A CLOSER LOOK AT GAMING COMPACT NEGOTIATIONS IN MICHIGAN PART I: The history of Michigan’s first gaming compacts

The Bay Mills Indian Community’s pending Supreme Court case has sucked a lot of the oxygen out of the room here in Michigan.  And it has definitely overshadowed an impending showdown between the State of Michigan and seven six* tribes over the negotiation of new Class III gaming compacts.

The negotiation of new tribal-state gaming compacts here in Michigan will offer a unique case study in how the Indian Gaming Regulatory Act’s compact provisions affect the negotiation of “second generation” gaming compacts – compacts that follow, rather than extend, a tribe’s previous compact.

We’re going to take a closer look at these negotiations in upcoming posts.  But, first, it is important to understand how the current agreements – approved in 1993 – came into effect. WARNING: Marathon Blog Post.

THE HISTORY

As in other parts of the country, a number of Michigan tribes were already operating Class III gaming when IGRA was enacted in 1988.  In enacting IGRA, Congress required tribes to negotiate a gaming compact with states to engage in Class III gaming – even for those tribes that were already operating such games.  Congress also required states to negotiate these agreements in “good faith.”

Six Michigan tribes sought to negotiate Class III gaming compacts with the State of Michigan almost immediately after IGRA’s enactment.  Then-Governor Jim Blanchard refused to negotiate over Class III slot machines, and ultimately refused to enter into a compact.

In 1990, those six tribes filed a lawsuit against the State of Michigan in the U.S. District Court for the Western District of Michigan, alleging that the State violated IGRA’s requirement to negotiate in good faith, and seeking a declaratory judgment that Class III slot machines would be permissible to include in the Compact.

In 1992 – 4 years before the Supreme Court’s decision in Seminole –  the Western District of Michigan ruled in that lawsuit (Sault Ste. Marie Tribe v. Engler) that the Tribes’ lawsuit was barred by sovereign immunity. 

After an unsuccessful appeal, the Tribes amended their lawsuit to name then-Governor John Engler as the defendant in an Ex parte Young action.  That case – Sault Ste. Marie Tribe of Chippewa Indians, et al. v. Engler – ended through a negotiated settlement agreement.  That agreement was entered by the U.S. District Court for the Western District of Michigan as a Consent Judgment in 1993.  That Consent Judgment included several key provisions that will impact ongoing compact negotiations:

  • The seven tribes that were party to the litigation agreed to pay 8% of the net win from electronic games of chance to the State of Michigan’s “Strategic Fund” – provided that the Tribes “collectively enjoy the exclusive right to operate electronic games of chance in the State of Michigan.” (Sections 6 and 7 of the 1993 Stipulation)
  • The Tribes also agreed to pay 2% of the net win from electronic games to “any local units of state government in the immediate vicinity of each tribal casino.”  Importantly, the Tribes were permitted to determine which local units of government would receive the payments (Section 8 of the 1993 Stipulation).
  • Section 5 of the Consent Judgment expressly states that the Tribes are only obligated to make revenue sharing payments to the state “only so long as there is a binding Class III compact in effect between each tribe and the State of Michigan…and then only so long as the tribes collectively enjoy the exclusive right to operate” electronic games of chance in Michigan.
  • Section 8 of the Consent Judgment states that both the Stipulation and the Consent Judgment may be modified or rescinded “only in the above captioned case, and only by the mutual written consent of all parties and with the Court’s concurrence.”

Concurrent with the Western District of Michigan’s entry of the Consent Judgment, the seven Tribes and the State of Michigan entered into separate Class III gaming compacts that were identical to one another.  Those gaming compacts were approved by the Department of the Interior in 1993.

Each of those compacts stated that they would remain in effect “for a term of twenty (20) years from the date it becomes effective[.]”  In other words, they would remain in effect until November 2013.

But those compacts also included language that has created some…(ahem) room for interpretation:

[12(B)]  At least one year prior to the expiration of twenty (20) years after the Compact becomes effective, and thereafter at least one year prior to the expiration of each subsequent five (5) year period, either party may serve written notice on the other of its right to renegotiate this Compact.

THE EPILOGUE

Several years after the 1993 Consent Judgment and Class III gaming compacts, Michigan voters approved a statewide ballot initiative that authorized commercial gaming in the City of Detroit (which now hosts three Las Vegas-scale casinos in downtown).

The Seven Tribes reopened the Engler litigation to enforce compliance with the 1993 Consent Judgment – arguing that the authorization of commercial gaming in Detroit violated their exclusive rights to conduct gaming in the State of Michigan.  The tribes lost at both the trial court and the Sixth Circuit Court of Appeals based upon the fact that no commercial gaming facilities were actually operating at the time they filed their motion.

But, during that lawsuit, the State of Michigan had entered into four new gaming compacts with tribes that had been recognized after the 1993 gaming compacts.  The U.S. District Court for the Western District of Michigan ruled in 2000 that this action violated the 1993 Consent Judgment, and that the Seven Tribes were relieved of their duty to make payments to the State (but, the Tribes were still obligated to make payments of 2% of their net win to local units of government).

THE UPSHOT

If you’ve read this far, congratulations! The finish line is in sight!

When considering this history, it is important to keep in mind the fact that these agreements were some of the first Class III gaming compacts negotiated anywhere in the United States.  There wasn’t a template or a body of case law from which the tribes (or the State) could derive a roadmap.

All of this history is coming back to reveal several important questions for the Tribes and the State of Michigan in upcoming compact negotiations:

1.     When do the 1993 Compacts actually expire?

Although the 1993 Compacts expressly provide for a 20-year term, they also contain language that strongly suggests that they automatically continue for successive five-year periods if a new agreement isn’t negotiated.  If the Compact does indeed “roll over” for another five years, this gives the Tribes enormous bargaining leverage with the State.

2.     Can new Class III gaming compacts include revenue sharing provisions?

Remember: The 1993 gaming compacts do not contain any revenue sharing obligations for the tribes that were parties to those agreements.  The 1993 Consent Judgment sets forth the Tribes’ revenue sharing obligations, which have since been extinguished by the execution of more recent tribal-state gaming compacts involving other tribes, as well as the operation of commercial casinos in Detroit.

The 1993 Consent Judgment does not contain an expiration date.  Does that mean that the 1993 Consent Judgment survives beyond the 1993 tribal-state gaming compacts?  If so, then any new gaming compact involving one of the parties to the Engler lawsuit cannot alter the revenue sharing scheme established in that Consent Judgment.   That would lead to the following question…

3.     Will any of the Seven Tribes that were party to the 1993 Consent Judgment agree to modification of the revenue sharing provisions?

The 1993 Consent Judgment expressly states that all of the parties must agree to modify or rescind any part of the agreement.  Given the fact that most** of those tribes aren’t currently obligated to make any payments to the State (because the State authorized other gaming), it is difficult to see how all of these seven tribes would agree to a new deal that requires them to make revenue sharing payments to the State again.

*          *          *

In upcoming posts, we’ll look at some of the other issues affecting compact negotiations between the State of Michigan and the “1993 Tribes”.

* The seven tribes are: Bay Mills Indian Community; Grand Traverse Band of Ottawa and Chippewa Indians; Hannahville Indian Community; Keweenaw Bay Indian Community; Lac Vieux Desert Band of Lake Superior Chippewa Indians; Saginaw Chippewa Indian Tribe; and, Sault Ste. Marie Tribe of Chippewa Indians.

** The Keweenaw Bay Indian Community entered into a more recent settlement agreement, which was approved by the District Court for the Western District of Michigan, that resolved litigation over its gaming on an off-reservation trust parcel.  That Consent Judgment renewed the Tribe’s obligation to share 8% of its net win with the State of Michigan, but expressly provided that it does not alter the 1993 Consent Judgment – which was entered in separate litigation.

This entry was posted in Author: Bryan Newland, gaming, Great Lakes, IGRA, legal history and tagged , , , . Bookmark the permalink.

3 Responses to A CLOSER LOOK AT GAMING COMPACT NEGOTIATIONS IN MICHIGAN PART I: The history of Michigan’s first gaming compacts

  1. Saw this FB post on uncle Allard’s wall. Great Blog. It’s great to see activity at MSU. Hope to make football game oct 19.

    Geewadin

  2. Pingback: A CLOSER LOOK AT GAMING COMPACT NEGOTIATIONS IN MICHIGAN PART DEUX: The State’s Bargaining Position | Turtle Talk

  3. Pingback: Michigan Gaming Compact Negotiation News Coverage | Turtle Talk

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