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Federal appeals court sends challenge to casino law back to trial court

A federal appeals court has revived a legal challenge to the advantage offered Native American tribes in the state’s 2011 casino law, sending the matter back to the trial court for more hearings, according to the decision and the developer that filed the suit.

The decision, issued Wednesday in the appeal brought by KG Urban Enterprises, a company seeking to build a commercial casino in New Bedford, may further muddle casino development efforts in Southeastern Massachusetts.

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KG filed its suit the day Governor Deval Patrick signed the casino legislation last November. The company challenged language in the law that delays any bidding on a commercial casino license in the southeast to give a federally recognized tribe — presumably the Mashpee Wampanoag — time to make progress on developing a tribal casino under federal law. The Mashpee are pursuing a casino in Taunton, though stubborn legal obstacles remain and the tribe could be years from final approval. KG argues that the state law unfairly gives the tribe the first chance to build a casino while denying the company an opportunity to compete for a casino license.

US District Judge Nathaniel Gorton upheld the state law in February and dismissed KG’s challenge. The company immediately appealed.

In its ruling, the US Court of Appeals for the First Circuit vacated the dismissal of the complaint and remanded the case back to the lower court.

But in a split decision, the court declined to issue an injunction as KG had requested.

“There are difficulties with each party’s arguments,” the court wrote in its 52-page decision. “In the end, though, it is clear to us that KG’s suit should not have been dismissed.”

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The Appeals Court noted the uncertainty over the Mashpee Wampanoag casino plans, including whether the tribe will ever be able to acquire land needed to host gambling under federal law. The tribe has asked the US secretary of the interior to take its proposed Taunton casino site into federal trust for the tribe, which would effectively convert it to sovereign tribal land and make it eligible for gambling. But, as the Appeals Court found, the secretary’s authority to do that is in question because of a 2009 Supreme Court ruling.

KG quickly declared victory Wednesday after the ruling was issued in its appeal.

The judges “unanimously rejected the Commonwealth’s central argument, have reinstated our complaint, and remanded the case for further proceedings,” Andrew M. Stern, KG’s managing director, said in a statement.

KG anticipates there next will be a preliminary hearing at the lower court level to determine how to proceed with the case.

The Patrick administration had no comment on the decision Wednesday, as state lawyers had not yet reviewed it, a spokesman said.

Mark Arsenault can be reached at marsenault@globe.com. Follow him on Twitter @bostonglobemark

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