Pauma Band of Luiseno Mission Indians of the Pauma & Yuima Reservation v. California, State of et al

Filing 49

ORDER granting Defendants State of California and Edmund G. Brown, Jr.'s ("State") 36 Cross-Motion for Summary Judgment; denying Plaintiff's 37 Motion for Summary Judgment. The Clerk shall enter a final judgment under FRCP 54(b) on Counts 1 through 20 of Plaintiff's Second Amended Complaint 27 in favor of the State and against Plaintiff. Signed by Judge Cynthia Bashant on 9/28/2018. (jah)

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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PAUMA BAND OF LUISENO
MISSION INDIANS OF THE
PAUMA & YUIMA
RESERVATION,

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ORDER:

Plaintiff,

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Case No. 16-cv-01713-BAS-JMA

v.
STATE OF CALIFORNIA, et al.,
Defendants.

(1) DENYING PLAINTIFF’S
MOTION FOR SUMMARY
JUDGMENT (ECF No. 37);
(2) GRANTING DEFENDANTS’
CROSS-MOTION FOR
SUMMARY JUDGMENT
(ECF No. 36); AND
(3) DIRECTING ENTRY OF
JUDGMENT UNDER RULE
54(b)

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OVERVIEW

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This action stems from an effort to negotiate a new tribal-state gaming

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compact under the Indian Gaming Regulatory Act. The Pauma Band of Luiseno

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Mission Indians of the Pauma & Yuima Reservation (“Pauma” or “Tribe”) seeks to

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offer new forms of gambling at its casino in Northern San Diego County. To make

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this possible, the Tribe entered into compact negotiations with the State of California

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and Governor Edmund G. Brown, Jr. (collectively, “State”) to expand its gaming
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rights. However, Pauma now claims the State has failed to negotiate with the Tribe

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in good faith. Pauma brings suit to trigger a remedial scheme that is designed to

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result in a new gaming compact.

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Presently before the Court are Pauma’s and the State’s cross-motions for

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summary judgment on the Tribe’s bad faith negotiation claims. (ECF Nos. 36, 37.)

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The parties have also submitted a joint record of their negotiations. (Joint Record of

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Negotiations (“JR”), ECF Nos. 32-1 to 32-4.) The Court held oral argument on the

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motions. (ECF No. 48.)

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There is no shortage of animosity between the parties. When they commenced

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negotiations to reach a new gaming compact, Pauma and the State were embroiled

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in litigation concerning an amendment to the parties’ operative compact.

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Unsurprisingly, the parties’ negotiations became contentious and unproductive at

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times. But the joint record does not demonstrate the State has failed to negotiate in

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good faith. The State met with Pauma several times and expressed a willingness to

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agree that the Tribe could offer additional forms of gambling at its casino. The State

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also reached out to other parties for information and obtained sample agreements to

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help Pauma and the State negotiate a new compact. In addition, to guide the parties’

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future discussions, the State transmitted a first draft of a new compact. Although

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Pauma now takes issue with the terms proposed in this initial draft, the Tribe never

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objected to these terms or otherwise responded to the State’s proposal. Finally, at

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the time Pauma stopped participating in the negotiations and filed this lawsuit,

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nothing indicated the State was unwilling to continue to negotiate with the Tribe to

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reach a compromise.

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The Court cannot conclude on this record that the State has failed to negotiate

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in good faith. Consequently, for the following reasons, the Court denies Pauma’s

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motion for summary judgment, grants the State’s cross-motion for summary

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judgment, and directs entry of judgment on the claims at issue under Federal Rule of

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Civil Procedure 54(b).
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BACKGROUND
I.

Indian Gaming Regulatory Act

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There is a “weathered past between Native American tribes and the State of

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California” when it comes to tribal gaming, and the story starts well before the turn

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of the century. See Pauma Band of Luiseno Mission Indians of Pauma & Yuima

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Reservation v. California, 813 F.3d 1155, 1159 (9th Cir. 2015); see also In re Indian

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Gaming Related Cases, 331 F.3d 1094, 1095–1107 (9th Cir. 2003) (“Coyote Valley

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II”).

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“In the 1970s, some California tribes began to operate bingo halls on their

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lands as a way to generate revenue.” Coyote Valley II, 331 F.3d at 1095. These

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operations “were controversial because the tribes generally refused to comply with

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state gambling laws, a situation that developed into a serious point of contention with

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[the] state government[].”

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Gambling Control Comm’n, 104 Cal. App. 4th 1125, 1132 (2002)).

Id. (alterations in original) (quoting Flynt v. Cal.

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California responded by attempting to enforce its “bingo statute” against the

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tribes. See California v. Cabazon Band of Mission Indians, 480 U.S. 202, 206

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(1987); see also Cal. Penal Code § 326.5. A dispute erupted between the State and

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two tribes, culminating in the Supreme Court’s decision in California v. Cabazon

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Band of Mission Indians, 480 U.S. 202, 206 (1987). The tribes prevailed—the

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Supreme Court held California lacked the authority to enforce its bingo statute on

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tribal lands. Id. at 221–22.

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“After the Court’s decision in Cabazon, States sought recourse on Capitol

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Hill.” Coyote Valley II, 331 F.3d at 1096. Within a year, “Congress attempted to

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strike a delicate balance between the sovereignty of states and federally recognized

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Native American tribes by passing” the Indian Gaming Regulatory Act (“IGRA” or

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“Act”), 25 U.S.C. §§ 2701–21. Pauma, 813 F.3d at 1160. To summarize the Act:

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IGRA was Congress’ compromise solution to the difficult questions
involving Indian gaming. The Act was passed 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” and “to shield [tribal gaming] from organized crime
and other corrupting influences to ensure that the Indian tribe is the
primary beneficiary of the gaming operation.” 25 U.S.C. § 2702(1), (2).
IGRA is an example of “cooperative federalism” in that it seeks to
balance the competing sovereign interests of the federal government,
state governments, and Indian tribes, by giving each a role in the
regulatory scheme.

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Artichoke Joe’s v. Norton, 216 F. Supp. 2d 1084, 1092 (E.D. Cal. 2002) (alteration

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in original), aff’d, 353 F.3d 712 (9th Cir. 2003).

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To accomplish its purpose, IGRA “creates a framework for regulating gaming

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activity on Indian lands.” Michigan v. Bay Mills Indian Cmty., 134 S. Ct. 2024, 2028

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(2014) (citing 25 U.S.C. § 2702(3)). “The Act divides gaming on Indian lands into

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three classes—I, II, and III.” Seminole Tribe of Fla. v. Florida, 517 U.S. 44, 48

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(1996).

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governments depending on the class of gaming involved.” Big Lagoon Rancheria v.

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California, 789 F.3d 947, 949 (9th Cir. 2015) (en banc).

IGRA then “assigns authority to regulate gaming to tribal and state

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The final category—Class III gaming—“includes the types of high-stakes

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games usually associated with Nevada-style gambling.” Coyote Valley II, 331 F.3d

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at 1097. “As a result, Class III gaming is subjected to the greatest degree of control

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under IGRA’s regulations.” Pauma, 813 F.3d at 1060. A tribe may conduct Class

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III gaming “only if such activities are conducted pursuant to a Tribal-State Compact

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entered into by the tribe and a state that permits such gaming, and the Compact is

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approved by the Secretary of the Interior.” Id. (citing Coyote Valley II, 331 F.3d at

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1097); see also 25 U.S.C. § 2710(d)(1), (3)(B). Thus, IGRA contemplates that a tribe

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and the relevant state shall negotiate to enter into a compact that (i) permits Class III

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gaming and (ii) may address various regulatory issues related to this type of gaming.

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25 U.S.C. § 2710(d)(3)(A), (C).
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II.

1999 Gaming Compact

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“Despite IGRA’s negotiation and compact framework, several unresolved

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conflicts . . . developed between the State of California and Indian tribes surrounding

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class III gaming and, especially, gaming devices in casinos. See Hotel Emps. & Rest.

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Emps. Int’l Union v. Davis, 21 Cal. 4th 585, 596 (1999). In particular, “[s]ome

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gubernatorial administrations were hostile to tribes conducting Class III gaming

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because it was then prohibited by California’s Constitution, and so the State refused

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to negotiate with the tribes to permit it.” Pauma, 813 F.3d at 1160.

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As a result, a coalition of tribes “went directly to the people of California” and

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“drafted and put on the November 1998 State ballot Proposition 5.” Coyote Valley

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II, 331 F.3d at 1100. Proposition 5 required the State to enter into a model compact

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with tribes to allow certain Class III gaming activities. Id.; see also Flynt, 104 Cal.

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App. 4th at 1136. Proposition 5 passed, but the tribes’ victory was short-lived. The

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California Supreme Court held that the gaming rights the proposition conferred on

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the tribes violated the California Constitution’s “anticasino provision.” Hotel Emps.,

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21 Cal. 4th at 615. “Undeterred, the voters of California responded by amending the

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California Constitution on March 7, 2000, to create an exception for certain types of

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Class III Indian gaming notwithstanding the general prohibition on gambling in the

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State.” Pauma, 813 F.3d at 1161 (citing Coyote Valley II, 331 F.3d at 1103 & n.11).

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Meanwhile, in 1999, a group of tribes had started negotiating with the State to

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enter into nearly identical compacts under IGRA. See Coyote Valley II, 331 F.3d at

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1101–07 (detailing the course of negotiations). “In April 2000, Pauma joined more

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than sixty other tribes who ultimately signed” a copy of this compact—the “1999

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Compact.” Pauma, 813 F.3d at 1161.

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Central to the 1999 Compact “is a formula to calculate the number of gaming

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devices California tribes are permitted to license.” Cachil Dehe Band of Wintun

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Indians of Colusa Indian Cmty. v. California, 618 F.3d 1066, 1069 (9th Cir. 2010).

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“The total number of slot machines allowed was restricted by contract language that
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authorized the continued operation of existing machines, permitted tribes who were

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not yet operating machines to operate up to 350 machines, and provided a formula

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for a limited license pool for the remaining machines.” Id. at 1069. The agreement

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allocates these limited licenses “according to a detailed draw process.” Id. at 1071.

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“The draw process, which includes tiers of priority for different tribes, was designed

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to skew the distribution of the available licenses towards those Compact Tribes that

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did not yet conduct large gaming operations.” Id. Given that Pauma signed a copy

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of the 1999 Compact, the Tribe was subject to the limited license pool and this draw

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process.

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III.

2004 Amendment and Rescission

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Over the next few years, an accounting agency—and then the State itself—

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administered various draws from the license pool under the 1999 Compacts. See

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Colusa, 618 F.3d at 1071–72. Yet, by the end of 2003, “the State informed the tribes

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that the collective license pool had been exhausted.” Pauma, 813 F.3d at 1161. “At

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the time, Pauma was set to enter into a contract with Caesars to build a Las Vegas-

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style casino in place of Pauma’s tent facility near San Diego, but needed more

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gaming licenses to do so.” Id. at 1161–62; see also Pauma Band of Luiseno Mission

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Indians v. Harrah’s Operating Co., No. D050667, 2009 WL 3069578 (Cal. Ct. App.

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Sept. 28, 2009) (summarizing Pauma’s plan to contract with Caesars to compete with

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the Rincon tribe, which had already associated with Harrah’s to build a Nevada-style

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casino near Pauma’s smaller casino).

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additional licenses from the license pool draw, it received only 200 licenses. Pauma,

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813 F.3d at 1161.

Thus, despite Pauma’s request for 750

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To obtain the remaining licenses it needed, the Tribe started negotiating with

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the State to amend Pauma’s iteration of the 1999 Compact “to abolish the license

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pool provision and gain access to an unlimited number of licenses.” Pauma, 813

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F.3d at 1161. The State in return “demanded substantially more money per operable

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license during negotiations.” Id. (citing Rincon Band of Luiseno Mission Indians v.
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Schwarzenegger, 602 F.3d 1019, 1025 (9th Cir. 2010)). Pauma succeeded in

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securing an amendment to the compact—the “2004 Amendment”—and the right to

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operate more machines, but the Tribe also agreed to pay substantially higher fees.

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Id. Pauma’s annual payment for the 1,050 Class III gaming machines it was currently

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operating at its casino increased from $315,000 under the 1999 Compact to $7.75

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million under the 2004 Amendment. Id.

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As Pauma sought reprieve from the depleted gaming license pool through an

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amendment to the 1999 Compact, two other tribes adopted a different approach.

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They sued the State in federal court to challenge its “interpretation of the formula for

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the license pool” in the 1999 Compact, arguing the formula authorized more gaming

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licenses than the State claimed. Colusa, 618 F.3d at 1069. By this time, the

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“opaquely drafted and convoluted” license formula had caused the State and certain

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tribes to be “mired in disputes for much of the period since the bilateral Compacts

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were signed.” Id. Ultimately, in 2010, after the district court ruled in favor of the

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tribes, the Ninth Circuit closely examined the murky license pool provisions. Id. at

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1070, 1073–82.

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authorized for distribution statewide through the license draw process.” Id. at 1082.

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This amount was significantly more than the limit the State had placed on the license

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pool—approximately 23,500—when informing the tribes the pool was depleted. See

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id. at 1078.

The Court of Appeals concluded that “40,201 licenses were

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While the federal court system resolved the other tribes’ challenge to the

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license pool provision, Pauma’s putative deals to expand its casino with a Las Vegas-

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style operator were falling through. Pauma, 813 F.3d at 1162. “[T]he economic

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recession of 2008 struck and no deal was ever completed.”

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Consequently, Pauma was still operating its same 1,050 gaming devices at its casino.

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Id. Yet, the Tribe “continued paying California the exorbitantly expensive 2004

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Amendment prices for the[se] same machines it acquired under the 1999 Compact

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provisions.” Id.
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Id. at 1162 n.4.

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Pauma took action: “Shortly after the district court’s decision in the action

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challenging the license pool formula, Pauma filed a complaint asserting eighteen

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claims attacking the formation of the 2004 Amendment under various theories,

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including mistake and misrepresentation.” Pauma, 813 F.3d at 1162. This prior

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litigation centered on whether the State had “misrepresented a material fact as to how

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many gaming licenses were available when negotiating with Pauma to amend its

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Compact.” See id. at 1059–60. In April 2010, the district court “granted Pauma’s

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request for injunctive relief from the annual $7.75 million payments, permitting

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Pauma to revert to the 1999 Compact rate.” Id. at 1162. On interlocutory appeal,

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the Ninth Circuit “left the injunction in place but remanded to the district court for

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reconsideration of the preliminary injunction factors in light of recent cases,”

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including—by then—the Ninth Circuit’s decision interpreting the 1999 Compact’s

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license pool formula summarized above. Id.

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After several more years of litigation, the district court entered summary

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judgment in favor of Pauma on its misrepresentation claim against the State. Pauma,

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813 F.3d at 1162. In 2015, the Ninth Circuit affirmed. Id. at 1167. The Ninth Circuit

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reasoned that the State misrepresented the number of licenses available because

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“[t]he formula for calculating the license pool never changed—it just took over a

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decade to reach a final judicial interpretation which settled a longstanding dispute

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over the number of licenses it authorized.” Id. at 1166. Further, the State’s

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representation to Pauma in 2003 that the license pool was depleted was material and

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induced Pauma to enter into the 2004 Amendment to acquire more gaming devices.

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Id. In light of this material inducement, the Court of Appeals held Pauma was

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entitled “to rescission of the amendment and restitution” in the amount of $36.2

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million, which was the sum of the payments Pauma made under the 2004

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Amendment in excess of what would have been owed under the original 1999

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Compact. Id. at 1173.

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Yet, the Tribe had hoped for greater relief. Although the district court’s

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judgment discharged the 2004 Amendment’s onerous obligations and allowed

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Pauma to recoup millions of dollars in payments, the Tribe was still left with the

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1999 Compact and its limitations. Thus, prior to the appeal, Pauma had asked the

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district court to vacate its judgment to allow Pauma to again move for summary

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judgment on two claims alleging the State negotiated the 2004 Amendment in bad

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faith in violation of IGRA. Pauma Band of Luiseno Mission Indians of the Pauma

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& Yuima Reservation v. State of California, No. 3:09-cv-1955-CAB-MDD, 2014 WL

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12570173, at *1–2 (S.D. Cal. June 6, 2014). Through this strategy, Pauma aspired

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to obtain an order compelling renegotiation of the agreement “so the Tribe can obtain

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a successor to [the 1999 Compact].” Id. at *2. The district court denied this

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additional relief, concluding:

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Although [] IGRA may allow a court to reform or rescind an unlawful
agreement (which is what Pauma wanted until now), it does not allow
the Court to turn back the clock and compel re-negotiation of an
agreement actually reached ten years ago, let alone one that has been
rescinded and never would have been negotiated in the first place in
light of the relief the Court has already granted in this case.

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Id. at *5.

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Pauma cross-appealed this determination, but the appeal failed. Pauma, 813

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F.3d at 1171–73. The Ninth Circuit agreed with the district court that IGRA’s

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remedy for bath faith negotiation was inapplicable because Pauma had “agreed to the

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2004 Amendment and did not challenge the negotiation process under IGRA”

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beforehand. Id.

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IV.

Successor Compact Negotiations

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It is against this backdrop—the 1999 Compact’s limited license pool, an

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amendment based on unrealized hopes of expansion, and years of litigation to unwind

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the 2004 Amendment—that the present dispute emerges. As the parties appealed the

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district court’s rulings in Pauma’s action challenging the 2004 Amendment, the Tribe
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set the gears in motion to possibly obtain a successor to the 1999 Compact by another

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avenue—new negotiations. On November 24, 2014, Pauma sent the State a request

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to “commence formal renegotiations” pursuant to Section 12.2 of the 1999 Compact

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“and/or” the 2004 Amendment. (JR 1.) This provision states:

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This Gaming Compact is subject to renegotiation in the event the Tribe
wishes to engage in forms of Class III gaming other than those games
authorized herein and requests renegotiation for that purpose, provided
that no such renegotiations may be sought for 12 months following the
effective date of this Gaming Compact.
(1999 Compact § 12.2, ECF No. 1-2.)

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To trigger this provision, Pauma identified two types of Class III gaming not

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authorized by the 1999 Compact that it wished to conduct. (See JR 2.) First, Pauma

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formally requested renegotiation “on the basis that the Tribe wishes to offer . . . on-

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track betting at an on-reservation horse track that it plans to construct following the

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renegotiation of the agreement(s).” (Id.) Second, Pauma stated it was seeking to

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offer additional types of lottery games at its casino. (Id.) The 1999 Compact allows

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Pauma to operate “any devices or games that are authorized under state law to the

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California State Lottery.” (1999 Compact § 3(c).) Pauma sought to “supplement the

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lottery games it offers by obtaining the right to conduct any games that are not

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currently authorized under State law to the California State Lottery.” (Id.) Further,

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Pauma identified in its request examples of unauthorized lottery games, including

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those games that “use traditional, non-electronic punchboards”; “are played on video

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terminals”; and “are part of a unique tribal lottery system.” (JR 2–3.)

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Beyond identifying its desired new gambling rights, Pauma highlighted that

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the 1999 Compact provides that, following a request for renegotiation, “the ‘parties

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shall confer promptly and determine a schedule for commencing negotiations within

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30 days of the request,’ and the renegotiations . . . ‘shall be governed, controlled, and

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conducted in conformity with the provisions and requirements of IGRA, including

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those provisions regarding the obligation of the state to negotiate in good faith and
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the enforcement of that obligation in federal court.’” (JR 3 (quoting 1999 Compact §

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12.3).) Finally, the Tribe requested that the negotiations be kept strictly confidential.

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(JR 3–4.)

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On December 15, 2014, the State responded to Pauma’s request, agreeing to

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commence negotiations regarding a compact that addresses the additional forms of

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gaming identified by Pauma, but noted that Class III gaming activities “not

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authorized in California” fall outside the governor’s “constitutional authority to

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negotiate” and are “not appropriate subjects for inclusion in a Compact.” (JR 5

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(citing 25 U.S.C. § 2710(d)(1)(B); Cal. Const. art. IV, § 19, subds. (e) & (f)).) The

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State suggested an initial meeting on December 24, 2014, at the Governor’s Office

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in Sacramento, California. (Id.; see also JR 9 (explaining why this specific date was

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chosen to comply with the deadline in Pauma’s letter and that the State had tried to

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discuss any scheduling issues with Pauma).) The State also requested that the parties

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discuss at their initial meeting “preliminary issues, such as process and

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confidentiality, with the objective of confirming the scope of the confidentiality

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agreement, as raised in [Pauma’s] letter, and a timeframe for, and the scope of, our

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negotiations.” (JR 6.)

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Through the exchange of additional letters, in which the parties discuss

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accommodating schedules and who will attend the first meeting, the parties agreed

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to meet in San Diego, California, on January 16, 2015. (JR 8–16.)

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A.

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At their initial meeting, the parties discussed preliminary matters and Pauma’s

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potential horse racing venture.1 Because the State has never entered into an on-track

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horse racing compact with a tribe, it sought details into Pauma’s operation, which

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Pauma deferred discussion of as premature because the Tribe was hesitant to

First Meeting

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There is no contemporaneous record of the parties’ first negotiation meeting. After the
meeting, the parties exchanged letters in which they memorialize—and dispute—the content of
their discussions. (JR 17–22.)
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“substantially invest in the project” before knowing whether it would “have the

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ability to conduct on track betting at all.” (JR 18; see also JR 21.) The State pointed

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out that it had “entered into off-track wagering compacts and that those might be

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used as a starting point for Pauma’s proposed facility.” (JR 21.) Further, to facilitate

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the process, the State “offered to bring in someone from the California Horse Racing

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Board” to assist the parties with their discussions. (JR 18; accord JR 21.)

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As to Pauma’s request for expanded lottery games, the parties offer differing

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recollections of their discussions. (Compare JR 18, with JR 21–22.) The State’s

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memorialization provides that it “asked for examples of the types of lottery games

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Pauma is considering,” and that the Tribe’s counsel “referred the State to the games

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listed in the Tribe’s November 24, 2014 letter.” (JR 21.) Pauma then referenced a

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prior Ninth Circuit decision concerning tribal gaming rights in California, to which

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the State then reiterated its “need to understand the scope of games that Pauma

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intends to offer to help identify issues and establish a legal framework for future

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negotiations.” (JR 22.) Last, the State “suggested both sides research the general

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legal framework for the lottery games further,” prior to the parties’ next meeting.

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(Id.)

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Pauma, on the other hand, recalls that the State—in addition to asking for legal

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support for Pauma’s position—also described the expanded lottery games “issue as

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‘murky’ and requiring further research.” (JR 18.) Moreover, Pauma contends it

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asked the State to provide its “position in writing as to the games underlying the

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negotiations before the next meeting, and [the State] agreed to do so.” (Id.) The

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State disputes this claim. (JR 22.)

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Beyond the gaming rights issues, the State recalls that, upon being asked if the

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Tribe sought “further amendments to its compact,” Pauma’s counsel “responded that

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at this time the Tribe wishes to focus on the additional games and nothing broader.”

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(JR 22.) Further, according to the State, “Pauma indicated it had prepared to discuss

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solely confidentiality and scheduling issues at the meeting,” and the State’s follow– 12 –

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up letter notes that “it is hopeful” the parties “can discuss Pauma’s proposals to

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operate a live horse racing facility and offer additional lottery games in more detail

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at [their] next meeting.” (Id.)

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Finally, the parties discussed scheduling their “next meeting in approximately

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May 2015, as the parties’ participating attorneys face[d] appellate briefing deadlines

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over the next few months”—presumably related to the then-ongoing 2004

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Amendment litigation. (JR 20; see also JR 18.)

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B.

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Second Meeting
1.

Prelude

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A few months passed before the parties reengaged. By this point, the tenor of

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the negotiations was quickly deteriorating. On May 8, 2015, Pauma sent the State a

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letter disputing California’s summary of the parties’ first meeting and reiterating the

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Tribe’s position on its request for expanded lottery games. (JR 23–25.) Pauma’s

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Chairman particularly took issue with the State’s contention that it did not agree to

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provide its position on the expanded lottery games issue in writing before the next

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meeting:

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While sensitive to the fact that the State is resistant to put anything in
writing out of fear of creating a coherent record for any future bad faith
suit, I am more concerned by the amount of time and money Pauma may
expend going through an undefined and seemingly inefficient process
in which it may be simply spinning its wheels.

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(JR 24.) The Tribe then requested that the State identify “before our next meeting .

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. . the games over which the State is and is not willing to negotiate.” (Id.) Next,

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Pauma takes issue with the State’s proposed process for formulating an on-track

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horse racing compact, with the Tribe asking the State to meet with the State Horse

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Racing Board “to formulate the State’s position regarding the civil regulations it

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would like to negotiate for during forthcoming meetings.” (JR 25.)

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Last, after raising these grievances, Pauma asks to postpone the next

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negotiation meeting to accommodate the parties’ appeals in the 2004 Amendment

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litigation:

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Although this letter may appear to ask a lot from the State on a relatively
short schedule, the recent orders in the pending compact litigation have
essentially guaranteed that our attorneys will be largely preoccupied
until the oral argument scheduled for July 10, 2015. In light of that, the
prudent thing to do would be to delay ou[r] next negotiation session
from the May 2015 date we contemplated during our first meeting to
some point shortly following the scheduled date for the oral argument.
(JR 25.)

10

On May 27, 2015, the State responded to Pauma’s communication, agreeing

11

to transcribe the parties’ future negotiations “so we can focus our energy on

12

discussing and resolving issues, rather than arguing about statements made at prior

13

meetings.” (JR 26.) The State also stood by its prior summary of the first meeting,

14

characterizing “the Tribe’s posture at that meeting” as being “primarily oriented

15

towards seeking a legal position from the State without providing a clear description

16

of the kinds of horse racing or lottery games it sought to conduct.” (Id.) Beyond this

17

back-and-forth, the State requested Pauma’s Chairman provide it with “dates in early

18

August that would be convenient for you to meet in Sacramento so we can continue

19

our discussions.” (Id.)

20

Pauma’s counsel replied to the State on August 5, 2015, and provided

21

proposed dates at the end of the month for the parties to continue their negotiations.

22

(JR 27.) The Tribe also, again, conveyed its perception that the State was exhibiting

23

a lack of willingness to negotiate for the expanded gaming rights Pauma requested:

24

Given the lack of a concrete response from the State over the past eight
months as to whether or not it is actually willing to negotiate for these
rights, Pauma has no choice but to simply construe your silence as a
tacit affirmation that these forms of games are indeed available so the
discussion of terms that both parties seemingly desire can finally take
place.

25
26
27
28

– 14 –

16cv1713

1

(JR 27.)

2

The parties continue to spar by correspondence as they settle on a date for their

3

second meeting and discuss other miscellaneous matters. (JR 29–37.) Ultimately,

4

the parties would agree to meet in Sacramento at the California Attorney General’s

5

Office on September 8, 2015, for a transcribed and recorded negotiation session. (JR

6

33–37.)

7

2.

Negotiation Session

8

The parties discussed several topics at their second meeting. That being said,

9

a disagreement is interspersed throughout their negotiations. This debate concerns

10

how the parties should move towards reaching an actual compact. The State’s

11

negotiator, “having reviewed the back and forth,” proposes that “the best way to

12

move forward” is for Pauma to “just draft compact language on those two issues”

13

that the Tribe feels needs “to be addressed in the compact.” (JR 42.) The State

14

justifies this request by stating it “will be the best way to at least move things forward

15

so [the parties] are not just arguing about positions” and “are actually working on

16

language that ultimately hopefully will lead to a compact.” (JR 42–43.) Pauma, on

17

the other hand, wants more input from the State before getting started. (JR 75–76.)

18

i.

Horse Wagering

19

As to substance, the parties first discussed Pauma’s on-track horse wagering

20

request. (JR 42–76.) Pauma expressed that it is “going to be very difficult for us to

21

come up with what a horse racing compact is supposed to be -- look like.” (JR 43.)

22

Although the State previously entered into compacts providing for off-track

23

wagering, these compacts are “15 or 20 pages” and “[r]elatively simple.” (Id.) In

24

contrast, Pauma stated a compact providing for operation of a horse race track

25

potentially implicates a wide range of horse racing regulations that “cover a whole

26

slew of things,” like weeks of operation and charity racings. (JR 43; see also JR 50–

27

51.) In response, the State asked Pauma to “do [its] best” and come up with a draft—

28

with placeholders as necessary—to “start[] the ball moving.” (Id.) The State also
– 15 –

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1

explained that it brought the Executive Director of the California Horse Racing

2

Board to the meeting because of the complexity of a tribe conducting on-track betting

3

in California. (JR 44.)

4

During this discussion, the Executive Director informed Pauma that he

5

believes the Tribe’s involvement with the horse racing business “would be very well

6

received” because it is “a declining industry” with “tracks closing.” (JR 45.) The

7

State also encouraged Pauma to include “off-track wagering” as part of its plans, and

8

the State informed Pauma that it had worked with the Executive Director and his staff

9

“to update the older provisions” in compacts concerning off-track wagering. (JR

10

46.)

11

After more discussion, the State requested that Pauma put together a “shell of

12

something that lays out what” the Tribe is looking for, and the Tribe pushed back

13

because it believed that creating a first draft would be “a massive undertaking,” (JR

14

49), and there are “massive amounts of regulations” that the parties may need to

15

consider, (JR 50). The State then repeats its willingness to work with Pauma, as

16

tribal on-track wagering has not been done in California, and the State wants to “try

17

to figure out the best way to do it.” (JR 54–55.) The parties thereafter continued to

18

discuss issues related to on-track wagering with the Executive Director, as well as

19

continue their debate about Pauma needing to make the first attempt at a draft

20

compact. (JR 56–76.)

21

ii.

Supplemental Lottery Games

22

As for the lottery games issue, Pauma asks to “work on the language today.”

23

(JR 39.) Its counsel states that in his view, this issue is “incredibly simple” when

24

compared to the horse racing topic. (JR 76–77.) The State, however, again asks

25

Pauma to “put together something and [the State] will respond,” with its preference

26

to “just get the ball rolling with some exchange of documents so we can focus on

27

language.” (JR 78.)

28
– 16 –

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1

Pauma then shares its position on the lottery issue, including what it believes

2

is the relevant state law framework. (JR 43–47.) The State admits that “there is a

3

question there,” and that the parties may need to “go back and research the history”

4

to determine if the Tribe can engage in lottery games beyond those games authorized

5

to the California State Lottery. (JR 47.) The parties continue to debate this issue,

6

until they reach a flashpoint:

7

Pauma’s Counsel:

. . . We just want the rights to do lottery games. And

8

I know this is a sensitive area for the State since the

9

[State] lottery makes like $5 billion per year.

10

State’s Negotiator: Right. And it goes to all of our kids’ education, right?

11
12

I mean -Pauma’s Counsel:

I know. And our kids can’t even get education. And

13

that’s why we are trying to fix this, Joe.

14

....

15

State’s Negotiator: I mean, actually, to make the point, it does go to

16

schools statewide, right?

17

....

18

State’s Negotiator: And it benefits all of our kids, right?

19

Pauma’s Counsel:

I get it. But you -- I don’t know if protectionism is,

20

like, a valid concern under IGRA, though. You know,

21

there is a way to provide tribes with equal rights.

22

State’s Counsel:

Actually, it is valid under IGRA. If you look at

23

IGRA, one of the things that the State is entitled to

24

negotiate over is to protect its own gambling industry.

25

I’m not suggesting we would do that. But that’s

26

expressed in IGRA.

27

Pauma’s Counsel:

That’s a – that’s a colorful interpretation . . . .

28

State’s Counsel:

It’s straight language. It’s not colorful interpretation.
– 17 –

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1

(JR 52–55.) Pauma presses onward, with the State eventually responding that the

2

issue is what exact games the state constitution may permit the Tribes to conduct

3

because the relevant constitutional provision simply states “lottery games.” (JR 56–

4

57.)

5

The parties take a break and return, but the negotiations quickly break down.

6

(See generally JR 96–109.) Pauma’s counsel starts employing sarcasm. (See JR 102

7

(remarking that Pauma wants to race “some elephants” and “donkeys” at its track,

8

and it is “going to be something else”). And these comments draw the ire of the

9

State’s negotiator. (See JR 109 (“No. You are being sarcastic. And it’s just

10

ridiculous.”).) Eventually, the State’s negotiator expresses that he believes the

11

parties “can make a lot of progress on the horse racing side.” (JR 112.) As to the

12

lottery issue, the State says, “we will see where that goes too. I mean, let’s get some

13

language and we will respond. At least we will have a framework of – you know,

14

we’ll have the issues . . . I mean, just arguing back and forth, with all respect, isn’t

15

really moving us anywhere.” (JR 113.)

16

iii.

Scope of Negotiations

17

Toward the end of the parties’ meeting, the State’s negotiator asks to focus

18

“on the next step” and inquires: “What’s the time line? What do we need to do?”

19

(JR 114.) These questions prompt Pauma’s counsel to bring up the start date of the

20

future compact they are negotiating for. (Id.) Yet, when Pauma wants to broaden

21

the topics of discussion, the State resists. (JR 117.) Its negotiator emphasizes that

22

Pauma was “clear that it” only wanted to negotiate regarding “on-track horse racing

23

and issues related to lottery games.” (Id.; see also JR 120.) The debate over this

24

issue quickly degenerates. More sarcasm is employed by Pauma’s counsel, again

25

drawing the ire of the State’s negotiator. (See JR 86–126.)

26

Needless to say, the parties make limited progress during the rest of the

27

meeting. At the end, the State’s position is twofold. (JR 140.) First, if Pauma seeks

28

to broaden the negotiations, the State requests that Pauma adhere to the 1999
– 18 –

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1

Compact by sending a letter that clarifies the scope of the negotiations. (Id.) Second,

2

the State asks Pauma to send the State “some compact language” regarding the horse

3

racing and expanded lottery games issues. (Id.)

4

C.

5

About a month later, Pauma sends the State a letter criticizing the State’s

6

conduct at the second meeting. (JR 174–81.) After acknowledging the meeting “had

7

a promising start,” Pauma characterizes the State as trying “to bring the meeting to

8

an end” by asking Pauma to “unilaterally draft the horse racing and on-track

9

wagering regulations for its compact by distilling down the many hundreds of pages

10

of convoluted State laws that have developed over the past eighty years and now

11

govern these activities.” (JR 174.) Pauma’s Chairman continues: “And this says

12

nothing about the State’s abject refusal to discuss the lottery games topic even when

13

Pauma’s counsel proposed a simple one sentence revision to the language currently

14

in . . . the 1999 Compact . . . to account for those games that are . . . not ‘authorized’

15

to the California State Lottery[.]” (JR 175.)

Resolution of Scope of Negotiations Dispute

16

In addition, Pauma objects—at length—to the State’s position that the parties’

17

negotiations are limited to the additional gaming rights Pauma identified in its initial

18

request. (JR 176–77.) Pauma also suggests the State is dodging the cooperative

19

negotiation process “simply because of bad feelings arising out [of the prior]

20

litigation or a desire to protect the State Lottery from tribal competition.” (JR 177.)

21

The State responds several weeks later. (JR 182–84.) It initially focuses on

22

the parties’ dispute as to the scope of negotiations. (JR 182–83.) After incorporating

23

excerpts from the parties’ prior letters, the State concludes:

24
25
26
27
28

Pauma did not previously request to negotiate subjects outside of
section 12.2. Pauma now seeks to expand the scope of the negotiations
to include subjects not encompassed by section 12.2 and that the State
has not agreed to renegotiate since receiving Pauma’s November 24,
2014 letter. Under the terms of the compact, the State is under no
obligation to renegotiate any matters beyond the scope of those
identified in, or related to, your initial request and declines to do so.
– 19 –

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1

(JR 183.)

2

The State also follows-up on the horse racing issue, noting that since the

3

parties’ last meeting, the State has “reached out to the National Indian Gaming

4

Commission to obtain information regarding other tribes that may be conducting on-

5

track betting.” (JR 183.) The State shares the fruits of its effort by attaching a

6

“Compact Addendum between the Sisseton-Wahpeton Sioux Tribe and the State of

7

North Dakota addressing pari-mutuel horse racing” to serve as a reference for the

8

parties’ further discussions. (JR 183, 185–205.) In closing, the State reports that it

9

is “preparing a draft off-track wagering compact for discussion and will forward it to

10

you soon” and “look[s] forward to reviewing Pauma’s proposals regarding a

11

framework for final compact language addressing the new forms of gaming that it

12

proposes to offer—horse racing and lottery games.” (JR 184.)

13

Several weeks later, Pauma reacts to the State’s steadfast position on the scope

14

of negotiations by triggering the 1999 Compact’s dispute resolution process. (JR

15

206.) In identifying the dispute, Pauma notes:

20

The amount of time the parties have spent going in circles about these
issues should eliminate any need to reiterate the problems let alone
provide gross specificity, but it should go without saying that the
prevailing dispute relates to the proper interpretation of Sections 12.2
and 12.3 of the compact, the position the State has taken in regards to
such issues over the course of the last year of negotiations, whether the
State has negotiated in good faith during this time, and related issues.

21

(JR 206.) The Tribe also expresses its “hope that the parties will approach the future

22

meeting . . . and any ensuing ones in good faith, thereby eliminating any need for

23

federal court involvement.” (JR 207.)

16
17
18
19

24

Several days later, the State acknowledges Pauma’s dispute resolution request

25

and suggests the parties meet on December 4, 2015. (JR 208.) The State also

26

summarizes the steps it has taken to move the parties forward on the horse racing

27

issue and also attaches “for discussion a draft compact addendum that would

28

authorize a satellite wagering facility.” (Id.; see also JR 210–21.) As for the
– 20 –

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1

expanded lottery games issue, the State notes that it has “asked for draft compact

2

language and received nothing but lengthy letters from [Pauma] or [its] lawyers that

3

seek to blame the State for the lack of progress, but fail to do anything to help the

4

parties move forward towards the conclusion of a compact.” (JR 209.)

5

In follow-up e-mails, the parties discuss scheduling and the location of the

6

dispute resolution meeting. (JR 222–27.) Pauma presses for an in-person meeting

7

near its reservation, but the State pushes back reportedly due to the short notice and

8

a lack of contract carrier flights to San Diego on the agreed-upon date. (JR 225–27.)

9

Pauma again presses the State, suggesting its representatives fly into Ontario instead.

10

(JR 224.) The State’s negotiator repels Pauma, taking issue with what the State

11

believes is the Tribe’s manipulation of the holiday season:

12
13
14
15
16
17
18
19
20
21
22
23
24
25

With all due respect, your comments about inconvenience and difficulty
of scheduling lack credibility and are difficult to take seriously when
you requested this meeting . . . at approximately 9 p.m. on the evening
before Thanksgiving . . . . It appears that you intentionally waited until
the evening before a four day holiday weekend to request a meeting
within ten days so you can find some basis to argue that the State is not
in compliance with its compact obligations. You appear to be
implementing a strategy of obtaining a compact by litigation rather than
negotiation. IGRA should not be manipulated by either party to avoid
the obligation to negotiate in good faith towards the conclusion of a
compact. We have tried, and will continue to try to work with you in
good faith. We worked over the holiday to provide a response and
present draft compact language on the Monday after the holiday.
Despite your many letters and e-mails, the State has yet to receive a
single word of proposed compact language from the Tribe. I believe
we’d do more to further the interests of the Tribe and the State if we
spent more time on developing a compact, than arguing about
scheduling.
(JR 223.)

26

The parties met on December 4, 2015, to discuss their scope of negotiations

27

dispute. (JR 228.) Afterwards, Pauma e-mailed the State two letters to support the

28
– 21 –

16cv1713

1

Tribe’s interpretation of the renegotiation provision of the 1999 Compact. (JR 228–

2

33.) The State agreed to provide a response within a week. (See JR 228.)

3

The State did. (JR 234–35.) Its response provides that the “exchange of

4

information, as well as the discussion at our meeting of December 4, 2015, was

5

helpful to frame the disputed issue,” but the State concludes its interpretation of the

6

1999 Compact’s renegotiation provision, “as consistently applied, is supported by

7

the specific compact language and reflects the intention and understanding of

8

compact parties.” (JR 234.) That said, the State agrees to broaden the scope of

9

negotiations:

14

However, rather than focus additional time and energy on this dispute,
the State is amenable and now agrees, pursuant to section 12.1 of the
compact, to enter into negotiations for a new or amended tribal-state
gaming compact . . . . To be clear, this letter reflects the State’s
understanding that both parties are amenable to considering all aspects
of the existing compact and other appropriate provisions to ensure that
we are able to achieve our mutual objectives.

15

(JR 234.) Next, the State cautions Pauma that it is engaged in “compact negotiations

16

with a large number of tribes,” emphasizing that it is committed to develop a new

17

compact but wants to “be up front with [the Tribe] about the demands on [the State’s]

18

time to ensure that we set realistic timeframes.” (JR 235.) Finally, the State requests

19

Pauma provide a date for a future meeting, and the State’s negotiator notes that he is

20

“amenable to conducting many of our meetings by phone to avoid cost and

21

inconvenience and to allow us to focus our efforts on productive negotiations.” (Id.)

22

Several days later, the Tribe replied to the State’s offer “to negotiate under the

23

voluntary negotiation provision of” the 1999 Compact. (JR 236.) The Tribe asks the

24

State to confirm that negotiations under the voluntary provision will include the new

25

forms of gaming Pauma is seeking. (Id.) The Tribe’s Chairman then informs the

26

State he will contact it “in short order about scheduling the next negotiation session

27

and the issues” to be addressed at that meeting once the scope of the current

28

negotiations are confirmed. (Id.)

10
11
12
13

– 22 –

16cv1713

1

A few weeks later, the State confirms that “the entire compact” is up for

2

negotiation. (JR 238.) The State then reiterates that it “has provided Pauma with

3

draft compact language on the issue of off-track betting and a complete compact

4

previously approved by the Department of the Interior governing tribal horse racing

5

in another state.” (Id.) The State’s response next provides: “We have requested, but

6

not received, the Tribe’s plans for on-track betting and proposed language regarding

7

authorized lottery games.

8

documentation as part of the next step in our negotiations to ensure they move

9

forward in a constructive manner.” (Id.)

We look forward to receiving and reviewing such

10

D.

11

With the parties’ dispute concerning the scope of negotiations resolved,

12

Pauma’s counsel sends the State a letter several weeks later. (JR 239–41.) The letter

13

does not include further negotiation on the horse racing provision; it instead focuses

14

solely on the Tribe’s request for expanded lottery games. (JR 244–45.) Further, the

15

Tribe’s counsel tells the State:

16
17
18
19
20
21
22

The State’s Draft Compact

Pauma prefers to conduct the negotiations in a piecemeal fashion,
focusing on one material issue and then moving on to the next only after
the parties have largely agreed on language for the final compact. It is
my view that structuring the negotiations in such a manner will foster
productivity and allow the parties to seek court guidance regarding a
particular issue should an impasse arise while simultaneously remaining
free to negotiate the other issues that come under the ambit of these
negotiations.
(JR 241.)

23

As to the lottery games, Pauma’s counsel suggests “two revisions” to the 1999

24

Compact to provide the Tribe with the gaming rights it seeks. (JR 240–41.) These

25

revisions involve inserting a definition for the term “Lottery” and amending the

26

scope of permitted lottery games to broaden it to include at least nine categories of

27

additional lottery games. (Id.) In closing, the Tribe informs the State that as it

28

considers Pauma’s letter, the Tribe “will begin to formulate positions on other
– 23 –

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1

topics—including the horse racing—so the parties may turn to those once we have

2

reached a consensus on the lottery provisions.” (JR 241.)

3

When the State does not respond to Pauma’s piecemeal negotiation proposal

4

in the next several weeks, Pauma follows-up. (JR 242–43.) The Tribe emphasizes

5

that it has been “four hundred and seventy (470) days since Pauma conveyed its

6

request to commence renegotiations of the 1999 Compact” and “respectfully

7

request[s] that the Office of the Governor expedite its response” to Pauma’s most-

8

recent proposal. (JR 242.)

9
10

In a response several weeks later, the State declines Pauma’s offer to “conduct
negotiations in a piecemeal fashion.” (JR 244.) The State rationalizes:

11

Such an approach has no basis in the dispute resolution framework
created within the Indian Gaming Regulatory Act (IGRA) that governs
the possibility of an impasse in the negotiations, limits the ability of the
parties to achieve consensus by giving and taking on the wide range of
issues that are addressed in bilateral compact negotiations, and is
remarkably inefficient.

12
13
14
15
16

(Id.)

17

Next, in addressing Pauma’s lottery games proposal, the State argues that the

18

governor’s authority to negotiate for lottery games under the California

19

Constitution’s tribal gaming provision “has always been understood to encompass

20

those games authorized for play by the California State Lottery.” (JR 244.) That

21

said, the State tells Pauma that it “is willing to negotiate to authorize Pauma to offer

22

certain additional lottery games to be enumerated in the compact.” (Id.) The State

23

continues:

24
25
26
27
28

Specifying the games provides clarity as to the scope of the
authorization, avoids future disputes between the parties, and mitigates
the risk of running afoul of other prohibitions on how lottery games may
be conducted, such as the keno game offered by the California State
Lottery that was found to be an illegal banked game by the Supreme
Court in Western Telcon, Inc. v. California State Lottery (1996) 13 Cal.
4th 475.
– 24 –

16cv1713

1

(Id.) “Furthermore, the State expressly takes issue with Pauma’s ability under IGRA

2

to seek to negotiate ‘devices or games that are authorized to any other state lottery or

3

any other multi-state lottery association,’ ‘lottery games that are played on video

4

terminals,’ ‘tribal lottery systems’ or other lottery systems to the extent operated or

5

conducted off tribal lands, and ‘video lottery games that dispense coins or currency.’”

6

(JR 244–45.) Finally, the State tells Pauma that it will provide the Tribe with “a

7

complete draft document to guide our future discussions within the next few weeks.”

8

(JR 245.)

9

Several weeks later, the State sends Pauma a “draft compact” by e-mail. (JR

10

246–382.) In a margin comment to the draft compact’s authorization of Class III

11

gaming, the State notes that it “is open, as indicated in prior correspondence, to

12

discussion regarding the authorization of additional enumerated [lottery] games.”

13

(JR 261.) The State also comments that it “has proposed” an off-track wagering

14

compact “that can be incorporated as an Appendix or negotiated and concluded as a

15

separate class III gaming compact.” (Id.) Pauma, however, did not respond to either

16

the State’s letter explaining its position on the additional lottery games or its

17

proposed draft compact.

18

V.

This Action

19

A few months later, the Tribe filed this action. In its Second Amended

20

Complaint, Pauma brings a torrent of twenty claims against the State for “bad faith

21

negotiation” under IGRA. (Second Am. Compl. (“SAC”) ¶¶ 210–310.) The Tribe

22

requests that this Court “find that the State failed to negotiate in good faith under

23

Section 2710(d)(7)(B)(iii) of IGRA and trigger the statutory remedial scheme set

24

forth in Section 2710(d)(7)(B)(iii)-(vii).” (Id. Prayer ¶ 1.) Pauma now moves for

25

summary judgment on sixteen of its bad faith claims. (ECF No. 37.) The State, in

26

turn, moves for summary judgment on all twenty of Pauma’s IGRA claims. (ECF

27

No. 36.)

28
– 25 –

16cv1713

1

LEGAL STANDARD

2

“A party may move for summary judgment, identifying each claim or

3

defense—or the part of each claim or defense—on which summary judgment is

4

sought.” Fed. R. Civ. P. 56(a). Summary judgment is appropriate where the moving

5

party demonstrates the absence of a genuine issue of material fact and entitlement to

6

judgment as a matter of law. Id.; see also Celotex Corp. v. Catrett, 477 U.S. 317,

7

322 (1986). A fact is material when, under the governing substantive law, it could

8

affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248

9

(1986). A dispute about a material fact is genuine if “the evidence is such that a

10

reasonable [factfinder] could return a verdict for the nonmoving party.” Id.

11
12

ANALYSIS
I.

IGRA’s Good Faith Requirement

13

IGRA provides that—upon receiving a tribe’s request to negotiate a compact

14

permitting Class III gaming—“the State shall negotiate with the Indian tribe in good

15

faith to enter into such a compact.” 25 U.S.C. § 2710. Provided that 180 days have

16

elapsed since the tribe’s request to negotiate, the tribe “may initiate a cause of action”

17

in federal court “arising from the failure of a State . . . to conduct such negotiations

18

in good faith.”2 Id. § 2710(d)(7)(A)(i), (B)(i).

19
20
21
22
23
24
25
26
27
28

2

In Seminole Tribe of Florida v. Florida, 517 U.S. 44 (1996), the Supreme Court gutted
IGRA’s enforcement mechanism, holding that the Eleventh Amendment bars tribes from suing
states in federal court for failing to negotiate in good faith. The State of California, however, has
waived its sovereign immunity to Pauma’s IGRA claims. See Cal. Gov. Code § 98005 (providing
the State “submits to the jurisdiction of the courts of the United States” for a tribe’s claim “arising
from the state’s refusal to enter into negotiations with that tribe for the purpose of entering into a
different Tribal-State compact pursuant to IGRA or to conduct those negotiations in good faith, the
state’s refusal to enter into negotiations concerning the amendment of a Tribal-State compact to
which the state is a party, or to negotiate in good faith concerning that amendment”); see also Hotel
Emps., 21 Cal. 4th at 615 (noting the final sentence of California Government Code § 98005 is
“obviously intended to restore to California tribes the remedy provided in IGRA” that became
ineffective after Seminole Tribe).

– 26 –

16cv1713

1

IGRA does not define the term “good faith.” See 25 U.S.C. § 2710; see also

2

id. § 2703 (listing definitions for the Act). But the statute does provide that in

3

evaluating whether a state has negotiated in good faith, the court:

4

(I)

may take into account the public interest, public safety,
criminality, financial integrity, and adverse economic impacts on
existing gaming activities, and

(II)

shall consider any demand by the State for direct taxation of the
Indian tribe or of any Indian lands as evidence that the State has
not negotiated in good faith.

5
6
7
8
9

Id. § 2710(d)(7)(B)(iii). Further, in addition to providing these two criteria for

10

assessing good faith, IGRA lists seven permissible negotiation topics for tribal-state

11

compacts. Id. § 2710(d)(3)(C). The compact may include “provisions relating to”

12

any of the following:

13
14
15
16
17

(i) the application of the criminal and civil laws and regulations of the
Indian tribe or the State that are directly related to, and necessary for,
the licensing and regulation of [gaming] activity;
(ii) the allocation of criminal and civil jurisdiction between the State and
the Indian tribe necessary for the enforcement of such laws and
regulations;

18
19

(iii) the assessment by the State of such activities in such amounts as are
necessary to defray the costs of regulating such activity;

20
21

(iv) taxation by the Indian tribe of such activity in such amounts
comparable to amounts assessed by the State for comparable activities;

22
23
24
25
26
27

(v) remedies for breach of contract;
(vi) standards for the operation of such activity and maintenance of the
gaming facility, including licensing; and
(vii) any other subjects that are directly related to the operation of
gaming activities.

28
– 27 –

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1

Id. These seven topics, however, are “circumscribed by one key limitation on state

2

negotiating authority: ‘Except for any assessments that may be agreed to under [§

3

2710(d)(3)(C)(iii)], nothing in this section shall be interpreted as conferring upon a

4

State . . . authority to impose any tax, fee, charge, or other assessment upon an Indian

5

tribe . . . .” Rincon, 602 F.3d at 1028 (quoting 25 U.S.C. § 2710(d)(4)). “IGRA

6

limits permissible subjects of negotiation in order to ensure that tribal-state compacts

7

cover only those topics that are related to gaming and are consistent with IGRA’s

8

stated purposes.” Id. at 1028–29 (footnotes omitted).

9

Given IGRA’s structure, the Ninth Circuit has reasoned “that the function of

10

the good faith requirement and judicial remedy is to permit the tribe to process

11

gaming arrangements on an expedited basis, not to embroil the parties in litigation

12

over their subjective motivations.” Rincon, 602 F.3d at 1041. Consequently, “good

13

faith should be evaluated objectively based on the record of negotiations, and . . . a

14

state’s subjective belief in the legality of its requests is not sufficient to rebut the

15

inference of bad faith created by objectively improper demands.” Id.

16

Beyond this guidance, “IGRA’s legislative history also makes clear that the

17

good faith inquiry is nuanced and fact-specific, and is not amenable to bright-line

18

rules.” See Coyote Valley II, 331 F.3d at 1113; see also S. Rep. No. 100–446, at 14

19

(1988) (“The terms of each compact may vary extensively depending on the type of

20

gaming, the location, the previous relationship of the tribe and State, etc.”). Further,

21

a state is not “guilty of bad faith” in compact negotiations simply because “it takes a

22

‘hard line’ negotiating position” with the tribe. See Rincon, 602 F.3d at 1038. “[A]

23

‘hard line’ stance is not inappropriate so long as the conditions insisted upon are

24

related to legitimate state interests regarding gaming and the purposes of IGRA.” Id.

25

at 1039 (emphasis in original). Yet, if the “hard line” position “results in a ‘take it

26

or leave it offer’ to the tribe to either accept nonbeneficial provisions” outside the

27

scope of those topics authorized by IGRA or go without a compact, the State acts in

28

bad faith. See id.
– 28 –

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1

IGRA also includes a burden-shifting mechanism for bad faith claims. The

2

initial burden is on the tribe, which must introduce evidence that: (1) “a Tribal-State

3

compact has not been entered into”; and (2) the State has either failed to respond to

4

the tribe’s request “in good faith” or has failed to respond to the request altogether.

5

25 U.S.C. § 2710(d)(7)(B)(ii)(I)–(II). The burden of proof then shifts to “the State

6

to prove that the State has negotiated with the Indian tribe in good faith to conclude

7

a

8

Id. § 2710(d)(7)(B)(ii).

Tribal-State

compact

governing

the

conduct

of

gaming

activities.”

9

If the court concludes the state has failed to negotiate in good faith, IGRA

10

provides for a multi-step remedy. First, the court shall order the state and tribe to

11

conclude “a compact within a 60-day period.” 25 U.S.C. § 2710(d)(7)(B)(iii). If,

12

however, the parties are still unsuccessful in reaching an agreement, they must

13

“submit to a mediator appointed by the court a proposed compact that represents their

14

last best offer for a compact.” Id. § 2710(d)(7)(B)(iv). The mediator then chooses

15

the proposed compact that “best comports with the terms of [IGRA] and any other

16

applicable Federal law and with the findings and order of the court.” Id. Finally,

17

“[i]f the State does not accept the mediator’s chosen compact within 60 days, the

18

Secretary of the Interior shall prescribe, consistent with the mediator’s chosen

19

compact and with the terms of IGRA, the conditions upon which the tribe may

20

engage in class III gaming.” Coyote Valley II, 331 F.3d at 1098 (citing 25 U.S.C.

21

2710(d)(7)(B)(vii)).

22

There are two significant decisions from the Ninth Circuit interpreting the

23

good faith requirement—both involving the State of California—that further guide

24

this Court.

25

A.

26

In Coyote Valley II, 331 F.3d 1094 (9th Cir. 2003), the Ninth Circuit applied

27

IGRA’s good faith standard to consider a challenge to several provisions in the 1999

28

Compact. There, the court summarized the lengthy background underpinning the

Coyote Valley

– 29 –

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1

1999 Compacts, including California’s negotiations with various tribes to formulate

2

this agreement. Id. at 1095–1106. The plaintiff Coyote Valley tribe initially signed

3

a letter of intent to enter into the 1999 Compact, but it then held off over concerns

4

with the agreement. Id. at 1106. The tribe ultimately brought suit against California

5

alleging bad faith negotiation, and the district court ruled against the tribe. Id. at

6

1107.

7

On appeal, the Ninth Circuit classified Coyote Valley’s bad faith arguments

8

into “two kinds.” Coyote Valley II, 333 F.3d at 1109. First, the court considered the

9

tribe’s “procedural” objection “that the State’s conduct during negotiations—

10

specifically its dilatory tactics over the course of a seven-year period—constitutes

11

bad faith.” Id. Having reviewed “the history of negotiations,” the Ninth Circuit held

12

it could not “conclude. . . as a procedural matter, the State has refused to negotiate in

13

good faith.” Id. It reasoned that the record showed California Governor Gray

14

Davis’s Administration had “actively negotiated” with the tribes, “including Coyote

15

Valley,” despite that the Davis Administration did not have the obligation to do so

16

before the ratification of the state constitutional amendment permitting tribal gaming.

17

Id. at 1110. “Moreover, at the time Coyote Valley filed its amended complaint with

18

the district court . . . , the State remained willing to meet with the tribe for further

19

discussions.” Id. Thus, the Ninth Circuit concluded that to the extent the tribe had a

20

“valid objection to negotiations by the Davis Administration,” the objection was to

21

the substance of several provisions in the 1999 Compact, not “to the timing and

22

procedures of” the negotiations. Id.

23

Turning to the tribe’s substantive objections, the Ninth Circuit analyzed

24

Coyote Valley’s challenges to three provisions contained in the 1999 Compact.

25

Coyote Valley II, 333 F.3d at 1109. The first provision was the 1999 Compact’s

26

establishment of a “Revenue Sharing Trust Fund” “that grants a maximum of $1.1

27

million dollars to each of the State’s non-gaming tribes each year.” Id. at 1105 (citing

28

1999 Compact § 4.3.2.1.). This revenue sharing fund is financed by the compacting
– 30 –

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1

tribes’ gaming device license fees. Id. Coyote Valley argued that because this fund

2

“requires payments from compacting tribes that go beyond amounts necessary to

3

defray the costs incurred by the State in regulating class III gaming,” the fund

4

“provision cannot properly be included in a Tribal-State compact.” Id. at 1110. And,

5

to draw it all together, Coyote Valley argued that California negotiated in bad faith

6

by “insisting that this forbidden provision be included in the compact.” Id.

7

The Ninth Circuit was unconvinced. Coyote Valley II, 333 F.3d at 1111. It

8

reasoned that IGRA provides a compact “may include provisions relating to . . .

9

subjects that are directly related to the operation of gaming activities,” and the

10

revenue sharing fund provision “falls within the scope” of this topic. Id. Further,

11

the sharing of gaming revenue with non-gaming tribes advances IGRA’s goal of

12

promoting tribal economic development and self-sufficiency. Id. Finally, the State

13

had offered meaningful concessions in exchange for this provision by negotiating for

14

Class III gaming and supporting an amendment to its constitution “to grant a

15

monopoly to tribal gaming establishments.” Id. at 1112.

16

The Ninth Circuit performed a similar analysis for the remaining two

17

challenged provisions, which concerned labor relations and a fund that the tribes had

18

to pay into to support “programs designed to address gambling addiction” and “state

19

and local government agencies impacted by tribal gaming. Coyote Valley II, 333

20

F.3d at 1106–07, 1113–17. The Court concluded these provisions also did not violate

21

IGRA. Id. at 1115–17. Thus, having resolved Coyote Valley’s procedural and

22

substantive objections in the State’s favor, the Ninth Circuit concluded that the State

23

did not act in bad faith. Id. at 1095, 1117.

24

B.

25

With a shift in gubernatorial administrations, the landscape changed by the

26

time the Rincon tribe sought to renegotiate certain provisions of the 1999 Compact

27

in 2003. See Rincon, 602 F.3d at 1024. Rincon, one of Pauma’s competitors in the

28

gambling industry, had “began to generate significant revenue that enabled it to

Rincon Band of Luiseno Mission Indians v. Schwarzenegger

– 31 –

16cv1713

1

improve tribal governmental functions and become economically self-sufficient” and

2

wished “to expand its operations beyond what the 1999 compact permitted.” Id.

3

However, instead of asking in negotiations for “funds to help defray the costs of

4

gaming, or to benefit Indian tribes, the State demanded that Rincon pay a significant

5

portion of its gaming revenues into the State’s general fund.” Id. Rincon countered

6

that it would pay some fees per gaming device, but emphasized that the proceeds

7

“had to be limited to paying for the costs of regulating gaming, building

8

infrastructure needed to support gaming operations, and mitigating adverse impacts

9

caused by gaming operations.” Id. at 1025. “The State held firm in its demand that

10

a portion of tribal gaming revenues be paid into the State’s general fund, rather than

11

into an earmarked fund.” Id. Rincon re-countered, “offering slightly increased per

12

device fees,” and this back-and-forth continued until the parties “reached an

13

impasse” approximately a year after the State’s initial revenue-sharing demand. Id.

14

at 1025–26. The parties then filed cross-motions for summary judgment, and the

15

district court ruled in favor of Rincon. Id. at 1026.

16

The State appealed, and the Ninth Circuit applied IGRA’s burden-shifting

17

framework. See Rincon, 602 F.3d at 1029. The court initially reasoned that once

18

Rincon offered evidence that the State attempted to “impose taxation” through its

19

demands—over Rincon’s objections—for payments into the State’s general revenue

20

fund, the burden shifted to the State to prove it had negotiated with Rincon in good

21

faith. See id. at 1029–32, 1038–39. The Ninth Circuit “conclude[d] that the State

22

failed to meet its burden.” Id. at 1029.

23

In reaching this result, the Ninth Circuit distilled its reasoning from Coyote

24

Valley II and applied it to the State’s expanded general fund revenue request, which

25

exceeded the scope of the revenue requests analyzed in Coyote Valley II concerning

26

payments into specialized, gaming-related funds. Rincon, 602 F.3d at 1032–40.

27

Then, after concluding “that general fund revenue sharing is neither authorized by

28

IGRA nor reconcilable with its purposes,” the Ninth Circuit rationalized that where
– 32 –

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1

“the State demands significant taxes and fails to offer any ‘meaningful concessions’

2

in return, a finding of bad faith is the only reasonable conclusion.” Id. at 1036

3

(emphasis omitted). Accordingly, the Court of Appeals also examined whether the

4

State had offered Rincon any meaningful concessions, and found that it did not. Id.

5

at 1036–40. Hence, the State’s hard line position on general fund revenue sharing

6

forced the tribe to either choose between going without an amended compact or

7

accepting provisions outside the permissible scope of IGRA’s negotiation topics. Id.

8

at 1039. And forcing this choice on the tribe amounted to bad faith on behalf of the

9

State. Id. at 1042.

10

II.

Pauma’s Bad Faith Negotiation Claims

11

The Court turns to applying this framework to Pauma’s twenty claims for bad

12

faith negotiation under IGRA. All of these claims arise from the same course of

13

negotiations summarized above. For each claim, Pauma highlights either an aspect

14

or specific part of the negotiations and alleges that the State’s conduct shows a lack

15

of good faith. The possible relief for all of these claims is the same: compelled

16

negotiation of a new compact.

17

Pauma’s numerous, individualized claims draw attention to certain portions of

18

the parties’ negotiations, but the Court is hesitant to take a fragmented approach to

19

the good faith inquiry—an approach Pauma’s claims occasionally invite.

20

mentioned above, this inquiry is “nuanced and fact-specific,” is “not amenable to

21

bright-line rules,” see Coyote Valley II, 331 F.3d at 1113, and requires an objective

22

evaluation “based on the record of negotiations,” see Rincon, 602 F.3d at 1041. Thus,

23

the Court has considered the entirety of the negotiations in weighing whether:

24

(1) Pauma demonstrates that the State did not respond to the Tribe’s request to

25

negotiate a compact “in good faith”; and (2) if so, the State meets its burden to “prove

As

26
27
28
– 33 –

16cv1713

1

that the State has negotiated with [Pauma] in good faith.”3 See 25 U.S.C. §

2

2710(d)(7)(B)(ii).

3

Having done so, all of Pauma’s claims encounter the same problem: the

4

parties never “reached an impasse” in their negotiations to reach a new compact. See

5

Rincon, 602 F.3d at 1026. The joint record reveals not only an incomplete course of

6

negotiations with untested bargaining positions, but also a first draft of a new

7

compact that was never responded to. Consequently, when this case’s circumstances

8

are compared to those encountered in Coyote Valley II or Rincon, all of Pauma’s

9

claims appear premature. The Tribe implicitly recognizes this problem, and Pauma

10

labors throughout its pleadings and briefing to portray the negotiations as being at a

11

standstill and coming to a close when Pauma filed suit. But the joint record does not

12

substantiate this portrayal. Nothing demonstrates the parties reached an impasse or

13

that the State was unwilling “to meet with the tribe for further discussions.” See

14

Coyote Valley II, 331 F.3d at 1110.

15

Ultimately, because the Court “cannot conclude from the history of

16

negotiations recounted above that . . . the State has refused to negotiate in good faith,”

17

the Court grants summary judgment against the Tribe on its bad faith claims. See

18

Coyote Valley II, 331 F.3d at 1095, 1109, 1117 (concluding “that the State has

19

negotiated in good faith” and affirming the district court’s decision to “den[y] the

20

[tribe’s] motion and enter[] judgment for the State”). The Court further expands on

21

these claims below.

22
23
24
25
26
27
28

3

The State objects to Pauma’s introduction of evidence outside the joint record of
negotiations, largely on the grounds that this evidence is irrelevant, unduly prejudicial, or hearsay.
(ECF No. 40-1.) “[W]hile a court will consider a party’s evidentiary objections to a motion for
summary judgment, ‘[o]bjections such as lack of foundation, speculation, hearsay and relevance
are duplicative of the summary judgment standard itself.’” Obesity Research Inst., LLC v. Fiber
Research Int’l, LLC, 310 F. Supp. 3d 1089, 1107 (S.D. Cal. 2018) (quoting All Star Seed v.
Nationwide Agribusiness Ins. Co., No. 12CV146 L BLM, 2014 WL 1286561, at *16–17 (S.D. Cal.
Mar. 31, 2014)). On this basis, the Court DENIES the State’s objections. See id.
– 34 –

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1

A.

2

The Court first turns to Pauma’s ten “draft compact” claims. These claims—

3

Counts 11 through 20 of the Tribe’s Second Amended Complaint—are all based on

4

the draft compact the State provided to guide the parties’ future discussions. (SAC

5

¶¶ 260–310; see also JR 245.) On March 30, 2016, the State informed the Tribe that

6

it would provide Pauma with “a complete draft document to guide our future

7

discussions within the next few weeks.” (JR 245.) Several weeks later, the State

8

transmitted a “draft compact” for Pauma’s “consideration” and said, “Please let us

9

know when you would like to discuss.” (JR 246.) This document was the first—and

10

only—draft of a new compact exchanged between the parties. As mentioned, Pauma

11

never responded to the State’s proposal before filing this action. The Tribe now

12

brings ten claims raising procedural and substantive objections to the parties’

13

negotiations predicated on this draft document.

14

The Draft Compact Claims

1.

Lack of Individualized Negotiations

15

In Count 11, Pauma raises a procedural objection to the negotiations, arguing

16

the State failed to negotiate in good faith because it “did not conduct any

17

individualized negotiations with Pauma.” (SAC ¶ 263.) The Tribe claims the State

18

“simply threw in the towel and sent Pauma a ‘complete draft [compact]’” that is

19

substantially similar to an agreement the State had negotiated with another tribe, but

20

with material changes made to Pauma’s detriment. (Id. (alteration in original).)

21

Thus, Pauma argues that “negotiations that started out with Pauma asking for

22

something unique ultimately ended with the State handing out a compact that was

23

designed for another tribe,” demonstrating a lack of good faith. (Pl.’s Mot. 23:2–3.)

24

Pauma does not show the State failed to respond to the Tribe’s request to

25

negotiate a new compact in good faith on this basis. Initially, as forecasted above,

26

the Court rejects Pauma’s characterization that the State was “wrapping up the

27

negotiations by simply offering a compact designed for another tribe.” (See Pl’s.

28

Mot. 21:12–14.) The joint record demonstrates the State was seeking to continue the
– 35 –

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1

negotiations and move them forward—not wrap them up. The State’s negotiator

2

stated the draft compact was to “guide [the parties’] future discussions.” (JR 245.)

3

In transmitting the draft, the State then asked Pauma to “[p]lease let us know when

4

you would like to discuss.” (JR 246.) The State did not express that this initial draft

5

was a final offer or anything but an initial proposal. (See JR 245–46.) Rather, it

6

appears the only reason the negotiations “ended with the State handing out a compact

7

that was” based on another tribe’s agreement is because Pauma did not respond to

8

the State’s draft. (See Pl.’s Mot. 23:2–3.) Furthermore, the State had invited the

9

Tribe to “just to take a crack” at a first draft incorporating Pauma’s requests, but it

10

appears the Tribe never did so in draft format. (See JR 48; see also, e.g., JR 54, 72,

11

143.)

12

The joint record also does not support Pauma’s criticism that the State was

13

“trying to cut off any further communication on the subject of” lottery games by

14

“relaying a generic compact offer.” (See Pl.’s Mot. 23:14–15.) A comment attached

15

to the relevant section of the draft compact notes that the “State is open, as indicated

16

in prior correspondence, to discussion regarding the authorization of additional

17

enumerated [lottery] games.” (JR 261.) Nothing prevented the Tribe from engaging

18

in further discussion with the State on the lottery games subject. Nor does State’s

19

prior letter demonstrate it was “trying to cut off any further communication” on this

20

subject. (See JR 244–45.) Simply put, Pauma’s claim that the “State flouted the

21

good faith requirement of IGRA by utterly failing to engage in negotiations that were

22

even remotely responsive to Pauma’s needs and concerns” does not survive scrutiny.

23

(See Pl.’s Mot. 23:16–18.) Hence, the Tribe fails to demonstrate a lack of good faith

24

on this basis.

25

2.

Harshness of Proposed Terms

26

Next, Pauma brings a series of claims challenging the proposed terms of the

27

draft compact. Briefly summarized, these nine claims allege the State has failed to

28

negotiate in good faith for the following reasons:
– 36 –

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1

• Count 12: The State allegedly offered Pauma less-favorable terms in its first

2

proposal than that ultimately given to a neighboring tribe as retribution for

3

Pauma’s successful lawsuit against the State concerning the 2004 Amendment.

4

(SAC ¶¶ 265–69; see also Pl.’s Mot. 23:19–28:4.)

5

• Count 13: The State’s draft of a new compact updated the waiver of sovereign

6

immunity in the 1999 Compact to limit the Tribe’s ability to obtain court-

7

ordered relief against the State in the future. (SAC ¶¶ 270–74; see also Pl.’s

8

Mot. 34:18–36:11.)

9

• Count 14: The State allegedly failed to offer more favorable terms in the draft

10

compact that make up for the State “frustrating” Pauma’s rights for eight years

11

under the 1999 Compact by unreasonably interpreting the 1999 Compact’s

12

license pool formula and inducing Pauma to enter into the now-rescinded 2004

13

Amendment. (SAC ¶¶ 275–79; see also Pl.’s Mot. 38:15–40:23.)

14

• Count 15: The State “re-conferred the exact same gaming rights under the

15

1999 Compact” in its proposal and did not offer meaningful concessions for

16

new revenue sharing demands. (SAC ¶¶ 280–84; see also Pl.’s Mot. 28:5–

17

31:17.)

18

• Count 16: The State broadened certain definitions in the draft compact to

19

allegedly allow it to assert regulatory authority over additional tribal activities.

20

(SAC ¶¶ 285–89; see also Pl.’s Mot. 31:18–34:17.)

21

• Count 17: The draft compact requires Pauma to pay into a gaming-related fund

22

(one of the same funds analyzed in Coyote Valley), but the draft does not

23

indicate the amount required, and the State has the authority to unilaterally

24

determine the amount. (SAC ¶¶ 290–94.)

25

• Count 18: The draft compact requires the Tribe to not only pay into a revenue

26

sharing fund to compensate for regulatory costs, but also enter into agreements

27

with local jurisdictions for services that mitigate the impacts of Pauma’s

28
– 37 –

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1

gaming facility, resulting in—according to Pauma—an overpayment of local

2

regulatory costs. (SAC ¶¶ 295–99.)

3

• Count 19: The draft compact requires Pauma to enter into memorandums of

4

understanding with local jurisdictions to make significant revenue sharing

5

contributions after the compact would be reviewed by the Secretary of the

6

Interior—thereby allegedly “evading the Secretarial review process.” (SAC

7

¶¶ 300–05; see also Pl.’s Mot. 36:12–38:14.)

8

• Count 20: The draft compact’s inclusion of the Special Distribution Fund

9

demands that “Pauma pay into a system whereby a state can fight one tribe

10

with monies provided by another” because the State is allegedly using these

11

funds to defend against tribal litigation. (SAC ¶¶ 306–10.)

12

In moving for summary judgment, the State argues that Pauma’s claims challenging

13

the specific terms of the draft compact are premature because the Tribe never

14

objected to these terms or responded to the State’s proposal. (Defs.’ Mot. 33:20–

15

40:11; Defs.’ Reply 13:7–14:6.)

16

The Court agrees. This Court will not wade into the granular details of a first

17

draft that was never even the subject of discussion between the parties. Pauma fails

18

to demonstrate the State refused to negotiate in good faith simply because it proposed

19

the challenged terms in a draft compact “to guide [the parties’] future discussions.”

20

(See JR 245.)

21

In Coyote Valley and Rincon, the negotiating parties engaged in a back-and-

22

forth about the terms the tribes claimed the State insisted on and refused to alter in

23

bad faith. See Rincon, 602 F.3d at 1024–25 (summarizing the State’s demands for

24

general fund revenue sharing, the tribe’s objections to these demands, and the parties’

25

counterproposals that led to “an impasse”); see also In re Indian Gaming Related

26

Cases, 147 F. Supp. 2d 1011, 1021 (N.D. Cal. 2001) (“Coyote Valley I”) (noting that

27

the tribe had “counter-offered with a modified compact that, among other things,

28

deleted the challenged provisions entirely, while . . . enlarging other aspects of the
– 38 –

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1

proposed compact favorable to it”). Here, by contrast, Pauma did not even engage

2

the State on the various terms in the draft compact that the Tribe now challenges are

3

improper and demonstrate a lack of good faith. And, “[h]aving declined to engage

4

in . . . negotiations over the challenged provisions,” Pauma “cannot reasonably assert

5

that the State’s” initial offer of those terms “constitutes a refusal to negotiate in good

6

faith.” See Coyote Valley I, 147 F. Supp. 2d at 1021–22 (rejecting a tribe’s analogous

7

challenge to the State’s refusal to alter certain terms the tribe objected to).

8

Moreover, the Court is unpersuaded by Pauma’s attempt to fit its draft compact

9

claims into the “meaningful concessions” framework employed by the Ninth Circuit

10

in Coyote Valley II and Rincon. In those cases, the State had either taken a “‘hard

11

line’ negotiation position” or had tried to “impose” taxation on the Tribe. See Rincon,

12

602 F.3d at 1032–40 (discussing these concepts and citing Coyote Valley II, where

13

the State had “insist[ed] on certain provisions”). The Ninth Circuit explained that in

14

the context of a demand for taxation, the State “‘impose[s]’ something during

15

negotiations . . . by insisting, over tribal objections, that the tribe make a given

16

concession—a concession beyond those specially authorized by [IGRA] and

17

contrary to the tribe’s sovereign interests—in order to obtain a compact.” Id. at 1031

18

(footnote omitted). Similarly, the Ninth Circuit noted that a “state may not take a

19

‘hard line’ position in IGRA negotiations when it results in a ‘take it or leave it offer’

20

to the tribe to either accept nonbeneficial provisions outside the permissible scope of

21

[IGRA’s compact topics], or go without a compact.” Id. at 1039 (emphasis omitted).

22

Here, where Pauma did not respond or object to the State’s proposed terms, it

23

cannot claim the State tried to “impose” taxation or revenue sharing “by insisting,

24

over tribal objections . . . that [Pauma] make a given concession . . . to obtain a

25

compact.” See Rincon, 602 F.3d at 1031 (emphasis added). Nor can Pauma

26

demonstrate the State took a “hard line position” on any of the terms it now

27

challenges. See id. at 1039. And because Pauma does not make this threshold

28

showing, Pauma fails to demonstrate the State’s proposal was a “take it or leave it
– 39 –

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1

offer” to Pauma to accept unfavorable provisions outside the scope of IGRA or go

2

without a compact. See id. In sum, in light of the posture of the negotiations in this

3

case, the Court finds the “meaningful concessions” framework from Coyote Valley

4

and Rincon inapposite.

5

Relatedly, the Court is also unpersuaded by Pauma’s various efforts to

6

characterize the draft compact as a final offer and then compare it to the final

7

agreements entered into between the State and other tribes. For example, Pauma

8

describes the State’s first draft “as the ultimate terms the State offered.” (Pl.’s Mot.

9

23:23.) In another instance, the Tribe labels the proposal as “the seemingly final

10

offer [the State] extended to Pauma.” (Id. 23:22–28:4.) Pauma then compares the

11

terms in the State’s proposal to the terms in the final agreement between the State

12

and the nearby Pala tribe (as well as other final tribal-state compacts). (Id. 1:21–

13

2:11, 23:22–28:4.) In doing so, the Tribe highlights, for example, that the State’s

14

first proposal to Pauma requires 8% of one form of revenue sharing whereas the

15

executed Pala compact requires only 6%. (Id. 1:27–2:3.)

16

These efforts are unconvincing.

For one, Pauma’s characterizations are

17

inaccurate. Again, the State’s “draft compact” was transmitted to “guide [the

18

parties’] future discussions,” included comments noting the State was open to further

19

discussion, and was accompanied with an e-mail asking Pauma to “[p]lease let us

20

know when you would like to discuss.” (JR 245–382.) There is no indication that

21

this proposal was the State’s best, “seemingly final,” or “ultimate” offer to Pauma.

22

In addition, the Court will not impute bad faith based on the deal another tribe

23

received when Pauma never negotiated for or requested more favorable terms. At

24

oral argument, the Tribe said it felt “boxed into a corner” and “almost checkmated”

25

by the State’s initial draft. (ECF No. 48.) When pressed to explain why Pauma chose

26

not to respond to the proposal, the Tribe said Pauma felt it would have been a “pretty

27

monumental undertaking” to obtain Pala’s comparably better terms “through the

28

course of negotiations,” and that it was “under the impression that at some point the
– 40 –

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1

negotiations have to break off if the parties felt like they had reached an impasse.”

2

(Id.) But an objective evaluation of the joint record does not substantiate these claims

3

of an impasse or Pauma being “almost checkmated” by an initial proposal sent to

4

guide the parties’ future discussions. Nor does the evidence substantiate Pauma’s

5

speculative claim that “there was zero chance the State would have reduced the

6

financial burden of the ‘complete draft [compact] through further negotiation.” (See

7

Pl.’s Opp’n 27:11–13 (alteration and emphasis in original).) The Court is therefore

8

unmoved by Pauma’s attempts to demonstrate a lack of good faith by comparing a

9

set of terms that are yet to be discussed with the specifics of final deals struck

10
11
12

between the State and other tribes. 4 (See Pl.’s Mot. 23:22–28:4.)
In sum, Pauma’s claims targeting the terms of the draft compact—Counts 12
to 20—do not demonstrate the State has failed to negotiate in good faith.

13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

4

Another one of Pauma’s efforts is to repeatedly highlight throughout its briefing and
pleadings that the State’s negotiator described the draft compact as a “complete draft document.”
In numerous instances, Pauma relies on an altered version of this phrase—“complete draft
[compact]”—to support its claims. (E.g., Pl.’s Mot. 23:2–18 (alteration in original).) In doing so,
Pauma argues “complete” means the draft document was “to the greatest extent or degree”
finished—that is, a “functionally final draft of the compact. (See id. 23:4–10.) This effort is not
convincing. Nothing prevented the Tribe from seeking to negotiate or modify the terms of the draft
compact. The document itself also shows it is not “to the greatest extent or degree” finished. The
draft compact includes comments indicating that the State is open to incorporating Pauma’s
requests to conduct new forms of gambling. (JR 247–381.) More importantly, the State expressed
that this draft was to “guide [the parties’] future discussions,” stated the draft was for Pauma’s
“consideration,” and requested that the Tribe “[p]lease let [the State] know when [it] would like to
discuss” the draft. (JR 245–46.)
Even less convincing is Pauma’s reliance on a comment attached to the draft table of
contents in the draft compact. The Tribe argues the draft compact “contained a comment bubble
at the very outset explaining that the document was ‘[t]o be finalized before singing.’” (Pl.’s 22:13–
14 (citing JR 248).) The implication Pauma asks the Court to draw is that the State was suggesting
the document is “complete” and only needs to be “finalized before signing.” (See id.) But, as
indicated, the “comment bubble” Pauma relies upon is appended to the draft compact’s “TABLE
OF CONTENTS” header. (JR 248.) Meaning, the State was commenting that the document’s
table of contents was “[t]o be finalized before signing.” (Id.) If anything, this comment undercuts
Pauma’s claims. It shows the State was anticipating that there would be changes made to the draft
compact that would require the document’s table of contents to be updated and “finalized” before
execution of the compact. (Id.)
– 41 –

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1

B.

2

Pauma claims in Count 3 that the State failed to negotiate in good faith in light

3

of the State’s response to the Tribe’s request to engage in on-track horse wagering.

4

(SAC ¶¶ 220–24.) The State argues it is entitled to summary judgment because the

5

record of negotiations demonstrates the State “repeatedly attempted to engage

6

Pauma” on this issue and “remained a willing and engaged partner for an on-track

7

horse-racing compact.” (Defs.’ Mot. 29:13–31:22; see also Defs.’ Reply 6:11–8:14.)

8

The Court agrees that Pauma fails to demonstrate a lack of good faith on this

9

basis. The State’s dealings with the Tribe concerning horse wagering do not reveal

10

the State failed to respond to Pauma’s request to negotiate a compact “in good faith.”

11

See 25 U.S.C. § 2710(d)(7)(B)(ii)(II). Pauma requested the right to conduct on-track

12

wagering, a type of Class III gaming that it cannot presently conduct under the 1999

13

Compact. (JR 2.) Although the State expressed that this type of compact had never

14

been done in California before, the State never told Pauma it would not negotiate for

15

this new gaming right. Instead, the State sought additional information about

16

Pauma’s plans and also offered to reach out to the Executive Director of the

17

California Horse Racing Board to assist the parties. (See, e.g., JR 18, 21, 22, 30.)

18

The State then brought the Executive Director to the parties’ second meeting, where

19

the participants discussed Pauma’s request. (JR 42–76.) The State also encouraged

20

Pauma to include “off-track wagering” as part of its plans, and the State informed

21

Pauma that it had worked with the Executive Director and his staff “to update the

22

older provisions” of an agreement concerning this type of wagering. (JR 46.)

Horse Wagering

23

Further along in the negotiations, the State “reached out to the National Indian

24

Gaming Commission to obtain information regarding other tribes that may be

25

conducting on-track betting.” (JR 183.) The State shared with Pauma a “Compact

26

Addendum between the Sisseton-Wahpeton Sioux Tribe and the State of North

27

Dakota addressing pari-mutuel horse racing” to serve as a reference for the parties’

28

further discussions. (Id.; JR 185–205.) The State also subsequently provided “for
– 42 –

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1

discussion a draft compact addendum that would authorize a satellite wagering

2

facility.” (JR 208; see also JR 210–21.) Finally, the State’s draft discussion compact

3

noted that the State had proposed an “OTW wagering compact that can be

4

incorporated as an Appendix or negotiated and concluded as a separate class III

5

gaming compact.” (JR 261.)

6

At the time Pauma filed this lawsuit, the Tribe had not responded to or

7

commented on the State’s sample compact from North Dakota or draft compact

8

addendum authorizing a satellite wagering facility. Nothing in the joint record

9

demonstrates the State, at the time Pauma filed this lawsuit, did not “remain[] willing

10

to meet with the tribe for further discussions” concerning horse wagering. See

11

Coyote Valley II, 331 F.3d at 1110.

12

The Court “cannot conclude from the history of negotiations recounted above

13

that . . . the State has refused to negotiate in good faith” on this basis. See Coyote

14

Valley II, 331 F.3d at 1109. Nor is the Court persuaded by Pauma’s attempts to argue

15

the State acted in bad faith. Pauma principally complains that the State insisted on

16

more details about the Tribe’s plans and did not do more to assist the Tribe in

17

navigating “the legions of horse racing regulations” in California. (See Opp’n 15:3–

18

20:26.) Having considered Pauma’s arguments in light of the joint record of

19

negotiations, none of them convincingly identify conduct that amounts to bad faith.

20

Accordingly, Pauma does not demonstrate a lack of good faith based on the State’s

21

negotiations concerning horse wagering.

22
23

C.

Additional Lottery Games
1.

The Tribe’s Request

24

Aside from its draft compact and horse wagering claims, Pauma brings a series

25

of claims related to its request to conduct additional lottery games. Under the 1999

26

Compact, Pauma is authorized to operate “any devices or games that are authorized

27

under state law to the California State Lottery, provided that the Tribe will not offer

28

such games through use of the Internet unless others in the state are permitted to do
– 43 –

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1

so under state and federal law.” (1999 Compact § 4.1(c).) Upon seeking to negotiate

2

a new compact, Pauma asked for the “right to conduct any [lottery] games that are

3

not currently authorized under State law to the California State Lottery.” (JR 2.)

4

Lotteries are a type of Class III gaming under IGRA. Seminole Tribe of Fla.,

5

517 U.S. at 48. Class III gaming activities are “lawful on Indian lands only if such

6

activities are . . . located in a State that permits such gaming for any purpose by any

7

person, organization, or entity . . . .” 25 U.S.C. § 2710(d)(1)(B). “Consequently,

8

where a state does not ‘permit’ gaming activities sought by a tribe, the tribe has no

9

right to engage in these activities, and the state thus has no duty to negotiate with

10

respect to them.” Rumsey Indian Rancheria of Wintun Indians v. Wilson, 64 F.3d

11

1250, 1256 (9th Cir. 1994). Stated differently, “a state need only allow Indian tribes

12

to operate games that others can operate, but need not give tribes what others cannot

13

have.” Id. at 1258.

14

In California, lotteries are generally prohibited. Section 19(a) of the California

15

Constitution provides: “The Legislature has no power to authorize lotteries, and shall

16

prohibit the sale of lottery tickets in the State.” Cal. Const. art. IV, § 19; see also

17

Cal. Penal Code §§ 320–26 (broadly prohibiting the operation of lotteries).

18

Notwithstanding this general prohibition, however, the California Constitution

19

authorizes “the establishment of a California State Lottery.” Id. § 19(d).

20

The State’s corresponding Lottery Act creates the California State Lottery,

21

with its revenues to be “allocated for public education in California.” Cal. Gov’t

22

Code § 8880.1. The State Lottery is limited to operating “lottery games.” See id. §

23

8880.12 (defining a “Lottery Game” for purposes of the Lottery Act); W. Telcon, Inc.

24

v. Cal. State Lottery, 13 Cal. 4th 475, 483 (1996) (noting the State Lottery “agrees it

25

is restricted to operating lottery games”). A “‘Lottery Game’ means any procedure

26

authorized by the [State Lottery Commission] whereby prizes are distributed among

27

persons who have paid, or who have unconditionally agreed to pay, for tickets or

28

shares which provide the opportunity to win those prizes.” Cal. Gov’t Code §
– 44 –

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1

8880.12. “The Lottery Act’s only express limitations on the types of lottery games

2

the commission may authorize are contained in [California] Government Code

3

section 8880.28.” W. Telcon, 13 Cal. 4th at 482. These limitations include that “[n]o

4

lottery game may use the theme of bingo, roulette, dice, baccarat, blackjack, Lucky

5

7’s, draw poker, slot machines, or dog racing,” and that “[i]n games utilizing

6

computer terminals or other devices, no coins or currency shall be dispensed as prizes

7

to players from these computer terminals or devices.”

8

8880.28(a)(1), (3).

9

Cal. Gov’t Code §

The California Constitution’s tribal gaming provision also provides an

10

exception to the State’s general prohibition on lotteries. This provision states:

11

15

[T]he Governor is authorized to negotiate and conclude compacts . . .
for the operation of slot machines and for the conduct of lottery games
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.

16

Cal. Const. art. IV, § 19(f). This authorization served as the basis for the 1999

17

Compact, which allows tribes like Pauma to engage in casino-style gambling.

18

Artichoke Joe’s California Grand Casino v. Norton, 353 F.3d 712, 717–18 (9th Cir.

19

2003). In Artichoke Joe’s, several California card clubs and charities challenged

20

whether this segment of the California Constitution satisfies IGRA’s requirement

21

that for Class III gaming to be lawful, the gaming activities must be “located in a

22

State that permits such gaming for any purpose by any person, organization, or entity

23

. . . .” Id. at 720; see also 25 U.S.C. § 2710(d)(1)(B). Their challenge required the

24

Ninth Circuit to resolve whether “‘any person, organization, or entity’ should be read

25

to exclude Indian tribes.” Artichoke Joe’s, 353 F.3d at 720. The Ninth Circuit

26

concluded that a tribe is an “entity,” and therefore the relevant portion of the

27

California Constitution “‘permits’ class III gaming within the meaning of IGRA by

12
13
14

28
– 45 –

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1

legalizing such gaming operations only when conducted by the ‘entity’ of an Indian

2

tribe.” Id. at 731.

3

In light of this background, Pauma argued to the State that it has the right to

4

conduct “lottery games” beyond those authorized to the California State Lottery. (JR

5

2–3.) In the Tribe’s view, because “lottery games . . . are . . . permitted to be

6

conducted and operated on tribal lands subject to [gaming] compacts,” California is

7

required under IGRA to negotiate with Pauma to allow it to conduct all “lottery

8

games,” not just those “lottery games” conducted by the California State Lottery.

9

(See JR 18.)

10

2.

Lottery Games Claims

11

Pauma brings nine interrelated claims based on this request for additional

12

lottery games. (SAC ¶¶ 210–54; see also Pl.’s Mot. 4:23–18:20.) In Count 1, the

13

Tribe alleges the State has engaged in “surface bargaining” by employing “dilatory

14

tactics or other forms of ‘sophisticated pretense’ to avoid reaching an agreement on”

15

the lottery games issue. (See SAC ¶ 12 (quoting Farnsworth on Contracts § 3.26c –

16

Meaning of Fair Dealing (4th ed. 2003)); see also Pl.’s Mot. 4:23–8:13 (focusing on

17

the lottery games issue).) The Tribe argues the joint record shows that after Pauma

18

requested additional lottery games, “the State did everything in its power to avoid

19

discussing those [gaming] rights for the next five-hundred-plus days.” (Pl.’s Mot.

20

4:27–5:1.) Count 2 relatedly alleges the State has failed to negotiate in good faith

21

because it is trying to protect the California State Lottery from increased tribal

22

competition. (SAC ¶¶ 215–19.)

23

Next, in Counts 4 through 8, Pauma alleges the State has negotiated in bad

24

faith because it has refused to negotiate for certain types of lottery games: (i) those

25

games not authorized to the California State Lottery, (Count 4, SAC ¶¶ 225–29); (ii)

26

video lottery terminals, (Count 5, SAC ¶¶ 230–34); (iii) video lottery terminals that

27

dispense coins or currency, (Count 6, SAC ¶¶ 235–39); (iv) games based on a tribal

28

lottery system, (Count 7, SAC ¶¶ 240–44); and (v) games authorized to the Multi– 46 –

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1

State Lottery Association or any other state, (Count 8, SAC ¶¶ 245–49). (See also

2

Pl.’s Mot. 11:15–16:23.) Finally, in Count 9, Pauma claims the State negotiated in

3

bad faith by not substantiating its position on whether Pauma can conduct additional

4

lottery games. (SAC ¶¶ 250–54; see also Pl.’s Mot. 16:24–18:20.)

5

The State argues that “[r]egardless of these claims’ multiple lottery-game

6

labels, none shows any failure by the State to negotiate in good faith under IGRA,”

7

and “the record of negotiations demonstrates that at all times the State was willing to

8

negotiate with Pauma over lottery games.” (Defs.’ Mot. 26:4–7; see also id. 26:1–

9

29:12, 31:23–32:4; Defs.’ Reply 3:20–6:10.) Ultimately, the Court agrees. The

10

parties’ incomplete negotiations over lottery games do not demonstrate the State has

11

failed to respond “in good faith” to Pauma’s request to negotiate a new compact. See

12

25 U.S.C. § 2710(d)(7)(B)(ii)(II).

13

At the threshold, like with other topics in the parties’ negotiations, the Court

14

notes the joint record does not demonstrate the parties “reached an impasse” on the

15

lottery games issue.

16

Consolidators, Inc. v. Wholesale & Retail Food Distribution, Teamsters Local 63,

17

849 F.2d 1236, 1241 (9th Cir. 1988) (“A bargaining impasse occurs when the parties

18

could well conclude that there was no realistic prospect that continuation of

19

discussion at that time would have been fruitful.” (citation and quotation marks

20

omitted).) Pauma claims otherwise in its briefing, (see Pl.’s Mot. 16:24–26), and

21

Pauma advanced a similar claim at oral argument, but the Court is unconvinced.

See Rincon, 602 F.3d at 1026; see also LAWI/CSA

22

Pauma’s last two communications to the State (1) expressed the Tribe’s

23

preference “to conduct the negotiations in a piecemeal fashion,” (2) articulated

24

Pauma’s position on additional lottery games, and (3) communicated that the State

25

“has not indicated whether it is willing to negotiate for the requested lottery games,

26

let alone begin to draft compact language.” (JR 239–43.) In response, the State

27

objected to Pauma’s preference to conduct piecemeal negotiations and provided its

28

position on additional lottery games:
– 47 –

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1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17

The grant of authority to the Governor to negotiate for lottery games
under . . . the California Constitution has always been understood to
encompass those games authorized for play by the California State
Lottery. This was the intent and understanding of the language
proposed by tribal negotiators and presented to the voters as they
considered the amendment to the California Constitution.
However, the State is willing to negotiate to authorize Pauma to offer
certain additional lottery games to be enumerated in the compact.
Specifying the games provides clarity as to the scope of the
authorization, avoids future disputes between the parties, and mitigates
the risk of running afoul of other prohibitions on how lottery games may
be conducted, such as the keno game offered by the California State
Lottery that was found to be an illegal banked game by the Supreme
Court in Western Telcon, Inc. v. California State Lottery (1996) 13
Cal.4th 45.
To be clear, the State is not conceding that it has an obligation to
negotiate for all lottery games enumerated in your January 27, 2016
letter (other than those authorized to the California State Lottery).
Furthermore, the State expressly takes issue with Pauma’s ability under
IGRA to seek to negotiate “devices or games that are authorized to any
other state lottery or any other multi-state lottery association,” “lottery
games that are played on video terminals,” “tribal lottery systems” or
other lottery systems to the extent operated or conducted off tribal lands,
and “video lottery games that dispense coins or currency.”

18
19

(JR 244–45.) Pauma did not respond to the State’s negotiation position. And as

20

mentioned several times, the State’s proposed draft compact that was transmitted

21

several weeks later expressed that the “State [was] open, as indicated in prior

22

correspondence, to discussion regarding the authorization of additional enumerated

23

[lottery] games.” (JR 261.) In light of the foregoing, the parties did not reach an

24

impasse on the lottery games issue. See Rincon, 602 F.3d at 1026. Rather, the State’s

25

letter—as well as the notation in its first draft of the parties’ new compact provided

26

to guide their discussions—indicates the State remained willing to continue

27

negotiating with Pauma on this issue. See Coyote Valley, 331 F.3d at 1110. That the

28
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1

State was open to further negotiation on the lottery games issue undercuts Pauma’s

2

various claims alleging the State failed to negotiate in good faith on this basis.

3

Moreover, the Court is unpersuaded by Pauma’s arguments that the State

4

failed to negotiate in good faith because it engaged in “shadow boxing” and “refused”

5

to negotiate for particular subsets of lottery games. In advancing its “shadow

6

boxing” count, Pauma claims the State engaged in bad faith because the State

7

“simply sen[t] Pauma” a draft compact “that simply omitted any new games” after

8

the parties’ back-and-forth on the lottery games topic. (SAC ¶ 218; see also SAC ¶¶

9

228, 223, 238, 243, 248, 253 (repeatedly highlighting that the State sent Pauma a

10

draft compact “that simply re-conveys the same gaming rights as the 1999

11

Compact”).) The Tribe similarly argues the focus should be “on answering questions

12

like ‘why did the State send Pauma a “complete draft [compact]” five hundred and

13

twenty-two days into the negotiations that was mum on both new forms of gaming

14

that instigated the talks?’” (Pl.’s Opp’n 24:6–8 (alteration in original).) But the draft

15

compact provided to guide the parties’ further discussions is not silent on the Tribe’s

16

request for new lottery games. The relevant portion of the draft has a comment

17

stating that the “State is open, as indicated in prior correspondence, to discussion

18

regarding the authorization of additional enumerated games.”5 (JR 261.)

19

Similarly unpersuasive is Pauma’s repeated emphasis on the “five hundred and

20

twenty-two day[]” length of the negotiations to support its allegations concerning the

21

lottery games issue. (See, e.g., Pl.’s Mot. 4:23–28.) Pauma requested the parties

22

negotiate a new compact shortly before Thanksgiving in 2015, (JR 1), and the final

23

communication in the joint record is dated April 28, 2016, (JR 246). Like in Coyote

24

Valley, “the record reflects that both parties at times were less than diligent” in

25
26
27
28

5

For the same reasons, the record does not validate Pauma’s claim that the State “sought to
block all new lottery games solely on the conjectural basis that one of them could run afoul of the
law at some point in the future.” (Pl.’s Opp’n 14:13–15 (emphasis in original).) Again, the State
said it was “willing” and “open” to negotiating certain additional lottery games to be enumerated
in the compact. (JR 244, 261.)
– 49 –

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1

seeking to move the negotiations forward, particularly because of the State and

2

Pauma’s ongoing litigation concerning the 2004 Amendment. See 147 F. Supp. 2d

3

at 1015. For example, the State’s summary of the parties’ January 30, 2015, meeting

4

reports that the parties “discussed scheduling [their] next meeting in approximately

5

May 2015, as the parties’ participating attorneys [would] face appellate briefing

6

deadlines over the next few months.” (JR 20.) Then, in the next communication

7

dated May 8, 2015, Pauma requested the negotiations be delayed for another few

8

months because “the recent orders in the pending compact litigation have essentially

9

guaranteed that [the parties’] attorneys will be largely preoccupied until the oral

10

argument scheduled for July 10, 2015.” (See JR 25.) The parties did not meet until

11

September 8, 2015—more than six months after their first meeting. (JR 38.)

12

Similarly, when the State was slow to respond to Pauma’s January 27, 2016, letter,

13

the State noted on March 30, 2016:

14
15
16
17
18
19

The State’s compact negotiating team is currently in negotiations with
over forty other California tribes and this necessarily impacts our
scheduling of meetings and response time. In addition to compact
negotiations, Pauma and the State continue to actively work on the
litigation currently pending at every level of the federal courts and have
recently filed significant pleadings. We are committed to moving these
negotiations forward but also understand if the Tribe prefers, as it has
previously, to defer some negotiation matters until there is a break in
the litigation.

20
21

(JR 245.) Hence, Pauma’s emphasis on the total length of the negotiations paints an

22

incomplete picture of the joint record.6 Overall, having reviewed the joint record,

23

“[a]ny delays that may have been caused by the State do not rise to the level of bad

24
25
26
27
28

6

In the same vein, the Court disapproves of Pauma characterizing the State as “enter[ing]
month ten of its efforts to stall the discussions” at the second negotiation session. (See Pl.’s Opp’n
24:15–17.) As recounted above, the parties did not meet for approximately six months between
the first and second meetings—in part due to Pauma’s request to delay the second meeting because
of the ongoing 2004 Amendment litigation. (JR 25.)
– 50 –

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1

faith.” See Coyote Valley I, 147 F. Supp. 2d at 1015; cf. Rincon, 602 F.3d at 1024–

2

26 (summarizing a course of negotiations that spanned from 2003 to 2006).

3

Further, Pauma’s claims centered on the State’s “refusal to negotiate for”

4

certain categories of lottery games do not demonstrate the State failed to negotiate in

5

good faith. (See SAC ¶¶ 225–49.) The State expressed a willingness to negotiate for

6

additional games, including those not authorized by the California State Lottery.

7

(See JR 244, 261.) And, although the State informed Pauma that it “expressly takes

8

issue” with certain remaining categories of new lottery games, the Court is not

9

persuaded that the State’s conduct amounts to a lack of good faith—or that the parties

10

had even reached an impasse on these other categories of new games. (See JR 244–

11

45.) Cf. Rumsey, 64 F.3d at 1255 (noting the State “refused to negotiate with the

12

tribes” concerning “certain stand-alone electronic gaming devices and live banking

13

and percentage card games”); see also Mashantucket Pequot Tribe v. State of Conn.,

14

913 F.2d 1024, 1027, 1026 & n.2, 1032 (2d Cir. 1990) (noting the State “wholly

15

fail[ed] to negotiate” when it “never entered into actual negotiations with the Tribe”

16

following its request to “expand its gaming activities to include class III games of

17

chance, such as” blackjack and poker).

18

Nor does the joint record adequately support the conclusion that the State

19

failed to negotiate in good faith because it employed a “protectionist strategy” aimed

20

at safeguarding the “revenue stream of the State Lottery.” (See SAC ¶ 218.) The

21

Court is unpersuaded that the parties’ back-and-forth in the second negotiation

22

session demonstrates the State’s representatives “insinuated that . . . they were

23

engaging in [protectionism] to protect the revenue stream of the State Lottery.” (See

24

SAC ¶ 218; see also JR 89–90 (“I’m not suggesting we would do that.”).) And the

25

State subsequently said it “is willing to negotiate to authorize Pauma to offer certain

26

additional lottery games to be enumerated in the compact.” (JR 244; see also JR

27

261.) If agreeing to negotiate to allow Pauma to offer new games beyond that

28

conducted by the California State Lottery is part of the State’s protectionist strategy,
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it is a poor one. The Court cannot conclude the State has failed to respond “in good

2

faith” to Pauma’s request to negotiate a new compact on this basis. See 25 U.S.C. §

3

2710(d)(7)(B)(ii)(II).

4

The Court reaches the same conclusion for Pauma’s claim concerning the

5

State’s alleged failure to substantiate its position on additional lottery games. Pauma

6

assigns significant weight to the State negotiator’s statement that “[t]he grant of

7

authority to the Governor to negotiate for lottery games under article IV, section 19,

8

subdivision (f) of the California Constitution has always been understood to

9

encompass those games authorized for play by the California State Lottery.” (JR

10

244; see also SAC ¶ 253; Pl.’s Mot. 16:24–18:20.) Pauma argues the State’s “ability

11

to throw out this baseless claim without any sort of corrective check allowed the State

12

to shut down all discussion on lottery games and leave the negotiations in a hopeless

13

morass.” (Pl.’s Mot. 18:16–18.) But, as outlined above, the State did not “shut down

14

all discussion on lottery games.” The next sentence of the State’s letter provides:

15

“However, the State is willing to negotiate to authorize Pauma to offer certain

16

additional lottery games to be enumerated in the compact.” (JR 244.) Further, the

17

State’s proposed draft compact, which is attached to the most recent communication

18

in the negotiations, similarly expressed that the “State is open, as indicated in prior

19

correspondence, to discussion regarding the authorization of additional enumerated

20

games.” (JR 261.) In light of the foregoing, Pauma does not demonstrate a lack of

21

good faith on this basis.

22

In sum, Pauma’s lottery games claims based on the parties’ incomplete

23

negotiations are unconvincing. After Pauma pressed the State on this issue, the State

24

agreed to negotiate for certain additional lottery games and took “issue” with several

25

other categories of new games. The Tribe, having received the State’s position on

26

this topic, never responded to it. And Pauma’s efforts to portray the State as seeking

27

to shut down negotiation on this topic are unconvincing.

28

concludes the evidence concerning lottery games does not show the State has failed
– 52 –

Overall, the Court

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to respond to Pauma’s request to negotiate a new compact “in good faith.” See 25

2

U.S.C. § 2710(d)(7)(B)(ii)(II).

3

D.

4

Pauma’s remaining claim alleges the State negotiated in bad faith by erecting

5

procedural barriers to hinder the parties’ negotiations. (SAC ¶¶ 255–59.) This claim

6

centers on the parties’ dispute concerning the scope of negotiations that is outlined

7

above. (See id.; see also Pl.’s Mot. 18:21–21:11.) To recap, the parties sparred over

8

whether Pauma’s request to offer two new forms of gaming under the 1999

9

Compact’s renegotiation provision—Section 12.1—subjected all of the compact’s

10

terms to renegotiation. The parties resolved their dispute, decided to proceed under

11

the amendment provision—Section 12.2—and agreed that “the entire compact” is up

12

for negotiation. (JR 238.) Having secured the State’s agreement that the entire

13

compact is subject to negotiation, Pauma then informed the State that the Tribe

14

“prefers to conduct the negotiations in a piecemeal fashion, focusing on one material

15

issue and then moving on to the next only after the parties have largely agreed on

16

language for the final compact.”

17

negotiations in this fashion, provided its position on Pauma’s lottery games request,

18

and transmitted a draft compact to guide the parties’ future discussions. (JR 244–

19

46.) The negotiations then ended.

Scope of Negotiations

(JR 239.)

The State declined to conduct

20

In Count 10, the Tribe alleges the State’s “negotiator used this change in the

21

basis for the negotiations to shift the discussion from what the State would give to

22

what it would receive.” (SAC ¶ 258.) “As a consequence,” in Pauma’s view, the

23

State’s negotiator “simply transmitted a ‘complete draft [compact]’ to Pauma that the

24

State had prepared for another tribe that incorporates legions of new regulations

25

while simply reconveying the same gaming rights of the 1999 Compact (i.e., slot

26

machines, house banked card games, and only those lottery games that the State

27

Lottery has authorized itself to offer).” (Id. (alteration in original).)

28
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The Court is unpersuaded that this claim demonstrates a lack of good faith.

2

Although the parties’ disagreement concerning the scope of negotiations may have

3

caused a delay in their discussions, the joint record reveals the parties resolved this

4

dispute and pressed onwards—with Pauma then seeking to focus on a single issue,

5

and the State seeking to negotiate the entire compact. (JR 234–38.) The Court also

6

notes that during the parties’ dispute concerning the scope of negotiations, the State

7

continued to engage Pauma on the lottery games and horse wagering issues. (JR

8

183–84, 208–09.) Overall, “[a]ny delays that may have been caused by the State

9

[regarding this issue] do not rise to the level of bad faith.” See Coyote Valley I, 147

10

F. Supp. 2d at 1015. Accordingly, when considering the balance of the parties’

11

negotiations, the State’s conduct regarding the scope of negotiations does not

12

demonstrate the State has failed to respond to Pauma’s request to negotiate a new

13

compact “in good faith.” See 25 U.S.C. § 2710(d)(7)(B)(ii)(II).

14

***

15

In sum, having considered all of Pauma’s twenty bad faith negotiation claims,

16

the Court “cannot conclude from the history of negotiations recounted above

17

that . . . the State has refused to negotiate in good faith.” See Coyote Valley II, 331

18

F.3d at 1109; see also 25 U.S.C. § 2710(d)(7)(B)(ii)(II). The Court therefore denies

19

Pauma’s motion for summary judgment and grants the State’s cross-motion. See

20

Coyote Valley II, 331 F.3d at 1095, 1009, 1117 (concluding “that the State has

21

negotiated in good faith” and affirming the district court’s decision to “den[y] the

22

[tribe’s] motion and enter[] judgment for the State”).

23

RULE 54(b) DETERMINATION

24

Having resolved the parties’ cross-motions for summary judgment on Pauma’s

25

bad faith claims, the Court considers their request to enter a final and appealable

26

judgment on these claims. (Joint Mot. 2:19–24, ECF No. 28.) “A district court order

27

is . . . not appealable unless it disposes of all claims as to all parties or unless judgment

28

is entered in compliance with Federal Rule of Civil Procedure 54(b). Romoland Sch.
– 54 –

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Dist. v. Inland Empire Energy Ctr., LLC, 548 F.3d 738, 747 (9th Cir. 2008). This

2

Court’s resolution of the parties’ cross-motions does not dispose of this action in its

3

entirety—Pauma also brings two claims against the State for breach of the 1999

4

Compact. (SAC ¶¶ 311–20.) Hence, the Court turns to Rule 54(b). This rule

5

provides:

6

10

When an action presents more than one claim for relief . . . , the court
may direct entry of a final judgment as to one or more, but fewer than
all, claims . . . only if the court expressly determines that there is no just
reason for delay. Otherwise, any order or other decision, however
designated, that adjudicates fewer than all the claims . . . does not end
the action as to any of the claims . . . and may be revised at any time
before the entry of a judgment adjudicating all the claims[.]

11

Fed. R. Civ. P. 54(b). “Thus, as Rule 54(b) makes plain, “[f]inality is achieved only

12

if the court takes each of two steps—it must make an ‘express determination that

13

there is no just reason for delay’ and it also must make ‘an express direction for the

14

entry of judgment.’” United States v. Gila Valley Irrigation Dist., 859 F.3d 789, 797

15

(9th Cir. 2017) (quoting 15A Charles Alan Wright, Arthur R. Miller & Edward H.

16

Cooper, Federal Practice and Procedure: Jurisdiction and Related Matters § 3914.7

17

(2d ed. 1991)).

7
8
9

18

Rule 54(b) “was adopted ‘specifically to avoid the possible injustice of

19

delay[ing] judgment o[n] a distinctly separate claim [pending] adjudication of the

20

entire case . . . . The Rule thus aimed to augment, not diminish, appeal opportunity.’”

21

Jewel v. Nat’l Sec. Agency, 810 F.3d 622, 628 (9th Cir. 2015) (alterations in original)

22

(quoting Gelboim v. Bank of Am. Corp., --- U.S. ---, 135 S. Ct. 897, 902–03 (2015)).

23

Although the Supreme Court “has eschewed setting narrow guidelines for district

24

courts to follow” when applying Rule 54(b), the Court has discussed “factors that

25

may inform a judge’s decision.” Wood v. GCC Bend, LLC, 422 F.3d 873, 878 n.2

26

(9th Cir. 2005).

27

Initially, “a district court must take into account judicial administrative

28

interests” to “assure that application of the Rule effectively ‘preserves the historic
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1

federal policy against piecemeal appeals.’” Curtiss-Wright Corp. v. Gen. Elec. Co.,

2

446 U.S. 1, 8 (1980) (quoting Sears, Roebuck & Co. v. Mackey, 351 U.S. 427, 438

3

(1956)). In doing so, the court may consider “whether the claims under review were

4

separable from the others remaining to be adjudicated and whether the nature of the

5

claims already determined was such that no appellate court would have to decide the

6

same issues more than once even if there were subsequent appeals.” Id. In addition,

7

the district court should assess the equities of the case to determine whether there is

8

a just reason for delay. See Wood, 422 F.3d at 882 n.7; see also Curtiss–Wright, 446

9

U.S. at 8, 10 (recognizing the winning party’s financial stake in an early outcome as

10

one of the equities the district court may consider under Rule 54(b)).

11

The Court finds entering a final judgment under Rule 54(b) on Pauma’s bad

12

faith negotiation claims is appropriate.

13

administrative interests, the Court notes that Pauma’s bad faith claims are

14

analytically distinct from the Tribe’s remaining two claims. While the first group of

15

claims addresses the requirement to negotiate in good faith under IGRA, the

16

remaining two claims are essentially breach of contract claims. There is some

17

overlap in the backstory for these two sets of claims, but even if there is a subsequent

18

appeal, an appellate court would not have to decide the same issues. In addition,

19

having assessed the equities, the Court does not discern any just reason for delay.

20

Consequently, the Court will direct entry of final judgment on Pauma’s bad faith

21

negotiation claims. See Fed. R. Civ. P. 54(b).

22

//

23

//

24

//

25

//

26

//

27

//

28

//
– 56 –

First, in considering the judicial

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1

CONCLUSION

2

In light of the foregoing, the Court DENIES Pauma’s motion for summary

3

judgment (ECF No. 37) and GRANTS the State’s cross-motion for summary

4

judgment (ECF No. 36). Further, the Clerk of the Court shall enter a final judgment

5

under Federal Rule of Civil Procedure 54(b) on Counts 1 through 20 of Pauma’s

6

Second Amended Complaint (ECF No. 27) in favor of the State and against Pauma.

7

IT IS SO ORDERED.

8
9

DATED: September 28, 2018

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– 57 –

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