NIGC Chairman’s Decision,

page 15

March 25, 2009

the United States nor any of its agencies are “persons” subject to liability under 42 U.S.C.
1983. See, e.g. Hoffman v. United States Dep’t of Housing and Urban Development, 519 F2d.
1160, 1165 (5" Cir. 1976); Accardi v. United States, 435 F. 2d 1239, 1241 (3 Cir 1970); La
Roughe v. City of New York, 369 F. Supp. 565, 567 (S.D.N.Y.1974).

CONCLUSION

After a review of the law and the provisions of both the 1996 GMA and the 1997 ELA,
I find that these individual agreements are now, and have been since their execution,

- management contracts. These contracts are disapproved because they are not in compliance
with the requirements of IGRA and NIGC regulations and because it would not be consistent
with my fiduciary responsibilities to the Band to approve the contracts. See 25 U.S.C. § 2710
(b)(2)(A); 25 CER. § 522.4(b)(1); 25 U.S.C. § 2711(¢)(4) and 25 CFR. § 533.6(b)(4). The
contracts are therefore void. 25 C.F.R. § 533.7.

The parties have the right to appeal this determination to the full Commission.
Pursuant to 25 C.F.R. § 539.2, an appeal must be filed within 30 days after the Chairman
serves his determination. Failure to file an appeal within the time provided shall result in a
waiver of the opportunity to appeal.

cc: Mary Kay Lacey, Esq.
Sonnenschein, Nath and Rosenthal LLP
525 Market St., 26" Fl
San Francisco, CA 04105-2708

15


NIGC Chairman’s Decision,
page 5
March 25, 2009

DISCUSSION

This case presents an unusual situation. Typically, when an agreement is submitted for
review and approval, there is no dispute as to whether it is a management contract, and it is
submitted at or near the time of execution. In the ordinary course, the parties submit
agreements as management contracts, and the process of approval is focused on a review of
the content and submission requirements, i-e., whether the contract contain the provisions
required by 25 C.F.R. § 531.1, whether the parties submitted all documents necessary pursuant
to 25 C.F.R. § 533.3, and whether any provisions violate IGRA. In the normal course of
management contract submissions, if the contract requires revision, or the submission
requirements have not been met, the NIGC sends the patties a list of deficiencies and then .
works together with the parties to achieve a complete submission. Here, however, the two
contracts were not submitted as management contracts but for a legal opinion, and, what is
more, seeking revisions would be futile. There has been no performance under the contracts
by either party for quite some time, and the Band has stated it will not agree to any
modifications of them. See Letter from Nicholas Fonseca, Chairman, Shingle Springs Band of
Miwok Indians, to Philip N. Hogen, Chairman, NIGC (January 24, 2008).

However, because I must in the course of reviewing and approving contracts
necessarily draw a conclusion as to whether an agreement is, as it is presently drafted, a
management contract, there is no reason why I cannot issue a conclusive determination on that
issue now. In fact, it is in the parties’ interest that I to do so as an unapproved contract is void.
25 CFR. § 533.7; Casino Magic, 293 F.3d at 421.

THE 1996 GMA AGREEMENT

The Band originally submitted the 1996 GMA to the OGC for review. On November
5, 1996, the OGC opined that that the agreement was illegal and, therefore, void under the
provisions of IGRA, 25 U.S.C. § 2710(d)(1), and the Johnson Act, 15 U.S.C. § 1175. The
opinion states:

Pursuant to the agreement, Sharp Image will lease to the Tribe [Band] 400
gambling machines valued at $3,000,000 for a term of 60 months beginning on
the date of the opening of the Tribe’s casino. As compensation for the leasing
of the gambling machines, Sharp Image will receive 30% of net revenues
derived from the machines. While the agreement does not describe the
machines, it is clear from conversations between Tribal officials and NIGC
staff that the Tribe intends to offer class II gambling devices...Class III
gaming may not be lawfully conducted by an Indian Tribe on Indian lands
without a compact entered into by an Indian tribe and the state that has been
approved by the Secretary of the Interior...

Though I am mindful of OGC’s 1996 opinion, the Band entered into a Class III gaming
compact with California in 2007, and it is the 2007 OGC Opinion that the Band asks me to
review here.


NIGC Chairman’s Decision,
page 11
March 25, 2009

1, A minimum guaranteed monthly payment to the Band in a sum certain that has
preference over the retirement of development and construction costs. 25 CER.
§531.1(f).

2. Anagreed-upon maximum dollar amount for the recoupment of development and
construction costs. 25 C.F.R. § 531.1(g).

3. A dispute resolution mechanism for disputes between the Management contractor
and customers. 25 C.F.R. § 531.1(k)(1).

4. A dispute resolution mechanism for disputes between the management contractor
and the gaming operation employees. 25 C.F.R. § 531.1(k)(3). And

5. A statement that the effective date of the contract is conditioned upon approval by
the NIGC Chairman. 25 C.F.R. § 531.1(n).

In addition to the above substantive deficiencies, I find that the parties have failed to
submit the following documents required for each contract by 25 CER. § 533.3:

1. A letter, signed by the tribal chairman, setting out the authority for an authorized
tribal official to act for the Band concerning the management contract. 25 CFR
§ 533.3(b).

2. Copies of documents evidencing the authority under the preceding requirement
(ie., a copy of the tribal constitution and resolution or other appropriate
documents). 25 CFR § 533.3).

3. For anew contract and a new operation, a three-year business plan that sets forth
the parties’ goals, objectives, budgets, financial plans, and related matters. 25 CFR
§ 533.3(e).

4. A list of all persons and entities with a financial interest in, or having management
responsibilities for, the management contract under 25 CFR §§ 537.1(a), (c)(1). 25
CFR § 533.3(d).

5. Applications for each person with management responsibility for, or a financial
interest in, the management contract under 25 CFR § 537.1. CFR § 533.3(d) (1).

6. Applications for each entity with management responsibility for, or a financial
interest in, the management contract under 25 CFR § 537.1. 25 CFR § 533.3(d) (1).

7. A bond, letter of credit, or deposit to cover the cost of the background investigation
for the management contractor when the contract includes management of Class II
gaming. 25 CFR § 537.3.


NIGC Chairman’s Decision,
page 8
March 25, 2009

The authority of the NIGC to review and approve gaming-related contracts is limited
by IGRA to management contracts and collateral agreements to management contracts to the
extent that they implicate management. Catskill Development LLC v. Park Place
Entertainment Corp., No. 06-5860, 2008 U.S. App. Lexis 21839 at *38 (2 Cir. October 21,
2008) (“‘a collateral agreement is subject to agency approval under 25 C.F.R. § 533.7 only ifit
‘provides for management of all or part of a gaming operation.””); Machal Inc. v. Jena Band
of Choctaw Indians, 387 F. Supp. 2d 659, 666 (W.D. La. 2005) (“collateral agreements are
subject to approval by the NIGC, but only if that agreement ‘relate[s] to the gaming
activity’”). Accord, Jena Band of Choctaw Indians v. Tri-Millenium Corp., 387 F. Supp. 2d
671, 678 (W.D. La. 2005); United States ex rel. St. Regis Mohawk Tribe v. President R.C.-St.
Regis Management Co., No. 7:02-CV-845, 2005 U.S. Dist. LEXIS 12456, at *3-*4, *9-*10
(N.D.N.Y. June 13, 2005), aff'd on other grounds, 451 F.3d 44 (2nd Cir. 2006).

The NIGC has defined the term management contract as “any contract, subcontract, or
collateral agreement between an Indian tribe and a contractor or between a contractor and a
subcontractor if such contract or agreement provides for the management of all or part ofa
gaming operation.” 25 C.F.R. § 502.15. Collateral agreement is defined as “any contract,
whether or not in writing, that is related either directly or indirectly, to a management contract,
or to any rights, duties or obligations created between a tribe (or any of its members, entities,
organizations) and a management contractor or subcontractor (or any person or entity related
to a management contractor or subcontractor).” 25 C.F.R. § 502.5.

Though NIGC regulations do not define management, the term has its ordinary
meaning. Management encompasses activities such as planning, organizing, directing,
coordinating, and controlling. NIGC Bulletin No. 94-5: “Approved Management Contracts v.
Consulting Agreements (Unapproved Management Contracts are Void).” Accordingly, the
definition of primary management official is “any person who has the authority to set up
working policy for the gaming operation.” 25 C.F.R.§ 502.19(b)(2). Further, management
employees are “those who formulate and effectuate management policies by expressing and
making operative the decision of their employer.” N.L:R.B. v. Bell Aerospace Co., 416 US.
267, 288 (1974). Whether particular employees are “managerial” is not controlied by an
employee’s job title. Waldo v. M.S.P.B., 19 F. 3d 1395 (Fed. Cir. 1994), Rather, the question
must be answered in terms of the employee’s actual job responsibilities, authority and
relationship to management. Jd. at 1399. In essence, an employee can qualify as management
if the employee actually has authority to take discretionary actions — a de jure manager — or
recommends discretionary actions that are implemented by others possessing actual authority
to control employer policy —a de facto manager. Id. at 1399 citing N.L.R.B. v. Yeshiva, 444
US. 672, 683 (1980).

Ifa contract requires the performance of any management activity with respect to all or
part of a gaming operation, the contract is a management contract within the meaning of 25
U.S.C. § 2711 and requires the NIGC Chairman’s approval. Management contracts not
approved by the Chairman are void. 25 C.F.R. § 533.7.


NIGC Chairman’s Decision,

page 6

March 25, 2009
TERMS OF THE AGREEMENTS

A.

1996 GMA Provisions

The provisions of 1996 GMA discussed below establish that both it and its successor
agreement, the 1997 ELA, contain many of the same or similar provisions. The 1996 GMA.
provisions important to the analysis here are:

iW

Sharp initially has the right to provide an initial 400 gaming machines in the
gaming facility. The machines will remain the property of Sharp.1996 GMA
§ 1, § 4. A similar provision is in the 1997 ELA at § 1.

. Sharp has the exclusive right to supply machines to this facility or any other

gaming establishment of the Band. Jd. The same or similar provision is in the
1997 ELA at § 2.

. Sharp receives 30% of net revenues, defined as all gross revenues received by

the Band in connection with its operation of all machines or table games on the
casino premises or reservation, minus all jackpots or payouts made through
such equipment. Id. § 2. The same or similar provision is in the 1997 ELA at

§ 3(a).

- Sharp has this exclusive right to provide machines for five years. Id. § 3. The

same or similar provision is in the 1997 ELA at § 2.

. The Band may purchase the machines at the end of five years; however, if it

does not to exercise this option, then the agreement is automatically extended
for another two years. Jd. § 4. The same or similar provision is in the 1997 ELA
at § 19.

. The Band is responsible for all operating expenses of the casino. Id. § 5.

. Sharp will reimburse the Band 30% of the costs incurred for casino promotions.

Sharp shall maintain complete responsibility for the promotions and provide
direction to the casino’s general manager. Id. § 6.

. Sharp will have a representative on-sight during the initial start-up to assist in

the implementation of operating, maintenance, and accounting procedures. Jd.
§ 7, And

. Sharp has the right to inspect and copy the casino’s books and records

pertaining to the machines. Jd. § 10. The same or similar provision is in the
1997 ELA at § 7, with the right to inspect enlarged to include the books and
records of all gaming revenues and equipment.


NIGC Chairman’s Decision,
page 10
March 25, 2009

10. Setting the advertising budget and placing advertising. 25 C.F.R. § 531.1(b)(10).
Although the contracts include some provisions concerning advertising and
promotions, nothing sets the advertising budget or determines who will place the
advertising. :

1

- Paying bills and expenses. 25 CF.R. § 531.1(b)(11). The contracts provide for
Sharp to pay 30% of the advertizing budget and for the Band to pay other
expenses, including but not limited to: operational and administrative staffing,
insurance, and modifications and repairs to gaming equipment (even thought the
devices are owned by Sharp). There are, however, no provisions that allocate
paying bills and expenses between the Band and Sharp for the many missing
requirements such as fire protection services, public safety, security personnel,
independent auditors, etc. .

12. Establishing and administering employment practices. 25 C.F.R. § 531.1(b)(12).

13. Compliance with all applicable provisions of the Internal Revenue Code, 25 C.F.R.
§ 531.1(6)(14).

14, Payment of the costs of any increased public safety services. 25 C.F.R.
§ 531.1(b)(15). And

15. Proving all information necessary for compliance with NEPA to the NIGC. 25
CER. § 531.1(6)(16).

In addition, the contracts do not, as required by 25 CFR. § 531.1(c), provide for the
establishment and maintenance of satisfactory accounting systems and procedures that, at a
minimum:

1. Include an adequate system of internal accounting controls.

2. Permit the preparation of financial statements in accordance with GAAP.

3. Are susceptible to audit.

4. Allow the Band and the NIGC to calculate annual fees under 25 C.F.R. § 514.1.

5. Permit the calculation and payment of manager’s fees. And

6. Provide for the allocation of operating expenses or overhead expenses among the

Band, tribal gaming operation, the contractor, and any other user of shared
facilities and services.
25 C.E.R. §§ 531.1(c)(1) - (6).
Further still, the contracts fail to provide the following:

i

10


“A
2 Y
fa 2
3 fo
Vc comm

April 23, 2009

Nicolas C. Fonseca, Chairman

Shingle Springs Band of Miwok Indians
5281 Honpie Rd.

Shingle Springs, CA 95682

Matthew G. Jacobs, Esq.
DLA Piper

400 Capitol Mall, Suite 2400
Sacramento, CA 95814

Re: — Chairman’s decision regarding agreements between the Shingle Springs Band
of Miwok Indians (Band) and Sharp Image Gaming Inc. (Sharp).

Dear Chairman Fonseca and Mr. Jacobs:

This decision reviews two agreements between the Band and Sharp. The first
agreement, called the “Gaming Machine Agreement,” (1996 GMA) was executed on May 24,
1996, and was originally submitted to the National Indian Gaming Commission (NIGC) in
1996. The second agreement, called an “Equipment Lease Agreement” (1997 ELA), was
executed on November 15, 1997, and was not submitted to the NIGC contemporaneously with
its execution.

The fundamental question presented is whether these agreements, individually or
collectively, constitute management contracts or collateral agreements to management
contracts subject to my review for approval or disapproval under the Indian Gaming
Regulatory Act (“IGRA”). 25 U.S.C. § 2711. The question whether a contract is a
management contract is a matter of federal law, and the NIGC is the federal agency with the
authority to make such a determination. United States ex rel. Saint Regis Mohawk Tribe v.
President R.C. — St. Regis Management Company, 451 F. 3d 44, 51 (2"¢ Cir. 2006) (NIGC has
broad power to determine what does and does not require approval). Such a determination is
necessary because an unapproved management contract is void. 25 C.F.R. § 533.7; United
States ex. rel. Bernard v. Casino Magic Corp., 293 F.3d 419, 421 (8" Cir. 2001) (for a
management agreement involving Indian land to become a binding legal document, it must be
approved by the NIGC).

NATIONAL HEADQUARTERS 1441 St. NW, Suite 9100, Washington, DC 20005 Tel: 202.632.7003 Fax: 202.632.7066 Wwww.Nicc.cov
REGIONAL OFFICES _ Portland, OR; Sacramento, CA; Phoenix, AZ; St. Paul, MN; Tulsa, OK


NIGC Chairman’s Decision,

page 13

March 25, 2009

but rather as all gross revenues received by the Band of all machines or table games, minus all
jackpots or payouts.

Sharp’s 30% of adjusted gross revenue will equal a far higher percentage of net
revenue because operating costs, such as electricity, building maintenance, and employee
salaries, have not been deducted. From analysis of the breakdown of other tribal management
contracts, it can be estimated that the actual percentage of net revenue that would go to Sharp
would be 50% to 60% of the net revenues from the gaming operation, not the 30% stated in
the contracts. Consequently, the majority of the benefit of Band’s gaming would be conveyed

to Sharp.

Ido not disagree with the 2007 OGC Opinion when it suggests that the contracts give
Sharp a prohibited proprietary interest in the Band’s gaming operation. However, I do not rely
on that fact to disapprove the contracts. There are so many statutory Tequirements that are not
met by the contracts that discussion of an impeimissible proprietorship by Sharp is not
necessary to my decision.

ADDITIONAL CONCERNS RAISED BY SHARP

Finally, Sharp has raised a number of arguments that it alleges preclude me from
reviewing the 1996 GMA and 1997 ELA. I have reviewed these arguments, and I conclude
that there is insufficient merit in them, whether considered individually or collectively, to
justify a different outcome here.

Generally, Sharp alleges that the NIGC has no legal authority to proceed to review the
agreements because the agreements were not intended to be management contracts and were
not submitted as such. It notes, for example, that the 1997 ELA states expressly it “is not a
management contract.” Sharp is in error as to the responsibilities of the NIGC under IGRA.

Abraham Lincoln famously asked how many legs a horse has if you call the tail a leg.
The answer, of course, is four, since calling the tail a leg does not make it one. Despite what it
calls itself, the 1997 ELA is a management contract. I must, in the course of reviewing and
approving contracts, necessarily draw a conclusion as to whether an agreement is, as it is
presently drafted, 2 management contract. That these contracts were executed some time ago
is of no import as long as any issue remains as to the requirements of IGRA and whether the
contracts are in compliance with those requirements. 25 C.F.R. § 533.7; Casino Magic Corp.,
293 F.3d at 421. IGRA requires the NIGC Chairman to approve management contracts, no
matter how the agreement comes before him, e.g, through voluntary submission or through
NIGC’s own regulatory investigation. In short, whether an agreement is a management
contract pursuant to the IGRA is most properly a matter of legal concern for this agency and.
completely consistent with the purposes of the Act as stated in 25 U.S.C. § 2702(2):

(2) to provide a statutory basis for the regulation of gaming...to ensure that
the Indian tribe is the primary beneficiary of the gaming operation...

13


NIGC Chairman’s Decision,
page 12
March 25, 2009

8. Justification consistent with provisions of 25 CFR § 531.1(i), for any fee in excess
of 30% of net revenue as defined by 25 CFR §502.16 but not more than 40%. 25
CER § 533.3(g).

9. Terms consistent with 25 CFR § 531. 25 CFR § 533.3(a)(3)(ii).

Based on the failure to comply with the above requirements of IGRA and Commission
regulations, I disapprove the 1996 GMA and the 1997 ELA.

In addition, 25 U.S.C. § 2711(€)(4) and 25 CFR. § 533.6(b)(4) authorize me to
disapprove a contract if I determine that a trustee, exercising the skill and diligence that a
trustee is commonly held to, would not approve the contract. Here, the parties have been in
litigation for some time over the termination of these agreements. In light of the ill will that
now exists between the parties, it would not be in the best interests of the Band to approve any
agreement allowing Sharp to provide services to the Band. See 2A W. Fratcher, Scott on
Trusts § 170 (4th ed.1987) (It is the duty of a trustee to administer the trust solely in the
interest of the beneficiaries). 2 :

Given all of the foregoing, based on the aspects of control provided in the terms of the
agreements, I find both the 1996 GMA and the 1997 ELA to be management contracts within
the meaning of IGRA. 25 U.S.C. § 2711. Based on the failure to include in the contracts many
mandatory provisions, and based upon and my judgment as a trustee that it would not be in the
best interests of the Band to allow Sharp to provide services to the Band, I disapprove both
contracts.

IGRA REQUIRES TRIBES TO BE THE PRIMARY BENEFICIARIES OF
GAMING

All of that said, tribes, not their contractors, are supposed to be the primary
beneficiaries of Indian gaming. 25 U.S.C. § 2702(2). Under the contracts reviewed here, not
only would Sharp have a significant level of control over the Band’s gaming activity, it would
receive the majority of the benefit from the operation over a five- or seven-year term, Sharp
would be receiving a share of the compensation from the gaming machines it is leasing and
the same share from card games and pull tab devices This type of arrangement evidences that
the terms are contrary to IGRA’s sole proprietary interest mandate 25 U.S.C. § 2710(b)(2)(A).

Further, management contracts approved by the Chairman have a fee cap set at 30% of
net revenues or 40% of net revenues if the Chairman determines that the capital investment
required and the gaming operation’s income projections warrant the higher fee. 25 U.S.C.
§2711(c)(1)-(2). IGRA defines net revenues as: “gross revenues of an Indian gaming activity
less amounts paid out as, or paid for, prizes and total operating expenses, excluding
management fees.” 25 U.S.C. § 2703(9) (emphasis added). Here, the contracts give Sharp a
fee equaling 30% of adjusted gross revenue because they define net revenue not as IGRA does


NIGC Chairman’s Decision,
page 9
March 25, 2009

Here, to begin with, under the 1996 GMA, Sharp has responsibility for casino
promotions and provides direction to the casino’s general manager. 1996 GMA § 6.This
directing, coordinating, and controlling alone makes the 1996 GMA a management contract
under IGRA.

Beyond this, both agreements provide Sharp with broad operational control sufficient
to make them management contracts. In short, Sharp will have the exclusive tight to provide
gaming machines for all of the casino floor space at such facilities for five, and potentially
seven, years. Freedom to configure the gaming floor, the essence of. managing a casino, is not
in the control of the Band.. This too is sufficient to make both agreements management
contracts. I therefore adopt the management analysis in the 2007 OGC opinion. The 1996
GMA and 1997 ELA are management contracts within the meaning of IGRA, 25 U.S.C. §
2711, and, as such, must be reviewed and approved by the NIGC Chairman. I disapprove the
two contracts here.

THE CONTRACTS FAIL TO PROVIDE REQUIRED PROVISIONS

IGRA requires management contracts to contain certain provisions. Many of these are
missing from the contracts here. The contracts fail to state that all gaming covered by the
contract will be conducted in accordance with IGRA and relevant tribal ordinances, as
required by 25 CFR 531.1(a).

The contracts fail to enumerate, as required by 25 CFR 531.1(b), the responsibilities of
each party for the following:

1. Maintaining and improving the gaming facility. 25 CF.R. § 531.1(b)(1).
2. The provision of operating capital. 25 C.F.R. § 531.1(b)(2).
3. Responsibilities for establishing operating days and hours. 25 CFR. § 531 -1(6)(3).

4. Responsibilities for hiring, firing, training, and promoting employees. 25 C.F.R.
§ 531.1(4).

5. Maintaining the gaming operation’s books and records. 25 C.F.R. § 531.1(b)(5).

6. The preparation of the operation’s financial statements and Teports. 25 C.F.R.
531.1()(6). :

7. The payment for services of the independent auditor engaged pursuant to 25 C.F.R.
§571.12. 25 C.F.R. § 531.1(b)(7).

8. The hiring and supervision of security personnel. 25 C.F.R. § 531.1(b)(8).

9. The provision of fire protection services. 25 C.F.R. § 531.1(b)(9).


NIGC Chairman’s Decision,
page 4
March 25, 2009

Nate McKitterick, attomey for Sharp Imagé Gaming, DLA Piper US LLP to Philip N. Hogen,
Chairman, the National Indian Gaming Commission, (Nov. 11, 2008).

On November 12, 2008, the Sharp’s request to keep the record open for more than two
months was denied. Sharp was granted another two-week period to make submissions. Letter
from Antonia Cowan, staff attomey, the National Indian Gaming Commission, to Nate
McKitterick, attorney for Sharp Image Gaming, DLA Piper US LLP (Nov. 12, 2008).

On November 17, 2008, the Band’s counsel repeated his request to keep the record
open until January 30, 2009. Letter from Nate McKitterick, attorney for Sharp Image Gaming,
DLA Piper US LLP to Philip N. Hogen, Chairman, the National Indian Gaming Commission,
(Nov. 17, 2008).

On November 23, 2008, the NIGC staff described to Sharp what submissions might be
made and stated that the record before the Chairman would be open for additional submissions
until the Chairman issued a decision. Letter from Antonia Cowan, staff attorney, the National
Indian Gaming Commission, to Nate McKitterick, attorney for Sharp Image Gaming, DLA:
Piper US LLP (Nov. 23, 2008).

On December 8, 2008, counsel for the Band urged the Chairman to make a
determination as to the agreements before the Califomia state court ruled. Letter from Mary
Kay Lacey, attorney for the Shingle Springs Band of Miwok Indians, Sonnenschein, Nath and
Rosenthal LLP, to Antonia Cowan, staff attomey, the National Indian Gaming Commission,
(Dec.8, 2008).

On December 11, 2008, Sharp submitted another letter brief, repeating the arguments it
made in its August 1 brief and arguing that the Chairman had no legal authority over the
agreements. Letter from Matthew G. Jacobs, attorney for Sharp Image Gaming, DLA Piper
US LLP, to Philip N. Hogen, Chairman, the National Indian Gaming Commission, (Dec.11,
2008).

The record remained open to receive any additional submissions from Sharp or the
Band through the end of discovery in the California matter and until the date of this decision.
No additional submissions were made by either party. I have considered all submissions from
both the Band and Sharp in arriving at this decision — the major substantive and procedural
communications listed here and all other miscellaneous communications. I note that discovery
in the civil action is irrelevant to this decision, which is based on the record before me.


NIGC Chairman’s Decision,

page 3

March 25, 2009

and the status of the agreements. Her letter noted that parties to the agreements were engaged
in litigation in California state court. Letter from Penny Coleman, the Acting General Counsel,
the National Indian Gaming Commission, to Nicholas Fonseca, Chairman, Shingle Springs
Band of Miwok Indians and Matthew G. Jacobs, Esq., attorney for Sharp Image Gaming, DLA
Piper US LLP, to (July 18, 2008).

On August 1, 2008, counsel for Sharp submitted a letter brief that presented Sharp’s
position and, inter alia, demanded a copy of all communications between the Band and the
NIGC. Letter from Matthew G. Jacobs, attorney for Sharp Image Gaming, DLA Piper US
LLP, to Penny J. Coleman, Acting General Counsel, the National Indian Gaming Commission,
(Aug. 1, 2008). :

On August 22, 2008, the Band’s counsel submitted a letter brief. Letter from Mary Kay
Lacey, attomey for the Shingle Springs Band of Miwok Indians, Sonnenschein, Nath and
Rosenthal LLP, to Matthew G. Jacobs, attomey for Sharp Image Gaming, DLA Piper US LLP
(Aug. 22, 2009).

On October 2, 2008, the Band’s counsel updated the status of the California state court
action. Letter from Mary Kay Lacey, attorney for the Shingle Springs Band of Miwok Indians,
Sonnenschein, Nath and Rosenthal LLP, to Philip N. Hogen, Chairman, the National Indian
Gaming Commission (Oct. 2, 2009).

On October 3, 2008, Sharp requested that the Chairman refuse to examine the two
agreements as requested by the Band. Letter from Matthew G. Jacobs, attomey for Sharp
Image Gaming, DLA Piper US LLP, to Penny J. Coleman, Acting General Counsel, the
National Indian Gaming Commission, (October 3, 2008).

On October 6, 2008, the NIGC staff sent a letter to Sharp’s counsel, acknowledged the
October 3, 2008 letter, and requested any additional submissions within two weeks. Letter
from Antonia Cowan, staff attorney, the National Indian Gaming Commission, to Nate
McKitterick, attorney for Sharp Image Gaming, DLA Piper US LLP, (Oct. 6, 2008).

On October 17, 2008, Sharp requested that the record before the Chairman be kept
open until discovery was concluded in the civil matter in Califomia, ie., by the end of January
2009. Letter from Nate McKitterick, attorney for Sharp Image Gaming, DLA Piper US LLP,
to Antonia Cowan, staff attomey, the National Indian Gaming Commission, (Oct. 17, 2008).

On November 7, 2008, the Band requested that the Chairman close the record by
January 30, 2009. Letter from Mary Kay Lacey, attorney for the Shingle Springs Band of
Miwok Indians, Sonnenschein, Nath and Rosenthal LLP, to Philip N. Hogen, Chairman, the
National Indian Gaming Commission, (Nov. 7, 2008).

On November 11, 2008, Sharp reiterated its previous request to keep the record open
until after the close of discovery, which it expected to happen by the end of 2008. Letter from


NIGC Chairman’s Decision,
page 2
March 25, 2009

On June 14, 2007, the Office of the General Counsel (OGC) opined that the 1996
GMA and the 1997 ELA were management contracts under IGRA and void because no
Chairman of the NIGC has ever approved them. The Band has requested that I review this
opinion and make a formal determination under 25 U.S.C. § 2711. I have done so. I determine
that each agreement individually is a management contract, and I disapprove them both. The
contracts fail to include certain statutory provisions required for management contracts.
Further, approval of these contracts would be inconsistent with the exercise of my fiduciary
responsibilities to the Band. Since both the contracts are disapproved, they are, therefore, void.
This decision is subject to appeal to the full Commission. 25 C.F.R. Part 539. A full
Commission decision would be a final agency action for the purposes of appeal to a federal
district court. 25 U.S.C. § 2714. =

PROCEDURAL HISTORY BEFORE THE NIGC

The 1996 GMA was executed on May 24, 1996, by the Band and Sharp and submitted
to OGC for an opinion on its status under IGRA. On November 5, 1996, the OGC opined that
the agreement was null and void because it provided for leasing Class III machines without a
tribal-state compact in violation of both IGRA and the Johnson Act. Letter from Michael D.
Cox, General Counsel, National Indian Gaming Commission, to William D. Murray,
Chairman, Shingle Spring Rancheria (November 5, 1996).

More than ten years later, on April 13, 2007, the Band again submitted the 1996 GMA
to OGC and, for the first time, submitted the 1997 ELA. The Band again requested a
determination as to the nature of both agreements, i.e., whether they were management
contracts or collateral agreements to management contracts subject to the Chairman’s review
under 25 U.S.C. § 2711. Sharp was suing the Band in California state court, El Dorado County
Superior Court, PC 20070154, filed March 12, 2007, for breach of these contracts, and the
Band sought to introduce evidence as to their status under IGRA. Letter from Kent E. Richey,
Special Counsel, Shingle Springs Band of Miwok Indians, to Penny Coleman, Acting General
Counsel, National Indian Gaming Commission (April 13, 2007).

As is the ordinary practice, the OGC reviewed the submissions and on June 14, 2007,
issued an advisory opinion finding that both the 1996 GMA and the 1997 ELA are
management contracts. Letter from Penny J. Coleman, Acting General Counsel, NIGC, to
Kent E Richey, Esq. (June 14, 2007) (2007 OGC Opinion). Both contracts had sufficient
indicia of management control to conclude that they were management contracts requiring the
approval of the Chairman. As neither contract had been approved by the Chairman, the OGC
opined that both contracts were void. 2007 OGC Opinion at 8.

On January 24, 2008, the Band requested this determination of me. Letter from
Nicholas Fonseca, Chairman, Shingle Springs Tribal Counsel, to Philip N. Hogen, Chairman,
the National Indian Gaming Commission (January 24, 2008).

On July 18, 2008, the NIGC Acting General Counsel, Penny Coleman, sent a letter to both the
Band and Sharp requesting that the parties submit their views concerning the advisory opinion


NIGC Chairman’s Decision,
page 14
March 25, 2009

More particularly, Sharp charges that it is denied due process, including notice and an
opportunity to be heard by a fair and impartial tribunal. Sharp alleges that the NIGC has had
ex parte communications with the Band. This allegation is based on an e-mail to the NIGC
Acting General Counsel from a Band attorney that included some friendly discussion about a
vacation. This e-mail was dated shortly before the 2007 OGC Opinion. Under the
circumstances, this communication is of no consequence.

An OGC advisory opinion is just that, only informal guidance by the OGC. Any
communications or notice concerning this informal guidance did not taking place in the
context of adversarial litigation or any formal agency action. What is more, my review of
management contracts under IGRA, and my approval or disapproval of them, is not a formal
adjudication under the Administrative Procedures Act (APA) to which its prohibition on ex
parte communication applies.

By its terms, section 554 of the APA applies to “every case of adjudication required by
statute to be determined on the record after [the] opportunity for an agency hearing.” 5 U.S.C.
§ 554(a); Girard v. Klopfenstein, 930 F.2d 738, 741 (9" Cir), cert. denied, 116 L. Ed. 2d 136
(1991). That section also provides that any hearing conducted with be “in accordance with
sections 556 and 557 of this title,” 5 U.S.C. § 554(c)(2), including, of necessity, the ban on ex
parte communications in 5 U.S.C. § 557(d)(1). The review and approval of management
contracts under IGRA, however, is not a formal adjudication under the APA because IGRA
does not require them to be on the record after a hearing. 25 U.S.C. § 2711.

That being said, I am fully aware of why ex parte communications are prohibited in
judicial or quasi-judicial adjudications, so that agency decisions are made on their merits and
not influenced by private, off-the-record communications from those with a personal stake in
the outcome. See, e.g., Raz Inland Navigation Co. v. ICC, 625 F.2d 258, 260 (9" Cir, 1980). I
do not see here, however, any prejudice to Sharp.

Sharp has been provided, in response to its Freedom of Information Act (FOIA)
request, a copy of all documents available under that statute. Furthermore, this record was left
open for months and Sharp was invited to submit any documents in its support that it wished
to supplement the record for an extended period of time.

Sharp also states that it has somehow been placed at a disadvantage by the functioning
of the NIGC sufficient to support a civil rights action under 28 U.S.C. § 1983. As there is no
such statute per se, I take this to refer to 42 U.S.C. § 1983 and its jurisdictional counterpart, 28
U.S.C. § 1343. Allegations such as these do not appear to have any basis when this agency is
fulfilling its responsibilities under IGRA to the tribes and to the public. It is not at all clear to
me how such an action could lie nor have you provided any analysis to support your
allegations.

Ido not recognize any constitutional or statutory deprivations visited upon Sharp; it is

not at all clear to me how, in acting upon contracts under IGRA, I or this agency could have
been acting “under color of state law,” as the statute requires; and it is well settled that neither

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