Court Opinion

ID: 3026262
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:35:27.613571+00
Date Added: 2024-06-11T11:47:51.311575
License: Public Domain

United States Court of Appeals
                         FOR THE EIGHTH CIRCUIT
                                  ___________

                                  No. 99-2822
                                  ___________

Casino Resource Corporation,            *
                                        *
             Appellant,                 *
                                        *
      v.                                * Appeal from the United States
                                        * District Court for the
Harrah's Entertainment, Inc. d/b/a      * District of Minnesota.
Harrah's Southwest Michigan Casino      *
Corporation, Inc.;Harrah's Southwest    *
Michigan Casino Corporation;            *
John Does, 1-10,                        *
                                        *
             Appellees.                 *
                                   ___________

                            Submitted: October 19, 2000

                                 Filed: March 13, 2001
                                  ___________

Before WOLLMAN, Chief Judge, BEAM and MORRIS SHEPPARD ARNOLD,
      Circuit Judges.

                                  ___________

BEAM, Circuit Judge.

      After Harrah's Entertainment, Inc. (Harrah's) entered into a termination
agreement that ended its gaming development and management opportunities with the
Potawatomi Indian Nation (Nation or Tribe), Casino Resource Corporation (CRC) sued
Harrah's for breach of contractual and fiduciary duties and for tortious interference with
CRC's "contractual and prospective economic advantage." The district court found that
CRC's state law claims are preempted by federal law, which provides no independent
cause of action, and, therefore, dismissed CRC's suit. CRC appeals. We reverse and
remand.

I.    BACKGROUND

       In 1994, CRC obtained a right of first refusal to negotiate a gaming management
contract with the Nation. CRC subsequently entered into a memorandum of
understanding with Harrah's, in which the parties agreed to jointly pursue gaming
opportunities with the Nation. Harrah's established a subsidiary (hereinafter also
referred to as "Harrah's") to explore the endeavor. Eventually, the subsidiary
negotiated various development and management contracts with the Nation, after which
Harrah's and CRC entered into a "Technical Assistance and Consulting Agreement"
(Consulting Agreement) "to formalize [CRC's] relationship with Harrah's regarding
CRC's ongoing role in the development of the proposed Enterprise."1

      1
          The Consulting Agreement states:

      3.1 CRC has provided and will continue, during the term of the Casino
      Agreements . . ., to provide . . . technical services related to the
      development of the proposed Enterprise in the form of advice and
      consultation . . . .

      3.1.1 CRC agrees that it shall provide such services directly to Harrah's
      and shall have no right to affect the management decisions made by
      Harrah's in its negotiations for, or the performance of, the Casino
      Agreements. Further, CRC shall not interfere in any way or involve itself
      directly nor will it encourage or in any way involve others to interfere or
      involve themselves with the operation of the Enterprise unless requested
      by Harrah's. . . .

                                           -2-
       On September 12, 1998, Harrah's and the Nation executed a termination
agreement that dissolved any prior development or management agreement between
them. Among recited impediments to their relationship were the Michigan Legislature's
refusal to negotiate a tribal-state gaming compact, as required by the Indian Gaming
Regulatory Act (IGRA), 25 U.S.C. §§ 2701 et seq., and an unresolved dispute as to
whether the purchase of a riverboat casino (which operated within a non-compete
radius restriction) by a Harrah's affiliate amounted to a material breach of all
agreements between Harrah's and the Nation. The Bureau of Indian Affairs approved
the termination agreement in October of 1998.

        On September 14, 1998, CRC filed suit in federal court, asserting diversity
jurisdiction and alleging that "[a]lthough the [Consulting Agreement] stated that it was
not intended to create a partnership or joint venture between the parties, the parties[']
relationship under the Agreement was, in fact, a partnership or joint venture." CRC
further alleged that Harrah's "breached the [Consulting Agreement] and the fiduciary
duty it owed to CRC and tortiously interfered with CRC['s] contractual and prospective
economic advantage by . . . purchasing an interest in a competing casino which caused
the Tribe to refuse to do further business with the Harrah's/CRC partnership or joint
venture," and by withholding information from CRC.

       Harrah's moved to dismiss CRC's complaint pursuant to Federal Rules of Civil
Procedure 12 and 56. The district court concluded that, because adjudication would
require the court to intrude into the Nation's governance of its own gaming affairs,
CRC's state law claims are preempted by IGRA. The court, therefore, dismissed
CRC's suit because IGRA provides no independent cause of action.

                                          -3-
II.   DISCUSSION

         We review a district court's grant of a Rule 12(b)(6) motion to dismiss de novo,
construing the complaint most favorably to the non-moving party, and will dismiss only
if it is clear that no relief can be granted under any set of facts that could be proven
consistent with the allegations. Frey v. City of Herculaneum, 44 F.3d 667, 671 (8th
Cir. 1995). Similarly, we review the grant of a motion for summary judgment de novo,
affirming if the evidence, viewed in the light most favorable to the nonmoving party,
shows that no genuine issue of material fact exists and the moving party is entitled to
judgment as a matter of law. Hughes v. Ortho Pharm. Corp., 177 F.3d 701, 704 (8th
Cir. 1999)

        "State jurisdiction is pre-empted by the operation of federal law if it interferes
or is incompatible with federal and tribal interests reflected in federal law, unless the
state interests at stake are sufficient to justify the assertion of state authority." New
Mexico v. Mescalero Apache Tribe, 462 U.S. 324, 334 (1983). Congress, by enacting
IGRA, has established the preemptive balance between tribal, federal, and state
interests in the governance of gaming operations on Indian lands. Gaming Corp. of
America v. Dorsey & Whitney, 88 F.3d 536, 548-49 (8th Cir. 1996); 25 U.S.C. §
2710(d)(3)(C); 1988 U.S.C.C.A.N. 3076 (IGRA "expressly preempt[s] the field in the
governance of gaming activities on Indian lands"). Therefore, we have said that "[a]ny
claim which would directly affect or interfere with a tribe's ability to conduct its own
[gaming] licensing process should fall within the scope of [IGRA's] complete
preemption." Gaming Corp., 88 F.3d at 549.

       In Gaming Corp., management companies pursued claims against a law firm that
had represented a Native American tribe during development of a casino. Id. at 539-
40. The companies argued that their claims did not affect the tribe because only non-
Indian parties were involved. Id. at 549. Rejecting that argument, we reasoned that
the tribe's relationship with the firm was not to be overlooked in that the firm was

                                           -4-
retained to carry out the tribe's congressionally-authorized governmental responsibility.
Id. We concluded that those causes of action that would interfere with the tribe's ability
to govern gaming fall within IGRA's complete preemption of state law.2 Id. at 550.

       Gaming Corp. dealt with the regulation of tribal gaming. Id. at 549. In contrast,
the instant case presents the issue of whether IGRA preempts state law claims by one
non-tribal entity against another, when resolution requires some review of a contract
terminating a gaming management arrangement between one of the parties and a tribal
entity. Unlike Gaming Corp., where we stifled management companies' attempts to
employ state law to circuitously challenge the outcome of an Indian nation's internal
governmental decisions, here the challenge is merely to the decisions of a management
company. Therefore, Gaming Corp. does not predestine our resolution.

        "Congressional intent is the touchstone of the complete preemption analysis."
Magee v. Exxon Corp. 135 F.3d 599, 601-02 (8th Cir. 1998). Through IGRA,
Congress has sought to bring sundry policy goals to fruition, including protecting
tribes' sovereign immunity, protecting tribes' "considerable control of gaming to further
their economic and political development," Gaming Corp., 88 F.3d at 549, protecting

      2
        Still, even when complete preemption applies, there may be claims that do not
fall within its scope. Gaming Corp., 88 F.3d at 543. Consequently, all claims must be
individually scrutinized. Id. at 548. In contrast to preempted claims:

              Potentially valid claims under state law are those which would not
      interfere with the nation's governance of gaming. To the extent a count
      alleges a violation of a duty owed to one of the management companies
      because of an attorney-client relationship or other independent duty, it
      may be a valid state law count. Resolution of such claims would not
      appear to involve attempted discovery of communications by the tribe to
      [the firm] or the merits of the licensing decision.

Id. at 550.

                                           -5-
"the Indian gaming industry from corruption and . . . provid[ing] for extensive federal
oversight of all but the most rudimentary forms of Indian gaming," Tamiami Partners
v. Miccosukee Tribe of Indians, 63 F.3d 1030, 1033 (11th Cir. 1995). CRC's claims
encroach on no IGRA goal.

        CRC's claims also fall outside IGRA's protective structure. But cf. Santa Clara
Pueblo v. Martinez, 436 U.S. 49, 64 (1978) (finding that, where Congress has sought
to achieve competing purposes, courts must be "more than usually hesitant to infer from
its silence a cause of action" that will serve one of the legislative purposes but
undermine the other); Florida v. Seminole Tribe of Florida, 181 F.3d 1237, 1248 (11th
Cir. 1999) ("'when legislation expressly provides a particular remedy or remedies,
courts should not expand the coverage of the statute to subsume other remedies'")
(citation omitted). Although IGRA addresses management and services contracts to
some degree,3 it was not designed to deal with disputes like this,4 which, despite CRC's

      3
        IGRA recognizes a tribe's authority to enter into contracts for the management
and operation of an Indian gaming facility by an entity other than the tribe or its
employees, so long as certain requirements are satisfied and subject to approval by the
Chairman of the National Indian Gaming Commission (Commission). 25 U.S.C. §§
2710(d)(9), 2711. Agreements collateral to such management contracts are likewise
constrained. 25 U.S.C. § 2711(a)(3). In contrast, contracts for supplies, services, or
concessions involving amounts in excess of $25,000 annually are merely subject to
audits by the Commission. 25 U.S.C. § 2710(b)(2)(D); 1988 U.S.C.C.A.N. 3085
("[t]he term 'management contract' does not include contracts or agreements for the
procurement of particular services, materials or supplies," which are subject to
Commission oversight under another provision).

       The Senate felt that "the plenary power of Congress over Indian affairs, and the
extensive government regulation of gambling, provide[ it with] authority to insist that
certain minimum standards be met by non-Indians when dealing with Indians." 1988
U.S.C.C.A.N. 3085. One such minimum requirement for approval is that the
management contract must contain grounds and mechanisms for its termination;
however, termination does not require the Commission's approval. 25 U.S.C. §

                                          -6-
creative characterization, is essentially a dispute between a non-tribal general
contractor and non-tribal sub-contractor.5 In Bruce H. Lien Co. v. Three Affiliated
Tribes, 93 F.3d 1412 (8th Cir. 1996), we distinguished the approval and review process
from the determination of the legal validity of a management contract, thereby finding
the latter outside the scope of the administrative bodies bearing IGRA responsibilities.
Id. at 1417-18. We recognized, however, that:

       While the issue of [a management] contract's validity does not raise a
       federal question per se, certainly there are aspects of . . . [tribal gaming]
       dispute[s] which do. Particularly where the entire association between the
       parties (and their various disputes) arise under IGRA, and where the
       management agreement at issue, once approved, remains so until
       disapproved by the [Commission].
Id. at 1421. Here, the association between CRC and Harrah's does not arise under
IGRA nor is an approved management contract at issue.

2711(b)(6). The management contract must also indicate "whether and to what extent
contract assignments and subcontracting are permissible" and "whether and to what
extent changes in the ownership interest in the management contract require advance
approval by the tribe." 25 C.F.R. § 531.1(l), (m) (2000). Compacts negotiated
between the tribe and state determine whose criminal and civil laws and regulations
("that are directly related to, and necessary for, the licensing and regulation" of tribal
gaming) will apply and what remedies are available for contract breaches. 25 U.S.C.
§ 2710(d)(3)(C).
      4
        CRC confounded us with its suggestion that "[b]ecause Congress specifically
required a mechanism to resolve . . . disputes [like this one], it could not have intended
that such disputes be preempted." That argument would mandate a conclusion contrary
to the one it pursues on appeal. Ante at 6 (quoting Seminole Tribe, 181 F.3d at 1248).
      5
        A contract dispute with the Nation itself would present another situation
altogether. See Tamiami Partners, 63 F.3d at 1048-49 (finding that district court
properly dismissed breach of contract claim that sought money damages from and
injunctive relief against a tribe when such relief was not contemplated by the
management contract).

                                           -7-
       Not every contract that is merely peripherally associated with tribal gaming is
subject to IGRA's constraints. E.g., International Gaming Network v. Casino Magic
Corp., 120 F.3d 135 (8th Cir. 1997); Calumet Gaming Group-Kansas, Inc. v. Kickapoo
Tribe of Kan., 987 F. Supp. 1321 (D. Kan. 1997); Gallegos v. San Juan Pueblo Bus.
Dev. Bd., Inc. 955 F. Supp. 1348, 1350 (D.N.M. 1997) (finding no federal subject
matter jurisdiction where, although unclear whether an agreement was a management
contract or lease of slot machines, because the contract was not approved by the
Commission Chairman, at most there was only an attempt at forming a management
contract). For instance, in Calumet Gaming, the court found that a dispute arising from
a consulting agreement was not subject to IGRA and, consequently, there was no need
to interpret or apply IGRA to resolve the plaintiff's state law claims for breach of that
agreement. 987 F. Supp. at 1325.

       Since Gaming Corp., we have addressed, on the merits, a state common law
claim with strikingly similar facts to those of the present matter. Casino Magic is
notable here only for its conspicuously absent discussion of IGRA's preemptive force.
120 F.3d at 135. There, jurisdiction was based on diversity, the case was governed by
South Dakota law, and the claim was for a non-tribal entity's purported tortious
interference with a business relationship between a tribe and another non-tribal entity.
Id. It is apparent that the claim was not preempted by IGRA; otherwise, the matter
could not have been resolved based on state law.6 Metropolitan Life Ins. Co. v. Taylor,
481 U.S. 58, 64-65 (1987) (reasoning that, where Congress had given explicit
direction, allowing a party to obtain remedy under state law would undermine that
federal scheme).

      6
         The tribe had terminated a management agreement that was not binding on the
parties because IGRA required it to be approved by the Commission. Casino Magic,
120 F.3d at 135. After reviewing the tribe's reasons for termination and the timing of
its actions, we concluded that the record could not support a reasonable inference that,
but for the non-tribal defendant's brief encounter with tribal members, the non-tribal
plaintiff 's advantageous relation with the tribe would have continued. Id. at 137.

                                          -8-
        Resolution of the present matter requires no more intrusion into the Nation's
ability to enter into and terminate management contracts than was necessary in Casino
Magic. Unlike the potential infringement on a tribe's governance of gaming that was
present in Gaming Corp., a non-tribal entity's state law claim (that does not implicate
tribal interests) against another non-tribal entity is not of central concern to IGRA.7
See Franchise Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1, 25-26
(1983) (determining that state claim did not arise under federal statute and was,
therefore, not preempted by that statute). In Gaming Corp., the fiduciary relationship
between the tribe and law firm underpinned our conclusion. 88 F.3d at 549. Here, the
Nation and Harrah's were only associated by an arm's length contract, which was
ultimately terminated. Therefore, CRC's claims do not present the same potential for
interference with IGRA-apportioned responsibilities as that presented in Gaming Corp.

       Although the district court expressed concern that resolution of CRC's claims
will intrude into the Nation's decision-making process regarding termination of
management contracts, we do not see the same cause for alarm. CRC's claims can
likely be resolved by looking to the four corners of the pertinent documents.8 Any
concern is further ameliorated because, absent a tribal-state compact, the Nation has
not waived its sovereign immunity from state intervention, Seminole Tribe, 181 F.3d

      7
        We do see potential situations, however, where a tribe's interests could be
jeopardized by disputes between non-tribal entities, such as where a valid management
contract calls for a tribe to indemnify a non-tribal management company or the
management company is acting as an agent of the tribe. Neither scenario is present in
this case.
      8
        Of particular interest is the Consulting Agreement, which clearly suggests that
the relationship between CRC and Harrah's is that of general and sub-contractors, and
not a partnership. The agreement also contains a specific damages provision, which
Harrah's points to in partial support of its argument that damages are too speculative
to permit relief. However, we do not reach the merits of CRC's claims or Harrah's
proposed alternative bases for affirming dismissal.

                                         -9-
at 1242, because the Nation is insulated from agreements that fall outside IGRA's
protective scheme, Turn Key Gaming, Inc. v. Oglala Sioux Tribe, 164 F.3d 1092, 1094-
95 (8th Cir. 1999), and because the Nation (a non-party) can be protected in the
discovery process, e,g., Fed. R. Civ. P. 45.

III.   CONCLUSION

       It is a stretch to say that Congress intended to preempt state law when there is
no valid management contract for a federal court to interpret, when the Nation's broad
discretion to terminate management contracts is not impeded, and when there is no
threat to the Nation's sovereign immunity or interests. Dismissal based on preemption
was error. Because the record is not developed outside that vein, we remand to the
district court for further action not inconsistent with this opinion.

       A true copy.

             Attest:

                CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.

                                         -10-