Forest Cnty. Potawatomi Cmty. v. United States
Forest Cnty. Potawatomi Cmty. v. United States
Opinion of the Court
Plaintiff Forest County Potawatomi Community has brought this action under the Administrative Procedure Act ("APA") against Defendants United States of America, United States Department of the Interior, the Secretary of the Interior, and the Assistant Secretary of Indian Affairs (collectively, the "Federal Defendants"), challenging the Assistant Secretary's decision to disapprove a 2014 amendment to a gaming compact between Plaintiff and the State of Wisconsin under the Indian Gaming Regulatory Act.
Now before the Court is Plaintiff's [79] Motion for Summary Judgment, Federal Defendants' [81] Cross-Motion for Summary Judgment, and Defendant-Intervenors' [82] Cross-Motion for Summary Judgment. Upon consideration of the pleadings,
The Court finds that the Assistant Secretary's disapproval of Plaintiff's 2014 compact amendment was not arbitrary or *275capricious. Evidence in the administrative record supports the Assistant Secretary's determination that the 2014 compact amendment was inconsistent with IGRA. Because there is evidence to support a finding that the amendment was inconsistent with IGRA, it was not arbitrary or capricious for the Assistant Secretary to disapprove the amendment.
I. BACKGROUND
A. Statutory and Regulatory Background
Congress passed IGRA in 1988 in order "to provide a statutory basis for the operation of gaming by Indian tribes as a means of promoting tribal economic development, self-sufficiency, and strong tribal governments."
For an Indian tribe to engage in Class III gaming, the tribe must have a tribal-state gaming compact. See
All Class III gaming compacts must be submitted to the Secretary of the Department of the Interior for approval. See
Once a gaming compact is submitted for approval, the Assistant Secretary has three options. The Assistant Secretary may: (1) approve the compact, (2) disapprove the compact, or (3) take no action for 45 days, which results in the compact being deemed approved only to the extent it is consistent with IGRA.
B. Factual Background
Plaintiff is an Indian tribe occupying Southeastern Wisconsin. FCPCAR000005. Prior to the passage of IGRA, Plaintiff submitted an application to the United States to acquire in trust for the benefit of the tribe two parcels of land located in the city of Milwaukee, "Concordia College Land" and "Menomonee Valley Land."
These lands were acquired in trust for Plaintiff in 1990 under the Indian Reorganization Act. And Plaintiff's application to conduct gaming on these lands was approved under IGRA.
In 1992, Plaintiff and the state entered into a gaming compact to regulate the conduct of Class III gaming.
In 1998, various amendments to the 1992 compact were required.
Plaintiff and the state again amended the original 1992 compact in 2003.
In consideration for the lump-sum payments and the increased annual payments, Plaintiff and the state negotiated a 50-mile "no-fly zone" around Milwaukee. FCPCAR000008. Under the "no-fly zone" agreement, if the state permitted Class III gaming within 50-miles of Plaintiff's casino, then Plaintiff would be relieved of its obligation to make additional payments and the state would refund some of Plaintiff's past payments.
Upon the submitting the 2003 compact amendment to the Secretary, the Secretary informed Plaintiff and the state that he would not approve the amendment if the "no-fly zone" provision was included.
For a year and a half, the parties attempted to negotiate a substitute provision for the "no-fly zone" and to resolve other ancillary issues. FCPCAR0000011. But, Plaintiff and the state were unable to reach a complete agreement.
While Plaintiff was renegotiating and amending its compact with the state, the Menominee tribe was attempting to develop an off-reservation casino for Class III gaming. In 2000, the Secretary approved Menominee's request to operate Class III gaming on an off-reservation land parcel in Kenosha, subject to the land being acquired in trust for gaming purposes. FCPCAR000685. The land parcel in Kenosha is located 33 miles away from Plaintiff's casino. FCPCAR001462. In 2004, Menominee filed an application asking the *277Secretary to take the Kenosha land into trust for gaming purposes. FCPCAR000685. In August 2013, the Assistant Secretary approved Menominee's application to take the Kenosha land into trust for gaming purposes. FCPCAR000014. Following the Assistant Secretary's determination, the Governor of Wisconsin had one year to concur. The Assistant Secretary granted the Governor a six-month extension, giving the Governor until February 19, 2015 to decide whether to concur.
Against this backdrop, in June 2014 the state invoked the arbitration agreement from the 2005 compact amendment with Plaintiff. The arbitration process was meant to establish compact terms pursuant to which Plaintiff would be compensated for lost revenue due to the opening of a new Class III gaming facility within 30 to 50 miles of its casino.
The 2014 compact amendment set out the obligations of the state and Plaintiff in the event that the Assistant Secretary approved a Class III gaming facility between 30 and 50 miles away from Plaintiff's casino. FCPCAR000029. In that event, the compact requires an annual Mitigation Payment to the Plaintiff equal to the annual revenue lost.
While the state is ultimately "responsible for ensuring that the Mitigation Payments are paid in a timely manner and in full," the 2014 compact amendment "anticipate[s] that the State will enter into agreements under which the Applicant will agree to pay the Mitigation Payment." FCPCAR000031. The only named Applicant Facility is Menominee's proposed gaming facility. FCPCAR000029.
Alternatively, the amendment provides a payment plan whereby the Plaintiff "shall negotiate in good faith to reach an agreement on reasonable terms proposed by the State which would obligate the Applicant or other third party to make some or all of the Mitigation Payments." FCPC000032. The amendment suggests these payments could be made from the "Lock Box established in the Menominee Compact."
On December 30, 2014, Plaintiff provided the Assistant Secretary with the 2014 compact amendment and detailed arguments for approving it. FCPCAR000001-25. But on January 9, 2015, the Assistant Secretary disapproved the 2014 compact amendment, finding it invalid under IGRA. FCPCAR001459-67.
In disapproving the amendment, the Assistant Secretary concluded that the amendment violated IGRA because it "includes provisions involving subjects that exceed the permissible scope of a Class III gaming compact." FCPCAR001464. The Assistant Secretary provided two primary reasons why the amendment exceeded the permissible scope of a Class III gaming compact. First, the Assistant Secretary determined that, rather than the state, "in fact, Menominee would be responsible for making all of the Mitigation Payments."
On January 21, 2015, Plaintiff filed this lawsuit challenging the Assistant Secretary's disapproval of the 2014 compact amendment.
II. LEGAL STANDARD
Under Rule 56(a) of the Federal Rules of Civil Procedure, "[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." However, "when a party seeks review of agency action under the APA [before a district court], the district judge sits as an appellate tribunal. The 'entire case' on review is a question of law." Am. Bioscience, Inc. v. Thompson,
The APA "sets forth the full extent of judicial authority to review executive agency action for procedural correctness." FCC v. Fox Television Stations, Inc.,
III. DISCUSSION
After considering the arguments of all the parties and reviewing the administrative record, the Court concludes that the Assistant Secretary's disapproval of Plaintiff's 2014 compact amendment was not arbitrary or capricious. The Assistant Secretary determined that the amendment violated IGRA in two ways. First, the Assistant Secretary determined that the amendment violated IGRA by making one tribe liable for another's revenue losses. Second, the Assistant Secretary determined that the amendment violated IGRA by requiring mitigation payments for Class II gaming and ancillary businesses. Neither of these determinations were arbitrary or capricious.
A. Chevron Deference
The Assistant Secretary determined that the 2014 compact amendment violated IGRA because the amendment concerned subjects impermissible under tribal-state compacts. Plaintiff contends that the subject of the compact was permissible because it fell under IGRA's tribal-state compact "catchall provision" which *279allows compacts concerning "any other subjects that are directly related to the operation of gaming activities."
When deciding whether to apply Chevron deference, initially, the Court must ask whether "Congress has directly spoken to the precise question at issue;" and if so, "the court as well as the agency, must give effect to the unambiguously expressed intent of Congress." Chevron,
The Court finds that Congress has not spoken to what makes the subject of a tribal-state compact "directly related to the operation of gaming activities."
Instead, the Court agrees with Defendant Intervenors and finds the catchall provision to be ambiguous. Based on the text of IGRA, it is unclear how attenuated the relationship between the subject of the compact and the operation of gaming activities may be while remaining direct. Additionally, it appears that the Assistant Secretary treated the catchall provision as though it was ambiguous. In reaching his decision, the Assistant Secretary construed the provision in light of the purposes of IGRA, used legislative history, and conducted a case-by-case approach. FCPCAR001463-67; see Braintree Elec. Light Dep't v. FERC ,
Because the statute is ambiguous, the Court must next determine whether the agency's interpretation of the catchall provision is based on a permissible construction of the statute. Chevron, U.S.A., Inc. v. Natural Resources Defense Council ,
First, the Court concludes that the Indian law canon does not apply under these circumstances. The Indian law canon does not apply simply because the statute in question involves Indian law or Indian tribes. See Stand Up for California! v. Dep't of Int. ,
Here, the general trust relationship between the United States government and Indian tribes is not implicated. Applying the Indian law canon would not benefit an Indian tribe vis-à-vis the federal government. Instead, as will be discussed further below, applying the Indian law canon as Plaintiff suggests would benefit Plaintiff at the expense of another tribe, Menominee. See infra III.B.1. The Court declines to apply the Indian law canon where the interests of all tribes are not aligned. See Confederated Tribes of Grand Ronde Cmty. of Oregon v. Jewell ,
Moreover, applying the Indian law canon to broaden the permissible subjects for tribal-state compacts is not in the best interest of tribes generally. IGRA limits the subjects that are permissible in tribal-state gaming compacts. See
Second, the Court disagrees with Plaintiff's argument that the Assistant Secretary's construction of IGRA should not receive Chevron deference because compact decisions do not have precedential effect and are not binding on third parties. Plaintiff cites Fogo De Chao as support for the proposition that Chevron deference should not apply to the Assistant Secretary's construction.
Here, the relevant question is whether " 'it appears that Congress delegated authority to the agency generally to make rules carrying the force of law, and [whether] the agency interpretation claiming deference was promulgated in the exercise of that authority.' " Gonzales v. Oregon ,
To determine whether Chevron deference is warranted, the D.C. Circuit applies the factors identified in Barnhart v. Walton ,
The Assistant Secretary's interpretation of IGRA's tribal-state compact provision is due deference because it is a key part of a comprehensive and detailed regulatory scheme. See Citizens Exposing Truth about Casinos v. Kempthorne ,
In support of its argument that Chevron deference should not apply to the Assistant Secretary's construction of compact provisions under IGRA, Plaintiff relies on two out-of-circuit California district court decisions.
In Chemehuevi Indian Tribe v. Brown ,
And in Fort Independence Indian Community v. California ,
The case before the Court is readily distinguishable. Here, an Indian tribe is suing the Assistant Secretary for disapproving a compact. In disapproving the compact, the Assistant Secretary considered the parties arguments, arguments from other interested parties, past decision, and "did not reach this decision without a good deal of thought." FCPCAR001460. On the other hand, Fort Independence Indian Community involved the approval of a compact under what the court considered to be a relatively informal process. Additionally, in Fort Independence Indian Community , the court was not "aware of any explicit interpretation of [the catchall provision] as it specifically applies to revenue sharing."
Insofar as Plaintiff relies on Fort Independence Indian Community for the proposition that the Assistant Secretary's decision on compacts "appear[s] not to have a precedential effect that binds third parties," that issue was not briefed by the parties in Fort Independence Indian Community .
Considering the parties' arguments on both sides, the Court concludes that, if it is reasonable, the Assistant Secretary' interpretation of IGRA's catchall provision for tribal-state compacts is entitled to Chevron deference.
B. Directly Related to the Operation of Gaming
The Assistant Secretary disapproved the 2014 compact amendment because it was contrary to IGRA for it was not directly related to the operation of gaming activities. He provided two primary *283reasons for why the amendment was not directly related to the operation of gaming activities. First, he found that the amendment "shift[ed] the burden of loss revenues from existing gaming operations to another tribe without the consent of the other tribe." FCPCAR001464. Second, he found that the amendment included mitigation payments for revenue from Class II gaming and other ancillary activities. Granting the Assistant Secretary's interpretation of the catchall provision Chevron deference, his determination that the 2014 compact amendment is not directly related to the operation of gaming activities is not arbitrary or capricious.
1. Imposing Risk of Loss on Another Tribe
It was not arbitrary or capricious for the Assistant Secretary to conclude that the 2014 compact amendment was contrary to IGRA because the compact called for "Mitigation Payments that guarantee[d] [Plaintiff's] profits by another tribe." FCPCAR001465.
As an initial matter, the Court grants Chevron deference to the Assistant Secretary's determination that the IGRA's catchall provision does not encompass a compact under which one tribe guarantees another's gaming revenue. This interpretation is reasonable and consistent with IGRA's purposes. See Chemical Mfrs. Ass'n v. EPA,
The Assistant Secretary's interpretation is reasonable because a compact which imposes mitigation payments on another tribe does not fall within the plain language of the catchall provision. The catchall provision requires that the subject of compacts be "directly related" to the "operation of gaming."
Moreover, such an amendment conflicts with the purposes of IGRA. Congress passed IGRA to ensure that the operation of gaming by Indian tribes would lead to economic development, self-sufficiency, and strong tribal governments. See Michigan v. Bay Mills Indian Community ,
Granting the Assistant Secretary's reasonable interpretation of the catchall provision Chevron deference, tribal-state compacts which make one tribe responsible for another's lost revenues are not directly related to gaming operations, so they are not permissible compacts. Furthermore, the Assistant Secretary's determination that the 2014 compact amendment was such a compact is not arbitrary or capricious. The Assistant Secretary considered the text of the amendment and supporting documents to conclude that, under the amendment, Menominee is responsible for making mitigation payments intended to insulate Plaintiff's revenues from increased competition.
Plaintiff argues that the Assistant Secretary's disapproval was arbitrary and capricious because the plain text of the amendment states that the "State is responsible for ensuring that the Mitigation Payments are paid in a timely manner and in full." FCPCAR000032. Despite this language, the Assistant Secretary found that "in fact ... Menominee would be responsible for making all of the Mitigation Payments." FCPCAR001464. There is evidence in the administrative record that permitted the Assistant Secretary to conclude that Menominee would make the mitigation payments. See Fuller v. Winter ,
The plain text of the amendment supports the Assistant Secretary's determination that the amendment would result in Menominee making the mitigation payments to Plaintiff. The amendment "anticipate[s] that the State will enter into agreements under which the Applicant will agree to pay the Mitigation payments." FCPCAR000032. The only named Applicant is Menominee. FCPCAR000029. The amendment also sets forth a "State Alternative Mitigation Payment Mechanism" under which Plaintiff "shall negotiate in good faith to reach an agreement on reasonable terms proposed by the State which would obligate the Applicant or other third party to make some or all of the Mitigation Payments." FCPCAR000032. The amendment contemplates that these alternative mechanisms could include payments made from the "Lock Box established in the Menominee Compact."
*285The supporting documents in the administrative record also buttress the Assistant Secretary's determination that the amendment would result in Menominee making the mitigation payments. The Assistant Secretary reviewed statements by Governor of Wisconsin Scott Walker explaining that the State would only "compensate the [Plaintiff] for losses that are not covered by the Menominee." FCPCAR001411. This statement indicates that the Governor believed Menominee would make at least some of the mitigation payments.
Similarly, the Assistant Secretary considered a letter from members of Congress supporting the amendment. According to the letter, the State and Plaintiff "anticipate entering into agreements under which the Menominee will agree to make annual payments to [Plaintiff] to mitigate lost revenue." FCPCAR001642. The members explained it was their "hope that, pursuant to this Amendment, any required Mitigation Payments will in fact be fully covered by the Menominee and that Wisconsin taxpayers will not be required to cover any of these costs."
The Assistant Secretary also credited submissions by Menominee contending that the tribe would be required to make mitigation payments to Plaintiff in order to get approval from the Governor to open a new gaming facility. The submission by Menominee notes that the amendment "assumes that the Menominee Tribe will pay for any [of Plaintiff's gaming] facility revenue losses allegedly caused by [Menominee's proposed] gaming facility." FCPCAR000389. And letters from representatives of Menominee to the Assistant Secretary contend that the amendment is designed to make it difficult for the Governor to approve Menominee's proposed gaming facility by tying his approval to Menominee's agreeing to make the mitigation payments. FCPCAR001160. Menominee's submissions further support the Assistant Secretary's finding that approval of the 2014 compact amendment would result in Menominee making the mitigation payments.
Finally, the Assistant Secretary's determination is supported by the context in which the amendment was submitted. Since at least 2000, Menominee had been attempting to develop a casino on land approximately 33 miles from Plaintiff's casino. FCPCAR000685 and FCPCAR001462. And in 2003, Plaintiff began trying to amend its tribal-state compact to protect itself from competition from other Indian casinos between 30 and 50 miles away. FCPCAR000008. Finally, in 2013, the Assistant Secretary approved Menominee's application to take the land into trust for gaming purposes. FCPCAR000014. Soon thereafter, Plaintiff and the state began the arbitration process that resulting in the 2014 compact amendment. It is against the backdrop of Plaintiff's continued efforts to protect itself from competition that the 2014 compact amendment was submitted. See FCPCAR001459 ("In two of [Plaintiff's tribal-state compact] amendments, [Plaintiff] sought to protect themselves from the risk that another tribe would follow the same path as [Plaintiff] and develop an off-reservation casino within the same general area.").
As was previously established, the Court grants deference to the Assistant Secretary's determination that the catchall provision does not reach compacts which require one tribe to compensate another tribe for its revenue losses due to competition. And, the plain language of the amendment, the supporting documents, and the context of the amendment all provide *286support for the Assistant Secretary's conclusion that Menominee would make the mitigation payments to Plaintiff. Based on the evidence before the Assistant Secretary in the administrative record, the Assistant Secretary's disapproval on this ground was not arbitrary or capricious. See United States Sugar Corporation v. Environmental Protection Agency ,
2. Inclusion of Class II gaming and ancillary businesses
In addition to concluding that the 2014 compact amendment concerned an impermissible subject because Menominee would guarantee Plaintiff's profits, the Assistant Secretary also concluded that the amendment concerned an impermissible subject because it covered activities beyond Class III gaming, namely Class II gaming and ancillary businesses. It was not arbitrary or capricious for the Assistant Secretary to conclude that the 2014 compact amendment was contrary to the IGRA because the compact requires that Plaintiff be compensated for lost revenue from "Class II gaming, food and beverage, hotel, and entertainment activities, which fall outside the permissible subjects of negotiation under IGRA." FCPCAR1466.
As an initial matter, the Court grants Chevron deference to the Assistant Secretary's determination that IGRA's catchall provision does not encompass a compact which provides mitigation payments for revenue lost from Class II gaming and other ancillary businesses. See Chemical Mfrs. Ass'n v. EPA,
Plaintiff argues that the inclusion of revenue from Class II gaming and ancillary businesses does not prevent a compact from being "directly related to the operation of gaming activities" under
But the Department of the Interior has consistently interpreted tribal-state compacts as encompassing only Class III gaming. FCPCAR001464 n.29 (quoting prior-Assistant Secretary Kevin Washburn as testifying before Congress that "Class II gaming is not an authorized subject of negotiation for Class III compacts"). This circuit has also treated § 2701(d) as dealing exclusively with Class III gaming. See Colo. R. Indian Tribes v. Nat'l Indian Gaming Comm'n ,
Given the regulatory background of Indian gaming, interpreting tribal-state compacts as regulating only Class III gaming is reasonable. A Senate committee report on IGRA explains that the bill "provides for a system of joint regulation by tribes and the Federal government of class II gaming on Indian lands and a system for compacts between tribes and States for regulation of class III gaming."
*287S. REP. NO. 100-446, at 1 (1988), reprinted in 1988 U.S.C.C.A.N. 3071, 3071. The report goes onto explain that IGRA created a bifurcated regulatory system for Class II and Class III gaming because "there is no adequate Federal regulatory system in place for class III gaming, nor do tribes have such systems for the regulation of class III gaming currently in place."
Despite the reasonableness of the Assistant Secretary's interpretation, Plaintiff argues that the Court should not grant the interpretation deference. Plaintiff argues that the Assistant Secretary's narrow interpretation is not consistent with the goals of IGRA because the inclusion of Class II gaming in the 2014 compact amendment only benefitted Plaintiff by increasing the amount of revenue that Plaintiff would be compensated for.
This argument fails for two reasons. First, Plaintiff conflates what is in its own interest with what is in the interest of tribes generally. It would not be in the interest of Menominee, or other Applicant tribes, to be expected to compensate Plaintiff for losses from non-Class III gaming activities. Second, making Class II gaming and ancillary businesses a permissible subject for compacting would allow states in future compacts to assert influence and regulatory control over non-Class III gaming activities. It is not in the interest of Indian tribes generally to increase the scope of the subjects over which states can regulate Indian tribes. See GasPlus, L.L.C. v. Dep't of Int. ,
Considering the arguments on both sides, the Court concludes that the Assistant Secretary's interpretation of the catchall provision is reasonable and entitled to Chevron deference. Therefore, tribal-state compacts which do not directly relate to the operation of Class III gaming are not permissible compacts. Furthermore, the Assistant Secretary's determination that the 2014 compact amendment did not directly relate to Class III gaming was not arbitrary or capricious.
If the Governor approved a gaming facility between 30 and 50 miles from Plaintiff's casino, the Amendment required mitigation payments based on the "Milwaukee Net Revenues." FCPCAR000030. These revenues were defined as "revenue from Class III gaming, Class II gaming, food and beverage, hotel and entertainment activity, earned at the Milwaukee Facility."
Plaintiff contends that, even if the amendment does concern Class II gaming and ancillary businesses, the amendment is still directly related to Class III gaming. Plaintiff cites Flandreau Santee Sioux Tribe v. Gerlach ,
*288gaming casino, the other amenities "would not exist in the sleepy but pleasant little town of Flandreau." Flandreau ,
Flandreau is distinguishable from the case before the Court. The small town of Flandreau is different from the urban city of Milwaukee. And Plaintiff has not shown that the ancillary activities included in the amendment would not exist without Plaintiff's casino. Moreover, Flandreau was a suit to enjoin state taxation of ancillary activities. The case did not concern whether mitigation payments for Class II gaming and ancillary businesses are a permissible subject for compacting. Finally, as the case involved state taxation, the Department of the Interior was not a party and is in no way bound by the court's decision in Flandreau .
Moreover, the Assistant Secretary's disapproval is not necessarily contrary to Flandreau . The Assistant Secretary did not conclude that Class II gaming and ancillary activities could never be a permissible subject for compacting under the catchall provision. See FCPCAR001465 n.32 (explaining that even if ancillary businesses are located near gaming facilitates "[i]t does not necessarily follow" that the ancillary businesses are directly related to gaming activity). Instead, he more narrowly determined that the 2014 compact amendment regulated activity not directly related to Class III gaming. The Assistant Secretary noted that Plaintiff's "new, $97 million, 360 room hotel, restaurant and conference complex are located beyond the exterior boundaries of [Plaintiffs'] trust lands at the Milwaukee casino." Given the Plaintiff's particular situation, mitigation payments for Class II gaming and ancillary businesses were not directly related to the operation of Class III gaming.
As the Court previously established, the Assistant Secretary's interpretation of the catchall provision as requiring that compacts be directly related to the operation of Class III gaming is entitled to deference. And, the plain language of the amendment supports the Assistant Secretary's determination that the amendment would require mitigation payments for revenue lost from Class II gaming and other ancillary businesses not directly related to Class III gaming. Based on the evidence before the Assistant Secretary in the administrative record, the Assistant Secretary's disapproval on this ground was not arbitrary or capricious. See United States Sugar Corporation v. Environmental Protection Agency ,
3. Benefit of the Bargain
Plaintiff argues that, in addition to being arbitrary and capricious, the Assistant Secretary's disapproval deprived Plaintiff of the benefit of its bargain with the state. As agreed in the 2003 and 2005 compact amendments, Plaintiff has paid the state $234.3 million in lump-sum payments and increased revenue-sharing payments. And Plaintiff continues to make these increased revenue-sharing payments each year. Pls.' Mot., 43, ECF Nos. 79-1. In exchange for these payments, the 2005 amendment provided that, if the state ended the tribe's exclusivity, Plaintiff would be compensated in the manner agreed upon in the last-best-offer arbitration process. Plaintiff argues that the disapproval of the 2014 amendment invalidated the primary economic benefit that Plaintiff had negotiated, exclusivity. This argument fails for two reasons.
First, Plaintiff has received benefits from its payments by being permitted to conduct gaming activities which are forbidden *289to non-Indians. Even after the "no fly zone" provision was withdrawn from the 2003 amendment Plaintiff "reassured [the Department of the Interior] that it will receive the benefit of its bargain." FCPCAR000325. Without a "no fly zone" provision preventing competition from other Indian tribes, this benefit was, at least partly, based on exclusivity vis-à-vis non-Indian gaming. Moreover, if the lump-sum payments and the increased revenue-sharing payments were made solely in return for tribal gaming exclusivity, it is unclear why Plaintiff did not negotiate with the state for a reduction or a return of those payments in the event that the Assistant Secretary disapproved the result of the arbitration process, as he had disapproved Plaintiff's previous exclusivity provision. FCPCAR000008.
Second, even if we assume that the Assistant Secretary's disapproval would deny Plaintiff the benefit of its bargain, that fact is not relevant to the Assistant Secretary's analysis or to the Court's analysis. In considering whether to approve a compact, the Assistant Secretary considers only whether the compact violates IGRA, another federal law, or the United States' trust obligations to Indians.
C. Distinguishing other Compact Decisions
In addition to questioning the reasoning behind the Assistant Secretary's disapproval, Plaintiff also criticizes the Assistant Secretary for failing to adequately distinguish past decisions either approving or deeming approved other compacts. Plaintiff argues that the Assistant Secretary's disapproval of the 2014 compact amendment was arbitrary and capricious because the Assistant Secretary provided no reasons for disapproving this amendment when other, similar compacts had been approved or deemed approved in the past.
When an agency declines to follow past decisions, the agency must explain the change in policy. See Hall v. McLaughlin ,
The Assistant Secretary addressed compacts which were cited by Plaintiff and made reasonable factual distinctions between those compacts and the 2014 compact amendment. The Assistant Secretary made an overarching distinction between Plaintiff's amendment and all other approved or deemed approved compacts, explaining that "none of the examples involve a revenue guarantee for a tribe that is operating gaming on so-called 'off-reservation' lands acquired by the Secretary in trust under a two part determination" and "none of the compact provisions define revenue *290to include Class II gaming, food and beverage, hotel, and entertainment activities, which fall outside the permissible subjects of negotiation under the IGRA." FCPCAR001466. The Assistant Secretary also specifically distinguished some of the other approved or deemed approved compacts.
Plaintiff argues that five Wisconsin compacts which were previously approved or deemed approved by the Assistant Secretary are materially indistinguishable from the 2014 compact amendment. But, considering the five Wisconsin compacts, the Assistant Secretary explained that "compact amendments between other tribes and the State of Wisconsin do not specifically call for anything approaching the Mitigation Payments that guarantee the Tribe's profits by another tribe. Nor do these other compact amendments include Class II gaming and other revenues." FCPCAR001465.
The Assistant Secretary's explanation distinguishing the 2014 compact amendment from other approved or deemed approved Wisconsin compacts was reasonable. Only one of the five Wisconsin compacts, the Lac Du Flambeau compact, was affirmatively approved. The Lac Du Flambeau compact is distinguishable from the 2014 compact amendment because, in the case of tribal gaming competition, it required the state to either indemnify the tribe for reductions in Class III gaming revenues or to arbitrate the event. BIA_003171. Importantly, the compact did not explicitly anticipate that the state would unload its payment obligation onto another tribe.
The remaining four Wisconsin compacts were only deemed approved to the extent that they are consistent was IGRA.
Plaintiff also relies on the Michigan compacts to support its argument that the Assistant Secretary has previously allowed compacts which include inter-tribal revenue-sharing provisions. The Michigan compacts contain provisions stating that no tribe will submit an application for a new off-reservation gaming facility unless it has first entered into a revenue-sharing agreement with other tribes in the state.
*291BIA_003265; BIA_003394. But, as the Assistant Secretary stated, the Michigan compacts are distinguishable because they "were based on a model agreement and all of the signatories consented to its provision."
Plaintiff also relies on the deemed-approved Seneca Nation compact. In deeming this compact approved, the then-Assistant Secretary found that the compact's exclusivity provision was consistent with IGRA because the tribe received geographic exclusivity in exchange for revenue-sharing payments. BIA_003182-84. Plaintiff argues that this compact demonstrates that exclusivity provisions are permissible subjects for gaming compacts. But, in disapproving the 2014 compact amendment, the Assistant Secretary never claimed that exclusivity provisions are contrary to IGRA. FCPCAR001465-66. And he did not disapprove the 2014 compact amendment because it contained an exclusivity provision. Instead, he disapproved the amendment because it, unlike the Seneca Nation compact, "ma[de] another tribe the guarantor of [Plaintiffs'] profits." FCPCAR001466. The importance of this distinguishing factor is underscored by the then-Assistant Secretary's decision on the Seneca Nation compact explaining that "I still find a provision excluding other Indian gaming anathema to basic notions of fairness in competition and, if pushed to its extreme by future compacts, inconsistent with the goals of IGRA." BIA-003183. Here, it was reasonable for the Assistant Secretary to find that the 2014 compact amendment pushed its exclusivity provision to the extreme.
The Assistant Secretary distinguished two other compacts relied on by Plaintiff. First, the Little Traverse Band of Odawa Indians compact relieved the tribe of its revenue-sharing payments in the case of competition rather than requiring mitigation payments from another tribe. FCPCAR001585-86. And the North Fork compact provided for a diversion of 2 percent of North Fork's revenue-sharing payments to another tribe. But this provision is not a profit guarantee and North Fork, the tribe required to make the payments, was a party to the agreement. FCPCAR001466. The 2014 compact amendment requires Menominee, a tribe which was not a party to the agreement, to guarantee Plaintiff's profits from Class III gaming, Class II gaming, and ancillary businesses.
Plaintiff also cites the Oklahoma tribe compacts which contain an exclusivity provision requiring the state to pay liquidated *292damages based on gross revenue to the tribe if the state authorizes a nontribal entity to operate additional gaming machines within 45 miles of a tribe's casino. Pls.' Reply and Opp'n, 25, ECF No. 86. But these compacts were not before the Assistant Secretary and are not part of the administrative record, so they cannot be considered. See Hill Dermaceuticals, Inc. v. FDA ,
Finally, in arguing that the 2014 compact amendment was not beyond the pale of other compacts approved or deemed approved by the Assistant Secretary, Plaintiff points to comments from the Office of Indian Gaming Management proposing that the 2003 compact amendment contain a provision under which the Governor agrees not to concur in the development of an off-reservation casino within 50-miles of Plaintiff's existing casino unless the other tribe entered into a binding indemnification agreement with Plaintiff. But Plaintiff's reliance on this language is misplaced for two reasons. First, this language was "for discussion purposes only" and was "not cleared by the Acting Assistant Secretary." FCPCAR000157. Second, after these comments were made, Plaintiff and the state agreed to remove the exclusivity provision in the pending 2003 amendment at the insistence of the Assistant Secretary so that the remaining amendment would be approved. FCPCAR000291.
Considering the arguments of all parties, the Court finds that the Assistant Secretary reasonably distinguished his disapproval of the 2014 compact amendment from decisions on other compacts. Because he sufficiently distinguished his disapproval from past decisions, the Assistant Secretary's disapproval was not arbitrary or capricious. See West Coast Media, Inc. v. FCC ,
IV. CONCLUSION
Based on the above analysis, the Federal Defendants and Defendant-Intervenors are entitled to summary judgment on all claims. Plaintiff is not entitled to its first claim for relief under the APA because the Assistant Secretary's disapproval of the 2014 compact amendment was not arbitrary or capricious.
For the foregoing reasons, the Court DENIES Plaintiff's [79] Motion for Summary Judgment, GRANTS Federal Defendants' [81] Cross-Motion for Summary Judgement, and GRANTS Defendant-Intervenors'
*293[82] Cross-Motion for Summary Judgment. An appropriate Order accompanies this Memorandum Opinion.
The Court's consideration has focused on the following documents:
• Pls.' Mot. for Summ. J. and Memo. of Points and Authorities in Support of Pls.' Mot. for Summ. J. ("Pls.' Mot."), ECF Nos. 79, 79-1;
• Fed. Defs.' Combined Response to Pls.' Mot. for Summ. J. and Cross-Mot. for Summ. J. ("Fed. Defs.' Res. and Cross-Mot."), ECF Nos. 81, 81-1;
• Def. Ints.' Statement of Points and Authorities in Opp'n to Pls.' Mot. for Summ. J. and in Support of Def. Ints.' Cross-Mot. for Summ. J. ("Def. Ints.' Opp'n and Cross-Mot."), ECF Nos. 82, 82-1;
• Pls.' Consolidated Reply in Support of its Mot. for Summ. J. and Response in Opp'n to the Defs.' and Def. Ints.' Cross-Mots. for Summ. J. ("Pls.' Reply and Opp'n"), ECF No. 86;
• Fed. Defs.' Reply in Support of Cross-Mot. for Summ. J. ("Fed. Defs.' Reply"), ECF No. 91; and
• Def. Ints.' Reply in Opp'n to Pls.' Mot. for Summ. J. and in Support of Def. Ints.' Cross-Mot. for Summ. J. ("Def. Ints.' Reply"), ECF No. 92.
In an exercise of its discretion, the Court finds that holding oral argument in this action would not be of assistance in rendering a decision. See LCvR 7(f).
On January 23, 2015, the Governor decided not to concur with the Assistant Secretary's approval of Menominee's proposed Class III gaming facility.
In its reply brief, Plaintiff briefly argues that the Assistant Secretary made conflicting statements on whether the mitigation payments would have a significant impact on Menominee. Pls.' Reply and Opp'n, 37, ECF No. 86. But the Assistant Secretary's statements that competition would have a modest impact on Plaintiff while mitigation payments would impose a significant burden on Menominee are not conflicting given that Menominee is one of the poorest tribes and would be a new market participant.
Plaintiff briefly argues that Menominee was involved in the negotiations for the 2014 compact amendment. Pls.' Reply and Opp'n, 4, ECF No. 86. But the amendment was selected during a closed arbitration process. And the only record evidence that Plaintiff cites for this proposition is an "e-update" from Wisconsin Governor Scott Walker claiming that the state "has also conducted extensive discussions and negotiations with the impacted tribal governments to work toward a win-win-win scenario." FCPCAR001130. This statement does not demonstrate that Menominee was involved in the negotiations concerning who would make mitigation payments to Plaintiff.
The Seneca Nation compact is also distinguishable because in that case the affected tribes were traditionally regarded as adverse to gaming and did not have pending applications for gaming facilities. BIA_003183-84. Here, Menominee had a pending application for an off-reservation gaming facility. FCPCAR000014.
Reference
- Full Case Name
- FOREST COUNTY POTAWATOMI COMMUNITY v. UNITED STATES, Menominee Indian Tribe of Wisconsin and Menominee Kenosha Gaming Authority, Defendant-Intervenors.
- Cited By
- 5 cases
- Status
- Published