Barona Group of the Capitan Grande Band of Mission Indians v. American Management & Amusement, Inc.

Citations: 840 F.2d 1394; 1988 WL 21903Docket: 86-6605

Court: Court of Appeals for the Ninth Circuit; March 17, 1988; Federal Appellate Court

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American Management, Amusement, Inc. (AMA) appeals a summary judgment favoring the Barona Group of the Capitan Grande Band of Mission Indians (the Band) concerning a tribal bingo management agreement. The Band sought to declare the agreement null and void under 25 U.S.C. § 81, which mandates approval from the Secretary of the Interior and the Bureau of Indian Affairs (BIA) for such contracts. The district court ruled in favor of the Band, asserting that the agreement was invalid due to the lack of requisite approvals.

AMA's appeal raises multiple issues: 
1. Jurisdictional claims, alleging the district court was barred from ruling due to an active bankruptcy court stay.
2. A request for a six-month continuance for further discovery, which AMA argues was an abuse of discretion by the court.
3. Claims of triable issues regarding material facts.
4. Arguments for the validity of the agreement under 25 U.S.C. § 81.
5. A failure by the district court to consider BIA correspondence regarding the agreement's validity.
6. Allegations of violations of due process, just compensation, and equal protection rights.
7. A defense based on laches.
8. Claims that the district court did not allow sufficient time for BIA approval.

The court ultimately disagreed with AMA on all points and affirmed the lower court's decision. The background indicates that AMA and the Band entered a 1981 agreement for a bingo facility, with AMA set to receive 45% of net profits. The BIA had previously informed AMA that the agreement did not require approval, as it did not involve trust lands or funds, but the court found this correspondence insufficient to validate the agreement under § 81.

On April 15, 1983, AMA commenced bingo operations under a 1981 agreement. Subsequently, on May 11, 1983, AMA and the Band entered into a new agreement (the 1983 agreement), which replaced the 1981 agreement and was not submitted for BIA approval. Following the shutdown of the bingo operation in April 1986, the Band filed a complaint against AMA on May 19, 1986, seeking declaratory relief and damages, asserting the 1983 contract was invalid under 25 U.S.C. Sec. 81 due to lack of BIA approval. In response, AMA counterclaimed for breach of the 1983 agreement, seeking compensation for a $3.6 million investment and alleging several other claims including fraud and negligence.

AMA filed for Chapter 11 bankruptcy on June 24, 1986, which automatically stayed the district court proceedings. The Band sought relief from this stay, and on September 15, 1986, the bankruptcy court permitted limited relief to address the validity of the 1983 contract. The Band then moved for summary judgment on September 19, 1986, claiming the contract was void, and the district court granted this motion on October 17, 1986.

Despite the stay, AMA argued that the district court lacked authority to rule on the summary judgment; however, the court maintained that it had jurisdiction since the bankruptcy court had granted partial relief prior to the district court's judgment. The proceedings established that the district court's order, although not resolving all issues, was certified for appeal, affirming the court's jurisdiction under 28 U.S.C. Sec. 1291.

The district court had jurisdiction to rule on the Band's summary judgment motion despite AMA's argument that the reference to the bankruptcy court was not formally withdrawn. Under 28 U.S.C. Sec. 157(d), a district court may withdraw a case from bankruptcy court for cause. The district court partially withdrew the reference on June 22, 1987, specifically to address the validity of a tribal bingo management agreement, retroactively effective to September 15, 1986, establishing good cause for its action.

AMA's assertion that the summary judgment motion was untimely due to the bankruptcy court's failure to file an order granting relief from the stay was dismissed as a reiteration of its earlier claim. Furthermore, AMA contended that the district court abused its discretion by not granting a six-month continuance for further discovery before ruling on the summary judgment. AMA's request, outlined in a 110-page memorandum, included the need to depose several individuals to support its affirmative defenses. However, the district court implicitly denied this request when it granted the Band's motion for summary judgment.

Under the deferential abuse of discretion standard, the court addressed Rule 56(f) of the Federal Rules of Civil Procedure, which allows for a continuance if a party opposing a motion cannot present essential facts due to a lack of discovery. The court emphasized that merely referencing a need for discovery in memoranda does not meet the requirements of Rule 56(f); rather, specific affidavits detailing the anticipated facts from the discovery are necessary. Failure to comply with this requirement justifies proceeding to summary judgment.

AMA did not submit an affidavit to support its continuance request as mandated by Rule 56(f) and Brae, merely stating its desire to depose four individuals to bolster its affirmative defenses without claiming these depositions would reveal material facts. Consequently, the district court acted within its discretion in denying AMA's further discovery request, as established in Over the Road Drivers, Inc. v. Transport Ins. Co. AMA argued that the court erred in granting the Band's summary judgment motion due to the presence of triable issues of material fact, which are addressed separately.

The Band sought summary judgment to declare the 1983 agreement null and void due to lack of approval by the Secretary or BIA as required by 25 U.S.C. Sec. 81. Citing A.K. Management Co. v. San Manuel Band of Mission Indians, the district court ruled the contract invalid due to this lack of approval. The order was reviewed de novo, focusing on whether genuine material facts remained and if the law was applied correctly.

AMA asserted there was a factual dispute regarding the necessity of BIA approval for the 1983 amended management agreement. However, such issues of statutory interpretation are legal questions, with courts resolving similar matters as questions of law rather than fact unless the contract is ambiguous. AMA did not claim ambiguity in the 1983 agreement, thus the question of BIA approval does not present factual disputes.

Additionally, AMA posited that there were factual questions regarding the BIA's review of the 1981 contract, asserting it was approved and exempt from Section 81 requirements. However, the validity of the 1981 agreement was not at issue in the Band's declaratory relief action, which focused solely on the 1983 agreement. The 1983 agreement explicitly nullified the 1981 agreement, stating it superseded and canceled the prior contract in all respects.

Allegations regarding the 1981 agreement are deemed immaterial to the summary judgment motion's issues. A 'material' fact is defined as one that impacts an element of a claim or defense, influenced by the applicable substantive law; irrelevant disputes do not obstruct summary judgment. AMA contends there are disputed facts about the impossibility of obtaining BIA review for the 1983 management agreement, citing a 1984 correspondence from the Department of the Interior, which indicated that prior to certain federal court rulings, BIA approval of such contracts was not deemed necessary unless they involved a lease. AMA argues that the doctrine of impossibility of performance supports the validity of the 1983 agreement, although this doctrine traditionally applies in contract scenarios where a contractual relationship exists. No cases have been cited by AMA or found that apply this doctrine absent such a relationship. Consequently, AMA has not shown that the doctrine is relevant to the summary judgment motion. Additionally, AMA claims that the prior rulings in Barona v. Duffy should prevent the Tribe and the District Court from asserting the invalidity of the 1983 contract; however, collateral estoppel does not apply in this case. In Barona, the Band sought an injunction against the enforcement of bingo-related laws by the Sheriff of San Diego County, asserting that the Sheriff lacked authority over Barona reservation operations.

Sheriff Duffy asserted in response to the Band's complaint that no case or controversy existed until the BIA approved the 1981 agreement, claiming it was void without such approval. Although the district court denied the Band's motion for a preliminary injunction, it ruled that the case satisfied the constitutional case or controversy requirement. AMA contends this implies the court found the 1981 agreement valid without needing BIA approval, but AMA's argument is speculative and lacks citation to evidence of any factual or legal determination made by the court regarding the agreement's validity.

Additionally, AMA argues that the conduct of the BIA, district court rulings, and the Tribe’s actions should estop them from declaring the contract invalid based on equitable estoppel. AMA claims it relied on BIA correspondence, the Barona v. Duffy ruling, and representations by the Tribe. However, the applicability of equitable estoppel to the 1981 agreement is not part of this proceeding, as the 1983 agreement was not submitted for BIA approval.

Finally, AMA raises questions about potential violations of its constitutional rights due to the BIA's determination and the district court's ruling on the contract's validity. However, AMA fails to identify material factual issues that would prevent summary judgment on these claims, which are primarily legal questions addressed in subsequent sections of the opinion. Regarding the 1983 agreement's validity under 25 U.S.C. § 81, AMA argues it's not subject to this statute as it does not pertain to Indian lands, but this argument is unsupported by case law, including A.K. Management Co. v. San Manuel Band of Mission Indians, which confirms that § 81 covers a wide range of Indian land transactions.

The Agreement grants AK exclusive rights to build and operate a bingo facility on tribal trust lands, while preventing the Band from encumbering the land, thus categorizing it as an "agreement relative to [Indian] lands" under 25 U.S.C. Sec. 81. This determination aligns with precedent set in *Wisconsin Winnebago Business Comm. v. Koberstein*, where similar agreements were deemed to fall under the same statute due to the contractor's absolute control over the facility and restrictions on the Indian party's rights to encumber the property. The 1983 agreement explicitly allows the contractor to finance, construct, manage, and operate the bingo facility while prohibiting the Band from conducting other bingo operations during the agreement's term, fulfilling the criteria established in earlier cases. Although AMA contends that the 1983 agreement provides the Band with significant oversight powers, including adherence to Band laws and approval for improvements and encumbrances, these provisions do not alter the essential control retained by AMA. The prior cases affirmed that such oversight does not negate the contractor's absolute control, which remains the critical factor in determining the agreement's status under Section 81. Furthermore, the argument that the Band is not prohibited from encumbering tribal trust land is dismissed, as the key elements of control and restriction on encumbrance were sufficient for classification under the statute. The interpretation of these agreements must consider Congressional intent and maintain a broad application of the existing Indian statutes.

The 1983 agreement between the Band and AMA is considered 'relative to [Indian] lands' under section 81, despite lacking a clause prohibiting the Band from encumbering its property. The agreement grants AMA exclusive rights to finance, construct, and manage the property, which satisfies the criteria of section 81, rendering the agreement null and void due to the absence of Bureau of Indian Affairs (BIA) approval. AMA argued that the district court should have deferred to the BIA’s interpretation from an October 5, 1981 letter, which stated that the agreement did not require BIA approval. However, the court was not obligated to accept the BIA's interpretation. This letter, limited to the need for BIA approval of the Barona Group Bingo Agreement, is inconsistent with established case law and the BIA's subsequent position, which presumes that all tribal gambling management contracts fall under section 81. The district court correctly determined that it was not bound by the BIA’s earlier interpretation. Additionally, AMA's claim that voiding the agreement would result in the Band taking property without just compensation under the Fifth and Fourteenth Amendments was rejected.

Tribes, as separate sovereign entities predating the Constitution, are not bound by constitutional limitations that apply to federal or state authorities, as established in *Santa Clara Pueblo v. Martinez* and reaffirmed in *Talton v. Mayes*, which ruled that the Fifth Amendment does not restrict tribal self-governance. Consequently, AMA's taking claim fails under this precedent. 

Regarding procedural due process, AMA argues it was denied such rights when the BIA did not approve the 1981 management agreement and when the district court denied its request for a continuance to conduct discovery. However, no violation occurred. Procedural due process requires constraints on government actions that deprive individuals of liberty or property interests, but any issues related to the 1981 agreement are irrelevant to the 1983 agreement in question, which was not submitted to the BIA. Furthermore, AMA had adequate notice and opportunity to contest the summary judgment motion, and the district court acted within its discretion in denying the continuance request.

In terms of retroactive application of 25 U.S.C. Sec. 81, AMA claims a due process violation when the district court nullified the contract with the Tribe based on a retroactive interpretation of prior BIA rulings. AMA cites *Anderson, Clayton & Co. v. United States*, arguing against retroactive enforcement of legislative regulations that lead to unjust outcomes. However, this case's principles do not apply here, as the BIA's correspondence was not a ruling that created a legal interest requiring enforcement. The district court was entitled to assess the contract's enforceability under Section 81 independently.

AMA argues that 25 U.S.C. § 81 violates the Equal Protection Clause of the Fourteenth Amendment by favoring the Tribe without a rational basis for protecting Indian interests. However, it is established that the Equal Protection Clause does not directly apply to the federal government; instead, an equal protection component exists within the Fifth Amendment's Due Process Clause, prohibiting the federal government from denying equal protection. The Supreme Court has affirmed that federal legislation concerning Indian tribes does not constitute impermissible racial classifications, as such laws treat Indians as members of quasi-sovereign tribal entities rather than as a distinct racial group. The Court applies the lowest scrutiny level to equal protection claims involving Indian legislation, allowing special treatment if it serves Congress's obligations to Indians. Section 81 aims to protect Indians from exploitative contracts and does not infringe upon the equal protection rights of non-Indians.

Regarding the doctrine of laches, AMA contends the district court erroneously granted summary judgment to the Band, claiming the Band was guilty of laches due to inexcusable delay. Laches requires proof of both inexcusable delay in asserting a known right and resulting prejudice. AMA failed to demonstrate either, as the Band filed the action shortly after a relevant decision on tribal bingo agreements, and AMA was not prejudiced by any perceived delay.

Lastly, AMA claims the district court erred by not allowing an opportunity to obtain BIA approval for the 1983 agreement before ruling on the summary judgment. AMA references the Koberstein case, where a tribe's agreement was submitted for BIA approval, which was deemed unnecessary. However, the context and details of the Koberstein case differ from AMA's situation.

The tribe initiated legal action to prevent a contractor from operating bingo games on its reservation, claiming the bingo agreement was invalid under 25 U.S.C. Sec. 81. The district court ruled in favor of the tribe, declaring the agreement void due to the lack of Bureau of Indian Affairs (BIA) approval. It allowed the contractor three months to rectify this by obtaining the necessary approval. During this period, the contractor submitted the agreement to the BIA, which subsequently disapproved it. The Seventh Circuit did not address the district court's decision to stay the judgment's effective date for the contractor's approval attempt.

In its opposition to the tribe's motion for summary judgment, the contractor requested a reasonable time to cure the defect by securing BIA approval. The district court implicitly denied this request when granting summary judgment to the tribe. The standard of review for the district court's refusal to continue the matter is abuse of discretion, meaning a higher court can only reverse if it finds a clear error in judgment.

On April 7, 1986, the Assistant Secretary for Indian Affairs issued a memorandum outlining guidelines for approving tribal bingo management agreements under section 81. The memorandum emphasized that such contracts should be presumed to fall under 25 U.S.C. Sec. 81 and noted that federal courts consistently rule these contracts void without BIA approval. The Assistant Secretary encouraged tribes to submit unapproved contracts for review and provided 31 guidelines for Area Directors to consider. Notably, guideline four states that contracts must have a fixed term not exceeding five years unless provisions for renegotiation are included. The 1983 agreement in question had a term of 25 years without any renegotiation provisions, thus failing to comply with the established guidelines.

The district court acted within its discretion by denying AMA's request for a continuance to obtain BIA approval, which would have been ultimately denied. The court's ruling is affirmed, as indicated by the original publication reference of 824 F.2d 710. In the context of the Garrett case, where defendants sought summary judgment and the plaintiff moved to compel document production, the trial court granted the summary judgment before addressing the discovery motion, which was deemed "moot." On appeal, the court noted this failure to assess the discovery request as an error. However, the current case differs because AMA's request for a continuance was included within its opposition to the Band's summary judgment motion, rather than as a separate motion requiring specific adjudication. Therefore, the district court did not fail to exercise its discretion, contrasting with the Garrett case. Additionally, the Band's memorandum for summary judgment referenced a tribal bingo management agreement with specific compliance and approval conditions, which were considered in prior rulings.