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Forest County Potawatomi Community v. United States

United States District Court, District of Columbia

September 10, 2018

FOREST COUNTY POTAWATOMI COMMUNITY, Plaintiff,
v.
UNITED STATES, et al., Defendants, MENOMINEE INDIAN TRIBE OF WISCONSIN and MENOMINEE KENOSHA GAMING AUTHORITY, Defendant-Intervenors.

          MEMORANDUM OPINION

          COLLEEN KOLLAR-KOTELLY UNITED STATES DISTRICT JUDGE.

         Plaintiff Forest County Potawatomi Community has brought this action under the Administrative Procedure Act (“APA”) against Defendants United States of America, United States Department of the Interior, the Secretary of the Interior, and the Assistant Secretary of Indian Affairs (collectively, the “Federal Defendants”), challenging the Assistant Secretary's decision to disapprove a 2014 amendment to a gaming compact between Plaintiff and the State of Wisconsin under the Indian Gaming Regulatory Act. 25 U.S.C. §§ 2701 et. seq, (“IGRA”). The Court has previously granted the Menominee Indian Tribe of Wisconsin (“Menominee”) and the Menominee Kenosha Gaming Authority's (collectively, the “Defendant-Intervenors”) [22] Motion for Leave to Intervene as Defendants.

         Now before the Court is Plaintiff's [79] Motion for Summary Judgment, Federal Defendants' [81] Cross-Motion for Summary Judgment, and Defendant-Intervenors' [82] Cross- Motion for Summary Judgment. Upon consideration of the pleadings, [1] the relevant legal authorities, and the record as a whole, the Court will DENY the Plaintiff's motion, GRANT the Federal Defendants' motion, and GRANT the Defendant-Intervenors' motion.

         The Court finds that the Assistant Secretary's disapproval of Plaintiff's 2014 compact amendment was not arbitrary or capricious. Evidence in the administrative record supports the Assistant Secretary's determination that the 2014 compact amendment was inconsistent with IGRA. Because there is evidence to support a finding that the amendment was inconsistent with IGRA, it was not arbitrary or capricious for the Assistant Secretary to disapprove the amendment.

         I. BACKGROUND

         A. Statutory and Regulatory Background

         Congress passed IGRA in 1988 in order “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. § 2702(1). IGRA divides gaming into three classes. As is relevant here, Class III games are “all forms of gaming that are not class I gaming or class II gaming.” Id. at § 2703(8). Class III gaming includes slot machines and “most casino games such as blackjack and roulette.” Amador Cty., Cal. v. Salazar, 640 F.3d 373, 376 (D.C. Cir. 2011).

         For an Indian tribe to engage in Class III gaming, the tribe must have a tribal-state gaming compact. See 25 U.S.C. § 2710(d)(1)(C). Gaming compacts may include provisions relating to a limited number of topics. Id. at § 2701(d)(3)(C)(i-vii). Gaming compacts may fall into one of six enumerated categories or may be on “any other subjects that are directly related to the operation of gaming activities.” Id. at § 2701(d)(3)(C)(vii).

         All Class III gaming compacts must be submitted to the Secretary of the Department of the Interior for approval. See 25 C.F.R. § 293.4. The Secretary has delegated authority to approve or disapprove of compacts to the Assistant Secretary of Indian Affairs.

         Once a gaming compact is submitted for approval, the Assistant Secretary has three options. The Assistant Secretary may: (1) approve the compact, (2) disapprove the compact, or (3) take no action for 45 days, which results in the compact being deemed approved only to the extent it is consistent with IGRA. 25 U.S.C. § 2710(d)(8). The Assistant Secretary is permitted to disapprove a compact only if the compact violates IGRA, another federal law, or the United States' trust obligations to Indians. Id. at § 2710(d)(8)(B).

         B. Factual Background

         Plaintiff is an Indian tribe occupying Southeastern Wisconsin. FCPCAR000005. Prior to the passage of IGRA, Plaintiff submitted an application to the United States to acquire in trust for the benefit of the tribe two parcels of land located in the city of Milwaukee, “Concordia College Land” and “Menomonee Valley Land.” Id. In its application, Plaintiff explained that it intended to operate a bingo hall on the Menomonee Valley Land. Id. Some of the profits from this bingo hall would fund the Milwaukee Indian School located on the Concordia College Land which served Indian children from various Wisconsin tribes. Id.

         These lands were acquired in trust for Plaintiff in 1990 under the Indian Reorganization Act. And Plaintiff's application to conduct gaming on these lands was approved under IGRA. Id. In 1991, Plaintiff opened a bingo hall. FCPCAR000006. The closest Class III gaming facility was over 110 miles away from the bingo hall. Id.

         In 1992, Plaintiff and the state entered into a gaming compact to regulate the conduct of Class III gaming. Id. The compact authorized 200 gaming devices at the bingo hall. The compact also required Plaintiff to pay its proportional share of the state's $350, 000 in annual costs for regulating Indian gaming. Id.

         In 1998, various amendments to the 1992 compact were required. Id. Plaintiff and the state submitted a new compact amendment to the Secretary of the Interior, and the amendment was approved. Id. The 1998 compact amendment permitted Plaintiff to operate 1, 000 gaming devices and 25 blackjack tables if the city and county adopted regulations allowing expanded gaming. FCPCAR000007. Additionally, the amendment increased Plaintiff's annual payment to the state to $6, 375, 000 and extended the 1992 compact for five additional years, with an expiration date of 2004. Id.

         Plaintiff and the state again amended the original 1992 compact in 2003. Id. In 2000, Plaintiff had opened a new, larger casino, and the 2003 compact amendment authorized Plaintiff to operate an unlimited number of gaming devices as well as additional casino games. Id. As part of the amendment, Plaintiff agreed to make lump-sum payments to the state totaling $90.5 million over two years to help alleviate the state budget crisis. Id. Plaintiff also agreed to make increased annual payments to the state based on a percentage of the Class III gaming net wins. Id.

         In consideration for the lump-sum payments and the increased annual payments, Plaintiff and the state negotiated a 50-mile “no-fly zone” around Milwaukee. FCPCAR000008. Under the “no-fly zone” agreement, if the state permitted Class III gaming within 50-miles of Plaintiff's casino, then Plaintiff would be relieved of its obligation to make additional payments and the state would refund some of Plaintiff's past payments. Id.

         Upon the submitting the 2003 compact amendment to the Secretary, the Secretary informed Plaintiff and the state that he would not approve the amendment if the “no-fly zone” provision was included. Id. The parties removed the “no-fly zone” provision and re-submitted the amendment to the Secretary. The parties agreed to negotiate a new provision at a later date which would similarly benefit Plaintiff. FCPCAR000009. Following the submission of the amendment with the “no-fly zone” provision removed, the Secretary took no action, so the amendment was deemed approved to the extent it was consistent with IGRA. Id.

         For a year and a half, the parties attempted to negotiate a substitute provision for the “no-fly zone” and to resolve other ancillary issues. FCPCAR0000011. But, Plaintiff and the state were unable to reach a complete agreement. Id. In 2005, the parties agreed to again amend the 1992 compact. Id. The 2005 compact amendment established a 30-mile “no-fly zone” and required the parties to undertake last-best-offer arbitration addressing the rights and duties of the parties in the event that another tribe opened a Class III gaming facility within 30 to 50 miles of Plaintiff's casino. Id. The 2005 compact amendment was deemed approved by the Secretary to the extent it was consistent with IGRA. FCPCAR000012. Plaintiff continued to make lump-sum payments and annual payments to the state in reliance on the compact amendment. Id.

         While Plaintiff was renegotiating and amending its compact with the state, the Menominee tribe was attempting to develop an off-reservation casino for Class III gaming. In 2000, the Secretary approved Menominee's request to operate Class III gaming on an off-reservation land parcel in Kenosha, subject to the land being acquired in trust for gaming purposes. FCPCAR000685. The land parcel in Kenosha is located 33 miles away from Plaintiff's casino. FCPCAR001462. In 2004, Menominee filed an application asking the Secretary to take the Kenosha land into trust for gaming purposes. FCPCAR000685. In August 2013, the Assistant Secretary approved Menominee's application to take the Kenosha land into trust for gaming purposes. FCPCAR000014. Following the Assistant Secretary's determination, the Governor of Wisconsin had one year to concur. The Assistant Secretary granted the Governor a six-month extension, giving the Governor until February 19, 2015 to decide whether to concur. Id.[2]

         Against this backdrop, in June 2014 the state invoked the arbitration agreement from the 2005 compact amendment with Plaintiff. The arbitration process was meant to establish compact terms pursuant to which Plaintiff would be compensated for lost revenue due to the opening of a new Class III gaming facility within 30 to 50 miles of its casino. Id. The arbitration panel selected the 2014 compact amendment as the best proposed compact amendment. Id.

         The 2014 compact amendment set out the obligations of the state and Plaintiff in the event that the Assistant Secretary approved a Class III gaming facility between 30 and 50 miles away from Plaintiff's casino. FCPCAR000029. In that event, the compact requires an annual Mitigation Payment to the Plaintiff equal to the annual revenue lost. Id. The annual revenue lost is to be calculated based on “Milwaukee Net Revenues” which include revenue from “Class III gaming, Class II gaming, food and beverage, [and] hotel and entertainment activity.” FCPCAR000030.

         While the state is ultimately “responsible for ensuring that the Mitigation Payments are paid in a timely manner and in full, ” the 2014 compact amendment “anticipate[s] that the State will enter into agreements under which the Applicant will agree to pay the Mitigation Payment.” FCPCAR000031. The only named Applicant Facility is Menominee's proposed gaming facility. FCPCAR000029.

         Alternatively, the amendment provides a payment plan whereby the Plaintiff “shall negotiate in good faith to reach an agreement on reasonable terms proposed by the State which would obligate the Applicant or other third party to make some or all of the Mitigation Payments.” FCPC000032. The amendment suggests these payments could be made from the “Lock Box established in the Menominee Compact.” Id.

         On December 30, 2014, Plaintiff provided the Assistant Secretary with the 2014 compact amendment and detailed arguments for approving it. FCPCAR000001-25. But on January 9, 2015, the Assistant Secretary disapproved the 2014 compact amendment, finding it invalid under IGRA. FCPCAR001459-67.

         In disapproving the amendment, the Assistant Secretary concluded that the amendment violated IGRA because it “includes provisions involving subjects that exceed the permissible scope of a Class III gaming compact.” FCPCAR001464. The Assistant Secretary provided two primary reasons why the amendment exceeded the permissible scope of a Class III gaming compact. First, the Assistant Secretary determined that, rather than the state, “in fact, Menominee would be responsible for making all of the Mitigation Payments.” Id. Because Menominee would make the payments, the amendment “impose[d] upon another tribe the obligation to guarantee the [Plaintiff's] gaming and other profits.” Id. Second, the calculation of the Mitigation Payments was based on revenue from not only Class III gaming, but also Class II gaming and ancillary businesses. FCPCAR001464-64 n.32.

         On January 21, 2015, Plaintiff filed this lawsuit challenging the Assistant Secretary's disapproval of the 2014 compact amendment.

         II. LEGAL STANDARD

         Under Rule 56(a) of the Federal Rules of Civil Procedure, “[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” However, “when a party seeks review of agency action under the APA [before a district court], the district judge sits as an appellate tribunal. The ‘entire case' on review is a question of law.” Am. Bioscience, Inc. v. Thompson, 269 F.3d 1077, 1083 (D.C. Cir. 2001). Accordingly, “the standard set forth in Rule 56[ ] does not apply because of the limited role of a court in reviewing the administrative record . . . . Summary judgment is [ ] the mechanism for deciding whether as a matter of law the agency action is supported by the administrative record and is otherwise consistent with the APA standard of review.” Southeast Conference v. Vilsack, 684 F.Supp.2d 135, 142 (D.D.C. 2010).

         The APA “sets forth the full extent of judicial authority to review executive agency action for procedural correctness.” FCC v. Fox Television Stations, Inc., 556 U.S. 502, 513 (2009). It requires courts to “hold unlawful and set aside agency action, findings, and conclusions” that are “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A). “This is a ‘narrow' standard of review as courts defer to the agency's expertise.” Ctr. for Food Safety v. Salazar, 898 F.Supp.2d 130, 138 (D.D.C. 2012) (quoting Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)). However, an agency is still required to “examine the relevant data and articulate a satisfactory explanation for its action including a rational connection between the facts found and the choice made.” Motor Vehicle Mfrs. Ass'n, 463 U.S. at 43 (internal quotation omitted). “Moreover, an agency cannot ‘fail[ ] to consider an important aspect of the problem' or ‘offer[ ] an explanation for its decision that runs counter to the evidence' before it.” Dist. Hosp. Partners, L.P. v. Burwell, 786 F.3d 46, 57 (D.C. Cir. 2015) (quoting Motor Vehicle Mfrs. Ass'n, 463 U.S. at 43).

         III. DISCUSSION

         After considering the arguments of all the parties and reviewing the administrative record, the Court concludes that the Assistant Secretary's disapproval of Plaintiff's 2014 compact amendment was not arbitrary or capricious. The Assistant Secretary determined that the amendment violated IGRA in two ways. First, the Assistant Secretary determined that the amendment violated IGRA by making one tribe liable for another's revenue losses. Second, the Assistant Secretary determined that the amendment violated IGRA by requiring mitigation payments for Class II gaming and ancillary businesses. Neither of these determinations were arbitrary or capricious.

         A. Chevron Deference

         The Assistant Secretary determined that the 2014 compact amendment violated IGRA because the amendment concerned subjects impermissible under tribal-state compacts. Plaintiff contends that the subject of the compact was permissible because it fell under IGRA's tribal-state compact “catchall provision” which allows compacts concerning “any other subjects that are directly related to the operation of gaming activities.” 25 U.S.C. § 2701(d)(3)(C)(vii). As an initial matter, the Court concludes that the catchall provision is ambiguous and that the Assistant ...


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