United States Court of Appeals

FOR THE EIGHTH CIRCUIT

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No. 97-3283SD

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Turn Key Gaming, Inc., *

*

Plaintiff, *

*

Miller & Schroeder Investments *

Corp., * On Appeal from the United

* States District Court

 Appellant, * for the District of

* South Dakota.

v. *

*

*

Oglala Sioux Tribe, *

*

Defendant - Appellee. *

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Submitted: October 19, 1998

Filed: January 8, 1998

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Before BOWMAN, Chief Judge, RICHARD S. ARNOLD and MORRIS SHEPPARD

ARNOLD, Circuit Judges.

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RICHARD S. ARNOLD, Circuit Judge.

Miller & Schroeder Investment Corp. appeals the District Court’s denial of its

application to intervene as of right under Fed. R. Civ. P. 24(a). We hold that Miller &
This Note is in addition to the Note between Turn Key’s shareholders and

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Miller & Schroeder, also in the amount of $4,000,000.

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Schroeder has satisfied the requirements of Rule 24(a), and we therefore reverse.

The pending lawsuit involves a dispute over a Management Agreement between

Turn Key Gaming, Inc., and the Oglala Sioux Tribe, under which Turn Key was to

develop, construct, and manage a gaming facility on Oglala Sioux tribal lands. All

costs of constructing and equipping the project were to be advanced by Turn Key and

repaid out of the revenues from operations according to a set formula. To finance the

project, the principal stockholders of Turn Key agreed to borrow up to $4,000,000

from Miller & Schroeder, of which approximately $2.65 million has already been

advanced. The project experienced significant cost overruns, and Turn Key sent a

change order to the Tribe requesting that it approve an increase in construction costs.

The Tribe refused, and Turn Key ceased work on the project. The Tribe then declared

Turn Key in default and terminated the Agreement. In the Notice of Termination, the

Tribe declared its intention to operate the casino for its own account without any

obligation or liability to Turn Key. Turn Key filed suit alleging breach of contract and

unjust enrichment. The Tribe counterclaimed for breach of contract and breach of

fiduciary duty. Miller & Schroeder then filed an application to intervene pursuant to

Fed. R. Civ. P. 24(a). 

Miller & Schroeder’s motion to intervene and proposed complaint alleged that

it had a security interest in all of the property purchased with the proceeds from the loan

which had been used to furnish and construct the casino, as well as in the revenues

generated by the casino. Miller & Schroeder relies on a number of agreements in

support of this allegation. First is a Promissory Note Master Installment Note in which 1

the Tribe agreed to pay Turn Key up to $4,000,000 from the revenues of the casino

operations in accordance with the formula set out in the Management Agreement;

second is a Security Agreement and Financing Statement wherein the Tribe granted a
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security interest in all furniture, supplies, inventory, and cash of the casino to Turn Key

to secure payment of the Tribe’s Note; and third is an agreement entitled Consent and

Estoppel of the Oglala Sioux Tribe, in which the Tribe agreed to remit all payments due

under its Note directly to Miller & Schroeder and acknowledged that Turn Key had

assigned its rights under the Tribe’s Note and Security Agreement to Miller &

Schroeder. The motion further averred that the disposition of the suit between the Tribe

and Turn Key could, as a practical matter, impair or impede Miller & Schroeder’s

ability to protect its interest, in that the Tribe had taken possession of the casino for its

own account and had denied that the Note, Security Agreement, and Consent and

Estoppel were enforceable. Finally, the motion argued that the interest of Miller &

Schroeder may not be adequately represented by Turn Key, since the primary issues in

the existing action concern whether the Management Agreement was broken and

whether either party is entitled to damages.

Under Rule 24(a) of the Federal Rules of Civil Procedure, a party will be

permitted to intervene in an action “when the applicant claims an interest relating to the

property or transaction which is the subject of the action and the applicant is so situated

that the disposition of the action may as a practical matter impair or impede the

applicant’s ability to protect that interest, unless the applicant’s interest is adequately

represented by existing parties.” Fed. R. Civ. P. 24(a). Rule 24 is to be construed

liberally, and doubts resolved in favor of the proposed intervenor. United States v.

Union Electric Co., 64 F.3d 1152, 1158 (8th Cir. 1995). An application for intervention

cannot be resolved by reference to the ultimate merits of the claim the intervenor seeks

to assert unless the allegations are frivolous on their face. Oneida Indian Nation v. New

York, 732 F.2d 261, 265 (2d Cir. 1984). Review of a denial of leave to intervene as of

right is de novo. Mille Lacs Band of Chippewa Indians v. Minnesota, 989 F.2d 994,

998 (8th Cir. 1993).

Miller & Schroeder easily satisfies the first requirement under Rule 24(a). The

Tribe’s Note, Security Agreement, and Consent and Estoppel clearly purport to give
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Miller & Schroeder an interest in the furniture, equipment, and other personalty, as well

as in the payments due Turn Key under the terms of the Note. Second, the interest that

Miller & Schroeder claims in the revenues from casino operations and the security

interest it claims in the property purchased with the proceeds of the loan could be

impaired by the existing litigation. If the Tribe were to prevail on its affirmative

defenses and counterclaims against Turn Key, Miller & Schroeder’s interests would be

seriously injured. It is the Tribe’s position that the agreements upon which Miller &

Schroeder relies are void, and that it is entitled to damages from Turn Key for breach

of the Management Agreement. The disposition of the lawsuit between Turn Key and

the Tribe may require resolution of legal and factual issues bearing on the validity of

these agreements. It is enough under Rule 24(a) that Miller & Schroeder could be

prejudiced by an unfavorable resolution in later litigation. Kansas Public Employees

Retirement System v. Reimer & Koger Associates, Inc., 60 F.3d 1304, 1307-08 (8th

Cir. 1995).

In addition, the interests of Miller & Schroeder may not be adequately

represented by Turn Key. Miller & Schroeder claims a distinct financial and property

interest in the casino and its revenues. If Turn Key prevails in its suit against the Tribe,

Miller & Schroeder’s interest may extend to any funds recovered by Turn Key. If the

Tribe prevails against Turn Key, Miller & Schroeder may have nothing against which

to assert its claim. Of course Turn Key has an incentive to pursue its claim against the

Tribe, but its incentive may be different from Miller & Schroeder’s. The Tribe has a

counterclaim against Turn Key. The existence of this counterclaim will necessarily

affect Turn Key’s litigation strategy, and perhaps give it reasons to agree to a settlement

that would be to Miller & Schroeder’s disadvantage. Miller & Schroeder should be

allowed into the case as a party to protect its own interests. We respectfully disagree

with the District Court’s holding to the contrary. In an opinion filed on January 4,

1999, Nos. 98-1484, 98-1577, Turn Key Gaming, Inc. v. Oglala Sioux Tribe, we have

remanded the main action for further proceedings. Miller & Schroeder should be

allowed to participate in those proceedings. The Tribe is free to assert all its
The Tribe’s motion to dismiss this appeal is denied. The Tribe’s motion for

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leave to file a reply to the opposition of Miller & Schroeder to the Tribe’s motion to

disqualify counsel for Miller & Schroeder is granted. The motion to disqualify counsel

is denied.

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defenses, including sovereign immunity, on remand.

Reversed and remanded with instructions.2

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.