LJWorld.com

Topeka — A judge was told Friday that blocking Harrah's Entertainment Inc. from going forward with plans to build and manage a state-owned casino in Sumner County could doom the project.

But lawyers for the Prairie Band Potawatomi Nation argued that Harrah's involvement in the south-central Kansas project would violate a noncompete agreement the company signed with the tribe in January. Harrah's had managed the tribe's northeastern Kansas casino for a decade.

The Jan. 13 agreement stated that for one year from that date, Harrah's wouldn't develop, promote or encourage the expansion of gambling in Kansas other than what's conducted by the tribe. For two years it wouldn't own, operate or manage a casino.

Harrah's is part of a partnership that last week was awarded the contract by the Lottery Gaming Facility Review Board to build and manage a state-owned casino in Sumner County, in south-central Kansas. The contract is subject to a background check of the company and approval by the Kansas Racing and Gaming Commission.

At the end of Friday's daylong hearing, Shawnee County District Judge David Bruns told the attorneys he hoped to rule sometime next week on the tribe's request for a temporary injunction. But his ruling won't be the final word.

If he grants the request and sets a date for a permanent injunction hearing, that could be appealed. If he denies the request, the tribe still could seek a permanent injunction hearing. Either way, the judge could order both sides to resolve the breach of contract issue by mediation or arbitration.

Harrah's attorney Richard Rhyne said his client didn't violate the agreement because the casino was created by a state law enacted last year by the Legislature and Harrah's played no role in that. He also said Harrah's wouldn't be managing the casino until after the agreement's two-year limit.

The tribe's attorney, Jere Sellers, said Harrah's opened an office in Mulvane and wanted to get one of the four 15-year casino management contracts authorized by last year's law.

"They decided they're going to risk the noncompete because they didn't want to be out of Kansas for 15 years," Sellers said.

The contract to manage the casino is between Sumner Gaming Joint Venture and the Kansas Lottery, which owns the gambling. The joint venture is 60 percent Sumner Gaming and Resort, a group of investors, and 40 percent Harrah's.

"The net effect of an injunction is the joint venture wouldn't be feasible and in all likelihood would drop out," John Frieden, Sumner Gaming attorney, testified. "It would be the end of the application on behalf of the joint venture. They couldn't proceed with the contract approved by the Lottery."

The Potawatomi Nation contracted with Harrah's to operate the casino on its reservation at Mayetta, north of Topeka, from January 1997 until July 2007, when the tribe took over its management.

The state-owned casino would be located at Mulvane, a short distance from Wichita, which is a major market for the tribe along with Topeka.

James Potter, a member of the tribal council, testified Harrah's did a good job of managing the Prairie Band casino and they parted on good terms. He said the Prairie Band facility, one of four tribal casinos in northeastern Kansas, represents about 75 percent of the tribe's annual revenue. "It's almost impossible to put a value on it," he said. "We often refer to it as the return of the buffalo because it provides food and shelter for our people."