Pauma Band of Luiseno Mission v. State of California ( 2015 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
PAUMA BAND OF LUISENO MISSION Nos. 14-56104
INDIANS OF THE PAUMA & YUIMA 14-56105
RESERVATION, AKA Pauma Band of
Mission Indians, AKA Pauma D.C. Nos.
Luiseno Band of Mission Indians, 3:09-cv-01955-
Plaintiff-Appellee/ CAB-MDD
Cross-Appellant, 3:09-cv-01955-
CAB-MDD
v.
ORDER AND
STATE OF CALIFORNIA; CALIFORNIA AMENDED
GAMBLING CONTROL COMMISSION, OPINION
an agency of the State of California;
EDMUND G. BROWN, JR., as
Governor of the State of California,
Defendants-Appellants/
Cross-Appellees.
Appeal from the United States District Court
for the Southern District of California
Cathy Ann Bencivengo, District Judge, Presiding
Argued and Submitted
July 10, 2015—San Francisco, California
Filed October 26, 2015
Amended December 18, 2015
2 PAUMA V. STATE OF CALIFORNIA
Before: Mary M. Schroeder and Richard C. Tallman,
Circuit Judges, and John A. Jarvey,* Chief District Judge.
Opinion by Judge Tallman;
Dissent by Chief District Judge Jarvey
SUMMARY**
Indian Law
The panel filed (1) an order amending its opinion and
dissent and denying petitions for panel rehearing and
rehearing en banc, and (2) an amended opinion and dissent in
an action concerning a Tribal-State Gaming Compact.
In its amended opinion, the panel affirmed the district
court’s summary judgment and held that the Pauma Band of
Luiseno Mission Indians was entitled to rescission of the
2004 Amendment to the 1999 Tribal-State Compact
governing operation of Class III, or casino-style, gaming on
Pauma’s land.
The panel held that the interpretation of a Compact
license pool provision in Cachil Dehe Band of Wintun
Indians of the Colusa Indian Cmty. v. Cal., 618 F.3d 1066(9th Cir. 2010), applied, such that the State of California
*
The Honorable John A. Jarvey, Chief United States District Judge for
the Southern District of Iowa, sitting by designation.
**
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
PAUMA V. STATE OF CALIFORNIA 3
would be deemed to have misrepresented a material fact as to
how many gaming licenses were available when negotiating
with Pauma to amend its Compact. The panel held that,
unlike a change in judicial interpretation of a statute or law,
the doctrine of retroactivity does not apply to contracts. Once
there has been a final judicial interpretation of an ambiguous
contract provision, that is and has always been the correct
interpretation from the document’s inception. The panel held
that the district court properly granted summary judgment on
Pauma’s misrepresentation claim.
The panel held that the district court awarded the proper
remedy to Pauma by refunding $36.2 million in
overpayments, even though the district court mislabeled the
remedy as specific performance, rather than rescission and
restitution for a voidable contract. The panel held that this
equitable remedy fell within the State’s limited waiver of its
sovereign immunity in the Compacts, and thus was not barred
by the Eleventh Amendment.
On cross-appeal, the panel held that Pauma was not
entitled to seek redress under the Indian Gaming Regulatory
Act because the State and Pauma actually reached a gaming
Compact.
Dissenting, Chief District Judge Jarvey wrote that the
State did not commit the tort of misrepresentation by
interpreting the Compact differently than a later court
decision. He also wrote that, under the language of the
Compact, the State did not waive its sovereign immunity with
respect to this claim.
4 PAUMA V. STATE OF CALIFORNIA
COUNSEL
Teresa Michelle Laird (argued), Deputy Attorney General;
Kamala D. Harris, Attorney General of California; Sara J.
Drake, Senior Assistant Attorney General; Neil D. Houston,
Deputy Attorney General, San Diego, California, for
Defendants-Appellants/Cross-Appellees.
Cheryl A. Williams (argued) and Kevin M. Cochrane,
Williams & Cochrane, LLP, San Diego, California, for
Plaintiff-Appellee/Cross-Appellant.
ORDER
The panel has voted to amend its previous opinion and
issues the following opinion to replace it. With this
amendment, the panel has voted to deny the petitions for
panel rehearing and to deny the petitions for rehearing en
banc.
The full court has been advised of the petitions for
rehearing en banc and no judge has requested a vote on
whether to rehear the matter en banc. Fed. R. App. P. 35.
The petitions for panel rehearing and petitions for
rehearing en banc are DENIED. No future petitions for
rehearing or petitions for rehearing en banc will be
entertained.
PAUMA V. STATE OF CALIFORNIA 5
OPINION
TALLMAN, Circuit Judge:
Sixteen years ago more than sixty Native American tribes
entered into Tribal-State Gaming Compacts with the State of
California. Sadly, the long and tortured history leading to the
culmination of these Compacts did not cease there. Rather,
litigation based on ambiguous provisions as to the number of
authorized gaming devices has ensued for most of the
duration of these Compacts. See In re Indian Gaming
Related Cases, 331 F.3d 1094, 1095–1107 (9th Cir. 2003)
(detailing the entire history before and after the Compacts
were enacted). Before us is yet another installment in this
ongoing saga, this time between the Pauma Band of Luiseno
Mission Indians (“Pauma” or “the Tribe”) and the State of
California, the California Gambling Control Commission, and
Governor Edmund G. Brown, Jr. (collectively “the State”).
Pauma sued the State based on our prior decision in
Cachil Dehe Band of Wintun Indians of the Colusa Indian
Community v. California (“Colusa II”), 618 F.3d 1066 (9th
Cir. 2010). We have been asked to determine (1) whether
Colusa II’s interpretation of the Compacts’ license pool
provision applies retroactively, such that the State would be
deemed to have misrepresented a material fact as to how
many gaming licenses were available when negotiating with
Pauma to amend its Compact; (2) whether the district court
awarded the proper remedy to Pauma by refunding $36.2
million in overpayments; and (3) whether the State has
waived its sovereign immunity under the Eleventh
Amendment. We answer each question in the affirmative,
although on alternative grounds supporting the relief awarded
by the district court with respect to the remedy. On cross-
6 PAUMA V. STATE OF CALIFORNIA
appeal, Pauma also asks us to determine whether the State
acted in bad faith under the Indian Gaming Regulatory Act
(“IGRA”), 25 U.S.C. § 2710. We agree with the district
court’s finding that IGRA is inapplicable here, and thus
Pauma’s argument that the State acted in bad faith is
irrelevant.
We have jurisdiction under 28 U.S.C. § 1291, and we
affirm.
I
We begin our journey with a quick overview of the
weathered past between Native American tribes and the State
of California, and then discuss the complicated procedural
history that leads us here.
A
In 1988, Congress attempted to strike a delicate balance
between the sovereignty of states and federally recognized
Native American tribes by passing IGRA. The purpose of
IGRA is well established:
IGRA was Congress’ compromise solution to
the difficult questions involving Indian
gaming. The Act was passed in order to
provide “a statutory basis for the operation of
gaming by Indian tribes as a means of
promoting tribal economic development,
self-sufficiency, and strong tribal
governments” and “to shield [tribal gaming]
from organized crime and other corrupting
influences to ensure that the Indian tribe is the
PAUMA V. STATE OF CALIFORNIA 7
primary beneficiary of the gaming operation.”
25 U.S.C. § 2702(1), (2). IGRA is an
example of “cooperative federalism” in that it
seeks to balance the competing sovereign
interests of the federal government, state
governments, and Indian tribes, by giving
each a role in the regulatory scheme.
Artichoke Joe’s Cal. Grand Casino v. Norton, 216 F. Supp.
2d 1084, 1092 (E.D. Cal. 2002), aff’d, 353 F.3d 712 (9th Cir.
2003). IGRA creates three classes of gaming, with Class III
gaming consisting of “the types of high-stakes games usually
associated with Nevada-style gambling.” In re Indian
Gaming, 331 F.3d at 1097. As a result, Class III gaming is
subjected to the greatest degree of control under IGRA’s
regulations. Class III gaming is lawful on Native American
lands only if such activities are conducted pursuant to a
Tribal-State Compact entered into by the tribe and a state that
permits such gaming, and the Compact is approved by the
Secretary of the Interior. Id. (citing 25 U.S.C. § 2710(d)(1),
(3)(B)).
California did not immediately allow Indian gaming
within its boundaries after the passage of IGRA. Some
gubernatorial administrations were hostile to tribes
conducting Class III gaming because it was then prohibited
by California’s Constitution, and so the State refused to
negotiate with the tribes to permit it. See id. at 1098–99. In
1998, the people of California spoke by passing the tribes’
ballot initiative—Proposition 5 (codified at Cal. Gov’t Code
§§ 98000–98012). See Hotel Emps. & Rest. Emps. Int’l
Union v. Davis, 21 Cal. 4th 585, 589 (1999). Proposition 5
contained a model compact purporting to effectuate IGRA’s
provisions within California. Id. at 589–90. But the victory
8 PAUMA V. STATE OF CALIFORNIA
was short-lived. The California Supreme Court found all but
one sentence of Proposition 5 unconstitutional.1 Id. at 589,
615. Undeterred, the voters of California responded by
amending the California Constitution on March 7, 2000, to
create an exception for certain types of Class III Indian
gaming notwithstanding the general prohibition on gambling
in the State. In re Indian Gaming, 331 F.3d at 1103 & n.11.
In September 1999, several tribes began negotiating with
the State to enter nearly identical Compacts to operate Class
III, or casino-style, gambling (the “1999 Compact”). In April
2000, Pauma joined more than sixty other tribes who
ultimately signed the 1999 Compact. The 1999 Compact
contains a provision limiting the number of licenses2
available statewide for tribes based on a formula.3 As we
1
The sole surviving provision of Proposition 5 is the statutory waiver of
sovereign immunity by the State for claims arising out of violations of
IGRA. Cal. Gov’t Code § 98005. The California Supreme Court found
this provision severable and recognized that the language was meant to
effectuate IGRA since the U.S. Supreme Court had recently stripped the
Act of its teeth in Seminole Tribe of Florida v. Florida, 517 U.S. 44(1996). Hotel Emps., 21 Cal. 4th at 614–15; see also Rincon Band of
Luiseno Mission Indians v. Schwarzenegger, 602 F.3d 1019, 1026 n.8 (9th
Cir. 2010) (“California has waived its Eleventh Amendment immunity
from such suits [brought by tribes under IGRA].”).
2
Each license is the equivalent of one slot machine or electronic video
gaming device, and each tribe was limited to a maximum of 2,000
licenses.
3
The formula, which has been the subject of much litigation, is found
in section 4.3.2.2(a)(1) and reads:
The maximum number of machines that all Compact
Tribes in the aggregate may license pursuant to this
Section shall be a sum equal to 350 multiplied by the
PAUMA V. STATE OF CALIFORNIA 9
have previously observed, “[t]he License Pool Provisions that
California and [the tribes] included in their Compact as a
foundation for establishing Class III gaming in California are
murky at best.” Colusa II, 618 F.3d at 1084. Due to the
limited time the tribes had to negotiate with the State, the
parties agreed to the 1999 Compact without ever discussing
their radically different interpretations of how many licenses
the statewide license pool formula actually produced. See id.at 1070–72; In re Indian Gaming, 331 F.3d at 1104. It
required protracted litigation before we settled the number in
Colusa II, 618 F.3d at 1082.
By December 2003, the State informed the tribes that the
collective license pool had been exhausted—without stating
the total number of licenses actually authorized—and Pauma
received only 200 licenses in that draw instead of its
requested 750. Thus several tribes, including Pauma, began
negotiating with the State to amend their Compacts in order
to abolish the license pool provision and gain access to an
unlimited number of licenses. The State demanded
substantially more money per operable license during
negotiations, Rincon Band of Luiseno Mission Indians v.
Schwarzenegger, 602 F.3d 1019, 1025 (9th Cir. 2010), and
only five tribes—including Pauma—ultimately concluded
such amendments (“2004 Amendment”). Colusa II, 618 F.3d
at 1072. At the time, Pauma was set to enter into a contract
number of Non-Compact tribes as of September 1,
1999, plus the difference between 350 and the lesser
number authorized under Section 4.3.1.
Section 4.3.1 states tribes may not operate more gaming devices than “the
larger of” “(a) A number of terminals equal to the number of Gaming
Devices operated by the Tribe on September 1, 1999; or (b) Three hundred
fifty (350) Gaming Devices.”
10 PAUMA V. STATE OF CALIFORNIA
with Caesars to build a Las Vegas-style casino in place of
Pauma’s tent facility near San Diego, but needed more
gaming licenses to do so.4
Several lawsuits ensued. By 2009–2010, these suits had
percolated in the district courts for several years, and
culminated in dispositive opinions rendered by our court. See
Colusa II, 618 F.3d at 1084; Rincon, 602 F.3d at 1026(holding that the State negotiated in bad faith by refusing to
remove a provision from the proposed 2004 Amendment for
15% of Rincon’s net wins, which we declared an
impermissible tax under IGRA). In Colusa II, we held that
the State miscalculated the number of licenses in the common
pool under the 1999 Compact. 618 F.3d at 1080. We found
that the formula in the 1999 Compact allows for a statewide
total of 40,201 licenses, not the 32,151 that the State had
originally calculated. Id. at 1082.
4
For more detail on the unsuccessful deal with Caesars, see Pauma
Band of Luiseno Mission Indians v. Harrah’s Operating Co., No.
D050667, 2009 WL 3069578 (Cal. Ct. App. Sept. 28, 2009). In summary,
the Pauma and Rincon tribes are competitors whose casinos are only six
miles apart in San Diego County. Id. at *2. The Rincon tribe had already
paired with Harrah’s in building a Nevada-style casino, and was operating
1600 licenses when their negotiations with the State broke down over the
proposed 2004 amendments. Pauma intended to enter its contract with
Caesars to compete with Rincon, but then Caesars and Harrah’s merged
in 2004. Id. Pauma knew the Rincon’s exclusivity agreement with
Harrah’s would preclude it from building a competing casino and so
Pauma backed out of the Caesars deal. Id. at *3–4. Pauma continued by
negotiating with several other large gaming companies (Hardrock,
Foxwood, etc.), but the economic recession of 2008 struck and no deal
was ever completed. Id. Pauma has never been able to build a larger
casino, and still operates its 1,050 licenses out of a tent facility.
PAUMA V. STATE OF CALIFORNIA 11
B
Shortly after the district court in Colusa rendered its
decision holding that more licenses existed than the State had
allowed, Pauma filed a complaint asserting eighteen claims
attacking the formation of the 2004 Amendment under
various theories, including mistake and misrepresentation.
Pauma notes that it has remained at roughly 1,050 licenses
since December 2003 when the State first asserted that the
license pool had been depleted, while two neighboring tribes
operate at least 2,000 gaming devices apiece. Pauma
executed the 2004 Amendment because it needed to have at
least 2,000 licenses in order to secure a viable deal with a Las
Vegas-style operator. But after the putative deals fell
through, Pauma continued paying California the exorbitantly
expensive 2004 Amendment prices for the same machines it
acquired under the 1999 Compact provisions. Under the
original 1999 Compact, Pauma paid $315,000 annually for
the 1,050 machines. Under the 2004 Amendment, Pauma
paid $7.75 million annually. Pauma sought reformation,
injunctive relief, rescission, and restitution.
In April 2010, the United States District Court for the
Southern District of California granted Pauma’s request for
injunctive relief from the annual $7.75 million payments,
permitting Pauma to revert to the 1999 Compact rate. The
State appealed. On the prior appeal, No. 10-55713, we left
the injunction in place but remanded to the district court for
reconsideration of the preliminary injunction factors in light
of recent cases, including Colusa II. On remand, the case was
reassigned to three different district judges before the court
finally ruled on the summary judgment motions, leaving the
injunction in place.
12 PAUMA V. STATE OF CALIFORNIA
Presently before us is the district court’s summary
judgment ruling in favor of Pauma on its misrepresentation
claim. In light of our ruling in Colusa II, the district court
found the State had misrepresented the number of licenses
available in December 2003 when it told Pauma the pool was
exhausted; in fact, there were 8,050 remaining. As a result,
the district court rescinded the 2004 Amendment, allowed
Pauma to return to the 1999 Compact’s lower rate, and
ordered as specific performance a refund of the difference in
payment that Pauma had made as between the higher and
lower rates for the 1,050 machines (totaling $36,235,147.01).
The district court also held that the State had waived its
Eleventh Amendment sovereign immunity in a provision in
the 1999 Compact, which the parties had left undisturbed in
the 2004 Amendment. The court further held that the State
was not entitled to a setoff for the profits Pauma made
between 2004 and 2009 because Pauma should have been
able to obtain the 1,050 machines under the correctly
calculated license formula in the 1999 Compact.
The district court entered final judgment in December
2013, but was immediately asked by Pauma to vacate the
order so it could request further relief. Pauma sought a ruling
on two additional claims labeled “bad faith/violation of
IGRA” so that the Tribe would be entitled to reformation
rather than rescission. The district court denied the request as
moot since it would not result in a remedy different from the
one already provided to Pauma, and held it would fail on the
merits in any event. This ruling triggered Pauma’s
mandamus petition, which we denied as premature earlier this
PAUMA V. STATE OF CALIFORNIA 13
year.5 The State’s appeal and Pauma’s cross-appeal are now
ripe for review.
II
We review a district court’s grant of summary judgment
de novo. Big Lagoon Rancheria v. California, 789 F.3d 947,
952 n.4 (9th Cir. 2015) (en banc). “Summary judgment is
appropriate if there is no genuine issue of material fact and,
even making all reasonable inferences in favor of the
nonmoving party, the moving party is entitled to judgment as
a matter of law.” Rincon, 602 F.3d at 1026. We also review
the following legal determinations de novo: interpretation of
contracts based on the plain meaning, Colusa II, 618 F.3d at
1070; whether negotiations were conducted in good faith
under IGRA, Rincon, 602 F.3d at 1026; and the applicability
of Eleventh Amendment sovereign immunity, Idaho v. Coeur
d’Alene Tribe, 794 F.3d 1039, 1042 (9th Cir. 2015). “General
principles of federal contract law govern the Compacts,
which were entered pursuant to IGRA.” Colusa II, 618 F.3d
at 1073 (citation omitted). We “often look to the . . .
Restatement when deciding questions of federal common
law.” Curtin v. United Airlines, Inc., 275 F.3d 88, 93 n.6
(D.C. Cir. 2001). We may also rely on California contract
law since there is no practical difference between state and
federal law in this area. Colusa II, 618 F.3d at 1073.
5
Pauma’s mandamus petition essentially challenged the district court’s
decision to rule solely on its misrepresentation claim, and refusal to reach
any of the other claims—such as the Tribe’s bad faith claims under IGRA.
We allowed Pauma to assert such claims in its cross-appeal, and Pauma
has chosen to do so. We address them below.
14 PAUMA V. STATE OF CALIFORNIA
“We review the district court’s choice of remedy for
abuse of discretion.” Id. at 1082. A misapplication of the
correct legal rule constitutes an abuse of discretion. United
States v. Hinkson, 585 F.3d 1247, 1261–62 (9th Cir. 2009)
(en banc). Otherwise, we must “determine whether the trial
court’s application of the correct legal standard was
(1) illogical, (2) implausible, or (3) without support in
inferences that may be drawn from the facts in the record.”
Id. at 1262 (internal quotations omitted).
III
The heart of the State’s argument before us focuses on
whether there was a “fact in existence” that it misrepresented
to Pauma during the 2004 negotiations. Thus, we review
whether Colusa II’s holding that 40,201 licenses were
available—meaning 8,050 remained in December 2003 when
the State told Pauma that the license pool had been
depleted—constitutes a “fact in existence” giving rise to
liability under Pauma’s misrepresentation claim. We hold
that, unlike a change in judicial interpretation of a statute or
law, the doctrine of retroactivity does not apply to contracts.
Once there has been a final judicial interpretation of an
ambiguous contract provision, that is and has always been the
correct interpretation from the document’s inception.
In order to establish its misrepresentation claim, Pauma
must demonstrate: (1) the State made a misrepresentation
about a fact in existence, (2) that was either fraudulent or
material, (3) which induced Pauma to enter into the 2004
Amendment, and (4) Pauma was justified in relying on the
State’s misrepresentation. See Restatement (Second) of
Contracts § 164(1) (1981); see also Addisu v. Fred Meyer,
Inc., 198 F.3d 1130, 1137 (9th Cir. 2000) (adopting the
PAUMA V. STATE OF CALIFORNIA 15
Restatement definition for misrepresentation). The outcome
of this case hinges on the first prong. “A misrepresentation
is an assertion that is not in accord with the facts” as they
exist at the time the assertion is made. Restatement (Second)
of Contracts § 159 & cmt. c. “Such facts include past events
as well as present circumstances but do not include future
events. An assertion limited to future events . . . may be a
basis of liability for breach of contract, but not of relief for
misrepresentation.” Id. § 159 cmt. c.
Furthermore, “an assertion need not be fraudulent to be a
misrepresentation” so long as “it is material.” Id. § 159
cmt. a; cf. Reliance Fin. Corp. v. Miller, 557 F.2d 674, 680
(9th Cir. 1977) (referring to this version as “innocent
misrepresentation”).6 A misstated fact is “material if it would
be likely to induce a reasonable person to manifest his [or
her] assent” to enter a contract. Restatement (Second) of
Contracts § 162(2). “A misrepresentation induces a party’s
manifestation of assent if it substantially contributes to his [or
her] decision to” enter the contract. Id. § 167. Although a
party must have justifiably relied upon the misrepresentation,
“the requirement of justification is usually met unless, for
example, the fact to which the misrepresentation relates is of
6
We note that the district court had before it Pauma’s claims for
either innocent/material misrepresentation or fraudulent/negligent
misrepresentation—and the court ruled for Pauma solely on the former.
Thus, we refuse to consider any of Pauma’s assertions that the State
knowingly acted in bad faith or with any kind of evil intent. The formula
was confusing. We definitively resolved the issue in 2010. Nothing in
our decision in Colusa II suggests the State should have known the correct
number of licenses when negotiating with Pauma in 2003–2004, and we
refuse to so hold now. We review only whether innocent
misrepresentation was properly applicable.
16 PAUMA V. STATE OF CALIFORNIA
only peripheral importance to the transaction . . . .” Id. § 164
cmt. d.
While both parties dispute whether the doctrine of
retroactivity applies, that doctrine is a red herring because we
are dealing with a contract provision. The State argues that
our holding in Colusa II does not apply “retroactively.” In
essence, the State asserts that the district court erred in
granting summary judgment for Pauma because the license
pool did not expand until mid-2009 when a district court first
handed down its ruling in Cachil Dehe Band of Wintun
Indians of the Colusa Indian Community v. California
(“Colusa I”), 629 F. Supp. 2d 1091 (E.D. Cal. 2009). In the
State’s view, the number of available licenses changed when
we handed down Colusa II in 2010. Thus, the State contends
it could not have misrepresented an existing fact when it
denied licenses to tribes beyond a total of 32,151. We reject
this argument.
We find that the term “retroactive” is a misnomer in the
realm of contract interpretation. Once a court has interpreted
an ambiguous contract provision that is and has always been
the correct interpretation from its formation. Although the
cases discussing the retroactivity of judicial decisions
interpreting statutes may be instructive, a contract is
fundamentally different from a statute or a body of law. A
contract is a private agreement formed between two parties to
represent their mutual intent. See Restatement (Second) of
Contracts § 3. Thus, a contract provision has only one true
meaning—what it meant when written—even though the
parties may later dispute the correct interpretation. By
contrast, a statute is enacted by Congress and the
PAUMA V. STATE OF CALIFORNIA 17
understanding of its provisions may evolve over time, often
through judicial interpretations or legislative amendments.7
“[T]he fundamental goal of contract interpretation is to
give effect to the mutual intent of the parties as it existed at
the time of contracting.” U.S. Cellular Inv. Co. v. GTE
Mobilnet, Inc., 281 F.3d 929, 934 (9th Cir. 2002) (emphasis
added). This fundamental axiom is widely accepted and
uncontested. See, e.g., Colusa II, 618 F.3d at 1073 (holding
the “court gives effect to the mutual intention of the parties as
it existed at the time the contract was executed” (emphasis
added) (internal quotations omitted)); Liberty Nat’l Bank &
Trust Co. v. Bank of Am. Nat’l Trust & Sav. Ass’n, 218 F.2d
831, 840 (10th Cir. 1955) (“[T]he basic rule of universal
acceptation for the ascertainment of [the parties] intention is
for the court, so far as possible, to put itself in the place of the
parties when their minds met upon the terms of the agreement
. . . .”); 11 Williston on Contracts § 31:9 (4th ed. 2015).
When dealing with interpretation of a contract there is no
such thing as a “change in the law”—once a final judicial
decision determines what the contested language supports,
that is it. The State’s argument that Colusa II “changed” the
number of licenses available under the license pool provision
defies logic. As is typical in contract interpretation cases, the
dispute was between the parties’ competing calculations.
Once we decreed that 40,201 licenses were available under
the formula provision based on a reasonable interpretation of
7
Therefore, the dissent’s reliance on Curtin v. United Airlines, Inc. is
misplaced as it involves the judicial interpretation of a provision of the
Warsaw Convention; a legislatively enacted document, similar to a statute,
rather than a contract. See 275 F.3d 88, 96–97 & nn. 16–20 (D.C. Cir.
2001).
18 PAUMA V. STATE OF CALIFORNIA
the contract language and the intention of the parties at the
time it was formed, we resolved the dispute. Colusa II,
618 F.3d at 1081–82. Thus, the number of licenses never
“changed” as the State asserts.
In Colusa II, we found that the State did not adequately
explain why it had chosen 32,151 for the total available
licenses since “the foundation for this . . . number is at odds
with the plain language of the contract and with an
interpretation of part of the formula that is now agreed upon
by both parties.” Id. at 1076; see also id. at 1078 nn. 9 & 12.
We calculated the correct number of licenses that “were
authorized for distribution statewide through the license draw
process,” to be 40,201, id. at 1082, and then we turned to the
opinion’s prospective effect on other tribes. We recognized
that “the remedy deprived the state of its right to litigate the
size of the license pool under different facts in other pending
and future cases” because we purposefully “anticipated that
California would be liable for a single number of licenses in
the statewide pool, not separate numbers for separate
litigants based on their respective situations.” Id. at 1084(emphasis added) (internal quotation marks omitted). In sum,
our interpretation in Colusa II of the 1999 Compact’s license
pool provision is the final word for all tribes, at all times.
The formula for calculating the license pool never
changed—it just took over a decade to reach a final judicial
interpretation which settled a longstanding dispute over the
number of licenses it authorized. Innocent misrepresentation
of a different number does not require a fraudulent or
misleading intent. See Restatement (Second) of Contracts
§ 159 cmt. a. It simply requires a fact, which is material, to
be false. Id. § 159 cmts. a, c. The formula stated in the 1999
Compact is a fact. The number of tribes with and without
PAUMA V. STATE OF CALIFORNIA 19
Compacts as of the listed date (September 1, 1999) was an
ascertainable, existing fact. See Colusa II, 618 F.3d at 1073.
The number of licenses each tribe with a Compact had as of
that date was also an existing fact. Id. at 1074. The State had
all of the information it needed to calculate its own formula.8
The State simply miscalculated.
Understandably, the State “expresses a sense of unfairness
engendered by the retrospective application of a new judicial
interpretation of an [existing contract provision]. But the
essence of judicial decisionmaking necessarily involves some
peril to individual expectations.” Morales-Izquierdo v. Dep’t
of Homeland Sec., 600 F.3d 1076, 1090 (9th Cir. 2010)
(internal quotation and alterations omitted). The State could
have sought a declaratory judgment much earlier, but it did
not. The State also could have simply used fixed numerals in
the formula, but it did not. The fact that there was ambiguity
in the formula’s language or that the State interpreted the
total number of licenses in good faith is irrelevant to the
analysis. We interpreted the total number of licenses in the
license pool to be 40,201 based on a reasonable interpretation
of the contract language. Therefore, in December 2003, the
State misrepresented an existing fact to the tribes—including
Pauma—that no further licenses were available when, in fact,
there were 8,050 more licenses under the correct
interpretation of the formula.
8
“[I]t is undisputed that the State’s negotiation team actually drafted
[this provision] in the Compact.” Colusa I, 629 F. Supp. 2d at 1115. As
such, general contract principles also indicate that any ambiguity in “‘the
language of the contract should be interpreted strongly against the party
who caused the uncertainty to exist’ [(i.e., the State drafters)].” Id. at
1113 (quoting Buckley v. Terhune, 441 F.3d 688, 695–96 (9th Cir. 2006)).
20 PAUMA V. STATE OF CALIFORNIA
The State’s remaining arguments regarding the
misrepresentation claim warrant only brief discussion. First,
the State’s argument that the license pool provision was not
material to the 1999 Compacts borders on the incredible. See
Colusa II, 618 F.3d at 1069 (“Central to the Compacts is a
formula to calculate the number of gaming devices California
tribes are permitted to license.”). Second, the State’s
argument that the limited number of licenses did not induce
Pauma to enter the 2004 Amendment is equally absurd,
considering procurement of more licenses (at least 2,000) was
essential to its putative contract with Caesars, dependent on
at least that many devices. Finally, Pauma justifiably relied
on a fact that was entirely within the State’s control (the total
number of available licenses). Pauma has, therefore,
established that no genuine issue of material fact remains as
to its misrepresentation claim, and the district court properly
granted summary judgment.9
IV
After granting summary judgment in favor of Pauma on
its innocent misrepresentation claim, the district court turned
to the appropriate remedy. Since the Compacts include a
limited waiver of sovereign immunity that allows for suit
seeking an equitable remedy, but not one seeking monetary
damages, we must first decide what the correct remedy is.
Then we determine whether that remedy is barred by the
9
We note that most tribes have already received their licenses under
Colusa II, which approved the district court’s remedy of re-opening the
draw process for the remainder of the licenses. By contrast, Pauma is one
of only five tribes who chose to amend its Compact and thus paid higher
prices for licenses which it should have been able to obtain under the
original 1999 Compact.
PAUMA V. STATE OF CALIFORNIA 21
Eleventh Amendment or if it falls within the State’s limited
waiver.
A
The district court erred in awarding Pauma $36.2 million
under the guise of “specific performance.” Specific
performance is a remedy associated with breach of contract.
Restatement (Second) of Contracts § 357; 81A C.J.S. Specific
Performance § 4 (2015) (“[A] cause for specific performance
ordinarily cannot lie until there has been a breach of the
contract.”). “A party who has avoided a contract on the
ground of . . . misrepresentation . . . is entitled to restitution
for any benefit that he has conferred on the other party by
way of part performance or reliance.” Restatement (Second)
of Contracts § 376; 1 Witkin, Summary of California Law,
Contracts § 1022 (10th ed. 2005) (“A person who pays money
under the mistaken belief that he or she is under a duty to do
so may recover it.”). Furthermore, “[s]pecific performance
. . . will not be granted unless the terms of the contract are
sufficiently certain to provide a basis for an appropriate
order.” Restatement (Second) of Contracts § 362.
Where, as here, no breach of a contract has been alleged,
but rather a challenge to its formation—i.e., Pauma would not
have entered into the 2004 Amendment had it known
additional licenses were available at the cheaper 1999
Compact rates—the contract is voidable and the appropriate
remedy is rescission and restitution. See 1 Witkin, Summary
of California Law, Contracts § 307 (10th ed. 2005) (noting
innocent misrepresentation is grounds for rescission); see also
Reliance Fin. Corp., 557 F.2d at 680 (same); Restatement
(Third) of Restitution §§ 52, 54 (2011); Dan B. Dobbs, Law
of Remedies § 4.1(1) (2d ed. 1993) (“When the contract itself
22 PAUMA V. STATE OF CALIFORNIA
is unenforceable, restitution is usually the only remedy
available for benefits the plaintiff has conferred upon a
defendant in part performance.” (emphasis in original)); id.
§ 9.2(2) (“A representation by the defendant, if believed by
the plaintiff, would be the equivalent of a mutual mistake for
which rescission would be granted.”); id. § 9.3(1).
Moreover, one cannot specifically perform something that
is not a term in the contract. Cf. Restatement (Second) of
Contracts § 362. The Compact did not contain a clause for
dealing with overpayments. The sole option for returning
Pauma to the status quo ante was equitable restitution. Id.
§ 376; see Ambassador Hotel Co. v. Wei-Chuan Inv.,
189 F.3d 1017, 1031 (9th Cir. 1999). Thus, the district court
misapplied the law in labeling the remedy specific
performance.
However, in this case, the district court’s error in
mislabeling the remedy does not require reversal. Neither
side disputes the calculation of $36,235,147.01 as the
difference between the higher 2004 Amendment payments
and the lower 1999 Compact’s rates. Rather, the State
challenges only whether it is entitled to a setoff for the profits
Pauma gained from operating machines it would not have had
absent the 2004 Amendment, and Pauma now alleges it is
entitled to essentially reform the entire contract under the
procedures outlined in IGRA. Since we reject both
arguments, we affirm the district court’s calculation of the
remedy on the alternative grounds of equitable rescission and
restitution.
Under general contract principles, “[w]hen calculating
restitution, we must offset the Plaintiffs’ award by the value
of any benefits that Plaintiffs received from the [D]efendant
PAUMA V. STATE OF CALIFORNIA 23
under the contract, so that only the actual, or net, loss is
compensated.” Republic Sav. Bank, F.S.B. v. United States,
584 F.3d 1369, 1377–78 (Fed. Cir. 2009) (internal quotation
omitted); see, e.g., Cal. Fed. Bank v. Matreyek, 8 Cal. App.
4th 125, 134 (1992) (holding restitutionary recovery
inequitable where the bank would be able to retain both a
benefit and a profit); Restatement (Second) of Contracts
§ 384; Dan B. Dobbs, Law of Remedies § 9.3(3) (2d ed.
1993). The State is not entitled to a setoff here because
Pauma would have made the same profits by acquiring the
same number of machines under the 1999 Compact that it
now operates under the 2004 Amendment if the State had not
miscalculated the number of available licenses.
The State argues that, although this would return Pauma
to the status quo ante in theory, in reality it would unjustly
enrich Pauma vis-à-vis the other tribes who were parties to
the 1999 Compact because the other tribes were unable to
obtain “unlimited” machines as Pauma could under the 2004
Amendment and thus did not earn additional profits.
Essentially, the State argues that Pauma will receive a
windfall of roughly $16 million by sitting on the sidelines
during the Colusa litigation.
However, the State’s argument depends on viewing the
situation holistically, in contravention to general litigation
principles. The district court correctly stated it must deal
solely with the parties before it. See, e.g., Boating Indus.
Ass’ns v. Marshall, 601 F.2d 1376, 1382 n.7 (9th Cir. 1979)
(“Remedy for this injury would depend upon actions of third
parties not before the court in this action.”). Under this view,
as between Pauma and the State, Pauma is not obtaining a
“windfall” because it should never have had to pay the State
the $36.2 million in the first place, and it should have been
24 PAUMA V. STATE OF CALIFORNIA
able to obtain the same number of licenses (a total of 1,050)
for less money. Thus, the State’s argument— to consider
Pauma’s position in comparison to the other tribes who were
unable to obtain further licenses and the attendant
profits—must fail. The district court correctly held that the
State is not entitled to a setoff.
Pauma’s argument for reformation meets a similar fate.
On cross-appeal, Pauma requests reformation of the 2004
Amendment—rather than rescission—so that Pauma may
keep the amended contract’s extended term limit (expiring in
2030 instead of 2020) at the more favorable 1999 Compact
price rates. “[H]owever, reformation is proper only in cases
of fraud and [mutual] mistake.” Skinner v. Northop
Grumman Ret. Plan B, 673 F.3d 1162, 1166 (9th Cir. 2012);
see Restatement (Second) of Contracts § 166 (referencing
only fraudulent misrepresentation as giving rise to
reformation as a remedy); Dan B. Dobbs, Law of Remedies
§ 9.5 (2d ed. 1993) (“Reformation is the appropriate remedy
. . . for fraud or mistake in the written expression of the
agreement.”). This case involves innocent misrepresentation,
not fraudulent misrepresentation. Reformation is thus
inappropriate here.
In sum, the district court erred in applying the law of
contractual remedies by awarding Pauma specific
performance rather than ordering rescission and restitution.
But because neither side challenges the calculation of the
remedy, only whether a setoff should be applied or
reformation ordered as a superior remedy— both of which we
reject—we affirm the district court’s award to Pauma of
$36,235,147.01 under the equitable remedies of rescission
and restitution.
PAUMA V. STATE OF CALIFORNIA 25
B
Because the State must refund the $36.2 million in
overpayments, we next consider whether the district court
correctly held that the State had waived its Eleventh
Amendment sovereign immunity in this case to permit such
relief.
“[T]he rule has evolved that a suit by private parties
seeking to impose a liability which must be paid from public
funds in the state treasury is barred by the Eleventh
Amendment.” Edelman v. Jordan, 415 U.S. 651, 663 (1974).
The Supreme Court has extended this bar to suits brought by
Native American tribes even though they are sovereigns in
their own right. See Blatchford v. Native Vill. of Noatak,
501 U.S. 775, 779–82 (1991). In Edelman, the Court made
clear that a state’s sovereign immunity extends even to
equitable judgments, particularly if “the award resembles far
more closely the monetary award against the State itself . . .
than it does the prospective injunctive relief . . . .” 415 U.S.
at 665. The Court specifically rejected an individual’s claims
for “equitable restitution” based on the state’s wrongful
withholding of benefits under a public aid program. Id. at
656, 665. Thus, the Court held only prospective, non-
monetary relief against state officials is exempt from the
Eleventh Amendment bar. Id. at 677.
“However, there are exceptions to this general bar.” N.E.
Med. Servs., Inc. v. Cal. Dep’t Health Care Servs., 712 F.3d
461, 466 (9th Cir. 2013). The Supreme Court discussed one
such exception at length in Edelman—waiver. 415 U.S. at671–74. Edelman recognized that Congress may abrogate a
states’ sovereign immunity via a clear, express legislative
statement, or a state may enter a “compact” by which the state
26 PAUMA V. STATE OF CALIFORNIA
expressly and unequivocally waives its own immunity. Id. at
672. “In deciding whether a State has waived its
constitutional protection under the Eleventh Amendment, we
will find waiver only where stated by the most express
language or by such overwhelming implications from the text
as will leave no room for any other reasonable construction.”
Id. at 673 (internal quotation and alteration omitted).
Here, the State waived its Eleventh Amendment sovereign
immunity through an explicit contractual waiver. The 1999
Compact contains a limited waiver of sovereign immunity on
behalf of both the State and the Tribe, which the 2004
Amendment left undisturbed. It reads in relevant part:
Sec. 9.4. Limited Waiver of Sovereign
Immunity.
(a) In the event that a dispute is to be resolved
in federal court . . . , the State and the Tribe
expressly consent to be sued therein and
waive any immunity therefrom that they may
have provided that:
(1) The dispute is limited solely to issues
arising under this Gaming Compact;
(2) Neither side makes any claim for
monetary damages (that is, only injunctive,
specific performance, including enforcement
of a provision of this Compact requiring
payment of money to one or another of the
parties, or declaratory relief is sought); . . . .
PAUMA V. STATE OF CALIFORNIA 27
This is an express waiver that falls within the exception to the
Eleventh Amendment delineated in Edelman—but the parties
dispute the scope of the waiver. We must determine whether
the exclusion for monetary damages in Section 9.4(a)(2)
includes authorization to seek the remedy of rescission and
restitution.
We hold that the proper remedy here does not trigger the
exclusion provision, and thus the State waived its sovereign
immunity for Pauma’s misrepresentation claim. We begin by
analyzing the language of the contract itself. See Colusa II,
618 F.3d at 1073. The contractual language establishes a
clear dichotomy between claims for monetary damages—
which are excluded and thus barred by sovereign
immunity—and equitable relief. Although restitution may be
considered a legal or equitable remedy, see Restatement
(Third) of Restitution § 4(1); Dan B. Dobbs, Law of Remedies
§ 4.1(1) (2d ed. 1993), interpreting the contract as a whole
demonstrates that restitution was contemplated by the parties
as a potential remedy for which sovereign immunity was
waived. Thus, we hold that restitution is included in the
waiver “by such overwhelming implications from the text as
will leave no room for any other reasonable construction.”
Edelman, 415 U.S. at 673 (internal quotation and alteration
omitted).10
10
The district court relied, as Pauma does on appeal, on Bowen v.
Massachusetts, 487 U.S. 879 (1988), for the distinction drawn between
monetary damages awards (meant to compensate for an injury) and
specific monetary relief (meant to reinstate one to his or her original
position). Id. at 893. But Bowen simply reaffirms two steadfast
principles: (1) equitable relief, which may take the form of money, is
different than monetary damages; and (2) when Congress has specifically
provided a waiver of sovereign immunity in a statute that allows for
equitable relief (there, the Administrative Procedure Act (“APA”)), that
28 PAUMA V. STATE OF CALIFORNIA
“A written contract must be read as a whole and every
part interpreted with reference to the whole, with preference
given to reasonable interpretations.” Wapato Heritage,
L.L.C. v. United States, 637 F.3d 1033, 1039 (9th Cir. 2011)
(internal quotation omitted); see Restatement (Second) of
Contracts § 202(2). Here, reading the contract as a whole, the
present restitutionary order falls well within the waiver.
The waiver applies “provided that . . . [n]either side
makes any claim for monetary damages (that is, only
injunctive, specific performance, including enforcement of a
provision of this Compact requiring payment of money to one
or another of the parties [which must mean either Pauma or
the State], or declaratory relief is sought).” This clause
envisions payment of money to either party, and yet the
Compact does not contain any provisions requiring payment
of money from the State to the Tribe.11 If this clause did not
may occasionally involve specific relief in the form of money. However,
those propositions do not answer the contractual interpretation question
presented here.
We have already stated that Bowen does “not implicate Eleventh
Amendment concerns” since it only analyzed the statutory language of the
APA. Native Vill. of Noatak v. Blatchford, 38 F.3d 1505, 1513 (9th Cir.
1994). Furthermore, although Bowen cited approvingly contract cases
awarding specific performance, those cases all dealt with a breach of
contract issue and enforcement of a contract provision to pay
money—neither of which exist in the present case. Consequently, Bowen
sheds light on the current case only to the extent it reinforces our
conclusion that restitution of the money wrongfully paid by Pauma may
still be awarded as an equitable remedy and is not a claim for monetary
damages against the State.
11
The State itself asserts that no provision in the contract required it to
pay Pauma money when arguing that specific performance was the wrong
PAUMA V. STATE OF CALIFORNIA 29
contemplate the restitutionary remedy ordered by the district
court and affirmed herein, then the provision would be
operative only as to one party, not both. Excluding restitution
as a remedy that the Tribe could seek under this waiver would
render this clause null and void. Cf. 11 Williston on
Contracts § 32:5 (4th ed. 2015) (“An interpretation which
gives effect to all provisions of the contract is preferred to
one which renders part of the writing superfluous, useless or
inexplicable.”). When “that is” is construed to limit waiver
only as to the remedies listed, as urged by the dissent, the
restitution remedy ordered by the district court still falls
within that restrictive interpretation. Thus, the district court
properly held that restitution by the State of overpayments by
the Tribe was included in the waiver.
In sum, the contractual waiver clearly envisions
restitution as falling within its purview, and only actions for
monetary damages or actions not arising from the Compact
itself to be excluded. The proper remedy for Pauma due to
the State’s misrepresentation of the number of licenses
available under the 1999 Compact’s formula is rescission of
the 2004 Amendment and restitution for the overpayments
made. Therefore, the State contractually waived to this extent
its Eleventh Amendment sovereign immunity and Pauma was
not barred from bringing its misrepresentation claim seeking
rescission and restitution.12
remedy. That argument cuts against the State here given the language of
the agreement.
12
In any event, California—unlike many states—has chosen to
legislatively enact a broad statutory waiver of sovereign immunity for
claims arising out of violations of IGRA. See Cal. Gov’t Code § 98005;
Hotel Emps., 21 Cal. 4th at 615. Because we find the contractual waiver
to include the restitutionary remedy sought and recovered here, we need
30 PAUMA V. STATE OF CALIFORNIA
V
On cross-appeal, Pauma asserts the district court erred by
denying summary judgment on the Tribe’s fifth and sixth
claims for relief—styled as bad faith/IGRA violation claims.
Pauma provides a lengthy and fact-intensive explanation why
it thinks the State acted in bad faith with respect to the
entirety of their course of dealings over the last fifteen years.
The Tribe relies heavily upon our recent decision in Rincon,
involving a different California tribe, that upheld a finding of
bad faith under IGRA. However, in the process, Pauma
ignores the explicit statutory language of IGRA under which
it seeks relief. The district court held Pauma’s IGRA claims
were moot because rescission of the 2004 Amendment had
already been granted,13 judicially estopped as inconsistent
not reach whether the statutory waiver would also apply. We do note,
however, that our ruling is supported by the California Supreme Court,
which upheld the constitutionality of the waiver provision contained in the
referendum by the people. Hotel Emps., 21 Cal. 4th at 615.
13
Neither of the parties briefed this issue so we need not reach it, but we
also note the district court’s analysis is supported by our recent en banc
decision in Big Lagoon Rancheria, 789 F.3d at 955 (holding the tribe’s
cross-appeal was moot regarding bad faith claim since the district court
had ruled in the tribe’s favor on other grounds).
PAUMA V. STATE OF CALIFORNIA 31
with Pauma’s earlier position,14 and barred by the plain
language of the IGRA statute. We affirm on the last ground.
The plain language of IGRA does not support Pauma’s
argument. IGRA states that a Native American tribe “shall
request” a state to enter into negotiations for the purposes of
entering a Tribal-State Gaming Compact, and “[u]pon
receiving such a request, the State shall negotiate with the
Indian Tribe in good faith to enter into such a compact.”
25 U.S.C. § 2710(d)(3)(A) (emphasis added). In order to give
effect to this language, the statute vests federal district courts
with jurisdiction over “any cause of action initiated by an
Indian tribe arising from the failure of a State to enter into
negotiations with the Indian tribe for the purpose of entering
into a Tribal-State compact under paragraph (3) or to conduct
14
Pauma’s claims are not inconsistent, as the district court found.
Although Pauma did not use the words “bad faith” in the body of its
complaint with respect to these IGRA claims, it relied heavily on Rincon’s
holding that the State’s request for 15% of the tribe’s net wins in its
proposed 2004 Amendment was an impermissible tax under IGRA and
that the State thus negotiated in bad faith when it refused to remove that
provision. Rincon, 602 F.3d at 1024–25, 1036, 1042. We did not express
an opinion as to the validity of the provision for the five tribes, including
Pauma, who successfully negotiated and obtained a 2004 Amendment
because their Compacts “were satisfactory to them” and the tribes freely
entered into the amendments. Id. at 1037 n.17. Since Pauma had the
same provision in its 2004 Amendment that was at issue in Rincon, Pauma
argues that the same result should be applied in its case.
The district court also found that Pauma was requesting different
relief, but in fact Pauma had been requesting “reformation” based on
IGRA claims five and six in the complaint from the beginning. Pauma
merely requested “rescission” and “restitution” in addition, with claim ten
(misrepresentation) providing a basis for such relief. Thus, Pauma’s
claims in its complaint and summary judgment motion are not
inconsistent.
32 PAUMA V. STATE OF CALIFORNIA
such negotiations in good faith[.]” Id. § 2710(d)(7)(A)(i)
(emphasis added).
The next subsection describes, in detail, the procedure a
tribe must follow if a state does not adhere to these mandates.
Id. § 2710(d)(7)(B). Specifically, the Native American tribe
must first introduce evidence that “a Tribal-State compact has
not been entered into under paragraph (3),” and “the State did
not respond to the request of the Indian tribe to negotiate such
a compact or did not respond to such request in good faith[.]”
Id. § 2710(d)(7)(B)(ii)(I), (II) (emphasis added). Then, IGRA
provides a remedy if such an event should occur: “If . . . the
court finds that the State has failed to negotiate in good faith
with the Indian tribe to conclude a Tribal-State compact
governing the conduct of gaming activities, the court shall
order the State and the Indian Tribe to conclude such a
compact within a 60-day period.” Id. § 2710(d)(7)(B)(iii)
(emphasis added). This same section also lists factors a court
may consider when determining whether a State has
negotiated in good faith. Id.
The detailed procedures set forth in IGRA allow for
redress by Native American tribes when a State refuses to
negotiate or negotiates in bad faith for a gaming Compact.
These procedures, by their own language, simply do not
apply when the State and the Tribe have actually reached a
Compact. See id. § 2710(d)(7)(B)(ii)(I). Rincon does not
hold otherwise. Cf. 602 F.3d at 1026. The Rincon tribe
(Pauma’s nearby competitor in San Diego) also entered into
negotiations with the State in 2003 and 2004—but Rincon
refused to sign an actual amended Compact with the State and
filed suit instead. Id. at 1023, 1026; see also Big Lagoon
Rancheria, 789 F.3d at 951–52; In re Indian Gaming,
331 F.3d at 1110 (holding the State did not negotiate in bad
PAUMA V. STATE OF CALIFORNIA 33
faith with respect to the 1999 Compact’s revenue provisions,
which the tribe refused to sign). Pauma is thus in a very
different position than the Rincon tribe because it actually
agreed to the 2004 Amendment and did not challenge the
negotiation process under IGRA.
Therefore, the district court correctly concluded:
“Although [ ] IGRA may allow a court to reform or rescind
an unlawful agreement (which is what Pauma wanted until
now), it does not allow the Court to turn back the clock and
compel re-negotiation of an agreement actually reached ten
years ago, let alone one that has been rescinded and never
would have been negotiated in the first place in light of the
relief the Court has already granted in this case.” The relief
Pauma seeks in its cross-appeal is not available under the
plain statutory language of IGRA, and we affirm the district
court’s denial of Pauma’s summary judgment motion on this
ground.
VI
In conclusion, we hold that once a court’s judgment
interpreting an ambiguous contract provision becomes final,
that is and has always been the correct interpretation from its
inception. As such, the State innocently misrepresented a
material fact when it erroneously informed Pauma the 1999
Compact’s license pool had been depleted based on its
miscalculation of the formula. Since this misrepresentation
induced Pauma to enter into the much more expensive 2004
Amendment, the Tribe is entitled to rescission of the
amendment and restitution for the $36.2 million in
overpayments made to the State. The Eleventh Amendment
does not bar this suit because the State contractually waived
its sovereign immunity for claims arising out of the Compacts
34 PAUMA V. STATE OF CALIFORNIA
seeking such relief. Finally, Pauma is not entitled on cross-
appeal to seek redress under IGRA because the plain
language of the statute precludes relief when the Tribe and
the State actually enter into a Compact.15
AFFIRMED. Each party shall bear its own costs.
JARVEY, Chief District Judge, dissenting:
I agree with the majority’s conclusion that courts
determine contracting parties’ intent as of the time the
contract is executed. I disagree, however, that California
committed the tort of misrepresentation by interpreting the
Compact differently than a later court decision. The
provision regarding the number of available licenses in the
Compact was hopelessly ambiguous. California, the
compacting tribes, the district court and this court all
interpreted it differently. That this court’s opinion differed
from that offered by California does not establish that
California made “an assertion that [was] not in accord with
the facts” as they existed at the time the assertion was made.
RESTATEMENT (SECOND) OF CONTRACTS § 159 & cmt. c.
The decision in Colusa II was not the result of any
judicial fact finding. In fact, this court rejected the parties’
15
Pauma makes conclusory references to the claims it advanced in its
mandamus petition, asking the court to vacate the magistrate judge’s order
denying Pauma’s motion to compel discovery and to reassign the case to
a different district court judge based on her handling of the IGRA claims.
We deny both of these requests as moot in light of our holding foreclosing
further pursuit of Pauma’s claims under IGRA.
PAUMA V. STATE OF CALIFORNIA 35
extrinsic evidence for contract interpretation purposes and
determined the number of available licenses as a matter of
law. Because extrinsic evidence was rejected and the number
determined as a matter of law, all parties to the Compact were
on equal footing with respect to their ability to interpret this
ambiguous provision. The majority is correct when it notes
that any party could have sued to get more clarity. The tribes
in Colusa II did, but the plaintiff here chose instead to
negotiate for the possibility of receiving more licenses than
have ever been available under the 1999 Compact.1
On the misrepresentation issue, Curtin v. United Airlines,
Inc., 275 F.3d 88 (D.C. Cir. 2001) is analogous and
persuasive. Curtin involved a provision of the Warsaw
Convention (a treaty) that established the compensation to be
paid by a carrier when passengers’ luggage was lost during
international travel. The Warsaw Convention provided for a
payment of $9.07 per pound up to the maximum of a seventy
pound bag, or $635. United Airlines had a practice of paying
the maximum amount ($635) for lost international luggage
rather than weighing the bags and paying the $9.07 price per
pound for the lost luggage. That practice had been
interpreted by some courts as permissible, and by others as
impermissible. Ultimately, the District of Columbia Circuit
Court of Appeals rejected the practice, holding that the
Warsaw Convention did not cap liability at $635 where the
carrier had failed to weigh the bags as required.
In Curtin, passengers who had settled their lost luggage
claims for $635 sued claiming, among other things, that the
1
I find it more than ironic that Pauma has received monetary damages
as a result of Colusa II that were denied to the tribes that won that
decision. I find it inequitable.
36 PAUMA V. STATE OF CALIFORNIA
settlement agreements were procured by United’s
misrepresentation of its obligation under the Warsaw
Convention, as later determined by the Court of Appeals.
However, the District of Columbia Circuit held that United
did not make a misrepresentation by reasonably interpreting
the Warsaw Convention differently than the later District of
Columbia Court of Appeals decision. This decision is
sensible, intuitive and analogous to what happened in the
matter now before the court. Because I believe that the
State’s interpretation of this ambiguous contractual provision
does not qualify under the common law definition of a
material misrepresentation, I respectfully dissent.
I also do not believe that the State of California waived
sovereign immunity with respect to this claim. The 1999
Compact waives immunity as follows:
Sec. 9.4. Limited Waiver of Sovereign
Immunity.
(a) In the event that a dispute is to be resolved
in federal court . . . , the State and the Tribe
expressly consent to be sued therein and
waive any immunity therefrom that they may
have provided that:
(1) The dispute is limited solely to issues
arising under this Gaming Compact;
(2) Neither side makes any claim for
monetary damages (that is, only injunctive,
specific performance, including enforcement
of a provision of this Compact requiring
PAUMA V. STATE OF CALIFORNIA 37
payment of money to one or another of the
parties, or declaratory relief is sought); . . . .
I agree with the majority that the remedy of specific
performance is not available in this case. The majority
upholds the award as restitution, concluding that the Compact
waives immunity against claims for restitution because the
Compact waives immunity against claims for “specific
performance, including payment of money to one or another
of the parties.” I disagree with the majority’s reading of the
waiver.
The limited waiver of sovereign immunity is well drafted
and clear. It states that neither side can make a claim for
monetary damages. It then defines the waiver, beginning
with the words “that is.” The phrase “that is” is commonly
thought of as a shorthand version of the phrase “that is to
say.” It is used to preface a more specific delineation of the
preceding contractual language. Here, to further clarify the
limitation of the waiver, the parties stated, “that is, only
injunctive, specific performance, including enforcement of a
provision of this Compact requiring payment of money to one
or another of the parties, or declaratory relief is sought . . . .”
(emphasis added). The use of the word “only” is routinely
defined to mean alone, solely or exclusively. The waiver’s
applicability is therefore explicitly confined to the
circumstances listed.
The majority infers a waiver of sovereign immunity for
restitution from a canon of contract interpretation that prefers
interpretations that do not render other terms “superfluous,
useless or inexplicable.” It finds that reading the language
“including payment of money to one or another of the
parties” as allowing monetary payment only in the context of
38 PAUMA V. STATE OF CALIFORNIA
specific performance would render the clause superfluous
because the Compact’s payment provisions run only from
Pauma to the State. But this reading disregards the explicit
text of the clause. The clause makes clear that the parties
intended “specific performance” to include monetary
payments only when the Compact requires them. This
language is the parties’ clear recognition of Bowen v.
Massachusetts, 487 U.S. 879 (1988), which held that a
monetary payment can constitute specific performance when
a contractual clause requires such payment. The fact that the
waiver includes specific performance of payment provisions
does not render it superfluous, useless or inexplicable simply
because those particular obligations run only from Pauma to
the State. It would be helpful in the event of that kind of
breach by Pauma.
The monetary damages awarded here do not qualify as
injunctive, specific performance or declaratory relief.
Because the law demands that waivers of sovereign immunity
ordinarily derive only from “the most express language” or
“such overwhelming implications from the text as [will] leave
no room for any other reasonable construction,” there can be
no waiver found here. Edelman v. Jordan, 415 U.S. 651, 673
(1974) (citation and internal quotation marks omitted)
(alteration in original). The express language of the
sovereign immunity does not include suits for restitution, and
in fact, explicitly excludes suits for monetary damages
outside the context of specific performance. I find no other
implications from the text, and certainly not overwhelming
implications, of sovereign immunity waiver.