Attorney General: Hon. John P. Burke, Department of Banking, 1995-024 Formal Opinion, Attorney General of Connecticut

Attorney General's Opinion

Attorney General, Richard Blumenthal

August 24, 1995

Hon. John P. Burke
State of Connecticut
Department of Banking
260 Constitution Plaza
Hartford, CT 06103

Dear Commissioner Burke:

You have asked this office for an opinion regarding your authority to approve and to regulate a branch (the "Branch") of a Connecticut bank (the "Bank") to be established in Foxwoods Casino (the "Casino") on the Mashantucket Pequot Reservation (the "Reservation") in Ledyard, Connecticut.

You received an inquiry from the Bank, which would like to locate a branch inside the Casino subject to a five-year lease. The Bank would have an "exclusive agreement" with the Mashantucket Pequot Tribe (the "Tribe") to be the sole provider of banking services on the Reservation. The Branch would offer standard services to the general public, and standard services at a discount to members of the Tribe and its employees. No mortgages would be offered, although unsecured lending and auto loans would be available. Apparently, the Tribe is prepared to adopt any tribal resolutions or execute any agreements necessary to facilitate approval.

In particular, you requested our opinion on the following issues: (1) Whether a branch of a Connecticut bank established on the Reservation would be "in this state" within the meaning of Conn. Gen. Stat. 36a-145(b) or, alternatively whether a branch would be "outside of this state" within the meaning of Public Act 95-155 "An Act Concerning Interstate Banking and Branching"; (2) Whether you are preempted by federal law from regulating a branch of a Connecticut bank established on the Reservation; and (3) Whether the Tribe and its enterprises, particularly the Mashantucket Pequot Gaming Enterprise (the "Enterprise"), may waive its sovereign immunity with respect to suits arising from contractual issues flowing from the establishment and operation of a branch bank.

Although you have not raised the issue of the impact of Conn. Gen. Stat. 31-57e, "An Act Concerning the Rights of Employees of Federally Recognized Indian Tribes," (the "Employment Rights Act"), this Act has some bearing upon your Department's proposed activities in connection with the Branch Bank and this opinion, therefore, will address this issue as well.

We conclude that the proposed Bank Branch would be within this state, that your authority to regulate the branch would not be preempted by federal law, and that the establishment of such a branch would be exempt from, and thus not be barred by, Conn. Gen. Stat. 31-57e.

With respect to your first question, Title 36a of the Connecticut General Statutes contains the "Banking Law of Connecticut", which laws are "applicable to all Connecticut banks ...." Conn. Gen. Stat. 36a-1. A "Connecticut bank" is defined as "a bank and trust company, savings bank or savings and loan association chartered or organized under the laws of this state." Conn. Gen. Stat. 36a-2(11). Pursuant to Conn. Gen. Stat. 36a-145(b)(1): "With the approval of the commissioner, any Connecticut bank may establish a branch in this state." (Emphasis added.)

The question, therefore, is whether a branch of a Connecticut bank located on the Reservation would be "in this state" as contemplated by Section 36a-145(b)(1). While federally recognized Indian tribes retain attributes of sovereignty over their members and reservation, "tribal lands within the boundaries of state or organized territories have always been considered to be geographically part of the respective state or territory." Cohen, Felix S., Handbook of Federal Indian Law (1982 Fed.) p. 649.

Federal and state cases and statutes and regulations support a finding that the Reservation is "in this state." The Tribe received federal recognition in 1983 by an act of Congress entitled the Indian Land Claims Settlement Act of 1983 (the "Settlement Act"). 25 U.S.C. 1751 et seq. The Settlement Act also established the boundaries of the Tribe's federal Reservation. Section 1752(7) of the Settlement Act defines the Reservation as: "The existing reservation of the Tribe as defined by Chapter 824 of the Connecticut General Statutes and any settlement lands taken in trust by the United States for the Tribe." Conn. Gen. Stat. 47-63 in turn defines the Tribe's reservation as: "The Mashantucket Pequot reservation in the town of Ledyard, assigned to the Mashantucket Pequot Tribe." (Emphasis added.)

The Federal Gaming Procedures, which govern the gaming operations and other related matters on the Reservation, support a finding that the Reservation is "in this state" for purposes of Section 36a-145(b)(1).1 Section 2(t) defines the Tribe's "Reservation" as:

"Reservation" means the Indian lands of the Mashantucket Pequot Tribe within the State of Connecticut as defined by Section 4(4) of the Act, 25 U.S.C. 2703(4), including all lands within the Mashantucket Pequot Reservation as defined by 25 U.S.C. 1752(7) and all lands within the State of Connecticut title to which is either held in trust by the United States for the benefit of the Tribe or held by the Tribe ....

(Emphasis added.)

In addition, federal statutes of general applicability provide further support for the principle that, as a general matter, Congress considers federal Indian reservations to be within states. The Indian Gaming Regulatory Act (IGRA), which governs Indian tribes' ability to conduct gaming on Indian reservations, provides:

Indian tribes have the exclusive right to regulate gaming activity on Indian lands if the gaming activity is not specifically prohibited by federal law and is conducted within a state which does not ... prohibit such gaming activity.2

25 U.S.C. 2701(5) (emphasis added). Furthermore, 25 U.S.C. 1321 and 1322, commonly referred to as P.L.280, permit states to assume criminal and civil adjudicatory jurisdiction on federal reservations "in areas of Indian country situated within such state ...." (Emphasis added).

Finally, the Eighth Circuit Court of Appeals has determined that a federal reservation located in Minnesota was a "portion of a state." The Court stated:

That a tribal government exercises sovereign powers on a reservation and that reservation lands are held in trust by the United States does not prevent the reservation from constituting a portion of a state and a political subdivision of a state.

Shakopee Medwakanton Sioux Community v. City of Prior Lake, 771 F.2d 1153 (8th Cir. 1985), cert. denied, 475 U.S. 1011, 106 S.Ct. 1185 (1985).

Thus, the Reservation is in Connecticut, and a branch of a Connecticut bank established on the Reservation would be established "in this state" under Conn. Gen. Stat. 36a-145(b)(1).3

Your second question is whether you would be preempted by federal law from regulating a branch bank on the Reservation. Your question involves the State's ability to regulate the activities of non-Indians, the branch bank, on a federal Indian reservation.

There is "no rigid rule" to resolve an issue as to whether a state civil regulatory law applies on a reservation. White Mountain Apache Tribe v. Bracker, 448 U.S. 136, 100 S.Ct. 2578, 2583 (1980). Absent an express statement by Congress on a particular issue, a state's power to assert its civil regulatory laws over non-Indians on a federal reservation, turns on whether state law in that area is preempted by operation of federal law.4 New Mexico v. Mescalero Apache Tribe, 462 U.S. 324, 103 S.Ct. 2378, 2386 (1983).

To determine whether a state law is preempted, the United States Supreme Court has applied a balancing test in which courts must analyze each question on a case by case basis and weigh the competing interests of the state, the tribes, and federal government. Accordingly, a state law on a reservation will be "preempted by the operation of federal law if it interferes or is incompatible with federal and tribal interests reflected in federal law, unless the State interests at stake are sufficient to justify the assertion of State authority." Id.

Traditional notions of tribal sovereignty provide a backdrop to the federal preemption analysis. Such notions stem from Indians' unique status as sovereign nations, possessing authority over their members and territory. Id., at 2385. Tribal sovereignty traditionally has been held to encompass reservation Indian rights to "'make their own laws and be ruled by them."' Bracker, 100 S.Ct. at 2583, quoting Williams v. Lee, 358 U.S. 217, 220 79 S.Ct. 269, 271 (1959); Rice v. Rehner, 463 U.S. 713, 718, 103 S.Ct. 3291 (1983). However, Indians' sovereignty interests are retained only to the extent that they are not inconsistent with the interests of the federal government, and are subject to complete defeasance by Congress. Rice, 103 S.Ct. 3291. If it is determined that there is no tradition of tribal sovereignty with respect to the area to be regulated, or the balance of the interest tips in favor of the state, less weight may be accorded the sovereignty interests. Id., 3296.

Where Indian conduct on a reservation involving only Indians is at issue, state law will generally be inapplicable because the state's interest is likely to be minimal and the federal interest in encouraging tribal self-government is likely to be substantial. Bracker, 100 S.Ct. at 2584. See, e.g., McClanahan v. State of Arizona, 411 U.S. 164, 93 S.Ct. 1257, (1973); Bryan v. Itasca County, Minnesota, 426 U.S. 373, 96 S.Ct. 2102, 2105 (1976).5 (FN5)

Under certain circumstances a state may validly assert authority over the activities of non-Indians on a reservation. Mescalero Apache Tribe, 103 S.Ct. at 2385. Generally speaking, the "application of state civil laws to non-Indians within Indian country in matters not effecting Indians or their property does not conflict with any federal statute." Cohen, Felix S., Handbook of Federal Indian Law, (1982) Ed.) p.266. See Begay v. Kerr-McGee Corp., 499 F.Supp. 1325 (D.Ariz. 1980), aff'd., 682 F.2d 1311 (9th Cir. 1982), citing Organized Village of Kake v. Egan, 369 U.S. 60-67-68, 82 S.Ct. 562, 567, 72 L.Ed. 2d 563 (1962); Washington v. Confederated Tribes of Colville Reservation, 447 U.S. 134, 160-61 (1980) (state may tax on reservation cigarette sales to non-Indians).

Clearly, there is a substantial State interest in the uniform regulation of banking activities within the State's boundaries. Given the global interplay between banks and banking systems, the activities at a branch bank located in the Casino on the Reservation will of necessity be part of the federal and state banking systems, which are subject to federal and/or state regulation.

We do not believe the Tribe's sovereignty interests would be implicated by the State's regulation of the Branch Bank. From the facts as we understand them, the Branch will operate independent of the Tribe, and, therefore, the State will not be seeking to manage a tribal operation. The State's regulation of the Branch established in the Casino will not fall on the Tribe, the Tribal gaming enterprise or on tribal members, but directly on a Connecticut bank, located within Connecticut, which is a non-Indian establishment.

Moreover, the State's regulation of the branch bank does not effect those types of traditional sovereignty interests of the Tribe traditionally sought to be protected by the federal government. In other words, the State's regulation of the Branch will not effect the Tribe's ability to "make [its] own laws and to be ruled by them," or to manage and regulate its own members and resources.6

Your third inquiry is whether the Tribe may waive its sovereign immunity in connection with contractual arrangements. While Indian tribes enjoy sovereign immunity from suit similar to that of the United States, immunity may be waived by a tribe so long as the waiver is "expressed unequivocally." Santa Clara Pueblo v. Martinez, 436 U.S. 49, 58, 98 S.Ct. 1670, 1677 (1978). See also Mashantucket Pequot Gaming Enterprise v. CCI, Inc., 1994 WL 373122 (Conn. Super. July 11, 1994). Issues of tribal sovereign immunity, waiver of that immunity and tribal contracts involving federal trust lands and federal Indian tribes are complex, and in some instances may require federal approval. See, e.g., 25 U.S.C. 81, 177. It does not appear from your letter that you are contemplating entering into any agreements with the Tribe in connection with the Branch Bank. Consequently, it is unnecessary for us to address these issues. Since, as we determined, the State has the authority to regulate the Branch on the Reservation, you have jurisdiction to enter the Branch to conduct investigations, or other compliance activities.7

We turn now to the issue of whether Conn. Gen. Stat. 31-57e, the Employment Rights Act, prohibits you from proceeding to approve and regulate the Branch Bank, and conclude that it does not.

The Employment Rights Act provides in pertinent part:

The state shall not provide any funds or services which directly or indirectly assist any tribe engaged in a commercial enterprise until the tribe adopts an Employment Rights Code established pursuant to Section 4 of this act, unless such funds or services are (1) required by federal or state law, (2) were agreed to in writing before the effective date of this act or (3) are provided to a project which is covered by federal or state employment regulations or employment rights laws ....

Conn. Gen. Stat. 31-57e(b). The Act provides that it shall not "be construed to prohibit the state from enforcing any civil or criminal law or any gaming regulation at a commercial enterprise owned and operated by the tribe ...." In addition, the Employment Rights Act may be waived by the Governor "in the event of a declared emergency." Id.

The Employment Rights Act applies to the Tribe. The word "tribe" is defined in the Act as "any federally recognized Indian tribe which is subject to the Indian Gaming Regulatory Act ...." Conn. Gen. Stat. 31-57e(a)(3). The Tribe is federally recognized and subject to the Indian Gaming Regulatory Act. The Tribe is clearly "engaged in a commercial enterprise"8 by virtue of its casino and resort activities. The Tribe has declined to adopt an employment rights code pursuant to the Employment Rights Act. Therefore, absent the applicability of an enumerated exception, the State is prohibited from providing any "funds" or "services" to the Tribe which would "directly or indirectly" assist it.

It is unnecessary for us to decide whether the Department's proposed activities in connection with approving and regulating the Branch Bank are "services" which would "directly or indirectly assist" the Tribe, because we conclude that these activities are exempt under the Act.

Under one of the three enumerated exemptions to the Employment Rights Act, the State may provide funds or services which directly or indirectly assist the Tribe under circumstances in which those funds or services are provided "to a project which is covered by federal or state employment regulations or employment rights laws." Thus, under this exemption, we must decide are whether 1) the establishment of the Branch Bank is a "project"; and 2) if so, if the project is "covered by" state or federal employment laws.

The word "project" is not defined in the Act. Where words are not defined in a statute, it is appropriate to determine their ordinary meaning by reference to their common understanding in law and in dictionaries. Keleman v. Rimrock Corp., 207 Conn. 599, 604 (1988). In common parlance, the word "project" has a broad meaning and is defined as: "1. something that is contemplated, devised or planned; plan; scheme. 2. A large or major undertaking, especially one involving considerable money, personnel and equipment." Random House Unabridged Dictionary (2d Ed. 1993).

The establishment of the Branch Bank is something which is planned and would be a large undertaking involving money, personnel, and equipment. Thus, the opening of a Branch Bank would constitute a "project" as contemplated by the Employment Rights Act.

The employees of the Branch Bank will be "covered by" state employment laws because the State would have jurisdiction over the Branch Bank, even though it is located on the Reservation. As discussed above, whether the State has jurisdiction to enforce any particular civil regulatory law as against non-Indian on the Reservation, depends upon whether the law interferes or is incompatible with federal and tribal interests as reflected in federal law. New Mexico v. Mescalero Apache Tribe, 103 S.Ct. 2378, 2386 (1993).

The State has a substantial interest in ensuring that its employees are protected by applicable employment laws. We do not believe that the federal government's interest in tribal sovereignty would be implicated by the State's application of its employment laws and regulations to the Branch Bank and its employees. Because the Branch Bank is a state bank and will operate independent of the Tribe, the State will not seek to manage a tribal enterprise, or enforce its employment laws on the Tribe or its employees. Moreover, the State's regulation of the Branch Bank's employees does not effect those types of tribal sovereignty interests which the federal government has traditionally sought to protect. In other words, state regulation will not effect the Tribe's ability to "make their own laws and be ruled by them."

Thus, the establishment of the Branch Bank is a "project" which is "covered by" State employment laws, and is therefore, exempt from the application of Conn. Gen. Stat. 31-57e.

To summarize, the Employment Rights Act does not prohibit the Department's proposed activities. A Connecticut bank's branch established on the Reservation is "within the state." The State's interest in regulating banks chartered and operating within its boundaries, outweighs any possible sovereignty interest of the Tribe. Accordingly, we conclude that you have jurisdiction to regulate the Branch Bank on the Reservation.

We trust this opinion answers your concerns.

Very truly yours,

Richard Blumenthal
Attorney General

Susan Quinn Cobb
Assistant Attorney General

RB/SQC/mm


1 The Federal Procedures were promulgated by the Secretary of Interior as federal procedures pursuant to the Indian Gaming Regulatory Act (IGRA). 56 Fed. Reg. 24,996 (May 31, 1991). The Federal Gaming Procedures, therefore, have the force of law.

2 FN2. Section 2710(d)(3)(A) of the IGRA provides similar language.

3 In view of our conclusion that the Reservation is "in the state," it is unnecessary for us to answer the second part of your first question, that is, whether the Reservation is "outside of this state."

4 Certain of the Tribe's and the State's Reservation-related activities are governed by Federal Procedures, or what is commonly referred to as the gaming compact (hereinafter "the Federal Procedures.)" 54 Fed. Reg. 24,996 (May 31, 1991). The Federal Procedures were promulgated by the United States Secretary of Interior in 1991, pursuant to the Indian Gaming Regulatory Act (IGRA), and govern the gaming operations and other matters on the Reservation. Section 17(g) of the Federal Procedures, states that "Nothing in this Compact shall be deemed to regulate or to authorize State regulation of any ordinary commercial or banking function of the Tribe, including without limitation the provision of cash advance facilities for use of credit cards or bank cards located either within or without any gaming facilities." (emphasis added). This provision does not apply because the State would be regulating the branch of a private bank which is not a "function of the Tribe."

5 However, a tribe's sovereignty has limitations and courts have left open the possibility that where Congress has been silent, "in exceptional circumstances a state may assert jurisdiction over the on-reservation activities of tribal members." Mescalero Apache Tribe, 103 S.Ct. 2378, 2385; California v. Cabazon Band of Mission Indians, 480 U.S. 202, 215-16, 107 S.Ct. 1083, 1091 (1987). One commentator has concluded that "the requisite 'unusual circumstances' are...likely to be found only when the involved regulation serves as an important adjunct to independently valid regulation of nonmember activity, where specific statutory or treaty provisions apply or where very significant state interests are immediately implicated." American Indian Law Deskbook, (1993 Ed.), p. 115.

6 Because this is a state bank branch, we are unaware of any federal law which would preempt state regulations in this matter.

7 Certainly, you may request that the Bank include in its lease with the Tribe a provision ensuring state access to the Branch for compliance purposes.

8 "Commercial enterprise" is defined in the Employment Rights Act as "any form of commercial conduct or a particular commercial transaction or act, including the operation of a casino, which relates to or is connected with any profit making pursuit."


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