Quantum Entm't Ltd. v. U.S. Dep't of the Interior

• Decision Date: 10 July 2013
• Docket Number: No. 12–5133.,12–5133.
• Citation: 714 F.3d 1338
• Parties: QUANTUM ENTERTAINMENT LIMITED, A New Mexico Limited Liability Company, Appellant v. UNITED STATES DEPARTMENT OF THE INTERIOR, Bureau of Indian Affairs, Appellee.
• Court: U.S. Court of Appeals — District of Columbia Circuit

714 F.3d 1338

QUANTUM ENTERTAINMENT LIMITED, A New Mexico Limited Liability Company, Appellant

v.UNITED STATES DEPARTMENT OF THE INTERIOR, Bureau of Indian Affairs, Appellee.

No. 12–5133.

United States Court of Appeals, District of Columbia Circuit.

Argued Feb. 15, 2013.

Decided April 30, 2013.

Rehearing En Banc Denied July 10, 2013.

Limited on Constitutional Grounds

25 U.S.C.A. § 81

Appeal from the United States District Court for the District of Columbia, (No. 1:11–cv–00047).

Charles K. Purcell argued the cause for appellant. With him on the brief was Nancy J. Appleby.

Matthew Littleton, Attorney, U.S. Department of Justice, argued the cause for appellee. With him on the brief were William J. Lazarus, and John L. Smeltzer, Attorneys. Tamara N. Rountree, Attorney, entered an appearance.

Before: GARLAND, Chief Judge, ROGERS and TATEL, Circuit Judges.

Opinion for the Court by Circuit Judge ROGERS.

ROGERS, Circuit Judge.

This appeal involves questions of statutory retroactivity, which the court analyzes under the two-part test in Landgraf v. USI Film Products, 511 U.S. 244, 280, 114 S.Ct. 1483, 128 L.Ed.2d 229 (1994). Agreeing with the Interior Board of Indian Appeals, the district court ruled that Quantum Entertainment Limited's 1996 Management Agreement with the Santo Domingo Pueblo, a federally recognized Indian tribe, and its tribal corporation, Kewa Gas Limited, was null and void for lack of approval by the Secretary of the Interior as required by 25 U.S.C. § 81 (1994), and that it was incapable of being validated by the 2000 amendment to § 81, the application of which would be impermissibly retroactive. Quantum challenges the Board's determinations that application of the 2000 amendment would be impermissibly retroactive and that § 81 applies to the 1996 Agreement.

Application of Landgraf's retroactivity test does not work in Quantum's favor. First, Congress made no clear statement that it intended the 2000 amendment to apply retroactively, see511 U.S. at 280, 114 S.Ct. 1483. Second, because the 1996 Agreement required Secretarial approval that was never obtained and the parties agree the Agreement would be valid without Secretarial approval under § 81 as amended, the application of the new law would give life to a null and void agreement, thereby attaching “new legal consequences” to it, id. at 269–70, 280, 114 S.Ct. 1483. Although the Pueblo may have voluntarily undertaken the stated duties and liabilities under the Agreement, such an agreement was null and void without Secretarial approval before 2000. Since the Secretary never approved the Agreement, any legislative validation of the “duties” or “liabilit[ies]” attached to it was impermissibly retroactive. Id. at 280, 114 S.Ct. 1483. Quantum's challenges to the scope of § 81 itself are unavailing. Accordingly, we affirm the grant of summary judgment, venturing no opinion on whether Quantum could recover in quantum meruit, an issue not briefed by the parties.

I.

On August 14, 1996, Quantum entered into an agreement with the Pueblo, acting through its Tribal Council, and Kewa Gas to manage, supervise, and operate Kewa Gas's gasoline distribution business on the Pueblo's reservation in New Mexico. Quantum is a limited liability company incorporated in the state of New Mexico, “engaged in, among other things, the business of managing gas distribution businesses.” 1996 Agreement Recitals, C. Kewa Gas was chartered in 1996 by the Tribal Council of the Pueblo for the purpose of “carry [ing] on certain economic development activities on behalf of the Pueblo, including ... operation of a gasoline distribution business,” Tribal Council Res. No. S.D. 08–96–18 (Aug. 14, 1996); at the time of the Agreement it was registered as a distributor with the New Mexico Tax and Revenue Department, 1996 Agreement Recitals, A, B.

Under the terms of the Agreement, Quantum exercised nearly exclusive control over Kewa Gas's distribution business. It supervised “the general operations ... including the purchase, marketing, sale and delivery of branded and unbranded gasoline and special fuels,” and was to “[s]elect and train personnel,” “[n]egotiate prices and coordinate deliveries,” “[m]aintain proper and suitable records and books of account for” Kewa Gas, and “provide for normal repairs, replacements, and maintenance of equipment.” Agreement, § 1.2(a)-(c), (e), (g). At a more general level, Quantum also “[d]evelop[ed] policies for the purpose of maximizing net income from the operations.” Id. § 1.2(d). The Agreement included a provision for capital advances by Quantum for construction of physical assets although for “any construction to expand the Gas Distribution Business or ... any capital expenditures costing in excess of $10,000,” Kewa Gas's approval was required. Id. § 1.3. In return for the “day-to-day operation” of the business, Quantum received an annual management fee of 49% of Kewa Gas's “Net Income,” payable monthly, a fee of $0.03 per gallon of gasoline or diesel fuel sold to the Pueblo gas station, and a “performance bonus” of $0.005 per gallon for every gallon of fuel sold in excess of 1 million gallons per month. Id. §§ 2.1–2.3.

In addition to provisions for indemnification and settlement of disputes through binding arbitration, the Agreement included a non-compete clause. The Pueblo and Kewa Gas covenanted not to have any interest in any other gas distribution business within the State of New Mexico, except with respect to the retail operation of the tribe's Santo Domingo gas station (located adjacent to I–25 at the N.M. State Highway 22 exit). Quantum also agreed to a non-compete covenant, except for areas of the State that Quantum and Kewa Gas determined could not be economically serviced by Kewa Gas's gas distribution business. The initial term of the Agreement was for 10 years, with Quantum having the option to renew it for two additional 10–year terms, subject to a management fee of 44% in the first ten-year extension and 39% in the second.

By means of the Agreement the parties were able to benefit from a state tax exemption available to Indian Tribes. Kewa Gas, which was 100% owned by the Pueblo, was not subject to New Mexico's gasoline and special fuel tax. Although Kewa Gas was the distributor, and the incidence of the tax fell on the distributor not the purchaser, the State had concluded that the tax was preempted by federal law, exempting Kewa Gas from the payment of taxes on the receipt and sale of gasoline and special fuels to retail outlets in the State. See New Mexico Taxation and Revenue Dep't, Ruling No. 640–96–01 (Apr. 4, 1996) (citing Oklahoma Tax Comm'n v. Chickasaw Nation, 515 U.S. 450, 115 S.Ct. 2214, 132 L.Ed.2d 400 (1995)). In 1999, the State replaced the exemption with a tax deduction for Indian tribal distributors like Kewa Gas for fuel sold from “a nonmobile storage container located within ... [the] reservation ... for resale outside ... [the] reservation” not in excess of 2,500,000 gallons per month. N.M. Stat. Ann. § 7–13–4(f) (1999).

Restrictions on contracting with Indian Tribes have existed since 1872. SeeS. Rep. (Comm. Indian Affairs)) NO. 106–1501, 7–8 (1999). At the time of the 1996 Agreement, section 81 provided in part:

No agreement shall be made by any person with any tribe of Indians, ... in consideration of services for said Indians relative to their lands, ... unless such contract or agreement be executed and approved as follows:

...

Second. It shall bear the approval of the Secretary of the Interior and the Commissioner of Indian Affairs indorsed upon it.

25 U.S.C. § 81 (1994) (emphases added). Congress amended this provision in 2000 to provide, in relevant part:

No agreement or contract with an Indian tribe that encumbers Indian lands for a period of 7 or more years shall be valid unless that agreement or contract bears the approval of the Secretary of the Interior or a designee of the Secretary.

25 U.S.C. § 81(b) (2000) (emphasis added). (For ease of reference we henceforth refer to the former as “old § 81” and the latter as “new § 81.”) The parties to this appeal stipulated that the 1996 Agreement would not require Secretarial approval under new § 81.

In 2003, after the Agreement had been operational for several years, a new Governor of the Pueblo Tribal Council advised the Bureau of Indian Affairs by letter that the 1996 Agreement had never been approved by the Secretary and that the Agreement was “far too lucrative” for Quantum. The Acting Regional Director determined that the Agreement was subject to the Secretary's approval under old § 81 and was not in the best interests of the Pueblo due to the high fees Quantum received under its terms; the Director declared the Agreement to have “never been legally valid” under old § 81, the law in effect at the time the parties entered the Agreement. Act'g. Reg'l Dir. Decision at 5 (Oct. 23, 2003). Upon Quantum's appeal, the Board of Indian Appeals agreed that the Agreement was not valid and that old § 81 applied, although it reached that conclusion for different reasons. The Board concluded that because the Agreement would have required Secretarial approval under old § 81 to be valid but would be valid without Secretarial approval under new § 81, applying new § 81 to the 1996 Agreement would have an impermissible retroactive effect of “rendering valid an otherwise invalid contract” and so would “alter the legal consequences of acts completed before New Section 81 was enacted.” Quantum Entertainment Ltd. v. Acting Sw. Reg'l Dir., Bureau of Indian Affairs, 44 IBIA 178, 192–93 (2007) (citing Landgraf, 511 U.S. at 269–70 & n. 23, 114 S.Ct. 1483).

Quantum challenged the Board's decision in the district court. The district court granted Quantum's motion for summary judgment in part and remanded the case to the Board to explain the basis for its conclusion the Agreement was invalid. Quantum Entertainment Ltd. v. U.S. Dep't of Interior, 597 F.Supp.2d 146, 155 (D.D.C.200...