Bettor Racing, Inc. v. Nat'l Indian Gaming Comm'n, CIV. 13-4051-KES

BETTOR RACING, INC. and J. RANDY GALLO, Plaintiffs, v. NATIONAL INDIAN GAMING COMMISSION, Defendant.FLANDREAU SANTEE SIOUX TRIBE, Applicant for Intervention.

CIV. 13-4051-KES

UNITED STATES DISTRICT COURT DISTRICT OF SOUTH DAKOTA SOUTHERN DIVISION

Dated November 6, 2013

ORDER GRANTING APPLICANT'S

MOTION TO INTERVENE AND

GRANTING IN PART APPLICANT'S

REQUEST FOR JUDICIAL NOTICE

Applicant for intervention, the Flandreau Santee Sioux Tribe, moves to intervene as a matter of right in this case, or alternatively, to intervene permissively. Docket 7. Plaintiffs, Bettor Racing, Inc., and J. Randy Gallo, oppose the motion. Defendant, the National Indian Gaming Commission (NIGC), has not taken a position on the motion to intervene. Additionally, the Tribe requests that the court take judicial notice of the action pending in tribal court between the Tribe and Bettor Racing and Gallo. Docket 9. Plaintiffs oppose this motion also. For the reasons set forth below, the Tribe's motion to intervene is granted, and the Tribe's request to take judicial notice is granted in part.

BACKGROUND

According to the facts alleged in the application for intervention:

The Tribe, a federally recognized tribe, operates Royal River Casino near Flandreau, South Dakota. The casino, located on tribal lands, is subject to the Indian Gaming Regulatory Act of 1988 (IGRA).¹ The NIGC is an independent federal agency charged with enforcement of the IGRA and regulation of tribal gaming. Gallo lives in Jupiter, Florida, and operates Bettor Racing, a corporation organized under South Dakota law. Bettor Racing is a parimutuel betting business.²

The Tribe, Bettor Racing, and Gallo have a decade-long history. In 2003, Gallo approached the Tribe about relocating Bettor Racing from its location in Sioux Falls, South Dakota, to Royal River Casino to avoid a state tax on parimutuel betting. On March 22, 2004, the Tribe and Bettor Racing reached agreement on a management contract and submitted that contract to the NIGC for approval. The NIGC requested a number of changes that the parties subsequently incorporated. The NIGC approved the revised management contract on March 17, 2005.

On September 20, 2004, while NIGC approval of the management contract was still pending, Bettor Racing entered into a consulting agreement with the Tribe under which it assisted the Tribe in running a parimutuel betting operation at Royal River Casino. This consulting agreement was never approved by the NIGC. From September 20, 2004, to March 17, 2005, Bettor Racing managed the parimutuel betting operation at Royal River Casino under the unapproved consulting agreement in exchange for a share of the net revenue. After the management contract was approved by the NIGC on March 17, 2005, the Tribe and Bettor Racing operated under its terms through February 15, 2007.

In 2006, South Dakota reduced its tax on parimutuel gaming from 4.5 percent to 0.25 percent for certain operations. SDCL 42-7-102. In response to that change, Bettor Racing and the Tribe agreed on a modification of the management contract that reduced the guaranteed minimum payment to be paid to the Tribe. Bettor Racing managed the parimutuel betting operation at Royal River Casino under the modified terms from February 15, 2007, to July 31, 2008. Following an industry-wide increase in racetrack fees charged to off-track facilities, Bettor Racing and the Tribe executed a second modification to the management contract that further reduced the minimum guaranteed payment to the Tribe. The Tribe and Bettor Racing operated under the second modification to the management contract from August 1, 2008, to April 5, 2010. Neither modification was approved by the NIGC.

In August 2009, the NIGC conducted a compliance review and issued a notice of noncompliance to Bettor Racing. AR 31-33.³ The NIGC found that while Bettor Racing was managing the parimutuel gaming at Royal River Casino under the consulting agreement and the first and second modifications to the management contract, Bettor Racing received fees in excess of the amount allowed under 25 U.S.C. § 2711(c)(1) and (2). Additionally, the NIGC found that Bettor Racing and the Tribe had an arrangement which was designed to cover up the excess payments to Bettor Racing. Under this arrangement, Bettor Racing remitted to the Tribe the amount approved in the original management contract, and the Tribe payed Bettor Racing a bonus equal to the additional amount due Bettor Racing under the modifications. Following an investigation, the NIGC served Bettor Racing and Gallo individually with a notice of violation directing Bettor Racing to pay $4,544,755 to the Tribe as a remedy for the alleged overpayments. AR 2510. The Tribe reached a settlement agreement with the NIGC concerning the Tribe's violations. AR 2611.

Plaintiffs appealed the notice of violation, and the Tribe intervened in the administrative process. AR 2540, 2544. The NIGC also assessed a civil fine against plaintiffs totaling $5,000,000. AR 2665. In its Final Decision and Order, the NIGC upheld the civil fine but stated that the fine supplanted the remedialpayments to the Tribe. See AR 3043, 3049 ("As the remedial measure has been supplanted by the [civil fine], the Commission will not consider this issue."); see also AR 3066 (denying motion for clarification with respect to the remedial payment to the Tribe).

In January 2013, the Tribe filed suit against plaintiffs in Flandreau Santee Sioux Tribal Court, alleging breach of contract and unjust enrichment. Docket 9-1, Docket 9-2. Plaintiffs have filed a counterclaim in that action alleging that the Tribe engaged in fraud. Subsequently, plaintiffs filed this suit against the NIGC on May 10, 2013, seeking relief from the Final Order and Decision of the NIGC. Docket 1. The Tribe moved to intervene on June 17, 2013. Docket 7.

DISCUSSION

I. Article III Standing

In addition to meeting the requirements of Rule 24, a party seeking to intervene must establish Article III standing. United States v. Metro St. Lous Sewer Dist., 569 F.3d 829, 833 (8th Cir. 2009). " 'To show Article III standing, a [party] has the burden of proving: (1) that he or she suffered an injury-in-fact, (2) a causal relationship between the injury and the challenged conduct, and (3) that the injury likely will be redressed by a favorable decision.' " South Dakota v. U.S. Dep't of Interior, 665 F.3d 986, 989-90 (8th Cir. 2012) (quoting Pucket v. Hot Springs Sch. Dist. No. 23-2, 526 F.3d 1151, 1157 (8th Cir. 2008)). An applicant for intervention must submit a pleading stating its claims ordefenses, and the court accepts all allegations as true and construes the pleading in favor of the applicant for intervention. Metro St. Louis Sewer Dist., 569 F.3d at 834.

A. Injury in Fact

An injury in fact is " 'an invasion of a legally protected interest which is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical.' " Charvat v. Mut. First Fed. Credit Union, 725 F.3d 819, 822 (8th Cir. 2013) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992). To ensure that an injury is not too speculative, the Supreme Court has "repeatedly reiterated that 'threatened injury must be certainly impending to constitute injury in fact,' and that '[a]llegations of possible future injury' are not sufficient." Clapper v. Amnesty Int'l USA, 133 S. Ct. 1138, 1147 (2013) (emphasis in original) (quoting Whitmore v. Arkansas, 495 U.S. 149, 158 (1990)).

The Tribe asserts the following injuries in fact: (1) impairment to the Tribe's claims against Bettor Racing in tribal court; (2) reinstatement of the administrative action to which the Tribe is a party; and (3) the inability to participate in the enforcement of federal and tribal gaming laws. Docket 8 at 10-11. Plaintiffs contend that those injuries do not constitute injuries in fact sufficient to confer Article III standing on the Tribe because (1) the Tribe's counterclaims do not arise under federal law and the Tribe cannot establish a case or controversy; (2) the Tribe did not pursue its own appeal of the NIGC'sFinal Decision and Order; (3) the tribal court has authority to determine the Tribe's claims regardless of the outcome in this action; and (4) the management contract divests this court of jurisdiction. Docket 16 at 3-10.

This court has jurisdiction over plaintiffs' appeal of the NIGC decision. 25 U.S.C. § 2713(c). To intervene, the Tribe needs to show a concrete and impending injury to a judicially cognizable interest. That injury can be denial of a benefit, Oti Kaga, Inc. v. S.D. Hous. Dev. Auth., 342 F.3d 871, 878 (8th Cir. 2003), or the threat of liability. Lyon v. Gila River Indian Community, 626 F.3d 1059, 1077 (9th Cir. 2010) cert. denied, 132 S. Ct. 498 (2011). The desire to ensure compliance with a favorable judgment can also confer standing. See Salazar v. Buono, 130 S. Ct. 1803, 1814-15 (2010) (plurality opinion) ("A party that obtains a judgment in its favor acquires a 'judicially cognizable' interest in ensuring compliance with that judgment.").

If the court rules in favor of plaintiffs in this case, the Tribe would suffer actual or potential injury in a number of ways. First, to the extent that the findings of the NIGC are admissible in tribal court to prove the Tribe's claims, particularly with respect to the validity of the management contract and its subsequent modifications, the Tribe would lose the ability to rely on those findings in proving its claims in tribal court, if the NIGC is unsuccessful in this federal court action. The Tribe has a significant financial interest in the outcome of the tribal court case, particularly because the NIGC judgment no longer requires plaintiffs to pay restitution to the Tribe. Second, because theTribe is a party to the NIGC proceedings, the Tribe would incur additional delay and expense if the court rules in favor of plaintiffs in this case and remands for further administrative proceedings....