Can a State Sue a Tribe for Off-Reservation Gambling?

That's the question before the Supreme Court today in Michigan v. Bay Mills Indian Community.  More particularly, the case asks whether the federal courts have jurisdiction to hear a state's claim that a Native American tribe's off-reservation casino violates the Indian Gaming Regulatory Act, and whether the tribe enjoys immunity from such a suit.

With the rapid proliferation of tribal gaming, including off-reservation gaming, the case could make an important statement about the regulatory authority of the tribe, the state, and the federal government over off-reservation gaming.  It could also make an important statement about federal court jurisdiction over a state's claim that a tribe's off-reservation gaming violates federal law, and about tribal immunity for such gaming.

Here's my oral argument preview of the case, republished, with permission, from the ABA Preview of U.S. Supreme Court Cases:

FACTS

Congress enacted the Indian Gaming Regulatory Act of 1988 (IGRA) in order to regulate gaming activities on “Indian lands.” The IGRA divides gaming into three separate classes and specifies how each class is regulated. Class I gaming includes social games and traditional tribal games; it is under the exclusive jurisdiction of the tribe. Class II gaming includes bingo and certain card games like poker; it is primarily within the jurisdiction of the tribe but subject to federal oversight.

Class III gaming, the class at issue here, includes everything else, such as slot machines and casino-style games. Class III gaming is not regulated by a uniform structure. Instead, an Indian tribe wishing to conduct Class III gaming has to adopt a gaming ordinance that is approved by the National Indian Gaming Commission (NIGC), a federal agency. The tribe also has to negotiate with the state where it is located and enter into a compact that will govern the gambling.

The Bay Mills Indian Community, a federally-recognized Indian tribe with a reservation in Michigan’s northern peninsula, entered into a compact with Michigan in 1993. Soon after the compact was finalized, the NIGC approved Bay Mills’s gaming ordinance. Bay Mills then proceeded to establish its own Gaming Commission. Bay Mills has continuously operated one or more gaming facilities on its reservation ever since.

In 1997, Congress passed the Michigan Indian Land Claims Settlement Act. The Act appropriated funds to Bay Mills and other Michigan Indian tribes to satisfy judgments that the Indian Claims Commission had entered in favor of the tribes. The Settlement Act directed that 20 percent of the funds awarded to Bay Mills be deposited in a “Land Trust” and required that earnings from the Trust “be used exclusively for improvements on tribal land or the consolidation and enhancement of tribal landholdings through purchase and exchange.” It also said that “[a]ny land acquired with funds from the Land Trust shall be held as Indian lands are held.”

In August 2010, Bay Mills used the funds from the Settlement Act land trust to purchase approximately 40 acres of land in Vanderbilt, Michigan, about 100 miles from the Tribe’s reservation. Bay Mills constructed a small casino on the property (initially with 38 electronic gaming machines, but later expanded to 84 machines) and began operating it on November 3, 2010. The U.S. Department of the Interior and the NIGC later issued letters concluding that the Vanderbilt casino was not located on “Indian lands” as defined by the IGRA, that it was therefore not eligible for gaming under the IGRA, and that the NIGC had no jurisdiction over it.

The state filed suit against Bay Mills in federal court. The state’s counts I and II alleged that the Vanderbilt land did not constitute “Indian lands” under the IGRA, and that Bay Mills therefore violated the compact. The state’s count III alleged that Bay Mills violated the IGRA by conducting gaming outside of Indian lands and that even if the Vanderbilt land constituted “Indian lands,” Bay Mills violated 25 U.S.C. § 2719 (and therefore the compact’s requirement that gaming comply with federal law) by operating a gaming facility on land acquired after October 17, 1988, that does not satisfy any statutory exception. The Little Traverse Bay Bands of Odawa Indians, which operated a competing casino about 40 miles away, filed a separate suit with similar claims the next day.

The district court consolidated the cases and entered a preliminary injunction halting the Bay Mills casino. Bay Mills appealed and moved for a stay of the injunction; the district court and the United States Court of Appeals for the Sixth Circuit both denied a stay.

While Bay Mills’s appeal was pending, the state amended its complaint to add three additional claims. Count IV alleged that Bay Mills violated federal common law by operating a casino that exceeds the scope of its authority. Count V alleged that Bay Mills failed to obtain a state license for a gaming facility in violation of Michigan law. Count VI alleged that the casino was a public nuisance under state law. The state also added several defendants—the Bay Mills Tribal Gaming Commission, the Commission’s members in their official capacities, and the members of the Bay Mills Executive Council in their official capacities.

On appeal, the Sixth Circuit reversed and vacated the preliminary injunction. The court held that the district court lacked jurisdiction as to counts I, II, and III. The court held that the district court had jurisdiction as to counts IV, V, and VI against Bay Mills, but that those counts were barred by tribal sovereign immunity. The court remanded the case to the district court to address the state’s counts IV-VI against the additional individual defendants.

The state brought this appeal. Little Traverse is not a party to it; neither are the individuals named in the state’s amended complaint.

CASE ANALYSIS

Federal courts are courts of limited jurisdiction. This means that their jurisdiction must be defined by statute. One common source of federal jurisdiction is found in 28 U.S.C. § 1331, which creates the so-called “federal question” jurisdiction. Under § 1331, federal district courts have original jurisdiction over “all civil actions arising under the Constitution, laws, or treaties of the United States.”

Another source of federal jurisdiction—one that goes particularly to gaming on Indian lands—is found in 25 U.S.C. § 2710(d)(7)(A)(ii), part of the NIGC. That provision says that federal district courts have jurisdiction over “any cause of action initiated by a State or Indian tribe to enjoin a class III gaming activity located on Indian lands and conducted in violation of any Tribal-State compact . . . .”

The parties here dispute whether the federal courts have jurisdiction over the state’s claims. In particular, they dispute whether the state’s claims arising out of the Bay Mills’s alleged violation of the compact fall under § 1331 (because these claims might amount to a violation of the IGRA, a federal statute), and whether the Vanderbilt casino is “a class III gaming activity located on Indian lands” under § 2710.

But even if a federal court has jurisdiction (under §§ 1331, 2710, or some other federal statute), certain parties, like Indian tribes, enjoy immunity from suit. The Supreme Court has recognized tribal sovereign immunity, and both parties agree that “the doctrine is now part of this Court’s settled precedent . . . .” But they disagree sharply over the extent of that immunity.

The state argues first that the district court has jurisdiction over its suit pursuant to § 2710. The state says that the Vanderbilt casino is “a class III gaming activity located on Indian lands,” because Bay Mills authorized, licensed, and operated the casino from its reservation. More particularly, it contends that § 2710 extends federal court jurisdiction to the gaming itself, but also to the gaming activity, which, the state argues, includes authorizing, licensing, and operating the casino. The state claims that its interpretation of the text is consistent with the congressional intent.

The state argues next that the district court has jurisdiction over its federal claims pursuant to § 1331. The state says that it alleged a violation of the IGRA, a federal statute, when it claimed that Bay Mills violated the compact (in counts I, II, and III). It also says that nothing in the IGRA limits the federal courts’ federal question jurisdiction under § 1331.

The state argues that tribal sovereign immunity does not bar its suit for two independent reasons. First, the state contends that the IGRA abrogated tribal sovereign immunity. The state says that the Court uses a “more holistic approach” in determining whether a federal statute abrogates tribal sovereign immunity, and that the IGRA viewed as a whole (and not just § 2710) makes clear that Congress intended that a state could enforce its gaming laws in federal court against an Indian tribe engaged in off-reservation gaming. The state claims that the opposite rule would lead to an absurd result—that the state could obtain a federal court injunction to stop illegal gaming on Indian lands, but not on its own sovereign state lands. The state says that Congress could not have intended this result.

Second, the state argues that even if the IGRA does not abrogate tribal sovereign immunity, the Court should decline to extend immunity here. The state says that the Court has never expressly extended tribal immunity to a tribe’s off-reservation commercial activities, and, especially given tribal immunity’s “dubious foundation,” the Court should decline to extend it to those activities in this case.

In response, Bay Mills first argues that the state cannot claim that the Vanderbilt casino is “on Indian lands,” as it does in its first point. Bay Mills says that that argument falls outside the questions presented, which speak solely to gaming activities “outside of Indian lands.” But even if this argument were properly before the Court, Bay Mills contends that the state is wrong: the IGRA itself says that a tribe’s decision to open a gaming facility is not a “class III gaming activity.”

Next, Bay Mills argues that it is immune from Michigan’s suit under § 1710. Bay Mills claims that § 1710 only abrogates tribal sovereign immunity “on Indian lands,” and that the whole premise of the state’s claim is that the Vanderbilt casino is off Indian lands. Bay Mills says that under the plain language of § 1710, “Michigan has simply pled itself out of court.”

To the extent that Michigan and its amici argue for a Court-created exception to tribal sovereign immunity, Bay Mills argues that the Court has already rejected the proposed exceptions. Bay Mills also says that the Court has rejected pleas to overrule its tribal sovereignty immunity precedents. Bay Mills contends that it is Congress’s prerogative, not the Court’s, to alter the scope of tribal sovereign immunity, and that Congress has only reaffirmed it. Bay Mills claims that tribal sovereign immunity “has deep roots in this country’s jurisprudence,” and that there is no reason for the Court to abrogate it now.

Finally, Bay Mills argues that the Ninth Circuit decision will not leave the state without a remedy, as the state argues. Bay Mills says that Michigan most obviously can invoke the dispute resolution procedure in the compact. Bay Mills claims that Michigan could also sue tribal officials for injunctive relief. Additionally, Bay Mills argues that the state could negotiate a waiver of sovereign immunity in the next round of compact negotiations, seek federal intervention in the dispute, or even outlaw gaming throughout the state.  

The federal government, as amicus in support of Bay Mills, also argues that the federal courts lack jurisdiction over Michigan’s claims. The federal government says that § 2710 does not extend jurisdiction of the state’s claims to the district court. Contrary to the state’s argument, the federal government says that numerous provisions in the IGRA demonstrate that the phrase “class III gaming activities” refers to the games themselves, and not to authorizing, licensing, and operating games. And because the games themselves are not located on Indian lands, § 2710 is not a basis for jurisdiction. Moreover, the federal government says that § 1331 does not extend jurisdiction, because the state’s federal claims (counts I, II, and III) do not fall within § 2710, and because the compact does not contain a provision agreeing to federal court review of the state’s other claims.

Next, the federal government argues that Bay Mills enjoys tribal sovereign immunity. The federal government says that § 2710 did not abrogate sovereign immunity, because the state alleged that the Vanderbilt casino is not on Indian lands. The federal government contends that 18 U.S.C. § 1166 also does not abrogate sovereign immunity, because that statute gives the federal government (not the states) enforcement authority in Indian lands for violations of assimilated state gambling laws. The federal government says that § 1166 does not give states authority to enforce state gambling laws outside Indian lands, and even less to sue the tribe itself. The government contends that tribal sovereign immunity already extends to a tribe’s commercial activities wherever they take place, and that the Court should leave it to Congress to balance the interests of the tribes and the states and to determine the scope of immunity.

Finally, the federal government argues that Michigan has other remedies. Like Bay Mills, the federal government says that the state could seek injunctive relief against an individual tribal official. The federal government claims that the state could also negotiate a waiver of sovereign immunity in the compact. Moreover, the federal government contends that the state could request approval from the NIGC of a site-specific gaming ordinance for the Vanderbilt casino, forcing the NIGC to determine whether the site is eligible for gaming, and appeal the decision in court. Finally, the federal government notes that the state can enforce its own gaming laws against individuals involved in gaming at the Vanderbilt casino. With all these options, the federal government argues that there is no need to diminish tribal sovereign immunity to create a remedy that would resolve this dispute.

SIGNIFICANCE

At its core, this case is about the allocation of power between states and Indian tribes over the operation of an activity, tribal-sponsored gambling, that has seen astonishing growth in recent decades and today is worth tens of billions of dollars nationwide. (The NIGC tracks this growth in Gaming Revenue Reports, available at http://www.nigc.gov/Gaming_Revenue_Reports.aspx.) Both Indian tribes and states use legalized gaming more and more for revenue, economic development, and economic activity and opportunity. Within this broader context, the regulation of tribal gaming, even at the margins, is itself a high-stakes game.

To be sure, this case deals with only a small part of this larger question, that is: off-reservation gambling. And it involves only special federal jurisdictional and immunity questions that come up in the particular case when an Indian tribe purchases land to build an off-reservation casino.

Still, in the rapidly growing sector of Indian gaming, the case already matters. As Michigan indicates, it “is already aware of at least three additional lawsuits where parties have cited the Sixth Circuit’s decision here in support of a tribe’s operation (or planned operation) of a casino in violation of IGRA or tribal-state gaming compacts.” The state notes that “[a]s tribes continue to look for better casino locations . . . or new ways to profit from the explosion of casino gaming, the friction between state authority and tribal immunity will inevitably increase.” That’s not to say that Michigan’s positions in the case are (necessarily) right, but only that the issues are already significant, and only likely to grow in importance.

Moreover, the issues are highly controversial. On the one hand, many favor expanding off-reservation gaming opportunities, because Indian tribes and states can use off-reservation gaming to generate more revenue and economic development in more attractive locations off the reservations (like closer to urban centers). On the other hand, many oppose off-reservation gaming, because it encroaches on local communities. The debate is playing out in communities across the country where Indian tribes are seeking permission to conduct off-reservation gaming. The debate is also playing out in Washington, where the Obama administration moved in 2011 to loosen requirements for some off-reservation gaming, and where some in Congress have introduced legislation to tighten them. Again, this case sits right at the center of these debates.

Whatever happens in this case, though, it cannot change the basic statutory framework under the IGRA: Indian tribes will still have to adopt a gaming ordinance and negotiate a compact with the state. The compact requirement ensures that both states and Indian tribes will have a significant hand in regulating casino-like tribal gaming. But the outcome of the case may affect how Indian tribes and states negotiate their compacts and the terms they include in them.

It is important to remember that the Department of the Interior and the NIGC issued opinions that the Vanderbilt casino was not on “Indian lands” and was therefore not eligible for gaming under the NGRA. The federal government does not disavow these opinions. Indeed, the federal government sets out an array of options for Michigan to regulate the Vanderbilt casino (and other future casinos), notwithstanding (as the federal government argues) the federal courts’ lack jurisdiction over the state’s claims and Bay Mills’s immunity from suit. In other words, the Sixth Circuit ruling does not mean that Bay Mills can operate its casino, or that other tribes could operate like casinos off reservation, without at least some state and federal oversight and permission.

Finally, the case is significant because it will resolve splits in the circuits. There is disagreement among the circuits on both questions presented—the scope of federal jurisdiction, and the scope of tribal sovereign immunity.