DOING BUSINESS IN INDIAN COUNTRY

Rea Cisneros, NIGC Acting General Counsel, explains the processes and uses behind a declination letter in Tribal gaming.

One of the most common requests of the National Indian Gaming Commission’s (NIGC) Office of the General Counsel (OGC) is for a declination letter (a nonbinding legal opinion) that specifies whether a Tribe’s planned action or contract conforms to the sole proprietary interest provision of the Indian Gaming Regulatory Act (IGRA) and does not constitute a management contract under it. Over the past several years, such requests have routinely been submitted to the OGC by IGRA-gaming Tribes as a precursor to obtain funding for their gaming operations.

Before discussing the purpose of a declination letter and what it is or is not – and when or how to request one – let’s be clear that declination letters exist to ensure Tribes operate in accordance with IGRA and not as a guarantee that banks will get paid.

Purpose Of The Declination Letter

In 2010, the United States District Court for the Western District of Wisconsin decided Wells Fargo Bank v. Lake of the Torches Economic Development Corp., which held that a trust indenture entered into by Lake of the Torches EDC and Wells Fargo Bank was an unapproved management agreement and, thus, void.

After the Lake of the Torches decision, OGC issued declination letters to ease lending in Indian Country for gaming-related projects. Declination letters have since become a regular part of doing business in Indian country. But now, 13 years later, do declination letters still serve this purpose? Quite simply, yes. OGC continues to issue declination letters to facilitate lending in Indian Country, especially in such uncertain financial times, because it is foremost an acknowledgement that agreements into which Tribes enter are legally sound and do not violate IGRA. Perhaps a more nuanced question to consider is whether declination letters should be part of an IGRA-gaming operation’s tools to secure financing.

WHAT IS A DECLINATION LETTER?

A declination letter is an advisory legal opinion that the submitted agreement, contract or their plural — as a whole — do not constitute a management contract under IGRA, requiring the NIGC Chair’s review and approval, and do not contravene IGRA’s mandate for the Tribe to possess the sole proprietary interest in its gaming activity. Historically, for purposes of a declination letter, OGC has reviewed various types of contracts and agreements including: development agreements, loan agreements, security agreements, promissory notes, bond indentures, consulting agreements, employment agreements, independent contractor agreements and depository account agreements or a package of some but not all of them.

Tribes seeking financing desire such an opinion because unapproved management contracts are void. Thus, the declination letter provides an assurance of the contract’s (or contracts’) validity. Additionally, the letter addresses whether the Tribe maintains the sole propriety interest (SPI) in its gaming activity, an IGRA requirement serving the Congressional purpose that Tribes be the primary beneficiaries of their gaming. In simple terms, this means that the Tribe, through the submitted contract(s), has not relinquished ownership of its gaming operation, its gaming activity and profits therefrom. Ownership includes the right of possession in, control of and present use of the gaming operation and activity; as well as exclusive control and responsibility for it.

SHOULD A TRIBE REQUEST A DECLINATION LETTER?

Based on available data, from 2010 to present, the NIGC has reviewed approximately 682 declination letter requests. Of these, 418 (61%) related to financing. Most of the reviews were straightforward, indicating most practitioners have fine-tuned their agreements over the years to remove any provisions that implicate management or sole proprietary interest conflicts. Hence, OGC review may not always be necessary and certainly should not be automatic. Instead, Tribes and financing entities should rely upon NIGC guidance regarding what constitutes management, control of a gaming operation/activity, or a proprietary interest in it.

So, back to the original question: should declination letters continue to be a routine part of doing business in Indian Country? The quick answer is “it depends.” Each Tribe’s agreements, previous NIGC declination reviews and unique or changing circumstances should factor heavily in a Tribe’s decision to request a declination letter. Present and past circumstances matter. For example, if a Tribe is making a discreet amendment to a credit agreement that OGC reviewed a year or two ago (e.g., only changing the London Interbank Offered Rate-LIBOR to Secured Overnight Financing Rate -SOFR), then there is very little risk that the amendments implicate management or sole proprietary interest concerns. The Tribe probably does not need to submit the amended agreements to OGC for a declination letter.

There are, however, circumstances where a Tribe may want to consider submitting agreements to OGC for review:

• Entering into financing agreements with a bank that does not typically lend in Indian Country and is unfamiliar with IGRA requirements. This is a good opportunity to submit the agreements to OGC for a declination letter to avoid inadvertent management or sole proprietary interest problems;

• Planning to submit a management contract for the Chairman’s review or possessing an existing management contract. New or updated financing documents may cross reference the management contract, or the documents may incorporate one another by reference, creating management or sole proprietary interest issues;

• Adding a new type of gaming to the gaming operation (e.g. sportsbooks).

As the market matures, new types of gaming develop and there may be new vendors entering into agreements with Tribes who may have limited knowledge of IGRA.

How To Request A Declination Letter

An initial declination letter request should include in the body of the cover letter a list of all relevant draft documents that have been submitted, as well as any and all exhibits, schedules and any other documents referenced in the submission. Because OGC is not familiar with each item included in a Tribe’s request, it is extremely helpful to summarize the nature and purpose of documents. Be sure to include any unique circumstances of the agreements that impact the terms but may not be apparent from the documents (e.g. an abnormally high interest rate, because only one bank was interested in lending, or it is a greenfield project, etc.). If the declination letter is time sensitive, please specify the date by which you are requesting the letter in the request.

Keep in mind several factors impact OGC’s ability to meet a requester’s proposed deadline, including: the number and complexity of changes recommended; the number of parties, including the Tribe, who must agree to the changes; and whether the Tribe and third parties accept OGC’s recommendations. OGC conducts its reviews as quickly as possible; however, declination letter reviews typically take between four and six weeks. Additional time may be required depending on the complexity of the documents or issues raised during the review, so parties to the agreements should factor in sufficient time to allow OGC to accommodate requests for review by a specific date.

The most efficient way to request a declination letter is by e-mail at: legal_opinions@nigc.gov.

Using this e-mail address ensures that OGC assigns the matter quickly. Tribes may also mail the request to NIGC, attention Office of the General Counsel. For more detailed instructions, see NIGC’s website homepage for “How to Request a Declination Letter.”

WHAT’S NEXT?

After the request is submitted, the assigned OGC Staff Attorney will reach out to you. They may have questions or concerns during their review and may call to discuss them. If specific provisions implicate management, the Staff Attorney will discuss them with their supervisor prior to advising the parties to the contract(s). If there are not any issues or once they are all addressed, the Staff Attorney will draft a memorandum summarizing the terms of the documents, and submit it and supporting materials to an Associate General Counsel — and ultimately to the General Counsel — for final review and issuance of a declination letter.

In conclusion, declination letters are and will continue to be an essential part of doing business in Indian Country for the foreseeable future. They help ensure the integrity of the industry and make crystal clear to all parties that the proposed agreements comply with IGRA. NIGC and OGC continue to support the declination letter process as a vehicle to help ease lending to tribal operations and, by doing so, can help preserve — and grow — for decades to come, the valuable resource Indian gaming represents to native communities.