Cachil Dehe Band Of Wintun Indians Of The Colusa Indian Cmty. v. State Of Cal.

• Decision Date: 20 August 2010
• Docket Number: No. 09-16942.,09-16942.
• Citation: 618 F.3d 1066
• Parties: CACHIL DEHE BAND OF WINTUN INDIANS OF the COLUSA INDIAN COMMUNITY, a federally recognized Indian Tribe, Plaintiff-Appellee,Picayune Rancheria of the Picayune Rancheria of the Chukchansi Indians, Indian Tribe, Plaintiff-intervenor-Appellee,v.State of CALIFORNIA; California Gambling Control Commission, an agency of the State of California; Arnold Schwarzenegger, Governor of the State of California, Defendants-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

618 F.3d 1066

CACHIL DEHE BAND OF WINTUN INDIANS OF the COLUSA INDIAN COMMUNITY, a federally recognized Indian Tribe, Plaintiff-Appellee,Picayune Rancheria of the Picayune Rancheria of the Chukchansi Indians, Indian Tribe, Plaintiff-intervenor-Appellee,v.State of CALIFORNIA; California Gambling Control Commission, an agency of the State of California; Arnold Schwarzenegger, Governor of the State of California, Defendants-Appellants.

No. 09-16942.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Feb. 8, 2010.

Filed Aug. 20, 2010.

COPYRIGHT MATERIAL OMITTED

George Forman, Jay B. Shapiro (argued), Kimberly A. Cluff, Jeffrey R. Keohane, Forman & Associates, San Rafael, CA, for Plaintiff-Appellee Cachil Dehe Band; John M. Peebles, Darcie L. Houck (argued), Timothy J. Hennessy, Fredericks Peebles & Morgan, LLP, Sacramento, CA, for plaintiff-intervenor-appellee, Picayune Rancheria.

Edmund G. Brown, Jr., Attorney General of California, Robert L. Mukai, Senior Assistant Attorney General, Sara J. Drake, Supervising Deputy Attorney General, Peter H. Kaufman, Deputy Attorney General, Neil D. Houston, Deputy Attorney General (argued), Sacramento, CA, for defendants-appellants State of California.

Appeal from the United States District Court for the Eastern District of California, Frank C. Damrell, Senior District Judge, Presiding. D.C. No. 2:04-cv-02265-FCD-KJM.

Before: CYNTHIA HOLCOMB HALL and M. MARGARET McKEOWN, Circuit Judges, and DAVID G. CAMPBELL,^* District Judge.

McKEOWN, Circuit Judge:

Who knew that simple math could be so tricky? The parties to this dispute, the State of California and two California Indian tribes, signed Gaming Compacts intended “to initiate a new era of tribal-state cooperation” with respect to gaming in the state. Central to the Compacts is a formula to calculate the number of gaming devices California tribes are permitted to license. How to interpret this opaquely drafted and convoluted formula has preoccupied the parties for some time, as the result has significant economic implications. Indeed, math and money have led to a breakdown in the cooperative spirit envisioned by the Compacts.

The Compacts stem from the Indian Gaming Regulatory Act (IGRA), passed by Congress in 1988 and designed “to provide a statutory basis for the operation of gaming by Indian tribes as a means of promoting tribal economic development, self-sufficiency, and strong tribal governments.” 25 U.S.C. § 2702(1). IGRA sets out three classes of lawful gaming; at issue here are slot machines and other gaming machines (“gaming devices”) that are included under Class III. 25 U.S.C. § 2703(7)(B)(ii), (8). A tribal-state gaming agreement, known as a “compact,” is required to conduct Class III gaming under IGRA. 25 U.S.C. § 2710(d)(1)(C).

In 1999, California and approximately 60 ¹ California Indian tribes signed substantively identical bilateral Gaming Compacts that authorized Class III gaming. The total number of slot machines allowed was restricted by contract language that authorized the continued operation of existing machines, permitted tribes who were not yet operating machines to operate up to 350 machines, and provided a formula for a limited license pool for the remaining machines. The primary issue in this appeal is the interpretation of the formula for the license pool, a mere two paragraphs in a 215-paragraph agreement. Unfortunately, these provisions are not a model of clarity. As a consequence, California and certain tribes have been mired in disputes for much of the period since the bilateral Compacts were signed.

This appeal springs from a disagreement between California and plaintiff Cachil Dehe Band of Wintun Indians of the Colusa Indian Community and plaintiff-intervenor Picayune Rancheria of the Chukchansi Indians (“Picayune”) (collectively, “Colusa”).² The parties agree that the formula sets a ceiling on the number of licenses in the pool. But the tribes claim the formula permits more licenses, while California maintains that it sets a lower limit. Acknowledging that the formula language is ambiguous, California and Colusa each offered different interpretations. The district court adopted yet a different formulation, introduced by Colusa as an alternative way to calculate the license pool. The parties also submitted extrinsic evidence purporting to explain their calculations.

Such a posture would normally suggest that summary judgment is inappropriate, even though contract interpretation is a matter of law. Nonetheless, both parties agreed that the matter should be decided on cross motions for summary judgment. An additional twist is that the parties' extrinsic evidence does not support their interpretations of the formula. As a result, we interpret the Compact de novo based on the plain meaning that adheres closest to the contract language.

We affirm in part the grant of summary judgment to Colusa because we agree that the limit on licenses exceeds that recognized by California. However, our interpretation of the governing provisions differs slightly from the district court's formulation. We also affirm the denial of California's motion for summary judgment. Finally, we uphold the remedy ordered by the district court of a license draw open to all eligible tribes, administered according to the process delineated in the Compacts. Before we wade into the somewhat mind-numbing discussion of numbers, it is useful to provide a background context for the formula.

Background

I. Compacts under IGRA

Following a successful ballot initiative permitting California Indian tribes to run “Nevada and New Jersey”-type casinos, and in response to the likely imminent invalidation of that initiative, then-Governor Gray Davis invited California tribes to negotiate Class III gaming compacts. By that time-April 1999-a number of California tribes were already operating gaming devices, although without authorization under IGRA. These tribes operated around 19,000 devices state-wide. In late August 1999, the California Supreme Court invalidated the ballot initiative permitting casino operation by Indian tribes. See Hotel Employees & Rest. Employees Int'l Union v. Davis, 21 Cal.4th 585, 88 Cal.Rptr.2d 56, 981 P.2d 990 (1999). California and the tribes, including Colusa, continued negotiating, however, intending to condition execution of the Compacts on the ratification of a constitutional amendment that would exempt Indian tribes from the prohibition on Class III gaming.

The final Compact negotiation sessions were held on September 8 and 9, 1999, and continued into the early hours of September 10. Late on September 9, the lead negotiator for California presented the entire draft Compact to the tribal representatives for approval. The representatives were given until September 10 to sign letters of intent to enter into bilateral Compacts with California. The Compacts required legislative ratification, and the end of the legislative session was fast approaching. Colusa's Chairman signed the tribe's letter of intent in the early hours of September 10. In total, about 60 tribes (the “Compact Tribes”), including Colusa and Picayune, entered into bilateral Class III gaming Compacts with California. These Compacts are substantially identical. See Artichoke Joe's Cal. Grand Casino v. Norton, 353 F.3d 712, 717-18 (9th Cir.2003).

The California legislature ratified the agreements in September 1999. On the same day, the Governor's Press Office released an “information sheet” regarding the number of licenses available, stating that the Compacts authorized 44,448 gaming devices total statewide, including those already in operation. California voters ratified the constitutional amendment in March 2000, enabling the Compacts to be executed. Colusa and Picayune's Compacts went into effect on May 16, 2000.

While the Colusa Compact includes a variety of provisions relating to the operation and licensing of Class III gaming devices, the only provisions at issue in this appeal relate to the aggregate number of gaming devices authorized statewide in addition to those already in operation as of September 1, 1999, i.e., the size of the “license pool.” The Compact provides a formula for determining that number, at § 4.3.2.2(a)(1):

The maximum number of machines that all Compact Tribes in the aggregate may license pursuant to this Section shall be the sum equal to 350 multiplied by the number of Non-Compact Tribes as of September 1, 1999, plus the difference between 350 and the lesser number authorized under Section 4.3.1.

The Compact defines Non-Compact Tribes as federally-recognized tribes that are operating fewer than 350 gaming devices whether or not the tribe executed a Compact with the State. § 4.3.2(a)(1). In other words, some tribes are both Compact and Non-Compact Tribes under the agreement. Section 4.3.1, which is referenced by § 4.3.2.2(a)(1), states:

The Tribe may operate no more Gaming Devices than the larger of the following: (a) A number of terminals equal to the number of Gaming Devices operated by the Tribe on September 1, 1999; or (b) Three hundred fifty (350) Gaming Devices.

For convenience, we refer to §§ 4.3.1 and 4.3.2.2(a)(1) as the “License Pool Provisions.”

A Compact Tribe may operate a certain number of gaming devices without securing licenses from the pool. This initial “free pass” covers either 350 devices or the number of devices the tribe was already operating as of September 1, 1999, whichever is larger. § 4.3.1. Colusa operated 523 gaming devices as of September 1, 1999, so it was permitted to continue operating all of those devices without licenses. A Compact Tribe must secure a license from the statewide pool for each additional device above the Tribe's “free pass” number, up to the maximum of 2000 devices per tribe. § 4.3.2.2(a).

The licenses are allocated from the license pool to Compact Tribes that request them according to a detailed draw process. § 4.3.2.2(a)(3). The draw process, which includes...