ALBANY – Gov. Andrew M. Cuomo and Seneca Nation President Todd Gates privately pledged five months ago to meet to solve a new dispute over tribal casino payments.
Since then, the two have engaged in tit-for-tat of verbal barbs.
The sparring played out again Tuesday, when Cuomo threatened to bring in a deep-pocket developer to construct a new casino near the Seneca’s flagship casino in Niagara Falls.
Hours later, Gates responded by calling Cuomo’s idea “foolish.’’
This is not what the State of New York and the Seneca Nation of Indians envisioned 15 years ago when then-Gov. George E. Pataki and then-Seneca Nation President Cyrus Schindler Jr. signed a 793-page compact in downtown Niagara Falls for the tribe to build and operate three casinos in Western New York.
On page 19 of the 2002 casino compact, the state and Senecas promised to “intend to resolve disputes in a manner that will foster a spirit of cooperation and efficiency.’’ When disagreements arose, they vowed to “use their best efforts” to solve them.
The compact also created the opportunity for arbitration. Now, after another week of verbal bashing, signs suggest that is where the state is headed.
The dispute began in March when the Senecas notified the state that its reading of the 21-year compact made clear that revenue sharing payments would end after the contract’s 14th year.
The state in March, and again this week, declined a Buffalo News request to point to wording in the compact or any other document to back up its claim that the Senecas should continue making payments.
The state was getting 25 percent of annual slot machine revenues at the tribe’s three casinos, which it then shared — at different rates — with Niagara Falls, Buffalo, Salamanca and 16 counties in the western part of the state. The Senecas in March notified the state that its reading of the 21-year compact made clear that revenue sharing payments would end after the contract’s 14th year.
The compact dispute costly for the state, but localities feel it more severely because they don’t have the financial wherewithal of the state’s $163 billion budget. Niagara Falls relies on the Seneca payment for 15 percent of its operating revenues.
This past week, Cuomo cancelled a meeting with Gates in Niagara Falls just a day before they were to meet. Cuomo said a face-to-face summit would be inappropriate because of a probe by the Erie County District Attorney’s Office into the discovery — a year ago — of a listening device in a room used by the state Gaming Commission at the tribe’s Buffalo casino.
Gates dismissed Cuomo’s explanation, saying the probe involves one employee of the Seneca Gaming Corp.
Some have expressed concern that a formal arbitration process could lead to lengthy court battles, but at least one stakeholder hopes Cuomo takes that route.
“I think it could make things go faster … I think the parties will get a sense of which ways things are going and that will shape them to have more reasonable expectations,’’ Niagara Falls Mayor Paul A. Dyster said.
That city has seen the stoppage of nearly $17 million in annual casino revenue payments that it spreads to various recipients, mostly its own budget.
The first step either side can take in a dispute is a written “notice of claim” about a compact violation. That letter is intended to kick off a meeting between the sides within 14 days.
On July 14, Alphonso David, Cuomo’s counsel, sent a two-paragraph "notice of claim" letter to Gates to inform the Senecas that the state was invoking the “negotiation provision” of the 2002 compact because of the tribe’s stoppage of revenue payments to Albany.
The Cuomo counsel, according to the letter released to The Buffalo News on Thursday, said the state was “hopeful” the Senecas will “negotiate in good faith and reach a prompt settlement.’’ If not, he said the state would be forced to commence arbitration “and seek a finding of material breach.’’
On July 24, the Nation’s associate counsel responded to Cuomo’s lawyer, according to a letter from the Seneca Nation that also was released to The Buffalo News on Thursday.
Attorney Michelle Mitchell noted Gates has repeatedly offered to meet with Cuomo. But Cuomo instead resorted to publicly “attack the integrity” of the Seneca people, she wrote. Still, Gates is open to talking with Cuomo prior to “resorting to costly, lengthy and adversarial arbitration proceedings.’’
In a written statement Thursday, Gates said the Senecas are and will continue to follow the compact’s terms for arbitration.
“Five months ago, when the governor asked, I offered a willingness to meet. In return, we’ve seen insults, the charade of scheduling and canceling meetings, and, most recently, threats. This is the path Governor Cuomo has chosen over dialogue. Threats and insults don’t change the facts,’’ Gates said.
Selecting an arbitration panel could take time. the Senecas and state each pick one and those two people select a third.
States, tribes turn to arbitration
The use of arbitrators, instead of courts, is not rare in state and tribal disputes.
“Arbitration is an increasingly common way for state or local and tribal governments to resolve their differences,’’ said Gabriel S. Galanda, a lawyer in Seattle who has represented tribes in various cases and has served as an arbitrator in state and tribal disputes.
“It avoids battles over ‘home turf’ with state or local governments wanting to be in state court and the tribe wanting to be in tribal court … Arbitration can help both governments get to a result and then turn the page and move forward,’’ added Galanda, who is also a member of the Round Valley Indian Tribes of California.
Micronomics, a Los Angeles analysis firm, studied several years’ worth of data and determined that arbitration, instead of the courts, can be quicker and cheaper for parties. In 2015, the firm said, the median time spent of a civil case in New York from the day of a filing to trial took 31 months. For arbitration cases, the length was 13 months.
But the 2002 New York/Seneca compact allows both arbitration and a court role. While any arbitration panel’s decision is supposed to be binding, either side can still dispute the finding, though only in one court system: the U.S. District Court for Western New York.
That has some stakeholders worried.
“If this goes to arbitration and arbitration doesn’t end in a mutually satisfactory manner and then it goes to litigation, it’s going to be years, not months, before the dispute ultimately gets resolved,’’ said Joseph Ruffolo, president and chief executive officer of Niagara Falls Memorial Medical Center, which has gotten $750,000 annually in Seneca revenue sharing payments.
Will history repeat?
Cuomo and Senecas have been down this path before, though observers on both sides say the current disagreement could be more difficult to resolve given that the Senecas insist their revenue payments to the state have ended.
Then-Gov. David A. Paterson in the final months of his administration sent a “notice of claim” in 2010 when the Senecas withheld casino payments because of what it called illegal competition in an exclusivity zone of casinos carved out for the tribe.
A three-member arbitration panel eventually was selected, but Cuomo and the Senecas came to terms in 2013 on a memorandum of understanding.
That settlement cost the state. The Senecas agreed to release $559 million it had held in escrow between January 2009 and May 2013. The state agreed to let the tribe keep $210 million.
Dyster said he “absolutely” encourages the Cuomo administration to begin arbitration. As with the 2013 dispute, he said the sides still could reach a separate deal.
More than 30 days have passed since Cuomo’s counsel sent the letter July 14. So that window is now open to the State of New York, the party in the dispute with the financial motivation, presumably, to seek arbitration.