Court ruling affects tribal compacts

A panel of judges for the U.S. 10th Circuit Court of Appeals ruled this week an arbitration clause that’s part of a model gaming compact between American Indian tribes and Oklahoma is unenforceable.

That arbitration clause, part of a statute voters approved in 2004 as a state question, was the only remedy tribes and Oklahoma had to settle disputes that arise under the compact, one tribe’s attorney asserts.

“The court’s ruling alters the gaming compacts of all Oklahoma tribes, making the compacts more difficult to enforce by both the tribes and the state itself,” said George Wright, the Citizen Potawatomi Nation’s attorney.

That potentially could become another headache for Oklahoma’s elected leaders, as tribal gaming is big business that provides substantial dollars to state coffers.

Oklahoma’s model gaming compact enables federally recognized American Indian tribes to enter into a compact with the state that allows them to operate establishments with certain types of faster electronic games, including video poker.

In exchange, compact tribes are obligated to make exclusivity payments to the state, plus fees for electronic and table games conducted in their establishments.

In Fiscal 2017, 32 tribes in the compact with Oklahoma paid the state nearly $134 million in exclusivity fees, $114.6 million in electronic game fees and $19.3 million in table game fees.

The statute requires the money to go to Oklahoma’s Education Reform Revolving Fund, the general revenue fund and the Department of Mental Health and Substance Abuse Services.

Disputes unresolved

A yearslong series of disputes between the Citizen Potawatomi Nation, the Oklahoma Tax Commission and the Oklahoma Alcohol Beverage Law Enforcement Commission led to the appeals court ruling.

The tribe requested arbitration under its compact with the state after the Alcohol Beverage and Law Enforcement Commission and the Oklahoma Tax Commission took steps to revoke or cancel various state permits held by the nation, including one to collect sales taxes and another to sell mixed beverages.

ABLE sought to revoke the nation’s mixed beverages permit because the tribe was selling alcoholic beverages on Sundays, which the commission said violated state law.

The tax commission sought to revoke permits it had issued based on assertions the nation had not provided it with documentation showing all of the tribe’s transaction-type sales were exempt from Oklahoma’s sales tax laws.

An administrative law judge at ABLE ruled against the tribe while proceedings before the tax commission were ongoing, and the tax commission ultimately decided to revoke permits it had issued to the tribe.

Those actions were appealed by the Citizen Potawatomi Nation to Oklahoma’s Supreme Court.

It also asked for arbitration, putting the cases before the court in a pending status, a tax commission attorney said Friday.

Daniel J. Boudreau, a former Oklahoma Supreme Court Justice, heard arguments on the issues in the subsequent arbitration and ruled in the tribe’s favor.

That was appealed by both parties into federal court, with the tribe asking for the award to be upheld and Oklahoma asking for a de novo review, as called for in the state statue that voters approved.

Essentially, a de novo review is a new trial in which all issues are reviewed as if for the first time.

U.S. District Judge Robin J. Cauthron upheld the arbitration award, prompting the appeal to the 10th Circuit, where a panel of three judges, including Chief Judge Timothy Tymkovich, invalidated the arbitration language in the model compact.

The issue, the judges wrote, is that the U.S. Supreme Court ruled after Oklahoma’s election that federal law precludes parties to an arbitration agreement from contracting for de novo review of the legal determinations in an arbitration award.

Wright said the tribe intends to continue legally pursuing a positive outcome for its people.

Spokesmen for both Oklahoma’s Attorney General and Gov. Mary Fallin said Friday their legal teams were reviewing the appeals court decision.

An attorney who represented the nation before the two state agencies seeking the permit revocations, meanwhile, said it raises potentially significant questions for not only tribes, but state officials as well.

“The Supreme Court basically changed the rules after the model tribal state gaming compact was created,” said Mike McBride III, an attorney with Crowe & Dunlevy.

“The impact is, it casts into doubt ... the dispute resolution provisions of the compact for all the 30-plus tribes who entered into the compact with Oklahoma, and it throws into question whether Oklahoma can enforce the compact, or the tribes could enforce the compact.”