Seminole Hard Rock Hotel and Casino: the Deal(s) Behind the Gaming Compact Between Florida and the Seminole Tribe

Abstract

I. Introduction¹

The Seminole Tribe of Florida has had tremendous influence on modern Indian gaming. As an early innovator of gaming as a means of economic development, the tribe was involved in one of the early court cases that led to the passage of the federal Indian Gaming Regulatory Act of 1988 (IGRA). Fifteen years later, the tribe's efforts to secure a tribal‐state compact for casino‐style gaming led to a landmark U.S. Supreme Court case on state sovereign immunity. A decade after that, the tribe acquired Hard Rock International for $965 million, possibly the largest purchase ever made by an American Indian tribe and funded almost entirely by the tribe's gaming revenue. And more recently, the tribe and Florida continue negotiations over the expansion of the Seminole casino operations in exchange for one of the nation's largest revenue‐sharing payouts to the state.

As we've done before,² we decided that an oral history would bring a valuable perspective to this story. The American Bar Association (ABA) Business Law Section Meeting in Orlando afforded us an opportunity to assemble a well‐placed group of political and legal insiders who generously agreed to appear together on one panel. Just a few days before the Seminole Tribe inked an agreement with Governor Rick Scott in April 2018,³ our panelists shared their perspectives on the precedent‐setting deals behind the tribal‐state compacts and other agreements governing the tribe's gaming operations in Florida.

II. The Panelists

Joseph H. Webster, Hobbs Straus Dean & Walker, Washington, DC. Joe Webster joined Hobbs Straus in 1993 and became a partner in 2002. He focuses on Indian gaming, economic development, self‐determination, and taxation. Joe also serves as the firm's managing partner. He is recognized for his knowledge of and experience in tribal rights under IGRA, and is a member of the International Masters of Gaming Law. He represents tribes before the National Indian Gaming Commission (NIGC) and the Department of the Interior (DOI), as well as in federal court. He was the primary drafter of the 2004 Oklahoma Tribal‐State Gaming Compact. He represented the Seminole Tribe of Florida in the negotiation of the landmark 2010 Gaming Compact with the State of Florida and in subsequent successful litigation over the tribe's right to continue offering banked card games. In 2016, Joe represented the Agua Caliente Band of Cahuilla Indians in its successful effort to negotiate an amended gaming compact with the State of California. Joe also has represented tribes in the Class III secretarial procedures process before the DOI.

Mary Ellen Klas, Tampa Bay Times/Miami Herald, Tallahassee, FL. Mary Ellen Klas is capital bureau chief for the Miami Herald and co‐bureau chief of the Tampa Bay Times/Miami Herald Tallahassee Bureau. She has been covering government and politics in the Florida Capitol for 30 years. She began her career as a business reporter for the Palm Beach Post and moved to Tallahassee as the Post's capital bureau chief. She was Tallahassee Editor for Florida Trend magazine and worked part‐time for the Palm Beach Post for 12 years. She joined the Miami Herald in 2004. The Herald's Tallahassee bureau merged with the Tampa Bay Time's Tallahassee bureau in November 2008. Mary Ellen has won numerous awards for journalistic excellence and civic accomplishment. She was a 2013 fellow at Journalist Law School at Loyola Marymount University Law School in Los Angeles, and a 2009 fellow at the Knight Center for Specialized Journalism. Throughout her career, she has reported extensively on the legal and political issues surrounding tribal and commercial gaming in Florida.

Steven A. Geller, Geller Law Firm, Fort Lauderdale, FL. Steve Geller is the principal of Geller Law Firm, where he concentrates his practice in the areas of land use and zoning, administrative law, lobbying, and gaming, representing local, state, and national clients. Steve currently serves as an elected Broward County commissioner, representing District 5, which contains all or parts of seven cities. He was a member of the Florida Legislature for 20 years, serving in the House from 1988 to 1998, and in the Senate from 1998 to 2008, where he served as the Minority Leader. He has served as chair of the Legislative Committees on Regulated Industries (alcohol, tobacco and gambling), Agriculture and Consumer Services, and Comprehensive Planning (local government and growth management), and as a member of the Finance and Tax Committee. He has also served as president of the National Council of Legislators from Gaming States (NCLGS), and currently serves as special counsel and legal advisor to NCLGS. Prior to starting his own law firm, Steve served as chair of the Gaming Law Practice Group at Greenspoon Marker. Throughout his career, Steve has represented numerous gaming clients in Florida.

III. Legal Background

A. Seminole Tribe v. Butterworth, 658 F.2d 310 (5th Cir. 1981)⁴

In the late 1970s and early 1980s, a few tribes, notably in California and Florida, opened high‐stakes bingo palaces as a means of raising revenue. As one of the few viable strategies for reservation economic development, bingo presented an attractive option to tribal governments: start‐up costs were relatively low, the facilities had a minimal impact on the environment, and the game had potential for high returns on the tribes' investment.⁵

Bingo was legal in both California and Florida, as it was in many states at the time, but state law stringently regulated bingo enterprises through both civil and criminal penalties. Based on federal Indian law's general prohibition against state regulation of tribes, the tribes offered games in their bingo halls that did not comply with state gambling regulations. The states, however, argued that state regulation had been authorized by Congress and attempted to fine or shut down the tribal bingo and card games for violations of state law.⁶

The Seminole Tribe contracted with a private company to build and operate a high‐stakes bingo hall on the tribe's reservation in southern Florida, within driving distance of Fort Lauderdale and Miami. Although Florida law permitted charitable bingo, it set several restrictions on the games, including a $100 ceiling on jackpots, and violations were punished through criminal penalties. Learning of the Seminoles' plans for a high‐stakes bingo palace, the Broward County sheriff announced that he would enforce the state bingo laws on the tribe's reservation. The tribe sued in federal court to enjoin application of state law within the bounds of its reservation.

Florida's defense centered on the congressional grant of legal authority over tribes in Public Law 280. Enacted by Congress in 1953, Public Law 280 gave certain states a broad grant of criminal jurisdiction and a limited grant of civil jurisdiction over tribes within their borders.⁷ Based on federal law, Florida had assumed criminal jurisdiction over tribes located in the state.⁸ Assessing Congress's authorization of state jurisdiction under Public Law 280, the Court of Appeals for the Fifth Circuit reasoned in Seminole Tribe v. Butterworth that the state only had authority to enforce criminal prohibitions on tribal land. It could not enforce its civil regulatory laws against the tribe.⁹ The court concluded that Florida's bingo laws, although enforced through criminal penalties, were not a criminal prohibition against bingo generally. The laws instead comprised a civil regulatory scheme and thus were unenforceable: “Where the state regulates the operation of bingo halls to prevent the game of bingo from becoming a money‐making business, the Seminole Indian tribe is not subject to that regulation and cannot be prosecuted for violating the limitations imposed.”¹⁰ Because Florida generally allowed bingo, subject to restrictions, the game did not violate the state's public policy and thus did not fall within Public Law 280's ambit of allowable state jurisdiction.

In California, the Barona Group of the Capitan Grande Band of Mission Indians had followed the Seminoles' lead and contracted with a private management company to open a bingo palace on the tribe's reservation in San Diego County. Both the state of California and the county allowed charitable bingo games, subject to the restrictions of state law. Local law enforcement, asserting that the state restrictions applied on the tribe's reservation, threatened to shut down the bingo operation and arrest its patrons. Although California's bingo law was similar to the Florida law examined in Seminole Tribe v. Butterworth, California's position was strengthened by the fact that Congress had expressly granted it both criminal and some civil jurisdiction through Public Law 280. In Barona Group v. Duffy, the Court of Appeals for the Ninth Circuit nevertheless adopted the reasoning of Seminole Tribe and held that because California generally allowed bingo games, bingo did not violate state public policy, and thus the state lacked authority to enforce its bingo regulations against the tribe.¹¹

The holdings in Barona Group and Seminole Tribe led a number of tribes to explore gaming as a means of reservation economic development.¹² Indian gaming facilities at the time, operated by more than 80 tribes across the country, primarily consisted of bingo and a few card rooms offering poker and blackjack. Even without slot machines or other lucrative casino‐style games, the tribal gaming industry grew rapidly in the 1980s, grossing over $110 million in 1988.¹³ Despite federal court rulings limiting state power over tribal gaming, some states continued to enforce their gambling regulations on reservations.

Two tribes in California, the Cabazon and Morongo Bands of Mission Indians, operated bingo halls and a card club on their reservations in Riverside County, near Palm Springs and within driving distance of Los Angeles. The tribes' games were open to the public and catered to non‐Indians coming onto the reservations to play. California law permitted charitable bingo games, but restricted the amount of jackpots to $250 per game and the use of gaming profits to charitable purposes. Violations of the state regulations were punishable as criminal misdemeanors. Riverside County ordinances similarly regulated bingo games, and also prohibited poker and other card games. The tribes challenged both the state's and the county's enforcement of their regulations in federal court, and the case culminated in the U.S. Supreme Court's landmark 1987 decision in California v. Cabazon Band of Mission Indians.¹⁴

Congress's response to Cabazon was to enact IGRA,¹⁵ which established the federal policy goals and regulatory scheme for tribal gaming while also broadly setting forth the regulatory role of tribes and states.

B. Seminole Tribe v. Florida, 517 U.S. 44 (1996)¹⁶

A key part of Congress's attempt to accommodate both tribal and state interests in IGRA was the state's role in regulating casino‐style Indian gaming through the tribal‐state compact requirement. Early on in post‐IGRA tribal gaming, some states resisted entering into compacts to allow Class III gaming on reservations.¹⁷ Without a compact, a tribe could not legally conduct casino‐style gaming.

State resistance to tribal gaming was, of course, the impetus for Congress to enact a companion provision to the tribal‐state compact requirement: IGRA imposes a duty on states to negotiate in good faith with tribes toward reaching a tribal‐state compact. Congress was concerned that states might simply refuse to negotiate a tribal‐state compact, thus effectively precluding Class III tribal gaming, and that states might use the compacting process to demand inappropriate concessions from tribes. To give teeth to the state's good‐faith duty, Congress created an enforcement mechanism in the form of a federal cause of action: if a state failed to negotiate in good faith, the tribe could sue the state in federal court.¹⁸ According to the Senate Report,

This section is the result of the Committee balancing the interests and rights of tribes to engage in gaming against the interests of States in regulating such gaming. Under this act, Indian tribes will be required to give up any legal right they may now have to engage in class III gaming if: (1) they choose to forgo gaming rather than to opt for a compact that may involve State jurisdiction; or (2) they opt for a compact and, for whatever reason, a compact is not successfully negotiated. In contrast, States are not required to forgo any State governmental rights to engage in or regulate class III gaming except whatever they may voluntarily cede to a tribe under a compact. Thus, given this unequal balance, the issue … was how best to encourage States to deal fairly with tribes as sovereign governments. The Committee elected, as the least offensive option, to grant tribes the right to sue a State if a compact is not negotiated and chose to apply the good faith standards as the legal barometer for the State's dealings with tribes in class III gaming negotiations.¹⁹

Some states challenged IGRA's cause of action to enforce the good‐faith duty as an unconstitutional infringement of state sovereignty. In its landmark decision in Seminole Tribe v. Florida, the U.S. Supreme Court sided with the states, holding that the Eleventh Amendment prevents Congress from authorizing such suits by tribes against states.²⁰

The Eleventh Amendment provides that “[t]he judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or subjects of any Foreign State.”²¹ The Supreme Court has interpreted the Eleventh Amendment broadly to generally proscribe suits against the states, including against state officials acting in their official capacity, without the state's consent. This general rule has a few exceptions, including Congress's limited ability to abrogate states' immunity from suit and what is commonly known as the “Ex parte Young exception”: state sovereign immunity does not extend to state officials acting unconstitutionally or contrary to federal law, so that they may be sued for prospective injunctive relief despite the state's immunity from suit.²²

In 1991, the Seminole Tribe filed a suit against Florida Governor Lawton Chiles under IGRA, alleging that the state had refused to negotiate a tribal‐state compact allowing the tribe to offer Class III games on its reservation. Florida moved to dismiss the tribe's action, asserting its state sovereign immunity under the Eleventh Amendment. Essentially, the case raised two questions: first, whether Congress's authorization, through IGRA, of a suit against the state violated the Eleventh Amendment, and second, whether the tribe's suit against the governor of Florida fell within the Ex parte Young exception.

Congress's power to abrogate state sovereign immunity is limited and must be “exercised with unmistakable clarity.”²³ IGRA's provisions creating the cause of action against a state for failing to negotiate in good faith were an unequivocal expression of Congress's intent to abrogate state sovereign immunity.²⁴ But Congress must possess the power to effect its intent. Prior to Seminole Tribe, the Supreme Court had held that only the Fourteenth Amendment and Article I's Interstate Commerce Clause²⁵ provided sufficient constitutional authorization for Congress to override the Eleventh Amendment. Congress did not enact IGRA under either the Fourteenth Amendment or the Interstate Commerce Clause, instead relying on its presumed power to regulate tribes under the Indian Commerce Clause.²⁶

In a prior case, Pennsylvania v. Union Gas Co., the Supreme Court had held, through a plurality opinion, that the Interstate Commerce Clause gave Congress power to abrogate state sovereign immunity.²⁷ If the Interstate Commerce Clause authorized congressional abrogation of state immunity, the tribe argued, then it logically followed that the Indian Commerce Clause should grant Congress similar power since both the Interstate and Indian Commerce Clauses stem from the same delegation of congressional authority. Indeed, the Supreme Court's construction of Congress's so‐called plenary power over tribes under the Indian Commerce Clause arguably is of greater scope than its authority under the Interstate Commerce Clause.²⁸

The Seminole Tribe Court, however, expressly overruled Union Gas and held that neither the Interstate Commerce Clause nor the Indian Commerce Clause authorized Congress to abrogate state sovereign immunity. State sovereignty, said the Court, “is not so ephemeral as to dissipate when the subject of a suit is an area, like the regulation of Indian commerce, that is under the exclusive control of the Federal Government.”²⁹ In other words, despite its exclusive authority to deal with tribes, Congress may not create a cause of action against the states under the Indian Commerce Clause, as it attempted to do through IGRA.

The tribe also argued that the Ex parte Young exception allowed the suit against Florida's governor for prospective injunctive relief based on a violation of federal law, namely IGRA's provision requiring the state to negotiate in good faith. The Court, however, disagreed. Although a state official who violates federal law sheds the cloak of state sovereign immunity, the remedies afforded for such a violation may be limited by the federal law itself. Where Congress chooses a specific remedial scheme to enforce a statutory right, other more general remedies—such as a cause of action under the Ex parte Young exception—may be precluded. Under IGRA, upon a finding that the state failed to negotiate in good faith, the district court only has authority to take certain steps specified in the statute and meant to effect the negotiation of a tribal‐state compact. In contrast, a suit under the Ex parte Young exception would allow the district court to exercise a broad range of judicial powers, including imposing sanctions on the state.³⁰ Thus, the Court held that because IGRA's cause of action against the state is narrower that the general remedy allowed under the Ex parte Young doctrine, the exception does not apply to suits under IGRA.

Accordingly, the Seminole Tribe Court held that a state could not be sued in federal court by a tribe under IGRA without the state's consent. In effect, the Court invalidated Congress's statutory compromise between state interests and tribal and federal interests over Indian gaming. Without the enforcement mechanism against the states, the states' duty to negotiate compacts in good faith lacked teeth. In the wake of the Court's decision in Seminole Tribe, a state effectively could prevent a tribe from engaging in Class III gaming simply by refusing to negotiate a tribal‐state compact. Indeed, no Class III tribal‐state compact was finalized for over two years following Seminole Tribe, as states took advantage of the Court's holding.³¹

C. Seminole Hard Rock and casino‐style gaming

Even without a Class III gaming compact, the Seminole Tribe built a phenomenally successful gaming enterprise utilizing high‐stakes bingo and other Class II games. By 1999, the Tribe's annual gaming revenue from its seven casino properties was reportedly about $96 million.³²

In 2006, the Seminole Tribe made history through possibly the largest purchase ever made by an American Indian tribe—it acquired Hard Rock International for $965 million. The purchase included 124 “Hard Rock Café” restaurants in 45 countries, seven hotels, two casinos, and two concert venues. “Our ancestors sold Manhattan for trinkets,” said tribal council representative Max Osceola at the time. “We're going to buy Manhattan back, one burger at a time.”³³ Within a few years, the tribe had expanded the Hard Rock brand to include 164 restaurants, 22 hotels (increasing the room count from 3,500 to over 16,500, with more under development), 11 casinos, and five concert venues in 68 countries worldwide.³⁴

The tribe continued to pursue Class III gaming, navigating the murky legal and political waters left in Seminole Tribe's wake.³⁵ In 2007, over 15 years since the tribe's first request to negotiate a tribal‐state compact with Florida, then‐Governor Charlie Crist reached a compact with the tribe. The compact authorized the tribe to operate Class III slot machines and banked card games, including blackjack and baccarat. Further, it guaranteed the tribe the exclusive right to conduct banked card games, which would remain illegal to other gaming operators in the state, in exchange for revenue‐sharing payments to the state: $50 million up front, $175 million the first two years, $150 million for the third year, and $100 million a year thereafter. Days later, the Florida House of Representatives and its then‐Speaker, Marco Rubio, filed suit challenging the governor's state constitutional authority to enter into a compact without legislative approval.³⁶ The Florida Supreme Court sided with the state legislature, holding that

[t]he Governor does not have authority to agree to legalize in some parts of the state, or for some persons, conduct that is otherwise illegal throughout the state. … By authorizing the Tribe to conduct “banked card games” that are illegal throughout Florida—and thus illegal for the Tribe—the Compact violates Florida law. … Neither the Governor nor anyone else in the executive branch has the authority to execute a contract that violates state criminal law. … We conclude that the Governor's execution of a compact authorizing types of gaming that are prohibited under Florida law violates the separation of powers. The Governor has no authority to change or amend state law. Such power falls exclusively to the Legislature. Therefore, we hold that the Governor lacked authority to bind the State to a compact that violates Florida law as this compact does. We need not resolve the broader issue of whether the Governor ever has the authority to execute compacts without either the Legislature's prior authorization or, at least, its subsequent ratification.³⁷

But a valid Class III compact was necessary to effect the revenue‐sharing payments to the state, a highly motivating factor for the state legislature to act.³⁸ In 2010, the Florida legislature approved a new compact. The 2010 compact once again authorized the tribe to operate slot machines and banked card games, and guaranteed the tribe the exclusive right to conduct banked card games—this time, in exchange for at least $1 billion paid to the state over five years. The compact's provisions had a 20‐year term, with one important exception: the authorization to conduct banked card games expired after five years unless the parties agreed to extend the term or the state triggered an automatic extension provision. Specifically, the compact provided that the tribe could continue to offer banked card games beyond the five‐year term if “the State permits any other [entity except for another tribe] to conduct such games.”³⁹

The end of the five‐year term prompted litigation over whether the tribe could continue to offer banked card games and if so, whether it had to make revenue‐sharing payments to the state. By that time, the tribe reportedly was earning $2.2 billion annually in gaming revenue.⁴⁰

In late 2015, Governor Rick Scott negotiated a new deal with the tribe that expanded the tribe's banked card games to all seven of its casinos in exchange for $3 billion over seven years in revenue‐sharing payments to the state. With increasing pressure to expand the casino‐style games available to commercial gaming operators, especially the state's struggling pari‐mutuel industry, the new compact also permitted the legislature to expand commercial slot parlors and to authorize blackjack at the state's racinos or take other measures to protect pari‐mutuel operations from tribal competition.⁴¹ The $3 billion in state payments was touted as “the largest share for any state in history.”⁴²

Despite a marketing campaign by the tribe in support of the deal, the state legislature failed to approve the 2015 compact during its 2016 session. The tribe continued to offer the banked card games authorized by the compact while its lawsuit against the state was pending. The lawsuit alleged that the state had triggered the automatic extension provision or, in the alternative, that the state had failed to negotiate an amended compact in “good faith” as required by IGRA.⁴³ The tribe also continued to make the revenue‐sharing payments under the 2010 compact, which the state placed into an escrow account. The state filed counterclaims, arguing that the tribe was violating both the 2010 compact and IGRA by continuing to offer banked card games.⁴⁴

D. Recent developments

By 2016, the tribe's gaming operations in Florida, along with its Hard Rock holdings worldwide, were earning about $5 billion in annual revenue.⁴⁵ The state legislature's failure to approve the 2015 deal was criticized as costing the state billions in lost revenue sharing.

In the meantime, the tribe gained an advantage through a federal court decision issued in November 2016. The federal district court held that the state, by allowing player‐banked card games in poker rooms, triggered the automatic extension provision that would allow the tribe to continue to conduct banked card games for the full term of the compact.⁴⁶ State regulators had authorized player‐banked card games at more than two dozen card rooms and pari‐mutuel operations. Relying on the compact language and Florida statutory law, the court concluded that “banked card games” were not limited to house‐banked games, but also included player‐banked games:

[A] Florida statue defines a “banking game” as “a game in which [1] the house is a participant in the game, taking on players, paying winners, and collecting from losers or [2] in which the cardroom establishes a bank against which participants play.” Fla. Stat. sec. 849.086(2)(b) . … The first part of the definition … describes a house‐banked game . … The second part of the definition … describes a game banked by anyone else, including a player . … When the cardroom devises and runs the game and sets the rules, including the requirement that a player act as the bank, the cardroom “establishes” a bank. Any notion that players just happen in off the street and decide on their own to establish a bank is wholly fanciful. … In sum, nothing in this or any other Florida statute suggests that a game is not “banked” when the bank is a player rather than the house.⁴⁷

The bottom line of the court's decision was that the 2010 compact “authorized the Tribe to conduct banked card games for five years or 20, depending on future events. As it turned out, the compact authorized the Tribe to conduct banked card games for 20 years.”⁴⁸ The court did not reach the tribe's claim that the state failed to negotiate in good faith.⁴⁹

By July 2017, the state and the tribe had negotiated yet another deal: a settlement agreement under which the state would honor the district court's decision and drop its appeal, the tribe would not challenge the state's right to the revenue‐sharing payments held in the escrow account, and the Florida Department of Business and Professional Regulation would enforce a rule preventing card rooms from operating banked card games.⁵⁰ This settlement deal resolved the litigation, but didn't necessarily resolve the political and financial issues still facing the state.

In spring 2018, the state legislature once again was considering approval of a new compact. A bill in the state senate, SB 840, would have renewed the 2010 compact provisions, expanded the tribe's authorized games to include craps and roulette, and significantly increased the annual revenue‐sharing payments to the state.⁵¹ At the same time, the state's commercial gaming operators, particularly the pari‐mutuel operations, were seeking expansion of authorized games, and a possible special legislative session loomed to expand slots throughout the state. Further, a proposed state constitutional amendment, the so‐called “Voter Control of Gambling Amendment,” would divest legislative control of authorized gaming.⁵²

By April 2018, Governor Scott and the Seminole Tribe had reached another deal. The tribe would continue making revenue payments to the state until May 2019, the end of the next year's state legislative session. While lawmakers continued to look for compromises to expand commercial gaming while preserving the tribe's payments to the state, the 2018 session ended without resolution—and without a special session.⁵³ Now, the state awaits the outcome on the proposed constitutional amendment in November. “The constitutional amendment will either change the playing field completely, or leave the status quo,” said state senator Bill Galvano.⁵⁴ In short, while much has been put on the table, there are still cards to be dealt.

IV. The Story of the Deal(S) Behind the Compact

What follows is an edited transcript of the panel program. The edits are designed to preserve and enhance the narrative flow of the account of various issues surrounding the tribal‐state compact between the Seminole Tribe and Florida.⁵⁵

Steve Light: This is a fascinating story that's not just about law, legalities, and litigation, but also politics, policy, and practical considerations on the ground. That's the story of gaming law, generally—it's far more than black‐letter law. Joe, let's start with the Seminole Tribe's efforts to exercise sovereignty, specifically in the context of gaming rights.

Joe Webster: First, I would like to clarify that although I've had the privilege to represent the Seminole Tribe since the mid‐1990s, I'm not speaking on behalf of the tribe or for any other client.

The legal background Kathryn provided is a good overview of some of the challenges that the tribe has faced over the years. The tribe was a forerunner in Indian gaming, opening its first high‐stakes bingo hall in 1979, well before there really was any other Indian gaming to speak of in the country.

One interesting aspect of the Seminole Tribe litigation was that prior to the Supreme Court's decision, U.S. Court of Appeals for the Eleventh Circuit ruled that the state sovereign immunity prevented the tribe's suit from going forward but, in doing so, applied a severance analysis: because IGRA would not work the way Congress had intended without a tribe's ability to sue the state, a saving construction of the statute would allow a tribe to go directly to the Secretary of the Interior for procedures in lieu of a compact.⁵⁶ The Supreme Court left that part of the lower court decision undisturbed. So, the case law in the Eleventh Circuit is very favorable in terms of the tribe's right to secretarial procedures in the event the state asserts its immunity. Ultimately, the Interior Department adopted regulations to govern the mechanisms for issuing secretarial procedures in 25 C.F.R. pt. 291; but, if those regulations don't apply, then there is still Eleventh Circuit case law.

The Florida Supreme Court's 2008 decision⁵⁷ actually was quite narrow. The court ruled on aspects of state law, but did not address whether the 2007 compact was still valid for purposes of federal law. After it was signed, the compact was submitted to Interior for review and was deemed approved, and notice was published in the Federal Register. Even if there was some state law defect with the compact, that doesn't mean that it's invalid for purposes of federal law. In fact, when the Interior Department approved the 2010 compact, the approval letter indicated that the 2007 compact remained in effect for purposes of federal law. That's significant in terms of the tribe's payments under the 2007 compact that ultimately were turned over to the state when the 2010 compact was approved.

All of that led up to the 2017 compact and the litigation over its validity. Those seemingly little legal nuances were important to the tribe's ability to operate gaming. Looking back on the last couple decades, the tribe's story is one of innovation and perseverance. Even though they had some setbacks, they always found a path to move forward not only to their own benefit, but also to the benefit of other tribes across the country.

Light: Steve, we have the state's history of race tracks, jai alai, and tribal bingo halls as a long‐standing backdrop for how gaming has evolved in Florida. As a state government official, what's your sense of how the public and public officials have felt about gaming?

Steve Geller: First, in reference to how the legislature deals with “Indian gambling” specifically versus other types of gambling, I think there is more sympathy for Indian gambling simply because it's indisputable that the U.S. Department of Interior has done, I believe the correct legal term is, a “crappy job,” as trustees of Indian lands. [Laughter.] The Indian tribes were overwhelmingly in poverty because they had been relegated to few areas with very few resources.

At one of the National Council of Legislators from Gaming States [NCLGS] meetings, we toured a tribal casino, the Tohono O'odham Nation's casino in Arizona. And prior to that, most of the Florida legislators, when they were thinking about Indian gambling, were thinking of the Mashantucket Pequots—the tribe that runs the Foxwoods casino in Connecticut. After Foxwoods opened, suddenly they were an extremely wealthy tribe. When we toured the Tohono O'odham facilities, we saw that the only thing that brought them out of stark poverty was Indian gambling. So, to the extent—and I think this is nationally—that people think about it, I do believe there is more sympathy for Indian gambling.

I also want to point out that the political context is important. I was in the legislature, and my last term, when Governor Crist negotiated the compact, I was in the Senate minority. Governor Crist and I had been friends since college; I got him into politics in the 1970s when we were at Florida State together. I warned him that he did not have the authority to enter into a compact with the Indians. For Class III gaming, IGRA requires a “compact entered into by the Indian tribes and the State.”⁵⁸ It fails to define who or what is “the State.” At the time, there had been several instances of state governors trying to enter into Indian gambling compacts without legislative approval, and in ten of those states the legislature had sued the governor. In nine cases, the state supreme court sided with the legislature that it is the legislature's job to set policy. The governor can't set policy by entering into a compact and authorizing gaming without the approval of the legislature. And in the tenth case, the court ruled against the legislature, but it was on grounds other than the merit of the state constitutional argument.

So in Florida, the state supreme court ruled the same way that other state supreme courts had ruled, at least at the time, that a tribal‐state compact requires state legislative approval. Which is why I don't believe the 2015 compact is valid: it is my firm opinion that it still requires legislative approval.

I want to note, too, that this isn't just about gaming compacts. It's about the appropriate balance of state authority. If the governor could assert that he has the ability to unilaterally set policy in the context of a gaming compact, then that would become precedent for the governor to assert unilateral power in other areas. I was still in the state senate at the time of the lawsuit, and I strongly urged Speaker Rubio to sue my friend Charlie Crist in order to protect the rights of the legislature.

Light: Mary Ellen, having reported on this for some time, what are your thoughts on the backdrop for gaming in Florida, and the Seminole Tribe's efforts?

Mary Ellen Klas: At the big‐picture level, Florida has an interesting history with gaming to begin with. We are a huge gaming state; we have been since the days of bolita and Meyer Lansky. The state put together a framework of laws and statutes in a reactionary way, addressing issues as they arose. Now, the framework is guided mostly by the compact, with decisions made based on whether or not they comport with the compact. It's been fascinating to watch.

With the initial compact, it was shortly before we had a recession. So, the money that was guaranteed from the tribe has been flowing into the state treasury ever since, a minimum of $250 million a year, and it became a reliable and dependable revenue source for the legislature. But now there are many people who are arguing that, because the tribe has been so successful and their business model has continued to expand, the state should be getting even more money. As we speak here today, the legislative leadership is attempting to find a way to have a special session to ratify a new compact with increased revenue sharing. The promise of that money continues to be a very good draw for getting people to the table.

Another interesting aspect is that the compact serves as a buffer against the expansion of commercial gaming in Florida. The legislature would authorize the pari‐mutuels to operate additional games, if it didn't risk the state's compliance with the compact. Dog and horse tracks are a dying industry; they are struggling to adapt to changing markets. I think if it weren't for the compact, the legislature would take action to give the pari‐mutuels more options. To me, that's the overarching impact of all of this.

Light: Let's break into the compact and the “art of the deal” as it transpired. Before we do that, Kathryn, can you remind us about the significance of the tribal‐state compacting process under federal law?

Kathryn Rand: In short, in order for a tribe to be able to offer casino‐style games on its reservation, the tribe has to have a valid tribal‐state compact in place. Without that compact, casino‐style games are illegal under the Johnson Act and would open the tribe up to federal criminal liability, as well as not being legal under IGRA. So the significance of the tribal‐state compact is very real. Additionally, although the Seminole Tribe has been hugely successful in Class II gaming, most folks know that the real money is seen as being in Class III or casino‐style gaming.

Light: Joe and Steve, you each were intimately involved in the compacting negotiations and compacting process. Joe, I'll start with you—tell us about the role you played as an attorney involved in the negotiations.

Webster: I've had the privilege to represent the Seminole Tribe on a variety of issues, but certainly gaming has been a major aspect of that representation. That has involved, over the years, numerous federal and state court cases, as well as while the tribe was trying to develop Class II games that would be viable as it continued its efforts to obtain Class III gaming.

With respect to the compact negotiations, I think it's important to understand the backdrop that led to the 2010 compact. The 2007 compact, when Governor Crist and the tribe came together to sign that, was in the context of the Interior Department and the threat of Secretarial procedures that would have allowed the tribe to offer a variety of games, including slot machines, and the state wouldn't have gotten a penny.⁵⁹ It's not as though the tribe didn't have a right to those games; it really, at that point, was a question of whether the tribe was going to operate the games under Interior's procedures or under a tribal‐state compact, with the latter being the only mechanism where the state would have a role and have the ability to obtain any revenue from the tribe.

Leading to the 2010 compact, I was involved in the negotiation sessions and the initial drafting, working with and for Jim Shore, the tribe's general counsel, Jim Allen, CEO of Seminole Gaming, my law partner Jerry Straus, Barry Richard at Greenberg Traurig, and others. It really was a team effort.

One issue is the confusion about the status of the 2010 compact and what it does or doesn't say about banked card games. The term of the compact is 20 years, so the compact doesn't expire until 2030. The provision on banked card games had a sunset after five years, but only if one of two conditions were not satisfied. Basically, it said banked card games could be offered at five of the tribe's facilities until a five‐year cutoff, unless the tribe and the state agreed to extend the cutoff, or the state let anyone else in Florida offer banked card games. Further, limiting banked card games to five facilities only lasted as long as the state did not allow anyone else to offer banked card games.

Judge Hinkle's decision⁶⁰ was that the state had triggered that exception by allowing banked card games elsewhere in the state, so that the facility limitation and sunset provisions no longer apply and the tribe is now able to offer all of the games at all of its facilities until 2030 under the terms of the compact. In terms of the tribe's obligation to continue to make payments to the state, the state's actions also are a violation of the required exclusivity—yet the tribe has continued to pay and, I think, has really tried to be a great partner with the state. But the compact's terms regarding exclusivity and banked card games, as well as other casino‐style games, remain intact until 2030.

Geller: I don't completely agree with that. First of all, in reference to the Secretarial procedures, my recollection is that they were not fully approved. And I don't think that Judge Hinkle's ruling necessarily is correct; it has not been appealed.

Webster: It was appealed, but the state agreed to drop its appeal in the settlement.

Geller: Okay. But there are player‐banked card games and there are house‐banked card games. There is a question as to whether player‐banked games are, in fact, banked card games. Under state law, player‐banked games are not banked games. Federal regulations might reach a different outcome. My point is that there are two sides—the answer isn't clear.

Back to the politics of this, I can tell you that the overwhelming majority of the legislature simply does not understand IGRA. And the reason is, this is very complicated stuff. It's hard to learn in a two‐year committee term. But I served on the Committee on Regulated Industries (alcohol, tobacco, and gambling) all 20 years I was in the legislature, and I've been attending NCLGS meetings since I started it 25 years ago, so I've kept up on this topic. But most legislators don't, so they do not realize the implications of exclusivity under the compact. If you're a legislator, you hear from a lot of the opposing interests, like the pari‐mutuels, who keep asking for things that might make sense to a legislator who doesn't realize they cannot do that and still preserve the tribe's payments.

Around the time of the 2010 compact negotiations, Phil Hogen was the chairman of the National Indian Gaming Commission [NIGC] and George Skibine was the director of the Office of Indian Gaming in the Department of the Interior. They both used to come to NCLGS meetings. I would speak to them on Indian gambling and what was going on with the Seminoles. And in 2009, I believe it was, I had just left the legislature and was not representing anyone. I was talking with Skibine when he had just been appointed interim NIGC chair after Hogen's retirement, and he was asking about a possible compromise between the tribe and the state. And I told him, George, until you notify the Seminoles that you are going to say that they are in violation of IGRA, and you are going to take away their banked card games, they simply have no incentive at all to negotiate with the state. He and I discussed this a couple of times, and he called me one day to say he was taking my advice and was going to notify the tribe that he would find them in non‐compliance. And within 30 days, we had a compact because until there was a hammer over them, there was simply no reason for them to negotiate with the state. Both sides have to have something to gain or to lose in order to enter into an agreement and that's what ended up happening in Florida.

Light: Before we shift to the actual key provisions of the compact, I want to ask Mary Ellen about your perspective on the role of the governor, the role of the legislature, or the role of other political players, such as advocacy organizations, as the deal was coming together.

Klas: In Florida, which I think is somewhat unique, legislative leadership, including committee chairs, generally only serve two years. So there is a constant turnover, with the exception of long‐serving members like Steve Geller, when he was in the Senate, and now Bill Galvano, who negotiated the 2010 compact—he has an enormous amount of historical knowledge. For other legislators, there is this giant learning curve, and the result of it, I think, is that Florida has been very badly served by the lack of continuity—as one senator described it, regulations get put together with chewing gum and baling wire. There is no consistency; there is not a clear vision for a regulatory model. Industry leaders have advised legislators to look at models like New Jersey and Nevada, put a gaming commission together, create some set of guidelines and standards that are consistent—but the Florida legislature has just not found the way to do that. The result is legislation that is reactive to lawsuits. Without a cohesive policy approach, the state has a “Swiss cheese” regulatory scheme that can't handle new issues, such as technological innovation and new games.

Light: By this account, it sounds like the state is disadvantaged in negotiating the compact because of the legislative turnover, learning curve, lack of cohesive policy, and so on. Doesn't that mean that the tribe has the upper hand?

Geller: I think they do. I think that the Seminoles, because they have excellent lawyers and they have consistency, have a huge advantage.

Light: Thoughts, Joe?

Webster: I'm not sure the advantage is as much as you say. One thing I would like to note: I think Steve Geller and I will probably need to respectfully disagree on our recollections of the history and some of the legal points in terms of the compact. [Laughter.]

The fact is that has been a multi‐decade struggle and battle for the tribe to vindicate its gaming rights, so I'm not sure that reflects an advantage. The tribe has to start over in dealing with the new state leaders on a pretty constant basis, so the lack of continuity impacts the tribe, too.

One thing that I think that has been good, particularly since the 2010 compact, is the relationship between the tribe and the state, the level of professionalism between the regulators, and the level of respect. The fact that the tribe has not only met but exceeded every commitment it made under the agreement—I think that's gone a long way in terms of the overall positive political dynamic.

Geller: I agree completely—most legislators I know have great respect for the Seminole Tribe, even if they aren't aware of, or don't fully understand, IGRA.

Light: Let's dive down for just a few minutes on the specifics of the compact provisions. We've heard some about the issues related to banked card games, pari‐mutuel interests, and exclusivity and revenue sharing. What from your perspectives are the key compact provisions?

Webster: One key provision is the tribe's commitment to make payments to the state. Under the 2010 compact, the tribe agreed to a minimum of $1 billion over the first five years of the compact. That was absolutely unprecedented: no other tribe in the country had agreed to revenue sharing even close to that amount. And ultimately, the tribe's payments exceeded the $1 billion minimum by tens of millions of dollars. The actual amount of the tribe's payments is based on tiered percentages, so the more the tribe makes, the higher the payments to the state. The tribe is continuing to pay the state hundreds of millions of dollars a year in exchange for the exclusivity that it has under the compact. Even though there are some issues right now that the tribe and the state need to resolve, the tribe has continued to pay every month as specified in the compact.

Another key provision is the banked card games provision. That is perhaps of particular interest to attorneys in terms of drafting agreements, because there were many arguments about banked card games, what does the phrase mean, what does state law say, what does federal law say—but ultimately what it really comes down to is what does the compact say. The 2010 compact gives the tribe the right to operate “covered games,” and covered games include banking or banked card games.⁶¹ It doesn't say house‐banked, it doesn't say player‐banked; it just says banking or banked card games and provides a list of examples: blackjack, baccarat, and chemin de fer. Blackjack and baccarat are house‐banked games, but chemin de fer is a player‐banked game. The examples that the parties used in drafting the compact included both house‐banked and player‐banked games. So, on the issue of whether the state had allowed someone to offer a banking or banked card game, you look to how the compact defines it, and it seems clear that the compact includes both types of games.

Klas: Let me offer a perspective as the journalist on the panel. The legislature authorized the compact giving the tribe exclusive ability to operate slot machines outside of Miami‐Dade and Broward Counties, and the exclusive ability to operate banked card games at most of its facilities. The reason they chose those two counties is that in 2004, the pari‐mutuels in south Florida teamed together on a referendum which passed, allowing pari‐mutuels in those two counties to operate slot machines.⁶² And that was, of course, the trigger that allowed the tribe then to demand slot machines. The compact permitted the tribe to operate slot machines at all of its seven facilities, even those outside Miami‐Dade and Broward Counties. In exchange for that partial exclusivity, as Joe said, the tribe agreed to revenue sharing.

Further complicating the new compact approval in the legislature is the fact that several other counties want to legalize slot machines, but the Florida Supreme Court ruled that counties don't have the authority to do that without legislative approval.⁶³ Also significant is the tax rate on those slot machines. When the 2010 compact was negotiated, the tax rate was at 50 percent; the legislature has since reduced it to 35 percent, and I believe is now talking about lowering it to 30 percent as part of the discussions to ratify the new compact.

Light: Two follow‐ups. First, Kathryn, how does exclusivity normally work in the context of revenue sharing, and second, what's happening here in Florida?

Rand: IGRA prohibits states from taxing tribal gaming operations. However, in the context of a compact, the state and the tribe can negotiate a payment in exchange for a benefit that the tribe isn't already entitled to. That's “revenue sharing.”

Usually, the benefit to the tribe is substantial exclusivity over at least some forms of Class III gaming. IGRA indicates that if Class III gaming is legal in the state, then the tribe is essentially entitled to operate Class III games—that's the reference to legalized slot machines in Miami‐Dade and Broward Counties opening the door to the tribe being able to operate slot machines. But if the state guarantees that other nontribal operators won't be able to offer those games on the same terms that the tribe is offering the games, then the state can ask for revenue sharing in exchange for that exclusivity, and that is permitted under federal law.⁶⁴

Webster: But what is required is “substantial exclusivity.” Here, the tribe has substantial exclusivity overall; it has complete exclusivity in the state with respect to banked card games, and it has partial exclusivity with respect to slot machines. Even with regard to Class III games that the tribe doesn't offer, the compact includes a catch‐all provision that limits the ability of the state to authorize other types of Class III games. For a compact that includes exclusivity payments, the Interior Department reviews that very closely; it's necessary to show that the value of the exclusivity is sufficient to justify the amount of the payments. Here in Florida, sometimes it's stated that so long as there is exclusivity for one type of game, that's sufficient. But that's not the case; you really have to look at exclusivity and revenue sharing as a whole.

Klas: It's also worth noting that the 2015 agreement that the tribe made with Governor Scott included more partial exclusivity. There, they agreed to the exclusive operation of craps and roulette at all of the tribe's casinos, but it also allowed the expansion of gaming at the state's racinos.

Webster: To be clear, though, the 2015 compact was signed by the governor and the tribe, but it was never approved, so it has no legal effect; the 2010 compact remains in effect until 2030. Discussions have moved beyond those terms—the 2015 compact was at a different point in time.

Klas: But every legislative proposal starts with it; legislators use it as a starting point for draft bills.

Light: In November, there will be a proposed state constitutional amendment on the ballot, Florida Amendment 3, the Voter Approval of Casino Gambling Initiative, or as it's sometimes called, the “Voter Control of Gambling Amendment.”⁶⁵ What is it, and what are the implications?

Geller: I think, if passed, Amendment 3 would mean the elimination of most gambling in the state of Florida. That's because slot machines are on their way out. People who are 35, 40 years old or younger have no interest whatsoever in playing slot machines. Whatever replaces slot machines will require voter approval under Amendment 3.

Klas: One thing that's important to note is that in Florida, in order for an amendment to pass it needs 60 percent approval. That is a pretty high threshold, although the polls are showing right now that it has a lot of support. If Amendment 3 is perceived as giving the tribe a monopoly on gaming in Florida, that may tamp down some of that support.

Also, the legislature has the authority to directly put anything on the ballot for voter approval. Even if Amendment 3 passes, the legislature can adopt new legislation and then put it on the ballot.

Geller: I don't know what the relevant interest groups will be, but I know it's going to be difficult to pass a constitutional amendment that, at a minimum, will have the entire anti‐gambling community opposing it.

Light: As we are nearing the end of our program, I'm going to ask each of our panelists one last question. For Kathryn, is there one top lesson learned or implication from this story?

Rand: What happens in a single state, like Florida, with a single tribe, like the Seminole Tribe, has impacts across the country for tribes in very different circumstances and for states in very different circumstances. While this might be a mutually agreeable revenue‐sharing provision in Florida for the Seminoles, I think that there ought to be outer bounds regarding revenue sharing for the good of all tribes and for building the legacies of Indian gaming across the country.

Light: Joe, if you could change or fix one thing in the compact, what would it be from your perspective?

Webster: Just from my perspective, I'd like to see a perpetual term, like the compacts in Minnesota.

Light: Steve, same question: if you could change or fix anything in the compact, what would it be?

Geller: I think that the compact, in general, is reasonable. I would hope that the legislature would be better educated on the compact.

Light: Mary Ellen, you get the last word. From where you're sitting, as an experienced journalist who knows the lay of the land in Florida, it's a two‐parter: What's going to happen with Amendment 3 in November—so put on your Carnac‐the‐Magnificent hat–and what's the headline going to be on the next day?

Klas: I am not as convinced that public opinion polls are as effective as they have been in previous election cycles. I am not confident that this amendment will pass. So that's my prediction at this point. That will mean the legislature gets to start over again in fixing the compact. And as a journalist, my take away is that I've got to start writing more explanations so that legislators will understand what exclusivity means. [Laughter.]

Steve: And the headline the day after the vote?

Klas: “No Deal.”