The Seneca Nation of Indians have filed for arbitration claiming New York State has violated its gaming compact. The compact guarantees the Nation a 14-county Western New York exclusivity zone for casino gambling. It defines the term “gaming devices” to include slot machines and video lottery gaming devices. The zone essentially covers all land west of State Route 14, which bisects the state from Sodus Point to the Pennsylvania line.
After more than a year of unproductive discussions with state officials, the Seneca Nation of Indians have taken action. The Nation has withheld over $350 million in payments to NYS and local governments for gaming activity starting in January 2009 because of thealleged violations. The Seneca Nation paid the state $476 million from 2002 to 2008 in accordance with the compact. Beginning in early 2009, the Nation set aside the disputed money in an escrow account; and each month as the amount in dispute grows as additional funds are deposited into the account.
“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,” said Seneca Nation President Robert Odawi Porter. “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 portion of the revenues from its casinos in Niagara Falls, Buffalo and Salamanca generate from slot machines and video lottery devices. The Nation continues to hold those three host communities blameless in this dispute, but is not forwarding them their monies.
“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,” President Porter said. “If we lose in arbitration, we continue paying to the state the exclusivity payments called for under the compact.”
The alleged violations of the compact result from NYS allowing slot machines and video lottery gaming devices inside of the exclusivity zone. The machines in question have been located at various establishments in WNY including taverns, restaurants, the Hamburg Fairgrounds, and multiple other locations. There was also re-branding of three racetracks as “casinos” offering slot-like machines, with the profits going directly to NYS.
“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.”
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 and 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 the 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 as early as 2014.
The Nation seeks to maintain its exclusivity zone, even if the state constitution is amended. Also last week, the Nation released a poll of 1,000 Western New Yorkers that it says shows overwhelming support for the Nation’s gaming operations and negligible backing for statewide casino gambling.
In the poll’s major finding (see different take here), 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.