Local investors in SugarHouse Casino are challenging the authority of the Pennsylvania Gaming Control Board to reissue a second gaming license for the city.
In a lawsuit filed Monday in Dauphin County, the minority partner in SugarHouse - RPRS Gaming L.P. - contends that the board has no power to award a license to a new casino operator three years after revoking one for the failed Foxwoods Casino project.
The local investors claim a second city license would cause them "irreparable injury."
The lawsuit says the state's gaming legislation, passed in 2004, vests the board with the ability to "issue, approve, renew, revoke, suspend, condition, or deny" the issuance or renewal of a license.
"Nothing in the statute, however, vests the board with authority to reissue a license that the board previously revoked," the lawsuit says.
The board is deep into the process of reviewing six applications for a second license in the city. Under the gaming act, the license must stay in Philadelphia.
But with three additional casinos in the surrounding area - Parx, Harrah's Philadelphia, and Valley Forge - there has been much discussion about whether the region can support another competitor in the city.
Richard McGarvey, a spokesman for the gaming board, said the agency was "reviewing the claim asserted by persons holding a small interest in SugarHouse Casino."
The minority investors are led by Philadelphia lawyer Richard A. Sprague and auto magnate Robert Potamkin. The lawsuit also names as codefendants the operator and other owners of SugarHouse, among them Chicago investor Neil Bluhm and his associate Greg Carlin.
They are included, according to the complaint, because of their "inability to reach a consensus" on participating in a challenge to the board's authority.
McGarvey said the gaming board "will be responding to the petition and seeking the dismissal of the action, as it believes the action to be without support in the law."
Late this year, the board expects to begin holding hearings on the suitability of each applicant, with a decision coming early next year. McGarvey said the lawsuit did not stop the review process.
Jack Horner, a spokesman for SugarHouse, declined to comment directly on the pending litigation. SugarHouse, on Delaware Avenue in Fishtown and Northern Liberties, became the city's first casino when it opened in 2010. It recently received state approval to expand with additional gaming-floor space and a new garage.
"It's our expectation this will have no impact on our operations or the approved SugarHouse Casino expansion," Horner said.
A. Bruce Crawley, a spokesman for PHL Local Gaming, one of the contenders for the second license, said the investors behind the Casino Revolution project were moving forward with their effort to secure a license.
"We've seen the filing and are fully confident that the board is operating well within its power," he said.
Karen Bailey, a spokeswoman for Penn National Gaming, said the lawsuit would not deter the gaming company from proceeding with its plans to develop Hollywood Casino Philadelphia.
"They're not going to scare us away," she said.
The lawsuit has exposed the lingering rift between local and Chicago investors in the SugarHouse Casino. The local group controls about 20 percent of the project.
When the gaming board announced last summer that it would reissue the second license for Philadelphia, local investors raised questions with the majority partners about legality of the action, the suit said.
But neither side was in a position to act because they were embroiled in separate litigation in a dispute regarding voting powers.
When that matter was resolved, the managing partners in Chicago did not respond "definitively" to subsequent recommendations to challenge the board, the complaint said.
The managing partners, the complaint said, were concerned about "how such a suit would be perceived by officials in the City of Philadelphia and others."