Flynt v. California Gambling Control Com.

• Decision Date: 26 December 2002
• Docket Number: No. A098186.,A098186.
• Parties: Larry FLYNT et al., Plaintiffs and Appellants, v. CALIFORNIA GAMBLING CONTROL COMMISSION et al., Defendants and Respondents.
• Court: California Court of Appeals Court of Appeals

129 Cal.Rptr.2d 167

104 Cal.App.4th 1125

Larry FLYNT et al., Plaintiffs and Appellants, v. CALIFORNIA GAMBLING CONTROL COMMISSION et al., Defendants and Respondents.

No. A098186.

Court of Appeal, First District, Division 2.

December 26, 2002.

Review Denied April 9, 2003.

Certiorari Denied October 14, 2003. See 124 S.Ct. 398.

Michael Franchetti, Attorney at Law, San Francisco, for Appellants.

Bill Lockyer, Attorney General of the State of California, Richard M. Frank, Chief Assistant Attorney General, Robert L. Mukai, Senior Assistant Attorney General, Sara J. Drake, Supervising Deputy Attorney General, Marc A. Le Forestier, Deputy Attorney General, Kathleen E. Gnekow, Deputy Attorney General, for Respondents.

RUVOLO, J.

I.

In March 2000, the overwhelming majority of California voters passed Proposition 1A,¹ which amended the California Constitution giving the Governor the authority "to negotiate and conclude compacts, subject to ratification by the Legislature, for the operation of slot machines and for the conduct of lottery games and banking games by federally recognized Indian tribes on Indian lands in California in accordance with federal law." (Cal. Const., art. IV, § 19, subd. (f).)

Larry Flynt, a card room owner, and Hustler Casino and Normandie Casino, state-licensed card rooms located in Los Angeles (collectively, appellants), challenge the legality of agreements entered into by the State of California with 62 Native American Indian (Indian)² tribes pursuant to Proposition 1A. Specifically, appellants claim that the tribal-state gambling agreements, known as compacts, which permit Indian tribes to conduct gaming prohibited to appellants and others by state law, violate the federal Indian Gaming Regulatory Act (IGRA) (25 U.S.C. § 2701 et seq.)³ and infringe upon appellants' right to equal protection of the laws (U.S. Const., 14th Amend.; Cal. Const., art. I, § 7, subd. (a).) They appeal from a judgment entered after a demurrer to their amended complaint was sustained without leave to amend. We reject these arguments and affirm the judgment dismissing appellants' case.

II.

On November 26, 2001, appellants filed a first amended complaint for declaratory relief asking the superior court to declare the respective rights, duties, and responsibilities of the California Gambling Control Commission and Attorney General Bill Lockyer (respondents) under specified Penal Code sections prohibiting certain forms of gambling (Pen.Code, §§ 330, 330a & 330b) and the Gambling Control Act (Bus. & Prof.Code, § 19800 et seq.). Respondents were named as defendants in the lawsuit because they have the authority to license appellants and to impose administrative and criminal sanctions upon appellants for violation of California statutes and regulations dealing with gambling. The Indian tribes that have entered into compacts with the state are not parties to this litigation.⁴

Appellants' complaint points out that under various state laws, they are not allowed to conduct class III games, such as banked games⁵ or percentage games,⁶ nor are they allowed to operate slot machines. (Pen.Code, §§ 330, 330a & 330b; see generally Hotel Employees & Restaurant Employees Internal. Union v. Davis (1999) 21 Cal.4th 585, 592-594, 88 Cal.Rptr.2d 56, 981 P.2d 990 (Hotel Employees).) Instead, state law authorizes appellants to offer only controlled games, such as non-banked card games, where players pay a fee to play on a per-hand or per-hour basis.

The complaint explained that on March 1, 2000, the voters of the State of California adopted Proposition 1A, which authorized members of federally recognized Indian tribes to operate slot machines, lottery games, and banked and percentage card games only on tribal lands and only under the terms of duly negotiated and ratified compacts. It was alleged that the Governor of California had entered into compacts with 62 Indian tribes in California allowing such games to be offered to the public.

Appellants alleged that if they "were to offer such games to the public they would be subject to sanctions . . . pursuant to the Gambling Control Act including loss of license, fines, and referral for criminal prosecution." Appellants further alleged that they "directly compete with Indian owned casinos for customers who wish to patronize casinos. The banked and percentage card games, 21, and slot machines which [respondents] authorize only Indian[-]owned casinos to offer to the public are more attractive to the public than the non[-]banked card games allowed [appellants]." Appellants alleged that this "state sanctioned monopoly" in gambling operations put them at a "competitive and economic" disadvantage that threatens their ability to stay in business.

Appellants also alleged that the IGRA, the federal statute governing the operation of games conducted by Indian tribes, "does not authorize a state to establish a classification such as that in California wherein only Indian Tribes and Native Americans which comprise their membership are allowed to offer class III gaming while non-Indians are subject to criminal and other sanctions for engaging in the same conduct." Appellants claimed that, to the extent provisions of the Penal Code and Gambling Control Act enforced by respondents prevented appellants from offering the games that were legally offered at tribal casinos, these provisions were "unconstitutional, invalid, and void" under the equal protection clauses of the federal and state constitutions. (See U.S. Const., 14th Amend.; Cal. Const., art. I, § 7, subd. (a).) Consequently, appellants sought declaratory relief removing the legal obstacles that prohibited them "from offering to the public bank[ed] and percentage games, '21', and slot machines." They requested a decision "that such games are controlled games which may be offered by [appellants] pursuant to the applicable provisions of the Gambling Control Act."

On December 21, 2001, respondents filed a demurrer to appellants' first amended complaint, arguing that the complaint failed to state facts sufficient to constitute a cause of action. Respondents challenged the viability of appellants' legal theories and argued that nothing in appellants' complaint entitled them to declaratory relief allowing appellants to operate slot machines and banked and percentage card games otherwise prohibited by California law.

On February 11, 2002, the trial court sustained respondents' demurrer to the first amended complaint without leave to amend. Following entry of a judgment of dismissal, this timely appeal followed. On appeal, this court must determine independently whether the facts alleged by appellants and the matters that may be judicially noticed entitle respondents to judgment as a matter of law. (Code Civ. Proc, § 438, subds. (c)(1)(B)(ii) & (d); Schabarum v. California Legislature (1998) 60 Cal.App.4th 1205, 1216, 70 Cal.Rptr.2d 745; Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967, 9 Cal.Rptr.2d 92, 831 P.2d 317.)

III.

A.

The issues raised in this appeal need not embroil this court in questions concerning the wisdom, policy implications, or economics of allowing Nevada-style gaming on Indian land in California, or elsewhere. Despite ongoing debate in some political quarters, as well as in the media,⁷ the fact remains that these complex questions of public policy were largely answered when voters resoundingly approved Proposition 1A, thereby paving the way for the operation of slot machines and lottery games as well as banked and percentage card games by federally recognized Indian tribes on Indian lands in California. Our only task is to determine whether the tribal-state gambling compacts that were entered into pursuant to Proposition 1A—which grant an exclusive franchise to certain Indian tribes to conduct such games—violate provisions of the IGRA and/or create an unconstitutional monopoly in violation of the guarantee of equal protection of the laws.

To date, there is no decision by a California state court addressing these issues. However, on August 5, 2002, shortly after the instant appeal became fully briefed, the United States District Court for the Eastern District of California issued an opinion rejecting the identical arguments that appellants make in this appeal. (Artichoke Joe's v. Norton (E.D.Cal.2002) 216 F.Supp.2d 1084 (Artichoke Joe's))⁸ Lower federal court decisions on federal questions, while not binding, are persuasive and entitled to great weight in state court. (See, e.g., Yee v. City of Escondido (1990) 224 Cal.App.3d 1349, 1351, 274 Cal.Rptr. 551; People v. Estrada, (1965) 234 Cal.App.2d 136, 145, 44 Cal.Rptr. 165.) In deciding these identical questions, we find the analysis in Artichoke Joe's persuasive, and therefore, we are moved to give it the great weight to which its compelling rationale is entitled.

B.

"`It is a long and well-established principle of Federal Indian law as expressed in the United States Constitution, reflected in Federal statutes, and articulated in decisions of the Supreme Court, that unless authorized by an act of Congress, the jurisdiction of State governments and the application of state laws do not extend to Indian lands. In modern times, even when Congress has enacted laws to allow a limited application of State law on Indian lands, the Congress has required the consent of tribal governments before State jurisdiction can be extended to tribal lands. . ..'" (Kansas v. U.S. (10th Cir. 2001) 249 F.3d 1213, 1223, fn. 6, quoting the Senate Report accompanying the IGRA's passage.) "`[T]he policy of leaving Indians free from state jurisdiction and control is deeply rooted in the Nation's history. . ..'" (McClanahan v. Arizona State Tax Comm'n (1973) 411 U.S. 164, 168, 93 S.Ct. 1257, 36 L.Ed.2d 129, quoting Rice v. Olson (1945) 324 U.S. 786, 789, 65 S.Ct. 989, 89 L.Ed. 1367.)

In the mid-1980's, Indian tribes began to engage in significant gaming operations. (Proposition 1A, su...