State High Court Overturns Indian Gaming Initiative

Proposition 5, the Indian gambling measure that state voters overwhelmingly approved last November, is unconstitutional because of a state ban on Nevada-style casinos, the California Supreme Court decided Monday.

The 6-1 decision means that the most popular kinds of gambling offered on many Indian reservations in California are illegal and can be shut down by federal authorities. A federal judge already had ordered some of the state’s largest Indian gambling halls to disconnect their slot machines within 45 days of a state Supreme Court rejection of the ballot measure.

Tribal officials remained hopeful Monday that their gambling halls could continue to operate in some limited fashion pending future talks with Gov. Gray Davis and a possible new ballot measure.

But the court decision prevents Davis from permitting slot machines and certain kinds of card games, such as blackjack, on reservations in any agreement he negotiates with tribes in coming months.

Davis said he would abide by the court’s decision but also would try to find a way to enforce the will of voters who approved Proposition 5.

“In light of last year’s overwhelming vote in favor of Indian gaming,” he said, “I intend to work diligently to find a constitutionally acceptable means of implementing the people’s expressed will. I intend to work with the Legislature, the tribes and all interested parties to achieve that result.”

With Proposition 5, voters were asked to endorse the kind of Indian gaming that has spread in California without state or federal approval, including the use of slot machines and some card games.

An attorney for the tribes said Monday that they may now try to modify their card games and electronic gambling machines to bring them into compliance with the high court ruling. But the necessary modifications would take time and money and significantly reduce casino profits, tribes say.

In the meantime, some tribal leaders have already begun collecting signatures for a ballot measure next March to amend the state Constitution by specifically exempting Indian gambling from the constitutional ban on casino-style gambling. One option for Davis, who has received major campaign contributions from California Indian tribes, would be to work with the Legislature to put the proposed constitutional amendment on the ballot without the need for an expensive and time-consuming signature campaign.

“We’ve come too far at this point to throw in the towel,” said Mark Macarro, chairman of the Pechanga Indians in Temecula.

The financial future for many tribes is at stake. In 1997, the 41 Indian casinos in California generated an estimated $1.36 billion in gross revenue. Casino profits have financed reservation housing, medical insurance, scholarships and other programs and even enabled some tribes to invest in non-gaming businesses ranging from banks to a TV station.

The California Supreme Court struck down the initiative on the grounds that it violated a 1984 constitutional amendment that created the state lottery. That amendment, approved by voters, also banned Nevada- and Atlantic City, N.J.-style casinos in California.

According to federal Indian gaming laws, tribes may offer any kind of gaming that is otherwise allowed in a state if they have the agreement of the state. Tribal leaders had argued that Indian casinos provided only lottery-type games.

Too Similar to Las Vegas-Style Games

But Justice Kathryn Mickle Werdegar, writing for the court, said the card games and slot machines authorized by Proposition 5 “amount to prohibited casinos.”

She said the Indian games have payout systems similar to those in Nevada and New Jersey, and the differences are insignificant. Casino-style gambling pays off winners from the casino bank, regardless of how much players contributed; lotteries pay winners from money deposited by other players.

“A slot machine is no less a slot machine under California law” if it dispenses chips or electronic credits rather than coins or is activated by buttons rather than levers, she wrote.

She noted that before November’s election, the legislative counsel issued an opinion stating that the measure would violate the state Constitution’s ban on Nevada- and New Jersey-style casinos.

Voters, however, didn’t seem to care. Nearly 63% of them approved the initiative after an almost $100-million campaign--the most expensive ever for a ballot measure in national history.

After the vote, labor and individuals backed by the Nevada gaming industry quickly went to court to block the measure. The state Supreme Court issued an order in December to prevent the measure’s implementation while the court considered the challenges.

Justice Joyce Kennard, the sole dissenter in Monday’s ruling, accused the majority of rejecting “the will of the people.” Kennard said California lacks authority to deny Indians the right to operate casinos on their reservations.

“It is utterly beyond the sovereign power of California to authorize or prohibit gambling on Indian lands within the state,” Kennard wrote.

An attorney for the Indian tribes said they have not yet decided whether to appeal to the U.S. Supreme Court, but indicated it was unlikely. The California Supreme Court has final say over the interpretation of the state Constitution, he said.

“To the extent they say this is what the California Constitution means, that is what the California Constitution means,” said Mark H. Epstein, who represented the tribes before the state high court.

Retired federal appeals Judge William Norris, who is Davis’ representative in negotiations with the gambling tribes, said the decision ends the current round of talks Davis has been having with tribes because “the centerpiece” of the discussions has been Proposition 5.

Now, he said, new options are for both sides to identify the kinds of machines that would be constitutional--those that function within the guidelines of a lottery--or to seek to exempt the tribes from the ban on slot machines with a proposed constitutional amendment on the ballot. If such a measure was approved, non-Indian card clubs would still be prohibited from using slot machines.

“We’ll be very busy in the next few days and weeks,” Norris said. “It’ll take some work to figure out how to accomplish that end and that’s what we’ll be working on, to fulfill the governor’s vision of how to implement the people’s will to permit Indian gaming.”

Sacramento attorney Howard Dickstein, who represents several gaming tribes, said they probably will continue to operate some version of their casinos under agreements with Davis until a possible vote in March on the proposed ballot measure.

“I can’t imagine that state or federal courts will move precipitously while negotiations are still going on and another ballot measure is pending for the people,” he said.

Nevertheless, Thom Mrozek, a spokesman for the U.S. attorney’s office in Los Angeles, said Monday that nine tribes that operate some of the largest casinos in the state previously agreed to comply with the court order to unplug their machines if the Supreme Court overturned the initiative.

“We have no reason to believe that the Indians will not abide by the decision they already agreed to--to shut down,” Mrozek said.

Nevada government and casino leaders Monday praised the court decision but conceded that Indian competition in California remains a threat.

“This is very favorable news for Nevada and our most important industry,” said Nevada Gov. Kenny Guinn. “But we have to be careful and keep vigilant because the executive branch in California may still have the leeway to decide on compacts [casino agreements] with Indian tribes.”

He noted that Indian gaming facilities could still offer bingo and other gambling under the terms of the decision and that gaming machines might be reconfigured to remove the Supreme Court’s objections.

Key Source of Casino Revenue

But others said the tribes cannot make the needed changes without a substantial loss of profits. Indian gaming terminals--slot machines in the court’s view--now account for 70% to 80% of the revenue at casinos on more than 40 California reservations.

Richard M. McCracken, a lawyer for the Hotel Employees & Restaurant Employees International Union, which filed suit to block the initiative, said the union does not want Indian gambling halls to be shut down.

The union opposed Proposition 5 because it did not give casino workers the right to organize or protect them from unfair working conditions. McCracken said the union hopes Davis will negotiate agreements that keep the casinos open and protect the workers.

He said there are 10,000 casino workers in California. “Very few are Indians,” he said, “and those who are work in management.”

Jack Gribbon, state political director of the union, said: “We want casino compacts that everyone can embrace . . . in which Indians can enjoy economic expansion and workers have the right to pick a union of their choice. We want to work together on this.”

Indian casinos have evolved slowly since the 1980s, emerging first as high-stakes bingo halls. Over time, tribes introduced video machines they said simply created a high-tech version of the kind of lottery-style gambling they were legally entitled to offer.

State and federal officials objected, and repeatedly threatened to shut down an estimated 15,000 slot machines operating in Indian gambling halls across the state. But the federal government has refrained from sending in U.S. marshals while the litigation has been pending.

Tribal leaders hope ultimately to win the fight by appealing to voters.

When they first considered a ballot measure, they did not think they could collect enough signatures--about 700,000--to qualify a constitutional amendment.

They proposed instead Proposition 5, which simply amended state law, because only 400,000 signatures were needed. To their surprise, They ended up with more than 1 million signatures, enough to have qualified a constitutional amendment.

In cases in which there is conflict between a law and the Constitution, the Constitution prevails. The proposed constitutional amendment now being circulated would exempt tribal casinos from the constitutional provision that prohibits Nevada-style gambling in California.

But even if such a proposal goes to the ballot, opponents of Indian casinos say they will again litigate it as unconstitutional. They claim such a measure would amount to an illegal contract between tribes and the state.

Theodore B. Olson, who represented individuals opposed to Indian casinos in the case before the state high court, predicted that the tribes would have more difficulty getting a gambling measure approved a second time.

“They will have to level with the California people,” Olson said. “Last time they said it wouldn’t legalize casino gambling in California. In fact, it would have.”

Times staff writer David Lesher in Sacramento contributed to this story. Gorman reported from Riverside.

* COURT ACCEPTS DNA METHOD

The state Supreme Court upheld a conviction that relied heavily on a DNA match. A3