Fort Indepedence Indian Community v. State of California et al, No. 2:2008cv00432 - Document 99 (E.D. Cal. 2009)

Court Description: ORDER denying 53 , 54 Motions for Summary Judgment, signed by Senior Judge Lawrence K. Karlton on 12/23/09, and GRANTS summary adjudication to the issues listed in this order. (Kastilahn, A)

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Fort Indepedence Indian Community v. State of California et al Doc. 99 1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 FOR THE EASTERN DISTRICT OF CALIFORNIA 8 9 10 FORT INDEPENDENCE INDIAN COMMUNITY, a federallyrecognized tribe, 11 NO. CIV. S-08-432 LKK/KJM Plaintiffs, 12 v. 13 14 15 O R D E R STATE OF CALIFORNIA; ARNOLD SCHWARZENEGGER, Governor of the State of California; JERRY BROWN, Attorney General of the State of California, 16 Defendants 17 / 18 19 Plaintiff Fort Independence Indian Community, a federally 20 recognized tribe, brings suit against the State of California and 21 associated officials (collectively, the “State”). The Tribe’s sole 22 remaining claim alleges that the State has violated its obligation 23 to negotiate in good faith regarding a Tribal-State gaming compact. 24 In particular, the Tribe argues that the State has improperly 25 insisted upon a revenue sharing agreement. 26 Gaming Regulatory Act is apparently hostile to such agreements, Although the Indian 1 Dockets.Justia.com 1 they have become common. 2 by the Department of the Interior, the agency that administers this 3 aspect of the IGRA. 4 These agreements have also been upheld The parties have filed cross motions for summary judgment. 5 The court resolves 6 supplemental briefing, and after oral argument. 7 material 8 adjudication/partial summary judgment as to several issues. fact the remain, but on the the papers, court including Questions of grants summary I. BACKGROUND 9 10 matters A. 11 Statutory Background The Indian Gaming Regulatory Act, 25 U.S.C. § 2701 et seq., 12 divides gaming into three classes.1 13 includes slot machines and similar devices, is at issue in this 14 case. 15 “conformance with a Tribal-State compact entered into by the Indian 16 Tribe and the State and approved by the Secretary of the Interior.” 17 Coyote Valley Band of Pomo Indians v. California (In re Indian 18 Gaming Related Cases Chemehuevi Indian Tribe), 331 F.3d 1094, 1097 19 (9th Cir. 2003) (citing §§ 2710(d)(1), (d)(3)(B)) (hereinafter 20 Coyote Valley II). Such gaming must also comply with certain other 21 conditions not relevant here. Class III gaming, which Under IGRA, a tribe may conduct Class III gaming only in Id. 22 A tribe seeking to conduct Class III gaming may request that 23 the state “enter into negotiations for the purpose of entering into 24 a Tribal-State compact.” § 2710(d)(3)(A). If the state permits 25 1 26 For the remainder of this order, the court cites to IGRA using only the section number. 2 1 other Class III gaming of the types sought, the state must honor 2 the request and negotiate in “good faith.” 3 Rancheria of Wintun Indians v. Wilson, 64 F.3d 1250, 1258 (9th Cir. 4 1994), amended by 99 F.3d 321 (9th Cir. 1996). 5 negotiate “regarding aspects of class III tribal gaming that might 6 affect legitimate State interests.” 7 1097; see also § 2710(d)(3)(C) (enumerating topics that “may” be 8 addressed by compacts). 9 Id., Rumsey Indian The State may Coyote Valley II, 331 F.3d at The present dispute principally concerns the extent to which 10 a state may seek money from a tribe. 11 authority to “impose any tax, fee, charge, or other assessment” 12 other than assessments necessary to defray the costs of regulating 13 gaming. 14 when the state “offer[s] meaningful concessions in return for its 15 demands.” 16 provides that “any demand by the State for direct taxation of the 17 Indian tribe” shall be considered as non-conclusive evidence of bad 18 faith. 19 § 2710(d)(4). IGRA does not provide However, a state does not “impose” a fee Coyote Valley II, 331 F.3d at 1111. IGRA separately § 2710(d)(7)(B)(iii)(II). IGRA provides a cause of action whereby tribes can enforce the 20 obligation to negotiate in good faith. § 2710(d)(7)(A); see also 21 S. Rep. 100-446, *14-15 (Aug. 3, 1988). 22 waive sovereign immunity, California has by statute consented to 23 suit. 24 44 (1996); see also Coyote Valley II, 311 F.3d at 1101 n.9.2 Although IGRA does not Cal. Gov. Code § 98005, Seminole Tribe v. Florida, 517 U.S. 25 2 26 Many other states have not consented to suit, leaving tribes in those states with little ability to enforce IGRA’s requirements. 3 1 Once a compact has been negotiated, it does not take effect 2 until the Secretary of the Interior affirms that it complies with 3 IGRA. 4 B. § 2710(d)(8)(B)(I). The 1999 California Compacts 5 In the gaming context, California’s present relationship with 6 tribes is largely the product of 60 compacts negotiated in 1999. 7 The Ninth Circuit provided the history of these negotiations in 8 Coyote Valley II, 331 F.3d at 1100-07, the relevant portions of 9 which are summarized here. Prior to 1999, California prohibited 10 slot machines and other forms of class III gaming sought by the 11 tribes. 12 compacts authorizing such gaming, and refused to do so. Rumsey, 64 13 F.3d at 1258, § 2710(d)(3)(A). 14 introduced a ballot initiative that would compel the State to 15 change this policy. This measure passed, and although it was later 16 invalidated by the California Supreme Court, it set in motion a 17 process culminating in extensive negotiations, further legislation, 18 and an amendment to the California Constitution. 19 the Constitution included the following: 20 21 Accordingly, California was not obliged to negotiate In 1998, a coalition of tribes The amendment to the Governor is authorized to negotiate and conclude compacts, subject to ratification by the Legislature, for the operation of slot 22 23 24 25 26 See, e.g., Texas v. United States, 497 F.3d 491, 504 (5th Cir. 2007) (Seminole Tribe “produced the unexpected result that a state may ‘veto’ Class III gaming by exercising its Eleventh Amendment sovereign immunity.”), Pueblo of Sandia v. Babbitt, 47 F. Supp. 2d 49, 52 (D.D.C. 1999) (explaining that New Mexico had not consented to suit under § 2710(d)(7)). The availability of this immunity is presumably responsible for the dearth of caselaw interpreting IGRA’s good faith provisions. 4 1 machines and for the conduct of lottery and banking and percentage card games by federally recognized Indian tribes on Indian lands in California in accordance with federal law. Accordingly, slot machines, lottery games, and banking and percentage card games are hereby permitted to be conducted and operated on tribal lands subject to those compacts. 2 3 4 5 Calif. Const. Art IV, § 19(f).3 Concurrent with the effort to pass 6 this amendment, the State negotiated with a group of tribes to 7 produce a template compact. Sixty tribes adopted the template (the 8 “1999 Compact”) shortly after the amendment was ratified. Coyote 9 Valley II, 331 F.3d at 1104. 10 The sixty tribes’ adoption of this compact, and the 11 contemporarily passed legislation, established the major features 12 of California’s present treatment of gaming. Most significantly, 13 tribes are the exclusive operators of slot machines and certain 14 other forms of class III gaming. Prior to 1999, the California 15 constitution had prohibited all slot machines and certain other 16 forms of gaming desired by the tribes. As part of the changes 17 surrounding the 1999 compacts, the constitution was amended to 18 allow tribal gaming, although other gaming remains prohibited. 19 A second major feature is the Revenue Sharing Trust Fund 20 (“RSTF”), which redistributes wealth among the tribes. Tribes 21 adopting the 1999 compacts pay into the fund by purchasing 22 “‘licenses’ to acquire and maintain gaming devices in excess of” 23 24 25 26 3 For the remainder of this order, the court uses “gaming” to refer to the types of Class III gaming enumerated in Calif. Const. Art IV, § 19(f), i.e., those forms of gaming which Tribes may be authorized to conduct, but which are otherwise prohibited in California. 5 1 certain quantities. 2 pays 3 recognized tribes 4 devices.” Non-compact tribes each receive up to $1.1 million 5 annually from the RSTF. 6 non-compact tribes are third party beneficiaries of the compacts, 7 but also that non-compact tribes have no right to enforce the 8 compacts. out to Coyote Valley II, 331 F.3d at 1105. “non-compact that are tribes,” defined operating fewer as The RSTF “[f]ederally than 350 gaming The 1999 Compacts explicitly provide that 9 Two other features of the 1999 Compacts are pertinent here. 10 The 1999 Compacts called for payments of a percentage of revenue 11 into a “Special Distribution Fund.” 12 pay expenses related to gaming, including shortfalls in the RSTF. 13 Id. at 1113-14. 14 a procedure “addressing organizational and representational rights 15 of Class III Gaming Employees and other employees associated with 16 the Tribe’s Class III gaming enterprise.” 17 section 10.7 of the 1999 Compact). 18 both of these provisions are consistent with IGRA. 19 1116. 20 C. 21 This fund may be used only to The 1999 Compacts also obliges tribes to provide Id. at 1116 (quoting The Ninth Circuit has held that Id. at 1114, Other State-Tribal Gaming Compacts California compacts negotiated since 1999 and compacts 22 negotiated by other states contain several additional features 23 pertinent here. 24 The post-1999 California compacts are notable in two ways. 25 First, the State has entered twenty one compacts with “non-compact 26 tribes,” allowing them to operate fewer than 350 gaming devices and 6 1 still receive payments from the RSTF. Conversely, there are no 2 federally recognized California tribes operating fewer than 350 3 class III gaming devices pursuant to a compact that do not receive 4 RSTF payments. 5 1999 compacts provide for “revenue sharing” with the state. 6 e.g., Tribal-State Compact Between the State of California and the 7 Pinoleville Pomo Nation, executed March 10, 2009, Pl.’s RFJN Ex. 6. 8 These provisions, unlike the “special distribution fund” approved 9 in Coyote Valley II, provide for payment into the State’s general 10 fund, such that the funds received may be used for any purpose. 11 Ordinary English would appear to require that a program in which a 12 percentage of revenues must be paid to a state is a tax. 13 the arrangements between sovereigns, the State and the Tribes, use 14 the term “revenue sharing” to refer to programs of this type.4 This 15 term is used ubiquitously in compacts with California and with 16 other states, and by the Department of the Interior. 17 the court adopts this practice here. 18 the term “revenue sharing” to refer to sharing of revenue between 19 the tribe and the state, and the acronym “RSTF” to refer to the 20 sharing of revenue between tribes. 21 order, this court uses the term “unrestricted revenue sharing” to 22 refer to programs wherein a portion of gaming revenues is paid into 23 the state’s general fund and the state’s use of those payments is Second, many California compacts subsequent to the See, However, Accordingly, In California, compacts use For the remainder of this 24 25 26 4 The court assumes that the term is meant to indicate that the payments are negotiated, rather than having been “imposed” or “demanded,” which the IGRA would disfavor. 7 1 unrestricted. 2 Post-1999 California compacts with unrestricted revenue 3 sharing provisions specify that revenue sharing is offered in 4 exchange 5 exclusivity. 6 Coyote Valley Band of Pomo Indians and The State of California, §§ 7 4.3.1(b),15.3 (Aug. 24, 2004) (accepted by the Secretary of the 8 Interior 9 http://www.cgcc.ca.gov/compacts/coyote_valley%20Compact.pdf. 10 Notwithstanding the fact that California law presently prohibits 11 all non-tribal gaming, 12 prohibit non-tribal gaming within a certain region. 13 revenue sharing provisions become void in the event that non-tribal 14 gaming becomes permitted within this area. for at the “meaningful concession” of continued tribal See, e.g., Tribal-State Gaming Compact between The 69 Fed. Reg. 76004) available at the State promises in these compacts to Id. The 15 Numerous other states have also negotiated compacts with 16 tribes that provide for unrestricted revenue sharing coupled with 17 tribal exclusivity provisions. 18 Babbitt, 47 F. Supp. 2d 49, 52 (D.D.C. 1999) (concerning compact 19 negotiated with New Mexico); see also Coyote Valley II, 331 F.3d at 20 1115 n.17 (noting that Connecticut, New Mexico and New York have 21 entered compacts containing such provisions). 22 D. 23 See, e.g., Pueblo of Sandia v. Fort Independence’s Negotiations Having provided this background, the court turns to the facts 24 particular to this case. Fort Independence is an Indian tribe 25 located in Inyo County, California, and is recognized by the 26 Secretary of the Interior. See 72 Fed. Reg. 13,648 (March 22, 8 1 2007). Fort Independence does not currently have a compact with 2 the State, and does not conduct any Class III gaming. 3 compact” 4 presently receives annual payments of $1.1 million from the RSTF. 5 From July 2004 to January 2008, the Tribe negotiated with the tribe, Fort Independence (hereinafter As a “non- the “Tribe”) 6 State regarding formation of a gaming compact. In general, the 7 Tribe argues that the State negotiated in bad faith by requesting 8 unrestricted revenue sharing and that the Tribe relinquish the 9 right to receive RSTF payments. The parties also negotiated the 10 range of geographic exclusivity guaranteed to the Tribe and the 11 number 12 Informed by this overview, the court turns to the history of the 13 negotiations. of devices 1. 14 the Tribe would be authorized to operate. July 2004 Request 15 In July 2004, Fort Independence formally requested that the 16 State enter into Tribal-State Compact negotiations under the IGRA, 17 25 U.S.C. § 2710(d)(3)(A). 18 the Tribe stated: 19 In its request to begin negotiations, The Fort Independence Tribe agrees with the Governor’s belief that Indian Tribes should provide compensation to the state in recognition of the unique privilege and benefit that gaming provides. 20 21 22 (Pl.’s Statement of Undisputed Facts (“PSUF”) 1.)5 23 “estimate[d] that the approximately 80 gaming devices the Tribe is 24 seeking would generate a win [to the tribe] per day of about $80 The Tribe 25 5 26 Facts taken from the parties’ undisputed statements are in fact undisputed. 9 1 per machine.” Id. 2 2. 3 In response to this request, the Tribe and the State began December 2004 Draft 4 negotiations in the fall of 2004. 5 Negotiations (“RN”) Ex. B) 6 draft compact preamble to the State. 7 the language of the 1999 compacts, expressly recognizing the 8 benefits the Tribe would gain from its tribal exclusivity, and 9 identifying exclusivity as a “meaningful concession.”6 (PSUF 6.) 10 The State negotiator incorporated this preamble into a draft 11 compact. 12 draft compact were based on the parties’ negotiations up to that (PSUF 8.) (PSUF 2; Def.’s Record of In December 2004, the Tribe provided a This draft preamble mirrored The State contends that the terms of this 13 6 14 15 16 17 18 19 20 21 22 23 24 25 26 The unabbreviated passage from the preamble provided: Whereas, the State and the Fort Independence Paiute Tribe recognize that the exclusive rights that the tribe will enjoy under this Compact create a unique opportunity for the Tribe to operate a Gaming Facility in a economic environment free from competition from Class III Gaming on non-Indian lands in California and that this unique economic environment is of great value to the Tribe; and Whereas, the Tribe in consideration of the exclusive rights enjoyed by the Tribe, the right to operate the desired numbers of Gaming Devices, and other meaningful concessions offered by the State in good faith negotiations, agrees to make a fair revenue contribution to the State, to enter into arrangements to mitigate to the extent possible the off-reservation environmental and direct fiscal impacts on the local community and local governments, and to offer consumer and employee protections. 10 1 point; the Tribe insists that the State unilaterally proposed the 2 terms. 3 ranging from 10 to 25 percent of the Tribe’s net win. 4 The draft also included a section on the RSTF, but this was marked 5 “[open]” rather than containing any specific provisions. 6 parties did not discuss the draft or compact again until January 7 26, 2006. 8 3. 9 In The draft provided for revenue sharing with the State, (PSUF 8.) The Tribe’s Disagreement in June and July 2006 the summer of 2006, the Tribe communicated various 10 objections to the State regarding the State’s positions. The Tribe 11 argued that unrestricted revenue sharing was prohibited because the 12 State had offered an inadequate concession. 13 Houck Supp. Pl’s Mot., Ex O.) 14 relinquishment of RSTF payments were prohibited, that the State was 15 not permitting enough gaming devices, that the draft provided for 16 too 17 environmental provisions were too burdensome. Id. much local control over (Decl. of Darcie L. The Tribe further argued that ancillary issues, and that the 18 4. Drafts Prepared by The Tribe 19 In December of 2006, the Tribe presented a photocopy of the 20 State’s draft compact on which the Tribe had made handwritten 21 modifications. 22 included the earlier preamble, a schedule for revenue sharing 23 payments to the state, an RSTF section stating “use language 24 similar to other compacts, w/$10 M threshold --> $900/machine,” and 25 an exclusivity provision prohibiting non-tribal gaming in a 55 mile 26 radius. (Houck Decl. Ex. S.) 11 This draft, as modified, 1 The Tribe sent the State another draft in February of 2007. 2 (Houck Decl. Ex. U.) 3 However, it did not provide for revenue sharing, and allowed the 4 Tribe to continue to receive payments from the RSTF, although the 5 draft specified that these payments would only be used for non- 6 gaming activities. 7 This draft retained the earlier preamble. In May of 2007, the Tribe made another proposal. 8 Ex. X.) 9 revenue (Houck Decl. This time, the Tribe proposed that it would begin to share once its net revenues, less debt servicing and 10 infrastructure payments, exceeded $12 million per year. 11 sharing obligations would be offset by the money the tribe paid for 12 other 13 infrastructure. 14 receive RSTF payments until the $12 million cutoff. 15 provided for geographic exclusivity within 100 miles. fees, such as fees to local government for Revenue associated Under this proposal, the tribe would continue to This proposal 16 5. 17 In August 2007, the State proposed a compact with some revenue 18 sharing at all net revenue levels, phasing out of RSTF payments, 19 exclusivity for 55 miles, and authorization of up to 349 devices. 20 (Houck Decl. Ex. Z.) 21 Tribe responded by contending that it did not have to negotiate 22 revenue sharing and RSTF payments absent meaningful concessions. 23 The The Parties’ Fall 2007 Negotiations Tribe then The day after receiving this proposal, the counter-proposed a plan with no revenue 24 sharing, continued receipt of the full $1.1 million RSTF payments, 25 349 devices, and payments to the State only for mitigation of off- 26 reservation impacts. The Tribe supported its proposal with a 12 1 “gaming market assessment,” projecting future revenue under various 2 scenarios. 3 amount of revenue sharing would cause the Tribe to operate at a 4 loss. 5 The Tribe asserted that this document showed that any The State rejected this proposal. Fort Independence then filed the complaint in this action on 6 February 25, 2008. The complaint alleged claims under the IGRA and 7 under the California and United States Equal Protection Clauses. 8 The court granted the State’s motion for judgment on the pleadings 9 as to the Equal Protection claims by Order of September 10, 2008. 10 Pending before the court are cross motions for summary judgment on 11 the IGRA good faith claim. II. STANDARD 12 13 Each party has filed a motion styled as a motion for summary 14 judgment. The Tribe asserts that the normal Fed. R. Civ. P. 56 15 standard applies, whereas the State does not discuss the standard 16 applicable to its motion. 17 motions to enforce IGRA’s good faith obligation. 18 Related Cases v. California, 147 F. Supp. 2d 1011, 1020-21 (N.D. 19 Cal. 2001) (Coyote Valley I), affirmed by Coyote Valley II, 331 20 F.3d 1094, the court considered a tribe’s “motion for an order 21 requiring Defendant State of California to negotiate,” which the 22 court resolved on the papers and after a hearing without discussion 23 of what standard applied. 24 Circuit affirmed denial of this motion without discussing the 25 posture of the case. 26 evidence, concluding that the evidence of good faith overcame the Courts have varied in their handling of In Indian Gaming 147 F. Supp. 2d 1011, 1013. The Ninth In its evaluation, the Ninth Circuit weighed 13 1 evidence of bad. 2 In contrast, in Rincon Band of Luiseno Mission Indians of the 3 Rincon Reservation v. Schwarzenegger, No. 04-cv-1151 (S.D. Cal. 4 April 29, 2008), (hereinafter Rincon Band) the court considered 5 cross 6 standards applicable to such motions, and proceeding to resolve all 7 issues presented in that case. 8 issues did not require weighing of evidence. motions for summary judgment. The court recited the That court’s resolution of the 9 Here, where the parties label their motions as motions for 10 summary judgment, the court uses the ordinary standards applicable 11 to such motions, recognizing that this differs from the posture of 12 the Coyote Valley cases. 13 Summary judgment is appropriate when it is demonstrated that 14 there exists no genuine issue as to any material fact, and that the 15 moving party is entitled to judgment as a matter of law. 16 Civ. P. 56(c); Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 17 (1970); Poller v. Columbia Broadcast System, 368 U.S. 464, 467 18 (1962); Jung v. FMC Corp., 755 F.2d 708, 710 (9th Cir. 1985); Loehr 19 v. Ventura County Community College Dist., 743 F.2d 1310, 1313 (9th 20 Cir. 1984). 21 22 23 24 25 Under summary judgment practice, the moving party [A]lways bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,” which it believes demonstrate the absence of a genuine issue of material fact. 26 14 Fed. R. 1 Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). 2 nonmoving party will bear the burden of proof at trial on a 3 dispositive issue, a summary judgment motion may properly be made 4 in reliance solely on the ‘pleadings, depositions, answers to 5 interrogatories, and admissions on file.’” 6 judgment should be entered, after adequate time for discovery and 7 upon motion, against a party who fails to make a showing sufficient 8 to establish the existence of an element essential to that party’s 9 case, and on which that party will bear the burden of proof at Id. at 322. Id. “[W]here the Indeed, summary 10 trial. “[A] complete failure of proof concerning an 11 essential element of the nonmoving party’s case necessarily renders 12 all other facts immaterial.” 13 judgment should be granted, “so long as whatever is before the 14 district court demonstrates that the standard for entry of summary 15 judgment, as set forth in Rule 56(c), is satisfied.” Id. In such a circumstance, summary Id. at 323. 16 If the moving party meets its initial responsibility, the 17 burden then shifts to the opposing party to establish that a 18 genuine 19 Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 20 586 (1986); First Nat’l Bank of Arizona v. Cities Serv. Co., 391 21 U.S. 253, 288-89 (1968); Ruffin v. County of Los Angeles, 607 F.2d 22 1276, 1280 (9th Cir. 1979), cert. denied, 455 U.S. 951 (1980). issue as to any material fact actually does exist. 23 In attempting to establish the existence of this factual 24 dispute, the opposing party may not rely upon the denials of its 25 pleadings, but is required to tender evidence of specific facts in 26 the form of affidavits, and/or admissible discovery material, in 15 1 support of its contention that the dispute exists. 2 Matsushita, 475 U.S. at 586 n.11; First Nat’l Bank, 391 U.S. at 3 289; Strong v. France, 474 F.2d 747, 749 (9th Cir. 1973). 4 opposing party must demonstrate that the fact in contention is 5 material, i.e., a fact that might affect the outcome of the suit 6 under the governing law, Anderson v. Liberty Lobby, Inc., 477 U.S. 7 242, 8 Contractors Ass’n, 809 F.2d 626, 630 (9th Cir. 1987), and that the 9 dispute is genuine, i.e., the evidence is such that a reasonable 10 jury could return a verdict for the nonmoving party, Anderson, 242 11 U.S. 248-49; Wool v. Tandem Computers, Inc., 818 F.2d 1433, 1436 12 (9th Cir. 1987). 248 (1986); T.W. Elec. Serv., Inc. v. Rule 56(e); Pacific The Elec. 13 In the endeavor to establish the existence of a factual 14 dispute, the opposing party need not establish a material issue of 15 fact conclusively in its favor. 16 factual dispute be shown to require a jury or judge to resolve the 17 parties’ differing versions of the truth at trial.” 18 Bank, 391 U.S. at 290; T.W. Elec. Serv., 809 F.2d at 631. 19 the “purpose of summary judgment is to ‘pierce the pleadings and to 20 assess the proof in order to see whether there is a genuine need 21 for trial.’” 22 56(e) advisory committee’s note on 1963 amendments); International 23 Union of Bricklayers v. Martin Jaska, Inc., 752 F.2d 1401, 1405 24 (9th Cir. 1985). 25 26 It is sufficient that “the claimed First Nat’l Thus, Matsushita, 475 U.S. at 587 (quoting Fed. R. Civ. P. In resolving the summary judgment motion, the court examines the pleadings, depositions, answers 16 to interrogatories, and 1 admissions on file, together with the affidavits, if any. Rule 2 56(c); Poller, 368 U.S. at 468; SEC v. Seaboard Corp., 677 F.2d 3 1301, 1305-06 (9th Cir. 1982). 4 is to be believed, Anderson, 477 U.S. at 255, and all reasonable 5 inferences that may be drawn from the facts placed before the court 6 must be drawn in favor of the opposing party, Matsushita, 475 U.S. 7 at 587 (citing United States v. Diebold, Inc., 369 U.S. 654, 655 8 (1962) (per curiam)); Abramson v. Univ. of Haw., 594 F.2d 202, 208 9 (9th Cir. 1979). Nevertheless, inferences are not drawn out of the 10 air, and it is the opposing party’s obligation to produce a factual 11 predicate from which the inference may be drawn. 12 Nielsen Freight Lines, 602 F. Supp. 1224, 1244-45 (E.D. Cal. 1985), 13 aff’d, 810 F.2d 898, 902 (9th Cir. 1987). The evidence of the opposing party Richards v. 14 Finally, to demonstrate a genuine issue, the opposing party 15 “must do more than simply show that there is some metaphysical 16 doubt as to the material facts. . . . Where the record taken as a 17 whole could not lead a rational trier of fact to find for the 18 nonmoving 19 Matsushita, 475 U.S. at 587 (citation omitted). party, there is no ‘genuine issue for trial.’” III. ANALYSIS 20 21 The heart of this dispute is the State’s request for revenue 22 sharing, and the tension between IGRA’s apparent hostility to 23 revenue sharing and the prevalence of revenue sharing agreements. 24 The Tribe first argues that the State has insisted on 25 negotiating topics which are not those that “may” be included in 26 compacts under section 2710(d)(3)(C), and that mere negotiation of 17 1 these topics violates 2 unrestricted 3 forfeiture of RSTF payments are issues that directly relate to 4 gaming 5 relating to these issues “may” be included in compacts under 6 section 2710(d)(3)(C). revenue under IGRA. sharing section The court (when tied 2710(d)(3)(C)(vii), concludes to that exclusivity) such that both and provisions 7 Second, the Tribe argues that revenue sharing and forfeiture 8 of RSTF payments are taxes which the state has impermissibly 9 imposed or demanded in violation of sections 2710(d)(4) and 10 (d)(7)(B)(iii)(II). 11 payments is not a tax, but that revenue sharing is, and that there 12 is a triable question as to whether the state has offered a 13 meaningful 14 provisions. 15 The court concludes that forfeiture of RSTF concession in exchange for the revenue sharing Third and finally, the remaining evidence does not permit 16 summary judgment as to good or bad faith. 17 dispute whether the State has provided evidence sufficient to 18 demonstrate its good faith. 19 meaningful concession is material, and the parties’ motions must be 20 denied. 21 A. 22 The parties separately Accordingly, the question regarding a Method of Statutory Interpretation Resolution of this case turns almost entirely on 23 interpretation of IGRA. The court is guided by the principles of 24 deference to agency interpretation of statutes and of interpreting 25 statutes passed for the benefit of tribes in a way that favors 26 tribal interests. 18 1 The interpretation of statutes that are administered by 2 executive agencies, and concomitant judicial deference to agency 3 interpretation, has received significant recent attention from the 4 courts. 5 United States v. Mead Corp., 533 U.S. 218, 230 (2001), Chevron 6 U.S.A. v. Natural Res. Def. Council, 467 U.S. 837, 842-45 (1984). 7 The cases have established a three step process for “Chevron” 8 interpretation. 9 1051, 1060 (9th Cir. 2003) (en banc), amended by 360 F.3d 1374 10 (2004). First, the court must determine whether the statutory text 11 is 12 ordinary textual tools of interpretation. For example, when making 13 this threshold determination, 14 See, e.g., Barnhart v. Walton, 535 U.S. 212, 222 (2002), ambiguous. Wilderness Soc’y v. United States FWS, 353 F.3d This determination is made with reference to 18 “a reviewing court should not confine itself to examining a particular statutory provision in isolation.” Rather, “[t]he meaning--or ambiguity--of certain words or phrases may only become evident when placed in context. . . . It is a ‘fundamental canon of statutory construction that the words of a statute must be read in their context and with a view to their place in the overall statutory scheme.’” 19 Nat’l Ass’n of Home Builders v. Defenders of Wildlife, 551 U.S. 644 20 (2007) (quoting FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 21 120, 132-33 (2000)) (internal citations omitted). 22 text is ambiguous, the court then determines whether the agency 23 interpretation is of a type entitled to deference under Chevron. 24 Mead Corp., 533 U.S. at 229-30. 25 entitled to Chevron deference, the third step is to determine 26 whether the agency interpretation is a reasonable interpretation of 15 16 17 Second, if the If the agency interpretation is 19 1 the statute. If so, the court adopts it. If the agency 2 interpretation is not entitled to deference under Chevron, it may 3 nonetheless be entitled to a distinct form of deference under 4 Skidmore v. Swift & Co., 323 U.S. 134 (1944). 5 v. Holder, 558 F.3d 903, 909 (9th Cir. 2009) (en banc). See Marmolejo-Campos 6 A second canon of interpretation is that statutes passed to 7 benefit Tribes should be interpreted in light of this purpose. See, 8 e.g., Montana v. Blackfeet Tribe, 471 U.S. 759, 766 (1985). 9 Chevron deference is owed to an agency interpretation, however, 10 Ninth Circuit authority provides that Chevron deference trumps 11 application of the Blackfeet canon. Confederated Salish & Kootenai 12 Tribes v. United States, 343 F.3d 1193, 1198 (9th Cir. 2003) 13 (citing Blackfeet Tribe, 471 U.S. at 766). As discussed below, the 14 court need not decide whether this hierarchy applies when the 15 agency receives Skidmore deference. See Shields v. United States, 16 698 F.2d 987, 991 (9th Cir. 1983). 17 B. When Objections to Topics of Negotiation, § 2710(d)(3)(C) 18 Section 2710(d)(3)(C) provides that compacts “may include 19 provisions relating to” a list of topics, including “subjects that 20 are directly related to the operation of gaming activities.” § 21 2710(d)(3)(C)(vii). The Tribe argues that both the discontinuation 22 of RSTF payments and the unrestricted revenue sharing provision 23 fall outside this list of topics. 24 As to RSTF payments, the Ninth Circuit has already held that 25 the RSTF program falls within section 2710(d)(3)(C)(vii). 26 Valley, 331 F.3d at 1111. 20 Coyote 1 Congress sought through the IGRA to “promot[e] tribal economic development, self-sufficiency, and strong tribal governments.” The RSTF provision advances this Congressional goal by creating a mechanism whereby all of California’s tribes--not just those fortunate enough to have land located in populous or accessible areas--can benefit from class III gaming activities in the State. 2 3 4 5 6 Id. (quoting § 2701(1), emphasis in original). Thus, this topic 7 directly relates to gaming, and no further analysis is required. 8 The Tribe’s arguments as to whether unrestricted revenue 9 sharing is “directly related to” gaming raise novel issues 10 regarding the effect of a topic’s omission from the list of factors 11 that “may” be included in compacts. The State argues that the 12 revenue sharing is “directly related to” gaming, and that the State 13 may therefore insist upon inclusion of this provision. The Tribe 14 argues that the revenue sharing is not directly related to gaming, 15 and that as a result, either the State cannot insist on negotiating 16 this issue (although the Tribe may agree to do so) or that 17 negotiation of this issue is prohibited.7 18 These three positions respectively correspond to the treatment 19 of mandatory, permissive, and prohibited topics of negotiation 20 recognized under the National Labor Relations Act. See Retlaw 21 Broadcasting Co. v. NLRB, 172 F.3d 660, 665 (9th Cir. 1999) 22 (discussing these three categories); see also Coyote Valley I, 147 23 F. Supp. 2d at 1020-21 (cases interpreting the NLRA provide 24 25 26 7 During negotiations prior to the filing of this suit, the Tribe adopted only the former of these two interpretations. See Def.’s Record of Negotiations Ex. Z, DD. 21 1 guidance in interpreting IGRA’s good faith provisions, although 2 NLRA caselaw cannot be applied “wholesale”). 3 employers and employee representatives have an “obligation . . . to 4 . . . confer in good faith with respect to wages, hours, and other 5 terms and conditions of employment.” 6 interpreting 7 subjects. 8 are “mandatory” subjects. 9 position relative to these provisions even if doing so leads to this language have Under the NLRA, 29 U.S.C. § 158(d). recognized a Courts trichotomy of The subjects about which parties are obliged to confer For these, a party may insist on its 10 impasse. 11 350 12 subjects.” 13 omitted). 14 terms, but they are not required to do so.” 15 not “insist on a permissive subject to the point of impasse.” 16 (citing Borg-Warner, 356 U.S. at 349). 17 the general rule that all un-enumerated subjects are permissive, 18 subjects “proscribed by federal or, where appropriately applied, 19 state law” are prohibited subjects that may not be negotiated. 20 Idaho Statesman v. NLRB, 836 F.2d 1396, 1400 (D.C. Cir. 1988). 21 example, the NLRA provides that a contract to boycott another 22 employer is unenforceable. 23 Parties are therefore prohibited from negotiating this topic. 24 NLRB v. Wooster Div. of Borg-Warner Corp., 356 U.S. 342, (1958). In general, Retlaw “all other Boardcasting, 172 subjects are permissive F.3d 665 (quotation at “The parties may bargain collectively on permissive Returning to the IGRA, Id. Thus, a party may Id. Third, in an exception to For NLRA § 8(e), 29 U.S.C. § 158(e). as explained below, this court 25 concludes that topics other than those enumerated by section 26 2710(d)(3)(C) are prohibited topics of negotiation. 22 Enumerated 1 topics 2 unrestricted revenue sharing did not directly relate to gaming, 3 then negotiation of it would be strong, if not determinative, 4 evidence 5 unrestricted revenue sharing directly relates to gaming within the 6 meaning of 2710(d)(3)(C)(vii). 7 may 1. mandatory bad faith.8 or The permissive. court Accordingly, concludes, however, if that Under Section 2710(d)(3)(C), Negotiation of Topics Not Enumerated Is Prohibited 8 9 of be The statutory text of section 2710(d)(3)(C) sharply differs 10 from the NLRA. 11 an “obligation . . . to . . . confer,” 29 U.S.C. § 158(d). 12 IGRA, in contrast, enumerates topics that “may” be included in 13 compacts, 14 2710(d)(3)(C). 15 canon of construction, both lists are presumed to be exhaustive. 16 See, e.g., United States v. 4,432 Mastercases of Cigarettes, 448 17 F.3d 1168, 1190 (9th Cir. 2006). 18 by NLRA are merely topics for which the parties have no obligation 19 to negotiate (i.e., permissive or prohibited topics), topics not 20 enumerated by IGRA are ones which the parties may not negotiate 21 (i.e., prohibited topics). 22 regard. and The NLRA enumerates topics for which parties have by extension, that may be negotiated. The § Under the inclusio unius est exclusio alterius Thus, while topics not enumerated The statute is not ambiguous in this 23 8 24 25 26 Because the court decides that the provisions negotiated here are within section 2710(d)(3)(C), the court does not decide whether unilateral efforts to negotiate a provision outside the scope of this section would constitute bad faith per se, or whether such efforts would merely be evidence of bad faith to be weighed against other evidence. 23 1 In Seminole Tribe, the Supreme Court stated that “§ 2710(d)(3) 2 . . . describes the permissible scope of a Tribal-State compact,” 3 implying that provisions outside of this section were prohibited. 4 517 U.S. at 49. 5 three compact provisions at issue were within section (d)(3)(C), 6 implying that they would have been prohibited if they were not 7 without stating this point directly. 8 also Wisconsin v. Ho-Chunk Nation, 512 F.3d 921, 933 (7th Cir. 9 2008).9 Similarly, Coyote Valley II concluded that the 331 F.3d at 1111, 1114. See These interpretations, while dicta, support the court’s 10 conclusion, and the court is not aware of any opinion squarely 11 addressing the issue. 12 Although the court holds that “may” as used in this section is 13 unambiguous, such that further inquiry is not required, the court 14 notes 15 legislative history of IGRA and the Department of the Interior’s 16 interpretations and implementation of the statute. 17 the Senate’s Select Committee on Indian Affairs’ report, section 18 2710(d)(3)(C) “describes the issues that may be the subject of 19 negotiations between a tribe and a State in reaching a compact. . that this interpretation is consistent with both the According to 20 21 22 23 24 25 26 9 But see Coyote Valley I, 147 F. Supp. 2d at 1018. In Coyote Valley I the district court stated that a “State cannot insist that compacts include provisions addressing subjects that are only indirectly related to the operation of gaming facilities.” Id. This statement might imply that such topics are permissive, rather than prohibited. However, even if the court intended this implication, the implication was dicta in that the court concluded that it was not confronted with such a provision. Although this court concludes otherwise, as with so many issues in this case, the rejected position is not without substance and weight. 24 1 . . The Committee does not intend that compacts be used as a 2 subterfuge for imposing State jurisdiction on tribal lands.” 3 Rep. 4 Department of Interior has held that section 2710(d)(3)(C) “limits 5 the proper topics for compact negotiations to those that bear a 6 direct relationship to the operation of gaming activities.” Letter 7 from Principal Deputy Assistant Secretary of Indian Affiars to 8 Kenneth Blanchard, Governor, Absentee Shawnee Tribe of Oklahoma 9 (Dec. 17, 2004) (approving in part the Shawnee-Oklahoma Compact).10 100-446, of (Aug. Interior 3, has 1988). enforced In like this manner, limitation the 10 The 11 rejecting a compact provision that would terminate the gaming 12 compact in the event that the Tribe materially breached the terms 13 of a separate tobacco compact, concluding that even though the 14 Tribe and State had agreed to this provision, it violated section 15 2710(d)(3)(C). 16 Department *14-15 S. by Id. Thus, the court concludes that parties may not negotiate 17 topics other than those enumerated by IGRA. Turning to those that 18 are enumerated, all such topics may be negotiated without violating 19 section 2710(d)(3)(C). 20 instances insist on its position with respect to negotiation of 21 these topics. 22 not lack good faith when it insisted that Coyote Valley adopt [the Moreover, a party may in at least some Coyote Valley II, 331 F.3d at 1111 (“the State did 23 10 24 25 26 This letter is attached as Plaintiff’s Request for Judicial Notice Exhibit 1. Exhibit 2 to plaintiff’s request for judicial notice is a Letter from the Acting Assistant Secretary of Indian Affairs to Janet Napolitano, Governor of the State of Arizona (January 24, 2003), approving a compact in full. Judicial notice of both letters is proper. 25 1 RSTF provision] as a precondition for entering a Tribal-State 2 compact.”) (emphasis added), id. at 1114 (“the State’s insistence 3 on” the Special Distribution Fund was permissible). 4 Coyote Valley II did not explicitly state that it used “insist” in 5 the sense used under the NLRA, namely, bargaining to impasse. 6 facts of that case, however, indicate that this is what occurred. 7 Such insistence is not always permissible, as demonstrated by the 8 panel’s treatment of sections 2710(d)(4) and (d)(7)(B)(iii)(II), 9 discussed below. by enumerated 11 mandatory as those terms are used under the NLRA. 2. 13 Pursuant The Here, the court merely notes that the topics 10 12 The panel in section 2710(d)(3)(C) are either permissive or Unrestricted Revenue Sharing and § 2710(d)(3)(C)(vii) to the above analysis, if unrestricted revenue 14 sharing provisions do not directly relate to gaming or otherwise 15 fall within section 2710(d)(3)(C), then such provisions violate 16 IGRA and are prohibited. The court concludes that phrase “directly 17 related to . . . gaming” is ambiguous and that the Department of 18 the Interior’s interpretation of the phrase is not entitled to 19 Chevron deference. 20 the Blackfeet Tribe canon, and the ordinary tools of statutory 21 interpretation together compel the conclusion that unrestricted 22 revenue sharing provisions that are tied to exclusivity provisions 23 directly 24 2710(d)(3)(C)(vii). 25 26 The relate Nonetheless, Skidmore deference to the agency, to gaming within the meaning of a. Section 2710(d)(3)(C)(vii) Is Ambiguous only subsection of section 26 2710(d)(3)(C) section potentially 1 encompassing unrestricted revenue sharing is subsection (vii), a 2 catch-all provision for “any other subjects that are directly 3 related to the operation of gaming activities.” 4 above, in Coyote Valley II, the Ninth Circuit held that both the 5 RSTF and Special Distribution Funds provision of the 1999 Compacts 6 directly related to gaming. 7 primarily on the uses to which the funds would be put. 8 1111. 9 used for any purpose. As explained The Ninth Circuit’s analysis focused 331 F.3d at This relationship is absent here, where the funds may be No circuit court has ruled on the lawfulness 10 of an unrestricted revenue sharing provision, and this court is not 11 aware of an district court opinion ruling on this issue. 12 Wisconsin v. Ho-Chunk Nation, 512 F.3d 921, 932 (7th Cir. 2008) 13 (concluding that the validity of a revenue sharing provision was 14 not before it, but noting that as of mid 2008, no Circuit decision 15 other than Coyote Valley II had addressed revenue-sharing). As the 16 court 17 relationships between revenue sharing and gaming activity. 18 of these are plainly outside the scope of the statute, but the 19 statute 20 “direct.” understands is the unclear as issue, to there whether are the four fourth other See potential Three relationship is 21 The State argues that revenue sharing directly relates to 22 gaming because it provides an incentive to the State to negotiate 23 and enter compacts on terms that are otherwise favorable to Tribes. 24 According to this argument, revenue sharing provisions thereby 25 increase the amount of gaming that will be conducted, and further 26 the Tribe’s ability to profit from gaming. 27 Revenue sharing 1 provisions may in fact have this effect. 2 cannot be read to encompass this type of relationship. 3 conceivable compact provision will affect either the State’s or the 4 Tribe’s willingness to enter the compact. 5 effect was sufficient to constitute a “direct relationship” to 6 gaming, then every conceivable provision would satisfy section 7 2710(d)(3)(C)(vii). 8 the statute, because it renders a restrictive term a nullity. “[A] 9 statute should be construed so that effect is given to all its 10 provisions, so that no part will be inoperative or superfluous, 11 void or insignificant.” 12 ___, 129 S. Ct. 1558, 1563 (2009) (quoting Hibbs v. Winn, 542 U.S. 13 88, 101 (2004)) (internal quotation marks omitted). 14 Nonetheless, the statute Every If this incentivizing The court cannot accept this construction of Corley v. United States, ___ U.S. ___, A more obvious relationship between revenue sharing and gaming 15 is that the revenue comes from gaming. 16 a whole, however, it is clear that this fact does not bring revenue 17 sharing within the scope of section 2710(d)(3)(C)(vii). 18 v. 19 (“Interpretation of a word or phrase depends upon reading the whole 20 statutory text, considering the purpose and context of the statute, 21 . . . .”). 22 “assessments,” a form of revenue sharing, tied to “defray[ment of] 23 the costs of regulating [gaming] activity.” 24 If all revenue sharing was permitted under subsection (vii), there 25 would be no need for subsection (iii) to permit a specific form of 26 revenue United States Postal Serv., When the statute is read as 546 U.S. 481, See Dolan 485 (2006) Subsection (iii) provides that compacts may include sharing. In addition, 28 IGRA’s § 2710(d)(3)(C)(iii). general hostility to 1 taxation, §§ 2710(d)(4), (d)(7)(b)(iii)(II), indicates that this 2 relationship is not the type envisioned by (d)(3)(C)(vii).11 3 Finally, revenue sharing is related to gaming in that gaming 4 is related to tribal exclusivity, and tribal exclusivity is 5 purportedly related to revenue sharing.12 6 gaming and exclusivity is clearly direct. 7 refer to all gaming, or only to gaming on tribal lands. 8 the former, then prohibition of non-tribal gaming directly relates 9 to gaming activity. The relationship between “Gaming activity” may If it is If it is the later, then exclusivity still 10 relates to tribal gaming in that exclusivity makes tribal gaming 11 substantially 12 slightly attenuated, is nonetheless as direct as the relationships more profitable. This relationship, although 13 14 15 16 17 18 19 20 21 22 23 24 25 26 11 The court further notes that in Coyote Valley II, both the RSTF and Special Distribution Fund provisions involved funding derived directly from gaming revenues, but the Ninth Circuit rested its conclusion that these provisions directly related to gaming on other factors. The only possible exception to this characterization of Coyote Valley II consists of one unexplained sentence in which the panel stated that the RSTF program acted “in a manner directly related to the operation of gaming activities.” Coyote Valley II, 331 F.3d at 1111. One reading of this sentence is that the “manner” of the RSTF’s operation is as a license on individual gaming devices, such that a license of that kind is “directly related to gaming activities.” This reading is belied by the remainder of the panel’s opinion, which is inconsistent with the conclusion that a per-device licensing fee is itself directly related to gaming operations. Although the panel’s general silence as to the significance of the fact that revenue for the RSTF and SDF provisions came from gaming does not establish that the factor is irrelevant, the court notes that the analysis here is consistent with the panel’s opinion in Coyote Valley II. 12 To again refer to Coyote Valley II, this is another relationship that was present in that case but that was not discussed by the Ninth Circuit panel. 29 1 approved by the Ninth Circuit in Coyote Valley 2 exclusivity directly relates to gaming activity, and the court need 3 not resolve any ambiguity as to the meaning of “gaming activity.”13 4 The second step is the relationship between exclusivity and There are two such relationships. II. Thus, 5 revenue sharing. The first is 6 the fact that in negotiations, exclusivity was offered in exchange 7 for revenue sharing. 8 to gaming cannot mean that any other provision that is offered in 9 exchange also directly The fact that one provision directly relates relates to gaming, because this would 10 eviscerate the prohibition imposed by section 2710(d)(3)(C). That 11 is, such a construction would allow any provision to be included in 12 a compact simply by connecting it to a permissible provision during 13 negotiations. 14 Here, however, exclusivity and revenue sharing are related by 15 more than the fact that in negotiation one is offered in exchange 16 for the other. 17 could have been raised by taxing non-tribal gaming, and the revenue 18 sharing provision purportedly offsets this loss of revenue.14 Exclusivity causes the state to forgo revenue that The 19 13 20 21 22 23 It appears that the broader interpretation is more likely. Although the statute is primarily concerned with tribal gaming, other provisions in the statute use the phrase “class III gaming activity on Indian lands.” See, e.g., §§ 2710(d)(1), (d)(2)(A), (d)(2)(C). If “gaming activity” always meant tribal gaming, these other provisions would not need to specifically refer to gaming on Indian lands. 14 24 25 26 Although this is the apparent justification, the court is not aware of any attempt, by the parties to this case or elsewhere, to quantify the amount of non-tribal gaming revenue foregone by the State. Payments into the RSTF obviously do not serve to replace the State’s forgone revenue, because the RSTF transfers money to other 30 1 court cannot conclude that the text of the statute unambiguously 2 indicates that this final relationship is direct or indirect. 3 Unlike the other relationships considered above, the statutory 4 context does not clearly exclude this type of relationship. Absent 5 a blanket exclusion, the statute does not provide a clear answer as 6 to how attenuated a relationship may be while still being direct. 7 The Ninth Circuit’s interpretation of the statutory text in Coyote 8 Valley 9 unrestricted revenue sharing is less directly related to gaming 10 than are the SDF and labor provisions accepted by Coyote Valley II. 11 Those provisions involved collecting funds for payment of costs 12 incurred by gaming itself, and for rights of workers employed by 13 gaming facilities. 14 revenue sharing to offset revenue lost through exclusivity is not 15 obviously less directly related to gaming than the RSTF provision, 16 which is related to gaming in that it reallocates funds raised by 17 gaming in a manner that effectuates IGRA’s purpose. 18 Although revenue sharing and exclusivity have a less obvious 19 connection to the statute’s purpose, the connection to gaming 20 itself is comparable, and the Ninth Circuit neither implied nor 21 concluded that only provisions that further the statute’s primary 22 purpose suffice. II does not resolve this ambiguity. 331 F.3d at 1114, 1116. On one hand, On the other hand, Id. at 1111. Accordingly, the statutory text is ambiguous as 23 24 25 26 tribes rather than to the State. However, as explained in Coyote Valley II and noted above, the Ninth Circuit has already determined that the RSTF program directly relates to gaming. Accordingly, the fact that RSTF payments do not replace revenue forgone by exclusivity is not pertinent. 31 1 to whether revenue 2 exclusivity, is directly related to gaming operations. 3 therefore turns to the next step in the Chevron analysis. b. 4 The sharing, Agency Deference 5 when offered Interpretation in Is connection Not with The court Entitled to Under Chevron 6 Once it is determined that a statute is ambiguous, the court 7 must determine whether an agency’s interpretation of the statute is 8 entitled to deference under Chevron. In Mead, the Supreme Court 9 established interpretation that an agency receives 10 Chevron deference only when (1) it is reasonable to believe that 11 “Congress delegated authority to the agency generally to make rules 12 carrying the force of law,” and (2) “the agency interpretation 13 claiming 14 authority.” 15 558 F.3d at 908. 16 that an interpretation has the force of law only when it has a 17 precedential effect that binds third parties. 18 value of an agency action [is] the essential factor in determining 19 whether Chevron deference is appropriate.” 20 F.3d at 909 (quoting Alvarado v. Gonzales, 449 F.3d 915, 922 (9th 21 Cir. 22 repeatedly 23 Immigration 24 interpretation of the phrase “paroled into the United States” in 8 25 U.S.C. 26 Chevron deference “‘[b]ecause the BIA’s decision was an unpublished deference promulgated in the exercise of that Mead, 533 U.S. at 226-27; see also Marmolejo-Campos, 2006)) § was In interpreting Mead, the Ninth Circuit has held (emphasis applied this Appeals’ 1255, in original). rule. In affirmation the Ninth 32 “[T]he precedential Marmolejo-Campos, 558 The Ninth considering of an Circuit Circuit the Bureau immigration declined to has of judge’s extend 1 disposition, issued by a single member of the BIA, which does not 2 bind third parties.’” Ortega-Cervantes v. Gonzales, 501 F.3d 1111, 3 1113 (9th Cir. 2007) (quoting Garcia-Quintero v. Gonzales, 455 F.3d 4 1006, 1012 (9th Cir. 2006)). 5 establish binding precedent through case-by-case adjudication, the 6 unpublished, single-member decision was not an exercise of that 7 authority. 8 1003.1(e) (specifying that such decisions are non-precedential). 9 Similarly, the Ninth Circuit has held that the U.S. Fish and 10 Wildlife Service’s decision to issue a permit to operate a project 11 in a wilderness area did not “‘bespeak the legislative type of 12 activity that would naturally bind more than the parties to the 13 ruling,’” and was not entitled to Chevron deference. 14 Soc’y, 353 F.3d at 1067 (quoting Mead, 533 U.S. at 232). 15 High Sierra Hikers Ass’n v. Blackwell, 390 F.3d 630, 648 (9th Cir. 16 2004).15 Although the BIA has the authority to Garcia-Quintero, 455 F.3d at 1012; see also 8 C.F.R. § Wilderness See also 17 15 18 19 20 21 22 23 24 25 26 Ninth Circuit cases provide less discussion of the Supreme Court’s decision in Barnhart v. Walton, 535 U.S. 212 (2002), decided subsequent to Mead. In Barnhart, the Court deferred to an interpretation of the Social Security Act contained in a regulation promulgated by the Social Security Administration. Id. at 214. The Court held that whether an interpretation was adopted after notice-and-comment rulemaking was not dispositive, and that the agency’s interpretation was entitled to deference because of “the interstitial nature of the legal question, the related expertise of the Agency, the importance of the question to administration of the statute, the complexity of that administration, and the careful consideration the Agency has given the question over a long period of time.” Id. at 222. Although the interpretation under consideration in Barnhart was binding on third parties, in that it was enacted in a regulation, the Court did not discuss the significance of this factor. Subsequently decided Ninth Circuit cases compel this court to conclude that even if the Barnhart factors are met, an interpretation receives Chevron deference only 33 1 The Department of the Interior interprets IGRA when it is 2 presented with a compact for approval. In some cases, the agency’s 3 approval has been accompanied by an explicit interpretation of 4 section 2710(d)(3)(C). 5 compact provision that would trigger nullification of a separate 6 tobacco compact. 7 of Indian Affiars to Kenneth Blanchard, Governor, Absentee Shawnee 8 Tribe of Oklahoma (Dec. 17, 2004). 9 explicit For example, the agency rejected a gaming Letter from Principal Deputy Assistant Secretary interpretation of This court is not aware of any section 2710(d)(3)(C)(vii) as it 10 specifically applies to revenue sharing. However, the Secretary 11 has repeatedly approved compacts that contain exclusivity and 12 revenue sharing provisions, in California and elsewhere.16 13 doing, the agency has implicitly concluded that revenue sharing is 14 consistent with IGRA, and thus with section 2710(d)(3)(C)(vii). By so 15 16 17 18 19 20 21 22 23 24 25 26 if it binds third parties. Marmolejo-Campos, 558 F.3d at 909. 16 For example, see the compacts between California and the Yurok Tribe and the Coyote Valley Band of Pomo Indians. The notices of the Secretary’s approval of these compacts are published at 72 Fed. Reg. 62264-01 and 69 Fed. Reg. 76004, respectively. The compacts themselves are available at http://www.cgcc.ca.gov/compacts/yurok_2006_compact.pdf and http://www.cgcc.ca.gov/compacts/coyote_valley%20Compact.pdf. In each compact, the revenue sharing agreement is codified at section 4.3.1. The Secretary has also approved compacts providing for unrestricted revenue sharing in New York, Massachusetts, Connecticut, and New Mexico. See, e.g., Pueblo of Sandia v. Babbitt, 47 F. Supp. 2d 49, 52 (D.D.C. 1999) (concerning compact negotiated with New Mexico); see also Coyote Valley II, 331 F.3d at 1115 n.17 (noting that Connecticut, New Mexico and New York have entered compacts containing such provisions) (citing Gatsby Contreras, Exclusivity Agreements in Tribal-State Compacts: Mutual Benefit Revenue-Sharing or Illegal State Taxation?, 5 J. Gender Race & Just. 487, 494-507 (2002)). 34 1 Indeed, the agency has demonstrated that it will reject compacts 2 that it determines violate this provision. 3 The Department of Interior’s decisions to approve individual 4 State-Tribal Gaming Compacts appear not to have a precedential 5 effect that binds third parties, although the parties have not 6 briefed this issue. 7 relatively informal procedure, under which the State and Tribe 8 submit 9 approval thereof to the Secretary, who notifies the parties in a copy of the The Department’s approvals result from a compact and documents indicating their 10 writing of his decision within 45 days. 25 C.F.R. §§ 293.8 - 11 293.14. 12 one indication that an interpretation has the force of law. 13 533 U.S. at 230. 14 approval of one compact establishes a precedent that binds the 15 agency 16 Instead, the agency is apparently able to change its interpretation 17 of IGRA, subject to the ordinary restraints on agency action. 18 Thus, the court concludes that the agency’s approval of individual 19 compacts, and the implicit interpretation of section 2710(d)(3)(C) 20 as applied to revenue sharing contained therein, does not bind 21 third parties, and is therefore not entitled to deference under 22 Chevron. Formality of procedures is not determinative, but it is in future Mead, In addition, nothing indicates that the agency’s cases, and thus also binds third parties. Marmolejo-Campos, 558 F.3d at 909. 23 c. 24 Because Interpreting IGRA under Skidmore and Blackfeet Tribe the statutory text is ambiguous and the agency 25 interpretation is not entitled to Chevron deference, the court must 26 itself resolve the ambiguity in the statute. 35 Here, the court is 1 primarily guided by two canons of interpretation. 2 agency interpretation is not entitled to deference under Chevron, 3 the court finds deference to be appropriate under Skidmore. 4 because IGRA was enacted in part to benefit tribes, the Blackfeet 5 Tribe canon directs the court to interpret IGRA in a manner 6 consistent with that purpose. 7 Blackfeet canon does not squarely support either interpretation, 8 and the court thereby adopts the Department of Interior’s position, 9 concluding that unrestricted revenue sharing tied to exclusivity 10 11 Although the And Here, the court concludes that the arrangements directly relates to gaming activities. While Chevron deference takes its force from an assumed 12 Congressional delegation of authority to the agency, Skidmore 13 deference reflects the fact that the agency has experience with the 14 statute and is likely to reach a reasoned interpretation regardless 15 of whether Congress intended the agency’s interpretation to be 16 binding. 17 deference, Skidmore deference is not all-or-nothing. 18 [accorded to an administrative] judgment in a particular case will 19 depend upon the thoroughness evident in its consideration, the 20 validity of its reasoning, its consistency with earlier and later 21 pronouncements, and all those factors which give it power to 22 persuade, if lacking power to control.” 23 In Mead, 533 U.S. at 230. this case, the agency has In contrast with Chevron “The weight Skidmore, 323 U.S. at 140. not provided a detailed 24 explanation of its interpretation. Nonetheless, the interpretation 25 embodied by the approvals is longstanding, and has been frequently 26 and consistently applied. Congress is undoubtedly aware of this 36 1 interpretation, yet it has not chosen to revisit IGRA. These facts 2 weigh 3 acknowledge the extremely disruptive effect that would result from 4 a finding to the contrary. 5 agency’s interpretation of the statute is plausible. 6 the 7 encompasses unrestricted revenue sharing provisions connected to 8 exclusivity is entitled to deference under Skidmore. 9 Artichoke Joe’s California Grand Casino v. Norton, 216 F. Supp. 2d 10 1084, 1126-27 (E.D. Cal. 2002) aff’d by 353 F.3d 712, 730 (9th Cir. 11 2003). heavily agency’s in favor of interpretation deference. This court must also Finally, as discussed above, the of whether section Accordingly, 2710(d)(3)(C) See also 12 The Blackfeet canon directs courts to interpret ambiguity in 13 statutes passed for tribes’ benefit in a way that favors tribes. 14 Here, the Tribe argues that this canon should cause the court to 15 reject the agency’s interpretation. Although the Tribe here argues 16 that a prohibition on revenue sharing is in its interest, the issue 17 is the interest of tribes generally. 18 1111. 19 Congress concluded that States were in a position of superior 20 bargaining power. 21 permissible 22 attempt to prevent States from exploiting this power. 23 Congress may have concluded that it was in tribes’ interests to 24 interpret section 2710(d)(3)(C) narrowly. 25 Court’s decision that IGRA did not abrogate states’ sovereign 26 immunity leaves the tribes’ interests less clear. Coyote Valley II, 331 F.3d at These interests are unclear. When IGRA was drafted, S. Rep. 100-446, *14-15. negotiations is an 37 apparent Limiting the scope of aspect of Congress’s Thus, However, the Supreme Seminole Tribe, 1 517 U.S. at 47. 2 waived, 3 obligation to negotiate under IGRA. 4 Babbitt, 47 F. Supp. 2d 49, 51 (D.D.C. 1999). Some tribes have 5 used non-waiving 6 recalcitrant 7 revenue sharing provisions are not directly related to gaming 8 activities, and that revenue sharing is therefore prohibited, would 9 eliminate one of the only tools these tribes have to encourage and In other states, sovereign immunity has not been tribes revenue-sharing therefore cannot agreements to sue to enforce states’ See Pueblo of Sandia v. entice states into negotiations. Id. and Concluding that 10 states to negotiate compacts. Accordingly, it is not at all clear 11 that a statutory prohibition on unrestricted revenue sharing would 12 provide the greatest benefit to tribes generally. 13 Because the Blackfeet canon has no clear application here, the 14 court need not decide the relationship between the Blackfeet canon 15 and Skidmore deference.17 16 Department 17 implicit, interpretation of the statute. 18 revenue sharing provision is tied to an exclusivity provision, the 19 revenue sharing is “directly related” to gaming activities, and of Interior’s The court defers under Skidmore to the longstanding and consistent, albeit When an unrestricted 20 17 21 22 23 24 25 26 The Ninth has held that Chevron deference, when appropriate, precludes application of the Blackfeet canon. See, e.g., Williams v. Babbitt, 115 F.3d 657, 663, n.5 (9th Cir. 1997). Although no case has specifically discussed whether Skidmore deference is similarly overriding, several cases decided prior to Chevron held, without citing Skidmore, that similar forms of agency deference precluded application of the canon favoring tribes. Shields v. United States, 698 F.2d 987, 991 (9th Cir. 1983) (quoting Assiniboine & Sioux Tribes v. Nordwick, 378 F.2d 426 (9th Cir. 1967)). The court does not express an opinion on this issue, other than to note that it, like many other issues in this case, is unclear. 38 1 therefore within the scope of section 2710(d)(3)(C)(vii). 2 requires the court to acknowledge that there are strong arguments 3 supporting contrary interpretations of this section. Nevertheless, 4 the court holds that the State’s efforts to negotiate this topic 5 did not violate section 2710(d)(3)(C). 6 B. 7 Candor Fee Demands and Meaningful Concessions The Tribe next argues that the State’s conduct amounts to 8 either an “imposition” of or a “demand for” a tax. 9 2710(d)(3)(C)(iii), a state may tax gaming “in such amounts as are 10 necessary 11 Section 2710(d)(4) provides that aside from such taxes, IGRA does 12 not provide States with “authority to impose any tax, fee, charge, 13 or other assessment,” and “[n]o State may refuse to enter into . . 14 . negotiations . . . based on the lack of [such] authority.” 15 Section 2710(d)(7)(b)(iii)(II) 16 direct taxation” is “evidence” of bad faith. 17 can 18 2710(d)(3)(C). 19 to violate defray these the costs sections of regulating Under section such activity.” provides that a “demand . . . for even if it A compact provision falls within section Coyote Valley II, 331 F.3d at 1112. IGRA does not define “impose” and “demand.” In ordinary 20 usage, the terms connote difference contexts. Imposition refers to 21 a state acting unilaterally, and compelling a tribe to pay a tax. 22 Demand, on the other hand, refers to behavior during bilateral 23 negotiation. 24 acceptance. Rather than a compulsion, a demand is insistence on 25 As the Ninth Circuit has interpreted the terms, they are 26 functionally equivalent. Without explicitly defining “imposition”, 39 1 Coyote Valley II explained what it was not. Where a state “offers 2 meaningful concessions in return for fee demands, it does not 3 exercise ‘authority to impose’ anything.” 4 F.3d at 1112. 5 acceptance of a fee in exchange for a meaningful concession offered 6 by the State, the State does not “impose” a fee. 7 Secretary of the Interior apparently concludes that a State imposes 8 a fee whenever a compact includes a fee which is not offset by a 9 meaningful concession. Coyote Valley II, 331 Even when “the State[] insist[s] on” a tribe’s Id. at 1114. The Letter from the Principal Deputy Assistant 10 Secretary of Indian Affairs to Kenneth Blanchard, Governor of the 11 Absentee Shawnee Tribe of Oklahoma (December 17, 2004). 12 Valley II indicated that imposition of a fee is bad faith per se. 13 When a concession is inadequate, insistence on a fee might “amount 14 to an attempt to ‘impose’ a fee, and therefore amount to bad faith 15 on the part of a State.” 16 (emphasis added). Coyote Coyote Valley II, 331 F.3d at 1112 17 A “demand” for a fee, on the other hand, is merely evidence of 18 bad faith, and this evidence may be outweighed by evidence of good 19 faith. 20 that the State had demanded a fee even though the State did not 21 impose one, only to hold that any evidence of bad faith was 22 outweighed by evidence of good faith. Coyote Valley II illustrated this distinction by assuming Id. at 1114.18 Despite this 23 18 24 25 26 The court explicitly refrained from deciding whether the state had in fact made a demand for a direct tax. Coyote Valley II, 331 F.3d at 1114. Instead, the court held that, assuming that the requested revenue sharing and RSTF provisions were such demands, the resulting evidence of bad faith was overcome by evidence of good faith. Id. 40 1 distinction, the evidence of good faith and the evidence of a 2 meaningful concession were largely one and the same. 3 evidence of good faith with respect to the demand for revenue 4 sharing was that “the tribes receive . . . an exclusive right to 5 conduct 6 country,” which the court had earlier identified as a meaningful 7 concession. 8 the compact restrict what the State can do with the money it 9 receives class III gaming in the most populous The first State in the The second piece of evidence was that “the terms of from the tribes pursuant to the [revenue sharing] 10 provision, and all of the purposes to which the money can be put 11 are directly related to gaming.” 12 Coyote 13 explained above, this court concludes that revenue sharing directly 14 relates to gaming when it is tied to an exclusivity provision. Valley II’s analysis of This language merely reiterates section 2710(d)(3)(C).19 As 15 The effect of Coyote Valley II’s analysis is that, at least 16 with respect to revenue sharing, the existence of a meaningful 17 concession, together with compliance with section 2710(d)(3)(C), is 18 sufficient to determine both whether a fee is imposed and whether 19 20 21 19 22 23 24 25 26 In the separate discussion of the RSTF provision, Coyote Valley II found additional evidence of good faith in the facts that the RSTF “provision does not put tribal money into the pocket of the State,” that the RSTF provision was included at the behest of the tribes, and that Coyote Valley tribe had had an opportunity to participate in the negotiations giving rise to the RSTF provision. 331 F.3d at 1113. Because these factors were not present with respect to the revenue sharing provision, id. at 1114-15, it is clear that these factors are not necessary for a finding of good faith. 41 1 the fee demand is itself proof of bad faith.20 2 Despite reaching this conclusion, the court notes that as with 3 many other issues in this case, the relationship between sections 4 2719(d)(4) and (d)(7)(B)(iii)(II) presents a difficult and largely 5 novel question. 6 Coyote 7 evidence of good and bad faith under section (d)(7)(B)(iii)(II), 8 that “the good faith inquiry is nuanced and fact-specific, and not 9 amenable to bright-line rules.” Valley The court responds to two potential concerns. II explained, in reference to the 331 F.3d at 1113. weighing of Here, the court 10 adopts the rule that a demand for a tax is not sufficient to 11 demonstrate 12 2710(d)(3)(C) and the state offers a meaningful concession. 13 rule comports with Coyote Valley II because, as illustrated below, 14 the question of whether a meaningful concession has been offered is 15 itself “nuanced and fact specific,” and because the broader good 16 faith inquiry, in which the tribe may introduce evidence other than 17 the demand for a tax, lies outside the scope of this rule. 18 bad faith when the demand comports with section This A second concern is that treating imposition and demand as 19 near-equivalents renders one statutory provision surplusage. 20 However, the two provisions use different language for different 21 purposes. 22 negotiating Section 2710(d)(7)(B)(iii)(II) explains that certain behavior indicates bad faith, whereas section 23 20 24 25 26 It should go without saying that even when the State offers a meaningful concession and negotiates topics permitted by section 2710(d)(3)(C), other factors, beyond a demand for a tax, may nonetheless demonstrate bad faith. For example, a state may act in bad faith by engaging solely in “surface bargaining,” as discussed in part III(C), below. 42 1 2710(d)(4) explains that the State has no power outside of its 2 power in negotiation. 3 Having laid this groundwork, the court turns to the facts of 4 this case. As explained in the following sections, the court 5 concludes that surrender of the right to receive RSTF payments is 6 not a “tax, fee, charge, or other assessment,” within the meaning 7 of section 2710(d)(4) or a “direct tax” within the meaning of 8 section 2710(d)(7)(B)(iii)(II). 9 such a tax, and the State’s offer of exclusivity is a concession, 10 but a triable question remains as to whether this concession is 11 meaningful. Unrestricted revenue sharing is 12 1. 13 The Tribe argues that the forfeiture of the right to receive 14 payments from the RSTF, or diminution of those payments, is a “tax, 15 fee, charge, or other assessment” within the meaning of section 16 2710(d)(4). 17 issue. 18 Forfeiting Receipt of RSTF Payments Is Not A Tax Neither party has provided any authority on this In ordinary English, a tax, charge, fee or assessment is an 19 obligation to pay out money that one already has. 20 Dictionary provides the following pertinent definitions: 21 22 Charge: 5 a : expense, cost <gave the banquet at his own charge> b : the price demanded for something <no admission charge> c : a debit to an account <the purchase was a charge> 23 24 25 26 Fee: 2 a : a fixed charge b : a sum paid or charged for a service Tax: 1 a : a charge usually of money imposed by authority on persons or property for public purposes b : a sum levied on members of an 43 Webster’s 1 organization to defray expenses 2 Merriam-Webster Online Dictionary (2009). Retrieved November 19, 3 2009, from http://www.merriam-webster.com/dictionary/. The Tribe’s 4 apparent contention is that, notwithstanding the ordinary usage, 5 there is no bottom line difference between a “debit” to an account 6 and withholding of a deposit. 7 from penalties, debts, fees, and other charges, but the court is 8 not aware of any authority addressing the antecedent question of 9 whether something is a charge at all.21 10 The caselaw has distinguished taxes The canons of statutory interpretation used in the preceding 11 sections provide little guidance here. The Department of the 12 Interior has not, to the court’s knowledge, interpreted these 13 terms. 14 “charge” generally. In this case, however, a narrow interpretation 15 of “charge” appears equally likely to benefit tribes, as the 16 withheld RSTF funds would go to other tribes. The Blackfeet canon may support a broad interpretation of Without deciding 17 21 18 19 20 21 22 23 24 25 26 In general, a “functional examination” is used to determine whether an “exaction . . . is a tax, a penalty, a debt, or something else.” George v. Uninsured Emplrs. Fund (In re George), 361 F.3d 1157, 1160 (9th Cir. 2004). For example, for purposes of the bankruptcy act, “[a] tax is a pecuniary burden laid upon individuals or property for the purpose of supporting the Government.” Id. (quoting United States v. Reorganized CF&I Fabricators of Utah, Inc., 518 U.S. 213, 224 (1996)). In another example, the Ninth Circuit uses a three part test to determine whether an “assessment” is a tax or a fee for purposes of the Tax Injunction Act. Qwest Corp. v. City of Surprise, 434 F.3d 1176, 1183 (9th Cir. 2006) (citing Bidart Bros. v. Cal. Apple Comm’n, 73 F.3d 925, 931 (9th Cir. 1996)). See also Welch v. Henry, 305 U.S. 134, 146 (1938) (distinguishing taxes from contractual obligations), United States v. La Franca, 282 U.S. 568, 572 (U.S. 1931) (distinguishing taxes and penalties). The distinctions between taxes, fees, charges and other assessments are not relevant here, as IGRA treats all equally. 44 1 whether the Blackfeet analysis should be case specific or should 2 instead consider situations not currently before the court, the 3 court simply concludes that Blackfeet does not strongly support the 4 Tribe on this issue. 5 In any event, statutory construction requires that ordinarily 6 words are given their ordinary meaning absent a reason to depart 7 from that meaning. 8 give them their ordinary meaning.” 9 L.L.C., ___ U.S. ___, 129 S. Ct. 2710, 2723 (2009) (quoting Asgrow 10 Seed Co. v. Winterboer, 513 U.S. 179, 187 (1995)); see also Gross 11 v. FBL Fin. Servs., ___ U.S. ___, 129 S. Ct. 2343, 2350 (2009). 12 Absent compelling reasons to depart from the ordinary meaning of 13 the words “tax,” “fee,” “charge,” or “assessment,” the 14 concludes that these words cannot be interpreted to encompass 15 surrender of a right to receive payment. 16 of RSTF payments is not within the scope of section 2710(d)(4). “When terms used in a statute are undefined, we Cuomo v. Clearing House Ass’n, court Accordingly, forfeiture 17 2. Revenue Sharing 18 The parties agree that revenue sharing is a fee, etc. 19 explained above, insistence on a fee is permissible where the state 20 offers a meaningful concession. 21 1112, 22 concession,” although it stated that the evaluation may turn on 23 “the nature of both the fee demanded and the concessions offered in 24 return.” 25 Interior has concluded that a state offers a meaningful concession 26 when (1) “the State concedes something that it was otherwise not 1114. Coyote Valley As Coyote Valley II, 331 F.3d at II did not Id. at 1112; see also id. at 1115. 45 define “meaningful The Department of the 1 required to negotiate” and (2) this “concession[] result[s] in a 2 substantial economic benefit to the Tribe.” 3 Principal Deputy Assistant Secretary of Indian Affairs to Kenneth 4 Blanchard, Governor of the Absentee Shawnee Tribe of Oklahoma 5 (December 6 interpretation 7 interpretation, the court grants it Skidmore deference. 17, 2004). Insofar of distinct IGRA as this from Letter from the definition the Ninth is an Circuit’s 8 The State argues that it has offered a “meaningful concession” 9 in the form of “the ability to operate, free from non-Indian 10 competition” certain Class III gaming. Coyote Valley II recognized 11 that the right to operate Class III gaming was distinct from the 12 promise to prohibit non-tribal entities from doing so. 13 facts of the 1999 Compact negotiations, the panel concluded that 14 each offered a meaningful concession. 15 that Coyote Valley II thereby established that exclusivity was a 16 meaningful concession as a matter of law. 17 argument, Coyote Valley II reached its conclusion after a fact 18 specific 19 concessions have changed. 20 that only exclusivity constitutes a concession. A triable question 21 exists as to whether this concession provides a meaningful benefit 22 to the Tribe. 23 24 analysis, a. and the facts On the The State mistakenly argues Contrary to the State’s underlying these purported On the facts here, the court concludes Permission to Conduct Class III Gaming Is Not A Concession 25 At the time of the 1999 Compact negotiations, California did 26 not permit any slot machines or other class III gaming of the type 46 1 sought by the tribes. 2 Rumsey, California therefore had no obligation to honor requests to 3 negotiate compacts for this type of gaming. 4 (interpreting § 2710(d)(1)(B)). Moreover, on August 23, 1999, 5 after the 6 concluded that state law prohibited the State from permitting 7 tribes to engage in such gaming. 8 Employees Internat. Union v. Davis, 21 Cal. 4th 585, 589 (1999). 9 Against negotiations this Pursuant to the Ninth Circuit’s decision in had started, background, 64 F.3d at 1258 California Supreme Court Hotel Employees & Restaurant then-governor Davis’s administration 10 proposed a constitutional amendment that would allow the State to 11 permit such gaming. 12 also negotiated with tribes, despite the fact that he was not 13 obliged to do so under the IGRA. 14 enter negotiations and offer the right to conduct gaming was a 15 concession, which had considerable value to the tribes. 16 1112.22 17 the meaningful concession test. Coyote Valley II, 331 F.3d at 1103. Id. Davis The State’s willingness to Id. at Thus, permission to conduct gaming satisfied both steps of 18 In this litigation, the State again asserts that granting the 19 Tribe the right to conduct class III gaming is a meaningful 20 concession. 21 “permits such gaming for any purpose by any person, organization, 22 or entity,” § 2710(d)(1)(B), IGRA compels the State to negotiate on However, in light of the fact that the State now 23 24 25 26 22 “[T]he State had no obligation to enter any negotiations at all with Coyote Valley concerning most forms of class III gaming. Nor did the State have any obligation . . . to offer tribes the right to operate Las Vegas-style slot machines and house-banked black-jack.” Coyote Valley II, 331 F.3d at 1112. 47 1 this 2 Accordingly, by offering the right to conduct such gaming, the 3 State does not concede something that it was otherwise not required 4 to negotiate. 5 issue. Rumsey, 64 F.3d at 1258; § 2710(d)(3)(A). The Department of the Interior has implicitly joined in this 6 interpretation. Through 2003, “the Department [of the Interior] 7 ha[d] approved payments to a State only when the State has agreed 8 to provide the tribe with substantial exclusivity for Indian 9 gaming.” Letter from the Acting Assistant Secretary of Indian 10 Affairs to Janet Napolitano, Governor of the State of Arizona 11 (January 24, 2003). 12 tribe provided by a concession is substantial, the Department has 13 looked to the benefit provided by exclusivity, rather than the 14 benefit of gaming generally. 15 Deputy Assistant Secretary of Indian Affiars to Kenneth Blanchard, 16 Governor, Absentee Shawnee Tribe of Oklahoma (Dec. 17, 2004). 17 Thus, the Department has not considered mere permission to conduct 18 gaming a concession 19 20 21 22 In calculating whether the benefit to the Id., see also Letter from Principal Accordingly, the State’s willingness to approve gaming and enter a compact is not a meaningful concession. b. Exclusivity Is A Concession The State also offers the Tribe exclusivity, in the form of a 23 ban on non-tribal gaming. The California Constitution currently 24 prohibits non-tribal gaming statewide. 25 “the State[’s] propos[al of] a constitutional amendment protecting 26 tribal gaming enterprises from free market competition by the 48 Coyote Valley II held that 1 State” was a meaningful concession. 331 F.3d at 1115. The State 2 has since promised, in compacts with other tribes, to maintain this 3 prohibition with respect to specific geographic areas. 4 offers a similar promise here. The State 5 The Tribe responds that constitutional prohibition on non- 6 tribal gaming has already been enacted, such that the offer of 7 market protection from non-tribal gaming is no longer a concession. 8 However, the State’s existing obligations regarding exclusivity 9 differ from its obligations to negotiate and permission to conduct 10 gaming. The latter arise under federal law that is beyond the 11 State’s control. 12 State could amend its constitution to permit non-tribal gaming. 13 Existing compacts reflect this possibility, stating that in the 14 event non-tribal 15 exclusivity offered to the tribe, provisions offered to the State 16 in exchange for this concession will be vacated. 17 Request for Judicial Notice, Ex. 6 (Tribal-State Compact Between 18 the State of California and the Pinoleville Pomo Nation, executed 19 March 20 willingness to amend its laws, even when this amendment required 21 voter approval, could be a meaningful concession. 22 1115. 23 different.23 10, 2009). The former arise purely under state law. The gaming becomes permitted within the zone of Coyote Valley II held See, e.g., Pl.’s that the State’s 331 F.3d at A State’s willingness to preserve its laws is not materially To the extent that this conclusion is not compelled 24 23 25 26 But see Rincon Band of Luiseno Mission Indians of the Rincon Reservation v. Schwarzenegger, No. 04-cv-1151 (S.D. Cal. April 29, 2008) (McCurine, M.J.). Rincon Band was a signatory to the 1999 Compacts. The Tribe sought to renegotiate portions of 49 1 by Coyote Valley II, the court notes that it is consistent with the 2 view adopted by the Secretary of the Interior, who has continued to 3 approve, since 2000, of California State-Tribal compacts with 4 revenue sharing provisions premised on the offer of exclusivity as 5 a meaningful concession. c. 6 See, e.g., Pl.’s RJFN Ex. 6. A Triable Question Exists As To Whether Exclusivity Provides A Meaningful Benefit To The Tribe 7 8 Under the Secretary’s two-step analysis, the second question 9 is whether this concession provides “substantial” benefits to the 10 Tribe. Letter from the Principal Deputy Assistant Secretary of 11 Indian Affairs to Kenneth Blanchard, Governor of the Absentee 12 Shawnee Tribe of Oklahoma (December 17, 2004). This issue presents 13 a triable question. 14 15 16 17 18 19 20 21 22 23 24 25 26 their compact, and filed suit objecting to certain provisions sought by the State, including an unrestricted revenue sharing provision. The Rincon Band court held that the consideration that was already given (exclusivity) for the mutual compact [the 1999 compacts] cannot be repeatedly reused as a basis for the State’s desire for a new compact . . . . In this Court’s view, the State has not offered exclusivity because exclusivity already exists. Id. at 18. The fact that Rincon Band concerned an attempt to renegotiate an existing compact, rather than to adopt a new compact, at least partially distinguishes that case from this one. There, the State had already offered exclusivity to the Rincon Tribe in adopting the prior compact, and the court relied at least in part on this fact rather than on the state’s general policy of prohibiting non-tribal gaming. Id. at 19. However, the court also expressed skepticism about the idea that refraining from amending the constitution was a concession. Id. at 20. It appears to this court to be a much more difficult question than it did to the Rincon Band court. 50 1 While the State concedes that the court must evaluate the 2 first step (whether the State has offered a concession), the State 3 argues that only the Secretary of the Interior can answer the 4 second (whether the concession offers meaningful benefits to the 5 Tribe). 6 court determined that the concessions provided a fair exchange, 331 7 F.3d at 1115, and by the fact that the Secretary evaluates compacts 8 only after the parties have agreed to them, such that the Secretary 9 does not take part in the good faith analysis.24 This argument is belied by Coyote Valley II, wherein the 10 In Coyote Valley II, rather than evaluate the benefit itself, 11 the court relied on other parties’ valuations, notably, the facts 12 that “[t]he tribes who drafted and placed Proposition 5 [containing 13 a model compact] on the ballot thought [the] exchange was fair,” 14 and that “[t]he former Secretary of the Interior also appears to 15 believe [that the] exchange is fair, given that he approved the 16 Davis [1999] Compact in May 2000.” 17 1115. 18 from other compacts in a way that precludes comparison to third 19 parties’ valuations. The Tribe’s primary argument is that no other Coyote Valley II, 331 F.3d at Here, the Tribe argues that the State’s proposals differ 20 21 24 22 23 24 25 26 If, as the State argues, the courts are prohibited from evaluating the benefit provided by a concession in the good faith analysis, a Tribe that contends that the benefit is inadequate will be forced to either surrender the possibility of a compact (because, absent a showing of bad faith, the Tribe will not be able to compel the State to enter a compact) or to agree to a compact despite this objection in the hopes that the Secretary will conclude that the agreed-upon compact provides an inadequate benefit. The State’s position thereby frustrates the purpose of good faith review. 51 has surrendered Tribe 2 However, the court has determined that forfeiture of RSTF payments 3 is not a “tax, fee, charge, or other assessment,” and the adequacy 4 of a concession is determined by reference to “the nature of . . . 5 the fee demanded.” 6 benefit of exclusivity is therefore weighed against the burden of 7 revenue sharing. 8 included revenue sharing at levels similar to those proposed here, 9 but argues that exclusivity is worth less in this case than it is 10 to other tribes. 11 Absent an the right to receive RSTF payments.25 1 Coyote Valley II, 331 F.3d at 1112. The The Tribe concedes that other compacts have independent evaluation, the court must itself 12 evaluate the benefit. The Secretary appears to evaluate compacts 13 by estimating whether the Tribe stands to realize greater revenue 14 if both revenue sharing provisions and exclusivity are included 15 16 17 18 19 20 21 22 23 24 25 26 25 Although the court finds this distinction irrelevant, the undisputed evidence demonstrates that no Tribe operating fewer than 350 machines has relinquished RSTF payments and also agreed to make unrestricted revenue sharing payments to the State, and as a result, the Secretary has not evaluated such a forfeiture. C.f. Compact of the Fort Mojave Indian Tribe, 69 Fed. Reg. 76004 (compact permits 1,500 gaming devices, calls for relinquishment of RSTF payments, and for payment of at least 12% of annual revenue), Compact of the Pinoleville Pomo Nation, March 10, 2009 (authorizing up to 900 devices, 15% revenue sharing, and payments into the RSTF if the tribe operates more than 700 gaming devices). Instead, the State has permitted other tribes to operate fewer than 350 devices and to continue to receive RSTF payments. In particular, the Tribe points to the Yurok compact, which was also negotiated by the Schwarzenegger administration. The Yurok compact provides for 99 devices, retention of RSTF payments, and the same schedule of revenue sharing proposed to Fort Independence on Aug. 30, 2007. Fort Independence’s situation differs in some important regards. Fort Independence seeks permission to operate up to 349 devices, rather than 99, and has 150 members, as opposed to the 4,000 in the Yurok Tribe. 52 1 than the Tribe would realize if both were omitted. Pl.’s RFJN Ex. 2 1, 2; see also Oversight Hr’g on the Indian Gaming Regulatory Act 3 of 1988 before the Sen. Comm on Indian Affairs, 108th Cong. 67, pt. 4 2, p. 3 (2003) (testimony of Aurene M. Martin, Acting Assistant 5 Secretary-Indian Affairs, Dept. of the Interior, July 9, 2003). 6 The court follows this approach here. 7 If exclusivity is maintained, the parties estimate that the 8 proposed casino will produce between $5.4 and $6.8 million in 9 gaming revenue. During negotiations, the Tribe commissioned a 10 “gaming market assessment,” which was completed in November of 11 2006. 12 assessment assumes that the Tribe will operate between 120 to 150 13 machines and will benefit from exclusivity. 14 on these assumptions, it predicts that annual revenue will reach 15 $5.9 million. 16 with the caveat that in 2009 dollars, projected revenue will be 17 $5.4 million. 18 87-2). 19 with this motion, which estimates that with exclusivity, annual 20 gaming revenue over the first five years of operation would range 21 from $6 to $6.8 million. 22 (Doc. No. 85). 23 Houck Decl. Ex. AA (Doc. 60-10). Id. at FI 396.26 The gaming market Id. at FI 937. Based The State adopts this prediction, Declaration of William R. Eadington, ¶ 12 (Doc. No. The Tribe has commissioned a second study in connection Declaration of Klas Robinson, Ex. C, 2 The parties’ estimates of revenue without exclusivity are not 24 26 25 26 The assessment predicted annual revenues of $6.9 million if a proposed competing tribal gaming facility at Bishop Paiute Palace did not open. Houck Decl. Ex. AA at FI 396. The Paiute Palace Casino has since been opened. 53 1 so similar. 2 would be reduced between $480,000 and $1.4 million annually. 3 Robinson Decl. Ex. C, 2. This represents roughly a 7% reduction 4 from exclusivity” 5 estimates the reduction at $4.3 to $5.1 million, or 80% percent of 6 the State’s “with exclusivity” estimate. 7 For purposes of the instant cross motions, the court concludes that 8 both parties’ expert testimony is admissible.27 9 the State’s requested revenue sharing of 10 to 25 percent, under 10 the Tribe’s estimate, exclusivity does not provide a substantial 11 benefit, whereas under the State’s estimate, exclusivity does. 12 13 the The The Tribe estimates that without exclusivity, revenue Tribe’s Tribe “with also asserts that prediction. the The State Eadington Decl. ¶ 16. court Measured against should exclusivity’s effect on profit, rather than revenue. look to Because the 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Robinson, the Tribe’s expert, bases his estimate on analysis of video lottery machines operated in South Dakota and Montana, after concluding that competitors in this region are unlikely to use other forms of gaming, and that other states permitting similar gaming types do not share similar geographic and demographic characteristics. Robinson Decl. 23-24. Eadington, the State’s expert, compares performance of casinos in California, where non-tribal gaming is prohibited, with casinos in Nevada, where there is no such prohibition. Eadington Decl. ¶ 5. Eadington also relies on the fact that the Tribe is located in a rural area, and estimates that if non-tribal gaming was permitted, potential customers would be likely to visit more conveniently located non-tribal facilities. Id. ¶¶ 13-14. Eadington further predicts that the direct decrease in expected revenue would lead to an additional indirect decrease in profitability, because lenders, faced with the prospect of lowered revenues, would provide financing to the Tribe on less attractive terms. Id. ¶ 15. This final prediction, however, does not appear to have been incorporated into Eadington’s analysis. The court concludes, for purposes of this motion, that both declarations are admissible expert testimony. The parties nonetheless are not barred from challenging these expert opinions in future proceedings. 54 1 relationship between revenue and profit is largely under the 2 Tribe’s control, it is not clear that this is the proper approach. 3 Even if the court were to adopt this approach, however, the dispute 4 would remain. 5 nor revenue sharing, the Tribe will receive between $212,000 and 6 $826,000 in annual profit over the first five years of operation, 7 but that with both, the Tribe’s effective annual profit will range 8 from $198,000 to $402,000 over the same period. 9 2, 22, 29 The Tribe estimates that with neither exclusivity (scenarios 2 and 5). While the Robinson Decl. at State does not 10 specifically estimate exclusivity’s effect on profit, a trier of 11 fact could find that for any reasonable relationship between 12 revenue and profit, and 80% decrease in revenue would also provide 13 a greater than 10 to 25% decrease in profit. 14 Accordingly, there is a dispute as to whether exclusivity is 15 a meaningful concession. Neither party is entitled to summary 16 judgment on the issue of whether the State has sought to impose a 17 tax or whether any demand for a tax was itself bad faith. 18 C. Other Evidence of Good and Bad Faith 19 Each party argues that it is entitled to summary judgment even 20 if a question remains as to whether exclusivity is a meaningful 21 concession. 22 adopted a “take it or leave it” attitude in negotiations. 23 State argues that because the disputed provisions were initially 24 proposed by the Tribe, the State’s continued requests for these 25 provisions is not bad faith. 26 turn, rejecting both. The Tribe argues that the State has impermissibly The The court addresses each argument in 55 1 The Tribe cites Seattle-First Nat’l Bank v. NLRB, 638 F.2d 2 1221 (9th Cir. 1981), a case interpreting the NLRA, for the 3 proposition that a “take it or leave it” attitude is evidence of 4 bad 5 maintain an attitude of ‘take it or leave it.’” 6 (citing NLRB v. Ins. Agents’ Int’l Union, 361 U.S. 477, 485 7 (1960)). 8 court’s 9 negotiates faith. Seattle-First Nat’l stated that a party “cannot Id. at 1227 n.9 This statement, however, was made in the context of the discussion in bad of “surface faith by bargaining,” “going through wherein the a party motions of 10 negotiating, without any real intent to reach an agreement.” 11 (quoting K-Mart Corp. v. NLRB, 626 F.2d 704, 706 (9th Cir. 1980)) 12 (emphasis added, internal quotation marks removed). 13 it or leave it” attitude may be evidence of surface bargaining, and 14 therefore of bad faith, the NLRA caselaw explicitly permits a party 15 to bargain to the point of impasse with respect to mandatory 16 subjects. 17 therefore does not itself demonstrate bad faith. 18 Nugget, Inc. v. NLRB, 968 F.2d 991, 995 (9th Cir. 1992) (“The 19 failure 20 management total control of wages, seniority, and work rules, and 21 the unwillingness to schedule long or frequent meetings, support 22 the inference of bad faith and surface bargaining.”). 23 context, Coyote Valley II found that the state’s insistence on 24 revenue sharing and RSTF provisions consistent with good faith. 25 26 In to Borg-Warner, 356 U.S. at 350. compromise, this case, the the proposal evidence of Id. While a “take Insistence on a position a C.f. Sparks contract demonstrates that that gave In the IGRA the state insisted upon revenue sharing of at least 10 percent, in that every 56 1 offer made by the State included at least this level of revenue 2 sharing, and nothing indicates that the State would have accepted 3 a lesser degree of revenue sharing. The evidence would also enable 4 a trier of fact to conclude that the State insisted on forfeiture 5 of RSTF payments, in that each offer made by the State involved 6 eventual surrender of these payments. 7 could conversely find that the State would have ultimately been 8 willing to abandon this second request, in light of the State’s 9 willingness to negotiate delayed elimination of these payments and 10 the fact that the State has allowed other tribes to retain RSTF 11 payments. However, a trier of fact 12 Here, the insistence on revenue sharing is insufficient to 13 determine, on summary judgment, that the State engaged in surface 14 bargaining and therefore acted in bad faith. 15 Nugget, the State has demonstrated some willingness to compromise 16 with 17 notwithstanding the fact that all proposals involve revenue sharing 18 of at least ten percent. 19 the state offered a meaningful concession, and thus whether the 20 offer was reasonable. 21 procedural failure of negotiation, such as inadequate meeting 22 times. 23 insistence here differs from the insistence in Coyote Valley II, 24 such that it demonstrates surface bargaining. regard to the precise level of Unlike in Sparks revenue sharing, A material question remains as to whether The Tribe has provided no evidence of a Accordingly, the court cannot conclude that the State’s 25 As to the State’s remaining argument, the State argues that 26 revenue sharing was initially proposed by the Tribe, in that the 57 1 Tribe’s initial proposal included a preamble stating that revenue 2 sharing was appropriate. However, this “initial proposal” was made 3 in the light of the State’s pervasive policy of extracting revenue 4 sharing from Tribes since adoption of the 1999 compacts. Moreover, 5 the quantity of revenue sharing was proposed by the State, not the 6 Tribe. 7 sharing prior to the commencement of negotiations and where the 8 State has uniformly sought at least ten percent revenue sharing 9 notwithstanding repeated, albeit inconstant, objections by the 10 Tribe, the State cannot attribute the proposal for revenue sharing 11 to the Tribe. Where the State had established its desire for revenue IV. CONCLUSION 12 13 For the reasons stated above, both parties’ motions for 14 summary judgment (Doc. Nos. 53 and 54) are DENIED. 15 grants summary adjudication as to the following issues: 16 * The State’s 2710(d)(3)(C) proposal comport with 25 The court U.S.C. section 17 * Forfeiture of the right to receive RSTF payments is not a tax, fee, charge, or assessment. 18 19 * The offer of permission to conduct Class III gaming is not a “concession.” 20 21 * The offer of exclusivity is a concession. 22 A material question 23 exclusivity is meaningful. 24 of this issue. 25 IT IS SO ORDERED. 26 DATED: exists as to whether the concession of The matter will proceed for resolution December 23, 2009. 58

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