UNITED STATES DISTRICT COURT WESTERN DISTRICT OF NEW YORK

Case 1:09-cv-00291-WMS Document 40 Filed 07/29/11 Page 1 of 14 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF NEW YORK CITIZENS AGAINST CASINO GAMBLING IN ERIE COUNTY, et al., -against- PHILIP N. HOGEN, in his Official Capacity as Chairman of the NATIONAL INDIAN GAMING COMMISSION, et al., Plaintiffs, Defendants. Civil Action No. 09-CV-0291 Hon. William M. Skretny, U.S.D.J. PLAINTIFFS REPLY MEMORANDUM IN FURTHER SUPPORT OF THEIR MOTION FOR AN ORDER COMPELLING PRODUCTION OF ADMINISTRATIVE RECORD DOCUMENTS AND AUTHORIZING DISCOVERY TO SUPPLEMENT THE ADMINISTRATIVE RECORD O'CONNELL AND ARONOWITZ Attorneys for Plaintiffs 54 State Street Albany, NY 12207-2501 (518) 462-5601 CORNELIUS D. MURRAY JANE BELLO BURKE Of Counsel Dated: July 29, 2011

Case 1:09-cv-00291-WMS Document 40 Filed 07/29/11 Page 2 of 14 TABLE OF CONTENTS Page TABLE OF AUTHORITIES... ii Introduction... 1 A. Defendants Opposition Papers Reinforce Concern about the Integrity of the Decision-Making Process and the Existence of a Conflict of Interest... 2 B. Plaintiffs are Entitled to the Disclosure of Documents Redacted and Withheld on Deliberative Process Privilege Grounds... 5 C. Plaintiffs are Entitled to Discovery... 7 CONCLUSION... 10 i

Case 1:09-cv-00291-WMS Document 40 Filed 07/29/11 Page 3 of 14 TABLE OF AUTHORITIES Cases Page A. Michael s Piano, Inc. v. FTC, 18 F3d 138 (2d Cir. 1994)... 5 Children First Found n v. Martinez, 2007 WL 4344915 (N.D.N.Y. 2007)... 5, 7 Federal Commun. Comm n v. Fox Television, 129 S.Ct. 1800 (2009)... 6 Formaldehyde Inst. v. Dep t of Health & Human Svcs., 889 F.2d 1118 (D.C. Cir. 1989)... 5 Grand Cent. P ship v. Cuomo, 166 F.3d 473 (2d Cir. 1999)... 5 Hopkins v. US Dep t of Housing and Urban Dev., 929 F.2d 81 (2d Cir. 1991)... 7 Mapother v. Dep t of Justice, 3 F.3d 1533 (D.C. Cir. 1993)... 5 Nat l Audubon Soc y v. Hoffman, 132 F.3d 7 (2d. Cir. 1997)... 10 New York v. Salazar, 701 F.Supp.2d 224 (N.D.N.Y. 2010), aff d, 2011 WL 1938232 (N.D.N.Y. 2011)... passim Schaghticoke Tribal Nation v. Norton, 2007 WL 867987 (D. Conn. 2006)... 9 Sokaogon Chippewa Community v. Babbitt, 961 F.Supp. 1276 (W.D. Wis. 1997)... 10 Statutes 18 U.S.C. 208... 4 18 U.S.C. 208(a)... 2, 4, 9 ii

Case 1:09-cv-00291-WMS Document 40 Filed 07/29/11 Page 4 of 14 25 U.S.C. 177... 5 Regulations 5 C.F.R. 2635.107(b)... 5 5 C.F.R. 2635.402... 4, 9 5 C.F.R. 2635.402(a)... 2 5 C.F.R. 2635.402(b)(2)(i)... 2, 3 5 C.F.R. 2635.402(b)(3)... 2 5 C.F.R. 2635.402(b)(4)... 9 5 C.F.R. 2635.402(c)... 2 5 C.F.R. 2635.402(d)... 4 5 C.F.R. 2635.502(d)... 4 Other Robert J. McCarthy, Senecas join pro-casino lawyer to fire back at LaFalce, BUFFALO NEWS, June 29, 2011, available at http://www.buffalonews.com/city/communities/buffalo/article471788.ece... 2 iii

Case 1:09-cv-00291-WMS Document 40 Filed 07/29/11 Page 5 of 14 Introduction Defendants argue Edith Blackwell s conflict of interest stemming from her relationship with Michael Rossetti, a partner at Akin Gump, a law firm which lobbied for and represented the SNI in legal proceedings, is irrelevant because this case challenges only NIGC s approval of the SNI s ordinance (Def. Br. 1-6) and Blackwell was not the decision-maker on that decision. (Def. Br. 12, 14) This response is neither adequate nor accurate. The ordinance approval is only one of two final determinations at issue. The other is DOI s issuance of the revised Part 292 regulations, without which NIGC would have had no basis to reconsider the SNI s ordinance after this Court struck the earlier approval in CACGEC II. The Complaint squarely challenges the regulations. (Compl. 1, 10-11, 123-24, 129-32, Prayer for Relief 3) Both determinations, and the actions that led to them, are at issue here. Moreover, as Defendants concede, the NIGC Chairman relied on the Bernhardt Memo at the time the decision was made to approve the ordinance. (Def. Br. 5, n.6) The NIGC s General Counsel, Penny Coleman, asked DOI s Solicitor s Office for a reasoned analysis for the revised regulations, which provided a 180-degree reversal of the interpretation in the 2006 draft regulations on the applicability of the IGRA 20 prohibition against gambling on afteracquired land, so as to complete the Chairman s review of the ordinance. (NIGC-717) The Solicitor s Office, with substantial input from Blackwell, responded with the Bernhardt Memo (Murray Decl. Ex. D). The revised regulations, the Bernhardt Memo and NIGC s approval of the resubmitted ordinance are thus inextricably intertwined. Although courts generally defer to an agency s interpretation of a statute it is charged with administering, this general principle does not apply when the agency s action stems from bias, conflict of interest or other improper motive. Blackwell s role in the underlying determinations and her disqualifying conflict are highly relevant: they bear on the deference due to the 1

Case 1:09-cv-00291-WMS Document 40 Filed 07/29/11 Page 6 of 14 challenged determinations. Accordingly, Plaintiffs motion should be granted. A. Defendants Opposition Papers Reinforce Concern about the Integrity of the Decision-Making Process and the Existence of a Conflict of Interest The Standards of Ethical Conduct for Employees of the Executive Branch, which implement 18 U.S.C. 208(a), prohibit an employee from participating personally and substantially in an official capacity in any particular matter in which, to his knowledge, he or any person whose interests are imputed to him... has a financial interest, if the particular matter will have a direct and predictable effect on that interest. 5 C.F.R. 2635.402(a). It is a criminal offense for an agency employee to participate in such a matter, 18 U.S.C. 208(a), and the employee facing such a situation shall disqualify himself... by not participating in the particular matter. 5 C.F.R. 2635.402(c). Significantly, financial interests of an employee s spouse disqualify an employee to the same extent as if [the spouse s financial interests] were the employee s own interests. 5 C.F.R. 2635.402(b)(2)(i). 1 Defendants do not dispute that the SNI was the sole tribe that stood to benefit from DOI s policy reversal toward restricted fee land. 2 This was a particular matter, 5 C.F.R. 2635.402(b)(3), and one that would permit the SNI to operate a Class III casino on the Buffalo Parcel. Blackwell knew she was conflicted from matters involving the SNI or Akin Gump; her spouse, Rossetti, was a partner at Akin Gump (Def. Br. 7), 3 which received hundreds of thousands of dollars from the SNI for lobbying DOI and Congress (Murray Decl. Exs. JJ and MM), 1 Contrary to Defendants claim, when the Inspector Devaney testified that short of a crime, anything goes at the highest levels of DOI, he was speaking in general terms about DOI s culture, not specifically about the Mineral Management Service. See Murray Decl. Ex. E. 2 CACGEC II, 2008 WL 2746566 at *39 n.49 (citing SNI Amicus Brief, CACGEC II, Dkt No. 58 at 53 n.29). 3 Consistent with Plaintiffs observation that the two owned a home together since 2007 (Murray Decl. Ex. R), Rossetti confirmed he and Blackwell married in 2007. Robert J. McCarthy, Senecas join pro-casino lawyer to fire back at LaFalce, BUFFALO NEWS, June 29, 2011, available at http://www.buffalonews.com/city/communities/buffalo/article471788.ece. 2

Case 1:09-cv-00291-WMS Document 40 Filed 07/29/11 Page 7 of 14 and continued to represent the SNI in other matters, including the NIGC enforcement proceeding in CACGEC II. (Murray Reply Decl. 29-30) Rossetti, through Akin Gump, had a financial interest in the NIGC approval process and enforcement proceeding, and under 5 C.F.R. 2635.402(b)(2)(i), that interest disqualified Blackwell as if it was her own financial interest. Despite the clear conflict, Defendants assert that Blackwell did not participate in the rulemaking involving Section 20 s application to restricted fee land and that the Agency Ethics Official ( AEO ) cleared her in advance to work on the Bernhardt Memo. (Def. Br. 7-8) Defendants response does not diminish, but heightens Plaintiffs concern. Clear discrepancies exist between these assertions and facts in the record, reinforcing the need for further inquiry. For example, George Skibine states that Blackwell was involved in drafting the regulations, but recused herself from one aspect: the interpretation that Section 20 does not apply to restricted fee lands. (Skibine Decl. 6) In November 2008, however, Blackwell put it differently in an email to a colleague requesting her input on how we arrived at our interp of 2719 that excludes restricted fee. At that time, Blackwell said she was involved in the discussion on the 2719 regulations. (BIA-161) Moreover, Skibine says nothing about Blackwell s recusal from the settlement of the land claim portion of the regulations, which also stood to benefit the SNI. Inexplicably, Blackwell does not submit an affidavit to clarify her role, and Akin Gump is silent. There is a discrepancy as to the timing of Blackwell s consultation with the AEO. Defendants say the consultation took place prior to her participation in the development of the M- Opinion. (Def. Br. 8) Blackwell s emails, however, show she started work on it one month earlier, on December 12, 2008. (BIA-222) There is also a divergence on the subject matter of the recusal. The AEO states that Blackwell was recused from all matters that involve the firm of Akin Gump (Loftin Decl. 2), but in 2008, Blackwell said she was recused from Seneca Nation gaming matters (BIA-121-22) and the specific matter of the Seneca litigation (BIA-160-3

Case 1:09-cv-00291-WMS Document 40 Filed 07/29/11 Page 8 of 14 61). The AEO does not explain her basis for deciding that Blackwell could participate in preparing the Solicitor s opinion (Loftin Decl. 2) or the facts considered in making that decision. It is thus impossible to verify if the AEO knew that the Solicitor s opinion related to SNI gaming matters and Seneca litigation, the matters from which Blackwell was recused. Perhaps most significantly, it is unclear whether the AEO evaluated the circumstances within the regulatory framework developed for mandatory disqualifications under 18 U.S.C. 208. In such a situation 5 C.F.R. 2635.402 applies, and the AEO may issue an individual waiver, but only upon a determination, in writing after full disclosure, that the employee s financial interest in the particular matter or matters is not so substantial as to be deemed likely to affect the integrity of the services which the Government may expect from the employee. 5 C.F.R. 2635.402(d). In contrast, for an appearance of impropriety that is, where an employee s participation would raise a question in the mind of a reasonable person about his impartiality, but would not violate 18 U.S.C. 208(a) a different process applies. There, the agency designee may authorize the employee s participation upon determining that the interest of the Government in the employee s participation outweighs the concern that a reasonable person may question the integrity of the agency's programs and operations. Authorization under 2635.502(d), however, does not authorize participation under 2635.402(d). Defendants do not provide a written waiver to evidence a determination, under 5 C.F.R. 2635.402, that Blackwell could participate in preparing the Bernhardt memo. There is no reference to a written request or written disclosure from Blackwell. The AEO does not describe her analysis or the information she considered. These omissions speak volumes. 4 4 Even if a written waiver exists, which appears doubtful, it would at most be relevant in a disciplinary proceeding and then only if the employee, in seeking such advice, has made full disclosure of all relevant circumstances. 5 C.F.R. 2635.107(b). In a criminal proceeding, the AEO s advice is not dispositive, but one factor to consider. Id. So too here, the AEO s decision cannot 4

Case 1:09-cv-00291-WMS Document 40 Filed 07/29/11 Page 9 of 14 B. Plaintiffs are Entitled to the Disclosure of Documents Redacted and Withheld on Deliberative Process Privilege Grounds Defendants offer no cogent basis to apply the deliberative process privilege to the improperly redacted and withheld documents at issue. In the Second Circuit, for the privilege to apply, the document must be an inter-agency or intra-agency document which is both predecisional and deliberative. Grand Cent. P ship v. Cuomo, 166 F.3d 473, 482 (2d Cir. 1999). Post decisional memoranda which set forth the reason for the agency s decision are not protected under this doctrine. Children First Found n v. Martinez, 2007 WL 4344915 at *6 (N.D.N.Y. 2007) (citing A. Michael s Piano, Inc. v. FTC, 18 F3d 138, 147 (2d Cir. 1994)). The Bernhardt Memo was clearly post-decisional. Defendants assert it is not unusual or remarkable for the Solicitor to issue an M-Opinion that opines on statutes, regulations or policies or officially reverse[s] a legal position or policy (Def. Br. 15-16), yet an M-Opinion written in January 2009 to explain regulations promulgated in May 2008 and effective in August 2008 hardly qualifies as pre-decisional. To be sure, it was the Part 292 regulations, not the Bernhardt Memo, which reversed DOI s longstanding position. 5 The Bernhardt Memo responded to the NIGC General Counsel s request for a reasoned analysis to assist the Chairman in evaluating the ordinance. (NIGC-717) 6 It came after the decision to explain it, not before to guide it. Although Defendants label the Bernhardt Memo an M-Opinion, this does not render it pre-decisional. Significantly, the administrative record reflects it was none other than Blackwell usurp this Court s consideration of whether the underlying determinations were so affected by bias, prejudice or a conflict as to make deference to the agency inappropriate. 5 Defendants cite Mapother v. Dep t of Justice, 3 F.3d 1533 (D.C. Cir. 1993), and Formaldehyde Inst. v. Dep t of Health & Human Svcs., 889 F.2d 1118 (D.C. Cir. 1989). These cases are inapposite. The reports in both provided the basis for future action, Mapother, 3 F.3d at 1535, and thus easily qualifie[d] as predecisional. Formaldehyde, 889 F.2d at 1123. 6 Likewise, the reference in the Bernhardt Memo to other matters (Def. Br. 16), such as the November 12, 2002 non-approval approval letter or DOI s position on the application of the 25 U.S.C. 177 to off-reservation parcels of land, does not render it pre-decisional. These merely explain the agency s departure from existing policies in the revised regulations. 5

Case 1:09-cv-00291-WMS Document 40 Filed 07/29/11 Page 10 of 14 who conceived the use of the term M-Opinion to describe her work product. As she explained to her colleagues in an email dated January 15, 2009: PS For DIA attorneys, I have put this draft in gaming, section 20, m-opinion on restricted fee since my work is not related to the on-going litigation and only the regs. (BIA-639) Whether she viewed her work product as not related to the on-going litigation and only the regs, or merely wanted to make it appear so, the clear purpose of the Bernhardt Memo was to justify the Part 292 regulations to assist the NIGC Chairman in approving the SNI s ordinance on the grounds that section 2719 does not apply to restricted fee land. (BIA-34) The memo is clearly post-, not pre-decisional. The deliberative process privilege does not apply. Even if the Bernhardt Memo was pre-decisional, disclosure nevertheless would be appropriate because this case challenges the core of the decision-making process. Defendants argue that New York v. Salazar does not apply because NIGC, not DOI, made the decision at issue and thus DOI s subjective motivation is not at issue. (Def. Br. 11) The argument lacks merit. When an agency reverses course on an administrative policy, it must display an awareness that it is changing position and show that there are good reasons for the new policy. Federal Commun. Comm n v. Fox Television, 129 S.Ct. 1800, 1811 (2009). An agency may not, for example, depart from a prior policy sub silentio or simply disregard rules that are still on the books. Id. In issuing the final regulations, DOI reversed course, sub silentio and in the midst of CACGEC II, from two key policy areas: (i) the applicability of Section 20, the after-acquired lands prohibition, to restricted fee land; and (ii) the meaning of the settlement of a land claim exception. The Solicitor, with Blackwell s substantial input, created the Bernhardt Memo to explain the basis for the regulatory change, which the NIGC Chairman then relied on to approve the SNI s resubmitted ordinance. This case does not involve a tenuous allegation of bias (Def. Br. 11), but a conflict of interest necessitating mandatory disqualification and cutting to the core of the decisionmaking 6

Case 1:09-cv-00291-WMS Document 40 Filed 07/29/11 Page 11 of 14 process. Thus, Defendants do not and cannot effectively distinguish Salazar or the historical and overwhelming consensus and body of law within the Second Circuit that when the decisionmaking process itself is the subject of the litigation, the deliberative process privilege cannot be a bar to discovery. Children First, 2007 WL 4344915 at *7, and cases therein. 7 The deliberative process privilege is a qualified privilege, and the proponent has the burden of establishing that it applies. Salazar, 701 F.Supp.2d at 232 (and cases therein). Defendants fail to meet that burden. Even if the Court applied a balancing test, as Defendants urge, it would still call for disclosure, for the reasons set forth in Plaintiffs moving brief. 8 C. Plaintiffs are Entitled to Discovery Defendants assert that the bad faith exception to the record rule applied in New York v. Salazar, 701 F.Supp.2d 224 (N.D.N.Y. 2010), aff d, 2011 WL 1938232 (N.D.N.Y. 2011) (Kahn, J.), does not apply because Plaintiffs have failed to allege bias in the decision-making process[,] a violation or any proof of wrongdoing by decision-makers at DOI or NIGC. (Def. Br. 18-19) To the contrary, the showing here is even stronger than in Salazar and more than adequate to warrant limited discovery on the issue of conflict, bias and bad faith. In Salazar, plaintiffs relied on general allegations tending to show DOI acted in bad faith in granting the application of the Oneida Indian Nation to take land into trust. Salazar, 701 F.Supp.2d at 241. 9 Considering all factors, Magistrate Judge Peebles held (in an opinion Judge 7 Contrary to Defendants suggestion (Def. Br.12-13, 19), the Complaint contains allegations of bias and impropriety in the decision-making process sufficient to invoke Children First and its progeny. (Compl. 1, 9, 11-12, 108, 118, 124, 135.) They cite no authority for the proposition that, in addition, a specific due process allegation is required. (Def. Br. 12) 8 With reference to the fifth factor, the possibility of future timidity, some degree of timidity under circumstances suggesting bias or conflict of interest could well be a positive development for future agency employees weighing whether to participate in such a matter. 9 For example, they alleged DOI favored the OIN during the decision-making process and relied on a Doomsday scenario from the OIN s attorneys; that the OIN paid over $1 million to a former government employee to lobby a former DOI colleague, who became personally involved in 7

Case 1:09-cv-00291-WMS Document 40 Filed 07/29/11 Page 12 of 14 Kahn affirmed) that the factors suggested, at least preliminarily that the DOI s actions were predetermined and influenced by factors not relevant to its consideration of the land into trust application and were sufficient to warrant limited discovery on the issue of bias and bad faith. Id. at 44, aff d, 2011 WL 1938232 at*8. In this case, even more so than in Salazar, the facts suggest bias and bad faith. In May 2008, while CACGEC II was sub judice, DOI perhaps in anticipation of an adverse decision issued regulations reversing the 2006 draft regulations in two major respects, by: (i) limiting the after-acquired land prohibition to restricted fee land; and (ii) redefining the settlement of a land claim exception to include any claim by a tribe concerning the impairment of title or other real property interest or loss of possession that... arises under the U.S. Constitution, the federal common law, federal statute or treaty. 73 Fed. Reg. 29354, 29376 (May 20, 2008). Defendants made these policy changes sub silentio, without acknowledging them or bringing them to the Court s or the Plaintiffs attention. Moreover, despite the significance of these changes, the Solicitor and his legal advisors, including Blackwell, did not republish them for public comment in accordance with the APA. 10 Following CACGEC II, the SNI used the revised regulations to submit a third ordinance on July 17, 2008 to the NIGC. Akin Gump appeared before the NIGC on behalf of the SNI to seek a stay of the court-ordered enforcement proceeding (Murray Decl. Ex. I). To assist the the administrative process; and that DOI deviated from customary practices and delayed in responding to FOIA requests. Salazar, 701 F.Supp.2d at 241. 10 Meanwhile, this Court, unaware of the new regulations, issued CACGEC II in July 2008 holding that: (1) the after-acquired land prohibition applies to restricted fee land; and (2) the settlement of a land claim exception did not apply to the Buffalo Parcel because the SNI did not have an enforceable right to relief against the United States that Congress purported to settle, the minimum definition Congress would have contemplated by its use of the term claim. CAC- GEC II at 107. Immediately thereafter, DOI and NIGC, together with the SNI, urged this Court to reconsider its decision in light of the new regulations. This Court refused, describing as egregious Defendants failure to notify the Court of the regulations and their asserted impact. 8

Case 1:09-cv-00291-WMS Document 40 Filed 07/29/11 Page 13 of 14 Chairman in approving the SNI s third ordinance on the grounds that section 2719 does not apply to restricted fee land, the NIGC asked DOI to provide a reasoned analysis for this new interpretation. (BIA-34) Blackwell participated personally and substantially in the Bernhardt Memo to explain, in response to the NIGC s request, DOI s reversal of its position on the applicability of Section 2719 to restricted fee land. She was not tangentially involved, but a key player in the analysis. Moreover, it appears from emails that, on the weekend of January 17-18, 2009, Blackwell participated from her home where she lives with Rossetti, the Akin Gump lawyer (BIA-863, 963-64). 11 There is no evidence of a written waiver under 5 C.F.R. 2635.402 or the imposition of any safeguards to ensure that Rossetti s financial interests did not interfere with Blackwell s substantial participation in the Bernhardt Memo. Although Defendants downplay Blackwell s conflict of interest on the ground that, unlike in Salazar, she was not the ultimate decision-maker (Def. Br. at 12, 19), this is a distinction without a difference. The Ethical Standards make clear that a person provides personal and substantial participation in a particular matter if he or she provides direct involvement that is of significance to the matter. 5 C.F.R. 2635.402(b)(4). Participation may be substantial even though it is not determinative of the outcome of a particular matter and [p]ersonal and substantial participation may occur when, for example, an employee participates through... the rendering of advice in a particular matter. Id. In Salazar, the court was concerned with the relationship between a former co-worker and government employee-turned-oin-lobbyist who had direct access to [the government employee deciding an OIN matter] with the ability to influence his decision. Salazar, 701 11 The facts here are even stronger than in Schaghticoke Tribal Nation v. Norton, 2007 WL 867987, at *4 (D. Conn. 2006), where the court allowed depositions of two DOI officials because they may have had unique personal knowledge of the matter at hand and because ex parte contacts between state and federal officials ( not necessarily impermissible ) had occurred. Here, the facts implicate mandatory recusal under 18 U.S.C. 208(a), a criminal statute. 9

Case 1:09-cv-00291-WMS Document 40 Filed 07/29/11 Page 14 of 14 F.Supp.2d at 241. In this case, precisely the same concerns are present, except that the former coworker and government employee-turned-lobbyist is not just a friend, but the spouse of the government employee who assumed substantial responsibility over the after-the-fact justification upon which NIGC relied to grant the ordinance approval. Plaintiffs need not come forward with conclusive evidence of political improprieties at a point when they are seeking to discover the extent of those improprieties. Sokaogon Chippewa Community v. Babbitt, 961 F.Supp. 1276, 1281 (W.D. Wis. 1997). The facts here present more than a sufficient preliminary showing that the ordinance approval was predetermined and influenced by factors irrelevant to NIGC s consideration of the resubmitted third ordinance. Accordingly, Plaintiffs motion for limited discovery on the issue of bias and bad faith, including the circumstances leading to Blackwell s recusal and un-recusal, should be granted. See Nat l Audubon Soc y v. Hoffman, 132 F.3d 7, 14 (2d. Cir. 1997); Salazar, 701 F.Supp.2d at 44, aff d, Salazar, 2011 WL 1938232 at*8. CONCLUSION For all the foregoing reasons, Plaintiffs respectfully submit that their motion to supplement the administrative record and for discovery should be granted in all respects. Dated: Albany, New York July 29, 2011 Respectfully submitted, O CONNELL & ARONOWITZ, P.C. s/ Cornelius D. Murray Cornelius D. Murray, Esq. cmurray@oalaw.com Jane Bello Burke, Esq. jburke@oalaw.com 54 State Street, Albany, NY 12207 (518) 462-5601 Attorneys for Plaintiffs 10