Rincon Band of Luiseno Mission Indians v. Schwarzenegger

In 1999, the governor of California (state) (defendant) negotiated tribal-state compacts for class III gaming with 57 tribes, including the Rincon Band of Mission Indians (tribe) (plaintiff). In 2003, the tribe initiated negotiations with the state with the aim of expanding its class III gaming operations. However, with a new governor representing the state, the tone of negotiations was less productive than in 1999. The state offered the tribe 900 additional slot machines in exchange for 15 percent of the tribe’s net gaming revenue, to be paid into the state’s general fund. The state’s offer included a compact provision guaranteeing exclusivity from non-tribal competitors. The tribe rejected the offer, claiming the request constituted an improper tax because the general fund was not directly tied to regulating gaming activity as required by the Indian Gaming Regulatory Act (IGRA). The tribe additionally objected to the exclusivity provision because it excluded only non-tribal casinos and, therefore, offered no competitive advantage over other tribes operating in the area. The state revised its offer to reduce the proposed fee to 10 percent to be paid into the state’s general fund. The state submitted reports showing that this proposal would result in a $2 million increase in annual tribal gaming revenue and $38 million increase to the state’s general fund. The tribe brought suit against the state in district court, claiming the state negotiated in bad faith. Both parties moved for summary judgment. The district court granted summary judgment for the tribe, concluding that the proposed revenue sharing constituted a tax evidencing bad-faith negotiation. The state appealed.