Gaming World Int. v. White Earth Chippewa Indians

• Citation: 317 F.3d 840
• Decision Date: 24 January 2003
• Docket Number: No. 01-3040.,01-3040.
• Parties: GAMING WORLD INTERNATIONAL, LTD., a Delaware Corporation, Petitioner-Appellee, v. WHITE EARTH BAND OF CHIPPEWA INDIANS; White Earth Reservation Business Committee, also known as White Earth Tribal Council, doing business as Shooting Star Casino, Respondent-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

317 F.3d 840

GAMING WORLD INTERNATIONAL, LTD., a Delaware Corporation, Petitioner-Appellee, v. WHITE EARTH BAND OF CHIPPEWA INDIANS; White Earth Reservation Business Committee, also known as White Earth Tribal Council, doing business as Shooting Star Casino, Respondent-Appellant.

No. 01-3040.

United States Court of Appeals, Eighth Circuit.

Submitted: May 16, 2002.

Filed: January 24, 2003.

Zenas Baer, argued, Hawley, MN, for appellant.

H. Morrison Keshner, argued, Fergus Falls, for appellee.

Before LOKEN, HEANEY, and MURPHY, Circuit Judges.

MURPHY, Circuit Judge.

This case grows out of a dispute between the White Earth Band of Chippewa Indians (the Band) and Gaming World International, Ltd. (Gaming World) related to the construction and management of a casino in Mahnomen, Minnesota. Approximately one month after the Band filed a declaratory judgment action against Gaming World in the White Earth Band of Chippewa Tribal Court, Gaming World filed this petition seeking declaratory relief and arbitration. The district court granted Gaming World's motion to compel arbitration, and the Band appeals. We affirm in part and reverse in part.

I.

Gaming World is a Delaware corporation that specializes in operating casinos, and the Band is a federally recognized Indian tribe. The Band is governed by the White Earth Tribal Council which has conducted business as the White Earth Reservation Business Committee. In 1991 the parties agreed that the Band would construct the Shooting Star Casino in Mahnomen, Minnesota and that Gaming World would help to finance and manage it. A written contract was drafted which provided for a term of seven years and a division of the net profits of the casino. Sixty percent of the net profits were to go to the Band and forty percent to Gaming World. Appellant's Appendix (App.) at A-363. The White Earth Reservation Business Committee signed on behalf of the Band.

The parties agreed that the Band would borrow funds to finance the construction of the casino and that the loans would be repaid out of the Band's share of net profits. Id. at A-32, 245. The Band obtained the necessary construction funds by drawing $11,800,000 from a trust fund established under the White Earth Land Settlement Act (WELSA), 25 U.S.C. § 331, and by arranging a $5,500,000 commercial loan. App. at A-43, 245. The casino was furnished through a $5,000,000 contribution by Gaming World, apparently to be reimbursed from casino gross revenues. Id. at A-44, 249.

Casino management contracts involving Indian tribes are regulated under the Indian Gaming Regulatory Act of 1988 (IGRA). 25 U.S.C. §§ 2701 et seq. IGRA created the National Indian Gaming Commission (NIGC), 25 U.S.C. § 2704, and assigned responsibility for reviewing all management contracts to the Chairman of NIGC. 25 U.S.C. §§ 2710(d)(9) & 2711. Although IGRA was passed in 1988, it was only in February 1993 that NIGC began to function. Before that time the Secretary of the Interior had interim authority to review and approve management contracts. See 25 U.S.C. § 2709. The Secretary delegated his own approval power under IGRA to the Area Directors of the Bureau of Indian Affairs (BIA), whose decisions could be appealed to the Interior Board of Indian Appeals (IBIA). 25 C.F.R. § 2.4(e). An Area Director's decision automatically became effective after thirty days, unless an adversely affected party had filed both a notice of appeal and a petition for a stay. 43 C.F.R. § 4.21(a)(2). During the interim before NIGC became operational, only IBIA could grant final approval of management agreements on behalf of the Secretary. 43 C.F.R. §§ 4.1(b)(2), 4.312. An unreviewed decision by an Area Director was not a final agency decision for purposes of exhaustion and judicial review. 43 C.F.R. §§ 4.21(c), 4.314(a).

IGRA specifies that the Chairman of NIGC has exclusive authority to approve any casino management contract, 25 U.S.C. § 2705(a)(4); 25 C.F.R. § 533.1(b), and every management contract must contain a provision acknowledging this fact. 25 C.F.R. § 531.1(n). Contracts approved under the Secretary's interim authority were to be effective only "until approved or disapproved by the Chairman." 25 C.F.R. § 533.1(c). Management contracts "that have not been approved by the Secretary of the Interior or the Chairman... are void." 25 C.F.R. § 533.7; see also 25 U.S.C. § 2711(a)(1) (management contracts subject to approval of chairman). After NIGC became operational in February 1993, only its chairman could grant final approval to a management contract under the regulatory scheme created under IGRA. 25 U.S.C. § 2705(a)(4); 25 C.F.R. § 533.1(a)-(b).

IGRA contains provisions governing the maximum term for management agreements, division of profits under them, and limitations on repayment of construction costs. See 25 U.S.C. § 2711(b)-(c). Although the statute limits management contract terms to five years, it authorizes approval of terms up to seven years if necessary because of the amount of capital investment, income projections, and type of gaming involved. 25 U.S.C. § 2711(b)(5). Similarly, management fees are not to exceed thirty percent of net revenues, but they may go as high as forty percent if approved and if circumstances require. 25 U.S.C. § 2711(c). Every management contract is also required to provide "a minimum guaranteed payment to the Indian tribe that has preference over the retirement of development and construction costs," 25 U.S.C. § 2711(b)(3), and "for an agreed ceiling for the repayment of development and construction costs." 25 U.S.C. § 2711(b)(4).

Because the Band and Gaming World drafted their initial agreement before NIGC was actually in operation, they submitted it to the Area Director of the BIA for approval. The Area Director decided that the contract could not be approved unless modified to decrease its term to five years, to reallocate profits seventy percent to the Band and thirty percent to Gaming World, and to repay all of the Band's borrowed construction funds from gross casino revenues rather than from the Band's share of net profits. The parties agreed to these conditions under protest, and the Area Director approved the contract as so modified on March 6, 1992. App. at A-119.

The contract approved by the Area Director in March 1992 contained several other clauses relevant to this appeal. It included an arbitration clause which stated:

Any dispute, controversy or question of interpretation arising under, out of, or in connection with this Agreement or any amendments hereof, or any breach or default hereunder, shall be submitted to and determined and settled by arbitration in the State of Minnesota, in accordance with the applicable rules of the American Arbitration Association then in effect.

Id. at A-49-50. It also included a limited waiver of the Band's sovereign immunity so that Gaming World could seek to enforce the contract, id. at A-50, and several seemingly contradictory clauses related to the date when the contract would become effective. One of these clauses said the contract would commence "on the date it is approved by the Bureau of Indian Affairs," id. at A-31, another stated that "As of this date, this Agreement is in full force and effect," id. at A-58, and a third indicated that the agreement would be binding when approved by the Secretary or his delegate unless IGRA were to require its submission to the NIGC Chair for approval:

The parties to this Agreement anticipate that said Agreement will be approved by the Secretary of the Interior or his delegate pursuant to the provisions of [IGRA] and recognize that such approval causes this Agreement to be binding upon the parties until such time in the future as the Agreement shall be amended. The parties to this Agreement also recognize that [IGRA] may require the Band to submit this agreement to the Chairman of the National Indian Gaming Commission for approval by the Chairman. If so required, the parties hereto agree to submit this Agreement.

Id. at A-31-32.

The Band appealed the Area Director's March 6, 1992 decision to IBIA, id. at A-242, which issued its decision in early March 1993, the month after NIGC had begun to function. IBIA affirmed that part of the Area Director's decision limiting the contract term to five years and setting the division of profits at seventy percent for the Band and thirty percent for Gaming World. It vacated that part of the decision requiring the Band's construction costs be repaid from gross revenues, however, and remanded the matter to the Area Director for "further consideration." White Earth Band of Chippewa Indians, 23 I.B.I.A. 216, 227 (Mar. 3, 1993). No reference was made to the fact that NIGC had become operational or that IGRA and the relevant regulations required final approval or disapproval of a management contract by the Chairman of NIGC, 25 U.S.C. § 2705(a)(4); 25 C.F.R. § 533.1(a)(b).

On April 23, 1993, the Area Director wrote a letter to Darrell "Chip" Wadena, chairman of the White Earth Tribal Council. App. at A-488. The Area Director advised in this letter that the funds obtained from the Band's WELSA trust fund for construction of the casino were actually disbursements and required no repayment:

Contrary to our original assumption in this matter, funds borrowed from a Bureau trust fund account, such as the White Earth Tribal Government and Economic Development fund ... do not have to be repaid in any form or manner. The funds should be considered a disbursement and not a loan.

Id. According to the Area Director, this meant that the $11,800,000 drawn from the Band's trust fund would not have to be repaid from casino revenues, neither from gross revenues (as provided in the March 6, 1992 contract approved by the Area Director but vacated by IBIA), nor from the Band's share of net profits (as originally contemplated by the parties).

The April 23 letter also indicated that the Area Director expected that the issue...