Arkansas Supreme Court upholds ruling that casino license issued to Cherokee Nation Businesses was unconstitutional

FILE — The Arkansas State Supreme Court building is shown in this undated file photo.
FILE — The Arkansas State Supreme Court building is shown in this undated file photo.

The Arkansas Supreme Court on Thursday upheld a lower court ruling that the Arkansas Racing Commission’s award of the Pope County casino license to Legends Resort and Casino and Oklahoma-based Cherokee Nation Businesses violated Amendment 100 to the Arkansas Constitution.

In a 5-2 ruling, the state’s Supreme Court affirmed a ruling by Pulaski County Circuit Judge Tim Fox issued in January. Fox ruled the Arkansas Racing Commission erred in the licensing process by awarding the license to two entities when the Arkansas Constitution states that only a single entity can hold a casino license, and that Legends does not meet licensing requirements written into the Arkansas constitution because the company has no prior casino gaming experience. The Legends/Cherokee consortium challenged Fox’s ruling to the state’s high court.

The high court’s ruling opens the door for the Arkansas Racing Commission to set a new period for applicants for the Pope County casino license to submit applications.

In November 2021, a divided Arkansas Racing Commission decided to issue the Pope County casino license to the Legends/Cherokee consortium after it nullified the license that it awarded to the Mississippi-based Gulfside Casino Partnership in 2020. Gulfside Casino Partnership and Cherokee Nation Business were two of the five initial applicants to the Racing Commission for the Pope County casino license in May 2019.

Gulfside Casino Partnership challenged the commission’s decision, asking Fox to void the license to the consortium.

The Arkansas Racing Commission accepted Legends’ application as an “amended application” of Cherokee Nation Businesses for “good cause shown” on May 7, 2020, according to the state Supreme Court.

The commission’s action to award the Pope County casino license to the Legends/Cherokee consortium in November 2021 came after the state Supreme Court in October 2021 reversed Fox’s ruling that declared unconstitutional a commission rule and state law that required that letters of endorsement for casino licenses come from local officials in office at the time the license application is submitted. Gulfside’s letter of support was signed by former Pope County Judge Jim Ed Gibson, just days before his term expired Dec. 31, 2018.

The Pope County casino license has been a source of turmoil for the county and the state, resulting in numerous court cases.

Amendment 100 to the Arkansas Constitution — approved by voters in November 2018 — authorized the Arkansas Racing Commission to license four full-fledged casinos. Three casinos currently operate in Hot Springs, Pine Bluff and West Memphis.

Trent Minner, administrator of the state Department of Finance and Administration’s Regulatory Division, which includes the Arkansas Racing Commission, said Thursday that the department “will be working with the Arkansas Racing Commission to open a new application window in a timely manner” for the Pope County casino license.

“We will work with the commission to ensure all legal requirements of Amendment 100 are fulfilled and that the process is carried out in compliance with Arkansas law,” he said in a written statement.

Casey Castleberry, attorney for Gulfside Casino Partnership, said Thursday in a written statement that “We are ecstatic about the Supreme Court’s affirmation of Judge Fox’s ruling that Legends was not a qualified applicant for the Pope County casino license.

“Just as the Racing Commission selected our superior application in 2020 in a head-to-head with Legends, we look forward to demonstrating again to county leaders and residents how our proposed world-class resort will benefit them and the entire state,” he said.

Chuck Garrett, chief executive officer for Cherokee Nation Businesses, said Thursday in a written statement that “We are disappointed by the decision handed down by the Arkansas Supreme Court.

“Having the express support of the incumbent county judge, many other local officials and the community, we remain committed to earning the privilege of being the operator of choice for a casino in Pope County,” he said.

“We will be ready to demonstrate our 30 plus years of experience in gaming and hospitality once the Arkansas Racing Commission and the Arkansas Attorney General’s office determines the next step in fulfilling Amendment 100,” Garrett said. “We have already purchased more than 325 acres in Russellville, and our building and design teams have done as much work as possible to ensure construction can commence quickly. We are fully committed to moving forward and working with local and state officials as we have been for the past five years to build Legends Resort & Casino and bring the much-needed economic growth the community and state deserves.”

Pope County Judge Ben Cross said Thursday in a written statement that “While today’s ruling is certainly not the finality we had hoped for to resolve this lingering issue, I look forward to the Arkansas Racing Commission working expeditiously to open an appropriate new application window, and I look forward to Cherokee Nation Businesses resubmitting their application with the requirements outlined in today’s decision.

“I remain fully committed to a quick resolution to access the economic development stimulus this project will entail, including hundreds of jobs, expanded tax base, and a vibrant new destination,” he said.

Hans Stiritz, a spokesman for the anti-casino group Citizens for a Better Pope County, said Thursday in a written statement that “We’re grateful that the Supreme Court affirmed Judge Fox’s decision and kept the previously-issued license invalid. Pope County voters were never included in plans for a casino here, and we voted 61% against Amendment 100” in 2018.

“Moving forward, we will continue to advocate for the Pope County electorate to have the final say in the decision to have a casino here,” he said. “Hopefully the Racing Commission will consider carefully before issuing a license in any future application periods, especially to CNB, who have spared no effort in keeping Pope County voters out of the process.”

In August 2022, the Fair Play for Arkansas committee that promoted a proposed constitutional amendment that would eliminate Pope County as a state-licensed casino site narrowly failed to submit enough signatures of registered voters to qualify for 30 more days to collect more signatures to get on the 2022 general election ballot ballot, Secretary of State John Thurston said at that time. The Choctaw Nation of Oklahoma helped finance the committee.

The state’s casinos get a lot of business. In September alone, about $663 million was wagered at the state’s casinos, said Scott Hardin, a spokesman for the state Department of Finance and Administration. In contrast, the Arkansas Scholarship Lottery reported $47 million in revenues in September.

THE COURT’S OPINIONS

Arkansas Supreme Court Justice Cody Hiland, who wrote the court’s majority decision, said Thursday that Amendment 100 to the Arkansas Constitution defines “casino applicant” as “any individual, corporation, partnership, association, trust, or other entity applying for a license to conduct casino gaming at a casino.”

Under Amendment 100, the Arkansas Racing Commission, “shall award a casino license to a casino applicant for a casino to be located in Pope County within two miles of the city limits of the county seat,” he wrote.

The Arkansas Racing Commission issued the Pope County casino license to both Legends Resort and Casino and Cherokee Nation Businesses, Hiland wrote in the opinion. Yet at the time of this issuance, Cherokee Nation Businesses had no application pending with the Arkansas Racing Commission, Hiland said.

“As stated, five applications were submitted during the May 2019 application period, but all five were rejected for failure to meet the requirements of amendment 100,” Hiland wrote. “Since then, the ARC did not reopen another application period during which it considered new applications.

“As CNB’s only application before the ARC was submitted in May 2019 and ultimately rejected, it was not a ‘qualified applicant’ as required by [Amendment 100],” he wrote.

Thus, the Arkansas Racing Commission acted ultra vires in issuing the license to Cherokee Nation Businesses, and the state Supreme Court affirms the lower court decision on this point, Hiland wrote.

Ultra vires means beyond the scope of power allowed or granted by a corporate charter or by law.

Hilland said the language of Amendment 100 to the Arkansas Constitution is unambiguous.

“It provides for one license to be awarded to one entity for one casino,” Hiland wrote. ” ‘Casino applicant’ is singular — not plural. Nowhere in the text does it allow for joint or dual licensing to more than one applicant. The circuit court was correct in finding that the award of the Pope County casino license to both Legends and CNB violated amendment 100, making such action ultra vires. Because of these constitutional infirmities, the circuit court’s order declaring that the license issued is void is affirmed.”

Justices Courtney Hudson, Barbara Webb and Rhonda Wood, and Special Justice Bryan McKinney agreed with Hiland’s majority opinion. Justices Karen Baker and Shawn Womack dissented. Chief Justice Dan Kemp did not participate in the case.

Hiland wrote in the opinion the Arkansas Racing Commission argues that sovereignty immunity bars suit because the relief granted seeks to control the action of a state agency, but that this runs against precedent. A lawsuit against the state seeking declaratory relief may survive a sovereign immunity challenge only if the complaint alleges the state acted illegally, unconstitutionally or ultra vires under a 2022 Supreme Court ruling, he said.

“Accordingly, sovereign immunity provides no basis for reversal,” he said.

Baker said the Arkansas Racing Commission issued public notice that a second application period would open, but on Jan. 10, 2020, elected to abandon this period and not consider any applications submitted during that time, including Cherokee Nation Businesses’ application.

She said the state Supreme Court held in its Board of Trustees of the University of Arkansas v. Andrews ruling in 2018 that “never means never” and thus the suit is barred based on the broad language in that ruling because the ruling did not identify exceptions, exemptions or the like.

A review of whether the Arkansas Racing Commission acted ultra vires and outside its constitutionality authority constitutes a review of state action, she said.

“Accordingly, I dissent from the result reached by the majority and would reverse and dismiss this appeal based on sovereign immunity,” Baker said.

Womack said Article 5, Section 20 of the Arkansas Constitution requires the court to reverse and dismiss this case.

“Without an express constitutional provision to the contrary, the State can never properly be a defendant in any of its courts,” he wrote. “The circuit court was simply without jurisdiction to consider Gulfside’s lawsuit because article 5, section 20 affords State immunity from suit in most instances, and none of the limited, constitutionally-based exceptions were present here. The same is true for this court.

"For these reasons, I would reverse and dismiss the case.”