Arbitration agreements within gaming compacts between states and Native American tribes can invoke federal jurisdiction when those agreements affect "remedies for breach of contract" under the Indian Gaming Regulatory Act (IGRA), according to the Seventh Circuit Court of Appeals.

In Wisconsin v. Ho-Chunk Nation, No. 07-1584, 2008 WL 114887 (7th Cir. Jan. 14, 2008), Wisconsin and the Ho-Chunk Nation disputed whether the Nation had breached a compact concerning revenue sharing with the State. The compact contained an agreement contemplating arbitration of certain disputes between the parties arising out of the contract and the waiver of sovereign immunity in certain circumstances.

Previously, in Wisconsin v. Ho-Chunk Nation, No. 05-C-632-S. 2007 WL 734390 (W.D. Wis. Mar. 9, 2007), the district court found that the compact affected interstate commerce, and was therefore subject to the Federal Arbitration Act (FAA). The district court therefore held it had jurisdiction to determine the arbitrability of claims between the parties, and whether to compel arbitration of the State's claims.

On appeal, the Ho-Chunk Nation argued that neither the FAA nor the IGRA provided federal jurisdiction as to the State's claims and did not abrogate the Nation's sovereign immunity outside the arbitral forum.

The Court found that the IGRA did not clearly provide federal jurisdiction over revenue-sharing claims as a "subject... directly related to the operation of gaming activities," but did provide such jurisdiction and abrogated tribal immunity when a compact "include[d] provisions relating to… remedies for breach of contract." See 25 U.S.C. § 2710(d)(3)(C)(v). The Court held that the arbitration agreement in the compact required that issues of interpretation or enforcement must be arbitrated, and therefore triggered federal jurisdiction and abrogation.

After finding supplemental jurisdiction to hear the State's related claims, the Court then considered the Nation's contention that it only waived sovereign immunity within the arbitral forum. The Court found that, according to the clear language of the compact's arbitration agreement, the parties contemplated a broad waiver. The Court observed that the parties referred to "suits," "an order," "a declaratory judgment," and to "enjoin[ing] any act or conduct," language that clearly encompassed an immunity waiver outside of the arbitral forum.

Finally, the Court noted that the arbitration agreement clearly gave the district court the responsibility to decide which claims were arbitrable and remanded the matter for that determination.