For the last eight years, Ralph Saltsman and Stephen Solomon have been running around town and gobbling up food as co-creators and co-hosts of the Emmy Award-winning cable show Cheap Eats. They recently sat down with the show’s director of communication, Erica Jamieson, to talk food in LA.
GAMING LAW – LITIGATION STRATEGIES
David H. Tennan t, Nixon Peabod y LLP; Marc W. Dunbar, Jones Walker LLP Stephen Solomon, Ralph Saltsman, Stephen Jamieson, Bruce Evans. and Ryan .Kroll, Solomon Saltsman & Jamieson: Paul S. West, Baker Donelson
Curt Beason and Ian Russell, Lane & Waterman LLP
John M. Bolton IIL Hill Hill Carter Franco Cole & Black PC
David H. Tennant 7
Partner, Nixon Peabody LLP
INDIAN GAMING TWENTY-FIVE YEARS AFTER THE IGRA: A LITIGATOR’S PERSPECTIVE
Marc W. Dunbar 27
Partner, Jones Walker LLP
A FLORIDA PRACTITIONER’S GUIDE TO GAMING LAWTRENDS, ISSUES, AND STRATEGIES
Stephen Solomon, Ralph Saltsman, Stephen Jamieson, 41
Bruce Evans, and Ryan Kroll
Partners, Solomon Saltsman & Jamieson UTIGATION CONCERNING BAD-FAITH NEGOTIATIONS FOR TRIBAL-STATE GAMING COMPACTS UNDER THE IGRA
Paul S. West 55
Shareholder, Baker Donelson
GAMING LAW TODAY
Curt Beason and Ian Russell 67
Partners, Lane & Waterman LLP STRATEGIES: STACKING THE ODDS IN GAMING LAWUTIGATION
John M. Bolton III 83
Shareholder, Hill Hill Carter Franco Cole & Black PC BINGO IN ALABAMA: LEGAL BATTLEGROUND OR POUT/CS AS USUAL
Litigation Concerning Bad-Faith Negotiations for
Tribal-State Gaming Compacts Under the I G-RA
Stephen Solomon, Ralph Saltsman, Stephen Jamieson, Bruce Evans, and Ryan Kroll Partners
Solomon Saltsman & Jamieson
INSIDE THE MINDS
Indian tribes seeking to engage in Class III gaming on their Indian lands are at times required to engage in litigation seeking a judicial determination that a state has acted in bad faith during the tribal-state gaming compact process. Because of the importance of Class III gaming to provide funding for vital tribal government operations, tribes may be placed in a situation where only an action challenging state negotiating tactics· will allow that tribe to obtain a fair and reasonable tribal-state compact, to assist in providing for the tribe’s members as envisioned by Congress when it passed the Indian Gaming Regulatory Act (IGRA) in 1988, regulating the operation of gaming on tribal lands.1
Under the IGRA, the level of regulation on gaming varies depending on which ·of the three classes of gaming a tribe wishes to provide. Class I gaming consists of social games for prizes of nominal value and traditional forms of Indian gaming as part of, or in connection with, tribal ceremonies and celebrations.2 Class I gaming is within the exclusive jurisdiction of the Indian tribes and not subject to the provisions of the IGRA.3
Class II gaming includes certain forms of bingo and card games but does not include any banking card games or slot machines.4 Class II gaming is within the jurisdiction of the Indian tribes, but is subject to the provisions of the IGRA.s
Class III gaming is all forms of gaming not Class I or Class II, and therefore includes slot machines and banked card games, as well as other forms of gaming.6 Class III gaming is generally the most lucrative form of gaming and is the most regulated gaming under the IGRA. Prior to operating Class III gaming, the IGRA requires a tribe to enter into a tribal-state compact along with other preconditions.? It is this requirement of a tribal-state compact that has led to disputes between Indian tribes and states because
1 25 U.S.C. § 2701 et seq. (West 1988).
2 25 U.S.C. § 2703(6).
3 25 U.S.C. § 2710(a)(I ).
4 25 u.s.c. § 2703(7).
5 25 U.S.C. § 2710(a)(2).
6 25 u.s.c. § 2703(8).
7 25 U.S.C. § 2710(d)(l)(C).
LITIGATION CONCERNING BAD-FAITH NEGOTIATIONS…
of the leverage for states created by the mandatory requirement of such a compact for tribes to operate Class III gaming.
Recognizing the potential for abuse by states, Congress sought to ensure that states did not take advantage of this leverage while negotiating tribal state compacts. The IGRA requires that a state negotiate in good faith and creates a procedure by which tribes can enforce this requirement through federal court action. Once 180 days has passed after a tribe has requested the state to enter into negotiations for a tribal-state compact, a tribe may file suit in federa district court seeking a judicial determination that a state failed to negotiate in good faith.
What a State May Negotiate for in a Gaming Compact
Since the IGRA’s inception on in 1988, only a handful of cases discuss what constitutes good-faith negotiations under the IGRA. However, over the last few years, several case decisions provide greater specificity on this subject matter. For instance, a recent case out of the district court of New Mexico, Pueblo of Santa Ana v. Nash, concerns Congress’s intent in restricting what subject may be included in a tribal-state gaming compact. 9 The states possess unequal bargaining power during the compact negotiations, because there is no requirement that a state enter into a compact, yet tribes may only operate Class III gaming if they have a tribal-state compact. Concerned that states may request a multitude of unfair concessions from tribes in exchange for the Class III gaming the tribes need to generate essential revenue, the IGRA prevents a compact from including more than these seven subject matters:
- the application of the criminal and civil laws and regulations of the Indian tribe or the state that are directly related to, and ·necessary for, the licensing and regulation of such activity;
- the allocation of criminal and civil jurisdiction between the state and the Indian tribe necessary for the enforcement of such laws and regulations;
8 25 U.S.C. § 2710(d)(7)(B)(i).
9 Pueblo of Santa Ana v. Nash, CIV. 11-957 LH/LFG, 2013 WL 5366403 (D. N.M. Sept 25, 2013).
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- the assessment by the state of such activities in such amounts as are necessary to defray the costs of regulating such activity;
- taxation by the Indian tribe of such activity in amounts comparable to amounts assessed by the state for comparable activities;
- remedies for breach of contract;
- standards for the operation of such activity and maintenance of the gaming facility, including licensing; and
- any other subjects that are directly related to the operation of gaming 10
Pueblo of Santa Ana Decision
In Pueblo of Santa Ana, the plaintiff tribe sought an order preventing a New Mexico district court judge from exercising jurisdiction over a pending lawsuit against a tribal gaming enterprise arising from allegations that the tribal gaming enterprise provided alcoholic beverages to two intoxicated patrons, which led to a one-car accident resulting in the death of those individuals and the injury of a third person.11 The plaintiff tribe also sought a declaration that the IGRA did not permit a compact to shift jurisdiction from tribal court to state court over personal. injury lawsuits against tribes or their gaming enterprises.12
The impetus behind the declaratory relief sought was a provision in the plaintiff tribe’s compact with New Mexico that allowed claims for bodily injury or property damage proximately caused by the conduct of the plaintiff tribe’s gaming enterprise to be filed in state district court, “unless it is finally determined by a state or federal court that the IGRA does not permit the shifting of jurisdiction over visitors’ personal injury suits to state court.”13 Utilizing the jurisdiction-shifting provision in the plaintiff tribe’s compact, an action was filed in New Mexico state district court alleging the gaming enterprise proximately caused the death of the decedents and injured a third person due to the over-service of alcohol.14
10 25 U.S.C. § 2710(d)(3)(C).
11 Pueblo of Santa Ana, 2013 WL 5366403, at *3.
12 Id. at *I.
13 Id. at *2.
14 Id. at *3.
LITIGATION CONCERNING BAD-FAITH NEGOTIATIONS…
In response, the plaintiff tribe filed an action in federal district court and asserted that a jurisdiction-shifting provision on for all claims of bodily injury or property damages against a gaming enterprise is not one of the seven listed topics permitted by the IGRA to be included in a tribal-state gaming compact. 15 Accordingly, the plaintiff tribe argued that Congress does not allow a tribal-state gaming compact to extend state court jurisdiction and the application of state laws over matters that are not directly related to gaming, such as the wrongful death claim and personal injury claim at issue therein.16
The district court agreed with the plaintiff tribe and noted that the IGRA is written in a restrictive rather than an expansive manner, and that only matters listed in 25 U.S.C. §2710(d)(3(C) are permitted in a tribal-state gaming compact.17 The district court then held that since the IGRA does not explicitly permit a jurisdiction-shifting provision in a compact, it therefore prohibits such a provision.18
Pueblo of Santa Ana is an important new case that helps define what is and is not permitted within a tribal-state gaming compact. It builds upon comments made in the IGRA Senate Committee Report that Congress did “not intend that compacts ·be used as a subterfuge for imposing state jurisdiction on tribal lands.” 19 While addressing bodily injury and wrongful death claims, its rationale and analysis can and should be allowed with respect to other matters requested by states for inclusion in a tribal-state gaming compact not explicitly included in 25 U.S.C. §2710(d)(3)(C).
Impact of Pueblo of Santa Ana Decision on Compact Negotiations
Using the Pueblo of Santa Ana’s rationale, other matters requested by a state to be included in a tribal-state compact also may not be permitted to be include in a compact pursuant to 25 U.S.C. § 2710(d)(3(C). For instance, recent tribal-state compacts in California include provisions that require tribes to waive their immunity and submit to private arbitration for all
15 Id. at *5.
16 Id. at *5-6.
17 Id. at *10.
18 Id. at *12.
19 In re Indian Gaming Related Cases, 331 F.3d 1094, 1109 (9th Cir. 2003).
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claims regarding bodily injury or property damage connected with, or relating to, the operation of the gaming facility; submit to the jurisdiction of the California state agencies that enforce California’s workplace and occupational health and safety standards; submit to the governance of California’s employment discrimination laws; and submit to the jurisdiction of California’s workers’ compensation program.
Presumably, the tribes that did enter into compacts with these questionable provisions did so because those tribes perceived that the benefits of obtaining a tribal-state compact and being able to begin operating Class III gaming outweighed the cost of submitting to the state’s jurisdiction on these matters. However, this willingness to subvert their own sovereign immunity exemplifies Congress’s concern regarding the unequal bargaining power possessed by the states and the exact reason that Congress enacted 25 U.S.C. §2710(d)(3(C) to limit the subject matters in a tribal-state comp ct.
Tribes and their counsel should be aware of the cost and benefits in litigating these matters. Litigation will likely delay the time in which a tribe is able to receive a tribal-state gaming compact even if the tribe ultimately prevails in the litigation. However, depending on the cost of inclusion of the challengeable provisions and the tribe’s willingness to preserve its sovereign immunity, a tribe may still deem it necessary to litigate over the challengeable provisions.
Rincon Band Decision
Another recent case of interest to tribes and their counsel seeking to negotiate a tribal-state gaming compact with a state and potentially litigate a claim for bad-faith negotiations is the Ninth Circuit decision in Rincon Band of Luiseno Mission Indians of the “Rincon Reservation.20 The Rincon decision provided further clarification as to the extent that states may seek revenue sharing from gaming tribes through a tribal-state gaming compact.
Concerned with budgetary shortfalls, California attempted to generate revenue for their general fund by demanding that Rincon, as well as other
20 Rincon Band of Luiseno Mission Indians of Rincon Reservation v. Schwarzenegger,
602 F.3d IO19 (9th Cir. 2010).
LITIGATION CONCERNING BAD-FAITH NEGOTIATIONS…
California tribes, pay a percentage of their revenue to the state.21 Rincon protested, stating that, in 25 U.S.C. § 2710(d)(4), the IGRA expressly_ prohibits a state from imposing “any tax, fee, charge, or other assessment upon an Indian tribe.” 22
The Ninth Circuit began its analysis with the determination that the IGRA required the court to consider a “demand” for a tax is evidence but not conclusive proof of bad faith.23 The court further noted that any time a state demands taxes to be paid into its general fund, the “state faces a very difficult task to rebut the evidence of bad faith necessarily arising from that demand.”24
However, bad faith may be disproved if the state demonstrates that the demanded revenue was to be used for the public interest, public safety, criminality, financial integrity, and adverse economic impacts on existing gaming activities.25 Noting that California made no attempt to justify its demand for general fund revenue sharing using any of those listed factors, the Ninth Circuit held that California failed to rebut the presumption of bad faith.26
The Ninth Circuit also rejected the state’s argument that it had offered meaningful concessions for the tax and therefore did not “impose” the tax but, instead, had merely negotiated for the revenue sharing.27 Because California tribes already enjoy the exclusive right to operate slot machines within the state of California, California could not offer exclusivity as a meaningful concession since it was something the tribes already possessed and which the Ninth Circuit previously held was already offered in exchange for two other payments required of California tribes, including Rincon in their earlier 1999 compacts.28
21 Rincon, 602 F.3d at 1024-25.
22 Id. at 1025.
23 Id. at 1029-30.
24 Id. at 1032.
27 Id. at 1036.
28 Id. at 1037.
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The Rincon decision is also helpful in determining how a “meaningful concession” is defined. California asserted that even if exclusivity by itself was not sufficiently meaningful, the court should consider the bundle of rights being offered within the compact and whether that bundle of rights is more valuable than the status quo.29 The Ninth Circuit rejected this argument, noting that the “consideration in exchange for the revenue sharing must be independently meaningful in comparison to the status quo”-i.e., not illusory (or illegal) if standing alone.3° Rincon stands for the proposition that once a meaningful concession has been exchanged for an obligation upon a tribe, that meaningful concession cannot further be utilized to obtain further obligations from the tribe.31 Therefore, tribes and their counsel negotiating compacts should be careful to create a clear record of what meaningful concessions, if any, are offered by a state in exchange for revenue sharing. This will also help determine whether each concession is “independently meaningful,” as required by Rincon.32
Big Lagoon Decision
Tribes and their counsel should also be aware of a recent Ninth Circuit case that could prevent a tribe from prevailing in its bad-faith negotiations claim if it is unable to establish that the tribe was under federal jurisdiction as of 1934. In Big Lagoon Rancheria v. State of California, the Ninth Circuit held that pursuant to the IGRA, a tribe’s right to request negotiations and thereafter to sue if a state does not negotiate in good faith is dependent upon that tribe having jurisdiction over Indian lands on which it proposed to conduct Class III gaming.33
The question of whether a tribe has jurisdiction over its Indian lands is based upon the 2009 Supreme Court holding that the Bureau of Indian Affairs (BIA) lacks authority to acquire land in trust for tribes that were not under federal jurisdiction in 1934.34 The determination of being under
29 Id. at I040.
30 Id. at I 040, fn. 23.
31 Id. at 1037.
32 Id. at I 040.
33 Big Lagoon Rancheria v. California, 741 F.3d 1032, 1040 (9th Cir. 2014).
34 Carcieri v. Salazar, 555 U.S. 379, 388 (2009).
LITIGATION CONCERNING BAD-FAITH NEGOTIATIONS…
federal jurisdiction is specific to the year 1934 because of language in the 1934 Indian .Reorganization Act (IRA) that authorized the secretary of the interior to acquire land and hold it in trust “for purpose of providing lands for Indians.”35 The IRA defined “Indian” to “include all persons of Indian descent who are members of any recognized Indian tribe now under federal jurisdiction.”36 The Supreme Court interpreted the word “now” in the phrase “Now under federal jurisdiction” to mean as of the date the IRA was passed in 1934.37 Thus, the Supreme Court interpreted the IRA to authorize the BIA to acquire land in trust only for tribes that were under federal jurisdiction as of 1934, and a tribe’s current status of recognition or jurisdiction is irrelevant for these purposes.38
Building upon the Carcieri decision, the Ninth Circuit in Big Lagoon determined that if the BIA cannot hold the lands in trust for the tribe, the lands are not “Indian lands” as defined in the IGRA.39 If the lands are not Indian lands, the IGRA does not permit a tribe to operate Class III gaming on those lands, and there is no requirement that a state negotiate a compact for Class III gaming on those lands.40
The issue this case may present to some tribe seeking a compact is whether it can be established that the tribe was under federal jurisdiction in 1934. In Big Lagoon, the Ninth Circuit noted that a helpful starting point in this determination is whether the tribe appears on a BIA list compiled shortly after the IRA was enacted.41 As did the Carcieri decision, the Big Lagoon decision is quick to point out that this list was not exhaustive and that the BIA did incorrectly leave certain tribes off the list that were in fact under federal jurisdiction at that time.42 This leaves open the door for tribes not appearing on the list to prove they were under federal jurisdiction in 1934 using other competent evidence such as treaties, legislative acts, and tribal documents.
35 25 U.S.C. § 465 (1934).
36 25 U.S.C. § 479 (1934) (emphasis added).
31 Carcieri, 555 U.S. at 392.
39 Big Lagoon, 741 F.3d at 1040.
40 Id. at 1045.
41 Id. at 1044.
42 Id. (citing Carcieri, 555 U.S. at 398).
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Big Lagoon’s Impact on Bad-Faith Litigation
Counsel for tribes should be aware that a state -could challenge whether the intended lands for the Class III gaming are in fact “Indian lands” even many years after the land was originally taken into trust. In Big Lagoon, the BIA took the subject lands into trust in 1994.43 In the Ninth Circuit, a challenge to an unauthorized agency action, such as taking lands into trust for a tribe pursuant to 25 U.S.C. § 465 if that tribe was not under federal jurisdiction in 1934, must be filed within six years from the date of the “agency’s application of the disputed decision to the challenger.” 44 In B Lagoon, the Ninth Circuit determined that this six-year period did not begin in 1994 when the land was taken into trust, but instead when the plaintiff tribe filed suit to compel negotiations and the state of California challenged the entrustment.45
Obtaining a Compact When a State Negotiates in Bad Faith
If the 180-day negation period has elapsed and a bad-faith negotiation action is filed, the district court will issue its decision on whether the state has negotiated in. bad faith. If the tribe is successful in proving bad-faith negotiations by the state, the district court will order the state and the tribe to conclude a compact within sixty days.46
If after the conclusion of this sixty-day period the tribe and state have not agreed upon a compact, the district court shall order each party to submit a
proposed compact that represents· that party’s last best offer to a mediator appointed by the court.47 The mediator shall then select from the two
proposed compacts the one that best comports with the terms of the IGRA, any other applicable federal law, and with the findings and order of the district court.48
If the state consents to the proposed compact selected by the mediator
within sixty days of the mediator’s submission to the state of the prevailing
43 Big Lagoon, 74I F.3d at I 035.
44 Id. at 1043.
45 Id. at 1043.
46 25 U.S.C. § 27IO(d)(7)(B)(iii).
47 25 U.S.C. § 27IO(d)(7)(B)(iv).
48 25 U.S.C. § 27IO(d)(7)(B)(iv).
LITIGATION CONCERNING BAD-FAITH NEGOTIATIONS…
compact, the proposed compact is treated as a tribal-state compact.49 If the state does not consent to the proposed compact selected by the mediator within sixty days, the mediator shall notify the secretary of the interior and the secretary shall proscribe procedures allowing the tribe to operate Class III gaming, which are consistent with the proposed compact selected by the mediator, the IGRA, and the relevant provisions of the laws of the state.50
Because 8lass III gaming has become one of the leading means for tribes to provide for their government operations and for their members, tribes may have to resort to filing an action if states do not act in good faith. In such instances, it is important that counsel for the negotiating tribe create a clear record of the underlying negotiations so a district court will have sufficient information to conclude that a state is not negotiating in good faith. To create a clear record, it is important that counsel understand what does and does not constitute good-faith negotiations under the IGRA.
The Pueblo of Santa Ana decision confirms that if a negotiated topic is not expressly permitted by e IGRA, it is prohibited. To the extent possible, tribes and their counsel should ensure that no prohibited topic is included in a tribal-state gaming compact to preserve the tribe’s sovereignty, obtain the best possible compact, and create a strong record in case of litigation. Tribes and their counsel should also be aware of the Rincon decision and its explanation of what constitutes a tax and what constitutes a meaningful concession.
Additionally, tribes and their counsel should recognize that, as in Big Lagoon, a state may assert that there is no requirement to engage in negotiations at all if a tribe was not under federal jurisdiction. Tribes and their counsel should be prepared to _address this issue before even filing a bad-faith. negotiation action.
As evidenced by these recent cases, there are many considerations for tribal counsel prior to initiating and litigating an action for a judicial determination of bad-faith negotiations by a state. As with all matters, it is
49 25 U.S.C. § 2710(d)(7)(B)(vi).
50 25 U.S.C. § 2710(d)(7)(B)(vii).
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important that counsel be aware of all precedential decisions to create a clear record in case the negotiations result in litigation.
- From the beginning of negotiations for a tribal-state compact for Class III gaming, make it a priority to establish a clear record of all parts of the negotiations. This will be vital evidence if it becomes necessary to go to court with claims that the state is negotiating in bad faith. Make sure that what the tribe believes is not permitted in a compact by the IGRA is clearly stated throughout the
- When negotiating_ a tribal-state compact, keep in mind that district court has established that the IGRA is written in a restrictive rather than an expansive manner. Therefore, only matters listed in 25 S.C. § 2710(d)(3(C)
are permitted in a tribal-state gaming compact. Become familiar with the seven listed topics permitted by the IGRA to be included in a tribal-state gaming compact, and stay within the boundaries of that list, otherwise provisions within the compact will be prohibited. Become conversant with the case of Pueblo of Santa Ana, as it helped define what is and is not permitted within a tribal-state gaming compact.
- While the Ninth Circuit noted that a state’s demand for taxes to be
paid into its general fund makes it difficult to rebut evidence of bad faith, do not depend on that in supporting a claim of bad faith against a state. The state can disprove a bad faith claim if it can demonstrate that the revenue will go toward public interest/safety, criminality, financial integrity, and adverse economic impacts related to gaming activities. The state can also claim that it offers meaningful concessions in return for the tax, but this can be disproved if it can be shown that whatever is being offered is something the tribe already has rights to or already possesses.
- Study the “Rincon decision as a guide for defining a “meaningful concession.” Also per the Ninth Circuit, “consideration in Exchange for
the revenue sharing must be independently meaningful in comparison to the status quo, “meaning that what was being offered, if it was standing alone, would not be illusory or illegal. Once a meaningful concession has been exchanged for an
LITIGATION CONCE NING BAD-FAITH NEGOTIATIONS…
obligation upon a tribe, it can no longer be used to obtain more obligations from the tribe. Create a clear record of what meaningful concessions are offered by a state in exchange for revenue sharing.
- Prepare to be able to prove that the tribe was under federal jurisdiction as of 1934 before filing a claim of bad faith. Per the Carcieri and Big Lagoon decisions, the BIA erred and left tribes off of the list that were under federal jurisdiction at that time, which makes it possible for tribes not appearing on the list to prove they were under federal jurisdiction in 1934, using other competent evidence such as treaties, legislative acts, and tribal
The partners of Solomon Saltsman & Jamieson have over 140 years of combined legal experience and practice in several areas of law, including gaming, land use, alcoholic beverage licensing, and litigation. The firm has been at the forefront of gaming law
representing both tribal and non-tribal clients. The firm has been involved in tribal-state
gaming compact negotiations, litigation to interpret gaming rights under a tribal-state gaming compact, and litigation concerning breaches of tribal-state gaming compact. Additionally, the firm is continuously approached to determine the legality of proposed gaming operations given the constantly improving level of technology.
Isn’t this a funny country? The hot issues of the day make us ask ourselves, are tax laws fairly applied, are gun laws sufficient and enforced, is our private information actually public? Do we need more tax laws? Do we need more laws restricting guns? How do we keep personal information private?
Ralph Barat Saltsman
Stephen Warren Solomon
Stephen Allen Jamieson
Holding a drill does not make someone wearing a white coat a dentist. Dressing up in a sailor’s suit doesn’t qualify anyone to captain a freighter through the Dardanelles. A suit, tie and brief case doesn’t enable an unlicensed consultant to try an administrative hearing. Read more
The attorneys here at SSJ Law are proud to have recently published an article covering the marijuana civil rights movement that is sweeping across our country which was recently featured by Metropolitan News-Enterprise.
Marijuana Is Here to Stay
Legal recreational marijuana has been the dream; politically and literally. This fall as individual states from the Atlantic Ocean to the Pacific adopted the dream as reality, it all seemed to be within reach. But the dreamers woke up to a different world on November 8. As California and other states adopted legal recreational marijuana or liberalized use of marijuana in state elections, the reins to the federal government changed hands. Did the dream of open marijuana use turn into a nightmare of federal enforcement?
The election results are in…marijuana wins? Not so fast. Notwithstanding the will of the people in several states, the national election also led to a White House which will likely enforce federal marijuana prohibitions that have been largely ignored by law enforcement for nearly a decade. The question left open by the national election is…will the Trump administration and the intended Attorney General Jeff Sessions enforce the federal prohibition? How vigorous will that enforcement be in light of Sessions previous pronouncements and public positions? Several states have now passed ballot measures legalizing marijuana. If Senator Sessions, the Republican Senator from Alabama, is confirmed as Attorney General, there will be dire concerns for those involved in the marijuana business. While the Obama administration took a hands-off approach to those states that legalized marijuana, a new administration could change course and threaten aggressive enforcement.
While storm clouds appear on the federal horizon, support for marijuana legalization, both recreational and medicinal, continues to grow throughout the nation, state by state.
Prior to the November 2016 election, only four states (Alaska, Colorado, Oregon, and Washington) permitted the use of recreational marijuana. Now, a total of eight states have adopted laws legalizing the recreational use of marijuana. Additionally, a total of twenty-nine states now have laws regulating marijuana in some form.
In the recent election, nine states had ballot measures regarding either the legalization of marijuana for recreational use or medical use and the results are in:
Arizona: Proposition 205 sought to legalize recreational marijuana for adults and permit the production and sale, but ultimately the ballot measure failed. But, medical marijuana remains legal in Arizona as it was passed in 2010.
Arkansas: The voters passed Issue 6 to legalize medical marijuana for certain conditions.
California: Proposition 64 was passed, which legalizes recreational marijuana in the state. Additionally, medical marijuana was legalized in California, under Proposition 215, in 1996.
Florida: Amendment 2 passed to legalize medical marijuana in Florida.
Maine: The voters have made recreational marijuana legal in Maine, as Question 1 passed.
Massachusetts: Question 4, legalizing recreational marijuana, was passed in Massachusetts.
Montana: The voters passed I-182, which expands Montana’s medical marijuana program.
Nevada: The voters have made recreational marijuana legal in Nevada, as Question 2 passed.
North Dakota: A limited ballot measure, Measure 5, has passed and it permits marijuana use for the treatment of specific conditions.
Overall, the legalization of marijuana has been certainly on the rise. Now, under our new federal administration, the question remains: So what?
As individuals and businesses are anticipating whether the federal government will decide if marijuana is here to stay, these individuals and businesses are contemplating entering the marketplace. In deciding whether to enter the marijuana business, operators must consider several factors and considering our new federal administration, the risks associated with operating a legal state enterprise, but an illegal federal business. Marijuana business operators, in states where it is legal, must consider a variety of factors, but certainly must consider the following:
Federal Illegality—Marijuana remains a Schedule I drug under the Controlled Substances Act. While the Obama administration decided not to take enforcement action against marijuana-related businesses, in states where the use is legal and the states robustly regulate the field, there is a new administration that is not bound by the previous administration’s stance and perhaps, will likely choose to exercise enforcement over these businesses. The fact that marijuana remains federally illegal and the uncertainty of President-Elect Trump’s administration’s position with respect to enforcement must be considered. That window of consideration will probably close fairly soon after Senator Sessions is confirmed by his colleagues in the Senate. At that point, it’s quite certain the federal government’s position on enforcement will be made clear. Businesses ready to engage in the lucrative marijuana enterprise will know the viability or its early demise. Depending on the White House occupants in 2020 and thereafter, the trade may revive. Out this year, back in four? Or eight? But is that any way to run a business?
Compliance with State and Local Laws—For purposes of discussion, ignore for a moment the spectre of federal enforcement. In states where the adult use of marijuana has been legalized, there are numerous state and local laws in play that regulate the industry. In order to be compliant with the state and local laws, the business must know the statutes, rules, and regulations in place. Determining which laws are applicable can be difficult and time consuming. Running afoul of any state or local law could result in hefty penalties, suspension, or revocation of the ability to conduct the business. Further, because the industry remains federally illegal, there are generally several restrictions and limitations placed on the businesses under state or local law.
Financing and Investors—Because marijuana remains federally illegal, businesses can have a difficult time obtaining bank accounts, loans from banks, and other traditional forms of financing. Many start-up businesses require a great deal of funds to get off the ground. Potentially, anyone involved in the marijuana business, even investors, could be federally charged with a crime as the substance remains a Schedule I drug. As such, it may be difficult for marijuana businesses to operate within financial institutions and secure capital from reliable sources and individuals and/or companies may not want to take such a risk.
Tax Concerns—As the marijuana business is federally illegal, there are serious federal tax implications in owning and operating a marijuana business. For instance, the Internal Revenue Code denies business deductions for illegal businesses. Therefore, a marijuana businesses’ tax rate is significantly higher than that of a business that is operating legally under federal law. Additionally, states where marijuana is legal, can and oftentimes do, impose significant taxes on marijuana operations.
Intellectual Property—Federally illegal marijuana businesses cannot obtain a registered trademark for the marijuana products through the United States Patent and Trademark Office. Thus, marijuana businesses face problems in developing and securing intellectual property.
Market Restrictions—Getting the businesses name out to the public may be difficult as there are generally several marketing and advertising restrictions in the states where marijuana use is legal due to the federal illegality. Because advertising can be severely restricted and traditional forms of media may not engage in such advertising, it places limitations on the marijuana industry to reach consumers.
Liability—In manufacturing and selling marijuana, there are certainly concerns with respect to liability if a customer suffers injury because of consuming the product. If a customer is injured because the marijuana contained pesticides, chemicals, mold, mildew, etc., then the business operator and/or manufacturer is exposing itself to potential lawsuits. Additionally, adequate liability coverage from insurance companies may be difficult to obtain as traditional insurance carriers may not want to cover federally illegal businesses.
There is now a line separating federal prohibition from state permission. Time will inform us as to how this conflict of jurisdictions will be resolved. In the meantime, one would expect big business to adopt a wait and see before investing in what could one day be a lawful billion dollar enterprise if all the moving governments align.
By STEPHEN WARREN SOLOMON, STEPHEN ALLEN JAMIESON, RALPH BARAT SALTSMAN, R. BRUCE EVANS, RYAN M. KROLL AND JENNIFER L. ODEN
Read the full article on the Metropolitan News website here: http://www.metnews.com/articles/2017/legcomm021617.htm
By: Ralph Barat Saltsman * Stephen Warren Solomon * Stephen Allen Jamieson
Did you hear the one about the convenience store owner who attempts to hold up the competing convenience store across the street? Ok. So there really wasn’t a robbery, but…this store owner really did try to hold up the city and state application process so that a competing store would never open its doors across from his business. This hold up man came armed with public forums and some serious misinterpretations of state law. He failed at each step along the way, and the saga ended in two published companion opinions by the Court of Appeal.
In these landmark opinions, the Court of Appeal delved into the byzantine Alcoholic Beverage Control application process and the obscure complex role played by municipalities in that process. In these cases the Court determined the collaborative effort between state and municipal governments properly resulted in issuance of a license for sale of alcoholic beverages. The discretion which must be exercised by these governmental entities was analyzed by the Court which held that both city and state properly engaged and completed their respective statutory obligations in concert one with the other.
Relevant to these cases, by statute, the Alcoholic Beverage Control cannot issue a license to an applicant in an “over-concentrated area,” that is, in a census tract where the number of licenses meets or exceeds the number of licenses allowed. There are exceptions. As set by statutory formula, certain Alcoholic Beverage Control license applications cannot be issued absent a finding of Public Necessity or Convenience. This finding is required for an application in over-concentrated areas or where the site is in an area designated as “high crime” also by statutory definition and law enforcement statistics.
For certain licenses, such as restaurants and hotels, the finding of Public Convenience or Necessity may be made directly by the Department of Alcoholic Beverage Control. For other licenses, such as liquor stores, markets and convenience stores, such finding may be made by the local governing body where the premises are sited. In this way, county governments and municipal governments exercise discretion to make a finding of Public Convenience or Necessity or choose to make a finding that Public Convenience or Necessity will not be served by issuance of such licenses.
Business and Professions Code § 25958.4 (1995) created this threshold process for municipalities and county governments, but the underlying investigation of determining whether the license should issue remains exclusively with the ABC.
However, where cities and counties have authority to make findings on Public Convenience or Necessity, such findings must state the affirmative or the ABC will not issue the applied-for license. In cases where a finding of Public Convenience or Necessity is vested in the local governing body there must be a collaborative process between the Department of Alcoholic Beverage Control and the city or county in reviewing applications for sale of alcohol.
Crucial to the two recent Court of Appeals decisions, Business and Professions Code § 25958.4 was amended in 1996 to provide, in relevant part:
“(b)(2) With respect to any other license, if the local government body of the area in which the applicant premises are located, or its designated subordinate officer or body, determines within 90 days of notification of a completed application that Public Convenience or Necessity would be served by the issuance. The 90-day period shall commence upon receipt by the local governing body of (A) notification by the department of an application for licensure, or (B) a completed application according to local requirements, if any, whichever is later.” (Emphasis added)
The Court of Appeal in Nick v. Lake Forest, 232 Cal.App.4th 871 (Dec. 2014) upheld a finding of Public Convenience or Necessity made by the City Council for Lake Forest for a 7-Eleven to be located within that municipality. In a companion case, Nick v. Department of Alcoholic Beverage Control, 233 Cal.App.4th 194 (Dec. 2014) (Modified Jan. 15, 2015), the Court upheld the Alcoholic Beverage Control decision to issue a license for sale of alcoholic beverages to that 7-Eleven.
The facts underlying both decisions show that on June 29, 2010 the Department of Alcoholic Beverage Control informed the City of Lake Forest that 7-Eleven would be filing a request for a municipal determination that Public Convenience or Necessity would be served by issuance of this license. 7-Eleven lodged its request with the City Development Director on July 6, 2010. The City found that 7-Eleven’s request constituted the “completed application” under city requirements. Lake Forest determined Public Convenience or Necessity on October 4, 2010, that is, within 90 days after 7-Eleven’s completed application. Appeals were brought by Nick, a nearby competitor, through the city appellate process which concluded before the City Council. After a public hearing, the Council affirmed the earlier finding of Public Convenience or Necessity and made its own extensive factual findings as to how Public Convenience or Necessity would be served by issuance of this license.
Nick challenged this City Council decision in the Superior Court under Code of Civil Procedure § 1094.5. Nick argued that the language of the Lake Forest ordinance did not reflect the statute’s mandate. The Superior Court upheld the City Council decision noting any phraseology distinction between ordinance and statute was insignificant. At the Court of Appeal, Nick argued that the City did not act timely. Ultimately, in its opinion, the Court of Appeal recognized the clear language of 25658.4(b)(2) which provides that the 90-day count begins with notification that an application is made or when the city receives a completed application “whichever is later.” (emphasis by the Court) The City’s finding was upheld as timely.
The Court in Nick v. Lake Forest also examined the city’s findings and found those findings to be a sound exercise of discretion conferred on the city by 25658.4. The Court also acknowledged prior Court of Appeal opinions (such as Sepatis v. Alcoholic Beverage Control Appeals Board, 110 Cal.App.3d 93 (1980)) which reviewed Public Convenience or Necessity determinations made by the Alcoholic Beverage Control based on the ABC rule which preceded Business and Professions Code § 23958.4. The Court in Nick noted there is no definition of what constitutes Public Convenience or Necessity but that the term vests broad discretion so long as the decision maker does not act arbitrarily or on factors nor supported by substantial evidence. The Court opined that the findings made by the city were reasonable and supported by substantial evidence.
In the companion case, Nick v. Department of Alcoholic Beverage Control, the Court examined the Alcoholic Beverage Control application process and the statutory system that anticipated a collaborative effort between state and city where, when required by statute and statistics, the city is to determine whether Public Convenience or Necessity is served, and the ABC must conduct its “thorough” investigation into the underlying question of whether public welfare and morals would be jeopardized by its issuance of the ABC license.
In this case in the administrative hearing before the ABC, Nick argued the ABC, in its investigation and hearing process, ceded its authority to conduct its investigation to the City of Lake Forest when the Department relied on and incorporated the city’s findings of Public Convenience or Necessity into the ABC’s decision to issue the applied-for license. This administrative hearing, held in November 2012, allowed Nick the opportunity to cross-examine 7-Eleven’s and the Department’s witnesses and to present his own witnesses. The Department’s decision to issue the license acknowledges the City’s extensive and comprehensive finding of Public Convenience or Necessity. Nick argued that it is the ABC’s exclusive authority and obligation to investigate an application including findings of Public Convenience or Necessity.
The ABC decision was appealed to the ABC Appeals Board, the administrative appellate body which affirmed the Department’s issuance of the license. In an original proceeding before the Court of Appeal (see Business and Professions Code § 23090), Nick argued that the Department did not engage in its statutory mandate to “make a thorough investigation” into the application (see 23958) but unlawfully relied on the City’s Public Convenience or Necessity finding.
The Court of Appeal upheld the Department’s decision and the Appeals Board’s affirming opinion that the ABC properly reviewed the city’s finding of Public Convenience or Necessity and also conducted its statutory mandated investigation and properly concluded, based on the evidence, that the license should issue. The Court concluded:
“The Department therefore did not cede any of its authority to license the sale of alcoholic beverages to the City.”
In the Court’s two companion decisions, taken together, the ABC application process and the statutory interplay between state and municipality are explored and explained by the Court.
The moral is: if you’re going to attempt to hold up the application for your competition across the street, come armed with accurate statutory interpretations.
Post script – The administrative hearings before the city and the ABC, as well as the cases before the Court of Appeal were litigated by Solomon Saltsman & Jamieson. Nick filed Petitions for Review before the California Supreme Court which were summarily denied on March 11, 2015 and April 15, 2015, respectively. The ABC license was issued May 27, 2015, nearly five (5) years after application. By permit 7-Eleven was open and operating beginning April 2011.
Ralph B. Saltsman, Stephen Warren Solomon and Stephen Allen Jamieson are partners in the Law Firm of Solomon, Saltsman & Jamieson in Los Angeles. The authors practice in the areas of Land Use; Indian Gaming; Internet Gaming; Gaming; Zoning; Administrative; Personal Injury; and Constitutional Law. Saltsman, Solomon and Jamieson can be reached at (310) 822-9848; firstname.lastname@example.org, email@example.com and firstname.lastname@example.org.
JUDGE FOR A DAY
By Ralph Barat Saltsman and Stephen Warren Solomon
At any given moment there is a serious possibility that the courtroom a Traffic Infraction litigant enters will have a Temporary Judge (aka Judge Pro Tem) presiding. The same holds true for Unlawful Detainer trials, hearings in Civil Harassment cases, Small Claims trials and some Family Law matters.
Temporary Judges are called upon in Civil Harassment cases to determine when the threats over a parking space constitute a danger or are just vigorous discussions protected by First Amendment. Do a series of emails constitute a danger? Is the ex husband really stalking the new boyfriend?
In Unlawful Detainer cases, tenants’ uninhabitability claims have to be measured, and land lords’ adherence to strict statutory time and process must be determined.
From the Temporary Judge’s perspective, each courtroom presents its own unique challenges. Visiting as Judge in Courtroom A, the Temporary Judge will immediately meet the Deputy Sheriff who says, “Good morning, Your Honor. Of course this is up to you, but our Judge usually grants OR releases in traffic arraignments, because who can afford $500 on a stop sign violation for bail?”
In Courtroom B across town, the clerk greets the Temporary Judge with, “Hello, Judge, the Commissioner, just for your information, almost never grants OR in traffic arraignments, because when they don’t show up, he/she can’t just forfeit bail. Of course, you’re in charge, so it’s up to you.” In Courtroom C the clerk informs the Temporary Judge, “Of course you know what your assignment is, right?” “To dispense justice?” you answer. “Yes, he/she says, “as long as you finish by 11:45. Did I mention we have 150 arraignments this morning?”
For the record those clerks and Deputies are crucial to the Temporary Judge’s success in handling the court calendar fairly, expeditiously and with a minimum of (one hopes harmless) error.
Throughout the Los Angeles County Superior Court system, Judges and Commissioners temporarily yield the bench to Temporary Judges. There are 444 Superior Court Judges appointed by the Governor and elected by the people. There are presently 694 Temporary Judges volunteering their time by half day or full day to preside over court cases. In 2010 Temporary Judges covered 6464 court calendars. In 2011 Temporary Judges covered 6785 calendars.
Temporary Judges are asked to voluntarily cover courts reaching from Santa Monica to Pomona and from Long Beach to Chatsworth and can accept their assignments from a list, and can choose to preside morning or afternoon.
Those volunteering as Temporary Judges contribute time without compensation. This translates to monetary benefit to the Superior Court. The number of calendars handled by Temporary Judges equates to the full time annual employment of 16 Superior Court Judges. By rough mathematics, the Temporary Judge system constitutes a savings of $3,990, 608. This comes at a time of devastating cutbacks in the justice system. Calculating the equivalent monetary contribution made by attorneys volunteering for the program by the hourly rate of, say, $400 per hour, the support is impressive. That contribution comes to $8,142,000. Impressive and yet, some believe, a small price to pay for putting on a black robe. (Gov’t Code Sec. 68110)
As Judge Stuart Rice recently stated, “As Chair of the Temporary Judge Program, I am gratified to send hundreds of Los Angeles’ finest attorneys to sit as Temporary Judges, in Traffic, Small Claims, Unlawful Detainer and Civil Harassment cases, so those courts can continue to function even though their judges are absent. Temporary Judges are often the public’s only encounter with the Judicial System. The Temporary Judge Program is economically beneficial and enhances the services provided to the public.”
With the significant budgetary crises and consequent cutbacks on personnel and court staff and the shifting and consolidating of caseloads amongst courthouses, the demand for Temporary Judges has become less predictable. Caseloads have shifted from Courthouse to Courthouse, courtrooms have closed, staff have been transferred and staffing levels have been cut back. The Temporary Judge Program continues to be an asset to the court as it struggles to continue to provide access to justice for all who seek it.
There was a time when attorneys would be asked to cover cases and courtrooms on an ad hoc basis by sitting Superior & Municipal Court Judges. Today, the California Rules of Court set training and qualification requirements. Presently, ten years of active practice is required. The training requirements for Temporary Judges are mandatory and continuing. The combination of on-line and live seminars includes:
Bench Demeanor, Traffic (arraignments and trials), Small Claims Procedure, Small Claims Consumer and Substantive Law, Unlawful Detainer, Judicial Ethics, Family Law (in several categories) and Civil Harassment.
Additionally, there are live seminars required and Bench Conduct and Demeanor and classes offered throughout the year on these and other topics important for temporary judges. Certification must be renewed every three years. (See: California Rules of Court 2.812)
Temporary Judges are asked to be mindful of the statistic that most people who come in contact with the judicial system are in a traffic court, small claims court or in a similar court experience. Those are people who are most concerned with being heard and having their day in court. However, lower monetary limits and procedures on infractions do not diminish the potential for controversy. Temporary Judges find themselves faced with serious and sometimes complex legal tangles. The cases heard are typically outside the practice areas of the Temporary Judge. For example, “Red Light Camera” laws are pending before the California Superior Court.
The Temporary Judges system is Constitutionally created. In 1927, the California Supreme Court in Martello v. Superior Court (Los Angeles County), 202 Cal. 400 reversed a Temporary Judge decision because the California Constitution authorization of Temporary Judges was deleted mid-trial.
Presently, California Constitution Article 6, Sec. 21 (adopted November 8, 1966) provides:
On stipulation of the parties litigant the court may order a cause to be tried by a temporary judge who is a member of the State Bar, sworn and empowered to act until final determination of the cause.”
With that stipulation signed, litigants and the Temporary Judge enter into a multi-faceted arrangement. For most litigants, standing before a judge in a courtroom is novel. For the Temp, looking down from the bench is itself different from the day to day of practice. There is a lot to be learned from that perspective, and the merits and substance of the litigation can be very foreign. Corporate litigators can hear Civil Harassment Restraining Orders. Lawyers spending a career dealing with administrative government regulations may decide small claims disputes between neighbors whose trees invaded their respective properties. Attorneys who regularly write appellate briefs and argue before the Courts of Appeal and Supreme Court can be assigned a morning of Unlawful Detainers. The unfamiliar is stimulating; performing the task, rewarding.
Decisions rendered by Temporary Judges can be reviewed by the Courts of Appeal (See People v Benhoor (2009) 177 CA 4th 1308 where the Court of Appeal affirmed a traffic infraction conviction and the issue was whether the appellant received a speedy trial.) Decisions made by Temporary Judges could be reviewed by the California Supreme Court or the United States Supreme Court.
In the materials presented to prospective Temporary Judges, emphasis is given to the fact that the parties typically appearing before a Temporary Judge are self-represented. Temporary Judges are informed that “attorneys care about results; the public cares more about being heard and being treated fairly and with respect; judges want to efficiently move cases and get them over with.…”
The volunteer presiding as Temporary Judge suddenly shifts from advocate and adversary to impartial trier of fact and law. As noted by Judge Rice, most litigants appearing in that courtroom have never before been involved in the judicial system. The impression that Temporary Judge leaves with the litigant will likely be his or her entire and only experience which may last a lifetime. It is most important for those litigants to leave the courtroom believing they had a full opportunity to tell their story and make their case. This is the mandate held by Temporary Judges and, oh yes, to finish the morning calendar while it’s still morning.
Ralph B. Saltsman and Stephen Warren Solomon are partners in the Law Firm of Solomon, Saltsman & Jamieson in Los Angeles. The authors practice in the area of land use, Indian Gaming, zoning, administrative, personal injury, and constitutional law. Both Saltsman and Solomon volunteer as Temporary Judges. Saltsman and Solomon can be reached at (310) 822-9848; email@example.com and firstname.lastname@example.org.
By Ralph B. Saltsman and Stephen Warren Solomon
With Indian Casinos virtually surrounding Los Angeles County, one might ask: why are there no Indian Casinos in Los Angeles County? The short answer is, there are no Indian Reservations in Los Angeles County upon which a casino could be built. How close did the LA basin get to having an Indian Reservation? The Gabrielino-Tongva, along with other tribes living west of the Sierras negotiated treaties with the United States between 1851 and 1853, but the treaties were never ratified by the U.S. Senate. Rather, the treaties were stuck in a drawer for fifty years in Washington DC until found there in 1905. Today, over a hundred years after the treaties were discovered, there is no reservation. There is no federal recognition of the Gabrielino-Tongva as an Indian Nation. There will be no Indian Casino in Los Angeles County.
One can dream that had the United States government by Congressional Resolution adopted the 1851 Treaty recognizing the Gabrielino-Tongva as an Indian Nation, with a reservation set on properties somewhere in Los Angeles County as a settlement of the Tribe’s claim for lands in the Los Angeles basin. Wrongs committed by Mexico and Missionaries against generations of Gabrielino-Tongva would have been rectified. As an officially recognized Indian Tribe the Gabrielino-Tongva certainly could have been in the club of Indian Nations in California operating Indian gaming casinos after1999. It didn’t happen in 1851, and it realistically cannot happen now.
Settling the Los Angeles area around 7,000 years ago, the Gabrielino-Tongva have been effectively shut out of the Tribe’s consistent and ancient claims to its homelands. Before European occupation of the Los Angeles area, the Gabrielino-Tongva established villages from west of the San Bernardino Mountains to Catalina and the Channel Islands, as far up the coast as Topanga, as far north as Tejon and as far south as at least Newport Beach and perhaps Laguna Beach. The 1851 treaty likely would have provided the Tribe with significant land interests in the Los Angeles basin. With the agreements lost and forgotten for over fifty years, no resolution of land claims was completed. Land claims settlements were undertaken after the conclusion of World War II, but the payments on millions of acres for Tribes west of the Sierras was an embarrassing pittance.
Instead of a casino, what the Gabrielino-Tongva Tribe has today is no reservation land, no federal recognition, no home and no realistic prospect for achieving those objectives. The Tribe continues in its quest for Federal recognition. In fact it was not until 1994 that the State of California formally recognized the Gabrielino-Tongva Nation.
Had that treaty been ratified, by the end of the 20th Century the Tribe would want a multi-million dollar casino and could possibly have the financial backing to build one. In order for the casino to include Class III gaming, the land upon which the casino would stand must be Indian land. The federal government divides Indian gaming into three classes with Class I gaming being social games for nominal prizes and traditional forms of Indian gaming as part of tribal ceremonies or celebrations. Class II gaming consists of bingo and also card games explicitly authorized by the State or those card games not explicitly prohibited by the State and may be played anywhere within the State. Class III gaming includes slot machines, poker, and blackjack. Fantasy headlines aside, the reality foretells no Indian Class III Casino will be built in Los Angeles County.
While the Federal government has the power, authority and jurisdiction to create an Indian Reservation and convert land held in fee to trust land, clearly, politics dictate whether one of the enumerated routes will yield Indian land where a Class III casino could stand. Considering all the economic power held by likely opponents to creation of Indian land in LA County, and considering the political strength of those likely opponents, it’s unrealistic to entertain thoughts of such events in the future.
It’s procedurally possible but not to be achieved. If the Tribe had land where a casino could be built, the assumption is the Gabrielino-Tongva would certainly be an attractive investment for lending institutions and would be a logical contact for architects, construction firms management companies all competent and vitally familiar with Indian gaming establishments. Within a few years, the Gabrielino-Tongva Indian Nation would own and operate the only Indian Casino in Los Angeles County. The Maricopa Tribe has a saying: “Everyone who is successful must have dreamed of something.”
This dream is clearly to stay just a dream.
“Solomon, Saltsman & Jamieson are attorneys practicing in the areas of ABC law, ABC Appeals Board cases, and all related Land Use Matters such as City and County Conditional Use Permits, Variances, Police and Fire permits, Entertainment law, and Indian Gaming; as well as Business and Personal Injury litigation. Solomon, Saltsman & Jamieson can be reached at 800 405 4222. https://ssjlaw.com/ “
Indian Country’s Debate on Internet Gaming
Ralph B. Saltsman and Stephen Warren Solomon
Well. Do we let the Genie out of the bottle? Does this Genie lavish untold wealth on its owner or wreak devastation on an established treasured enterprise? By the way, to whom does this Genie belong?
In California State legislation appears from time to time allowing Intrastate Internet gaming. One such bill in preliminary discussion in Sacramento and elsewhere would grant a license for Internet Intrastate poker to an enterprise consisting of card clubs and Indian Tribes. That license would unleash a Genie co-owned by those two sets of entities. This bill would allow for On-line poker and not Class III gaming. What is not included in this discussion is the race track or state lottery.
Class III gaming includes card games played against the house and also Las Vegas style slot machines. In time more than one license could be issued to more than one business entity. This intrastate gaming by definition would be confined to California. Intrastate Internet poker where there is no bank and no percentage take could yield hundreds of millions of dollars.
Internet gaming may: 1) reap billions for its owners; or, 2) generate a lot of excitement and not much else; or, 3) diminish the most successful gaming structure in California, that is, Native American land.
Indian casinos in California are billion dollar industries. According to the National Indian Gaming Commission, California casinos had gross incomes of $7.8 billion in 2007 and $7.36 billion in 2008. No one would consciously want to dismantle or endanger those generous structures. On the other hand, who would want to ignore tomorrow’s multi-billion dollar money machine that is internet gaming?
At present, there is no lawful Internet gaming in the United. States. In California through state Constitutional amendment, legislation and Compacts between Tribe and State, Indian casinos have Class III gaming. Card Clubs do not. California Indian casinos are holding the cards over the competing Card Clubs. This could change.
The statistical array of poker players, internet gamblers, and casino patrons is only part of the equation under debate. Regardless of what the numbers show as to who is gambling and how they are doing it, no one can seriously argue the limits and potential for Intrastate California Internet gambling. Internet gaming may prove to be without easily predictable limit. But Indian Tribes are wrestling with the issue of structure. One very serious argument in opposition to Internet gaming is the inclusion of Card Clubs into the world of Tribal gaming capabilities. Card Clubs are not presently part of that success story. Inclusion into an Internet gaming system of Card Clubs partnered together with Indian Tribes may be the Card Clubs’ first step toward intrusion into what is now the Tribes’ exclusive domain.
The issue of Indian Gaming exclusivity in California raises the perplexing question: Is it in the Indian Nation’s best interest to allow Intrastate Internet gaming to be born if it means ultimately losing exclusivity in Class III gaming Indian Nations presently enjoy? The above referenced legislation under early discussion in California would restrict games to poker thereby preserving Indian Casinos’ exclusive right to provide Class III gaming, but many in Indian Country are wondering out loud if poker is but step one in a continuum of graduated legislation and Constitutional amendment that will end with full Class III internet gambling. At that point, the Tribes’ exclusivity is lost, the Genie has destroyed the brick and mortar enterprise that has sustained Indian Tribes, and there is no putting the Genie back in the bottle.
But then on the other hand, how can Indian Nations which had the foresight to create and build casino gaming allow the lucrative opportunity of Internet gaming to pass?
The argument in favor of immediate passage of state legislation permitting Internet interstate poker, is this gaming will be restricted to poker and not Class III gaming. The sanctity of the Indian Casino will be therefore undisturbed. Moreover, failure to act now will allow legal Internet intrastate poker to take off leaving the Tribes behind.
However, once allowed the financial wherewithal, cache of success and the attendant political power, Card Clubs could have a platform from which further and additional Internet gaming could be modified by legislation and Constitutional amendment by ballot all at Card Club instigation. Most observers believe Native American Tribes can now effectively block gaming legislation. Will that still be true when financially successful Card Clubs participating in a Tribal-Card Club Internet Intrastate poker system go to the legislature and ballot proposition in the future with new laws and constitutional provision allowing Class III Internet gaming?
Those in favor of Internet intrastate poker point out that absent Tribal leaders’ foresight in the 1980’s and 1990’s, the Las Vegas style casinos on Indian Reservation lands would not exist. That foresight now calls for action to take advantage of the computer phenomenon which will grow exponentially with or without Tribal participation.
It is also true that when Native Americans won passage of State constitutional amendments and attendant legislation, and the Federal Government and State law adopted the machinery for Native American Casinos with Class III gaming, and the Tribes built those casinos, there were no billion dollar casino businesses in California to lose. Now the intricacies of the arguments are dangerous, because the stakes are awfully high.
To some Native Americans contemplating their economic status during the mid Twentieth Century, their memories recall deprivation without the nostalgia for those good old days. That Genie could be key to further fortune or could be the self-chosen means of destruction of the existing enterprise sustaining so many Native American Tribes and the communities in which those Indian casinos stand.
The decision to allow passage of legislation in California to establish lawful Internet Intrastate gaming must be made wisely to protect the existing casinos and, at the same time, provide for the future.
So. Do we let this Genie out of the bottle? And whose Genie is it?
Ralph B. Saltsman is a lawyer with Solomon, Saltsman & Jamieson (ssjlaw.com). He has been a lawyer for 36 years, 34 of which have been in the area of land use licenses and permits.
Stephen Warren Solomon practices administrative law at Solomon, Saltsman & Jamieson (ssjlaw.com) in Los Angeles. His expertise centers on licensing and Indian gaming and catastrophic personal injury.
Solomon, Saltsman & Jamieson are attorneys practicing in the areas of ABC Law, ABC Appeals Board cases, and all related Land Use Matters such as City and County Conditional Use Permits, Variances, Police and Fire Permits, Entertainment Law, and Gambling Law as well as Business and Personal Injury Litigation. Solomon, Saltsman & Jamieson can be reached at 800-405-4222.