California’s Native American tribes won a victory against the state when the Ninth Circuit ruled that Governor Gavin Newsom’s attempt to make tribes enforce the state’s domestic support orders, comply with its environmental laws, and waive sovereign immunity in tort claims were “wholly collateral” to the operation of casinos, and thus “per se evidence of bad faith.”

Congress passed the Indian Gaming Regulatory Act (IGRA) in 1988 as a way to promote “tribal economic development, self-sufficiency and strong tribal governments.” The law allows “high-stakes, Las Vegas-style” casinos to be located on Indian reservations. When those lands are in California, tribes must periodically receive and renew their operating licenses. During the current renewal cycle, California demanded several things.

The state wanted to mandate that the casinos enforce judgments against their employees who owed spousal and child support. It wanted the tribes to agree to comply with an extensive series of environmental regulations and asked the tribes to waive sovereign immunity for various tort claims. The tribes objected to all of these, and the Ninth Circuit agreed because they said these matters are “wholly collateral to the operation of gaming facilities” and thus constituted “per se evidence of bad faith.”

In Chicken Ranch Rancheria of Me-Wuk Indians v. State of California, the Me-Wuk and several other tribes sued Newsom for attempting to require compliance with family, environmental and tort laws that had nothing to do with the operation of their casinos. In a 2-1 decision on July 2 by Judge Daniel A. Bress, with a concurrence by Judge Kim McLane Wardlaw and a dissent by Judge Patrick J. Bumatay, the Circuit Court affirmed the opinion of Judge Anthony W. Ishii, Presiding Judge of the United States District Court for the Eastern District of California, although their decision was based on different grounds.

The District Court, the opinion said, misunderstood precedents by focusing on California’s failure to make “meaningful concessions” rather than what they considered to be the clear meaning of the statute that required all regulations to be directly related to gaming activities. In addition, these concessions can only be applied to demands for taxes, fees or revenue-sharing provisions.

Bress reviewed the “extensive history” of the tribes’ negotiations with California and summarized the events subsequent to Congressional passage of the IGRA. In exchange for permission to operate casinos, approximately 60 California tribes agreed to a series of compacts with the State that outlined “various regulations and duties related to their gaming activities.” These were negotiated and renegotiated over the years, with the tribes often claiming that some of the State’s requests were “insufficiently related to gaming” and thus prohibited under the IGRA.

The most recent round of negotiations went on for five years until 2019 when the tribes said they had had enough. They said California was not making adequate concessions and was negotiating in bad faith so they filed suit. The district court agreed with the tribes but believed that some provisions that were “somewhat connected” to gaming were not violations of the State’s duty to negotiate in good faith.

Violation of this duty allows tribes to sue in federal court, where the State has the burden of proving that it had complied with the law. Failure to meet that burden will require the court to appoint a mediator, and if that does not result in a satisfactory solution, the case is decided by the Secretary of the Interior.

The Ninth Circuit’s opinion also revisited the “unique and limited powers that IGRA gives states over Indian tribes,” emphasizing that “tribal sovereignty is dependent on, and subordinate to, only the Federal Government, not the States.

The opinion also explained that the IGRA divides gaming into three classes, with Class III gaming, the type in this lawsuit, covering blackjack, baccarat, slot machines and betting on horse races. This is allowed only if approved by the Secretary of the Interior, an arrangement the Court called “cooperative federalism.”

Following the explanation of relevant statutes, Bress described the two questions in Chicken Ranch Rancheria’s case: Did California exceed the permissible topics of negotiation under the IGRA, and, if so, what are the consequences? The Ninth Circuit concluded that “California crossed the line.” Under the IGRA, only seven “exhaustive and exclusive” topics are permitted. Although the seventh topic does allow the inclusion of “any other subjects that are directly related to the operation of gaming activities,” the Court did not find that any of California’s topics met that definition.

In all of its proposed regulations, Bress wrote, “California overstepped its proper role under IGRA.” The disputed provisions, he explained. have “minimal connection to the operation of gaming activities, much less the required “direct” relationship. He conceded that the provisions “may reflect worthy policy objectives,” but that does not mean they are appropriate topics during negotiations of Class III gaming compacts. If allowed, they would also impose burdensome enforcement, review and reporting obligations on tribes.

These conclusions, in the Ninth Circuit’s view, demonstrate that the State failed to negotiate in good faith. The opinion stressed that the IGRA “sharply limits the permissible topics of negotiation to prevent states from misusing their compact approval powers to unduly infringe on tribal sovereignty.”

Bress then dismissed Bumatay’s dissenting arguments that concerned whether the state had negotiated in good faith. These included consideration of “the public interest, public safety, criminality, financial integrity and adverse economic impacts on existing gaming activities.” He said the dissent “reflects a misunderstanding of the statutory text” and “has it backwards.”

This case clarifies not only the meaning of “cooperative federalism,” but appears to explain uncooperative state-tribal relations as well.