Indian Gaming Today

Wednesday, May 28, 2008

NIGC Reports Successful Government-to-Government Consultations—However One Defines “Success”

During last week's Great Plains/Midwest Indian Gaming Conference and Trade Show at the Shakopee Mdewakanton Sioux Community's Mystic Lake Casino Hotel near Minneapolis-St. Paul, the National Indian Gaming Commission conducted government-to-government consultations with tribal leaders from the region. According to NIGC Chair Phil Hogen, the consultations allowed "ample time" for tribal delegations to discuss "anything on their minds."

The NIGC has drawn criticism for its tribal consultation practices, with some tribal leaders complaining that the consultation is pro forma -- that is, that the Commission conducts consultation sessions, but tribal input has little if any effect on the NIGC's actions. Recently, criticism directed at the NIGC was the subject of an April 17th U.S. Senate Indian Affairs Committee oversight hearing at which we testified.

Can the NIGC ever overcome criticism of its actions? Like any regulated industry, Indian gaming has numerous stakeholders, and we all know the old saying about pleasing everybody, all the time….

Read more about the Conference and Trade Show here.

Read our testimony at the April 17th Senate Indian Affairs Committee Hearing here.

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Tuesday, May 20, 2008

Wow – California Negotiated in Bad Faith?

As we discussed in our last post, a federal district court has held that California's revenue sharing demands in its negotiations with the Rincon Band of Luiseno Mission Indians amounted to an illegal tax, and therefore were evidence of the state's bad faith. What was the Band hoping to do – and what are the implications of this holding?

The Band sought to add 900 slot machines at its Harrah's Rincon Casino & Resort. In return, the state sought annual payments of 15% of the average net win for each of the new machines, as well as 10% of the net win on the existing machines. According to numbers crunched by Prof. Bill Eadington, who served as an expert witness for California, this would mean that the state would receive nearly $38M, while the Band's new profits from the deal, after making the required revenue sharing payments to the state, would be less than $2M. (The tribe’s income with or without the new machines would hover around $60 million.) The concessions offered by the state were "an agreement to reduce its fee payment in the future should gaming one day be opened up to non-tribal gaming establishments (a scenario the Court finds speculative and unlikely . . .), 900 more machines and five additional years to operate under its Compact." The court concluded that "[i]t is difficult to regard the State's proposed plan as anything more than a tax." And, the court expressly found that California negotiated in bad faith: "[T]he Court finds that the State's insistence on the payment of such a large fee to its general fund in return for concessions of markedly lesser value was in bad faith . . . ."

We believe this may be the first time a federal court has found that a state has negotiated in bad faith. In an early "scope of gaming" case, Mashantucket Pequot Tribe v. Connecticut, the Second Circuit avoided finding that the state had negotiated in bad faith, noting that the state's refusal to negotiate, whether or not in bad faith, could trigger IGRA's mediated negotiation process. The district court in Lac du Flambeau Band v. Wisconsin similarly avoided a finding of bad faith on the part of the state. Are we right? Let us know what you think!

Read more in Onell Soto's story in the San Diego Union-Tribune by clicking

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Monday, May 05, 2008

Court Finds that California Negotiated in Bad Faith

In the “so significant it merits a two-part post” file….

A federal district court has held that California's revenue sharing demands in its negotiations with the Rincon Band of Luiseno Mission Indians amounted to an illegal tax, and therefore were evidence of the state's bad faith.

IGRA specifically prohibits states from using tribal-state compacts to tax tribes or to charge tribes a fee to conduct Class III gaming. IGRA also provides that state demands for taxes or fees are evidence of bad faith in compact negotiations. The Interior Secretary has adopted a practice of approving revenue sharing provisions if the state gives up meaningful concessions in exchange for the tribe's revenue sharing payments. Typically, the state concessions are some form of exclusivity -- a promise not to legalize gambling, or to allow tribes to operate games others may not, such as slot machines.

Due to the U.S. Supreme Court's 1996 decision in Seminole Tribe holding that tribes could not sue states under IGRA without state consent, the federal courts rarely examine whether state demands during compact negotiations violate IGRA. In California, however, the state has consented to suit. In 2003, the Ninth Circuit decided one of the very few cases examining state demands for revenue sharing. In that case, In re Indian Gaming Related Cases, which concerned the revenue sharing provisions in the compacts negotiated under Gov. Gray Davis, the Ninth Circuit adopted the Interior Secretary's general approach. The court upheld the revenue sharing provisions in light of the meaningful concessions on the part of the state as well as the provisions' consistency with IGRA's goals.

In Rincon Band v. Schwarzenegger (S.D. Cal. Apr. 29, 2008), the district court applied In re Indian Gaming Related Cases to hold that California was negotiating in bad faith with the Rincon Band over an amended compact. In our next post, we’ll take a look at what the Band sought to do, and how the court held what it did.

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