Court Opinion

ID: 3022077
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:26:03.478837+00
Date Added: 2024-06-11T11:47:31.952800
License: Public Domain

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. ARNOLD 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 &
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 Note1 in which
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

      1
       This Note is in addition to the Note between Turn Key’s shareholders and
Miller & Schroeder, also in the amount of $4,000,000.

                                           -2-
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

                                            -3-
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

                                            -4-
defenses, including sovereign immunity, on remand.

      Reversed and remanded with instructions.2

      A true copy.

             Attest:

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

      2
        The Tribe’s motion to dismiss this appeal is denied. The Tribe’s motion for
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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