Court places Detroit casino plans on hold

John Porretto

Friday, Sept. 13, 2002 | 9:51 a.m.

DETROIT -- Detroit's plans for three permanent casinos were placed on hold Thursday by a federal appeals court -- a victory for an Indian tribe that wants the bidding process reopened.

An injunction from a three-judge panel of the 6th U.S. Circuit Court of Appeals in Cincinnati prohibits the city from issuing building permits for the permanent gambling halls and prevents the developers from starting construction.

The Lac Vieux Desert Band of Lake Superior Chippewa Indians filed the request in July in its case against the city. The 430-member tribe contends the licensing process that gave preferences to two developers that campaigned to legalize Detroit casinos in 1996 is unconstitutional.

"We're even more confident now that the Court of Appeals will grant the relief we seek, i.e. a legal re-bidding process for the permanent casinos," said Conly Schulte, an attorney for the Lac Vieux Desert tribe.

"In order to grant our injunction, the court was required to find that the tribe is likely to succeed on the merits of its appeal," Schulte said. "The writing is on the wall. A new bidding process is likely."

Mayor Kwame Kilpatrick and representatives of two of the city's three casinos -- MotorCity and Greektown -- were not immediately available for comment. MotorCity is controlled by Mandalay Resort Group of Las Vegas.

A spokeswoman for MGM Grand Detroit Casino -- owned by MGM MIRAGE of Las Vegas -- said executives were studying the decision and had no immediate comment.

Kilpatrick had been at odds with the City Council since he announced initial deals with the casinos in March, but city officials last month struck deals with the three companies for permanent casinos. The agreements provide about $2 billion in economic benefits to the city, with an estimated $1.2 billion of that to be in construction of the new casinos, according to the mayor.

The agreement also calls for the casinos to make $51 million in cash payments to the city this year. The city is supposed to receive another $51 million in cash next year. A $40 million business development fund also is included in the agreement.

It wasn't clear Thursday how the temporary injunction affects those payments. Councilwoman Sharon McPhail, who opposed two of the casino deals last month, said she was pleased with the court's decision.

"The city will benefit from a re-bidding process. That's always been my position and, frankly, I'm glad to see it," McPhail said.

Schulte said parties in the matter will file briefs in the coming months. He said arguments before the appeals court likely will be heard early next year.

U.S. District Judge Robert Holmes Bell acknowledged in a July 9 ruling that the licensing process was flawed. But he rejected the tribe's demand that Detroit solicit a new round of bids for licenses, saying that would be an economic blow to the casinos, their workers, the city and others. Bell also said the city could proceed with negotiating permanent deals with operators of its three casinos.

On July 16 Bell denied a request by the Lac Vieux Desert band to temporarily halt talks on new development agreements until its appeal was resolved by the federal appeals court.

Later that month the tribe asked the appeals court to block negotiations on permanent casinos until its appeal was heard.

In its ruling Thursday, the three-judge panel said the tribe had "demonstrated a likelihood of success on the merits of its appeal and irreparable harm."

"Moreover," the decision says, "the defendants ... and other interested parties are not likely to suffer substantial harm if development of the permanent casinos is delayed while this court considers the appeal."

The Lac Vieux Desert tribe, based in the western Upper Peninsula village of Watersmeet, filed suit in 1997 -- before the casinos opened -- claiming Detroit had stacked the deck with its licensing ordinance.

The ordinance gave preference to two companies that helped support the successful 1996 statewide referendum that allowed off-reservation gambling in Detroit. The measure said only three casinos could be built.

Those companies -- Greektown Casino LLC and Atwater Entertainment Associates LLC, part owner of MotorCity Casino -- received licenses.