Turn Key Gaming v. Oglala Sioux Tribe

Turn Key Gaming promised to build a casino for the Oglala Sioux Tribe but
could not keep the project within its budget. Turn Key stopped construction when the
Tribe refused to modify their contract. Turn Key filed suit against the Tribe to
resolve the parties' dispute over the costs of a temporary casino and the incomplete permanent casino. The District Court 1 found in favor of the Tribe and awarded it a
net amount of $336,343.73 in damages. Turn Key appealed. We hold that the
District Court was correct in using the cost of completion of the permanent casino as
the measure of damages for the breach of contract and awarding interest on the
judgment. The District Court did not clearly err in giving more credence to some
pieces of evidence than it did to others. Further, the Court properly held that the
Tribe's sovereign immunity prevents Turn Key from bringing claims in a federal court
regarding the temporary casino. We affirm the decision of the District Court in all
respects.

I.

Turn Key Gaming and the Oglala Sioux Tribe negotiated a contract for Turn
Key to build and operate a casino for the Tribe. Turn Key was to manage the casino
for five years in return for a share of the casino's profits after deducting the cost of
building the casino. The contract was submitted to the National Indian Gaming
Commission in late November of 1994 for approval. The Management Agreement
was approved by the Commission a year later. Pending approval of the Management
Agreement, the Tribe and Turn Key operated a temporary casino on tribal land under
a Rental Agreement in which Turn Key provided temporary facilities, equipment, and
support in exchange for dividing casino profits with the Tribe.

After approval of the Management Agreement, Turn Key, using Mid-West
Construction Management Services, began to build the permanent casino. Under the
Agreement, the Tribe was liable only for the first $4,000,000 in construction costs.
Turn Key realized that the project was going to cost $1,300,000 more than that, and
tried to get the Tribe voluntarily to increase its liability. The Tribe refused to alter the Management Agreement. Turn Key refused to continue construction, and the Tribe
announced that it was treating the contract as broken. It seized the temporary casino
to operate on its own. Turn Key sued the Tribe to recover its construction costs, and
the Tribe counterclaimed for the damages it suffered because of Turn Key's breach.

The District Court granted summary judgment for the Tribe. Turn Key
appealed to this Court. On appeal, we affirmed for the most part. We held that Turn
Key had committed a breach of the Management Agreement by refusing to complete
the permanent casino for the agreed-upon price of $4,000,000. In our view, however,
the District Court had failed to address certain of Turn Key's claims, specifically that
it was entitled to reimbursement of certain costs either under the Management
Agreement or on an unjust-enrichment theory. The Tribe's counterclaim also
remained to be decided. We remanded the case for the District Court to consider
these remaining issues. Turn Key Gaming, Inc. v. Oglala Sioux Tribe, 164 F.3d 1092,
1096 (8th Cir. 1999).

After a three-day bench trial on remand, the District Court awarded breach-of-contract
damages to both parties. The Tribe was awarded $1,973,002.32, and Turn
Key was awarded $1,745,658.87. The District Court declined to award any damages
arising out of opening or operating the temporary casino, on the ground that those
expenses were incurred under a separate contract, as to which the Tribe had not
waived sovereign immunity. Ultimately, the Tribe netted $336,000 in damages and
prejudgment interest. Turn Key appealed to this Court.

II.

The principal legal issue presented, and the one we discuss first, is the measure
of damages properly applied on the Tribe's counterclaim. It will be recalled that the
counterclaim sought damages for Turn Key's breach of the Management Agreement.
The breach occurred before construction was completed. Under the approach taken by the District Court, Turn Key's damages would be the amount of money required
to complete the construction according to the specifications in the Management
Agreement, less an adjustment for the $4,000,000 ceiling contained in that agreement.
The District Court computed that amount at $1,973,002.32. Turn Key argues that a
significant fact was omitted in the District Court's analysis. If no breach had
occurred, the permanent facility would have been completed at Turn Key's expense,
but Turn Key would also have been entitled to manage the facility for a period of
time, and to receive for its services a fee amounting to 30 per cent. of net revenues.
But because of the breach, the Tribe took over the casino (actually the temporary
facility) and operated it for its own account. It did not have to pay Turn Key's
management fee. This benefit to the Tribe, in the form of a reduced expense, should
have been allowed for in the computation of the Tribe's damages. On this view, the
damages would have been $1,973,002.32, less the amount of the manager's fee that
the Tribe did not have to pay.

The purpose of contract damages is to put the injured party in the same position
it would have occupied if there had been no breach. Clayton Center Associates v.
Schindler Houghton Elevator Corp., 731 F.2d 536, 540 (8th Cir. 1984). The District
Court believed that its computation did exactly that. The Court said:

23. Because of the breach of the Management
Agreement, plaintiff is not entitled to a credit relating to
the 30% manager's fee. In addition, even if plaintiff was
entitled to this credit, the Court finds its calculation to be
speculative. Furthermore, the credit would not account for
the costs incurred by defendant in assuming the duties of
the manager.

Turn Key Gaming, Inc. v. Oglala Sioux Tribe, CIV. 96-5084 (D.S.D., opinion filed
July 13, 2001), p. 6.

We have no fault to find with this approach. It contains no error of law, and
no clearly erroneous finding of fact. It was Turn Key's breach in the first place that
prevented performance of the contract, including Turn Key's management of the
permanent facility, from going forward. In addition, Turn Key does not dispute the
District Court's finding that calculation of the amount that might be saved by the
Tribe is "speculative." Instead, Turn Key takes the position that the burden of proof
was on the Tribe to show all elements of damage, including the amount of any credit
or offset that Turn Key might be entitled to in consequence of losing its manager's
fee. We cannot agree with this contention. Whether or not the manager's fee is
properly characterized, in technical pleading terms, as a set-off or affirmative defense,
we hold it was not unfair, under the circumstances of this case, for the District Court
to rely, in part, upon the speculative nature of this item when deciding not to reduce
the recovery that the Tribe was otherwise entitled to for breach of the construction
contract.

In short, we agree with the District Court's decision to award the Tribe, on its
counterclaim, $1,973,002.32.

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Click the case caption above for the full text of the Court's opinion.

Affirmed

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