EAST ST. LOUIS – Casino Queen directors and former owners can’t enforce individual arbitration of claims that they cheated employees out of retirement income, U.S. District Judge David Dugan ruled on Jan. 25.
He rejected an arbitration clause that directors inserted by amendment in 2018, finding they failed to provide any consideration.
“Consideration exists only if there is a grant of an advantage or the bargained for acceptance of a disadvantage,” Dugan wrote.
He found the contract change was at worst illusory.
He relied on an Illinois Supreme Court case where a contract change provided nothing of value to plaintiffs and a defendant gained a corresponding benefit.
Pension plan participants Tom Hensiek and Jason Gill sued casino directors and former owners Timothy Rand, James Koman, and Charles Bidwill last April.
Hensiek and Gill also sued current St. Clair County Associate Judge Jeffrey Watson, president and general counsel of Casino Queen until 2019.
Their suit claims that after Rand, Koman and Bidwill failed to find a buyer, defendants created a buyer by establishing an employee stock ownership plan.
They claim the plan incurred $170 million in debt and paid an inflated price.
They claim directors sold virtually all the real property to Gaming and Leisure Properties for $140 million, to refinance the debt.
They claim directors entered into an agreement to lease the property back for $210 million over 15 years.
They claim directors reported positive results until 2019, when they told employees the stock price dropped nearly to nothing.
Defendants moved to compel individual arbitration in August, claiming the plan provided that directors could amend it prospectively or retroactively at any time.
Hensiek and Gill responded that they didn’t sign an arbitration clause, consent to it, or receive consideration for it.
Dugan heard argument on Dec. 17.
He then discarded the arbitration clause, finding modification of a contract in Illinois requires consideration like a new contract.
“Consideration consists of some detriment to the offeror, some benefit to the offeree, or some bargained for exchange between them,” Dugan wrote.
“Defendants by implementing the amendment took advantages for themselves while imposing corresponding disadvantages on the plaintiffs by stripping from them certain rights they otherwise enjoyed under the plan.”
He plans a scheduling conference on Feb. 23, for trial in October 2022.
Minutes of a scheduling conference on Jan. 20 suggest it didn’t go smoothly.
Dugan directed the parties to meet and confer to resolve issues in their joint report and submit another report by Feb. 19.
Mary Bortscheller of Washington represents Hensiek and Gill.
Joe Rice of Chicago represents Casino Queen and Watson.
Ronald Norwood of St. Louis represents Rand and Bidwill.
Lars Golumbic of Washington represents Koman.