Casino Gambling

Biloxi wins lawsuit over Golden Nugget Casino's rent reduction

 Golden Nugget casino in Biloxi.
JOHN FITZHUGH/SUN HERALD Golden Nugget casino in Biloxi. SUN HERALD

BILOXI -- Harrison County Circuit Judge Roger Clark ruled this week Golden Nugget Casino isn't entitled to a refund or a reduction in its lease payment with the city, which could have cost Biloxi millions.

"It was a case the city had to win," said Ron Peresich, attorney for Biloxi.

Riverboat Corp. of Mississippi, the operating name of Isle of Capri and now Golden Nugget, is current in its lease payments to the city, but Peresich said, "They sued to get the money back that they had paid under protest."

The case was heard Sept. 24 and the judgment was handed down Tuesday.

"We respect the judge and his decision, but feel he is incorrect in this matter and will advise our client to appeal," said Britt Singletary, attorney for Riverboat, Golden Nugget Casino Biloxi and its parent company, Landry's.

"This lease is way out of fair market rent now," Singletary said. "It was negotiated during the early days of gaming before competition and poor economic conditions set in. We feel we have a strong argument and may well prevail on appeal."

Riverboat maintained that since 2009, the company is entitled to a refund and a half-million dollar-per-year reduction in lease payments to $3.233 million,

The judge disagreed, saying Riverboat should continue to pay $3.733 million a year.

At dispute is language in the lease tied to casino market conditions in Harrison and Hancock counties.

When annual gross casino revenue in South Mississippi drops below $1.25 billion, the agreement said, the lease payment also will decrease.

But another condition of the lease said Riverboat's casino revenue from its Biloxi property in those years must fall below $100 million -- but not less than $90 million -- to get the reduced rent.

From 2009 to 2015, the overall casino market was less than $1.25 billion and Riverboat's gross gaming revenues were less than $90 million, the lawsuit said. Revenue remained below $1.25 billion in 2015.

Riverboat argued it is not reasonable that if revenues decline below $90 million it should pay more rent.

"Nowhere in the lease does it state the rent cannot go down if market conditions go down," Singletary said.

The court "is not concerned with what the parties may have meant or intended but rather with what they said, for the language employed in the contract is the surest guide to what was intended," the ruling said.

Judge Clark said people are free to enter into contracts -- "even unfavorable ones."

Riverboat was founded in 1990 and the company opened Isle of Capri, the first casino in Mississippi, on Aug. 1, 1992. Landry's bought the casino in November 2012.

Most of what Biloxi receives from the lease agreement is a percentage of the casino revenue paid by Golden Nugget, Peresich said. But the annual lease fee also is significant.

Under the original lease, Riverboat and Isle of Capri paid $2.5 million each year through July 31, 2003. As a hotel was built and the resort expanded, the lease increased to $2.733 million in 2003, to $3.483 million in 2005 and to $3.733 million in 2008, which did not change when Landry's bought the property.

The city said the lawsuit could have cost Biloxi and state $5 million to $10 million over the length of the lease, which runs up to 50 years with options.