California to return $36.2 million to Pauma Band after decade-long casino fight

By Kathleen McGuire Gilbert | Sep 21, 2016

SAN FRANCISCO – Gov. Jerry Brown recently signed a bill appropriating funds for a $36.2 million payment to the Pauma Band of Luiseño Mission Indians after a court found that the Pauma unfairly overpaid for the right to add slot machines to Casino Pauma.

The fight began approximately 10 years ago with a deal negotiated between the Pauma and then-Gov. Arnold Schwarzenegger.

In 1999, Schwarzenegger had negotiated a tribal casino compact with more than 60 tribes. The 1999 compact authorized a pool of licenses for all the gaming tribes, including the Pauma Band of Luiseño Mission Indians. However, the exact number of licenses in the agreement was poorly defined.

Circuit Judge Richard C. Tallman wrote in the court’s opinion: “Due to the limited time the tribes had to negotiate with the state, the parties agreed to the 1999 Compact without ever discussing their radically different interpretations of how many licenses the statewide license pool formula actually produced.”

This ultimately led to several lawsuits, including Pauma Band of Luiseño Mission Indians of the Pauma & Yuima Reservation v. State of California, et al.

The Pauma had requested 750 licenses from that pool but received only 200, and by December 2003, the state had told tribes that the pool was exhausted. The following year, the Pauma were planning to build a casino to replace their existing tent facility and needed more licenses to do so; the state would not allow them the additional licenses without a new agreement.

Under this new compact in 2004, the tribe was required to pay the state $7.75 million annually compared to their previous annual payments of $315,000, an increase of roughly 2,400 percent. In October 2015, the 9th Circuit Court of Appeals ruled that the state had misled the tribe and that they would be permitted to return to the terms of the 1999 compact. Cheryl Williams, who represented the Pauma, told the San Diego Union that the decision would also save the tribe at least $7.4 million annually until 2022. 

Chief District Judge John A. Jarvey disagreed with the claim of misrepresentation of the number of licenses, writing in his dissenting opinion that the state of California did not misrepresent the facts by interpreting the 1999 compact’s terms differently than a later court.

The decision was a major victory for the tribal gaming industry. Gov. Brown’s signing of bill SB1187 ensures prompt repayment of the funds to the Pauma.

“California is the largest jurisdiction for tribal gaming in the nation,” Gareth Lacy, deputy press secretary in the governor’s office, told the Northern California Record.

According to Gaming Statistics ’15, a report published by the accounting firm RubinBrown LLP, tribal gaming is a $28 billion industry, and 61 of the 240 tribes operating casinos in the U.S. are located in California (2013-2014 data). California has more American Indian-run casinos than any other state, with only Oklahoma approaching a similar number.

In 2016 alone, the state of California has negotiated 11 compacts with tribal governments.

“One fourth of all revenue generated by tribal gaming facilities in the nation is produced by tribes operating pursuant to compacts negotiated with the state of California,” Lacy said.

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