15 Cal.App.5th 391
Cal. Ct. App.2017Background
- Sharp Image (vendor) and the Shingle Springs Band (Tribe) executed a series of agreements (1996 GMA; 1997 Equipment Lease Agreement (ELA); promissory Note) to develop Crystal Mountain Casino; the ELA granted exclusivity to supply machines and a 30% share of defined "net revenues."
- The temporary casino opened briefly in 1996 and closed; NIGC counsel wrote the Tribe in 1996 that the GMA was null and void for lack of appropriate federal approvals.
- In 1999 the Tribe repudiated the Sharp Image agreements after informal NIGC/BIA advice; Sharp Image sued in California state court in 2007 for breach of the ELA and Note.
- The Tribe sought NIGC review; the NIGC Acting General Counsel issued an advisory opinion in 2007 and the NIGC Chairman issued a formal Decision Letter in 2009 concluding the GMA and ELA were management contracts requiring approval and thus void without approval; Sharp Image did not pursue federal appeal under 25 U.S.C. § 2714.
- The state trial court refused to defer to the NIGC letters, denied dismissal/preemption, a jury found breach and awarded >$30 million; on appeal the Court of Appeal held IGRA preempted Sharp Image’s state-law enforcement claims because the ELA was a management contract and the Note a collateral agreement, both unapproved and therefore void, and reversed for dismissal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether IGRA preempts state breach-of-contract claims based on the ELA/Note such that the state court lacks subject-matter jurisdiction | Sharp Image: state-law contract claims may be litigated in state court; whether an agreement is an unapproved management contract is an affirmative defense for the state court to decide; American Vantage supports non-preemption where NIGC concluded the agreements do not require approval | Tribe: IGRA completely preempts management contracts and collateral agreements; NIGC determined the agreements are unapproved management contracts and state court lacks jurisdiction | Held: IGRA preempts state enforcement suits based on unapproved management contracts and collateral agreements; trial court lacked subject-matter jurisdiction and judgment reversed and case to be dismissed |
| Whether the trial court should defer to NIGC interpretations/decisions that the agreements are management contracts | Sharp Image: NIGC letters were flawed, procedural defects, ex parte contacts, not entitled to deference; hearsay | Tribe / U.S. (amicus): NIGC expertise and published guidance/Bulletins justify deference to its interpretation of management activity and application to these agreements | Held: Formal NIGC Decision Letter and prior Opinion Letter are entitled to Skidmore (persuasive) weight; Bulletin No. 94-5 is persuasive; court found the NIGC analysis persuasive though afforded informal-level deference |
| Whether the Note is outside IGRA because it is merely a financing instrument (not a management contract) | Sharp Image: Note does not itself provide for management and so is not subject to IGRA approval | Tribe: Note is a collateral agreement to the ELA/GMA (expressly tied to machine installation and repayment tied to gaming revenues) and thus falls within IGRA's definition of collateral agreements | Held: The Note is a collateral agreement related to the management contracts and thus subject to IGRA; unapproved, it is void and preempted |
| Whether the trial court properly declined to decide threshold legal question of whether agreements are management contracts before proceeding to trial | Sharp Image: management-contract status is a factual/affirmative defense for trial and jury; American Vantage suggests merits resolution in state court | Tribe: threshold legal determination is required because preemption and subject-matter jurisdiction turn on it | Held: Determination whether an agreement is a management contract or collateral agreement is a question of law necessary to resolve preemption and jurisdiction; trial court erred by not deciding it and by allowing the case to proceed to jury verdict |
Key Cases Cited
- Plains Commerce Bank v. Long Family Land & Cattle Co., 554 U.S. 316 (2008) (discusses tribal sovereignty and congressional plenary authority)
- Santa Clara Pueblo v. Martinez, 436 U.S. 49 (1978) (tribal immunity and limits on suits against tribes)
- Gaming Corp. of America v. Dorsey & Whitney, 88 F.3d 536 (8th Cir. 1996) (IGRA has extreme preemptive force; claims that intrude on tribal gaming governance are preempted)
- Catskill Dev. v. Park Place Entertainment, 547 F.3d 115 (2d Cir. 2008) (unapproved management contracts are void and subject to IGRA review)
- First Amer. Kickapoo Operation v. Multimedia Games, 412 F.3d 1166 (10th Cir. 2005) (lease/management analysis; agency bulletins and letters are persuasive under Skidmore)
- Wells Fargo Bank v. Lake of the Torches, 658 F.3d 684 (7th Cir. 2011) (IGRA’s scope and management-contract analysis; tribes must be primary beneficiaries)
- AT&T Corp. v. Coeur d’Alene Tribe, 295 F.3d 899 (9th Cir. 2002) (NIGC determinations are final agency actions subject to federal review)
- A.K. Mgmt. Co. v. San Manuel Band of Mission Indians, 789 F.2d 785 (9th Cir. 1986) (pre-approval under section 81 is an absolute prerequisite to enforceability)