DULUTH, MINN. -- A small Native American tribe is trying to use a federal law that it considers unconstitutional to extricate itself from a troublesome gambling partnership with the Duluth city government.

The Fond du Lac Chippewas, whose 3,100-member reservation occupies a forested area about 20 miles from here, have filed a federal suit against this Lake Superior port city of 85,000. Tribal attorneys contend that the Indian Gaming Regulatory Act of 1988 invalidates the city-tribal partnership that developed the downtown Fond-du-Luth Gaming Casino, which features bingo-related games and video games of chance in casino-style settings.

The Fond du Lac and most other tribes nationwide take issue with the law, saying it seriously erodes the authority of tribal governments. It gives states some jurisdiction over tribes and allows taxing tribes to pay for a federal commission to oversee tribal gambling.

"We find ourselves in a funny position," Fond du Lac Chairman Robert Peacock said recently. "We are opposed to the law. It's an infringement of the federal government against tribal governments. But we're using the law to try to win a court case."

The law is the tribe's only hope of getting out of a partnership that burdens the tribe with the entire $7 million casino debt while affording it only 25 percent of the profits. The federal law requires that tribes get 70 percent. The tribe is trying to use the law "as a leverage to get out of a deal fairly made," Duluth attorney David Sullivan wrote in a brief to the court. He contends that the law does not apply to this type of partnership.

When the casino enterprise was developed, leaders on both sides expressed enthusiasm about turning a piece of downtown Duluth into an Indian reservation, thereby allowing the casino to operate relatively free of state gambling laws. Millions of dollars in profits were forecast. Leaders sold the idea to a wary tribal membership and an anti-gambling Duluth public as a way to further economic development in both jurisdictions.

Half of the profits are targeted for additional joint economic development ventures.

But the dream soured within months of the showy opening in late 1986, and the casino became a battleground where city and tribal representatives struggled for control. Management deteriorated and business foundered.

The relationship deteriorated further when city officials withheld from the tribe crucial information about an improperly constructed casino parking ramp, which is rapidly deteriorating and the subject of two lawsuits in state court. The city built and owns the ramp but, under the partnership, the tribe was to pay for it.

Now the casino is operating under a more cooperative city-tribal casino commission, whose president is Fred Burnes and vice president is Edward Pelerin, a Chippewa, and for the first time is paying its bills and has prospects of making profits.

But relations between its owners have not improved. Peacock and Duluth Mayor John Fedo have not met in a year, and no action is planned to settle their governments' differences or negotiate a new partnership.

The tribe's exit from the partnership could leave the city with a $3 million bill and an empty, inoperable casino. Duluth put up the money for the partnership with the understanding that the tribe would repay it, but the repayment agreement is part of the contract that the tribe claims is illegal. Fedo said he expects the tribe to live up to its obligation.

Gambling operations have become an increasingly important source of jobs and income on Native American reservations, where unemployment ranges from 40 percent to 90 percent. Revenue from tribal gaming operations was $400 million last year, almost double that of the previous year.

Supporters of the gaming regulatory act said it was needed to bring order and oversight to the hodgepodge of 125 independent tribal-gambling operations nationwide and to protect the tribes from unethical non-Indian gaming managers. The law requires that tribes maintain control of the businesses.

Most Native American leaders do not support the law, with many calling it a continuation of a long history of scheming between U.S. businesses and Congress to rob tribes of land and resources and, now, of a unique governmental status that gives tribes a competitive edge. They noted that Nevada and New Jersey gambling interests lobbied hard in support of the law.

"It's the meanness of the whole thing," Peacock said. "They just didn't feel Indians had a right to gaming."

A lawsuit challenging the gaming law was dismissed last month by U.S. District Judge Louis F. Oberdorfer in Washington, D.C.

The Red Lake Chippewas of Minnesota and Mescalero Apaches of New Mexico will appeal the ruling. In an attempt to upend a century of federal Indian law, they contend Congress has no inherent authority to make any law that determines the affairs of tribes. They contend Congress acted illegally when it unilaterally assumed that authority and stopped dealing with tribes as separate nations through the treaty-making process.

In defending the gaming act, federal attorneys argued that the last century of federal law allows Congress to do virtually anything it wants with Native American tribes, including dissolving them, abrogating treaties and subjecting tribes to state control.

After considering the matter for six months, Oberdorfer agreed, expressing reluctance but ruling that Congress's "devastating" power over tribes has been well established over the last century.

He quoted U.S. Court of Claims Judge Philip Nichols Jr. as saying that the day the Supreme Court first upheld congressional power over tribes represents "one of the blackest days in the history of the American Indian."

Oberdorfer said that, although such rulings are "disturbing," he was bound by the Supreme Court's "clear rulings that Congress may pass laws such as the gaming legislation even if they violate treaties with the Indians or Indians' aboriginal rights."

Mescalero President Wendell Chino expressed dismay, saying, "If we entertain that line of thought, we can entertain the idea that {the United States} can exercise genocide against Indian people and destroy them by legislation and court decisions."

Fran Ayer, a Washington attorney who argued the case for the tribes, said the case will be appealed within the month. "We made a principled statement, and people need to keep making those," Ayer said. He added that courts need to "be reminded of the injustice in the doctrine" under which Congress assumes responsibility for tribes.

The Fond du Lac suit, unaffected by the defeat of the federal challenge, is scheduled to be heard next month in U.S. District Court in Duluth.