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Note 17. Commitments and Contingencies
 12 Months Ended
Dec. 30, 2012
Commitments and Contingencies Disclosure [Text Block]
17.  Commitments and Contingencies

Operating Lease with the Maryland Department of Natural Resources Related to the Rocky Gap Resort

As discussed in note 4, Investment in Evitts Resort, LLC and Acquisition of Rocky Gap Lodge & Golf Resort, Evitts entered into a 40- year operating ground lease with the Maryland DNR for approximately 268 acres in the Rocky Gap State Park on which the Rocky Gap Resort is situated.  Future minimum lease payments under this operating ground lease at December 30, 2012 are as follows (in thousands):

 
 
 
2013
   
2014
   
2015
   
2016
   
2017
   
Thereafter
 
Minimum lease payment
  $ 425     $ 425     $ 425     $ 425     $ 425     $ 14,450  

Aircraft Lease

In November 2011, Lakes terminated its aircraft lease with Banc of America Leasing & Capital, LLC, which was set to expire on February 28, 2018. To complete the early termination of the lease, Lakes incurred a loss of approximately $3.3 million.  Rent expense under the Company’s aircraft operating lease, exclusive of taxes, insurance and maintenance expense was $0.4 million for fiscal 2011.

Rock Ohio Ventures, LLC

Lakes’ has a 10% ownership in Rock Ohio Ventures and as of December 30, 2012, Lakes has contributed approximately $20.2 million as required (see note 8, Investment in Unconsolidated Investee).  Lakes may contribute additional capital up to $4.9 million as needed to maintain its equity position in Rock Ohio Ventures.  If Lakes chooses not to fund any additional amounts, it will maintain an ownership position in Rock Ohio Ventures in a pro rata amount of what its $2.8 million initial payment is to the total amount of equity funded to develop casino operations, and all equity funded in excess of the initial $2.8 million is required to be repurchased at an amount equal to the price paid.

Employment Agreements

Lakes has entered into employment agreements with certain key employees of the Company. The agreements provide for certain benefits to the employee as well as severance if the employee is terminated without cause or due to a “constructive termination” as defined in the agreements. The severance amounts depend upon the term of the agreement and can be up to three years of base salary and three years of bonus calculated as the average bonus earned in the previous two years. If such termination occurs within two years of a change of control as defined in the agreements by the Company without cause or due to a constructive termination, the employee will receive a lump sum payment equal to two times the annual base salary and bonus/incentive compensation along with insurance costs, 401(k) matching contributions and certain other benefits. In the event the employee’s employment terminates for any reason, including death, disability, expiration of an initial term, non-renewal by the Company with or without cause, by the employee with notice, or due to constructive termination, all unvested stock options vest at the date of termination and remain exercisable for two years. The agreements provide for a base salary, bonus, stock options and other customary benefits.

Quest Media Group, LLC Litigation

In May 2012, Lakes received service of a breach of contract lawsuit filed in the Franklin County Court of Common Pleas, Franklin County, Ohio by Quest Media Group, LLC (“Quest”) with respect to an  agreement (the “Agreement”) entered into between Lakes Ohio Development, LLC (a wholly owned subsidiary of Lakes) (“Lakes Ohio Development”) and Quest on March 9, 2010.  The Agreement relates to Quest assisting Lakes Ohio Development in partnering with Rock Ohio Ventures, LLC and Penn Ventures, LLC (“Penn”) with respect to funding the proposed citizen-initiated referendum in November 2009 to amend the Ohio constitution to permit one casino each in Cleveland, Cincinnati, Toledo and Columbus, Ohio. The lawsuit alleges, among other things, that Lakes breached the Agreement by selling Lakes Ohio Development’s interest in the Toledo and Columbus casino projects to Penn, failing to pay the proper fee to Quest as a result of such sale, and incorrectly calculating the costs that are to be offset against Quest’s fee.  The lawsuit seeks unspecified compensatory damages in excess of $25,000, punitive damages, declaratory and injunctive relief.  The lawsuit names as defendants Lakes Entertainment, Inc., Lakes Ohio Development, LLC and Lyle Berman, Chairman and CEO of Lakes. Lakes removed the case to federal court and answered the pleadings.  The case is still in the early stages of discovery.  Lakes believes the suit to be without merit and intends to vigorously defend itself in this lawsuit.

Litigation Settlement

Lakes entered into a Settlement and Mutual Releases Agreement (the “Settlement Agreement”) in October 2012 related to the lawsuit entitled WPT Enterprises, Inc., et al vs. Deloitte & Touche, LLP.  The Settlement Agreement provided for payment to Lakes of $2.2 million, which was received in November 2012.  This payment is recorded as other income in the Company’s consolidated statement of operations for fiscal 2012.

Miscellaneous Legal Matters

Lakes and its subsidiaries are involved in various other inquiries, administrative proceedings and litigation relating to contracts and other matters arising in the normal course of business. While any proceeding or litigation has an element of uncertainty, and although unable to estimate the minimum costs, if any, to be incurred in connection with these matters, management currently believes that the likelihood of an unfavorable outcome is remote, and is not likely to have a material adverse effect upon Lakes’ consolidated financial statements. Accordingly, no provision has been made with regard to these matters.