Case Title: Foundations of East Chicago v. City of East Chicago, et al.

Citation: 

Docket Number: 

State: indiana

Court: Indiana Supreme Court

Date: 2010-05-18T00:00:00Z

Document:
ATTORNEYS FOR APPELLANT 
ATTORNEYS FOR APPELLEES 
FOUNDATIONS OF EAST CHICAGO, INC. 
CITY OF EAST CHICAGO 
Peter J. Rusthoven 
James A. Knauer 
Mark J. Crandley 
William Bock, III 
Deborah Pollack-Milgate 
Steven E. Runyan 
Paul L. Jefferson 
Indianapolis, Indiana 
Indianapolis, Indiana 
 
STATE OF INDIANA 
ATTORNEYS FOR AMICI CURIAE 
Gregory F. Zoeller 
SAINT STANISLAUS CHURCH AND SCHOOL, 
Attorney General of Indiana 
THE TWIN CITY MINISTERIAL ALLIANCE, AND 
 
THE NORTHWEST INDIANA FEDERATION,  
Thomas M. Fisher   
F/K/A INTERFAITH FEDERATION 
Solicitor General of Indiana 
Kathleen A. DeLaney 
 
Amanda Couture 
Heather L. Hagan 
Indianapolis, Indiana 
Deputy Attorney General  
 
Indianapolis, Indiana 
NEIGHBORS INCORPORATED OF HAMMOND, 
 
INDIANA, ST. CATHERINE HOSPITAL, INC., 
 
WORKFORCE DEVELOPMENT SERVICES, INC., 
 
CALUMET COLLEGE OF ST. JOSEPH, INC., 
 
JANELLE SCOTT, AND 
 
THE HON. WILLIAM H. HUDNUT 
 
Stephen J. Peters 
David I. Rubin 
Indianapolis, Indiana 
 
 
 
In the 
Indiana Supreme Court  
 
 
No. 49S02-0908-CV-00383 
 
FOUNDATIONS OF EAST CHICAGO, INC., 
SUCCESSOR BY MERGER TO EAST CHICAGO 
COMMUNITY DEVELOPMENT FOUNDATION, 
INC. AND TWIN CITY EDUCATION 
FOUNDATION, INC., 
 
Appellant (Plaintiff below), 
 
v. 
 
CITY OF EAST CHICAGO, 
 
Appellee (Defendant below), 
 
and 
 
FILED
CLERK
of the supreme court,
court of appeals and
tax court
May 18 2010, 11:26 am
 
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STATE OF INDIANA, 
 
Appellee (Intervenor-Defendant  
 
 
    below).   
 
 
Appeal from the Marion Superior Court, No. 49D13-0705-PL-019348 
The Honorable S.K. Reid, Judge 
 
 
On Petition to Transfer from the Indiana Court of Appeals, No. 49A02-0711-CV-00987 
 
 
May 18, 2010 
 
 
Shepard, Chief Justice. 
 
 
At the outset of riverboat gambling in this state, the Indiana Gaming Commission issued 
a license for operation of a boat at East Chicago.  It incorporated as a condition of this license the 
terms of a local economic development agreement between the operator and the City of East 
Chicago, with the result that certain gaming revenue flowed from the operator to several local 
entities.  During its 2007 session, the Indiana General Assembly enacted a provision declaring 
that if the license at East Chicago transferred to a new operator (which it has), the City could 
void its agreement with the former operator. 
 
 
The present appeal represents a challenge to the constitutionality of the 2007 legislation 
by certain recipients of the revenue.  We conclude that the 2007 provision did not alter in any 
substantive way the statutory framework under which the Gaming Commission regulates 
licenses and license conditions, and thus find it unnecessary to rule on its constitutionality. 
 
 
Facts and Procedural History 
 
The original riverboat arrangements had been in place about a decade when a new city 
administration took office in East Chicago.  The city government has been attempting to re-direct 
the considerable revenue (3.75% of the licensee‟s adjusted gross gaming revenue) that has been 
 
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distributed to four local entities:  the City itself, two non-profit foundations, and a for-profit 
corporation.  Our decisions in two previous appeals arising out of this effort contain substantial 
background and details about the resulting struggle.  In City of East Chicago v. East Chicago 
Second Century, Inc., 908 N.E.2d 611 (Ind. 2009), we largely reinstated various claims the City 
had lodged against the profit and non-profit corporations receiving funds, and in Zoeller v. East 
Chicago Second Century, Inc., 904 N.E.2d 213 (Ind. 2009), we reinstated the Attorney General‟s 
claims against the for-profit corporation.   
 
In February 2007, as the foregoing suits were working their way through the court 
system, the two non-profits that were receiving funds (Twin City Education Foundation and East 
Chicago Community Development Foundation) dissolved themselves and merged their assets 
into a newly created non-profit called Foundations of East Chicago, Incorporated (“FEC”).  
(App. at 1918-24.)   
 
About ten weeks later, the Indiana General Assembly passed the state‟s biennial budget.  
Tucked into the budget bill as Section 302 was the provision at issue today, a new subsection to 
Ind. Code § 4-33-6-7 (2008), which reads: 
 
(c) This subsection applies to an owner‟s license issued for the City of East 
Chicago.  If a controlling interests in the owner‟s license is transferred, the fiscal 
body of the City of East Chicago may adopt an ordinance voiding any term of the 
development agreement . . . between:  
(1) the city; and  
(2) the person transferring the controlling interest in the owner‟s license; . . .  
The ordinance may provide for any payments made under the redevelopment 
agreement, including those held in escrow, to be redirected to the City of East 
Chicago for use as directed by ordinance of the city fiscal body.  
 
H.E.A. 1001, 115th Gen. Assem., 1st Reg. Sess. (Ind. 2007).  The City subsequently adopted 
ordinances invoking this enactment, including amending the development agreements to provide 
that the City receive the casino revenue for distribution rather than FEC.  (See App. at 2057-59.)   
 
 
FEC filed this action challenging the validity of Section 302 under numerous provisions 
of the United States and Indiana Constitutions.  The Attorney General intervened to defend the 
 
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statute‟s validity.  After conducting a bench trial, the trial court entered judgment against FEC, 
holding that FEC did not have standing to maintain the challenge and rejecting its constitutional 
arguments.     
 
 
FEC appealed, and a divided Court of Appeals affirmed in a manner that produced a 
majority result, but not a majority opinion.  Foundations of East Chicago, Inc. v. City of East 
Chicago, 905 N.E.2d 30 (Ind. Ct. App. 2009).  We granted transfer.  919 N.E.2d 550 (Ind. 2009) 
(table). 
 
 
I. 
Does FEC Have Standing? 
 
FEC challenges the trial court‟s ruling that it “lacked standing” to challenge the statutory 
section at issue.  (Appellant‟s Br. at 1, 14-17.)  It urges that the court mistakenly permitted the 
City to re-litigate standing arguments earlier resolved adverse to the City in a different division 
of the Marion Superior Court, where Judge Cale Bradford allowed FEC to substitute as a party 
under Ind. Trial Rule 25 for the two non-profits that had been receiving funds.  (Appellant‟s 
App. at 14-15.)  Thus, FEC submits, “the trial court here usurped the exclusive jurisdiction of its 
sister Marion Superior Court, improperly engaging in „appellate review‟ of a coordinate 
tribunal‟s decision.”  (Appellant‟s Br. at 15.)  It also contends that the court overlooked 
undisputed evidence of the board-structure changes implemented in forming the merged FEC 
entity.  In any event, the FEC says it has standing to challenge the statute.     
 
The City, by contrast, argues that the litigation earlier before Judge Bradford was largely 
a dispute over whether the local corporations possessed third-party beneficiary rights that might 
limit the ability of the actual parties to the local development agreement.  It says the procedural 
decision rendered by Judge Bradford was not a final judgment entitled to any preclusive effect in 
other cases.  (City‟s Br. at 17-18.)   
 
The City‟s larger point about FEC‟s status is one of considerable force.  The entity before 
us today bears scant resemblance in structure to the two non-profit foundations that had been 
 
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receiving funds in accordance with the license and the local development agreement between the 
City and the riverboat operator.  Whether FEC is entitled to receive funds under the gaming 
license, as Twin City and ECCDF did, is first and foremost a matter of administrative law for the 
Indiana Gaming Commission to decide.  We deem that to be an open question.   
 
By contrast, whether FEC has a sufficient interest to be a party in the litigation before us 
is a judicial question to be resolved by reference to the law of standing.   
 
The judicial doctrine of standing focuses on whether the complaining party is the proper 
party to invoke the court‟s power.  State ex rel. Cittadine v. Indiana Dept. of Transp., 790 N.E.2d 
978 (Ind. 2003).  Courts seek to assure that litigation will be actively and vigorously contested.  
Schloss v. City of Indianapolis, 553 N.E.2d 1204 (Ind. 1990).  It is generally insufficient that a 
plaintiff merely has a general interest common to all members of the public.  Terre Haute Gas 
Corp. v. Johnson, 221 Ind. 499, 45 N.E.2d 484 (1942).  Standing requires that a party have “a 
personal stake in the outcome of the lawsuit and must show that he or she has sustained or was in 
immediate danger of sustaining, some direct injury as a result of the conduct at issue.”  Higgins 
v. Hale, 476 N.E.2d 95, 101 (Ind. 1985).   
 
At least for now, FEC is receiving substantial revenue from the casino license and the 
original local development agreements.  The fact that Section 302 has the potential to set in 
motion events under which the Commission might eliminate that flow of money is sufficient to 
find standing under these circumstances.   
 
 
II. 
Does Section 302 Impair FEC’s Interests? 
 
As the local corporations argued in the two earlier appeals, FEC contends that Section 
302 directly impairs contract rights it possesses as a beneficiary of the agreements the City and 
the operator tendered to the Gaming Commission.  (Appellant‟s Br. at 17-18.)  Specifically, FEC 
contends that the section “directly and purposely authorizes the City to eliminate the 
Foundations‟ contract rights.”  (Appellant‟s Br. at 18.)  The Attorney General and the City both 
 
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argue, however, that Section 302 does not substantially impair any such interests because FEC 
had no reasonable expectation that its ability to receive riverboat revenue would continue 
indefinitely.  (State‟s Br. at 10; City‟s Br. at 2.)   
 
Standard judicial practice clothes every statute with a presumption of constitutionality.  
Boehm v. Town of St. John, 675 N.E.2d 318 (Ind. 1996).  The party challenging the 
constitutionality of a statute bears the burden of proof, and all doubts are resolved against that 
party.  Id.  If there are two reasonable interpretations of a statute, one of which is constitutional 
and the other not, we will choose the path which permits upholding the statute.  Id.   
 
The legislature enacted the Riverboat Gambling Act, Ind. Code § 4-33-1-1 et seq. (2008), 
intending that the gambling industry would benefit the people of Indiana by promoting tourism 
and economic development, subject to “the strict regulation of facilities, persons, associations 
and gambling operations.”  Ind. Code § 4-33-1-2.  After the decisions by the trial court and the 
Court of Appeals in this case, we had occasion to analyze the structure and operation of the Act 
and the East Chicago local development agreements.  The decisions in those two appeals largely 
drive the resolution of the present case. 
 
 
A.  What Was the Nature of the LDA? 
 
In our earlier cases, we considered the regulatory scheme as it stood before Section 302 
was added.  In Zoeller v. East Chicago Second Century, Inc., we concluded that the funding 
arrangements memorialized in the local development agreements and incorporated into the 
riverboat license have always been subject to alteration, through the administrative processes of 
the Gaming Commission.  Speaking specifically to the local economic development agreements, 
we said: 
 
[T]he agreement is not like an ordinary commercial contract at all.  This 
agreement was a mode of implementing the casino‟s obligation to contribute to 
local economic development.  Its terms were intended to control the rights and 
duties of East Chicago and the casino licensee in relation to each other; they were 
not intended to control the rights of any non-parties. 
 
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Zoeller, 904 N.E.2d at 221.  We also observed that gaming revenue flows, ultimately, as a result 
of decisions made by the Indiana Gaming Commission in the course of issuing, transferring, or 
revoking a license:   
 
The Commission‟s role in these events is a central one.  Indiana‟s Riverboat 
Gambling Act provides:  “A license to operate an excursion gaming boat:  (1) is a 
revocable privilege granted by the state . . .” . . . The Code also provides that any 
sale or transfer of a license is subject to the approval by the Gaming Commission, 
requires that a proposed acquirer must meet the same criteria applicable to any 
initial applicant, and directs the Commission to adopt rules reflecting the 
standards applicable to transfers. 
 
East Chicago, 908 N.E.2d at 623.  Moreover, we concluded: 
 
While the Foundations and Second Century are correct that the agreements 
imbedded in the license do not appear terminable at will, the City is correct that 
they are subject to periodic alteration (through the administrative processes of the 
Gaming Commission).  As the city‟s motion for summary judgment sought a 
court order to turn over to the City all funds that Second Century and the 
Foundations had received and would receive from the riverboat operations, the 
trial court was warranted in denying the motion.   
 
Id. at 624.  Lastly, this Court declared, “the City alone could not redirect gaming revenue 
presently flowing to the private entities by means of the ordinance it adopted in 2005, or by other 
means, for that matter.”  Id. at 623. 
 
 
B.  Effect of Section 302 
 
In interpreting a statute, our goal is to determine and give effect to the General 
Assembly‟s intent.  Where the statute is unambiguous, the Court will read words and phrases for 
their plain and ordinary meaning.  Porter Dev., LLC v. First Nat. Bank of Valparaiso, 866 N.E.2d 
775 (Ind. 2007).  When a statue is clear, courts do not impose other constructions upon it.  
Huffman v. Office of Envtl. Adjudication, 811 N.E.2d 806 (Ind. 2004).   
 
 
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Viewed in the light of these canons of construction, Section 302 is fairly straightforward.  
It authorizes the City to make changes to the local agreements which sought to facilitate 
economic development in East Chicago.  The statute says this power may be exercised 
unilaterally by the City.  This idea is obviously at odds with the idea of an “agreement” between 
the City and the licensees, but it is consistent with our earlier declaration that even without 
Section 302, the City was “free to change its mind” about how gaming resources might best 
foster economic development and seek the Gaming Commission‟s concurrence with its altered 
plans.  The original licensee‟s successors seem not to have been too concerned about where the 
3.75% was deployed, playing something like the role of an interpleader who regards the 
economic development payments simply as a cost of doing business, while largely content to 
“leave it to the government” to decide on the best strategy for advancing local economic 
development. 
 
Section 302 does not by its terms even purport to alter the Commission‟s regulatory 
authority.  The flow of funds for economic development are subject to any terms and conditions 
in the license issued by the Commission.  The Commission incorporated various arrangements 
into the East Chicago gaming license on advice of the city government and other stakeholders 
and interested citizens.  They may be revised by the Commission, with or without Section 302.   
 
In light of the foregoing conclusions, we see no impairment of contractual rights 
presenting a colorable alarm under the applicable state or federal provisions.  U.S. CONST. art. I, 
§ 10 and IND. CONST. art. 1, § 24. 
 
 
C.  Other Constitutional Claims 
 
FEC‟s challenge to Section 302 covers a considerable list of constitutional provisions, 
from, bar on taking private property without just compensation (U.S. CONST. amend. V, XIV and 
IND. CONST. art. 1, § 21), to the requirement that bills be confined to a single subject (IND. 
CONST. art. IV, § 19), to the constraint on special and local legislation (IND. CONST. art. 4, § 22), 
to the separation of powers principle (IND. CONST. art. III, § 1).  (Appellant‟s Br. at 16-37.)  A 
 
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number of these may be plausible.  Still, we avoid constitutional declarations when a dispute can 
be resolved through non-constitutional means.  Superior Const. Co. v. Carr, 564 N.E.2d 281 (Ind. 
1990).  For all that appears, Section 302 did not alter the legal options of the combating parties in 
any substantial way, and we thus conclude that a constitutional declaration is unwarranted. 
 
 
Conclusion 
 
 
We reverse the trial court‟s holding on FEC‟s standing, but otherwise affirm the 
judgment.  
 
 
Dickson, Sullivan, Boehm, and Rucker, JJ., concur.