Pueblo of Isleta et al v. Martinez et al
Filing
125
ORDER by Magistrate Judge Kirtan Khalsa denying 55 Motion for Summary Judgment; granting 67 Motion for Summary Judgment and granting 68 Motion for Summary Judgment; denying as moot 81 Motion to Compel, 84 Motion for Protective Order, and 102 Motion for Settlement (KK)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW MEXICO
PUEBLO OF ISLETA et al.,
Plaintiffs,
vs.
Civ. No. 17-654 KG/KK
MICHELLE LUJAN GRISHAM 1 et al.,
Defendants.
MEMORANDUM OPINION AND ORDER
THIS MATTER is before the Court on: (1) Defendants’ Motion for Summary Judgment on
the Issue of Arbitrability (Doc. 55) (“Defendants’ Summary Judgment Motion”), filed January 4,
2018; (2) Plaintiffs-in-Intervention Santa Ana, Santa Clara and San Felipe’s and Plaintiff Tesuque’s
Motion for Summary Judgment (Doc. 67), and Plaintiffs Pueblo of Isleta’s and Pueblo of Sandia’s
Motion for Summary Judgment and Supporting Authorities (Doc. 68) (collectively, “Pueblos’
Summary Judgment Motions”), both filed April 10, 2018; (3) Defendants’ Motion to Compel
Discovery and for Sanctions (Doc. 81) (“Defendants’ Motion to Compel”), filed June 8, 2018; (4)
Plaintiffs’ and Plaintiffs-in-Intervention’s Consolidated Motion for Protective Order to Quash
Defendants’ Rule 30(b)(6) Deposition Notices (Doc. 84) (“Pueblos’ Motion for Protective Order”),
filed June 20, 2018; and (5) Defendants’ Motion for Settlement Conference Pursuant to Rule 16
(Doc. 102) (“Defendants’ Motion for Settlement Conference”), filed October 3, 2018. 2
1
Pursuant to Federal Rule of Civil Procedure 25(d), Governor Lujan Grisham has been automatically substituted for
former Governor Susana Martinez.
2
Defendants’ Summary Judgment Motion and the Pueblos’ Summary Judgment Motions are before the Court pursuant
to the Notice, Consent, and Reference of Dispositive Motions to a Magistrate Judge filed in this case on October 16,
2018. (Doc. 105.) The remaining motions, which are nondispositive, are before the Court pursuant to Local Rule of
Civil Procedure 73.1(a). D.N.M.LR-Civ. 73.1(a); see also Fed. R. Civ. P. 72(a).
1
Having reviewed the parties’ submissions, the record, and the relevant law, and for the
reasons set forth below, the Court finds that: (1) Defendants’ Summary Judgment Motion should
be DENIED; (2) the Pueblos’ Summary Judgment Motions should be GRANTED; and, (3)
Defendants’ Motion to Compel, the Pueblos’ Motion for Protective Order, and Defendants’ Motion
for Settlement Conference should be DENIED AS MOOT.
I.
INTRODUCTION
Plaintiffs the Pueblos of Isleta, Sandia, and Tesuque, and Plaintiffs-in-Intervention the
Pueblos of Santa Ana, Santa Clara, and San Felipe (collectively, “the Pueblos”), are six (6) federally
recognized Indian tribes that operate casinos in New Mexico pursuant to identical gaming compacts
with the State of New Mexico (“the State”). (Doc. 67-1 at 6; Doc. 68 at 10; Doc. 99 at 6-7.)
Defendants are the State Governor, the State Gaming Representative, and the Chair and members
of the State Gaming Control Board (“NMGCB”) in their official capacities. (Doc. 67-1 at 6-7; Doc.
68 at 10; Doc. 99 at 6-7.) The Pueblos and the State entered into gaming compacts in 2007 (“2007
Compacts”), and again in 2015 and 2016 (“2015 Compacts”). Inter alia, the compacts require the
Pueblos to make quarterly revenue sharing payments to the State, in exchange for the Pueblos’
nearly exclusive right to conduct certain kinds of gaming in New Mexico. (Doc. 67-3 at 20; Doc.
68-3 at 27.)
In 2017, Defendants sent the Pueblos notices of non-compliance and notices to cease
conduct, asserting that the Pueblos had miscalculated their revenue sharing obligations under the
2007 Compacts beginning as early as April 2011. (See, e.g., Docs. 1-8, 1-9, 1-10.) Specifically,
Defendants claimed that, in calculating their revenue sharing payments, the Pueblos had improperly
excluded the face value of free play and deducted the value of prizes won by patrons as a result of
2
free play wagers from their Class III gaming machines’ “Net Win.” 3 (Id.) Pursuant to the 2015
Compacts, which preserved Defendants’ claims, Defendants instructed the Pueblos to make
additional revenue sharing payments to the State under the 2007 Compacts. (Id.)
The Pueblos of Isleta, Sandia, and Tesuque filed this civil action on June 19, 2017 in
response to Defendants’ notices. (Doc. 1.) The Pueblos of Santa Ana and Santa Clara intervened
on June 29, 2017, and the Pueblo of San Felipe intervened on August 31, 2017. (Docs. 11, 36.) In
their complaints, the Pueblos ask the Court for a judgment declaring that: (1) Defendants’ claims
pursuant to the 2015 Compacts for additional revenue sharing payments under the 2007 Compacts 4
violate federal law, and the 2015 Compacts are therefore invalid and ineffective to preserve
Defendants’ unlawful claims, (Doc. 1 at 32-33); (2) neither the Pueblos’ claims in this lawsuit nor
Defendants’ claims for additional revenue sharing payments are subject to arbitration under the
2015 Compacts, (id. at 33); and, (3) Defendants have no authority as a matter of federal law to
pursue their claims for additional revenue sharing payments against the Pueblos. (Doc. 11 at 12;
Doc. 36 at 12.) The Pueblos further ask the Court to enjoin Defendants from: (1) continuing to
violate federal law by seeking to impose a tax, fee, charge, or other assessment on the Pueblos in
the guise of asserting claims for additional revenue sharing payments under the 2007 and 2015
3
As used in this Memorandum Opinion and Order, the term “free play” refers to play on a Class III gaming machine
initiated by points or credits that the casino provided to the patron without consideration, and which have no cash
redemption value. (Cf. Doc. 1-3 at 6.) “Free play” includes but is not limited to “point play,” i.e., play on a Class III
Gaming Machine initiated by points earned or accrued by a patron through previous gaming machine play, players’
clubs, or any other method, and which have no cash redemption value. (Cf. id.) “Free play” as used in this
Memorandum Opinion and Order excludes play initiated by points or credits that can be redeemed for cash or
merchandise.
4
As used in this Memorandum Opinion and Order, the phrase “Defendants’ claims for additional revenue sharing
payments” refers specifically to Defendants’ claims pursuant to the 2015 Compacts that the Pueblos owe the State
additional revenue sharing payments under the 2007 Compacts because they did not include the face value of free play,
and deducted the value of prizes won by patrons as a result of free play wagers, from their Net Win from 2011 to 2016.
Any other claims Defendants may have for additional revenue sharing payments are not before the Court in this civil
action.
3
Compacts, (Doc. 1 at 34); (2) continuing their efforts to arbitrate the dispute over their claims that
free play must be treated as revenue under the 2015 or 2007 Compacts, (id.); and, (3) taking any
other action to attempt to enforce their unlawful claims against the Pueblos. (Doc. 11 at 12; Doc.
36 at 12); see Muscogee (Creek) Nation v. Pruitt, 669 F.3d 1159, 1166 (10th Cir. 2012) (“[U]nder
Ex Parte Young, [209 U.S. 123 (1908)], a plaintiff may bring suit against individual state officers
acting in their official capacities if the complaint alleges an ongoing violation of federal law and
the plaintiff seeks prospective relief.”).
II.
FACTS 5
The Pueblos and the State entered into the 2007 Compacts pursuant to the Indian Gaming
Regulatory Act (“IGRA”), 25 U.S.C. §§ 2701 et seq. (Doc. 55 at 3; Doc. 67-1 at 6; Doc. 68 at 12;
Doc. 99 at 6-7, 10). Additionally, the State executed the 2007 Compacts pursuant to the New
Mexico Compact Negotiation Act, N.M. Stat. Ann. §§ 11-13A-1 et seq., which provides that the
Governor will approve and sign compacts “identical to a compact . . . previously approved by the
legislature except for the name of the compacting tribe[.]” N.M. Stat. Ann. § 11-13A-4(J); (Doc.
68 at 12 n.6). Thus, the terms of each of the 2007 Compacts are identical except for the Pueblos’
names. (Doc. 55 at 3; Doc. 67-1 at 7; Doc. 68 at 12 n.6; Doc. 99 at 6-7.)
The 2007 Compacts authorized the Pueblos to conduct “any or all forms of Class III
Gaming” on Indian Lands in New Mexico and to establish the “betting and pot limits, applicable to
such gaming.” (Doc. 67-3 at 8; Doc. 68 at 7, 12; Doc. 68-2; Doc. 99 at 7.) Authorized forms of
Class III gaming included gaming machines played “upon insertion of a coin, token or similar
5
Unless otherwise noted, the Court has determined that the following facts are undisputed based on its review of the
parties’ briefs, admissible evidence in the record, and the relevant law. By separate order, the Court has excluded
portions of the Affidavit of Craig S. Telle, JD, CFE, attached to Defendants’ response to the Pueblos’ Summary
Judgment Motions. (Doc. 99-12.)
4
object, or upon payment of any consideration in any manner.” (Doc. 67-3 at 3-4; Doc. 68 at 12-13;
Doc. 99 at 7.)
Subsection 4(C) of the 2007 Compacts provided in pertinent part:
Audit and Financial Statements. The Tribal Gaming Agency shall require all books
and records relating to Class III Gaming to be maintained in accordance with
generally accepted accounting principles. . . . Not less than annually, the Tribal
Gaming Agency shall require an audit and a certified financial statement covering
all financial activities of the Gaming Enterprise, including written verification of the
accuracy of the quarterly Net Win calculation, by an independent certified public
accountant licensed by the State. The financial statement shall be prepared in
accordance with generally accepted accounting principles and shall specify the total
amount wagered in Class III Gaming on all Gaming Machines at the Tribe’s Gaming
Facility for purposes of calculating “Net Win” under Section 11 of this Compact
using the format specified therein.
(Doc. 1-2 at 10; Doc. 68-2 at 10; Doc. 67-3 at 9; Doc. 99 at 6-7.) 6
Section 7 of the 2007 Compacts pertaining to “Dispute Resolution” provided in relevant
part:
A. In the event either party believes that the other party has failed to comply
with or has otherwise breached any provision of this Compact, such party may
invoke the following procedure:
1. The party asserting noncompliance shall serve written notice on
the other party. The notice shall identify the specific Compact provision
believed to have been violated and shall specify the factual and legal basis
for the allegation of noncompliance[.]
2. In the event an allegation by the complaining party is not resolved
to the satisfaction of such party within twenty (20) days after service of the
notice set forth in Paragraph A(1) of this section, the complaining party may
serve upon the other party a notice to cease conduct of the particular game(s)
or activities alleged by the complaining party to be in noncompliance. Upon
receipt of such notice, the responding party may elect to stop the game(s) or
6
Attached to numerous pleadings on the docket in this case are true and correct copies of the generic form of the 2007
Compacts, (Doc. 1-2; Doc. 67-2 at 1 ¶ 2; Doc. 67-3; Doc. 68-2), and the 2015 Compacts. (Doc. 1-3; Doc. 68-3; Doc.
68-1 at 2 ¶ 3.) Defendants do not dispute the authenticity and veracity of these documents. (Doc. 99 at 6-7.) To avoid
confusion, the Court will hereafter cite only to the 2007 Compact attached as Exhibit A (Doc. 67-3) to the Declaration
of Richard Hughes (Doc. 67-2) in support of the Motion for Summary Judgment of the Pueblos of Santa Ana, Santa
Clara, San Felipe, and Tesuque. (Doc 67.) The Court will likewise cite only to the 2015 Compact attached as Exhibit
2 (Doc. 68-3) to the Declaration of David C. Mielke (Doc. 68-1) in support of the Motion for Summary Judgment of
the Pueblos of Isleta and Sandia. (Doc. 68.)
5
activities specified in the notice or invoke arbitration and continue the
game(s) or activities pending the results of arbitration. The responding party
shall act upon one of the foregoing options within ten (10) days of receipt
of notice from the complaining party, unless the parties agree to a longer
period, but if the responding party takes neither action within such period
the complaining party may invoke arbitration by written notice to the
responding party within ten (10) days of the end of such period.
3. The arbitrators shall be attorneys who are licensed members in
good standing of the State Bar of New Mexico or of the bar of another state.
. . . The arbitrators . . . shall permit the parties to engage in reasonable
discovery, and shall establish other procedures to ensure a full, fair and
expeditious hearing on the matters at issue. . . . The arbitrators shall make
determinations as to each issue presented by the parties, but the arbitrators
shall have no authority to determine any question as to the validity or
effectiveness of this Compact or of any provision hereof.
4. All parties shall bear their own costs of arbitration and attorneys’
fees.
5. The results of arbitration shall be final and binding, and shall be
enforceable by an action for injunctive or mandatory injunctive relief
against the State and the Tribe in any court of competent jurisdiction. For
purposes of any such action, the State and the Tribe acknowledge that any
action or failure to act on the part of any agent or employee of the State or
the Tribe, contrary to a decision of the arbitrators in an arbitration
proceeding conducted under the provisions of this section, occurring after
such decision, shall be wholly unauthorized and ultra vires acts, not
protected by the sovereign immunity of the State or the Tribe.
B. Nothing in Subsection 7(A) shall be construed to waive, limit or restrict
any remedy that is otherwise available to either party to enforce or resolve disputes
concerning the provisions of this Compact. Nothing in this Section shall be deemed
a waiver of the Tribe's sovereign immunity. Nothing in this Section shall be deemed
a waiver of the State's sovereign immunity.
(Doc. 67-3 at 15-16.)
Section 11 of the 2007 Compacts, entitled “Revenue Sharing,” provided in pertinent part:
A. Consideration. The Tribe shall pay to the State a portion of its Class III
Gaming revenues identified in and under procedures of this Section, in return for
which the State agrees that the Tribe has the exclusive right within the State to
conduct all types of Class III Gaming described in this Compact, with the sole
exception of the use of Gaming Machines, which the State may permit on a limited
basis for racetracks and for veterans' and fraternal organizations . . . .
6
B. Revenue to State. The parties agree that . . . the Tribe shall make the
quarterly payments provided for in Paragraph C of this Section. Each payment shall
be made to the State Treasurer for deposit into the General Fund of the State.
C. Calculation of Payment Amounts.
1. As used in this Compact, "Net Win" means the total amount
wagered in Class III Gaming at a Gaming Facility, on all Gaming
Machines less:
(a) the amount paid out in prizes to winning patrons,
including the cost to the Tribe of noncash prizes, won on
Gaming Machines. The phrase “won on Gaming Machines”
means the patron has made a monetary wager, and as a result
of that wager, has won a prize of any value. Any rewards,
awards or prizes, in any form, received by or awarded to a
patron under any form of a players’ club program (however
denominated) or as a result of patron-related activities, are not
deductible. The value of any complimentaries given to
patrons, in any form, are not deductible;
(b) the amount paid to the State by the Tribe under the
provisions of Section 4(E)(6) of this Compact [representing
the State’s regulatory costs related to the Tribe’s gaming
activities]; and
(c) the sum of two hundred seventy-five thousand
dollars ($275,000) per year as an amount representing tribal
regulatory costs, which amount shall increase by three
percent (3%) each year beginning on the first day of January
occurring after the Compact has been in effect for at least
twelve months.
2. The Tribe shall pay the State a percentage of its Net Win
[ranging from 3 per cent to 10.75 per cent depending on the date and
the amount of the Tribe’s Annual Net Win] . . . .
3. . . . Any payment or any portion thereof that is not made
within ten (10) days of the due date shall accrue interest at the rate of
ten percent (10%) per annum, from the original due date until paid. .
..
D. Limitations.
7
1. The Tribe's obligation to make the payments provided for
in Paragraphs B and C of this Section shall apply and continue only
so long as this Compact remains in effect; and provided that that
obligation shall terminate altogether in the event the State:
a) passes, amends, or repeals any law, or takes any
other action, that would directly or indirectly attempt to
restrict, or has the effect of restricting, the scope or extent of
Indian gaming; . . .
d) licenses, permits or otherwise allows any nonIndian person or entity to engage in any other form of Class
III gaming other than a state-sponsored lottery, pari-mutuel
betting on horse racing and bicycle racing, operation of
Gaming Machines, and limited fundraising by non-profit
organizations, as set forth in subsection (D)(2) . . . .
(Doc. 67-3 at 20-22.)
Section 11 of the 2007 Compacts differed from Section 11 of the previous gaming compacts
between the State and the Pueblos (“2001 Compacts”). (Doc. 99 at 9-10; Doc. 110 at 19-21; see
Doc. 99-8.) Subsection 11(C) of the 2001 Compacts provided:
C. Calculation of Payment Amounts.
1. As used in this Compact, "Net Win" means the total amount wagered in
Class III Gaming at a Gaming Facility, on all Gaming Machines less:
(a) the amount paid out in prizes, including the cost to the Tribe of
noncash prizes, won on Gaming Machines;
(b) the amount paid to the State by the Tribe under the provisions of
Section 4(E)(5) of this Compact; and
(c) the sum of two hundred seventy-five thousand dollars ($275,000)
per year as an amount representing tribal regulatory costs, which amount
shall increase by three percent (3%) each year beginning on the first day of
January occurring after the Compact has been in effect for at least twelve
months.
(Doc. 99-8 at 20-21.) The State and the Pueblos negotiated the changes from the 2001 Compacts
to the 2007 Compacts, including the changes to Subsection 11(C). (Doc. 99 at 10-11; Doc. 99-7;
8
Doc. 110 at 20-21.) The United States Secretary of the Interior (“the Secretary”) approved the 2007
Compacts on July 5, 2007. (Doc. 55 at 3; Doc. 67-1 at 6; Doc. 68 at 12; Doc. 99 at 6-7); 72 Fed.
Reg. 36,717-01, 2007 WL 1922332 (Jul. 5, 2007).
In 2015 and 2016, the State and each of the Pueblos entered into the 2015 Compacts. Like
the 2007 Compacts, all of the terms of the 2015 Compacts are identical to each other except for the
Pueblos’ names. (Doc. 55 at 4; Doc. 67-1 at 8; Doc. 68 at 15; Doc. 99 6-7.) Subsection 9(A) of the
2015 Compacts provides that the 2015 Compacts “fully supplant[] and replac[e]” the 2007
Compacts, except that under Subsection 9(B), the terms of the 2007 Compacts
(including, without limitation, any limited waiver of sovereign immunity and
jurisdictional waivers and consents set forth therein) shall survive to permit the
resolution of payment disputes. Such disputes shall be resolved through the
procedures set forth in Section 7 of this Compact. Failure to abide by the procedures
set forth in Section 7 or failure to comply with an arbitrator's final decision with
respect to the parties’ obligations under a Predecessor Agreement constitutes a
breach of this Compact. This survival provision is intended to provide for the
reasonable resolution of past disputes without hindering a Tribe’s ability to obtain a
new compact.
(Doc. 68-3 at 26.)
Section 7 of the 2015 Compacts regarding “Dispute Resolution” provides in pertinent part:
A. In the event either party believes that the other party has failed to comply
with or has otherwise breached any provision of this Compact, such party may
invoke the following procedure within two (2) years from the date any alleged
violation of this Compact is discovered or reasonably should have been discovered;
or, if the State believes that, prior to the Effective Date of this Compact, the Tribe
has failed to comply with or has otherwise breached any provision of a Predecessor
Agreement affecting payment, the State may invoke the following procedure within
two (2) years of the Effective Date of this Compact, as permitted in Section 9(B) of
this Compact:
1. The party asserting noncompliance shall serve written notice on
the other party. The notice shall identify the specific Compact provision
believed to have been violated and shall specify the factual and legal basis
for the allegation of noncompliance. The notice shall specifically identify the
date, time and nature of the alleged noncompliance.
9
2. In the event an allegation by the complaining party is not resolved
to the satisfaction of such party within twenty (20) days after service of the
notice set forth in Paragraph A(1) of this Section, the complaining party may
serve upon the other party a notice to cease conduct of the particular game(s)
or activities alleged by the complaining party to be in noncompliance. Upon
receipt of such notice, the responding party may elect to stop the game(s) or
activities specified in the notice or invoke arbitration and continue the
game(s) or activities pending the results of arbitration. The responding party
shall act upon one of the foregoing options within ten (10) days of receipt of
notice from the complaining party, unless the State and the Tribe (hereinafter
the “parties”) agree to a longer period, but if the responding party takes
neither action within such period the complaining party may invoke
arbitration by written notice to the responding party within ten (10) days of
the end of such period.
3. Unless the parties agree in writing to the appointment of a single
arbitrator, or as otherwise provided below, the arbitration shall be conducted
before a panel of three (3) arbitrators. . . . The arbitrators shall make
determinations as to each issue presented by the parties, but the arbitrators
shall have no authority to determine any question as to the validity or
effectiveness of this Compact or of any provision hereof. . . .
4. The results of arbitration shall be final and binding, and shall be
enforceable by an action for injunctive or mandatory injunctive relief against
the State and the Tribe in any court of competent jurisdiction. For purposes
of any such action, the State and the Tribe acknowledge that any action or
failure to act on the part of any agent or employee of the State or the Tribe,
contrary to a decision of the arbitrators in an arbitration proceeding
conducted under the provisions of this Section, occurring after such decision,
shall be wholly unauthorized and ultra vires acts, not protected by the
sovereign immunity of the State or the Tribe.
B. Nothing in Subsection 7(A) shall be construed to waive, limit or restrict
any remedy that is otherwise available to either party to enforce or resolve disputes
concerning the provisions of this Compact. Nothing in this Section shall be deemed
a waiver of the Tribe’s sovereign immunity. Nothing in this Section shall be deemed
a waiver of the State’s sovereign immunity.
(Doc. 68-3 at 22-24.)
In addition, the Appendix to the 2015 Compacts provides that
Free Play and Point Play do not increase Net Win, and amounts paid as a result of
Free Play or Point Play reduce Net Win for purposes of the revenue sharing
calculation in Section 11(C). However, any form of credits with any cash
redemption value increase Net Win when wagered on Gaming Machines and
10
amounts paid as a result of such wagers reduce Net Win for purposes of calculating
revenue sharing.
(Doc. 68-3 at 37.)
“Free Play” means play on a Class III Gaming Machine initiated by points or credits
provided to patrons without monetary consideration, and which have no cash
redemption value. . . .
“Point Play” means play on a Class III Gaming Machine initiated by points earned
or accrued by a player through previous Gaming Machine play, players’ clubs, or
any other method, and which have no cash redemption value.
(Doc. 68-3 at 6-7.)
The Secretary neither approved nor disapproved the 2015 Compacts within 45 days of their
submission. (Doc. 55 at 4; Doc. 58 at 8; Doc. 67-1 at 8; Doc. 68 at 16-17; Doc. 99 at 6-7; see, e.g.,
Doc. 1-7 at 2.) As such, the 2015 Compacts are “considered to have been approved by the Secretary,
but only to the extent the [Compacts are] consistent with the provisions of [IGRA].” 7 25 U.S.C. §
2710(d)(8)(C). The United States Department of the Interior (“DOI”) sent letters to the Pueblos
and the State explaining the Secretary’s decision to neither approve nor disapprove the 2015
Compacts contemporaneously with the decision. (Doc. 1-4 at 5-6; Doc. 1-5 at 5-6; Doc. 1-6 at 45; Doc. 36-1 at 3-4; Doc. 58 at 8; Doc. 67-1 at 8; Doc. 67-4 at 3; Doc. 68 at 16; Doc. 99 at 6-7.) In
one such letter, the DOI took the following position:
[w]e wish to commend the Tribe and the State for the successful resolution of the
free play and point play issue. Free play and point play will now be treated
according to industry standards and Generally Accepted Accounting Principles
(GAAP) by excluding both from the definition of “net win,” which forms the basis
for revenue sharing calculations. We note, however, that Section 7 of the 2015
Compact reserves a two-year period from its effective date for the State to pursue
7
The 2015 Compacts between the Pueblos and the State are considered to have been approved by the Secretary on the
following dates: (a) Pueblo of Isleta, July 28, 2015, 80 Fed. Reg. 44,992-01, 2015 WL 4512708 (Jul. 28, 2015); (b)
Pueblo of Tesuque, October 23, 2015, 80 Fed. Reg. 64,443-01, 2015 WL 6384819 (Oct. 23, 2015); (c) Pueblo of Santa
Clara; October 23, 2015, 80 Fed. Reg. 64,443-02, 2015 WL 6384821 (Oct. 23, 2015); (d) Pueblo of Sandia, April 4,
2016, 81 Fed. Reg. 19,235-01, 2016 WL 1274294 (Apr. 4, 2016); (e) Pueblo of San Felipe, April 4, 2016, 81 FR 19,23602, 2016 WL 1274296 (Apr. 4, 2016); and, (f) Pueblo of Santa Ana, December 30, 2016, 81 FR 96,477-01, 2016 WL
7481406 (Dec. 30, 2016).
11
its assertion that the Tribe’s net win – and thus their revenue sharing payments –
should include wins and losses arising from free play or point play. In light of its
conflict with industry standards and GAAP, it is our view that such an assertion by
the State to include such sums in revenue sharing calculations would constitute an
impermissible tax on tribal gaming revenues in violation of IGRA. 8
8
The record includes the DOI’s letters to five of the six Pueblos, in which the agency expressed its position in five
slightly different ways. In his October 16, 2015 letter to the Governor of the Pueblo of Santa Clara, Assistant Secretary
Kevin Washburn used the language quoted above. (Doc. 67-4 at 3.) In his July 21, 2015 letter to the Governor of the
Pueblo of Isleta, Assistant Secretary Washburn stated:
[w]e wish to commend the Tribe and the State for the successful resolution of the free play and point
play issue. Free play and point play will now be treated according to industry standards and
Generally Accepted Accounting Principles (GAAP) by excluding both from the definition of “net
win,” which forms the basis for revenue sharing calculations. We note, however, that Section 7 of
the 2015 Compact reserves a two-year period from its effective date for the State to pursue its
assertion that the Tribe’s net win – and thus their revenue sharing payments – should include wins
and losses arising from free play or point play. In light of its conflict with industry standards and
GAAP, it is our view that the State’s unilateral determination to include such sums in revenue
sharing calculations would constitute an impermissible tax on tribal gaming revenues in violation
of IGRA.
(Doc. 1-4 at 5.) In his October 16, 2015 letter to the Governor of the Pueblo of Tesuque, Assistant Secretary Washburn
stated:
[w]e are troubled by the assertion in the Tribe’s response indicating that the State seeks additional
revenue sharing payments stemming from free play under the 2007 Gaming Compact. Section 7 of
the 2015 Compact provides a two-year period from its effective date for the State to pursue it
assertion that the Tribe’s net win should not deduct wins and losses arising from free play or point
play. Our position remains the same. Free play and point play must be treated according to industry
standards and Generally Accepted Accounting Principles (GAAP) by excluding both from the
definition of “net win,” which forms the basis for revenue sharing calculations. We are in agreement
with the Tribe that its net win – and thus its revenue sharing payments – should include wins and
losses arising from free play or point play and should result in a reduction in revenue sharing
payments. In light of its conflict with industry standards and GAAP, it is our view that a contrary
assertion by the State that includes such sums in revenue sharing calculations would constitute an
impermissible tax on tribal gaming revenues in violation of IGRA.
(Doc. 1-6 at 4.) In his March 29, 2016 letter to the Governor of the Pueblo of Sandia, Assistant Secretary Roberts
stated:
Section 7 of the 2015 Compact provides a two-year period from its effective date for the State to
pursue its assertion that the Tribe’s net win should not deduct wins and losses arising from free play
or point play. Our position remains the same. Free play and point play must be treated according
to industry standards and Generally Accepted Accounting Principles (GAAP) by excluding both
from the definition of “net win,” which forms the basis for revenue sharing calculations.
(Doc. 1-5 at 5.) Finally, in his March 29, 2016 letter to the Governor of the Pueblo of San Felipe, Assistant Secretary
Roberts stated:
[w]e are troubled by the assertion in the Tribe’s response indicating that the State seeks additional
revenue sharing payments stemming from free play under the 2007 Gaming Compact. Section 7 of
the 2015 Compact provides a two-year period from its effective date for the State to pursue it
assertion that the Tribe’s net win should not deduct wins and losses arising from free play or point
play. Our position remains the same. Free play and point play must be treated according to industry
12
(Doc. 1-4 at 5; Doc. 1-5 at 5; Doc. 1-6 at 4; Doc. 36-1 at 3; Doc. 67-4 at 3.) In October 2017, the
DOI reaffirmed its position regarding the State’s claims for additional revenue sharing payments in
reviewing the 2015 Compact between the State and the Pueblo of Pojoaque. 9 (Doc. 67-1 at 9; Doc.
67-5 at 2; Doc. 68 at 16; Doc. 99 at 6-7.)
On April 13, 2017, in her capacity as the Acting State Gaming Representative, Defendant
Becker sent letters to each of the Pueblos with the subject line “Notice of Noncompliance.” (Doc.
55 at 4-5; Doc. 58 at 7; Doc. 67-1 at 9; Doc. 68 at 17; Doc. 99 at 6-7; see, e.g., Docs. 67-6, 68-22,
and 68-23.) In these letters, Defendant Becker asserted that, beginning as early as April 2011, the
Pueblos had underreported their Net Win and underpaid the State pursuant to the revenue sharing
provisions of the 2007 Compacts, and that “prizes awarded as a result of the use of ‘free play’ are
not deductible unless the face value of the ‘free play’ is included in the calculation of the total
amount wagered.” (Doc. 55 at 4-5; Doc. 67-1 at 9; Doc. 99 at 6-7; see, e.g., Doc. 67-6 at 1.) On this
basis, Defendant Becker instructed the Pueblos to make additional revenue sharing payments to the
standards and Generally Accepted Accounting Principles (GAAP) by excluding both from the
definition of “net win,” which forms the basis for revenue sharing calculations. In light of its conflict
with industry standards and GAAP, it is our view that the State’s unilateral determination to include
such sums in revenue sharing calculations would constitute an impermissible tax on tribal gaming
revenues in violation of IGRA.
(Doc. 36-1 at 3.)
9
In his October 23, 2017 letter to the Governor of the Pueblo of Pojoaque, Deputy Assistant Secretary Clarkson
repeated the language in Assistant Secretary Roberts’ letter to the Governor of the Pueblo of Sandia quoted in footnote
8, supra, and added:
[b]eyond being contrary to longstanding industry standards and GAAP, our view is that the State’s
position constitutes an attempt to impose a “tax, fee, charge or other assessment” in violation of
IGRA because the customer is using a form of “house money” derived from the net win on which
the tribes have already made revenue sharing payments to the State. See 25 U.S.C. § 2710(d)(4).
(Compare Doc. 1-5 at 5 with Doc. 67-5 at 2 & n. 6.)
13
State in specified amounts. 10 (Doc. 55 at 4-5; Doc. 67-1 at 9; Doc. 99 at 6-7; see, e.g., Doc. 67-6
at 1-2.) On May 19, 2017, the Pueblos sent responsive letters to Defendant Becker in which they
objected to the State’s requests for additional revenue sharing payments and asserted that the
requests violated federal law and the terms of the 2007 Compacts. (Doc. 67-1 at 9; Doc. 67-7; Doc.
68 at 17; Doc. 68-18; Doc. 68-19; Doc. 99 at 6-7.)
On May 31, 2017, Defendant Becker sent letters to each of the Pueblos with the subject line
“Notice to Cease Conduct.” (Doc. 55 at 5; Doc. 58 at 7; Doc. 67-1 at 9; Doc. 68 at 17-18; Doc. 99
at 6-7; see, e.g., Docs. 67-8, 68-24, and 68-25.) These letters instructed the Pueblos to either “pay
all sums due or . . . invoke arbitration.” (Doc. 55 at 5; Doc. 58 at 7; Doc. 67-1 at 9; Doc. 68 at 1718; Doc. 99 at 6-7; see, e.g., Doc. 67-8 at 2.) However, the Pueblos neither made the additional
revenue sharing payments requested in Defendant Becker’s letters nor invoked arbitration. (Doc.
55 at 5; Doc. 58 at 7.) Rather, on June 19, 2017, Plaintiffs filed this civil action; and, on June 29,
2017, Plaintiffs-in-Intervention the Pueblos of Santa Ana and Santa Clara intervened. (Docs. 1,
11.)
On June 30, 2017, Defendant Becker sent letters to each of the Pueblos with the subject line
“Notice to Invoke Arbitration,” in which she invoked arbitration pursuant to Section 7 of the 2015
Compacts on the State’s behalf. (Doc. 58 at 8; Doc. 58-3 at 1; Doc. 62 at 5.) Plaintiff-inIntervention the Pueblo of San Felipe then intervened in this action on August 31, 2017. (Doc. 36.)
The Pueblos authorize patrons to play on Class III gaming machines using electronic free
play credits. (Doc. 11 at 5; Doc. 36 at 4-5; Doc. 68 at 13; Doc. 82-1 at 4 Doc. 99 at 10; Doc. 110
at 20.) There is no difference in the payouts, prizes, or jackpots awarded to patrons for each instance
10
For example, Defendant Becker instructed the Pueblo of Isleta to pay an additional $10,360,149, the Pueblo of Sandia
an additional $26,491,350, and the Pueblo of Tesuque an additional $3,252,873. (Doc. 1-8 at 3; Doc. 1-9 at 3; Doc. 110 at 3.)
14
of electronic free play versus cash play of the same face value. (Doc. 99 at 11; Doc. 110 at 21.)
The Pueblos do not separately account for patrons’ winnings from cash wagers and their winnings
from electronic free play wagers. (Doc. 99 at 11; Doc. 110 at 21.) However, the Pueblos’ slot
accounting systems meter each instance of electronic free play and the face value of such free play,
along with each instance of cash play, and this data is generated in daily reports. (Doc. 99 at 11;
Doc. 110 at 21.)
For federally recognized Indian tribes, the Governmental Accounting Standards Board
(“GASB”) determines authoritative sources of generally accepted accounting principles (“GAAP”).
(Doc. 67-10 at 5-6.) According to GASB statements, the American Institute of Certified Public
Accountants’ (“AICPA”) 2011 Audit and Accounting Guide—Gaming (“Gaming Guide”) was the
authoritative source of GAAP for the Pueblos’ gaming operations at the relevant times. 11 (Id. at 78; see also Doc. 99-12 at 3-4.)
The Gaming Guide provides that “monetary credits may be played [on slot machines] using
bills, coins, tickets, electronic wagering credits recorded on cards, or by other means.” (Doc. 6711 at 3 & n.3.) 12 The Gaming Guide defines “free play” as “[f]ree wagering offered by a gaming
entity to provide cashable benefits that increase the customer’s odds of winning, changing the basic
odds of the game.” (Doc. 67-10 at 8; Doc. 68-4 at 11.) “In these circumstances the gaming entity
is providing a chance for the customer to win a slot machine outcome for no cost (i.e. ‘free’).”
11
In identifying and defining the applicable GAAP, the Court has considered the Declaration and Expert Report of the
Pueblos’ expert witness, Andrew Mintzer, C.P.A., in light of his professional education, training, and experience and
the fact that Defendants have presented no evidence creating a genuine issue of material fact regarding his opinions or
expertise. (See Doc. 67-10.) The Court has also considered the Affidavit of Craig S. Telle, JD, CFE (Doc. 99-12), to
the extent it tends to identify and define the applicable GAAP, but not his opinions regarding ultimate legal issues, as
explained in the Court’s Order Granting in Part and Denying in Part Motion to Exclude Telle Affidavit filed
contemporaneously with this Memorandum Opinion and Order. In addition, the Court has considered the portions of
the Gaming Guide in the record.
12
This provision is from the 2014 Gaming Guide; the record does not include a comparable provision from the 2011
Gaming Guide. (Doc. 67-11 at 1, 3.)
15
(Doc. 67-10 at 11.) The Gaming Guide defines a gaming entity’s “net win” as “the difference
between [the entity’s] gaming wins and losses before deducting costs and expenses. Also called
gross gaming revenue.” (Doc. 68-4 at 12; Doc. 99-12 at 16.) Similarly, according to the Gaming
Guide, “gross gaming revenue” is “the difference between gaming wins and losses from banked
games before deducting incentives or adjusting for changes in progressive jackpot liability
accruals.” 13 (Doc. 67-10 at 10; Doc. 99-12 at 9.)
Under GAAP, the face value of free play is not included in net win. (Doc. 67-10 at 9-13.)
The Gaming Guide states that
the use of free play will not trigger accounting recognition because revenue is
measured based on an aggregate daily (or shift) basis, rather than on a per bet or
per customer basis. Because revenue is the net win from gaming activities, the use
of the benefit has no effect on the reporting of net win or loss from gaming
activities. For example, if a customer bets $5 of his or her own cash and wins $1,
the gaming entity reports revenue of $4. If a customer bets $5 of his or her own
cash, uses $5 of credits from his or her club card, and wins $1, the gaming entity
reports revenue of $4. In each transaction, the net win is $4.
(Doc. 67-10 at 8; Doc. 68 at 12; Doc. 99 at 7.) GAAP “permit no recognition in revenue for free
play . . . so that the gaming entities [do] not overstate gross gaming revenue.” (Doc. 67-10 at 11
(emphases in original).)
In addition, under GAAP, the value of prizes won by patrons as a result of free play wagers
must be deducted from net win.
GAAP requires that the gross gaming revenue or net win is calculated using the
cash value of what remains ‘in’ the machine – such as cash, coins, electronic money
transfers, tickets with cash redemption values. Thus in complying with GAAP all
cash/cash equivalent payouts must be considered without regard as to whether the
value was paid as the result of a paid bet or a free play bet.
13
Somewhat confusingly, “net win” is also called “gross gaming revenue,” while “net gaming revenue” refers to “gross
gaming revenues less cash sales incentives and the change in progressive jackpot liabilities and revenue from gaming
related activities.” (Doc. 99-12 at 15.) The proper calculation of net gaming revenue under GAAP is not at issue in
this case.
16
(Id. at 12.) In contrast, the cost of “complimentaries” such as free food, drinks, and hotel rooms, 14
and the cost of loyalty program points redeemed for cash or merchandise are not deducted from net
win under GAAP. (Id. at 13-14.)
The Gaming Guide’s treatment of free play and prizes won by patrons as a result of free
play wagers is consistent with “economic reality and the representational faithfulness required by
GAAP.” (Id. at 9-10, 16.) In general, “revenue” consists of “the economic resources provided by
customers to the entity for the products or services the entity provides to the customers.” (Id. at 9.)
“Revenues represent actual or expected cash in-flows (or the equivalent) that have occurred.” (Id.
at 11.) Thus, “providing a product or service to a customer for no . . . consideration provided by
the customer does not create revenue.” (Id. at 12.) In the context of the gaming industry, a gaming
entity’s “revenue is the net win or loss from gaming activities”; and, free play is not included in a
gaming entity’s revenue because it does not represent actual or expected cash in-flow or its
equivalent. (Id. at 8, 12.)
III.
ANALYSIS
A.
Defendants’ Summary Judgment Motion
The Court will first consider Defendants’ Summary Judgment Motion, because it raises the
threshold issue of whether the parties’ dispute must be submitted to arbitration. “Summary
judgment is appropriate if the pleadings, depositions, answers to interrogatories, and admissions on
file, together with the affidavits, if any, show that there is no genuine issue as to any material fact
and that the moving party is entitled to a judgment as a matter of law.” Jones v. Kodak Med.
Assistance Plan, 169 F.3d 1287, 1291 (10th Cir. 1999); Fed. R. Civ. P. 56(a). “A dispute is genuine
when the evidence is such that a reasonable [factfinder] could return a verdict for the nonmoving
14
The Court understands the term “complimentaries” to refer to goods or services that a casino gives to a patron for no
consideration, and not as a prize won by a patron as a result of a successful wager. (See Doc. 68-4 at 6.)
17
party, and a fact is material when it might affect the outcome of the suit under the governing
substantive law.” Bird v. W. Valley City, 832 F.3d 1188, 1199 (10th Cir. 2016) (quotation marks
and brackets omitted). Only material factual disputes preclude the entry of summary judgment.
Atl. Richfield Co. v. Farm Credit Bank of Wichita, 226 F.3d 1138, 1148 (10th Cir. 2000).
The movant bears the initial burden of demonstrating the absence of a genuine issue of
material fact and his entitlement to judgment as a matter of law. Adler v. Wal-Mart Stores, Inc.,
144 F.3d 664, 670-71 (10th Cir. 1998). If the movant carries this initial burden, “the burden shifts
to the nonmovant to go beyond the pleadings and set forth specific facts that would be admissible
in evidence in the event of a trial from which a rational trier of fact could find for the nonmovant.”
Id. at 671 (internal quotation marks omitted). If the nonmovant demonstrates a genuine dispute as
to material facts, the Court views the facts in the light most favorable to her. Ricci v. DeStefano,
557 U.S. 557, 586 (2009). However, “a complete failure of proof concerning an essential element
of the nonmoving party’s case necessarily renders all other facts immaterial.” Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986).
In their motion, Defendants argue that the Court should grant them summary judgment “on
the arbitrability issue,” i.e., on the Pueblos’ claims for: (1) an injunction barring Defendants from taking
any further steps to arbitrate or otherwise enforce their claims for additional revenue sharing payments;
and, (2) a judgment declaring that neither the Pueblos’ claims in this lawsuit nor Defendants’ claims for
additional revenue sharing payments are subject to arbitration. (Doc. 55 at 2, 10.) Defendants further
ask the Court to dismiss the Pueblos’ claims for a judgment declaring that: (1) Defendants’ claims for
additional revenue sharing payments violate federal law; (2) the 2015 Compact provisions preserving
Defendants’ claims are therefore invalid and ineffective, as are the 2007 Compacts’ revenue sharing
provisions if they mean what Defendants say they mean; and, (3) Defendants have no authority as a
matter of federal law to pursue their claims for additional revenue sharing payments against the
18
Pueblos. 15 (Id.) In support of their motion, Defendants argue that the parties’ dispute regarding the
Pueblos’ revenue sharing obligations under the 2007 Compacts is arbitrable because it is a payment
dispute, and the 2015 Compacts provide that payment disputes under the 2007 Compacts are to be
resolved by arbitration. (Id. at 5-6.) According to Defendants, “[t]he parties have explicitly agreed
to resolve this payment dispute through arbitration, and the dispute therefore is arbitrable based on
the plain language of the contract and the [federal] policy favoring arbitration.” (Id. at 7.)
The Pueblos respond that, under the 2015 Compacts, arbitration is not an exclusive remedy
for resolving disputes under the Compacts. (Doc. 58 at 9-13.) In addition, the Pueblos assert that
the 2007 and 2015 Compacts exclude from arbitration “any question as to the validity or
effectiveness” of the Compacts or any of their provisions, whereas in this civil action they claim
that certain Compact provisions on which Defendants rely are invalid and ineffective under IGRA
and other federal law. (Id. at 17-20.) According to the Pueblos, they would be unfairly prejudiced
if forced to submit to arbitration, because they could not defend against the State’s claims for
additional revenue sharing payments by challenging the validity and effectiveness of these Compact
provisions. 16 (Id.)
The law is well settled that disputes about arbitrability are for the courts to decide, unless
there is clear and unmistakable evidence that the parties intended to submit such disputes to
arbitration. BG Grp., PLC v. Republic of Arg., 572 U.S. 25, 34 (2014); AT & T Techs., Inc. v.
Commc’ns Workers, 475 U.S. 643, 649 (1986); Commc'n Workers of Am. v. Avaya, Inc., 693 F.3d
15
Defendants claim that if the Court grants them summary judgment on “the arbitrability issue,” its ruling will
necessarily resolve the issues raised by the Pueblos’ remaining claims as well. (Doc. 62 at 8-9.)
16
The Pueblos also argue that Defendants did not timely invoke arbitration. (Doc. 58 at 18-20.) However, if the
parties’ dispute were otherwise arbitrable, this would be a question for the arbitrators to decide. BG Grp., PLC v.
Republic of Arg., 572 U.S. 25, 34–35 (2014); Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84–85 (2002).
19
1295, 1303 (10th Cir. 2012); Riley Mfg. Co. v. Anchor Glass Container Corp., 157 F.3d 775, 779–
80 (10th Cir. 1998). Disputes about arbitrability “include questions such as ‘whether the parties
are bound by a given arbitration clause,’ or ‘whether an arbitration clause in a concededly binding
contract applies to a particular type of controversy.’” BG Grp., PLC, 572 U.S. at 34. Here, there
is no evidence that the parties intended to submit disputes about arbitrability to arbitration. In fact,
the parties appear to agree that their arbitrability disputes are for the Court to decide. The Court
will therefore address the arbitrability issues raised in Defendants’ Summary Judgment Motion.
1.
The Pueblos’ claims in this lawsuit fall outside the 2015 Compacts’
arbitration clause and the Court must decide these claims in the first instance.
The Court must first consider the parties’ competing arguments regarding whether the 2015
Compacts’ arbitration clause applies to their claims. A tribal-state gaming compact under IGRA is
“a form of contract” that must be interpreted according to federal common law. Citizen Potawatomi
Nation v. Oklahoma, 881 F.3d 1226, 1238-39 (10th Cir. 2018). “IGRA neither encourages nor
discourages the inclusion of arbitration provisions in gaming compacts, leaving the matter entirely
to the parties entering into such a compact.” Id. at 1237. “Arbitration is a matter of contract,” id.,
“and thus is a way to resolve those disputes—but only those disputes—that the parties have agreed
to submit to arbitration[.]” Granite Rock Co. v. Int'l Bhd. of Teamsters, 561 U.S. 287, 299 (2010)
(emphasis in original) (quotation marks omitted); see Commc'n Workers of Am., 693 F.3d at 1300
(“Because arbitration is a creature of contract, a party cannot be forced to arbitrate any issue he has
not agreed to submit to arbitration.”). Thus, where the parties to an agreement have specifically
excepted certain types of claims from arbitration, “it is the duty of courts to enforce not only the
full breadth of the arbitration clause, but its limitations as well.” State of N.Y. v. Oneida Indian
Nation of N.Y., 90 F.3d 58, 62 (2d Cir. 1996).
Under Tenth Circuit law,
20
[t]o determine whether a particular dispute falls within the scope of an agreement's
arbitration clause, a court should undertake a three-part inquiry. First, recognizing
there is some range in the breadth of arbitration clauses, a court should classify the
particular clause as either broad or narrow. Next, if reviewing a narrow clause, the
court must determine whether the dispute is over an issue that is on its face within
the purview of the clause, or over a collateral issue that is somehow connected to
the main agreement that contains the arbitration clause. Where the arbitration clause
is narrow, a collateral matter will generally be ruled beyond its purview. Where the
arbitration clause is broad, there arises a presumption of arbitrability and arbitration
of even a collateral matter will be ordered if the claim alleged implicates issues of
contract construction or the parties' rights and obligations under it.
Cummings v. FedEx Ground Package Sys., Inc., 404 F.3d 1258, 1261 (10th Cir. 2005) (emphasis,
citations, and quotation marks omitted); Burlington N. & Santa Fe Ry. Co. v. Pub. Serv. Co. of
Okla., 636 F.3d 562, 569 (10th Cir. 2010). Nevertheless,
even narrow arbitration clauses must be interpreted under the liberal federal policy
favoring arbitration agreements. We resolve doubts concerning the scope of
arbitrable issues in favor of arbitration. When considering narrow arbitration
clauses, this liberal policy does not create a presumption of arbitrability because
the policy favoring arbitration does not have the strong effect that it would have if
we were construing a broad arbitration clause.
Chelsea Family Pharmacy, PLLC v. Medco Health Sols., Inc., 567 F.3d 1191, 1197 (10th Cir. 2009)
(citations and ellipses omitted).
“[I]n deciding whether the parties have agreed to submit a particular grievance to arbitration,
a court is not to rule on the potential merits of the underlying claims.” AT & T Techs., Inc., 475
U.S. at 649; Local 5-857 Paper, Allied-Indus., Chem. & Energy Workers Int'l Union v. Conoco,
Inc., 320 F.3d 1123, 1126 (10th Cir. 2003); but see Int'l Bhd. of Elec. Workers, Local #111 v. Pub.
Serv. Co. of Colo., 773 F.3d 1100, 1110 (10th Cir. 2014) (holding that “incidental contact with the
merits” was not error where trial court “devoted its entire discussion to answering the arbitrability
question”).
Defendants argue that the parties’ dispute must be submitted to arbitration based on Section
9 of the 2015 Compacts, which provides that “payment disputes” under the 2007 Compacts “shall
21
be resolved through the procedures set forth in Section 7 of this Compact.” (Doc. 68-3 at 26; Doc.
55 at 4; Doc. 68 at 15; Doc. 99 at 6-7.) Subsection 7(A) of the 2015 Compacts provides: “if the
State believes that, prior to the Effective Date of this Compact, the Tribe has failed to comply with
or has otherwise breached any provision of a Predecessor Agreement affecting payment, the State
may invoke” arbitration. (Doc. 68-3 at 22.) To invoke arbitration, the party alleging noncompliance
“shall” issue a notice of noncompliance and “may” issue a notice to cease conduct, after which it
“may” invoke binding arbitration, all within specified time frames. (Id. at 22-23.) Subsection 7(A)
further specifies that, in the event of arbitration, the arbitrators “shall make determinations as to
each issue presented by the parties, but the arbitrators shall have no authority to determine any
question as to the validity or effectiveness of this Compact or of any provision hereof.” (Id. at 23.)
Subsection 7(B), in turn, provides that “[n]othing in Subsection 7(A) shall be construed to waive,
limit or restrict any remedy that is otherwise available to either party to enforce or resolve disputes
concerning the provisions of this Compact,” and that “[n]othing in this Section shall be deemed a
waiver of the Tribe’s [or the State’s] sovereign immunity.” (Id. at 23, 24.)
The Court finds that the relevant provisions of the 2015 Compacts constitute a narrow
arbitration clause, because they limit arbitrable disputes under the 2007 Compacts to “payment
disputes” premised on a breach of compact theory and exclude from arbitration “any question as to
the validity or effectiveness” of the 2015 Compact provisions. (Id. at 22-24, 26.) Thus, though the
Court must resolve doubts concerning the arbitration clause’s scope in favor of arbitration, it may
not find that a party’s claim is arbitrable unless on its face the claim falls within the clause’s
purview. Cummings, 404 F.3d at 1261.
Clearly, Defendants allege that the Pueblos have “failed to comply with or otherwise
breached” provisions of the 2007 Compacts “affecting payment,” i.e., the 2007 Compacts’ revenue
22
sharing provisions, and the Pueblos disagree. Thus, on its face, the parties’ dispute is a payment
dispute premised on a breach of compact theory within the meaning of the 2015 Compacts’
arbitration clause.
However, this is not the end of the inquiry in light of the additional language in the
arbitration clause limiting its scope. As explained below, this language removes the Pueblos’
claims under both the 2015 and 2007 Compacts from the arbitration clause’s purview. First,
regarding the 2015 Compacts, the Pueblos claim that the 2015 Compact provisions preserving
Defendants’ claims for additional revenue sharing payments are invalid and ineffective because
Defendants’ claims violate IGRA and other federal law. As such, though they do relate to the
parties’ payment dispute, these claims fall squarely within the 2015 Compacts’ exclusion from
arbitration, in Subsection 7(A), of questions regarding the validity or effectiveness of the 2015
Compacts or any of their provisions. (See Doc. 68-3 at 23 (“[T]he arbitrators shall have no authority
to determine any question as the validity or effectiveness of this Compact or any provision
hereof….”).) The Court therefore finds that, on their face and as a matter of law, the Pueblos’
claims challenging the validity and effectiveness of the 2015 Compact provisions preserving
Defendants’ claims fall outside the purview of the 2015 Compacts’ arbitration clause.
Second, regarding the 2007 Compacts, the Pueblos claim that the 2007 Compacts’ revenue
sharing provisions are also invalid and ineffective under IGRA and other federal law if they mean
what Defendants say they mean. The Pueblos’ claims regarding the validity and effectiveness of
the 2007 Compacts’ revenue sharing provisions also relate to the parties’ payment dispute; and, the
2015 Compacts’ exclusion from arbitration of questions regarding the validity or effectiveness of
the 2015 Compacts does not apply to these claims. (Id.) Nevertheless, for the following reasons,
23
the Court finds that these claims fall outside the purview of the 2015 Compacts’ arbitration clause
as well.
As previously noted, Subsection 9(A) of the 2015 Compacts provides that the 2015
Compacts “fully supplant[] and replac[e]” the 2007 Compacts, except that under Subsection 9(B),
the terms of the 2007 Compacts
(including, without limitation, any limited waiver of sovereign immunity and
jurisdictional waivers and consents set forth therein) shall survive to permit the
resolution of payment disputes. . . . This survival provision is intended to provide
for the reasonable resolution of past disputes without hindering a Tribe’s ability to
obtain a new compact.
(Doc. 68-3 at 26 (emphases added).) Because rights that never existed cannot “survive,” Subsection
9(B) of the 2015 Compacts only preserved rights that existed under the 2007 Compacts. See, e.g.,
Merriam-Webster Online Dictionary, https://www.merriam-webster.com/dictionary/survive (to
“survive” means “to remain alive or in existence” or “to continue to function or prosper”) (last
visited Mar. 29, 2019). Thus, because Section 7 of the 2007 Compacts expressly limited the parties’
waiver of sovereign immunity17 and expressly excluded from arbitration “questions as to the
validity or effectiveness of [the 2007 Compacts] or of any provision [t]hereof,” (Doc. 67-3 at 15),
Subsection 9(B) of the 2015 Compacts is likewise limited in scope. Then, Sections 7 and 9 of the
2015 Compacts further limit the scope of arbitrable disputes under the 2007 Compacts to the
resolution of “payment disputes” premised on the State’s belief that “the Tribe has failed to comply
with or has otherwise breached any provision of a Predecessor Agreement affecting payment.”
(Doc. 68-3 at 22.)
17
See Doc. 67-3 at 16 (“[T]he State and the Tribe acknowledge that any action or failure to act on the party of any
agent or employee of the State or the Tribe, contrary to a decision of the arbitrators in an arbitration proceeding
conducted under the provisions of this section, occurring after such decision, shall . . . not [be] protected by the
sovereign immunity of the State or the Tribe.”) and id. (“Nothing in this Section shall be deemed a waiver of the Tribe’s
[or the State’s] sovereign immunity.”).
24
Pulling all of these limitations together, only claims for breach of a 2007 Compact provision
affecting payment that do not raise questions regarding the validity or effectiveness of the 2007
Compacts or any of its provisions fall within the purview of the 2015 Compacts’ arbitration clause
insofar as it preserves claims under the 2007 Compacts. On their face and as a matter of law, the
Pueblos’ claims that the 2007 Compacts’ revenue sharing provisions are invalid and ineffective
under federal law fall outside the scope of the 2015 Compacts’ arbitration clause because they raise
questions regarding the validity and effectiveness of 2007 Compact provisions.
If further proof were needed that the 2015 Compacts do not restrict the Pueblos’ ability to
press in this forum their claims challenging the validity and effectiveness of the 2007 Compacts’
revenue sharing provisions, one need only look at the one-sided nature of the 2015 Compacts’
arbitration clause as it pertains to “payment disputes” under the 2007 Compacts. Specifically, under
the 2015 Compacts, only the State may initiate the arbitration procedure to pursue payment
disputes, based only on the State’s belief that the Pueblos breached a 2007 Compact provision
affecting payment. 18 (Id. at 22.) On its face, this procedure does not even apply to the Pueblos’
claims challenging the validity and effectiveness of the 2007 Compacts’ revenue sharing
provisions, much less restrict them to arbitration.
Defendants attempt to avoid this outcome by arguing that
[i]f the arbitrators find in the Pueblos’ favor on the interpretation of the revenue
sharing provisions of the Compact, no additional payments would be owed to the
State and there would therefore be no issue with respect to any impermissible tax
against the Pueblos, no violation of IGRA, and no validity concerns with respect to
the Compact provisions. Similarly, if the arbitrators find in the State’s favor, the
payments that the Pueblos owe the State under the revenue-sharing provision of the
2007 Compact would not be an illegal tax against the Pueblos (and therefore would
neither violate IGRA nor invalidate the Compact) because they would be a payment
that the Pueblos voluntarily agreed to under the terms of the 2007 Compact.
18
Subsection 9(B) further provides that Pueblos’ “failure to comply with an arbitrator’s final decision with respect to
the parties’ [contractual payment] obligations under a Predecessor Agreement constitutes a breach” of the 2015
Compacts. (Doc. 68-3 at 26.)
25
(Doc. 62 at 6.) Either way, Defendants conclude, the Compact provisions at issue would be valid.
(Id.)
The Court declines to adopt Defendants’ argument because it is a gross oversimplification
of the parties’ dispute and fails to address all of the reasons the Pueblos allege that the 2015
Compact provisions preserving Defendants’ claims and the 2007 Compacts’ revenue sharing
provisions are invalid and ineffective. It is true that one of the theories on which the Pueblos rely
is that Defendants’ claims for additional revenue sharing payments violate federal law because the
Pueblos did not agree to make these payments in the 2007 Compacts. (See, e.g., Doc. 67-1 at 1720.) However, the Pueblos offer other theories in support of their claims as well. Thus, for example,
the Pueblos also allege that the 2015 Compact provisions preserving Defendants’ claims for
additional revenue sharing payments are invalid because Defendants’ claims seek to force the
Pueblos to calculate their net win in a manner contrary to federal regulations. (See, e.g., id.) In
addition, the Pueblos assert that the 2015 Compact provisions preserving Defendants’ claims—and
the 2007 Compacts’ revenue sharing provisions, as well, if they mean what Defendants say they
mean—are invalid because the additional payments Defendants claim are an illegal tax, rather than
permissible revenue sharing, under IGRA. (See, e.g., Doc. 68 at 20-22.) Even if an arbitration
panel were to find that the Pueblos agreed to the 2007 Compacts’ revenue sharing provisions as
Defendants interpret them, the finding would not save the 2007 Compacts’ revenue sharing
provisions or the 2015 Compact provisions preserving Defendants’ claims from invalidation under
the latter theory. “[T]he negotiated terms of the Compact cannot exceed what is authorized by the
IGRA.” Navajo Nation v. Dalley, 896 F.3d 1196, 1205 n.4 (10th Cir. 2018).
Moreover, the Court agrees with the Pueblos that their claims regarding the validity and
effectiveness of Compact provisions under federal law must be resolved in this forum before
26
Defendants’ claims, if they survive, may be resolved by arbitration or otherwise. (Doc. 68 at 1820.) As discussed above, the Pueblos challenge the validity and effectiveness of the 2015 Compact
provisions preserving Defendants’ claims and the 2007 Compacts’ revenue sharing provisions
based on federal law; and, the arbitration clause at issue does not allow the parties to arbitrate such
challenges, so they must be decided here. If the Pueblos are correct, and these Compact provisions
are invalid and ineffective because their enforcement would violate federal law, then Defendants
have no right to pursue such enforcement through arbitration or otherwise. Thus, to preserve the
Pueblos’ rights under federal law, the Court must decide their claims before arbitration—if any—
occurs. 19
2.
The Pueblos’ claims challenging the validity and effectiveness of the 2015
Compact provisions preserving Defendants’ claims are not subject to
arbitration because the 2015 Compacts’ arbitration clause is permissive and
the Pueblos have not consented to arbitration.
In opposition to Defendants’ Summary Judgment Motion, the Pueblos also argue that the
parties’ dispute is not subject to arbitration because the arbitration clause in the 2015 Compacts is
permissive and they have not consented to arbitration. “[A] party cannot be forced to arbitrate
against its will if the arbitration clause permits, but does not require, arbitration.” Summit
Packaging Sys., Inc. v. Kenyon & Kenyon, 273 F.3d 9, 12 (1st Cir. 2001). The use of the term
“may” in a document generally indicates that an action is permissive. PCH Mut. Ins. Co. v. Cas. &
Sur., Inc., 750 F. Supp. 2d 125, 144 (D.D.C. 2010). Nevertheless, the use of this term in an
arbitration clause does not, standing alone, indicate that arbitration is permissive. Id. at 143-44.
19
There are two incidental benefits to the Court’s deciding the Pueblos’ claims in the first instance. First, as the Pueblos
observe, it will have “the salutary effect of resolving legal uncertainty,” because other tribes entered into identical
gaming compacts with the State, also offered free play to their patrons at the relevant times, and will benefit from a
“roadmap[]” on how to account for free play and the prizes patrons won from the use of it. Citizen Potawatomi Nation,
881 F.3d at 1235. Second, it will conserve the parties’ resources, because the Pueblos’ Summary Judgment Motions
are fully briefed and for the most part raise questions of law, whereas arbitration of Defendants’ claims would likely
involve fact discovery regarding the Pueblos’ gaming operations and accounting for the last decade or more. (See
generally, e.g., Doc. 81.)
27
Rather, many courts have held that it simply means the party may either pursue arbitration or
abandon its claim, United States v. Bankers Ins. Co., 245 F.3d 315, 320–21 (4th Cir. 2001); Austin
v. Owens-Brockway Glass Container, Inc., 78 F.3d 875, 879 (4th Cir. 1996); Am. Italian Pasta Co.
v. Austin Co., 914 F.2d 1103, 1104 (8th Cir. 1990); Bonnot v. Cong. of Indep. Unions, Local No.
14, 331 F.2d 355, 359 (8th Cir. 1964); Block 175 Corp. v. Fairmont Hotel Mgmt. Co., 648 F. Supp.
450, 452 (D. Colo. 1986), or that arbitration, though not an exclusive remedy, is mandatory once
either party invokes it. See, e.g., Deaton Truck Line, Inc. v. Local Union 612, Affiliated with Int'l
Bhd. of Teamsters, Chauffeurs, Warehousemen & Helpers of Am., 314 F.2d 418, 422 (5th Cir.
1962); Benihana of Tokyo, LLC v. Benihana Inc., 73 F. Supp. 3d 238, 251 (S.D.N.Y. 2014); Conax
Fla. Corp. v. Astrium Ltd., 499 F. Supp. 2d 1287, 1297–98 (M.D. Fla. 2007); see also AllisChalmers Corp. v. Lueck, 471 U.S. 202, 204 n.1 (1985) (“The use of the permissive ‘may’ is not
sufficient to overcome the presumption that parties are not free to avoid the contract's arbitration
procedures.”); MEI Techs., Inc. v. Detector Networks Int'l, LLC, Civ. No. 09-425 RB/LFG, 2009
WL 10665141, at *9 (D.N.M. Jul. 6, 2009) (collecting cases).
However, courts have construed arbitration clauses to be permissive when they used the
term “may” and also included other language supporting that construction. Thus, for example, in
Independent Oil Workers at Paulsboro, New Jersey v. Mobil Oil Corp., the Third Circuit held that
an arbitration clause was optional where it used the term “may” and provided that “[n]othing in this
agreement shall prevent either [party] . . . from applying, during the term of this agreement to a
court of competent jurisdiction for the relief to which such party may be entitled[.]” 441 F.2d 651,
653 (3d Cir. 1971). As the Third Circuit noted, “the qualification . . . that ‘nothing in the agreement
shall prevent’ application to a court of competent jurisdiction takes away the mandatory aspect of
the contractual grievance procedures.”
Id.
“This is an ‘escape’ clause which nullifies the
28
mandatory terms of the earlier language and makes arbitration optional.” Id. at 654; see also Quam
Constr. Co. v. City of Redfield, 770 F.3d 706, 708-09 (8th Cir. 2014) (holding that arbitration clause
was permissive where it used the term “may” and indicated that arbitration procedure applied “if
the parties agree to arbitration”). In recognizing the existence of permissive arbitration clauses,
these cases undercut the theory that an arbitration clause can never be permissive because then it
would be superfluous, as parties to a contract can always consent to arbitration. 20 See, e.g., Bankers
Ins. Co., 245 F.3d 320–21; Austin, 78 F.3d at 879.
Here, the Court finds that, as a matter of law, the arbitration clause in the 2015 Compacts is
not mandatory as to claims to enforce or resolve disputes concerning 2015 Compact provisions.
Initially, Subsection 7(A) of the 2015 Compacts provides that either party “may” invoke arbitration
if it believes the other party has breached the Compact. (Doc. 68-3 at 22.) Further, Subsection
7(B) expressly states that “[n]othing in Subsection 7(A),” which describes the arbitration procedure,
“shall be construed to waive, limit or restrict any remedy that is otherwise available to either party
to enforce or resolve disputes concerning the provisions of this Compact.” (Id. at 23.) Subsection
7(B) also provides that nothing in Section 7 should be deemed a waiver of either the Pueblos’ or
the State’s sovereign immunity. (Id. at 23-24.)
Subsection 7(B) is very like the “escape clause” in Independent Oil Workers that, according
to the Third Circuit, “ma[de] arbitration optional.” 441 F.2d at 654. Its broad language expressly
preserves, wholly intact, the parties’ right to pursue remedies other than arbitration to enforce
provisions of and resolve disputes under the 2015 Compacts. 21 The Court would necessarily nullify
20
Arbitration clauses may serve purposes other than providing for an exclusive or mandatory remedy, for example, to
specify the procedures to be followed in the event the parties agree to arbitration.
21
It does not, however, preserve the parties’ right to pursue remedies to enforce provisions of and resolve disputes
under the 2007 Compacts. Subsections 7(A) and 9 of the 2015 Compacts narrowly preserve and limit the State’s ability
to pursue a payment related breach of Predecessor Compact dispute remedy under the specified arbitration procedure.
29
this subsection if it were to hold that Subsection 7(A) makes arbitration mandatory. Requiring
either party to submit to arbitration would unquestionably waive, limit, or restrict the remedies
otherwise available to that party to resolve disputes under the 2015 Compacts; “review of arbitration
awards is among the narrowest known to the law.” Citizen Potawatomi Nation, 881 F.3d at 1234,
1236-38.
Nullifying Subsection 7(B) would, in turn, violate the “cardinal principle of contract
construction . . . that a document should be read to give effect to all its provisions and to render
them consistent with each other.” Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 63
(1995); see Citizen Potawatomi Nation, 881 F.3d at 1239 (“[T]his court will construe the [tribalstate gaming c]ompact [at issue] to give meaning to every word or phrase.”). The Court declines
to read Subsection 7(B) out of the Compacts, especially in light of the fact that Defendants do not
actually contest the permissive nature of the 2015 Compacts’ arbitration clause in their reply. (See
Doc. 62 at 2 (“[W]hether arbitration is the exclusive or one of many permissible avenues available
for the parties to resolve their dispute is immaterial. . . . [A]rbitration is at least one forum in which
the parties are permitted to bring claims related to payment disputes arising out of the 2007
Compact.”).)
In addition, the Court will not order arbitration under Subsection 7(A) “at the expense of a
specific provision[,]” i.e., Subsection 7(B), “meant to maintain critical aspects of the parties’
sovereign immunity.” Citizen Potawatomi Nation, 881 F.3d at 1240-41. Reading Section 7 to
The Court’s rulings in this Memorandum Opinion and Order may not foreclose the State’s ability to pursue such
remedies provided the dispute does not raise a question as to the validity or effectiveness of 2007 or 2015 Compact
provisions. Defendants have offered evidence that the Pueblos miscalculated their revenue sharing obligations under
the 2007 Compacts even using the GAAP-compliant formula the Pueblos believe to be lawful. (Doc. 99-11.) This
issue is not before the Court, and the Court has not considered it in ruling on the parties’ motions. Thus, the Court
offers no opinion on whether if the State wished to pursue claims for additional revenue sharing payments against the
Pueblos on the basis of this evidence and otherwise met the procedural requirements for invoking arbitration,
Subsections 7(A) and 9(B) of the 2015 Compacts would require the Pueblos to submit to mandatory arbitration.
30
provide for permissive but binding arbitration of disputes concerning 2015 Compact provisions best
gives meaning and purpose to both of its parts in this sense as well: Subsection 7(B) preserves the
parties’ sovereign immunity, while Subsection 7(A) provides for its limited waiver if both parties
agree to it by consenting to arbitration. (See Doc. 68-3 at 23 (providing that results of arbitration
are “enforceable by an action for . . . mandatory injunctive relief against the State and the Tribe in
any court of competent jurisdiction,” and that any official’s act contrary to an arbitration decision
is “not protected by . . . sovereign immunity”). Because the 2015 Compacts’ arbitration clause is
permissive as to disputes regarding the 2015 Compacts, and the Pueblos brought this action in lieu
of arbitration (and, incidentally, before Defendants invoked arbitration), the Court finds that, as a
matter of law, the parties’ claims to enforce or resolve disputes concerning the provisions of the
2015 Compacts are not subject to arbitration.
In spite of all of the foregoing, Defendants argue that the Court should require the Pueblos
to arbitrate Defendants’ claims for additional revenue sharing payments, because the Pueblos’
sovereign immunity has prevented the State from pursuing these claims in federal court. (Doc. 55
at 9); see State of N.M. v. Pueblo of Isleta et al., Civ. No. 17-995 JB/KK (Notice of Dismissal,
Doc. 13, D.N.M. filed Nov. 14, 2017). However, if, as the Pueblos allege, Defendants’ claims
violate federal law, then the lack of a forum in which to pursue them is of no consequence, because
they would be unenforceable regardless. Moreover, while the Pueblos’ sovereign immunity may
prevent the State from pursuing the remedies it prefers, the Court is “not persuaded that [the State]
lacks any adequate alternatives.” Okla. Tax Comm’n v. Citizen Band Potawatomi Indian Tribe of
Okla., 498 U.S. 505, 514 (1991). For example, the Supreme Court has “never held that individual
agents or officers of a tribe are not liable for damages in actions brought by the State.” Id. Also,
the State is free to negotiate with the Pueblos to modify the dispute resolution procedures in the
31
2015 Compacts; and, if the State “find[s] that none of these alternatives produce the revenues to
which [it believes it is] entitled, [it] may of course seek appropriate legislation from Congress.” Id.
In sum, the Court must resolve the Pueblos’ claims regarding the validity and effectiveness
of Compact provisions in the first instance to preserve the Pueblos’ rights under federal law; and,
the parties’ claims to enforce or resolve disputes concerning the 2015 Compacts are not arbitrable
because the 2015 Compacts’ arbitration clause is permissive as to these claims and the Pueblos
have not consented to arbitration. In these circumstances, Defendants have failed to show their
entitlement to judgment as a matter of law on Plaintiffs’ arbitrability claims, and the Court will
deny Defendants’ Summary Judgment Motion.
B.
The Pueblos’ Summary Judgment Motions
Having denied Defendants’ request for summary judgment on the threshold issue of
arbitrability, the Court turns to the Pueblos’ Summary Judgment Motions and Defendants’ request
for additional discovery under Federal Rule of Civil Procedure 56(d). (Doc. 67 at 2; Doc. 68 at 33.)
As an initial matter, the Court must address the proposition at the heart of the Pueblos’ claims, i.e.,
that according to GAAP, a gaming entity must exclude the face value of free play, and deduct the
value of prizes won as a result of free play wagers, from its net win. (Doc. 67-1 at 14, 22, Doc. 68
at 26.)
GAAP “are the conventions, rules, and procedures that define accepted accounting
practices.” United States v. Arthur Young & Co., 465 U.S. 805, 811 n.7 (1984); see also In re
Imergent Sec. Litig., No. 2:05-CV-204, 2009 WL 3731965, at *7 (D. Utah Nov. 2, 2009) (GAAP
are a set of “broad accounting principles . . . approved by the [AICPA that] establish guidelines for
measuring, recording and classifying the transactions of a business entity”); N.J. & its Div. of Inv.
v. Sprint Corp., 314 F. Supp. 2d 1119, 1146 n.24 (D. Kan. 2004) (same). In his report, the Pueblos’
32
expert witness Andrew Mintzer stated that, under GAAP, the face value of free play is not included
in, and the value of prizes won by patrons as a result of free play wagers must be deducted from,
gross gaming revenue or net win. (Doc. 67-10 at 9-13.)
Mr. Mintzer also stated that the treatment of free play and prizes won as a result of free play
wagers under GAAP is consistent with “economic reality.” (Id. at 9-10, 16.) According to Mr.
Mintzer, free play is not included in a gaming entity’s revenue because it does not represent actual
or expected cash in-flow or its equivalent, (id. at 8, 12), or, in simpler terms, because a casino
doesn’t make any money when a customer uses it. 22 Defendants have presented no evidence that
refutes Mr. Mintzer’s statements on these points. 23 (See generally Doc. 99.) The Court therefore
finds that under GAAP the face value of free play must be excluded, and the value of prizes won
by patrons as a result of free play wagers must be deducted, from net win.
1.
Defendants’ claims for additional revenue sharing payments constitute an
attempt to impose an illegal tax under IGRA and the per se rule, and the 2015
Compact provisions preserving these claims are invalid and ineffective.
In their motions, the Pueblos first assert that the 2015 Compact provisions preserving
Defendants’ claims for additional revenue sharing payments under the 2007 Compacts are invalid
and ineffective, because Defendants’ claims constitute an attempt to impose a tax on the Pueblos in
violation of IGRA and the per se rule prohibiting state taxation of Indian tribes without express
22
Likewise, the value of prizes won by patrons as a result of free play wagers is deducted from revenue because such
prizes are a net “loss from gaming activities.” (Doc. 67-10 at 8.) In other words, a casino loses money when a patron
wins a prize as a result of a free play wager.
23
In his affidavit, Mr. Telle quotes portions of the Gaming Guide to the effect that “incentives,” including “free play,”
are not deducted from net win. (Doc. 99-12 at 5-6.) At least two factors prevent Mr. Telle’s quotations from creating
a genuine issue of material fact regarding whether the value of prizes won as a result of free play wagers must be
deducted from net win under GAAP. First and foremost, Mr. Telle stops short of contradicting Mr. Mintzer and
asserting that the value of prizes won as a result of free play wagers must not be deducted from net win under GAAP.
(Id.) Second, it appears that “deducting free play” is distinct from “deducting the value of prizes won as a result of free
play wagers” in the Gaming Guide. (See Doc. 68-4 at 6-7 (discussing the deduction of “free play offered through
nondiscretionary loyalty programs” from net gaming revenue).)
33
Congressional authorization. The Pueblos offer two arguments in support of this assertion, i.e., that
(1) the Pueblos did not, in the 2007 Compacts, agree to make the additional payments Defendants
seek, and (2) the additional payments are not permissible revenue sharing payments under IGRA.
The Court will address these related arguments in turn.
a.
Defendants’ claims for additional revenue sharing payments
constitute an attempt to impose an illegal tax under IGRA and the per
se rule because the Pueblos did not agree to make these payments.
The Pueblos first argue that Defendants’ claims for additional revenue sharing payments
constitute an attempt to impose an illegal tax under IGRA and the per se rule prohibiting state
taxation of Indian tribes without express Congressional authorization because the Pueblos did not
agree to make these payments in the 2007 Compacts. For the following reasons, the Court agrees.
“IGRA provides a comprehensive approach to the controversial subject of regulating tribal
gaming, and strikes a careful balance among federal, state, and tribal interests.” Alabama v. PCI
Gaming Auth., 801 F.3d 1278, 1283 (11th Cir. 2015) (quotation marks and brackets omitted).
IGRA’s
first stated purpose is to provide a statutory basis for the operation of gaming by
Indian tribes as a means of promoting tribal economic development, selfsufficiency, and strong tribal governments. Its second stated purpose is to provide
a statutory basis for the regulation of gaming by an Indian tribe, adequate to shield
it from organized crime and other corrupting influences, to ensure that the Indian
tribe is the primary beneficiary of the gambling operation, and to assure that gaming
is conducted fairly and honestly by both the operator and players. The third and
final declared purpose of the IGRA is to declare as necessary the establishment of
independent Federal regulatory authority, Federal standards and a National Indian
Gaming Commission—all to meet congressional concerns regarding gaming and to
protect such gaming as a means of generating tribal revenue.
Pueblo of Santa Ana v. Nash, 972 F. Supp. 2d 1254, 1263 (D.N.M. 2013) (citations omitted); 25
U.S.C. § 2702; see also City of Duluth v. Fond du Lac Band of Lake Superior Chippewa, 785 F.3d
1207, 1211 (8th Cir. 2015) (“Congress has noted that for tribes, gaming income often means the
difference between an adequate governmental program and a skeletal program that is totally
34
dependent on [f]ederal funding.”) (quotation marks omitted); Flandreau Santee Sioux Tribe v.
Gerlach, 155 F. Supp. 3d 972, 992 (D.S.D. 2015) (same).
IGRA
divides gaming into three classes. Class III gaming, the most closely regulated and
the kind involved here, includes casino games, slot machines, and horse racing. A
tribe may conduct such gaming on Indian lands only pursuant to, and in compliance
with, a compact it has negotiated with the surrounding State. A compact typically
prescribes rules for operating gaming, allocates law enforcement authority between
the tribe and State, and provides remedies for breach of the agreement's terms.
Michigan v. Bay Mills Indian Cmty., 572 U.S. 782, 785 (2014) (citations omitted).
“IGRA expressly prescribes the matters that are permissible subjects of gaming-compact
negotiations between tribes and states.” Navajo Nation, 896 F.3d at 1201–02. Specifically, the
statute lists seven categories of provisions a gaming compact may include, 25 U.S.C. §
2710(d)(3)(C); and, provisions falling outside of these seven categories are unlawful. Navajo
Nation, 896 F.3d at 1205 n.4 (“[T]he negotiated terms of the Compact cannot exceed what is
authorized by the IGRA.”); Pueblo of Santa Ana, 972 F. Supp. 2d at 1265 (“the negotiated scope”
of a compact under IGRA “is controlled by § 2710(d)(3)(C).”).
Tribes and states have relied on two of Section 2710(d)(3)(C)’s categories to authorize
compact provisions that require a tribe to make direct payments to a state. These two categories
are: (1) provisions relating to “the assessment by the State of such activities in such amounts as are
necessary to defray the costs of regulating such activity,” 25 U.S.C. § 2710(d)(3)(C)(iii); and, (2)
the catch-all category of provisions regarding “any other subjects that are directly related to the
operation of gaming activities.” 24 25 U.S.C. § 2710(d)(3)(C)(vii); see, e.g., Rincon Band of Luiseno
24
Section 2710(d)(3)(C) provides in full that
[a]ny Tribal-State compact negotiated under subparagraph (A) may include provisions relating to-(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 such activity; (ii) the
35
Mission Indians of Rincon Reservation v. Schwarzenegger, 602 F.3d 1019 (9th Cir. 2010); Idaho v.
Shoshone-Bannock Tribes, 465 F.3d 1095 (9th Cir. 2006); In re Indian Gaming Related Cases, 331
F.3d 1094 (9th Cir. 2003). However, IGRA limits the ability of compact parties to include
provisions requiring a tribe to make direct payments to a state by further providing that,
[e]xcept for any assessments that may be agreed to under paragraph (3)(C)(iii) of
this subsection, nothing in this section shall be interpreted as conferring upon a
State or any of its political subdivisions authority to impose any tax, fee, charge, or
other assessment upon an Indian tribe or upon any other person or entity authorized
by an Indian tribe to engage in a class III activity.
25 U.S.C. § 2710(d)(4).
In light of Section 2710(d)(4), courts considering compact provisions requiring a tribe to
make direct payments to a state under Section 2710(d)(3)(C)(vii) have found that such provisions
are lawful only if they meet three criteria. First, as Section 2710(d)(3)(C)(vii) expressly requires,
the payments must be directly related to the operation of gaming activities. Rincon Band of Luiseno
Mission Indians of Rincon Reservation, 602 F.3d at 1033.
Second, the payments must be
“consistent with the purposes of IGRA.” Id.; accord City of Duluth, 785 F.3d at 1210 (holding that
trial court was required to consider “Congress’s express intent that tribes be the primary
beneficiaries of Indian casinos” in deciding whether to grant tribe’s motion for relief from consent
decree requiring it to pay percentage of casino’s gross revenues to city as rent).
Finally, the parties must have
allocation of criminal and civil jurisdiction between the State and the Indian tribe necessary for the
enforcement of such laws and regulations; (iii) the assessment by the State of such activities in such
amounts as are necessary to defray the costs of regulating such activity; (iv) taxation by the Indian
tribe of such activity in amounts comparable to amounts assessed by the State for comparable
activities; (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.
25 U.S.C. § 2710(d)(3)(C).
36
negotiated a bargain permitting such payments in return for meaningful
concessions from the state (such as a conferred monopoly or other benefits).
Although the state [does] not have authority to exact such payments, it [can]
bargain to receive them in exchange for a quid pro quo conferred in the compact.
Shoshone-Bannock Tribes, 465 F.3d at 1101–02 (emphases in original) (citation omitted). In other
words, courts “have interpreted § 2710(d)(4) as precluding state authority to impose taxes, fees, or
assessments, but not prohibiting states from negotiating for such payments where ‘meaningful
concessions’ are offered in return.”
Rincon Band of Luiseno Mission Indians of Rincon
Reservation, 602 F.3d at 1036 (emphases in original). These courts have concluded that, if a state’s
demand for tribal payments under Section 2710(d)(3)(C)(vii) is not based on a bargained-for and
agreed-upon compact provision where meaningful concessions are offered in return, it is an
impermissible tax, fee, charge, or other assessment under IGRA. 25 Id. at 1042; 25 U.S.C. §
2710(d)(4).
Defendants claim that the additional revenue sharing payments they seek are permissible
revenue sharing payments under Section 2710(d)(3)(C)(vii). 26 However, the Pueblos argue that the
payments do not comply with Section 2710(d)(3)(C)(vii) because the Pueblos did not, in the 2007
Compacts, agree to make them, and they would therefore constitute an illegal tax under Section
2710(d)(4) if imposed. To determine whether the 2007 Compacts required the Pueblos to make the
additional revenue sharing payments Defendants seek, and therefore whether the Pueblos agreed to
25
“While this court strives to avoid conflicts with sister circuits, it has an obligation to engage independently in
reasoned analysis. Binding precedent for all is set only by the Supreme Court, and for the district courts within a circuit,
only by the court of appeals for that circuit.” State of N.M. v. Dep't of Interior, 269 F. Supp. 3d 1145, 1152 (D.N.M.
2014) (quotation marks omitted). Thus, the Court, though cognizant and respectful of other circuits’ decisions
regarding IGRA, has engaged in an independent reasoned analysis of the issues raised in the Pueblos’ Summary
Judgment Motions.
26
Defendants do not claim that the additional payments they seek are payments to reimburse the State for regulatory
costs under Section 2710(d)(3)(C)(iii). Subsection 4(E)(6) of the 2007 Compacts provided for the Pueblos to make
payments to the State under Section 2710(d)(3)(C)(iii), and there appears to be no dispute that the Pueblos properly
made those payments.
37
make them, the Court must apply federal common law regarding contracts. Citizen Potawatomi
Nation, 881 F.3d at 1238-39; Pauma Band of Luiseno Mission Indians of Pauma & Yuima
Reservation v. California, 813 F.3d 1155, 1163 (9th Cir. 2015); see also Shoshone-Bannock Tribes,
465 F.3d at 1098 (“We apply general principles of contract interpretation to construe a contract
governed by federal law.”).
According to the Tenth Circuit,
[u]nless a contrary intention appears in the instrument, the words used [in a
contract] are presumed to have been used in their ordinary or customary meaning,
deliberately and with intention. The law does not assume that the language of the
contract was carelessly chosen; but it must be presumed that the parties meant
something by the words used, that they intended to achieve something definite and
concrete in the contract, and that they intended the consequences of its
performance. Where words having a definite legal meaning are knowingly used in
a contract, the parties thereto will be presumed to have intended such words to have
their proper legal meaning and effect, in the absence of any contrary intention
appearing in the instrument.
Raulie v. United States, 400 F.2d 487, 521 (10th Cir. 1968). Moreover,
a contract should be interpreted as a harmonious whole to effectuate the intentions
of the parties, and every word, phrase or part of a contract should be given meaning
and significance according to its importance in context of the contract. Further, in
construing the contract, reasonable rather than unreasonable interpretations are
favored by the law.
Doña Ana Mut. Domestic Water Consumers Ass'n v. City of Las Cruces, N.M., 516 F.3d 900, 907
(10th Cir. 2008) (citation and quotation marks omitted); see also Mastrobuono, 514 U.S. at 63 (“[A]
document should be read to give effect to all its provisions and to render them consistent with each
other.”); Citizen Potawatomi Nation, 881 F.3d at 1239 (“[T]his court will construe the Compact to
give meaning to every word or phrase.”). In the same vein, courts “presume that words have the
same meaning throughout the contract.” McLane & McLane v. Prudential Ins. Co. of Am., 735
F.2d 1194, 1195 (9th Cir. 1984).
38
“Under federal contract principles, if the terms of a contract are not ambiguous, this court
determines the parties' intent from the language of the agreement itself.” Citizen Potawatomi
Nation, 881 F.3d at 1239; Shoshone-Bannock Tribes, 465 F.3d at 1099 (“[W]hen the terms of a
contract are clear, the intent of the parties must be ascertained from the contract itself.”). Extrinsic
evidence is admissible “only to resolve ambiguity in the contract.” Citizen Potawatomi Nation,
881 F.3d at 1239; Sault Ste. Marie Tribe of Chippewa Indians v. Granholm, 475 F.3d 805, 812 (6th
Cir. 2007) (“Where a contract is unambiguous on its face, extrinsic evidence is inadmissible
because no outside evidence can better evince the intent of the parties than the writing itself.”). In
addition, “[e]xtrinsic evidence must be relevant in order to be admitted to resolve an ambiguity.”
Id. at 815. “We have consistently held that where an industry is specialized, extrinsic evidence that
helps define words within their specialized context is admissible.” Id.; accord 11 Williston on
Contracts § 32:4 (4th ed.) (“[T]echnical terms or words of art will be given their technical
meaning.”). Whether contract terms are ambiguous, and the interpretation of unambiguous terms,
are questions of law. Bank of Okla. v. Muscogee (Creek) Nation, 972 F.2d 1166, 1171 (10th Cir.
1992); see also Sault Ste. Marie Tribe of Chippewa Indians, 475 F.3d at 810.
As a preliminary matter, the Court notes that both sides have submitted extrinsic evidence
in support of their interpretation of the 2007 Compacts’ revenue sharing provisions. For example,
the Pueblos have offered evidence that their slot accounting systems have never segregated prizes
won by patrons using free play credits versus cash or cash equivalents, (Doc. 67-12); and,
Defendants have offered evidence that, before the Pueblos instituted electronic free play, they gave
patrons coupons that could be exchanged for cash or tokens, and included the value of cash and
tokens wagered in their net win. (Doc. 99 at 22.) However, the Court finds the relevant provisions
of the 2007 Compacts to be unambiguous except for the fact that they do not identify or define the
39
GAAP applicable to calculating net win. Thus, the Court will consider the parties’ extrinsic
evidence only to the extent that it tends to identify and define the applicable GAAP. 27 Citizen
Potawatomi Nation, 881 F.3d at 1239 (extrinsic evidence is “relevant only to resolve ambiguity in
the contract”).
Applying federal common law principles of contract interpretation to the 2007 Compacts,
the Court finds that these Compacts unambiguously required the Pueblos to calculate their Net Win
for revenue sharing purposes in accordance with GAAP. First, Subsection 4(C) of the Compacts
required the Pueblos to maintain “all books and records relating to Class III Gaming . . . in
accordance with [GAAP].” (Doc. 67-3 at 9.) In addition, this subsection required the Pueblos to
hire an independent certified public accountant to prepare annual financial statements that included
“written verification of the accuracy of the quarterly Net Win calculation”; and, critically, these
financial statements were to “be prepared in accordance with [GAAP].” (Id.) Finally, this
subsection required the Pueblos’ GAAP-compliant financial statements to “specify the total amount
wagered in Class III Gaming on all Gaming Machines . . . for purposes of calculating ‘Net Win’
under Section 11 of this Compact using the format specified therein.” (Id.)
To summarize, then, Subsection 4(C) of the 2007 Compacts required the Pueblos to: (1)
maintain all of their gaming books and records in accordance with GAAP; (2) verify their Net Win
calculations in accordance with GAAP; and, (3) specify the “total amount wagered” for purposes
of calculating their Net Win in accordance with GAAP. Read together, these provisions are clear:
the 2007 Compacts required the Pueblos to calculate their Net Win in accordance with GAAP. And,
as previously discussed, under GAAP the face value of free play must be excluded, and the value
of prizes won as a result of free play wagers must be deducted, from net win. Thus, Subsection
27
Extrinsic evidence in the record relevant to identifying and defining the applicable GAAP includes Mr. Mintzer’s
affidavit, the admissible portions of Mr. Telle’s affidavit, and portions of the Gaming Guide in the record.
40
4(C) required the Pueblos to exclude the face value of free play and deduct the value of prizes won
as a result of free play wagers in calculating their Net Win.
Defendants argue that Section 11 of the 2007 Compacts nevertheless required the Pueblos
to include either the face value of free play or the value of prizes won as a result of free play wagers
in calculating their Net Win for revenue sharing purposes. The Court disagrees. Defendants’
interpretation would require the Pueblos to calculate their Net Win using one set of rules—GAAP—
under Subsection 4(C), and a different set of rules—rules contrary to GAAP—under Section 11.
As such, it contravenes the principle of contract construction that a contract must be read as a
harmonious whole, with words having the same meaning throughout. Mastrobuono, 514 U.S. at
63; Citizen Potawatomi Nation, 881 F.3d at 1239; Doña Ana Mut. Domestic Water Consumers
Ass'n, 516 F.3d at 907; McLane & McLane, 735 F.2d at 1195–96. The Court finds that, in
accordance with this principle, Section 11 can and should be read in harmony with Section 4 and
therefore in conformity with GAAP.
Subsection 11(C)(1)(a) defined “Net Win” as “the total amount wagered in Class III Gaming
at a Gaming Facility, on all Gaming Machines less . . . the amount paid out in prizes to winning
patrons, including the cost to the Tribe of noncash prizes, won on Gaming Machines.” (Doc. 673 at 20.) Other than limiting the Pueblos’ Net Win to their net win from Class III gaming machines,
this definition is consistent with the definition of net win under GAAP, i.e., “the difference between
[the gaming entity’s] gaming wins and losses before deducting costs and expenses.” (Doc. 68-4 at
12; Doc. 99-12 at 16.)
In support of their argument that Section 11 defines Net Win in a manner contrary to GAAP,
Defendants rely on the additional language in Subsection 11(C)(1)(a) to the effect that
[t]he phrase ‘won on Gaming Machines’ means the patron has made a monetary
wager, and as a result of that wager, has won a prize of any value. Any rewards,
41
awards or prizes, in any form, received by or awarded to a patron under any form
of a players’ club program (however denominated) or as a result of patron-related
activities, are not deductible. The value of any complimentaries given to patrons,
in any form, are not deductible.
(67-3 at 20-21.) According to Defendants, this language prohibited the deduction of any kind of
marketing or promotional expense from Net Win, including the value of prizes won by patrons as
a result of free play wagers. (Doc. 99 at 14, 30.)
In fact, however, this language also can and should be read in conformity with Subsection
4(C) and therefore GAAP. The Gaming Guide provides that “monetary credits may be played [on
slot machines] using bills, coins, tickets, electronic wagering credits recorded on cards, or by other
means.” (Doc. 67-11 at 3 & n.3 (emphasis added).) Thus, under GAAP, “monetary credits” are
not limited to cash or cash equivalents, and the term “monetary wagers” as used in Section
11(C)(1)(a) can be read consistently with GAAP to include wagers made using free play “monetary
credits,” i.e., electronic free play credits assigned a monetary face value for the purpose of gaming
machine play. Similarly, Section 11(C)(1)(a), though it prohibited the deduction of prizes a patron
received from his or her participation in a players’ club program or other “patron-related activities,”
did not even mention, much less prohibit the deduction of, prizes won by a patron as a result of free
play wagers, which again is consistent with GAAP. Nowhere did Section 11(C)(1)(a) prohibit the
deduction of all marketing or promotional expenses of any kind, as Defendants claim. Rather, in
accordance with GAAP, Section 11(C)(1)(a) drew a line between the value of prizes won as a result
of wagers, which were deductible, and the value of prizes awarded for other reasons, which were
not.
If further support were needed, the Court notes that Section 11 was entitled “Revenue
Sharing,” and required the Pueblos to “pay to the State a portion of [their] Class III Gaming
revenues.” (Doc. 67-3 at 20 (emphases added).) However, as discussed above, free play is not
42
revenue, and neither is money (or the cost of non-cash prizes) the Pueblos paid out to patrons as a
result of free play wagers. This is true not only under GAAP, but also in economic reality. 28 The
law favors reasonable contract interpretations over unreasonable ones, Doña Ana Mut. Domestic
Water Consumers Ass'n, 516 F.3d at 907, and it would be unreasonable to interpret Section 11 to
require the Pueblos to make “revenue sharing” payments from nonrevenue. For all of these reasons,
the Court finds that, under the 2007 Compacts and as a matter of law, the Pueblos did not agree to
make the additional revenue sharing payments Defendants seek.
Then, because the Pueblos did not agree to them, the additional revenue sharing payments
Defendants seek do not satisfy the requirements of Section 2710(d)(3)(C)(vii), i.e., they are not
payments made pursuant to a bargained-for and agreed-upon compact provision for which
meaningful concessions were offered in return. 25 U.S.C. § 2710(d)(3)(C)(vii); cf. Rincon Band of
Luiseno Mission Indians of Rincon Reservation, 602 F.3d at 1033-36; Shoshone-Bannock Tribes,
465 F.3d at 1101–02. Lacking any authorization under Section 2710(d)(3)(C), Defendants’ claims
for such payments from the Pueblos constitute an impermissible attempt to impose a tax, fee,
charge, or other assessment under Section 2710(d)(4). 25 U.S.C. § 2710(d)(3)(C)(vii), (d)(4); cf.
Rincon Band of Luiseno Mission Indians of Rincon Reservation, 602 F.3d at 1042.
The Court further finds that Defendants’ claims for additional revenue sharing violate the
“per se rule” prohibiting states from taxing federally recognized Indian tribes without express
Congressional authorization. California v. Cabazon Band of Mission Indians, 480 U.S. 202, 21415 n.17 (1987), superseded by statute on other grounds as stated in Bay Mills Indian Cmty., 572
28
Economic reality likewise undermines Defendants’ argument that it was inequitable for the Pueblos to exclude the
face value of free play, and also deduct the value of prizes won as a result of free play wagers, from net win. (Doc. 99
at 21.) The apparent inequity merely reflects the actual nature of the transaction, i.e., the Pueblos received no money
from free play wagers but they did lose money when a patron won a jackpot on such a wager.
43
U.S. at 794-95; Montana v. Blackfeet Tribe of Indians, 471 U.S. 759, 766 (1985); Moe v.
Confederated Salish & Kootenai Tribes of Flathead Reservation, 425 U.S. 463, 475–76 (1976);
McClanahan v. State Tax Comm'n of Ariz., 411 U.S. 164, 170–71 (1973); Mashantucket Pequot
Tribe v. Town of Ledyard, 722 F.3d 457, 467 (2d Cir. 2013); Flandreau Santee Sioux Tribe, 155 F.
Supp. 3d at 995. A tax is “a monetary charge imposed by the government on persons, entities,
transactions or property to yield public revenue.” Hill v. Kemp, 478 F.3d 1236, 1245 (10th Cir.
2007). The Supreme Court “consistently has held that it will find the Indians' exemption from state
taxes lifted only when Congress has made its intention to do so unmistakably clear.” Blackfeet
Tribe of Indians, 471 U.S. at 765.
Because the 2007 Compacts did not require the Pueblos to make the additional revenue
sharing payments Defendants seek, IGRA does not authorize them. Thus stripped of IGRA’s
validation, they are simply payments Defendants insist the Pueblos make to the State’s general fund
on the basis of past transactions between the Pueblos and their gaming patrons. It is difficult to
characterize such payments as anything other than a tax. “No amount of semantic sophistry can
undermine the obvious: a non-negotiable, mandatory payment . . . into the State treasury for
unrestricted use yields public revenue, and is a ‘tax.’” Rincon Band of Luiseno Mission Indians of
Rincon Reservation, 602 F.3d at 1029–30. Moreover, Congress has clearly not authorized the State
to impose such a tax; on the contrary, it explicitly withheld its authorization in Section 2710(d)(4).
The Court therefore finds that Defendants’ claims pursuant to the 2015 Compacts for additional
revenue sharing payments under the 2007 Compacts constitute an attempt to impose an illegal tax
not only under IGRA, but also under the per se rule prohibiting state taxation of Indian tribes
without express Congressional authorization.
44
b.
Defendants’ claims for additional revenue sharing payments
constitute an attempt to impose an illegal tax because they are not,
in fact, permissible revenue sharing payments under IGRA.
The Pueblos also contend that the additional payments Defendants seek are not in fact
revenue sharing payments and would therefore constitute an illegal tax under IGRA even if the
Pueblos had agreed to them. (See, e.g., Doc. 68 at 20-22.) As discussed in Section III.B.1.a., supra,
courts to date have recognized only two types of direct payments from a tribe to a state pursuant to
a gaming compact under IGRA, i.e., payments to defray the state’s regulatory costs associated with
the tribe’s gaming activities, and revenue sharing payments if they are directly tied to gaming,
consistent with IGRA’s purposes, and bargained for and agreed upon in exchange for meaningful
concessions. See, e.g., Rincon Band of Luiseno Mission Indians of Rincon Reservation, 602 F.3d
at 1033-34; Shoshone-Bannock Tribes, 465 F.3d at 1101–02; In re Indian Gaming Related Cases,
331 F.3d at 1111-12; but see Ho-Chunk Nation, 512 F.3d at 932 (“The validity, under the IGRA,
of revenue-sharing agreements in tribal-state compacts . . . is far from a settled issue.”).
Defendants contend that the additional payments they seek from the Pueblos fall into the
category of “revenue sharing” payments under 25 U.S.C. § 2710(d)(3)(C)(vii). In reality, however,
and according to GAAP, Defendants are attempting to “share” funds that are not “revenue” to the
Pueblos. As discussed at the beginning of Section III.B., free play is not revenue to the Pueblos
because they receive no money from patrons when it is used; and, prizes won as a result of free play
wagers are not revenue to the Pueblos because they lose money when they award prizes to patrons
on winning free play bets. If the Pueblos were to include the face value of free play or the value of
prizes won as a result of free play wagers in their Net Win as Defendants insist, the Pueblos would
have to pay the State a percentage of these values even though they are not actually revenue. (Doc.
67-3 at 20-21 (requiring Pueblos to pay the State a percentage of their Net Win as revenue sharing).
45
As a matter of first impression, the Court finds that Section 2710(d)(4) does not allow a
state to collect “revenue sharing” payments from a tribe pursuant to a gaming compact under IGRA
where the funds the tribe is required to “share” are not, in fact, “revenue.” Such payments do not
comport with GAAP or economic reality, and they do not fall within any category of direct tribal
payments to states that courts have found to be permissible under IGRA.
25 U.S.C. §
2710(d)(C)(3)(iii), (vii); cf. Rincon Band of Luiseno Mission Indians of Rincon Reservation, 602
F.3d at 1033-35; Shoshone-Bannock Tribes, 465 F.3d at 1101–02; In re Indian Gaming Related
Cases, 331 F.3d at 1111-13.
Moreover, such payments are inconsistent with IGRA’s stated purposes to promote tribal
economic development and self-sufficiency, ensure that the tribes are the primary beneficiaries of
their gaming operations, and protect tribal gaming activities as a means of generating tribal revenue.
25 U.S.C. § 2702; City of Duluth, 785 F.3d at 1210-12; Pueblo of Santa Ana, 972 F. Supp. 2d at
1263; see also Rincon Band of Luiseno Mission Indians of Rincon Reservation, 602 F.3d at 1034
(“[N]one of the purposes outlined in § 2702 includes [promoting] the State's general economic
interests. The only state interests mentioned in § 2702 are protecting against organized crime and
ensuring that gaming is conducted fairly and honestly.”) (emphasis in original). If a compact
provision is to increase a tribe’s direct payments to a state under IGRA, it should do so expressly
and accurately, so that the tribe and the DOI have the opportunity to assess whether the increase
comports with IGRA’s purposes. 29 Increasing a tribe’s revenue sharing payments to a state by
including a percentage of nonrevenue in the payments creates an unacceptable risk of confusion
and lack of mutual agreement between compact stakeholders about the nature and propriety of the
29
For example, a compact provision could expressly provide for the tribe to pay the state a higher percentage of its net
win.
46
payments under IGRA. The Court therefore finds that Defendants’ claims for additional “revenue
sharing” payments constitute an attempt to impose a tax, fee, charge, or other assessment in
violation of Section 2710(d)(4) not only because the Pueblos did not agree to the payments, but also
because the payments are not permissible revenue sharing payments under Section
2710(d)(3)(C)(vii).
Relatedly, according to the Pueblos, the Court should defer to the DOI’s determination that
Defendants’ claims for additional revenue sharing payments constitute an attempt to impose an
illegal tax under IGRA. The DOI made this determination in letters to the Pueblos explaining its
decision to neither approve nor disapprove the 2015 Compacts, expressing concern regarding the
2015 Compact provisions preserving Defendants’ claims. (See, e.g., Doc. 1-4 at 5.) The Pueblos
appear to concede that the statutory interpretation implicit in the DOI’s determination is not binding
legal authority, but they do argue that it is “persuasive authority” that is “due deference,” citing
United States v. Mead Corp., 533 U.S. 218, 230 (2001). (Doc. 110 at 6-7.)
Initially, the Court agrees that the DOI’s interpretation is not binding legal authority entitled
to deference under Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837
(1984). An agency interpretation is entitled to Chevron deference only
when it appears that Congress delegated authority to the agency generally to make
rules carrying the force of law, and that the agency interpretation claiming
deference was promulgated in the exercise of that authority. Delegation of such
authority may be shown in a variety of ways, as by an agency's power to engage in
adjudication or notice-and-comment rulemaking, or by some other indication of a
comparable congressional intent.
Mead Corp., 533 U.S. at 226–27.
“Interpretations such as those in opinion letters—like
interpretations contained in policy statements, agency manuals, and enforcement guidelines, all of
which lack the force of law—do not warrant Chevron-style deference.” Christensen v. Harris Cty.,
529 U.S. 576, 587 (2000).
47
The DOI clearly did not promulgate the interpretation at issue in the exercise of the type of
authority Chevron deference requires. The parties did not brief the process by which the DOI made
its determination to neither approve nor disapprove the 2015 Compacts pursuant to 25 U.S.C. §
2710(d)(8)(C). However, there is no indication in the record that it made the determination pursuant
to “adjudication or notice-and-comment rulemaking” or a comparably formal process. Mead Corp.,
533 U.S. at 226-27. Also, in the six letters in the record, the DOI expressed its interpretation
variably and offered a variety of reasons for it, putting it firmly in the category of “[i]nterpretations
such as those in opinion letters . . . which lack the force of law[.]” Christensen, 529 U.S. at 587.
The Court further finds that the Pueblos have failed to demonstrate that the DOI’s
interpretation is entitled to a lesser measure of deference under Skidmore v. Swift & Co., 323 U.S.
134 (1944). In Skidmore, the Supreme Court held that
[t]he weight [accorded to an administrative] judgment in a particular case will
depend upon the thoroughness evident in its consideration, the validity of its
reasoning, its consistency with earlier and later pronouncements, and all those
factors which give it power to persuade, if lacking power to control.
Id. at 140. Recognizing the continuing validity of Skidmore deference after Chevron, in Mead
Corp. the Supreme Court confirmed that “an agency’s interpretation may merit some deference
whatever its form,” depending on “the agency's care, its consistency, formality, and relative
expertness,” and “the persuasiveness of the agency's position.” Mead Corp., 533 U.S. at 228, 234.
The Pueblos, however, fail to discuss or even acknowledge the factors listed in Skidmore
and Mead Corp. (Doc. 110 at 6-7 & n.7.) Rather, they simply argue that the DOI’s interpretation
is due deference because it is “the product of IGRA’s administrative process.” 30 (Id.) This
argument is gravely insufficient to support a finding that the interpretation is entitled to Skidmore
30
In a footnote, the Pueblos also dispute Defendants’ characterization of the contents of the DOI’s letters. (Doc. 110
at 7 n.7.) However, the letters are in the record and therefore speak for themselves.
48
deference. 323 U.S. at 140; Mead Corp., 533 U.S. at 228, 234; but see Forest Cnty. Potawatomi
Cmty. v. United States, 330 F. Supp. 3d 269, 279-82 (D.D.C. 2018) (holding that DOI’s decision to
disapprove amendment to gaming compact was entitled to Chevron deference); Fort Indep. Indian
Cmty. v. California, 679 F. Supp. 2d 1159, 1176-79 (E.D. Cal. 2009) (holding that DOI’s approvals
of gaming compacts that included unrestricted revenue sharing provisions were entitled to Skidmore
deference). 31
“Without a specific reference, [the Court] will not search the record in an effort to determine
whether there exists dormant evidence” in support of the Pueblos’ argument that the DOI’s
interpretation is entitled to Skidmore deference. Gross v. Burggraf Const. Co., 53 F.3d 1531, 1546
(10th Cir. 1995) (“Judges are not like pigs, hunting for truffles buried in briefs.”); Mitchell v. City
of Moore, Okla., 218 F.3d 1190, 1199 (10th Cir. 2000) (“The district court was not obligated to
comb the record in order to make [the plaintiff’s] arguments for him.”). Thus, the Court will not
rely on any deference to the DOI’s interpretation to support its independent conclusion that
Defendants’ claims for additional “revenue sharing” payments constitute an attempt to impose a
tax, fee, charge, or other assessment in violation of Section 2710(d)(4) regardless of whether the
Pueblos agreed to them, because the payments are not, in fact, permissible revenue sharing
payments under Section 2710(d)(3)(C)(vii).
c.
The 2015 Compact provisions preserving Defendants’ claims for
additional revenue sharing payments under the 2007 Compacts are
invalid and ineffective.
The Pueblos argue that, because Defendants’ claims for additional revenue sharing
payments under the 2007 Compacts are inconsistent with IGRA, the 2015 Compact provisions
31
However, Rincon Band of Luiseno Mission Indians of Rincon Reservation, 602 F.3d at 1033-34, calls into question
the continuing validity of Fort Independence Indian Community insofar as it held that unrestricted revenue sharing
provisions in gaming compacts directly relate to gaming under Section 2710(d)(3)(C)(vii). 679 F. Supp.2d at 1179.
49
preserving Defendants’ claims are invalid and ineffective. (See, e.g., Doc. 67-1 at 17-20; Doc. 68
at 20-22.) A gaming compact under IGRA “takes effect” when the Secretary approves it and notice
of the Secretary’s approval is published in the Federal Register. 25 U.S.C. § 2710(d)(3)(B); Pueblo
of Santa Ana v. Kelly, 104 F.3d 1546, 1552 (10th Cir. 1997). Because the Secretary did not approve
or disapprove the 2015 Compacts within 45 days of submission, these Compacts are “considered
to have been approved by the Secretary, but only to the extent the [Compacts are] consistent with
[IGRA].” 25 U.S.C. 2710(d)(8)(C).
For the reasons discussed in Section III.B.1.a. and b., supra, Defendants’ claims for
additional revenue sharing payments under the 2007 Compacts constitute an attempt to impose a
tax, fee, charge, or other assessment in violation of Section 2710(d)(4) and are therefore inconsistent
with IGRA. To the extent that the provisions of the 2015 Compacts preserve Defendants’ claims,
they are likewise inconsistent with IGRA; and, to the extent the 2015 Compact provisions are
inconsistent with IGRA, they are not considered to have been approved by the Secretary and did
not “take effect.” 25 U.S.C. § 2710(d)(3)(B), (8)(C). In addition, the 2015 Compact provisions
preserving Defendants’ claims are unenforceable to the extent that Defendants’ claims violate the
per se rule prohibiting state taxation of Indian tribes without express Congressional authorization.
Cabazon Band of Mission Indians, 480 U.S. at 214-15 n.17; Blackfeet Tribe of Indians, 471 U.S. at
766; Moe, 425 U.S. at 475-76; McClanahan, 411 U.S. at 170-71. In short, because Defendants’
claims for additional revenue sharing payments under the 2007 Compacts violate IGRA and the per
se rule, the 2015 Compact provisions preserving those claims are invalid and ineffective.
2.
The Court need not decide whether federal regulations required the Pueblos
to calculate their Net Win according to GAAP.
The Pueblos also argue that Defendants’ claims for additional revenue sharing payments are
inconsistent with federal regulations that require the accounting records of the Pueblos’ gaming
50
operations to comply with GAAP. (Doc. 67-1 at 12, Doc. 68 at 26.) In support of this argument,
the Pueblos rely on three federal regulations. First, they cite to 25 C.F.R. § 542.19(b), which
provides that
[e]ach gaming operation shall prepare general accounting records according to
[GAAP] on a double-entry system of accounting, maintaining detailed, supporting,
subsidiary records, including, but not limited to . . . [d]etailed records identifying
revenues, expenses, assets, liabilities, and equity for each gaming operation[.]
25 C.F.R. § 542.19(b). Second, they cite to 25 C.F.R. § 549.19(d), which defines gross gaming
revenue from gaming machines in accordance with GAAP, i.e., “[f]or gaming machines, gross
[gaming] revenue equals drop, 32 less fills,33 jackpot payouts and personal property awarded to
patrons as gambling winnings.” 25 C.F.R. § 542.19(d)(2); see also 25 C.F.R. § 542.2 (“Gross
gaming revenue means annual total amount of cash wagered on . . . class III games . . . less any
amounts paid out as prizes or paid for prizes awarded.”). Finally, they cite to 25 C.F.R. § 571.12,
which provides that
[a] tribe shall engage an independent certified public accountant to provide an
annual audit of the financial statements of each . . . class III gaming operation on
the tribe's Indian lands for each fiscal year. . . . Financial statements prepared by
the certified public accountant shall conform to generally accepted accounting
principles[.]
25 C.F.R. § 571.12(b).
According to the Pueblos, these federal regulations require them to calculate their net win
in accordance with GAAP. Thus, the Pueblos continue, Defendants’ demands that they calculate
their Net Win in a manner contrary to GAAP for purposes of revenue sharing under the 2007
32
“Drop (for gaming machines) means the total amount of cash, cash-out tickets, coupons, coins, and tokens removed
from drop buckets and/or bill acceptor canisters.” 25 C.F.R. § 542.2.
33
“Fill means a transaction whereby a supply of chips, coins, or tokens is transferred from a bankroll to a . . . gaming
machine.” 25 C.F.R. § 542.2.
51
Compacts contravene these regulations. Defendants counter that: (1) the regulations do not prohibit
the Pueblos from creating financial records in addition to their general accounting records and
annual financial statements; (2) the regulations do not require these other financial records to
comply with GAAP, and, (3) discrepancies between the net win in the Pueblos’ GAAP-compliant
records and the Net Win in their revenue sharing calculations can be addressed by “a simple
footnote . . . explaining that the [r]evenue [s]haring calculation was performed in the format set
forth in Section 11 of the 2007 Compact[s].” (Doc. 99 at 27.)
Neither side cites any caselaw discussing whether the regulations on which the Pueblos rely
require all of their financial records, including their Net Win calculations under the 2007 Compacts,
to comply with GAAP, and the Court’s research has not uncovered any such cases. But see Sault
Ste. Marie Tribe of Chippewa Indians, 475 F.3d at 813 (citing 25 C.F.R. § 571.12 for the proposition
that the plaintiff tribe was “federally required to comply” with the Gaming Guide). Also, the Court
notes that there is some doubt regarding whether the National Indian Gaming Commission had the
authority to promulgate the regulations on which the Pueblos rely, Colo. River Indian Tribes v.
Nat'l Indian Gaming Comm'n, 466 F.3d 134, 137-39 (D.C. Cir. 2006); and, Section 542.19 was
stayed effective September 27, 2018 and is not currently enforceable. 83 Fed. Reg. 39,877-01,
2018 WL 3818191, at *39,879 (Aug. 13, 2018).
The Court need not decide whether complying with Defendants’ demands for additional
revenue sharing payments would require the Pueblos to violate 25 C.F.R. §§ 542.19, 542.2, and
571.12, in light of its determination that these claims constitute an attempt to impose a tax on the
Pueblos in violation of IGRA and the per se rule. In addition, the lack of authority addressing these
regulations and their uncertain validity and status make the Court reluctant to attempt to interpret
them. The Court will therefore decline to decide whether these regulations required the Pueblos to
52
calculate their Net Win under the 2007 Compacts in accordance with GAAP. However, the Court
notes that the regulations are at least consistent with the 2007 Compact provisions that required the
Pueblos to calculate their Net Win in accordance with GAAP. See Walsh v. Schlecht, 429 U.S. 401,
408 (1977) (“[A] general rule of construction presumes the legality and enforceability of
contracts.”).
3.
Defendants are not entitled to additional time to conduct discovery and
respond to the Pueblos’ Summary Judgment Motions under Rule 56(d).
Defendants argue that the Court should grant them more time to conduct discovery and
respond to the Pueblos’ Summary Judgment Motions under Rule 56(d) because they cannot
currently present facts essential to justify their opposition to the motions. (Doc. 99 at 30); Fed. R.
Civ. P. 56(d). Rule 56(d) provides that
[i]f a nonmovant shows by affidavit or declaration that, for specified reasons, it
cannot present facts essential to justify its opposition, the court may: (1) defer
considering the motion or deny it; (2) allow time to obtain affidavits or declarations
or to take discovery; or (3) issue any other appropriate order.
Fed. R. Civ. P. 56(d).
Although the Supreme Court has held that, under Fed. R. Civ. P. 56(f), 34 summary
judgment should be refused where the nonmoving party has not had the opportunity
to discover information that is essential to his opposition, this protection arises only
if the nonmoving party files an affidavit explaining why he or she cannot present
facts to oppose the motion.
Universal Money Ctrs., Inc. v. Am. Tel. & Tel. Co., 22 F.3d 1527, 1536 (10th Cir. 1994) (brackets
omitted).
In its affidavit,
a non-movant requesting additional discovery under Rule 56(d) must specify (1)
the probable facts not available, (2) why those facts cannot be presented currently,
(3) what steps have been taken to obtain these facts, and (4) how additional time
34
When Rule 56 was amended in 2010, Rule 56(f) became Rule 56(d). Fed. R. Civ. P. 56(d), 2010 Advisory
Committeee Notes.
53
will enable the party to obtain those facts and rebut the motion for summary
judgment.
Gutierrez, 841 F.3d at 908 (quotation marks and brackets omitted); Hackworth v. Progressive Cas.
Ins. Co., 468 F.3d 722, 732 (10th Cir. 2006). It is within the Court’s discretion to deny a Rule 56(d)
request based solely on a party’s failure to present an affidavit that complies with the rule.
McKissick v. Yuen, 618 F.3d 1177, 1190 (10th Cir. 2010). Also, if the information sought is
irrelevant or cumulative, the nonmoving party is not entitled to relief under Rule 56(d). Jensen v.
Redevelopment Agency of Sandy City, 998 F.2d 1550, 1554 (10th Cir. 1993).
In support of their Rule 56(d) request, Defendants argue that they require additional time to
conduct discovery regarding: (a) whether the Pueblos actually applied GAAP to their revenue
sharing calculations under the Compacts; (b) the parties’ negotiations regarding the revenue sharing
provisions in the 2007 Compacts 35; (c) who decided to implement free play at the Pueblos’ casinos
and who decided how to account for it; (d) the accuracy of Defendants’ calculation of the additional
revenue sharing payments they claim the Pueblos owe under the 2007 Compacts; (e) when the
Pueblos began offering patrons free play; (f) how the Pueblos determined the appropriate method
for calculating their net win once they started offering free play; and, (g) whether the Pueblos ever
intended to comply with GAAP or the 2007 Compacts. (Doc. 99 at 30-33.)
Initially, the Court notes that, except regarding one probable fact, Defendants have failed to
present an affidavit that satisfies the Gutierrez requirements. 841 F.3d at 908. Defendants attach
two affidavits to their response to the Pueblos’ Summary Judgment Motions, those of Mr. Telle and
Rainier Kamplain. (Docs. 99-11, 99-12.) Mr. Telle’s affidavit contains only one sentence that
even remotely supports Defendants’ Rule 56(d) request, i.e., “[t]he Pueblos have not been
35
Defendants have not explained why information about the parties’ compact negotiations is not equally available to
both sides.
54
forthcoming with the data needed to assess the proper Net Win calculation, further delaying the
State’s actual notice of the accounting discrepancies.” (Doc. 99-12 at 7.) This one sentence is too
vague and conclusory to comply with Rule 56(d)’s requirements and concerns information that is
irrelevant to the issues raised in the Pueblos’ Summary Judgment Motions. Gutierrez, 841 F.3d at
908; Birch, 812 F.3d at 1249-50.
Mr. Kamplain’s affidavit is more detailed, but only regarding one probable fact, i.e.,
“whether the Pueblos have complied with the correct Net Win and revenue sharing calculations,
regardless of which format or formula they are applying in determining Net Win.” (Doc. 99-11 at
4.) In his affidavit, Mr. Kamplain explained why Defendants question whether the Pueblos
correctly calculated their revenue sharing obligations under the 2007 Compacts regardless of which
formula they used. (Id. at 2-4.) He also stated in general terms what steps Defendants have taken
to obtain additional information on this point, and why additional time could allow them to do so.
(Id. at 4-5.) However, Mr. Kamplain made no attempt to address any of the other probable facts
Defendants listed in support of their Rule 56(d) request. (See generally id.) Thus, with the one
exception noted, the Court could in its discretion deny Defendants’ Rule 56(d) request based solely
on their failure to present an affidavit that complies with the rule. McKissick, 618 F.3d at 1190.
The Court need not do so, however, because Defendants’ Rule 56(d) request is also subject
to denial for the substantive reason that all of the information Defendants seek additional time to
discover is irrelevant to the issues raised in the Pueblos’ Summary Judgment Motions. The Court’s
decision on the Pueblos’ motions turns on the meaning of certain Compact provisions and whether
Defendants’ claims for additional revenue sharing payments comport with federal law.
As
discussed in Section III.B.1.a., the Compact provisions at issue are unambiguous except regarding
the identification and definition of the applicable GAAP. As such, extrinsic evidence is irrelevant
55
to the Court’s decision except to the extent it relates to the applicable GAAP; the interpretation of
the Compacts and the federal law applicable to Defendants’ claims are otherwise questions of law.
Citizen Potawatomi Nation, 881 F.3d at 1239; Sault Ste. Marie Tribe of Chippewa Indians, 475
F.3d at 810, 812, 815; Bank of Okla., 972 F.2d at 1171.
Yet, all of the probable facts on which Defendants rely in seeking additional time for
discovery under Rule 56(d) are extrinsic to the Compacts, and none have any tendency to identify
or define the applicable GAAP. Consequently, none are relevant to the Court’s decision on the
Pueblos’ Summary Judgment Motions. Garcia, 232 F.3d at 768. Because the information
Defendants seek is irrelevant, they are not entitled to relief under Rule 56(d). Jensen, 998 F.2d at
1554. The Court will therefore deny Defendants’ Rule 56(d) request for additional time to conduct
discovery and respond to the Pueblos’ motions.
4.
Defendants’ remaining arguments are unsupported and immaterial.
Finally, the Court must address Defendants’ assertion that the Court should deny the
Pueblos’ Summary Judgment Motions because the Pueblos have breached the covenant of good
faith and fair dealing and should not be unjustly enriched. (Doc. 99 at 27.) In support of this
assertion, Defendants allege that the Pueblos failed to: (a) inform the State of their decision to
offer patrons electronic free play credits rather than coupons to be exchanged for cash or tokens;
(b) provide the State with documents regarding how they accounted for free play despite many
requests; and, (c) attempt to renegotiate the 2007 Compacts when they began offering free play.
(Doc. 99 at 28.)
Defendants fail to cite to any provision of law, equity, or contract that required the Pueblos
to either inform the State of their decision to offer free play or try to renegotiate the Compacts when
they did so. Defendants also fail to cite to any legal authority in support of their argument that the
56
Pueblos’ alleged failure to produce documents under the 2007 Compacts invalidates their current
claims for declaratory and injunctive relief under federal law. Interestingly, Defendants’ evidence
tends to show that the Pueblos and the State have been debating the proper treatment of free play
in calculating the Pueblos’ Net Win for revenue sharing purposes under various compacts off and
on since June 2005, and neither side appears to have changed its position in all that time. (See, e.g.,
Doc. 99-1 at 27-41; Doc. 99-2 at 4-21; Doc. 99-3 at 33-34, 47-58; Doc. 99-4 at 46-55; Doc. 99-5 at
39-46; Doc. 99-6 at 48-68.) This evidence casts some doubt on Defendants’ claim of unfair
surprise. However, even if Defendants’ characterization of the Pueblos’ past conduct is accurate,
in the Court’s view it is simply not relevant to the issues the Pueblos raised in their Summary
Judgment Motions. Moreover, the Court declines to speculate about whether Defendants could
have made a properly supported legal argument regarding the Pueblos’ alleged past misconduct, or
what this argument might have been. It is not the Court’s role to construct the parties’ arguments
for them. Smith v. United States, 561 F.3d 1090, 1096 (10th Cir. 2009); Brown v. City of Las Cruces
Police Dep’t, 347 F. Supp. 3d 792, 811 (D.N.M. 2018). In short, the Court finds that Defendants’
arguments regarding the Pueblos’ alleged bad faith and inequitable conduct are unsupported and
immaterial.
5.
The Pueblos are entitled to declaratory and injunctive relief.
To summarize, the Court finds that Defendants’ claims for additional revenue sharing
payments from the Pueblos constitute an attempt to impose a tax, fee, charge, or other assessment
in violation of IGRA and the per se rule barring state taxation of Indian tribes without express
Congressional authorization. The Court further finds that the 2015 Compact provisions preserving
Defendants’ claims under the 2007 Compacts are invalid and ineffective. The Court so finds both
because the Pueblos did not, in the 2007 Compacts, agree to make the additional payments
57
Defendants seek, and because the payments are not permissible revenue sharing payments
consistent with IGRA’s requirements and purposes. The Court also finds that Defendants are not
entitled to more time to conduct discovery under Rule 56(d), and that their arguments regarding the
covenant of good faith and fair dealing and unjust enrichment are unsupported and immaterial. The
Court therefore concludes that, as a matter of law, the Pueblos are entitled to declaratory and
injunctive relief and it will grant their Summary Judgment Motions as set forth below.
C.
Defendants’ Motion to Compel and the Pueblos’ Motion for Protective Order 36
“The general principle of Rule 56(d) is that summary judgment should be refused where
the nonmoving party has not had the opportunity to discover information that is essential to
opposition.” N.M. Consol. Constr., LLC v. City Council of the City of Santa Fe, 97 F. Supp. 3d
1287, 1304 (D.N.M. 2015) (quoting Price ex rel. Price v. W. Res., Inc., 232 F.3d 779, 783 (10th
Cir. 2000)). “Rule 56(d) does not require, however, that summary judgment not be entered until
discovery is complete.” Id. If the information the non-moving party seeks under Rule 56(d) is
“irrelevant to the summary judgment motion . . . no extension will be granted.” Id.
As discussed in Section III.B.3., supra, the information Defendants seek under Rule 56(d)
is irrelevant to the issues the Pueblos raised in their Summary Judgment Motions, and the Court has
therefore declined to delay ruling on the Pueblos’ motions to allow Defendants to complete
discovery. Id. In these circumstances, and because the Court has determined that the Pueblos are
entitled to summary judgment, the Court finds that Defendants’ Motion to Compel and the Pueblos’
Motion for Protective Order are moot and should be denied.
D.
Defendants’ Motion for Settlement Conference
36
The Court held a hearing on Defendants’ Motion to Compel and the Pueblos’ Motion for Protective Order on August
16, 2018. (Docs. 94, 123.) At the hearing, the Court deferred ruling on the motions and ordered Defendants to submit
a fully compliant Rule 56(d) affidavit within 30 days of the hearing to the extent they believed they needed more
discovery to respond to the Pueblos’ Summary Judgment Motions. (Doc. 94 at 1-2.)
58
In light of the Court’s determination that the Pueblos are entitled to summary judgment,
Defendants’ Motion for Settlement Conference Pursuant to Rule 16 (Doc. 102) is also moot and
should be denied.
IV.
CONCLUSION
IT IS THEREFORE ORDERED as follows:
1.
Defendants’ Motion for Summary Judgment on the Issue of Arbitrability (Doc. 55)
is DENIED;
2.
Plaintiffs-in-Intervention Santa Ana, Santa Clara and San Felipe’s and Plaintiff
Tesuque’s Motion for Summary Judgment (Doc. 67) and Plaintiffs Pueblo of Isleta’s and Pueblo of
Sandia’s Motion for Summary Judgment and Supporting Authorities (Doc. 68) are GRANTED.
Pursuant to 28 U.S.C. § 2201 and Federal Rule of Civil Procedure 57, the Court hereby declares
that:
a.
Defendants’ claims that the Pueblos owe the State additional revenue sharing
payments because the Pueblos excluded the value of free play, and deducted the value of prizes
won by patrons as a result of free play wagers, from their Net Win at any time between 2007 and
2016 constitute an attempt to impose a tax, fee, charge, or other assessment in violation of IGRA
and the per se rule prohibiting state taxation of federally recognized Indian tribes without express
Congressional authorization;
b.
As such, the provisions of the 2015 Compacts preserving Defendants’ claims that
the Pueblos owe the State additional revenue sharing payments because the Pueblos excluded the
value of free play, and deducted the value of prizes won by patrons as a result of free play wagers,
from their Net Win at any time between 2007 and 2016 are invalid and ineffective; and
59
c.
Neither the Pueblos’ claims in this civil action, nor Defendants’ claims that the
Pueblos owe the State additional revenue sharing payments because the Pueblos excluded the value
of free play, and deducted the value of prizes won by patrons as a result of free play wagers, from
their Net Win at any time between 2007 and 2016, are subject to arbitration under the 2015
Compacts.
For the reasons set forth herein, and pursuant to Federal Rule of Civil Procedure 65, the
Court hereby permanently enjoins Defendants from taking any further action, including but not
limited to pursuing arbitration under the 2015 Compacts, to enforce their claims that the Pueblos
owe the State additional revenue sharing payments because the Pueblos excluded the value of free
play, and deducted the value of prizes won by patrons as a result of free play wagers, from their Net
Win at any time between 2007 and 2016, except that Defendants may pursue any and all appeals to
which they are entitled in this civil action; and,
3.
Defendants’ Motion to Compel Discovery and for Sanctions, Plaintiffs’ and
Plaintiffs-in-Intervention’s Motion for Protective Order to Quash Defendants’ Rule 30(b)(6)
Deposition Notices (Doc. 84), and Defendants’ Motion for Settlement Conference Pursuant to Rule
16 (Doc. 102) are DENIED AS MOOT.
IT IS SO ORDERED.
__________________________________________
KIRTAN KHALSA
UNITED STATES MAGISTRATE JUDGE
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