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Shingle Springs Band of Miwok Indians v. Sharp Image Gaming

October 15, 2010

SHINGLE SPRINGS BAND OF MIWOK INDIANS, A FEDERALLY RECOGNIZED INDIAN TRIBE, PLAINTIFF,
v.
SHARP IMAGE GAMING, INC., A CALIFORNIA CORPORATION; NATIONAL INDIAN GAMING COMMISSION; THE HONORABLE PATRICK J. RILEY, JUDGE OF THE EL DORADO COUNTY SUPERIOR COURT (RETIRED, SITTING BY DESIGNATION), DEFENDANTS.



The opinion of the court was delivered by: Frank C. Damrell, Jr. United States District Judge

MEMORANDUM AND ORDER

This matter is before the court on defendants Sharp Image Gaming, Inc. ("Sharp Image") and the Honorable Patrick J. Riley's (the "Superior Court")*fn1 (collectively, "defendants") motions to dismiss plaintiff Shingle Springs Band of Miwok Indians' (the "Tribe" or "plaintiff") complaint on the basis that it is barred by the Anti-Injunction Act, or alternatively, that the court should abstain from exercising jurisdiction over the claims under the principles set forth by Younger v. Harris and its progeny. Plaintiff opposes the motion and moves for partial summary judgment on its claims for declaratory and injunctive relief. On October 8, 2010, the court heard oral argument. For the reasons set forth below, defendants' motions to dismiss are GRANTED, and plaintiff's motion for partial summary judgment is DENIED.

BACKGROUND*fn2

This case arises out of claims made by defendant Sharp Image with respect to contracts the Tribe and Sharp Image entered into in the mid-1990s. Specifically, Sharp Image alleges that (1) on or about May 24, 1996, the Tribe and Sharp Image entered into a contract known as the Gaming Machine Agreement (the "GMA");*fn3 (2) on or about November 15, 1997, the parties entered into an agreement known as the Equipment Lease Agreement (the "ELA");*fn4 and (3) on or about November 15, 1997, the parties entered into a third agreement known as the Promissory Note (collectively, the "Agreements"). (First Am. Compl. filed in Superior Court of California, County of El Dorado ("State Compl."), Ex. C to Compl., filed June 7, 2010, ¶¶ 5, 7.) Sharp Image contends that the Tribe breached the Agreements by, inter alia, entering into an agreement with a third-party for purposes of leasing or purchasing gaming equipment for the Tribe's casino in contravention of exclusivity provisions in the Agreements. (Id. ¶ 11.) The Tribe contends that the Agreements are void and unenforceable.

A. State Court Proceedings

On March 12, 2007, Sharp Image filed suit against the Tribe in the Superior Court of California, County of El Dorado, alleging claims for breach of contract based upon the 1996 and 1997 agreements. (Compl. ¶ 29.) On May 22, 2007, Sharp Image filed its First Amended Complaint (the "State Complaint"), asserting that the Agreements are all "valid and binding contracts," which it had the right to enforce. (Id. ¶ 30.)

Subsequent to the filing of the lawsuit, on April 13, 2007, the Tribe sought review by the National Indian Gaming Commission (the "NGIC") regarding whether the GMA and ELA were unapproved "management contracts" that required but did not receive NIGC approval in violation of the Indian Gaming Regulatory Act (the "IGRA"). (Id. ¶ 31; Ex. G to Pl.'s Request for Judicial Notice ("PRFJN"), filed Sept. 10, 2010.) On June 14, 2007,*fn5 the NIGC issued an Advisory Opinion letter from the NIGC's General Counsel, providing that the GMA and ELA were management contracts that violated the IGRA. (Ex. I to PRFJN.)

On July 9, 2007, the Tribe moved to quash/dismiss the State Complaint on the grounds of complete preemption and sovereign immunity. (Compl. ¶ 32.) On September 12, 2007, Sharp Image made an evidentiary objection to the June 14 Advisory Opinion, contending that "the advisory opinion of the NIGC's General Counsel... has no legal effect because it is not a final decision of the agency." (Id. ¶ 33) (emphasis deleted). On December 12, 2007, the Superior Court issued a ruling, concluding that the June 14 Advisory Opinion had "no legal effect," did not constitute "official agency action," and was, therefore, not entitled to "judicial review... until the agency took a final determinative action." (Id. ¶ 34; Ex. J to PRFJN.)

Consequently, on January 24, 2008, the Tribe requested the NIGC to undertake a formal review of the GMA and ELA and make a final agency determination. (Id. ¶ 35; Ex. K to PRFJN.) On July 18, 2008, the NIGC advised the parties that it would undertake a formal review of the contracts to determine whether the GMA and ELA were "management contracts" that violated the IGRA. The NIGC also advised that it would "give Sharp an opportunity to share its views on the subject" prior to making any decision. (Compl. ¶ 35; Ex. M to PRFJN.) By letter dated August 1, 2008, Sharp Image urged the NIGC to conclude that the GMA and ELA were not management contracts. (Compl. ¶ 37.) On April 23, 2009, the Chairman of the NIGC issued his "formal determination under 25 U.S.C. § 2711," finding that "each agreement individually is a management contract," but concluding that they were "void" for failure to comply with IGRA statutory requirements. (Id. ¶ 38; Ex. A to RFJN.) The Chairman noted that the determination was "subject to appeal to the full Commission under 25 C.F.R. § 539" and thereafter to "a federal district court under 25 U.S.C. § 2714." (Id.)

On May 21, 2009, Sharp Image appealed to the full Commission. (Compl. ¶ 40; Ex. P to PRFJN.) By letter dated June 5, 2009, the NIGC asserted that because it did not have the necessary Commissioners available to provide a full Commission review, the NIGC was "functionally unable to review" the appeal, and that the Chairman's final determination would become final action by the NIGC on June 20, 2009. (Compl. ¶ 41; Ex. S to PRFJN.) Sharp Image did not file any subsequent appeals to either the NIGC or in federal court. (Compl. ¶ 41.)

On September 11, 2009, the Superior Court heard oral argument on the Tribe's Motion to Quash/Dismiss on the basis of complete preemption and sovereign immunity. (Id. ¶ 42.) On November 30, 2009, the Superior Court issued its Order, concluding that the Agreements had been "terminated and/or cancelled" prior to the filing of the State Complaint on March 12, 2007 and well before the NIGC undertook review of the GMA and ELA between 2007 and 2008; thus, the Superior Court held that the Tribe's Motion to Quash/Dismiss on the basis of NIGC action must be denied because the NIGC was without jurisdiction "to review, regulate, approve or disapprove" the GMA and ELA. (Ex. E to Compl., at 11-12.) Further, the Superior Court concluded that the decision of the Chairman of the NIGC was not "final action" and "must be disregarded" because (1) the decision violated the due process rights of Sharp due to unreasonable ex parte contacts between the Tribe's Chairman and the Chairman of the NIGC; and (2) the NIGC did not comply with fee requirements and time limits set forth in applicable statutes and regulations.*fn6 (Id. at 13-14.) As such, the Superior Court held that preemption did not apply. (Id. at 14.) The Tribe asserts that in reaching these conclusions, the Superior Court acted outside the scope of its authority. (Compl. ¶ 42.)

On December 15, 2009, the Tribe petitioned the California Court of Appeal, Third Appellate District, to overturn the Superior Court's decision. (Ex. A to Def. Superior Court's Request for Judicial Notice ("DRFJN"), filed July 19, 2010.) On January 21, 2010, the Court of Appeal denied the petition. (Id.)

On January 29, 2010, the Tribe petitioned the California Supreme Court to reverse the decision of the Court of Appeal declining to reverse the Superior Court's decision. (Id.; Ex. B to DRFJN.) On March 8, 2010, the California Supreme Court issued an order staying all proceedings in the Superior Court pending final determination of the petition. (Ex. B to DRFJN.) On March 30, 2010, the California Supreme Court dissolved the stay and denied the petition. (Id.)

Thereafter, the Superior Court set the case for trial on November 1, 2010. At the Tribe's request, however, the trial was continued until February 7, 2011. (Decl. of Steven S. Kimball in Supp. of Def. Sharp Image's Opp'n ("Kimball Decl."), filed Sept. 24, 2010, ¶ 8.)

B. Federal Action

On June 7, 2010, after the California Supreme Court denied its petition, the Tribe filed a Complaint for Declaratory and Injunctive Relief in this court. Specifically, the Tribe seeks (1) a declaration that the NIGC's April 23, 2009 decision is binding final agency action that must be appealed to a federal district court; (2) a declaration that the Superior Court may not entertain an appeal of the NIGC's April 23, 2009 decision; (3) an injunction to prevent the Superior Court from hearing an appeal of the NIGC's April 23, 2009 action; and (4) a declaration that the NIGC correctly decided that the Agreements are unapproved management contracts, and thus, void. The Tribe prays for relief in the form of:

a. a preliminary and permanent injunction directing and compelling Sharp immediately to cease and desist from challenging in the Superior Court the NIGC's final agency action declaring the Agreements unapproved management contracts;

b. a preliminary and permanent injunction directing and compelling the Superior Court to immediately cease and desist reaching the merits of Sharp's substantive and procedural challenge to the NGIC's final agency action in the State Court Action;

c. a preliminary and permanent injunction directing and compelling the Superior Court to vacate and reverse any prior order to the extent that it is consistent with federal law holding that final agency action by the NGIC is entitled to binding and preclusive effect unless and until it is successfully challenged in a United States District Court;

d. a declaration that, notwithstanding any other relief that this Court may order, the Superior Court may not continue to maintain jurisdiction over Sharp's state court action in a manner that defies federal law mandating that the NGIC's April 23, 2009 decision that the Agreements are unapproved management contracts that violate IGRA is final agency action entitled to binding and preclusive legal effect unless and until Sharp successfully appeals the decision to a United States District Court;

e. a declaration that the Superior Court lacks jurisdiction to reach the merits of, and is precluded by federal law from reaching the merits of, a substantive and procedural challenge to a final agency decision of the NIGC, which found the Agreements to be unapproved management contracts that violate IGRA, because only a United States District Court possesses jurisdiction to hear a challenge to the procedural or substantive merits of the NIGC's final agency decision;

f. in the alternative to the foregoing relief, a declaration that the NIGC properly determined that the Agreements constituted unapproved management contracts that violate IGRA and that are thus void, and that no grounds exist to set aside the NIGC's decision under the APA; and

g. such other relief as the Court deems just and proper.

(Compl., Prayer for Relief.)

STANDARD

A. Motion to Dismiss

Under Federal Rule of Civil Procedure 8(a), a pleading must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." See Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). Under notice pleading in federal court, the complaint must "give the defendant fair notice of what the claim is and the grounds upon which it rests." Bell Atlantic v. Twombly, 550 U.S. 544, 555 (2007) (internal quotations omitted). "This simplified notice pleading standard relies on liberal discovery rules and summary judgment motions to define disputed facts and issues and to dispose of unmeritorious claims." Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512 (2002).

On a motion to dismiss, the factual allegations of the complaint must be accepted as true. Cruz v. Beto, 405 U.S. 319, 322 (1972). The court is bound to give plaintiff the benefit of every reasonable inference to be drawn from the "well-pleaded" allegations of the complaint. Retail Clerks Int'l Ass'n v. Schermerhorn, 373 U.S. 746, 753 n.6 (1963). A plaintiff need not allege "'specific facts' beyond those necessary to state his claim and the grounds showing entitlement to relief." Twombly, 550 U.S. at 570. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S.Ct. at 1949.

Nevertheless, the court "need not assume the truth of legal conclusions cast in the form of factual allegations." United States ex rel. Chunie v. Ringrose, 788 F.2d 638, 643 n.2 (9th Cir. 1986). While Rule 8(a) does not require detailed factual allegations, "it demands more than an unadorned, the defendant-unlawfully-harmed-me accusation." Iqbal, 129 S.Ct. at 1949. A pleading is insufficient if it offers mere "labels and conclusions" or "a formulaic recitation of the elements of a cause of action." Twombly, 550 U.S. at 555; Iqbal, 129 S.Ct. at 1950 ("Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice."). Moreover, it is inappropriate to assume that the plaintiff "can prove facts which it has not alleged or that the defendants have violated the... laws in ways that have not been alleged." Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983).

Ultimately, the court may not dismiss a complaint in which the plaintiff has alleged "enough facts to state a claim to relief that is plausible on its face." Iqbal, 129 S.Ct. at 1949 (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 554, 570 (2007)). Only where a plaintiff has failed to "nudge [his or her] claims across the line from conceivable to plausible," is the complaint properly dismissed. Id. at 1952. While the plausibility requirement is not akin to a probability requirement, it demands more than "a sheer possibility that a defendant has acted unlawfully." Id. at 1949. This plausibility inquiry is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 1950.

In ruling upon a motion to dismiss, the court may consider only the complaint, any exhibits thereto, and matters which may be judicially noticed pursuant to Federal Rule of Evidence 201. See Mir v. Little Co. Of Mary Hospital, 844 F.2d 646, 649 (9th Cir. 1988); Isuzu Motors Ltd. v. Consumers Union of United States, Inc., 12 F. Supp. 2d 1035, 1042 (C.D. Cal. 1998).

B. Motion for Summary Judgment

The Federal Rules of Civil Procedure provide for summary judgment where "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c); see California v. Campbell, 138 F.3d 772, 780 (9th Cir. 1998). The evidence must be viewed in the light most favorable to the nonmoving party. See Lopez v. Smith, 203 F.3d 1122, 1131 (9th Cir. 2000) (en banc).

The moving party bears the initial burden of demonstrating the absence of a genuine issue of fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). If the moving party fails to meet this burden, "the nonmoving party has no obligation to produce anything, even if the nonmoving party would have the ultimate burden of persuasion at trial." Nissan Fire & Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1102-03 (9th Cir. 2000). However, if the nonmoving party has the burden of proof at trial, the moving party only needs to show "that there is an absence of evidence to support the nonmoving party's case." Celotex Corp., 477 U.S. at 325.

Once the moving party has met its burden of proof, the nonmoving party must produce evidence on which a reasonable trier of fact could find in its favor viewing the record as a whole in light of the evidentiary burden the law places on that party. See Triton Energy Corp. v. Square D Co., 68 F.3d 1216, 1221 (9th Cir. 1995). The nonmoving party cannot simply rest on its allegations without any significant probative evidence tending to support the complaint. See Nissan Fire & Marine, 210 F.3d at 1107. Instead, through admissible evidence the nonmoving party "must... set out specific facts showing a genuine issue for trial." Fed. R. Civ. P. 56(e).

ANALYSIS

A. Anti-Injunction Act

Defendants move to dismiss plaintiff's complaint and oppose plaintiff's motion for partial summary judgment on the basis that this action is barred by the Anti-Injunction Act. Plaintiff opposes the motion, arguing that the Anti-Injunction Act does not bar a federal court order from prohibiting a state court from violating exclusive jurisdiction over matters involving the regulation of gaming on tribal lands.

The Anti-Injunction Act provides: A court of the United States may not grant an injunction to stay proceedings in a State court except as expressly authorized by Act of Congress, or where necessary in aid of its jurisdiction, or to protect or effectuate its judgments.

28 U.S.C. § 2283. Congress adopted this restriction on federal courts based on "the essentially federal nature of our national government." Atl. Coast Line R.R. Co. v. Bhd. of Locomotive Eng'rs, 398 U.S. 281, 285 (1970). "When this Nation was established by the Constitution, each State surrendered only a part of its sovereign power to the national government.... One of the reserved powers was the maintenance of state judicial systems for the decision of legal controversies." Id. As such, the Court acknowledged that from its formation, this country has had "two essentially separate legal systems," each of which "proceeds independently of the other with ultimate review" by the Supreme Court of federal questions raised in either system. ...


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