UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
CITY OF DULUTH
Plaintiff,
v.
Civil Action No. 13-246 (CKK)
NATIONAL INDIAN GAMING
COMMISSION, et al.
Defendants.
MEMORANDUM OPINION
(December 18, 2013)
Plaintiff City of Duluth (“the City” or “Plaintiff”) brings this action against Defendants
the National Indian Gaming Commission and Jonodev Chaudhuri, in his official capacity as the
Acting Chairman of the National Indian Gaming Commission 1 (collectively “Defendants”),
asserting claims under the Administrative Procedure Act. Currently before the Court is
Defendants’ [8] Motion to Dismiss. Upon consideration of the pleadings 2, the relevant legal
authorities, and the record as a whole, the Court DENIES Defendants’ [8] Motion to Dismiss.
I. BACKGROUND
A. Factual Background
The following facts are taken from the Plaintiff’s Complaint and must be accepted as true
for purposes of a motion to dismiss. See Atherton v. D.C. Office of the Mayor, 567 F.3d 672, 681
1
Pursuant to Fed. R. Civ. P. 25(d), Jonodev Chaudhuri has been automatically substituted
for Tracie L. Stevens, whom the parties’ pleadings name as Defendant.
2
Compl., ECF No. [1]; Defs.’ Mot. to Dismiss, ECF No. [8] (“Defs.’ MTD”); Pl.’s Mem.
Opp. Defs.’ Mot. to Dismiss, ECF No. [9] (“Pl.’s Opp’n.”); Reply in Supp. of the United States’
Mot. to Dismiss, ECF No. [10] (“Defs.’ Reply”).
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(D.C. Cir. 2009). In 1984, representatives of the City and the Fond du Lac Band of Lake
Superior Chippewa (“the Band”) began negotiations to explore the creation of a gaming facility
within the boundaries of the City of Duluth. Compl. ¶ 9. At this time, the Band did not have
reservation lands within the City, but did operate a bingo parlor on its reservation located west of
Cloquet, Minnesota. Id. With the City’s assistance, the Band acquired land in downtown
Duluth, had it placed into trust for the tribe, and had it declared part of the Band’s reservation by
the Secretary of the Interior. Id. ¶ 10.
In 1986, the City and the Band entered into a series of agreements (“the 1986
Contracts”), to, among other things, create an economic development entity known as the
Duluth-Fond du Lac Economic Development Commission, and to develop a casino gaming
facility on the Band’s property in downtown Duluth (“the Casino”). Id. ¶ 12. Under the 1986
Agreements, the Commission was given the authority to operate gaming within the Band’s
Casino, with the revenues from the Casino to be split among the Band, the City, and the
Commission. Id. ¶ 13. The Secretary of the Interior approved the 1986 Contracts, and in
September 1986 the Casino opened for business.
In 1988, Congress passed the Indian Gaming Regulatory Act (“IGRA”), 25 U.S.C. §
2701 et seq. Upon the passage of IGRA, the Band sued the City in federal court arguing that the
1986 Contracts violated IGRA. Compl. ¶ 15; see Fond du Lac Band v. City of Duluth, et al., No.
5:89-cv-163 (D.Minn. July 31, 1989). On December 26, 1990, the United States District Court
for the District of Minnesota dismissed the case without prejudice and referred the parties to the
National Indian Gaming Commission (“NIGC”) for a report and recommendation. Compl. ¶ 16.
Following this Order, the Band filed a petition with the NIGC seeking review of the legality of
the 1986 Contracts in light of the subsequent enactment of IGRA. Id. ¶ 17. On September 24,
2
1993, the NIGC issued a determination that the operation of the Casino under the 1986
Agreements violated IGRA, but deferred commencement of any enforcement action in order to
allow for mediation. Id. ¶ 18.
With the assistance of the NIGC, the City and the Band ultimately reached a revised
agreement (the “1994 Contracts”) that restructured the ownership and control of the gaming
operation of the Casino. Id. ¶ 19-20. The 1994 Contracts created a sublease and assignment of
gaming rights agreement, under which the Band sublet the Casino from the Commission, took
control of the operation and regulation of all gaming at the Casino, and allegedly obtained sole
proprietary interest in the Casino gaming operations as well as all ancillary businesses conducted
in the Casino. Id. ¶ 21-22. Under this sublease, the Band agreed to pay rent to the City of 19%
of the gross revenues from video games of chance at the Casino until the initial expiration date of
the sublease. Id. ¶ 22. The sublease had an initial expiration date of March 31, 2011, with an
extension term running through March 31, 2036. Id. The amount of rent for the extension term
was left undetermined, with the sublease requiring that the City and the Band meet and negotiate
the rent for the extension term on or before January 1, 2010, and in the absence of an agreement,
submit the issue to arbitration. Id.
The City and the Band submitted the 1994 Contracts to the NIGC for review and
approval and the NIGC determined that the 1994 Contracts fully complied with IGRA. Id. ¶ 23.
Following this NIGC approval, the City and the Band entered into and filed with the United
States District Court for the District of Minnesota a Stipulation and Consent Order. Under this
Stipulation, the parties filed a Consent Decree with the court seeking approval of a Settlement
Agreement consisting of the 1994 Contracts. Id. ¶ 24; see Fond du Lac Band of Lake Superior
Chippewa Indians v. City of Duluth, No. 5:94-cv-82 (D.Minn. June 22, 1994). In this
3
Stipulation, the Band and the City agreed that the 1994 Contracts gave the Band sole proprietary
interest in the gaming operations. Compl. ¶ 25. In a separate Report and Recommendation to
the Minnesota District Court dated June 20, 1994, the NIGC Chairman advised the court of its
approval of the 1994 Contracts and informed the court that the agreements were “fully consistent
with the IGRA.” Id. ¶ 27. The 1994 Contracts have not been subsequently modified. Id. ¶ 28.
Fourteen years later, in January 2009, the Band notified the City that it believed that it
had overpaid rent under the terms of the sublease, and advised the City that the overpayment
included the entire period of the sublease from its execution in 1994 through the third quarter of
2008. Id. ¶ 29. The Band further informed the City that the Band would be withholding all
future rent payments under the sublease due to this alleged past overpayment of rent. Id. The
City disagreed with this assessment and demanded payment of the withheld rent. Id. ¶ 30. On or
about August 6, 2009, the Band, through its Reservation Business Committee, passed Resolution
No. 1316/09 under which it immediately ceased all payments to the City pursuant to the 1994
Contracts. Id. ¶ 31.
In response to the Band’s actions, the City brought suit seeking to enforce the Consent
Decree incorporating the 1994 Contracts in the United States District Court for the District of
Minnesota. Id. ¶ 32; see City of Duluth v. Fond du Lac Band of Lake Superior Chippewa, No.
09-cv-2668 (D.Minn. Sept. 29, 2009). On April 21, 2010, the District Court granted the City’s
motion for summary judgment as to liability, concluding that the Band had failed to demonstrate
a change in the law justifying the Band’s action. See City of Duluth v. Fond du Lac Band of
Lake Superior Chippewa, 708 F.Supp.2d 890 (D.Minn. 2010). The court ruled that the Band’s
argument about the legality of the consent decree was barred by res judicata because the decree
had been approved by the court and formalized in a judgment. Id. at 898. The court denied
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dispositive relief as to the amount of damages and held that the issue of the appropriate
accounting method for the rent determination under the sublease was to be tried. Id. at 902-03.
Subsequently, in an August 16, 2010 letter to the NIGC, the Band requested that the
NIGC reexamine the 1994 Contracts and make a limited order prohibiting the Band from making
further payments to the City, but otherwise allowing for the continued operation of the Casino.
Compl. ¶ 34. Via letter dated October 20, 2010, NIGC Chairwoman Tracie L. Stevens notified
the Band and the City that it was reviewing the 1994 Contracts as requested by the Band. Id. ¶
35. Both the City and the Band participated in and submitted briefs to the NIGC’s Enforcement
Division. Id. On May 13, 2011, the Minnesota District Court denied the Band’s motion for a
continuance pending the completion of the NIGC’s review, and ordered the Band and the City to
submit to binding arbitration on the issue of the amount of rent for the twenty-five year extension
term of the 1994 Contracts. See City of Duluth v. Fond du Lac Band of Lake Superior
Chippewa, 09-cv-2668 (D.Minn. May 31, 2011), ECF No. 179. An arbitration hearing between
the Band and the City commenced and the City completed presentation of its case-in-chief on
July 12, 2011. Compl. ¶ 38.
On July 12, 2011, the NIGC issued NOV-11-02 (“Notice of Violation” or “NOV”). In
this Notice of Violation, the NIGC concluded that the 1994 Contracts violated IGRA’s mandate
that the Band retain “sole proprietary interest” in and “responsibility for” its gaming activity.
Compl. ¶ 38. The Band was ordered to cease performance under the 1994 Contracts “of those
provisions identified in [the] NOV as violating IGRA.” Id. The Band did not appeal the NOV.
Id. ¶ 40. However, on July 21, 2011, the City filed a petition with the NIGC seeking to intervene
in order to perfect an appeal of the NOV. Id. ¶ 41. The NIGC rejected this petition on the
5
grounds that the City was not a respondent to the NOV and thus could not initiate an appeal
before the NIGC. Id.
The Band took several actions in response to the NOV. On July 19, 2011, the Band,
through its Reservation Business Committee passed Resolution No. 1242/11 which, among other
things, (1) adopted the NIGC’s interpretation of IGRA’s sole proprietary interest provision set
forth in the NOV and (2) ceased all activities under the 1994 Contracts that could result in the
imposition of sanctions under the NOV. Id. ¶ 42. Further, on July 22, 2011, the Band filed a
motion for relief from the Consent Decree under Fed. R. Civ. P. 60(b). In response to this filing,
on November 21, 2011, the Minnesota District Court issued an order granting the Band’s motion
for relief under Rule 60(b), insofar as it requested that the Band be relieved of any further
compliance with its obligations under the 1994 Contracts. City of Duluth v. Fond du Lac Band
of Lake Superior Chippewa, 830 F.Supp.2d 712, 726 (D.Minn. 2011). However, the court
denied the Band’s motion insofar as it requested retroactive relief, including (1) relief from
payments due the City for the years 2009-2011, and (2) the right to pursue its counterclaims
seeking refund of all rent already paid to the City prior to 2009. Id. at 726-728.
Both the Band and the City appealed the District Court’s Rule 60(b) Order to the United
States Court of Appeals for the Eighth Circuit. On January 14, 2013, the Eighth Circuit issued
an opinion affirming the District Court’s ruling relieving the Band from prospective compliance,
but reversing and remanding the Court’s denial of retrospective relief for further consideration.
See City of Duluth v. Fond du Lac Band of Lake Superior Chippewa, 702 F.3d 1147, 1156 (8th
Cir. 2013). On October 8, 2013, the United States District Court for the District of Minnesota
issued its order on remand, which affirmed its earlier denial of retrospective relief to the Tribe.
6
See City of Duluth v. Fond du Lac Band of Lake Superior Chippewa, No. 09-cv-2668, 2013 WL
5566172, at *11 (D. Minn. Oct. 8, 2013).
As of the date of the Complaint, the Band continues to operate the Casino. Compl. ¶ 48.
B. Procedural History
On February 26, 2013, the City filed suit against Defendants in this Court. Plaintiff
argues that Defendants’ decision to issue the NOV was arbitrary, capricious, or otherwise not in
accordance with the law in violation of the Administrative Procedure Act, 5 U.S.C. §§ 701-706,
as no change of law occurred between the NIGC’s approval of the 1994 Contracts and the July
12, 2011 issuance of the NOV. Compl. ¶¶ 55-56. Further, Plaintiff argues that the NOV exceeds
the NIGC’s statutory and regulatory authority, as it conflicts with a judgment of the United
States District Court for the District of Minnesota approving the 1994 Contracts. Id. ¶ 59.
Accordingly, Plaintiff requests that the Court issue a declaratory judgment that the actions of the
Defendants are arbitrary, capricious, or otherwise not in accordance with law, and set aside the
NOV. Id. ¶ 61. Plaintiff also requests additional relief including a reversal of the NOV as well
as an order that Defendants take all necessary corrective action to reinstate the preexisting legal
rights of the City. Id. ¶ 63 et seq.
In response to this Complaint, Defendants filed their [8] Motion to Dismiss, contending
that Plaintiff lacks jurisdiction over this Complaint because Plaintiff lacks both Article III
standing and prudential standing.
II. LEGAL STANDARD
To survive a motion to dismiss pursuant to Rule 12(b)(1), the plaintiff bears the burden of
establishing that the court has subject matter jurisdiction over its claim. Moms Against Mercury
v. FDA, 483 F.3d 824, 828 (D.C. Cir. 2007). In determining whether there is jurisdiction, the
7
Court may “consider the complaint supplemented by undisputed facts evidenced in the record, or
the complaint supplemented by undisputed facts plus the court's resolution of disputed facts.”
Coal. for Underground Expansion v. Mineta, 333 F.3d 193, 198 (D.C. Cir. 2003) (citations
omitted). “At the motion to dismiss stage, counseled complaints, as well as pro se complaints,
are to be construed with sufficient liberality to afford all possible inferences favorable to the
pleader on allegations of fact.” Settles v. U.S. Parole Comm’n, 429 F.3d 1098, 1106 (D.C. Cir.
2005). “Although a court must accept as true all factual allegations contained in the complaint
when reviewing a motion to dismiss pursuant to Rule 12(b)(1),” the factual allegations in the
complaint “will bear closer scrutiny in resolving a 12(b)(1) motion than in resolving a 12(b)(6)
motion for failure to state a claim.” Wright v. Foreign Serv. Grievance Bd., 503 F.Supp.2d 163,
170 (D.D.C. 2007) (citations omitted).
III. DISCUSSION
A. Article III Standing
“To satisfy the requirements of Article III standing in a case challenging government
action, a party must allege an injury in fact that is fairly traceable to the challenged government
action, and ‘it must be likely, as opposed to merely speculative, that the injury will be ‘redressed
by a favorable decision.’” National Wrestling Coaches Ass’n. v. Department of Education, 366
F.3d 930, 937 (D.C. Cir. 2004) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61
(1992) (internal quotation marks omitted)). It is axiomatic that the “party invoking federal
jurisdiction bears the burden of establishing these elements” of constitutional standing. Lujan,
504 U.S. at 561.
Here, Defendants argue that Plaintiff fails to meet the second and third elements required
for Article III standing: causation and redressability. Defs.’ MTD at 9-12. In order to assess
these two elements, the Court must first establish (1) the City’s claimed injury, and (2) the
8
challenged government action. First, the City’s claimed injury is the loss of rights accorded it
under the Consent Decree and 1994 Contracts. Pl.’s Opp’n at 6. Although the City does not
specify, as it submitted its filing prior to the most recent decision of the Minnesota District
Court, the Court understands these to consist primarily of the loss of rents due under the
extension term of the 1994 Contracts which was set to begin in 2011. Id. The city cannot be
claiming injury from the loss of rents under the initial term of the contract, as the Minnesota
District Court has denied the Band retrospective relief for rents paid prior to 2009 and required it
to pay rent for the 2009 to 2011 period up to the conclusion of the initial term of the 1994
Contracts. See City of Duluth, 2013 WL 5566172, at *5 & n.4. Second, the challenged
government conduct here is the issuance of the NOV by Defendants. Pl.’s Opp’n at 6.
In challenging Plaintiff’s Article III standing, Defendants argue that Plaintiff cannot show
(1) a sufficient causal link between the NOV and the loss of the post-2011 rent payments, or (2)
that a favorable ruling with respect to the NOV would redress Plaintiff’s loss of the benefits of
the agreement. Defs.’ MTD at 9-12. As Defendants point out, causation and redressability in
this case hinge on the actions of a third-party not before the Court, the Band. Id. at 10. The
Band, and not the City, was the party regulated by the NIGC and directly affected by the NOV.
And since the independent actions of the Band caused the injury complained of by Plaintiff – the
loss of the benefits provided for in the 1994 Contracts – Defendants question the causal link
between the injury and the challenged government conduct.
“When the plaintiff is not himself the object of the government action or inaction he
challenges, standing is not precluded, but it is ordinarily ‘substantially more difficult’ to
establish.” Lujan, 504 U.S. at 562 (quoting Allen v. Wright, 468 U.S. 737, 758 (1984)). As the
Supreme Court noted in Lujan, when “a plaintiff’s asserted injury arises from the government’s
9
allegedly unlawful regulation (or lack of regulation) of someone else . . . causation and
redressability ordinarily hinge on the response of the regulated (or regulable) third party to the
government action or inaction—and perhaps on the response of others as well.” Id. (emphasis in
original). Accordingly, “it becomes the burden of the plaintiff to adduce facts showing that those
choices have been or will be made in such manner as to produce causation and permit
redressability of injury.” Id. “[M]ere ‘unadorned speculation’ as to the existence of a
relationship between the challenged government action and the third-party conduct ‘will not
suffice to invoke the federal judicial power.’” National Wrestling Coaches, 366 F.3d at 938
(quoting Simon v. E. Ky. Welfare Rights Org., 426 U.S. 26, 44 (1976)).
Yet despite this higher standard, “courts occasionally find the elements of standing to be
satisfied in cases challenging government action on the basis of third-party conduct.” National
Wrestling Coaches, 366 F.3d at 940. As the D.C. Circuit has observed, “mere indirectness of
causation is no barrier to standing, and thus, an injury worked on one party by another through a
third party intermediary may suffice.” Tel. & Data Sys., Inc. v. FCC, 19 F.3d 42, 47 (D.C. Cir.
1994) (quoting National Wildlife Fed’n v. Hodel, 839 F.2d 694, 705 (D.C. Cir. 1988)). In
applying this standard, the D.C. Circuit has identified categories of cases where standing to
challenge government action may be found despite the involvement of third parties in the chain
of causation. See National Wrestling Coaches, 366 F.3d at 940.
The set of these cases most relevant here revolve around the “narrow proposition” that
“injurious private conduct is fairly traceable to the administrative action contested in the suit if
that action authorized the conduct or established its legality.” Tel. & Data Sys., 19 F.3d at 47.
Accordingly, “[w]hen an agency order permits a third-party to engage in conduct that allegedly
injures a person, the person has satisfied the causation aspect of the standing analysis.”
10
Consumer Federation of America v. FCC, 348 F.3d 1009, 1012 (D.C. Cir. 2003). See also
America’s Cmty. Bankers v. FDIC, 200 F.3d 822, 827-28 (D.C. Cir. 2000); Animal Legal Def.
Fund v. Glickman, 154 F.3d 426, 440-43 (D.C. Cir. 1998) (en banc). “Causation and
redressability thus are satisfied in this category of cases, because the intervening choices of third
parties are not truly independent of government policy.” National Wrestling Coaches, 366 F.3d
at 940-41. 3
The Court concludes that Plaintiff’s claim fits within this line of precedent. Accordingly,
standing exists here despite the fact that Plaintiff is challenging government action on the basis
of intervening third-party conduct. As the D.C. Circuit has noted, “injurious private conduct is
fairly traceable to the administrative action contested in the suit if that action authorized the
conduct or established its legality.” Tel. & Data Sys., 19 F.3d at 47. Here, that is plainly the
case. In the absence of the NOV, the Band was faced with an order from the Minnesota District
3
Another set of cases has found standing despite the actions of an intervening third party
“where the record presented substantial evidence of a causal relationship between the
government policy and the third-party conduct, leaving little doubt as to causation and the
likelihood of redress.” National Wrestling Coaches, 366 F.3d at 941. See Tozzi v. United States
Dep’t of Health & Human Svcs., 271 F.3d 301, 307-10 (D.C. Cir. 2001); Block v. Meese, 793
F.2d 1303, 1308 (D.C. Cir. 1986). These cases require “formidable evidence” of causation, see
Freedom Republicans, Inc. v. FEC, 13 F.3d 412, 418 (D.C. Cir. 1994), in order to allow a court
to easily discern whether standing exists. The Court notes that these cases also suggest standing
exists here, as Plaintiff has alleged facts showing that the Band’s actions in response to the NOV
were never in doubt. First, the Band only sought the NIGC’s evaluation of the 1994 Contracts
after the City had brought suit to enforce the Consent Decree, and after the Minnesota District
Court had issued an order requiring the Band to abide by the terms of the 1994 Contracts. See
Compl. ¶ 34. Moreover, according to Plaintiff’s allegations, “by letter dated August 16, 2010,
the Band requested that the NIGC reexamine the 1994 Contracts and make a limited order
prohibiting the Band from making further payments to the City, but otherwise allowing for the
continued operation of the Casino.” Id. These allegations, if ultimately substantiated, could
show that it was “not at all speculative”, Tozzi, 271 F.3d at 308 (internal quotation marks
omitted), that the Band would take the actions it ultimately took in response to the NOV.
However, because the Court concludes that Plaintiff has established causation under an
alternative line of precedent, it need not address whether Plaintiff has put forth sufficient
evidence at the motion to dismiss stage to establish standing under this line of precedent as well.
11
Court enforcing the 1994 Contracts and requiring the Band to submit to arbitration to determine
the terms of the 2011-2036 extension of the 1994 Contracts. See City of Duluth, 708 F.Supp.2d
890; id., 09-cv-2668 (D.Minn. May 31, 2011), ECF No. 179. The NOV, declaring that the
provision requiring payment of rent to the City violated IGRA, provided the basis for the Band to
seek reconsideration of the Minnesota District Court’s decision, withdraw from the 1994
Contracts while continuing to engage in gaming, and ultimately cause the injury Plaintiff
complains of in this Court. Indeed, if there was any doubt that the administrative action at issue
here established the legality of the Band’s actions, both the Minnesota District Court and the
Eighth Circuit recognized the NOV as a change in the law justifying the Band’s actions. See
City of Duluth, 702 F.3d at 1152 (“Here, the district court decided that the NIGC’s determination
that terms of the consent decree violated IGRA was a change in law that required modification of
the decree to eliminate its prospective application from 2011 to 2036.”) (emphasis added); id. at
1153 (“We agree with the district court that a binding adjudication by a federal agency, which
has been tasked with interpreting and enforcing a statute enacted by Congress, represents a
change in law for the purposes of Rule 60(b).”) (emphasis added); City of Duluth, 830 F.Supp.2d
at 722 (“The Court finds that this change in agency position or interpretation constitutes a
change in the law that could warrant relief under Rule 60(b)(5).”) (emphasis added).
Accordingly, based on the facts alleged by Plaintiff, the Court concludes that the administrative
action at issue authorized the conduct that allegedly injured Plaintiff, which is sufficient to
establish causation.
To be sure, as Defendants note, the NOV did not mandate the course of action taken by
the Band. Defs.’ Reply at 3. The Band was free to take other actions in response to the NOV,
including ceasing gaming entirely (as it was permitted to do under the contract). Id. But the
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crucial fact here is that the NOV established the legality of the course of conduct the Band did
take. But for the NOV, the City would have been entitled to enforcement of the 1994 Contracts
and Consent Decree in the manner determined by the Minnesota District Court prior to the
NIGC’s decision. See City of Duluth, 708 F.Supp.2d 890. Once issued, however, the NOV
provided the Band the legal authority to inflict the injury complained of by Plaintiff. And as the
D.C. Circuit has stated, “[w]hen an agency order permits a third-party to engage in conduct that
allegedly injures a person, the person has satisfied the causation aspect of the standing analysis.”
Consumer Fed. of Am., 348 F.3d at 1012. Importantly, the court in Consumer Federation of
America used the word permit, meaning that causation does not demand that the agency action
mandate the allegedly injurious conduct. Id.
In arguing that Plaintiff lacks standing here, Defendants focus primarily on the D.C.
Circuit’s opinion in Microwave Acquisition Corp. v. FCC, 145 F.3d 1410 (D.C. Cir. 1998).
However, that case is factually distinct from Plaintiff’s claim. The case of Microwave
Acquisition Corp. involved the FCC’s regulatory approval of the transfer of Qwest
Communications from MCI to Southern Pacific Telecommunications. Id. at 1411-12.
Microwave Acquisition Corporation (“MAC”), the appellant, alleged that it had an enforceable
contract with MCI to purchase Qwest, and sought review of the FCC’s transfer approval order
for the rival contract. Id. The D.C. Circuit agreed with the FCC and concluded that MAC lacked
standing because its asserted injury – the loss of its contractual right to acquire Qwest – met
“neither the traceability nor the redressability requirement for standing.” Id. at 1412. The court
concluded that “MAC’s loss of Qwest is . . . attributable not to any action of the Commission but
to MCI’s alleged breach of its contract to sell Qwest to MAC. The transfer proceeding could not
have caused the alleged breach which occurred before the transfer application was ever filed and
13
would have continued whatever the Commission’s decision.” Id. (emphasis added). Here, by
contrast, there is a greater causal link between the alleged breach and the administrative action at
issue. Indeed, the breach at issue would not have continued in the absence of the NOV. As
discussed, the issuance of the NOV represented a legal change which authorized the Band to do
that which it had previously been ordered not to do by the Minnesota District Court. But for the
NOV, the Band would not have been able to assert a successful Rule 60(b) motion and the City
and the Band would have engaged in Court-ordered arbitration on the extension term of the
agreement. Accordingly, in the absence of the NOV, the alleged breach of the 1994 Contracts
would have been resolved by the orders of the Minnesota District Court. Indeed, Microwave
Acquisition Corp. actually recognized the basis of the Court’s opinion here, noting that the
Commission’s action did not “authorize the alleged injury”, in contrast to other cases where the
D.C. Circuit has found standing. 145 F.3d 1412 n.3 (citing Tel. & Data Sys., Inc., 19 F.3d at 47).
The case explicitly recognized the “narrow proposition” applicable here, under which “injurious
private conduct is fairly traceable to the administrative action contested in the suit if that action
authorized the conduct or established its legality.” Id. (quoting Tel. & Data Sys., Inc., 19 F.3d at
47).
Defendants’ remaining arguments for lack of causation are unpersuasive. Defendants
first focus on the fact that the alleged breach of the contract occurred in 2009, two years before
the issuance of the NOV, suggesting that Plaintiff’s injury predates the NOV. Defs.’ MTD at 11.
Yet, in light of the judgment of the Minnesota District Court requiring the Band to pay withheld
rent to the city for the initial term of the contract ending in 2011, see City of Duluth, 2013 WL
5566172 at *11, the lost rents from 2009 to 2011 do not constitute part of Plaintiff’s current
injury. Plaintiff has established, however, that its remaining injury – the post-2011 rents to
14
which it believes it is entitled – are causally related to the administrative action at issue, forming
the basis for its standing in this Court. Next, Defendants argue that the Band’s breach could
have continued regardless of the NIGC’s decision to issue the NOV. Defs.’ MTD at 11.
However, this is plainly untrue. Prior to the issuance of the NOV, the Minnesota District Court
had rejected the Band’s challenge to the validity of the 1994 Contracts and ordered the City and
the Band to enter into arbitration to set a rate for the extension term of the contract. See City of
Duluth, 708 F.Supp.2d 890; id. 09-cv-2668 (D.Minn. May 31, 2011), ECF No. 179. The Band
could not have continued in its breach of the 1994 Contracts without running afoul of this court
order.
Defendants’ arguments for a lack of redressability are similarly unavailing. “To survive a
motion to dismiss, a plaintiff ‘must allege facts from which it reasonably could be inferred that,
absent the [challenged policy], there is a substantial probability that . . . if the court affords the
relief requested, the asserted [injury] will be removed.” National Wrestling Coaches, 366 F.3d at
944 (quoting Warth v. Seldin, 422 U.S. 490, 504 (1975)). “A claim is justiciable ‘so long as the
relief sought would constitute a necessary first step on a path that could ultimately lead to relief
fully redressing the injury.’” American Petroleum Tankers Parent, LLC v. United States, 943
F.Supp.2d 59, 66 (D.D.C. 2013) (quoting Tel. & Data Sys., Inc., 19 F.3d at 47).
With respect to the relief sought by Plaintiff, the Administrative Procedure Act states that
a court “shall . . . hold unlawful and set aside agency action . . . found to be arbitrary, capricious,
an abuse of discretion or not otherwise in accordance with law.” 5 U.S.C. § 706(2)(A). “[T]he
Supreme Court and the D.C. Circuit have held that vacatur is the presumptive remedy for this
type of violation.” In re Polar Bear Endangered Species Act Listing and § 4(d) Rule Litigation,
818 F.Supp.2d 214, 238 (D.D.C. 2011). See also Federal Election Comm’n v. Akins, 524 U.S.
15
11, 25 (1998) (“If a reviewing court agrees that the agency misinterpreted the law, it will set
aside the agency’s action and remand the case.”); Am. Bioscience, Inc. v. Thompson, 269 F.3d
1077, 1084 (D.C. Cir. 2001) (“If an appellant has standing . . . and prevails on its APA claim, it
is entitled to relief under that statute, which normally will be vacatur of the agency’s order.”). 4
Here, a decision by this Court vacating and remanding the NOV to the NIGC constitutes
a necessary first step toward redressing Plaintiff’s injury. The NOV formed the basis of the
Minnesota District Court and the Eighth Circuit’s conclusion that Plaintiff was no longer entitled
to payments under the contract. City of Duluth, 702 F.3d at 1153 (“We agree with the district
court that a binding adjudication by a federal agency, which has been tasked with interpreting
and enforcing a statute enacted by Congress, represents a change in law for the purposes of Rule
60(b).”). If the NIGC’s decision as to the NOV is ultimately reversed or withdrawn on remand
from this Court, Plaintiff could once again seek to enforce the 1994 Contracts. Pl.’s Opp’n at 16.
Indeed, the Eighth Circuit so much as set out this course for Plaintiff, noting that the City should
raise its challenge to the NOV not before Minnesota federal courts, but rather in an APA action
in this Court. See City of Duluth, 702 F.3d at 1153 (“While the City may question the validity of
the NIGC’s current position, such challenges are properly made under the Administrative
Procedure Act (APA). The NIGC is not a party to this litigation, and the City has not made a
showing that the review process established by Congress in the APA might be circumvented
here.”) (citations omitted). In light of the Eighth Circuit’s instructions, Plaintiff states in its brief
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Plaintiff also seeks additional relief from this Court, including a reversal of the NOV as
well as an order that Defendants take all necessary corrective action to reinstate the preexisting
legal rights of the City. The Court notes its skepticism regarding its power to issue this relief, as
the APA appears to authorize injunctive relief only for “agency action unlawfully withheld or
unreasonably delayed.” 5 U.S.C. § 706(1). However, because Plaintiff has also requested relief
within the power of this Court to grant that would appear to redress its injury, the Court takes no
position at this time whether the Court has the power to grant these other forms of relief sought
by Plaintiff, as this question is not currently at issue.
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that if it prevails in this action and the NOV is ultimately reversed, such a reversal will provide a
basis for the City to return to the Minnesota District Court and assert its own Rule 60(b) motion
to reinstate the Consent Decree and the 1994 Contracts. Pl.’s Opp’n at 16. To be sure, the Court
cannot know whether this motion would ultimately succeed. However, this does not mean
Plaintiff lacks standing. As this Court has noted, “[t]he Plaintiff may not ultimately prevail if the
Court vacates the Administrator’s decision, but it ‘cannot prevail unless [the Court] do[es] so,’
which is sufficient to satisfy the redressability requirement for constitutional standing.”
American Petroleum Tankers Parent, LLC v. United States, 943 F.Supp.2d 59, 66 (D.D.C. 2013)
(quoting Power Co. of Am., L.P. v. Fed. Energy Regulatory Comm’n, 245 F.3d 839, 842 (D.C.
Cir. 2001)).
In arguing for a lack of redressability, Defendants contend that even if the NIGC chose
not to issue another NOV on remand, the Band would still have the option to cease gaming
entirely or to renegotiate the agreements. Defs.’ Reply at 8. Under this view, if the Band chose
to cease gaming entirely (as it would be entitled to do under the contract), this Court’s ruling
would not redress Plaintiff’s injury. But this argument ignores the scope of Plaintiff’s claimed
injury and the details of the Minnesota District Court’s holdings. To be sure, the City is seeking
to regain the benefits of the 1994 Contracts prospectively. However, the City is also seeking the
rent payments owed under the 1994 Contracts. This includes the payments from the time of the
end of the initial term of the contracts until the present. Pl.’s Opp’n at 6. The Minnesota District
Court ruled, and the Eighth Circuit affirmed, that the City is not entitled to rent under the
extension term due to the change in the law created by the NOV. See City of Duluth, 702 F.3d at
1152 (“Here, the district court decided that the NIGC’s 2011 determination that terms of the
consent decree violated IGRA was a change in the law that required modification of the decree to
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eliminate its prospective application from 2011 to 2036”). Even if at some future date the Band
ceased gaming entirely in response to the withdrawal or reversal of the NOV on remand, the City
would still be deprived of these payments from 2011 until the present. Furthermore, the
withdrawal or reversal of the NOV would provide the City grounds to seek these payments
through a motion for reconsideration in the Minnesota District Court. In light of this component
of Plaintiff’s injury, which would not be affected by any ultimate decision by the Band to cease
gaming, the Court concludes that Plaintiff’s injury is surely redressable by a favorable ruling
from this Court.
B. Prudential Standing
Yet the Court’s conclusion that Plaintiff has standing under Article III does not fully
resolve Defendants’ motion. “[C]onstitutional standing is not the end of the game because the
‘question of standing involves both constitutional limitations on federal-court jurisdiction and
prudential limitations on its exercise.’” National Ass’n of Home Builders v. U.S. Army Corps of
Engineers, 417 F.3d 1272, 1278 (D.C. Cir. 2005) (quoting Bennett v. Spear, 520 U.S. 154, 162
(1996)). With respect to prudential limits on standing, the Supreme Court has “long held that a
person suing under the APA must satisfy not only Article III’s standing requirements, but an
additional test: The interest he asserts must be ‘arguably within the zone of interests to be
protected or regulated by the statute’ that he says was violated.” Match-E-Be-Nash-She-Wish
Band of Pottawatomi Indians v. Patchak, 132 S.Ct. 2199, 2210 (2012) (quoting Assoc. of Data
Processing Service Organizations, Inc. v. Camp, 397 U.S. 150, 153 (1970)). Here, Defendants
contend that Plaintiff’s claims fall outside the zone of interests. Defs.’ MTD at 13-19.
In its most recent discussion of the zone of interests test, the Supreme Court made clear
that the requirement is a very low hurdle for APA plaintiffs. “The prudential standing test . . .
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‘is not meant to be especially demanding.’” Patchak, 132 S.Ct. at 2210 (quoting Clarke v.
Securities Industry Assn., 479 U.S. 388, 399 (1987)). See also Amador County v. Salazar, 640
F.3d 373, 379 (D.C. Cir. 2011) (noting “the oft-repeated rule that the zone-of-interests test is not
especially demanding.”) (internal citations and quotation marks omitted); 3 RICHARD J. PIERCE,
JR., ADMINISTRATIVE LAW TREATISE § 16.9, at 1521 (5th ed. 2010) (“An injured plaintiff has
standing under the APA unless Congress intended to preclude judicial review at the behest of
parties in plaintiff’s class.”). In enforcing this lenient requirement, a court must “apply the test
in keeping with Congress’ ‘evident intent’ when enacting the APA ‘to make agency action
presumptively reviewable.’” Patchak, 132 S.Ct. at 2210 (quoting Clarke, 479 U.S. at 399). “We
do not require any ‘indication of congressional purpose to benefit the would-be plaintiff.” Id.
(quoting Clarke, 479 U.S. at 399-400). Furthermore, the Court noted that it “ha[s] always
conspicuously included the word ‘arguably’ in the test to indicate that the benefit of any doubt
goes to the plaintiff.” Id. In general, “[t]he test forecloses suit only when a plaintiff’s ‘interests
are so marginally related to or inconsistent with the purposes implicit in the statute that it cannot
reasonably be assumed that Congress intended to permit the suit.’” Id. (quoting Clarke, 479 U.S.
at 399).
In arguing that Plaintiff lacks prudential standing under the zone of interests test,
Defendant focuses on the fact that the City is not an entity regulated by the NIGC or an intended
beneficiary of IGRA. Defs.’ MTD at 13-17. Absent these facts, Defendants contend that under
D.C. Circuit precedent, Hazardous Waste Treatment Council v. Thomas, 885 F.2d 918, 922-24
(D.C. Cir. 1989), the city must show it is a “suitable challenger” to the NIGC’s implementation
of the sole proprietary interest requirement contained in § 2710(b)(2)(A). Defs.’ MTD at 13.
The Court notes that in applying this “suitable challenger” standard, the D.C. Circuit has utilized
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exactly the lenient test for the zone of interests requirement most recently set out by the Supreme
Court in Patchak. For example, in Scheduled Airlines Traffic Offices, Inc. v. Department of
Defense, the D.C. Circuit noted that a non-regulated party who is not an intended beneficiary of a
provision “may nonetheless have standing if it is a ‘suitable challenger[ ] to enforce’ the statute.”
87 F.3d 1356, 1360 (D.C. Cir. 1996) (quoting First Nat’l Bank & Trust Co. v. National Credit
Union Admin., 988 F.2d 1272, 1276 (D.C. Cir. 1993)). After emphasizing that “this ‘test is not
meant to be especially demanding,’” the D.C. Circuit made clear, just as the Supreme Court
stated in Patchak, that “a would-be plaintiff is outside the statute’s ‘zone of interests’ only ‘if the
plaintiff’s interests are so marginally related to or inconsistent with the purposes implicit in the
statute that it cannot reasonably be assumed that Congress intended to permit the suit.’” Id.
(quoting Clarke, 479 U.S. at 399).
Here, Defendants argue that Plaintiff’s interests are so marginally related to or
inconsistent with the purposes implicit in IGRA’s sole proprietary interest and responsibility
requirement that the City falls outside the zone of interests. Defs.’ MTD at 17-18. Pursuant to
25 U.S.C. § 2710(b)(2)(A), “[t]he Chairman shall approve any tribal ordinance or resolution
concerning the conduct, or regulation of Class II gaming on the Indian lands within the Tribe’s
jurisdiction if such ordinance or resolution provides that – (A) . . . the Indian tribe will have the
sole proprietary interest and responsibility for the conduct of any gaming activity.” Defendants
contend that in seeking vacatur of the NOV and preservation of its contractual rights under the
1994 Contracts, “[t]he City has absolutely no interest in the Band being the ‘primary beneficiary’
of the gaming operation or in the Band being the ‘sole proprietor.’ Rather, the City is interested
in being a joint beneficiary and joint proprietor of the casino.” Defs.’ MTD at 18. Accordingly,
because its interest is inconsistent with preserving the Band as the “primary beneficiary” of the
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gaming operation, the City’s interest is inconsistent with the purposes of the provision. Id.
Under this view, Defendants contend, the City is not a suitable challenger and should be denied
prudential standing.
However, the Supreme Court rejected a similar argument against prudential standing in
Patchak. In that case, a landowner brought an APA challenge to the Secretary of Interior’s
decision to acquire a parcel of property neighboring his own “for the purpose of providing land
for Indians” under 25 U.S.C. § 465. Patchak, 132 S.Ct. at 2210. Applying the lenient test for
prudential standing set out above, the Court concluded that the landowner plaintiff fell within the
zone of interests to be protected or regulated by the statute. Id. at 2210-12. In reaching this
conclusion, the Court rejected arguments that this plaintiff lacked prudential standing because he
was “not an Indian or tribal official seeking land” or did not “claim an interest in advancing
tribal development.” Id. at 2210 n.7. “The question is not whether § 465 seeks to benefit
[plaintiff]; everyone can agree it does not. The question is instead . . . whether issues of land use
(arguably) fall within § 465’s scope—because if they do, a neighbor complaining about such use
may sue to enforce the statute’s limits.” Id.
So too here, the relevant issue is not whether the “sole proprietary interest” requirement
in § 2710(b)(2)(A) was intended to benefit Plaintiff or whether Plaintiff seeks to advance the
Band’s interest. Rather, the question is whether the issues raised by Plaintiff fall within the
scope of the provision. Clearly they do. It seems obvious that when considering whether a tribe
“possess[es] the sole proprietary interest in and responsibility for the gaming activity and [is] the
primary beneficiary of that activity,” 25 U.S.C. § 2710(b)(2)(A), that the proprietary interests of
another in the gaming operation (the interest Plaintiff seeks to protect here) is a relevant
consideration. Indeed, revealing the extent to which the interests of the City fall within the scope
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of this provision, the NOV explicitly considered the extent of the City’s contractual rights, noting
that the agreements “grant the City of Duluth, Minnesota (the ‘City’) an unlawful proprietary
interest in the Band’s gaming activity and prevent the Band from possessing the sole
responsibility for the gaming activity.” Defs.’ MTD, Ex. 1 (NIGC Notice of Violation), at 1.
Moreover, the NIGC actually solicited the City’s views on this issue, id. at 6, providing further
evidence that the interests asserted by Plaintiff in the protection of its contractual rights are
hardly some marginal issue to the “sole proprietary interest” requirement and the NOV issued for
violation of this requirement. In Patchak, the Court reached a similar conclusion in finding
prudential standing, noting that “when the Secretary obtains land for Indians under § 465, she
does not do so in a vacuum. Rather, she takes title to properties with at least one eye directed
toward how tribes will use those lands to support economic development.” 132 S.Ct. at 2211.
This consideration of land use as part of the Secretary’s determination under § 465 provided the
landowner plaintiff in Patchak prudential standing on the basis of his interests relating to land
use. Id. Similarly, here, in making its determination to issue the NOV, the NIGC necessarily
considered the ownership interests of other parties in the gaming operation and whether they
were too great to raise concerns under § 2710(b)(2)(A).
In concluding that Plaintiff falls within the zone of interests to be protected or regulated
by § 2710(b)(2)(A), the Court is cognizant of the fact that in assessing prudential standing, “the
benefit of any doubt goes to the plaintiff.” Patchak, 132 S.Ct. at 2210. Here, for the reasons
discussed, the Court cannot say that Plaintiff’s “interests are so marginally related to or
inconsistent with the purposes implicit in the statute that it cannot reasonably be assumed that
Congress intended to permit the suit.” Clarke, 479 U.S. at 399. Indeed, “[a]s a practical matter
it would be very strange to deny [plaintiff] standing in this case. [Its’] stake in opposing the
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[NOV] is intense and obvious. The zone-of-interests test weeds out litigants who lack a
sufficient interest in the controversy . . . .” Patchak v. Salazar, 632 F.3d 702, 707 (D.C. Cir.
2011), aff’d sub nom, Patchak, 132 S.Ct. 2199. Plaintiff is “surely not in that category.” Id.
For the same reason, Defendants’ fears are unfounded that a finding of prudential
standing in this case would create standing to challenge an NIGC NOV for any contractual
counterparty of a tribe. Defs.’ MTD at 19. Plaintiff represents a particular type of contractual
counter-party, one whose interests were explicitly and obviously considered and weighed in
reaching the determination to issue the NOV as to the sole proprietary interest requirement.
Accordingly, the Court is pointedly not granting prudential standing to any party disadvantaged
by an NOV, because, as the D.C. Circuit has recognized, “a rule the gave [a plaintiff] standing
merely because it happened to be disadvantaged by a particular agency would destroy the
requirement of prudential standing; any party with constitutional standing could sue.”
Hazardous Waste Treatment Council v. EPA, 861 F.2d 277, 283 (D.C. Cir. 1988).
IV. CONCLUSION
For the foregoing reasons, the Court DENIES Defendants’ [8] Motion to Dismiss. An
appropriate Order accompanies this Memorandum Opinion.
Dated: December 18, 2013
____/s/________________________
COLLEEN KOLLAR-KOTELLY
United States District Judge
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City of Duluth v. National Indian Gaming Commission
Court: District Court, District of Columbia
Date filed: 2013-12-18
Citations: 7 F. Supp. 3d 30
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