## United States Court of Appeals FOR THE EIGHTH CIRCUIT

_______________ No. 97-3283SD

_____________ 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. *

___________ Submitted: October 19, 1998 Filed: January 8, 1998

___________ Before BOWMAN, Chief Judge, RICHARD S. A RNOLD and MORRIS SHEPPARD ARNOLD, Circuit Judges.

___________ 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 N ote is in addition to the Note between Turn Key’s shareholders an d 1 Miller & Schroeder, also in the amount of $4,000,000. -2- 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 t o develop, construct, and manage a gaming facility on Oglala Sioux tribal lands. Al l costs of constructing and equipping the project were to be advanced by Turn Key and rep aid out of the revenues from operations according to a set formula. To finance the pro ject, the principal stockholders of Turn Key agreed to borrow up to $4,000,00 0 fromM iller & Schroeder, of which approximately $2.65 million has already bee n 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 Ke y ceased work on the project. The Tribe then declared Turn Key in default and terminated the Agreement. In the Notice of Termination, the Trib e declared its intention to operate the casino for its own account without an y obligation or liab ility to Turn Key. Turn Key filed suit alleging breach of contract and
un just enrichment. The Tribe counterclaimed for breach of contract and breach o f fiduciar y duty. Miller & Schroeder then filed an application to intervene pursuant t o Fed. R. Civ. P. 24(a).

Miller & Schroeder’s motion to intervene and proposed complaint alleged tha t it had a security interest in all of the property purchased with the proceeds from the loan whichhad been used to furnish and construct the casino, as well as in the revenue s genera ted by the casino. Miller & Schroeder relies on a number of agreements i n 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 casin o 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-3-

security interest in all furniture, suppl ies, 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 unde r its Note directly to Miller & Schroeder and acknowledged that Turn Key ha d assigned i ts 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 acc ount and had denied that the Note, Security Agreement, and Consent an d Es toppel were enforceable. Finally, the motion argued that the interest of Miller & Schroeder may not be adequatel y represented by Turn Key, since the primary issues in the existing action concern whether the Management Agreement was broken an d whether either party is entitled to damages.

Un der Rule 24(a) of the Federal Rules of Civil Procedure, a party will b e permitted to intervene in an action “when the ap plicant claims an interest relating to the property or transaction which is the subject of the act ion and the applicant is so situated th atthe disposition of the action may as a practical matter impair or impede th e 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 construe d lib erally, and doubts resolved in favor of the proposed intervenor. United States v

. Union Electric Co. , 64 F.3d 1152, 1158 (8th Cir. 1995). An appli cation 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. On eida Indian Nation v. New York , 732 F.2d 261, 265 (2d Cir. 1984). Re view 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).

Mill er & Schroeder easily satisfies the first requirement under Rule 24(a). The Tribe’s Note, Security Agreement, and Consent and Estoppel clearly purport to give-4-

Miller & Schroeder an interest in the furniture, equipme nt, 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 securit y intere stit claims in the property purchased with the proceeds of the loan could b e impaired by the existing litigation. If the Tribe were to prevail on its affirmativ e defenses and counterclaims against Tur n Key, Miller & Schroeder’s interests would be seriousl y 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 o f these agreements. It is enough under Rule 24(a) that Miller & Schroeder could b e prejud icedby an unfavorable resolution in later litigation. Kansas Public Employee s Retireme nt

System v. Reimer & Koger Associates, Inc. , 60 F.3d 1304, 1307-08 (8t h Cir. 1995).

In additio n, the interests of Miller & Schroeder may not be adequatel y represented by Turn Key. Miller & Schroeder claims a distinct financial and property interest in the casino and its revenues. If Tur n Key prevails in its suit against the Tribe, Miller &Schroeder’s interest may extend to any funds recovered by Turn Key. If the T r ibe prevails against Turn Key, Miller & Schroeder may have nothing against which to assert its claim. Of c ourse 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 counte rclaim

against Turn Key. The existence of this counterclaim will necessaril y affect Turn Key’s litigation strategy, and perhaps give it reaso ns to agree to a settlement that wou ld be to Miller & Schroeder’s disadvantage. Miller & Schroeder should b e al lowed into the case as a party to protect its own interests. We respectfully disagree with the Distr ict 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 remandedthe main action for further proceedings. Miller & Schroeder should b e allowed to participate in those proceedings. The Tribe is free to assert all itsThe Tri be’s motion to dismiss this appeal is denied. The Tribe’s motion fo r 2 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. -5- defenses, including sovereign immunity, on remand.

Reversed and remanded with instructions. 2
A true copy.

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