UNITED STATES ex rel. MAYNARD BERNARD,
Plaintiff,
v.
CASINO MAGIC CORP.,
a Minnesota Corporation,
and Casino Magic American Corp., a Minnesota Corporation.
Defendants.
[1999 DSD 21]
United States District Court
District of South Dakota - Northern Division
CIV. 98-1033
MEMORANDUM OPINION AND ORDER
DENYING MOTION TO DISMISS
Donald R. Shultz, Jay C. Shultz, Robert Gusinsky
Lynn, Jackson, Shultz & Lebrun, Rapid City, SD
Attorneys for Plaintiff.
Roberto Antonio Lange, Keith Alan Gauer
Davenport, Evans, Hurwitz & Smith, Sioux Falls, SD
Mark J. Briol, Scott A. Benson, Briol & Associates, Minneapolis, MN
Dated July 13, 1999
Richard H. Battey, U. S. Senior District Judge
BACKGROUND
[¶1] On October 13, 1998, Maynard Bernard ("Bernard") filed this action as a qui tam (fn1) proceeding pursuant to both 25 USC § 81 and the Indian Gaming Regulatory Act ("the IGRA"), 25 USC § 2711. Bernard is an enrolled member of the Sisseton-Wahpeton Sioux Tribe ("Tribe") and brings this action as relator in the name of the United States. (fn2) The Tribe is not a party to these proceedings.
[¶2] On November 23, 1998, defendants, Casino Magic Corporation and Casino Magic American Corporation ("Casino Magic"), filed a motion to dismiss plaintiff's complaint (Docket #7) pursuant to Fed. R. Civ. P. 12(b)(6) and 19(b). Plaintiff has responded and Casino Magic has replied. This Court has jurisdiction pursuant to 28 USC § 1331.
[¶3] A brief narrative of the alleged facts follows. In 1996, the Tribe and Casino Magic executed a Consulting Agreement (and several other collateral contracts) for the development and/or operation of a number of Class III gaming casinos located in North and South Dakota. See Exhibit A, Complaint (Consulting Agreement). Though relations between the Tribe and Casino Magic were initially amiable, the Tribe later filed suit in Tribal Court alleging, in part, that Casino Magic had failed to perform its obligations under the terms of the Consulting Agreement. See Exhibit 5, Defendant's Motion to Dismiss (Tribal Court Complaint at ¶ 28-30). (fn3) The Tribe also asserted its right to terminate its own obligation under the Consulting Agreement due to the alleged defaults. Id.
[¶4] In the instant suit, plaintiff alleges that the Consulting Agreement and related documents, when considered as a whole, comprise a management contract requiring the approval of the National Indian Gaming Commission ("NIGC"). See Exhibit B, Complaint (letter from NIGC). Because the Tribe and Casino Magic failed to obtain NIGC approval of the contracts, plaintiff claims that they are void under 25 USC § 81. Additionally, plaintiff seeks the return of all money the Tribe has paid to Casino Magic under the terms of these contracts; one-half thereof to be paid to Bernard and the other half to be paid into the treasury of the United States in trust for the use of the Tribe.
MOTION TO DISMISS STANDARD
[¶5] A plaintiff's claim should not be dismissed for failure to state a claim or for lack of subject matter jurisdiction unless it is patently clear that the plaintiff can prove no set of facts in support of its claim which would entitle it to relief. McCormack v. Citibank, N.A., 979 F2d 643, 646 (8th Cir. 1992); Murphy v. Lancaster, 960 F2d 746, 748 (8th Cir. 1992). For purposes of a motion to dismiss, all well-pleaded factual allegations contained in plaintiff's complaint are taken as true and all reasonable inferences must be construed in favor of the plaintiff. McCormack, 979 F2d at 646; Murphy, 960 F2d at 748; Morton v. Becker, 793 F2d 185, 187 (8th Cir. 1986) (citing United States v. Mississippi, 380 U.S. 128, 143, 85 S. Ct. 808, 816, 13 LEd2d 717 (1965)).
[¶6] Because a motion to dismiss for failure to state a claim tests the formal sufficiency of the plaintiff's statement of a claim for relief, as opposed to the merits of such a claim, motions pursuant to Rule 12(b)(6) must be read in light of Fed. R. Civ. P. 8(a), which sets forth the requirements for pleading a claim. 5A Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 1356, at 294-96. Rule 8(a) states in pertinent part that "[a] pleading which sets forth a claim for relief . . . shall contain . . . a short and plain statement of the claim showing that the pleader is entitled to relief . . . ." Thus, the issue presented by Casino Magic's motion is whether, taking all well-pleaded factual allegations in the complaint to be true, plaintiff has succeeded in stating a claim that would entitle it to relief.
DISCUSSION
[¶7] As noted above, Bernard has filed this action on behalf of the United States pursuant to 25 USC § 81. The relevant part of this statute states:
No agreement shall be made by any person with any tribe of Indians, or individual Indian citizens of the United States, for the payment or delivery of any money or other thing of value, in present or in prospective, or for the granting or procuring any privilege to him, or any other person in consideration of services for said Indians relative to their lands, or to any claims growing out of, or in reference to annuities, installments, or other moneys, claims, demands, or thing, under law . . . unless such contract or agreement be executed as follows:
. . .
Second, it shall bear the approval of the Secretary of the Interior and the Commissioner of Indian Affairs indorsed upon it.
. . .
All contracts or agreements made in violation of this section shall be null and void, and all money or other thing of value paid to any person by any Indian or tribe, or any one else, for or on his or their behalf, on account of such services, in excess of the amount approved by the Commissioner and Secretary for such services, may be recovered by suit in the name of the United States, regardless of the amount in controversy; and one-half thereof shall be paid to the person into the Treasury for the use of the Indian or tribe or for whom it was so paid.
25 USC § 81. Congress enacted this statute with the intent of protecting Indian tribes from improvident and unconscionable contracts. See In re Sanborn, 148 U.S. 222, 13 S. Ct. 577,
37 L. Ed. 429 (1893). It has often been called a "bounty hunter's statute" because it authorizes "any person to sue to declare an Indian contract void and if he succeeds to be rewarded with half the money that the contractor had received under the contract." United States ex rel. Mosay v. Buffalo Bros. Management, Inc., 20 F3d 739, 741 (7th Cir. 1994).
[¶8] This statute remained the main source of federal regulatory authority over Indian contracts for over a hundred years. By 1988, however, Congress became concerned with the rapid growth of Indian gaming activities and its potential for infiltration by organized crime or other criminal elements. See S. Rep. No. 446, 100th Cong., 2d Sess. at 5, (1978), reprinted in 1988 USC C.A.N. 3071, 3075 (statement of policy). In response to this perceived threat, Congress enacted the Indian Gaming Regulatory Act, 25 USC § 2701 et seq. The IGRA authorized the creation of a three-member independent agency within the Department of Interior (the NIGC) whose purpose was to monitor and regulate all aspects of Indian gaming. See
25 USC § 2704.
[¶9] Under the IGRA, authority for the approval of a class of contracts termed "casino management contracts" and their collateral agreements was transferred from the Secretary of the Interior to the NIGC. See 25 USC § 2711(h); 25 CFR § 502.5. Failure to submit these contracts for the approval of the NIGC can subject violators to a host of potential civil penalties, as well as a possible qui tam suit under 25 USC § 81.
[¶10] In this case, the Court assumes for the purposes of resolving Casino Magic's motion to dismiss that the contracts at issue (the consulting agreement and collateral contracts) do comprise a management contract not properly approved by the NIGC. Casino Magic argues, nonetheless, that even if these contracts are subject to the approval of the NIGC, plaintiff's suit still must be dismissed. Specifically, Casino Magic asserts (1) that plaintiff lacks standing to bring a qui tam action; and (2) that the Tribe is an indispensable party who has not and cannot be joined in this action, thereby requiring dismissal of the case.
[¶11] Lack of Standing
[¶12] Casino Magic contends that Bernard lacks standing (4) based upon the following grounds: (1) Bernard's failure to allege an actual injury to himself or to his interests; (2) qui tam is unavailable in this instance because the contracts at issue do not comprise a management contract requiring federal approval; and (3) the qui tam provision of § 81 may not be used to void contracts now governed by the IGRA. Because the issue of standing is a threshold question in every federal case, Warth v. Seldin, 422 U.S. 490, 498-502, 95 S. Ct. 2197, 2204-2207, 45 LEd2d 343 (1975), this Court has carefully evaluated each of Casino Magic's arguments and concludes they are without merit.
[¶13] As to Casino Magic's first argument, Bernard need not assert actual injury to himself or his interests to fulfill the requirements of standing. Rather, as a tribal member suing in qui tam, Bernard has standing based upon the government's interest in this action, not on his own. It is enough that the United States, as the entity on behalf and in whose name this suit was brought, has suffered an injury-in-fact. See United States ex rel. Hall v. Tribal Dev. Corp., 49 F3d 1208, 1213-14 (7th Cir. 1994) (observing that to require "an additional showing of injury on the part of the qui tam relator would be an analytical redundancy"); see also United States ex rel. Kreindler v. United Technologies, 985 F2d 1148, 1154 (2d. Cir.), cert. denied, 508 U.S. 973, 113 S. Ct. 2962, 125 LEd2d 663 (1993) (noting that in a qui tam action "plaintiff sues on behalf of and in the name of the government and invokes the standing of the government resulting from the fraud or injury") (analyzed under qui tam authorized by the False Claims Act, 31 USC §§ 3729 to 3733).
[¶14] Casino Magic next argues that plaintiff lacks standing in qui tam because the contracts at issue, taken together, do not comprise a "management contract" requiring NIGC approval. While this contention may or may not be true, the Court must assume for purposes of Casino Magic's motion to dismiss that the contract at issue is a management contract not properly approved by the NIGC. Accordingly, this argument is also without merit.
[¶15] Finally, Casino Magic argues that the qui tam provision of § 81 is not applicable to contracts now governed by the Indian Gaming Regulatory Act and therefore, only the NIGC (not a qui tam plaintiff) has the ability to enforce agency approval of casino management contracts. This argument is also unavailing. An exhaustive search of the case law surrounding this question has failed to unearth a single instance in which a court has dismissed a qui tam plaintiff on this basis. While at least one circuit has speculated that qui tam may no longer be available to void contracts under the IGRA, (5) this assertion is unsupported by the comments of the NIGC itself.
[¶16] On August 19, 1992, the NIGC published its proposed regulations covering management contracts requirements and procedures in the Federal Register. In its preamble to the proposed rules, the NIGC invited public comment. A summary of the NIGC's response to these comments was subsequently published in the Federal Register along with the final form of the rules. See Management Contract Requirements and Procedures Under the Indian Gaming Regulatory Act, General Comments, 58 Fed. Reg. 5818 (1993). In one comment and response summarized by the NIGC, the applicability of section 81 under the IGRA was addressed:
Another commenter, arguing that Section 81 remains in full force and effect, including the citizen suit provision (6) and that the Commission has been substituted for the Secretary in carrying out continuingly valid provisions of Section 81, urged the Commission to include a statement to that effect.
Response: The Commission agrees with the commenter that section 81 remains in full force and effect, including the citizen suit provision. The IGRA contains no express repeal of section 81.
Id. (emphasis added). It has long been recognized that courts should accord considerable weight to an agency's construction of a statutory scheme it is entrusted to administer. See Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S. Ct. 2778, 81 LEd2d 694 (1984). Furthermore, while the authority to approve casino management contracts has been transferred from the Secretary of the Interior to the NIGC under the IGRA, the purpose behind allowing qui tam actions remains the same -- to encourage private individuals to bring suit in order to assist the executive branch in its enforcement of the law, the violation of which affects the government's ability to protect Indian tribe's from improvident and unconscionable contracts. In view of these principles, Bernard does have standing to bring this qui tam action on behalf of the United States.
[¶17] The Tribe as an Indispensable Party
[¶18] Having dispensed with the issue of standing, this Court next considers Casino Magic's argument that the Tribe is an indispensable party to this action who has not and cannot be joined, thereby requiring dismissal of the case pursuant to Fed. R. Civ. P. 19(b).
[¶19] The Eighth Circuit has stated that "[u]nder Federal Rule of Civil Procedure 19, a nonparty is indispensable to an action if (1) the nonparty is necessary; (2) the nonparty cannot be joined; and (3) the action cannot continue in equity and good conscience without that nonparty." United States ex rel. Steele v. Turn Key Gaming, Inc., 135 F3d 1249, 1251 (8th Cir. 1998) (citing Pembina Treaty Comm. v. Lujan, 980 F2d 543, 544-45 (8th Cir. 1992)).
[¶20] All of the facts necessary to establish the first and second factors outlined above appear to be present in this case. There is little doubt that the Tribe is a necessary party to this action within the meaning of Fed. R. Civ. P. 19(a)(2)(i). After all, the challenged contracts are between the Tribe and Casino Magic. Any interest the Tribe might have in the contracts would be directly affected by a judgment declaring the contracts void and unlawful. See United States ex rel. Hall v. Tribal Dev. Corp., 825 F. Supp. 1422, 1428 (D. Minn. 1993) (citing Enterprise Mgmt. Consultants, Inc. v. United States ex rel. Hodel, 883 F2d 890, 893 (10th Cir. 1989)). Further, the Tribe cannot be joined involuntarily because it is entitled to sovereign immunity, and there has been no indication that this immunity has been or would be waived. See Santa Clara Pueblo v. Martinez, 436 U.S. 49, 58, 98 S. Ct. 1670, 1677, 56 LEd2d 106 (1978) (cited in Tribal Dev. Corp., 825 F. Supp. at 1428-29).
[¶21] Finding that a party is necessary and cannot be joined does not end the Court's inquiry under Rule 19. This Court must next decide whether in equity and good conscience the action should proceed without the nonparty's presence. See Fed. R. Civ. P. 19(b). To assist the Court in making this determination, Rule 19 provides the following factors for consideration: (7)
[F]irst, to what extent a judgment rendered in the person's absence might be prejudicial to the person or those already parties; second, the extent to which, by protective provisions in the judgment, by the shaping of relief, or other measures, the prejudice can be lessened or avoided; third, whether a judgment rendered in the persons's absence will be adequate; fourth, whether the plaintiff will have an adequate remedy if the action is dismissed for nonjoinder.
Fed. R. Civ. P. 19(b). The first factor of Rule 19(b) requires the Court to consider "whether the nonparty would be 'adversely affected in a practical sense, and if so, would the prejudice be immediate and serious, or remote and minor.'" Turn Key Gaming Inc., 135 F3d at 1251 (quoting Fed. R. Civ. P. 19 advisory committee notes to 1966 amendments).
[¶22] While parties to contracts are often deemed indispensable under Rule 19, (8) such an outcome is not guaranteed. In the instant case, the qui tam plaintiff is not seeking to void a contract which is heartily supported by both contracting parties. See Buffalo Bros. Management, Inc., 20 F3d at 742-43 (reasoning that there may be some limits on the ability of a relator-plaintiff to challenge a contract "in the teeth of" the tribe's support for the contract); see also Turn Key Gaming Inc., 135 F3d at 1251 (noting that "[i]t is possible that the Tribe would be prejudiced by not being joined to this suit if it sought to maintain the validity of the . . . contracts, or even if the Tribe's position was unclear"). To the contrary, the Tribe has already terminated its obligations under the Consulting Agreement and is seeking damages for Casino Magic's alleged default. See Exhibit 5, Defendant's Motion to Dismiss (Tribal Court Complaint at ¶ 30).
[¶23] Given the Tribe's lack of support regarding the contracts in question, this Court does not believe that this action would prejudice the Tribe in a "practical sense." Rather, a judgment invalidating the contracts would actually end the matter favorably for the Tribe because it would simultaneously eliminate the Tribe's obligations under the terms of the contract and result in the Tribe's receipt of one-half of any money recovered from Casino Magic. See Fidelity & Deposit Co. v. City of Sheboygan Falls, 713 F2d 1261, 1268 (7th Cir. 1983) (reasoning that a nonparty contractor is not always indispensable because so long as the party to the action vigorously litigates the nonparty's position the nonparty is protected) (cited in Turn Key Gaming Inc., 135 F3d at 1251).
[¶24] As to the second and third guiding factor found in Fed. R. Civ. P. 19(b), both militate against dismissal. The second factor requires the Court to determine the extent which, by protective provisions in the judgment, by the shaping of relief, or other measures, the prejudice to the Tribe can be lessened or avoided. This question is mooted, however, given the Court's conclusion that any prejudice to the Tribe is both remote and minor.
[¶25] The third factor compels the Court to ask whether a judgment rendered in absence of the Tribe would be adequate to protect the public and court's interest in "settling disputes by wholes, whenever possible . . . ." Provident Tradesmens Bank & Trust Co., 390 U. S. at 111, 88 S. Ct. at 739. In this case, plaintiff seeks, in part, a declaration that the contracts between the Tribe and Casino Magic are invalid for a lack of NIGC approval. This Court is satisfied that such a determination would signal the end to litigation surrounding these contracts and would not result in the piecemeal litigation of concern in Provident.
[¶26] Finally, the fourth factor asks whether the plaintiff will have an alternative remedy if the case were dismissed for nonjoinder. This factor weighs heavily against dismissal. While the true plaintiff in this case is the United States, Bernard brings this action on behalf of the United States pursuant to 25 USC § 81. In enacting this qui tam statute, Congress expressly enlisted private parties to act as agents for the government. Hence, each relator plaintiff is the very person intended by Congress to maintain these suits. If this case were dismissed due to nonjoinder, Bernard would have no other forum in which to challenged the contracts at issue. Such a result would do violence to the policy of qui tam. Given that the prejudice to the Tribe under these facts is both remote and minor and the lack of alternative forum available to the plaintiff, as well as the other factors discussed above, the Court concludes that the Tribe (though a necessary party) is not an indispensable party as provided for in Fed. R. Civ. P. 19(b).
CONCLUSION
[¶27] Because plaintiff meets the requisite elements of standing and in view of this Court's conclusion that the Tribe is not an indispensable party, it is hereby
[¶28] ORDERED that Casino Magic's motion to dismiss (Docket #7) is denied.
[¶29] IT IS FURTHER ORDERED that plaintiff's request for oral argument is denied.
1. "Qui tam" is short for "qui tam pro domino rege quam pro se imposo sequitur," which in English means "who brings this action as well for the king as for himself." United States ex rel Kelly v. Boeing Co., 9 F3d 743, 746 n.3 (9th Cir. 1993) (quoting Bass Anglers Sportsman's Soc'y of America v. U.S. Plywood-Champion Papers, Inc., 324 F. Supp. 302, 305 (S.D. Tex. 1971), cert. denied, 510 U.S. 1140, 114 S. Ct. 1125, 127 LEd2d 433 (1994)).
2. Because this is an action in qui tam, it is important to remember that Bernard is not the "plaintiff" in this matter. In a qui tam suit "it is the government, and not the individual relator, who has suffered the injury resulting from the violation of the underlying law and is therefore the real plaintiff in the action." United States ex rel. Hall v. Tribal Dev. Corp., 49 F3d 1208, 1212 (7th Cir. 1995) (footnote omitted).
3. While the Court is aware that matters outside the pleadings are not typically to be considered at the motion to dismiss stage, a court may look beyond the plaintiff's complaint to matters of public record (such as court documents) without converting a motion to dismiss into a motion for summary judgment. See Henson v. CSC Credit Services, 29 F3d 280 (7th Cir. 1994). In this case, the Court has examined and taken notice of the Tribal Court document presented in Exhibit 5 of Defendant's Motion to Dismiss.
4. Standing requires that plaintiff show (1) that he personally suffers some actual or threatened injury, Valley Forge Christian College v. Americans United for Separation of Church & State, Inc., 454 U.S. 464, 472, 102 S. Ct. 752, 758, 70 LEd2d 700 (1982); (2) that the injury is fairly traceable to the defendant's putatively illegal actions, Simon v. Eastern Kentucky Welfare Rights Org., 426 U.S. 26, 41, 96 S. Ct. 1917, 1926, 48 LEd2d 450 (1976); and (3) that the injury is likely to be redressed by a favorable decision. Id. at 38, 96 S. Ct. at 1924.
5. In Buffalo Bros. Management, Inc., 20 F3d at 743, the Seventh Circuit Court of Appeals questioned the applicability of section 81 to contracts governed under the IGRA noting: "[w]e doubt that the qui tam provision of section 81 remains applicable to contracts now governed by the Indian Gaming Regulatory Act." See also United States ex rel. Hall v. Tribal Dev. Corp., 49 F3d 1208 (7th Cir. 1994) (concurring opinion).
6. The term "citizen suit" is often used interchangeably with the term "qui tam." See United States ex rel. Yankton Sioux Tribe v. Gambler's Supply, Inc., 925 F. Supp. 658, 668 (D.S.D. 1996) (noting that "[q]ui tam actions are frequently referred to as 'citizen suits' and the parties bringing these enforcement actions are referred to as 'private attorneys general'") (citing Evan Caminker, "The Constitutionality of Qui Tam Actions," 99 Yale L. J. 341, 342-43 (1989)).
7. In Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102, 109-11, 88 S. Ct. 733, 737-39, 19 LEd2d 936 (1968), the Supreme Court suggested that these factors reflect four "interests" that must be considered in each case to determine whether, in equity and good conscience, the court should proceed without a party whose absence from the litigation is compelled: First, the plaintiff has an interest in having a forum. Second, the defendant has an interest in avoiding multiple litigation, or inconsistent relief, or sole responsibility for a liability he shares with another. Third, there is the interest of the outsider whom it would have been desirable to join. Fourth, there remains the interest of the courts and the public in complete, consistent, and efficient settlement of controversies.
8. See, e.g., Fluent v. Salamanca Indian Lease Auth., 928 F2d 542, 547 (2d Cir. 1991); Lomayaktewa v. Hathaway, 520 F2d 1324, 1325 (9th Cir. 1975).
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