Challenge to gaming compact fails

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The Seventh Circuit held on Sept. 1 that a Wisconsin Indian tribe has standing to object to a compact entered between the State and another tribe.

However, the court held that, by failing to respond to the Department of the Interior’s argument that judicial review was precluded by the Administrative Procedure Act (APA), it forfeited the argument.

Pursuant to the Indian Gaming Regulatory Act (IGRA), tribes may operate casinos on their reservations or on lands held in trust for their benefit by the Secretary of the Interior, only pursuant to an agreement between the tribe and the state where the proposed casino will be located. The secretary must independently approve the compact.

In 2003, the Ho-Chunk Nation negotiated a new compact with the State authorizing it to open additional casinos. One provision in the compact provides that, if any tribe other than Ho-Chunk submits an application to the Secretary to conduct gaming on off-reservation trust lands, and the Secretary determines that the establishment would be in the best interest of the tribe and not be detrimental to the community, the State must either object, or compensate the Ho-Chunk for any reduction of revenues that it may suffer from the competition.

The compact was presented to the Secretary, who did not take any action on it; pursuant to law, the compact thus took effect after 45 days lapsed.

The Lac du Flambeau Band of Lake Superior Chippewa Indians (LDF) brought suit in federal court against the Secretary, challenging her decision to permit the compact to take effect.

The Ho-Chunk intervened, and it and the Secretary moved to dismiss the suit. U.S. District Judge Barbara B. Crabb granted the motion, holding that LDF lacked standing, and that the Secretary’s action was not reviewable under the APA. The court also held that the Ho-Chunk was a necessary party, but that it has sovereign immunity, and thus could not be joined as a defendant.

LDF appealed, and, in a decision by Judge Joel M. Flaum, the Seventh Circuit held that it had standing, but that it forfeited the argument on whether the Secretary’s action was subject to judicial review. The court did not address whether the Ho-Chunk tribe was a necessary party.

Standing

The court agreed with LDF’s argument that it has suffered injury and has standing, even though it may never come to pass that, because of its compact with the Ho-Chunk, the State rejects a casino that it proposes to build.

The court reasoned, "The harm is not LDF’s ‘inability to obtain the benefit,’ here, approval of its off-reservation gaming application. Rather, the harm lies in ‘the denial of equal treatment,’ in this case, being forced to seek approval under the cloud created by the amended compact. The possibility that Wisconsin might reject LDF’s application for legitimate reasons is therefore irrelevant to the standing analysis."

The court employed the same reasoning as in Alliant Energy Corp. v. Bie, 277 F.3d 916 (7th Cir.2002). In Bie, an electric utility challenged a Wisconsin statute prohibiting electric utility holding companies from selling 10 percent or more of their stock in a Wisconsin utility to a single person without prior administrative approval.
The court found the utility had standing, reasoning that the option to sell 10 percent of one’s stock has value even if no one wants to buy it at present: "A firm with the ability to sell such blocs in the future, when conditions change, is worth more in the market today than a firm hamstrung by laws cutting off its opportunities. This difference in value supplies standing." Bie, at 921.

Applying Bie to the case at bar, the court concluded, "Plaintiff contends that it must court potential investors years in advance to make its planned casino a reality.

Recognizing that the compact gives Wisconsin an incentive to reject LDF’s application, potential lenders will see LDF’s venture as a more risky, and therefore less attractive, investment. LDF will be forced to compensate for this risk by offering a higher rate of return. The increased cost of capital harms LDF now, whether or not the Secretary approves plaintiff’s application."

The court also noted that the Ho-Chunk have six casinos in Wisconsin, and are authorized to open three more; thus, it is likely that any casino anywhere in the state would compete with one of them: "Indeed, Ho-Chunk almost certainly understands this reality, and we therefore find it highly implausible that it would forego its right to be indemnified against lost revenues in the face of a pending application by another tribe. And while Wisconsin might choose to indemnify Ho-Chunk for revenues lost to a competing LDF casino, we find it unlikely that the State would do so without exacting some concession from LDF. More importantly, none of these contingencies shows that actual or imminent harm to LDF is inconsistent with the pleadings."

Administrative Procedure Act

Nevertheless, the court affirmed the dismissal of the complaint, because LDF did not respond to the argument that the APA precludes judicial review.

The APA confers upon persons "aggrieved by agency action" the right to seek judicial review of that action. 5 U.S.C. 702. However, the right of judicial review does not extend to an action that is "committed to agency discretion by law." 5 U.S.C. 701(a)(2).

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The Secretary argued that IGRA commits to her discretion the decision whether to disapprove a compact, and LDF therefore cannot challenge that decision via the APA.

Without adopting that argument, the court affirmed dismissal, stating, "There may be convincing counterarguments to the Secretary’s position, but LDF fails to make them. Plaintiff’s opening brief does not mention sec. 701(a)(2); its reply brief states only that the Secretary’s argument on this point ‘is flawed and ignores supporting authority.’ Neither of LDF’s briefs meaningfully address whether the Secretary’s action was ‘committed to agency discretion by law.’ Moreover, as the party invoking the federal courts’ subject matter jurisdiction, LDF bears the burden of establishing that the APA authorizes the district court to entertain this suit. By not responding to the argument that sec. 701(a)(2) bars judicial review, LDF has forfeited the point (citation omitted)."

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David Ziemer can be reached by email.