Supreme Co’.~,t, l! eF I !,,,E ~’~

.tlnO.~ICE OF THE CLERK

up eme niteb tate

ARNOLD SCHWARZENEGGER,Governor of California; State of California,

Petitioners,V.

RINCON BAND OF LUISENO MISSIONINDIANS of the Rincon Reservation, aka RINCON

SAN LUISENO BAND OF MISSION INDIANS,aka RINCON BAND OF LUISENO INDIANS,

Respondent.

On Petition For A Writ Of CertiorariTo The United States Court Of Appeals

For The Ninth Circuit

PETITION FOR A WRIT OF CERTIORARI

EDMUND G. BROWN JR.Attorney General of CaliforniaMANUEL MEDEIROSSolicitor General of CaliforniaSARA J. DRAKESenior Assistant Attorney GeneralMARC A. LEFORESTIER*Supervising Attorney General1300 1 St., Suite 125Sacramento, CA 95818(916) 322-5452mleforestier@doj.ca.gov

*Counsel of Record

COCKLE LAW BRIEF PRINTING CO. (800) 225-6964OR CALL COLLECT (,402) 342-283l

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QUESTIONS PRESENTED

The Indian Gaming Regulatory Act of 1988("IGRA") compels federally recognized Indian tribesto enter into compacts with states to set the terms bywhich tribes may conduct casino-style gaming ontheir Indian lands. IGRA’s compact requirement didnot abrogate Indian tribes’ immunity to state taxa-tion, and provides that a state’s demand for directtaxation in compact negotiations is evidence of badfaith. This petition for a writ of certiorari presentsthe following questions:

1. Whether a state demands direct taxationof an Indian tribe in compact negotia-tions under Section 11 of the IndianGaming Regulatory Act, when it bar-gains for a share of tribal gaming reve-nue for the State’s general fund.

2. Whether the court below exceeded its ju-risdiction to determine the State’s goodfaith in compact negotiations under Sec-tion 11 of the Indian Gaming RegulatoryAct, when it weighed the relative valueof concessions offered by the parties inthose negotiations.

ii

PARTIES TO THE PROCEEDINGS

Petitioner Arnold Schwarzenegger is the Gover-nor of the State of California; he was a defendant inthe district court, and an appellant and cross-appelleein the court of appeals. He was sued in his officialcapacity. Petitioner State of California ("the State"), isa constituent State of the United States, a defendantin the district court, and an appellant and cross-appellee in the court of appeals. Respondent RinconBand of Luiseno Mission Indians of the Rincon Res-ervation ("the Rincon Band") is an Indian entitylocated within the geographic boundaries of the Stateof California and is recognized and eligible to receiveservices from the United States Bureau of IndianAffairs, a plaintiff in the district court, and an appel-lee and cross-appellant in the court of appeals.

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TABLE OF CONTENTS

Page

QUESTIONS PRESENTED ................................i

PARTIES TO THE PROCEEDINGS ...................ii

TABLE OF AUTHORITIES .................................v

OPINIONS BELOW .............................................1

JURISDICTION ...................................................1

CONSTITUTIONAL AND STATUTORY PRO-VISIONS INVOLVED .......................................1

STATEMENT .......................................................9

REASONS FOR GRANTING THE PETITION... 22

A. The decision below presents urgent,important and recurring issues con-cerning the permissible scope of tribal-state negotiations under IGRA, andthe authority of the Executive andJudicial Branches to intercede intribal-state compact negotiations ........

o

22

Whether negotiations for generalfund revenue sharing constitute ademand for direct taxation is animportant and recurring issue de-manding immediate resolution ......22

Whether federal courts have juris-diction to weigh the value of con-cessions offered by the parties intribal-state compact negotiationsis an important and recurringissue demanding immediate reso-lution ...............................................25

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TABLE OF CONTENTS - Continued

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B. The court of appeals finding of badfaith was erroneous, and prudentialconsiderations weigh heavily in favorof granting the petition .......................31

1. Negotiations for revenue sharingdo not constitute a demand for di-rect taxation ...................................32

2. The majority’s analysis of whatconstitutes a "meanin,~oful conces-sion" sufficient to justify a demandfor direct taxation violates con-tract law, and usurps the role ofthe Secretary ..................................34

CONCLUSION .....................................................39

APPENDIX

Ninth Circuit Opinion .........................................App. 1

District Court Opinion .....................................App. 128

Ninth Circuit Order denying en bancreview ............................................................App. 173

Department of the Interior Letter of Dis-approval Regarding Habematolel Pomo ofUpper Lake-State of California Compact,Aug. 17, 2010 ................................................. App. 175

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TABLE OF AUTHORITIES

Page

CASES

Artichoke Joe’s v. Norton,216 F. Supp. 2d 1084 (E.D. Cal. 2002) ...................20

California v. Cabazon Band of Mission Indians,480 U.S 202 (1987) ..............................................9, 20

Continental Ins. Co. v. NLRB,495 F.2d 44 (2nd Cir. 1974) .....................................27

Cotton Petroleum Corp. v. New Mexico,490 U.S. 163 (1989) .................................................20

Goldwater v. Carter, 444 U.S. 996 (1979) ..................28

Idaho v. Shoshone-Bannock Tribes,465 F.3d 1095 (9th Cir. 2006) .................................35

In re Indian Gaming Related Cases,331 F.3d 1094 (9th Cir. 2003) .........................passim

Livadas v. Bradshaw, 512 U.S. 107 (1994) ...............26

Montana v. Blackfeet Tribe of Indians,471 U.S. 759 (1985) .................................................34

Nixon v. U.S., 506 U.S. 224 (1993) .............................28

NLRB v. Blevins Popcorn Co.,659 F.2d 1173 (D.C. Cir. 1981) ................................27

Pueblo of Santa Ana v. Kelly,104 F.3d 1546 (10th Cir. 1997) .........................24, 36

Seminole Tribe of Florida v. Florida,517 U.S. 44 (1996) ...............................................9, 12

TABLE OF AUTHORITIES - Continued

Page

Texas v. New Mexico, 482 U.S. 124 (1987) .................36

United States v. Munoz-Flores,495 U.S. 385 (1990) ..................................................28

United States v. Sioux Nation of Indians,448 U.S. 371 (1980) ..................................................17

STATUTES

25 U.S.C.

§ 2702(2) ..................................................................15

§ 2702(3) ....................................................................2

§ 2710(11) ..................................................................2

§ 2710(b)(7)(B) .........................................................10

§ 2710(d)(1) ..........................................................2, 10

§ 2710(d)(1)(A) .....................................................2 24

§ 2710(d)(1)(C) .....................................................3, 27

§ 2710(d)(3)(A) .....................................................3, 12

§ 2710(d)(3)(C) ...............................................3, 18, 36

§ 2710(d)(3)(C)(iii) ..........................................4, 16, 20

§ 2710(d)(3)(C)(vii) ............................................33, 34

§ 2710(d)(3)(C)(7) .....................................................13

§ 2710(d)(3) et seq .....................................................10

§ 2710(d)(4) ......................................................passim

§ 2710(d)(7) ...............................................................12

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TABLE OF AUTHORITIES - Continued

Page

§ 2710(d)(7)(A) ...............................................5, 12, 16

§ 2710(d)(7)(B) .....................................................5, 17

§ 2710(d)(7)(B)(iii) .........................................6, 18, 25

§ 2710(d)(7)(B)(iii)(I) ...........................................6, 14

§ 2710(d)(7)(B)(iii)(II) ....................................6, 21, 34

§ 2710(d)(7)(C) .........................................................11

§ 2710(d)(8) ..........................................................7, 29

§ 2710(d)(8)(B) .........................................8, 11, 23, 28

28 U.S.C.

§ 1254(1) ....................................................................1

§ 1331 .......................................................................16

§ 1343 .......................................................................16

§ 1367 .......................................................................16

§ 2201 .......................................................................16

§ 2202 .......................................................................16

29 U.S.C. § 158(d) .......................................................26

California Government Code § 16300 ........................13

Vlll

TABLE OF AUTHORITIES - Continued

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CONSTITUTIONAL PROVISIONS

United States Constitution

article I, § 8 ...............................................................1

California Constitution

article IV, § 19 ............................................................8

article IV, § 19, subd. (f) ......................................9, 24

OTHER AUTHORITIES

65 Federal Register 31189 (May 16, 2000) ................13

75 Federal Register 38833-02 (Jul. 6, 2010) ..............30

Black’s Law Dictionary 1594 (9th ed. 2009) ..............32

Corbin on Contracts §§ 5.14, 5.17 (2d ed. 1995) ........36

Restatement (Second) of Contracts § 79 (1981) .........36

S. Rep. No. 100-446, reprinted in 1988U.S.C.C.A.N. 3071 ........................... 11, 20, 26, 27, 33

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PETITION FOR A WRIT OF CERTIORARI

OPINIONS BELOW

The opinion of the Ninth Circuit Court of Ap-peals, (App. 1-127) is reported at 602 F.3d 1019. Theopinion of the district court (App. 128-172) is reportedat 2008 WL 6136699. A prior opinion in this case (onrulings not sought to be reviewed by this petition fora writ of certiorari) is reported at 290 Fed. Appx. 60(9th Cir. 2008), cert. den., 129 S.Ct. 1995 (2009).

JURISDICTION

The judgment of the Ninth Circuit Court ofAppeals was entered on April 20, 2010. The court ofappeals denied a timely petition for rehearing en bancon June 7, 2010, App. 174, but stayed the issuance ofits mandate to allow time to file this petition for awrit of certiorari. The jurisdiction of this court isinvoked under 28 U.S.C § 1254(1).

CONSTITUTIONAL AND STATUTORYPROVISIONS INVOLVED

Article I, section 8 of the United States Constitu-tion provides:

The Congress shall have power... [t]o regu-late Commerce... with the Indian tribes;

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Section 3 of the Indian Gaming :Regulatory Act of1988, 25 U.S.C. § 2702, provides:

The purpose of this chapter is -

(1) to provide a statutory basis for the op-eration of gaming by Indian tribes as ameans of Promoting tribal economic devel-opment, self-sufficiency, and strong tribalgovernments;

(2) to provide a statutory basis for the regu-lation of gaming by an Indian tribe adequateto shield it from organized crime and othercorrupting influences, to ensure that the In-dian tribe is the primary beneficiary of thegaming operation, and to assure that gamingis conducted fairly and honestly by both theoperator and players; and

Section 11 of the Indian Gaming Regulatory Actof 1988, 25 U.S.C. § 2710, provides:

(d)(1) Class III gaming activities shall belawful on Indian lands only if such activitiesare -

(A) authorized by an ordinance or resolu-tion that -

(i) is adopted by the governing body of theIndian tribe having jurisdiction over suchlands,

(ii) meets the requirements of subsection(b) of this section, and

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(iii) is approved by the Chairman,

(B) located in a State that permits suchgaming for any purpose by any person, or-ganization, or entity, and

(C) conducted in conformance with a Tribal-State compact entered into by the Indiantribe and the State under paragraph (3) thatis in effect.

(3)(A) Any Indian tribe having jurisdictionover the Indian lands upon which a class IIIgaming activity is being conducted, or is tobe conducted, shall request the State inwhich such lands are located to enter intonegotiations for the purpose of entering intoa Tribal-State compact governing the conductof gaming activities. Upon receiving such arequest, the State shall negotiate with theIndian tribe in good faith to enter into such acompact.

(B) Any State and any Indian tribe may en-ter into a Tribal-State compact governinggaming activities on the Indian lands of theIndian tribe, but such compact shall take ef-fect only when notice of approval by the Sec-retary of such compact has been published bythe Secretary in the Federal Register.

(C) Any Tribal-State compact negotiatedunder subparagraph (A) may include provi-sions relating to -

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(i) the application of the criminal and civillaws and regulations of the Indian tribe orthe State that are directly related to, andnecessary for, the licensing and regulation ofsuch activity;

(ii) the allocation of criminal and civil ju-risdiction between the State and the Indiantribe necessary for the enforcement of suchlaws and regulations;

(iii) the assessment by the State of such ac-tivities in such amounts as are necessary todefray the costs of regulating such activity;

(iv) taxation by the Indian tribe of such ac-tivity in amounts comparable to amounts as-sessed by the State for comparable activities;

(v) remedies for breach of contract;

(vi) standards for the operation of such ac-tivity and maintenance of the gaming facili-ty, including licensing; and

(vii) any other subjects that are directly re-lated to the operation of gaming activities.

(4) Except for any assessments that may beagreed to under paragraph (3)(C)(iii) of thissubsection, nothing in this section shall beinterpreted as conferring upon a State or anyof its political subdivisions authority to im-pose any tax, fee, charge, or other assess-ment upon an Indian tribe or upon any otherperson or entity authorized by an Indiantribe to engage in a class III activity. No Statemay refuse to enter into the :negotiations

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described in paragraph (3)(A) based upon thelack of authority in such State, or its politicalsubdivisions, to impose such a tax, fee,charge, or other assessment.

(7)(A) The United States district courtsshall have jurisdiction over -

(i) any cause of action initiated by an Indi-an tribe arising from the failure of a State toenter into negotiations with the Indian tribefor the purpose of entering into a Tribal-State compact under paragraph (3) or to con-duct such negotiations in good faith,

(B)(i) An Indian tribe may initiate a causeof action described in subparagraph (A)(i) on-ly after the close of the 180-day period be-ginning on the date on which the Indiantribe requested the State to enter into nego-tiations under paragraph (3)(A).

(ii) In any action described in subpara-graph (A)(i), upon the introduction of evi-dence by an Indian tribe that -

(I) a Tribal-State compact has not been en-tered into under paragraph (3), and

(II) the State did not respond to the requestof the Indian tribe to negotiate such a com-pact or did not respond to such request ingood faith, the burden of proof shall be uponthe State to prove that the State has negoti-ated with the Indian tribe in good faith to

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conclude a Tribal-State compact governingthe conduct of gaming activities.

(iii) If, in any action described in subpara-graph (A)(i), the court finds that the Statehas failed to negotiate in good faith with theIndian tribe to conclude a Tribal-State com-pact governing the conduct of gaming activi-ties, the court shall order the State and theIndian Tribe to conclude such. a compactwithin a 60-day period. In determining insuch an action whether a State has nego-tiated in good faith, the court -

(I) may take into account the :public inter-est, public safety, criminality, financial integ-rity, and adverse economic impacts onexisting gaming activities, and

(II) shall consider any demand by the Statefor direct taxation of the Indian tribe or ofany Indian lands as evidence that the Statehas not negotiated in good faith.

(iv) If a State and an Indian tribe fail toconclude a Tribal-State compact governingthe conduct of gaming activities on the Indi-an lands subject to the jurisdiction of suchIndian tribe within the 60-day period provid-ed in the order of a court issued under clause(iii), the Indian tribe and the State shall eachsubmit to a mediator appointed by the courta proposed compact that represents their lastbest offer for a compact. The mediator shallselect from the two proposed compacts theone which best comports with the termsof this chapter and any other applicable

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Federal law and with the findings and orderof the court.

(v) The mediator appointed by the courtunder clause (iv) shall submit to the Stateand the Indian tribe the compact selected bythe mediator under clause (iv).

(vi) If a State consents to a proposed com-pact during the 60-day period beginning onthe date on which the proposed compact issubmitted by the mediator to the State underclause (v), the proposed compact shall betreated as a Tribal-State compact entered in-to under paragraph (3).

(vii) If the State does not consent duringthe 60-day period described in clause (vi) to aproposed compact submitted by a mediatorunder clause (v), the mediator shall notifythe Secretary and the Secretary shall pre-scribe, in consultation with the Indian tribe,procedures -

(I) which are consistent with the proposedcompact selected by the mediator underclause (iv), the provisions of this chapter, andthe relevant provisions of the laws of theState, and

(II) under which class III gaming may beconducted on the Indian lands over whichthe Indian tribe has jurisdiction.

(8)(A) The Secretary is authorized toapprove any Tribal-State compact enteredinto between an Indian tribe and a State

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governing gaming on Indian lands of suchIndian tribe.

(B) The Secretary may disapprove a com-pact described in subparagraph (A) only ifsuch compact violates -

(i) any provision of this chapter,

(ii) any other provision of Federal law thatdoes not relate to jurisdiction ower gaming onIndian lands, or

(iii) the trust obligations of the UnitedStates to Indians.

(C) If the Secretary does not approve ordisapprove a compact described in subpara-graph (A) before the date that is 45 days af-ter the date on which the compact issubmitted to the Secretary for approval, thecompact shall be considered to have been ap-proved by the Secretary, but only to the ex-tent the compact is consistent with theprovisions of this chapter.

(D) The Secretary shall publish in the Fed-eral Register notice of any Tribal-State com-pact that is approved, or considered to havebeen approved, under this paragraph.

Article IV, section 19, of the California Constitu-tion provides:

(a) The Legislature has no power to author-ize lotteries, and shall prohibit the sale oflottery tickets in the State.

9

(e) The Legislature has no power to author-ize, and shall prohibit casinos of the typecurrently operating in Nevada and New Jer-sey.

(f) Notwithstanding subdivisions (a) and(e), and any other provision of state law, theGovernor is authorized to negotiate and con-clude compacts, subject to ratification by theLegislature, for the operation of slot ma-chines and for the conduct of lottery gamesand banking and percentage card games byfederally recognized Indian tribes on Indianlands in California in accordance with feder-al law. Accordingly, slot machines, lotterygames, and banking and percentage cardgames are hereby permitted to be conductedand operated on tribal lands subject to thosecompacts.

STATEMENT

1. In California v. Cabazon Band of MissionIndians, 480 U.S 202 (1987), this Court held that theState of California lacked authority to regulate high-stakes bingo operations on the Morongo and CabazonIndian reservations. In response to the Cabazon Banddecision, Congress enacted the Indian Gaming Regu-latory Act of 1988 to create a statutory framework forthe conduct of gaming on tribal lands that balancesthe sovereign interests the federal government,states, and tribes all have in tribal gaming. Seminole

10

Tribe of Florida v. Florida, 517 U.S. 44, 48 (1996).Under this framework, gaming activity is divided intothree separate classes, over which the three govern-ments have varying degrees of regulatory authority.States have a significant regulatory role only withregard to the most lucrative form of gaming, class III,which generally means blackjack, slot machines, andother banked and percentage games common inNevada and Atlantic City at the time of IGRA’s pas-sage. § 2710(b)(7)(B).1 IGRA authorizes Indian tribesto conduct class III gaming only in states that permitsuch gaming, and in "conformity with a tribal-state compact negotiated by the Indian tribe andthe State under [§ 2710(d)(3) et seq.] that is in effect."§ 2710(d)(1). According to the Senate Report accom-panying the passage of IGRA,

both State and tribal governments have sig-nificant governmental interests in the con-duct of class III gaming. States and tribesare encouraged to conduct negotiations with-in the context of the mutual benefits that canflow to and from tribe [sic ] and States. Thisis a strong and serious presumption thatmust provide the framework for negotia-tions .... A State’s governmental interestswith respect to class III gaming on Indianlands include the interplay of such gamingwith the State’s public policy, safety, law andother interests, as well as impacts on the

1 All statutory citations are to Title 25 of the United States

Code, unless otherwise specified.

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State’s regulatory system, including its eco-nomic interest in raising revenue for its citi-zens.

S. Rep. No. 100-446, at 13 (1988), as reprinted in 1988U.S.C.C.A.N. 3071, 3083 (emphasis added).

IGRA provides that a tribal-state gaming com-pact may include provisions relating to the following:(i) the application of the criminal and civil laws andregulations of the Indian tribe or the State that aredirectly related to, and necessary for, the licensingand regulation of such activity; (ii) the allocation ofcriminal and civil jurisdiction between the State andthe Indian tribe necessary for the enforcement of suchlaws and regulations; (iii) the assessment by theState of such activities in such amounts as are neces-sary to defray the costs of regulating such activity;(iv) taxation by the Indian tribe of such activity inamounts comparable to amounts assessed by theState for comparable activities; (v) remedies forbreach of contract; (vi) standards for the operation ofsuch activity and maintenance of the gaming facility,including licensing; and (vii) any other subjects thatare directly related to the operation of gaming.activi-ties. § 2710(d)(7)(C). Under IGRA, once a compact isnegotiated, it must be approved by the Secretary ofthe Department of the Interior, prior to the compactgoing into effect; the Secretary may disapprove acompact only if the compact violates federal law orthe trust obligations of the United States to Indians.

§ 2710(d)(8)(B).

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States are required by IGRA to negotiate gamingcompacts with tribes "in good faith," § 2710(d)(3)(A),and tribes may enforce this good faith obligation byfiling suit in federal court. § 2710(d)(7)(A).2 Since2000, when class III gaming became lawful in Cali-fornia, sixty-seven tribes have negotiated compactsthat have been approved by the Secretary of theInterior, and come into effect under the provisions ofIGRA. Under the authority of a compact concluded in1999, the Rincon Band operates the Harrah’s RinconHotel and Casino, under a management contract withHarrah’s Entertainment, Inc.

2. This case arises from the Rincon Band’srequest to negotiate an amendment to its existingtribal-state gaming compact with the State ("the 1999Compact"). App. 7. Under the 1999 Compact, whichexpires in 2020, the Tribe is authorized to operate upto 2,000 slot machines at its tribal casino, and paysannually into the Revenue Sharing Trust Fund("RSTF"), which supports other Caliibrnia tribes thateither do not game, or operate small casinos. The

~ This Court has ruled that the Indian Commerce Clausedoes not grant Congress the power to abrogate the State’sEleventh Amendment Immunity to suit, and so § 2710(d)(7)cannot grant jurisdiction to the federal courts over a State thatdoes not consent to be sued. Seminole Tribe of Florida v. Florida,517 U.S. 44, 47 (1996). However, the State of California waivedits Eleventh Amendment Immunity to this action under theterms of the 1999 Compact.

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State derives no revenue sharing of any kind from theRincon Band under the 1999 Compact.~

In these negotiations for an amendment, theTribe sought to raise the cap on the number of slotmachines allowed by the 1999 Compact, and tolengthen the compact’s term. Negotiations for anamendment reached an impasse over the thresholdquestion of whether, in exchange for an expansion ofthe Rincon Band’s gaming rights, the State couldlawfully bargain for a share of the Tribe’s slot ma-chine revenue to be contributed to the State’s generalfund. App. 8-12; see Cal. Govt. Code § 16300 (theState’s general fund "consists of money received intothe treasury and not required by law to be credited toany other fund").

The State had concluded that such negotiationsfor general fund revenue sharing would be lawful,

and not otherwise violate public policy, because:(1) IGRA specifically authorizes negotiations over"subjects that are directly related to the operationof gaming activities," (§ 2710(d)(3)(C)(7)); (2) courts

~ The 1999 Compact between the Rincon Band and theState of California is one of sixty compacts approved by theSecretary in May 2000, all of which shared the same terms. See65 Fed. Reg. 31189 (May 16, 2000) (approving the 1999 Com-pacts). The Rincon Band is not subject to revenue sharing underthe Special Distribution Fund provisions of § 5 of the 1999 Com-pact, because it did not conduct gaming prior to 1999. The fullcompact can be accessed at the Internet site of the CaliforniaGambling Control Commission: http://www.cgcc.ca.gov/?pageID=compacts, last visited Aug. 19, 2010.

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adjudicating a State’s good faith may consider "thepublic interest, public safety, criminality, [a State’s]financial integrity, and adverse economic impacts onexisting gaming activities" (§ 2710(d)(7)(B)(iii)(I)); (3)the Ninth Circuit Court of Appeals had stated that"Congress ... did not intend to require that Statesignore their economic interests when engaged incompact negotiations" (see In re Indian GamingRelated Cases ("Coyote Valley IF’), 331 F.3d 1094, 1115(9th Cir. 2003)); and (4) ten compacts in California,memoranda of understanding in Massachusetts, andcompacts in New York and Wisconsin already includ-ed general fund revenue sharing provisions approvedby the Secretary of the Interior. App. 103-06.4 TheTribe, in contrast, contended that any bargainingposition seeking general-fund revenue sharing wouldconstitute a demand for direct taxation in violation ofIGRA. App. 142, 152-53.

Toward the end of negotiations, the State madetwo alternative offers to the Tribe. Its October 23,2006, offer would have provided a five-year extensionof the 1999 Compact’s term, an additional layer ofprotection against an attack on exclusive tribalgaming rights which other California tribes hadaccepted, and the right to operate 900 additional slotmachines. In exchange for the right to operate the1,600 slot machines it already operated under the

~ Today, fifteen compacts in California include revenuesharing, as do compacts in Connecticut, Florida, Michigan, NewYork, New Mexico, Oklahoma, and Wisconsin.. App. 103-05.

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1999 Compact for an additional five years, the RinconBand would provide ten percent of its net win onthese devices to the State for general fund purposes.In exchange for the right to operate the additional900 slot machines, the Rincon Band would providefifteen percent of its net win on these devices to theState for general fund purposes. App. 7-12. Substan-tially similar terms had been accepted by otherCalifornia tribes in renegotiations of their 1999Compacts, and had been approved by the Departmentof the Interior in an exercise of its trust responsibilityover Indian tribes. App. 123-24 (Bybee, J., dissent-ing).

At the Rincon Band’s request, the State made analternative offer on October 31, 2006. If accepted, thisoffer would have authorized the Tribe to operate 400additional slot machines. In exchange the RinconBand would have paid annually $2 million to theRSTF for small and non-gaming tribes, and twenty-five percent of the net win on the additional 400 slotmachines to the State for general fund purposes. App.11. Under either of these offers made by the State,the Rincon Band would remain the "primary benefi-ciary" of its tribal gaming operations, as is requiredby IGRA. § 2702(2).

Under the first of these offers, the Rincon Band’sannual slot machine revenue would increase from $59million to $61 million, App. 11-12; the State’s annualrevenue share with the Rincon Band would increasefrom $0 to $38 million; and Harrah’s Entertainment,Inc. would receive an annual management fee of

16

$36.3 million.~ Negotiations closed upon the RinconBand’s rejection of these offers. App. 12.

3. On June 9, 2004, the Rincon Band filed suitalleging the State’s bargaining for general fundrevenue sharing constituted bad ihith negotiation,invoking the jurisdiction of the federal district courtunder 28 U.S.C. §§ 1331, 1343, 1367, 2201, and 2202,and 25 U.S.C § 2710(d)(7)(A). On April 29, 2008, thedistrict court granted in part the Rincon Band’smotion for summary judgment, and found the Stateto have engaged in bad faith negotiations in violationof IGRA. App. 130. The district court’s analysis of theparties’ cross-motions for summary judgment beganwith § 2710(d)(4). This provision bars the "imposition"of "any tax, fee, charge, or other assessment upon anIndian tribe" other than one agreed to under§ 2710(d)(3)(C)(iii), which contemplates reimburse-ment to the State for its regulatory costs. App. 156.According to the district court, § 2710(d)(4) "does notcategorically prohibit fee demands" and while a Statelacks authority to "exact" revenue sharing payments,"it could bargain to receive them in exchange for aquid pro quo conferred in the compact." App. 157-62.Applying what the district court described as "basic

~ In Coyote Valley H, the Ninth Circuit approved revenuesharing to the State for allocation to the "’~ ",~peclal DistributionFund," which was established primarily to mitigate regulatoryand other costs of Indian gaming. Coyote Valley H, 331 F.3d at1114. The Rincon makes no payment to this fund, so to date thecosts imposed upon the State by Harrah’s Rincon Casino havenot been mitigated.

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contract principles" to the modification of the 1999Compact, it concluded that the State’s revenue shar-ing demands would constitute an "attempt to imposea tax" unless the State provided a "meaningful con-cession" to the Rincon Band in exchange. App. 162-62.

The district court concluded that because theState sought revenue for general purposes, ratherthan for the mitigation of gaming impacts, "theState’s fee demands constitute an improper attemptto impose a tax on Rincon." App. 167. The districtcourt next turned to the value of the considerationproposed by the State and concluded that "the pay-ment of such a large fee to its general fund in returnfor concessions of markedly lesser value was in badfaith." App. 168. Pursuant to § 2710(d)(7)(B), thedistrict court ordered the State and the Rincon Bandto conclude an amended compact within sixty days, orsubmit to the arbitration process provided by the Act.App. 172. This order was stayed pending appeal tothe Ninth Circuit Court of Appeals.

4. The Ninth Circuit Panel affirmed the districtcourt in a two-to-one ruling. The majority first analo-gized the State’s conduct of negotiations in this caseto other official acts of depredation against Indiantribes, including the treaty violations imposed uponthe Sioux Nation following the discovery of gold in theBlack Hills. App. 14-15 (citing United States v. SiouxNation of Indians, 448 U.S. 371 (1980)). Against thisbackdrop, the majority turned to IGRA’s text, notingthat IGRA required it to "consider any demand

18

by the State for direct taxation of the Indian tribeor of any Indian lands as evidence that the Statehas not negotiated in good faith." App. 16 (quot-ing §2710(d)(7)(B)(iii)). The majority understood§ 2710(d)(3)(C) as enumerating an exclusive list ofpermissible topics of compact negot:iation, which listis circumscribed by §2710(d)(4), providing that"nothing in this section shall be interpreted as con-ferring upon a State... authority to impose any tax,fee, charge, or other assessment upon an Indiantribe .... " App. 16-18. According ’to the majority,IGRA limits the permissible subjects of negotiation to"restrain aggression by powerful states," and pre-vents State interests from being served throughcompact negotiations. App. 15-20.

Turning to the negotiations between the RinconBand and the State, the majority concluded that theState’s negotiations for "a non-negotiable, mandatorypayment of 10% of net profits into the State treasuryfor unrestricted use" constituted a demand for taxa-tion, which it presumed to be evidence of bad faith.App. 21-22. The majority then concluded that thispresumption of bad faith was not overcome because,in their view, the State failed to offer any "meaningfulconcession" of sufficient value in return for generalfund revenue sharing. It is not at all clear, however,what the majority would consider a sufficiently"meaningful" concession, other than something thatis "exceptionally valuable." App. 39. The majority was"unconvinced" an alternative remedy provision of-fered by the State would be "better" for the Tribe than

19

what it had; it considered that the financial benefit ofone of the State’s offers was "negligible" because"Rincon stood to gain only about $2 million in addi-

tional revenues;" and it concluded that the "relativevalue" of the State’s demands and concessions "sug-gests the State was improperly using its authority."App. 43.

Finally, the majority rejected the State’s argu-ment that earlier approvals of general fund revenuesharing in compacts negotiated in California, andother states, and approved by the Secretary of the

Interior, provided an objective, good faith basis for theState’s bargaining position. ’We ... therefore holdthat good faith should be evaluated objectively basedon the record of negotiations, and that a state’s sub-jective belief in the legality of its requests is notsufficient to rebut the inference of bad faith createdby objectively improper demands." App. 48-53. Themajority affirmed the district court order compellingfurther negotiations, followed by arbitration.

In a vigorous and lengthy dissent, Judge Bybeedisputed the majority’s conclusion that the State

demanded direct taxation from the Rincon Band, ordid anything other than engage in good faith negotia-

tions: "[W]e have long held that the power to tax isdefined by the sovereign’s power to impose the tax.California has exercised no such power here. Themajority has confused California’s hardball negotia-tions with the taxing power." App. 54. Judge Bybeeexplained that, while the IGRA framework aroseagainst an "intricate backdrop of federal-state-tribal

20

relations" under which Indian tribes are exempt fromdirect state taxation, App. 59-60 (citing Cotton Petro-leum Corp. v. New Mexico, 490 U.S. 163, 183 n. 14(1989)), it also reflects "cooperative federalism" underwhich Congress "’balance[d] the competing sovereigninterests of the federal government, state govern-ments and Indian tribes, by giving each a role in theregulatory scheme.’" App. 62 (quoting Coyote ValleyH, 331 F.3d at 1096 and Artichoke Joe’s v. Norton, 216F. Supp. 2d 1084, 1092 (E.D. Cal. 2002)). The mecha-nism Congress developed to advance the "important -and potentially divergent - interests"’ of the sovereignstates and sovereign tribes, was "as~ old as the freemarket itself: allow states and tribe~,~ to bargain overthe terms of their class III gaming relationship." App.63.

The dissent noted that IGRA’s Senate Reportencourages states and tribes "to conduct negotiationswithin the context of the mutual benefits that canflow to and from tribe [sic] and States," App. 63-64(quoting S. Rep. No. 100-446, at 13 (1988)). However,to ensure that "IGRA’s compact requirement did not’[lift] the Indians’ exemption from state taxes,’" App.65-66 (quoting California v. Cabazon Band of MissionIndians, 480 U.S. at 215 n. 17), Congress did twothings: (1) in § 2710(d)(4), Congress explained thatIGRA’s compact requirement did not abrogate tribalimmunity to taxation by stating that "[e]xcept for anyassessments that may be agreed to under paragraph(3)(C)(iii) of this subsection, nothing in this section

21

shall be interpreted as conferring upon a State or anyof its political subdivisions authority to impose anytax, fee, charge, or other assessment upon an Indiantribe.., to engage in a class III activity," App. 66; and(2) in § 2710(d)(7)(B)(iii)(II), Congress declared that ifa state demanded that a tribe abrogate its immunityto direct taxation as a condition of compact negotia-

tions, the demand would be evidence of bad faith.App. 66-67. Viewed in this context, the dissent con-cluded that §§ 2710(d)(4) and (d)(7)(B)(iii)(II) were notintended to prevent negotiations over revenue shar-ing, but to prevent states using the "promise of classIII gaming to otherwise impose taxes on Indian tribesand their land." App. 67-68.

Turning to the facts of this case, the dissentconcluded that the State never sought to tax the

Rincon Band because a tax, in contrast to negotiatedrevenue sharing, "is imposed by the state and may becollected by the state, under penalty of law, over theobjections of its citizens." App. 76. Here, becauseCalifornia and the Rincon Band are independentsovereigns, "they may negotiate an agreement or not,but neither has the power to tax the other," a factthat is underscored by the fact that "[f]or all of itsposturing and demands, California has, to date, notone penny to show for its negotiations with the[Rincon] Band." App. 77. Accordingly, the dissentconcluded that California’s bargaining may constitutea "hard line stance," but not a tax. App. 77. Finally,

22

the dissent’s conception of what constitutes a "mean-ingful concession" sufficient to overcome a presump-tion of bad faith negotiation fundamentally differs themajority’s. The dissent contends that a "meaningfulconcession" is essentially the same as "consideration"under the common law of contracts. Under this view,the court should not apply its own subjective assess-ment of the value of the parties’ respective conces-sions because a "meaningful concession" is madewhenever "a bundle of rights more valuable than thestatus quo" is offered. App. 91.

REASONS FOR GRANTING THE PETITION

A. The decision below presents urgent, im-portant and recurring issues concerningthe permissible scope of tribal-state nego-tiations under IGRA, and the authority ofthe Executive and Judicial Branches to in-tercede in tribal-state compact negotia-tions

1. Whether negotiations for general fundrevenue sharing constitute a demandfor direct taxation is an important andrecurring issue demanding immediateresolution

The majority has thrown the law of tribal-statecompact negotiations into disarray by holding thatnegotiation for general fund revenue sharing con-stitutes a demand for direct taxation in violationof IGRA. This conclusion is irreconcilable with the

23

numerous existing tribal-state relationships wheregeneral fund revenue sharing is an element of asettled gaming compact. In the dissent’s words, themajority "does not just upset the apple cart - itderails the whole train." App. 56.

The majority’s bad faith holding is not onlyremarkable for its sweeping impact on California’sability to negotiate with Indian tribes, but it will also

have dramatic practical implications around theNation. There are 562 recognized Indian tribes in theUnited States and gaming is currently conducted in28 states.6 General fund revenue sharing provisionsare found in the fifteen compacts California hasnegotiated or renegotiated with tribes over the lastsix years, and in tribal-state compacts negotiated inConnecticut, Florida, Michigan, New York, New Mex-ico, Oklahoma, and Wisconsin. App. 103-106 (Bybee,J., dissenting). In every instance, these compactshave been approved by the Secretary of the Interior,in an exercise of the federal government’s trustresponsibility over Indian tribes. § 2710(d)(8)(B).

Indian gaming is an expanding industry, and atany given time states and tribes are engaged inexpensive and time-consuming compact negotiationsthat may take months or years to conclude. These

6 General information related to Indian gaming is availableat the National Indian Gaming Commission’s Internet site. Seehttp://www.nigc.gov/About_Us/Frequently_Asked_Questions.aspx,last visited Aug. 26, 2010.

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negotiations are typically extraordinarily delicateand, when concluded, reflect a political accommoda-tion between the sovereigns that is not entered intolightly. A compact must be entered in accordance withthe law of each sovereign. See Pueblo, of Santa Ana v.Kelly, 104 F.3d 1546, 1548 (10th Cir. 1997) (InteriorSecretary may not approve a tribal-state gamingcompact entered into by state governor in violation ofstate law). In California, negotiatio~Ls are conductedby the Governor, and any resultant compact mustbe ratified by the California Legislature. Cal. Const.,Art. IV, § 19, subd. (f). Tribes also enter into com-pacts through a formal act of tribal government,§ 2710(d)(1)(A), and significant tribal governmentresources are expended to engage the State in nego-tiations.

If the majority decision is allowed to stand, it willcreate an incentive for revenue sharing tribes toavoid paying millions, tens-of-millions, or even hun-dreds-of-millions of dollars in revenue-sharing totheir respective states, by seeking to void or renegoti-ate their compacts. Indeed, the dissent recognizes thelikely impact of the majority decision, and describesthe result as "chaos as tribe after tribe seeks toreopen negotiations concluded and duly approved."App. 56. It may take years of further litigation in thefederal courts to unwind disputes that are the fruit ofthe decision below. And for tribes without compacts,this decision will likely frustrate efforts to developsignificant gaming operations because states, once

25

denied any meaningful benefit from tribal gaming,will have a powerful incentive to limit it.

The Court should grant review to consider thequestions presented here because the decision belowraises important and recurring issues demandingimmediate resolution in order to preserve existingtribal-state compact relations, preserve the ability toconduct meaningful negotiations under IGRA, and toprevent enormous resources from being expended inlitigation over the status of the existing general fundrevenue sharing compacts that have been concludedin eight different states.

Whether federal courts have jurisdic-tion to weigh the value of concessionsoffered by the parties in tribal-statecompact negotiations is an importantand recurring issue demanding imme-diate resolution

The majority’s analysis exceeded a legitimateinquiry into the State’s good faith and went beyondthe jurisdiction of the federal courts established byCongress in IGRA, and usurped authority moreappropriately exercised by the Executive Branch.IGRA authorizes courts to determine only whether astate "has failed to negotiate in good faith .... "§ 2710(d)(7)(B)(iii). When a court looks beyond thequestion of a state’s good faith, and weighs the rela-tive value of concessions offered by the parties, itassumes a policy making role Congress never envi-sioned. It is not for the federal courts to developfederal Indian policy on a circuit-by-circuit basis.

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IGRA does not define "good faith," but the NinthCircuit has recognized that it is appropriate to look atthe closest analog to IGRA’s good faith requirement,

the National Labor Relations Act ("NLRA"), forguidance in interpreting the standard. Coyote ValleyH, 331 F.3d at 1094. Under the NLRA there is anobligation to bargain collectively, defined as "theperformance of the mutual obligation of the employerand the representative of the employees to meet atreasonable times and confer in good faith with re-spect to wages, hours, and other terms and conditionsof employment .... " 29 U.S.C. § 158(d). Under casesinterpreting the NLRA, the duty of good faith bar-gaining does not require the parties to make particu-

lar concessions, or even to reach agreement. SeeLivadas v. Bradshaw, 512 U.S. 107, 117 n. 11 (1994)(Under the NLRA the obligation to bargain in goodfaith does not compel either party to agree to aproposal or require the making of a concession.)(citing 29 U.S.C. 158(d)).7 It does envision, however,

7 Similarly, IGRA’s Senate Report indicates that the com-pact negotiation process was not intended to guarantee thesuccessful conclusion of negotiations:

Under this act, Indian tribes will be required to giveup any legal right they may now have to engage inclass III gaming if: (1) they choose to forgo gaming ra-ther than to opt for a compact that may involve Statejurisdiction; or (2) they opt for a compact and, forwhatever reason, a compact is not successfully negoti-ated.

S. Rep. No. 100-446, at 14 (1988), as reprinted in 1988U.S.C.C.A.N. 3071, 3084.

27

"a sincere, serious effort to adjust differences and toreach an acceptable common ground." NLRB v. Blev-ins Popcorn Co., 659 F.2d 1173, 1187 (D.C. Cir. 1981).An employer engages in bad faith or surface bargain-ing when it conducts negotiations "as a kind of cha-rade or sham, all the while intending to avoidreaching an agreement .... " Continental Ins. Co. v.NLRB, 495 F.2d 44, 48 (2nd Cir. 1974).

In this case, the majority did not attempt todetermine whether the State’s conduct of negotiationswas a sincere effort to reach agreement or was acharade, or sham. Instead, after erroneously conclud-ing that the State had demanded direct taxation ofthe Tribe, the majority looked to the relative value ofthe concessions the State offered in exchange forgeneral fund revenue sharing. But this inquiry haslittle relevance to whether the State engaged in asincere effort to reach agreement. Indeed, nowheredoes IGRA’s text or legislative history suggest thatfederal courts were expected to weigh the value ofconcessions negotiated in the course of tribal-statecompact negotiations. To the contrary, this valuationis, in the first instance, left expressly "between [the]two equal sovereigns." § 2710(d)(1)(C); S. Rep. No.100-446, at 13, reprinted in 1988 U.S.C.C.A.N. 3071,3083. This is appropriate, because the concessionsmade in tribal-state compact negotiations, in thefurtherance of the sovereigns’ governmental interests,are essentially political in nature.

The majority’s intrusion into these negotiationsnot only impinged upon the sovereignty of the Rincon

28

Band and the State, but also invaded the province ofthe Secretary of the Department of Interior, which isresponsible for implementing federal Indian policy.IGRA provides that a tribal-state compact may gointo effect only following approval by the Secretary.The Secretary may disapprove a compact if it violatesfederal law, or "the trust obligations of the UnitedStates to Indians."§ 2710(d)(8)(B). If there is authori-ty in IGRA to intrude upon the political process ofcompact negotiations, it resides in the Secretary’sauthority to disapprove a compact for a violation ofthe federal trust obligation. Moreover, where theSecretary disapproves a compact in an exercise of thefederal government’s trust obligations, the remedyunder IGRA is a bilateral determination by theparties to return to compact negotiations. IGRA doesnot provide an express judicial remedy. Accordingly,under IGRA, any federal intrusion into the compactrelationship is very narrow. The federal governmenthas no seat at the table.

Accordingly, the majority decision violates theprinciple that federal courts, do not engage political

questions, a doctrine that arises from the separationof powers and from prudential concerns regarding therespect courts owe the political departments, andrestrains courts "from inappropriate interference inthe business of the other branches of Government."

See Nixon v. U.S., 506 U.S. 224, 252-53 (1993) (Sout-er, J., concurring) (quoting United States v. Munoz-Flores, 495 U.S. 385, 394 (1990), and citing Goldwater

v. Carter, 444 U.S. 996, 1000 (1979) (Powell, J.,

29

concurring in judgment). Construing IGRA to prohibitfederal courts from weighing the value of concessionsoffered in negotiations would protect courts fromincursion into political processes and avoid anyresultant separation of powers concern.

The majority’s misinterpretation of IGRA alreadycaused mischief in the real world. On August 17,2010, the United States Department of the Interiordisapproved a compact, pursuant to § 2710(d)(8), thathad been negotiated between the State of Californiaand the Habemotolel Pomo of the Upper Lake ("Up-per Lake Compact") and submitted for Secretarialapproval on July 6, 2010. App. 175. Relying on thedecision below, the Interior Department concludedthat the fifteen percent general fund revenue sharingagreed to by the Tribe, is a tax. App 178-179. It thenacknowledged that the exclusive gaming rightsprovided to Indian tribes under California law, andthe cap of 700 slot machines authorized in the UpperLake compact, were both "meaningful concessions"granted by the State. App. 182-183. Nevertheless, theInterior Department arrived at the inexplicableconclusion that these "meaningful concessions" didnot "confer a substantial economic benefit on theTribe proportional to the value received by the State."App. 183, 186 (emphasis added). While this decisionappears to be an exercise of the Secretary’s trustresponsibility under § 2710(d)(8), the timing of thisdecision, its reasoning, and its incompatibility withearlier compact approvals, demonstrate that themajority’s erroneous construction of IGRA has led the

30

Secretary to reach a baseless and far-reaching prece-dent, and stray from the deference that is due thesedual-sovereign negotiations.

Notwithstanding the Secretary’s disapproval ofthe Upper Lake compact, on the same day it wassubmitted for approval, the Secretary publishednotice of approval of another gaming compact be-tween the Seminole Tribe of Florida and the State ofFlorida. See Notice of Approved Tribal-State Class IIIGaming Compact, 75 Fed. Reg. 38833-02 (Jul. 6,2010). Significantly, this twenty-year compact pro-vides for general fund revenue shalving under whichFlorida anticipates receiving at least $1.2 billion fromthe Tribe for the Florida’s public schools. See Semi-

nole Tribe celebrates new gamin~g compact withFlorida, Broward News and Entertainment Daily(May 6, 2010) (available at http://browardnetonline.corn/2010/05/seminole-tribe-celebrates-new-gaming-compact-with-florida, last viewed Sept. 1, 2010).s It isnot apparent from the Secretary’s notice of approval,or from a review of the two compacts, what meaning-ful basis there is for the Secretary to approve theSeminole compact on the one hand, but disapprovethe Upper Lake compact on the other - in both casesthe Tribes have accepted compacts u.nder which theywill operate class III gaming free of non-Indiancompetition. Together, these decisions demonstrate

The Seminole compact is available on Governor of Florida’sInternet site at the URL, http://www.flgov.com/pdfs/20100824_seminole.pdf, last viewed Sept. 1, 2010.

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that as a result of the majority decision, IGRA is nolonger being applied uniformly across the nation.

The majority’s assumption of responsibility forvaluing the parties’ proposed concessions offends thedual-sovereign nature of tribal-state compact negotia-tions under IGRA, and asserts authority more proper-ly exercised by the Secretary. The federal courts arenot in a position to know intimately the uniquenature of a tribal-state relationship, the course ofnegotiations, local economic conditions and myriadother factors that may inform the value of conces-sions. The Secretary, in its role as trustee over Indiantribes, is in a more appropriate position to make suchvaluations, and to do so in furtherance of federalIndian policy. The decision below has misconstruedthe respective roles of the Judicial and ExecutiveBranches in the tribal-state compact process underIGRA. This is an important federal question thatimplicates important rights and obligations of allthree sovereigns, and deserves urgent attention fromthis Court.

B. The court of appeals finding of bad faithwas erroneous, and prudential considera-tions weigh heavily in favor of grantingthe petition

As the dissent ably points out, the majority’serrors are many, with consequences for states thatare difficult to exaggerate. Literally hundreds of

32

millions of dollars in general fund revenues are atstake, as are stable political relations between dozens

of states and the tribes located within their bounda-ries.

1. Negotiations for revenue sharing do notconstitute a demand for direct taxation

IGRA provides that its compacting provisionsshall not be interpreted as "conferring upon a State... authority to impose any tax, fee, charge, or otherassessment upon an Indian tribe," and that this lackof authority is not a basis for a State’s refusal to enternegotiations. § 2710(d)(4) (emphasis added). Withoutany consideration of what it would mean for theState to "impose" taxation on a sovereign tribe,9 themajority concluded that the State:’s bargaining forrevenue sharing violated § 2710(d)(4): "No amount ofsemantic sophistry can undermine the obvious: a non-negotiable, mandatory payment of 10% of net profitsinto the State treasury for unrestricted use yieldspublic revenue, and is a ’tax.’" App. 21-22. However,taxation involves three elements: (1) a monetary con-tribution; (2) imposed by the government; (3) to yieldpublic revenue. Black’s Law Dictionary 1594 (9th ed.2009). The majority ignored the second, most essen-tial, element; it "simply sidesteps the ’imposition’

9 Indeed, at oral argument the author of the majorityopinion characterized as "ludicrous" and "ridiculous" the State’scontention that tribes exercise sovereign powers in compactnegotiations under IGRA.

33

requirement by slapping the conclusory labels ’non-negotiable’ and ’mandatory’ on proposed revenuesharing payments that are neither." App. 77. (Bybee,J., dissenting).

Revenue sharing was certainly contemplated byCongress which recognized that "[a] state’s govern-mental interests with respect to class III gaming onIndian lands include ... impacts on the State’s regu-latory system, including its economic interest inraising revenue for its citizens," and encouragedStates and tribes "to conduct negotiations within the

context of the mutual benefits that can flow to andfrom tribe [sic] and states." S. Rep. No. 100-446, at 13,reprinted in 1988 U.S.C.C.A.N. 3071, 3083 (emphasisadded). More importantly, Congress expressly au-thorized revenue sharing tied to income from theoperation of slot machines, because such revenueis directly related to the operation of gaming.§ 27 lO(d)(3)(C)(vii).

In Coyote Valley H, the Ninth Circuit recognizedthat state authority to negotiate for revenue sharingwas expressly provided for in IGRA, provided therevenue stream was "directly related" to the Tribe’sclass III gaming operations. Coyote Valley H, 331 F.3dat 1111 (citing § 2710(d)(3)(C)(vii)). Here, as in CoyoteValley H, the State sought revenue sharing derivedfrom, and so directly related to, the operation of theTribe’s class III slot machines. Notwithstanding thisclear authority, the majority ruled that the notion theproposed revenue sharing was directly related to theTribe’s gaming operations was "circular," and rejected

34

it.1° App. 29. The majority simply erred in ruling thatthe State sought to "impose" anything; it merelyengaged in good faith negotiations, as IGRA requiresit to do.

2. The majority’s analysis of what consti-tutes a "meaningful concession" suffi-cient to justify a demand for directtaxation violates contract law, andusurps the role of the Secretary

Having concluded that the State; demanded directtaxation in negotiations with the Rincon Band, themajority applied § 2710(d)(7)(B)(iii)(II) to establish apresumption that the State had negotiated in badfaith. The majority then applied its own subjectivevaluation of the concessions offered :in negotiations toconclude that the State had failed to offer meaningfulconcessions sufficient to rebut this presumption ofbad faith negotiation. This analysis was erroneous inboth its approach and its application.

lo To support its construction of § 2710(d)(3)(C)(vii), themajority relied upon the "Indian canon" of statutory construc-tion, which canon requires courts to construe ambiguous stat-utes in the manner most favorable to tribal interests. App. 18-19n. 9; Montana v. Blackfeet Tribe of Indians, 471 U.S. 759, 766(1985). However, in Coyote Valley H, the Ninth Circuit ruled that§ 2710(d)(3)(C)(vii) is "unambiguous." Coyote Valley H, 331, F.3dat 1111. Again, the majority erred. App. 100 rL. 9.

35

Earlier Ninth Circuit decisions demonstrate anunderstanding that the federal court’s jurisdiction todetermine a State’s good faith is much narrower thanthe majority has conceived it. Coyote Valley H and

Idaho v. Shoshone-Bannock Tribes, 465 F.3d 1095 (9thCir. 2006), both stand for the proposition that a Statedoes not exercise authority to "impose" a tax on atribe when it engages in negotiations for revenuesharing and offers in exchange a meaningful conces-sion. Coyote Valley H concerned a challenge to reve-nue sharing and other provisions proposed in the1999 negotiations between California and the CoyoteValley Band of Pomo Indians. In Coyote Valley H, therevenue sharing provisions were either to fund tribeswith small or no casinos for general tribal uses, or tofund the State’s efforts to mitigate the impacts of, andregulate, tribal gaming. Coyote Valley H, 331 F.3d at

1105-06. The Ninth Circuit did not consider whetherthe revenue sharing sought in those negotiationsconstituted a direct tax, because "[w]here, as here,...a State offers meaningful concessions in return for feedemands, it does not exercise ’authority to impose’anything. Instead, it exercises its authority to negoti-ate, which IGRA clearly permits." Coyote Valley H,331 F.3d at 1112. Significantly, the Coyote Valley Hcourt defined a "meaningful concession" as somethingmerely "real," a conception that comports which theapplication of the common-law doctrine of considera-

tion. Id. See also Shoshone-Bannock Tribes, 465 F.3dat 1101 (indicating that while a "state [does] not haveauthority to exact [revenue sharing] payments, it[may] bargain to receive them in exchange for a quid

36

pro quo conferred in the compact"). These cases indi-cate that a meaningful concession, is nothing morethan "consideration" within the meaning of commonlaw contract law.11 Under the comraon law, however,courts do not weigh the adequacy of consideration,but will only determine whether putative considera-tion is nominal or a "sham." App. 92-93 (Bybee, J.,citing 4 Joseph M. Perillo, et al., Co.rbin on Contracts§§ 5.14, 5.17 (2d ed. 1995)). It is for the good reasonthat the valuation of consideration is left to privateaction because the parties are "better able thanothers to evaluate the circumstances of particulartransactions ...." Restatement (Second) of Contracts§ 79 (1981).

The majority departs from Coyote Valley II’ssensible construction of IGRA, and. denies that theState offers a meaningful concession when it "offers abundle of rights more valuable than the status quo,"as the State certainly did in this case. App 47-48. Thedissent appropriately concluded that; "[t]he majority’snovel conception of ’meaningful concessions’ findsno support in IGRA and conflicts with our explana-tion of ’meaningful concessions’ in Coyote Valley II,the Department of the Interior’s reading of the Act,

11 It is undisputed that the common law of contracts appliesto the construction and interpretation of tribal-state gamingcompacts. See § 2710(d)(3)(C) (noting that c~mpacts may include"remedies for breach of contract"); see also Pueblo of Santa Anav. Kelly, 104 F.3d 1546, 1556 (10th Cir. 1997) (stating that atribal-state compact "is a form of contract" and citing Texas v.New Mexico, 482 U.S. 124, 128 (1987)).

37

and centuries of contracts jurisprudence as well."App. 91.

The majority also erred in the application of itsown conception of what constitutes a meaningfulconcession, by concluding that neither of the State’stwo separate compact offers in October 2006, wouldprovide a meaningful concession in exchange forgeneral fund revenue sharing. Even in the majority’scramped view of the State’s offers, the State offered abundle of rights significantly more valuable than thestatus quo. The State’s concessions included a five-year extension of the compact’s term, an additionallayer of protection for tribal gaming exclusivity, andan increase in the number of slot machines the Tribecould offer. These amounted to substantially morethan mere consideration necessary for compact for-mation, and should have satisfied even the majority’sconception of a "meaningful concession."

Although the decision below is the first federalcourt of appeals to consider whether general fundrevenue sharing constitutes an impermissible tax

under IGRA, it would be a mistake for this Court toawait a split between circuit court decisions beforeconsidering the questions presented by this petition.The majority decision departs from prior decisions ofthe Ninth Circuit Court of Appeals, and threatenschaos in tribal-state gaming relations. If the decisionbelow is not reversed, litigation will likely be filed in

the Second, Sixth, Tenth, and Eleventh Circuits to"unsettle dozens of mutually beneficial revenuesharing provisions that have fed both tribal coffers

38

and revenue-hungry state treasuries." App. 127(Bybee, J., dissenting). Multiple litigation of thesequestions would consume vast federal, state, andtribal resources, and unnecessarily extend the periodof uncertainty in tribal-state gaming relations thedecision below has guaranteed. And this uncertaintymay not ultimately be resolved in favor of tribal

gaming interests.

Notwithstanding the serious implications of themajority’s decision, whether general fund revenuesharing constitutes direct taxation under IGRA is arelatively straightforward question of statutoryconstruction that has been amply explored in thelengthy majority and dissenting opinions below.Accordingly, there is no reason for this Court to delayconsideration of the important and urgent questionspresented here.

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CONCLUSION

The petition for a writ of certiorarigranted.

Respectfully submitted,

MARC A. LEFORESTIERSupervising Attorney General

EDMUND G. BROWN JR.Attorney General of CaliforniaMANUEL MEDEIROS

Solicitor General of CaliforniaSARA J. DRAKESenior Assistant Attorney General1300 1 St., Suite 125Sacramento, CA 95818(916) 322-5452

should be

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