Appeal Board upholds bankruptcy court ruling in favor of Susan Bala – InForum
FARGO – An appeals court panel upheld an April 2021 federal bankruptcy court ruling that defeated North Dakota Attorney General Wayne Stenehjem in a long-standing legal battle between the State and Susan Bala, owner of Racing Services Inc. (RSI), a Fargo horse betting operation.
between a Las Vegas player and Stenehjem’s office appeared to violate state law, and Collins called the nearly two-decade affair in North Dakota as an example of “an uncontrollable process that must stop.”
Stenehjem appealed Collins’ decision in 2021, but on January 7, a U.S. Bankruptcy Appeal Board for the Eighth Circuit upheld the decision, which was part of a legal dispute that dates back to 2004, when RSI, an off-track horse racing betting company in Fargo, filed for bankruptcy.
Since then, RSI and Bala, the founder of the company, have been at the center of numerous legal proceedings, both civil and criminal.
A number of court cases culminated 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 RSI’s bankruptcy estate and its sole owner, Bala.
The state transferred the funds to the RSI estate trust account in early 2018. Since then, the balance has declined by several million dollars due to disbursements to creditors and legal fees.
The final distribution to Bala of the remaining money was delayed by continued legal battles, some of which stemmed from the start of RSI’s bankruptcy case when a major creditor – PW Enterprises – amended its original claim by 2.2 million dollars, increasing what he was asking of the estate by about $ 10.8 million.
In November 2018, the U.S. bankruptcy court dismissed PWE’s amended claim, but approved PWE’s initial $ 2.2 million claim. PWE appealed the ruling, saying it was entitled to the money North Dakota paid into the bankruptcy estate. Alternatively, PWE said, the money returned to North Dakota RSI would have to go to charity.
The State of North Dakota, represented by the Stenehjem office, filed a brief in support of PWE’s appeal, but subsequently withdrew the brief. PWE’s appeal was ultimately dismissed in June 2020.
At the end of December 2018, about a year after the North Dakota state bankruptcy and RSI bankruptcy settled for about $ 15.8 million, the state filed a new claim against the estate on behalf of ‘non-profit associations. PWE filed a brief in support of the state’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 from Collins – the judge learned that an agreement had existed between the state and PWE since about December 2018 which called for the state to divide any recovered proceeds for use. charities with PWE.
In January 2020, Collins issued a ruling dismissing the state’s new claim against RSI’s bankruptcy assets, a claim specifically made on behalf of a single nonprofit group – Team Makers, the fundraising arm. from the athletic department at North Dakota State University.
The state appealed this decision to the Bankruptcy Appellate Panel (BAP), and PWE sought to join the state in that appeal.
In September 2020, the appeal panel issued a ruling that partially upheld and partially reversed Collins’ January 2020 ruling.
The appeal committee’s decision sent the case back to Collins, who was tasked with re-adjudicating the state’s new claim on behalf of Team Makers, although this time the bankruptcy judge was to decide the complaint on the merits and not on its desirability.
The bankruptcy judge was also forced to rule on an amended claim that the state filed at the evidence hearing on May 30, 2019, on the state’s new claim, the amended claim arguing a claim for breach of contract against RSI on behalf of Team Makers.
In his April 2021 ruling, Collins spoke out against the two claims filed by the state against RSI’s bankruptcy estate on behalf of Team Makers.
Stenehjem’s office appealed the ruling, but in its Jan. 7 ruling, the Bankruptcy Appeal Board upheld Collins’ ruling.
“The bankruptcy court has insisted that this marathon litigation must end, and we agree. It is high time to reach a final decision on the claims,” said the appeal board.
Bala said on Monday January 10 that she couldn’t help but think there had been a personal aspect to the North Dakota state-RSI litigation over the years, based on the conduct of the state.
“The most important thing for me about what this (appeals) court said is that the state’s arguments were incomprehensible and this must stop,” Bala added.
A spokeswoman for the Stenehjem office said the appeal board’s decision was under review.