Court Dismisses Tribes’ Suit Giving California Card Rooms A Victory

Written By John Holden on November 16, 2021 - Last Updated on November 17, 2021

On October 28, 2021, the California Court of Appeal, Fourth Appellate District, Division One, based in San Diego, affirmed an appeal from the Superior Court of San Diego County. The decision allows California card rooms to continue offering the games that they have, in some cases, been offering for decades.

Tribes vs. California card rooms

The California Constitution grants the Tribes within the state the exclusive right to offer “casino-style banked games.” For those unfamiliar, the federal courts have previously defined a banked game as one in which the house has a stake in the game. An example would be blackjack.

Two California Tribes, affiliated businesses, and some individual tribal members filed a lawsuit against several California card rooms arguing that they were offering banked games, which would violate the Tribal exclusivity contained within the California Constitution.

The plaintiffs alleged a variety of tort-based claims. However, the trial court ruled that the plaintiffs lacked standing to bring the lawsuits. According to the trial court, the tribes and their business entities were not “persons” with standing to sue under the State’s unfair competition law, nor did they qualify as “private persons under the State’s public nuisance laws.

The issue on appeal?

The California appellate court argued that while the plaintiffs framed the issue on appeal as effectively whether Tribes have the right to “redress their grievances in California state courts….” The Appellate Court suggests that the claim is whether the plaintiff’s complaint contained allegations sufficient to establish that the plaintiffs had standing.

Standing

Establishing standing is a threshold issue to bring a lawsuit. In federal courts, we frequently discuss Article III standing, which derives from Article III of the Constitution and establishes that plaintiffs must have suffered an injury and that the defendant must have caused the harm. The relief that the plaintiff is seeking must redress the injury.

The Tribes argued on appeal in this case that the trial court’s decision to dismiss the claims for lack of standing was incorrect. Several Tribes who filed an amicus argued:

“[b]arring Indian tribes from court on all cases involving UCL claims without authority to do so is draconian at best and discriminatory at worst” (emphasis omitted).

The California Appellate Court articulated that the plaintiffs “failed to allege sufficient injury to establish their own standing to sue under the two statutes.”

Limited circumstances

The appellate decision devotes several pages to discussing federally-recognized Tribes’ sovereign status and the interplay between federal-state-tribal gaming regulation in the years following the Indian Gaming Regulatory Act (“IGRA”).

The decision highlights that Congress has periodically granted states like California jurisdiction over individual tribal members in limited circumstances. Still, according to the Appellate Court, that jurisdiction does not extend sufficiently far to include “arms of the tribes.”

A double-edged sword?

The Appellate Court suggests that while the plaintiffs cannot use state courts to redress their claims, they are similarly not subject to the jurisdiction of California courts if similar claims are asserted against them.

Unfair competition

In regards to the plaintiffs’ unfair competition claims, the Appellate Court states that the tribes are not persons within the meaning of the law. The law designates certain public officials who can bring a claim and “by a person who has suffered injury in fact and has lost money or property as a result of the unfair competition.”

The California Unfair Competition Law; however, defines who exactly is a person for purposes of the statute:

  • Natural persons
  • Corporations
  • Firms
  • Partnerships
  • Joint-stock companies
  • Associations
  • Other organizations of persons

The Appellate Court concluded that Tribes “are none of those things.” The Court relies on the federal recognition of the Tribes as sovereign nations to conclude that the plaintiffs do not fall within the enumerated groups.

The public nuisance claims

The plaintiffs’ other causes of action claim that the card rooms are creating a public nuisance. According to the Court of Appeal, public nuisance actions are “aimed at the protection and redress of community interests” (emphasis omitted).

However, the California Civil Code does not allow anyone to bring a public nuisance claim; instead, only a “private person” can bring such a claim.

Governmental entities, including the City of Los Angeles, previously tried to bring public nuisance claims but were unsuccessful because California Courts have ruled that “private person” does not include government actors.

The Court of Appeal stated succinctly:

“The Tribes, as sovereign domestic dependent nations, have inherent sovereign authority but only over their members and territories…Thus, the Tribes, just like any other governmental entity, would have authority to address any alleged nuisance presented by banked card games within their own communities. However, permitting the Tribes to seek redress of an alleged public harm that is not within their own jurisdiction, by bringing a public nuisance claim as a “private person,” would circumvent the clear jurisdictional limits on governmental entities set forth in Code of Civil Procedure section 731.”

What to make of this?

The decision is a victory for California’s card rooms as the status quo will remain.

Regarding the larger picture, the lawsuit features a good preview of the two primary opposing sides who are both pushing ballot measures over gaming expansion; the card rooms have at least one measure that would allow the card rooms the ability to offer banked card cards games and sports betting. Gaming expansion ballot measures face long odds in California and even longer odds when two opposing interest groups seek similar things.

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