Proposed Legislation to Establish the

National Indian Gaming Commission

A bill that proposes to create an “independent commission” within the Department of the Interior 

to regulate gambling on Indian reservations and that would give the commission the power, 

inter alia, to impose civil fines, gives rise to several constitutional issues. The extent to which 

Congress may restrict the removal of subordinate executive officers such as the members of 

the Indian Gaming Commission is unclear, but such restrictions should be avoided. Furthermore, consistent with the Appointments Clause, the authority to waive a federal statute should 

be subject to the approval of a principal officer, such as the Secretary of the Interior.

Under the Due Process Clause, civil penalties imposed by members of the Indian Gaming 

Commission should be imposed by an unbiased administrative judge rather than an interested 

official.

Under the Fourth Amendment, the Indian Gaming Commission may conduct warrantless searches 

of gambling establishments, which are part of a closely regulated industry, only if: (1) there is 

a substantial government interest; (2) the searches are necessary to further the regulatory 

scheme; and (3) the statute provides a constitutionally adequate substitute for a warrant. The 

first and second requirements are met in this case. The third requirement may be met by 

providing notice in the statute that inspections will be made on a regular basis and will have a 

particular scope.

July 24, 1987

M e m o r a n d u m O p in io n f o r t h e A s s i s t a n t A t t o r n e y G e n e r a l ,

L a n d a n d N a t u r a l R e s o u r c e s D i v is io n

This responds to your request for our views on S. 1303, a bill that would 

establish a National Indian Gaming Commission (Commission) within the 

Department of the Interior to regulate gambling on Indian reservations. We 

have several comments.

First, the Commission is established as “an independent commission” within 

the Department of the Interior. S. 1303, § 5(a). As a part of the Department of 

the Interior, the Commission is subordinate to the Secretary of the Interior and 

cannot be independent of that authority. Section 5(b)(5) states that the four 

members appointed by the Secretary may only be removed for cause. The 

extent of Congress’ power to place limitations on the removal of subordinate 

executive officers is unclear,1 and in this context, should be avoided. The 

Secretary is responsible for the actions of the Commission’s members, a 

majority of whom he appoints, and will be charged with defending them if they 

are sued or act in a controversial fashion. Limiting his removal power will

1 Cf. United States v. Perkins, 116 U.S. 483 (1886).

73
handicap his supervisory authority. This is especially important given that the 

Commission is acting in an area that will undoubtedly attract criminals and 

subject the Commissioners to a variety of pressures. If enacted as is, we would 

read the “for cause” provision broadly, in order to give the Secretary maximum 

flexibility. To provide the Secretary with adequate authority to supervise the 

Commission’s members, however, we urge that he be given the clear right to 

remove the members at will.

Second, § 4, which prohibits gaming on certain Indian lands, does not apply 

“if the Indian tribe . . . obtains the concurrence of the Governor of the State, 

and the governing bodies of the county or municipality in which such lands are 

located” to the tribe’s obtaining the land. Id., § 4(b). This provision would give 

individuals not appointed in accordance with the Appointments Clause, U.S. 

Const, art. II, § 2, cl. 2, the authority to waive a federal statute. In order to avoid 

the constitutional problems inherent in such a situation, § 4(b) should be 

revised to begin: “Subject to the approval of the Secretary.” This would insure 

that implementation of the statute remained in the hands of a properly appointed Executive Branch officer.

Third, we are concerned by § 15(a)(1), which permits the Chairman of the 

Commission to levy civil fines of up to $25,000 against the managers of the 

gambling establishments.2 “Fines collected pursuant to this section shall be 

utilized by the Commission to defray its operating expenses.” Id? The use of 

civil penalties to supplement the Commission’s appropriation raises due process concerns. The Due Process Clause requires that such fines be assessed by 

a neutral tribunal. Ward v. Monroeville, 409 U.S. 57, 62 (1972). Although it is 

true that Commission members will not benefit personally from any civil fines 

imposed,4 the provision raises questions about how impartial the Chairman will 

be in levying fines when he knows the proceeds will be applied directly to the 

“operating expenses” of the Commission.

The Supreme Court addressed this issue most recently in Marshall v. Jerrico,

Inc., 446 U.S. 238 (1980).5 In upholding the assessment provision at issue in 

Marshall, the Court highlighted several factors. First, the Court noted that the 

regional administrator levying the fine did not have the role of a judge, as in 

Ward and Tumey, but was akin to a prosecutor. Prosecutors, the Court said, 

need not be entirely neutral and detached, as judges must be. Marshall, 446 U.S. at 

248. The regional administrator had the role of a prosecutor because the employer 

was “entitled to a de novo hearing before an administrative law judge,” where the 

administrator would have to prove his case. Id. at 247. Thus, the first level of 

adjudication (rather than accusation) was before an unbiased judge.

2 The m anager may have the Commission hear the evidence against him before the Fine is collected by the 

Chairm an. S. 1303, § 15(a)(2).

3 O perating expenses are not defined.

4 See Tumey v. Ohio, 273 U.S. 510, 523 (1927).

5 Marshall involved the power of a D epartm ent o f Labor regional administrator to assess a civil penalty of 

up to $1000 against em ployers who violated the child labor laws. The penalties collected in each region were 

returned to the national office, which allocated them for various parts o f the program, including the regional 

offices. The statute was challenged on the ground that regional administrators would assess extra fines in the 

hope that some of the money would be returned to their regions.

74
By contrast, under S. 1303 the Chairman (and the Commission) are not 

analogous to prosecutors: they do not have to prove their case before an 

independent administrative law judge. The Chairman’s decision to levy a fine 

is reviewed not by an independent administrative law judge but by the Commission, which is as interested in the matter as the Chairman. Thus, the 

Chairman and the Commission constitute the initial level of adjudication for 

the owners. The next level of adjudication is in the court of appeals. S. 1303, 

§ 16. The Marshall opinion seems to indicate that if a financially interested 

administrator acts as a judge, the “rigid requirements of Tumey and Ward,

designed for officials performing judicial or quasi-judicial functions” apply. 

Marshall, 446 U.S. at 248.

Moreover, the Court in Marshall emphasized that the penalties collected by 

the regional administrators constituted “substantially less than 1%” of the 

agency’s budget. Id. at 245. In fact, the agency returned money each year to the 

Department of the Treasury because it was not even using up its appropriation, 

so that the collection of penalties did not “resulft] in any increase in the funds 

available to the [agency] over the amount appropriated by Congress.” Id. at 

246. In light of these figures, the Court did not believe that there was “a 

realistic possibility that the [administrator’s] judgment will be distorted by the 

prospect of institutional gain as a result of zealous enforcement efforts.” Id. at 

251. The Commission’s initial appropriation is $2,000,000. S. 1303, § 20. We 

cannot say at this point how much money the Commission will collect in 

penalties, but there is certainly a significant possibility that the Commission 

may generate more than 1 percent of its operating expenses from assessing 

penalties of up to $25,000 per offense.

As the Supreme Court has said, one of the most important functions served 

by having an impartial and disinterested judge is the preservation of a fair 

adjudicative process: “Indeed, ‘justice must satisfy the appearance of justice.’” 

Marshall, 446 U.S. at 243 (citation omitted). While we cannot state definitively 

whether the penalty provision in S. 1303 would survive court scrutiny, we do 

believe it would provide a serious ground for attack. We would therefore 

recommend that this provision be eliminated. If it is not, we recommend that 

the amount of money collected be used as a credit against the Commission’s 

appropriation, rather than as a supplement to it, or that some cap be placed on 

the amount that the Commission may retain.

Our next concern with the bill is that it would permit the Commission to 

inspect the premises and records of any establishment where gambling is 

conducted. S. 1303, § 7(b)(2), (4). As we noted last year when commenting on 

an earlier version of this bill,6 the Supreme Court has recognized the applicability of the Fourth Amendment to commercial enterprises, but has created certain 

exceptions: first, for closely regulated industries in which owners have reduced 

expectations of privacy; and second, for laws providing such a regular and 

certain pattern of inspections that there is a predictable and guided federal

6 M emorandum for Stephen S Trott, Assistant Attorney General, Criminal Division from Charles J. 

Cooper, Assistant Attorney General, Office of Legal Counsel (Apr 1, 1986).

75
regulatory presence.7 The Supreme Court has held that closely regulated industries include the liquor trade, firearms, mining, and, in its most recent decision 

in this area, automobile junkyards. New York v. Burger, 482 U.S. 691 (1987). 

We think it is fair to assume that gambling would be considered a closely 

regulated industry in the United States.

In Burger, the Supreme Court held that warrantless inspections of closely 

regulated industries are permissible if three criteria are met. First, there must be 

a substantial federal interest at stake. Id. at 702. Regulation of gambling on 

Indian reservations in order to prevent the infiltration of organized crime is 

certainly an important federal interest. Second, warrantless inspections must be 

necessary to further the regulatory scheme. Id. As with the scheme upheld in 

Burger, effective inspections of gambling establishments require surprise. 

Otherwise, the owners would have ample time to hide or destroy ledgers or 

other evidence of malfeasance. Third, the statute must provide “a ‘constitutionally adequate substitute for a warrant.’” Id. at 703 (quoting Donovan v. Dewey,

452 U.S. 594, 603 (1981)). In Burger, this condition was met because:

[t]he statute informs the operator of a vehicle dismantling business that inspections will be made on a regular basis. Thus [he] 

knows that the inspections . . . do not constitute discretionary 

acts by a government official but are conducted pursuant to 

statute. [The statute] also sets forth the scope of the inspection 

and, accordingly, places the operator on notice as to how to 

comply with the statute.

Id. at 711 (citations omitted). The only restraint on the scope of the inspection 

identified by the Court was limiting the inspections to regular business hours. Id.

S. 1303 puts the operators of gambling establishments on notice that they 

will be inspected and lists the items that are subject to inspection, thus placing 

operators on notice as to the scope of what can be examined. Accordingly, our 

only suggestion is that the bill be amended to state that inspections will take 

place during regular business hours.8

D o u g l a s W . K m i e c

Deputy Assistant Attorney General

Office o f Legal Counsel

1 See Donovan v. Dewey, 452 U.S. 594, 598 (1981); Marshall v. Barlow's Inc., 436 U.S. 307, 311 (1978); 

United States v. Biswell, 406 U.S. 311,313 (1972); Colonnade Catering Corp. v. United States, 397 U.S. 72, 

75 (1970); See v. City o f Seattle, 387 U.S. 541, 542 (1967).

* Earlier cases such as Donovan also required inspections on more than an annual basis: Donovan upheld a 

statutory schem e in part because it provided for irregular inspections at least twice a year. 452 U.S. at 604. 

Burger does not appear to insist on this factor, but such a provision would provide further protection against 

constitutional attack.

76