Towards a Carcieri Fix - Are We There Yet?

On October 13, 2011, Assistant Secretary Echo Hawk testified before the Senate Committee on Indian Affairs in support of the proposed legislation “fixing” the Carcieri decision (Carcieri v. Salazar, 129 S.Ct. 1058 (2009)) by allowing the Bureau of Indian Affairs (BIA) to place land into trust for all federally recognized tribes.

The Assistant Secretary testified in part as follows:

In April of this year, the United States Government Accountability Office (GAO) stated that the uncertainty in accruing land in trust for tribes, as a result of the Carcieri decision, is a barrier to economic development in Indian Country. When asked to identify the “key” issue that must be “resolved first” to ease impediments to job growth in Indian Country, GAO stated that the uncertainty in taking land-in-trust has to be resolved. Moreover, GAO predicted that until the uncertainty created by the Carcieri decision is resolved, Indian tribes would be asking Congress for tribe-specific legislation to take land in trust, rather than submitting fee-to-trust applications to the Department. The Department understands that this prediction is coming true, and Indian tribes are asking their Members of Congress for legislation to take land in trust. Thus, instead of a uniform fee-to-trust process under the Indian Reorganization Act, a variety of tribe specific fee-to-trust laws could lead to a patchwork of laws that could be difficult for the Department to administer.

The webcast of his testimony is available at Echo Hawk Senate Testimony and Webcast

What does this mean for Oklahoma? A number of Tribes were not recognized in 1934. (In fact, in Oklahoma most tribes fall under the Oklahoma Indian Welfare Act of 1936 which was similar to the Indian Reorganization Act of 1934). However, as noted by Justice Breyer in his concurrence, the BIA can still place land into trust for Tribes which should have had federal recognition in 1934 – just that the BIA didn’t know it.  (And naturally Oklahoma Indian Welfare Act tribes should meet this test, if applied). As a result of the Carcieri decision, tribes not recognized by 1934 must prove that they should have been recognized in 1934 (which has been done) but that leads to greater legal expense and confusion. Not exactly an ideal environment. Nor is it fair, as Indian tribes, according to the Supreme Court, may be treated unequally under the law.  A fix is clearly needed – and Republicans, Democrats, and the President seem to be in favor of it.  Yet, it has been almost two years since the Supreme Court created this uncertainty and nothing has been done.

Indian Gaming Revenue Continues to Increase as Percentage of Total Gaming

Earlier this year, Dr. Alan Meister and Casino City Press released the 2011 Gaming Industry Report.

Of special note this year:

“Despite the small decline in Indian gaming, it continued to close the gap on commercial casinos, which suffered a much larger decline. In 2009, Indian gaming revenue was 96 percent of that of the commercial casino segment. This compares to 89 percent in 2008.”

As Indian gaming is now larger than Nevada commercial gaming and coming close to surpassing all commercial gaming in the United States it is Interesting to note that, California and Oklahoma account for 38% of total Indian gaming revenue in 2010. 

You can order a copy of Dr. Meister’s report on Amazon and at www.casinocitypress.com

Lake of the Torches - the Perils of an Unapproved Management Contract

The Seventh Circuit in Wells Fargo Bank, NA v. Lake of the Torches Economic Development Corp. affirmed in part and reversed in part the U.S. District Court for the Eastern District of Wisconsin’s decision dismissing an action to collect and appoint a receiver over a gaming operation in default on a $50 million dollar bond indenture.  (Incidentally, Wells Fargo Bank, NA, the largest gaming lender in Indian Country is the plaintiff but is only the trustee for the bondholders, its own assets are not at risk). The District Court held that the bond indenture was an unapproved management contract and hence completely void as a matter of law.

And there is the rub. A court struck down a loan of $50 million because it provided control of the casino to the lender in the event that the lender was not being repaid. As any banker can tell, syndicated commercial loans as a matter of course contain strong protections to support re-payment. Otherwise no one would ever lend money. And certainly not $50 million.

However, in Indian Country the Congress provided that in order for an indvidiual or company, other than the Tribe on whose land gaming is conducted, to control a casino that it must have a management contract approved by the National Indian Gaming Commission.  The NIGC is the expert agency which provides guidance through its regulations and bulletins as to what does and does not constitute a management contract.  The NIGC views its duty to protect Indian gaming for the Tribes and to prevent bad actors from conducting business. The only problem from a lender’s point of view is that NIGC approval can be slow, and the banks typically do not want to manage a casino in any event. As a result, loan agreements include creative methods of to ensure re-payment – which supposedly stop short of management.  Bad actors, unfortunately, have similar incentive to avoid NIGC scrutiny – and seek to put creative methods of control into loans, leases, or consulting agreements, because they too want to be paid from the Indian casino. In response, the NIGC maintains a broad view of management and informs whoever will listen that the potential for management equals management.

The lesson from Lake of the Torches is that a void contract is a void contract.  No provision of an unapproved management contract may be severed or enforced. This rule ensures that lenders do not profit from placing control provisions into a document which are only intended primarily to intimidate pre-litigation or arbitration.

The Seventh Circuit’s holding:

We conclude that the Indenture constitutes a management contract under IGRA and that, as a condition of its validity, it should have been submitted to the Chairman of the NIGC for approval prior to its implementation. The parties’ failure to secure such approval renders the Indenture void in its entirety and thus invalidate s the Corporation’s waiver of sovereign immunity. The district court therefore correctly determined that it was without jurisdiction with respect to Wells Fargo’s motion for the appointment of a receiver.

The full opinion is available at:  http://caselaw.findlaw.com/us-7th-circuit/1579278.html

The other lesson from Lake of the Torches is that the Seventh Circuit expressed substantial deference to the NIGC’s opinion and that of its former general counsel Kevin Washburn the Dean of the University of New Mexico School of Law.  The Seventh Circuit listened to the expert agency’s bulletins and guidance, and those positions are designed to promote the goals of IGRA and protect Indian tribes.  This should be a sign that Courts can be educated that a seemingly punitive holding (invalidating a $50 million dollar loan) actually supports Congressional policy and the public interest in protecting Indian gaming.

Tribal Water Rights in Oklahoma - And the Merits of the New Lawsuit by the Choctaw and Chickasaw Nations

At formation of the State of Oklahoma, Congress and the new State specifically stated that tribal governments and tribal jurisdiction would not change as a result of statehood.  Congress enacted the Oklahoma Enabling Act providing for Indian Territory and Oklahoma Territory to be admitted as the state of Oklahoma.  Section 1 of the Enabling Act authorized the inhabitants of both territories to adopt a constitution and become the State of Oklahoma provided,

That nothing contained in said constitution shall be construed to limit or impair the rights of persons or property pertaining to the Indians of said Territories (so long as such rights shall remain unextinguished) or to limit or affect the authority of the Government of the United States to make any law or regulation respecting such Indians, their lands, property or other rights by treaties, agreement, law or otherwise, which it would have been competent to make if this Act had never been passed.

The third paragraph of Section 3 of the Enabling Act contained a requirement that the proposed Oklahoma Constitution contain a disclaimer clause. The disclaimer clause presently Article I, Section 3 of the Oklahoma Constitution, provides that:

The people inhabiting the State do agree and declare that they forever disclaim all right and title in or to any unappropriated public lands lying within the boundaries thereof, and to all land lying within said limits owned or held by any Indian, tribe, or nation; that until the title to any such public land shall have been extinguished by the United States the same shall be and remain subject to the jurisdiction, disposal, and control of the United States. . .

            Despite these clear mandated disclaimers, Oklahoma immediately began acting as if it had jurisdiction over all Indian lands.  See  Ex parte Nowabbi, 1936 OK CR 123, 61 P.2d 1139 and Toosigah v. United States, 186 F.2d 93 (10^th Cir. 1950).  This assertion was imbedded in Oklahoma’s psyche.  For example, in a 1953 letter from Johnston Murray, Governor of Oklahoma, replying to a suggestion by the Assistant Secretary of the Interior, that the Governor meet with the Indian tribes in Oklahoma regarding Oklahoma assuming civil and criminal jurisdiction over Indian country (as was being legislated for other states in Public Law 280) in Oklahoma, Governor Murray stated:

When Oklahoma became a State, all tribal governments within its boundaries became merged in the State and the tribal codes under which the tribes were governed prior to Statehood were abandoned and all Indian tribes, with respect to criminal offenses and civil causes, came under State jurisdiction.

Therefore, Public Law No. 280 (providing a procedure for the assumption of jurisdiction by the States) will not in any way affect the Indian citizens of this State.

Oklahoma largely ignored Indian jurisdiction within the state until the 1970s when a number of court decisions recognized that Indians still existed within the state. Finally, a series of cases in the early 1990s resolved for Oklahoma that, indeed, Indian Country did still exist in Oklahoma and the state had little, if any, jurisdiction over actions therein.  Okla. Tax Comm’n v. Citizen Band Potawatomi Indian Tribe, 498 U.S. 505 (1991); Okla. Tax Comm’n v. Sac & Fox Nation, 508 U.S. 114 (1993).  Thus, from statehood thru the 1990s, Oklahoma engaged in numerous transactions and enacted legislation impacting transfer of water within the state without considering the rights that Indian tribes might have to the water.

            Indian water rights are substantively governed by federal law.  Cappaert v. United States, 426 U.S. 128 (1976); In re General Adjudication of All Rights to Use Water in Big Horn River System, 753 P.2d 76 (Wyo. 1988). Two major Indian water rights cases decided by the Supreme Court more than half a century apart, Winters v. United States, 207 U.S. 564 (1908) and Arizona v. California, 373 U.S. 546 (1963), (footnote omitted) established the scope and foundational principles of the reserved rights doctrine.

The Winters Doctrine. The genesis of federal Indian water rights was founded in the Winters case wherein the Supreme Court held that a right to water was impliedly reserved in the agreement establishing the reservation. 

In Winters, the non-Indian appropriators of water, although junior in right to the tribes, had arguably been using the water for irrigation for a number of years prior to the tribal use.  In spite of the clear prior usage, the Court held that the tribe’s use, as the senior federally protected right, not only had priority over the junior state-law rights, but would be recognized even if the result would deprive the non-Indian irrigators of the water they had been using and on which they had been relying.  From its inception, then, the Winters doctrine contemplated that the water rights of junior non-Indian users would be forfeited when tribes asserted their reserved rights. 

In Winters, the court held that when Indian reservations were established, the United States and the Indian tribes implicitly reserved, along with the land, water sufficient to fulfill the purposes of the reservation.  As stated by the Court:

The Indians had a command of the lands and the waters—command of all their beneficial use, whether kept for hunting, “and stock,” or turned to agriculture and the art of civilization.  Did they give up all this?  Did they reduce the area of their occupation and give up their water which made it valuable or adequate. Id. at 576. The “implied reservation of water rights” doctrine expressed in Winters is that when land is set aside for Indian tribes, implicit with that reservation is the allocation of sufficient water to fulfill the purposes of the reservation.

In Arizona v. California, a dual riparian/appropriation state like Oklahoma, the issue was whether the reserved rights recognized in Winters entitled the Indian Tribe to enough water to irrigate its entire reservation even though it had never irrigated a substantial portion of its reservation.  The Court held whenever an Indian reservation was created, there was an “implied reservation of water rights . .  . necessary to make the reservation livable” and thus the tribe was entitled to that amount of water to “satisfy the future as well as the present needs of the Indian reservation”.  Arizona at p. 600.

The Winters doctrine, as it has developed, has established that Indian reserved rights to water are determined by federal, not state, law.  Indian rights and interests in property are defined and protected by federal law.  And state jurisdiction over Indian property interests with Indian country is preempted unless authorized by Congress.  As set forth above, Congress has expressly stated, in the state’s Organic Act and Enabling Act, that Oklahoma state law is preempted with respect to Indian water rights.

            Indian reserved water rights differ significantly from both riparian and appropriative rights.  Unlike riparian rights, Indian reserved rights are not ratably reduced in times of shortage.  Reserved rights do, however, share certain characteristics with riparian rights:  They generally arise from land ownership rather than use; they may be asserted at any time; and they are not lost through nonuse.  Unlike appropriation rights, reserved rights are not based on diversion and actual beneficial use.  Instead, sufficient water is reserved to fulfill the purposes for which a reservation was established.  Nonetheless, reserved rights, like appropriation rights, are assigned priority dates.  But the priority of reserved rights is no later than the date on which a reservation was established, which, in the case of most Indian reservations in the West, is earlier than the priority of most non-Indian water rights. 

Present status of water rights in Oklahoma

            In his original treatise on Indian Law, Felix S. Cohen had this to say about Oklahoma and the state of Indian law:

The Laws governing the Indians of Oklahoma are so voluminous that analysis of them would require a treatise in itself.  In fact, two treatises have already been written on the subject, and at least two more are in the course of preparation.

            The laws concerning water rights by Indian tribes in Oklahoma would probably be just as voluminous and just as confusing.  Because tribal water rights are to be established consistent with federal law, an examination of the treaty history of the more than 30 tribes would have to be conducted just to determine the extent and scope of the individual tribe’s rights to water on the specific reservation land area on which the tribe was located prior to the allotment acts. 

There is no doubt that all tribes in Oklahoma have Winters rights in the reserved water.  However, because of the unique nature of some tribes, they arguably have greater rights to water than those provided under the Winters doctrine.  When the Five Civilized Tribes were removed to Indian Territory, each was granted in fee simple its own “country” that was never to be a part of any state. Treaty with Creeks, Feb. 14, 1833, 7 Stat. 417, Art. III Because the land held by Five Civilized Tribes is in restricted status and not in trust status, the rights to water in the land are arguably greater than Oklahoma tribes who hold land in trust.

Indian Territory.  The Five Civilized Tribes owned, in fee simple, all of the land in Indian Territory and the water was reserved for their absolute and exclusive use.   In Choctaw Nation v. Oklahoma, 397 U.S. 620, 639, Justice Douglas stated in a concurring opinion that “The treaties with the present Indians solemnly assured them that these new homelands would never be made part of a State or Territory.  So it is reasonable to infer that the United States did not have a plan to hold this riverbed in trust for a future State.  As the United States says, we would have to indulge "a cynical fiction without any basis in fact," to attribute such a purpose to the parties.”

Consequently, it is also reasonable to infer that the United States did not reserve to itself any other water rights in the land and, in fact, conveyed the full legal title to the land and water to the Tribes, who are sovereign entities.  Because Indian rights to property may only be taken by an act of Congress, and Congress has taken no such action on the water rights owned by the tribes before statehood, the Five Civilized Tribes still own much of the water currently in use by the state of Oklahoma.  Neither the General Allotment Act, Dawes Act, Curtis Act, Oklahoma Organic Act, and Oklahoma Enabling Act express any conveyance of water rights.  A well-settled cannon of construction enunciated by the courts in analyzing treaty rights is that the tribes impliedly reserve all rights not expressly given up in the treaty.

Thus, the Five Civilized Tribes legal position is that they did not give up any water rights at the time their land was allotted and retain the rights to the water.  The lawsuit filed by the Choctaw and Chickasaw Nations against the City of Oklahoma City and the Oklahoma Water Resources Board is designed to assert and protect these rights, which were never extinguished by treaty or act of Congress. 

Oklahoma Territory.  Whether the Tribes in Oklahoma Territory (largely the Western half of the state) can assert the same position depends upon their treaty history. Depending upon when and how the Indian Tribe held title to its reservation, Oklahoma Territory tribes may assert the same rights as the Five Civilized Tribes or may be limited to Winters rights only.

Conclusion:

Indian Water rights in Oklahoma have been largely unasserted until recent litigation including the lawsuit by the Choctaw and Chickasaw Nations.  The Eastern side of Oklahoma has a comparatively plentiful water supply and a riparian water rights system. The Five Civilized Tribes and certain tribes which received lands directly from them rather than the federal government have a cognizable claim to ownership of the riparian rights.  As noted by the U.S. District Court for the Northern District of Oklahoma in Oklahoma v. Tyson Foods, et al., the Five Civilized Tribes (and in that instance specifically the Cherokee Nation) have colorable claims to exclusive ownership over water in their territories.  A claim for damages to water could not be fully adjudicated without the Tribe’s participation.

For a news article about the new lawsuit filed in the Western District of Oklahoma, see http://newsok.com/article/3595666

Western District of Oklahoma Affirms Tribal Gaming Commission's right to regulate

In March, the Hon. Judge Heaton of the Western District of Oklahoma entered an order denying a temporary restraining order sought against the Tonkawa Gaming Commission.  The gaming company seeking a temporary restraining order sought to compel the Gaming Commission to hold a hearing on its licensing.  The Western District held that irreperable harm could not be proven and affirmed the right of tribal gaming commissions to regulate Indian gaming under federal law and the State Compact.  Excepts from the Order are posted below:

In the United States District Court for thr Western District of Oklahoma

Gaughan Gaming, et al v. the Tonkawa Tribe of Indians and the Tonkawa Gaming Commission, Case No. CIV-11-330-NE.

Here, plaintiffs' argument is essentially that the TGC is going to, at the March 3 hearing, reject plaintiffs' objections to a summary procedure and grant the summary judgment motion of the Tribe. That argument is based on the history of this dispute, which has previously resulted in the TGC's suspension of plaintiffs' licenses, the fact that the TGC's Executive Director has filed a motion for summary judgment, and the fact that the Executive Director has refused plaintiffs' requests for issuance of subpoenas to allow it to prepare for the hearing or otherwise defend against the Tribe's motion.

While there is, of course, no way to determine now with certainty what the TGC will do tomorrow, the court concludes plaintiffs' submissions do not show, beyond the level of speculation, that the TGC will take some action contrary to plaintiffs' rights. The TGC has entered a scheduling order setting the March 31 hearing. (Scheduling Order entered March 15, 2011, plaintiffs' hearing exhibit 12). That order notes that motions filed by both parties are pending, directs the parties to appear on March 31 "for consideration of the above listed motions," and sets a deadline for plaintiffs' response to the summary judgment motion. There is nothing in the order which indicates the TGC will grant the Tribe's motion or that it has determined that the license revocation issues can be or should be determined by such a motion as opposed to some further or different procedure. There is nothing in the TGC's order to suggest that it will necessarily do anything other than hear argument on the pending motions. It may conclude that plaintiffs' objections to a summary procedure are valid and proceed as plaintiffs suggest. Indeed, the parties' submissions indicate that, in connection with the earlier license suspension proceedings, the Commission heard testimony from witnesses and. conducted a hearing or trial not unlike what plaintiffs seek to assure here.

To be sure, the refusal of the Executive Director to issue subpoenas is troubling and TGC counsel's somewhat lame explanation at the hearing for that refusal was unpersuasive.[1] However, as noted above, there is nothing in the formal acts of the Commission to suggest that it has adopted, or will adopt, a summary procedure in derogation of plaintiffs' rights or that, if it did, it would grant the summary judgment motion now pending before it.[2]  Further, given the persons to whom the subpoenas were directed,[3]there may well be preliminary issues of privilege or otherwise which should be addressed before issuance of subpoenas.

In sum, the court concludes that, while plaintiffs' concerns are understandable in light of the past history of this dispute,[4] they have not submitted evidence sufficient to establish a likelihood of the TGC taking steps that will cause injury to them.[5]  There is no reason, on the present showing, to conclude that the TGC will do other than make a good faith effort to apply the applicable law and its own rules to any determination it must make. The Commission will presumably be aware that it is in the best interest of the tribal gaming operation, and the Tribe generally, for others who deal with tribal governmental structures — whether NIGC regulators or entities entering into commercial arrangements — to have confidence in the fairness and propriety of tribal regulatory actions.

The motion for temporary restraining order [Doc. #1, exhibit 3] is DENIED.

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[1]               Counsel suggested the Executive Director was not the proper person from whom to request the subpoenas and that plaintiffs should have tried to locate the chairman of the Commission somewhere or perhaps locate and make the request to some staff member other than the Executive Director.

[2]               Based on the submissions to this court, it appears highly unlikely that the summary judgment motion could or should be granted based on any standard with which this court is familiar.

[3]           Some of the requested subpoenas were directed to tribal officers.

[4]               The Tribe’s forced eviction of plaintiffs from control and operation of the casinos, arguably contrary to the plain terms of the management agreements, and the relationship between the Tribe and the TGC raise potential questions.

[5]               Plaintiffs urge that any injury to them would be irreparable and not subject to being remedied by a damages recovery due to the potential impact on their licensing status in other jurisdictions.  The court need not resolve any question in that regard as the issue here turns on whether there is a non-speculative basis for the injury occurring at all (i.e. the likelihood of injury rather than the irreparable nature of any claimed injury.

Department of the Interior Drops “Commutability Rule”

Assistant Secretary (Indian Affairs) Echo Hawk on Wednesday announced a change in the so-called “Commutability Rule” issued by the previous administration.  Stated simply, the rule prevented Indian tribes from acquiring land too far from their reservations and using the land for gaming projects. The obvious purpose of the rule was to prevent the proliferation of Indian casinos which under an IGRA exception could have been built in former aboriginal areas of a Indian tribe. Of course, BIA didn’t say that was the purpose of the rule. Instead, BIA publicly justified the rule on the basis of promoting tribal employment. The reasoning was thus: if casinos are built too far from a tribe’s reservation, then it will be difficult for tribal members to seek employment there. Hence the name “commutability.” The forces of paternalism and anti-gaming thus met to effectively create a moratorium on new casinos that were not on or near Indian reservations.

What is the effect in Oklahoma? The “Commutability” rule specifically halted the building of a St. Regis Mohawk casino in New York, the BIA thought the proposed casino was too far from the Mohawk reservation to provide employment opportunities to tribal members. In Oklahoma, there are no reservations per se, and Indian Country in this state is a patchwork of trust and allotted fee land rather than a reservation.  And my original thoughts ended there. However, all 39 federally recognized Indian tribes in Oklahoma came from outside of this state (and many were even moved around within the state), therefore most of these tribes have opportunities to obtain land, place into into trust, and building gaming projects in their original aboriginal areas. That’s right, the Ft. Sill Apache may return to New Mexico, and even the Cherokee Nation could conceivably purchase land in Georgia to expand their gaming enterprise. With the expansion of gaming in Oklahoma as a result of the 2005 State Compact, many tribes have the resources to expand. And with the abolition of the “Commutability Rule” it will not matter that a tribe's trust land in Oklahoma is not within commuting distance of Philadelphia, Pennsylvania.

Tenth Circuit Decides Crowe & Dunlevy v. Stidham - Ex Parte Young Applies to Tribal Courts

The Tenth Circuit's most recent decision involving Indian tribes should give pause to tribal governments everywhere. The Circuit upheld a federal court's injunction against a tribal judge on the basis of Ex Parte Young - a doctrine stating that sovereign immunity is waived for a lawsuit seeking injunctive relief against a government officer for ongoing violations of federal law.