California | Compacts | Litigation

Pauma Band wins dispute over $36.2M in gaming compact overpayments

Monday, October 26, 2015

The Casino Pauma in Pauma Valley, California. Photo from Facebook

The state of California owes $36.2 million to the Pauma Band of Luiseño Indians for misleading the tribe, the 9th Circuit Court of Appeals ruled on Monday.

A 1999 compact authorized the tribe to offer up to 2,000 Class III devices at the Casino Pauma. But the state refused to allow the tribe to reach that limit so a new agreement was reached in 2004 that included a higher revenue sharing rate in exchange for more machines.

The state, however, kept key information from the tribe, the 9th Circuit determined. There were in fact enough machines to go around, Judge Richard C. Tallman wrote, yet the tribe still wasn't able to add more to its facility.

"Pauma continued paying California the exorbitantly expensive 2004 amendment prices for the same machines it acquired under the 1999 compact provisions," Tallman wrote in the 2-1 decision. "Under the original 1999 compact, Pauma paid $315,000 annually for the 1,050 machines. Under the 2004 amendment, Pauma paid $7.75 million annually."

Indianz.Com SoundCloud: 9th Circuit Court of Appeals Oral Arguments in Pauma Band of Luiseno Mission v. State of California

As a result, the tribe is allowed to go back to the terms of the 1999 compact, Tallman wrote. And the state must refund the overpayments for the five years the tribe was forced to operate under the "expensive" compact, the majority said.

"Since this misrepresentation induced Pauma to enter into the much more expensive 2004 amendment, the tribe is entitled to rescission of the amendment and restitution for the $36.2 million in overpayments made to the state," Tallman wrote.

Judge John A. Jarvey dissented with his colleagues on two major points. The state's mistake in calculating how many machines were available to tribes does not rise to misrepresentation and the compact does not waive the state's sovereign immunity, he said.

The disagreement could lead the state to ask for a rehearing before an en banc, or larger, panel of judges on the 9th Circuit. Or the state could take the case to the U.S. Supreme Court.

Turtle Talk has posted briefs from the case, Pauma Band of Luiseno Mission v. State of California.

9th Circuit Decision:
Pauma Band of Luiseno Mission v. State of California (October 26, 2015)