Opinion ID: 1608822
Heading Depth: 1
Heading Rank: 4

Heading: Challenge to the Validity of the Agreement.

Text: The Iowa Gaming Regulation Act requires that all management contracts be approved by the National Indian Gaming Council (NIGC). 25 U.S.C. § 2711. For purposes of this requirement, the applicable agency regulation defines a 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 of a gaming operation. 25 C.F.R. § 502.15. The consulting firm has contended throughout this litigation that its contract with the tribe is not a management agreement and thus need not receive NIGC approval. Federal courts have held that the determination of whether a particular arrangement is a management contract need not be based entirely on the language of the particular agreement with the tribe. United States ex rel. Bernard v. Casino Magic Corp., 293 F.3d 419, 424 (8th Cir. 2002). Extrinsic evidence may be considered, including a review of the activities performed and expected to be performed under the agreement. Id. In the present case, the tribe on January 2, 1997, inquired of the NIGC whether its agreement with the consulting firm was a management contract requiring NIGC approval. The NIGC responded to that request as follows: Although we are not prepared to conclude, at this time, that the agreement is a management contract, it does raise several concerns about the actual relationship between the consultant and the tribe. For this reason, the matter has been referred to the Enforcement Division for further investigation regarding whether the consultant is acting as a de facto manager of the gaming operation. In a later communication with the tribe dated November 4, 1998, the NIGC stated: As you know, we have subjected the Tribe's relationship with IMCI [the consulting firm] to intense scrutiny. Our field investigator visited twice; we have reviewed materials which have been submitted by the Tribe and the Tribe's Gaming Commission as well as information provided by Mr. Junkins' counsel; and two attorneys from the NIGC visited Tama and conducted interviews of a number of individuals. At this point, I have decided not to commit additional resources to this matter. While it is clear that Mr. Junkins, as the agent of IMCI [the consulting firm], played an active role in the development of the expanded casino and hotel facilities, it is not possible to conclude on the basis of the existing evidence, that his conduct constituted management of all or part of the Meskwaki gaming operation within the meaning of the Indian Gaming Regulatory Act. In its challenge to the consulting firm's effort to compel arbitration, the tribe contends that, notwithstanding the failure of the NIGC to find that the contract at issue here was a management contract as defined in 25 C.F.R. § 502.15, that agreement was a management contract and is thus void for want of NIGC approval. The district court rejected this contention on two grounds: (1) the NIGC has made a determination that the agreement is not a management contract; and (2) in the prior federal litigation to enforce arbitration, the federal court of appeals characterized the agreement as one over which federal courts were without jurisdiction. We believe that in so ruling the district court has mischaracterized both the nature of the NICG's action and the scope of the federal court adjudication. The action taken by the NIGC was only an investigation by its enforcement division to determine whether the consulting firm's actions were unlawful because it was acting pursuant to an agreement, which the NIGC was required to approve and had not. That investigation did not produce enough evidence to support the issuance of sanctions against the consulting firm. At no time in the process, however, did the NIGC purport to render an adjudication of the validity of the agreement. Consequently, we view that issue as still open for the tribe to assert by way of defense to the present suit to compel arbitration. With respect to the district court's reliance on the federal court of appeals' characterization of this action as a routine contract action, that conclusion was reached solely on the allegations of the consulting firm's federal court complaint in accordance with the federal law well-pleaded complaint rule. See Iowa Mgmt. & Consultants, 207 F.3d at 488. The court's decision did not involve in any way an adjudication of whether the contract was a management contract for which NIGC approval was required. We are convinced that the tribe has sufficiently asserted a challenge to the entire agreement, including the arbitration clause, based on a failure to secure approval of the NIGC as required by 25 U.S.C. § 2711. The district court erred in resolving this issue as a matter of law based entirely on the motion papers in the proceedings to compel arbitration. Genuine issues of material fact exist that must be resolved in order to adjudicate this federal-law defense to the effort to compel arbitration.