Pauma Band of Luiseno Mission Indians of the Pauma & Yuima Reservation v. California

• Decision Date: 02 September 2020
• Docket Number: No. 18-56457,18-56457
• Citation: 973 F.3d 953
• Parties: PAUMA BAND OF LUISENO MISSION INDIANS OF THE PAUMA & YUIMA RESERVATION, aka Pauma Band of Mission Indians, aka Pauma Luiseno Band of Mission Indians, Plaintiff-Appellant, v. State of CALIFORNIA; Gavin Newsom, as Governor of the State of California, Defendants-Appellees, and California Gambling Control Commission, an agency of the State of California; Attorney General for the State of California, Defendants.
• Court: U.S. Court of Appeals — Ninth Circuit

973 F.3d 953

PAUMA BAND OF LUISENO MISSION INDIANS OF THE PAUMA & YUIMA RESERVATION, aka Pauma Band of Mission Indians, aka Pauma Luiseno Band of Mission Indians, Plaintiff-Appellant,

v.State of CALIFORNIA; Gavin Newsom^* , as Governor of the State of California, Defendants-Appellees,andCalifornia Gambling Control Commission, an agency of the State of California; Attorney General for the State of California, Defendants.

No. 18-56457

United States Court of Appeals, Ninth Circuit.

Submitted July 6, 2020^** Pasadena, California

Filed September 2, 2020

Cheryl A. Williams and Kevin M. Cochrane, Williams & Cochrane LLP, Temecula, California, for Plaintiff-Appellant.

Xavier Becerra, Attorney General; Sara J. Drake, Senior Assistant Attorney General; T. Michelle Laird, Supervising Deputy Attorney General; Paras Hrishikesh Modha, Deputy Attorney General; Timothy M. Muscat, Deputy Attorney General; Office of the Attorney General, Sacramento, California; for Defendants-Appellees.

Before: Carlos T. Bea and Bridget S. Bade, Circuit Judges, and Yvonne Gonzalez Rogers,^*** District Judge.

Opinion by Judge Bade

BADE, Circuit Judge:

This action arose from negotiations for a new tribal-state compact between Plaintiff-Appellant Pauma Band of Luiseno Mission Indians of the Pauma and Yuima Reservation ("Pauma") and Defendants-Appellees the State of California and the Governor of the State of California (collectively, the "State"). In a well-reasoned decision, the district court held that the State satisfied its obligation to negotiate in good faith under the Indian Gaming Regulatory Act ("IGRA") and entered judgment in favor of the State on twenty of Pauma's twenty-two claims. We agree with the district court that the State agreed to negotiate for the new types of class III gaming that Pauma sought authorization to offer, actively engaged in the negotiations, and remained willing to continue the negotiations when Pauma filed this litigation. We have jurisdiction under 28 U.S.C. § 1291, and we affirm.

I

IGRA "strike[s] a delicate balance between the sovereignty of states and federally recognized Native American tribes" with respect to gaming on tribal land. Pauma Band of Luiseno Mission Indians of Pauma & Yuima Rsrv. v. California ("Pauma "), 813 F.3d 1155, 1160 (9th Cir. 2015) ; see Michigan v. Bay Mills Indian Cmty. , 572 U.S. 782, 785, 134 S.Ct. 2024, 188 L.Ed.2d 1071 (2014). IGRA separates tribal gaming into three general "classes," each with progressively restrictive regulations. See Seminole Tribe of Fla. v. Florida , 517 U.S. 44, 48, 116 S.Ct. 1114, 134 L.Ed.2d 252 (1996). Class III gaming "includes the types of high-stakes games usually associated with Nevada-style gambling," Coyote Valley Band of Pomo Indians v. California (In re Gaming Related Cases ) ("Coyote Valley "), 331 F.3d 1094, 1097 (9th Cir. 2003), and "is subjected to the greatest degree of control under IGRA's regulations," Pauma , 813 F.3d at 1160. A tribe may offer class III gaming only pursuant to a tribal-state compact—an agreement between the tribe and state authorizing and governing gaming activities. See 25 U.S.C. § 2710(d) ; Rumsey Indian Rancheria of Wintun Indians v. Wilson ("Rumsey "), 64 F.3d 1250, 1256 (9th Cir. 1994).

When a state receives a tribe's request to negotiate a compact to permit class III gaming, it "shall negotiate with the Indian tribe in good faith to enter into such a compact." 25 U.S.C. § 2710(d)(3)(A). Although IGRA does not define "good faith," it provides that courts "may" consider "the public interest, public safety, criminality, financial integrity, and adverse economic impacts on existing gaming activities" when evaluating whether a state negotiated in good faith and "shall consider any demand by the State for direct taxation of the Indian tribe or of any Indian lands as evidence" of bad faith. Id. § 2710(d)(7)(B)(iii). A compact may include "provisions relating to" various terms, including application of criminal and civil laws, allocation of criminal and civil jurisdiction, assessments, taxation, remedies, and operational standards. Id. § 2710(d)(3)(C)(i)–(vii).

We analyze bad faith claims under IGRA's burden-shifting standard. The tribe bears the initial burden of "introduc[ing] ... evidence" that: (1) "a Tribal-State compact has not been entered into" and (2) the state either failed to respond to the tribe's request "in good faith" or failed to respond altogether. Id. § 2710(d)(7)(B)(ii)(I)–(II). If that evidentiary showing is made, the burden shifts to the state to establish that it "negotiated with the Indian tribe in good faith to conclude a Tribal-State compact governing the conduct of gaming activities." Id. § 2710(d)(7)(B)(ii).

If a state fails to negotiate in good faith, IGRA affords a multi-step judicial remedy. First, the court must order the state and tribe to approve "a compact within a 60-day period." Id. § 2710(d)(7)(B)(iii). Second, if those negotiations are unsuccessful, the parties shall "submit to a mediator appointed by the court a proposed compact that represents their last best offer for a compact," and the mediator must select the proposal that "best comports with the terms" of IGRA. Id. § 2710(d)(7)(B)(iv). In the third and final step, "[i]f the State does not accept the mediator's chosen compact within 60 days, the Secretary of the Interior shall prescribe, consistent with the mediator's chosen compact and with the terms of IGRA, the conditions upon which the tribe may engage in class III gaming." Coyote Valley , 331 F.3d at 1098 (citing 25 U.S.C. § 2710(d)(7)(B)(vii) ).

"[T]he function of the good faith requirement and judicial remedy is to permit the tribe to process gaming arrangements on an expedited basis, not to embroil the parties in litigation over their subjective motivations." Rincon Band of Luiseno Mission Indians v. Schwarzenegger ("Rincon "), 602 F.3d 1019, 1041 (9th Cir. 2010). As a result, we evaluate good faith "objectively based on the record of negotiations." Id. ; see also Coyote Valley , 331 F.3d at 1113 ("[T]he good faith inquiry is nuanced and fact-specific, and is not amenable to bright-line rules.").

We have indicated that a state is not guilty of procedural bad faith if it "remained willing to meet with the tribe for further discussions." Coyote Valley , 331 F.3d at 1110. Similarly, a state does not engage in bad faith simply because "it takes a ‘hard line’ negotiating position" with a tribe. Rincon , 602 F.3d at 1038. "[A] ‘hard line’ stance is not inappropriate so long as the conditions insisted upon are related to legitimate state interests regarding gaming and the purposes of IGRA." Id. at 1039 (emphasis omitted).

II

A

The California Constitution generally prohibits lotteries. Section 19(a) provides: "The Legislature has no power to authorize lotteries, and shall prohibit the sale of lottery tickets in the State." Cal. Const. art. IV, § 19 (a); see Cal. Penal Code §§ 320 – 326. Nonetheless, the California Constitution authorizes "the establishment of a California State Lottery." Id. § 19(d).

The corresponding Lottery Act creates the California State Lottery, which is limited to operating "lottery games." Lottery game "means any procedure authorized by the [State Lottery Commission] whereby prizes are distributed among persons who have paid, or who have unconditionally agreed to pay, for tickets or shares which provide the opportunity to win those prizes." Cal. Gov't Code § 8880.12. "The Lottery Act's only express limitations on the types of lottery games the commission may authorize are contained in [California] Government Code section 8880.28." W. Telcon, Inc. v. Cal. State Lottery , 13 Cal.4th 475, 53 Cal.Rptr.2d 812, 917 P.2d 651, 654 (1996). These limitations include that "[n]o lottery game may use the theme of roulette, dice, baccarat, blackjack, Lucky 7s, draw poker, slot machines, or dog racing," and that "[i]n games utilizing computer terminals or other devices, no coins or currency shall be dispensed as prizes to players from these computer terminals or devices." Cal. Gov't Code § 8880.28(a)(1), (3).

In March 2000, the voters of California amended the California Constitution to authorize Indian tribes to operate three forms of class III gaming in reservation casinos: slot machines, banking and percentage card games, and lottery games. As amended, the California Constitution provides:

[T]he 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 (f).

B

In May 2000, Pauma and the State executed what is commonly known as the 1999 Compact, a nine-page document prescribing, inter alia , the types of class III gaming that Pauma could offer. As one type of class III gaming, Section 4.1(c) of the 1999 Compact authorized Pauma to operate "any devices or games that are authorized under state law to the California State Lottery, provided that the Tribe will not offer such games through use of the Internet unless others in the state are permitted to do so under state and federal law."

In 2004, Pauma and the State negotiated an amendment to the 1999 Compact authorizing Pauma to operate more machines in exchange for higher fees to the State. See Pauma , 813 F.3d at 1161–62. Lengthy litigation ensued, and in 2015, this court affirmed the district court's judgment rescinding the amendment and awarding $36.2 million to Pauma. See id. at 1173. With the 2004 amendment rescinded, the 1999 Compact became the sole operative agreement governing Pauma's gaming activities.

In November 2014, Pauma notified the State that it wanted to renegotiate the...