What's Next for Coeur D'Alene?

"It was always just about money and not about laws and the rhetoric that was being attached to it by our opponents."

- Dave Matheson
Coeur d'Alene Tribe Hotel Casino and Resort

The Ninth U.S. Circuit Court of Appeals last week reversed a U.S. district court's ruling that AT&T was not obligated to provide toll-free phone numbers to the Coeur d'Alene Tribe of Idaho for the purpose of operating a telephone-based lottery.

AT&T withheld service after being contacted by several state attorneys general who said it would take action against the phone company for violating gaming laws if it provided the service.

Although the decision doesn't address online gaming directly, at the center of the case was whether the tribe could conduct its gaming business with consumers who weren't physically located on the tribal lands.

Lawyer Jeff Modisett, the former attorney general of Indiana, feels the decision could force the hand of a group of state attorney's general who would like to see Internet gaming challenged in the court system.

How Will the Coeur D'Alene Reversal Affect Internet Gambling?

This case deals with jurisdiction: jurisdiction of the tribal courts, U.S. district courts, state attorneys generals and federal governmental agencies.

The Ninth Circuit ruled that the tribal court lacked jurisdiction over the tribe's lawsuit against AT&T because the tribe's claim that AT&T violated the Federal Communications Act may only be brought in a U.S. District court. Also, because the NIGC is a federal governmental agency, the state attorneys general lacked jurisdiction over AT&T regarding service to the tribe. Because the NIGC approved the tribe's lottery concept, until that decision is challenged in accordance with the administrative procedure act, state attorneys general are unable to invoke the Wire Act's cease-and-desist provision.

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The appellate decision marks the latest chapter in a long court battle between the tribe and various attorneys general. The case was originally assigned to a tribal court. A federal appeals court, however, ruled that the tribal court didn't have jurisdiction over the case. But the federal court also said the lottery wasn't illegal because it was inline with the Indian Gaming Regulatory Act (IGRA).

In accordance with IGRA the Coeur d'Alene tribe signed a compact with the state of Idaho, which was in turn approved by the U.S. Secretary of the Interior in 1993. That agreement didn't specify how the lottery tickets would be sold, but those details were worked out between the tribe and the company it partnered with to manage the lottery, Unistar Entertainment Inc. The two parties agreed to distribute tickets via telephone and the Internet, and the chairman of the National Indian Gaming Commission (NIGC) approved that contract.

Then attorneys general from 37 states formed a pact and petitioned the NIGC to shut down the Coeur d'Alene lottery. They argued that gambling must take place at the location where the game is being offered. The tribe, in turn, argued that the key to the gaming activity was where the transaction took place, which, it claimed, was on the reservation in Worley, Idaho. The attorneys general then sent letters to AT&T, notifying the company that it could be penalized if it provided service to the tribe and was found to be in violation of state and federal laws. The tribe was shut out by AT&T and subsequently sued the long distance provider in an effort to force it to provide the toll-free service. In the meantime the lottery was operated through a local telephone service in Idaho. A U.S. district judge ordered the tribe to stop operating the lottery more than three years ago.

"This decision has awaken a sleeping giant. . . a giant that had only recently fallen asleep."

- Jeff Modisett
Former Attorney General, Indiana

Dave Matheson, CEO of the Coeur d'Alene Tribe Hotel Casino and Resort, said the tribe is taking a wait-and-see approach now that it has the court's OK to conduct its lottery business via the telephone.

"We are very pleased with the outcome," he said. "We believed all along that we were right, and exactly what we were saying to AT&T and the attorneys generals that raised issues and questions is what the court said. We were really vindicated"

Matheson said the Tribal Council requested that everything be put on hold until a review of the decision can be made and an option sheet can be put together. Matheson said they want to have clear understanding of what the overall legal and political environment is before they go ahead and make another substantial investment.

That potential investment could mean bringing the lottery to the Internet.

"Everything is possible, but all I know right now is that all plans are on hold," Matheson said. "They are very conservative and conscience about how they want to approach this."

States that Came Out Against the Tribal Lottery:

Minnesota, Florida, Alabama, Alaska, Arizona, Arkansas, Colorado, Connecticut, Georgia, Hawaii, Illinois, Indiana, Iowa, Kansas, Louisiana, Massachusetts, Michigan, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New York, New Mexico, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, South Dakota, Utah, Vermont, Virginia, Washington, West Virginia, Wyoming.

The tribe, Matheson said, always felt like it was being targeted because attorneys general were seeing potential revenue leave their states.

"There is something like 1,000 gaming sites on the Internet today," he said. "You can't even turn on your computer now without an ad coming up and being a click away to go and gamble with their credit card. We could never understand why people wanted to go and attack ours and leave the other 999 alone."

"There is no doubt about it," he said. "It was always just about money and not about laws and the rhetoric that was being attached to it by our opponents."

Matheson added that he doesn't expect any decision to be made at least for the next couple of months. He said tribal leaders want to meet with various "powers-that-be" to determine the best course of action.

Meanwhle, Modisett, who now maintains a private practice, feels the court case will force various attorneys general to take action against Internet gambling businesses. He said attorneys general could ban together again and request an On Bloc hearing with the court of appeals. Such a hearing could be warranted, as one of the judges, Ronald Gould, wrote a rather compelling dissenting opinion.

Because the Indian Gaming Regulatory Act "governs only gambling on Indian lands, it neither permits nor prohibits tribe-sponsored gambling off Indian lands," Gould wrote. "Thus, a statement that the IGRA does not prohibit a national lottery does not mean that the IGRA authorizes such a lottery."

Modisett cautioned that anything could happen.

"You can never predict the Ninth Circuit, but I would say that there is just as much of a chance that an On Bloc panel would adopt Judge Gould's descent as they would adopt Judge Fletcher's opinion."

Modisett, who in 1998, as the attorney general of Indiana, sent warning letters to the operators of 180 gambling-related Web sites, pointed out that a lot of attorneys general had taken their focus off of Internet gaming in recent months. Other issues, he said, started to take precedence for some, while others were focused on various election campaigns.

This trend, Modisett said, could change. He feels that newly elected attorneys general will be getting up to speed and follow in his footsteps. Others who were previously active in the same regardcould revisit the issue.

"This decision has awaken a sleeping giant, " he said, "a giant that had only recently fallen asleep."