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Millions in attorney's fees still at stake in Ledyard slot-machine tax case

Litigation that stems from a long-running dispute over Ledyard’s right to tax slot machines the Mashantucket Pequot Tribe leased for Foxwoods Resort Casino has reached the state Supreme Court.

Still at stake, potentially, are millions of dollars in attorney’s fees.

The saga dates to 2006, when the tribe filed a federal lawsuit against the town, claiming it had no authority to tax the Atlantic City Coin & Slot Co., which owned the slot machines leased by the tribe. In 2012, a district court judge ruled for the tribe, but things took a turn in the town’s favor the following year when the 2nd U.S. Circuit Court of Appeals reversed the district court's decision.

Along the way, in 2008, Ledyard lodged a suit in state court against another lessor of slot machines, WMS Gaming, claiming it owed the town more than $18,000 in unpaid personal property taxes, interest and penalties. When the tribe learned that the town had sued WMS Gaming over the same type of tax the tribe was challenging in federal court, the tribe filed a second federal suit against the town. Eventually, the two federal suits were consolidated.

Over the years, WMS Gaming’s tax bill grew to more than $372,000, a sum WMS paid in 2014.

According to court documents, the parties also agreed at the time that Ledyard could recover from WMS Gaming “reasonable” attorney’s fees the town incurred in prosecuting the state court action.

But that’s not all the town wanted, attorneys for WMS Gaming write in the company’s state Supreme Court appeal.

Ledyard also claimed that state law governing a municipality’s collection of delinquent taxes entitled the town to recover from WMS Gaming the attorney’s fees the town incurred in fighting the federal suit brought by the tribe — “a suit that WMS was never a party to and that concerned (the tribe’s) sovereign rights under federal law,” the attorneys write.

In October, New London Superior Court Judge Robert Vacchelli had agreed with the town, ruling that attorney’s fees “incurred in the related federal action were ‘as a result of and directly related to’ its (the town's) collection proceeding in this (state) matter.”

Vacchelli found that the language in the state statute is “unambiguous.” He also directed the town to request a hearing on the amount of the fees it sought.

WMS Gaming appealed what it now calls Vacchelli’s “extraordinary interpretation” of the statute to the state Appellate Court, which in March granted the town’s motion to dismiss the challenge. The Appellate Court ruled that Vacchelli’s decision was not final until he had ruled on the town’s pending motion for fees.

That prompted WMS to appeal to the state Supreme Court, which has agreed to rule on whether the Appellate Court correctly dismissed WMS’s appeal as premature.

Attorneys for both sides did not respond to requests for comment Friday.

Lloyd Langhammer, the New London attorney representing the town, said months ago that the fees the town is seeking could exceed $1.5 million, perhaps even double that amount.

“If the judge rules in our favor, it could be the largest award of attorney’s fees in New London County history,” Langhammer said.

In their Supreme Court appeal, attorneys for WMS say the fees Ledyard incurred over a seven-year period — "potentially millions of dollars" — “would dwarf the amount of taxes the Town collected from WMS and the fees and costs the Town incurred in prosecuting the state-court collection action itself.”

b.hallenbeck@theday.com

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