Calif. Commerce Casino v. Schwarzenegger

• Decision Date: 23 January 2007
• Docket Number: No. B188220.,B188220.
• Citation: 146 Cal.App.4th 1406,53 Cal.Rptr.3d 626
• Court: California Court of Appeals Court of Appeals
• Parties: CALIFORNIA COMMERCE CASINO, INC., et al., Plaintiffs and Appellants, v. Arnold SCHWARZENEGGER, as Governor, etc., et al., Defendants and Respondents.

53 Cal.Rptr.3d 626

146 Cal.App.4th 1406

CALIFORNIA COMMERCE CASINO, INC., et al., Plaintiffs and Appellants, v. Arnold SCHWARZENEGGER, as Governor, etc., et al., Defendants and Respondents.

No. B188220.

Court of Appeal, Second District, Division 3.

January 23, 2007.

Manatt, Phelps & Phillips, Ronald B. Turovsky and Joanna S. McCallum, Los Angeles, for Plaintiffs and Appellants.

Howard Rice Nemerovski Canady Falk & Rabkin, Steven L. Mayer, San Francisco, for Hollywood Park Land Co., LLC, et al. as Amici Curiae on behalf of Plaintiffs and Appellants.

Bill Lockyer, Attorney General, Robert L. Mukai, Assistant Attorney General, Sara J. Drake and Kenneth R. Williams, Deputy Attorneys General, for Defendants and Respondents.

Fred J. Hiestand, Sacramento, for the Pala Band of Mission Indians, the Pauma Band of Mission Indians, the Rumsey Band of Wintun Indians, the United Auburn Indian Community and the Viejas Band of Kumeyaay Indians as Amici Curiae on behalf of Defendants and Respondents.

KLEIN, P.J.

Plaintiffs and appellants California Commerce Casino, Inc. and Michael Sana (collectively, plaintiffs) appeal a judgment of dismissal following the sustaining without leave to amend of a demurrer interposed by defendants and respondents Arnold Schwarzenegger in his official capacity as Governor of the State of California, Tom Campbell in his official capacity as Director, California Department of Finance, and California Infrastructure and Economic Development Bank (I-Bank) (defendants).

SUMMARY STATEMENT

As a preliminary matter, this court has subject matter jurisdiction over the appeal. Government Code section 63048.8, subdivision (e), added by section 4 of Assembly Bill No. 687 (2003-2004 Reg. Sess.) (AB 687), insofar as it provides for direct review, by the California Supreme Court of certain matters, is unconstitutional because it abridges the Court of Appeal's appellate jurisdiction. (In re Perris City News (2002) 96 Cal.App.4th 1194, 1197, 118 Cal.Rptr.2d 38.)

The essential issue presented on appeal is the statute of limitations applicable to this action in which plaintiffs are challenging the constitutionality of AB 687, a five section bill wherein the Legislature ratified amended gaming compacts among the State of California and five Indian tribes Although plaintiffs contend they are attacking solely the validity of AB 687 and not any matters authorized by AB 687, plaintiffs' action, if successful, would have the effect of invalidating the amended compacts which were ratified thereby. Therefore, the various theories raised in plaintiffs' complaint should have been tested in a validation action within 60 days of the enactment of AB 687. (Code Civ. Proc., § 860 et seq.; Gov.Code, § 17700., However, plaintiffs waited nearly 11 months to file suit, and therefore, the trial court properly ruled the action was time-barred.

In addition to being filed late in the trial court, the matter was not filed timely on appeal. The issue of the timeliness of the appeal is inextricably intertwined with the issue of whether this action was subject to the validation statutes. Because plaintiffs' lawsuit was subject to the time limits specified for validation actions, the time for filing notice of appeal is governed by Code of Civil Procedure section 870, within the statutory scheme pertaining to validating proceedings, not by California Rules of Court, former rule 2(a). Code of Civil Procedure section 870 requires notice of appeal in a validation action to be filed within 30 days of notice of entry of judgment. The notice of appeal herein was filed 47 days after notice of entry of judgment, Therefore, the appeal must be dismissed as untimely.

FACTUAL AND PROCEDURAL BACKGROUND

1. The federal Indian. Gaming Regulatory Act.

The federal Indian Gaming Regulatory Act (IGRA) was enacted in 1988 as a mean? of generating tribal government revenue and to promote triable economic development, self-sufficiency, and strong tribal governments. (25 U.S.C. § 2702.)

IGRA separates gaming into three categories and provides for different modes of regulation for each category. Class 1 gaming (e.g., social games for minor prizes or traditional forms of Indian gaming) (25 U.S.C. § 2703. subd. (6)) is subject to tribal regulation only. (25 U.S.C. § 2710, subd. (a)(1).) Class 2 gaming (e.g. bingo and similar games and card games that arc allowed by a state) (25 U.S.C. § 2703, subd. (7)) is jointly regulated by federal and tribal authorities. (25 U.S.C. § 2710, subd. (a)(2).) Class 3 gaming, which includes ail forms of gambling that are not class 1 gaming or class 2 gaming (25 U.S.C. § 2703, subd. (8)), requires a compact that is negotiated between a tribe and a state, subject to federal approval and oversight. (25 U.S.C. § 2710, subd. (d).)

2. Pre-2000 state gaming laws and Proposition 5.

In 1988, when the federal legislation was enacted, California prohibited all non-antique slot machines and all banking and percentage card games. (Pen.Code, § 330 et seq.)¹ California's Constitution also prohibited all lotteries except the state lottery. (Cal. Const, art. IV, § 19, subds. (a), (d).) The state Constitution also declared: "The Legislature has no power to authorize, and shall prohibit casinos of the type currently operating in Nevada and New Jersey." (Cal. Const, art. IV, § 19, subd. (e), added by initiative, Gen. Elec. (Nov. 6, 1984.))

In 1998, the voters approved Proposition 5, which required the state to enter into specified tribal—state compacts. (Gov. Code, § 98000 et seq.) Proposition 5 was a purely statutory measure. In 1999, the California Supreme Court held most of Proposition 5 unconstitutional because it conflicted with the constitutional ban on casino-type gambling. (Hotel Employees & Restaurant Employees Internat. Union v. Davis (1999) 21 Cal.4th 585, 589, 88 Cal.Rptr.2d 56, 981 P.2d 990.)

3. The 1999 compacts and the subsequent approval of Proposition 1A

On September 10, 1999, Governor Davis executed Class III gaming compacts with 57 Indian tribes. (Gov.Code, § 12012.25.) The 1999 compacts allowed the tribes to operate slot machines at their casinos on Indian lands, and limited each tribe to a maximum of 2,000 slot machines.

The 1999 compacts were conditioned upon the passage of Proposition 1A, which would resolve the Supreme Court's concerns about Proposition 5 by amending the state Constitution to permit tribes to operate slot machines and banking and percentage card games pursuant to state-tribal compacts.

In March 2000, the voters approved Proposition 1A, which added the following provision to the state Constitution: "(f) Notwithstanding subdivisions (a) and (e), and any other provision of state law, the Governor is authorized 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 and percentage card games by federally recognized Indian tribes on Indian lands in California in accordance with federal law. Accordingly, slot machines, lottery games, and banking and percentage card games are hereby permitted to be conducted and operated on tribal lands subject to those compacts." (Cal. Const., art. IV, § 19, subd. (f).)

With the passage of Proposition 1A, the 1999 compacts finally were approved.

4. The 2004 compact amendments.

On June 21, 2004, some four years after the approval of Proposition 1A, Governor Schwarzenegger and five of the tribes amended their compacts to allow the tribes, after paying substantial fee increases, to operate slot machines in excess of the previous limit of 2,000.² The compact amendments also provided for enhanced environmental protection and employee rights.

The compact amendments, inter alia, required each of the five tribes to make 18 annual payments to the state with the agreement that "it is the State's intention to assign these ... revenue contributions totaling at least $100 million annually to a third party for purposes of securitizing the 18-year revenue stream in the form of bonds that can be issued to investors."

During the life of the bonds arid in order to protect the tribes' ability to make the payments underlying the bonds, the state agreed not to authorize slot machines or banking or percentage card games within the tribes' core geographic market area, except to another Indian tribe with a valid class III gaming compact. Also, the compact amendments provided the five tribes could seek injunctive relief to enjoin the authorization of any such gaming, so as to protect the marketability of the bonds and to provide the stability in gaming operations needed to ensure the tribes' annual payments.

5. Ratification of the amended compacts via AB 687.³

The Legislature ratified the amended compacts in AB 687, which was enacted on July 1, 2004.

AB 687 is a five-section bill. Section 3 thereof added section 12012.40 to the Government Code, which ratified the amendments of tribal-state gaming compacts entered into by the state and the five tribes.

AB 687 was enacted as an urgency statute to take immediate effect, in order "to ensure that sufficient funds are available when needed to fund essential transportation programs and to ensure that the revenues available under the amended tribal-state compacts ratified pursuant to this act are made available to the state as expeditiously as possible.. .." (AB 687, § 5.)

AB 687, among other things, approved the specific details of the bond financing arrangements by adding article 6.5 (commencing with § 63048.6) to chapter 2 of division 1 of title 6.7 of the Government Code (hereafter, article 6.5). Article 6.5 authorized the issuance of bonds securitized by the moneys paid by the five tribes to the state pursuant to the amended compacts. AB 687 also required that any action challenging the validity of any matter authorized by article 6.5 be brought "in accordance with, and within the time specified in" Code of Civil Procedure...