Tulalip Tribes of Wash. v. Washington

• Decision Date: 17 April 2015
• Docket Number: No. 13–35464.,13–35464.
• Citation: 783 F.3d 1151
• Parties: TULALIP TRIBES OF WASHINGTON, Plaintiff–Appellant, v. State of WASHINGTON; Washington State Gambling Commission ; David Trujillo, Director of the Washington State Gambling Commission, in his official capacity; Jay Inslee, Governor of the State of Washington, in his official capacity, Defendants–Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

783 F.3d 1151

TULALIP TRIBES OF WASHINGTON, Plaintiff–Appellant

v.State of WASHINGTON; Washington State Gambling Commission ; David Trujillo, Director of the Washington State Gambling Commission, in his official capacity; Jay Inslee, Governor of the State of Washington, in his official capacity, Defendants–Appellees.

No. 13–35464.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Dec. 11, 2014.

Filed April 17, 2015.

Lisa M. Koop (argued), Office of the Reservation Attorney, Tulalip Tribes of Washington, Wulalip, WA; Phillip E. Katzen, Kanji & Katzen, PLLC, Seattle, WA; Riyaz A. Kanji, David Giampetroni, and Philip H. Tinker, Kanji & Katzen, PLLC, Ann Arbor, MI, for Plaintiff–Appellant.

Robert W. Ferguson, Attorney General, and Callie M. Castillo (argued), Assistant Attorney General, Olympia, WA, for Defendants–Appellees.

Craig J. Dorsay and Lea Ann Easton, Dorsay & Easton LLP, Portland, OR, for Amicus Curiae Samish Indian Nation.

Appeal from the United States District Court for the Western District of Washington, Richard A. Jones, District Judge, Presiding. D.C. No. 2:12–cv–00688–RAJ.

Before: M. MARGARET McKEOWN, RICHARD C. TALLMAN, and JOHN B. OWENS, Circuit Judges.

OPINION

McKEOWN, Circuit Judge:

This appeal requires us to interpret a tribal-state gaming compact between the Tulalip Tribes of Washington (“Tulalip”) and the State of Washington. More specifically, at issue are electronic scratch ticket and online lottery games that use video player terminals. Tulalip asks us to force the State to amend the compact so that Tulalip can acquire additional licenses to these terminals. Citing the “most-favored tribe” clause in its compact, Tulalip argues that it is entitled to what it characterizes as the “more favorable terms” available to the Spokane Tribe through a mechanism known as the Inter–Tribal Fund. We disagree. We conclude that the terms of the compact do not require the State to adopt Tulalip's amendment.

Background

I. The Legal Framework of Tribal Gaming

This dispute occurs against the backdrop of many iterative changes to tribal-state gaming compacts, so we begin with the basics of tribal gaming. The Indian Gaming Regulatory Act (“IGRA”), which was passed by Congress in 1988, provides a framework 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. § 2702(1). IGRA “provide[s] a statutory basis for the regulation of gaming by an Indian tribe adequate to shield it from organized crime and other corrupting influences, to ensure that the Indian tribe is the primary beneficiary of the gaming operation, and to assure that gaming is conducted fairly and honestly by both the operator and players.” Id. § 2702(2).

Under IGRA, lawful gaming is divided into three classes, each of which is subject to different regulations. We have previously summarized the classes:

Class I gaming covers “social games solely for prizes of minimal value or traditional forms of Indian gaming engaged in by individuals as part of, or in connection with, tribal ceremonies or celebrations.” 25 U.S.C. § 2703(6). Class II gaming includes bingo and card games that are explicitly authorized by a state or “not explicitly prohibited by the laws of the State and are [legally] played at any location in the State.” Id. § 2703(7)(A)(ii). Class II gaming specifically excludes banked card games and slot machines.

Artichoke Joe's Cal. Grand Casino v. Norton, 353 F.3d 712, 715 (9th Cir.2003). Class III gaming, the subject of this appeal, includes “all forms of gaming that are not class I gaming or class II gaming,” 25 U.S.C. § 2703(8), such as slot machines and other “high-stakes games usually associated with casino-style gambling,” Artichoke Joe's Cal. Grand Casino, 353 F.3d at 715.

For class III gaming to be lawfully conducted on tribal lands, three conditions must be satisfied: “(1) authorization by an ordinance or resolution of the governing body of the Indian tribe and the Chair of the National Indian Gaming Commission ...; (2) location in a state that permits such gaming for any purpose by any person, organization, or entity; and (3) the existence of a Tribal—State compact approved by the Secretary of the Interior.” Id. at 715–16 (footnote omitted) (citing 25 U.S.C. § 2710(d)(1) ).

In Washington, the process for entering into tribal gaming compacts is governed by both federal and state law—IGRA and the Revised Code of Washington § 9.46.360. The process begins when a tribe asks the state to enter into negotiations for a gaming compact. 25 U.S.C. § 2710(d)(3)(A) ; Wash. Rev. Code § 9.46.360. The Executive Director of the Washington State Gambling Commission is authorized to negotiate on behalf of the state. Wash. Rev. Code § 9.46.360(2). Following approval by the Commission, the proposed compact is sent to the Governor for review and execution. Id. § 9.46.360(3), (6). Once the Governor and the tribe execute a compact, or an amendment to a compact, the U.S. Secretary of the Interior reviews it and it takes effect after the Secretary's approval has been published in the Federal Register. 25 U.S.C. § 2710(d)(3)(B).

II. The Tulalip Compact

In 1991, Tulalip and the State of Washington signed a tribal-state gaming compact (the “Tulalip Compact”), an agreement that has since been amended numerous times.

A 1998 amendment to the Tulalip Compact authorized Tulalip to operate a Tribal Lottery System, which authorizes tribes to operate electronic scratch ticket and online lottery games that use video player terminals. According to Tulalip, “the terminals resemble video slot machines.” The terms of the Tribal Lottery System were collectively negotiated between the State and twelve tribes, including Tulalip, and resulted in amendments to their gaming compacts. Tulalip's amendment became effective on January 28, 1999. See Notice of Amendment to Approved Tribal–State Compact, 64 Fed. Reg. 4,460 –04 (Jan. 28, 1999).

The Tribal Lottery System rules are laid out in “Appendix X” to the Tulalip Compact. Section 12 of Appendix X prescribes how terminals are allocated to tribes. Each tribe receives a base allocation of the right to operate 675 terminals after one year. A tribe may increase the number of authorized terminals, up to an overall limit of 1500, by acquiring unused allocation rights from any “[e]ligible tribe,” that is, a compacting tribe with gaming rights consistent with Appendix X. Any such acquisition or transfer of unused allocation rights “shall be made only pursuant to a plan approved by no less than a majority” of eligible tribes. Appendix X § 12.4.1. Such a terminal allocation plan exists among the tribes.

Some aspects of the Tribal Lottery System changed through a 2007 amendment to the Tulalip Compact. The new terms were also collectively negotiated, this time between the State and the twenty-seven Washington tribes with gaming compacts, including Tulalip. The negotiations concluded in February 2007, and Tulalip and the State executed the amendment in March 2007. The amendment became effective on May 31, 2007. See Notice of Amendment to Approved Tribal—State Compact, 72 Fed. Reg. 30,392 –01 (May 31, 2007).

The updated terms for the Tribal Lottery System are found in another appendix—this one entitled “Appendix X2.” Appendix X2 raised the base allocation to 975 terminals and also raised the overall limits on terminals. Most tribes have a new overall limit of 3000 terminals. Three tribes—Tulalip, the Muckleshoot Tribe, and the Puyallup Tribe—have a higher overall limit of 4000 terminals. As under Appendix X, a tribe that seeks to acquire the right to operate terminals in addition to its base allocation may do so through a plan approved by a majority of eligible tribes. This terminal allocation plan is the only mechanism specified in Appendix X2 for a tribe to obtain rights in excess of its base allocation.

Both Appendices X and X2 contain a “most-favored tribe clause” that entitles Tulalip to different, more favorable terms under certain circumstances. The substantive portion of each clause is the same:

[I]n the event the State agrees (or is required by law or a court ruling to agree) to permit an allocation of Player Terminals to a tribe which is greater, or is on terms which are more favorable, than as set forth herein, the Tribe shall be entitled to such greater Allocation or more favorable terms.

Appendix X § 12.5; Appendix X2 § 12.4.

At the time of the 2007 amendment, the State and the tribes involved in the collective negotiations also agreed to a moratorium on amendments. Specifically, Appendix X2 contains a moratorium on compact amendments before June 30, 2009, unless the amendment would involve a technical change or would be by mutual agreement. After June 30, 2009, the tribe may seek an amendment under four specific circumstances: (1) federal or state law is amended to authorize gambling devices that were previously not permitted, (2) a court interpreting Washington law permits use of a gambling device not previously permitted, (3) another tribe or entity is allowed to use a type or number of class III gambling devices that is materially different or greater in quantity per location than authorized by Appendix X2, or (4) another tribe offers higher maximum wagers or the extension of credit.

III. The Spokane Compact

The Spokane Tribe is one of two Washington tribes that did not participate in the collective negotiation process that led to the Tulalip Compact. In 2005, the Spokane Tribe and the State arrived at terms of an initial proposed compact, but the proposal was returned for further negotiations that proceeded concurrently with the collective negotiation of the terms of Appendix X2 to the Tulalip Compact, discussed above. The Spokane Tribe and the State eventually executed a compact (the “Spokane Compact”) that became effective on April 30, 2007. See Notice of Amendment to Approved Tribal–State Compact, 72 Fed. Reg. 21,284 –03 (Apr. 30, 2007)...