A full understanding of the circumstances underlying the 2001 New Mexico tribal-state class III gaming compact requires some appreciation of the history of the Indian gaming controversy in New Mexico. The following is an effort to recount the highlights in that tortuous history.

A. The Beginning: The Sandia/Mescalero Lawsuits

In the mid-1980s, the Pueblos of Acoma and Sandia, following a trend begun by tribes in Florida and elsewhere, opened high-stakes bingo parlors on their land. Litigation over similar facilities opened by the Florida tribes had resulted in rulings in favor of the tribes, and the State of New Mexico took no action to thwart the two pueblos' operations. When the Supreme Court decided the case of California v. Cabazon Band of Indians, 480 U.S. 202 (1987), holding that states had no authority to prohibit tribal high-stakes gaming operations so long as the type of gaming being offered was not totally prohibited by state policy, the pressure for high-stakes gaming operations by other tribes began to grow.

The following year, in response to that pressure and to growing demands on the part of the states that they be involved in the regulation of high-stakes gaming on Indian land, Congress enacted the Indian Gaming Regulatory Act, 25 U.S.C. §§ 2701-2721 (“IGRA”), in which it essentially cleared the way for high-stakes bingo operations by tribes (which was denominated "class II gaming" in the act), subject to oversight by the newly created National Indian Gaming Commission, and allowed for casino-type gaming (referred to as "class III gaming") to be conducted by any tribe that entered into a tribal-state compact with the State, and provided that the State "permits such gaming for any purpose, by any person, organization or entity.”

After the enactment of IGRA, the Pueblo of Sandia and the Mescalero Apache Tribe, among others, formally requested that the State enter into compact negotiations for limited class III gaming. Governor Garrey Carruthers refused to respond to those requests, but after Bruce King was reelected as Governor in 1990, he appointed a task force, consisting of the heads of various state agencies and chaired by Jerry Manzagol, to conduct negotiations with the two tribes. Those negotiations led to compacts that would have allowed the operation of a very

screen shows the game outcome). Those compacts were presented to Governor King for signature, and then-Attorney General Tom Udall advised the Governor in writing that he could sign the compacts as a matter of state law, and might even be obliged to do so as a matter of federal law. King, however, who was staunchly against gambling and believed that New Mexico law precluded the type of gaming that the proposed compacts would allow, refused to sign either document. The tribes thereupon filed separate suits in federal court, under the provision of IGRA, § 2710(d)(7)(A)(i), that purported to authorize a tribe to sue a state for the state's failure to negotiate for a class III compact in good faith.

Soon after that case was filed, a federal district court in Oklahoma, facing a similar tribal bad faith lawsuit, dismissed the suit on the ground that the state had immunity under the Eleventh Amendment of the Constitution, which immunity (the court held) could not be abrogated by Congress for purposes of IGRA. Ponca Tribe of Oklahoma v. State of Oklahoma, 834 F.Supp. 1341 (W.D.Okla. 1992). New Mexico District Judge John Conway, faced with a motion by the State of New Mexico to dismiss the Mescalero and Sandia cases on Eleventh Amendment immunity grounds, adopted the Ponca Tribe decision in its entirety, and dismissed the complaints. The tribes appealed to the 10th Circuit Court of Appeals.

B. The Grand Jury Subpoena and the “Stand-Still” Agreement

In the meantime, more and more New Mexico tribes had become frustrated by Governor King's refusal to sign compacts, even those negotiated by his own hand-picked task force. The tribes' position was that New Mexico law allowed charities to conduct “casino-night" fundraising events (under a fairly vaguely worded charity lottery statute), and that that justified the tribes' demand that they be entitled to engage in casino-style gaming, as had been held in Machantucket Pequot Tribe v. Connecticut, 913 F.2d 1024 (2d Cir. 1990), cert. denied, 499 U.S. 975 (1991). A growing number of tribes began to open their own class III gaming facilities, without compacts. Political pressure began to build on the United States Attorney to take action with respect to these uncompacted class III gaming operations. Finally, in mid-1993, then U.S. Attorney Don Svet convened a grand jury that issued subpoenas duces tecum to the tribes operating such facilities, commanding them to produce various categories of documents pertaining to their operations. The tribes went to court to contest the subpoenas on sovereign immunity and Fifth Amendment grounds, and U.S. Magistrate Judge William Deaton, following a hearing on July 6, 1993, granted their motion to quash the subpoenas. The United States appealed that decision to the district court, but District Judge James A. Parker, after several hearings, refused to rule on the appeal.

Then, in late 1993, John J. Kelly was confirmed as the new United States Attorney. Kelly immediately initiated contacts with the tribes, indicating a desire to negotiate a resolution of the problem of the uncompacted class III gaming operations, and negotiations commenced in early 1994. Those negotiations ultimately led, on May 31, 1994, to the issuance by the United States Attorney's Office of letters of non-prosecution to each of the tribes then engaged in class III gaming activities, under which each tribe agreed not to expand its operation beyond the number of gaming devices that were in use by such tribe on January 1, 1994, and to various other

conditions. (The agreements were referred to as "stand-still" agreements.) Kelly, who believed the tribes' arguments that they were being wrongfully denied compacts, endured substantial public criticism as a result of those agreements.

At the same time, a political newcomer, Gary Johnson, entered the political arena and won the Republican nomination for Governor, and he began running a strong campaign against Bruce King. Johnson, a true maverick, stated early on that if elected he would negotiate and sign gaming compacts with the tribes, and after the tribes (who have traditionally been strongly Democratic) had made several more futile efforts to get King to give in on his refusal to sign compacts, they swung their support behind Johnson, and eventually contributed nearly $250,000 to his campaign. In early September of 1994, as the campaign was in full swing, the 10th Circuit Court of Appeals issued its decision in the Sandia-Mescalero appeal (consolidated with several similar cases), reversing Judge Conway's decision dismissing the suit to compel compact negotiations. Ponca Tribe of Oklahoma v. State of Oklahoma, 37 F. 3d 1422 (10th Cir. 1994). The decision was a further embarrassment to King but he was resolute in his refusal to sign compacts.

In November, the voters chose Gary Johnson as the new Governor of New Mexico. Within weeks, Johnson had named Fred Ragsdale, a flamboyant former Associate Solicitor for Indian Affairs, as his chief compact negotiator, and soon after Johnson's inauguration, negotiations between Ragsdale and the tribes were in full swing.

Ragsdale, and David McCumber, Johnson's new chief counsel, early on agreed to compact terms that essentially allowed for unlimited class III gaming, and that made the tribes the primary regulators of the gaming activity. Johnson's only significant condition was that the State get a cut of each tribe's revenues. This so-called "Revenue Sharing Agreement," which was negotiated as a side agreement, rather than part of the compact itself, required that the tribes pay the State up to 5% of their gross receipts (referred to somewhat ambiguously as "net win") from slot machines, but conditioned on the State not expanding non-Indian gaming, except for permitting gaming devices at race tracks and at certain non-profit organizations. The agreement had a fairly complex provision under which revenue-sharing would continue so long as the tracks operated gaming devices only on days on which live races were being run somewhere within the state, and it further provided for significant reductions in the revenue-sharing obligation of a tribe within 150 miles of a racetrack that was operating gaming machines, on days on which such machines were in operation. (That proviso basically covered every tribe in the state.)

The Johnson negotiations were carried on largely behind closed doors, and when the 1995 legislature convened, legislators, already deeply mistrustful of Johnson, begun to express indignation that they had been excluded from the process. Finally, in early February, Johnson released the negotiated agreement for review by legislators and the Attorney General's Office. Before there had been much opportunity for feedback on the document, however, at 9:00 a.m. on Monday, February 13, 1995, Johnson assembled with tribal leaders in his cabinet room, and

signed identical compacts and Revenue Sharing Agreements with each of 14 tribes. The compacts were approved by Assistant Secretary Ada Deer in less than 30 days after they were submitted for review.

The New Mexico compacts were apparently the first gaming compacts submitted for Secretarial approval that included revenue-sharing. The March 15, 1995 approval letter, therefore, went to some pains to justify the Revenue Sharing Agreement, which had been submitted with the compact. The letter found that the revenue sharing payments were either an "operating cost" of the gaming operation, and thus not prohibited by IGRA, or amounted to the purchase of an economic benefit, in the form of the State's forbearance in expanding competing non-Indian gaming activities, and therefore fell within the provisions of § 2710(b)(2)(B)(iii), which allows the use of net revenues from tribal gaming "to promote tribal economic development."

Barely a month after the compacts were approved, several members of the state legislature who were opposed to gambling in any form, and others, filed a petition with the New Mexico Supreme Court seeking a ruling that the Governor had no authority to bind the State to a compact that had not received the approval of the legislature. The Court acted with extraordinary speed, issuing an opinion on July 13, 1995, in which it found that Governor Johnson had exceeded his authority by approving gaming activities in the compacts that were not otherwise allowed in the state, and that the compacts were, therefore, "null, void and of no effect" in New Mexico. State ex rel. Clark v. Johnson, 120 N.M. 562, 904 P.2d 11 (1995).

The tribes, not having been parties to the litigation, viewed themselves as technically not bound by the decision, but again, political pressure began to build, and the United States Attorney's Office once again became its object. In August, the tribes' position that under existing state law, the state essentially "permitted" class III gaming in that it allowed charity casino nights, was dealt a blow when the Supreme Court, in a footnote in the case of Citation Bingo, Ltd. v. Otten, 121 N.M. 205, 910 P.2d 281 (1995) (which footnote had nothing to do with the issues in the case) expressed the view that it was unaware of any statutory authority permitting the operation of slot machines or other casino-type gaming in the state. Despite the clear dictum quality of that observation, U.S. Attorney Kelly concluded that any state law basis for the gaming being operated by the tribes had evaporated, and he informed the tribes that he believed their operations violated federal law, notwithstanding the compacts. He threatened enforcement action unless the tribes agreed to terminate their class III gaming operations.

The tribes persuaded Kelly to postpone the initiation of any action against them until after the first of the year, but on January 3, 1996, the tribes themselves filed an action in federal court, seeking to enjoin Kelly from taking any enforcement action, on the ground that they had valid

The tribes' suit raised potentially difficult questions of federal sovereign immunity, prosecutorial immunity and other obstacles, but it was clear that whether the tribes' suit proceeded or Kelly initiated enforcement action against the tribes, the ultimate issue would be the validity of the compacts. Consequently, the tribes and Kelly reached an agreement that Kelly would not contest the tribes' suit on immunity or other procedural grounds, but the tribes agreed that if the ultimate decision in the case went against them, they would voluntarily cease their class III gaming operations. That agreement was embodied in a stipulation that was approved by the court, and the case of Santa Ana v. Kelly thereafter proceeded on an expedited schedule in the federal district court. The State intervened as an additional party defendant, and after extensive discovery, the filing of hundreds of pages of briefs and exhibits, and oral argument that lasted a full day, the district court issued its decision on July 12, 1996, holding that the Governor's lack of authority to execute the compact on behalf of the State, as determined by the state Supreme Court decision in Clark, meant that there was never a valid compact submitted to the Secretary for approval. Pueblo of Santa Ana v. Kelly, 932 F. Supp. 1284 (D.N.M. 1996). Mindful of the tribes' stipulation with the United States Attorney, however, and of the severe economic dislocations that would accompany closure of the nine Pueblos' gaming operations, the district court stayed its decision pending the tribes' appeal to the 10th Circuit.

The Mescalero Apache Tribe had not joined the nine Pueblos that filed the Santa Ana case, but in early 1996 the State filed a counterclaim in the still-pending bad faith lawsuit the tribe had filed in 1991, asking the court to declare the Mescalero's 1995 compact invalid. Chief Judge John Conway heard argument on the State's summary judgment motion on the claim on June 3, 1996, just two weeks before Judge Martha Vazquez was to hear arguments in Santa Ana, and ruled from the bench that the Mescalero compact was void. In late September, while their case was on appeal, but without any stay in effect, U.S. Attorney Kelly forced the Mescaleros to close their casino. It remained closed for more than two months, until the tribe agreed to the same terms the Santa Ana plaintiffs had reached with Kelly.

The appeal in Santa Ana was similarly expedited. Oral argument occurred in early December, and on January 10, 1997, just days before the New Mexico legislature reconvened, the Court of Appeals issued its decision affirming the district court. Pueblo of Santa Ana v. Kelley, 104 F.3d 1546 (10th Cir.), cert. denied, 522 U.S. 807 (1997). The 10th Circuit also stayed its decision while the tribes sought review in the Supreme Court, but the handwriting was clearly on the wall. The tribes knew that the likelihood of Supreme Court review of the 10th Circuit decision was practically nil, and that if there were not a legislative fix in the 1997 legislative session, their gaming operations would have to be shut down sometime before the end of the year. Consequently, the tribes geared up for the most extraordinary lobbying effort they had ever undertaken.

E. House Bill 399

Importantly, while the Santa Ana litigation was pending, the Supreme Court decided the seminal case of Seminole Tribe v. Florida, 517 U.S. 44 (1996), in which it held that the purported abrogation of state sovereign immunity in § 2710(d)(7)(A)(i) of IGRA was beyond