174 F. Supp. 3d 1194
D. Ariz.2016Background
- The Tohono O’odham Nation negotiated a 2002 Tribal-State Compact with Arizona (approved by DOI) permitting four Class III gaming facilities; the Nation later bought Glendale land and began building the West Valley Resort (a Phoenix‑area casino).
- ADG Director Daniel Bergin asserted (Apr–June 2015) that the Nation engaged in fraud during Compact negotiations and announced a policy declining to certify vendors/employees for facilities ADG considered unauthorized, including the West Valley Resort.
- The Nation sued state officers alleging IGRA preempts ADG’s refusal to certify; it sought declaratory and injunctive relief that ADG must process certifications. Director Bergin asserted counterclaims for promissory estoppel, fraudulent inducement, and material misrepresentation and sought various declaratory/reformation remedies.
- The Nation moved to dismiss the counterclaims on capacity, sovereign‑immunity, and failure‑to‑state‑a‑claim grounds. The Court considered Ex Parte Young implications, tribal sovereign immunity, and the narrow equitable‑recoupment exception.
- Rulings: the Court held the Director may assert counterclaims despite lack of Arizona statutory capacity, struck demands beyond the scope of the Nation’s waiver (reformation and relief as to other casinos), dismissed promissory estoppel, and otherwise denied dismissal of the fraud‑based counterclaims (subject to later factual development). Leave to amend was denied.
Issues
| Issue | Nation's Argument (Plaintiff) | Director's Argument (Defendant) | Held |
|---|---|---|---|
| Whether ADG Director has capacity to assert counterclaims | Nation: Arizona law provides no statute authorizing Director to sue or be sued, so no capacity | Director: Ex Parte Young brought him into federal court; equity and Rule 13 favor allowing counterclaims | Court: Director may assert counterclaims — federal practice and Ex Parte Young permit participation despite lack of state statutory capacity |
| Whether tribal sovereign immunity bars the Director’s counterclaims | Nation: Tribal immunity protects it from counterclaims, even compulsory ones | Director: Claims fit equitable recoupment or fall within waiver by litigating the Compact issues | Court: Sovereign immunity bars most affirmative relief; but Nation waived immunity as to issues necessary to decide its complaint (so Director may pursue counterclaims that directly challenge the Nation’s asserted federal right to Class III gaming at West Valley Resort); struck claims beyond that scope (reformation; relief re other casinos) |
| Whether equitable recoupment permits counterclaims for declaratory/injunctive relief | Nation: Recoupment is limited to monetary setoffs and does not allow declaratory relief | Director: Some precedents allow mirror declaratory counterclaims | Court: Equitable recoupment is narrow and generally limited to diminishing monetary recovery; mirror declaratory relief is not covered — counterclaims seeking affirmative relief beyond negating Nation’s claims cannot proceed under recoupment |
| Whether promissory estoppel, fraudulent inducement, and misrepresentation counterclaims survive Rule 12(b)(6) | Nation: Promissory estoppel barred by an integrated written Compact; fraud claims fail for lack of actual or justifiable reliance | Director: Promissory estoppel/fraud are viable because Nation allegedly promised no Phoenix casino and State relied; factual issues exist about what governor/salt‑river community might have done | Court: Promissory estoppel dismissed (contract covers same subject); fraud/misrepresentation survive dismissal for now — actual reliance and justifiable reliance present factual disputes (Compact did not expressly prohibit Phoenix casino, but collateral promises about intent/plans may be justifiably relied upon). |
Key Cases Cited
- Ex parte Young, 209 U.S. 123 (federal officer suits for prospective injunctive relief against state officers)
- Michigan v. Bay Mills Indian Cmty., 134 S. Ct. 2024 (2014) (tribal sovereign immunity limits lawsuits against tribes)
- Oklahoma Tax Comm’n v. Citizen Band Potawatomi Indian Tribe of Okla., 498 U.S. 505 (1991) (tribe’s suit does not waive immunity to counterclaims beyond the issues litigated)
- Bull v. United States, 295 U.S. 247 (1935) (equitable recoupment limited to reducing sovereign monetary recovery)
- United States v. U.S. Fid. & Guar. Co., 309 U.S. 506 (1940) (recoupment principle described)
- United States v. Park Place Assocs., Ltd., 563 F.3d 907 (9th Cir.) (recoupment is a narrow exception to sovereign immunity)
- Ute Indian Tribe of the Uintah & Ouray Reservation v. Utah, 790 F.3d 1000 (10th Cir.) (tribal immunity covers counterclaims unless narrow exceptions apply)
- Tohono O’odham Nation v. State of Arizona, 944 F. Supp. 2d 748 (D. Ariz.) (2013) (prior ruling construing Compact and permitting West Valley construction)