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Duran: For what the bell tolls: California's shakedown

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The latest shot heard round the gaming world was in April: the U.S. District Court, Southern District of California's ruling in Rincon Band v. Schwarzenegger, et al., a formerly obscure lawsuit pitting a small California gaming tribe against the largess of the state of California, concerning the state's tribal-state compacting process, of which the Rincon Band of Luiseno Indians believes the state's negotiation tactics constituted ''bad faith.''

While the court did not find the state's negotiation tactics to have been made in bad faith, the federal district magistrate did hold California's present compact negotiation requirement of ''net revenues'' paid into the state's general fund in exchange for additional gaming devices to be illegal. This shocking and potentially politically devastating holding for the Arnold Schwarzenegger administration basically guts the heart and soul of its present political and compacting strategy of making California Indian tribes pay their ''fair share.''

Many of us in the gaming industry have considered any payment to a state's general fund, i.e. the ''quid pro quo'' for ''exclusivity'' and the like, to be illegal and a breach of the Indian Gaming Regulatory Act's provision against tribal taxation. In holding for Rincon, the magistrate found the state's offering of ''exclusivity'' in exchange for extra devices was not only transparent, but of no significant value to the tribe, because exclusivity was previously conferred under Proposition 1A.

Moreover, the magistrate held that there must exist a ''nexus'' between the demand for a portion of a tribe's net revenues and the purposes of the IGRA to pass legal muster. This basically means that Schwarzenegger's use of Indian gaming revenues to solve the state's current and future budget crisis is - until reversed or modified on appeal - a no-no.

Two other pending cases, one again involving the Rincon tribe and the other the Cachil Dehe Band of Wintun Indians, concern the state's convoluted and bizarre means of determining the total number and allocation of slot machine gaming device licenses available to tribes under the 1999 tribal-state compact. These two other cases, which were dismissed by the court on a technicality, are pending before the Ninth Circuit Court of Appeals. Any of these cases, if upheld on appeal, could forever change the landscape of Indian gaming in California, if not the nation. Tribes outside of California with similar gaming issues: stay tuned.

In addition to the net revenues issue, the state is also engaged in an attempt to impose the National Indian Gaming Commission's minimum internal control standards on tribes. This, too, is another empty promise and a highly suspect demand, because the 1999 compact does not include a MICS provision and requires the consent of the tribal-state association prior to the imposition of any post-compact gaming regulation. Presently, many, if not all, gaming tribes oppose the state's imposition of the NIGC MICS without being offered something in return.

What the appellate court will do with any of these cases is anyone's guess. However, these cases illustrate the ''problem'' of the huge success of Indian gaming and the state of California's belief that it is entitled to an excess piece of the action in the form of cash payments and net revenue percentages.

While Indian gaming tribes, just like ordinarily successful non-Indian businesses, do not mind paying their own way, paying for the best managers, security, regulators and marketing people as a cost of doing business, what they do mind is having to pay something for nothing. This is exactly what the state of California has offered tribes since the present administration came into power. For now, at least, the days of the getting something for nothing are on hold.

Jack Duran is a graduate of the University of the Pacific McGeorge School of Law and is presently an associate attorney with Rosette & Associates, PC.