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Laura Berglan, Acting Attorney General, SBN 022120 Office of Attorney General TOHONO O’ODHAM NATION P.O. Box 830 Sells, AZ 85634 (520) 383-3410 [email protected]
Seth P. Waxman (Pro hac vice) Danielle Spinelli (Pro hac vice) Kelly P. Dunbar (Pro hac vice) Sonya L. Lebsack (Pro hac vice) WILMER CUTLER PICKERING HALE AND DORR LLP 1875 Pennsylvania Avenue, N.W. Washington, D.C. 20006 (202) 663-6000 [email protected] [email protected] [email protected] [email protected]
Counsel for Plaintiff Tohono O’odham Nation
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA
THE TOHONO O’ODHAM NATION,
Plaintiff, v.
DOUGLAS DUCEY, Governor of Arizona; MARK BRNOVICH, Arizona Attorney General; and DANIEL BERGIN, Director, Arizona Department of Gaming, in their official capacities,
Defendants.
Case No. 2:15-cv-01135-PHX-DGC
THE TOHONO O’ODHAM NATION’S MOTION TO DISMISS DEFENDANT BERGIN’S AMENDED COUNTERCLAIMS ORAL ARGUMENT REQUESTED
Case 2:15-cv-01135-DGC Document 108 Filed 11/30/15 Page 1 of 34
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i
TABLE OF CONTENTS
Page
TABLE OF AUTHORITIES .................................................................................................... ii
PRELIMINARY STATEMENT .............................................................................................. 1
BACKGROUND ...................................................................................................................... 3
I. IGRA AND THE TRIBAL-STATE GAMING COMPACT ..................................................... 3
II. PRIOR LITIGATION .......................................................................................................... 5
III. THE CURRENT LITIGATION ............................................................................................. 7
STANDARD OF REVIEW .................................................................................................... 10
ARGUMENT .......................................................................................................................... 10
I. THE COUNTERCLAIMS ARE BARRED BY THE NATION’S SOVEREIGN IMMUNITY ........ 10
II. DIRECTOR BERGIN HAS NO CAPACITY TO BRING THE COUNTERCLAIMS ................... 14
III. COUNTERCLAIMS TWO, THREE, AND FOUR (AND COUNTERCLAIM ONE TO THE
EXTENT IT TURNS ON COMPACT INVALIDITY) FAIL TO STATE A CLAIM ................... 16
A. Promissory Estoppel ......................................................................................... 18
B. Fraud In The Inducement And Misrepresentation ............................................ 20
1. Actual reliance ........................................................................................ 21
2. Justifiable reliance .................................................................................. 23
CONCLUSION ....................................................................................................................... 25
CERTIFICATE OF SERVICE
Case 2:15-cv-01135-DGC Document 108 Filed 11/30/15 Page 2 of 34
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TABLE OF AUTHORITIES
CASES Page(s)
484 Associates, L.P. v. Moy, 2007 WL 683999 (S.D.N.Y. Mar. 5, 2007) ............................. 24
Addisu v. Fred Meyer, Inc., 198 F.3d 1130 (9th Cir. 2000) ................................................... 21
Aguilar v. International Longshoremen’s Union, 966 F.2d 443 (9th Cir. 1992) ................... 18
All-Tech Telecom v. Amway Corp., 174 F.3d 862 (7th Cir. 1999) ......................................... 19
Arizona v. Tohono O’odham Nation, 2011 WL 2357833 (D. Ariz. June 15, 2011) .......................................................................................................................... 1, 6, 11
Arizona v. Tohono O’odham Nation, 944 F. Supp. 2d 748 (D. Ariz. 2013) .................... passim
Ashcroft v. Iqbal, 556 U.S. 662 (2009) ................................................................................... 10
Bank Leumi Trust Co. of New York v. D’Evori International, Inc., 163 A.D.2d 26 (N.Y. App. Div. 1990) ....................................................................................................... 22
Board of Education of City of Peoria, School District No. 150 v. Illinois Board of Educuation, 810 F.2d 707 (7th Cir. 1987) .................................................................... 15
Bolduc v. Beal Bank, SSB, 167 F.3d 667 (1st Cir. 1999) ........................................................ 13
California v. Cabazon Band of Mission Indians, 480 U.S. 202 (1987) .................................... 3
Caterpillar Inc. v. Williams, 482 U.S. 386 (1987) .................................................................. 13
Chanay v. Chittenden, 563 P.2d 287 (Ariz. 1977) .................................................................. 19
Chewning v. Palmer, 650 P.2d 438 (Ariz. 1982) .................................................................... 18
Cimeran v. Cook, 561 F. App’x 447 (6th Cir. 2014) .............................................................. 15
Community Electric Service of Los Angeles, Inc. v. National Electric Contractors Association, 869 F.2d 1235 (9th Cir. 1989) ...................................................................... 15
Demontiney v. United States ex rel. Deparment of Interior, Bureau of Indian Affairs, 255 F.3d 801 (9th Cir. 2001) ............................................................................................. 11
Echols v. Beauty Built Homes, Inc., 647 P.2d 629 (Ariz. 1982) ............................................. 21
Emrit v. Access Rx, 2015 WL 6689294 (D. Ariz. Nov. 3, 2015) ............................................ 10
Case 2:15-cv-01135-DGC Document 108 Filed 11/30/15 Page 3 of 34
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Ezell v. Burton, 2007 WL 4218974 (D. Ariz. Nov. 29, 2007) ................................................ 22
The Fair v. Kohler Die & Specialty Co., 228 U.S. 22 (1913) ................................................ 14
Fofi Hotel Co. v. Davfra Corp., 1994 WL 649978 (N.D. Ill. Nov. 16, 1994) ........................ 25
Garduno v. National Bank of Arizona, 738 F. Supp. 2d 1004 (D. Ariz. 2010) ...................... 14
Gila River Indian Community v. United States, 776 F. Supp. 2d 977 (D. Ariz. 2011) ............ 5
Gonzalez v. Planned Parenthood of Los Angeles, 759 F.3d 1112 (9th Cir. 2014) ................. 10
Grande v. Casson, 72 P.2d 676 (Ariz. 1937) .......................................................................... 14
Great Lakes Press Corp. v. Froom, 695 F. Supp. 1440 (W.D.N.Y. 1987) ............................ 22
Guido v. Koopman, 2 Cal. Rptr. 2d 437 (Ct. App. 1991) ....................................................... 23
Higginbottom v. State, 51 P.3d 972 (Ariz. Ct. App. 2002) ............................................... 18, 19
Holder v. Holder, 305 F.3d 854 (9th Cir. 2002) ..................................................................... 10
Kungys v. United States, 485 U.S. 759 (1988)........................................................................ 21
Lee v. City of Los Angeles, 250 F.3d 668 (9th Cir. 2001) ....................................................... 10
Linder v. Brown & Herrick, 943 P.2d 758 (Ariz. Ct. App. 1997) .......................................... 21
List v. Ohio Elections Commission, 45 F. Supp. 3d 765 (S.D. Ohio 2014) ............................ 23
Mann v. GTCR Golder Rauner, 425 F. Supp. 2d 1015 (D. Ariz. 2006) ..................... 18, 19, 25
Merrell Dow Pharms. v. Thompson, 478 U.S. 804 (1986) ..................................................... 13
Michigan v. Bay Mills Indian Community, 134 S. Ct. 2024 (2014) ....................................... 10
State ex rel. Montgomery v. Mathis, 290 P.3d 1226 (Ariz. Ct. App. 2012) ........................... 14
Mukarugwiza v. JPMorgan Chase Bank NA, 2015 WL 3960889 (D. Ariz. June 30, 2015) ................................................................................................................... 10
Oklahoma Tax Commission v. Citizen Band Potawatomi Indian Tribe of Oklahoma, 498 U.S. 505 (1991) .............................................................................. 2, 11, 12
Pinnacle Peak Developers v. TRW Investment Corp., 631 P.2d 540 (Ariz. Ct. App. 1980) ......................................................................................................................... 25
Quinault Indian Nation v. Comenout, 2015 WL 1311438 (W.D. Wash. Mar. 23, 2015) ...... 13
Case 2:15-cv-01135-DGC Document 108 Filed 11/30/15 Page 4 of 34
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Rincon Band of Luiseno Mission Indians v. Schwarzenegger, 602 F.3d 1019 (9th Cir. 2010) ......................................................................................................................... 3, 4
Robi v. Five Platters, Inc., 838 F.2d 318 (9th Cir. 1988) ....................................................... 17
Rosebud Sioux Tribe v. Val-U Construction Co. of South Dakota, Inc., 50 F.3d 560 (8th Cir. 1995) ................................................................................................................... 12
Salt River Pima-Maricopa Indian Community v. Hull, 945 P.2d 818 (Ariz. 1997) ............... 22
School Disrict No. 69 of Maricopa County v. Altherr, 458 P.2d 537 (Ariz. Ct. App. 1969) ......................................................................................................................... 23
Schlaifer Nance & Co. v. Estate of Warhol, 119 F.3d 91 (2d Cir. 1997) ............................... 23
Schwartz v. Superior Court in & for County of Maricopa, 925 P.2d 1068 (Ariz. Ct. App. 1996) ................................................................................................................... 14
Spudnuts, Inc. v. Lane, 641 P.2d 912 (Ariz. Ct. App. 1982) .................................................. 25
Tripati v. Henman, 857 F.2d 1366 (9th Cir. 1988) ................................................................. 17
United States v. U.S. Fidelity & Guaranty Co., 309 U.S. 506 (1940) .............................. 12, 13
Ute Indian Tribe of the Uintah & Ouray Reservation v. Utah, 790 F.3d 1000 (10th Cir. 2015) ................................................................................................. 2, 11, 12, 13
Vulgamore v. Tuba City Regional Healthcare Corp., 2011 WL 3555723 (D. Ariz. Aug. 11, 2011) .......................................................................................................... 11
Walker v. KFC Corp., 728 F.2d 1215 (9th Cir. 1984) ............................................................ 19
Weaver v. Bratt, 421 F. Supp. 2d 25 (D.D.C. 2006) ............................................................... 24
White v. Lee, 227 F.3d 1214 (9th Cir. 2000)........................................................................... 10
In re Wilshire Courtyard, 729 F.3d 1279 (9th Cir. 2013) ...................................................... 10
Case 2:15-cv-01135-DGC Document 108 Filed 11/30/15 Page 5 of 34
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STATUTES, RULES, AND REGULATIONS
25 U.S.C. § 2702 .............................................................................................................................. 3, 4 § 2710 .................................................................................................................................. 3 § 2710(d)(3) ......................................................................................................................... 4 § 2710(d)(3)(C) ................................................................................................................... 4 § 2710(d)(7)(A)(ii) ............................................................................................................ 11 § 2719 .............................................................................................................................. 4, 5 § 2719(b)(1)(B)(i) ................................................................................................................ 6
Ariz. Rev. Stat. §§ 5-601 et seq. .................................................................................................................. 15 § 5-601(D) ........................................................................................................................... 7 § 5-601.02 ................................................................................................................ 5, 22, 23 § 5-601.02(E) ....................................................................................................................... 5 § 5-602 ....................................................................................................................... 8, 9, 13 § 5-602(A) ........................................................................................................................... 7 § 5-602(C) ......................................................................................................................... 16 § 5-602.01(C) .................................................................................................................... 15 § 11-201 ............................................................................................................................. 15 § 19-113(D) ....................................................................................................................... 23 § 19-114.01 ........................................................................................................................ 23 § 19-115(B) ....................................................................................................................... 23 § 19-116 ............................................................................................................................. 23 § 19-119 ............................................................................................................................. 23 § 19-119.01 ........................................................................................................................ 23 § 19-123 ............................................................................................................................. 23 § 19-124(B) ....................................................................................................................... 23 § 19-129 ............................................................................................................................. 23 § 23-106 ............................................................................................................................. 15
Gila Bend Indian Reservation Lands Replacement Act, Pub. L. No. 99-503, 100 Stat. 1798 (1986) .......................................................................................................... 5
Fed. R. Civ. P. R. 9(a)(2) ....................................................................................................................... 1, 14 R. 12(b)(1) ........................................................................................................................... 1 R. 12(b)(6) ........................................................................................................................... 1 R. 12(h)(2) ......................................................................................................................... 17 R. 13(a) .............................................................................................................................. 12 R. 17(b)(3) ......................................................................................................................... 14
68 Fed. Reg. 5,912 (Feb. 5, 2003) ............................................................................................ 5
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OTHER AUTHORITIES
4 James Wm. Moore et al., Moore’s Federal Practice § 17.23 (3d ed. 2015) ....................... 14
Williston on Contracts (4th ed. 2008) § 8.7 ................................................................................................................................... 18 § 69:32 ............................................................................................................................... 22
7 Charles Alan Wright et al., Federal Practice and Procedure § 1613 (3d ed. 2015) .................................................................................................................................. 16
6 Michael L. Roberts, Litigating Tort Cases § 68:25 (2014) ................................................. 24
Restatement (Second) of Contracts (1981) § 90 .................................................................................................................................... 18 § 164 ............................................................................................................................ 21, 23 § 167 .................................................................................................................................. 21 § 213 .................................................................................................................................. 19
Restatement (Second) of Torts § 541 (1977) ........................................................................... 25
U.S. Dep’t of the Interior Trust Letter (July 3, 2014), available at http://bia.gov/cs/groups/webteam/documents /text/idc1-027180.pdf ................................. 6
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Pursuant to Federal Rules of Civil Procedure 12(b)(1), 12(b)(6), and 9(a)(2), the
Tohono O’odham Nation (the “Nation”) moves to dismiss the Amended Counterclaims
(Doc. 96) brought by Defendant Daniel Bergin, in his official capacity as Director of the
Arizona Department of Gaming (“ADG”).
PRELIMINARY STATEMENT
In the latest chapter in the ongoing effort to block the Nation from exercising its
federal right to engage in Class III gaming on its reservation land, Director Bergin seeks to
resurrect claims of promissory estoppel, fraud in the inducement, and material
misrepresentation that the State has already brought in this Court and continues to litigate in
the Ninth Circuit. The allegations underlying Director Bergin’s counterclaims are baseless.
But, even taking those allegations as true, the counterclaims can—and should—be dismissed,
for three independently sufficient reasons.
First, the Nation’s sovereign immunity requires dismissal of the counterclaims. This
Court has already held that identical claims are barred by the Nation’s immunity, as Director
Bergin acknowledges. See Arizona v. Tohono O’odham Nation, 944 F. Supp. 2d 748, 753,
769 (D. Ariz. 2013) (“TON II”), appeal docketed, No. 13-16517 (9th Cir.); Arizona v.
Tohono O’odham Nation, 2011 WL 2357833, at *12-13 (D. Ariz. June 15, 2011) (“TON I”).
Director Bergin nonetheless contends that, “[b]y initiating an action to enforce the terms of
the Compact, the Nation has waived its sovereign immunity with regard to [his]
counterclaims.” Am. Countercl. ¶ 14. As an initial matter, that seriously mischaracterizes
the Nation’s suit. The Nation has brought a preemption claim under Ex parte Young
challenging Director Bergin’s position that ADG may veto the Nation’s Class III gaming
rights based on the Nation’s purported “disqualifying conduct” (Compl. Exh. H (Doc. 1-5)).
The Nation has not sued to “enforce the terms of the Compact,” nor has it, in Director
Bergin’s own words, “assert[ed] any breach of the … compact” (Bergin MTD Br. 9 n.2
(Doc. 50)). The Nation—not Director Bergin—is the master of its complaint, and it is
entitled to decide what claims to bring and on what law it will rely.
Case 2:15-cv-01135-DGC Document 108 Filed 11/30/15 Page 8 of 34
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In any event, Director Bergin’s mischaracterization of the Nation’s suit does not help
him. The Supreme Court has unequivocally held that “a tribe does not waive its sovereign
immunity from actions that could not otherwise be brought against it merely because those
actions were pleaded in a counterclaim to an action filed by the tribe”—even a compulsory
counterclaim. Oklahoma Tax Comm’n v. Citizen Band Potawatomi Indian Tribe of Okla.,
498 U.S. 505, 509 (1991). “Supreme Court precedent couldn’t be clearer on this point.” Ute
Indian Tribe of the Uintah & Ouray Reservation v. Utah, 790 F.3d 1000, 1011 (10th Cir.
2015). That principle is dispositive here, and it requires the dismissal of Director Bergin’s
counterclaims.
Second, Director Bergin lacks the capacity under state law to bring counterclaims
against the Nation. Under Arizona law, ADG is a non-jural entity that may neither sue nor
be sued. Although Ex parte Young permits the Nation to sue Director Bergin for the limited
purpose of obtaining prospective injunctive relief to remedy his ongoing violations of federal
law, that does not give Director Bergin state-law authority that he and ADG otherwise lack
to bring counterclaims against the Nation on behalf of the State. Enforcing that state-law
limitation on Director Bergin’s capacity to sue makes especially good sense here. Director
Bergin is not a party to the Tribal-State Compact he sues to rescind or reform. He has
professed ignorance of facts crucial to the allegations he levels in his counterclaims. And the
actual party to the Compact—the State—has already brought identical claims, which it
continues to pursue before the Ninth Circuit.
Third, Director Bergin’s counterclaims for promissory estoppel, fraudulent
inducement, and misrepresentation fail to state claims on which relief may be granted.
Those counterclaims bottom on the allegations that the Nation made an extra-contractual
“promise” that it would not engage in Class III gaming in the Phoenix area and represented
that the Compact would not permit it to do so. Those allegations are false. But taking them
as true for purposes of this motion, the counterclaims nonetheless fail as a matter of law. It
is black-letter law that a promissory estoppel claim cannot be maintained when the parties
have entered into an actual contract on the same subject—let alone a fully integrated written
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contract like the Compact. And Director Bergin’s allegations are insufficient as a matter of
law to establish two key elements of his fraud and misrepresentation claims: (1) the State
could not actually have relied on the Nation’s alleged representations as a basis for entering
into the Compact because Arizona law required it to enter the Compact; and (2) in any event,
the State—as a sophisticated, well-counseled party—could not justifiably have relied on
those alleged representations as a basis for entering a written agreement that this Court has
held expressly authorizes gaming wherever IGRA allows it and expressly provides that no
statements, promises, or agreements outside the Compact are valid or binding.
Director Bergin’s counterclaims should accordingly be dismissed in their entirety.
BACKGROUND
I. IGRA AND THE TRIBAL-STATE GAMING COMPACT
States have no authority under their inherent police powers to regulate gaming on
Indian lands. See California v. Cabazon Band of Mission Indians, 480 U.S. 202, 207 (1987).
Rather, because “‘tribal sovereignty is dependent on, and subordinate to, only the Federal
Government, not the States,’” “state laws may be applied to tribal Indians on their
reservations” only “if Congress has expressly so provided.” Id.
In 1988, in response to Cabazon, Congress enacted IGRA to “provide a legal
framework within which tribes could engage in gaming—an enterprise that holds out the
hope of providing tribes with the economic prosperity that has so long eluded their grasp—
while setting boundaries to restrain aggression by powerful states.” Rincon Band of Luiseno
Mission Indians v. Schwarzenegger, 602 F.3d 1019, 1027 (9th Cir. 2010); see 25 U.S.C.
§ 2702. Under IGRA, States have no authority to regulate Class I or Class II gaming, and
play only a limited role with regard to Class III gaming on Indian lands, subject to tribal
consent. 25 U.S.C. § 2710. Specifically, IGRA provides that an Indian tribe in a State that
permits Class III gaming may request that the State negotiate with it to enter into a “Tribal-
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State compact governing the conduct of” such gaming, and IGRA requires the State to do so.
Id. § 2710(d)(3).1
In 1993, the Nation entered into a gaming compact with the State of Arizona pursuant
to IGRA. That compact, which was substantially the same as other gaming compacts entered
into by the State at that time, “authorized” the Nation to conduct Class III gaming on its
“Indian Lands” and provided that “[g]aming on lands acquired after the enactment of
[IGRA] on October 17, 1988, shall be authorized only in accordance with 25 U.S.C. § 2719,”
which, among other things, permits tribes to game on after-acquired lands taken into trust as
part of a settlement of a land claim. Compl. Exh. A §§ 2(s), 3(f) (Doc. 1-1).
In 1999, in anticipation of the expiration of some of the existing compacts, Arizona
and most of the gaming tribes in the State began negotiations toward a new standardized
compact that the State would execute separately with each tribe. TON II, 944 F. Supp. 2d at
754. Both the State and the Nation “had substantial interests at stake and were well-
represented during negotiations,” id. at 765, “by experienced lawyers,” id. at 753. “The
parties reached agreement on the framework for a new compact in 2002.” Id. at 754. Like
the 1993 compact, the new framework did not include any restrictions on gaming on lands
acquired after IGRA’s enactment. Compl. ¶ 45 (Doc. 1).
The parties’ negotiations never resulted in a concluded compact, however. The
Governor lacked the authority under Arizona law to sign a compact, and a bill that would
1 A compact may address only the topics specified in IGRA, including “the
application of the criminal and civil laws and regulations of the Indian tribe or the State that are directly related to, and necessary for, the licensing and regulation of such activity,” “remedies for breach of contract,” and “any other subjects that are directly related to the operation of gaming activities.” 25 U.S.C. § 2710(d)(3)(C). “IGRA limits permissible subjects of negotiation in order to ensure that tribal-state compacts cover only those topics that are related to gaming and are consistent with IGRA’s stated purposes”: to promote tribal economic development and self-sufficiency; to shield Indian gaming from organized crime and ensure that the tribes are the primary beneficiaries of their gaming operations; and to establish independent federal regulatory authority over such gaming. Rincon Band, 602 F.3d at 1028-1029 & n.9 (holding revenue-sharing provision to be outside the scope of permissible negotiation); see 25 U.S.C. § 2702.
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have given the Governor that authority failed to pass the state legislature. TON II, 944 F.
Supp. 2d at 754. Instead, a coalition of tribes proposed a ballot initiative, Proposition 202,
which required the Governor to enter into a standardized compact with any tribe that
requested one and set out the precise wording of the compact. See A.R.S. § 5-601.02
(codifying Proposition 202).2 The voters passed the initiative, and in December 2002, as
required by Proposition 202, the Governor executed a gaming compact with the Nation (the
“Compact”). See Compl. Exh. B (Doc. 1-2). In January 2003, the Secretary of the Interior
approved the Compact, which became effective on February 5, 2003. 68 Fed. Reg. 5,912.
Like the 1993 compact, the 2002 Compact “authorize[s]” Class III gaming on the
Nation’s “Indian Lands” as defined by IGRA (Compl. Exh. B §§ 2(s), 3(a), (j)), and provides
that “Gaming Activity on lands acquired after the enactment of [IGRA] shall be authorized
only in accordance with 25 U.S.C. § 2719” (id. § 3(j)). The Compact further provides that it
“contains the entire agreement of the parties with respect to the matters covered by this
Compact and no other statement, agreement, or promise made by any party, officer, or agent
of any party shall be valid or binding.” Id. § 25.
II. PRIOR LITIGATION
In 2009, the Nation applied to have certain land in Maricopa County taken into trust
for it by the United States pursuant to the Gila Bend Indian Reservation Lands Replacement
Act (“LRA”), Pub. L. No. 99-503, 100 Stat. 1798 (1986). The LRA settled the Nation’s
claims against the United States for the flooding of the Nation’s Gila Bend Indian
Reservation by a federal dam, in return for $30 million and the right to have replacement
lands placed into trust. Id.; TON II, 944 F. Supp. 2d at 754. The Secretary determined that
he was required under the LRA to take the land into trust; this Court upheld that decision
against a challenge by the State and others, see Gila River Indian Cmty. v. United States, 776
2 Proposition 202 permitted the Governor to negotiate and enter into amendments to
such compacts, but only if the amendments were “consistent” with the terms of Proposition 202. A.R.S. § 5-601.02(E).
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F. Supp. 2d 977 (D. Ariz. 2011), aff’d in part & rev’d & remanded in part, 729 F.3d 1139
(9th Cir. 2013); and the Secretary subsequently took the land into trust, U.S. Dep’t of the
Interior Trust Letter (July 3, 2014), available at http://bia.gov/cs/groups/webteam/documents
/text/idc1-027180.pdf. The Nation intends to open a Class III gaming facility on the property
pursuant to IGRA’s exception to the bar on gaming on after-acquired lands for lands taken
into trust as part of a settlement of a land claim. See 25 U.S.C. § 2719(b)(1)(B)(i).
The State, along with two tribes with competing gaming facilities, sued the Nation,
claiming that the Compact expressly or impliedly prohibited the Nation from gaming in the
Phoenix area and that the Nation’s planned gaming facility violated the implied covenant of
good faith and fair dealing. TON I, 2011 WL 2357833, at *1-2. Alternatively, the State
asserted a claim for promissory estoppel, alleging that the Nation had promised not to game
in the Phoenix area. Id. The State also asserted claims for fraudulent inducement and
material misrepresentation, seeking to have the Compact reformed or declared voidable. Id.
The State alleged that the Nation had made or failed to correct statements asserting that the
Compact would not permit any new casinos in Phoenix and that the Nation would not
operate a gaming facility in the Phoenix area. Id.; see generally Pls.’ Am. Compl., Arizona
v. Tohono O’odham Nation, No. 2:11-cv-00296-DGC (D. Ariz. Apr. 22, 2011) (Doc. 26).3
This Court dismissed the State’s claims for fraudulent inducement and material
misrepresentation, holding them barred by the Nation’s sovereign immunity. TON I, 2011
WL 2357833, at *12-13. A year of intensive discovery ensued on the remaining claims,
during which the State was permitted to explore all facts relevant to its allegations that the
Nation had misrepresented the effect of the Compact and had promised not to game in
Phoenix, on the theory that this parol evidence was relevant to interpretation of the
Compact’s language, to application of the covenant of good faith and fair dealing, and to the
3 The State also argued that the Nation’s land was not acquired as part of a “settlement
of a land claim” within the meaning of IGRA. This Court rejected that claim. See TON II, 944 F. Supp. 2d at 755-756.
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State’s promissory estoppel claim. See TON II, 944 F. Supp. 2d at 761-763 (describing parol
evidence).
On cross-motions for summary judgment, this Court carefully considered all of that
evidence in the light most favorable to the State and held that, notwithstanding that evidence,
the State’s claims failed as a matter of law. TON II, 944 F. Supp. 2d at 769, 774. The Court
held that the promissory estoppel claim was barred by the Nation’s sovereign immunity. Id.
at 769. The Court rejected all of the Compact-based claims on the merits, holding that, even
under “Arizona’s liberal parol evidence rule,” “the written Compact” cannot be read to
“prohibit the Nation from building a new casino in the Phoenix area,” and that “the parties
did not reach such an agreement.” Id. at 753. Indeed, the Court concluded that “no
reasonable reading of the Compact could lead a person to conclude that it prohibited new
casinos in the Phoenix area,” and that “any understanding on the part of the State that the
Compact contained such a limitation was not reasonable.” Id. at 768. The Court further held
that the Compact is “fully integrated,” id. at 771, meaning that “all separate agreements, both
inconsistent … and consistent … are discharged,” and that “even if … a separate agreement
existed between the State and the Nation” that the Nation would not game in the Phoenix
area, the State “could not enforce such an agreement,” id. at 772.
The State appealed this Court’s judgment, and the appeal is pending before the Ninth
Circuit. The State did not seek or obtain an injunction barring the Nation from engaging in
Class III gaming on its Maricopa County land during the pendency of the appeal.
III. THE CURRENT LITIGATION
ADG is a state agency charged with “carry[ing] out the duties and responsibilities of
the state gaming agency in compacts executed by the state and Indian tribes of this state
pursuant to [IGRA].” A.R.S. § 5-601(D). ADG has limited regulatory authority. Its
primary duty is to certify some, but not all, prospective gaming employees, vendors, and
contractors to “ensure that unsuitable individuals or companies are not involved in Indian
gaming.” Id. § 5-602(A); see Compl. Exh. B (Compact), §§ 4(b)-(d), 5. It performs that
function alongside the Nation’s gaming regulator, the Tohono O’odham Gaming Office
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(“TOGO”), which has the authority to license all the same gaming employees, vendors, and
contractors as ADG. Compl. Exh. B (Compact) §§ 4(b)-(d). TOGO also has sole
authority—not granted to ADG—to license gaming employees who are tribal members (id.
§ 4(b)), and to license the gaming facility itself and the gaming facility operator (here, the
Tohono O’odham Gaming Enterprise, an entity distinct from the Nation) (id. § 4(a)).
Before the opening of a Class III gaming facility, the Compact calls for TOGO and
ADG to undertake “a joint pre-operation inspection” to “verify compliance with th[e]
requirement” that TOGO has licensed the gaming facility and its operator. Compl. Exh. B
(Compact) § 4(a). If ADG determines after the inspection that the gaming facility and
operator “do not comport with the terms of the Compact,” it may send a “non-compliance
letter” setting out the “matters of non-compliance,” but ADG does not have the final word on
those matters; disagreements arising during the inspection are subject to dispute resolution
procedures. Id. ADG has no authority to certify the Nation (or TOGO or the gaming facility
operator) or to determine that bad acts allegedly committed by the Nation bar it from
exercising its right to engage in Class III gaming under IGRA and the Compact.
In late 2014, the Nation began construction of its planned Class III gaming facility,
the West Valley Resort (“WVR”), on its Maricopa County reservation land. In April 2015,
Director Bergin wrote to the Nation stating that “[t]he State’s position in the litigation
remains unchanged; namely, that principles of fraudulent inducement, promissory estoppel,
and misrepresentation nullify any right that [the Nation] would otherwise have under the
compact to build the Glendale casino. This is also ADG’s position as an agency of the
State.” Compl. Exh. F (Doc. 1-5). Noting that A.R.S. § 5-602 directs ADG to execute its
duties “‘in a manner that is consistent with this state’s desire to have extensive, thorough,
and fair regulation of Indian gaming,’” Director Bergin opined that “ADG lacks statutory
authority to approve [the Nation’s] Glendale casino.” Id. In a subsequent letter, Director
Bergin reiterated that A.R.S. § 5-602 is “binding on ADG regardless of whether … gaming
would otherwise be permitted by a valid tribal-state compact,” and that, based on the
Nation’s “disqualifying conduct,” ADG would not provide “regulatory approvals” for the
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WVR “regardless of how issues of compact validity and compact interpretation are
ultimately resolved.” Compl. Exh. H (Doc. 1-5). ADG subsequently sent notices to all
certified vendors and employees applying for certification stating that “[p]roviding goods or
services to any location considered by the State to be unauthorized, or in pending litigation
with the State concerning whether it is authorized,” would subject a vendor or employee “to
legal and/or regulatory risks,” and that “[ADG] has determined that the [WVR] is not
authorized.” Compl. Exh. K (Doc. 1-6).
The Nation accordingly brought this suit, arguing that Director Bergin’s assertion of
authority under A.R.S. § 5-602 to block Class III gaming at the WVR “regardless of how
issues of compact validity and compact interpretation are ultimately resolved” (Compl. Exh.
H) is preempted by IGRA. The Nation seeks declaratory and injunctive relief that would
prohibit Director Bergin from refusing to issue certifications or a letter of compliance based
on ADG’s unilateral determination that the Nation has engaged in “disqualifying conduct”
that “nullif[ies]” the Nation’s right to engage in Class III gaming at the WVR. Compl. Exhs.
F, H.
Director Bergin has now brought counterclaims against the Nation for promissory
estoppel, fraud in the inducement, misrepresentation, and related declaratory relief, seeking
rescission, reformation, or a declaration that the Compact is invalid or voidable. See Am.
Countercl. ¶ 75 (seeking a declaration that the Compact was not “validly entered into”); id.
¶ 83 (seeking to enjoin the Nation “from opening a Class III gaming facility in the Phoenix
metropolitan area based upon an invalidly entered into compact”); id. ¶ 91 (alleging a legal
entitlement to have the “Compact reformed”); id. ¶ 104 (alleging that the Compact “is
voidable and unenforceable … and is subject to rescission”). These claims are identical in
all essential respects to the claims previously brought by the State that this Court held were
barred by the Nation’s sovereign immunity.
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STANDARD OF REVIEW
“The burden of establishing subject matter jurisdiction rests on the party asserting that
the court has jurisdiction.” In re Wilshire Courtyard, 729 F.3d 1279, 1284 (9th Cir. 2013).
In resolving a motion to dismiss under Rule 12(b)(1), the Court need not “presume the
truthfulness of the [complainant’s] allegations” and “may look beyond the complaint to
matters of public record.” White v. Lee, 227 F.3d 1214, 1242 (9th Cir. 2000).
With respect to a “motion to dismiss under Rule 12(b)(6), all allegations of material
fact are assumed to be true and construed in the light most favorable to the non-moving
party.” Mukarugwiza v. JPMorgan Chase Bank NA, 2015 WL 3960889, at *2 (D. Ariz. June
30, 2015). However, a complaint must “permit the court to infer more than the mere
possibility of misconduct,” and a court need not “‘accept as true a legal conclusion couched
as a factual allegation.’” Ashcroft v. Iqbal, 556 U.S. 662, 678, 679 (2009). Relatedly, a
complaint “must plead ‘enough facts to state a claim to relief that is plausible on its face.’”
Emrit v. Access Rx, 2015 WL 6689294, at *1 (D. Ariz. Nov. 3, 2015). Dismissal is
appropriate “where the complaint lacks a cognizable legal theory” or “lacks sufficient facts
alleged under a cognizable legal theory.” Id.
On a motion to dismiss, “a court may take judicial notice of ‘matters of public
record,’” Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001), and it need not
accept as true allegations that contradict judicially noticed facts, Gonzalez v. Planned
Parenthood of Los Angeles, 759 F.3d 1112, 1115 (9th Cir. 2014); see also Holder v. Holder,
305 F.3d 854, 866 (9th Cir. 2002) (taking judicial notice of court’s decision and parties’ filed
briefs for purposes of determining preclusive effect).
ARGUMENT
I. THE COUNTERCLAIMS ARE BARRED BY THE NATION’S SOVEREIGN IMMUNITY
All of Director Bergin’s counterclaims, like the materially identical claims raised by
the State in the prior litigation, are barred by the Nation’s sovereign immunity. As
“‘separate sovereigns pre-existing the Constitution,’” Indian tribes possess the “‘common-
law immunity from suit traditionally enjoyed by sovereign powers.’” Michigan v. Bay Mills
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Indian Cmty., 134 S. Ct. 2024, 2030 (2014). Tribal sovereign immunity may be overcome
only when Congress has clearly abrogated that immunity or the tribe has “clear[ly]” waived
it. Oklahoma Tax Comm’n v. Citizen Band Potawatomi Indian Tribe of Okla., 498 U.S. 505,
509 (1991). And there is a “strong presumption against waiver of tribal sovereign
immunity.” Demontiney v. U.S. ex rel. Dep’t of Interior, Bureau of Indian Affairs, 255 F.3d
801, 811 (9th Cir. 2001). Absent a clear abrogation or waiver of the Nation’s immunity,
Director Bergin’s counterclaims must be dismissed. See, e.g., Vulgamore v. Tuba City Reg’l
Healthcare Corp., 2011 WL 3555723, at *1 (D. Ariz. Aug. 11, 2011).
No such abrogation or waiver exists here. This Court has already held that Congress
did not abrogate the Nation’s immunity from claims of promissory estoppel, fraudulent
inducement, material misrepresentation, or any claim that seeks to invalidate the Compact
rather than to enforce its terms. TON II, 944 F. Supp. 2d at 769; TON I, 2011 WL 2357833
at *12-13. “Congress abrogated tribal sovereign immunity only for claims alleging
violations of gaming compacts.” TON I, 2011 WL 2357833, at *12; see 25 U.S.C.
§ 2710(d)(7)(A)(ii) (abrogating immunity from “any cause of action initiated by a State … to
enjoin a class III gaming activity located on Indian lands and conducted in violation of any
Tribal-State compact … that is in effect” (emphasis added)).
Director Bergin acknowledges this Court’s holding, but alleges that, “[b]y initiating
an action to enforce the terms of the Compact, the Nation has waived its sovereign immunity
with regard to these counterclaims.” Am. Countercl. ¶ 14; see id. ¶¶ 86, 95, 108. That is
simply wrong. The Supreme Court has held that an Indian tribe does not, by bringing an
action against a state or state official, waive its sovereign immunity against counterclaims,
even compulsory counterclaims. Whether the Nation’s action is characterized as one “to
enforce the terms of the Compact” makes no difference to the sovereign immunity analysis,
but in any event, that characterization is incorrect.
“Supreme Court precedent couldn’t be clearer on this point: a tribe’s decision to go to
court doesn’t automatically open it up to counterclaims—even compulsory ones.” Ute
Indian Tribe of the Uintah & Ouray Reservation v. Utah, 790 F.3d 1000, 1011 (10th Cir.
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2015), pet. for cert. filed, No. 15-641 (U.S.). In Oklahoma Tax Commission, a tribe sued to
enjoin the assessment of a state tax on cigarette sales by a tribal business. 498 U.S. at 507.
Oklahoma counterclaimed, seeking an order enforcing the tax assessment against the tribe
and enjoining the tribe from selling cigarettes without collecting and remitting the taxes. Id.
at 507-508. Oklahoma “argue[d] that the [tribe] waived [its] sovereign immunity by seeking
an injunction against [the] proposed tax assessment.” Id. at 509. The Court rejected that
argument, holding that “a tribe does not waive its sovereign immunity from actions that
could not otherwise be brought against it merely because those actions were pleaded in a
counterclaim to an action filed by the tribe.” Id.; accord United States v. U.S. Fidelity &
Guaranty Co., 309 U.S. 506, 511-513 (1940) (tribe that brought suit to enforce a bond did
not thereby waive sovereign immunity against counterclaim by bondholder). That is true
regardless of whether the counterclaims would be deemed “compulsory” under Federal Rule
of Civil Procedure 13(a). Oklahoma Tax Comm’n, 498 U.S. at 509.
The Nation thus did not, by bringing suit against Director Bergin, “waive its
sovereign immunity from actions that could not otherwise be brought.” Oklahoma Tax
Comm’n, 498 U.S. at 509. And this Court has already held that claims mirroring the
counterclaims may not “otherwise be brought” under IGRA’s abrogation of sovereign
immunity. That should be the end of the matter. “It’s long since settled that ‘an Indian tribe
is subject to suit only where Congress has authorized the suit or the tribe has waived its
immunity.’ This principle extends to counterclaims lodged against a plaintiff tribe—even
compulsory counterclaims. And it applies with just as much force to claims or counterclaims
brought by states as by anyone else.” Ute Indian Tribe, 790 F.3d at 1009 (citations
omitted).4 Director Bergin’s counterclaims must accordingly be dismissed.
4 Some courts have applied a narrow exception to this rule permitting counterclaims
that sound in “recoupment”—i.e., “a defensive action that operates to diminish the plaintiff’s recovery rather than to assert affirmative relief.” Rosebud Sioux Tribe v. Val-U Constr. Co. of South Dakota, Inc., 50 F.3d 560, 562 (8th Cir. 1995). The recoupment exception—which allows a defendant to deduct from any monetary award the plaintiff might receive money owed by the plaintiff to the defendant as part of the same transaction—is properly limited to
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Director Bergin’s assertion that the Nation sued to “enforce the terms of the
Compact” is irrelevant to the analysis. The principles the Supreme Court has articulated
apply in that context just as in any other. See U.S. Fidelity, 309 U.S. at 511-512 (suit to
enforce a bond—which is a contract—does not waive sovereign immunity from related
counterclaims). In any event, Director Bergin’s characterization of the Nation’s suit is
inaccurate. The Nation brought a preemption claim challenging Director Bergin’s assertion
that state law (specifically, A.R.S. § 5-602) gives him the authority to veto gaming at the
WVR based on the Nation’s allegedly fraudulent “disqualifying conduct.” Compl. ¶¶ 1-7,
94-113. As a defense to that claim, Director Bergin has asserted that the state statute is
somehow incorporated into the Compact and that the Compact thus supplies him with that
veto authority. See Am. Answer ¶ 5 (“[S]tate law, as incorporated within the terms of the
Compact, allows the fraud and misrepresentations to be considered by [ADG].”).
That defense, however, does not transform the Nation’s preemption claim into
something it is not—namely, a breach-of-contract claim. Cf. Merrell Dow Pharms. v.
Thompson, 478 U.S. 804, 808 (1986) (“A defense that raises a federal question is inadequate
to confer federal jurisdiction.”). The Nation is the “master of [its] complaint.” Caterpillar
Inc. v. Williams, 482 U.S. 386, 398-399 (1987). Under that black-letter rule, it is irrelevant
damages actions. See, e.g., Bolduc v. Beal Bank, SSB, 167 F.3d 667, 672 n.4 (1st Cir. 1999) (“Classically, recoupment is permitted only to reduce or eliminate damages, not to gain some other form of relief.”). In any event, it is clear that recoupment cannot be used “to obtain affirmative relief.” Quinault Indian Nation v. Comenout, 2015 WL 1311438, at *3 (W.D. Wash. Mar. 23, 2015), appeal docketed, No. 13-35263 (9th Cir.); see Ute Indian Tribe, 790 F.3d at 1011 (even assuming that the recoupment exception applies outside the context of money damages, the doctrine “‘is in the nature of a defense’ to defeat a plaintiff’s claims, not a vehicle for pursuing an affirmative judgment”). The doctrine is thus wholly inapplicable here, where Director Bergin’s counterclaims plainly seek affirmative relief. See Am. Countercl. ¶ 104 (seeking a declaration that “the Compact is voidable and unenforceable, in whole or in part, and is subject to rescission”); id. ¶ 91 (seeking judicial reformation of the Compact); id. ¶ 82 (seeking to “estop[] and enjoin[]” the Nation from Class III gaming in the Phoenix metropolitan area); id. ¶ 75 (seeking a declaration that the Compact was not “validly entered into”).
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whether the Nation could have sued Director Bergin for a breach of the Compact. The
Nation has not done so—and the Nation’s choice, not Director Bergin’s characterization of
the suit, is dispositive. See, e.g., The Fair v. Kohler Die & Specialty Co., 228 U.S. 22, 25
(1913) (“[T]he party who brings a suit is master to decide what law he will rely upon.”)
(Holmes, J.); Garduno v. Nat’l Bank of Arizona, 738 F. Supp. 2d 1004, 1008 (D. Ariz. 2010)
(“Plaintiff is the master of the complaint and he explicitly chose not to bring any claims
pursuant to RESPA.”). Indeed, Director Bergin has conceded that the Nation has not
“assert[ed] any breach of the … compact” (Bergin MTD Br. 9 n.2), and this Court has so
held (MTD/PI Order 21 (“The Nation does not assert a claim … that the State has breached
the Compact.”) (Doc. 82)).
In short, however the Nation’s suit is characterized, the Nation has not waived its
sovereign immunity from Director Bergin’s counterclaims, which must be dismissed.
II. DIRECTOR BERGIN HAS NO CAPACITY TO BRING THE COUNTERCLAIMS
All the counterclaims must be dismissed for an independent reason: Director Bergin
has no capacity to bring them under Arizona law. See Fed. R. Civ. P. 9(a)(2). A state
official’s capacity to sue is determined by state law. Fed. R. Civ. P. 17(b)(3); 4 James Wm.
Moore et al., Moore’s Federal Practice § 17.23 (3d ed. 2015). “Capacity [to bring suit] does
not depend on the nature of a claim in a particular lawsuit”; rather, it depends on whether the
would-be plaintiff or counterclaimant possesses “the legal authority to act.” State ex rel.
Montgomery v. Mathis, 290 P.3d 1226, 1234 (Ariz. Ct. App. 2012). In Arizona, “[s]tate
administrative agencies have no inherent powers; their powers are limited to those granted
by statute.” Schwartz v. Superior Court in & for County of Maricopa, 925 P.2d 1068, 1070
(Ariz. Ct. App. 1996). Director Bergin can thus “act on behalf of the State with respect to
gaming” (Am. Countercl. ¶ 13) only to the extent that the Arizona legislature has authorized
him to do so. See Grande v. Casson, 72 P.2d 676, 681 (Ariz. 1937) (where “there is no
provision authorizing suits to be brought by or against [a state agency] in its official
capacity,” the agency cannot sue or be sued), overruled in part on other grounds by State ex
rel. Morrison v. Thelberg, 350 P.2d 988 (1960).
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Arizona law nowhere authorizes Director Bergin to bring suit in his official capacity,
even in the form of counterclaims. Compare A.R.S. §§ 5-601 et seq. (containing no “sue or
be sued” authority), with id. § 11-201 (“[The county board of supervisors] has the power to
… [s]ue and be sued.”), and id. § 23-106 (“The [industrial] commission may, in its name,
sue and be sued.”). Indeed, the structure of Arizona gaming law makes clear that ADG lacks
independent litigation authority. When ADG imposes a civil penalty on a licensee, Arizona
law requires the Attorney General to sue to recover the penalty on ADG’s behalf. Id. § 5-
602.01(C). Thus, even if ADG “can act on behalf of the State with respect to gaming” in
some circumstances (Am. Countercl. ¶ 13), it cannot do so by bringing claims for judicial
relief. Indeed, ADG itself has asserted in other litigation that it lacks the capacity to sue or
be sued. See Aff. Defenses ¶ 11, Pistor v. Garcia, No. 2:12-cv-00786-FJM (D. Ariz. July 9,
2012) (Doc. 34) (“The Arizona Department of Gaming is a non-jural entity, and may neither
sue, nor be sued and is, therefore, an improper party Defendant.”).5
Because the Arizona legislature has not authorized Director Bergin to sue on behalf of
the State, all of the counterclaims should be dismissed. See, e.g., Bd. of Educ. of City of
Peoria, Sch. Dist. No. 150 v. Illinois Bd. of Educ., 810 F.2d 707, 709-710, 713 (7th Cir.
1987) (affirming dismissal for lack of capacity to sue); Cmty. Elec. Serv. of Los Angeles, Inc.
v. Nat’l Elec. Contractors Ass’n, 869 F.2d 1235, 1239 (9th Cir. 1989) (same), abrogated on
other grounds by Townsend v. Holman Consulting Corp., 914 F.2d 1136 (9th Cir. 1990).
Enforcing this limitation on ADG’s authority to sue is not only mandatory, but makes
good sense here, where Director Bergin is not a suitable party to bring the counterclaims he
has alleged. The parties to the Compact are “the Tohono O’odham Nation … and the State
of Arizona”—not Director Bergin or ADG. Compl. Exh. B. (Compact), at 1; see Am.
5 ADG’s lack of capacity does not bar the Nation’s Ex parte Young action against
Director Bergin because state law cannot exempt state officials from such suits. See Cimeran v. Cook, 561 F. App’x 447, 450-451 (6th Cir. 2014). But that does not mean that state law permits Director Bergin, in his official capacity, to raise affirmative counterclaims on behalf of the State.
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Countercl. ¶ 13; cf. 7 Wright & Miller, Federal Practice and Procedure § 1613 (3d ed.
2015) (“In cases seeking reformation, cancellation, rescission, or otherwise challenging the
validity of a contract, all parties to the contract … will be required.”). ADG is merely the
agency tasked with executing certain regulatory functions relating to gaming. A.R.S. § 5-
602(C). Indeed, Director Bergin has professed ignorance regarding many facts crucial to the
very charges he levels against the Nation. Compare, e.g., Compl. ¶¶ 32-33, 37-38 (alleging
facts related to compact negotiations, including what the State knew at the time), with Am.
Answer ¶¶ 32-33, 37-38 (claiming that Director Bergin “lacks knowledge or information
sufficient to form a belief as to the truth of the allegations”). And the State itself—the actual
party to the Compact—has already brought and is still pursuing on appeal the same claims
Director Bergin seeks to litigate now. In these circumstances, there is no basis for permitting
Director Bergin to exercise litigation authority that the Arizona legislature has chosen not to
grant him.
III. COUNTERCLAIMS TWO, THREE, AND FOUR (AND COUNTERCLAIM ONE TO THE EXTENT IT TURNS ON COMPACT INVALIDITY) FAIL TO STATE A CLAIM
In addition to the threshold legal defects identified above, Director Bergin’s second,
third, and fourth counterclaims—promissory estoppel, fraud in the inducement, and
intentional misrepresentation—fail to state a claim. The same is true of Director Bergin’s
first counterclaim, to the extent it rests on the purported invalidity of the Compact (which in
turn depends on the viability of the counterclaims for fraud and misrepresentation).6
6 The contours of Director Bergin’s first counterclaim are far from clear. See Am.
Countercl. ¶¶ 74-75. But it appears to request relief premised on a theory that the Compact was not “validly entered into,” which would require a showing of fraud in the inducement or material misrepresentation. To the extent the first counterclaim rests on alleged invalidity of the Compact, it should be dismissed for failure to state a claim for the same reasons the counterclaims for fraud and misrepresentation should be dismissed. To the extent that the first counterclaim seeks a declaration about the meaning of the Compact, the Nation believes that question may also be decided as a matter of law: The Compact unequivocally does not provide Director Bergin the veto authority he has asserted, and no language in the Compact is reasonably susceptible to that interpretation. Nonetheless, the Nation respects this Court’s ruling that parol evidence could potentially bear on questions of Compact meaning, and thus
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The claim of promissory estoppel fails because, as a matter of black-letter law, no
such claim can be maintained in the face of a written agreement—particularly, as here, a
completely integrated written agreement—covering the same subject matter.
The claims of fraud in the inducement and misrepresentation fail because those claims
require actual and justifiable reliance on the allegedly fraudulent statements or
misrepresentations. Here, Director Bergin’s assertions that the State relied on the Nation’s
alleged statements or omissions as a basis for entering into the Compact are insufficient as a
matter of law, given that the Governor was required by state law to enter into the Compact.
Nor can allegations that the Governor or the voters were misled into supporting or voting for
Proposition 202 bridge that gap.
Even if Director Bergin could show reliance, as a matter of law he cannot show
justifiable reliance. This Court—taking into account all of the State’s allegations of
fraudulent representations, misrepresentations, and omissions—has already held that if the
State truly held the view that the Compact would bar new casinos in Phoenix, that view was
“not reasonable” as a matter of law given what the Compact itself says on the matter. TON
II, 944 F. Supp. 2d at 768. That holding was necessary to this Court’s prior judgment and is
binding here.7 The State thus cannot have justifiably relied on alleged representations by the
Nation that the Compact would bar new casinos in Phoenix. Likewise, this Court has
already held that the Compact is “fully integrated,” meaning that “even if … a separate
does not move to dismiss the first counterclaim on that Rule 12(b)(6) ground at this time. See Fed. R. Civ. P. 12(h)(2) (an argument that a complaint fails to state a claim is not waived by failure to raise that argument in a motion to dismiss). The first counterclaim, however, is nonetheless barred for the reasons identified in Parts I and II.
7 Notwithstanding the State’s pending appeal, this Court’s judgment “‘retains all of its res judicata consequences.’” Tripati v. Henman, 857 F.2d 1366, 1367 (9th Cir. 1988) (quoting 18 C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure § 4433 (1981)). Likewise, “all ‘issues of fact or law that were actually litigated and necessarily decided’” in the prior litigation remain impervious to collateral attack by the State or by Director Bergin purportedly on the State’s behalf. Robi v. Five Platters, Inc., 838 F.2d 318, 322 (9th Cir. 1988).
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agreement existed” that the Nation would not game in the Phoenix area, the State “could not
enforce such an agreement.” Id. at 772. For the same reasons Director Bergin cannot
maintain a claim for promissory estoppel, the State—a sophisticated and well-represented
party—cannot as a matter of law have justifiably relied on a purported representation that the
Nation would not game in the Phoenix area as a basis for entering into an agreement that
unequivocally gave the Nation that right and also expressly made unenforceable the very
“promise” on which the State purportedly relied.
A. Promissory Estoppel
In his second counterclaim, Director Bergin alleges that the Nation should be
“estopped” from “opening a Class III gaming facility in the Phoenix metropolitan area”
based on the Nation’s purported “promises” not to do so. Am. Countercl. ¶¶ 78, 82. That
claim fails because, as a matter of law, no such claim can be maintained in the face of a fully
integrated Compact that covers the subject matter at issue.
Promissory estoppel is an equitable cause of action that substitutes for a contractual
obligation where one party relies on another’s promise without having entered into an
enforceable contract. Restatement (Second) of Contracts (“Restatement”) § 90(1) & cmt. a
(1981); 4 Williston on Contracts § 8.7 (4th ed. 2008).8 It requires proof of “[a] promise which
the promisor should reasonably expect to induce action or forbearance on the part of the
promisee or a third person and which does induce such action or forbearance.” Restatement
§ 90(1). The promisee “must also show that he actually relied on the promise to his detriment”
and that his reliance was “justifiable.” Higginbottom v. State, 51 P.3d 972, 977 (Ariz. Ct. App.
2002); see also Mann v. GTCR Golder Rauner, 425 F. Supp. 2d 1015, 1032 (D. Ariz. 2006).
Because promissory estoppel is an equitable remedy available where the parties did
not make an enforceable contract, no claim for promissory estoppel can be brought where
8 While Director Bergin has not identified the law under which he brings his claim of
promissory estoppel, both Arizona and federal common law generally follow the Restatement. See Aguilar v. Int’l Longshoremen’s Union, 966 F.2d 443, 445 & n.2 (9th Cir. 1992); Chewning v. Palmer, 650 P.2d 438, 440 (Ariz. 1982).
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there is “an express contract between the parties in reference to the same subject matter.”
Chanay v. Chittenden, 563 P.2d 287, 290 (Ariz. 1977); Mann, 425 F. Supp. 2d at 1036
(granting summary judgment to alleged promisor where subject matter of alleged promise
was addressed in a contract between the parties). “Promissory estoppel is not a doctrine
designed to give a party to a negotiated commercial bargain a second bite at the apple in the
event it fails to prove a breach of contract.” Walker v. KFC Corp., 728 F.2d 1215, 1220 (9th
Cir. 1984). Thus, even if a promisee “may [be] able to prove an implied agreement … under
some equitable theory,” a claim for promissory estoppel fails as a matter of law where the
parties have entered into an express contract governing their rights and obligations. Chanay,
563 P.2d at 290; see also All-Tech Telecom v. Amway Corp., 174 F.3d 862, 869 (7th Cir.
1999) (noting that under such circumstances “there is no gap in the remedial system for
promissory estoppel to fill”). That long-settled rule reflects the common-sense principle that
a promisee “cannot establish that [it] justifiably relied on the alleged promises” in the face of
an “express contract[] … referencing the same subject matters.” Mann, 425 F. Supp. 2d at
1036 (emphasis added); see also Higginbottom, 51 P.3d at 977 (“‘Reliance is … not justified
when knowledge to the contrary exists.’”).
A fortiori, where the contract at issue is fully integrated, a claim for promissory
estoppel necessarily fails as a matter of law. Such a contract discharges all prior agreements
or promises, whether consistent or inconsistent, on the same subject matter. See Restatement
§ 213(2) (“A binding completely integrated agreement discharges prior agreements to the
extent that they are within its scope.”); TON II, 944 F. Supp. 2d at 771; Mann, 425 F. Supp.
2d at 1036 (rejecting a claim for promissory estoppel in light of express contracts covering
the same subject matter and containing integration clauses).
Under these black-letter principles, Director Bergin’s promissory estoppel counterclaim
must be dismissed. Here, as this Court has found, “[a]fter long negotiation,” the parties’
“experienced lawyers” drafted a Compact that “covers every aspect of the Nation’s gaming
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rights and obligations in Arizona,” including the central question of where gaming facilities
could be located. TON II, 944 F. Supp. 2d at 753; see also id. at 764.9 The Compact expressly
“authorize[s]” the Nation to game on any land where IGRA permits it (see Compl. Exh. B
(Compact) §§ 3(a), 3(j), 2(s)), including on “lands acquired after the enactment of [IGRA] …
in accordance with 25 U.S.C. § 2719” (id. § 3(j)(1)). Moreover, the Compact is “fully
integrated.” TON II, 944 F. Supp. 2d at 771. The parties intended it to embody their “‘entire
agreement’” on the subject, and thus provided that “‘no other statement, agreement, or promise
… shall be valid or binding’” even if it is consistent with the Compact. Id. (quoting Compact
§ 25). Indeed, this Court has already held that “the fully integrated [C]ompact discharges any
unwritten understandings”—including any understanding by the State that the Nation would
not game in the Phoenix area or that the Compact would prohibit such gaming—and that “even
if [the State] could establish that a separate agreement existed between the State and the
Nation” that the Nation would not game in the Phoenix area, the State “could not enforce such
an agreement in the face of the fully integrated Compact.” Id. at 772, 774. Because the fully
integrated Compact provides that no extra-contractual “promise” shall be “binding,” such a
promise (even if made) cannot be enforced—through promissory estoppel or otherwise.
B. Fraud In The Inducement And Misrepresentation
In his third and fourth counterclaims, Director Bergin seeks reformation or rescission
of the Compact on the grounds of fraud in the inducement and material misrepresentation (or
omission), respectively. Am. Countercl. ¶¶ 87-108. He claims, in essence, that the State’s
assent to the Compact was induced by the Nation’s purported representations that the
Compact would bar any new casinos in Phoenix and that the Nation would not game in the
Phoenix area. Id.
9 As Director Bergin himself alleges, “limits on the number and location of gaming
facilities were a key part of the consideration bargained for by the State.” Am. Countercl. ¶ 27; see also id. ¶ 23 (“After years of negotiations, the State and the seventeen tribes reached agreement on … the number and location of gaming facilities … the new compacts would authorize.”).
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These counterclaims fail as a matter of law for two independent reasons. Under either
federal or Arizona law, both fraud in the inducement and material misrepresentation require
a showing that the party seeking to void or reform the contract actually and justifiably relied
on the representations in question. See Restatement § 164(1) (“If a party’s manifestation of
assent [to a contract] is induced by either a fraudulent or a material misrepresentation by the
other party upon which the recipient is justified in relying, the contract is voidable by the
recipient.” (emphasis added)); Addisu v. Fred Meyer, Inc., 198 F.3d 1130, 1137 (9th Cir.
2000) (adopting the Restatement standard); Echols v. Beauty Built Homes, Inc., 647 P.2d
629, 631 (Ariz. 1982) (intentional misrepresentation requires “reliance” and “the right to
rely”); Linder v. Brown & Herrick, 943 P.2d 758, 765 (Ariz. Ct. App. 1997) (“[j]ustifiable
reliance is [an] essential element[]” of fraud). Here, while Director Bergin makes conclusory
allegations that the State relied on the Nation’s representations (Am. Countercl. ¶¶ 90, 102)
and—as to material misrepresentation—that the State’s reliance was justified (id. ¶ 103),
those allegations are insufficient as a matter of law to support the necessary elements of
actual and justifiable reliance under the circumstances of this case.
1. Actual reliance
As an initial matter, Director Bergin’s allegation that the Nation’s conduct “induced”
the State “to enter into the Compact” (Am. Countercl. ¶¶ 90, 101) fails as a matter of law
because the State was required by Arizona law to enter into the Compact. “A
misrepresentation is not a cause of a party’s making a contract unless he relied on the
misrepresentation in manifesting his assent.” Restatement § 167 cmt. a; see id. § 164 cmt. c
(“No legal effect flows from … a fraudulent misrepresentation unless it induces action by the
recipient, that is, unless he manifests his assent to the contract in reliance on it.”); Kungys v.
United States, 485 U.S. 759, 787-788 & n.2 (1988) (a “material misrepresentation must have
induced the recipient … to enter the contract”).
Here, the State could not have relied on any purported misrepresentation by the
Nation as a basis for entering into the Compact because the negotiations between the parties
failed to result in a signed Compact. Instead, Proposition 202, as approved by the voters,
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required the State to enter into a standard-form compact with any tribe requesting one. See
A.R.S. § 5-601.02 (“Notwithstanding any other law … the state, through the governor, shall
enter into the new standard form of tribal-state gaming compact[.]” (emphasis added)).
Thus, contrary to Director Bergin’s conclusory allegation that “[t]he State would not have
signed the Compact had it known of the Nation’s plans … and [its] right[s]” (Am. Countercl.
¶ 90), state law compelled the State to do just that. See Salt River Pima-Maricopa Indian
Community v. Hull, 945 P.2d 818, 826 (Ariz. 1997) (interpreting a substantially identical
statutory provision as a “clear, unambiguous … require[ment] [that] the governor … agree to
[the] identified terms and enter into [the] compacts”).
Director Bergin’s fraudulent inducement and misrepresentation claims therefore fail
as a matter of law: “A party … cannot be defrauded into doing that which it was already
legally obligated to do.” Bank Leumi Trust Co. of N.Y. v. D’Evori Int’l, Inc., 163 A.D.2d 26,
33 (N.Y. App. Div. 1990); see 27 Williston on Contracts § 69:32 & n.15 (4th ed.) (collecting
authority for the proposition that “[t]hose induced by false representations to do an act that it
was their duty to do have had no legal rights infringed”); Great Lakes Press Corp. v. Froom,
695 F. Supp. 1440, 1449 (W.D.N.Y. 1987) (fact that a party had “a legal duty” to take the
action allegedly fraudulently induced “foreclose[d]” the party from “asserting an essential
element of a cause of action for fraud, namely reliance”); cf. Ezell v. Burton, 2007 WL
4218974, at *2 (D. Ariz. Nov. 29, 2007), aff’d, 339 F. App’x 759 (9th Cir. 2009) (“fulfilling
a pre-existing contractual obligation cannot constitute reliance because satisfying a legal
obligation is not a change in position”).
It is no answer to say that the Nation’s purported fraud caused “the State” to
“advocate acceptance of Proposition 202” or “the public” to approve Proposition 202. Am.
Countercl. ¶¶ 89-90; 101-102. Director Bergin does not challenge the validity of Proposition
202 here, and it is doubtful that he could.10 But, in any event, the allegation that the Nation
10 While Arizona regulates the integrity of the initiative process in detail—including
by requiring an impartial analysis of ballot measures to be produced by the State’s legislative
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somehow misled the State or voters into supporting Proposition 202 provides no basis for
rescinding or reforming the Compact. That relief requires proof that the Nation’s alleged
fraud caused the State to “assent to the [Compact] in reliance on” the fraud, Restatement
§ 164 cmt. c—a demonstration Director Bergin simply cannot make as a matter of law given
that A.R.S. § 5-601.02 compelled that assent.
2. Justifiable reliance
Even assuming that Director Bergin could adequately allege that the State relied on
the Nation’s purported representations, he cannot, under the circumstances of this case and in
light of the findings and conclusions this Court has already made, plausibly allege that the
State justifiably relied on those representations. Indeed, with respect to fraud in the
inducement, Director Bergin does not even plead justifiable reliance. See Am. Countercl.
¶ 92. With respect to material misrepresentation, he does allege that the State’s reliance was
“justified in these circumstances” (id. ¶ 103), but that conclusory allegation is insufficient as
a matter of law. Where, as here, the relevant facts have already been determined, the
question whether reliance was justifiable is a question of law. See Sch. Dist. No. 69 of
Maricopa County v. Altherr, 458 P.2d 537, 542 (Ariz. Ct. App. 1969), abrogated in part on
other grounds by Board of Trustees v. Wildermuth, 492 P.2d 420 (Ariz. Ct. App. 1972)
(where “facts affecting the right to rely … are undisputed, the question is one for the court”);
Guido v. Koopman, 2 Cal. Rptr. 2d 437, 440 (Ct. App. 1991) (“whether a party’s reliance
was justified may be decided as a matter of law if reasonable minds can come to only one
conclusion based on the facts”); Schlaifer Nance & Co. v. Estate of Warhol, 119 F.3d 91,
101 (2d Cir. 1997) (“[N]o rational juror could have concluded that SNC reasonably relied on
council and distributed to voters, A.R.S. §§ 19-123, 19-124(B)—it has not created any remedy for fraudulently currying support for a ballot initiative, cf. id. §§ 19-113(D), 19-114.01, 19-115(B), 19-116, 19-119, 19-119.01, 19-129 (penalizing various petition- and election-related conduct), even assuming it could do so consistent with the First Amendment, cf. List v. Ohio Elections Comm’n, 45 F. Supp. 3d 765, 774-779 (S.D. Ohio 2014), appeal filed, No. 14-4008 (6th Cir.) (striking down Ohio’s political false-statements law on First Amendment grounds).
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the Estate’s misrepresentations.”); Weaver v. Bratt, 421 F. Supp. 2d 25, 33 (D.D.C. 2006)
(granting motion to dismiss because “[e]ven if [defendant] misrepresented information
contained in the agreement, the plaintiff was entirely capable of reading and fully
understanding the agreement”); 6 Roberts, Litigating Tort Cases § 68:25 (2014) (citing cases
from numerous jurisdictions).
Director Bergin alleges that the Nation made representations that the Compact would
bar it from gaming in the Phoenix area. E.g., Am. Countercl. ¶¶ 6-7, 32, 36-40. In the
circumstances of this case, however, the State could not, as a matter of law, have justifiably
relied on any such representations as a basis for entering the Compact. As discussed above,
this Court has already held that the Compact’s terms—the product of long negotiation by
sophisticated, sovereign parties—unambiguously permit additional gaming in the Phoenix
area: The Compact “does not contain a ban on new casinos in the Phoenix area, and its
terms cannot reasonably be read to include such a ban.” TON II, 944 F. Supp. 2d at 774.
“[A]ny understanding on the part of the State that the Compact contained such a limitation
was not reasonable.” Id. at 768. As a matter of law and common sense, the State cannot
have justifiably relied on that unreasonable understanding of the Compact’s terms in
entering into the Compact, when anyone reading the Compact in a reasonable manner would
understand that it did not bar the Nation from gaming in the Phoenix area. See 484 Assocs.,
L.P. v. Moy, 2007 WL 683999, at *3 (S.D.N.Y. Mar. 5, 2007) (collecting authority for the
proposition that “courts will grant a Rule 12(b)(6) motion if Plaintiff had … indisputable
access to information that would have revealed the truth with minimal diligence”); cf.
Restatement (Second) of Torts § 541 cmt. a (1977) (“[I]f one induces another to buy a horse
by representing it to be sound, the purchaser cannot recover even though the horse has but
one eye, if the horse is shown to the purchaser before he buys it and the slightest inspection
would have disclosed the defect.”).11
11 Arizona law makes clear that where a party is highly sophisticated and ably
represented—as this Court has already held the State was here, see TON II, 944 F. Supp. 2d
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Nor could the State have justifiably relied on any alleged representation or promise by
the Nation that it would not game in the Phoenix area as a basis for entering into the
Compact. Just as any claim for promissory estoppel fails as a matter of law in the face of a
fully integrated Compact that unequivocally grants the Nation the right to game anywhere on
its Indian lands that IGRA permits, so too does any claim that such a promise induced the
State to enter into the Compact. The State—a sophisticated, well-counseled party—could
not have justifiably relied on the Nation’s alleged promise that it would not game in Phoenix
as a basis for entering an agreement that any reasonable person would understand gave the
Nation the right to do precisely that, and that also expressly provided that any “statement,
agreement, or promise” not reflected in the Compact’s terms would be unenforceable.
Compl. Exh. B (Compact) § 25; see Mann, 425 F. Supp. 2d at 1036 (holding in the
promissory estoppel context that a party “cannot establish that [it] justifiably relied on …
alleged promises” given “the express contracts between the parties referencing the same
subject matters and the integration clauses contained therein”). Director Bergin’s claims for
fraud in the inducement and material misrepresentation should therefore be dismissed.
CONCLUSION
The Nation’s motion to dismiss Director Bergin’s counterclaims should be granted.
at 753, 765—reliance on a representation that contradicts an agreement’s express terms cannot, as a matter of law, be justifiable. See Pinnacle Peak Developers v. TRW Investment Corp., 631 P.2d 540, 547-548 (Ariz. Ct. App. 1980) (rejecting claim of fraudulent inducement based on an oral statement contradicting the written agreement where the “parties each had experience in business transactions … [and] were represented by counsel … [in] a relatively substantial and sophisticated real estate transaction … [that resulted in] a ‘formal contract’”); see also Spudnuts, Inc. v. Lane, 641 P.2d 912, 915 (Ariz. Ct. App. 1982) (holding that a claim of fraudulent inducement cannot be based on “a promise directly at variance with the terms of a written instrument”); Fofi Hotel Co. v. Davfra Corp., 1994 WL 649978, at *6-10 (N.D. Ill. Nov. 16, 1994) (applying Arizona law and finding as a matter of law that “the clear contradictions between the alleged oral representations and the written terms of the [contract] … [and] the sophistication and business acumen of both parties” barred a claim of fraudulent inducement).
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Dated: November 30, 2015 Respectfully submitted,
/s/ Danielle Spinelli Laura Berglan, Acting Attorney General, SBN 022120 Office of Attorney General TOHONO O’ODHAM NATION P.O. Box 830 Sells, AZ 85634 Telephone: (520) 383-3410 [email protected]
Seth P. Waxman (Pro hac vice) Danielle Spinelli (Pro hac vice) Kelly P. Dunbar (Pro hac vice) Sonya L. Lebsack (Pro hac vice) WILMER CUTLER PICKERING HALE AND DORR LLP 1875 Pennsylvania Avenue, N.W. Washington, D.C. 20006 Telephone: (202) 663-6000 [email protected] [email protected] [email protected] [email protected]
Counsel for Plaintiff Tohono O’odham Nation
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CERTIFICATE OF SERVICE
I hereby certify that on this 30th day of November, 2015, I electronically transmitted
the foregoing document to the Clerk’s Office using the CM/ECF System, which will send a
notice of filing to all counsel of record.
/s/ Danielle Spinelli
DANIELLE SPINELLI
Case 2:15-cv-01135-DGC Document 108 Filed 11/30/15 Page 34 of 34
