Sharp Image Gaming, Inc. v. Shingle Springs Band Indians
223 Cal. Rptr. 3d 362
Cal. Ct. App. 5th2017Background
- The Shingle Springs Band of Miwok Indians (the Tribe) and Sharp Image Gaming entered a series of agreements (GMA in 1996; Equipment Lease Agreement (ELA) and promissory Note in 1997) to develop and equip a casino on tribal land; the agreements granted Sharp Image exclusive supply rights and revenue-based compensation.
- The temporary casino opened briefly and was shut down; the NIGC General Counsel issued an advisory opinion in 2007 that the GMA and ELA were unapproved management contracts and therefore void; the Tribe later requested and the NIGC Chairman issued a formal Decision Letter in 2009 reaching the same conclusion.
- The Tribe repudiated the agreements in 1999 after informal advice that the contracts might be invalid; Sharp Image sued in California state court in 2007 for breach of the ELA and Note; the jury awarded Sharp Image damages but the Tribe appealed.
- The Tribe moved to dismiss for lack of subject-matter jurisdiction based on IGRA preemption and the NIGC determinations; the trial court rejected the NIGC letters and allowed the case to proceed to jury trial.
- On appeal, the California Court of Appeal held that (1) whether a contract is a management contract or a collateral agreement is a threshold legal question necessary to resolve preemption/subject-matter jurisdiction, (2) the ELA is a management contract and the Note is a collateral agreement under IGRA, (3) because neither was approved by the NIGC Chairman they are void and Sharp Image’s state-law enforcement action is preempted.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether IGRA preempts Sharp Image’s state-law breach claims | Sharp Image: state contract claims are ordinary contract disputes and can proceed in state court; American Vantage supports adjudication in state court | Tribe: IGRA preempts state adjudication of unapproved management contracts and collateral agreements; NIGC determined agreements are management contracts | Held: IGRA preempts state enforcement suits based on unapproved management contracts and collateral agreements; state court lacked subject-matter jurisdiction |
| Whether the trial court should defer to the NIGC’s advisory and final opinions | Sharp Image: NIGC letters are not binding final agency actions and are infected by procedural defects; no Auer deference warranted | Tribe / U.S. (amicus): NIGC’s statutory/regulatory interpretations are entitled to deference; Decision Letter is a formal §2711 determination | Held: Formal Decision Letter and Opinion Letter merit Skidmore-level (persuasive) weight; Auer deference to NIGC Bulletin not appropriate because it interprets a statute; letters persuasive and consistent with prior NIGC practice |
| Whether the ELA is a "management contract" under IGRA | Sharp Image: ELA is merely an equipment lease, parties disclaimed management | Tribe: ELA grants control (exclusive supply, revenue share, audit/inspection, configuration control, one-sided remedies) indicating management | Held: ELA is a management contract — its rights and obligations (control over machines, revenue sharing, audit/operations influence) satisfy the regulatory/agency indicia of management |
| Whether the Note is a collateral agreement subject to IGRA | Sharp Image: Note is financing; it does not itself provide for management and thus is not subject to IGRA approval | Tribe: Note is tied to the ELA/GMA, was executed contemporaneously and affects gaming revenues; it thus "relates to the gaming activity" and is a collateral agreement | Held: Note is a collateral agreement to a management contract (it relates to gaming activity and financial rights/obligations) and is therefore subject to IGRA; unapproved Note is void |
Key Cases Cited
- Plains Commerce Bank v. Long Family Land & Cattle Co., 554 U.S. 316 (U.S. 2008) (tribal sovereignty principles)
- Santa Clara Pueblo v. Martinez, 436 U.S. 49 (U.S. 1978) (tribes are distinct political communities generally immune from suit)
- A.K. Management Co. v. San Manuel Band of Mission Indians, 789 F.2d 785 (9th Cir. 1986) (federal approval under predecessor statute is prerequisite to enforceability)
- Gaming Corp. of Am. v. Dorsey & Whitney, 88 F.3d 536 (8th Cir. 1996) (IGRA can completely preempt state law in the field of Indian gaming)
- American Vantage Cos. v. Table Mountain Rancheria, 103 Cal.App.4th 590 (Cal. Ct. App. 2002) (discussing limits of IGRA preemption; NIGC determinations relevant)
- Catskill Dev. v. Park Place Entm’t, 547 F.3d 115 (2d Cir. 2008) (unapproved management contracts are void under IGRA/regulations)
- Wells Fargo Bank v. Lake of the Torches, 658 F.3d 684 (7th Cir. 2011) (IGRA’s protective scheme and indicia of management contracts)
- First Am. Kickapoo Operations v. Multimedia Games, 412 F.3d 1166 (10th Cir. 2005) (regulatory indicia and analysis support characterization of certain leases as management contracts)