At a Minimum: The Legal Case for Advisory MICS

In Colorado River Indian Tribes v. NIGC (CRIT), 383 F. Supp. 2d 123 (D.D.C. 2005), the Colorado River Indian Tribes objected to the National Indian Gaming Commission’s (NIGC) audit of its Class III gaming operation. The tribe maintained that the NIGC “had exceeded its statutory powers in promulgating the [Minimum Internal Control Standards (MICS), 25 C.F.R. § 542] for Class III gaming and that the compliance audit was therefore unlawful.” (Id. at 125.) The court agreed with the tribe, holding that “while surely well-intentioned, the NIGC ha[d] overstepped its bounds” in promulgating and enforcing the MICS. (Id.). The decision was upheld on appeal. (See Colorado River Indian Tribes v. NIGC (CRIT II), 466 F.3d 134 (D.C. Cir. 2006).)

For Indian gaming attorneys, the CRIT decision evoked many questions that are yet to be answered. Earlier this year, Norman H. DesRosiers, commissioner of the San Manuel Tribal Gaming Commission, brought some of these questions to the forefront in his article, “A Closer Look at the NIGC’s Class III MICS,” which appeared in the March 2011 issue of Indian Gaming. Some of the gaps created by the CRIT opinion and exposed by DesRosiers deserve further exploration. In denying the NIGC the regulatory authority to issue binding regulations, the CRIT opinion struck the proper balance between tribal and federal regulatory powers. CRIT did not, however, render the NIGC MICS inoperable or unnecessary, nor did it strike down the authority of the NIGC to promulgate MICS pursuant to other administrative procedures. Indeed, CRIT revealed the appropriate place for the NIGC MICS: advisory regulations issued in order to provide a default template for tribal-state compact negotiations. In short, short of an intolerable intrusion of the NIGC into tribal regulatory authority, NIGC MICS are still permissible and potentially useful—if for no other reason than to keep states out of the tribal internal gaming control arena and Congress from seeking to amend the Indian Gaming Regulatory Act (IGRA).

The Importance of the MICS
Because MICS go to the heart of Indian casino management, CRIT created a seemingly unworkable framework for Indian gaming. These foundational regulatory standards have had an important impact on the Indian gaming industry and serve as a solid baseline for tribal control standards and regulatory compliance. MICS not only dictate the particularities of casino management (e.g., how operators are to count money and verify certain processes, how many signatures are needed when chips are filled at a table, and how to execute emergency evacuations), but for many tribes MICS were an important part of making large-scale Indian gaming possible.

In California v. Cabazon Band of Mission Indians, 480 U.S. 202 (1987), the U.S. Supreme Court held that the authority to police civil regulatory activities on tribal lands falls outside of the powers bestowed upon the states—that power rested solely with Congress. In 1988, however, IGRA, 25 U.S.C. § 2701 et seq., delegated to the states some of the federal regulatory authority that the Supreme Court had held inapplicable to Indian country in Cabazon. Specifically, IGRA mandated that banked card games such as blackjack and baccarat, slot machines, other electronic gaming machines, and other Nevada-style gaming activities (Class III gaming) may be conducted on Indian lands only if: (1) it is authorized by the tribe seeking to conduct the gaming; (2) it is located in a state that does not bar such gaming; and (3) it is “conducted in conformance with a tribal-state compact entered into by the Indian tribe and the state. . . .” (25 U.S.C. § 2710(d); Confederated Tribes of Siletz Indians of Oregon v. State of Oregon, 143 F.3d 481, 483 (9th Cir. 1998).)

Many of the tribal-state compacts (or their amendments) that make Class III Indian gaming possible under the IGRA incorporate the MICS. Indeed, even “[w]hen a state and a tribe cannot agree on a tribal-state compact, [IGRA] provides that the Secretary of the Interior can step in to prescribe … procedures … under which Class III gaming may be conducted on the Indian lands over which the Indian tribe has jurisdiction.” (CRIT, 383 F.Supp.2d, at 137 (internal quotations omitted).) These procedures specifically direct the tribe to comply with NIGC Class III MICS. (See e.g., Second Amended Class III Gaming Procedures for the Northern Arapaho Nation (2007).) Likewise, tribal governments regularly adopt the MICS in their gaming ordinances, which are subsequently approved by the NIGC as required by § 2710 (b)(1)(B) of the IGRA.

The conundrums created by the doing-away of the NIGC MICS abound. If the NIGC MICS no longer exist, how can tribes comply with their tribal-state compacts? What about tribes that cannot reach a compact agreement with their surrounding state—tribes specifically directed by the Secretary of the Interior to comply with the MICS? If tribal gaming ordinances require compliance with something that does not exist, how can tribes comply with their own regulations?

CRIT and MICS by Other Means
In CRIT, the court held that the IGRA did “not authorize the NIGC to promulgate and enforce MICS for Class III gaming.” (383 F. Supp. 2d at 132 (emphasis added).) In arriving at this conclusion, the court found that although the IGRA granted the secretary the authority to approve tribal-state gaming compacts, and that §2710 of the IGRA mandated that something like the MICS be included within the terms of the compact, “[t]here is, of course, a clear distinction between the power to approve the terms of an ordinance or contract and the power to police compliance with the terms of a ordinance or contract, and there is reason to believe that Congress did not intend to give the NIGC the latter power for Class III gaming.” (Id. at 134.) The appellate court affirmed on these same grounds, finding no “statutory basis empowering the commission to regulate Class III gaming operations.” (CRIT II, 466 F.3d at 140.)

The question presented in CRIT was one of federal delegation of power. As a basic tenant of administrative law, federal agencies may not act beyond—or in a manner inconsistent with—the power granted to them by Congress. (National Treasury Employees Union v. Chertoff, 452 F.3d 839 (C.A.D.C. 2006).) But another basic tenet of administrative law is the power of federal regulatory bodies to issue non-binding, advisory opinions. (See Sabella v. U.S., 863 F.Supp. 1, 5 (D.D.C. 1994) (agency action is not final or binding “where no rulemaking has taken place yet”); American Federation of Government Employees v. O’Connor, 747 F.2d 748, 752-53 (D.C. Cir. 1984) (advisory opinions “create[] no law and bind[] neither the public nor any agency or officer of government”).) It is under this mechanism that the NIGC may address the challenges posed by the CRIT opinion.

Since the early 1990s, the NIGC’s Office of General Counsel has issued written advisory opinions. The status of these advisory opinions has been made clear by case law. Like other advisory opinions, numerous courts have held that advisory opinions issued by the NIGC do not constitute a “final agency action” and have no binding legal effect on tribal governments, states or federal agencies. (See Saint Regis Mohawk Tribe v. St. Regis Management Company, 451 F.3d 44, 49 n.4 (2nd Cir. 2006); Cheyenne-Arapaho Gaming Commission v. National Indian Gaming Commission, 214 F.Supp.2d 1155, 1167-68 (N.D. Okla. 2002); NGV Gaming Ltd. v. Upstream Point Molate LLC, 355 F.Supp.2d 1061, 1065 (N.D. Cal. 2005); Crosby Lodge Inc. v. National Indian Gaming Commission, No. 06-0657, 2008 WL 5111036, at *7 (D. Nev. Dec. 3, 2008); Shingle Springs Band of Miwok Indians v. Sharp Image Gaming Inc., No. 10-1396, 2010 WL 4054232, at *2 (E.D. Cal. Oct. 15, 2010).) Thus, it appears that a feasible and absolutely permissible solution to the potential conundrums created by CRIT already exists. Indeed, this means of maintaining the MICS has been consistently utilized by the NIGC for at least 10 years. As the NIGC enters its relaxed post-CRIT role in Indian gaming regulation, this means of the NIGC’s advisory function should not be overlooked.

More Reasons to Maintain MICS
There is a very real fear that states—if not Congress, bird-dogged by Sen. John McCain (R–Ariz.)—will attempt to fill the perceived “void” left by CRIT. States might interpret tribal-state gaming compacts in a manner that requires the state to devise and enforce its own minimum internal control standards, thus providing a back door for intrusive state regulation. In California, for example, in addition to incorporating the MICS into tribal-state compacts, a new statewide regulation, “CGCC-8,” codifies NIGC MICS—not just any MICS—into state law.Importantly, CGCC-8 also confers certain inspection rights upon the state, including the right to inspect gaming facilities and gaming operation papers to verify that tribes are complying with the compacts, including the adoption and enforcement of the CGCC-8.

A significant caveat to California’s back door regulation scheme, however, is that the inspection provision of CGCC-8 is not mandatory; it is optional. As an alternative, tribes may voluntarily change their gaming ordinances in order to authorize the NIGC to verify compliance with minimum internal control standards. This alternative, which leaves the scope of NIGC’s authority in the hands of tribal governments, creates a safe harbor for tribes that would otherwise be subject to intrusive state regulation. The alternative is dependent, however, upon the existence of NIGC MICS in some form or another.

And then there is McCain, who has twice in the last two years threatened the possibility of a CRIT-fix. Sen. Dianne Feinstein (D–Calif.) previously expressed concern about CRIT’s regulatory impact. Indian country should cringe at any attempt to “reopen” IGRA for amendment, especially an amendment that, in the name of a CRIT-fix, could receive vast bipartisan support. Given the current climate in Washington, D.C., any movement toward amending IGRA would present an imminent threat of further state regulatory encroachment into tribal governmental affairs. Maintaining the NIGC MICS in its current advisory form will do much to keep Indian gaming out of the very dangerous political limelight.

Final Thoughts
Currently, the NIGC is conducting extensive tribal consultations on the status of NIGC MICS in light of CRIT—a subject that the Department of the Interior recognizes is “important to both tribes and the public.” (76 Fed. Reg. 18457 (Department of the Interior, April 4, 2011).) Citing tribal “concern [about] how the commission will review the MICS,” the NIGC has also recently announced the formation of a Tribal Advisory Committee to assist in the decision-making process.

Whatever the NIGC decides, MICS should remain, albeit in an advisory form. In their advisory form, it should be made clear that tribes have the option to adopt advisory NIGC MICS into their internal control standards. This approach would accommodate tribal control standards that incorporate MICS “as published or amended by the NIGC,” thereby avoiding costly modification efforts. The approach would also complement CGCC-8, which requires compliance with NIGC MICS “as amended” if a tribe opts for a non-intrusive federal scheme. Above all, this approach would help maintain the status quo regarding IGRA and tribal governmental gaming at large.

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