Marshall Bank sues Nooksacks' casino
Submitted by the Tribune on October 20, 2009 - 4:23pm. News
WHATCOM – The Nooksack Indian Tribe and a tribal business group are being sued in Whatcom County Superior Court for breach of various contracts in connection with the building and equipping of the controversial Northwood Casino north of Lynden.
Minnesota-based Marshall Bank, NA, which loaned over $26 million to get the casino up and running in 2007, claims that Nooksack Business Corporation II, wholly owned by the tribe, has not lived up to payment commitments made in original documents or in a restructuring of the payment terms in early 2009.
Instead, the suit alleges, revenues from the Northwood Casino were used by the tribe to support operation of its Nooksack River Casino in Deming and for other entities associated with the Nooksack tribe or the tribe itself.
Marshall Bank asks the court for an award of over $27.7 million for what’s owed on the Nooksack loans and related costs as of Aug. 1. The bank also seeks an order requiring a detailed accounting of all the revenue that was supposed to go into a depository for paying off the loans and also paying for the Northwood Casino’s daily operations.
The suit was filed in early August. On Sept. 2, the tribe’s Seattle attorney, James H. Jordan, asked to have the case transferred to the U.S. District Court in Seattle. Court papers cite a diversity of citizenship in the case and the request for damages exceeding $75,000.
As of Monday, it was unclear whether that transfer of court jurisdiction had been or would be granted.
The casino opened in November 2007. The small, federally recognized Nooksack tribe is based in Deming.
This is the sequence of events as claimed by Marshall Bank, which is represented by attorneys Lori Lynn Phillips and Charles J. Ha of Seattle:
• About April 30, 2007: Marshall agreed to loan the Nooksack Business Corporation II $17,602,734 for construction of the casino and $8,635,417 to buy certain equipment for the casino. On both loans, the Nooksack Indian Tribe itself agreed to provide a limited guarantee of the business group's obligations.
Other papers in the case identify Narcisco Cunanan as chairman of both the tribe and Nooksack Business Corporation II. Papers also say that the tribe did not pledge its “general assets.”
Under the agreement, the tribal corporation would daily deposit certain revenues with another bank based in Minnesota, First National Bank & Trust, as a third-party depository, to secure payment of the loans and also to pay for operating expenses of the Northwood Casino.
From November 2008 to February 2009: The business corporation failed to make the required monthly interest and principal payments on the two loans to Marshall. The bank sent notice of default and declared all amounts due to be paid immediately.
About March 1, 2009: After negotiations, the tribe and Nooksack Business Corporation II reached forbearance agreements with Marshall. A new payment schedule was created.
The original schedule was to pay off the construction loan, starting March 1, 2008, in 96 months, now amended to 240 months. The equipment loan, originally set up for 48 months of payment starting May 1, 2008, was extended to 60 months.
Early 2009: Marshall Bank learned that NBC II was using pledged revenue from the depository to pay expenses at the Nooksack River Casino and other tribal entities rather than for Northwood Casino loan payments and operations, as required by contract, and the tribe was allowing this activity to occur.
Marshall gave notice of default, directed an immediate stop of the diversion of funds, and requested a detailed accounting of all transfers. The bank, by original contract, was supposed to have access, with 24 hours’ notice, to examine books and records relating to performance of the loans.
About July 1, 2009: The business corporation stopped making payment of its monthly debt service charge of $132,031. Marshall offered an extension to July 13, which was rejected by NBC II. This, to Marshall, canceled the forbearance agreement and brought the tribe back into default on the original loan agreements.
About July 14, 2009: NBC II asked to have the forbearance agreement reinstated. Marshall refused.
August 2009: The lawsuit was started. Papers were served at the Deming tribal office.
The bank claims that the lawsuit is properly in Whatcom County Superior Court, which is part of the Washington state courts system. Marshall says that the tribe and business council, in agreements and documents, “have irrevocably waived any sovereign immunity from suit or legal process relating to this action and have also consented to jurisdiction in ‘any court of general jurisdiction’ (in Washington).”
E-mail Calvin Bratt at firstname.lastname@example.org.
casino’s tribal land status also still active
WHATCOM -- The North County Community Alliance, which has fought the National Indian Gaming Commission on the original siting of the Northwood Casino, may appeal its case to the U.S. Supreme Court.
Both Tom Williams, local alliance officer, and Richard Stephens, the alliance’s Bellevue attorney in the case, said that the local group has until early January to decide to take the next step of action.
A 90-day clock is running after the U.S. Ninth Circuit Court of Appeals rejected a request for reconsideration in early October. The alliance had lost an appeal, 2-1, in U.S. District Court, based in Seattle.
Williams said the central issue is whether the National Indian Gaming Commission must make a tribal lands determination before allowing the construction of an Indian casino. The alliance contends that the status of the Northwood Casino land is in doubt.
Challenges on the same issue have been made by citizen groups in other parts of the country, and lower federal courts have reached differing conclusions looking at the federal law, Williams said. “It’s in limbo now,” he said.