On June 18, 2012, the Supreme Court ruled 8-1 that David Patchak, an individual, has standing and can file suit against the government's decision to take land into trust on behalf of a Native American tribe. The court offered no conclusions regarding the merits of Patchak's case; it simply allows the case to proceed in the lower courts. Fitch believes this ruling has several key credit implications for the gaming sector:
--It is likely to result in increased challenges from anti-gaming interests regarding land-into-trust decisions for tribes, as it lengthens the statute of limitations on judicial review to six years from 30 days;
--Raising capital for Native American casino projects could become more difficult/expensive, as investors are likely to have heightened concern about potential challenges regarding land-into-trust decisions;
--Casino operators that face the possibility of increased competition from potential casino projects tied to land-into-trust decisions could benefit from a longer regulatory process.
BACKGROUND
Patchak brought the suit to challenge the Department of Interior (DOI) Secretary's decision to take land into trust for the Match-E-Be-Nash-She-Wish Band of Pottawatomi Indians in Michigan (Gun Lake Tribe) using the Administrative Procedures Act (APA), which allows the government to be sued if it fails to follow proper procedures, thereby waiving its sovereign immunity.
Patchak specifically cited that the Gun Lake Tribe was not recognized as of 1934 and therefore per the Indian Reorganization Act of 1934 (IRA), the Secretary could not take the land into trust (suit was filed before the 2009 Carcieri decision). The APA stipulates that other acts may void the sovereign immunity waiver provided by APA. The Gun Lake Tribe and the Government argued that the language in the Quiet Title Act (QTA) provides such language, citing the section that prohibits suits involving Indian land.
TIMELINE
--August 1999: Tribe recognized;
--August 2001: Tribe petitioned to have land taken into trust;
--May 2005: DOI Secretary announced the decision to take land into trust;
--June 2005: MichGO (an anti-gaming interest group) files suit against the decision, citing a negative impact on the local community and failure to comply with the trust land exceptions under the Indian Gaming Regulatory Act of 1988 (IGRA);
--August 2008: Patchak files suit invoking IRA, stating that the Secretary could not take land into trust for tribes not recognized as of 1934;
--January 2009: Supreme Court denies MichGO's final appeal and DOI Secretary takes land into trust;
--February 2009: Supreme Court ruled on Carcieri. Secretary asks court to dismiss the Patchak case based on Indian trust land carveout in the QTA;
--August 2009: District court dismissed Patchak case on grounds that he had no prudential standing pursuant to IRA;
--September 2009: Gun Lake Tribe breaks ground on casino;
--January 2011: U.S. Court of Appeals in D.C. overturns the district court decision regarding the prudential standing and remanded the case back to the district court;
--December 2011: Supreme Court accepts petition from the Gun Lake Tribe and the Government to review the prudential standing question.
June 18, 2012 Ruling
The majority opinion disregarded the section in the QTA excluding Indian trust land from suits arguing that QTA specifically applies to disputes in which the plaintiff is arguing for an interest in the land. Patchak's suit does not dispute land ownership (the designated purpose of the land would cause 'anesthetic, socioeconomic and environmental problems'). The court also stated that Patchak has prudential standing, citing that the test should not be 'especially demanding'. The decision does not rule on the merits of Patchak's case.
The one dissenting opinion was provided by Judge Sotomayor. Her argument is centered on prior case precedents and the perceived intention of Congress when writing the carveout for Indian trust land in QTA.
CONCLUSIONS
Judge Sotomayor made the analysis that the June 18 decision will create three difficulties for courts and the Government. One of her concerns affects gaming. She noted that parties seeking to challenge land-into-trust decisions had only a 30-day window to seek judicial review prior to this decision, but will now have the ordinary six-year statute of limitations granted within the APA. This results in an additional challenge to an already cumbersome process for tribes seeking to take land into trust for gaming.
Tribes with notable potential projects that could be impacted include the Cowlitz Tribe in Washington, Shinnecock Tribe in New York, Mashpee Wampanoag in Massachusetts and Graton Rancheria and North Fork Rancheria in California.
Therefore, if the Patchak decision leads to additional challenges, it would result in a modest longer-term benefit to gaming operations near the Oregon/Washington border, in Atlantic City and Connecticut, as well as the Sacramento/San Francisco and Fresno regions in California. Additionally, this decision could complicate the Mashpee Wampanoag's standing with respect to a Massachusetts gaming license, as the tribe needs to have a compact signed with the governor by July 31, 2012 or the license could become available.
The decision may also embolden additional parties to step forward to challenge land-into-trust decisions that took place within the last six years. Major Native American gaming enterprises that were established on land taken into trust since 2006 include Snoqualmie Tribe's Snoqualmie Casino (land taken into trust October 2006) and Nottawaseppi Huron Band of Potawatomi's Firekeepers Casino (December 2006).
Of course it remains to be seen if Patchak prevails in court.
Fitch discusses the topic in significant detail in Native American Gaming Insights - Off-Reservation Gaming: Three Years into the Obama Administration (dated Feb. 10, 2012). Click the link below to access the report.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Native American Gaming Insights -- Off-Reservation Gaming: Three Years into the Obama Administration' dated Feb. 10, 2012.
Applicable Criteria and Related Research:
Native American Gaming Insights -- Off-Reservation Gaming: Three Years into the Obama Administration
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=669850
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