U.S. District Judge Linda R. Reade recently denied a motion by the owners of the former Argosy Sioux City riverboat casino to block a lawsuit by Community Action Agency of Siouxland, contending the riverboat owners did not make million revenue-sharing payments to local nonprofits as required. The lawsuit further noted the Argosy was “operating unlawfully” after losing its state license, and its owners, Belle of Sioux City and Iowa Gaming Company, unjustly made money by withholding the payments instead of giving it to Missouri River Historical Development to be distributed to charities.
The Argosy’s owners admitted the casino was operating without a license during the 16 months it withheld payments from its former nonprofit partner MRHD. Reade wrote Belle “cannot escape its financial obligations by operating outside the law. By failing to comply with the Iowa Code, Belle enjoyed the retention of the 3 percent of its receipts to which it would normally not have been entitled as a casino operator.”
A subsidiary of Pennsylvania-based Penn National Gaming Inc., the nation’s largest gaming operator, Belle sued MRHD for breach of contract in October 2012, and stopped making the payments in April 2013. Two months earlier the Iowa Racing and Gaming Commission awarded the first gaming license for a land-based casino in Woodbury County to MRHD, which by then had partnered with the Hard Rock Hotel & Casino; it opened in downtown Sioux City on August 1, 2014. Two days earlier, state regulators ordered the Argosy to close because its state gaming license had expired.
Community Action Agency sued Belle and Iowa Gaming Company in November in Woodbury County District Court to collect the $1.93 million in revenue-sharing payments that had been withheld from MRHD, which would have made grants to up to 54 other nonprofits.
In its motion to dismiss, Belle claimed the nonprofit had failed to state a claim for unjust enrichment, adding Iowa law requiring it to share revenue with MRHD did not apply, since “Belle did not have an operating agreement during the period at issue.”
Reade disagreed, stating, “Community Action has pled sufficient facts to support a claim that defendants’ failure to remit 3 percent of its receipts conferred a benefit on defendants.”
The case is set for June 11, 2018 in Cedar Rapids. Belle’s breach of contract lawsuit against MRHD still is pending in Polk County District Court. MRHD has countersued in that case, which is scheduled to go to trial February 12 in Des Moines.
