Appeal board upholds bankruptcy court ruling in favor of Susan Bala – InForum

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FARGO — An appeals court panel upheld an April 2021 federal bankruptcy court ruling that defeated North Dakota Attorney General Wayne Stenehjem in a lengthy legal battle between the state and Susan Bala, owner of Racing Services Inc. (RSI), a Fargo horse racing betting operation.

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Judge Thad Collins’ 2021 ruling declared a deal

between a Las Vegas gambler and Stenehjem’s office appeared to violate state law, and Collins called the nearly two-decade-long North Dakota case an example of “an uncontrollable process that needs to stop.”

Stenehjem appealed Collins’ decision in 2021, but on January 7, a U.S. Bankruptcy Appeals Board for the Eighth Circuit upheld the ruling, which was part of a legal wrangle that dates back to 2004, when RSI , an off-track horse racing betting company in Fargo, has filed for bankruptcy.

Since then, RSI and Bala, the company’s founder, have been at the center of numerous lawsuits, both civil and criminal.

A number of legal proceedings came to a head in 2014, when a federal judge ruled that the state of North Dakota was not allowed to collect taxes on account betting, a form of gambling that used services like RSI.

As part of this case, the State of North Dakota agreed to pay approximately $15.8 million to bankrupt RSI and its sole owner, Bala.

The state transferred the funds to the RSI Estate Trust Account in early 2018. Since then, the balance has shrunk by millions of dollars due to disbursements to creditors and legal fees.

The final distribution to Bala of the remaining money has been delayed by continuing legal battles, some of which stemmed from the start of RSI’s Georgia bankruptcy laws case when a major creditor – PW Enterprises – amended its original claim of 2, $2 million, increasing what he was looking for from the estate by about $10.8 million.

In November 2018, the U.S. bankruptcy court denied PWE’s amended claim, but approved PWE’s original $2.2 million claim. PWE appealed the decision, saying it was entitled to the money North Dakota paid into the bankruptcy estate. Alternatively, PWE said, money returned to RSI from North Dakota should go to charity.

The State of North Dakota, represented by Stenehjem’s office, filed a brief in support of PWE’s appeal, but later withdrew the brief. PWE’s appeal was ultimately dismissed in June 2020.

wayne stenehjem

In late December 2018 — about a year after the state of North Dakota and RSI’s estate settled for about $15.8 million — the state filed a new claim against the estate on behalf of profit groups. non-profit. PWE filed a brief in support of the Crown’s request.

An evidentiary hearing was held on the State’s new request on May 30, 2019.

During that hearing – and only after direct and persistent questioning by Collins – the judge learned that an agreement had existed between the state and PWE since around December 2018, which provided for the state to share any product it recovered. for charitable purposes with PWE.

In January 2020, Collins issued a decision dismissing the state’s new claim against the RSI bankruptcy estate, a claim specifically made on behalf of a single nonprofit group – Team Makers, the fundraising arm from the athletic department of North Dakota State University.

The state appealed that decision to the Bankruptcy Appeal Panel (BAP), and PWE sought to join the state in that appeal.

In September 2020, the Appeal Panel issued a decision that partly upheld and partly reversed Collins’ January 2020 decision.

The appeals panel’s decision sent the case back to Collins, who was tasked with adjudicating the state’s new claim on behalf of Team Makers again, although this time the bankruptcy judge had to decide the complaint on the merits and not on its opportunity.

The bankruptcy judge was also forced to rule on an amended claim the state filed at the May 30, 2019 hearing of the state’s new claim, with the amended claim asserting a breach of contract claim. against RSI on behalf of Team Makers.

In his April 2021 ruling, Collins ruled against the two claims the state brought against the bankrupt RSI estate on behalf of Team Makers.

Stenehjem’s office appealed that decision, but in its January 7 ruling, the Bankruptcy Appeals Board upheld Collins’ decision.

“The bankruptcy court has insisted that this marathon of litigation be brought to an end, and we agree. The time to reach a final decision on the claims is long overdue,” the appeals panel said.

Bala said Monday, Jan. 10, that she couldn’t help but feel there had been a personal side to the litigation between the State of North Dakota and RSI over the years, based on how the state had behaved.

“The most important thing for me in what this (appeal) court said was that the state’s arguments were incomprehensible and this had to stop,” Bala added.

A spokeswoman for Stenehjem’s office said the appeal committee’s decision was under review.

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