Scope Creep: What Are the Limits Under IGRA on State Powers to Regulate Ancillary Non-Gaming Business Ventures

GAMING LAW REVIEW AND ECONOMICS Volume 18, Number 1, 2014 Articles Ó Mary Ann Liebert, Inc. DOI: 10.1089/glre.2013.1814 Scope Creep: What Are the Limits Under IGRA on State Powers to Regulate Ancillary Non-Gaming Business Ventures Frederick R. Petti, Patricia Lane Briones, and Wendell Long IGRA’s legislative history made clear that Congress did not ‘‘intend that compacts be used as a subterfuge for imposing state jurisdiction on tribal lands.’’ INTRODUCTION Department elected to file a Notice of Dispute under the Compact regarding the status of the n November 11, 2011, the Pascua Yaqui Tribe1 Resort, the Department believed it was simply ask- O (the ‘‘Tribe’’) opened a new resort and confer- ing a three-person panel to decide whether the ence center, a 161,000 square foot facility that was Resort was a ‘‘Gaming Facility’’ as that term was adjacent to the Tribe’s existing casino. Prior to defined under the Compact.4 In reality, the issue be- opening the Tribe’s Casino del Sol Resort and Con- fore the Panel was more profound than simply re- ference Center (the ‘‘Resort’’), the Arizona Depart- solving a disagreement about the meaning of a ment of Gaming (the ‘‘Department’’) notified the defined term in the Compact. Tribe that the Department was taking the position The real issue before the Panel was whether that the Resort was merely an expansion of the IGRA granted power to the states to regulate tribal Tribe’s existing casino and, therefore, the Resort enterprises merely because an enterprise was ancil- was a ‘‘Gaming Facility’’ and subject to regulation lary to a tribal gaming operation. In reaching its de- under the Pascua Yaqui Tribe-State of Arizona cision, the Panel set forth what it believed were the Gaming Compact (the ‘‘Compact’’). The Tribe dis- limits on that authority under the Compact. Since agreed, asserting that the Resort was a facility at the Panel issued its award in the dispute between which no gaming activity was taking place and, the Tribe and the Department, the United States therefore, it was not a ‘‘Gaming Facility’’ as defined Department of Interior has issued two letters that under the Compact. As such, the Tribe asserted fur- further define the limits of state authority to regulate ther that the Resort was not subject to regulation tribal enterprises that exist to support tribal gaming under either the Compact or the Indian Gaming operations. Regulatory Act (‘‘IGRA’’).2 This article discusses the Panel’s decision in the The Arizona Tribal-State Gaming Compacts pro- Pascua Yaqui Tribe-State of Arizona dispute, as well vide for a binding arbitration process when there is a as what the recent Interior letters tell us about the formal dispute between a tribe and the state regarding the interpretation of the Compact.3 When the 1The Pascua Yaqui Tribe is located just southwest of the Tuc- son, Arizona metropolitan area. Frederick R. Petti and Patricia Lane Briones are partners at Petti 2See Committee Report for Indian Gaming Regulatory and Briones, PLLC in Phoenix, AZ and represented the Pascua Act, S. Rep. No. 100-446, at 14. Yaqui Tribe in its arbitration with the State of Arizona. Wendell 3Section 15(c) of 2003 of the Arizona Tribal-State Gaming Long is a law school graduate and was the chief executive offi- Compacts. cer of the Pascua Yaqui Tribe’s gaming enterprises at the time 4A three-member panel was chosen by the parties in October of of the arbitration. 2011. 19 20 PETTI, BRIONES, AND LONG permissible limits on a state’s authority to regulate At the present time, there are 308 slot machines ancillary non-gaming activities. The article goes located at Casino of the Sun. Casino Del Sol offers on to argue that such power is extremely limited, a variety of Class III and Class II gaming to its cus- but that through a process of exponential accretion, tomers. In the Class III area, it offers 956 slot ma- states have extended that authority beyond permissi- chines, 22 table games, including blackjack and ble limits. Finally, the article asserts that tribes variations of poker, and a poker room. As for should object to this improper extension of state Class II gaming,8 Casino Del Sol’s bingo hall regulatory authority, lest such power become ac- seats up to 600 players. All Class III gaming offered cepted as a matter of custom. in Casino Del Sol is regulated under the 2003 Com- pact and that regulation was not at issue in the arbitration between the Tribe and the Department. FACTUAL BACKGROUND OF THE PASCUA On November 11, 2011, the Tribe opened its new YAQUI/STATE OF ARIZONA DISPUTE Resort. The Resort has 215 guest rooms, a spa, and 65,000 square feet of indoor and outdoor meeting Definition of ‘‘Gaming Facility’’ under both and convention space. It also offers additional dining the 1993 and 2003 Arizona Compacts to its guests and visitors—critically, no gaming at all, let alone Class III gaming, takes place in the Resort. Following the 1988 passage of IGRA, the Pascua The Tribe was transparent in its communications Yaqui Tribe and the State of Arizona entered into with the Department regarding the development of the Tribe’s initial Compact on June 24, 1993. That the Resort and the Tribe’s belief that the Resort document defined the phrase ‘‘Gaming Facility’’ was not a gaming facility. The Tribe first notified to mean ‘‘the building or structures in which Class the Department of its plans to build the Resort in III Gaming, as authorized by this Compact, is con- October 2009, and the parties met on four separate ducted.’’5 The Tribe’s 1993 Compact, as well as occasions to discuss the Resort. At these meetings, all other compacts between other Arizona tribes the Department consistently stated its belief that the and the State, was scheduled to begin expiring in Resort is a gaming facility and that the Department June 2003, if not renewed by the parties. In early intended to regulate the Resort as if it were a building 2002, the State of Arizona and 17 Arizona tribes or structure in which Class III gaming is conducted. came to agreement on a model compact that On July 7, 2011, the Tribe provided a copy of the would be offered to all Arizona tribes. Thereafter, Tribal Enterprise Ordinance and Regulations (the the State presented that model compact to the Ari- ‘‘Enterprise Ordinance’’) enacted by the Tribe as zona legislature for approval.6 When the legislature the regulatory scheme under which the Tribe planned failed to approve the model compact, the 17 tribes to operate the Resort. The Enterprise Ordinance re- gathered the necessary signatures to put the model quired employee background checks and contained compact on the November 5, 2002 ballot as Propo- a number of other provisions designed to ensure the sition 202. Arizona voters approved Proposition 202 safety and security of resort guests and their in November, and on January 9, 2003, the Tribe signed its 2003 Compact with the State. The definition of ‘‘Gaming Facility’’ did not change from the 1993 Compact to the 2003 Compact.7 5Section 2(n) of the 1993 Pascua Yaqui Tribe-State of Arizona Gaming Compact (emphasis added). 6The 17 Tribes that participated in the negotiations with then Ari- The development of Casino Del Sol Resort zona Governor Jane Hull were the following: Gila River Indian and Conference Center Community, Kaibab-Paiute Tribe, Cocopah Tribe, Fort Mojave In- dian Tribe, Salt River Pima-Maricopa Indian Community, White After signing its initial gaming compact in 1993, Mountain Apache Tribe, Yavapai Apache Nation, Pascua Yaqui the Tribe operated a single casino known as the Tribe, Hualapai Tribe, Tonto Apache, Ak-Chin Indian Commun- Casino of the Sun. On October 10, 2001, the Tribe ity, Quechan Indian Tribe, Tohono O’odham Nation, Fort Mc- Dowell Yavapai Nation, the San Carlos Apache Tribe; the expanded its gaming operations when it opened a Colorado River Indian Tribes; and the Yavapai-Prescott Indian new casino known as Casino Del Sol. The two casinos Tribe. 7 are approximately one-and-a-half miles apart, the 2(n) of 2003 Pascua Yaqui Tribe-State of Arizona Gaming Compact. minimum distance required by the Compact, and 8Pursuant to IGRA, states have no regulatory authority over there is no lodging adjacent to the Casino of the Sun. Class II gaming. LIMITS ON STATE REGULATION OF ANCILLARY NON-GAMING BUSINESSES 21 property, including providing for tort remedies for found that an expansion of an existing casino to patrons of the Resort.9 After initially informing the add more hotel rooms and suites, some of which Tribe that it had unspecified issues with the Enterprise were designated for private table gaming, fell Ordinance, the Department notified the Tribe on Sep- within the definition of ‘‘Gaming Facility’’ in the tember 9, 2011, that it was instituting the dispute res- Compact between the Picayune Rancheria and the olution process under Section 15(c) of the Compact to State of California.14 arbitrate the status of the Resort as a gaming facility. Finally, the Department claimed that its position was supported by the express language of IGRA. In particular, the Department noted that x 2710(d) (3)(c)(vi) provides that ‘‘[a]ny Tribal-State com- THE PARTIES’ LEGAL ARGUMENTS pact.may include provisions relating to.stan- dards for the operation of such activity and The Department’s position maintenance of the gaming facility, including licens- Before the arbitration panel, the Department took ing.’’ Because subsection (c)(vi) does not require that the position that the definition of a gaming facility regulation be ‘‘directly related’’ to gaming, the found in the Compact—‘‘the building or structures Department argued it was permissible for the Depart- in which Class III Gaming, as authorized by this ment to regulate any activity or location, so long as Compact, is conducted’’10—is clear, unambiguous, that activity or location exists to support a tribal gam- and not reasonably susceptible to the Tribe’s inter- ing enterprise in some fashion.

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