Casino pacts impacted by recent court ruling

PARTLY in response to budget challenges, lawmakers have discussed proposals to legalize roulette and dice games at Oklahoma’s tribal casinos, estimating that could rake in another $20 million for the state under existing tribal compacts. But a recent court decision that struck down a key enforcement measure in those compacts may complicate that discussion.

Under existing state-tribal gaming compacts, arbitration is used for disagreements arising under the compact’s provisions, and either party can then seek a review of the resulting arbitration award in a federal district court.

A state-tribal dispute arose when a casino operated by the Citizen Potawatomi Nation was selling liquor on Sundays, which is not allowed under state law without the approval of county voters. The state argued the tribe failed to report, collect, or remit associated state sales taxes and reports. When the issue was taken to arbitration, the tribe prevailed. The Citizen Potawatomi Nation then sought to have that decision enforced by filing an action in the U.S. District Court for the Western District of Oklahoma.

In response, the state of Oklahoma sought to have the award vacated, arguing it was entitled to de novo federal court adjudication of the factual and legal issues involved in the arbitration. (In de novo review, a court handles a case as though it is being argued for the first time, regardless of prior rulings.) The district court ultimately enforced the arbitration award. The state of Oklahoma then appealed the case.

Based on a prior U.S. Supreme Court ruling, a panel of judges for the 10th U.S. Circuit Court of Appeals ruled the de novo review provision contained in Oklahoma’s state-tribal gaming compacts is “legally invalid.” But, because “the availability of de novo review” was “a material aspect” of the parties’ agreement to engage in binding arbitration, the court concluded lower courts should have severed that provision from the compact.

That only creates additional headaches for state officials. George Wright, the Citizen Potawatomi Nation's tribal attorney, says 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.” Mike McBride III, an attorney with Crowe & Dunlevy, said the court’s ruling “throws into question whether Oklahoma can enforce the compact, or the tribes could enforce the compact."

One doesn’t have to be a cynic to think that having unenforceable contracts involving millions of dollars across the state could lead to problems. Corruption has been a routine occurrence in Oklahoma government throughout this state’s history, and tribal governments have not been immune from that plight either.

For the benefit of both parties — tribal governments and state government alike — it’s important that officials come together and work out revisions to the compact agreements that are acceptable to both sides, provide stability, and ensure consistent and fair enforcement of all provisions.