The landmark ballot referendum proposing to reverse the California Legislature’s ratification of two off-reservation tribal casinos is being challenged in state court litigation seeking to block the referendum from appearing on the general election ballot in November.

The North Fork Rancheria of Mono Indians has just filed the litigation in Madera County Superior Court proposing to preserve the compact signed by Governor Jerry Brown in July 2013 and approved through operation of federal law on October 22, 2013. Formal notice of the compact approval was published in the Federal Register on that same day. The status of the second compact likely will be determined in this litigation although that tribe is not a party to this litigation.

The Legislature approved the two compacts pursuant to California’s state law requiring legislative ratification of such documents. California is one of the states requiring legislative confirmation of tribal compacts. California’s Constitution allows statutes enacted by the Legislature to be challenged through petition and referendum, and the required number of signatures to put the measure on the ballot was collected within the requisite period of time. The petition drive was conducted by a Sacramento area casino watchdog organization and was funded primarily by two casino tribes and a New York City investment firm that has a significant investment in one of the tribal casinos opposing the project. The latest estimate of the total amount spent in the petition/referendum effort is $2 million.

The new litigation challenges the referendum on two major legal theories. The first theory alleges that the compact is final because federal law allows tribes to conduct casino gaming so long as the state does not – as a matter of criminal law and public policy – prohibit such gaming activity. However, the gaming must be conducted in accordance with the provisions of a compact negotiated by the Governor and approved by the Secretary of the Interior. Thus, the state court will have to address whether a post-ratification challenge at the ballot box can be used to deratify a compact that has been approved by the federal government pursuant to applicable federal laws. The second theory raises the question of whether legislative ratification of a contract between the State and a tribe is subject to the petition/referendum process.

The stakes in this litigation are enormous for California and its booming Indian gaming industry, as well as neighboring states that permit casino gaming operations. This is litigation that likely will be in higher courts before it is fully resolved.