Hard Rock Construction 021114

Construction on the Hard Rock Hotel & Casino Sioux City is shown Feb. 11. The Iowa Supreme Court Tuesday gave Polk County District Court Judge Eliza Ovrom the green light to vacate an earlier lower court decision that had suspended the Hard Rock's state gaming license.

Dawn J. Sagert, Sioux City Journal

DES MOINES | Reversing an earlier decision, an Iowa judge Friday lifted a suspension of the Hard Rock Hotel & Casino Sioux City's state gaming license.

Pending an appeal, Polk County District Court Judge Eliza Ovrom's ruling clears the way for construction on the $128.5 million project to proceed, and for the venue to open as scheduled late this summer.

"We appreciate the opportunity to present the full facts in this matter before the court," Bill Warner, president of the Hard Rock developer, Sioux City Entertainment, said in a statement. "We thank the court for the thorough and fair assessment of our position, and for allowing us to proceed in accordance with the award granted by the Iowa Racing and Gaming Commission in April."

The owner of the Argosy Sioux City riverboat casino, which wanted the court to suspend the Hard Rock license until a final ruling in Argosy's lawsuit against the IRGC, declined to say whether it would appeal to the Iowa Supreme Court.

"We are disappointed with the judge's decision but remain confident in our legal position and we do look forward to bringing the merits of this case to trial," Argosy parent Penn National Gaming Co. said in a statement on its Hollywood Casino Sioux City Facebook page.

The Iowa Supreme Court intervened after a different Polk County District Court Judge, Robert Hanson, suspended the Hard Rock license on Dec. 10. Hanson's stay would have remained in place until a final verdict in Argosy's lawsuit seeking to overturn the IRGC decision to award Woodbury County's first land-based casino license to SCE and its nonprofit partner, Missouri River Historical Development.

After the IRGC and Hard Rock developer SCE Partners appealed, Supreme Court Justice Brent Appel on Dec. 21 granted an emergency stay of Hanson's ruling. On Jan. 8, a three-judge panel of justices ordered the district court to reconsider the ruling.

Specifically, the high court instructed Ovrom, who was reassigned the case through a routine judge rotation schedule, to determine whether the district court had the authority or jurisdiction to grant a stay while SCE was not a party to the case.

In her ruling Friday, Ovrom found SCE is an "indispensable party" and has the right to be heard.

"The effect on SCE's gaming license from a temporary stay is significant, if not drastic," Ovrom wrote.

"It would very likely lose its financing. It would lose millions of dollars already spent. The project would likely come to a halt."

In testimony at a Jan. 30 hearing, Warner emphasized SCE has already spent nearly $50 million and has approved dozens of contracts for the venue, which includes extensive renovations to the historic Battery Building at Third and Water streets and construction of an adjoining 55,852-square-foot structure. Even a temporary license suspension, Warner said, likely would trigger a default in $66 million in construction financing from a division of the Swiss bank Credit Suisse.

In deciding against a stay, Ovrom also appeared swayed by the large public investment in the Hard Rock venue and its potential community impact, which includes hundreds of new construction and casino jobs and millions of dollars in revenues for local governments and other groups.

The city of Sioux City, the judge noted, has issued $22 million in tax-increment financing bonds for parking and other infrastructure related to the venue.

Argosy attorneys argued SCE knew the risks of starting construction while the license was in litigation and had ample opportunities before Hanson's Dec. 10 ruling to intervene in the judicial review case. In her ruling Friday, Ovrom, citing precedent, called those arguments irrelevant.

Argosy argued it would suffer irreparable harm without a stay, saying it would be more difficult to persuade the courts to rule in its favor after the Hard Rock is fully constructed and operating.

Because the IRGC has every intention of replacing the floating casino with the Hard Rock upon its opening, the Argosy stands to lose its entire $100 million investment in Sioux City, and the boat's 320 employees also would lose their jobs.

Though Ovrom agreed Argosy would "suffer extreme financial loss" if the IRGC shuts down the boat, a stay is not warranted because Argosy is "not likely to succeed on the merits" of its legal claims against the IRGC.

In her ruling, Ovrom pointed to the IRGC's "broad discretion to regulate gambling and to set the requirements for licensure" in the state.

The five-member commission decided in June 2012 to take bids for a land casino in Woodbury County after growing frustrated with months of failed talks between Penn and its then-nonprofit partner MRHD over a long-term contract that would have included moving from water to land.

After the operating agreement between the two parties expired, the IRGC allowed the Argosy to stay open under a provision known as operation of law so the employees would not lose their jobs, Ovrom wrote.

In awarding the land license to Hard Rock/MRHD on April 18, while the IRGC "did not follow the exact procedure" under state law to convert a license from riverboat to land-based gambling, "the result was the same as if it had," Ovrom wrote.

Penn, the nation's second-largest gaming operator, applied for the land license with a new nonprofit, Greater Siouxland Improvement Association, proposing two different sites for a Hollywood-themed casino.

In its petition for the district court to review a series of IRGC actions that culminated with the April vote, Argosy claims the IRGC ignored its own rules and violated state laws and the company's constitutional rights.

As part of the Supreme Court order, Ovrom also expedited the remaining schedule for the Argosy's judicial review case. Final arguments case are now set for Sept. 26, with reply briefs due by Oct. 6.

Hanson originally set the final hearing for Dec. 22. The revised schedule means the case likely won't conclude until weeks or even months after the Hard Rock opens.

In her ruling Friday, Ovrom said she will not issue an order to make SCE a partner to the judicial review case until authorized by the Supreme Court.

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