Colorado Riv. Indian v. National Indian Gam. Com'n

Citation383 F.Supp.2d 123
Decision Date24 August 2005
Docket NumberNo. CIV.A. 04-0010(JDB).,CIV.A. 04-0010(JDB).
CourtU.S. District Court — District of Columbia

Kim Hoyt Sperduto, Washington, DC, Eric N. Shepard, Acting Attorney General, Parker, AZ, Gwenellen P. Janov, Albuquerque, NM, Counsel for plaintiff.

Edward J. Passarelli, Department of Justice, Environment & Natural Resources Division, General Litigation Section, Washington, DC, Counsel for defendant.

Scott D. Crowell, Crowell Law Offices, Kirkland, WA, Counsel for Amici Curiae

Confederated Tribes of Siletz Indians of Oregon et al.

David S. Black, Holland & Knight LLP, McLean, VA, Counsel for Amicus Curiae National Indian Gaming Association.

Jennifer L. Nutt Carleton, Oneida, WI, Counsel for Amicus Curiae Oneida Tribe of Indians of Wisconsin.


BATES, District Judge.

Plaintiff Colorado River Indian Tribes ("Colorado River" or "the tribe") is a federally-recognized Indian Tribe that operates a casino on its tribal lands in Parker, Arizona. The casino conducts what is known as Class III gaming, which includes most conventional forms of casino gaming, such as slot machines, roulette, and blackjack. On January 10, 2001, the tribe interrupted the National Indian Gaming Commission ("NIGC" or "Commission") as it was conducting an audit of the casino to assess the tribe's compliance with the Commission's minimum internal control standards ("MICS"), a set of detailed rules that regulate the day-to-day activities of an Indian casino. The tribe maintained that the NIGC had exceeded its statutory powers in promulgating the MICS for Class III gaming, and that the compliance audit was therefore unlawful. The NIGC left the premises without completing the audit.

On July 17, 2003, the NIGC issued a Final Decision and Order in which it imposed a fine of $2,000 on Colorado River for terminating the audit, and affirmed its authority under the Indian Gaming Regulatory Act ("IGRA") to issue and enforce MICS for Class III operations. Colorado River now brings this action against the NIGC challenging the Final Decision and Order on the ground that the NIGC is without the authority to regulate Class III gaming. Upon a careful review of the text, the structure, and the legislative history of the IGRA, and the entire record in this case, the Court is compelled to agree with Colorado River that the statute does not confer upon the NIGC the authority to issue or enforce MICS for Class III gaming. While surely well-intentioned, the NIGC has overstepped its bounds. The Court therefore vacates the Final Decision and Order, and declares unlawful the MICS as applied to Class III gaming.


Because this case involves a challenge to an agency's authority to issue regulations, the relevant background consists not only of the factual and procedural history of the case, but also a brief overview of the applicable statutes and regulations.

I. The Indian Gaming Regulatory Act

For centuries, the Indian tribes have occupied a unique position in American jurisprudence. One defining aspect of the legal status of the Indian tribes has been their treatment as "domestic dependent nations" exercising "inherent sovereign authority over their members and territories." Okla. Tax Comm'n v. Citizen Band Potawatomi Indian Tribe of Okla., 498 U.S. 505, 509, 111 S.Ct. 905, 112 L.Ed.2d 1112 (1991) (quotation omitted). The sovereignty of the Indian tribes is unusual, however, in that it is subordinate to the federal government. See Washington v. Confed. Tribes of the Colville Indian Reservation, 447 U.S. 134, 156, 100 S.Ct. 2069, 65 L.Ed.2d 10 (1980). The Supreme Court has consistently affirmed the authority of Congress to enact statutes that expand the role of the federal government or the States over Indian affairs at the expense of tribal sovereignty. See United States v. Lara, 541 U.S. 193, 200, 124 S.Ct. 1628, 158 L.Ed.2d 420 (2004); New Mexico v. Mescalero Apache Tribe, 462 U.S. 324 333-34, 103 S.Ct. 2378, 76 L.Ed.2d 611 (1983).

One traditional area of Indian sovereignty in which the federal government has begun to assert a role for itself and the States in recent years is Indian gaming. The federal government historically had not played a direct role in the regulation of gaming activities on Indian lands. For decades, its involvement in Indian gaming was limited to oversight activities such as the approval of tribal ordinances relating to gaming activities, the review of tribal bingo management contracts with outside authorities, and the promotion of tribal gaming enterprises through financial incentives. See California v. Cabazon Band of Mission Indians, 480 U.S. 202, 218-19, 107 S.Ct. 1083, 94 L.Ed.2d 244 (1987). The States, for their part, already had on the books statutes of general application that prohibited or regulated casino gaming, but the Indian tribes resisted the application of those laws to gaming on Indian lands. See S.Rep. No. 100-446, at 1 (1988), reprinted at 1998 U.S.C.C.A.N. 3071. The authority of the States to extend the reach of their general gaming regulations to Indian gaming operations was, for some time at least, an open question of law.

The Supreme Court addressed that question in its 1987 decision in Cabazon Band. See 480 U.S. at 202, 107 S.Ct. 1083. The Court observed that the application of state gambling laws to Indian gaming had not been authorized by Congress. The Court also noted that state regulation of Indian gaming "would impermissibly infringe on tribal government," and "[s]elf-determination and economic development are not within reach if the Tribes cannot raise revenues and provide employment for their members" through gaming activities. Id. at 219-21, 107 S.Ct. 1083. The Court therefore concluded that the States were without the authority to impose laws that regulate casino gaming on Indian lands. The Court exempted from its decision those state laws that prohibited rather than regulated gambling: States that outlawed gambling in its entirety within their borders were permitted to apply those laws to Indian casinos. See id. at 220-21, 107 S.Ct. 1083.

The decision in Cabazon Band led to the enactment of the Indian Gaming Regulatory Act. Pub.L. 100-497, § 2, Oct. 17, 1988, 102 Stat. 2467, codified at 25 U.S.C. § 2701. Under pressure from States seeking the authority to regulate Indian gaming within their borders in the wake of the Supreme Court decision, and without gambling statutes or regulations of its own, Congress created a comprehensive scheme of regulation over Indian gaming with authority divided among the federal government, the States, and the Indian tribes. The statute reflected a hard-won compromise among the various interests with a stake in Indian gaming:

S. 555 is the outgrowth of several years of discussions and negotiations between gaming tribes, States, the gaming industry, the administration, and the Congress, in an attempt to formulate a system for regulating gaming on Indian lands. In developing the legislation, the issue has been how best to preserve the right of tribes to self-government while, at the same time, to protect both the tribes and the gaming public from unscrupulous persons. An additional objective inherent in any government regulatory scheme is to achieve a fair balancing of competitive economic interests.

S.Rep. No. 100-446, at 1, U.S.C.C.A.N. 1988, p. 3071.

To carry out the federal government's responsibilities in the scheme, the IGRA created the National Indian Gaming Commission (" NIGC"), an independent federal regulatory agency within the Department of the Interior. 25 U.S.C. § 2704. The IGRA also divided Indian gaming into three classes. Class I gaming consists of social gaming for minimal prizes and traditional forms of Indian gaming in connection with tribal ceremonies. See id. § 2703(6). Class II gaming encompasses bingo, pull-tabs, bingo-like games, and certain "non-banking" card games. See id. § 2703(7)(A). Finally, Class III gaming includes all other forms of gaming, including those ordinarily found in a casino, such as slot machines, roulette, blackjack, and other house banked games. See id. § 2710(d)(1); 25 C.F.R. § 502.4.

The IGRA subjects each class of gaming to a distinct regulatory scheme. The statute commits the regulation of Class I gaming entirely to the Indian tribes. See id. § 2710(a) ("Class I gaming on Indian lands is within the exclusive jurisdiction of the Indian tribes and shall not be subject to the provisions of this chapter."). The statute creates a complex scheme of shared regulation on the part of the NIGC and the Indian tribes over Class II gaming. See id. § 2710(a)(2) ("Any class II gaming on Indian lands shall continue to be within the jurisdiction of the Indian tribes, but shall be subject to the provisions of this chapter."). Finally, as to Class III gaming, the statute authorizes the States and tribes to enter into tribal-State compacts to address regulatory issues. See id. § 2710(d)(3)(A) ("Any Indian tribe having jurisdiction over the Indian lands upon which a class III gaming activity is being conducted, or is to be conducted, shall request the State in which such lands are located to enter into negotiations for the purpose of entering into a Tribal-State compact governing the conduct of gaming activities."). The legal question at the heart of this case is whether the IGRA also contemplates an active role for the NIGC in the regulation of Class III gaming.

II. The Minimum Internal Control Standards

The dramatic growth in Indian casino gambling in the 1990s prompted the NIGC to consider the need for a set of objective standards to ensure the integrity of gaming on Indian lands. On January 5, 1999, following public notice and the opportunity for comment, the NIGC promulgated regulations that set out minimum internal control standards ("MICS") for Class II and Class III Indian gaming. 64...

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