55
1019 RINCON BAND OF LUISENO MISSION v. SCHWARZENEGGER Cite as 602 F.3d 1019 (9th Cir. 2010) the BIA did not correct that error. We therefore remand to the agency to apply the correct legal standard in considering, in its discretion, Vasquez’s application for a fraud waiver. CONCLUSION The BIA did not err in holding that Vasquez is ineligible to apply for an ex- treme hardship waiver under § 216(c)(4). Vasquez is eligible to apply for a fraud waiver under § 237(a)(1)(H), as her condi- tional permanent resident status was ter- minated upon a finding of marriage fraud. In these circumstances, we conclude that the fraud waiver can waive removal based on the termination of status. Finally, we remand to the BIA to determine, applying the proper legal standard, whether Vas- quez’s application for a fraud waiver should be denied in the exercise of discre- tion. PETITION GRANTED; REMANDED for further proceedings. , RINCON BAND OF LUISENO MIS- SION INDIANS OF THE RINCON RESERVATION, aka Rincon San Luiseno Band of Mission Indians, aka Rincon Band of Luiseno Indians, Plaintiff–Appellee, v. Arnold SCHWARZENEGGER, Gover- nor of California; State of Califor- nia, Defendants–Appellants. Rincon Band of Luiseno Mission Indi- ans of the Rincon Reservation, aka Rincon San Luiseno Band of Mission Indians, aka Rincon Band of Luiseno Indians, Plaintiff–Appellee–Cross–Ap- pellant, v. Arnold Schwarzenegger, Governor of California; State of California, Defen- dants–Appellants–Cross–Appellees. Nos. 08–55809, 08–55914. United States Court of Appeals, Ninth Circuit. Argued and Submitted Nov. 4, 2009. Filed April 20, 2010. Background: Rincon Band of Luiseno Mission Indians filed action against State of California alleging violation of Indian Gaming Regulatory Act (IGRA). The Unit- ed States District Court for the Southern District of California, William McCurine, United States Magistrate Judge, 2008 WL 6136699, granted judgment for plaintiff. State appealed. Holdings: The Court of Appeals, Milan D. Smith, Jr., Circuit Judge, held that: (1) state’s non-negotiable demand for mandatory payment of 10–15% of Indi- an tribe’s net profits, to be paid into state treasury for unrestricted use, was impermissible demand for pay- ment of tax by tribe; (2) general fund revenue sharing is not ‘‘directly related to the operation of gaming activities,’’ and thus is not an authorized subject of negotiation under the IGRA; (3) state could not use exclusivity to Indi- an tribe as new consideration for new types of revenue sharing; (4) state’s offer to Indian tribe to ac- quiesce to permanent injunction to en- force non-tribal gaming exclusivity,

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Page 1: RINCON BAND OF LUISENO MISSION v. SCHWARZENEGGER 1019€¦ · Arnold SCHWARZENEGGER, Gover-nor of California; State of Califor-nia, Defendants–Appellants. Rincon Band of Luiseno

1019RINCON BAND OF LUISENO MISSION v. SCHWARZENEGGERCite as 602 F.3d 1019 (9th Cir. 2010)

the BIA did not correct that error. Wetherefore remand to the agency to applythe correct legal standard in considering,in its discretion, Vasquez’s application fora fraud waiver.

CONCLUSION

The BIA did not err in holding thatVasquez is ineligible to apply for an ex-treme hardship waiver under § 216(c)(4).Vasquez is eligible to apply for a fraudwaiver under § 237(a)(1)(H), as her condi-tional permanent resident status was ter-minated upon a finding of marriage fraud.In these circumstances, we conclude thatthe fraud waiver can waive removal basedon the termination of status. Finally, weremand to the BIA to determine, applyingthe proper legal standard, whether Vas-quez’s application for a fraud waivershould be denied in the exercise of discre-tion.

PETITION GRANTED; REMANDEDfor further proceedings.

,

RINCON BAND OF LUISENO MIS-SION INDIANS OF THE RINCONRESERVATION, aka Rincon SanLuiseno Band of Mission Indians, akaRincon Band of Luiseno Indians,Plaintiff–Appellee,

v.

Arnold SCHWARZENEGGER, Gover-nor of California; State of Califor-

nia, Defendants–Appellants.

Rincon Band of Luiseno Mission Indi-ans of the Rincon Reservation, akaRincon San Luiseno Band of MissionIndians, aka Rincon Band of LuisenoIndians, Plaintiff–Appellee–Cross–Ap-pellant,

v.

Arnold Schwarzenegger, Governor ofCalifornia; State of California, Defen-dants–Appellants–Cross–Appellees.

Nos. 08–55809, 08–55914.

United States Court of Appeals,Ninth Circuit.

Argued and Submitted Nov. 4, 2009.

Filed April 20, 2010.

Background: Rincon Band of LuisenoMission Indians filed action against Stateof California alleging violation of IndianGaming Regulatory Act (IGRA). The Unit-ed States District Court for the SouthernDistrict of California, William McCurine,United States Magistrate Judge, 2008 WL6136699, granted judgment for plaintiff.State appealed.

Holdings: The Court of Appeals, Milan D.Smith, Jr., Circuit Judge, held that:

(1) state’s non-negotiable demand formandatory payment of 10–15% of Indi-an tribe’s net profits, to be paid intostate treasury for unrestricted use,was impermissible demand for pay-ment of tax by tribe;

(2) general fund revenue sharing is not‘‘directly related to the operation ofgaming activities,’’ and thus is not anauthorized subject of negotiation underthe IGRA;

(3) state could not use exclusivity to Indi-an tribe as new consideration for newtypes of revenue sharing;

(4) state’s offer to Indian tribe to ac-quiesce to permanent injunction to en-force non-tribal gaming exclusivity,

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1020 602 FEDERAL REPORTER, 3d SERIES

and monetary remedies contingentupon that event, could not form basisfor good faith negotiations for gamingrights;

(5) state did not make meaningful conces-sions, as required by IGRA to negoti-ate for gaming rights in good faith, byoffering bundle of rights more valuablethan status quo; and

(6) state could not have reasonably reliedon approval of certain other compactsby Department of Interior (DOI) asproof of lawfulness of its non-negotia-ble demands.

Affirmed.Bybee, Circuit Judge, filed dissenting opin-ion.

1. Indians O342Whether negotiations under the Indi-

an Gaming Regulatory Act (IGRA) be-tween a state and its resident NativeAmerican tribes to reach compacts con-cerning casino-style gaming on NativeAmerican lands were conducted in goodfaith is a mixed question of law and factthat the Court of Appeals reviews de novo.Indian Gaming Regulatory Act,§ 11(d)(7)(B)(iii, iv), 25 U.S.C.A.§ 2710(d)(7)(B)(iii, iv).

2. Indians O337(3), 340 Taxation O3412

State’s non-negotiable demand formandatory payment of 10–15% of Indiantribe’s net profits, to be paid into statetreasury for unrestricted use, was imper-missible demand for payment of tax bytribe, in violation of state’s duty underIGRA to negotiate for gaming rights ingood faith, since IGRA negotiations weresupposed to be limited to gaming regula-tion, state could not be primary beneficiaryof gaming rights under negotiation, andgeneral fund revenue sharing was neitherauthorized by IGRA nor reconcilable withits purposes. Indian Gaming Regulatory

Act, § 11(d)(7)(B)(iii, iv), 25 U.S.C.A.§ 2710(d)(7)(B)(iii, iv).

3. Indians O337(3), 340Under the IGRA a state may, without

acting in bad faith, request revenue shar-ing if the revenue sharing provision is foruses directly related to the operation ofgaming activities, consistent with the pur-poses of IGRA, and not imposed because itis bargained for in exchange for a mean-ingful concession. Indian Gaming Regula-tory Act, § 11(d)(3)(C)(vii), 25 U.S.C.A.§ 2710(d)(3)(C)(vii).

4. Indians O337(3), 340Whether revenue sharing is an au-

thorized negotiation topic under the IGRAdepends on the use to which the revenuewill be put, not on the mere fact that therevenue derives from gaming activities.Indian Gaming Regulatory Act,§ 11(d)(3)(C)(vii), 25 U.S.C.A.§ 2710(d)(3)(C)(vii).

5. Indians O337(3), 340General fund revenue sharing is not

‘‘directly related to the operation of gam-ing activities,’’ and thus is not an author-ized subject of negotiation under theIGRA. Indian Gaming Regulatory Act,§ 11(d)(3)(C)(vii), 25 U.S.C.A.§ 2710(d)(3)(C)(vii).

6. Indians O337(3), 340State could not use exclusivity to Indi-

an tribe as new consideration for newtypes of revenue sharing, and thus offer ofgrant of such exclusivity could not formbasis for good faith negotiations for gam-ing rights under IGRA in consideration fornon-negotiable demand of 10–15% of Indi-an tribe’s net profits to be paid into statetreasury for unrestricted use, since stateand collective tribes previously had struckbargain wherein tribes were exemptedfrom prohibition on gaming in exchangefor their contributions to funds that redis-

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1021RINCON BAND OF LUISENO MISSION v. SCHWARZENEGGERCite as 602 F.3d 1019 (9th Cir. 2010)

tributed that money to tribes who choosenot to, or were unable to, conduct theirown gaming activities, and to address bur-dens caused by gambling. Indian GamingRegulatory Act, § 11(d)(4), 25 U.S.C.A.§ 2710(d)(4).

7. Contracts O75(1)Giving party something to which he

has absolute right is not consideration tosupport that party’s contractual promise.

8. Indians O337(3), 340State’s offer to Indian tribe to ac-

quiesce to permanent injunction to enforcenon-tribal gaming exclusivity, and mone-tary remedies contingent upon that event,could not form basis for good faith negoti-ations for gaming rights under IGRA inconsideration for non-negotiable demand10–15% of Indian tribe’s net profits to bepaid into state treasury for unrestricteduse, since they did not have anythingmore than speculative value to tribe ornegligible value in comparison state’s gain;passage of constitutional amendment elim-inating tribal gaming exclusivity was ex-tremely unlikely and offer did not protecttribe against high degree of tribal compe-tition it experienced in its core geographicmarket. Indian Gaming Regulatory Act,§ 11(d)(4), 25 U.S.C.A. § 2710(d)(4).

9. Indians O337(3), 340In order to obtain additional time and

gaming devices, an Indian tribe under theIGRA may have to submit to greater stateregulation of its facilities or greater pay-ments to defray the costs the state willincur in regulating a larger facility, but anIndian tribe need not submit to demandsthat it assist the state in addressing itsbudget, since general fund revenue sharingis not a state public policy interest directlyrelated to gaming and is not an authorizednegotiation topic under the IGRA. IndianGaming Regulatory Act, § 11(d)(3)(C),(d)(4), 25 U.S.C.A. § 2710(d)(3)(C), (d)(4).

10. Indians O337(3), 340Gaming rights for which tribes are

entitled to negotiate under the IGRA, likedevice licensing and time, cannot serve asconsideration for general fund revenuesharing; the consideration must be forsomething ‘‘separate’’ than basic gamingrights. Indian Gaming Regulatory Act,§ 11(d)(3)(C), 25 U.S.C.A. § 2710(d)(3)(C).

11. Indians O337(3) Taxation O3412

State did not make meaningful conces-sions, as required by IGRA to negotiatefor gaming rights in good faith, by offeringbundle of rights more valuable than statusquo; state’s limited negotiating authorityover specific items under IGRA did notallow state to lump together proposals fortaxation, land use restrictions, and othersubjects along with IGRA gaming rights.Indian Gaming Regulatory Act, § 11(d), 25U.S.C.A. § 2710(d).

12. Indians O337(3), 340State could not have reasonably relied

on approval of certain other compacts byDepartment of Interior (DOI) as proof oflawfulness of its non-negotiable demandsto Indian tribe for 10–15% of Indian tribe’snet profits to be paid into state treasuryfor unrestricted use, since IGRA anticipat-ed that, even if some tribes agree to waiv-er of their rights to not be taxed by state,such waiver could not form basis for stateexpecting same from other Indian tribeand Secretary of DOI simply permittedcompacts with revenue sharing provisionsto go into effect ‘‘only to the extent theyare consistent with IGRA.’’ Indian Gam-ing Regulatory Act, § 11(d), 25 U.S.C.A.§ 2710(d).

13. Indians O337(3), 342Under the IGRA, good faith should be

evaluated objectively based on the recordof negotiations; a state’s subjective beliefin the legality of its requests is not suffi-cient to rebut the inference of bad faith

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1022 602 FEDERAL REPORTER, 3d SERIES

created by objectively improper demands.Indian Gaming Regulatory Act, § 11(d), 25U.S.C.A. § 2710(d).

Peter H. Kaufman, Deputy AttorneyGeneral of the State of California, SanDiego, CA; Marc Le Forestier, DeputyAttorney General of the State of Califor-nia, Sacramento, CA, for the defendants-appellants/cross-appellees.

Kimberly A. Demarchi, Lewis & RocaLLP, Phoenix, AZ; Scott D. Crowell, Cro-well Law Offices, Kirkland, WA, for theplaintiffs-appellees/cross-appellants.

Steven J. Bloxham, Fredericks Peebles& Morgan LLP, Sacramento, CA, for theamicus.

Appeal from the United States DistrictCourt for the Southern District of Califor-nia, William McCurine, Magistrate Judge,Presiding. D.C. No. 3:04–cv–01151–WMC.

Before: T.G. NELSON, JAY S. BYBEEand MILAN D. SMITH, JR., CircuitJudges.

MILAN D. SMITH, JR., Circuit Judge:

The Indian Gaming Regulatory Act(IGRA), 25 U.S.C. § 2701 et seq., providesthat a state must negotiate in good faithwith its resident Native American tribes toreach compacts concerning casino-stylegaming on Native American lands. Defen-dants–Appellants/Cross–Appellees the

State of California (the State) and Gover-nor Arnold Schwarzenegger (GovernorSchwarzenegger) (collectively as parties tothis litigation, the State) appeal the districtcourt’s finding that, in violation of IGRA,25 U.S.C. § 2710(d)(3)(A), the State nego-tiated in bad faith with Plaintiff–Appel-lee/Cross–Appellant the Rincon Band ofLuiseno Mission Indians (Rincon) concern-ing amendments to the parties’ existingtribal-state gaming compact.

The district court based its bad faithfinding on the State’s repeated insistencethat Rincon pay a portion of its net reve-nues into the State’s general fund, whichthe district court determined to be an at-tempt by the State to impose a tax on thetribe in violation of 25 U.S.C. § 2710(d)(4).

The State challenges the district court’scharacterization of its requests as an at-tempt to impose a tax, and argues thateven if it was attempting to impose a tax,that alone is insufficient to support thefinding of bad faith. We affirm.1

FACTUAL AND PROCEDURALBACKGROUND

The 1999 Compacts

In the fall of 1999, the State (throughthen-governor Gray Davis) and Rincon ne-gotiated a compact granting Rincon theright to operate casino-style (class III 2)gaming on its lands located near San Die-go, California, subject to certain limita-tions.3 Simultaneously, the State’s negoti-ations also resulted in similar compacts

1. Because we affirm the district court’s find-ing of bad faith on the issue of the State’sdemands for revenue sharing, we do notreach any of the alternative grounds for afinding of bad faith asserted by Rincon oncross-appeal.

2. IGRA divides gaming into three classes.Class I involves traditional tribal gaming;class II involves bingo and non-banked cardgames; class III involves gambling not cov-ered in class I or class II (such as casino-style

gaming, including slot machines and bankedcard games). 25 U.S.C. § 2703.

3. The compact included several terms that areirrelevant to the issues addressed in this opin-ion. For context, however, we note that un-der the 1999 compact, Rincon was permittedto operate a certain number of devices, plusdraw additional device licenses from a limitedstatewide pool. The 1999 compact thus re-flected a system of limited gaming.

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1023RINCON BAND OF LUISENO MISSION v. SCHWARZENEGGERCite as 602 F.3d 1019 (9th Cir. 2010)

with dozens of other tribes across Califor-nia. Although some of the 1999 compactshave since been renegotiated, the 1999compact between Rincon and the Stateremains operative.

While negotiations over the 1999 com-pacts were pending, the California Su-preme Court handed down its decision inHotel Employees & Restaurant Employ-ees International Union v. Davis, 21Cal.4th 585, 88 Cal.Rptr.2d 56, 981 P.2d990 (1999). In that case, the CaliforniaSupreme Court determined that the Cali-fornia constitution prohibited everyone inthe state, including Indian tribes, fromoperating Las Vegas-style casinos. As amajor consideration, and in order to makethe proposed 1999 compacts legally en-forceable, the State sponsored a constitu-tional amendment—Proposition 1A—thatwould authorize tribal gaming in Califor-nia.4

In March 2000, California voters ap-proved Proposition 1A, thereby vivifyingthe 1999 compacts. Not only did Proposi-tion 1A permit tribes to conduct class IIIgaming lawfully, it effectively gave tribes astate constitutional monopoly over casinogaming in California. In re Indian Gam-ing Related Cases (Coyote Valley II, 331F.3d 1094, 1103 (9th Cir.2003)).Revenue Sharing Under the 1999 Com-pacts

In consideration for the State’s efforts insecuring the passage of Proposition 1A(without which the tribes would have beenbarred from conducting class III gamingin the State of California), the tribes

agreed to share a portion of their expectedrevenues. Flynt v. Cal. Gambling ControlComm’n, 104 Cal.App.4th 1125, 129 Cal.Rptr.2d 167, 175–77 (2002). The Stateoriginally took the position that the reve-nue should be for general use, but aban-doned that position during the negotiationsin favor of tribal proposals. See CoyoteValley II, 331 F.3d at 1102–03, 1113. Thetribes agreed to pay a portion of theirrevenues into two funds: the RevenueSharing Trust Fund (RSTF) and the Spe-cial Distribution Fund (SDF). See id. at1104–05. Monies paid into the RSTF areredistributed to tribes who choose not to,or are unable to, conduct their own gamingactivities. Id. at 1105. Monies paid intothe SDF, on the other hand, are used tofund:

(a) grants for programs designed to ad-dress gambling addiction; (b) grants forthe support of state and local govern-ment agencies impacted by tribal gam-ing; (c) compensation for regulatorycosts incurred by the State GamingAgency and the state Department ofJustice in connection with the implemen-tation and administration of the com-pact; (d) payment of shortfalls that mayoccur in the RSTF; and (e) ‘‘any otherpurposes specified by the legislature.’’ 5

Id. at 1106.In Coyote Valley II, appellants ques-

tioned whether the RSTF and SDF pro-visions of the 1999 compacts were lawfulsince IGRA, 25 U.S.C. § 2710(d)(4), pre-cludes states from imposing taxes on In-dian gaming. 331 F.3d 1094. We held

4. For a more detailed history of Proposition1A and related state/tribe negotiations con-cerning the 1999 compacts, see In re IndianGaming Related Cases, 331 F.3d 1094 (9thCir.2003) and Artichoke Joe’s Cal. Grand Casi-no v. Norton, 353 F.3d 712 (9th Cir.2003).

5. In this opinion, we focus only on subsec-tions (a), (b) and (e) of the SDF. Subsection(c) is expressly authorized by

§ 2710(d)(3)(C)(iii), and the State does notrely upon it in its quest because it seeks todeposit funds into its general fund, not onewith earmarked uses. Subsection (d) is effec-tively part of the RSTF so it need not beanalyzed separately. We have previously con-strued subsection (e) to cover only those pur-poses directly related to gaming. Coyote Val-ley II, 331 F.3d at 1113–14.

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that the RSTF and SDF were permissi-ble notwithstanding § 2710(d)(4) because,as more fully explained infra, the natureof the revenue sharing and the constitu-tional exclusivity obtained in considerationfor it were primarily motivated by a de-sire to promote tribal interests. 351 F.3dat 1110–15. We further concluded thatby virtue of the 1999 compacts and Prop-osition 1A, the State gave all tribes inCalifornia significant opportunities to ben-efit from gaming without taking anythingsignificant for itself, beyond what was re-quired to protect its citizens from the ad-verse consequences of gaming, and to ful-fill other regulatory and police functionscontemplated by IGRA. Id.The 2003–2006 Compact Renegotiations

Operating under its 1999 compact, Rin-con began to generate significant revenuethat enabled it to improve tribal govern-mental functions and become economicallyself-sufficient. By 2003, Rincon desired toexpand its operations beyond what the1999 compact permitted. Accordingly, inMarch of that year, Rincon notified the

State of its interest in renegotiating cer-tain provisions of the 1999 compact.

Negotiations began in 2003 in responseto Rincon’s request, but in October of thatyear, California voters recalled GovernorDavis and elected Governor Schwarzeneg-ger in his stead. Although negotiationseventually reconvened, they quickly as-sumed a decidedly different tone. Insteadof requesting funds to help defray thecosts of gaming, or to benefit Indiantribes, the State demanded that Rinconpay a significant portion of its gamingrevenues into the State’s general fund.

The State made its first offer to Rinconon November 10, 2005.6 The State offeredRincon the opportunity to operate 900 ad-ditional devices plus the 1600 devices Rin-con already operated, but only if Rinconwould agree to pay the State 15% of thenet win on the new devices, along with anadditional 15% annual fee based on Rin-con’s total 2004 net revenue. In exchangefor the 15% revenue share demanded, theState offered Rincon an ‘‘exclusivity provi-sion.’’ 7

6. In June 2004, Rincon filed the present suitin order to force the State to expedite negotia-tions. The offers described herein were bothIGRA negotiations and on-the-record settle-ment negotiations.

7. Specifically, the State offered:1. The State would agree to allow theTribe to operate an additional 900 GamingDevices outside of the licensing pool estab-lished by the Tribe’s existing compact aslong as the total number of Gaming Devicesin operation by the Tribe do [sic] not exceed2500 Gaming Devices[;]2. The Tribe would be required to main-tain its existing Gaming Device licenses, butthe parties would negotiate over theamount of the contributions made by theTribe to the [RSTF] in connection there-with;3. The Tribe would pay annually to theState 15% of the average net win for eachof the additional Gaming Devices outside ofthe licensing system that it operates pursu-ant to the compact amendment, provided

that the average net win is calculated onthe basis of all Gaming Devices operated bythe Tribe;4. The Tribe would pay to the State, forthe duration of the compact term, an annu-al fee equal to 15% of the net win in FiscalYear 2004 from the Gaming Devices in op-eration at the Tribe’s casino;5. The term of the amended compactwould be the same as that of the existingcompact;6. A portion of the Tribe’s payment to theState could be designed for San DiegoCounty and CalTrans, which amount wouldbe negotiated between the Tribe and theState TTT [;]7. Except as set forth in paragraphs 5 and8, the amendment would contain the samenon-economic provisions as the Pala Com-pact Amendment;8. The Tribe [would] be afforded an exclu-sivity provision, the terms of which [would]be subject to further negotiation TTT [but]the exclusivity provisions would be ‘‘simi-lar’’ to the Pala compact amendmentTTTT

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Rincon countered that, in order to ob-tain additional devices, it would agree tosome per device fees. Rincon emphasized,however, that the use of any fees it paidhad to be limited to paying for the costs ofregulating gaming, building infrastructureneeded to support gaming operations, andmitigating adverse impacts caused by gam-ing operations. Rincon further stated that‘‘with all due respect, we are not asking forexclusivity and the State’s analysis doesnot hold water as it relates to Rincon in itscurrent circumstance.’’

Rincon also noted that Proposition 1Aalready provided for tribal gaming exclu-sivity, so it was not seeking whatever fur-ther exclusivity might provide. Rincon’slands are located in the middle of a satu-rated tribal gaming market. Accordingly,no form of tribal exclusivity could shelterRincon from substantial competition. Aslong as the proposed exclusivity provisionrelated only to freedom from non-tribalcompetition, ‘‘exclusivity’’ would not pro-vide Rincon with any meaningful economicadvantages that would warrant the tribemaking the requested payments.

The State interpreted Rincon’s counter-proposal for limited-use, per device feesand its rejection of exclusivity to be arequest that the State agree to allow Rin-con to operate additional devices beyondthe 1999 compact limits ‘‘without offeringthe State anything meaningful in return.’’The State held firm in its demand that aportion of tribal gaming revenues be paidinto the State’s general fund, rather thaninto an earmarked fund.

Rincon re-countered with an offer sub-stantially mirroring its previous offer, butoffering slightly increased per device fees.Rincon also presented several expert re-ports on the financial impact the State’soffer would have on Rincon. By Rincon’scalculations,

the State’s offer TTT would require Rin-con to pay an additional $23 million in

fees for the machines currently in playat Rincon’s gaming operation pursuantto the 1999 CompactTTTT By imposingthe 15% fee on the Tribe’s net win as ofFiscal year 2004, the Tribe would berequired to pay 15 to 20 times what it ispaying now without adding a single ma-chine onto the gaming floor! TheState’s proposal is a poorly disguisedtax, which is impermissible under IGRA.

The State made its next counteroffer onOctober 23, 2006. That offer included sub-stantially the same terms as its November10, 2005 offer, but offered that the compactterm would be extended for five years, andthat Rincon would pay an annual fee equalto 10% (instead of 15%) of its net winbased on fiscal year 2005 (instead of 2004).The State noted that the terms it wasoffering Rincon were similar to those al-ready accepted by a handful of other tribesand approved by the Department of theInterior. At Rincon’s request, on October31, 2006, the State made an alternativeoffer to allow Rincon to operate 400 addi-tional devices with no other changes to theexisting compact. In exchange for the 400additional devices, Rincon would have topay $2 million annually to the RSTF, plus25% of Rincon’s net win on those addition-al 400 devices to the State’s general fund.

The State accompanied this last counter-offer with its own expert analysis compar-ing the value to Rincon of continuing tooperate its current 1600 devices under the1999 compact to the value to Rincon ofaccepting the State’s counteroffer of 2500devices with a 10% annual fee. TheState’s expert concluded that if Rinconaccepted the State’s offer, it would payCalifornia $38 million and retain $61 mil-lion in net revenue. If Rincon maintainedits operations under the 1999 compact, itwould pay the State nothing and retain $59million in net revenue. Hence, accordingto the State’s expert, Rincon stood to gain$2 million in additional revenues if it ac-

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cepted the amendment. In contrast, theState stood to gain $38 million. Rinconrejected the State’s counteroffer, and therecord of negotiations then closed.

Having reached an impasse, the partiesfiled cross-motions for summary judgmentin the district court. The district courtgranted summary judgment in favor ofRincon, and this timely appeal followed.

JURISDICTION AND STANDARDOF REVIEW

IGRA grants district courts original fed-eral jurisdiction over tribal claims that astate has failed to negotiate in good faithconcerning class III gaming rights. 25U.S.C. § 2710(d)(7)(A)(i). California haswaived its Eleventh Amendment immunityfrom such suits.8 Cal. Gov’t Code § 98005;Hotel Employees, 88 Cal.Rptr.2d 56, 981P.2d at 1011. We have jurisdiction under28 U.S.C. §§ 1291 and 1292(a)(1).

[1] Summary judgment is appropriateif there is no genuine issue of material fact

and, even making all reasonable inferencesin favor of the nonmoving party, the mov-ing party is entitled to judgment as amatter of law. Fed.R.Civ.P. 56(c); Bodettv. CoxCom, Inc., 366 F.3d 736, 742 (9thCir.2004). The State argues that the dis-trict court erred in granting summaryjudgment against it on the issue of wheth-er it negotiated in good faith. See 25U.S.C. § 2710(d)(7)(B)(iii-iv). Whether thenegotiations were conducted in good faithis a mixed question of law and fact that wereview de novo. Coyote Valley II, 331F.3d at 1107 (citing Diamond v. City ofTaft, 215 F.3d 1052, 1055 (9th Cir.2000)).

DISCUSSION

[2] From the advent of colonists inNorth America, the new arrivals promptlybegan encroaching on Indian lands, andfrequently treating Indians unfairly. Toprotect against further ‘‘great Frauds andAbuses’’ perpetrated by the colonistsagainst the Indians, and to avoid war, the

8. Many states have not waived their EleventhAmendment immunity under IGRA as Califor-nia has. The dissent’s reliance on the preva-lence of compacts containing revenue sharingprovisions is therefore suspect because thatreliance ignores the fact that many of thestates involved in those compacts would notpermit tribes to challenge state demands asmade in bad faith. See, e.g., Seminole Tribe ofFlorida v. Florida, 517 U.S. 44, 116 S.Ct.1114, 134 L.Ed.2d 252 (1996) (holding thatIGRA did not abrogate state Eleventh Amend-ment immunity, so Florida state actors couldnot be sued by tribe to force good faith negoti-ations); Mescalero Apache Tribe v. New Mexi-co, 131 F.3d 1379, 1384–85 (10th Cir.1997)(holding that New Mexico has not waived itsEleventh Amendment immunity to IGRAsuits); Ponca Tribe of Okla. v. Oklahoma, 89F.3d 690 (10th Cir.1996) (same for Okla-homa); Santee Sioux Tribe of Neb. v. Nebras-ka, 121 F.3d 427, 431 (8th Cir.1997) (same forNebraska); Sault Ste. Marie Tribe of ChippewaIndians v. Michigan, 800 F.Supp. 1484(W.D.Mich.1992) (same for Michigan).Tribes in states that have not waived theirEleventh Amendment immunity for IGRA

suits have no recourse to challenge the validi-ty of revenue sharing, and some thereforechoose to accept revenue sharing rather thango without a compact. See Pueblo of Sandiav. Babbitt, 47 F.Supp.2d 49, 51, 56–57 & n. 7(D.D.C.1999) (explaining that the Departmentof the Interior believed the revenue sharingprovision was illegal, but also believed that ithad no choice but to allow the compact to gointo effect because the tribe would have norecourse against the state to obtain a legalcompact). Moreover, this reality—for betteror worse—will prevent the proliferation oflawsuits feared by our dissenting colleague.The dissent suggests that 25 C.F.R. §§ 291.1et seq. is a potential vehicle for tribes tochallenge state demands, Dissent at 1073. n.27, but the only circuit court to consider thequestion has held the regulations invalid.Texas v. United States, 497 F.3d 491 (5thCir.2007), cert. denied sub nom. Kickapoo Tra-ditional Tribe of Tex. v. Texas, ––– U.S. ––––,129 S.Ct. 32, 172 L.Ed.2d 18 (2008). Thevalidity of the regulations is not before us,and we therefore do not find it appropriate torely on them, or express any opinion as totheir validity.

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British Crown assumed ultimate authorityover Indian affairs. 1–1 Cohen’s Hand-book on Fed. Indian Law § 1.02 (MatthewBender 2009). When our nation wasformed, the federal government essentiallytook the place of the Crown, with Con-gress being granted the power to ‘‘regulateCommerce TTT with the Indian tribes,’’U.S. Const. art. I, § 8, cl. 3, and the Presi-dent being given the power to make trea-ties (including with Indian tribes) with theconsent of the Senate. U.S. Const. art. II,§ 2, cl. 2. According to the Supreme Court,the federal government’s relationship tothe tribes was that of a ‘‘ward to hisguardian.’’ Cherokee Nation v. Georgia,30 U.S. (5 Pet.) 1, 17, 8 L.Ed. 25 (1831).Nevertheless, promises and treaties wererepeatedly broken or ignored as Indianswere swept from their lands and homes bystates, hoards of settlers, and sometimeseven by the ‘‘guardian’’ federal govern-ment itself, when they wanted the lands orresources possessed by those Indians. SeeCohen’s, supra, at §§ 1.02–1.03. Recount-ing one such instance, the Supreme Courtin United States v. Sioux Nation of Indi-ans detailed the history of how, first bymilitary force, then by Congressional act,the government deprived the Sioux tribe inSouth Dakota of much of its land becausegold was discovered in the Black Hills.448 U.S. 371, 100 S.Ct. 2716, 65 L.Ed.2d844 (1980). Today, many tribes havestruck figurative gold with casino gamingand, again, some state governments, justlike their predecessors, are maneuveringto take, or at least share in, some of thatfigurative gold.

Mindful of this ignominious legacy, Con-gress enacted IGRA to provide a legalframework within which tribes could en-gage in gaming—an enterprise that holdsout the hope of providing tribes with theeconomic prosperity that has so long elud-ed their grasp—while setting boundariesto restrain aggression by powerful states.See S.Rep. No. 100–446, at 33 (1988)

(statement of Sen. John McCain), reprint-ed in 1988 U.S.C.C.A.N. 3071, 3103; 134Cong. Rec. at S12654 (statement of Sen.Evans). In passing IGRA, Congress as-sured tribes that the statute would alwaysbe construed in their best interests. See,e.g., S.Rep. No. 100–446, at 13–14, as re-printed in 1988 U.S.C.C.A.N. at 3083–84.

Under IGRA, a tribe may conduct classIII gaming only once a compact with itshome state is in effect. Because the com-pact requirement skews the balance ofpower over gaming rights in favor ofstates by making tribes dependent on statecooperation, IGRA imposes on states theconcomitant obligation to participate in thenegotiations in good faith. 25 U.S.C.§ 2710(d)(3)(A). If a court finds that astate has failed to negotiate in good faith,IGRA empowers the court to order addi-tional negotiations and, if necessary, toorder the parties into mediation in which acompact will be imposed. § 2710(d)(7).

In evaluating a State’s good faith, thedistrict court:

(I) may take into account the public in-terest, public safety, criminality, finan-cial integrity, and adverse economic im-pacts on existing gaming activities, and(II) shall consider any demand by theState for direct taxation of the Indiantribe or of any Indian lands as evidencethat the State has not negotiated in goodfaith.

§ 2710(d)(7)(B)(iii) (emphasis added); seeCoyote Valley II, 331 F.3d at 1108–09(quoting at length S.Rep. No. 100–446, at13–14, as reprinted in 1988 U.S.C.C.A.N.at 3083–84, which provides guidance onhow Congress intended§ 2710(d)(7)(B)(iii)(I) to be interpreted).

In addition to specifying criteria forevaluating a state’s good faith, IGRA out-lines permissible tribe-state negotiationtopics.

(C) Any Tribal–State compact TTT mayinclude provisions relating to—

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(i) the application of the criminal andcivil laws and regulations of the Indiantribe or the State that are directly relat-ed to, and necessary for, the licensingand regulation of such activity;

(ii) the allocation of criminal and civiljurisdiction between the State and theIndian tribe necessary for the enforce-ment of such laws and regulations;

(iii) the assessment by the State ofsuch activities in such amounts as arenecessary to defray the costs of regulat-ing such activity;

(iv) taxation by the Indian tribe ofsuch activity in amounts comparable toamounts assessed by the State for com-parable activities;

(v) remedies for breach of contract;

(vi) standards for the operation ofsuch activity and maintenance of thegaming facility, including licensing; and

(vii) any other subjects that are di-rectly related to the operation of gamingactivities.

§ 2710(d)(3)(C). However, the list of per-missible negotiation topics is circumscribedby one key limitation on state negotiatingauthority:

Except for any assessments that may beagreed to under [§ 2710(d)(3)(C)(iii) ],nothing in this section shall be interpret-ed as conferring upon a State TTT au-thority to impose any tax, fee, charge, orother assessment upon an IndiantribeTTTT No State may refuse to enterinto the negotiations TTT based upon thelack of authority in such State TTT toimpose such a tax, fee, charge, or otherassessment.

25 U.S.C. § 2710(d)(4). IGRA limits per-missible subjects of negotiation 9 in order

9. Our dissenting colleague suggests that§ 2710(d)(3)(C) is not exhaustive, and thengoes on to say that even if it is, reading the‘‘catch-all’’ provision, § 2710(d)(3)(C)(vii), re-strictively conflicts with Coyote Valley II. Dis-sent at 1059–62. The language and structureof § 2710(d)(3)(C) suggests it is exhaustive.There are seven categories of what ‘‘may’’ benegotiated. Although ‘‘may’’ indicates per-missiveness as the dissent explains, to grantpermission is not necessarily to grant carteblanche. What is ‘‘permitted’’ is limited.Section 2710(d)(C)(vii) explicitly addressesunenumerated topics, but limits them to those‘‘directly related’’ to gaming. See Wisconsinv. Ho–Chunk Nation, 512 F.3d 921, 933–34(7th Cir.2008) (reading § 2710(d)(3)(C) as ex-haustive for jurisdictional purposes); see alsoCoyote Valley II, 331 F.3d at 111 (noting thatCongress ‘‘limit[ed] the proper topics for com-pact negotiations to those that bear a directrelationship to the operation of gaming activi-ties’’ (emphasis added)). Significantly, whatcompels a limited reading of the permittedtopics is the canon of construction obligatingus to construe a statute abrogating tribalrights narrowly and most favorably towardstribal interests. See United States v. Winans,198 U.S. 371, 381, 25 S.Ct. 662, 49 L.Ed.1089 (1905) (stating that ‘‘the treaty was not a

grant of rights to the Indians, but a grant ofright from them,—a reservation of those[rights] not granted’’); Bryan v. Itasca Coun-ty, 426 U.S. 373, 392, 96 S.Ct. 2102, 48L.Ed.2d 710 (1976) (‘‘[I]n construing this ad-mittedly ambiguous statute, we must be guid-ed by that eminently sound and vital canonthat statutes passed for the benefit of depen-dent Indian tribes are to be liberally con-strued, doubtful expressions being resolved infavor of the Indians.’’ (internal quotationmarks, citations, and ellipsis omitted)). Thedissent is correct that Coyote Valley II heldthat § 2710(d)(3)(C)(vii) is not ambiguous,and we do not hold otherwise. Whether reve-nue sharing fits into the unambiguous phrase‘‘directly related to gaming’’ however is asubject of significant dispute between the par-ties. To help resolve the dispute, we, like theCoyote Valley II court, consider relevant theCongressional directive to construe ambigui-ties related to the issues covered by IGRAmost favorably to tribal interests. Coyote Val-ley II, 331 F.3d at 1111 (quoting S.Rep. No.100446, at 15, reprinted in 1988 U.S.C.C.A.N.at 3085). Even if the dissent is correct thatresolution of this issue features a clash of‘‘dueling canons,’’ Congress’ specific invoca-tion of the tribal canon persuades us whichcanon must triumph here.

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to ensure that tribal-state compacts coveronly those topics that are related to gam-ing 10 and are consistent with IGRA’s stat-ed purposes, see Coyote Valley II, 331F.3d at 1111, which are:

(1) to provide a statutory basis for theoperation of gaming by Indian tribes asa means of promoting tribal economicdevelopment, self-sufficiency, and strongtribal governments;(2) to provide a statutory basis for theregulation of gaming by an Indian tribeadequate to shield it from organizedcrime and other corrupting influences, toensure that the Indian tribe is the pri-mary beneficiary of the gaming opera-tion, and to assure that gaming is con-ducted fairly and honestly by both theoperator and players; and(3) to declare that the establishment ofindependent Federal regulatory authori-ty for gaming on Indian lands, the es-tablishment of Federal standards forgaming on Indian lands, and the estab-lishment of a National Indian GamingCommission are necessary to meet con-gressional concerns regarding gamingand to protect such gaming as a meansof generating tribal revenue.

§ 2702 (emphasis added); see also Arti-choke Joe’s, 353 F.3d at 715.

Here, the State repeatedly demandedthat Rincon agree to pay into the State’s

general fund 10–15% of Rincon’s annualnet win, and up to 25% of Rincon’s revenuefrom any new devices Rincon would oper-ate under an amended compact. OnceRincon proffered evidence suggesting thatthe State had acted in bad faith by at-tempting to impose taxation, ‘‘the burdenof proof [shifted to] the State to prove thatthe State has negotiated with the Indiantribe in good faith to conclude a Tribal–State compact governing the conduct ofgaming activities.’’ § 2710(d)(7)(B)(ii). Weconclude that the State failed to meet itsburden.

I. Taxation Demands ‘‘Shall’’ Be Con-sidered Evidence of Bad Faith

Under § 2710(d)(7)(B)(iii)(II), a courtmust consider a ‘‘demand’’ for a tax to bemade in bad faith.11 A tax is ‘‘a charge,usu[ally] monetary, imposed by the gov-ernment on persons, entities, transactions,or property to yield public revenue.’’Black’s Law Dictionary 1594 (9th ed.2009)(emphasis added). The State insisted thatRincon pay at least 10% of its net profitsinto the State’s general fund. Accordingto California Government Code § 16300,‘‘[t]he General Fund consists of money re-ceived into the treasury and not requiredby law to be credited to any other fund.’’No amount of semantic sophistry can un-dermine the obvious: a non-negotiable,mandatory payment of 10% of net profits

persuades us which canon must triumphhere.

10. ‘‘Gaming by its very nature is a uniqueform of economic enterprise and the Commit-tee is strongly opposed to the application ofthe jurisdictional elections authorized by thisbill to any other economic or regulatory issuethat may arise between tribes and States inthe future.’’ S.Rep. No. 100–446, at 14, asreprinted in 1988 U.S.C.C.A.N. 3071, 3084.See also 134 Cong. Rec. S12643–01, atS12651 (1988) (‘‘There is no intent on thepart of Congress that the compacting method-ology be used in such areas such as taxation,water rights, environmental regulation, and

land use TTT. The exigencies caused by therapid growth of gaming in Indian country andthe threat of corruption and infiltration bycriminal elements in class III gaming war-ranted the utilization of existing State regula-tory capabilities in this one narrow area.’’)(statement of Sen. Inouye) (emphasis added).

11. In Coyote Valley II we were convinced thatany inference of bad faith had been rebutted,so we did not need to address this thresholdinquiry into whether the RSTF and SDF weretaxes demanded by the State. Because thebad faith question is more difficult in thiscase, we commence with the threshold inqui-ry.

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into the State treasury for unrestricted useyields public revenue, and is a ‘‘tax.’’Moreover, unlike what occurred in the1999 negotiations, none of the State’s com-munications during the renegotiations thatoccurred after the change in administra-tion in 2003 reflected a willingness to takeits general fund revenue sharing demandoff the table. The State repeatedly em-phasized its position that it would not giveRincon more devices or time without areciprocal benefit to the State, and therecord reveals that no other ‘‘benefit’’ wasdemanded besides monetary payments intothe general fund. Webster’s Third NewInternational Dictionary 598 (2002) defines‘‘demand’’ as ‘‘to call for as useful, neces-sary, or requisite: make imperative.’’ TheState’s repeated and forceful insistence onmonetary payments to the general fundundoubtedly constitutes a ‘‘demand.’’ Un-der the plain language of§ 2710(d)(7)(B)(ii)(II), the State’s demandfor the payment of a tax is evidence of theState’s bad faith.

Our dissenting colleague faults us forour characterization of the 10–15% reve-nue share as a ‘‘tax,’’ primarily because hecontends we fail to appreciate the importof the word ‘‘imposed’’ in the definition of a‘‘tax.’’ Dissent at 5934–37, 5943–45. Heargues that IGRA merely creates a con-text for ‘‘voluntary’’ negotiations, and thatno matter how ‘‘hard line’’ the State’s posi-tion is, it still has not attempted to exer-cise authority to ‘‘impose’’ a tax.

The flaw in this argument—related to afaulty assumption made throughout thedissent—is that it ignores the plain factthat neither tribes nor states enter IGRAnegotiations ‘‘voluntarily’’ in the way par-ties do in all the examples cited by thedissent. IGRA negotiations are thereforedistinguishable from regular contract ne-gotiations. When private parties, or inde-pendent sovereign entities, commence con-tract negotiations, they generally do so

because each has something of value theother wants, and each side has the right toaccept or reject an offer made, based onthe desirability of the terms. If negotia-tions fail, neither party has a right tocomplain. Not so in IGRA negotiations.In IGRA, Congress took from the tribescollectively whatever sovereign rights theymight have had to engage in unregulatedgaming activities, but imposed on thestates the obligation to work with tribes toreach an agreement under the terms ofIGRA permitting the tribes to engage inlawful class III gaming activities. IfIGRA negotiations break down between astate and a tribe because the state doesnot come to the bargaining table in goodfaith, IGRA specifically provides thatcourts, and the Secretary of the Interior,can intervene to impose a gaming arrange-ment without the affected state’s approval.See § 2710(d)(7)(B)(iii-vii). Thus, whileIGRA was designed to give states a voicein Indian gaming, it was not designed togive states complete power over tribalgaming such that each state can put theopportunity to operate casinos up for saleto the tribe willing to pay the highestprice. See § 2702; see also Cheyenne Riv-er Sioux Tribe v. South Dakota, 3 F.3d273, 281 (8th Cir.1993) (noting that IGRAimposes mandatory duties upon states andgives them incentives to negotiate, but thatit also provides tribes with alternativeroutes to a compact if the states choosenot to cooperate); Dalton v. Pataki, 5N.Y.3d 243, 802 N.Y.S.2d 72, 835 N.E.2d1180, 1189 (2005) (‘‘IGRA confers a benefiton the state by allowing it to negotiate andto have some input into how class IIIgaming will be conducted.’’).

The dissent claims that § 2710(d)(4)means only that IGRA should not be inter-preted as ‘‘conferring ’’ upon states the‘‘authority to impose ’’ taxes and fees.Dissent at 1048. But nothing in IGRA canreasonably be construed as conferring onstates the power to impose anything; all

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the states are empowered to do is negoti-ate. The logic underlying the dissent isthat there is no ‘‘imposition’’ when there is‘‘negotiation.’’ But by that logic, not onlymay states demand revenue sharing likeCalifornia has done here, they could takeany ‘‘hard-line’’ stance, such as demandingthat a tribe agree to waive its sovereignimmunity from taxation, as a condition ofobtaining more gaming devices. No onedisputes that requiring a tribe to waive itssovereign immunity from state taxation inorder to obtain a compact is clearly con-trary to IGRA. And yet, if a tribe ‘‘agreed’’to do so, the waiver of taxation immunitywould be no less ‘‘negotiated’’ than therevenue sharing the dissent advocateshere.

Exercising an authority to ‘‘impose’’ inthe context of IGRA must therefore relateto something the state does during thenegotiations process to extract an improp-er concession. In other words, the onlyconceivable way a state could ‘‘impose’’something during negotiations is by insist-ing, over tribal objections, that the tribemake a given concession—a concession be-yond those specially authorized by

§ 2710(d)(3)(C) 12 and contrary to thetribe’s sovereign interests—in order to ob-tain a compact.13

The dissent acknowledges that in thiscase ‘‘California has insisted that the Bandshare its gaming revenues as a condition toreceiving authorization for additional gam-ing devices,’’ but then concludes that thisis simply ‘‘hard-line’’ negotiating for reve-nue sharing, not imposing a tax. Dissentat 5933. If there is a distinction betweeninsisting on obtaining a share of Rincon’sincome as a non-negotiable condition ofgranting it a compact, and demanding atax or ‘‘refus[ing] to enter into the negotia-tions TTT based upon the lack of authorityTTT to impose such a tax, fee, charge, orother assessment,’’ § 2170(d)(4), it is a dis-tinction without a difference. In eithercase, the state is using its power overnegotiations to force Rincon to pay theState a portion of its income into theState’s general fund (and not for any usefor the benefit of Rincon or other tribes) inorder to engage in class III gaming. If§ 2710(d)(4) means anything, it means thatCalifornia cannot do that—whatever onecalls it.14

12. Indeed, the dissent overlooks the signifi-cance of § 2710(d)(4)’s introductory phrase:‘‘Except for any assessments that may beagreed to under [§ 2710(d)(3)(C)(iii)].’’ Thus,§ 2710(d)(4) clearly contemplates which feesmay be ‘‘agreed to,’’ and subsequently im-posed by the state, in exchange for basicgaming rights: only those described in§ 2710(d)(3)(C)(iii).

13. Under § 2710(d)(4), it is not only ‘‘taxes’’that are precluded, it is any ‘‘tax, fee, charge,or other assessment.’’ Even if the dissentwere correct that the fees are not ‘‘taxes,’’ wefail to see how the State’s demands, which theState itself described as ‘‘annual fees,’’ do notrun afoul of this provision. The importanceof the fact that the ‘‘demand’’ was for a ‘‘di-rect tax’’ only matters as to the question ofwhether the court is required to take the de-mand as evidence of bad faith under§ 2710(d)(7)(B)(iii)(II), which refers to directtaxation but not the other sorts of extracted

payments named in § 2710(d)(4). But under§ 2710(d)(7)(B)(iii)(II), the language is clearthat what matters is the State’s ‘‘demand’’ forthe tax. This shows that the analysis mustfocus on what states ‘‘demand,’’ not what theymay think they have the authority to ‘‘im-pose’’ in the way the dissent interprets thatterm.

14. Even if we were to accept the dissent’sinterpretation of the meaning of§§ 2710(d)(3)(C) and 2710(d)(4), that wouldonly mean that IGRA is silent on the issue ofrevenue sharing. The dissent takes silence asauthorization, but in doing so forgets that thisis a statute affecting Indian tribes. As such,we are obligated to construe ambiguities inthe statute most favorably towards tribal in-terests, which means that we are obligated toconstrue the silence as a withholding of stateauthority to negotiate for that term. SeeBryan, 426 U.S. at 392, 96 S.Ct. 2102.

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In Coyote Valley II, we explained thatIGRA requires courts to consider a state’sdemand for taxation as evidence of badfaith, not conclusive proof. 331 F.3d at1112–13 (citing § 2710(d)(7)(B)(iii)(II)).However, ‘‘[d]epending on the nature ofboth the fees demanded and the conces-sions offered in return, such demandsmight, of course, amount to an attempt toimpose a fee, and therefore amount to badfaith on the part of a State.’’ Coyote Val-ley II, 331 F.3d at 1112 (internal quotationmarks omitted). For the reasons de-scribed in greater detail infra, when the‘‘nature of the fees’’ is general fund reve-nue sharing—a bald demand for paymentof a tax—the State faces a very difficulttask to rebut the evidence of bad faithnecessarily arising from that demand. See§ 2710(d)(3)(B)(iii)(II).

Under IGRA, the State may attempt torebut bad faith by demonstrating that therevenue demanded was to be used for ‘‘thepublic interest, public safety, criminality,financial integrity, and adverse economicimpacts on existing gaming activities.’’§ 2710(d)(3)(B)(ii). See S.Rep. No. 100–446, at 13–14, as reprinted in 1988U.S.C.C.A.N. at 3083–84. The State’sneed for general tax revenues is not in thelist. Even if ‘‘the public interest’’ or ‘‘fi-nancial integrity’’ could conceivably be con-strued to implicate the State’s need forgeneral funds, IGRA’s purposes do notpermit such a construction. Instead, thoseterms clearly apply to protecting the Stateagainst the adverse consequences of gam-ing activities. See § 2702; S.Rep. No.100–446, at 13–14, as reprinted in 1988U.S.C.C.A.N. at 3083–84. Moreover, con-struing those terms broadly in favor of theState’s interests would be inconsistent with

our obligation to construe IGRA most fa-vorably towards tribal interests. See Arti-choke Joe’s, 353 F.3d at 728–30 (discussingMontana v. Blackfeet Tribe of Indians,471 U.S. 759, 105 S.Ct. 2399, 85 L.Ed.2d753 (1985)); see also S.Rep. No. 100–446,at 15, as reprinted in 1988 U.S.C.C.A.N. at3085 (stating Congressional intent thatcourts interpret any ambiguities regarding§ 2710(d)(3)(B)(ii)(I) in the way most fa-vorable to tribal interests).

Critically, the State does not even seekto justify its general fund revenue sharingdemands directly under any of the factorsin § 2710(d)(7)(B)(ii)(I).15 Rather, theState relies on its interpretation of ourdecision in Coyote Valley II. The State’sreliance is misplaced. Coyote Valley II isan exceptional case whose facts are readilydistinguishable from those in this case.

II. Coyote Valley II

Coyote Valley II considered objectionsto, among other things, the RSTF andSDF provisions of the 1999 compacts. Weheld those funds to be authorized subjectsof negotiation under 25 U.S.C.§ 2710(d)(3)(C)(vii) (subjects ‘‘directly re-lated to the operation of gaming’’). TheSDF was clearly ‘‘directly related’’ to gam-ing because all uses of SDF funds wereearmarked for gaming-related purposes.Coyote Valley II, 331 F.3d at 1114. TheRSTF funds similarly were related togaming because, by redistributing gamingfunds from gaming to non-gaming tribes,they are entirely consistent with the IGRAgoal of using gaming to foster tribal eco-nomic development. Id. at 1111. Notably,we expressly declined to decide if theRSTF or SDF were ‘‘taxes,’’ because theywere decidedly not ‘‘imposed’’ in bad faith.

15. The State’s offers include reference to itsdesire to limit the number of gaming devicesoperating in the State. Although a desire toprevent excessive proliferation of casinos andgambling devices would likely be a legitimateinterest justifying State refusal to permit a

tribe to expand its gaming operations, suchan interest is not at issue here. The Statedoes not rely on that interest in this case, butcf. supra n.3, nor could the State credibly doso since it has shown its willingness to permitnearly unlimited gaming if the price is right.

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Rather, the tribes themselves suggestedthem, and were willing to pay into them inexchange for the ‘‘meaningful concession’’of constitutional exclusivity. Id. at 1112–15.

[3] Coyote Valley II thus stands forthe proposition that a state may, withoutacting in bad faith, request revenue shar-ing if the revenue sharing provision is (a)for uses ‘‘directly related to the operationof gaming activities’’ in§ 2710(d)(3)(C)(vii), (b) consistent with thepurposes of IGRA, and (c) not ‘‘imposed’’because it is bargained for in exchange fora ‘‘meaningful concession.’’ The State’soffers in this case fail on all three prongsof that proposition.

A. ‘‘Directly Related to the Opera-tion of Gaming Activities’’

The State asserts that, like the RSTFand SDF, its revenue sharing demandswere authorized under § 2710(d)(3)(C)(vii)because they involve a subject directly re-lated to gaming. The State misunder-stands.

The State’s argument that general fundrevenue sharing is ‘‘directly related to theoperation of gaming activities’’ because themoney is paid out of the income fromgaming activities is circular. Moreover,the very next section of the statute pre-cludes us from interpreting§ 2710(d)(3)(C)(vii) in the way the Statesuggests. See § 2710(d)(4) (stating explic-itly that states are not authorized to usenegotiations to impose assessments on

tribes other than those ‘‘agreed to underparagraph (3)(C)(iii) ’’ (emphasis added));see also Wisconsin v. Ho–Chunk Nation,512 F.3d 921, 932 (7th Cir.2008) (describ-ing revenue sharing agreements as beingin tension with § 2710(d)(4)).

Crucially, in Coyote Valley II we did notconclude that § 2710(d)(3)(C)(vii) author-ized the RSTF and SDF because ‘‘revenuesharing’’ is a subject directly related togaming. Rather, we held that fair distri-bution of gaming opportunities and com-pensation for the negative externalitiescaused by gaming are subjects directlyrelated to gaming, and the RSTF and SDFwere the means chosen by the parties tothe 1999 compacts to deal with those is-sues. See Coyote Valley II, 331 F.3d at1111, 1114.

[4, 5] Whether revenue sharing is anauthorized negotiation topic under§ 2710(d)(3)(C)(vii) thus depends on theuse to which the revenue will be put, noton the mere fact that the revenue derivesfrom gaming activities. General fund rev-enue sharing, unlike funds paid into theRSTF and SDF, has undefined potentialuses. See Cal. Gov.Code § 16300 (provid-ing that the ‘‘General Fund consists ofmoney received into the treasury and notrequired by law to be credited to any otherfund.’’). Therefore, payments into thegeneral fund cannot be said to be directlyrelated to gaming. Indeed, in Coyote Val-ley II we expressly recognized the distinc-tion between general fund revenue sharingand the RSTF and SDF.16 We noted that

16. This distinction also gave the Seventh Cir-cuit pause in Ho–Chunk Nation.

While we decline to use the case before usto weigh in on [the contentious issue ofrevenue sharing], we do note that the termsof the revenue-sharing agreements at issuein In re Indian Gaming are distinct from theone contained in the Compact between theNation and the State. In In re Indian Gam-ing, the state’s use of the payments made bythe tribes was heavily restricted, with all

payments placed in two funds, one of whichdistributed gaming revenue amongst non-gaming tribes, with the other designed tofund programs to treat gambling addiction,support local agencies impacted by Indiangaming, and finance other costs directlyrelated to gaming operations. Here, how-ever, the Nation’s payments to the State aremade without any restrictions or limits onthe manner in which the State may usethose funds.

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the RSTF ‘‘provision does not put tribalmoney into the pocket of the State,’’ id. at1113, and reserved the question of whetherthe SDF would be lawful if the funds weredeposited straight into the State’s generalfund, id. at 1114 n. 17. Consequently, wehold that general fund revenue sharing isnot ‘‘directly related to the operation ofgaming activities’’ and is thus not an au-thorized subject of negotiation under§ 2710(d)(3)(C)(vii). See Cabazon Band ofMission Indians v. Wilson, 37 F.3d 430,435 (9th Cir.1994) (holding that where feesgo to the state’s general fund, the relation-ship between the revenue payments andthe costs incurred in regulating gamingactivities is attenuated).

Ruling out § 2710(d)(3)(C)(vii) (authoriz-ing negotiations over subjects directly re-lated to gaming not otherwise listed in§ 2710(d)(3)(C)) makes the applicability of§ 2710(d)(4) (withholding authority to im-pose taxes or fees other than those permit-ted under § 2710(d)(3)(C)(iii)) even moreapparent. The State was admittedly seek-ing ‘‘annual fees’’ and objected to Rincon’ssuggestion that any fees be limited to§ 2710(d)(3)(C)(iii) uses. That, combinedwith the general notion that IGRA negoti-ations are supposed to be limited to gam-ing regulation, convinces us that there isno statutory basis for authorizing tribe-state negotiations over general fund reve-nue sharing. See Ho–Chunk Nation, 512F.3d at 932–33 (declining to decide wheth-er general fund revenue sharing is invalid,but noting that it was apparently not asubject ‘‘contemplated by Congress as be-ing one of the matters tribes and thestates may negotiate over under theIGRA’’).

B. Consistent with the Purposes ofIGRA

According to § 2702, IGRA is intendedto promote tribal development, prevent

criminal activity related to gaming, andensure that gaming activities are conduct-ed fairly. In Coyote Valley II we con-strued the meaning of subjects ‘‘directlyrelated to the operation of gaming’’ in§ 2710(d)(3)(C)(vii) broadly to include rev-enue sharing because the RSTF is consis-tent with the plain language of § 2702(listing tribal economic self-sufficiency asone of IGRA’s purposes). See Coyote Val-ley II, 331 F.3d at 1111. By contrast, wecannot read § 2710(d)(3)(C)(vii) broadlyhere to include general fund revenue shar-ing because none of the purposes outlinedin § 2702 includes the State’s general eco-nomic interests. The only state interestsmentioned in § 2702 are protecting againstorganized crime and ensuring that gamingis conducted fairly and honestly. § 2702(2);see also S.Rep. No. 100–446, at 2, 4, asreprinted in 1988 U.S.C.C.A.N. at 3072–73,3075.

Because the plain language of § 2702does not support the State’s position, theState misconstrues certain statements inCoyote Valley II to say that the State’spursuit of its economic interests is at leastnot inconsistent with IGRA. As an initialmatter, we are reluctant to inject into thestatute a purpose not codified within it.See Exxon Mobil Corp. v. AllapattahServs., Inc., 545 U.S. 546, 568, 125 S.Ct.2611, 162 L.Ed.2d 502 (2005). But weneed not digress into that potentially com-plicated statutory analysis because theState clearly misinterprets Coyote ValleyII.

The State first points to our recognitionin Coyote Valley II that Congress acknowl-edged as legitimate the State’s ‘‘economicinterest in raising revenue for its citizens.’’331 F.3d at 1115 (quoting S. Rep. NO.100–446, at 13, as reprinted in 1988U.S.C.C.A.N. at 3083). The State takes

512 F.3d at 932 (internal citations omitted).

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this quotation out of context. The fullquotation is:

A State’s governmental interests withrespect to class III gaming on Indianlands include the interplay of such gam-ing with the State’s public policy, safety,law and other interests, as well as im-pacts on the State’s regulatory system,including its economic interest in raisingrevenue for its citizens. It is the Com-mittee’s intent that the compact require-ment for class III not be used as ajustification by a State for excluding In-dian tribes from such gaming or for theprotection of other State-licensed gam-ing enterprises from free market compe-tition with Indian tribes.

Coyote Valley II, 331 F.3d at 1115 (quotingS.Rep. No. 100–446, at 13, as reprinted in1988 U.S.C.C.A.N. at 3083).

Although a grammatical analysis of thesentence could conceivably suggest that astate’s ‘‘economic interests in raising reve-nue for its citizens’’ is one of the ‘‘impactson the State’s regulatory system,’’ such aconstruction would represent a distortionof the text. A more common sense ap-proach to interpreting Congress’s meaninghere, as taken in Coyote Valley II, is toread a state’s ‘‘interest in raising revenue’’as being ‘‘included’’ as one of the ‘‘State’sother interests.’’ 331 F.3d at 1115. Andin context, the ‘‘other interests’’ are thestates’s own gaming systems like the Cali-fornia Lottery that would, after IGRA,have to compete with Indian gaming.IGRA itself, as well as clearer statementsin the legislative history, support this in-terpretation. See § 2710(d)(7)(B)(iii)(I)(listing the state’s interest concerning ‘‘ad-verse economic impacts on existing gamingactivities’’ among the factors relevant to astate’s good faith); see also, e.g., S.Rep.No. 100–446, at 1–2, 14, as reprinted in1988 U.S.C.C.A.N. at 3071–72 (acknowl-edging the problem that States and thegaming industry may attempt to use thecompact requirement to impede tribal

competition). Thus, neither the statutenor the legislative history support inter-preting the phrase ‘‘other interests TTT

including its economic interest in raisingrevenue for its citizens’’ to mean thatstates may tax tribes. In fact, all indica-tions are to the contrary. See§ 2710(d)(4); supra n. 10.

The State next directs us to a similarstatement from Coyote Valley II that‘‘Congress TTT did not intend to requirethat States ignore their economic interestswhen engaged in compact negotiations.’’Coyote Valley II, 331 F.3d at 1115. TheState’s reliance on this statement is like-wise misplaced. When we said that Con-gress did not intend for states to ignoretheir economic interests, we were not de-ciding whether states were allowed to pur-sue their own economic objectives affirma-tively through compact negotiations.Rather, we decided only whether the Statecould require the tribes to pay into theSDF to cover the government’s costs ofdealing with the fallout of gaming. It isone thing to ask the tribes to contributefunds so the State is not left bearing thecosts for gaming-related expenses; it isquite another to ask the tribes to help fixthe State’s budget crisis. The State istherefore incorrect that pursuit of stategeneral economic interests is consistentwith IGRA’s purposes.

As already explained, IGRA’s statedpurposes include ensuring that tribes arethe primary beneficiaries of gaming andensuring that gaming is protected as ameans of generating tribal revenue.§ 2702. We therefore find particularlypersuasive the fact that the revenue shar-ing demanded in this case would result in$38 million in additional net revenue to theState compared to $2 million for the tribe.In such case, it is the State, not the tribe,that would be the ‘‘primary beneficiary’’ ofthe gaming rights under negotiation. See

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Cabazon Band of Mission Indians, 37F.3d at 433 (explaining that where thestate benefits ‘‘from the tribal gaming op-eration to a considerably greater extentthan the [tribe, the tribe would not] bedescribed as a ‘primary beneficiary[,’ ands]uch an outcome contravenes the pur-poses of IGRA’’).

C. ‘‘Meaningful Concessions’’

[6] Because we hold above that generalfund revenue sharing is neither authorizedby IGRA nor reconcilable with its pur-poses, it is difficult to imagine what con-cessions the State could offer to rebut thestrong suggestion of bad faith arising fromsuch demands. But even if it were possi-ble to conjure up an exceptional circum-stance where such would be the case,where, as here, the State demands signifi-cant taxes and fails to offer any ‘‘mean-ingful concessions’’ in return, a finding ofbad faith is the only reasonable conclusion.

The relevance of ‘‘meaningful conces-sions’’ arises from § 2710(d)(4). We haveinterpreted § 2710(d)(4) as precludingstate authority to impose taxes, fees, orassessments, but not prohibiting statesfrom negotiating for such payments where‘‘meaningful concessions’’ are offered in re-turn. See Coyote Valley II, 331 F.3d at1112; see also Idaho v. Shoshone–BannockTribes, 465 F.3d 1095, 1101 (9th Cir.2006).In other words:

[t]he theory on which [revenue shar-ing] payments were allowed [in CoyoteValley II ] TTT was that the partiesnegotiated a bargain permitting suchpayments in return for meaningful con-cessions from the state (such as a con-ferred monopoly or other benefits).Although the state did not have au-thority to exact such payments, itcould bargain to receive them in ex-change for a quid pro quo conferred inthe compact.

Shoshone–Bannock, 465 F.3d at 1101 (in-ternal citation omitted).

Importantly, we emphasized in CoyoteValley II that we were not holding that‘‘the State could have, without offeringanything in return, taken the position thatit would conclude a Tribal–State compactwith [the tribe] only if the tribe agreed topay into the RSTF.’’ 331 F.3d at 1112.But, ‘‘[w]here TTT a State offers meaning-ful concessions in return for fee demands,it does not exercise ‘authority to impose’anything. Instead, it exercises its authori-ty to negotiate, which IGRA clearly per-mits.’’ Id. With this concept in mind, theState argues that it offered ‘‘meaningfulconcessions’’ and therefore merely exer-cised its authority to negotiate within thepermissible bounds of IGRA.

The State’s analogy fails. Unlike inCoyote Valley II, in which the tribes pro-posed the revenue sharing provisions, see331 F.3d at 1113, Rincon did not suggestrevenue sharing; indeed, Rincon has con-sistently objected to it. Additionally, theState has not offered any ‘‘meaningful con-cessions.’’

Just how ‘‘meaningful’’ the exclusivityprovision at issue in Coyote Valley II wasat the time of the 1999 compacts cannot beoverstated. In 1999, the California consti-tution prohibited casino-style gaming, andthe State was therefore under no obli-gation to allow tribes to conduct it, or evennegotiate concerning it. Rumsey IndianRancheria of Wintun Indians v. Wilson,64 F.3d 1250 (9th Cir.1994). The Statenonetheless negotiated the 1999 compactswith dozens of tribes, and to make the1999 compacts fully operable, the Statepromoted a constitutional amendment ex-empting tribes, and tribes alone, from theconstitutional prohibition. Flynt, 129 Cal.Rptr.2d at 175–77; see also ArtichokeJoe’s, 353 F.3d at 718.

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The value of a monopoly is obvious, andthe value of a monopoly that cannot bealtered except by the extraordinary act offurther constitutional amendment is evengreater. Such a benefit was well beyondanything IGRA required the State to offer.See Coyote Valley II, 331 F.3d at 1111,1115. Specifically, IGRA provides thattribes can engage in class III gaming tothe same extent as others in the state.§ 2710(d)(1). Thus, IGRA only requiresthat states treat tribes equally. However,with the strong encouragement of the thengovernor, California voters gave the tribesan economic opportunity denied to every-one else. The State’s agreement (with theconsent of the voters) to confer such asubstantial benefit on the tribes provedthat its request that more successful tribesfinancially assist the less fortunate ones(and that the tribes agree to cover thecosts of adverse impacts) was freely nego-tiated. Indeed, in a rare example of gen-erosity to tribes, the State conferred avaluable economic right on the tribes inexchange for a program under which all ofthe significant benefits of the compactwere to be enjoyed by the tribes them-selves.

[7] In short, we approved exclusivityas a ‘‘meaningful concession’’ in CoyoteValley II because it was exceptionallyvaluable and bargained for. By contrast,in the current legal landscape, ‘‘exclusivi-ty’’ is not a new consideration the Statecan offer in negotiations because the tribealready fully enjoys that right as a matterof state constitutional law. Moreover, thebenefits conferred by Proposition 1A havealready been used as consideration for theestablishment of the RSTF and SDF in

the 1999 compact. See Flynt, 129 Cal.Rptr.2d at 177. ‘‘It is elementary law thatgiving a party something to which he al-ready has an absolute right is not consid-eration to support that party’s contractualpromise.’’ Salmeron v. United States, 724F.2d 1357, 1362 (9th Cir.1983). The Stateasserts that it would be unfair to permitRincon to keep the benefit of exclusivityconferred by Proposition 1A without hold-ing the tribe to an ongoing obligation toperiodically acquiesce in some new reve-nue sharing demand. While we do nothold that no future revenue sharing ispermissible, it is clear that the State can-not use exclusivity as new considerationfor new types of revenue sharing since itand the collective tribes already struck abargain in 1999, wherein the tribes wereexempted from the prohibition on gamingin exchange for their contributions to theRSTF and SDF. Flynt, 129 Cal.Rptr.2d at177.17

The State offers various alternative ar-guments to support its claim that it offeredmore than illusory consideration. We findall of the State’s arguments unpersuasive.

1. Revised and Expanded Exclusivity

[8] The State first claims that it of-fered Rincon revised and expanded exclu-sivity, which had even greater economicvalue than the exclusivity originally grant-ed by Proposition 1A.

We first note that the State never de-fined the precise contours of the exclusivi-ty provision it proposed, giving us verylittle upon which to base a finding that theState has met its burden to show it offereda real, meaningful concession in the form

17. We are aware that a few tribes have rene-gotiated their compacts with the State andaccepted general fund revenue sharing in ex-change for revised exclusivity. We express noopinion concerning the validity of those com-pacts. Those tribes agreed that the revisedexclusivity offered, and the financial benefits

they would receive from amending their 1999compacts, were satisfactory to them. In thiscase, to the contrary, the general fund reve-nue sharing demanded by the State in ex-change for a revised exclusivity was not freelyaccepted by Rincon, and was demonstrablynot of significant value to Rincon.

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of a new and improved exclusivity provi-sion. However, we assume, as apparentlythe parties have done, that the revisedexclusivity provision would have been simi-lar to the one recently accepted by severalother tribes, including the Pala Band ofMission Indians. The Pala Band’s exclu-sivity provision provides that (1) ‘‘the Stateshall not authorize any person or entityother than an Indian tribe TTT to engage inany Gaming Activities TTT within theTribe’s core geographic market’’ (San Die-go, Riverside, Orange, and Los AngelesCounties); and (2) if the State were tobreach its obligation to ensure geographicexclusivity, ‘‘the Tribe shall have the rightto enjoin such gaming’’ and ‘‘the right tocease the payments’’ due to the State.Such a revised and expanded exclusivitywould be practically worthless to Rincon.

Since the passage of a constitutionalamendment eliminating tribal gaming ex-clusivity is extremely unlikely, neither theinjunctive relief 18 nor the monetary 19 rem-edies contingent upon that event have any-thing more than speculative value to Rin-con. In addition, Rincon did not requestor desire a revised local tribal gamingexclusivity provision because such a provi-sion—which would not apply to othertribes—would not protect Rincon againstthe high degree of tribal competition itexperiences in its core geographic market.

Freedom from nontribal competition in itscore geographic market therefore providesRincon with no significant additional eco-nomic advantages over whatever valueRincon receives from the statewide exclu-sivity it already enjoys.

More importantly, even if there weresome enhanced value in the proposed re-vised and expanded exclusivity provision,the calculations presented by the State’sown expert reveal that the financial benefitto Rincon from the amendments proposedwould be negligible: Rincon stood to gainonly about $2 million in additional reve-nues compared to the State’s expected $38million. Thus, in stark contrast to CoyoteValley II, the relative value of the demandversus the concession here strongly sug-gests the State was improperly using itsauthority over compact negotiations to im-pose, rather than negotiate for, a fee. SeeCoyote Valley II, 331 F.3d at 1112. UnderIGRA and Coyote Valley II, that is badfaith.

Our conclusion is buttressed by the factthat the State never wavered from its gen-eral fund revenue sharing demands. Wedo not mean to suggest that the State isguilty of bad faith whenever it takes a‘‘hard line’’ negotiating position. Indeed,in Coyote Valley II we upheld the State’sability to insist on certain provisions. SeeCoyote Valley, 331 F.3d at 1116 (finding

18. Even if a constitutional amendment elimi-nating the nontribal casino ban were immi-nent, the value of the proposed injunctiveremedy is questionable. We are unaware ofany authority that would permit a court toenjoin a constitutional amendment on thegrounds that it violated Rincon’s contract.

19. The State suggests the amended monetaryremedy is superior to the monetary remedyprovided under the 1999 compact because,although both compacts provide for the endof revenue sharing in the event exclusivity islost, the Pala compact amendment permitscontinued gaming, whereas the 1999 compactrequires termination. We are unconvinced

that the continuation of gaming regime isbetter for Rincon than the termination re-gime. The Pala compact amendment wouldpermit termination of revenue sharing if trib-al exclusivity is lost in Rincon’s core geo-graphic market (which is a benefit Rinconwould not enjoy in any event, see supra pp.1025, 1037–38). The 1999 compact providesfor termination whenever tribal exclusivity islost anywhere statewide. Also, because IGRArequires the State to negotiate with Rincon ingood faith, termination may not actually re-sult in a loss of gaming-Rincon could obtain anew compact. Thus, under the 1999 termi-nation option, Rincon has greater opportuni-ties for essentially the same monetary relief.

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that it was not bad faith for the State toinsist on a particular labor standards pro-vision). As already suggested supra, a‘‘hard line’’ stance is not inappropriate solong as the conditions insisted upon arerelated to legitimate state interests re-garding gaming and the purposes ofIGRA. See § 2710(d)(3)(B)(iii)(I). We holdonly that a state may not take a ‘‘hardline’’ position in IGRA negotiations when itresults in a ‘‘take it or leave it offer’’ to thetribe to either accept nonbeneficial provi-sions outside the permissible scope of§§ 2710(d)(3)(C) and 2710(d)(4), or gowithout a compact. Cf. NLRB v. Ins.Agents’ Int’l Union, 361 U.S. 477, 485, 80S.Ct. 419, 4 L.Ed.2d 454 (1960).

2. More Devices and Time

[9] The State’s next argument is that,at the very least, it is entitled to some newconsideration in exchange for giving Rin-con expanded gaming rights, and the in-creased revenue share it requested wasthe only possible new consideration itcould seek.

The State is correct that general con-tract principles dictate that new or addi-tional consideration for a compact amend-ment is required. However, as alreadyexplained, IGRA does not permit the Stateand the tribe to negotiate over any sub-jects they desire; rather, IGRA antici-pates a very specific exchange of rightsand obligations, defined in§§ 2710(d)(3)(C) and (d)(4). Cf., e.g., Cal.Const., art. XV, § 1 (limiting the permissi-ble scope of loan contract negotiations byprohibiting, subject to penalty, negotiationfor usurious interest rates).

[10] As held above, general fund reve-nue sharing is not a state public policy

interest directly related to gaming and isnot an authorized negotiation topic under§ 2710(d)(3)(C). Therefore, gaming rightsthat tribes are entitled to negotiate forunder IGRA, like device licensing andtime, see § 2701(d)(3)(C)(vi),20 cannot serveas consideration for general fund revenuesharing; the consideration must be forsomething ‘‘separate’’ than basic gamingrights. See Dissent at 5957 (quotingCourtney J.A. DaCosta, Note, When‘‘Turnabout’’ Is Not ‘‘Fair Play’’: TribalImmunity under the Indian Gaming Reg-ulatory Act, 97 Geo. L.J. 515, 543–44(2009)). In order to obtain additional timeand gaming devices, Rincon may have tosubmit, for instance, to greater State regu-lation of its facilities or greater paymentsto defray the costs the State will incur inregulating a larger facility. See 25 U.S.C.§ 2710(d)(3)(C)(i, iii). Rincon need not,however, submit to demands that it assistthe State in addressing its budget crisis.

We are further influenced by the factthat the Department of the Interior, theexecutive agency charged with approvinggaming compacts, also interprets IGRA inthis way. As stated by the Assistant Sec-retary of Indian Affairs,

It is the position of the Department topermit revenue-sharing payments in ex-change for quantifiable economic bene-fits over which the State is not requiredto negotiate under IGRA, such as sub-stantial exclusive rights to engage inClass III gaming activities. We havenot, nor are we disposed to, authorizerevenue-sharing payments in exchangefor compact terms that are routinelynegotiated by the parties as part of theregulation of gaming activities, such asduration, number of gaming devices,hour of operation, and wager limits.21

20. ‘‘[L]icensing issues under clause vi mayinclude agreements on days and hours of op-eration, wage and pot limits, types of wagers,and size and capacity of the proposed facili-ty.’’ S.Rep. No. 100–446, at 13, reprinted in1988 U.S.C.C.A.N. at 3084.

21. We take judicial notice of this statement bythe Assistant Secretary pursuant to FederalRule of Evidence 201.

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To hold otherwise would effectively meanthat states could put gaming rights ‘‘up forsale.’’ 22 That would be inconsistent withIGRA’s spirit, and its express refusal toallow states to use their right to engage incompact negotiations as a means to extractfees. § 2710(d)(4).

3. ‘‘Exclusive Gaming Rights ’’

[11] Next, the State argues that thevalue of its offers during compact negotia-tions should be analyzed as a whole, notpiecemeal. Specifically, the State con-tends that we should evaluate its offer notsimply by considering the value of theexclusivity provision itself, but rather thevalue of the entire bundle of ‘‘exclusivegaming rights’’ that Rincon would obtainunder an amended compact. Viewing itsoffer in this way, the State contends itnegotiated in good faith.

If there is a meaningful distinction be-tween ‘‘exclusivity’’ and ‘‘gaming rights’’ asstand alone terms and ‘‘exclusive gamingrights,’’ it is too minuscule to see. Be-cause exclusivity exists independent of thecurrent compact negotiations, the negotia-tions concern only the extent of gamingrights, which are, by nature as a result of

California constitutional law, exclusive.Were we to accept the State’s view thatwhenever it negotiates with a tribe, it of-fers ‘‘meaningful concessions’’ because thegaming rights offered will, as a matter oflaw, be exclusive, we would effectively beholding that, as a matter of law, the Stateis entitled to insist on significant generalfund revenue sharing whenever a tribewants to renegotiate basic terms. We re-ject the State’s view. As explained in PartII.C.2, supra, IGRA entitles tribes to ne-gotiate for basic class III gaming rightswithout being forced to accept revenuesharing.

Further, we disagree that the Statemakes ‘‘meaningful concessions’’ wheneverit offers a bundle of rights more valuablethan the status quo.23 As previously ex-plained, IGRA endows states with limitednegotiating authority over specific items.Accepting the State’s ‘‘holistic’’ view of ne-gotiations would permit states to lump to-gether proposals for taxation, land use re-strictions, and other subjects along withIGRA class III gaming rights. Such aconstruction of IGRA would violate thepurposes and spirit of that law.24 See su-pra n. 10.

22. Congress considered amending IGRA in2003, although no definitive action has sincebeen taken. During the discussions, a repre-sentative from the Department of the Interiorstated to Congress that the Department wasseriously concerned about having to makedecisions about the legitimacy of revenuesharing agreements, and wanted Congress togive it clear guidance so that it could avoidseeing ‘‘more and more of these revenuesgoing to the States under these compacts.’’S. Hrg. 108–475, at 33–34 (statement of Act-ing Deputy Assistant Sec’y for Policy andEcon. Dev. for the Dep’t of the Interior Skir-bine). The Department representative sum-marized, ‘‘we do not believe it was the intentof IGRA to have all the provisions up forsale.’’ Id. at 33.

23. The dissent takes this statement out of con-text. At oral argument, the State argued that

as long as the tribe would be better off withthe new compact concerning ‘‘exclusive’’gaming rights than the tribe was under its oldone, the State could demand revenue sharingas its reward. Although we do not inquireinto the adequacy of consideration as a gener-al rule, when the consideration must neces-sarily be divided into two parts—that whichIGRA contemplates and that which is outsideof IGRA—we cannot bundle the rights beingnegotiated and compare the whole to the sta-tus quo as our method for determiningwhether the concessions are meaningful. Theconsideration in exchange for the revenuesharing must be independently meaningful incomparison to the status quo, i.e. not illusory(or illegal) if standing alone.

24. ‘‘I hope the States will be fair and respect-ful of the authority of the tribes in negotiatingthese compacts and not take unnecessary ad-vantage of the requirement for a compact.’’

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III. Other Evidence of Good Faith

[12] The State raises one final argu-ment in support of its position. Specifical-ly, the State contends that it genuinelybelieved its revenue sharing demands wereauthorized by Coyote Valley II, approvedby the Department of the Interior, and fairbecause other tribes had accepted them.The State therefore urges us to find thatits demands, even though herein held im-proper under IGRA, were nonethelessmade in good faith.

[13] IGRA does not provide expressguidance about whether good faith is to beevaluated objectively or subjectively.However, we are influenced by the factorsoutlined in § 2710(d)(7)(B)(iii), which lendthemselves to objective analysis and makeno mention of unreasonable beliefs. Fur-ther, the structure and content of§ 2710(d) make clear that the function ofthe good faith requirement and judicialremedy is to permit the tribe to processgaming arrangements on an expedited ba-sis, not to embroil the parties in litigationover their subjective motivations. Wetherefore hold that good faith should beevaluated objectively based on the recordof negotiations, and that a state’s subjec-tive belief in the legality of its requests isnot sufficient to rebut the inference of badfaith created by objectively improper de-mands.25 See Mashantucket Pequot Tribev. Connecticut, 913 F.2d 1024, 1033 (2dCir.1990) (‘‘The statutory terms are clear,and provide no exception for sincere buterroneous legal analyses.’’).

Here, the State’s belief that IGRA per-mitted the revenue sharing it sought wasobjectively unreasonable. IGRA expresslycondemns state attempts to compel feesfor purposes other than those specified in§ 2710(d)(3)(C)(iii). The State does noteven attempt to fit its general fund reve-nue sharing demand within§ 2710(d)(3)(C)(iii). While Coyote ValleyII held that § 2710(d)(3)(C)(vii) might alsoauthorize revenue sharing, that case in-volved exceptional circumstances andturned on the specialized, limited uses ofthe revenue. As explained supra, the ra-tionale for permitting revenue sharing un-der 2710(d)(3)(C)(vii) in Coyote Valley II isnot present in this case, and the State wasunreasonable to rely on Coyote Valley IIfor propositions not decided, or expresslyreserved. See supra pp. 1032–33. Fur-ther, the Department of the Interior hasfrequently noted its concerns about thelegitimacy of general fund revenue shar-ing. See, e.g., supra nn. 21 & 22 andaccompanying text; New Mexico v. Puebloof Pojoaque, 30 Fed.Appx. 768, 768 (10thCir.2002) (order); Mescalero Apache Tribev. New Mexico, 131 F.3d 1379, 1382 n. 2(10th Cir.1997); Pueblo of Sandia v. Bab-bitt, 47 F.Supp.2d 49, 51 (D.D.C.1999).The Department of the Interior has ap-proved compacts with general fund reve-nue sharing provisions agreed to by otherCalifornia tribes, but has done so reluc-tantly, and only after the tribes themselvesconfirmed the desirability of the amend-ments.26 Often, the Secretary simply per-

134 Cong. Rec. at S12651 (statement of Sen.Inouye).

25. Interestingly, on the question of the scopeof discovery permissible in IGRA negotia-tions, the State has taken the position thatgood faith should be proved based on theobjective course of negotiations. See alsoFort Independence Indian Cmty. v. California,No. Civ. S–08–432, 2009 WL 1283146, at *3(E.D.Cal. May 7, 2009) (agreeing with theState that good faith should be based on ob-

jective factors). The State cannot have it bothways. If the State wants to avoid discoveryand limit review of good faith to the officialrecord of negotiations, the State cannot de-fend itself on the good faith question byclaiming its objectively improper demandswere made with an innocent intent.

26. In approving the compact amendmentsreferenced by the State, the Secretary notedthat ‘‘the Department has sharply limited the

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mits compacts with revenue sharing provi-sions to go into effect ‘‘only to the extentthey are consistent with IGRA,’’ thus leav-ing open the precise question at issue.The State therefore could not reasonablyhave relied on the Department of the Inte-rior’s approval of certain other compactsas proof that its demands to Rincon werelawful. This is especially true since IGRAanticipates that, even if some tribes agreeto a waiver of their rights not to be taxedby a state, such a waiver cannot be a basisfor the State expecting the same fromRincon. See Shoshone–Bannock, 465 F.3dat 1101–02; S.Rep. No. 100–446, at 5, asreprinted in 1988 U.S.C.C.A.N. at 3075–76(explaining that ‘‘it is the Committee’s in-tention that to the extent tribal govern-ments elect to relinquish rights in a tribal-State compact that they might have other-wise reserved, the relinquishment of suchrights shall be specific to the tribe somaking the election, and shall not be con-strued to extend to other tribes’’).

The State’s demand for 10–15% of Rin-con’s net win, to be paid into the State’sgeneral fund, is simply an impermissibledemand for the payment of a tax by thetribe. See § 2710(d)(3)(B)(iii);§ 2710(d)(4). None of the State’s argu-ments suffices to rebut the inference ofbad faith such an improper demand cre-ates.

In so holding, we are mindful that manystates, and especially California, are cur-rently writhing in the financial maw creat-ed by the clash of certain mandatory stateexpenditures at a time when state reve-nues have plummeted from historic levels.However, we are also keenly aware of ournation’s too-frequent breach of its trustobligations to Native Americans when

some of its politically and economicallypowerful citizens and states have lustedafter what little the Native Americanshave possessed. In developing IGRA,Congress anticipated that states mightabuse their authority over compact negoti-ations to force tribes to accept burdens ontheir sovereignty in order to obtain gam-ing opportunities. See, e.g., 134 Cong.Rec. S12643–01, at S12651 (1988) (state-ment of Sen. Evans); see also S.Rep. No.100–446, at 33 (statement of Sen. JohnMcCain), reprinted in 1988 U.S.C.C.A.N.at 3103. That is why the good faith re-quirement exists, and why IGRA con-demns state taxation demands.

CONCLUSION

We AFFIRM the district court’s findingthat the State of California negotiated withRincon in bad faith by conditioning itsagreement to expand Rincon’s class IIIgaming rights on Rincon’s agreement topay a percentage of its revenues to theState’s general fund. The district court’sorder compelling the parties to reach acompact or submit their best offers to amediator pursuant to § 2710(d)(7) is effec-tive forthwith.

AFFIRMED.

BYBEE, Circuit Judge, dissenting:

In 1999, the Rincon San Luiseno Bandof Mission Indians (‘‘the Band’’) negotiateda compact with the State of California tooperate a casino—known as Harrah’s Rin-con Hotel & Casino—in San Diego County.Under the terms of that compact, theBand was authorized to operate up to1,600 Nevada-style gaming devices. Thecompact remains in effect until 2020. In

circumstances under which Indian tribes canmake direct payments to a State for purposesother than defraying the costs of regulatinggaming activities,’’ but agreed to approve thecompacts at issue because the tribes them-

selves had confirmed that the exclusivity pro-vision constituted ‘‘meaningful geographicalexclusivity’’ and that the ‘‘amount of paymentto the State [was] appropriate in light of theexclusivity right conferred.’’

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2003, the Band requested that Californiarenegotiate the compact so that the Bandcould increase the number of devices from1,600 to 2,500. Throughout an exchange ofproposals, the State demanded that theBand contribute a percentage of its gam-ing revenues to the State’s general fund.The negotiations failed, resulting in no in-crease in gaming devices for the Band andno revenues for the State. Unhappy withthe course of the negotiations, the Bandbrought suit under the Indian GamingRegulatory Act (‘‘IGRA’’), 25 U.S.C.§ 2701 et seq., claiming that the State hadnegotiated in bad faith and requestingmandatory mediation.

In In re Indian Gaming Related Cases(‘‘Coyote Valley II’’), we held that when ‘‘aState offers meaningful concessions in re-turn for fee demands TTTT it exercises itsauthority to negotiate, which IGRA clearlypermits.’’ 331 F.3d 1094, 1112 (9th Cir.2003). Going well beyond anything wesaid in Coyote Valley II, the majority holds(1) the State’s demand for ‘‘general fundrevenue sharing [is] a bald demand forpayment of a tax,’’ Maj. Op. at 1032 (em-phasis omitted); (2) ‘‘general fund revenuesharing TTT is TTT not an authorized sub-ject of negotiation’’ under IGRA, id. at1034; and therefore (3) the State’s ‘‘de-mand for payment of a tax [is] TTT evi-dence of [the State’s] bad faith,’’ id. at1032. The majority concludes that theState has negotiated in bad faith and or-ders the parties to amend their compact orsubmit to mediation.

I respectfully disagree with all of thesepropositions. First, we have long heldthat the power to tax is defined by thesovereign’s power to impose the tax. Cali-fornia has exercised no such power here.The majority has confused California’shardball negotiations with the taxing pow-er. California has not claimed any author-ity to tax the Band and, if these negotia-tions fail, the Band will not have added one

penny to the State’s coffers. Second,IGRA is silent on the particular questionwhether states and tribes may include rev-enue sharing in their negotiations. Butthe Act provides that the parties ‘‘mayinclude provisions relating to TTT any oth-er subjects that are directly related to theoperation of gaming activities,’’ 25 U.S.C.§ 2710(d)(3)(C)(vii), and we held in CoyoteValley II that the parties could negotiateover ‘‘fee demands.’’ The majority nowholds that such fee demands cannot in-clude general revenue sharing derivedfrom the operation of gaming activities,but are limited to fees spent on the regula-tion of gaming alone. This restrictiontakes from the State its primary incentivein negotiating gaming compacts with thetribes. Third, even if I thought Californiahad imposed a tax on the Band, I do notbelieve the State has negotiated in badfaith. By its constitution, California hasgranted the tribes the exclusive right tooffer Nevada-style gaming in the State.That structure puts the State and theBand into a bilateral monopoly situation inwhich each side has powerful economicincentives to negotiate at the margins. Atthe least, the State has offered the Band amore than fifty percent increase in thenumber of authorized gaming machinesand a twenty-five year extension on itscontract on terms comparable to othertribes with California compacts. The of-fered terms are well within the range ofgood faith negotiations. Of course, wheth-er the Band should accept the State’s offeris a very different question from whetherthe State has negotiated in bad faith. Butabsent the majority’s intervention, bothsides would have strong incentives to con-tinue negotiations.

The impact of the majority’s decisionmay not be readily apparent from its opin-ion, but the holding that California hasnegotiated in bad faith because its demandfor general revenue sharing is a tax and

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not an authorized subject of negotiationdoes not just upset the apple cart—it de-rails the whole train. If the majority iscorrect, then there is nothing for Califor-nia to do but to authorize whatever devicesthe Band wants. The Band wins. Every-thing.

Moreover, the damage is not confined tothe Rincon Band. The revenue sharingprovision that the majority strikes fromthe negotiations is found in fifteen othercompacts that California has recently ne-gotiated or renegotiated with tribes. Allof those compacts were approved by theSecretary of the Interior. Those tribesnow have a powerful argument that theircompacts must be renegotiated (again) inlight of the majority’s decision. The dam-age, moreover, is not confined to our cir-cuit. Every state that has negotiated acompact in recent years—including Con-necticut, Florida, Michigan, New York,New Mexico, Oklahoma, and Wisconsin-has negotiated a similar revenue sharingprovision, one that was also approved bythe Secretary. The result is going to bechaos as tribe after tribe seeks to reopennegotiations concluded and duly approved.Nothing in IGRA compels our interventionin these negotiations.

I respectfully dissent.

I

Since the framing of the Constitution,Indian tribes have occupied a ‘‘unique legalposture TTT in relation to the federal gov-ernment.’’ WILLIAM C. CANBY, JR., AMERI-

CAN INDIAN LAW 1 (5th ed.2009). ‘‘[T]ribesare independent entities with inherentpowers of self-government,’’ but ‘‘the inde-pendence of the tribes is subject to excep-tionally great powers of Congress,’’ which‘‘has a responsibility for the protection ofthe tribes and their propertiesTTTT’’ Id. at1–2. The presence of fifty sovereignstates complicates the relationship: ‘‘thepower to deal with and regulate the tribesis wholly federal; the states are excludedunless Congress delegates power to them.’’Id. at 2. ‘‘[I]n assessing state regulationthat does not involve taxation,’’ the Su-preme Court has taken a functional ap-proach to try to ‘‘balance[ ] federal, state,and tribal interests.’’ Okla. Tax Comm’nv. Chickasaw Nation, 515 U.S. 450, 458,115 S.Ct. 2214, 132 L.Ed.2d 400 (1995).However, state taxation of Indians or Indi-an tribes, where a ‘‘State attempts to levya tax directly on an Indian tribe or itsmembers inside Indian country,’’ has pro-duced, ‘‘instead of a balancing inquiry, amore categorical approach.’’ Id. at 458,115 S.Ct. 2214 (quotation marks omitted).1

The Supreme Court’s approach to tribalsovereign immunity has evolved over time.As Chief Justice Marshall explained inWorcester v. Georgia, 31 U.S. 515, 6 Pet.515, 8 L.Ed. 483 (1832), at the time of theframing there was a ‘‘universal convictionthat the Indian nations possessed a fullright to the lands they occupied, until thatright should be extinguished by the UnitedStates, with their consent: that their terri-tory was separated from that of any state

1. Like the unique relationship between Con-gress and the tribes, see U.S. CONST. art. I, § 8,cl. 3 (giving Congress the power ‘‘[t]o regulatecommerce with foreign nations, and amongthe several states, and with the IndianTribes’’), the special tax immunity enjoyed byIndian tribes has its roots in the Constitution,see id. art. I, § 2, cl. 3 (‘‘Representatives anddirect Taxes shall be apportioned among theseveral States which may be included withinthis Union, according to their respective

Numbers, which shall be determined by add-ing to the whole Number of free Persons,including those bound to Service for a Termof Years, and excluding Indians not taxed,three fifths of all other Persons.’’ (emphasisadded)); see also id. amend. XIV, § 2 (‘‘Rep-resentatives shall be apportioned among theseveral states according to their respectivenumbers, counting the whole number of per-sons in each State, excluding Indians nottaxed.’’).

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within whose chartered limits they mightreside, by a boundary line, established bytreaties: that, within their boundary, theypossessed rights with which no state couldinterfere: and that the whole power ofregulating the intercourse with them, wasvested in the United States.’’ Id. at 560.2

By the late twentieth century, the Su-preme Court had ‘‘reject[ed] TTT the broadassertion that the Federal Government hasexclusive jurisdiction over the Tribe for allpurposes and that the State is thereforeprohibited from enforcing its revenue lawsagainst any tribal enterprise whether theenterprise is located on or off tribal land’’in favor of ‘‘more individualized treatmentof particular treaties and specific federalstatutes, including statehood enabling leg-islation, as they, taken together, affect therespective rights of States, Indians, andthe Federal Government.’’ MescaleroApache Tribe v. Jones, 411 U.S. 145, 147–48, 93 S.Ct. 1267, 36 L.Ed.2d 114 (1973)(quotation marks omitted) (citing McCla-nahan v. Ariz. State Tax Comm’n, 411U.S. 164, 93 S.Ct. 1257, 36 L.Ed.2d 129(1973)). But ‘‘[e]ven so, in the special areaof state taxation, absent cession of jurisdic-tion or other federal statutes permittingit,’’ the Supreme Court found ‘‘no satisfac-tory authority for taxing Indian reserva-tion lands or Indian income from activitiescarried on within the boundaries of thereservation,’’ holding that ‘‘such taxation[wa]s not permissible absent congressionalconsent.’’ Id. at 148, 93 S.Ct. 1267.

In short, ‘‘[a]bsent cession of jurisdictionor other federal statutes permitting it TTT

a State is without power to tax reservationlands and reservation Indians.’’ Okla. TaxComm’n, 515 U.S. at 458, 115 S.Ct. 2214(quotation marks omitted). A tax levied

directly on persons or property is knownas a ‘‘direct tax,’’ and ‘‘Indian tribes, likethe Federal Government itself, are exemptfrom direct state taxation and TTT thisexemption is lifted only when Congresshas made its intent to do so unmistakablyclear.’’ Cotton Petroleum Corp. v. NewMexico, 490 U.S. 163, 183 n. 14, 109 S.Ct.1698, 104 L.Ed.2d 209 (1989) (quotationmarks omitted).

II

Against this intricate backdrop of feder-al-state-tribal relations, tribal gamingemerged.

A

In the 1970s, bingo halls began to openon tribal land, often in derogation of stategambling laws. See Coyote Valley II, 331F.3d at 1095; Flynt v. Cal. Gambling Con-trol Comm’n, 104 Cal.App.4th 1125, 129Cal.Rptr.2d 167, 172–73 (2002). Whenstates attempted to regulate or shut downtribal bingo halls, the tribes argued thattheir sovereign status immunized themfrom state gambling regulation. Id.; seeBarona Group of Capitan Grande Band ofMission Indians v. Duffy, 694 F.2d 1185(9th Cir.1982); Seminole Tribe v. Butter-worth, 658 F.2d 310, 312 (5th Cir.1981),cert. denied, 455 U.S. 1020, 102 S.Ct. 1717,72 L.Ed.2d 138 (1982); Oneida Tribe ofIndians v. Wisconsin, 518 F.Supp. 712(W.D.Wis.1981). Tribal bingo halls—andstate attempts to regulate them—attractednational attention as the stakes and profitfrom these establishments skyrocketed.See James Coates, U.S. fears big-moneybingo will draw mob to Indian tribes, CHI.

TRIB., Dec. 1, 1985, at 4; Howard LaFran-

2. ‘‘The source of federal authority over Indianmatters has been the subject of some confu-sion, but it is now generally recognized thatthe power derives from federal responsibilityfor regulating commerce with Indian tribes

and for treaty making.’’ McClanahan v. Ariz.State Tax Comm’n, 411 U.S. 164, 172 n. 7, 93S.Ct. 1257, 36 L.Ed.2d 129 (1973) (citing U.S.CONST. art. I, § 8, cl. 3; id. art. II, § 2, cl. 2(additional citations omitted)).

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chi, States vs. Indian Bingo, CHRISTIAN SCI.

MONITOR, Feb. 24, 1986, at 3; LenoreLook, Hearing to Air Complaints on Mis-use of Tribes’ Bingo Revenue, L.A. TIMES,May 24, 1985, at A1; Iver Peterson, BingoThat Doesn’t Get Any Bigger, N.Y. TIMES,Nov. 3, 1985, at E4.

California was right in the middle of thebingo battles: in the mid–1980s, the Stateattempted to enforce its gambling statutesagainst tribes operating bingo halls withinits borders, and the tribes responded byfiling suit in federal court, arguing that theState did not have regulatory jurisdictionover tribal lands. Coyote Valley II, 331F.3d at 1095. In response, the State ar-gued that Congress had expressly consent-ed to the State’s exercise of jurisdictionover tribal gaming activities in Public Law83–280, which granted five states, includ-ing California, jurisdiction over criminalviolations on tribal land. Pub.L. 83–280(Aug. 15, 1953), codified as amended at 18U.S.C. § 1162, 28 U.S.C. § 1360, and 25U.S.C. §§ 1321–1326; see Coyote ValleyII, 331 F.3d at 1095. In 1987, the Su-preme Court ruled in favor of the tribes,holding that Public Law 83–280 did notexpressly authorize state jurisdiction overactivities on tribal land that were regulat-ed, rather than wholly prohibited, understate law. See California v. CabazonBand of Mission Indians, 480 U.S. 202,210–12, 107 S.Ct. 1083, 94 L.Ed.2d 244(1987). Since ‘‘California regulate[d] rath-er than prohibit[ed] gambling in generaland bingo in particular,’’ the State’s at-tempts to regulate tribal bingo were notauthorized by Public Law 280, id. at 211,107 S.Ct. 1083, and ‘‘[s]tate regulationwould impermissibly infringe on tribal gov-ernment,’’ id. at 222, 107 S.Ct. 1083.

Legislation concerning tribal gaminghad percolated in Congress for severalyears prior to Cabazon, but prior to theCourt’s decision in that case, it was unclearthat congressional action was required to

allow state regulation of tribal gaming.The Cabazon decision answered this ques-tion in the affirmative, and the year afterCabazon, Congress passed the IndianGaming Regulatory Act, Pub.L. 100–497(Oct. 17, 1988), codified at 25 U.S.C.§ 2701 et. seq.

B

In IGRA, Congress created a ‘‘coopera-tive federalis[t]’’ framework that ‘‘bal-ance[d] the competing sovereign interestsof the federal government, state govern-ments and Indian tribes, by giving each arole in the regulatory scheme.’’ CoyoteValley II, 331 F.3d at 1096 (quoting Arti-choke Joe’s v. Norton, 216 F.Supp.2d 1084,1092 (E.D.Cal.2002)). Recognizing thatdifferent types of gaming presented differ-ent regulatory burdens, IGRA outlinedthree classes of gaming and gave the re-spective sovereigns differing degrees ofregulatory authority with respect to eachgaming class. States were given very lit-tle regulatory authority over what Con-gress deemed class I and class II gam-ing—consisting of social games with prizesof minimal value, 25 U.S.C. § 2703(6), andbingo and certain non-banked card games,id. §§ 2703(7)(A)(B), respectively. Statescould not regulate class I gaming on triballands at all, id. § 2710(a)(1), and if a stateallowed any class II gaming within itsborders, it had to allow tribes to conductsuch class II gaming on tribal lands sub-ject only to tribal and federal regulation,id. §§ 2710(a)(2) and 2710(b)(1)(A)-(B).By contrast, class III gaming—consistingof banked card games such as blackjackand baccarat, slot machines and other elec-tronic gaming machines, and other Neva-da-style gaming activities, id.§§ 2710(b)(7)(B) and 2710(b)(8)—was ‘‘sub-ject to a greater degree of federal-stateregulation than either class I or class IIgaming.’’ Coyote Valley II, 331 F.3d at1097. In particular, IGRA allowed class

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III gaming activities on tribal lands only(1) ‘‘in a State that permits such gamingfor any purpose by any person, organiza-tion, or entity,’’ 25 U.S.C. § 2710(d)(1)(B),and (2) ‘‘conducted in conformance with aTribal–State compact entered into by theIndian tribe and the State under[25 U.S.C.§ 2710(d)(3) et seq.] that is in effect,’’ id.§ 2710(d)(1)(C).

IGRA’s compact requirement represent-ed a unique approach to a unique situation.The prospect of class III gaming on triballands implicated important—and potential-ly divergent—interests of two sovereignparties, states and tribes. At the sametime, however, Congress recognized thatthe respective interests of states andtribes with respect to class III gamingwere neither identical nor mutually exclu-sive. Faced with this situation, Congresscame up with a solution as old as the freemarket itself: allow states and tribes tobargain over the terms of their class IIIgaming relationship. As the Senate Reportfor IGRA explained:

In the Committee’s view, both State andtribal governments have significant gov-ernmental interests in the conduct ofclass III gaming. States and tribes areencouraged to conduct negotiations with-in the context of the mutual benefitsthat can flow to and from tribe [sic ] andStates. This is a strong and seriouspresumption that must provide theframework for negotiations. A tribe’sgovernmental interests include raisingrevenues to provide governmental ser-vices for the benefit of the tribal commu-nity and reservation residents, promot-ing public safety as well as law andorder on tribal lands, realizing the objec-tives of economic self-sufficiency and In-dian self-determination, and regulatingactivities of persons within its jurisdic-tional borders. A State’s governmentalinterests with respect to class III gam-ing on Indian lands include the interplayof such gaming with the State’s public

policy, safety, law and other interests, aswell as impacts on the State’s regulatorysystem, including its economic interestin raising revenue for its citizens. It isthe Committee’s intent that the compactrequirement for class III not be used asa justification by a State for excludingIndian tribes from such gaming or forthe protection of other State-licensedgaming enterprises from free marketcompetition with Indian tribes.

S. REP. NO. 100–446, at 13 (1988), as re-printed in 1988 U.S.C.C.A.N. 3071, 3083.

At the same time, Congress recognizedthat it was not drafting IGRA against ablank legal slate. The Senate Report ac-knowledged the ‘‘long [ ] and well-estab-lished principle of Federal–Indian law asexpressed in the United States Constitu-tion, reflected in Federal statutes, and ar-ticulated in decisions of the SupremeCourt, that unless authorized by an act ofCongress, the jurisdiction of State govern-ments and the application of state laws donot extend to Indian lands.’’ Id. at 5,reprinted in 1988 U.S.C.C.A.N. at 3075.‘‘Consistent with these principles, theCommittee TTT developed a framework forthe regulation of gaming activities on Indi-an lands which provide[d] that in the exer-cise of its sovereign rights, unless a tribeaffirmatively elects to have State laws andState jurisdiction extend to tribal lands,the Congress w[ould] not unilaterally im-pose or allow State jurisdiction on Indianlands for the regulation of Indian gamingactivities.’’ Id. at 6, reprinted in 1988U.S.C.C.A.N. at 3075. ‘‘The mechanismfor facilitating the unusual relationship inwhich a tribe might affirmatively seek theextension of State jurisdiction and the ap-plication of state laws to activities conduct-ed on Indian land [wa]s a tribal-State com-pact.’’ Id. at 6, reprinted in 1988U.S.C.C.A.N. at 3076.

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In enacting IGRA, Congress was notonly aware of the complicated legal frame-work governing state-tribal relations, butwas legislating directly in response to aSupreme Court decision in this area Caba-zon Band. Recognizing the special consid-eration given to tribal immunity againsttaxation by the states absent congression-al consent, Congress took care to ensurethat IGRA’s compact requirement did not‘‘[lift] the Indians’ exemption from statetaxes.’’ Cabazon Band, 480 U.S. at 215 n.17, 107 S.Ct. 1083. Congress did this intwo ways: First, Congress explained thatIGRA’s compact provision did not consti-tute the ‘‘express congressional authoriza-tion’’ required under Cabazon Band andrelated precedents to abrogate tribal im-munity to taxation, stating that ‘‘[e]xceptfor any assessments that may be agreed tounder paragraph (3)(C)(iii) of this subsec-tion, nothing in this section shall be inter-preted as conferring upon a State or anyof its political subdivisions authority toimpose any tax, fee, charge, or other as-sessment upon an Indian tribe TTT toengage in a class III activity.’’ 25 U.S.C.§ 2710(d)(4) (emphases added). Second,recognizing that states might demand thattribes abrogate their immunity to directtaxation as part of compact negotiations,Congress declared such a practice to beevidence of bad faith on behalf of the statemaking the demand. See id. § 2710(d)(7)(B)(iii)(II) (a court ‘‘shall consider anydemand by the State for direct taxation ofthe Indian tribe or of any Indian lands asevidence that the State has not negotiatedin good faith’’).

Providing a proper context to 25 U.S.C.§§ 2710(d)(4) and (d)(7)(B)(iii)(II) clarifiesthe congressional intent behind these pro-visions. These subsections are not con-cerned with States negotiating a ‘‘piece ofthe pie’’ with respect to class III gamingrevenue: Congress expressly authorizedState ‘‘assessment TTT of [class III gam-ing] activities,’’ 25 U.S.C.

§ 2710(d)(3)(C)(iii), used deliberately nar-row language in subsections (d)(4) and(d)(7)(B)(iii)(II), and, after recognizing that‘‘[a] state’s governmental interests with re-spect to class III gaming on Indian landsinclude TTT impacts on the State’s regula-tory system, including its economic inter-est in raising revenue for its citizens,’’encouraged States and tribes ‘‘to conductnegotiations within the context of the mu-tual benefits that can flow to and fromtribe [sic ] and states.’’ S. REP. NO. 100–446, at 13, reprinted in 1988 U.S.C.C.A.N.3071, 3083 (emphasis added). Rather, sub-sections (d)(4) and (d)(7)(B)(iii)(II) are con-cerned with the possibility that a Statemight use IGRA as pretext to impose tax-es directly on an Indian tribe or its lands,where the tribe would otherwise be im-mune, see S. REP. NO. 100–446, at 14, re-printed in 1988 U.S.C.C.A.N. 3071, 3084(‘‘The Committee TTT view[s] the conces-sion to any implicit tribal agreement to theapplication of State law as unique and doesnot consider such agreement to be prece-dent for any other incursion of State lawonto Indian lands.’’), as well as the con-verse—using the threat of direct taxationto discriminate against tribes in favor ofprivate gaming interests, see id. at 13 (‘‘Itis the Committee’s intent that the compactrequirement for class III gaming not beused as a justification by a State for ex-cluding Indian tribes from such gaming orfor the protection of other State-licensedgaming enterprises from free market com-petition with Indian tribes.’’).

In sum, §§ 2710(d)(4) and(d)(7)(B)(iii)(II) were motivated not by aconcern that states might generate reve-nue from class III gaming conducted onIndian lands—indeed, the legislative histo-ry of IGRA contemplates this very eventu-ality, S. REP. NO. 100–446, at 13, reprintedin 1988 U.S.C.C.A.N. 3071, 3083 (recogniz-ing a State’s ‘‘economic interest in raisingrevenue for its citizens’’)—but by a con-

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cern that states might use IGRA and thepromise of class III gaming to otherwiseimpose taxes on Indian tribes and theirland.

The majority treats §§ 2710(d)(4) and(d)(7)(B)(iii)(II) as though these sectionsdelegate to Article III judges the responsi-bility of conducting a broad, standardlessreview of the overall ‘‘fairness’’ of negotiat-ed compacts, but this is simply not thecase. As explained above, §§ 2710(d)(4)and (d)(7)(B)(iii)(II) were limited, careful-ly-worded responses to specific issues aris-ing from the background of tribal-staterelations under the Constitution. More-over, IGRA already assigns to the Secre-tary of the Interior—the government offi-cial ‘‘charg[ed by Congress] TTT with broadresponsibility for the welfare of Indiantribes,’’ Udall v. Littell, 366 F.2d 668, 672(D.C.Cir.1966) (Burger, J.), and who owes‘‘the Indians TTT [a] duty of care and pro-tection,’’ Rainbow v. Young, 161 F. 835,838 (8th Cir.1908) (Van Devanter, J.); see25 U.S.C. § 2 (Secretary of the Interior,through the Commissioner of Indian Af-fairs, ‘‘shall TTT have the management ofall Indian affairs and of all matters arisingout of Indian relations’’); 43 U.S.C. § 1457(charging the Secretary of the Interior‘‘with the supervision of public businessrelating to TTT Indians’’)—broad authorityto approve or disapprove tribal-state com-pacts, and enumerates specific standardsagainst which a tribal-state compact is tobe reviewed by the Secretary. See 25U.S.C. § 2710(d)(3)(B) (‘‘[A] Tribal–Statecompact TTT shall take effect only whennotice of approval by the Secretary [of theInterior] of such compact has been pub-lished by the Secretary in the FederalRegister.’’); id. § 2710(d)(8) et seq. (‘‘TheSecretary may disapprove a [Tribal–State]compact TTT only if such compact vio-lates—(i) any provision of this chapter, (ii)any other provision of Federal law thatdoes not relate to jurisdiction over gaming

on Indian lands, or (iii) the trust obli-gations of the United States to Indians.’’).

C

As we explained in Coyote Valley II,‘‘[t]he passage of IGRA did not end thefight over Indian gaming in California.’’331 F.3d at 1098. After IGRA’s passage,numerous California tribes sought to nego-tiate class III gaming compacts with theState. Id. Among the class III games thetribes sought to offer were banked cardgames and slot machine-like electronicgaming machines. However, at the timethese particular games were not permittedunder California law, even though Califor-nia permitted other forms of class IIIgaming such as non-electronic keno andlotto. Id.; see Rumsey Indian Rancheriaof Wintun Indians v. Wilson, 64 F.3d1250, 1257–58 (9th Cir.1994). During theAdministration of Governor Pete Wilson,the State refused to negotiate with thetribes with respect to banked card gamesand slot machine-like gaming machines,arguing that under 25 U.S.C.§ 2710(d)(1)(B) (‘‘class III gaming shall belawful on Indian lands only if such activi-ties are TTT located in a State that permitssuch gaming for any purpose by any per-son, organization, or entity’’), a state needonly negotiate with tribes with respect toclass III games and devices otherwise al-lowed under state law. Coyote Valley II,331 F.3d at 1098. In Rumsey, we agreedwith the State, holding that ‘‘IGRA doesnot require a state to negotiate over oneform of Class III gaming simply because ithas legalized another, albeit similar formof gamingTTTT In other words, a stateneed only allow Indian tribes to operategames that others can operate, but neednot give tribes what others cannot have.’’64 F.3d at 1258.

For the next few years, numerous tribescontinued to offer class III gaming activi-

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ties that were categorically prohibited un-der California state law; in response, theWilson administration refused to negotiatecompacts covering class III games theState did permit. Id. at 1099. In 1998, acoalition of California tribes drafted a bal-lot proposition that would amend statelaw—but not the State Constitution—torequire the State to enter into compactswith Indian tribes that allowed otherwise-illegal class III gaming activities includingbanked card games and slot machines. Id.at 1100. This ballot proposition passed bya wide margin, but was ruled unconstitu-tional by the California Supreme Court, asthe California Constitution provided thatthe ‘‘Legislature has no power to author-ize, and shall prohibit casinos of the typecurrently operating in Nevada and NewJersey.’’ CAL. CONST. art. IV, § 19(e);see Hotel Employees & Rest. EmployeesInt’l Union v. Davis, 21 Cal.4th 585, 88Cal.Rptr.2d 56, 981 P.2d 990, 994 (1999).

In early 1999—while Hotel Employeeswas pending before the California Su-preme Court, but prior to the court’s deci-sion in that case—the administration ofnewly-elected Governor Gray Davis re-versed the Wilson Administration’s non-negotiation policy and began compact ne-gotiations with tribes regarding class IIIgaming that would include banked cardgames and slot machines. Coyote ValleyII, 331 F.3d at 1102–03. After the HotelEmployees decision was filed in August1999, the Davis Administration proposedan amendment to Article IV, Section 19 ofthe California Constitution that would ex-empt tribal gaming from the prohibition onNevada-style casinos, subject to the re-quirement that class III gaming be con-

ducted pursuant to a tribal-state compact;this proposed amendment was to be placedon the ballot in March 2000 as Proposition1A. Id. at 1103 & n. 11. Also in the latesummer of 1999, the United States Depart-ment of Justice announced that it plannedto proceed with enforcement actionsagainst California tribes engaged in unau-thorized class III gaming if those tribesdid not enter into compacts with the Statebefore October 13, 1999. Id. at 1103.

The Davis Administration and the tribesengaged in compact negotiations through-out August and September of 1999. Thebasic quid pro quo in these 1999 negotia-tions was as follows: First, the State of-fered the tribes the exclusive right—withthis exclusivity embodied in a constitution-al amendment, see CAL. CONST. art. 4,§ 19(f)—to conduct Nevada-style class IIIgaming, including house-banked slot ma-chines and blackjack, see 1999 Tribal–StateGaming Compact (‘‘1999 Compact’’) § 12.4,http://www.cgcc.ca.gov/enabling/tsc.pdf(last visited Apr. 6, 2010). In exchange,the tribes offered a variety of concessionsincluding, as relevant here, (1) limits onthe number of class III gaming devices atribe could operate, see id. § 4.3; and (2)‘‘Revenue Distribution,’’ see id. § 5.0–5.3,under which a gaming tribe was requiredto remit to the State a percentage of itsaverage net win from class III gamingdevices in operation on September 1, 1999,to be deposited in a ‘‘Special DistributionFund’’ (‘‘SDF’’). Id. § 5.1(a).3 Under the1999 Compact’s ‘‘Revenue Distribution’’provisions,

[t]he State’s share of the Gaming Devicerevenue [was to] be placed in the Special

3. The 1999 compact also provided for reve-nue sharing between gaming and non-gamingtribes through the creation of a ‘‘RevenueSharing Trust Fund’’ (‘‘RSTF’’). Id. § 4.3.2 etseq. The RSTF provision required gamingtribes to pay, on a quarterly basis, a per-device annual fee into the RSTF for distribu-

tion to non-gaming tribes in California. Id.§ 4.3.2.2(2). The RSTF provisions of the1999 Compact were solely directed at gamingand non-gaming tribes—‘‘[i]n no event [was]the State’s General Fund [ ] obligated to makeup any shortfall or pay any unpaid claims.’’Id. § 4.3.2.1(b).

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Distribution Fund, available for appro-priation by the Legislature for the fol-lowing purposes: (a) grants, includingany administrative costs, for programsdesigned to address gambling addiction;(b) grants, including any administrativecosts, for the support of state and localgovernment agencies impacted by tribalgovernment gaming; (c) compensationfor regulatory costs incurred by theState Gaming Agency and the state De-partment of Justice in connection withthe implementation and administrationof the Compact; (d) payment of short-falls that may occur in the RevenueSharing Trust Fund; and (e) any otherpurposes specified by the Legislature.

Id. § 5.2. If a tribe failed to timely pay itsrequired share of gaming device revenuesto the State, the tribe would be chargedinterest ‘‘in addition to any other remediesthe State m[ight] have,’’ id. § 5.3(b); if‘‘more than two quarterly contributions’’by the tribe were overdue, the tribe wouldbe prohibited from conducting class IIIgaming, id. § 5.3(e).

On September 10, 1999, 57 tribes, in-cluding the Band, signed letters of intentto enter the 1999 Compact. In March2000, Proposition 1A was ratified by Cali-fornia voters. Two months later, the Unit-ed States Secretary of the Interior ap-proved the Tribal–State compacts enteredinto between the State and 60 tribes, in-cluding the Band. Coyote Valley II, 331F.3d at 1107; see 65 Fed.Reg. 31189 (May16, 2000). The Band currently operates its‘‘Harrah’s Rincon’’ casino pursuant to the1999 Compact. Under this compact, whichdoes not expire until 2020, the Band isauthorized to operate 1600 gaming devices.Notably, because the Band operated fewerthan 200 gaming devices on September 1,1999, it is not required to make—and nev-er has made—revenue sharing paymentsto the SDF under its existing compact.See 1999 Compact § 5.1(a) (‘‘The Tribeshall make contributions to the Special

Distribution Fund TTT only with respect tothe number of Gaming Devices operatedby the Tribe on September 1, 1999.’’).

By 2003, California was awash in debtand faced a $38 billion dollar budget defi-cit. See generally Mark Simon, RecallElection set for Oct. 7: Fiscal Crisis andvoter resentment led to recall, S.F. CHRON.,July 25, 2003, at A1. As Governor Davisfaced recall by the California voters, theState executed three new gaming com-pacts in August and September of 2003.See http://www.cgcc.ca.gov/compacts.asp(last visited Apr. 6, 2010). These compactswere nearly identical to the 1999 Com-pacts, although they differed in one impor-tant respect: instead of requiring the com-pacting tribe to remit a percentage of itsgaming device net win to the Special Dis-tribution Fund, these compacts called forthe revenue sharing with the State’s gener-al fund. See, e.g., La Posta Band of Mis-sion Indians Tribal–State Gaming Com-pact § 4.3.1(a), http://www.cgcc.ca.gov/compacts/8132009/laposta.pdf (last visitedApr. 6, 2010) (‘‘The La Posta Tribe mayoperate no more than 350 Gaming Devices.From and after the first day of operationof its first Gaming Facility, the La PostaTribe shall pay five percent (5%) of its NetWin from the operation of Gaming Devicesto the California Gambling Control Com-mission, or such other State entity as maybe designated by the Governor, for depositinto the General Fund.’’). All three com-pacts executed in 2003 calling for generalfund revenue sharing were approved bythe Department of the Interior. http://www.cgcc.ca.gov/compacts.asp (last visitedApr. 6, 2010).

In October 2003, Gray Davis was re-called, and Arnold Schwarzenegger waselected governor of California. TheSchwarzenegger Administration has con-tinued the late-term practice of the DavisAdministration by negotiating general

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fund, rather than Special DistributionFund, revenue sharing in new and amend-ed tribal compacts. At present, fifteenTribal–State compacts in California pro-vide for general fund revenue sharing.See http://www.cgcc.ca.gov/Tribal/2009/GF%20Paying lTribeslfor lWebsite03–04–09.pdf(last visited Apr. 6, 2010). Each of thesecompacts has been approved by the Secre-tary of the Interior.

III

When Congress drafted IGRA, it did soagainst a well-defined legal backgroundprohibiting states from directly taxing In-dian tribes and tribal lands without ex-press congressional authorization. Withthis history expressly in mind, see S. REP.

NO. 100–446, at 5, reprinted in 1988U.S.C.C.A.N. 3071, 3075, Congress draftedtwo very specific provisions explaining (1)that IGRA’s compact provisions, which al-lowed states to bargain with tribes overclass III gaming regulation, did not au-thorize the states to impose a tax on thetribe, 25 U.S.C. § 2710(d)(4); and (2) thatin the context of compact negotiations, astate’s demand for otherwise-prohibited di-rect taxation of a tribe or its lands wouldbe evidence of bad faith, id.§ 2710(d)(7)(b)(iii)(II). These provisionswere carefully worded to respond to aspecific problem—the possibility thatIGRA’s class III gaming provisions mightbe interpreted by states as an ‘‘expresscongressional authorization’’ for direct tax-ation or, relatedly, that states might usecompact negotiations to demand abroga-tion of a tribe’s immunity to direct taxa-tion.

The majority steps into these stallednegotiations with an astonishing proposi-tion: a demand for revenue sharing by theState is ‘‘simply an impermissible demandfor the payment of a tax by the tribe’’prohibited by § 2710(d)(4), Maj. Op. at1042, and under § 2710(d)(7)(B)(iii)(II) ‘‘isevidence of the State’s bad faith,’’ id. at

1030. The majority orders the parties ei-ther to reach a compact or submit to medi-ation, but in either case, there is only oneoutcome: The Band wins. California los-es.

In my view, the majority has failed torecognize the legal and historical differ-ences between taxation and revenue shar-ing. A tax is imposed by the state andmay be collected by the state, under penal-ty of law, over the objections of its citizens.Revenue sharing, by contrast, is typicallynegotiated by the parties and then en-forced through the law of contract. If theparties fail to agree to revenue sharing inthe first instance, neither side can unilater-ally compel the other to share revenues;there is no contract. Here, California hasinsisted that the Band share its gamingrevenues as a condition to receiving au-thorization for additional gaming devices.To date, California has nothing to show forits negotiations and, under long-estab-lished principles, no power to compel theBand to pay it a percentage of its reve-nues. California and the Band are inde-pendent sovereigns; they may negotiatean agreement or not, but neither has thepower to tax the other. Thus, California’sinsistence on revenue sharing may be ‘‘ahard line stance,’’ Maj. Op. at 1039, but itis not a tax.

A

The majority has confounded two dis-tinct and well-defined concepts: ‘‘taxation’’and ‘‘revenue sharing.’’ As described bythe majority:

Under § 2710(d)(7)(B)(iii)(II), a courtmust consider a ‘‘demand’’ for a tax tobe made in bad faith. A tax is ‘‘acharge, usu[ally] monetary, imposed bythe government on persons, entities,transactions, or property to yield publicrevenue.’’ Black’s Law Dictionary 1594(9th ed.2009) (emphasis added). TheState insisted that Rincon pay at least

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10% of its net profits into the State’sgeneral fund. According to Cal. Govt.Code § 16300, ‘‘[t]he General Fund con-sists of money received into the treasuryand not required by law to be creditedto any other fund.’’ No amount of se-mantic sophistry can undermine the ob-vious: a non-negotiable, mandatory pay-ment of 10% of net profits into the Statetreasury for unrestricted use yields pub-lic revenue, and is a ‘‘tax.’’

Maj. Op. at 1029–30 (footnote omitted).Indeed, at every turn, the majority hasequated revenue sharing with taxation.See id. at 1032 (‘‘when the ‘nature of thefees’ is general fund revenue sharing—abald demand for payment of a tax—theState faces a very difficult task to rebutthe evidence of bad faith necessarily aris-ing from that demand’’); id. at 1042 (‘‘TheState’s demand for 10–15% of Rincon’s netwin, to be paid into the State’s generalfund, is simply an impermissible demandfor the payment of a tax by the tribe.’’).The majority fundamentally errs when itdeclares that ‘‘general fund revenue shar-ing [is] a bald demand for payment of atax.’’ Maj. Op. at 1032. In a definitionquoted by the majority itself, Black’s LawDictionary defines a ‘‘tax’’ as ‘‘[a] charge,usu[ally] monetary, imposed by the gov-ernment on persons, entities, transactions,or property to yield public revenue.’’BLACK’S LAW DICTIONARY 1594 (9th ed.2009)(emphasis added). Webster’s Third NewInternational Dictionary and The OxfordEnglish Dictionary feature nearly identicaldefinitions. See WEBSTER’S THIRD NEW IN-

TERNATIONAL DICTIONARY 2345 (1993) (defin-ing ‘‘tax’’ as ‘‘a usu[ally] pecuniary chargeimposed by legislative or other public au-thority upon persons or property for pub-lic purposes: a forced contribution of

wealth to meet the public needs of a gov-ernment’’ (emphases added)); XVII THE

OXFORD ENGLISH DICTIONARY 677 (2ded.1989) (defining ‘‘tax’’ as ‘‘[a] compulsorycontribution to the support of government,levied on persons, property, income, com-modities, transactions, etc., now at fixedrates, mostly proportional to the amounton which the contribution is levied ’’ (em-phases added)).4 Whether the dictionaryof record is Black’s, Webster’s 3d, or TheOxford English Dictionary, there are threecomponents to the definition of ‘‘tax’’: (1) amonetary contribution; (2) imposed by thegovernment; (3) to yield public revenue.The majority focuses on the first and thirdcomponents—a monetary contributionyielding public revenue—but completelyignores the second component—the re-quirement that a charge be ‘‘imposed ’’ or‘‘levied ’’ by the government before it canbe deemed a ‘‘tax.’’ See Maj. Op. at 1029–31. Yet, the fact that a monetary paymentto the government is imposed, and notbargained-for, is the essential characteris-tic that defines a tax.

We have had occasion to consider whatconstitutes a tax, and have ‘‘applied thistax definition: (1) An involuntary pecuni-ary burden (2) imposed by the state legis-lature (3) for a public purpose (4) underthe state’s police or taxing power. Ourpoint in so refining the definition of a taxwas to distinguish taxes from debts forvoluntarily assumed obligations TTTT’’George v. Uninsured Employers Fund (Inre George), 361 F.3d 1157, 1160 (9th Cir.2006) (emphases added). As we explainedin In re Lorber Industries of California,Inc., ‘‘[i]n general, TTT charges can beclassified as a tax only if they constitute ‘apecuniary burden laid upon individuals orproperty for the purpose of supporting the

4. ‘‘Levied’’ is simply a tax term of art for‘‘imposed.’’ See BLACK’S LAW DICTIONARY 991(9th ed.2009) (defining ‘‘levy’’ as ‘‘[t]o imposeor assess (a fine or tax) by legal authority’’);

WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY

1301 (1993) (defining ‘‘levy’’ as ‘‘to impose orcollect (as a tax or tribute) by legal process orby authority’’).

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Government’ or to support ‘some specialpurpose authorized by it.’ Taxes are notequivalent to debts, which are voluntaryobligations based on express or impliedcontracts. Taxes are levied without theconsent or voluntary action of the taxpay-er.’’ 675 F.2d 1062, 1066 (9th Cir.1982)(emphasis added) (quoting New Jersey v.Anderson, 203 U.S. 483, 492, 27 S.Ct. 137,51 L.Ed. 284 (1906)); see also Nat’l CableTelevision Ass’n v. United States, 415 U.S.336, 340–41, 94 S.Ct. 1146, 39 L.Ed.2d 370(1974).5

The majority, however, simply sidestepsthe ‘‘imposition’’ requirement by slappingthe conclusory labels ‘‘nonnegotiable’’ and‘‘mandatory’’ on proposed revenue sharingpayments that are neither. If the ‘‘pay-ment of 10% of net profits into the Statetreasury for unrestricted use[,] yield[ing]public revenue’’ that the majority deridesas a ‘‘non-negotiable, mandatory’’ tax, Maj.Op. at 1029–30, were either non-negotiableor mandatory, how is it that the State hasnot, to date, received one dime of generalfund revenue from the Tribe? The an-swer, of course, is that the State’s pro-posed 10% general fund revenue sharingpayments are both negotiable (indeed, the10% figure is just one of several revenuesharing proposals put forth by the State innegotiations with the Tribe) and subject to

the Tribe’s agreement in exchange for ad-ditional machines.

Perhaps the majority simply means thata fixed, agreed-to ‘‘payment TTT into theState treasure for unrestricted use yieldspublic revenue, and is a tax,’’ but thiscannot be right, either. A purchaser of abond—whether issued by a state, a munici-pality, or by the federal government—makes a monetary contribution that yieldspublic revenue. But a bond is not a ‘‘tax.’’Indeed, a bond is not a ‘‘tax’’ even if itsproceeds go to a State’s general fund.The reason for this is simple: even thougha bond purchaser pays money to the gov-ernment to support its functions, this pay-ment is not ‘‘imposed’’ on the purchaser;rather, the bond purchaser pays money tosupport the government in exchange forsomething of value, a future intereststream. Under the majority’s definition,another ‘‘obvious’’ tax would be simply gift-ing ten percent of one’s net revenue to thefederal government. Such a gift would,after all, be a monetary contribution yield-ing public revenue. But although helpfulto the public fisc, this voluntary contribu-tion would not be a ‘‘tax.’’

B

We must contrast ‘‘taxation’’ with ‘‘reve-nue sharing,’’ in which two parties-whether

5. IGRA also recognized the distinction be-tween a tax and a direct tax. Compare 25U.S.C. § 2710(d)(4) (discussing the ‘‘im-pos[ition] of any tax, fee, charge, or otherassessment upon an Indian tribe’’) with 25U.S.C. § 2710(d)(7)(B)(iii)(II) (discussing‘‘any demand by the State for direct taxationof the Indian tribe or of any Indian lands’’).A direct tax is

[a] tax that is imposed on property, asdistinguished from a tax on a right or privi-lege. A direct tax is presumed to be borneby the person upon whom it is assessed,and not ‘‘passed on’’ to some other person.

BLACK’S LAW DICTIONARY 1595 (9th ed.2009).See also Pollock v. Farmers’ Loan & Trust Co.,157 U.S. 429, 588, 15 S.Ct. 673, 39 L.Ed. 759(1895) (Field, J., concurring) (‘‘Direct taxes,

in a general and large sense, may be de-scribed as taxes derived immediately from theperson, or from real or personal property,without any recourse therefrom to othersources for reimbursement.’’), superseded byU.S. CONST. amend. XVI; Quarty v. UnitedStates, 170 F.3d 961, 970 (9th Cir.1999) (‘‘Incontrast to an excise or indirect tax, which islevied upon the use or transfer of propertyeven though it might be measured by theproperty’s value, a direct tax is levied uponthe property itself.’’) (quotation marks andcitations omitted); LAURENCE H. TRIBE, AMERI-

CAN CONSTITUTIONAL LAW 843 (3d ed. 2000) (‘‘Adirect tax is one imposed upon property assuch, rather than on the performance of anact.’’).

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private firms or sovereign entities agree tosplit a certain proportion of revenues froma specified source.

Revenue sharing is ubiquitous. Privateentities engage in revenue sharing in areasas diverse as movie rentals, see BrooksBarnes, Movie Studios See a Threat inGrowth of Redbox, N.Y. TIMES, Sept. 6,2009, at B1 (Redbox and Paramount),sports arenas, see Ken Belson and DavidM. Halbfinger, Possible Truce BetweenNew Jersey Arenas Could Come at a Costto Fans, N.Y. TIMES, Dec. 12, 2009, at B16(Izod Center and Prudential Center innorthern New Jersey), newspapers andweb portals, see Evan Hessel, Yahoo!’siDangerous Newspaper Deal?, FORBES ON-

LINE, June 22, 2009, http://www.forbes.com/2009/0 6/22/advertising-newspapers-inter-net-businessmedia-yahoo.html (last visitedApr. 6, 2010) (five newspapers and Ya-hoo!), and, of course, casinos, see, e.g., In-troduction to Slots and Video Gaming 76,International Game Technology, http://media.igt.com/Marketing/ PromotionalLit-erature/IntroductionToGaming.pdf (lastvisited Apr. 6, 2010) (slot machines andgaming venues).

Moreover, revenue sharing is hardlyconfined to the private realm. Since the1880s, the federal government has con-tracted with private parties to operate‘‘contract postal units’’ (‘‘CPUs’’), whichare ‘‘postal facilities operated by privateparties on private property pursuant torevenue-sharing contracts with the gov-ernment.’’ Cooper v. United States Post-al Serv., 577 F.3d 479, 485 (2d Cir.2009).In exchange for the right to operate apostal facility, a CPU submits all of itsrevenues to the Postal Service, which thenrepays a portion of the revenue to theCPU. Like the federal government, stateand local governments also enter into rev-enue-sharing contracts with private firms.For example, under a federal program ad-ministered by the U.S. Department of

Transportation, a number of state and lo-cal governments contract with a privatefirm to collect and analyze traffic data.See Eric Lipton, U.S. System for Track-ing Traffic Flow is Faulted, N.Y. TIMES,Dec. 13, 2009, at A22; see also FederalHighway Administration Report No. MH–2010–030, Transportation Technology In-novation and Demonstration Program(Dec. 8, 2009), http://www.oig.dot.gov/sites/dot/files/TTID 12 8 2009.pdf (last visitedApr. 6, 2010) (‘‘TTID Report’’). The pri-vate firm is supposed to remit to thesestate and local governments a percentageof the money it makes from selling itstraffic data, which Congress has describedas revenue sharing, not a tax. See Pub.L.105–178, § 5117(b)(3)(B)(iii) (June 9,1998); see generally TTID Report at 6–8.

Federal, state and local governmentshave long entered into revenue sharingagreements with each other. ‘‘A form ofgeneral revenue sharing was actually inoperation as early as 1836[,] when nearly$28 million was deposited with State gov-ernments. In [the twentieth] century, con-gressional attempts to secure Federal taxsharing date back to 1949[,] when a Mem-ber of Congress from Kansas introduced abill to transfer to State treasuries 1 per-cent of Federal individual and corporateincome taxes raised within the State.’’Council of and for the Blind of Del. Coun-ty Valley, Inc. v. Regan, 709 F.2d 1521,1523 n. 2 (D.C.Cir.1983) (en banc) (quota-tion marks, ellipses, brackets, and citationomitted); see also 43 U.S.C. § 1608 et seq.(requiring the United States and the Stateof Alaska to pay to Native Alaskans twopercent of annual gross revenue from thedisposition of minerals removed from thatstate; Congress titled this program ‘‘reve-nue sharing’’).

Perhaps the most prominent example ofbroad-based intergovernmental revenuesharing was the State and Local Fiscal

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Assistance Act of 1972, Pub.L. 92–512, 86Stat. 919, more commonly known as theRevenue Sharing Act. See generally Presi-dent Richard Nixon, Statement About theGeneral Revenue Sharing Bill (Oct. 20,1972) (transcript available at http://www.presidency.ucsb.edu/ws/index.php?pid=3636 (last visited Apr. 6, 2010)). Underthe Revenue Sharing Act, Congress‘‘g[ave] legal effect to a concept which hadbeen proposed intermittently for morethan 20 years—that the federal govern-ment make general revenue grants to stateand local governments with no strings at-tached.’’ Council of and for the Blind ofDel. County Valley, Inc., 709 F.2d at 1523.For just over a decade (the program wasallowed to expire in 1983), the federal gov-ernment paid billions of dollars to stateand local government general funds with‘‘no strings TTT attached.’’ See S. REP. NO.

92–1050, at 3876 (1972), reprinted in 1972U.S.C.C.A.N. 3874, 3876; Goolsby v. Blu-menthal, 590 F.2d 1369, 1371 (5th Cir.1979) (en banc).6

As these examples demonstrate, there isa long history of revenue sharing in theUnited States. It has taken two forms.First, there is vertical revenue sharing,where one government decides to share itsrevenues with another (smaller) govern-mental entity. In this form of revenuesharing, the smaller entity has no continu-ing demand on the revenues; it appearsthat the decision by the larger entity toengage in revenue sharing is one of lar-gesse and can be amended at any time.The second form is horizontal or negotiat-ed revenue sharing, where two sovereigns,two private entities, or a sovereign and aprivate entity negotiate revenue sharing asa matter of contract. Horizontal revenuesharing is a voluntary matter, to be agreed

upon by the parties as a part of theiroverall negotiations. No one has everthought that horizontal revenue sharing isa form of taxation.

C

The ultimate question, then, is whetherCalifornia’s demand for a share of theBand’s gaming revenues is direct taxationor a form of revenue sharing. The answeris critical to the resolution of this case. Inmy view, the answer is not a difficult one.

IGRA requires that tribes and states‘‘enter[ ] into a Tribal–State compact gov-erning the conduct of gaming activities.’’25 U.S.C. § 2710(d)(3)(A). Congress’schosen words here—‘‘ ‘enter,’’ ‘‘compact,’’and ‘‘governing’’—are the language oftreaties and other sovereign-to-sovereignagreements. Since the states are barredfrom entering into ‘‘any Treaty, Alliance,or Confederation,’’ U.S. CONST. art. I, § 10,cl. 1, Congress chose an appropriate word:‘‘compact’’—the very definition of whichimplies negotiation between equal parties.See BLACK’S LAW DICTIONARY 318 (9thed.2009) (defining ‘‘compact’’ as ‘‘[a]nagreement or covenant between two ormore parties, esp. between governmentsor states’’). Notably, the tribal-state com-pacts in IGRA, which derive their exis-tence from a congressional enactment andmust be approved by the Secretary of theInterior, resemble very closely the inter-state compacts described by the Constitu-tion’s Compact Clause. See U.S. CONST.art. I, § 10, cl. 3 (‘‘No State shall, withoutthe Consent of Congress TTT enter intoany Agreement or Compact with anotherStateTTTT’’). An interstate compact, evenif it involves the exchange of funds, is notinterstate taxation, but ‘‘[a] voluntary

6. States have their own forms of intergovern-mental revenue sharing. For example, Cali-fornia has decided to share its cigarette taxrevenues with its counties and cities, but not

with the Indian tribes within its borders. CAL.

REV. & TAX § 30462; see Chemehuevi IndianTribe v. Cal. State Bd. of Equalization, 800F.2d 1446, 1450 (9th Cir.1986).

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agreement between states enacted into lawin the participating states upon federalcongressional approval.’’ BLACK’S LAW

DICTIONARY 318 (9th ed.2009). Critically,‘‘[i]nterstate compacts, like treaties, arepresumed to be the subject of careful con-sideration before they are entered into,and are drawn by persons competent toexpress their meaning, and to choose aptwords in which to embody the purposes ofthe high contracting parties.’’ New Jerseyv. Delaware, 552 U.S. 597, 615–16, 128S.Ct. 1410, 170 L.Ed.2d 315 (2008) (quota-tion marks omitted).

As a sovereign (a state) negotiating acompact with another sovereign (an Indiantribe), California has no ‘‘authority to im-pose any tax’’ on the Band. 25 U.S.C.§ 2710(d)(4). It may ‘‘demand’’ that theBand share a portion of its gaming reve-nues with the State, but ‘‘demands’’ arepart and parcel of negotiations; as in ne-gotiations between private parties, theState has no authority to impose such arequirement unilaterally. This case is thebest proof of this principle. California candemand general revenue sharing until it ishoarse, but it will not get revenue from theBand until the Band agrees. The State’sstrategy is aggressive, and aggression innegotiations comes with the risk that thedeal will fall through. California is run-ning that risk. For all of its posturing anddemands, California has, to date, not onepenny to show for its negotiations with theBand.7

In the tribal-state compacts Californiahas negotiated since 2003, it has securedrevenue sharing from other tribes. It hasnot imposed revenue sharing, but ratherobtained it through sovereign-to-sovereignnegotiations. When ‘‘two equal sover-eigns,’’ S. REP. NO. 100–446, at 13, reprint-ed in 1988 U.S.C.C.A.N. 3071, 3083; Coy-ote Valley II, 331 F.3d at 1112, negotiate apercentage of gross revenue to be paidfrom one party to the other in exchangefor other concessions, this is revenue shar-ing—even if the revenue is not earmarkedfor a specific fund. Revenue sharing is nota ‘‘tax,’’ and it is certainly not ‘‘directtaxation of [a] tribe or TTT [its] lands.’’ 25U.S.C. § 2710(d)(7)(B)(iii)(II). The major-ity errs when it holds otherwise.

IV

Although much of the majority opinionis devoted to holding that California’s reve-nue sharing proposal is a tax, the majoritystops short of conceding that all revenuesharing provisions are prohibited. SeeMaj. Op. at 1037 (‘‘[W]e do not hold thatno future revenue sharing is permissi-bleTTTT’’). The majority qualifies its con-cern so long as two conditions are satis-fied: First, that the State has offered‘‘meaningful concessions,’’ Coyote ValleyII, 331 F.3d at 1111, and second, that thepurposes for which the State intends touse the revenue are directly related to theoperation of gaming activities, see 25U.S.C. § 2710(d)(3)(C) (‘‘Any Tribal–Statecompact negotiated under subparagraph

7. I do not doubt for a moment that a tribewould regard a demand for revenue sharingwith the same disdain it would the impositionof a tax. That is, a tribe may equate revenuesharing and taxation because they have thesame economic effect on its welfare. But thelegal difference between the two is significant,for reasons I have described above.

A simple example illustrates my point aboutthe difference between an economic and alegal effect. Whether my landlord raises my

rent by $100 a month or the governmentincreases my income taxes by $100 a month,the economic impact on me is the same: I amout an additional $100 a month. But thereare legal and political consequences wheregovernment imposes additional taxes that arenot found in the rent increase. No one wouldmistake the rent increase for a tax, eventhough my checkbook can’t tell the differencebetween the two.

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(A) may include provisions relating to TTT

(vii) any other subjects that are directlyrelated to the operation of gaming activi-ties.’’). In my view, the majority has mis-read both requirements.

A

In Coyote Valley II, we held that whereCalifornia ‘‘offered meaningful concessionsin return for its demands, it did not ‘im-pose’ [a putative tax] within the meaningof § 2710(d)(4).’’ 331 F.3d at 1111. Weexpressed concern that, if a state demand-ed revenue from a tribe without offeringanything in return, then the revenue de-mand might constitute an ‘‘impose[d] tax,fee, charge, or other assessment,’’ whichIGRA’s compact provisions did not author-ize. 25 U.S.C. § 2710(d)(4). However, wedid not actually decide whether such ademand would constitute the imposition ofa tax, fee, or charge, because we foundthat California had offered concessions inthe negotiating process:

We do not hold that the State couldhave, without offering anything in re-turn, taken the position that it wouldconclude a Tribal–State compact withCoyote Valley only if the tribe agreed topay into the RSTF. Where, as here,however, a State offers meaningful con-cessions in return for fee demands, itdoes not exercise ‘‘authority to impose’’anything. Instead, it exercises its au-thority to negotiate, which IGRA clearlypermits.

Coyote Valley II, 331 F.3d at 1112. Simi-larly, in Shoshone–Bannock Tribes, we ob-served that § 2710(d)(4) was not a barwhere ‘‘the parties negotiated a bargainpermitting such payments in return formeaningful concessions from the state(such as a conferred monopoly or otherbenefits).’’ 465 F.3d at 1101. We rea-soned that ‘‘[a]lthough the state did nothave authority to exact such payments, itcould bargain to receive them in exchange

for a quid pro quo conferred in the com-pact.’’ Id.

The majority goes one step beyond Coy-ote Valley II and Shoshone–BannockTribes. Unfortunately, it goes in thewrong direction. Instead of allowing theparties to work out their differencesthrough the negotiating process, it findsthat the State did not offer ‘‘meaningfulconcessions’’ to the Band because it ‘‘dis-agree[s] that the State makes ‘meaningfulconcessions’ whenever it offers a bundle ofrights more valuable than the status quo.’’Maj. Op. at 1040. The majority’s state-ment mangles the phrase ‘‘meaningful con-cessions’’: it is hard to think what conces-sion could be more meaningful than ‘‘abundle of rights more valuable than thestatus quo.’’

The majority’s novel conception of‘‘meaningful concessions’’ finds no supportin IGRA and conflicts with our explanationof ‘‘meaningful concessions’’ in Coyote Val-ley II, the Department of the Interior’sreading of the Act, and centuries of con-tracts jurisprudence as well.

A ‘‘meaningful concession’’ is somethingconceded or granted that is real to at leastone of the parties and not merely nominalor illusory. Notably, this is exactly howwe described the requisite ‘‘concessions’’under 25 U.S.C. § 2710(d)(4) in CoyoteValley II: ‘‘If [ ] offered concessions by aState are real, § 2710(d)(4) does not cate-gorically prohibit fee demands.’’ 331 F.3dat 1112 (emphasis added). Simply put,‘‘meaningful’’ implies ‘‘non-negligible,’’ butno more.

The Department of Interior has alsointerpreted ‘‘meaningful concessions’’along the same line. As described in anIGRA review letter by the Principal Depu-ty Assistant Secretary of the Interior:

As our previous compact decision lettershave stated, in order to determinewhether revenue sharing violates 25

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U.S.C. § 2710(d)(4), we first look towhether the State has offered meaning-ful concessions. We have traditionallyviewed this concept as one where theState concedes something that it wasotherwise not required to negotiate thatprovides a benefit to the Tribe, i.e. ex-clusivity or some other benefit.

Absentee Shawnee Tribe Oklahoma, Dept.of Interior IGRA Rev. Ltr. (Dec. 17, 2004),http://www.nigc.gov/Portals/0/ NIGC%20Uploads/readingroom/compacts/Absen-tee% 20 Shawnee% 20Tribe% 20of%20Oklahoma/absenteeshawnee 121704.pdf(last visited Apr. 6, 2010) (emphasis add-ed). DOI’s interpretation of ‘‘meaningfulconcession[ ]’’ as ‘‘the State conced[ing]something that it was otherwise not re-quired to negotiate’’ accords with thephrase’s plain meaning and also falls neat-ly within black-letter contract law.

This understanding of ‘‘meaningful con-cession[ ]’’ dovetails nicely with one of themost venerable concepts in the commonlaw—the doctrine of consideration. Underthe common law of contracts, a court willnot weigh the adequacy, in the sense ofmarket equivalence, of bargained-for con-sideration, but will determine whether pu-tative consideration is nominal or a‘‘sham.’’ See 4 JOSEPH M. PERILLO ET AL.,

CORBIN ON CONTRACTS §§ 5.14, 5.17 (2ded.1995). Thus, a court will make athreshold inquiry to make sure that whatis exchanged is not a ‘‘pretense,’’ but willnot assign its own subjective valuation toeach side’s respective concessions. In thewords of a leading treatise, this approachto contract law is the very cornerstone ofmarket exchange:

We have a free market, under our com-mon law, for the reason that the courtshave left it free. They do not requirethat one person shall pay as much asothers may be willing to pay, or that oneperson shall receive as little as othersmay be willing to receive for a like arti-cle. The contracting parties make their

own contracts, agree upon their own ex-changes, and fix their own values.

4 CORBIN ON CONTRACTS § 5.14.In light of our own explanation of the

phrase in Coyote Valley II, DOI’s under-standing of the phrase, and black lettercontract law, there can be little doubt thatwhen we used the phrase ‘‘meaningful con-cessions’’ in Coyote Valley II, we weredescribing exactly what the majority re-jects: a State makes ‘‘meaningful conces-sions’’ whenever it offers a bundle of rightsmore valuable than the status quo. Courtshave not traditionally tipped the scales ofnegotiations between two well-representedparties, and there is no warrant in IGRAor in Coyote Valley II to do so here.Coyote Valley II states the applicable testas plainly as words will allow: ‘‘If TTT

offered concessions by a State are real,§ 2710(d)(4) does not categorically prohibitfee demands.’’ 331 F.3d at 1112 (emphasisadded).

B

Equally infirm is the majority’s restrict-ed reading of § 2710(d)(3)(C)(vii) and itsconception of what a state may do with therevenue it has bargained for. In the endanalysis, I think that the majority hasturned Coyote Valley II on its head. Themajority now holds that ‘‘[w]hether reve-nue sharing is an authorized negotiationtopic TTT depends on the use to which therevenue will be put, not on the mere factthat the revenue derives from gaming ac-tivities.’’ Maj. Op. at 1033. As describedby the majority, the RSTF and SDF ad-dressed ‘‘fair distribution of gaming oppor-tunities and compensation for the negativeexternalities caused by gaming’’ and didnot ‘‘ ‘put tribal money into the pocket ofthe State.’ ’’ Id. at 1033–34 (quoting CoyoteValley II, 331 F.3d at 1113). But whereasin Coyote Valley II we simply held that theRSTF and SDF were permissible subjectsof negotiation, the majority now holds thatthe RSTF and SDF represented the outer

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limits of permissible negotiation. Thus,the majority answers the question we re-served in Coyote Valley II and holds that‘‘general fund revenue sharing is not ‘di-rectly related to the operation of gamingactivities’ and is thus not an authorizedsubject of negotiation.’’ Maj. Op. at 1034(quoting 25 U.S.C. § 2710(d)(3)(C)(vii));see also id. at 1039 (‘‘[G]eneral fund reve-nue sharing is not a state public policyinterest directly related to gaming and isnot an authorized negotiation topic TTTT’’).

I have two responses to the majority’sanalysis. First, I do not think that§ 2710(d)(3)(C) is so limited. The listingof subjects that are appropriate for State–Tribe negotiations is permissive: the com-pact ‘‘may include provisions relating to’’the items on the list. 25 U.S.C.§ 2710(d)(3)(C) (emphasis added). InUnited States v. Redman, 35 F.3d 437 (9thCir.1994), we interpreted the phrases ‘‘mayconsider,’’ ‘‘shall consider,’’ and ‘‘shouldconsider’’ in successive versions of the Sen-tencing Guidelines. Id. at 440–41. The1989 amendment to § 5G1.3(c) of theGuidelines provided that the court ‘‘mayconsider’’ a reasonable incremental penaltyto be a sentence for the instant offense,while the 1991 amendment to this sectionused the phrase ‘‘shall consider,’’ and the1992 amendment to the same section usedthe phrase ‘‘should consider.’’ Id. We not-ed that ‘‘Webster defines the word ‘may’ as‘have permission to[,]’ WEBSTER’S THIRD

NEW INTERNATIONAL DICTIONARY 1396 (1986)TTT [,] ‘[s]hall’ is defined as being ‘used inlaws, regulations and directives to expresswhat is mandatory[,]’ id. at 2085[, and]‘[s]hould’ is used to express what is ‘proba-ble or expected[,]’ id. at 2104,’’ and rea-soned:

The meaning of the current ‘‘should con-sider’’ language in § 5G1.3 can be dis-cerned by reference to the earlier itera-tions of the Guideline. Under the 1989[‘‘may consider’’] amendment, courtshad complete discretion to employ thecommentary methodology or not whendeciding on a reasonable incrementalpenalty. The 1991 [‘‘shall consider’’]amendment stripped courts of all discre-tion in the matterTTTT The ‘‘should con-sider’’ language in the current versionfalls somewhere between the ‘‘may con-sider’’ language in the 1989 amendmentand the ‘‘shall impose’’ mandate of the1991 version.

Redman, 35 F.3d at 440–441 (citationsomitted). In short, we have interpretedthe word ‘‘may’’ as Webster’s Third NewInternational Dictionary defines it: as agrant of permission rather than an pres-criptive limitation. Section 2710(d)(3)(C),which enumerates a number of subjectswhich a Tribal–State compact ‘‘may in-clude provisions relating to,’’ identifiesthese interests as permitted subjects ofnegotiation, but neither explicitly nor im-plicitly restricts negotiations to these in-terests.8 See generally COHEN’S HANDBOOK

8. The majority opines that ‘‘[t]he languageand structure of § 2710(d)(3)(C) suggest it isexhaustive.’’ Maj. Op. at 1028 n. 9. But themajority’s analysis on this point runs contraryto our longstanding interpretation of the com-pact requirement’s closest legal analog: the‘‘good faith bargaining’’ requirement in theNational Labor Relations Act. See In re IndianGaming Related Cases (‘‘Coyote Valley I ’’),147 F.Supp.2d 1011, 1020–21 (N.D.Cal.2001)(‘‘Like IGRA, the NLRA imposes a duty tobargain in good faith, but does not expresslydefine ‘good faith.’ TTT The Court does not

intend to import federal case law interpretingthe NLRA wholesale into its interpretation ofthe IGRATTTT However, the Court considersthe NLRA case law for guidance in interpret-ing a standard undefined by the IGRA.’’),aff’d, Coyote Valley II, 331 F.3d 1094.

Under section 158 of the NLRA, 29 U.S.C.§ 158 et seq., there is an ‘‘[o]bligation to bar-gain collectively,’’ defined as ‘‘the perform-ance of the mutual obligation of the employerand the representative of the employees tomeet at reasonable times and confer in good

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OF FEDERAL INDIAN LAW 873 (2005 ed.)(‘‘Tribes and states may include a widevariety of subjects in the gaming com-pactsTTTT More than 200 tribal-state com-pacts have been approved, and they areoften subject to amendments, as well asnew negotiations if they have sunset provi-sions. It is thus impossible to generalizeabout the content of provisions TTT’’).

Even if the list outlined in§ 2710(d)(3)(C)(i)-(vii) were exclusive—aproposition that runs contrary to the dic-tionary definition of ‘‘may,’’ our interpreta-tion of the term ‘‘may’’ as used in othercongressional enactments, and our long-standing interpretation of § 158(d) of theNLRA-the State’s revenue-sharing propos-al would still be an authorized subject ofnegotiation, as it falls within§ 2710(d)(3)(C)(vii), a catch-all provisionauthorizing negotiation of ‘‘any other sub-jects that are directly related to the opera-tion of gaming activities.’’ The majorityreads this clause very restrictively, ex-plaining that ‘‘[w]hether revenue sharing isan authorized negotiation topic under§ 2710(d)(3)(C)(vii) [ ] depends on the useto which the revenue will be put, not onthe mere fact that the revenue derivesfrom gaming activities,’’ Maj. Op. at 1033;see also id. at 1028–29 n. 9, but its readingof § 2710(d)(3)(c)(vii) cannot be reconciledwith our decision in Coyote Valley II.

In Coyote Valley II, we rejected thetribe’s request ‘‘to read § 2710(d)(3)(C)(vii)narrowly and to hold that it does not en-compass a provision like the RSTF.’’ 331F.3d at 111. Instead, ‘‘we h[e]ld that§ 2710(d)(3)(C)(vii) authorize[d] the RSTFprovisionTTTT’’ 331 F.3d at 1111. Critical-ly, the RSTF did not use revenue forgaming purposes. Rather, the RSTF dis-tributed revenue to non-gaming tribes,who could use it however they saw fit; theRSTF was effectively a contribution to thenon-gaming tribes’ general revenue funds.The RSTF certainly used revenue for thebenefit of Indian tribes, but it did not userevenue for any purpose directly related togaming. Our express holding in CoyoteValley II that ‘‘the RSTF provision clearlyfalls within [§ 2710(d)(3)(C)(vii)’s] scope,’’id., is irreconcilable with the ‘‘use’’ restric-tion relied on by the majority.

The majority also runs afoul of CoyoteValley II when it declares that ‘‘what com-pels a limited reading[of§ 2710(d)(3)(C)(vii) ] is the canon of con-struction obligating us to construe a stat-ute abrogating tribal rights narrowly andmost favorably towards tribal interests.’’Maj. Op. at 1028–29 n. 9. This canon, which‘‘we regard [ ] as a mere guideline and nota substantive law,’’ Williams v. Babbitt,115 F.3d 657, 663 n. 5 (9th Cir.1997) (quo-tation marks omitted), only applies to ‘‘am-

faith with respect to wages, hours, and otherterms and conditions of employmentTTTT’’ Id.§ 158(d). The list ‘‘wages, hours, and otherterms and conditions of employment’’ couldeasily be read to comprise the entirety ofpermissible subjects that could be collectivelybargained; i.e., the list could be read as ‘‘ex-haustive,’’ an interpretation the majority be-lieves is compelled by the language andstructure of § 2710(d)(3)(C) in IGRA. Likethe subjects in 25 U.S.C. § 2710(d)(3)(C), thesubjects in 29 U.S.C. § 158(d) include abroad final clause—in IGRA, ‘‘any other sub-jects that are directly related to the operationof gaming activities,’’ and in the NLRA, ‘‘oth-er terms and conditions of employment.’’

Yet 29 U.S.C. § 158(d) has not been inter-preted to establish an ‘‘exhaustive’’ list ofsubjects that may be negotiated in collectivebargaining. Instead, we have interpreted§ 158(d) as setting out ‘‘[m]andatory sub-jects—‘wages, hours, and other terms andconditions of employment’—[that] must bebargained collectively in good faith,’’ RetlawBroad. Co. v. NLRB, 172 F.3d 660, 665 (9thCir.1999), but which are not the only subjectssubject to collective bargaining. Rather, ‘‘allother subjects are permissive subjects,’’which ‘‘deal with a wide range of mattersdeemed to fall outside the framework of man-datory terms.’’ Id.(quotation marks omitted).

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biguous provisions,’’ Montana v. BlackfeetTribe of Indians, 471 U.S. 759, 766, 105S.Ct. 2399, 85 L.Ed.2d 753 (1985). Yet inCoyote Valley II, we held that§ 2710(d)(3)(C)(vii) ‘‘is not ambiguous andthat the RSTF provision clearly falls with-in its scope,’’ rejecting the tribe’s argu-ment that the RSTF provision was unau-thorized under § 2710(d)(3)(C)(vii) basedon the principle that ‘‘we should interpretany ambiguities on these issues in a matterthat will be most favorable to tribal inter-ests.’’ 331 F.3d at 1111 (quotation marksomitted). Since we have expressly heldthat § 2710(d)(3)(C)(vii) is not ambiguous,the canon that ambiguities in statutesshould be construed in favor of Indiantribes is inapplicable. Once again, the ma-jority is simply wrong on this point.9

Instead of rigidly imposing a gaming-only restriction on how negotiated revenuesharing may be used, § 2710(d)(3)(C)(vii)simply ‘‘prevent[s] compacts from beingused as a subterfuge for imposing State

jurisdiction on tribes concerning issues un-related to gaming.’’ Coyote Valley II, 331F.3d at 1111. As in Coyote Valley II, ‘‘theState has not sought to engage in such asubterfuge’’ here. Id. Tribes such as theBand are asking for something from theState-additional gaming devices—to whichthey are not entitled under their currentcompacts. California has requested ashare of the revenues generated by thosedevices. This seems pretty ‘‘related to theoperation of gaming activities’’ to me. If,for example, California had asked theBand to open a water park on tribal landslocated elsewhere in the state or to make adonation to the booster club at UCLA, wemight have an issue.

The majority and I would probablyagree that it would have been better ifCongress had made it explicit in IGRAwhether general revenue sharing could bea part of compact negotiations or not. Butit didn’t, and that failure has generatedpublic controversy, litigation, and a cottage

9. To the extent the majority relies on thiscanon beyond its interpretation of§ 2710(d)(3)(C)(vii) (to which we have alreadyheld the canon inapplicable), even this reli-ance is flawed. As we explained in CoyoteValley II and as the Supreme Court madeclear in Seminole Tribe, IGRA involved twocountervailing sovereign interests-states andIndian tribes-and it granted authority to each.See Coyote Valley II, 331 F.3d at 1096 (‘‘IGRATTT seeks to balance the competing sovereigninterests of the federal government, state gov-ernments, and Indian tribes, by giving each arole in the regulatory scheme.’’); SeminoleTribe, 517 U.S. at 58, 116 S.Ct. 1114 (‘‘[T]heAct grants the States a power that they wouldnot otherwise haveTTTT’’). Although stateshave not traditionally had the power to regu-late Indian tribes, states have traditionallyhad the power to regulate the scope of gam-bling within their territorial borders. As theSupreme Court has explained, ‘‘Congressshould make its intention clear and manifestif it intends to pre-empt the historic powers ofthe StatesTTTT This plain statement rule is TTT

an acknowledgment that the States retainsubstantial sovereign powers under our con-

stitutional scheme, powers with which Con-gress does not readily interfere.’’ Gregory v.Ashcroft, 501 U.S. 452, 461, 111 S.Ct. 2395,115 L.Ed.2d 410 (1991) (quotation marks andinternal citation omitted); see also, e.g., Owas-so Indep. Sch. Dist. No. I–011 v. Falvo, 534U.S. 426, 435–36, 122 S.Ct. 934, 151 L.Ed.2d896 (2002) (rejecting a proposed interpreta-tion of the ambiguous term ‘‘education rec-ords’’ in the Family Education Rights andPrivacy Act where it was ‘‘doubt[ful] Congressmeant to intervene in this drastic fashion withtraditional state functionsTTTT The Congressis not likely to have mandated this result, andwe do not interpret the statute to require it.’’).Thus, to the extent that IGRA’s provisionsother than § 2710(d)(3)(C)(vii) are ambigu-ous, this is a ‘‘dueling canons’’ situation inwhich it is far from clear that the federalismcanon should be shoved aside in favor of thetribal sovereignty canon. See, e.g., Fla. Dept.of Revenue v. Piccadilly Cafeterias, Inc., 554U.S. 33, 128 S.Ct. 2326, 2338, 171 L.Ed.2d203 (2008) (‘‘We agree with Florida that thefederalism canon TTT obliges us to construe [astatutory exemption from state taxation] nar-rowly.’’).

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industry in law review articles.10 Unfortu-nately, the only consensus among aca-demics appears to be that Congress shouldclarify the issue and address revenue shar-ing head-on.11 States and tribes, however,do appear to have reached a consensus, atleast in practice:

Although it is clear that states may nottax gaming activities, tribes and stateshave devised approaches that allow someform of revenue sharing with thestatesTTTT The Secretary of the Interiorhas approved revenue sharing arrange-ments on the ground that those pay-ments are not taxes, but exchanges of

cash for significant economic value con-ferred by the exclusive or substantiallyexclusive right to conduct gaming in thestateTTTT Despite generating high-levelpublicity and debate, revenue sharingprovides states and tribes with themeans to consummate compacts thatboth sides can legitimately claim willprovide substantial economic benefits totheir constituents.

COHEN’S HANDBOOK OF FEDERAL INDIAN LAW

874. Perhaps the best evidence for thepractice is the fact that, after twentyyears of experience with IGRA, everycompact negotiated in recent years-includ-ing compacts in Connecticut,12 Florida,13

10. See, e.g., Katie Eidson, Note, Will StatesContinue to Provide Exclusivity in Tribal Gam-ing Compacts or Will Tribes Bust on the Handof the State in Order to Expand Indian Gam-ing?, 29 AM. INDIAN L. REV. 319, 325–39 (2004);Courtney J.A. DaCosta, Note, When ‘‘Turna-bout’’ Is Not ‘‘Fair Play’’: Tribal Immunityunder the Indian Gaming Regulatory Act, 97GEO. L.J. 515, 542–546 (2009); Ezekiel J.N.Fletcher, Negotiating Meaningful Concessionsfrom States in Gaming Compacts to FurtherTribal Economic Development: Satisfying the‘‘Economic Benefits’’ Test, 54 S.D. L. REV.

419, 431–39 (2009); Matthew L.M. Fletcher,Bringing Balance to Indian Gaming, 44 HARV.

J. ON LEGIS. 39, 57–95 (2007); Eric S. Lent,Note, Are States Beating the House?: TheValidity of Tribal–State Revenue Sharing underthe Indian Gaming Regulatory Act, 91 GEO.

L.J. 451, 453–74 (2003); Matthew Murphy,Note, Betting the Rancheria: EnvironmentalProtections as Bargaining Chips under the In-dian Gaming Regulatory Act, 36 B.C. ENVTL.

AFF. L. REV. 171, 181–84 (2009); Kathryn R.L.Rand, Caught in the Middle: How State Poli-tics, State Law, and State Courts ConstrainTribal Influence over Indian Gaming, 90 MARQ.

L. REV. 971, 985–87 (2007); Kathryn R.L.Rand and Steven Andrew Light, How Con-gress Can and Should ‘‘Fix’’ the Indian Gam-ing Regulatory Act: Recommendations for Lawand Policy Reform, 13 VA. J. SOC. POL’Y & L.396, 462–65 (2006); Joshua L. Sohn, TheDouble–Edged Sword of Indian Gaming, 42TULSA L. REV. 139, 150–56 (2006).

11. Much of the academic literature disap-proves of tribal-state revenue sharing as anormative matter, but the legal consensus—

particularly among professorial, as opposedto student, authors—appears to be that IGRAis simply silent on the issue of revenue shar-ing. Commentators have suggested that Con-gress clarify the issue. See Fletcher, 44 HARV.

J. ON LEGIS. at 94 (‘‘argu[ing] that a legislativepackage to ratify and authorize revenue shar-ing TTT [would] alleviate the major problemsin IGRA TTT’’); Rand and Light, 13 VA. J. SOC.

POL’Y & L. at 462 (recommending that Con-gress ‘‘[a]mend IGRA to create a revenue-sharing structure that encourages cooperativetribal-state policymaking while ensuringtribes remain the primary beneficiaries of In-dian gaming by creating a presumptive rebut-table cap’’); see also Wisconsin v. Ho–ChunkNation, 512 F.3d 921, 932 (7th Cir.2008)(‘‘The validity, under the IGRA, of revenue-sharing agreements in tribal-state compactshas been a contentious issue. TTT [T]he legiti-macy of these revenue-sharing provisions isfar from a settled issue.’’).

12. See Mashantucket Pequot Tribe Memoran-dum of Understanding (Apr. 30, 1993) (pro-viding for revenue sharing of twenty-fivepercent of gross operating revenues fromelectronic gaming machines), http://www.ct.gov/ dosr/lib/dosr/Memorandum Of Under-standing Foxwoods.pdf (last visited Apr. 6,2010); Mohegan Tribe Memorandum of Un-derstanding (May 17, 1994), http://www.ct.gov/dosr/lib/dosr/Memorandum OfUnderstanding Mohegan.pdf (last visitedApr. 6, 2010) (same); see also http://www.ct.gov/dos r/lib/dosr/tribal state compact fox-woods.pdf (last visited Apr. 6, 2010) (statingthat assessment pursuant to 25 U.S.C.

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Michigan,14 New York,15 New Mexico,16

Oklahoma,17 Wisconsin,18 and, of course,California—has included general revenue

sharing. Equally significant, the Secre-tary of the Interior has sanctioned thesecompacts.19 Many of the payments under

§ 2710(d)(3)(C)(iii) is to be paid into State’sgeneral fund); http://www.ct.gov/dosr/lib/dosr/tribal state compact mohegan.pdf (lastvisited Apr. 6, 2010) (same).

13. See Seminole Tribe of Florida Compact Pt.XI and Exh. A (Nov. 14, 2007), http://www.flgov.com/pdfs/2007114compact—exhibita.pdf(last visited Apr. 6, 2010) (providing for reve-nue sharing of between ten and twenty-fivepercent of the tribe’s net win, and noting that‘‘[t]he appropriation of any Payments re-ceived by the State pursuant to this Compactlies within the exclusive prerogative of theLegislature’’).

14. See, e.g., Match–E–Be–Nash–She–WishBand of Pattawatomi Indians of MichiganCompact § 15–17 (May 9, 2007), http://www.michigan.gov/ documents/mgcb/Gun-lake Compact 276443 7.pdf (last visited Apr.6, 2010) (providing for eight to twelve percentof net win to be paid into Michigan StrategicFund, a state economic development fund inno way related to gaming or its effects, pro-viding for additional two percent revenuesharing between the tribe and affected localgovernments, and explaining that ‘‘[b]y enter-ing into this agreement neither the Tribe northe State of Michigan intend to create anynew authority, nor to expand or diminish anyexisting authority, on the part of the State ofMichigan to impose taxes upon the Tribe, itsmembers, or any person or entity doing busi-ness with the Tribe pursuant to this Com-pact’’).

15. See Seneca Nation of Indians Compact§ 12(b) (April 12, 2002), http://www.ncai.org/n cai/resource/agreements/ny gaming-sene-ca nation–4–12–2002.pdf (last visited Apr. 6,2010) (providing for general fund revenuesharing of eighteen to twenty-five percent,depending on year).

16. See Tribal–State Class III Gaming Com-pact § 11 (2007), http://www.nmgcb.org/tribal/2007%20compact.pdf (last visited Apr.6, 2010) (providing for payment by tribe of apercentage of gaming machine net win ‘‘tothe State Treasurer for deposit into the Gen-eral Fund of the State’’).

17. See Oklahoma Tribal–State Gaming ActModel Tribal Gaming Compact, 3A OKLA. STAT.

§ 281 Part 11 (outlining percentage of adjust-

ed gross gaming revenues that are to be paidto the State by tribes, and providing: ‘‘Pay-ments of such fees shall be made to the Trea-surer of the State of Oklahoma. Nothingherein shall require the allocation of such feesto particular state purposes, including, butnot limited to, the actual costs of performingthe state’s regulatory responsibilities hereun-der.’’).

18. See, e.g., Amendments to the MenomineeIndian Tribe of Wisconsin Compact § 42(Apr.2003), http://www.doa.state.wi.us/docview.asp? docid=2147 (last visited Apr. 6,2010) (amending tribal-state compact to pro-vide for general fund, rather than earmarked,revenue sharing).

19. The majority has erred to the extent itimplies that the Eleventh Amendment pre-vents the Secretary from disapproving com-pacts he considers illegal under IGRA. SeeMaj. Op. at 1026 n. 8. Under IGRA, the Secre-tary may disapprove any compact he deter-mines ‘‘violates—(i) any provision of this Act,(ii) any other provision of Federal law thatdoes not relate to jurisdiction over gaming onIndian lands, or (iii) the trust obligations ofthe United States to Indians.’’ 25 U.S.C.§ 2710(d)(8)(B)(i)-(iii) (emphasis added). TheSecretary, who is ‘‘charg[ed by Congress] TTT

with broad responsibility for the welfare ofIndian tribes,’’ Udall, 366 F.2d at 672, andowes ‘‘the Indians TTT [a] duty of care andprotection,’’ Rainbow, 161 F. at 838, ischarged by IGRA with conducting an inde-pendent review of the legality of compacts,irrespective of whether the tribes can chal-lenge those compacts in federal court. Cf.Knight v. United States Land Ass’n, 142 U.S.161, 12 S.Ct. 258, 35 L.Ed. 974 (1891) (‘‘TheSecretary[of the Interior] is the guardian ofthe people of the United States over the publiclands. The obligations of his oath of officeoblige him to see that the law is carried outTTTT’’).

Moreover, as the majority itself explains,where the Secretary has had concerns about acompact but nonetheless felt the compactshould not be disapproved, he has voicedthese concerns explicitly. See Pueblo of San-dia v. Babbitt, 47 F.Supp.2d 49, 51 (D.D.C.1999). Yet the Secretary has approved, or

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these compacts are substantial. For ex-ample, Florida receives approximately$100 million annually in general fund reve-nue sharing from the Seminole Tribe,Courtney J.A. DaCosta, Note, When‘‘Turnabout’’ Is Not ‘‘Fair Play’’: TribalImmunity under the Indian Gaming Reg-ulatory Act, 97 GEO. L.J. 515, 543 (2009),while New Mexico’s general fund receivednearly $63 million in revenue sharing pay-ments between October 1, 2008 and Sep-tember 30, 2009, see http://www.nmgcb.org/tribal/revsharing.html. In Connecticut,home to the nation’s largest tribal casinoand two of the largest casinos in the entireworld, the Mashantucket Pequot and Mo-hegan tribes pay twenty-five percent ofgross revenue from electronic gaming ma-chines to the State of Connecticut’s gener-al fund. See supra n. 9. In 2008, the lastfull calendar year for which revenue infor-mation is available, Connecticut received$411,410,973 in general fund revenue un-der the Mashantucket Pequot and Mohe-gan gaming compacts, http://www.ct.gov/dosr/lib/dosr/General Fund RevenuesAll Games.pdf (last visited Apr. 6, 2010),about half of which came from Connecti-cut’s slot machine revenue sharing agree-ment with the tribes, http://www.ct.gov/dosr/lib/ dosr/Fosltweb.pdf (last visitedApr. 6, 2010). In the years 2003–07, Con-necticut received $387 million, $403 mil-lion, $418 million, $428 million, and $430

million, respectively in general fund reve-nue from its tribal casinos. The Secretaryof the Interior, charged with seeing to thegeneral welfare of the tribes, has ap-proved the revenue sharing provisions ofevery one these compacts, taking the‘‘view[that] revenue-sharing arrangementsare lawful so long as the state offers thetribe separate consideration in exchangefor a cut of the tribe’s gaming revenues.’’Dacosta, 97 GEO. L.J. at 543–44; see alsoCOHEN’S HANDBOOK OF FEDERAL INDIAN LAW

at 876 (‘‘The Secretary of the Interior TTT

has not expressed concern over how therevenues are used by a state, so long asthe exclusivity provides ‘substantial eco-nomic benefit’ to the tribe.’’).

V

From its flawed premises—that negoti-ated revenue sharing is a direct tax andthat any state demands for revenue shar-ing must be accompanied by substantialconcessions and a promise to use the reve-nues for gaming-related purposes only—the majority proceeds to consider whetherthe State has failed to negotiate with theBand in good faith. The majority con-cludes that it has. Among the majority’sconcerns with the State’s demands, onestands above all others: in the majority’sview, ‘‘the financial benefit to Rincon fromthe amendments proposed would be negli-

deemed approved without any cautionary lan-guage, dozens of compacts or compactamendments providing for general revenuesharing, including all fifteen compacts callingfor general revenue sharing by Californiatribes. See, e.g., 69 Fed.Reg. 76,004 (Dec. 20,2004) (approving compact between Californiaand Coyote Valley Band of Pomo Indians); 72Fed Reg. 36,717 (July 5, 2007) (approvingcompacts between State of New Mexico andthe Pueblo of Isleta, Pueblo of Nambe, Puebloof Picuris, Pueblo of San Felipe, Pueblo ofSandia, Pueblo of Santa Ana, Pueblo of Te-suque, Pueblo of Taos, Pueblo of Santa Claraand Ohkay Owingeh); 72 Fed.Reg. 58,333(Oct. 15, 2007) (approving compact between

New Mexico and Pueblo of Laguna); 72 Fed.Reg. 71,939–40 (Dec. 19, 2007) (deeming ap-proved, without cautionary language, com-pacts between California and Morongo Bandof Mission Indians, Pechanga Band of Luise-no Indians, and Agua Caliente Band of Ca-huilla Indians); 73 Fed.Reg. 1229 (Jan. 7,2008) (deeming approved compact betweenFlorida and Seminole Tribe of Florida); 73Fed.Reg. 3480 (Jan. 18, 2008) (approvingcompact between California and San ManuelBand of Mission Indians); 74 Fed.Reg. 18397(Apr. 22, 2009) (deeming approved, withoutcautionary language, compact between Michi-gan and Match–E–Be–Nash–She–Wish Bandof Pottawatomi Indians of Michigan).

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gible: Rincon stood to gain only about $2million in additional revenues compared tothe State’s expected $38 million.’’ Maj.Op. at 1038; see also id. at 1035–36 (‘‘We[ ] find particularly persuasive the fact thatthe revenue sharing demanded in this casewould result in $38 million in additional netrevenue to the State compared to $2 mil-lion for the tribe.’’); id. at 1025–26.

‘‘IGRA’s legislative history TTT makesclear that the good faith inquiry is nuancedand fact-specific, and is not amenable tobright-line rules.’’ Coyote Valley II, 331F.3d at 1113. ‘‘The terms of each compactmay vary extensively depending on thetype of gaming, the location, the previousrelationship of the tribe and State, etc.’’S. REP. NO. 100–446, at 14 (1988), reprintedin 1988 U.S.C.C.A.N. 3071, 3084. Even ifthe State’s demand for revenue sharingcould be construed as a demand for directtaxation, I think the majority’s concernsare misplaced and the State has not nego-tiated in bad faith. The State has taken ahardline position, one that the Band doesnot like, but that does not make it a badfaith negotiating position. See, e.g., Wis.Elec. Power Co. v. Union Pac. R.R. Co.,557 F.3d 504, 510 (7th Cir.2009) (‘‘A dutyof good faith does not mean that a partyvested with a clear right is obligated toexercise that right to its own detriment forthe purpose of benefiting another party tothe contract.’’); NLRB. v. Truitt Mfg. Co.,351 U.S. 149, 154–55, 76 S.Ct. 753, 100L.Ed. 1027 (Frankfurter, J., concurring inpart and dissenting in part) (‘‘ ‘Good faith’means more than merely going throughthe motions of negotiating; it is inconsis-tent with a predetermined resolve not tobudge from an initial position. But it isnot necessarily incompatible with stub-bornness or even with what to an outsidermay seem unreasonablenessTTTT The pre-vious relations of the parties, antecedentevents explaining behavior at the bargain-ing table, and the course of negotiations

constitute the raw facts for reaching sucha determination.’’).

For reasons I explain below, the way inwhich California authorized Indian gamingcreates a bilateral monopoly that givesboth parties an economic incentive to takehardline positions—positions that are per-fectly consistent with the obligation to ne-gotiate in good faith. I then explain whythe State’s demands are reasonable and itsconcessions meaningful. Because I do notthink it is our place to interfere in thesenegotiations absent bad faith, I would letthe parties work it out (or not).

A

In California, unlike other states, Indiantribes’ territorial exclusivity is enshrinedin the state Constitution. California pro-hibits all entities other than Indian tribesfrom operating Nevada-style gaming with-in its borders. Thus, when the State nego-tiates a class III gaming compact with atribe, it is negotiating with the only entitylegally authorized to offer such gaming inCalifornia. The State, for its part, has thesole right to authorize the operation ofadditional gaming machines by the tribes.The negotiation of a new compact betweenthe State and the Band therefore presentsa classic bilateral monopoly, where ‘‘two[parties] TTT bargain over some thing ofvalue only with each other [and] neithercan rely on competition to determine theprice of the thing.’’ In re Hoskins, 102F.3d 311, 315 (7th Cir.1996), abrogated onother grounds by Assocs. CommercialCorp. v. Rash, 520 U.S. 953, 117 S.Ct.1879, 138 L.Ed.2d 148 (1997); see general-ly BLACK’S LAW DICTIONARY 1098 (9thed.2009) (defining ‘‘bilateral monopoly’’ as‘‘[a] hypothetical market condition in whichthere is only one buyer and one seller,resulting in transactional delays becauseeither party can hold out for a better dealwithout fearing that the other party willturn to a third party’’).

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The Band enjoys such a monopoly posi-tion. Although it can only offer class IIIgaming pursuant to a Tribal–State com-pact, see CAL. CONST. art. 4, § 19(f), and canonly increase its number of gaming devicespursuant to a new or amended compact, atthe same time, the Band is the only entitythat can offer class III gaming in its imme-diate territory under the California Consti-tution. By law, the State has monopolypower over the authorization of gamingmachines; equally by law, the Band is theonly entity that can be authorized to offerthese machines.

Here, the ‘‘thing of value’’ over whichthe State and the Band are bargaining isthe revenue from additional class III gam-ing devices at Harrah’s Rincon. Accord-ing to the State’s economic expert, 900 newdevices would bring in an additional $40million in gaming revenue. The ‘‘price’’being negotiated here is the proportion ofnew gaming revenue the Band will pay tothe State in exchange for these additionaldevices and an extension of its compact.What economists call the ‘‘bargainingrange’’ in a bilateral monopoly can be as-certained by determining the ‘‘corner solu-tions’’—i.e., the situations in which oneparty is an unmitigated winner and theother an unmitigated loser. See generallyWalgreen Co. v. Sara Creek Prop. Co., 966F.2d 273, 278 (7th Cir.1992) (noting that insuch situations ‘‘[n]egotiations would beunlikely to break down completely, givensuch a bargaining range, but they mightwell be protracted and costly’’). Here, thecorner solutions are as follows. At oneextreme, the State offers the Band somenumber of additional gaming devices, butthe Band pays 100 percent of new reve-nues to the State. The State is an unmiti-gated winner; the Band an unmitigatedloser. Assuming the Band realizes $40million in revenues from 900 new ma-chines, this would result in $40 million forthe State, and $0 for the Band. At the

other extreme, the State offers the Bandsome number of additional gaming devices,but the Band pays no more to the Statethan it does under the current compact;the State gains nothing at all from thistransaction, while the Band gains 100% ofnew revenue. The Band is an unmitigatedwinner; the State an unmitigated loser.Assuming $40 million in revenues from 900new machines, this would result in $40million for the Band, and $0 for the State.

These corner solutions determine thebargaining range in negotiations betweenthe State and the Band for a new compactallowing the Band to operate additionalclass III gaming devices. Assuming $40million in new revenues, the bargainingrange is anywhere between: (1) $0.01 forthe State and $39,999,999 for the Band;and (2) $39,999,999.99 for the State and$0.01 for the Band. Given the vagaries andtransaction costs involved in bilateral mo-nopoly, ‘‘[t]here is no way to predict wherein the bargaining range the bargain w[ill]be struck,’’ In re Hoskins, 102 F.3d at 316,but ‘‘at any price between those figuresTTT both parties would be better off,’’ Wal-green Co., 966 F.2d at 276 (emphasis add-ed). The reason for this ‘‘any price’’ prin-ciple is because here, there exists anotherpossible ‘‘corner solution’’ besides the twodescribed above: the Band refuses toshare revenues and the State refuses toauthorize new gaming devices, and neitherparty gains any additional revenue. Un-der the circumstances of the bilateral mo-nopoly at issue here, any compact offerfalling within the ‘‘bargaining range’’—which includes the State’s offers in thiscase—cannot be seen as made in ‘‘badfaith,’’ since the Band would be offeredreal net gains in the millions of dollarsannually under even the most parsimoni-ous State offer.

Despite the raw economics of the situa-tion, the majority holds that ‘‘a state maynot take a ‘hard line’ position in IGRA

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negotiations when it results in a ‘take it orleave it offer’ to the tribeTTTT’’ Maj. Op. at1039. What the majority has failed toappreciate is that the State and the Bandare in precisely the same position. If theState wants additional revenue (or any ad-ditional intangible benefits from Harrah’sRincon’s expanded operations), and theBand refuses to budge, the State musttake or leave the Band’s offer. The Statehas no other options available to it.

B

Even negotiating within the frameworkof a bilateral monopoly, the State’s offer isnot one-sided. The State argues that ithas offered three ‘‘meaningful concessions’’to the Band: (1) territorial exclusivity, (2)an extension of the compact term, and (3)authorization for additional devices. Al-though I agree with the majority that theState’s offer of territorial exclusivity is nota meaningful concession in light of Propo-sition 1A, there is no question that theState has offered a ‘‘real’’ concession to theBand by offering to extend the compactterm and to increase the allowed numberof class III gaming devices the Band canoperate. I will address each in turn.

1

As an initial matter, I agree with themajority that the State’s ‘‘offer’’ of territo-rial exclusivity is not a ‘‘meaningful conces-sion’’ within the meaning of Coyote ValleyII. See Maj. Op. at 1037–39. The Califor-nia Constitution already guarantees tribalexclusivity against private gaming inter-ests, and under the Band’s current com-pact, as modified by Addendum A, theBand retains the right to terminate itscompact or to continue under the compactwith reduced revenue sharing require-ments ‘‘[i]n the event the exclusive right ofIndian tribes to operate Gaming Devices inCalifornia is abrogated TTTT’’ The ‘‘revisedand expanded’’ exclusivity provision pro-vides no meaningful protection beyond

that afforded by the Band’s current com-pact, and thus cannot serve as consider-ation for an amended compact. In otherwords, it is not a ‘‘real’’ concession, seeCoyote Valley II, 331 F.3d at 1112, but anillusory one.

2

The State’s other offered concessions,however, are unquestionably ‘‘real.’’ First,the State’s offer to extend the expirationdate of the Band’s compact to 2045 is quitemeaningful. The Band’s current compact,which expires on December 31, 2020 (orJune 30, 2022 if a party requests negotia-tions for an extension), contains no right toautomatic renewal. Under the SupremeCourt’s decision in Seminole Tribe v. Flor-ida, 517 U.S. 44, 116 S.Ct. 1114, 134L.Ed.2d 252 (1996), a tribe cannot sue astate in federal court under 25 U.S.C.§ 2710(d)(7) et seq. absent an expresswaiver of sovereign immunity by the state.The current compact between Californiaand the Band contains a limited waiverfrom the State of its sovereign immunity.See 1999 Compact § 9.4 et seq., http://www.cgcc.ca.gov/enabling/ tsc.pdf (last vis-ited Apr. 6, 2010). Once the compact ex-pires, the State will not longer be subjectto suit by the Band to enforce any ofIGRA’s requirements, including its goodfaith negotiation requirement. See Semi-nole Tribe, 517 U.S. at 72, 116 S.Ct. 1114.Thus, by offering to extend the Band’scompact until 2045, the State is offering tosubject itself to IGRA’s requirements withrespect to negotiations with the Band foran additional twenty-five years. To mymind, the State’s promise to extend thecompact and waive its sovereign immunityfor another twenty-five years is a substan-tial concession. Without it, the Band has acasino resort until 2020, but not beyond.

3

Even more ‘‘meaningful’’ is the State’soffer to increase the number of gaming

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devices the Band may operate from 1600to 2500 devices. Under the CaliforniaConstitution, ‘‘[t]he Legislature has nopower to authorize, and shall prohibit, casi-nos of the type currently operating in Ne-vada and New Jersey’’—i.e., establish-ments offering Class III gaming. CAL.

CONST. art. 4, § 19(e). California’s Consti-tution provides a limited exception to thisprohibition with respect to federally recog-nized Indian tribes on Indian lands: ‘‘theGovernor is authorized to negotiate andconclude compacts, subject to ratificationby the Legislature, for the operation ofslot machines and for the conduct of lot-tery games and banking and percentagecard games by federally recognized Indiantribes on Indian lands in California in ac-cordance with federal law,’’ and ‘‘slot ma-chines, lottery games, and banking andpercentage card games are TTT permittedto be conducted and operated on triballands subject to those compacts.’’ Id. art.4, § 19(f) (emphasis added). Thus, al-though the California Constitution allowsIndian tribes to operate slot machines,banked card games, and similar activities,it does not provide blanket authorization

for their operation; the Constitution ex-plicitly requires that casino-style gamingbe operated ‘‘subject to [a] compact[ ]’’ be-tween the Governor and the Tribe.

Critically, since the very inception ofIndian gaming compacts in California, theState has negotiated, in gaming compacts,limits on the scope of class III gaming,including the number of gaming devicesthat a tribe can operate. See 1999 ModelTribal–State Gaming Compact § 4.3.1(‘‘The Tribe may operate no more GamingDevices than the larger of the following:(a) A number of terminals equal to thenumber of Gaming Devices operated bythe Tribe on September 1, 1999; or (b)Three hundred fifty (350) Gaming De-vices.’’), http://www.cgcc.ca.gov/enabling/tsc.pdf (last visited Apr. 6, 2010).20 As themajority itself concedes, see Maj. Op. at1038–39 & n. 20, device licensing is a prop-er subject for negotiation under IGRA, see25 U.S.C. § 2710(d)(3)(C)(vi). Since tribalexclusivity is already written into the Cali-fornia Constitution, the number of author-ized gaming devices is, at this point, thesingle most important issue subject tonegotiation in Tribal–State compacts inCalifornia.21

20. The Band operates its casino subject to acompact effectively identical to this 1999Model Compact. See http://www.cgcc.ca.gov/Tribal/ 1999lCompactlTribeslGamingand lNon–Gaming% 20list.pdf (last visited Apr. 6, 2010).

21. The majority relies on a DOI letter to theForest County Potawatomi Community ofWisconsin for the proposition that negotia-tions over the number of gaming devices can-not serve as adequate consideration for reve-nue sharing. Maj. Op. at 1039–40. Yet thisletter, and the views expressed therein, areirrelevant here. In the letter, the AssistantSecretary of Indian Affairs explains that ‘‘[w]ehave not, nor are we disposed to, authorizerevenue-sharing payments in exchange forcompact terms that are routinely negotiated bythe parties as part of the regulation of gamingactivities, such as duration, number of gamingdevices, hour of operation, and wager limits.’’

Maj. Op. at 1039 (emphasis added). Howev-er, in Wisconsin, unlike in California, thenumber of gaming devices a tribe may oper-ate has not been limited by compact, but hasbeen subject only to reporting requirementsand tribal self-regulation. See, e.g., Bad RiverBand of the Lake Superior Tribe of ChippewaIndians Gaming Compact § XV(C)(3), http://www.doa.state.wi.us/docview.asp?docid=2127 (last visited Apr. 6, 2010); Amendmentsto the Bad River Band of the Lake SuperiorTribe of Chippewa Indians Gaming Compact§ 7, http://www.doa.state.wi.us/ doc-view.asp?docid=2129 (last visited Apr. 6,2010). Since a Wisconsin tribe could alreadyincrease the number of devices it operatedwithout a compact amendment, the DOIopined that an offer to increase the number ofallowed devices was not a meaningful conces-sion by the State of Wisconsin. This is instark contrast to California, where the num-

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When the State offered to allow theBand to operate a greater number of ma-chines, it was not only offering a ‘‘real’’ or‘‘meaningful’’ concession, it was offering aconcession on the single most ‘‘meaningful’’subject over which it retained control.Under our decision in Coyote Valley II,this means that the State did not violate§ 2710(d)(4) in connection with the pro-posed compact. See 331 F.3d at 1112.Since ‘‘offered concessions by [the] State[we]re real, § 2710(d)(4) d[id] not categori-cally prohibit [the] fee demands’’ in thiscase. Id.

C

Next, I wish to address why, in light ofthese concessions, the disparity betweenthe revenue sharing demanded by theState and the profits to be realized by theBand is not as great as the majority por-trays it to be and why it is not, therefore,evidence of bad faith negotiations. Whenthe Band entered into its original compactin 1999, it was operating less than twohundred gaming devices. As a conse-quence, the Band was exempt from makingrevenue payments into the SDF. In fact,the Band does not now make (and neverhas made) any SDF payments under itscurrent compact.22 In stark contrast toevery tribe that has negotiated, or renego-tiated, a compact with California since1999, the Band shares no revenue with theState. But this will likely change in 2020.Without a doubt, the Band’s sweetheartdeal with respect to revenue sharing willnot last past its current compact: everycompact negotiated in California since1999 includes either SDF or general fund

revenue sharing.23 Thus, any compact ne-gotiation between the Band and theState—whether it be for an amended com-pact today or for a wholly new compact adecade from now—will inevitably include aState demand for revenue sharing of somesort; to do otherwise would put the Bandin a preferred position vis-a-vis the othertribes in California.

In Coyote Valley II, we approved of theSDF revenue sharing provisions in com-pacts negotiated by the Davis Administra-tion. We recognized that ‘‘the contribu-tions tribes must make to the SDF aresignificant,’’ but concluded that, in light ofthe State’s concession of exclusivity, it wasnot ‘‘inimical to the purpose or design ofIGRA for the State TTT to ask for a rea-sonable share of tribal gaming revenues.’’331 F.3d at 1114–15. Here, the majoritydeclares that the State’s revenue sharingproposals in the negotiations with theBand differ so vastly from the ‘‘reasonableshare of tribal revenues’’ paid under theSDF provision by the Coyote Valley IItribes that the State’s bad faith is conclu-sively established:

[T]he calculations presented by theState’s own expert reveal that the finan-cial benefit to Rincon from the amend-ments proposed would be negligible:Rincon stood to gain only about $2 mil-lion in additional revenues compared tothe State’s expected $38 million. Thus,in stark contrast to Coyote Valley II, therelative value of the demand versus theconcession here strongly suggests theState was improperly using its authorityover compact negotiations to impose,

ber of allowed gaming devices has alwaysbeen set by compact, and therefore is notnow, and never has been, ‘‘routinely negotiat-ed by the parties as part of the regulation ofgaming activities.’’

22. See List of SDF Paying Tribes, http://www.cgcc.ca.gov/Tribal/2008/ SDFlPayinglTribes-

lfor lWebsite2008.pdf (enumerating twenty-onetribes making SDF payments under their cur-rent compacts (last visited Apr. 6, 2010), ofwhich the Band is not one).

23. See generally Tribal–State Gaming Com-pacts, http://www.cgcc.ca.gov/compacts.asp(last visited Apr. 6, 2010).

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rather than negotiate for, a fee. UnderIGRA and Coyote Valley II, that is badfaith.

Maj. Op. at 1038 (citation omitted).The majority’s analysis on this point

could not diverge any more sharply fromthe reality of what we deemed to be a‘‘reasonable share of tribal gaming reve-nues’’ in Coyote Valley II. 331 F.3d at1115. Under the SDF formula—and usingthe same economic model used to calculatethe majority’s $38 million-$2 million split—the Band would be required to pay $35.8million to the state, and would keep ap-proximately $4 million in net revenues.24

There is simply no logical basis for simul-taneously deeming a formula leading to a$36 million-$4 million split in net revenues‘‘a reasonable share,’’ and a formula lead-ing to a $38 million-$2 million split in netrevenues so substantively and objectivelyunreasonable as to constitute ‘‘bad faith.’’I do not see how the majority’s analysiscan be reconciled with Coyote Valley II.

Furthermore, although the Band is notrequired to make SDF payments under itscurrent compact,25 once the Band’s currentcompact expires in 2020, the State willcertainly insist on revenue sharing at alevel at least equal to the SDF level re-quired of other tribes and already ap-proved by this court in Coyote Valley II.

Thus, come 2020, the Band will likely befaced with the following choice: negotiatea new compact with the State that willinclude at least SDF-level revenue sharing,or cease class III gaming. The State’soffer here, however, not only extends theBand’s compact until 2045, but allows theBand to make more money now and overthe next decade leading up to 2020. TheState has offered a ten-year revenuestream of $2 million annual payments towhich the Band would not otherwise beentitled; after ten years has passed, theBand will be able to conduct class IIIgaming under a revenue sharing agree-ment similar to that which the State wouldno doubt insist upon in negotiating a newcompact. In sheer monetary terms, theState is offering concessions with a netpresent value of approximately $19.5 mil-lion.26 If this is not ‘‘meaningful,’’ I’m notsure what is.

Nothing that I have said here is anendorsement of the State’s terms. I don’tknow whether the State’s offer is a ‘‘good’’one or not. The point is not whether theState’s offer is ‘‘good’’ or ‘‘bad.’’ We arenot the Band’s advisors or guardians adlitem. The Band has been well represent-ed in this proceeding, and I am sure it hasbeen well advised throughout these negoti-ations as well. All we have to decide is

24. These calculations are based on the State’sexpert testimony referred to in the majorityopinion. Using a net win of $369 per day permachine for 2,500 machines gives the follow-ing payments to the State:

(1) Under the State’s 10 percent/15 percentrevenue sharing proposal deemed to be ‘‘badfaith’’ by the majority:

(0.10 2005 Gross Revenues of $197 mil-lion) v (0.15 $369/day 365 days 900 ma-chines) = $37.9 million

(2) Under the SDF structure we deemed tobe ‘‘a reasonable share of tribal revenues’’ inCoyote Valley II:$369/day 365 days (0.07 300 machines v 0.10500 machines v 0.13 1500 machines) =$35.8 million

25. Tribes that did not operate 200 or moregaming devices as of September 1, 1999 werenot required to contribute to the SDF underthe 1999 Compact. The Band was not oper-ating 200 or more devices as of September 1,1999 and is therefore exempt from SDF pay-ments under its current compact.

26. This net present value calculation assumesthe federal funds discount rate remains at anear-record low 0.50. If the rate were to riseto a more normal level—averaging, say, 2.25over the next decade—the net present value ofthe bargained-for income stream would de-crease to $17.7 million, still a ‘‘meaningful’’sum.

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whether the State has negotiated in goodfaith, not whether it has made the Band agood offer. I would hold that these termshave been offered in good faith.

D

Finally, there is abundant real-world ev-idence that the State’s offers were notmade in bad faith: specifically, numeroustribes in California (none of whom arebarred by the Eleventh Amendment fromsuing California in federal court) haveagreed to compact terms effectively identi-cal to those offered by the State. Fifteentribes currently contribute gaming reve-nue to the State’s General Fund, see http://www.cgcc.ca.gov/ Tribal/2009/GFlPayinglTribeslfor lWebsite 03–04–09.pdf (last visitedApr. 6, 2010), all pursuant to compactsnegotiated or renegotiated since 2003,http://www.cgcc.ca.gov/compacts.asp (lastvisited Apr. 6, 2010). Notably, eleven ofthe tribes that currently contribute classIII gaming revenues to the State’s generalfund are 1999 Compact tribes (like theBand) who now contribute to the State’sgeneral fund pursuant to renegotiatedcompacts that allowed these tribes to oper-ate additional devices in exchange for gen-eral fund revenue sharing. Id.; see, e.g.,Shingle Springs Band of Miwok IndiansCompact § 4.3.1, http://www.cgcc.ca.gov/compacts/Shingle% 20Springs% 20 Com-pact.pdf (last visited Apr. 6, 2010) (amend-ing 1999 Compact to increase allowed de-vices to 5,000 and providing for generalfund revenue sharing of 20% for first $200million in net win and 25% for net winexceeding $200 million). And whateverquestions these compacts may have raisedfor the Secretary of the Interior, the Sec-retary ultimately accepted the negotiationsand declined to disapprove all of the com-pacts and their amendments.

In other words, the State has regularlyproposed, the tribes have regularly accept-ed, and the Secretary has regularly ap-proved contract terms similar to those pro-

posed by the State in this case. Althoughit is true, as the majority posits, that thefact that numerous tribes have agreed togeneral fund revenue sharing would notinsulate such revenue sharing fromIGRA’s substantive requirements, it defieslogic to hold, as does the majority, that acontract proposal readily agreed to by adozen other tribes was so outrageouslyone-sided that it could only have beenmade in ‘‘bad faith.’’ See Maj. Op. at1029–30, 1041–42; see also Wis. Elec. Pow-er Co., 557 F.3d at 510 (‘‘the duty of goodfaith does not require your putting one ofyour customers ahead of the others’’). Yetthis is what 25 U.S.C. § 2710(d)(7)(B)(iii)requires for court intervention. The pro-vision does not prohibit ‘‘hard bargaining’’within the negotiating range of the Tribal–State compact bilateral monopoly, but isinstead concerned solely with ‘‘bad faith’’based on an ‘‘inquiry [that] is nuanced andfact-specific, and is not amenable to bright-line rules,’’ Coyote Valley II, 331 F.3d at1113, and which takes into account ‘‘theprevious relationship of the tribe andState,’’ S. REP. NO. 100–446, at 14 (1988),reprinted in 1988 U.S.C.C.A.N. 3071, 3084.The negotiations at issue here, eventhough inconclusive, have been well withinthose parameters.

As we explained in Coyote Valley II:Congress did not intend to allow Statesto invoke their economic interests as ajustification for excluding Indian tribesfrom class III gaming; nor did Con-gress intend to permit States to use thecompact requirement as a justificationfor the protection of other State-licensedgaming enterprises from free marketcompetition with Indian tribes. By thesame token, however, Congress also didnot intend to require that States ignoretheir economic interests when engagedin compact negotiations. See [S. REP.

NO. 100–446, at 2, reprinted in 1988U.S.C.C.A.N. 3071, 3071] (‘‘An objective

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inherent in any government regulatoryscheme is to achieve a fair balancing ofcompetitive economic interests.’’). In-deed, § 2710(d)(7)(B)(iii)(I) expresslyprovides that we may take into accountthe ‘‘financial integrity’’ of the State and‘‘adverse economic impacts on theState’s existing gaming activities’’ whendeciding whether the State has acted inbad faith, and IGRA’s legislative historyexplains that a State’s governmental in-terests with respect to class III gamingon Indian lands include its economic in-terest in raising revenue for its citizens.

331 F.3d at 1115 (quotation marks, brack-ets, ellipses, and internal citation omitted).

VI

The majority’s legal errors carry grave-and widespread—practical repercussions.The majority’s decision will call into ques-tion Tribal–State gaming compacts notjust in cash-strapped California, where nofewer than fifteen Tribal–State compactsprovide for general fund revenue sharing,see http://www.cgcc.ca.gov/Tribal/2009/GF% 20Paying% 20Tribes% 20for% 20Website% 2003–04–09.pdf (last visited Apr. 6,2010), but throughout the country.27 TheSecond Circuit has never addressed a legalchallenge to the Connecticut compacts gov-erning the behemoth Foxwoods and Mohe-gan Sun Casinos, but the majority decision

here will inevitably spur such challenges inConnecticut and in New York. The Sixth,Tenth, and Eleventh Circuits have yet toconsider the validity of general revenuesharing under IGRA, but it can reasonablybe expected that district court clerks inMichigan, New Mexico, Oklahoma, andFlorida will be docketing legal challengessometime soon. These lawsuits—based ona misreading of IGRA by the majority inthe first federal appellate decision tosquarely address the legality of negotiatedgeneral fund revenue sharing—will eat upState, tribal, and federal resources and willunsettle dozens of mutually beneficial reve-nuesharing provisions that have fed bothtribal coffers and revenue-hungry statetreasuries.

I respectfully dissent.

,

27. The majority is correct to point out thatalthough California has waived its sovereignimmunity to suits under IGRA, not all stateshave done so. But the majority is prematureto conclude that tribes in those states couldnot challenge the legality of compact negotia-tions. See Maj. Op. at 1026 n. 8. After theSeminole Tribe decision, the Secretary pro-mulgated 25 C.F.R. Part 291, which ‘‘estab-lish[es] procedures that the Secretary will useto promulgate rules for the conduct of ClassIII Indian gaming when: (a) A State and anIndian tribe are unable to voluntarily agree toa compact and; (b) The State has asserted itsimmunity from suit brought by an Indiantribe under 25 U.S.C. § 2710(d)(7)(B).’’ 25

C.F.R. § 291.1. In 2007, a divided Fifth Cir-cuit panel held that IGRA did not authorize25 C.F.R. Part 291. See Texas v. UnitedStates, 497 F.3d 491 (5th Cir.2007), cert. de-nied, ––– U.S. ––––, 129 S.Ct. 32, 172 L.Ed.2d18 (2008). It appears that the Department ofthe Interior has refused to acquiesce in theFifth Circuit’s decision, see Alabama v. UnitedStates, 630 F.Supp.2d 1320, 1332 (S.D.Ala.2008), indicating that the invalidity of theregulations is hardly a settled issue outsidethe Fifth Circuit. Notably, no other circuitcourt—including the Second, Sixth, Tenth,and Eleventh Circuits (home to Connecticut,Michigan, New Mexico and Oklahoma, andFlorida, respectively)—has held the Part 291regulations to be invalid.