Yavapai-Apache Nation v. La Posta Band of Diegueno Mission Indians

YAVAPAI-APACHE NATION, Plaintiff and Respondent, v. LA POSTA BAND OF DIEGUENO MISSION INDIANS, Defendant and Appellant, CALIFORNIA GAMBLING CONTROL COMMISSION Defendant and Respondent.

C091801

California Court of Appeals, Third District, Sacramento

April 6, 2022

NOT TO BE PUBLISHED

(Super. Ct. No. 34-2018-00238711-CU-MC-GDS)

BLEASE, ACTING P. J.

This case arises out of a contract dispute between two Indian tribes, Yavapai-Apache Nation (YAN) and La Posta Band of Diegueno Mission Indians (La Posta). Over a decade ago, YAN and La Posta entered into an agreement that required La Posta to pay back tens of millions of dollars that it borrowed to finance the construction of a casino.

Under the terms of the agreement, if La Posta failed to pay its debt, YAN's sole recourse in most circumstances would be to seize La Posta's casino revenues, casino equipment and other casino-related assets. But the agreement also authorized YAN to pursue La Posta's other assets too if a court made a "final determination" that La Posta committed any act of fraud in connection with the parties' agreement.

Shortly after the parties entered into their agreement, La Posta failed to make payments on the loan. YAN then sued La Posta in three different suits in three different courts. In the first, YAN sued La Posta in San Diego County Superior Court alleging that La Posta breached the parties' agreement when it failed to make the required payments. YAN also alleged that La Posta committed an act of fraud in connection with the parties' agreement, reasoning that La Posta intentionally misrepresented a material fact about its planned operation of the casino. Following a bench trial for the contract claim, the trial court agreed that La Posta committed a breach of contract and awarded YAN nearly $49 million for the breach. But after a jury trial for the fraud claim, the jury rejected YAN's claim of intentional misrepresentation, finding in a special verdict that La Posta did not make any false representation to YAN.

In the second suit, YAN sued La Posta in YAN Tribal Court. As in the San Diego action, YAN sought to show that La Posta committed an act of fraud in connection with the parties' agreement. But in this case, as relevant here, YAN alleged that La Posta negligently, not intentionally, misrepresented a material fact-a claim it based on largely the same set of facts as its earlier intentional misrepresentation claim. The tribal court ultimately accepted the argument. Without acknowledging the San Diego jury's finding that La Posta did not make any false representation to YAN, the tribal court reached the opposite conclusion after considering the very same testimony that had been presented to the San Diego jury.

Lastly in the third suit, YAN sued La Posta and the California Gambling Control Commission (the Gambling Commission) in Sacramento County Superior Court. YAN asked the court to declare that the Gambling Commission-which collects revenue from tribes with large gambling operations and distributes it to other tribes, like La Posta, with small or no gambling operations-must pay to YAN all the money that it otherwise would have distributed to La Posta until La Posta's debt is repaid. YAN based its argument on the terms of the parties' agreement and the tribal court's decision. According to YAN, although the agreement generally bars YAN from reaching these assets, it allows YAN to recover the amount it is owed from these assets if a court makes a "final determination" that La Posta committed an act of fraud in connection with the agreement. YAN then asserted that the YAN Tribal Court made such a final determination when it found that La Posta committed an act of negligent misrepresentation. The trial court ultimately agreed and entered judgment in YAN's favor.

This appeal concerns the last of these suits. According to La Posta, the trial court's ruling should be reversed for five general reasons. It contends (1) claim and issue preclusion principles bar YAN's claim that La Posta committed an act of negligent misrepresentation because, although the tribal court accepted this claim, the jury's special verdict in the San Diego case precludes a California court from accepting the tribal court's conclusion, (2) the trial court should have refused to recognize the tribal court's decision because, among other things, it is inconsistent with the jury's special verdict in the San Diego case, (3) the parties' agreement does not allow YAN to receive La Posta's distributions from the Gambling Commission under any circumstance, and (4) the trial court's decision wrongly binds an entity (the Gambling Commission) that was not a party to the tribes' agreement. La Posta also, following our request for supplemental briefing, contends (5) the tribal court's decision does not qualify as a "final determination" within the meaning of the parties' agreement.

We agree that La Posta's final argument favors reversal in this case. The tribal court, again, accepted YAN's claim that La Posta committed an act of negligent misrepresentation in connection with the parties' agreement. But the court did not resolve all YAN's claims in the case, explicitly reserving one of its claims for a later day-a day that, it appears, has yet to come. Based on these facts, La Posta contends the tribal court's decision is not a final judgment under the tribal court's own rules and thus not a "final determination" within the meaning of the parties' agreement. Although we stop short of accepting La Posta's reading of tribal law, we agree that uncertainties concerning the status of the tribal court's decision preclude a judgment in YAN's favor. Because, on the limited record before us, we conclude that YAN failed to meet its burden to show that the tribal court's decision was a "final determination" within the meaning of the parties' agreement, we reverse.

BACKGROUND

I. The Loan Agreement

YAN and La Posta are both federally recognized Indian tribes. (81 Fed.Reg. 26826, 26828, 26830 (May 4, 2016).) In 2003, the two tribes entered into an agreement "pursuant to which [YAN] agreed to provide casino development expertise and extend credit to [La Posta] so that [La Posta] could obtain conventional financing for construction of its La Posta Casino in San Diego County, California." To further this agreement, as later amended, YAN provided a bridge loan to La Posta to fund the first phase of development and construction, and a bank afterward provided a larger loan, which YAN guaranteed, to pay off the bridge loan and fund the rest of the construction costs for the casino.

But the cost of constructing the casino proved to be higher than anticipated, necessitating a larger loan, and the casino, once up and running, never performed as expected. La Posta, left with a heavy debt burden and a failing casino, never generated the income necessary to repay the loan. YAN, which was responsible for the debt in the event La Posta defaulted, afterward decided to purchase the loan to avoid any potential penalties following La Posta's default. After it did so, La Posta and YAN modified their existing agreement and established a schedule for La Posta to repay the loan (the Loan Agreement). The parties agreed that their agreement would be construed in accordance with California law, absent an express choice of another jurisdiction's law.

II. The San Diego Action

Several years later in 2013, after the casino closed and La Posta failed to pay back the debt, YAN sued La Posta in San Diego County Superior Court. YAN alleged, among other things, that La Posta breached the Loan Agreement when it failed to repay its debt.

La Posta, in turn, filed a cross-complaint. Without contesting YAN's claims, it sought a declaration that would protect certain of its assets should YAN ultimately prevail on its claims. In particular, it sought to protect money it receives in its capacity as a "Non-Compact Tribe." As courts have previously explained, "the State of California has entered into tribal-state gaming compacts with the various tribes in California authorized to operate gambling casinos (collectively, the Compacts)." (California Valley Miwok Tribe v. California Gambling Control Com. (2014) 231 Cal.App.4th 885, 888) Relevant here, "[t]he Compacts set forth a revenue-sharing mechanism under which tribes that operate fewer than 350 gaming devices share in the license fees paid by the tribes entering into the Compacts, so that each 'Non-Compact Tribe' in the state receives 'the sum of $1.1 million per year.'" (Id. at pp. 888-889.) The Gambling Commission administers a special fund called the "Indian Gaming Revenue Sharing Trust Fund" (the Trust Fund) that holds these funds, and it distributes them to "Non-Compact Tribes" on a quarterly basis. (Id. at p. 889; see also Gov. Code, § 12012.75.)

La Posta is one of these "Non-Compact Tribes" and, in its cross-complaint, it sought to protect the distributions it receives from the Trust Fund. It reasoned that these funds are protected under the terms of the Loan Agreement. The agreement states that, in the event La Posta fails to pay its debt, "any judgment resulting therefrom shall be limited to recovery against the Collateral (other than the Real Property)," which the agreement defines to include any collateral (apart from certain real property) mentioned in any security agreement for La Posta's loan. The one security agreement the parties discuss, a security agreement between La Posta and the bank that funded the casino's construction, states that the collateral for the loan includes casino revenues, casino equipment, and other casino-related assets, but excludes, as relevant here, "trust assets." Apart from generally limiting YAN's recovery to "the Collateral...