Dustin McDaniel and Racing CommissionOn March 9, 2021, Gulfside Casino Partnership filed for judicial review of a decision by the Arkansas Racing Commission that Legends Resort and Casino, LLC, was a qualified casino applicant.
With all the cases I was watching, I missed looking closely at one of them. Nothing had happened in it since August and the main event in all the litigation was the case that went to the Arkansas Supreme Court, 60-CV-19-5832, Gulfside Casino Partnership v. Arkansas Department of Finance.
The new case, 60-CV-21-1653, asks for a judicial review of the Racing Commission’s finding that Legends demonstrated experience conducting casino gaming. Gulfside claims it was injured by the Racing Commission’s decision, as Legends seeks to take away Gulfside’s casino gaming license, even though Legends fails to meet a minimum requirement imposed by Amendment 100. (Interestingly, the license wasn’t actually awarded to Gulfside until the end of July.)
On October 21, 2021, in Gulfside Casino Partnership v. Arkansas Department of Finance, 60-CV-19-5832, the Arkansas Supreme Court reversed and dismissed Judge Tim Fox’s order of May 7, 2021. In that order, Judge Fox determined that a portion of a casino gaming rule and that part of an Arkansas law were unconstitutional. Both of these stipulate that required local documents expressing support for the application be from current local officeholders. Gulfside’s support documents came from previous officeholders. If Judge Fox’s order was upheld, then those documents would be valid. Since the Supreme Court reversed and dismissed the case, Gulfside’s support documents are invalid as is their license.
Gulfside had 18 calendar days to file a petition for a rehearing. The end of that period was end-of-day on 11/8/2021. They did not file a petition for a rehearing. That afternoon they did, however, file new motions in 60-CV-21-1653 regarding their allegations of Legends’ lack of experience in casino gaming.
On the morning of 11/9/2021, the Arkansas Supreme Court issued a mandate, making the decision final, with the mandate to be mailed to Judge Fox’s court.
The only remaining litigation for Gulfside is 60-CV-21-1653.
The Racing Commission, per the Casino Gaming Rules, had accepted Legends as a qualified applicant at least twice before this litigation (request for judicial review) was filed.
After the litigation was filed, on July 30, 2020, a hearing was held “In the Matter of Gulfside Casino Partnership Request for Determination Regarding Legend Resort and Casino LLC Applicant Status Under Amendment 100.” The following partial transcript is from that hearing:
MR. MCDANIEL: Then in August we resubmitted again, under the name of CNB. And then in September there was a back-and-forth between Mr. Freeland, with whom I have spoken a couple of times this week, and I have been very clear to say, Mr. Freeland, if I cite our conversations, would it be fair to say this, or fair to say that?
He’s here, so if I in any way unfairly cite our conversations, I’m sure he will correct me.
But at the time there was a discussion among the Commission, the Chair, especially, and counsel, Mr. Freeland, about sovereign immunity of Quapaw Nation and Cherokee Nation, as applicants, and also the Choctaw Nation, which was, had an application in the mix somewhere.
And so there were sovereign immunity waivers that circulated back and forth between the lawyers at that time, and apparently the decision was made that the comfort level of the Commission and of all of the lawyers involved would be for the Quapaw Nation to transfer their license to a newly formed LLC called Saracen Resort, LLC.
They created that pursuant to your rules. They came in front of you. Saracen Resort, LLC is just like Legends. It’s a brand new formed Arkansas LLC. And the determination was made by your counsel and yourselves that it qualified, met every qualification, and you transferred the license over to Saracen.
Subsequent to conversations with that, the question arose, Well, do you want us to do that on our application as well, and the answer was, Yeah, that would be appropriate.
So we formed a new LLC that would be purely an Arkansas holding LLC, no risk of sovereign immunity issues popping up at anytime in the future, and we resubmitted our application not in January, but rather in November, November the 15th. And then it was resubmitted again in January.
So it was done purely in cooperation with and coordination with this, this Commission and your counsel. I would submit that the law is rather clear, that no LLC in and of itself has experience. Procurement law is guiding in this.
Whether it is federal contracting, construction, or mortgage lenders, or any other licensed entity, it is clear that you can’t just start a CPA LLC and say, I’m now a CPA because I have an accounting LLC. You have to have an accountant that has experience who manages that LLC, and then that’s where you get the experience.
So you have twice considered whether or not we demonstrate, according to the constitution, “demonstrate” means have. No part of the constitution redefines “demonstrate” or “have.” It doesn’t redefine any of our corporate law or modify any of our corporate law.
You have twice said that there is good cause to accept the CNB Legends LLC application, and that wouldn’t have happened if your counsel and you had not determined we qualified as applicants.
So I appreciate Mr. Castleberry making a record on this. I’m sure that we will all hear about it again later in our lives, but for today, I am certainly happy to answer any of your questions, but I would ask that you affirm your previous findings, that Legends LLC is a qualified applicant.
VICE CHAIRMAN LAMBERTH: Thank you, Mr. McDaniel. Questions, comments from the Commissioners for Mr. McDaniel?
Mr. McDaniel, the principals for Legends, Cherokee Entertainment, CNB are they the same?
MR. MCDANIEL: All the exact same, yes, sir. Each one of them were provided to you in our application. There are background checks photographs, thumbprints, curriculum vitae, experience level. Legends Resort, LLC has no executives.
VICE CHAIRMAN LAMBERTH: Mr. Hunter?
COMMISSIONER HUNTER: Yes, sir. You mentioned the sovereign immunity question. Are there any other reasons, or is that one simple, one simple reason for the change?
MR. MCDANIEL: I was not involved, Mr. Hunter, in the discussion between Mr. Lieblong, Mr. Freeland, and the Quapaw, no I don’t really know what initiated that thinking at the time. But once it had been decided and determined, Hey, that’s how we want them to do it, we, we certainly had no objections. There is no corporate reason in the world not to have a holding company in any given state where you have a license, so we were perfectly happy to do it.
COMMISSIONER HUNTER: Thank you.
VICE CHAIRMAN LAMBERTH: Did the LLC created for Saracen — and this may be a question for Mr. Bowen or Mr. Freeland — did the, did the LLC for Saracen come before or after they had been given a license?
MR. MCDANIEL. It was after. I can answer that. They were, they were given a license, I believe, in May, and then it was transferred, but the requirements for licensure and transfer are the same.
VICE CHAIRMAN LAMBERTH: So the Saracen LLC was created after that, after the license was awarded?
MR. BOWEN: I’m looking back at former counsel, who is — this was a little bit before our time, before I think the Attorney General’s office came in, and it’s my understanding that it was created after.
MR. FREELAND: That Is a correct statement.
MR. BOWEN: Okay.
VICE CHAIRMAN LAMBERTH: Any further questions or comments for Mr. McDaniel? Hearing none, what is the pleasure of the Commission? Do I have a motion?
COMMISSIONER HUNTER: I move that we affirm the finding that Legends Resort and Casino is a qualified casino applicant.
VICE CHAIRMAN LAMBERTH: A motion has been made by Mr. Hunter. Do I have a second?
COMMISSIONER LANDERS: Second.
VICE CHAIRMAN LAMBERTH: Second by Mr. Landers. Any further discussion? All in favor say “Aye.”
COMMISSIONERS: Aye.
VICE CHAIRMAN LAMBERTH: Opposed?
(No audible response.)
VICE CHAIRMAN LAMBERTH: Motion carries. Thank you.
Conclusions Of Law — February 2, 2021
- Amendment 100 requires that an applicant “demonstrate” experience in casino gaming. The sole owner and manager of Legends — CNB — operates ten (10) casinos in Oklahoma through its wholly owned subsidiary CNE.
- The business structure adopted by CNB/Legends is expressly authorized by the Casino Gaming Rules (see Casino Gaming Rule 15) and Amendment 100.
- CNB/Legends is a qualified applicant based on the knowledge, experience and expertise of any corporation or LLC is derived from its owners, members, managers, and executives.
- For these reasons, the ARC finds that Legends has demonstrated casino gaming experience as required by Amendment 100, § 4(m) and therefore is a qualified applicant.
Other things I’ve found
The counsel for the Racing Commission, who is the defendant in the case, is the Attorney General’s office. They have already said in previous filings in the case:
- Gulfside lacks standing under the Administrative Procedures Act
- Gulfside fails to allege, as is required, a “proper” injury.
- The Court (Fox) lacks subject matter jurisdiction
- The Racing Commission is entitled to sovereign immunity (you can’t sue the state except as specifically allowed by law)
CNB has said in previous filings in the case:
- Gulfside lacks standing because it is not a qualified applicant
- The resolution of Gulfside’s claim does nothing to change its current condition.
- Gulfside cannot show an immediate concrete injury that will be redressed by the relief question
At this point, as a former applicant, Gulfside has no current legal interest in the casino gaming license. As Dustin McDaniel has written, “Gulfside has no standing to challenge the qualification of any entity applying for a casino gaming license.”