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Law360 (May 13, 2020, 5:02 PM EDT ) A Native American tribe told a New York state judge Wednesday that because of the COVID-19 pandemic and the shutdown of its California casino, it can't afford to litigate a suit over a $250 million Wells Fargo loan.
The suit was initially filed last July when Wells Fargo accused the Picayune Rancheria of Chukchansi Indians of California and its economic development authority of participating in a scheme to avoid making payments owed as part of a $250 million loan agreement.
The tribe asked to skip oral arguments scheduled for the end of May, requesting for the decision to be made on a comprehensive briefing the two sides had in November. Because of the state-mandated closure of the Chukchansi Gold Resort and Casino in March, the tribe said, it would be a significant hurdle to spend its limited reserves on preparing for its court appearance.
"The cost of preparing for and participating in the oral argument will deplete funds the casino needs to conserve in order to maintain its facilities and reopen, especially since, in addition to the legal fees incurred by the casino for its own representation, the casino is required by the indenture to reimburse Wells Fargo for its legal fees," the tribe said in Wednesday's letter.
Because of the casino's closure, the tribe said, it hasn't been able to provide for its members and the casino only has $12 million in reserve, money it plans on using to keep the facility maintained and to cover the costs of reopening. Even after it reopens, the tribe said, revenues wouldn't be as high as usual because of less demand and the added expense caused by social distancing measures.
Alternatively, the tribe asked for the oral arguments to be postponed indefinitely and rescheduled when the casino reopens and starts making money again.
Wells Fargo accused the tribe of violating its agreement to pay its loan by paying casino employees a bogus "bonus" of $7.2 million in September despite claiming the casino had shaky finances. The bonus was allegedly paid out so the casino could avoid having cash on hand to make its payment. By paying out those bonuses every month, Wells Fargo said the tribe could perpetually avoid having to pay the loan.
The tribe said the bank can't claim the employee bonus had no business purpose and was thus a diversion. Tribal council members acted cautiously when determining that the casino's search for talent in a tight labor market required the bonus, the tribe claimed.
Wells Fargo asked for an injunction to force the tribe into paying the loan, a request that is currently under dispute.
Counsel for the tribe declined to comment Wednesday.
Counsel for Wells Fargo didn't immediately respond to a request for comment Wednesday.
Wells Fargo is represented by Robert J. Malionek and Sean H. McMahon of Latham & Watkins LLP.
The Picayune Rancheria of Chukchansi Indians of California are represented by Gregory P. Joseph, Pamela Jarvis and Rachel M. Cherington of Joseph Hage Aaronson LLC.
The case is Wells Fargo Bank NA v. Chukchansi Economic Development Authority et al., case number 654079/2019, in the Supreme Court of the State of New York, County of New York.
--Additional reporting by Joyce Hanson. Editing by Stephen Berg.
For a reprint of this article, please contact reprints@law360.com.
