Seminole Tribe may have winning hand in gambling dispute with Florida

Lisa Johnson of Bel Air, Maryland, and Louis Cohen of Delray Beach watch the dealer during a hand of blackjack at the Seminole Hard Rock Casino in Hollywood, Wednesday June 22, 2011.
Lisa Johnson of Bel Air, Maryland, and Louis Cohen of Delray Beach watch the dealer during a hand of blackjack at the Seminole Hard Rock Casino in Hollywood, Wednesday June 22, 2011.

A federal judge appeared convinced on Wednesday that Florida gambling regulators’ decision to allow controversial card games had violated an agreement with the Seminole Tribe that had given tribal casinos exclusive rights to conduct “banked” games such as blackjack.

The controversial “designated-player” games allowed at pari-mutuel facilities were the focus of the trial that closed Wednesday after U.S. District Judge Robert Hinkle grilled Anne-Leigh Gaylord Moe, a private attorney representing the state Department of Business and Professional Regulation.

“The state has permitted banked card games to go on [at pari-mutuel facilities]. … It’s a stretch for you to convince me that the state did not permit that,” Hinkle, who is expected to rule in the coming weeks, told Moe.

The Seminoles and their lawyers accuse gambling regulators of violating a 2010 deal that gave the tribe exclusive rights to operate banked card games, such as blackjack, in exchange for $1 billion in payments to the state. A five-year agreement regarding the cards — part of a larger, 20-year deal called a “compact” — expired last summer, but the Seminoles have continued to offer the games.

The tribe accuses the state of failing to negotiate in good faith on a new agreement. The Seminoles’ case is centered on two types of games — designated-player games and slot machines that simulate blackjack — authorized by state gambling regulators at pari-mutuel facilities.

The tribe’s lawyers contend that, by allowing the designated-player games, the state violated the exclusivity provision in the compact. Under the terms of the agreement, the Seminoles are allowed to continue to conduct the games — without paying the state any money — if anyone else is permitted to offer banked card games.

But the state wants a federal judge to order the Seminoles to stop operating the banked card games. Its lawyers insist that the designated-player games authorized by the state do not violate the compact, even if the manner in which they are being played at some card rooms might.

Pari-mutuel card rooms are allowed to conduct games in which players compete only against each other. The Seminoles allege that designated-player games in which a player acts as the “bank”— paying winners and collecting from losers — violates the terms of the compact.

In 2014, the department’s Division of Pari-mutuel Wagering adopted a rule governing how the designated-player games should be conducted. The designated-player rule appears to be an “end run around the prohibition” against banked card games, Hinkle said.

But Moe insisted that an executive-branch agency could not authorize something that is banned in state law.

“Is that rule valid or not?” Hinkle persisted.

“Absolutely,” Moe responded.

But she insisted that the rule did not authorize the establishment of a bank, saying that the term “established” in state law suggests “a firmness and a permanence” not present in the way the rules outline how the games should be played.

“This case is not about exclusivity,” Moe said. “What this case is really about is the tribe wants to continue to conduct banked card games. … This case is about the tribe’s desire for a newer, bigger, better deal.”

Hinkle pointed to testimony from the Seminoles’ expert witness, Jimmie Ray Kilby, who defined a banking or banked card game as one in which all players play against the bank, instead of against each other.

“Everybody in the industry knows that’s a banked game,” Hinkle said.

Under Florida law, a “banking game” is defined as one “in which the house is a participant in the game, taking on players, paying winners, and collecting from losers or in which the card room establishes a bank against which participants play.”

Regulators in January and February filed complaints against more than two dozen pari-mutuel operators, alleging that the way the designated-player games were being conducted violated a legal prohibition against banked games. Those complaints and a move late last year by gambling regulators to repeal the rule touched off legal battles in state administrative courts.

“The state knew about this for a long time and did nothing until the tribe filed a request for mediation,” which was the first step in filing the federal lawsuit, Hinkle noted.

Hinkle also rejected arguments that, even if the state did violate the compact, only the Legislature could give the tribe permission to continue the banked games.

“The tribe’s authorization to conduct banking or banked games automatically terminated five years after the effective date” of the compact, Moe told Hinkle.

The only exceptions are if the Legislature passes a law or if the state Constitution is changed, Moe said.

“Let me see if I have it. The state of Florida says if the secretary of DBPR [Department of Business and Professional Regulation] says we’re going to allow banking games in flat-out competition with the tribe, this provision would not be extended beyond five years [because the Legislature didn’t authorize it]?” an exasperated Hinkle asked. “You’re not going to win that argument. You’re just not.”

Department Secretary Ken Lawson, who was present for Wednesday’s closing arguments, would not respond to questions from reporters.

“The judge will make a ruling. It would be inappropriate for me to comment,” Lawson said, referring questions to his communications office.

But Barry Richard, a lawyer who represents the Seminoles, appeared pleased with Hinkle’s questions.

“Certainly, I was happy with where he is, and I think it was the right position. But I’ll wait until he rules before I tell you how happy I am, ultimately,” Richard told reporters.

The tribe is asking Hinkle to allow them to continue to conduct the games and also to order the state to negotiate a new deal.

“The most important issue of this whole trial is that the tribe is paying the state of Florida literally billions of dollars for the right to have exclusivity in offering banked card games. The question is, is it OK for the state to let the pari-mutuels do what I think any rational person would say circumvents that and takes undue advantage of the tribe, which is setting up a game which is the same thing,” Richard said. “They’re just having the group of squirrelly rules to pretend that it’s something different, but the effect on the tribe is the same.”