United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 03-3043

___________

United States of America, *

ex rel. Maynard Bernard, *

*

 Appellant, *

*

v. *

*

Casino Magic Corp., a Minnesota *

Corporation; Casino Magic American *

Corp., a Minnesota Corporation, *

*

 Appellees. *

Appeals from the United States

District Court for the

District of South Dakota.

___________

No. 03-3149

___________

United States of America, *

ex rel. Maynard Bernard, *

*

 Appellee, *

*

v. *

*

Casino Magic Corp., a Minnesota *

Corporation; Casino Magic American *

Corp., a Minnesota Corporation, *

*

 Appellants. *
-2-

___________

Submitted: May 13, 2004

Filed: September 13, 2003

___________

Before MURPHY, HEANEY, and MAGILL, Circuit Judges.

___________

HEANEY, Circuit Judge.

This is the second time this case has come before this court. The first time, the

United States through its relator (collectively the United States or government)

disputed the legality of contracts involving a casino project between the SissetonWahpeton Sioux Tribe (the Tribe) and Casino Magic Corporation (Casino Magic).

We declared the contracts illegal and remanded for a determination of damages. On

summary judgment, the district court awarded the United States $350,000. Both

parties now appeal this amount. We affirm in part and reverse in part.

I. Background

In 1993, the Tribe contacted Casino Magic to help in the process of developing

a casino on the Tribe’s land. The two parties entered into three agreements that

defined their business relationship: the Consulting Agreement, the Construction and

Term Loan Agreement, and the Participation Agreement. The first round of litigation

centered on whether the three agreements, collectively, constituted a management

agreement that required approval from the National Indian Gaming Commission

(NIGC). United States ex rel. Bernard v. Casino Magic Corp., 293 F.3d 419 (8th Cir.

2002) (Bernard I). On appeal, we held that, taken together, the agreements did

constitute a management agreement. Id. at 426. Since they were not approved by the

NIGC, the agreements were invalid and the United States was entitled to recovery of

any fees paid by the Tribe for services rendered under the invalid contracts. Given
-3-

that the record did not contain any fee information, we remanded for a determination

of “fees . . . paid by the Tribe to Casino Magic.” Id. at 427.

On remand, the district court awarded the United States $350,000. This amount

reflected the Tribe’s payments to Casino Magic pursuant to the terms of the

Consulting Agreement. Both parties appeal the district court’s determination. The

United States maintains that it should have been awarded the following additional

sums: the interest payments Casino Magic collected as a result of its construction loan

to the Tribe; the origination fee on the same loan; the prepayment penalty fee the

Tribe paid to Casino Magic; various indirect costs of the project that the Tribe

reimbursed to Casino Magic; and prejudgment interest. Casino Magic, on the other

hand, argues that because its out-of-pocket expenses on the casino project exceeded

$350,000, the United States is not entitled to any payment.

II. Analysis

We review a grant of summary judgment de novo. Hammond v. Northland

Counseling Ctr., Inc., 218 F.3d 886, 890 (8th Cir. 2000). If there is no genuine issue

as to any material fact, summary judgment is appropriate. Fed.R.Civ.P. 56(c). “When

ruling on a summary judgment motion, a court must view the evidence in the light

most favorable to the nonmoving party.” County of Mille Lacs v. Benjamin, 361 F.3d

460, 463 (8th Cir. 2004) (citation and internal quotation marks omitted). 
1

Though Congress eliminated this section in 2000, we rely on the version of the

statute that was in effect when the suit was filed. See United States ex rel. Steele v.

Turn Key Gaming, Inc., 260 F.3d 971, 973 (8th Cir. 2001). 

2

For an agreement to be “relative” to the land, the agreement must “put in play

actual incidents and rights of property ownership.” Id. at 978-79.

-4-

Twenty-five U.S.C. § 811

 details the proper procedure for reimbursing the

United States when an agreement relative to Indian lands,2

 between a tribe and a third

party, has not been properly approved:

All contracts or agreements made in violation of this section shall be null

and void, and all money or other thing of value paid to any person by any

Indian or tribe, or anyone else, for or on his or their behalf, on account

of such services, in excess of the amount approved by the Commissioner

and Secretary for such services, may be recovered by suit in the name of

the United States in any court of the United States . . . .

The disputed payments here fall into four basic categories: borrowing fees,

indirect costs, out-of-pocket expenses, and prejudgment interest. We examine each

category in turn and affirm the district court in its damages calculation in three out of

the four categories, reversing only the district court’s denial of prejudgment interest.

A. Borrowing Fees

In September 1994, Casino Magic loaned the Tribe $5 million (the Bridge

Loan) so it could begin construction on the casino. Nearly two years later, the Tribe

secured a loan with BNC National Bank of Bismarck (the Bank) for $17.5 million that

was to be paid in installments at the Tribe’s request. Casino Magic agreed to

contribute $5 million of the $17.5 million loan. The loan was set up such that twentysix lenders were each responsible for funding a percentage of the loan. When the

Tribe made a draw on the loan, each of the lenders contributed its respective

percentage share to the payment. 
-5-

The Tribe’s first draw on the loan was for $6 million. Casino Magic was

required to contribute approximately $1.7 million; its proportionate share. The Tribe

used its first draw to pay off the Bridge Loan in full, so Casino Magic netted

approximately $2.3 million on the transaction – the difference between what the Tribe

owed Casino Magic on the Bridge Loan and what Casino Magic owed the Tribe due

to the first draw. Casino Magic did not charge interest or collect any fees on the

Bridge Loan.

When the Tribe made payments on the Bank’s loan, the Bank distributed the

payments to each of the lenders based on their percentage of participation. This was

also true of any interest payments the Bank accrued, and for the origination fee the

Bank charged to the Tribe. Additionally, Casino Magic collected approximately

$20,000 of the prepayment penalty the Tribe was charged for paying off the $17.5

million loan early.

The government argues that the district court erred by not including the

payments that Casino Magic received from the Tribe via the Bank – the interest fees,

the origination fee, and the prepayment penalty fee – in its damages award to the

government. Because these payments were made pursuant to the Construction and

Term Loan Agreement, the government reasons that the payments were made as part

of the overall management scheme created by the Consulting Agreement, the

Construction and Term Loan Agreement, and the Participation Agreement. Casino

Magic, on the other hand, maintains that the money it collected in connection with the

Bridge Loan and the bank loan were not due to management services rendered and are

therefore not within the purview of 25 U.S.C. § 81. 

We agree with the district court that the government is not entitled to the return

of payments the Tribe made to Casino Magic in connection with the Bridge Loan or

the subsequent $17.5 million loan. It is true that in Bernard I we examined the

interplay between all three contracts in determining that a management agreement

implicating property rights existed between the Tribe and Casino Magic. The issue
-6-

of damages, however, requires a slightly different analysis. According to the language

of 25 U.S.C. § 81, only fees resulting from illegal services, in this case management

fees, need to be returned. While there may have been language in the three

agreements between the Tribe and Casino Magic indicating that Casino Magic was

attempting to create a management relationship that required NIGC approval, it does

not follow that all of the payments it collected were solely as a result of the

unapproved management relationship. Casino Magic received those payments as a

result of its lender status, not because of management services it rendered that were

relative to the land. See United States ex rel. Yellowtail v. Little Horn State Bank,

828 F. Supp. 780, 787 (D. Mont. 1992) (finding loan agreements between a bank and

a tribe not to be service contracts as contemplated by 25 U.S.C. § 81 because the loan

agreements were not “relative” to the land). The district court was correct in its

interpretation of Bernard I: We required Casino Magic to return the management fees

it collected, and borrowing fees do not constitute management fees. See Bernard I,

293 F.3d at 426 (“The law is clear that management agreements must be approved by

the Chairman of the NIGC. Without that approval, invalid management fees must be

recovered on behalf of the Tribe.”).

B. Indirect Costs

The government has identified several costs the Tribe reimbursed to Casino

Magic that it maintains were not directly related to the casino project and should

therefore be returned by Casino Magic. These costs included licensing fees, Casino

Magic’s legal fees, and a donation to a men’s softball team (totaling approximately

$206,000). The government also cites to other, “unverifiable” expenses, totaling

$41,440.71 that it believes it is owed. As with the borrowing fees, we agree with the

district court that these indirect costs were not paid by the Tribe in exchange for

management services, or as a result of services rendered relative to the land, and are

therefore not recoverable under 25 U.S.C. § 81.
-7-

C. Out-of-Pocket Expenses

Casino Magic maintains that it should not be required to pay any damages

because it expended over $600,000 of its own money in connection with the casino

project, and to allow the government to collect $350,000, without a deduction of outof-pocket expenses, would result in an unfair double-billing. To support its argument,

Casino Magic primarily relies on language from Bernard I stating, “If the agreements

were in fact invalid, the Tribe expects Casino Magic to return any fees paid to it under

the terms of the invalid agreements, excluding the Tribe’s secured loan repayment to

Casino Magic and any other out-of-pocket expenses.” Bernard I, 293 F.3d at 424.

Casino Magic’s reliance on this language from Bernard I is misplaced. This portion

of the opinion is merely stating what the parties’ expectations were – not what we

eventually held. 

Additionally, Casino Magic cites to one case in which a South Dakota district

court found that a management agreement was not properly authorized by the United

States, but did not require the casino management company to return its fees to the

government. See Rita, Inc. v. Flandreau Santee Sioux Tribe, 798 F. Supp. 586 (D.

S.D. 1992). This case, however, does not intersect with ours. The district court in

Rita was deciding whether to grant a temporary restraining order that would have

prevented the tribe from removing the management company from the casino. In

deciding to deny the temporary restraining order, but allowing the case to go forward,

the district court stated that the tribe induced the management company into investing

$3 million in the casino – a fact that the district court stated may entitle the company

to “some relief.” Id. at 589. Rita does not, however, suggest that a management

company must return only the profits it obtained as the result of an illegal contract

under 25 U.S.C. § 81. 

Casino Magic’s out-of-pocket expenses should not be deducted from the

damages award. The controlling statute, 25 U.S.C. § 81, does not contemplate such

a result: The statute says that “all money” paid for services should be returned,
-8-

without any reference to compensating the third party for its expenditures. The

district court acted properly in excluding these costs from its damages calculation.

D. Prejudgment Interest

Finally, the district court denied the government’s request for prejudgment

interest. We review a district court’s decision to grant prejudgment interest for an

abuse of discretion. Children’s Broad. Corp. v. Walt Disney Co., 357 F.3d 860, 868

(8th Cir. 2004). The purpose of awarding prejudgment interest is to compensate the

prevailing party for its true money damages, to encourage settlements, and to deter

parties from benefitting from unfairly delaying litigation. Val-U Constr. Co. v.

Rosebud Sioux Tribe, 146 F.3d 573, 582 (8th Cir. 1998). To that end, generally

prejudgment interest should be awarded, absent exceptional circumstances. See Turn

Key Gaming, Inc. v. Oglala Sioux Tribe, 313 F.3d 1087, 1093 (8th Cir. 2002). Often

cited examples of such circumstances include the claimant’s bad faith, the claimant’s

assertion of frivolous claims, and the claimant’s repeated delay tactics. See e.g. City

of Milwaukee v. Cement Div., Nat’l Gypsum Co., 515 U.S. 189, 196 (1995); Stroh

Container Co. v. Delphi Indus., Inc., 783 F.2d 743, 752 (8th Cir. 1986). 

There are no exceptional circumstances here that warrant the denial of

prejudgment interest. The district court explicitly recognized the justifications

underlying a grant of prejudgment interest, but cited two reasons for refusing to award

prejudgment interest. The entirety of the court’s analysis follows: “Casino Magic has

incurred $632,000 in out-of-pocket expenses for which it will not be reimbursed.

Furthermore, the reimbursement of $350,000 will make the Tribe whole again.” (Dist.

Ct. Op. at 8-9.)

The district court’s analysis of the equities in this case is incomplete in our

view. While it may be true that Casino Magic incurred out-of-pocket expenses for

which it will not be reimbursed, it is also true that Casino Magic profited from the

loan arrangement it had with the Tribe. The district court’s second rationale, that the
-9-

Tribe would be made whole by the $350,000 damage award, ignores the time value

of money. The Tribe “has been denied the use of money which was legally due.”

Stroh Container Co., 783 F.2d at 752. An award of prejudgment interest recognizes

that the Tribe can only be made whole by awarding prejudgment interest. See Kansas

v. Colorado, 533 U.S. 1, 10 (2001) (“Our cases since 1933 have consistently

acknowledged that a monetary award does not fully compensate for an injury unless

it includes an interest component.”).

We do not find that the district court’s reasons for denying prejudgment interest

in this case rise to the level of exceptional circumstances that justifies deviating from

the general rule of awarding prejudgment interest. Accordingly, we reverse the

district court’s denial of prejudgment interest.

III. Conclusion

For the reasons stated above, we affirm the district court’s award of $350,000

to the government, but reverse and remand for a determination of prejudgment interest

owed to the government on that amount. 

______________________________