Failed deal spurs lawsuit

Wednesday, May 25, 2005 | 10:54 a.m.

A San Diego Indian tribe has sued Caesars Entertainment Inc. and Harrah's Entertainment Inc. for breach of contract, saying Caesars abandoned an agreement to develop a major casino for the tribe and misled the tribe about a pending deal with Harrah's.

Harrah's, which expects to consummate its $9.4 billion purchase of Caesars by mid-June, is prevented from working with the Pauma Band of Luiseno Mission Indians because it has a development and management deal with the nearby Rincon tribe, which owns the Harrah's Rincon hotel and casino.

In a suit filed May 13 in San Diego Superior Court, the Pauma tribe claims Caesars initially informed tribal members that the pending deal with Harrah's wouldn't affect plans to build the Pauma-Caesars casino.

"While Caesars assured the Pauma tribe that the project would continue as agreed upon, it was secretly being told by Harrah's to pull the plug so that Harrah's could avoid litigation with the Rincon tribe," the suit said.

The tribe "was forced to seek another gaming company to bid and begin anew," a delay which created financial problems, the suit said. Caesars had promised to build the Pauma-Caesars casino by the end of 2005 and said the casino would generate more than $200 million in revenue and nearly $50 million in payments to the tribe by the end of 2006, it said. Relying on Caesars' promise to "promptly develop and manage the new casino," the tribe had obtained a new casino compact and agreed to pay at least $5.7 million per year to the state, it said.

The tribe approved a management and development contract with the owner of the Hard Rock Hotel and Casino in Las Vegas in February. The tribe envisions replacing its small casino with a resort including up to 2,000 slot machines, 100 table games, a 300-room hotel, restaurants and a spa.

Caesars signed a development deal with the tribe in 2003 and began merger talks in 2004. The acquisition was announced in July.

A Harrah's spokesman declined comment, saying the company hasn't yet been served with the suit.