Asked and Answered . . .

Jana Simmons on Gaming Compact Controversy

By Steve Thorpe
Legal News

The Gun Lake Tribe stopped making revenue-sharing payments two months ago in protest of what it sees as violation of the gaming contract with the state. The tribe believes the state broke the non-compete provision of its compact when the Michigan Lottery started to sell online games and added new electronic ticket-dispensing machines last summer. Jana Simmons is a partner in Foley & Mansfield's Detroit office, where she leads the American Indian Law practice area. Licensed to practice in several tribal courts, she assists tribal members and tribal organizations with matters including tribal enrollment and disenrollment, Tribal Constitutions and regulations, and Federal Indian law.

Thorpe: Give us a quick overview of the issue.

When the Indian Gaming Regulatory Act (IGRA) was passed in 1988, the federal government authorized federally recognized tribes to engage in gaming on tribal lands in cooperation with state governments.  IGRA envisions that “gaming compacts” embody tribal-state cooperation – and often times hefty compromise – to promote the ends of tribal self-sufficiency, tribal sovereignty and enhanced economic opportunities.  You have to remember … tribes have little or no “tax-base” to fund necessary government programs for their members.  Things like tribal schools, courts, medical clinics, housing and public safety are funded by tribal business and economic pursuits, with gaming operations being the largest source of tribal revenue for the continuation of these vital services. 

While gaming compacts generally vary from tribe to tribe and from state to state, they read as a give-and-take in terms of tribal gaming operations versus states’ interests in promoting their own revenue-generating gaming operations, protecting their citizens and advancing their public policies.  In this instance, there is an alleged breach of a substantive provision – a non-compete provision wherein the State of Michigan promised the Gun Lake Tribe “economic benefits of exclusivity” – basically exclusive gaming rights – in nine counties in exchange for the Tribe’s sharing of its gaming revenues with the State.  However, last year, the State of Michigan launched a successful online lottery program that presumably targets and attracts gaming dollars away from individuals in those same counties. 

Thorpe: Both sides acknowledge that they saw this issue coming and Gun Lake’s tribal council made its December 2014 payment, despite its belief the tribe was not required to do so. The talks have been amicable so far. Does that surprise you?

It doesn’t necessarily surprise me.  For starters, IGRA requires that states negotiate tribal gaming compacts in “good faith.”  This level of cooperation should carry forward as both the Tribe and the State stand to benefit from it.  At this juncture, both governments should continue to engage in meaningful discussions – take a look at what concessions the State is willing to make in exchange for continued revenue-sharing. 

Thorpe: Tribal revenue-sharing was originally spelled out in a federal consent decree. Does the mix of state and federal issues make this dispute more complex?

That federal consent decree – addressing tribal revenue-sharing – was entered in 1993 following disputes between Gov. John Engler and seven federally-recognized tribes in Michigan.  Those disputes concerned the refusal of the State of Michigan to engage in “good faith” negotiations in the pursuit of gaming compacts with the tribes.  Remember, IGRA requires states to negotiate tribal gaming compacts in “good faith.”  The Gun Lake Tribe did not earn federal recognition until later and it was not party to that judgment.

Nonetheless, federal Indian law, as well as those federal policies advancing tribal self-sufficiency and economic development, will always lend some degree of complexity to tribal gaming compacts and the negotiations that surround them.  Generally speaking, gaming compacts are like hybrid contracts that follow basic principles of contract law but also invoke federal statutory and case law, the provision of government-to-government services, state-tribal jurisdictional and sovereignty considerations and accountability to citizens of both governments.  Complex to say the least.

Thorpe: Are the other tribes watching this development and how might they react?

Very likely.  This is especially because similar exclusivity provisions are found in other tribal gaming compacts here in Michigan.  In other words, if the State is found to have violated its gaming compact with the Gun Lake Tribe, arguably, it may find itself in violation of other gaming compacts which include similar exclusivity provisions.  An interesting question here is whether a court would find that a virtual-lottery invades or competes with a physical, geographical space for purposes of a tribal gaming compact. 
Reaction-wise, it is a misconception that tribal governments are “one size fits all.”  They are not.  Just as states or counties have their own demographics, their own agenda, relationships and policies and – ultimately – the best interests of their own citizens at hand, so, too, do the twelve federally-recognized tribes in Michigan.  One cannot simply assume that because the Gun Lake Tribe has chosen a course of action, that another tribe automatically will follow suit.  On the other hand, there may be strength in numbers on this one.  If another tribe does join ranks with the Gun Lake, I am confident that the decision will be the product of thoughtful deliberation by its tribal leaders.

Thorpe: Some tribes stopped payments in the ‘90s after the Detroit casinos opened and once again 10 years ago when the state lottery introduced Club Keno, only to resume making them after court settlements. Might that happen here?

As noted above, tribal gaming compacts are a give-and-take between state and tribal governments.  There are bound to be disputes particularly where one considers that these compacts may span the course of decades.  It’s not unreasonable that issues that were not anticipated back when the compacts originally were negotiated and signed may arise.  And then toss new gaming technologies, changing demographics – you name it – into the mix.  While some disputes have landed in federal court eventually to settle, what we have seen is that a spirit of cooperation has best served the interests of state and tribal citizens alike.

At least in Michigan, exclusivity and revenue-sharing are key factors in tribal gaming negotiations.  States know it.  Tribes know it.  These days, you’d be hard-pressed to find a tribal gaming compact that does not contemplate these.  I am optimistic that if state leaders will offer meaningful concessions – something of value – to protect and enhance Gun Lake’s gaming revenue streams, the Tribe will entertain future revenue-sharing with the State.

Thorpe: The Snyder administration is two years into negotiating new gaming compacts with six tribes after the 20-year contracts effectively ended in 2013. Might this issue be addressed in any new compact?

I suspect it will.  That’s because, as gaming in Michigan expands, competition for gaming revenues increases.  Simply put, there’s only so many gaming dollars to go around.  These tribes will not-too-fondly remember when the State fired up the Detroit casinos and Club Keno despite repeated promises of exclusivity to Michigan tribes.  You have to assume that these tribes will be looking for something of value from the State, along with assurances.

Ultimately, the State will have a very tough go at insisting upon enhanced revenue sharing-provisions – or even the status quo – when its own gaming-operations continue to chink away at tribal gaming revenues.  You can’t insist on more … but give less.