Colo. River Indian Tribes v. Nat. Indian Gaming

• Decision Date: 20 October 2006
• Docket Number: No. 05-5402.,05-5402.
• Citation: 466 F.3d 134
• Parties: COLORADO RIVER INDIAN TRIBES, A Federally recognized Indian Tribe, Appellee v. NATIONAL INDIAN GAMING COMMISSION, et al., Appellants.
• Court: U.S. Court of Appeals — District of Columbia Circuit

466 F.3d 134

COLORADO RIVER INDIAN TRIBES, A Federally recognized Indian Tribe, Appellee v. NATIONAL INDIAN GAMING COMMISSION, et al., Appellants.

No. 05-5402.

United States Court of Appeals, District of Columbia Circuit.

Argued September 8, 2006.

Decided October 20, 2006.

Appeal from the United States District Court for the District of Columbia (No. 04cv00010).

Todd S. Aagaard, Attorney, U.S. Department of Justice, argued the cause and filed the briefs for federal appellants. Edward J. Passarelli, Attorney, U.S. Department of Justice, entered an appearance.

Gwenellen P. Janov argued the cause for appellee. With her on the brief were Samuel D. Gollis and Kim Hoyt Sperduto.

Thomas M. Brownell and Scott D. Crowell were on the brief for amici curiae National Indian Gaming Association, et al. in support of appellee.

Before: RANDOLPH and TATEL, Circuit Judges, and EDWARDS, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge RANDOLPH.

RANDOLPH, Circuit Judge.

This is an appeal from an order of the district court, Bates, J., granting summary judgment in favor of the Colorado River Indian Tribes and against the National Indian Gaming Commission, the Commission's Chairman, and two of its members. Colo. River Indian Tribes v. Nat'l Indian Gaming Comm'n, 383 F.Supp.2d 123 (D.D.C.2005). The issue is whether the Indian Gaming Regulatory Act, 25 U.S.C. §§ 2701-2721, gives the Commission authority to promulgate regulations establishing mandatory operating procedures for certain kinds of gambling in tribal casinos.

Congress enacted the Indian Gaming Regulatory Act in the wake of the Supreme Court's decision that state gaming laws could not be enforced on Indian reservations within states otherwise permitting gaming, California v. Cabazon Band of Mission Indians, 480 U.S. 202, 107 S.Ct. 1083, 94 L.Ed.2d 244 (1987). The Act established the Commission as an agency within the Department of the Interior. 25 U.S.C. § 2704(a). The Commission has the authority to investigate and audit certain types of Indian gaming, to enforce the collection of civil fines, and to "promulgate such regulations and guidelines as it deems appropriate to implement the provisions" of the Act. Id. § 2706; see Cabazon Band of Mission Indians v. Nat'l Indian Gaming Comm'n, 14 F.3d 633, 634 (D.C.Cir.1994).

The Tribe operates the BlueWater Resort and Casino on Indian lands in Parker, Arizona. The casino offers what the Act defines as "class II" and "class III" gaming. Class II gaming includes bingo; "non-banking" card games; and pull-tabs, lotto, and other games similar to bingo, if played in the same location. 25 U.S.C. § 2703(7)(A), (B). Class III gaming includes most conventional forms of casino gaming such as slot machines, roulette, and blackjack. Id. § 2703(8); 25 C.F.R. § 502.4. Class I gaming consists of social gaming for minimal prizes and traditional forms of Indian gaming in connection with tribal ceremonies. 25 U.S.C. § 2703(6).

The Act treats each gaming class differently. "Class I gaming on Indian lands is within the exclusive jurisdiction of the Indian tribes," and is not subject to the Act. Id. § 2710(a)(1). As to class II gaming, the Commission and the tribes share regulatory authority: the tribes must enact a gaming ordinance applying the Act's minimum regulatory requirements; and the Commission's Chairman must approve the tribal ordinance before gaming may occur. Id. § 2710(a)(2), (b). The Act regulates how tribes engaging in class II gaming may make payments to tribal members, id. § 2710(b)(3), and it requires an annual outside audit of the gaming and various contracts, id. § 2710(b)(2)(C), (D).

Like class II gaming, class III gaming is lawful only if it takes place on Indian land "in a State that permits such gaming for any purpose by any person, organization, or entity ...." Id. § 2710(d)(1)(B). But unlike class II gaming, a tribe conducts class III gaming pursuant to a compact with the state. Id. § 2710(d)(1)(C). The Secretary of the Interior must approve any such compact before it may become effective. Id. § 2710(d)(3)(B). Thereafter, the "Tribal-State compact govern[s] the conduct of gaming activities," id. § 2710(d)(3)(A), and the tribe's class III gaming operations must be "conducted in conformance" with the compact, id. § 2710(d)(1)(C). Tribal-state compacts may contain provisions related to "standards for the operation of such activity" and "any other subjects that are directly related to the operation of gaming activities." Id. § 2710(d)(3)(C)(vi), (vii). The Commission must approve any tribal ordinances for regulating and conducting class III gaming and any contracts the tribe enters into for the management of its class III gaming. Id. § 2710(d)(1)(A)(iii), (d)(9).

The Colorado River Indian Tribes regulates gaming at its BlueWater casino pursuant to a tribal ordinance and rules contained in a tribal-state class III gaming compact with the State of Arizona. See Gaming Ordinance of the Colo. River Indian Tribes, Ord. No. 94-1 (Aug. 31, 1994); Colo. River Indian Tribes and State of Ariz. Gaming Compact (Jan. 31, 2003) (Gaming Compact). Both the ordinance and the compact contain their own internal control standards. The most recent version of the compact requires the Tribe's gaming agency to create standards governing operating procedures that are at least as stringent as those contained in the rules the Commission promulgated in 1999. Gaming Compact § 3(b)(3)(B). The State of Arizona monitors the Tribe's compliance with the standards, for which the Tribe reimburses the state about $250,000 per year. The Tribe's gaming agency employs twenty-nine employees and has an annual budget of $1.2 million.

In 1999 the Commission promulgated regulations, which it termed "Minimum Internal Control Standards," governing class II and class III gaming. See 64 Fed.Reg. 590 (Jan. 5, 1999) (codified as amended at 25 C.F.R. pt. 542). The regulations take up more than eighty pages in the Code of Federal Regulations. No operational detail is overlooked. The rules establish standards for individual games, see, e.g., 25 C.F.R. § 542.7, .8, .10, customer credit, id. § 542.15, information technology, id. § 542.16, complimentary services, id. § 542.17, and many other aspects of gaming. To illustrate, tribes must establish "a reasonable time period" not to exceed seven days for removing playing cards from play, but "if a gaming operation uses plastic cards (not plastic-coated cards), the cards may be used for up to three (3) months if the plastic cards are routinely inspected, and washed or cleaned in a manner and time frame approved by the Tribal gaming regulatory authority." Id. § 542.9(d), (e). To take another example the district court mentioned, coin drops are regulated differently according to the size of the gaming facility. See id. § 542.21, .31, .41. There are rules prescribing the number and type of employees who must be involved in the removal of the coin drop, id. § 542.21(g)(1), the timing of the removal of the coin drop, id. § 542.21(g)(2), the tagging and transportation of the coin drop, id. § 542.21(g)(4), the manner in which the coin drop must be housed while in the machine, id. § 542.21(g)(5), and the purposes for which a coin drop may be used, id. § 542.21(g)(6).

In January 2001, the Commission sought to audit the Tribe's class III gaming at the BlueWater casino in order to determine whether the Tribe was complying with the regulations. The Tribe protested on the ground that the rules exceeded the Commission's authority under the Act. The auditors departed and the Commission issued a notice of violation. After administrative hearings, the Commission fined the Tribe $2,000 for terminating the audit. Colo. River, 383 F.Supp.2d at 130. The Commission denied the Tribe's objection, citing its authority to "promulgate such regulations and guidelines as it deems appropriate to implement the provisions" of the Act, 25 U.S.C. § 2706(b)(10), among which is the provision stating that one of the Act's purposes is to protect the integrity of gaming revenue, id. § 2702. In re Colo. River Indian Tribes, NOV/CFA 01-01, 5-6 (Nat'l Indian Gaming Comm'n May 30, 2002) (NIGC Final Order). The Commission located its power to audit the casino in § 2706(b)(4), which authorizes the Commission to "audit all papers, books, and records respecting gross revenues of class II gaming conducted on Indian lands and any other matters necessary to carry out the duties of the Commission under this chapter ...." See NIGC Final Order at 7. The Tribe brought an action in federal district court challenging the decision and the Commission's statutory authority to regulate class III gaming. The district court reached the "inescapable conclusion" that Congress did not intend to give such broad authority to the Commission, and therefore vacated the Commission's decision and declared the regulations unlawful as applied to class III gaming. Colo. River, 383 F.Supp.2d at 132.

There was a time when the Commission agreed with the district court's view of the Act. The first Chairman of the Commission notified the Inspector General of the Department of the Interior in 1993 that "the regulation of class III gaming was not assigned to the Commission but was left to the tribes and the states ...." Memorandum from Anthony J. Hope, Chairman, Nat'l Indian Gaming Comm'n to the Assistant Inspector General for Audits, Dep't of the Interior 2 (Oct. 18, 1993). He explained that this was why the Commission had not imposed "gaming control standards" on class III gaming: "the Act assigns those responsibilities to the tribes and/or the states." Id. The Commission's Chairman took the same position when he testified before Congress the following year. See Manner in which Gaming Activities Are Regulated by the Several States and the Role of the Federal Government in the Regulation of Indian Gaming Activities: Hearing Before the S. Comm. on Indian Affairs, 103d Cong. 7-8 (...