210 F.3d 1247 (10th Cir. 2000), 98-2247, Atkinson Trading Co. v. Shirley

Docket Nº:98-2247
Citation:210 F.3d 1247
Party Name:ATKINSON TRADING COMPANY, INC., a New Mexico corporation, Plaintiff - Appellant, v. JOE SHIRLEY, JR.; VICTOR JOE; DERRICK B. WATCHMAN; ELROY DRAKE; MEMBERS OF THE NAVAJO TAX COMMISSION; STEVEN C. BEGAY, Director of the Navajo Tax Commission, Defendants - Appellees.
Case Date:May 02, 2000
Court:United States Courts of Appeals, Court of Appeals for the Tenth Circuit

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210 F.3d 1247 (10th Cir. 2000)

ATKINSON TRADING COMPANY, INC., a New Mexico corporation, Plaintiff - Appellant,



No. 98-2247

United States Court of Appeals, Tenth Circuit

May 2, 2000

Appeal from the United States District Court for the District of New Mexico (D.C. No. CIV-97-1261-BB)

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William J. Darling (Margaret P. Armijo with him on the briefs) of William J. Darling & Associates, P.A., Albuquerque, New Mexico, for Plaintiff-Appellant.

Marcelino R. Gomez, Assistant Attorney General (Herb Yazzie, Attorney General of the Navajo Nation Department of Justice, with him on the brief), Window Rock, Navajo Nation (AZ), for Defendants-Appellees.

Before EBEL, McKAY, and BRISCOE, Circuit Judges.

McKAY, Circuit Judge.

Plaintiff-Appellant is a non-Indian New Mexico corporation operating several businesses­including a hotel, restaurant, cafeteria, gallery, curio shop, retail store, and RV park­on property held in fee simple but completely surrounded by Navajo Nation Reservation trust lands. This case involves Appellant's challenge to a Hotel Occupancy Tax enacted by the Navajo Nation, Navajo Nation Code tit. 24, §§ 101-142 (1995), requiring persons (Appellant's guests in this case) to pay an eight percent tax on any room or space costing two dollars or more each day in a hotel which is located within the exterior boundaries of the Navajo Nation.1 Id. at §§ 102-103. Appellant initiated its complaint against the tribe in 1993 in a declaratory judgment action brought in the United States District Court for the District of New Mexico. See Atkinson Trading Co. v. Navajo Nation, 866 F.Supp. 506, 507 (D.N.M. 1994). The court in that case dismissed the action without prejudice requiring that Appellant exhaust its remedies in the tribal system. See id. at 512-13. After receiving an adverse result in the Navajo tribal system,2

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Appellant again brought a declaratory judgment action in the district court requesting a ruling that the Navajo Nation has no jurisdiction to impose its Hotel Occupancy Tax on Appellant's guests. See Atkinson Trading Co. v. Gorman et al., No. 97-1261 BB/LFG (D.N.M. Aug. 21, 1998); R., Vol. III at 913. Appellant moved for trial de novo and summary judgment. The district court denied Appellant's motions and granted instead Appellees' cross-motion for summary judgment. See id. Appellant now appeals the district court's rulings. We exercise jurisdiction under 28 U.S.C. § 1291.


As a preliminary matter, we consider the district court's denial of Appellant's motion for trial de novo. Appellant argues that it should have received a new trial in the district court because the factual findings established in Appellant's appeal to the Navajo tribal system were not supported by the evidence and because the Navajo Supreme Court demonstrated bias in its proceedings. The standard of review for a district court's refusal to grant a new trial is abuse of discretion. See Unit Drilling Co. v. Enron Oil & Gas Co., 108 F.3d 1186, 1193 (10th Cir. 1997).

The district court applied the standard set forth in Mustang Production Co. v. Harrison, 94 F.3d 1382, 1384 (10th Cir. 1996), to Appellant's declaratory judgment action. In Mustang, we adopted the reasoning of the Ninth Circuit from FMC v. Shoshone-Bannock Tribes, 905 F.2d 1311, 1313-14 (9th Cir. 1990), and held that "when reviewing tribal court decisions on jurisdictional issues, district courts should review tribal courts' findings of fact for clear error and conclusions of law de novo." Mustang, 94 F.3d at 1384. Appellant complains that our holding was too deferential to decisions of tribal courts and argues that Mustang is no longer good law in light of the Supreme Court's decision in Strate v. A-1 Contractors, 520 U.S. 438 (1997). See Appellant's Br. at 36. Appellant asserts that Strate overruled the reasoning of National Farmers Union Ins. Cos. v. Crow Tribe of Indians, 471 U.S. 845 (1985), and, by implication, the reasoning of Mustang and FMC. See Appellant's Br. at 36.

Strate, however, reiterated the holding of National Farmers Union and specifically upheld its reasoning. In National Farmers Union, a Montana school district and its insurer brought an action in federal district court challenging a tribal court's assertion of jurisdiction over a personal injury action initiated against the school district on behalf of an Indian minor. The Supreme Court ruled that federal courts have the authority to determine whether a tribal court has exceeded the limits of its jurisdiction, National Farmers Union, 471 U.S. at 853, but the Court instructed federal courts to follow a deferential exhaustion rule that gives examination of the jurisdictional question in the first instance to the tribal court. Id. at 856-57. The National Farmers Union exhaustion rule allows a party to challenge in federal court a tribal court's assertion of jurisdiction only after that party has exhausted the remedies available in the tribal court system. The Supreme Court explained the policy behind the rule: "Our cases have often recognized that Congress is committed to a policy of supporting tribal self-government and self-determination. That policy favors a rule that will provide the forum whose jurisdiction is being challenged the first opportunity to evaluate the factual and legal bases for the challenge." Id. at 856 (footnotes omitted). The Court reasoned that the rule would encourage tribal courts to explain "the precise basis for accepting jurisdiction" and "provide other courts with the benefit of

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their expertise . . . in the event of further judicial review." Id. at 857. The exhaustion rule would also promote "the orderly administration of justice . . . [that] will be served by allowing a full record to be developed in the Tribal Court" and would minimize the risks of a "procedural nightmare" like the one then before the Court. Id. at 856.3 Referring to policy considerations like these, our circuit adopted the Mustang standard of review for decisions of tribal courts. We find nothing in Strate to persuade us that the Supreme Court has changed the exhaustion rule or abandoned the reasoning behind it. We therefore conclude that we need not reexamine our decision in Mustang.

At issue in Strate was "the adjudicatory authority of tribal courts over personal injury actions against defendants who are not tribal members." Strate, 520 U.S. at 442. The petitioners in Strate wanted the Court to distinguish Montana v. United States, 450 U.S. 544 (1981), and extend the holding of National Farmers Union to establish a sweeping boundless form of tribal jurisdiction over disputes involving nonmembers. See Strate, 520 U.S. at 447. The Court declined to extend National Farmers Union, concluding instead that National Farmers Union and Montana were completely compatible. See id. at 448. Montana, the Court explained, addressed the larger "concept of 'inherent sovereignty'" and the bounds of tribal power which were at issue in Strate. Id. at 453 (quoting Montana, 450 U.S. at 563). The National Farmers Union decision and its deferential rule did "not expand or stand apart from Montana's instruction on 'the inherent sovereign powers of an Indian tribe.'" Id. (quoting Montana, 450 U.S. at 565). The Strate Court set forth a general proposition that was "unremarkable" for the purposes of its holding but is actually central to the discussion at hand, that is, "where tribes possess authority to regulate the activities of nonmembers, '[c]ivil jurisdiction over [disputes arising out of] such activities presumptively lies in the tribal courts.'" Id. at 453 (quoting Iowa Mut. Ins. Co. v. LaPlante, 480 U.S. 9, 18 (1987)) (alterations in original). Deference lies at the heart of the standard of review established in Mustang. Even the Strate Court recognized the deference that federal courts owe tribal courts. Significantly, Strate left intact the deferential reasoning of National Farmers Union and, by implication, the rationale of FMC and Mustang.

FMC and Mustang set forth a clearly erroneous standard of review for factual questions decided by the tribal courts. That standard is built upon the "traditional judicial policy of respecting the factfinding ability of the court of first instance," FMC, 905 F.2d at 1313, a policy with theoretical underpinnings similar to those articulated by the Supreme Court in National Farmers Union. See, e.g., National Farmers Union, 471 U.S. at 856 ("[T]he orderly administration of justice in the federal court will be served by allowing a full record to be developed in the Tribal Court before either the merits or any question concerning appropriate relief is addressed."). The standard of review set forth in FMC and Mustang is de novo for questions of law decided in the tribal system. On that point, the FMC and Mustang courts expected that tribal courts would provide others "with the benefit of their expertise . . . in the event of further judicial review." National Farmers Union, 471 U.S. at 857; see also FMC, 905 F.2d at 1313-14. This standard "indicates that federal courts have no obligation to follow [the tribal courts'] expertise, but need only be guided

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by it." FMC, 905 F.2d at 1314. The rationale underlying the FMC and Mustang standards of review for factual and legal questions decided by the tribal courts still persuades us. We conclude that Mustang is still good law and that the district court in this case did not err in applying the Mustang standard to the decisions of the Navajo Supreme Court and Navajo Tax Commission.

Appellant asserts that even if the Mustang...

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