The legal dispute between Kewadin Casinos and two investment companies may soon come to an end after the two parties reached an agreement last Thursday, under which the Kewadin Casinos Gaming Authority is to pay $25 million by April 12 to its two former investment partners over failed casino projects in Michigan. Depending on the outcome of Kewadin’s malpractice claim, the tribe will pay the two investment companies between $5 million and $10 million extra.
Why the Two Casino Projects Failed?
In January this year, an Ingham County Circuit Court judge found Kewadin liable for the damages JLLJ Development and Lansing Future Development (LFD) had suffered and ordered Kewadin to pay $88 million in damages to its former development partners JLLJ Development and Lansing Future Development (LFD).
The settlement agreement reached last week reduces the amount the Kewadin Casinos Gaming Authority has to pay by 75% from the initial $88 million. Besides, it will put an end to the lengthy and expensive appeals process.
The two casino projects in Lansing and Romulus never broke ground because the tribe failed to gain approval from the U.S. Department of the Interior to bring the proposed casino land into trust, which is required if a tribe wants to operate a casino outside its reservation land.
In April 2020, the two investment companies legally challenged the Kewadin Casinos Gaming Authority. They revealed that Kewadin had convinced them to invest money in the temporary casinos that would operate until the main gambling establishments launched operations.
The two plaintiffs thought that they would receive 14% of the profit generated by the temporary gambling establishments and the same amount from the main casinos’ profit for the first seven years of their operations. The two companies announced that they had invested $9 million so Kewadin Gaming could acquire the lands for the casinos and realize the two casino projects.
Kewadin Sues Its Former Legal Counsel, Holding It Liable for the Damage Claim
The law firm Patterson, Earnhart, Real Bird & Wilson LLP was Kewadin’s legal counsel during the litigation. Kewadin Casinos General Counsel Aaron Schlehuber explained that the firm did not defend Kewadin properly, which affected the reputation of Kewadin Casinos and Sault Tribe.
Under the settlement agreement, Kewadin Casinos will pay the two investment companies up to $10 million if it wins the case against its former legal counsel. But if Kewadin’s malpractice claim is unsuccessful, it will pay the two investors $5 million. Mr. Schlehuber said that the settlement agreement allows Kewadin to continue providing top-quality entertainment services and supporting health care and various cultural programs.