Opinion ID: 787849
Heading Depth: 2
Heading Rank: 1

Heading: Borrowing Fees

Text: 8 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 twenty-six 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. 9 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. 10 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. 11 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. 12 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 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.).