in the Federal Register that the exclusivity amendments had been approved. However, as MGM noted, “The notice states
that the Secretary ‘took no action” on the amendment and that the amendment ‘is considered to have been approved, but only to the extent that the Amendment is consistent with IGRA.'”

That forced MGM’s hand, even if it took another year for MGM to assemble its full complaint against Interior’s hand-washing and alleged misuse of IGRA. In the complaint MGM adds, “The Amendments are unprecedented. No other tribe has ever used IGRA’s amendment procedure to authorize the operation of a commercial, off-reservation casino. No state has ever implemented a hybrid commercial-tribal gaming scheme similar to Connecticut’s. And, before the approval decisions at issue here, Interior had never approved amendments to facilitate such a scheme.”

This one appears headed to a lengthy legal battle. On the one side, there’s what appears to be a blatant and illicit move by Connecticut and its two prominent gaming tribes to do an end-around on IGRA and misuse the law to expand tribal exclusivity to include a commercial, non-tribal venture, while also protecting a major existing gaming-revenue stream. On the side, there’s MGM trying to force its way into another state’s gambling market, one where it’s clearly not welcome. It’s going to be messy.

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