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City of Lawrenceburg v. Franklin County

Court of Appeals of Indiana

August 28, 2019

The City of Lawrenceburg, Indiana, the Mayor of the City of Lawrenceburg in his official capacity, and The Common Council of the City of Lawrenceburg in their official capacities, Appellants-Defendants,
Franklin County, Indiana, and The Franklin County Board of Commissioners in their official capacities, Appellees-Plaintiffs

          Appeal from the Decatur Superior Court The Honorable Matthew D. Bailey, Judge Trial Court Cause No. 16D01-1702-PL-89.

          Attorneys for Appellants Alice M. Morical Michael R. Limrick Evan D. Carr Hoover Hull Turner LLP Indianapolis, Indiana

          Attorneys for Appellees Paul L. Jefferson McNeely Stephenson Indianapolis, Indiana Grant M. Reeves Barada Law Offices LLC Rushville, Indiana

          Baker, Judge.

         [¶1] The City of Lawrenceburg (Lawrenceburg) entered into an agreement with Franklin County (Franklin), pursuant to which Lawrenceburg would share its gaming tax revenue with Franklin by making annual payments of $500, 000. In 2014, Lawrenceburg stopped making those payments. Franklin sued for breach of contract and the trial court entered summary judgment in its favor. Lawrenceburg appeals, raising the following arguments: (1) the trial court erroneously determined that it had waived its defenses; (2) the agreement is void by statute; and (3) there are genuine issues of material fact regarding consideration, Franklin's performance of its obligations, and the duration of the agreement. We hold that Lawrenceburg did not waive its defenses and that the agreement is void by statute. Consequently, we reverse and remand with instructions to enter judgment in favor of Lawrenceburg.

         Facts [1]

         [¶2] As the home dock of a riverboat casino, Lawrenceburg receives a percentage of Gaming Tax Revenue[2] collected by the State each year. In 2005, Lawrenceburg created a revenue sharing program, pursuant to which it shared some of its Gaming Tax Revenue with surrounding counties, including Franklin.

         [¶3] On January 17, 2006, Lawrenceburg and Franklin entered into a "Special Revenue Sharing Agreement" (the Agreement). Appellants' App. Vol. II p. 100. The recitals of the Agreement indicate that it was made "in consideration of the mutual covenants and promises contained herein[.]" Id. The Agreement required Lawrenceburg to make annual $500, 000 payments to Franklin; those payments were to be made "from the net amount of Gaming Tax Revenues Lawrenceburg receives on an annual basis." Id. at 101. The Agreement "is contingent upon Lawrenceburg's continued receipt of Wagering Tax Revenue . . . ." Id. Both entities agreed that they had "the necessary power and authority to enter into this Agreement" and that they would "cooperate with each other in a marketing plan to promote tourism and development in each area." Id.

         [¶4] After the Agreement was executed, the Lawrenceburg Common Council appropriated $500, 000 in 2006 for Lawrenceburg's first payment to Franklin. Lawrenceburg continued to make annual $500, 000 payments through 2013.[3]According to Lawrenceburg, in 2013, it decided to stop making payments because of increased competition from nearby Ohio casinos and because of a projected 30% loss in its Gaming Tax Revenue for the following year.[4]

         [¶5] According to Lawrenceburg, Franklin did nothing to earn the annual payments. It did not provide any services or goods, nor did it incur any non-trivial expenses in connection with the Agreement.

         [¶6] Franklin explains the reason for the Agreement, as well as its own obligation, as follows:

In 2006, the issue of the distribution of local riverboat gaming monies was receiving special scrutiny by the Indiana Gaming Commission and the Indiana General Assembly. . . . Lawrenceburg was rightfully concerned with the possibility of seeing its wagering and admissions taxes lessening or ending completely, as almost all of its revenue for development remained at the local level, which conflicted with the policies of riverboat gaming. In an effort to keep as much money as possible, to comply with its statutory requirements, and to avoid potential difficulty with state lawmakers and governmental regulators, Lawrenceburg approached Franklin County so it could accurately represent that its economic development activities were, in fact, regional in scope.
. . . Lawrenceburg identified an opportunity to further the footprint of its economic development by utilizing adjacent counties, including Franklin County, and in turn persuade the legislature to keep the wagering and admissions revenue flowing. In that effort to ensure that monies kept flowing to Lawrenceburg, the City of Lawrenceburg and Franklin County entered into [the Agreement], and a separate grant program, at Lawrenceburg's invitation. This regional partnership was shown to and apparently had the intended effect of appeasing regulators and legislators looking at the issue. In exchange for the Agreement, Franklin County publicly supported Lawrenceburg's riverboat revenue program. That support was effective, as Lawrenceburg kept its revenue.

         Appellees' Br. p. 11-12 (internal citations omitted). In fashioning this explanation, Franklin does not cite to any specific documents or evidence related to this case or the Agreement; instead, it cites statutes and an unrelated case. It does direct our attention to two letters drafted by Franklin County:

• On January 23, 2006, the Franklin County Board of Commissioners sent a letter thanking Lawrenceburg for its "contribution" of $500, 000 and stating that Franklin supported Lawrenceburg in its "endeavors with your riverboat revenue." Appellants' App. Vol. II p. 142.
• On January 28, 2006, the president of the Franklin County Council sent a letter thanking Lawrenceburg for including Franklin in its Revenue Sharing Program. The letter acknowledges that the Agreement will remain in effect only so long as Lawrenceburg "continues to enjoy financial stability and a steady flow of revenue. We also understand that this revenue flow would be subject to the decisions made by the Indiana State Legislature. We, the members of the County Council pledge to support your endeavor by contacting the necessary members of the State Legislature and extend to them how important this Revenue Sharing program is to all of the 9 surrounding counties included in the agreement." The letter notes that the "sharing of this revenue with us and the other counties is truly a wonderful example of a neighbor helping others." Id. at 145.

         [¶7] On November 18, 2015, Franklin sued Lawrenceburg for breach of contract. In Lawrenceburg's answer, it did not raise any affirmative defenses. Franklin moved for summary judgment, arguing that the Agreement was a valid and enforceable contract that could be terminated only if there was a complete failure of Lawrenceburg's Gaming Tax Revenue stream. Lawrenceburg filed a cross-motion for summary judgment, arguing that the Agreement was void pursuant to Indiana Code section 36-4-8-12(b) because it purported to obligate the city to pay money that had not been appropriated. It also argued that the Agreement was unenforceable because it was not supported by consideration and did not have a finite durational term. Following briefing and a hearing, the trial court entered summary judgment in favor of Franklin on August 10, 2018. In pertinent part, it found and held as follows:

4. The Agreement acknowledges adequate consideration.
9. The Wagering Tax revenue that is shared pursuant to the Agreement is appropriated to Lawrenceburg by the State of Indiana. These funds are State money collected pursuant to a State tax.
12. Annually, Lawrenceburg has continued to receive wagering tax revenue in amounts exceeding $500, 000.
13. Franklin County has fully performed under the Agreement.
14. There are no genuine issues of material fact.
15. The Agreement has a sufficient term of duration. The duration of the Agreement is the period of time that Lawrenceburg continues to receive Wagering Tax revenue in an amount sufficient to make the agreed payment to Franklin County.
16. The Agreement is a valid and enforceable contract.
17. Lawrenceburg has breached the Agreement, and Franklin County has ...

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