U.S. ex rel. Morongo Band of Mission Indians v. Rose

• Decision Date: 08 September 1994
• Docket Number: No. 92-56180,92-56180
• Citation: 34 F.3d 901
• Parties: UNITED STATES of America ex rel. MORONGO BAND OF MISSION INDIANS, Plaintiff-Appellee, v. Frank ROSE, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 901

34 F.3d 901

30 Fed.R.Serv.3d 813

UNITED STATES of America ex rel. MORONGO BAND OF MISSION INDIANS, Plaintiff-Appellee, v. Frank ROSE, Defendant-Appellant.

No. 92-56180.

United States Court of Appeals Ninth Circuit.

Argued and Submitted March 11, 1994.

Decided Sept. 8, 1994.

David M. Liberman, Los Angeles, CA, for defendant-appellant.

George Forman, Alexander & Karshmer, Berkeley, CA, for plaintiff-appellee.

Appeal from the United States District Court for the Central District of California.

Before: BRIGHT ^*, WIGGINS, and T.G. NELSON, Circuit Judges.

WIGGINS, Circuit Judge:

Appellant Frank Rose appeals the imposition of a $25,000 fine for violations of a bingo ordinance enacted by the Morongo Band of Mission Indians (the "Band"). The case is on its second visit to this court. In the first sojourn, we held that a suit to enforce the tribal ordinance against a non-Indian presented a federal question of the Band's "disputed ability, under the principles of federal common law, to apply that power against one outside of its community." Morongo Band of Mission Indians v. Rose, 893 F.2d 1074, 1077 (9th Cir.1990) (hereinafter "Morongo I "); see also Chilkat Indian Village v. Johnson, 870 F.2d 1469 (9th Cir.1989). This appeal involves that very same dispute of tribal authority, among other issues.

I. Facts and Prior Proceedings

Though the basic facts are accurately recited in Morongo I, we repeat them here with some additional details relevant to this appeal.

In April of 1983, Appellee Morongo Band of Mission Indians ("Appellee" or the "Band") adopted an ordinance regulating the playing of bingo and establishing the Morongo Tribal Bingo Enterprise. At the same time, the Band entered into a lease with Clive "Sonny" Miller ("Miller"), a member of the Band, to use for the games a building located on allocated trust land belonging to Miller. The Band also entered into a management agreement with Justus Enterprises, Inc. ("Justus") whereby Justus would operate the games and manage the enterprise in return for 49 percent of the operating profits, and 95% of the profits after the Band's share exceeded half a million dollars. The Band approved the three documents by a bare majority vote. The Band's attorney forwarded the Management Agreement and Lease to the Bureau of Indian Affairs ("BIA") for approval "if possible."

Concurrently, Miller and Justus executed a Joint Venture Agreement, which directed that, in the event of termination of the agreement by Miller for breach by Justus, "Owner [Miller] will retain all sums accrued or paid to him to that date and Manager [Justus] will assign to Owner all of its rights under the management agreement to be entered into by Manager and Band...."

Days later, the Band, having undergone a change in leadership, began to reconsider its Bingo Enterprise. A new attorney requested that the BIA withhold approval of the contracts so that the Band could try to get more favorable terms. The Band seemed concerned with the amount being paid to Miller. On January 17, 1984, the Band's attorney informed Justus' attorney that the Band had decided to terminate the existing bingo operation and that, while it would consider new proposals from Justus, it would not consider any arrangement involving the lease of Miller's land. The Band rescinded the Management Agreement on the grounds that it was procured through misrepresentation, that it was void because it had not been approved by the BIA, and that Justus had breached the Agreement by failing to make an accounting and make payment for the first fiscal year of operation. Justus paid amounts payable to Miller into the district court as part of an interpleader action. The Bingo Enterprise was to be terminated on February 10, 1984.

Miller, however, believed that his lease with the Band was still valid and that he had succeeded to Justus' rights under the Management Agreement by the terms of their Joint Venture Agreement. He decided to continue holding bingo games on his property, turning to Rose, an experienced bingo advisor, for help in running the games. Rose was a consultant and had no ownership or equity interest in Miller's bingo operation.

On September 5, 1984, the Band filed the current action against Miller and Rose in the district court, seeking both to enjoin the bingo operation and to collect penalties of $500 for each violation of its bingo ordinance. See Ordinance p 5(b), ER 50. The bingo operation was seized by United States Marshalls.

The district court first dismissed the entire action for lack of jurisdiction, and the Band appealed. While the appeal was pending, the Band stipulated to the dismissal of the appeal as to Miller. The district court's original dismissal of the claim against Rose for lack of subject matter jurisdiction was reversed by Morongo I. On remand, Rose moved to dismiss the complaint for failure to join Miller as an indispensable party and for failure to state a claim upon which relief could be granted. The district court denied that motion.

The district court granted summary judgment to the Band as to liability. A two-day trial was held to determine the extent of Rose's liability. The court determined that Rose should be liable for one-fourth of the penalties under the ordinance. Final judgment in the amount of $25,000 against Rose was entered on August 14, 1992. Rose appeals, arguing (1) that the contracts provide a defense to the enforcement of the ordinance, (2) that the Band did not have the authority to enforce its ordinance against him, a non-Indian, and (3) that the complaint should have been dismissed for the failure to join Miller.

II. The Contractual Defense

Rose claims that the entry of summary judgment against him on liability was error because the district court concluded that the Management Agreement and Joint Venture Agreement provide Rose with no defense against the operation of the ordinance. He claims that the rights of Justus to conduct the games under the Management Agreement were assigned to Miller by the Joint Venture Agreement, making the games conducted by Miller and Rose authorized under the ordinance. This court reviews de novo the application of the principles of contract interpretation to the facts. Aetna Casualty and Surety Co. v. Pintlar Corp., 948 F.2d 1507, 1511 (9th Cir.1991). The interpretation of a statute is a question of law reviewed de novo. E.g., Mt. Graham Red Squirrel v. Espy, 986 F.2d 1568, 1571 (9th Cir.1993).

Section 81 of 25 U.S.C. declares that certain contracts with a tribe of Indians or individual Indians are null and void unless approved by the Secretary of the Interior and the Commissioner of Indian Affairs. ¹ The district court concluded that the lack of approval of the Management Agreement and Joint Venture Agreement rendered them void and no basis for a defense against liability. Rose argues that the contracts did not require approval for two reasons. First, the contracts authorizing the bingo games were allegedly between the Band and Miller, an Indian, because Justus had assigned its rights to Miller. Rose argues that section 81 is intended to guard against unconscionable or exploitative contracts between Indians or tribes and non-Indians. Second, Rose claims that the contracts were not "relative to [Indian] lands" because the facility was to be located on Miller's allotted trust land, and because the Management Agreement did not give Justus the exclusive right to operate bingo on the reservation.

We find no merit in Rose's contentions. The contract authorizing the games, the Management Agreement, was clearly between the band and a non-Indian, Justus. Failure to get BIA approval made the contract a nullity from the outset. To find that the fact that Miller was a member of the Band made any difference, one would have to conclude that the purported assignment worked a novation of an otherwise void contract. Even if that were possible, there was no assignment because there was no approval thereto as required by 25 U.S.C. Sec. 84. Miller and Rose, therefore, did not accede to the benefits of the Management Agreement.

Rose also fails to establish that the contract was not "relative to [Indian] lands." This court and the Seventh Circuit have held that section 81 controls contracts involving bingo facilities located on tribal trust lands. A.K. Management Co. v. San Manuel Band of Mission Indians, 789 F.2d 785, 787 (9th Cir.1986) ("The broad language of section 81 expresses congressional intent to cover almost all Indian land transactions."); Wisconsin Winnebago Bus. Comm. v. Koberstein, 762 F.2d 613, 619 (7th Cir.1985). Barona Group of Capitan Grande Band of Mission Indians v. American Management & Amusement, Inc., 840 F.2d 1394 (9th Cir.1987), cert. dismissed, 487 U.S. 1247, 109 S.Ct. 7, 101 L.Ed.2d 958 (1988), cited by Appellant, does not support Appellant's claim that courts have found section 81 controlling only where unallotted tribal trust lands are involved. In fact, the Barona court held that section 81 controlled where the lands were on the reservation, even though the lands involved apparently were not trust lands. Id. at 1398 (quoting BIA, which did not believe approval was required because "trust lands and funds are not involved"). Moreover, that case held that a bingo management agreement was "relative to" Indian lands because it granted the exclusive right to operate bingo games. Id. at 1403-04. The Management Agreement in this case granted Justus the exclusive right to operate for-profit bingo games on the reservation. The district court did not err by holding that BIA approval was required.

We find no error in the district court's conclusion that the contracts between the Band, Justus, and Miller provide Rose with no defense against the enforcement of the bingo ordinance.

III. Tribal Authority over Non-Indians

Rose argues that the bingo ordinance may not be enforced against him, a non-Indian, based on activities occurring on...