Seneca Nation to Arbitrate Gaming Violations

December 12, 2011 Updated Dec 12, 2011 at 5:19 PM EDT

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Seneca Nation to Arbitrate Gaming Violations

December 12, 2011 Updated Dec 12, 2011 at 5:19 PM EDT

(WKBW release) -- The Seneca Nation of Indians on Monday formally filed for arbitration over New York’s violation of its gaming compact that guarantees the Nation a 14-county Western New York exclusivity zone for casino gambling.

According to a news release, the move comes after more than a year of unproductive discussions with state officials from two gubernatorial administrations. The Nation withheld what now totals more than $350 million in payments to the state, for gaming activity starting Jan. 1, 2009, because of the violations. Between 2002 and 2008, the Nation paid the state, and the three communities that host Seneca casinos, $476 million under the compact’s provisions.

The compact, signed in 2002, states: “the Nation shall have total exclusivity with respect to the installation and operation of…gaming devices, including slot machines, within the geographic area defined by…”

The zone essentially covers all land west of State Route 14, which bisects the state from Sodus Point to the Pennsylvania line. The compact defines the term “gaming devices” to include slot machines and video lottery gaming devices.

The Nation’s Council unanimously adopted a resolution ordering Nation lawyers to file for arbitration.

“This is a decision the Nation does not make lightly, but it is one the Council and I must make to defend our rights under the Nation’s 2002 compact with New York State. The state has violated that compact for years, and the Nation has simply lost its patience with the lack of progress,” Seneca Nation President Robert Odawi Porter said in a news release. “The Council, the Seneca people, and I are tired of the intrusions into our legal zone of exclusivity by competing casino games and horse tracks that market themselves as casinos.”

In exchange for exclusivity, the Nation agreed to pay the state a significant portion of the revenues the Nation’s casinos in Niagara Falls, Buffalo and Salamanca generate on slot machines and video lottery devices. The Nation continues to hold those three host communities blameless in this dispute.

“The Council and I feel this is a positive move for our Nation. The arbitration will settle whether we still have the exclusive right to offer slot machines and video lottery devices in Western New York. If we win the arbitration, we keep the escrowed money and the profits generated by our gaming devices,” Porter said. “If we lose in arbitration, we continue paying to the state the exclusivity payments called for under the compact.”

The compact violations arose as a result of the state allowing “slot machines” and “video lottery gaming devices” in the exclusivity zone. These include introduction of “Moxie Mania” slot machines in taverns and restaurants; introduction of gaming devices at Hamburg Fairgrounds, Batavia Downs and Finger Lakes Raceway; and re-branding the three racetracks as “casinos” offering “slots.” The race track gaming machines are licensed by the state Lottery and profits from those machines go directly to the state.

“The compact clearly states that when New York breaches exclusivity of ‘slot machines’ or ‘video lottery gaming devices,’ the state payments the Nation is supposed to make for that category of gaming device ‘shall cease immediately,’” Council members Richard Nephew and J.C. Seneca stated jointly. “The compact also contemplates that operations under the compact continue even though the payments have ceased.”

Beginning in early 2009, the Nation set aside the disputed money in an escrow account; and each month as the amount in dispute grows, additional funds are deposited into the account.
           
The dispute now goes to a three-member panel of arbitrators. The Nation and the state each pick an arbitrator to sit on the panel, and the two named arbitrators select the third arbitrator. The arbitration will be conducted in accordance with the rules of the American Arbitration Association and the costs of the arbitration will be shared equally by the Nation and the state. The arbitration panel’s decision will be binding and cannot be appealed.

Under the compact, the available remedies through arbitration are limited to exempting the Nation from payment obligations if the panel rules exclusivity was breached, directing specific performance for material and non-material breaches of the compact, or termination of the compact for material breaches. An arbitration award can be enforced solely in federal district court in Buffalo.

Once the arbitration panel is set, the members will establish a schedule for discovery, presentation of witnesses, briefings and other timelines as the panel moves the case to a decision. The arbitration process is expected to last several months. 

While the panel could order a variety of remedies on either side, the Nation is seeking a determination confirming that the Nation can keep the escrowed funds and is exempted from paying the state any more money under the compact because of its breach.

“The Seneca Nation met the letter of the law on every exclusivity requirement in the compact, paying New York an enormous share of our gross gaming machine revenues. We agreed to do that because New York promised, in a law passed by the state Legislature, that our three casinos would have the exclusive right to offer those games. But then, like so many times in the past, the state decided it just didn’t have to live up to that agreement when it came to dealing with Indians,” President Porter said.

Last week, Gov. Andrew Cuomo and legislative leaders announced support for statewide casino gambling via a constitutional amendment that requires two successive legislative passages and a referendum by the state’s voters. If that process moves as fast as possible, statewide casinos run by Las Vegas and Asian companies could open in 2014.

The Nation seeks to maintain its exclusivity zone, even if the state constitution is amended. Also last week, the Nation released a scientific poll of 1,000 Western New Yorkers that shows overwhelming support for the Nation’s gaming operations and negligible backing for statewide casino gambling.

In the poll’s major finding, a dominant majority – 84 percent – favored continued operation of Seneca Nation gaming in its Western New York exclusivity zone and payments from it to the state and local communities. That is superior to wide-open, Las-Vegas- or Malaysian-owned commercial casinos statewide, those polled said.