Federal Court Limits Tribe’s, Secretary’s Options When States Balk at Gaming Compact

by Sheppard Mullin Richter & Hampton LLP

A federal district court in New Mexico has issued a decision finding that the U.S.  Department of the Interior’s regulations permitting the Secretary of the Interior to adopt Class III gaming procedures for a tribe lacking a Tribal-State Compact are invalid and violate the Indian Gaming Regulatory Act, 25 U.S.C. §§ 2701 et. seq. (“IGRA”).  If upheld, the decision in New Mexico v. Dept. of Interior could be expected to shift the balance of power to the states in the negotiation of new compacts and renewed compacts.  The decision also may result in pressure on the Department of the Interior to exercise its role as trustee for tribes and sue states that fail to negotiate compacts in good faith.

The court issued the decision in New Mexico v. Department of the Interior on Friday.[1]  The Pueblo of Pojoaque (“Pueblo”) is an intervenor-defendant in the case.  The legal dispute concerns IGRA’s so-called remedial provisions, which require tribes to negotiate Tribal-State Compacts in order to operate Class III gaming.  If a state does not negotiate in good faith, a tribe may sue the state in federal district court to obtain a finding that the state acted in bad faith.[2]  If a state is found to have acted in bad faith, the court may order the tribe and the state to enter into a Tribal-State Compact within 60 days.[3]  If the tribe and the state have still not entered into an agreement, the court can order mediation, with the mediator selecting a proposed agreement.[4]  The state may then accept or reject the mediator’s selected agreement.[5]  If the state rejects the agreement, the Secretary may adopt gaming procedures that permit the tribe to operate Class III gaming.[6]

A dispute arose when the State of New Mexico (“State”) asserted its Eleventh Amendment immunity to defend a suit the Pueblo brought alleging the State’s failure to negotiate a renewed Tribal-State Compact in good faith.[7]  Following dismissal of its suit on March 3, 2014, the Pueblo petitioned the Secretary of the Interior (“Secretary”) to determine it was eligible to conduct gaming under the Department of the Interior’s gaming procedure regulations at 25 C.F.R. Part 291.[8] The Secretary found the Pueblo eligible for gaming procedures on June 17, 2014, and solicited comments from the State.[9]  The State submitted comments under protest and filed suit against the Department of the Interior and the Secretary on August 7, 2014, alleging the gaming procedure regulations of 25 C.F.R. Part 291 are invalid because they conflict with the unambiguous terms of IGRA.[10]

In its suit, the State alleged that the Department of the Interior’s regulations exceed the authority Congress granted the agency in IGRA.[11]  The State argued that while IGRA authorized the Secretary to adopt Class III gaming procedures for a tribe, that action could only be taken after a federal court found that the state failed to negotiate in good faith.[12]   The State argued that “[i]n the absence of such a finding, the action terminates and the Act provides no other recourse.”[13]

Interior argued that it had authority to adopt gaming procedures for a tribe to fill a “gap” in the law created by Seminole Tribe of Florida v. Florida, 517 U.S. 44 (1996) (“Seminole Tribe”).[14]  In the Seminole Tribe case, the U.S. Supreme Court held that Congress did not have the power to abrogate the sovereign immunity of nonconsenting states and require such states to submit to suit by tribes seeking to enforce IGRA’s remedial provisions.[15]

The U.S. District Court for the District of New Mexico, however, found that notwithstanding the issues caused by Seminole Tribe, IGRA was not ambiguous and clearly requires a district court to find bad faith and order mediation before the Secretary could adopt gaming procedures for a tribe:

[T]he issue in this case is whether and when IGRA itself allows the Secretary to adopt such regulations.  On this count, IGRA is unambiguous:  the Secretary may only adopt procedures after a federal court finds the State has failed to negotiate in good faith and ordered mediation between the parties.  Congress’s failure to anticipate States’ ability to sabotage IGRA’s remedial process does not make Congress’s delegation of authority to adopt procedures any broader:  IGRA remains clear that this authority only arises after a federal court finds bad faith and the State passes up its remaining chances to negotiate a compact after such a finding.  25 U.S.C. 2710(d)(7)(B)(iii).[16]

The court acknowledged that its interpretation of IGRA did not benefit the Pueblo, which could not sue the State to obtain a ruling that the State acted in bad faith.  But the court also noted that “it appears nothing prevents the United States from doing so as the Pueblo’s trustee.”[17]  The Pueblo’s governor has stated in news reports that the Pueblo was considering taking an appeal. The Pueblo’s compact expires in June 2015.

The decision is likely to be closely watched by tribes and states both inside and outside of New Mexico entering negotiations for new compacts or for the renewal of expiring compacts.  If upheld and if adopted by other courts, the decision in New Mexico v. Dept. of Interior would shift the balance of power in Tribal-State Compact negotiations – both new compacts and renewals – to the states unless the Department of the Interior decides to act on the court’s suggestion that it sue states for bad faith negotiations.  Consequently, the Department of Interior may come under pressure from tribes that want the United States to sue states on their behalf for failure to negotiate compacts in good faith or that want a legislative “fix” permitting the Secretary to adopt gaming procedures after a state exercises its Eleventh Amendment immunity.

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Sheppard Mullin Richter & Hampton LLP

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