Regulatory Updates

Texas v. United States: Will IGRA Allow States to Have Their Cake and Eat It Too?

John H. Douglas
John H. Douglas

John H. Douglas, Attorney at Law
Foley & Lardner LLP

The Indian Gaming Regulatory Act (IGRA) allows tribes to conduct Class III gaming on tribal lands pursuant to the terms of tribal-state compacts. Although Congress attempted to structure IGRA in a way that would balance the interests of tribes and states in compact negotiations, the statute has not been effected as Congress intended. The reason - in 1996 - in Seminole Tribe of Florida v. State of Florida (Seminole Tribe) - the United States Supreme Court held that Congress lacked authority to waive states' sovereign immunity to suits by Indian tribes under the Eleventh Amendment to the Constitution, thereby allowing states to “block” good-faith determination suits under IGRA by refusing to consent to be sued. This distinct advantage for states was unintended by Congress, and has frustrated tribes trying to engage in compact negotiations under IGRA.

In response to this effective evisceration of the key remedial procedure of the statutory scheme under IGRA, in 1999, the Secretary of the Interior created the so-called “Secretarial Procedures” – regulations that potentially allow for tribal gaming even when states refuse to negotiate a compact or consent to a good-faith suit. Under the Procedures, once a state refuses to consent to a good-faith suit, the tribe can submit a proposal to the Secretary of the Interior. A state can then respond to the tribe's proposal, and even submit its own proposal. If a state does not submit a proposal of its own, however, the Secretary can either approve the tribe's proposal or hold a conference to allow the state and the tribe to resolve any disagreements. If the state submits a proposal, a mediator appointed by the Secretary can resolve differences between the proposals. The Secretary can then approve the mediator's proposal, or reject it and prescribe his or her own procedures for Class III gaming.

The crucial difference between IGRA and the Secretarial Procedures is that, under the latter, a determination by a court that the state has not negotiated in good faith is not required before a proposal can move forward. Under the Secretarial Procedures, even if the state refuses to submit a proposal of its own, the Secretary may approve the tribe's proposal. The Secretarial Procedures have thus at least held out some hope for tribes seeking to re-level the playing field with states during compact negotiations. At least until now.

In an August 17, 2007 decision, a divided panel of the Fifth Circuit Court of Appeals (the federal court of appeals with jurisdiction over Texas, Louisiana, and Mississippi) found that, by creating the (at least theoretical) mechanism of judicial “good faith” determinations, IGRA had effectively negated the authority of the Secretary of the Interior to promulgate the Secretarial Procedures in an attempt to solve the problem created by Seminole Tribe. Although the Bush Administration is seeking rehearing of the matter before a full panel of all of the judges of the Fifth Circuit, the Secretarial Procedures now face an uphill battle in the courts. If the decision is not reversed by the Fifth Circuit or the Supreme Court, it has the potential to render the Secretarial Procedures a dead letter – at least in the three states where the Fifth Circuit has jurisdiction.

How did the decision come about? A brief detour into history is helpful in order to understand the answer to this question.

The state of Texas has operated a high-stakes lottery since 1991 and the Department of the Interior has taken the position that the state's definition of “lottery” is broad enough to include most casino-style games, with the exception of slot machines. Three Indian tribes – the Kickapoo Traditional Tribe of Texas, the Alabama-Coushatta Tribe of Texas, and the Tigua Tribe of the Ysleta del Sur Pueblo – all have land within Texas' borders. Since the passage of IGRA, all three tribes have attempted to negotiate a Class III gaming compact with Texas, none with success. Despite the lack of compacts, each tribe has at least attempted to operate a casino. In 1993, for example, one year after its petition for a tribal-state compact was rejected, the Tigua tribe opened Speaking Rock Casino, near El Paso. In 1999, empowered by the federal law whereby the tribe had been recognized, Texas filed suit against the Tiguas, claiming the casino violated the state's limited gaming laws. The Fifth Circuit Court of Appeals agreed, and the doors of Speaking Rock closed in early 2002, cutting off what had become a $60 million annual source of income for the tribe. The Alabama-Coushatta Tribe of Texas also operated a casino in southeast Texas for about a year ­– before it, too, was forced to close in 2002.

Federal recognition of the Kickapoo Tribe predated that of the Tiguas and Alabama-Coushattas, however, and, in contrast, was on terms that did not allow the State of Texas to directly interfere with its operation. Since 1996, the Kickapoos have operated the Lucky Eagle Casino, and offered non-banked poker and bingo. Even though Texas had flatly rejected the tribe's petition to enter into a compact under IGRA, the tribe had not given up on its pursuit of Class III gaming, and in 2004, using the Secretarial Procedures, the Kickapoo Tribe submitted a gaming proposal to the Secretary of the Interior. Texas then sued the Secretary of the Interior, seeking an injunction prohibiting the Secretary of the Interior from proceeding against the State of Texas under the Secretarial Procedures.

In a 2-1 decision authored by Chief Judge Edith Jones of the Fifth Circuit, a Republican appointee, the court held that the Secretary of the Interior did not have the authority to institute the Secretarial Procedures – essentially because they were in conflict with the (eviscerated) judicial “good faith” determination process set up under IGRA. In particular, Judge Jones found the Secretarial Procedures lacked the “safeguard” IGRA purported to afford states – namely, the right to a “good faith” determination by the independent federal judiciary. According to Judge Jones, the Secretary of the Interior could not act under IGRA until there had been litigation, negotiation, and mediation, all before “neutral parties” such as a judge or a court-appointed mediator. In finding the Secretarial Procedures invalid, she noted that they allowed the Secretary not only to select a mediator, but also to create a proposal independent of that of a tribe, the state, and even the mediator. This, Judge Jones found, meant the Secretarial Procedures essentially allowed for the possibility of tribal gaming in the absence of a tribal-state compact, in contradiction to Congress's “repeated and emphatic insistence” that Class III gaming should not be conducted on tribal lands without such a compact.

Though Judge Jones' colleague, Judge King, a Democratic appointee, also agreed that the Secretarial Procedures should be invalidated, she did so on much narrower grounds. Judge King also was cognizant of the troubling implications of the majority's decision for tribes, remarking that it “returns IGRA's Class III gaming system to the complicated situation that existed after the Supreme Court's decision in Seminole Tribe, with a state having the leverage to block gaming on Indian land under IGRA in a manner wholly contrary to Congress's intent.”

Dissenting, Judge Dennis, another Democratic appointee, rejected Judge Jones' analysis entirely. He found that, long before – and independently of – IGRA, the Secretary of the Interior had been delegated authority by Congress to promulgate regulations to carry into effect statutes relating to Indian relations. Thus, independent of any problems with IGRA and the judicial determination process it set forth (as identified in the Seminole decision) – the Secretary of the Interior had pre-existing and non-IGRA-dependent authority to implement the Secretarial Procedures. Judge Dennis likewise emphasized the contradictory position at the heart of Texas' case – “The State of Texas, after categorically refusing to negotiate with the Kickapoo and after asserting its sovereign immunity in federal court when the Kickapoo attempted to invoke the original statutory procedures, now resorts to a federal court complaining that it is crucial that a federal court serve as an independent body to determine whether its absolute refusal to negotiate constituted 'negotiations in good faith.'”

Now that tribal leverage under both the IGRA and the Secretarial Procedures has been undermined, what options exist to protect tribal interests? Though the Department of Justice always has the discretion to decide whether or not to prosecute tribes for conducting gaming without a compact, the Texas v. U.S. decision certainly does not bode well for Indian tribes. After all, the Secretarial Procedures favored tribal interests by providing a way around a state's avoidance of a good-faith determination suit. However, the analysis that led to the Fifth Circuit's decision most fundamentally affirms that the Secretary may not exceed the authority intended by Congress. In other words, this decision can be seen as a reminder to Congress that Seminole Tribe has effectively placed an immovable roadblock in the compacting path prescribed in IGRA, and only Congress can establish a new path for tribes and states to follow.

In the meantime, a recent 66-66 vote in the Texas House of Representatives blocked a bill that could have allowed casino gambling to resume on Tigua and Alabama-Coushatta tribal lands – and Texans themselves continue to take their gaming dollars on regular trips to Indian casinos in Louisiana,
Oklahoma, and New Mexico.

John H. Douglas is a management-side labor and appellate lawyer, and a partner in the San Francisco office of Foley & Lardner LLP, a law firm founded in Wisconsin in 1842 - and now with close to 1,000 attorneys in offices coast to coast, Asia and Europe. He can be reached by calling (415) 984-9879 or email jdouglas@foley.com.