Diamond Game Enterprises Inc. v. Reno

• Decision Date: 03 November 2000
• Docket Number: 98-5516
• Parties: Diamond Game Enterprises, Incorporated and The Cheyenne and Arapaho Tribes of Oklahoma Gaming Commission, on behalf of the Cheyenne and Arapaho Tribes of Oklahoma, Appellants v. Janet Reno, Attorney General, et al., Appelleesonsolidated with 99-5345 United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT
• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)

Diamond Game Enterprises, Incorporated and The Cheyenne and Arapaho Tribes of Oklahoma Gaming Commission, on behalf of the Cheyenne and Arapaho Tribes of Oklahoma, Appellants v Janet Reno, Attorney General, et al., Appellees

No. 98-5516, Consolidated with 99-5345

United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 7, 2000

Decided November 3, 2000

Appeals from the United States District Court for the District of Columbia (No. 97cv00452)

James E. Townsend argued the cause for appellants. With him on the briefs were David W. McElroy, Munford Page Hall, II, Virginia W. Boylan and Stephen A. Lenske. Philip Baker-Shenk entered an appearance.

Leander Bergen, Geoffrey M. Standing Bear and Andrew W. Baldwin were on the brief for amici Pueblo of San Juan, et al.

John T. Stahr, Attorney, U.S. Department of Justice, ar- gued the cause for the Federal appellees and Jonathan A. Glogau, Special Counsel, State of Florida, argued the cause for the State appellees. With them on the joint brief were Lois J. Schiffer, Assistant Attorney General, U.S. Depart- ment of Justice, David C. Shilton and Edward J. Passarelli, Attorneys, and Sara J. Drake, Supervising Deputy Attorney General, State of California. Jared A. Goldstein, Attorney, U.S. Department of Justice, entered an appearance.

Before: Ginsburg, Randolph and Tatel, Circuit Judges.

Opinion for the Court filed by Circuit Judge Tatel.

Tatel, Circuit Judge:

This case requires us to determine whether a gambling machine known as the Lucky Tab II, an electromechanical device that dispenses paper pull-tabs and then displays their contents on a video monitor, should be classified under the Indian Gaming Regulatory Act as a Class II "aid" or a Class III "facsimile." The Act prohibits Indian tribes from operating Class III facsimiles without first negoti- ating a compact with the state. Applying the statute's plain language, guided by our only relevant precedent, Cabazon Band of Mission Indians v. NIGC, 14 F.3d 633 (D.C. Cir. 1994), and proceeding without any views from the agency charged with the Act's implementation, we conclude that the Lucky Tab II is a Class II aid.

I

The Indian Gaming Regulatory Act of 1988 ("IGRA"), 25 U.S.C. s 2701-19, regulates gambling operations run by Indi- an tribes. The Act's purpose is 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. s 2702(1).

The Act divides Indian gaming into three classes, each requiring a different level of authorization. Class I gaming consists of social games played solely for prizes of minimal value as well as traditional forms of Indian gaming. See 25 U.S.C. s 2703(6). Indian tribes may operate Class I games as they wish. See 25 U.S.C. s 2710(a)(1).

Class II gaming includes bingo, and if conducted in the same hall as bingo, it also includes lotto, punch boards, and tip jars, as well as pull-tabs, the game at issue here. See 25 U.S.C. s 2703(7)(A). In language central to the dispute in this case, the Act allows the use of "electronic, computer, or other technologic aids" in connection with Class II games, 25 U.S.C. s 2703 (7)(A)(i), but prohibits the use of "[e]lectronic or electromechanical facsimiles of any game of chance." 25 U.S.C. s 2703 (7)(B)(ii). Tribes may conduct Class II gaming if the state in which they are located permits such forms of gambling and if the governing body of the tribe adopts a gaming ordinance that is then approved by the Chairman of the National Indian Gaming Commission, the agency created by Congress to implement IGRA. See 25 U.S.C. ss 2710(b), 2704.

Class III gaming includes all gambling not covered by either Class I or Class II, including "facsimiles" of Class II devices. See 25 U.S.C. s 2703(8). In order to conduct Class III operations, tribes must obtain state approval through negotiation of a tribal-state compact. See 25 U.S.C. s 2710(d)(1).

Commission regulations define Class II aids and Class III facsimiles. An aid is "a device ... that when used ... [i]s not a game of chance but merely assists a player or the playing of a game [and] is readily distinguishable from the playing of a game of chance on an electronic or electrome- chanical facsimile." 25 C.F.R. s 502.7. A facsimile is "any gambling device as defined in [the Johnson Act]." 25 C.F.R. s 502.8. Predating IGRA by more than 30 years, the John- son Act prohibits the use of gambling devices on federal land, in interstate commerce, and in "Indian country." See 15 U.S.C. ss 1171-78 (1953). Both the Commission's regula- tions and this Court have interpreted IGRA as limiting the Johnson Act prohibition to devices that are neither Class II games approved by the Commission nor Class III games covered by tribal-state compacts. See Cabazon, 14 F.3d at 635, n.3 (noting that IGRA repealed the Johnson Act with regard to Class III devices subject to a tribal-state compact but that there is no other repeal of the Johnson Act in IGRA, implying that Class II aids, permitted under IGRA, do not run afoul of the Johnson Act).

This case concerns a game known as pull-tabs. A small, two-ply paper card, a pull-tab bears symbols and patterns similar to tic-tac-toe that appear when players peel off the pull-tab's top layer. The pattern of the symbols determines whether the player wins a prize. In the traditional pull-tabs game, bingo hall clerks sell pull-tabs from counters or mobile carts, and winners present the tabs to either clerks or cash- iers to collect prizes. Pull-tabs are sold from large pools known as "deals." Containing anywhere from 1200 to 100,000 pull-tabs, deals have a fixed number of winners and losers.

At issue in this case is the proper classification of a gambling device known as the Lucky Tab II, an electrome- chanical dispenser of paper pull-tabs. The machine dispenses pull-tabs from a roll containing approximately 7500 tabs. About 100 rolls comprise a deal, within which winning pull- tabs are randomly distributed. The machine cuts the pull-tab from the roll and drops it into a tray. A bar code scanner inside the machine automatically reads the tab and then displays its contents on a video screen. A placard on the machine informs players that "[v]ideo images may vary from actual images on pull tabs. Each tab must be opened to verify." To collect prizes, players must present the actual winning tab to a clerk. In many bingo halls, players pur- chase pull-tabs either from a Lucky Tab II or from clerks; in such cases, machines and clerks cut pull-tabs from rolls that are part of the same deal.

In 1994, the Kickapoo Traditional Tribe of Texas and Diamond Game Enterprises, the manufacturer of the Lucky Tab II, asked the Commission to classify the machine as a Class II aid. Two years passed without Commission action. In August 1996, the Kickapoo Tribe began operating approxi- mately 100 Lucky Tab II machines. At this point, the record becomes complicated and, to say the least, confusing. As far as we can tell, the following events of significance to this case transpired: The Commission's Director of Enforcement ad- vised the Tribe that the machines were Class III gambling devices that could only be operated pursuant to a tribal-state compact. See Diamond Game Enterprises, Inc. v. Reno, 9 F. Supp. 2d 13, 15 (D.D.C. 1998). Notwithstanding the Di- rector's action, the members of the Commission were appar- ently divided over the proper classification of the Lucky Tab II, some thinking it an aid and others a facsimile. Because of this disagreement, the Commission sought advice from the Department of Justice, but DOJ lawyers were themselves divided over the proper classification of the machine. See Memorandum from Deputy Assistant Attorney General Rich- ard Shiffrin to Associate Deputy Attorney General Seth P. Waxman, at 1 (June 13, 1996) (noting that the Office of Tribal Justice and the Criminal Division had reached opposite con- clusions on the appropriate classification of the Lucky Tab II--the former concluding that it falls under Class II and the latter concluding that it belongs in Class III). The Commis- sion never formally responded to the request to classify the Lucky Tab II.

According to the Tribe and Diamond Game, certain mem- bers of the Commission recommended that the Tribe and the company file a declaratory judgment action in federal court to resolve the issue. Acting on that advice, they filed this action in the U.S. District Court for the District of Columbia seek- ing, among other things, a declaratory judgment that the machine qualifies as a Class II aid. The Cheyenne and Arapaho Tribes of Oklahoma intervened as plaintiffs. Ala- bama, California, and Florida intervened as defendants.

The parties filed cross motions for summary judgment. Finding that the Lucky Tab II "performs all the functions that a player of the traditional pull-tab game would have performed," the district court found the machine to be a Class III facsimile and granted summary judgment to the govern- ment. See Diamond Game, 9 F. Supp. 2d at 20. Subse- quently, Diamond Game and the Tribes filed a Rule 60(b) motion, claiming that the company had made technical changes to the Lucky Tab II. Finding that the modifications were not new evidence, the district court denied the motion.

II

Unlike the legal issues presented in this case, the policy questions are both interesting and challenging. In determin- ing the proper classification of the Lucky Tab II, how do we further Congress' objective of allowing Indian tribes to use gaming as a means of "promoting tribal economic develop- ment, self-sufficiency, and strong tribal governments," 25 U.S.C. s 2702(1), while at the same time "shield[ing] [Indian tribes] from organized crime and other corrupting influ- ences," 25 U.S.C. s 2702(2)? Will the Lucky Tab II enable tribes to "take advantage of modern methods of conducting...