Wednesday, January 24, 2007
C.A. Rejects Casino’s Challenge to Indian Gaming Compacts
By KENNETH OFGANG, Staff Writer
Non-Indian gambling interests waited too long to challenge compacts granting the tribes a monopoly over casino-type gaming, the Court of Appeal for this district ruled yesterday.
Div. Three dismissed an appeal from Los Angeles Superior Court Judge Dzintra Janavs’ ruling dismissing California Commerce Casino, Inc.’s suit against state officials who entered into the compacts pursuant to AB 687, an urgency measure enacted in 2004.
The plaintiffs alleged that AB 687 violated constitutional provisions barring the use of an urgency measure to grant a franchise or privilege, barring the state from contracting away its police power, and prohibiting the state from borrowing in order to fund a year-end budget deficit.
Janavs ruled that the suit was effectively an attack on the validity of the compacts, not just the authorizing legislation, and was thus subject to a 60-day statute of limitations.
AB 687 was enacted by the Legislature to implement Proposition 1A, which was adopted by a 2 to 1 margin in March 2000, after Proposition 5—a statutory initiative designed to promote Indian gaming—was declared unconstitutional by the Supreme Court.
Proposition 1A amended the California Constitution to allow Nevada-style gambling at slot machines, lottery games, and “banking” games in which the gaming operator competes against the customer.
The amendment restricts the operation of such games to casinos on Indian tribal lands. In exchange for the monopoly, tribes must enter into compacts with the state—subject to approval by the governor and Legislature, as well as by federal authorities under the Indian Gaming Regulatory Act—and share the revenues with the state and with non-gaming tribes.
Proposition 1A enabled the state to grant final approval to compacts negotiated in 1999, which limited tribal gambling to slot machines, with no tribe allowed to operate more than 2,000 of them. But four years later, five tribes renegotiated the compacts to lift the cap on the number of slots and to permit additional forms of gambling allowed by Proposition 1A.
Under the revised compacts, the tribes were given the right to sue for injunctive relief to prevent the operation of competing games by non-Indian casinos in their core geographic areas. In exchange for the monopoly, the tribes agreed to pay the state at least $100 million per year for 18 years, to be used to pay off up to $1.5 billion in transportation bonds.
Non-Indian casinos like the Commerce can only offer poker and other “non-banking” games, in which the “house” has no stake in the outcome but charges a per-hand or per-hour fee to each player.
Besides Commerce, there are non-Indian casinos in Bell, Bell Gardens, Hawaiian Gardens, Gardena, Inglewood and in many other cities throughout the state. But the inability to offer the high-stakes “banking” games, the owners claim, is causing them to lose their wealthier customers, even though the nearest Indian casinos are 60 miles from Los Angeles.
Janavs sustained the state defendants’ demurrer on the ground that the action was time-barred by the validation statutes, beginning with Code of Civil Procedure Sec. 860. The statutes provide that an action to determine the validity of a bond issue or related contract must be brought by the public agency or “any interested person”—in which case the action is referred to as a “reverse validation action”—within 60 days.
The judge also ruled that the action had to be dismissed because the tribes—which are immune—were necessary and indispensable parties, an issue that the Court of Appeal said it need not decide.
Presiding Justice Joan Dempsey Klein, writing for the Court of Appeal, said the trial judge was correct in ruling that the action, filed 11 months after the compacts were approved by the enactment of AB 687, was untimely. She also concluded that the appeal was untimely, because it was filed 47 days after judgment was entered and the validation statutes only allow 30 days for an appeal.
She cited Court of Appeal cases holding that actions challenging Ontario’s plan for the financing of its auto raceway and the Pasadena Redevelopment Authority’s plan to finance the building of a shopping mall were subject to the validation statutes.
Klein distinguished Kaatz v. City of Seaside (2006) 143 Cal.App.4th 13, in which the court held that a challenge to the city’s sale of acreage purchased from the federal government after it closed Fort Ord was not a reverse validation action and thus was not subject to the 60-day statute.
Unlike the Ontario and Pasadena cases, the court reasoned in Kaatz, the allegedly unlawful action did not relate to a public agency’s incurring of debt.
In this case, Klein explained, the plaintiffs’ theories were inextricably intertwined with the state’s plan to issue and sell the bonds, and were thus subject to the validation statutes.
The case is California Commerce Casino, Inc. v. Schwarzenegger, B18820.
Copyright 2007, Metropolitan News Company