COA sides with Lauth in casino suit

Michael W. Hoskins
January 1, 2008
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Indianapolis commercial developer Lauth didn't breach a joint venture contract or any of its duties with other parties by partnering with the Bloomington-based Cook Group on an Orange County riverboat casino project, the Indiana Court of Appeals ruled today.

In a unanimous holding in Lauth Indiana Resort & Casino LLC v. Lost River Development LLC, et al., 29A02-0710-CV-839, the court ruled on an issue of first impression about when a joint venture terminates in situations where the agreements contain no specific termination date, creating a bright-line rule as it reversed a ruling from Hamilton Superior Judge Steven Nation that determined there was an issue of fact about whether Lauth had violated the agreement and that a jury should decide that issue.

This case stems from the construction of an Orange County riverboat casino project starting in 2004. Three companies submitted original proposals - Trump Indiana Casino Management, Orange County Development affiliated with Larry Bird, and Lost River that was formed by Merit Gaming Group. After Lost River submitted its proposal, Lauth contacted the developer and they formalized an agreement that provided Lauth would have 50 percent ownership to create a joint venture.

The Indiana Gaming Commission debated between the Trump Indiana and the Lost River/Lauth proposal, ultimately deciding on Trump Indiana. Lauth started contacting other gaming companies and developers to see if anyone would partner with them in case Trump didn't come through; Lauth eventually partnered with the Cook Group to submit another proposal under the name Blue Sky Casino LLC. They won the bid, and the casino opened in Nov. 1, 2006.

As the project was ongoing, Lost River and Merit filed a complaint in late 2005 against Lauth and the Cook Group and alleged they'd entered into an enforceable contract for a joint venture and that, by teaming with Cook Group to form Blue Sky, the Indianapolis developer breached the contract.

Lauth filed a motion for summary judgment in June 2006 claiming that the agreement formed a joint venture at most and that it was terminated when the Gaming Commission chose Trump over Lost River's proposal. At the trial level, Judge Nation dismissed that motion, finding that it didn't contemplate a second bid proposal and that federal caselaw says that a formed joint venture agreement generally "remains in force until its purpose is accomplished or that purpose becomes impracticable."

The Court of Appeals disagreed, and its ruling gives guidance as to when a joint venture agreement ends if nothing is written or specifically detailed about how it ends.

"In conclusion, we hold that if a joint venture is formed for the purpose of submitting a proposal or similar bid, and the joint venture agreement is silent as to when or under what circumstances that venture will end, then the joint venture ends when the proposal or bid is rejected," the court wrote.

In this case, the Lost River joint venture ended as a matter of law when the IGC chose Trump Indiana. As a result, Lauth didn't breach the agreement and the trial judge erred in denying Lauth's motion for summary judgment, the appellate court said.

The case is remanded.

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