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Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 8, 2006 Decided October 20, 2006

No. 05-5402

COLORADO RIVER INDIAN TRIBES, A FEDERALLY RECOGNIZED

INDIAN TRIBE,

APPELLEE

v.

NATIONAL INDIAN GAMING COMMISSION, ET AL.,

APPELLANTS

Appeal from the United States District Court

for the District of Columbia

(No. 04cv00010)

Todd S. Aagaard, Attorney, U.S. Department of Justice,

argued the cause and filed the briefs for federal appellants.

Edward J. Passarelli, Attorney, U.S. Department of Justice,

entered an appearance.

Gwenellen P. Janov argued the cause for appellee. With her

on the brief were Samuel D. Gollis and Kim Hoyt Sperduto. 

Thomas M. Brownell and Scott D. Crowell were on the brief

for amici curiae National Indian Gaming Association, et al. in

support of appellee.

USCA Case #05-5402 Document #999028 Filed: 10/20/2006 Page 1 of 11
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Before: RANDOLPH and TATEL, Circuit Judges, and

EDWARDS, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge RANDOLPH.

RANDOLPH, Circuit Judge: This is an appeal from an order

of the district court, Bates, J., granting summary judgment in

favor of the Colorado River Indian Tribes and against the

National Indian Gaming Commission, the Commission’s

Chairman, and two of its members. Colo. River Indian Tribes

v. Nat’l Indian Gaming Comm’n, 383 F. Supp. 2d 123 (D.D.C.

2005). The issue is whether the Indian Gaming Regulatory Act,

25 U.S.C. §§ 2701-2721, gives the Commission authority to

promulgate regulations establishing mandatory operating

procedures for certain kinds of gambling in tribal casinos.

Congress enacted the Indian Gaming Regulatory Act in the

wake of the Supreme Court’s decision that state gaming laws

could not be enforced on Indian reservations within states

otherwise permitting gaming, California v. Cabazon Band of

Mission Indians, 480 U.S. 202 (1987). The Act established the

Commission as an agency within the Department of the Interior.

25 U.S.C. § 2704(a). The Commission has the authority to

investigate and audit certain types of Indian gaming, to enforce

the collection of civil fines, and to “promulgate such regulations

and guidelines as it deems appropriate to implement the

provisions” of the Act. Id. § 2706; see Cabazon Band of

Mission Indians v. Nat’l Indian Gaming Comm’n, 14 F.3d 633,

634 (D.C. Cir. 1994).

The Tribe operates the BlueWater Resort and Casino on

Indian lands in Parker, Arizona. The casino offers what the Act

defines as “class II” and “class III” gaming. Class II gaming

includes bingo; “non-banking” card games; and pull-tabs, lotto,

and other games similar to bingo, if played in the same location.

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25 U.S.C. § 2703(7)(A), (B). Class III gaming includes most

conventional forms of casino gaming such as slot machines,

roulette, and blackjack. Id. § 2703(8); 25 C.F.R. § 502.4. Class

I gaming consists of social gaming for minimal prizes and

traditional forms of Indian gaming in connection with tribal

ceremonies. 25 U.S.C. § 2703(6).

The Act treats each gaming class differently. “Class I

gaming on Indian lands is within the exclusive jurisdiction of the

Indian tribes,” and is not subject to the Act. Id. § 2710(a)(1).

As to class II gaming, the Commission and the tribes share

regulatory authority: the tribes must enact a gaming ordinance

applying the Act’s minimum regulatory requirements; and the

Commission’s Chairman must approve the tribal ordinance

before gaming may occur. Id. § 2710(a)(2), (b). The Act

regulates how tribes engaging in class II gaming may make

payments to tribal members, id. § 2710(b)(3), and it requires an

annual outside audit of the gaming and various contracts, id.

§ 2710(b)(2)(C), (D). 

Like class II gaming, class III gaming is lawful only if it

takes place on Indian land “in a State that permits such gaming

for any purpose by any person, organization, or entity . . ..” Id.

§ 2710(d)(1)(B). But unlike class II gaming, a tribe conducts

class III gaming pursuant to a compact with the state. Id.

§ 2710(d)(1)(C). The Secretary of the Interior must approve any

such compact before it may become effective. Id.

§ 2710(d)(3)(B). Thereafter, the “Tribal-State compact

govern[s] the conduct of gaming activities,” id. § 2710(d)(3)(A),

and the tribe’s class III gaming operations must be “conducted

in conformance” with the compact, id. § 2710(d)(1)(C). Tribalstate compacts may contain provisions related to “standards for

the operation of such activity” and “any other subjects that are

directly related to the operation of gaming activities.” Id.

§ 2710(d)(3)(C)(vi), (vii). The Commission must approve any

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tribal ordinances for regulating and conducting class III gaming

and any contracts the tribe enters into for the management of its

class III gaming. Id. § 2710(d)(1)(A)(iii), (d)(9). 

The Colorado River Indian Tribes regulates gaming at its

BlueWater casino pursuant to a tribal ordinance and rules

contained in a tribal-state class III gaming compact with the

State of Arizona. See Gaming Ordinance of the Colo. River

Indian Tribes, Ord. No. 94-1 (Aug. 31, 1994); Colo. River

Indian Tribes and State of Ariz. Gaming Compact (Jan. 31,

2003) (Gaming Compact). Both the ordinance and the compact

contain their own internal control standards. The most recent

version of the compact requires the Tribe’s gaming agency to

create standards governing operating procedures that are at least

as stringent as those contained in the rules the Commission

promulgated in 1999. Gaming Compact § 3(b)(3)(B). The State

of Arizona monitors the Tribe’s compliance with the standards,

for which the Tribe reimburses the state about $250,000 per

year. The Tribe’s gaming agency employs twenty-nine

employees and has an annual budget of $1.2 million.

In 1999 the Commission promulgated regulations, which it

termed “Minimum Internal Control Standards,” governing class

II and class III gaming. See 64 Fed. Reg. 590 (Jan. 5, 1999)

(codified as amended at 25 C.F.R. pt. 542). The regulations take

up more than eighty pages in the Code of Federal Regulations.

No operational detail is overlooked. The rules establish

standards for individual games, see, e.g., 25 C.F.R. § 542.7, .8,

.10, customer credit, id. § 542.15, information technology, id.

§ 542.16, complimentary services, id. § 542.17, and many other

aspects of gaming. To illustrate, tribes must establish “a

reasonable time period” not to exceed seven days for removing

playing cards from play, but “if a gaming operation uses plastic

cards (not plastic-coated cards), the cards may be used for up to

three (3) months if the plastic cards are routinely inspected, and

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washed or cleaned in a manner and time frame approved by the

Tribal gaming regulatory authority.” Id. § 542.9(d), (e). To take

another example the district court mentioned, coin drops are

regulated differently according to the size of the gaming facility.

See id. § 542.21, .31, .41. There are rules prescribing the

number and type of employees who must be involved in the

removal of the coin drop, id. § 542.21(g)(1), the timing of the

removal of the coin drop, id. § 542.21(g)(2), the tagging and

transportation of the coin drop, id. § 542.21(g)(4), the manner in

which the coin drop must be housed while in the machine, id.

§ 542.21(g)(5), and the purposes for which a coin drop may be

used, id. § 542.21(g)(6). 

In January 2001, the Commission sought to audit the

Tribe’s class III gaming at the BlueWater casino in order to

determine whether the Tribe was complying with the

regulations. The Tribe protested on the ground that the rules

exceeded the Commission’s authority under the Act. The

auditors departed and the Commission issued a notice of

violation. After administrative hearings, the Commission fined

the Tribe $2,000 for terminating the audit. Colo. River, 383 F.

Supp. 2d at 130. The Commission denied the Tribe’s objection,

citing its authority to “promulgate such regulations and

guidelines as it deems appropriate to implement the provisions”

of the Act, 25 U.S.C. § 2706(b)(10), among which is the

provision stating that one of the Act’s purposes is to protect the

integrity of gaming revenue, id. § 2702. In re Colo. River

Indian Tribes, NOV/CFA 01-01, 5-6 (Nat’l Indian Gaming

Comm’n May 30, 2002) (NIGC Final Order). The Commission

located its power to audit the casino in § 2706(b)(4), which

authorizes the Commission to “audit all papers, books, and

records respecting gross revenues of class II gaming conducted

on Indian lands and any other matters necessary to carry out the

duties of the Commission under this chapter . . ..” See NIGC

Final Order at 7. The Tribe brought an action in federal district

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court challenging the decision and the Commission’s statutory

authority to regulate class III gaming. The district court reached

the “inescapable conclusion” that Congress did not intend to

give such broad authority to the Commission, and therefore

vacated the Commission’s decision and declared the regulations

unlawful as applied to class III gaming. Colo. River, 383 F.

Supp. 2d at 132.

There was a time when the Commission agreed with the

district court’s view of the Act. The first Chairman of the

Commission notified the Inspector General of the Department

of the Interior in 1993 that “the regulation of class III gaming

was not assigned to the Commission but was left to the tribes

and the states . . ..” Memorandum from Anthony J. Hope,

Chairman, Nat’l Indian Gaming Comm’n to the Assistant

Inspector General for Audits, Dep’t of the Interior 2 (Oct. 18,

1993). He explained that this was why the Commission had not

imposed “gaming control standards” on class III gaming: “the

Act assigns those responsibilities to the tribes and/or the states.”

Id. The Commission’s Chairman took the same position when

he testified before Congress the following year. See Manner in

which Gaming Activities Are Regulated by the Several States

and the Role of the Federal Government in the Regulation of

Indian Gaming Activities: Hearing Before the S. Comm. on

Indian Affairs, 103d Cong. 7-8 (1994) (testimony of Chairman

Hope, Nat’l Indian Gaming Comm’n). Despite many legislative

efforts since then, all of which are cited in Judge Bates’s careful

opinion, 383 F. Supp. 2d at 142 n.13, Congress has never

amended the Act to confer any such express power on the

Commission. 

Even now the Commission concedes that no provision of

the Act explicitly grants it the power to impose operational

standards on class III gaming. Section 2706 grants the

Commission authority over several aspects of class II regulation.

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Thus, the Commission “shall monitor class II gaming,” and

“inspect and examine all premises located on Indian lands on

which class II gaming is conducted . . ..” 25 U.S.C.

§ 2706(b)(1), (2). It “may demand access to and inspect,

examine, photocopy, and audit all papers, books, and records

respecting gross revenues of class II gaming conducted on

Indian lands and any other matters necessary to carry out the

duties of the Commission under this chapter . . ..” Id.

§ 2706(b)(4). While the statute grants the Commission audit

authority over “any other matters necessary to carry out [its]

duties,” the statute does not indicate that these duties extend to

class III regulation. Instead, the main provision dealing with the

regulation of class III gaming – § 2710(d) – contemplates joint

tribal-state regulation. The Act describes tribal-state compacts

as agreements “governing the conduct of [class III] gaming

activities.” Id. § 2710(d)(3)(A). A compact may contain

provisions relating to “the application of the criminal and civil

laws and regulations of the Indian tribe or the State that are

directly related to, and necessary for, the licensing and

regulation of” class III gaming, id. § 2710(d)(3)(C)(i),

“standards for the operation of such activity,” id.

§ 2710(d)(3)(C)(vi), and “any other subjects that are directly

related to the operation of [class III] gaming activities,” id.

§ 2710(d)(3)(C)(vii). That the Act sets up concurrent tribal-state

regulation of class III gaming, not tribal-state-Commission

regulation, is evident from § 2710(d)(5): “Nothing in this

subsection shall impair the right of an Indian tribe to regulate

class III gaming on its Indian lands concurrently with the State,

except to the extent that such regulation is inconsistent with, or

less stringent than” – not Commission regulations, but – “the

State laws and regulations made applicable by any Tribal-State

compact entered into by the Indian tribe under paragraph (3) that

is in effect.” Contrast this provision with § 542.4(c) of the

regulations, which states that if a standard in the Commission’s

regulations is more stringent than a standard in a tribal-state

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compact, the Commission’s regulation “shall prevail.” 25

C.F.R. § 542.4(c). There are other indications that Congress

intended to leave the regulation of class III gaming to the tribes

and the states, including the fact that the Secretary of the Interior

– rather than the Commission – approves (or disapproves) tribalstate compacts regulating class III gaming. 25 U.S.C.

§ 2710(d)(3)(B). The significance of this provision and others

is thoroughly discussed in Judge Bates’s opinion in the district

court, 383 F. Supp. 2d at 135-38, and need not be repeated here.

As against this, the Commission offers three main

arguments. One is that the Commission has “oversight”

authority over class III gaming, that the dictionary defines

“oversight” to mean “supervision,” and that the Commission’s

regulation of class III gaming falls within that definition. The

trouble is that the Act does not use the word “oversight.” The

Commission relies not on statutory language, but on a sentence

from the Senate committee report on the Act: “The Commission

will have a regulatory role for class II gaming and an oversight

role with respect to class III gaming.” S. REP. NO. 100-446, at

1 (1988), reprinted in 1988 U.S.C.C.A.N. 3071, 3071. But just

two sentences before the “oversight” passage, the report states

that the Senate bill “provides for a system for joint regulation by

tribes and the Federal Government of class II gaming on Indian

lands and a system for compacts between tribes and States for

regulation of class III gaming.” Id. One might wonder why the

Committee would rely on tribal-state compacts to regulate class

III gaming. The report gives this explanation: “the Committee

notes that there is no adequate Federal regulatory system in

place for class III gaming, nor do tribes have such systems for

the regulation of class III gaming currently in place. Thus a

logical choice is to make use of existing State regulatory

systems, although the adoption of State law is not tantamount to

an accession to State jurisdiction. The use of State regulatory

systems can be accomplished through negotiated compacts but

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this is not to say that tribal governments can have no role to play

in regulation of class III gaming – many can and will.” Id. at 13.

In addition to the point that a committee report is not law, it is

perfectly clear that whatever the Senate committee thought

“oversight” might entail, the committee did not foresee the

Commission regulating class III gaming. 

The Commission’s other arguments proceed from the text

of the Act. The Commission is funded by a percentage of each

tribe’s gross gaming revenues from class II and class III gaming.

25 U.S.C. § 2717(a). To this end, tribes must submit annual

“outside audits” to the Commission of their class II and class III

gaming operations. Id. § 2710(b)(2)(C), (d)(1)(A)(ii). From this

the Commission infers that it has the authority to regulate the

handling and accounting of gaming receipts in order to ensure

the integrity of audits. We cannot see how the right to receive

an outside audit, presumably conducted in accordance with

Generally Accepted Auditing Standards, translates into a power

to control gaming operations. Under the Securities Exchange

Act of 1934, public companies must file reports necessary to the

protection of investors. See 15 U.S.C. § 78m(a). If the public

company happened to be in the casino business, such as

Harrah’s Entertainment, Inc., the Commission’s logic here

would entitle the SEC to dictate the details of how Harrah’s

conducts its casino operations because the SEC receives reports

from the company. The SEC obviously has no such authority,

and neither does the Commission.

This brings us to the Commission’s third argument –

namely, that its regulations are valid in light of its authority to

“promulgate such regulations and guidelines as it deems proper

to implement the provisions of [the Act].” 25 U.S.C.

§ 2706(b)(10). Mourning v. Family Publications Service, Inc.,

411 U.S. 356 (1973), the Commission tells us, states a canon of

statutory interpretation for general rulemaking provisions such

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as this – regulations promulgated pursuant to such statutes are

valid so long as they are “reasonably related to the purposes of

the enabling legislation.” Id. at 369 (quoting Thorpe v. Housing

Auth. of Durham, 393 U.S. 268, 280-81 (1969)). Judge Bates

rejected this argument and so do we. An agency’s general

rulemaking authority does not mean that the specific rule the

agency promulgates is a valid exercise of that authority. See

Goldstein v. SEC, 451 F.3d 873, 878 (D.C. Cir. 2006). So here.

See Ragsdale v. Wolverine World Wide, Inc., 535 U.S. 81, 92

(2002) (“Our previous decisions, Mourning included, do not

authorize agencies to contravene Congress’ will in this

manner.”).

In arguing that the regulations implement the provisions of

the Act, the Commission points to § 2702, the Act’s general

declaration of policy, which it says embodies the congressional

purpose to promote integrity in Indian gaming, a purpose the

Commission’s regulations further. But this cannot carry the

Commission as far as it needs to go. We have observed before

that “[a]ll questions of government are ultimately questions of

ends and means.” Nat’l Fed’n of Fed. Employees v. Greenberg,

983 F.2d 286, 290 (D.C. Cir. 1993); see Bd. of Governors of the

Fed. Reserve Sys. v. Dimension Fin. Corp. 474 U.S. 361, 373-74

(1986). Agencies are therefore “bound, not only by the ultimate

purposes Congress has selected, but by the means it has deemed

appropriate, and prescribed, for the pursuit of those purposes.”

MCI Telecomms. Corp. v. AT&T, 512 U.S. 218, 231 n.4 (1994).

The Commission is correct that Congress wanted to ensure the

integrity of Indian gaming, but it is equally clear that Congress

wanted to do this in a particular way. The declared policy is

therefore not simply to shield Indian tribes “from organized

crime and other corrupting influences” and “to assure that

gaming is conducted fairly and honestly by both the operator

and players,” 25 U.S.C. § 2702(2), but to accomplish this

through the “statutory basis for the regulation of gaming”

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provided in the Act, id. This leads us back to the opening

question – what is the statutory basis empowering the

Commission to regulate class III gaming operations? Finding

none, we affirm.

So ordered.

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