Big Horn County Electric Cooperative, Inc. v. Adams
Docket: No. 99-35799
Court: Court of Appeals for the Ninth Circuit; July 14, 2000; Federal Appellate Court
The Crow Tribe enacted the Railroad and Utility Tax Code (RUTC), imposing a 3% tax on the full fair market value of 'utility property' on tribal or trust lands within the Crow Reservation. Big Horn Electric Cooperative challenged the tax in federal court, claiming the Tribe overstepped its regulatory authority. The tribal officials appealed a district court ruling in favor of Big Horn, asserting that the Tribe's sovereign authority supports the tax. The court affirmed in part and reversed in part, maintaining jurisdiction under 28 U.S.C. § 1291. The Crow Reservation was established by the 1868 Treaty of Fort Laramie, originally encompassing 8 million acres but later reduced to approximately 2.3 million acres due to various Congressional Acts. Land ownership is mixed, with both tribal and non-tribal fee lands alongside trust lands. RUTC, adopted in 1993, defines 'utility property' broadly, including any property used for utility purposes under certain agreements. The tax commissioner calculates the tax based on the market value of utility property, as determined by the State of Montana or qualified appraisers, and applies a formula that considers the proportion of utility lines on the Reservation. RUTC prohibits passing the tax to Crow customers, categorizing it as an embedded cost, with penalties for discriminatory charges. Big Horn, the primary electrical service provider on the Reservation, serves over 1,700 customers, half of whom are Tribe members. Rights-of-way for Big Horn's infrastructure were granted through federal consent in collaboration with the Tribe.
In December 1993, the Tribe issued a tax bill of $36,699 to Big Horn. Starting in April 1994, Big Horn unlawfully passed through the utility tax to Crow customers, which was calculated based on their prior year’s kilowatt-hour usage and labeled as 'Crow Utility Tax' on billing statements. The Tribe sought a court injunction against this practice. Big Horn countered, claiming the Tribe overstepped its jurisdiction by taxing non-Indian fee land and contested the legality of § 219 of RUTC. The tribal court ruled in favor of the Tribe, issuing a permanent injunction against the tax pass-through and dismissing Big Horn’s counterclaims due to a lack of controversy, as evidence showed the Tribe had not taxed non-Indian fee land. On appeal, the Crow Court of Appeals upheld the Tribe's authority under § 219 of RUTC and confirmed Big Horn's violation.
Subsequently, Big Horn filed a complaint in federal district court against tribal officials, seeking injunctive and declaratory relief as well as a refund of the taxes. The district court granted Big Horn's summary judgment, ruling that the Tribe exceeded its jurisdiction in taxing utility property on congressionally-granted rights-of-way, akin to non-Indian fee land. This resulted in a permanent injunction against future assessments of the utility tax and required refunds of taxes previously collected. The defendants' motions to vacate the summary judgment were denied, although an emergency injunction pending appeal was later granted. The tribal officials are appealing the district court's judgment. The standard for reviewing the district court's summary judgment is de novo, while jurisdictional issues from Indian tribal courts are reviewed de novo for federal law and clearly erroneous for factual questions. Determining whether Big Horn's utility property is on non-Indian fee land is crucial, as tribal jurisdiction over non-member conduct on such land is severely limited by precedents established in cases like Strate and Montana.
The Supreme Court addressed tribal jurisdiction in a case involving a tort claim related to an accident on a state highway crossing Indian trust land. The highway was established via a federal right-of-way under 25 U.S.C. §§ 323-28, similar to the easements granted to Big Horn for transmission lines. The Court examined several factors to determine if the highway was akin to non-Indian fee land: 1) the legislation creating the right-of-way, 2) the tribe's consent for the right-of-way, 3) the tribe's reservation of dominion over it, 4) public access to the land, and 5) state control over the right-of-way. Although the Strate decision focused on adjudicative jurisdiction, it noted that a tribe’s adjudicative authority does not exceed its legislative jurisdiction, making the analysis applicable to both.
The Ninth Circuit clarified this in Burlington Northern R.R. Co. v. Red Wolf, where it ruled on a tort claim from a train-automobile collision on a congressionally-granted railroad right-of-way. It determined that the tribe did not reserve its dominion over the right-of-way, aligning with Strate's analysis. In Red Wolf, the right-of-way was not state-controlled or publicly accessible, distinguishing it from Strate. Big Horn’s easements meet the first three Strate factors, as they were established under the same federal statute with tribal consent, without a reservation of dominion. Although the defendants assert that Big Horn's rights-of-way differ because they lack public access and state control, this is irrelevant due to Red Wolf’s precedent. The Supreme Court's view that legislative and adjudicative jurisdiction are coextensive supports the conclusion that Big Horn's rights-of-way are equivalent to non-Indian fee land for assessing the Tribe's regulatory jurisdiction limits.
Montana's legal framework is applicable for determining a tribe's jurisdiction over nonmembers on non-Indian fee land, as established in post-Burlington jurisprudence. The Montana rule primarily governs disputes on non-Indian fee land, affirming that absent a treaty or federal law, tribes lack civil regulatory authority over nonmembers. Two exceptions to this rule exist: (1) tribes may regulate nonmembers who enter consensual relationships with the tribe or its members through commercial dealings or contracts; and (2) tribes may exercise civil authority over non-Indians on fee lands if their conduct directly affects the tribe’s political integrity, economic security, or health.
In this case, the district court found that Big Horn created a consensual relationship with the Tribe by providing electrical services under contracts with tribal members. However, the agreements for rights-of-way did not establish this relationship. Despite the consensual relationship, the first exception does not grant unlimited jurisdiction; it only allows regulation of nonmembers' activities. An ad valorem tax on Big Horn’s utility property is deemed a tax on property value, not on activities, thus falling outside the first exception. The defendants further argued that the second exception applies since revenues from the utility tax support vital tribal services. However, this interpretation is overly broad, as the second exception is narrowly construed by the Supreme Court and only permits actions necessary for protecting tribal self-government or internal relations.
The defendants' proposal to broaden Montana's second exception would undermine the primary rule, allowing virtually any tribal tax to qualify, contrary to Supreme Court precedent that limits tribal jurisdiction. The defendants' assertion that the Tribe would suffer irreparable harm and need to reduce essential services is unconvincing, as the Tribe can implement a tax scheme that complies with Montana law. Consequently, neither of Montana's exceptions applies, leaving the Tribe without jurisdiction to impose an ad valorem tax on Big Horn's utility property.
In their final argument, the defendants claim the Tribe has inherent sovereign authority to tax because the property is within the Reservation's boundaries, citing Merrion v. Jicarilla Apache Tribe and Washington v. Confederated Tribes of the Colville Indian Reservation. However, neither case negates Montana's primary rule. In Colville, the Supreme Court addressed tribal taxation powers concerning on-reservation transactions, emphasizing that tribes can only tax nonmembers engaging in economic activities on the reservation or where the tribe has a significant interest. The Court also limited a tribe's tax authority over non-Indian property on Indian lands.
Merrion acknowledged a tribe's fundamental sovereignty to tax transactions on tribal or trust lands but did not discuss taxing property on non-Indian fee land. It reinforced that a tribe only has authority over nonmembers who enter tribal lands or conduct business with the tribe. Thus, both cases suggest that the Tribe lacks authority to impose an ad valorem tax on Big Horn's property, as such taxation would exceed permissible tribal jurisdiction under Montana.
Montana's legal framework contradicts the defendants' claims regarding the applicability of tribal taxation, as it explicitly includes tribal taxation cases. The cases cited, such as Morris v. Hitchcock and Thomas, support the principle that tribes can impose taxes on nonmembers engaged in consensual relationships with the tribe. The language of Montana's first exception confirms that tribal taxation of nonmembers is permissible. However, the Tribe’s ad valorem tax on Big Horn’s utility property is deemed invalid as it exceeds the Tribe's territorial jurisdiction, aligning with the requirement that property must fall within the taxing authority's jurisdiction to be valid.
The court also addresses whether its ruling impacts the precedent set in Burlington Northern R.R. Co. v. Blackfeet Tribe. Although the defendants argue that Blackfeet Tribe should control the case, it was based on an incorrect interpretation of property rights following Strate v. A-1 Contractors, which clarified that congressionally-granted rights-of-way are akin to non-Indian fee land, necessitating a Montana analysis. Consequently, Blackfeet Tribe's reasoning is problematic due to subsequent Supreme Court rulings, leading to its classification as no longer valid law concerning ad valorem taxes on properties on such rights-of-way. The court may reassess existing Ninth Circuit precedents when they conflict with later Supreme Court decisions without requiring an en banc review.
Defendants assert that Big Horn acknowledged the Tribe's authority to tax property on a congressionally-granted right-of-way in the Crow Tribal Court, but an exception to waiver exists for changes in law, as established in Curtis Publishing Co. v. Butts and USA Petroleum v. Atlantic Richfield Co. At the time of litigation in the Crow court, the Strate decision had not been issued, leading Big Horn to reasonably believe in the Tribe's taxing authority based on the earlier Blackfeet Tribe case. Once Strate was decided, Big Horn argued that the Tribe exceeded its jurisdiction in taxing its utility property, indicating that the defendants' waiver claim is unfounded.
The defendants also contend that the district court's order infringed on the Tribe's sovereign immunity by imposing a permanent injunction and requiring a tax refund to Big Horn. The court's order seemed to target tribal officers in their official capacity, not personally. Federally recognized tribes possess sovereign immunity unless waived or abrogated by Congress. While the court allowed injunctive relief against tribal officials under the Ex Parte Young doctrine to challenge tax constitutionality, the refund mandate contravenes sovereign immunity since retrospective tax awards are prohibited by the Supreme Court. Consequently, the district court's decision to refund past taxes to Big Horn is reversed.
Big Horn contends that § 215 of the RUTC constitutes an express waiver of the Tribe's sovereign immunity, allowing taxpayers a process for seeking refunds through the tax commissioner and appeals to the Crow Tribal Court as outlined in § 212. These sections delineate the exclusive methods for challenging the utility tax, with no authorization for lawsuits in federal court or other forums. While a tribe can waive its sovereign immunity, such waivers must be "express and unequivocal," and waivers in state court do not typically extend to federal court. In this instance, the Tribe limited jurisdiction over refund claims to its tax commissioner and tribal courts, indicating no consent to federal court lawsuits. RUTC § 218 explicitly states that the remedies in §§ 211 through 215 are exclusive, reinforcing that any waiver in tribal court does not extend to federal court immunity. Consequently, the Tribe overstepped its authority by imposing an ad valorem tax on Big Horn's utility property located on non-Indian fee land. The court affirmed the district court's issuance of a permanent injunction to Big Horn but reversed the order for the Tribe to refund past utility taxes based on sovereign immunity. The case is affirmed in part, reversed in part, and remanded, with each party bearing their own costs. The defendants' claim that Big Horn is not entirely a non-tribal entity is deemed unsupported and too vague to alter the court's assessment.
