On Feb. 28, 2003, facing intense pressure to squeeze concessions from California's Indian gaming tribes, then-Gov. Gray Davis invoked the state's one and only chance to force each of the 61 tribes to address environmental problems their casinos raise in surrounding communities. On Nov. 14, on his last day of work before being replaced by Arnold Schwarzenegger, Davis quietly reversed himself and abandoned the negotiations he had opened almost nine months earlier. Davis--who was recalled by voters in part for having failed to be tougher with the Indian gaming interests, which contributed $1.2 million to his campaigns--wrote a letter to each tribe ending the legal requirement that they would have to pay for the damage to local roads, animal and plant life and water supplies and for public services.
Davis declined to be interviewed for this article. Here is his letter, deconstructed:
On February 28, 2003, I sent you a letter requesting that your Tribe enter into negotiations for the purpose of amending Section 10.8 of the class III gaming compacts entered into between the State and 61 California Tribes in 1999 (the "Compacts"). The request was made pursuant to Sections 10.8.3(b) and 12.3 of the Compacts.
This paragraph set forth the legal basis for serious talks, as provided for in the compacts. His Feb. 28 letter had said: "Unfortunately, the prosperity that many Indian casinos are enjoying has created unintentional consequences for many local governments--affecting traffic, air quality, law enforcement, water, and sewage . . . .That is why I now believe it is important to invoke the renegotiation provision . . . ."
That Feb. 28 letter had earned the governor acclaim from local officials across the state, frustrated that they could not get tribes in their communities to address local concerns.
"That's all we had," says Bill Horn, a San Diego County supervisor whose district includes five casinos, the most of any supervisor in the state. "I've been dealing with the tribes for, what, eight years now. It's like beating your head against the wall. We have no influence with them whatsoever."
Since February, my three appointed negotiators have met with many Tribes to discuss these issues. These discussions have been constructive and informative, and the three new compacts that were entered into this year contained provisions different from those in the 1999 Compacts, which I believe will foster good-neighbor relationships between those Tribes and their local communities.
This paragraph makes the case that the negotiations with many tribes were making progress. The three new compacts Davis refers to were negotiated with small tribes just entering into the casino business.
Unfortunately, we were not be [sic] able to conclude the dialogue we had begun about how best to address the environmental provisions contained in the 1999 Compact. Under the terms of that Compact, as a practical matter if there is no agreement by December 31, 2003, litigation is likely to result about whether the state has bargained in good faith.
These paragraphs are crucial to the governor's action. It suggests that the state must wrap up negotiations in six weeks--by the end of the year--or face a lawsuit alleging the state has not been bargaining in good faith. The argument is based on Section 10 of the compact, which says: "On or after Jan. 1, 2004, the Tribe may bring an action in federal court . . . on the grounds that the State has failed to negotiate in good faith, provided that the Tribe's good faith in the negotiations shall also be in issue."
If the tribes filed a lawsuit, the state would be asked by the court to show that it had been bargaining in good faith. If the state believed it had bargained responsibly, it could argue as much in court and continue negotiating on behalf of communities around the state.
So the question becomes: Were Davis' negotiators bargaining in good faith? If they were, why close off negotiations? If they weren't, why had Davis allowed them to act in bad faith?
I do not believe it is fair to the new administration or the tribes to artificially impose a six-week deadline to renegotiate the environmental provisions of the 1999 Compacts. For this reason, I hereby withdraw the request for negotiations contained in my February 28, 2003 letter to your Tribe. I have consulted with Governor-Elect Schwarzenegger and he does not object to this action.
This final paragraph ended the negotiations. The Schwarzenegger administration says it agreed with the action "because the previous administration never seriously attempted to renegotiate the environmental terms of the compact," says Vince Sollitto, a press aide to the new governor.
The Davis letter does not mention one other consequence of his action. Another provision of Section 10 put a hammer over the heads of the tribes, saying that a federal court could halt all new casino construction as of Jan. 1, 2005, if the two sides had not reached agreement. In other words, if the state had gone to court and demonstrated it was acting in good faith, the tribes would have been under pressure to wrap up negotiations by the end of this year.
Schwarzenegger is now left with less bargaining power. He has vowed to push the tribes to give the state some of the billions of dollars they extract from gamblers, but his only leverage is under Section 4 of the compact. It says that any tribe wanting to raise the number of slot machines in its casino or to move into a major urban area must reopen negotiations with the state. Fewer than a dozen of the tribes have such desires. In any event, any money the tribes do reliquish would go to the state, not the communities affected by their operations.
WHAT OTHERS SAY
Cruz Reynoso, a former state Supreme Court justice who now teaches ethics at UC Davis' law school, was one of the three state negotiators for Davis. (The other two were Anthony Joseph, a retired San Diego County Superior Court judge, and attorney Frederick Wyle of San Francisco.) Reynoso said the negotiations were unquestionably acting in good faith. "Oh, absolutely. We had tons of meetings. Our negotiations were of a preliminary nature; we didn't really put down figures and that sort of thing."
Reynoso said the committee put concrete proposals for existing casinos on a back burner so it could first hammer out agreements with the three tribes requesting compacts. "We felt we had a priority to get those done; they had been waiting a long time."
John Hensley, former head of the California Gambling Control Commission, says the deadline Davis referred to is for the beginning of litigation, not the end of negotiations. "Show me where it says there was a deadline for negotiations," Hensley says. "There was none. All [the new administration] would have to do to preserve their role was to send a good-faith letter to the tribes saying that we want to negotiate with you, but give us a little time. And given the confusion of the last year's recall election, it's likely no judge would rule against that."
Cathy Christian, a Sacramento attorney who represents county governments in tribal relations, says, "Most people were absolutely stunned" by Davis' letter. Section 10 was "the only part of the compact you could count on, because the tribes had signed off on it. The state might come up with some other type of leverage, but it won't be one that is a guaranteed way to get the tribes to deal with these [environmental ] issues. It was the only real hammer that we could absolutely count on."
Former Gov. Pete Wilson, one of Schwarzenegger's allies and a longtime opponent of uncontrolled Indian gaming, says that the Nov. 14 letter made no sense. "Davis' release of the tribal gambling casinos from this legal requirement is an inexplicable abandonment of the state's clearly enforceable right and duty to protect the communities who are the involuntary hosts of tribal casinos."
Mike McGowan is an attorney and supervisor from Yolo County, where the Rumsey Band is in conflict with local communities over traffic, sewage leaks and water conservation. McGowan says negotiations often take a tortuous route through preliminary posturings, and he thinks that the three new compacts were positive signs. "I know about the bad-faith argument, and I don't see it. We were actually becoming encouraged. The negotiations were taking into account a number of issues important to us, and some tribes were agreeing with them. We were getting concessions." McGowan has little fear that a court would find the state acted in bad faith. "In order to prevail, the tribes would have to claim that the process put up by the government was a sham, was never intended to reach a compromise, and none of its positions were reasonable."
Asked why Schwarzenegger agreed to end the talks, McGowan says: "I think they stepped in it. I think some lawyer for the new governor probably thought, 'Well, there's a potential cause of action here, and Gov. Davis is willing to get us off the hook with this letter, so, yeah, that's cool with us.' And, in fact, they ignored all the other ramifications of that action. That was a bad call. That was a mistake."
Steven Woodside is county counsel for Sonoma County, which is concerned about fire safety and crime and traffic problems associated with the Dry Creek Band's casino and has objected to alleged violations of the compact by the tribe. Woodside say that the negotiators were "very fine people who took their duties seriously. The inference by Davis that bad faith was involved points right at them. If I were them, I'd be insulted." Woodside says that the federal court would likely have sent the parties back to the negotiating table with a stern lecture on the need to act.
Rob Rosette, a Sacramento attorney who represents almost a dozen gaming tribes, says that the decision by the state to conclude negotiations with the three tribes before dealing with environmental issues where casinos already exist was evidence that the state wasn't acting in good faith. "We had been meeting with Gov. Davis' negotiators regularly, specifically on environmental issues. We had been offering revised compacts to address the issues they set forth, and quite frankly, we weren't getting much response. We were confident if we were forced to file, we would be successful in it."
Tony Cohen, a tribal attorney from Santa Rosa, believes that the tribes had a strong case for showing bad faith. But Cohen also seconds Woodside's argument that the state and the tribes likely would have been ordered back to the bargaining table.
Daniel Kolkey is the San Francisco lawyer whom Schwarzenegger appointed last month to negotiate with gaming tribes. He acknowledged in an interview that being able to bring Section 10 to the table "would have provided the state with more leverage."
I. Nelson Rose, a gambling-law expert and professor at Whittier School of Law, says: "Given the reputation of Gray Davis, you have to ask, who were his biggest contributors--the tribes. Frankly, it stinks.
"He had already given away almost everything the state had. The state is desperate now for bargaining chips, and [Davis] just gave away the biggest one."