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Pauma Band of Luiseno Mission Indians of Pauma & Yuima Reservation v. State

United States District Court, S.D. California

March 29, 2017

PAUMA BAND OF LUISENO MISSION INDIANS OF PAUMA & YUIMA RESERVATION, a/k/a/ PAUMA BAND OF MISSION INDIANS, a federally recognized Indian Tribe, Plaintiff,
v.
STATE OF CALIFORNIA, et al., Defendants.

          ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS, [ECF NO. 19]

          Cynthia Bashant United States District Judge

         On July 1, 2016, Plaintiff Pauma Band of Luiseno Mission Indians of the Pauma & Yuima Reservation (“Pauma”) commenced this action against Defendants the State of California; Governor Edmund G. Brown, Jr.; the California Gambling Control Commission; and the State of California Department of Justice, Office of the Attorney General. This action arises out of the Indian Gaming Regulatory Act (“IGRA”) and an original form gaming compact executed between Pauma and the State of California. Pauma brings claims against Defendants for violation of the IGRA and for breach of the gaming compact.

         Pauma amended its complaint on August 4, 2016, and Defendants now move to dismiss the twenty-first claim of the First Amended Complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. (ECF No. 19.) Pauma opposes Defendants' motion. (ECF No. 22.)

         The Court finds this motion suitable for determination on the papers submitted and without oral argument. See Fed. R. Civ. P. 78(b); Civ. L.R. 7.1(d)(1). For the reasons set forth below, the Court GRANTS IN PART and DENIES IN PART Defendants' motion to dismiss the twenty-first claim of the First Amended Complaint.

         I. BACKGROUND

         A. The 1999 Gaming Compacts

         The IGRA, “which was passed by Congress in 1988, provides a framework for ‘the operation of gaming by Indian tribes as a means of promoting tribal economic development, self-sufficiency, and strong tribal governments.' ” Tulalip Tribes of Washington v. Washington, 783 F.3d 1151, 1152 (9th Cir. 2015) (quoting 25 U.S.C. § 2702(1)). The act “provides that a state must negotiate in good faith with its resident Native American tribes to reach compacts concerning casino-style gaming on Native American lands.” Rincon Band of Luiseno Mission Indians of Rincon Reservation v. Schwarzenegger, 602 F.3d 1019, 1022 (9th Cir. 2010). If the state fails to do so, the IGRA allows a tribe to sue the state in federal court to compel performance of the state's duty to negotiate. 25 U.S.C. § 2710(d)(7).[1] Despite the IGRA's gaming compact framework, “several unresolved conflicts . . . developed between the State of California and Indian tribes surrounding . . . gaming and, especially, gaming devices in casinos.” Hotel Emps. & Rest. Emps. Int'l Union v. Davis, 21 Cal.4th 585, 596 (1999). In response to these conflicts, California voters passed Proposition 5, The Tribal Government Gaming and Economic Self-Sufficiency Act of 1998, “to authorize various forms of gaming in tribal casinos.” See Id. at 589.[2] Shortly after Proposition 5 passed, the State of California entered into negotiations with over sixty Indian tribes in the spring of 1999 to devise a compact to establish Indian gaming under the IGRA. (First Am. Compl. (“FAC”) ¶¶ 39-40, ECF No. 12.) Pauma and the State fully executed a form version of the 1999 Compact on May 1, 2000. (Tribal-State Compact Between the State of California and the Pauma Band of Mission Indians (“1999 Pauma Compact”), FAC Ex. 1, ECF No. 12-1.)

         The 1999 Compacts allowed signatory tribes to operate a baseline entitlement of gaming devices, while allowing tribes to acquire licenses to operate additional devices through a series of communal draws administered by a trustee. (FAC ¶¶ 46- 50.) The total number of licenses available to all tribes was capped based on a license pool formula detailed in Section 4.3.2.2(a)(1) of the 1999 Compacts. (Id. ¶ 48.) On March 13, 2001, then Governor of California Gray Davis empowered the California Gambling Control Commission (“CGCC”) to assume control over the license pool draws. (Id. ¶ 66.) The CGCC interpreted the license pool formula as providing for a smaller number of total licenses than had the previous trustee. (Id. ¶¶ 68-71.)

         B. Renegotiation of the 1999 Pauma Compact

         Following the reinterpretation of the license pool formula, Pauma entered into negotiations with the State in an attempt to obtain a larger number of licenses than was possible under the new interpretation of the 1999 Compacts. (FAC ¶ 77.) On June 21, 2004, Pauma and the State executed an amendment to the 1999 Pauma Compact (“2004 Amendment”) that included increased revenue sharing requirements and operating costs. (Id.) However, subsequent litigation between the State and the Cachil Dehe Band of Wintun Indians of the Colusa Indian Community resulted in a finding that the State lacked the authority to interpret the license pool formula. (Id. ¶¶ 79-83.) See also Cachil Dehe Band of Wintun Indians of Colusa Indian Cmty. v. California, 629 F.Supp.2d 1091, 1108 (E.D. Cal. 2009), aff'd in part, rev'd in part, 618 F.3d 1066, 1084-85 (9th Cir. 2010). Following the decision, Pauma brought suit to rescind the 2004 Amendment, and the U.S. District Court for the Southern District of California granted that request in 2013. (FAC ¶¶ 84-90.) See also Pauma Band of Luiseno Mission Indians of the Pauma & Yuima Reservation v. California, No. 09-cv-1955-CAB-MDD, 2013 WL 12120442, at *17 (S.D. Cal. Mar. 18, 2013) (Bencivengo, J.). The Ninth Circuit affirmed. Pauma Band of Luiseno Mission Indians of Pauma & Yuima Reservation v. California, 813 F.3d 1155, 1173 (9th Cir. 2015).

         On November 14, 2014, Pauma made requests to commence renegotiations with the State pursuant to Section 12.2 of the 1999 Pauma Compact following rescission of the 2004 Amendment. (FAC ¶ 111, Ex. 2.) Between January 16, 2015, and March 30, 2016, representatives for Pauma and the State held three in-person meetings and exchanged seventeen letters. (Id. ¶¶ 106-52, Exs. 7-23.) As a result of these exchanges, the State presented Pauma with a “complete draft [compact]” on April 28, 2016. (Id. ¶ 152.) Pauma alleges that the complete draft compact contains nearly identical gaming rights and a substantial increase in revenue sharing requirements, but no new State concessions of meaningful value. (Id. ¶¶ 159-80.)

         C. Use of Special Distribution Fund Resources

         Meanwhile, during a review of the 1999 Compacts in 2015, three signatory tribes made a request for information regarding the State's appropriation of moneys paid by the tribes into a Special Distribution Fund (“SDF”). (FAC ¶ 186.) Under Section 5.1(a) of the 1999 Compacts, tribes operating gaming devices as of September 1, 1999, are required each quarter to pay into the SDF a percentage of the average wins of those devices. (1999 Pauma Compact § 5.1(a).) The SDF funds are then available for appropriation by the California legislature for a number of purposes spelled out in Section 5.2-namely, to cover the regulatory and administrative costs of implementing and administering the Compacts, as well as to provide funding for programs designed to address gambling addiction. (Id.) In response to the requests for information from the signatory tribes, the State, on November 12, 2015, disclosed that SDF moneys were funding the California Department of Justice's litigation efforts with regards to the 1999 Compacts. (FAC ¶¶ 186-87.) Shortly thereafter, counsel for Pauma submitted a California Public Records Act request with the State of California, Office of the Attorney General, asking for documents related to the appropriation and use of SDF funds by the State. (Id. ¶ 190.) The Office of the Attorney General produced documents showing annual expenditures for the SDF for fiscal years 2009-2010 to 2014-2015. (Id. ¶ 191.)

         Pauma now alleges that, based on the records disclosed by California's Office of the Attorney General, the State has been misusing SDF funds in violation of Section 5.2 of the 1999 Pauma Compact. (FAC ¶ 192.) Pauma contends that the State's use of SDF moneys has resulted in the prolonged and costly litigation of compact suits and has discouraged the State from appropriately settling these matters. (Id. ¶¶ 301-02.) Further, Pauma claims that the use of SDF funds for litigation has resulted in a shortfall of SDF funds that would otherwise have gone to local communities or be used for regulatory purposes. (Id. ¶ 302.) As a result, Pauma alleges it was forced to execute a memorandum of understanding with the State under the now rescinded 2004 Amendment, which obligated Pauma to cover the regulatory costs that the State had not been paying. (Id. ¶ 78.) Pauma claims it anticipates having to do so again under any future compact with the State should Pauma ever decide to expand its gaming operations. (Id. ¶ 302.)

         Based on the foregoing, Pauma brings claims against (1) the State and Governor Brown for negotiating in bad faith under the IGRA, and (2) the State, Governor Brown, the CGCC, and the State of California Department of Justice, Office of the Attorney General for breach of the 1999 Pauma Compact. (FAC ¶¶ 198-303.)

         II. LEGAL STANDARD

         A motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure “tests the legal sufficiency” of the claims asserted in the complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). The court must accept all factual allegations pleaded in the complaint as true and must construe them and draw all reasonable inferences from them in favor of the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). To avoid a Rule 12(b)(6) dismissal, a complaint need not contain detailed factual allegations; rather, it must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “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.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556). ...


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