## Facts

- Federally recognized Indian tribes sought to conduct class III gaming, which IGRA permits only under a tribal–state compact negotiated in good faith.
- California, through the Governor, negotiated a standard-form compact with 58 tribes known as the “Davis Compact.”
- The Davis Compact granted signatory tribes exclusive rights to operate certain class III gaming in California, limiting non-Indian competition.
- In exchange, the compact required: (1) payments to a Revenue Sharing Trust Fund benefiting non-gaming or limited-gaming tribes, (2) payments to a Special Distribution Fund for state regulatory costs and gaming-related public programs, and (3) adoption of a Tribal Labor Relations Ordinance governing labor organization and employee protections at casinos.
- Fifty-seven tribes signed the Davis Compact; the Coyote Valley Band did not and sued, alleging California failed to negotiate in good faith under IGRA.
- The tribe contended California acted in bad faith by conditioning a compact on revenue sharing and labor provisions, and by effectively imposing an unlawful tax or assessment on tribal gaming revenues.
- The district court entered judgment for California; the tribe appealed in consolidated proceedings.

## Issues

1. Whether California failed to negotiate in good faith under IGRA by insisting that a compact include revenue-sharing payments to the RSTF and SDF.
2. Whether the revenue-sharing provisions constituted prohibited state “taxation” of tribal gaming revenues, triggering a statutory presumption of bad faith.
3. Whether requiring a tribal labor relations framework was outside IGRA’s permissible subjects of negotiation and therefore evidence of bad faith.

## Decision

- The Ninth Circuit affirmed the judgment for California.
- The court held California negotiated in good faith under IGRA.
- The court held the Davis Compact’s revenue-sharing provisions were not per se unlawful and, in context, were not prohibited state taxation.
- The court held labor-relations provisions were permissible compact subjects as directly related to gaming operations.
- The court concluded the tribe did not establish conduct amounting to bad faith when the negotiations were assessed as a whole.

## Legal Principles

- IGRA’s good-faith duty permits bargaining over compact terms so long as the state does not insist on terms forbidden by IGRA or refuse to consider reasonable proposals.
- Revenue sharing may be permissible under IGRA when it is part of a negotiated exchange for concrete benefits conferred by the state, including exclusivity in class III gaming markets and a stable regulatory framework.
- Payments negotiated as part of a bilateral compact bargain are not necessarily a prohibited “tax, fee, charge, or other assessment” under IGRA, and do not automatically create a presumption of bad faith.
- IGRA’s catch-all authorization for “other subjects that are directly related to the operation of gaming activities” is broad enough to include labor-relations rules governing casino employment conditions and organizing procedures.
- Good faith is evaluated under the totality of the negotiations, including whether the state engaged in ongoing bargaining and whether demanded terms are tied to gaming-related purposes.

## Conclusion

The Ninth Circuit held that California satisfied IGRA’s good-faith negotiation obligation because the challenged revenue-sharing and labor-relations terms were permissible compact subjects and, given the exclusivity and other benefits offered to tribes, did not amount to prohibited state taxation or per se bad faith.


In re Gaming Related Cases, 331 F.3d 1094 (9th Cir. 2003)