Peabody Coal Co. v. Navajo Nation, s. 94-15647
| Decision Date | 16 January 1996 |
| Docket Number | 94-15650 and 94-16622,Nos. 94-15647,s. 94-15647 |
| Citation | 75 F.3d 457 |
| Parties | 96 Cal. Daily Op. Serv. 317, 96 Daily Journal D.A.R. 496 PEABODY COAL COMPANY, A Delaware corporation; Southern California Edison Company, a California corporation, Plaintiffs-Appellees, Ferrell Secakuku, Chairman of the Hopi Tribal Counsel of the Hopi Tribe, Intervenor-Appellant, v. The NAVAJO NATION, Cross-Claim-Defendant-Appellee. PEABODY COAL COMPANY, A Delaware corporation; Southern California Edison Company, a California corporation, Plaintiffs-Appellants, Ferrell Secakuku, Chairman of the Hopi Tribal Counsel of the Hopi Tribe, Intervenor-Appellee, v. The NAVAJO NATION, Cross-Claim-Defendant-Appellee. PEABODY COAL COMPANY, a Delaware corporation, Plaintiff, Ferrell Secakuku, Chairman of the Hopi Tribal Counsel of the Hopi Tribe, Intervenor-Appellant, v. The NAVAJO NATION, Cross-Claim-Defendant-Appellee. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Jeffrey B. Smith, O'Connor, Cavanagh, Anderson, Westover, Killingsworth & Beshears, Phoenix, Arizona; Robert B. Hoffman, Snell & Wilmer, Phoenix, Arizona, for plaintiffs-cross-appellants.
Alfred T. McDonnell and James E. Scarboro, Arnold & Porter, Denver, Colorado, for intervenor-appellant.
Eric N. Dahlstrom and Michael C. Shiel, Rothstein, Donatelli, Hughes, Dahlstrom, Cron & Schoenburg, Phoenix, Arizona, for defendant-appellee.
Appeal from the United States District Court for the District of Arizona.
Before: CHOY, WIGGINS, and LEAVY, Circuit Judges.
Introduction
These consolidated appeals present another chapter in the long-standing controversy between the Hopi and Navajo over governing reservation lands in northeastern Arizona. These appeals arise from the District of Arizona and present two issues. First, did the district court, Judge Strand presiding, err in holding that the Navajo have exclusive governmental power over the Navajo Partitioned Lands to the extent that the Navajo may unilaterally impose a Possessory Interest Tax and Business Activity Tax on Peabody's mining activity? And second, did the district court, Judge Van Sickle presiding, err in holding that taxes imposed by the Navajo on Peabody's mining activities are not "proceeds" under 25 U.S.C. § 640d-6 which must be shared with the Hopi? We affirm the holding of Judge Strand and reverse the holding of Judge Van Sickle.
These appeals concern the former "Joint Use Area" as designated by the United States District Court in Healing v. Jones, 210 F.Supp. 125 (D.Ariz.1962). In Healing, a three-judge district court panel held that, subject to the trust title of the United States, the Hopi and Navajo shared an undivided interest in the Joint Use Area.
Congress enacted the Navajo-Hopi Land Settlement Act of 1974, 25 U.S.C. § 640d (the "Settlement Act") in an effort to end conflicts between the Hopi and Navajo which persisted after the Healing decision. The Settlement Act authorized the district court to partition the Joint Use Area into Navajo and Hopi lands. With respect to the subsurface mineral estate, section 7 of the Settlement Act provides:
Partition of the surface of the lands of the joint use area shall not affect the joint ownership status of the coal, oil, gas, and all other minerals within or underlying such lands. All such coal, oil, gas, and other minerals within or underlying such lands shall be managed jointly by the two tribes, subject to supervision and approval by the Secretary as otherwise required by law, and the proceeds therefrom shall be divided between the tribes, share and share alike.
25 U.S.C. § 640d-6.
On February 10, 1977 the district court entered the first judgment of partition. We vacated this judgment to allow the district court to determine properly the boundaries of the 1882 Reservation. Sekaquaptewa v. MacDonald, 575 F.2d 239 (9th Cir.1978). On April 18, 1979 the district court entered the second and final judgment partitioning the Joint Use Area into the Hopi Partitioned Lands and the Navajo Partitioned Lands. Sekaquaptewa v. MacDonald, D.C. No. Civ. 579 Pct. (D.Ariz.1979), aff'd, 626 F.2d 113 (9th Cir.1980).
The mining activity in this litigation dates back to 1966. In that year, Sentry Royalty Company entered into separate leases with the Hopi and Navajo to mine coal from the Joint Use Area (respectively, the "1966 Hopi Lease" and the "1966 Navajo Lease"). In 1968, Sentry assigned its rights in these leases to the Peabody Coal Company. In 1970, Peabody began operating two mines, the Kayenta Mine and the Black Mesa Mine, within the Joint Use Area.
The land leased under the 1966 Hopi Lease and the 1966 Navajo Lease was entirely within the former Joint Use Area. The partition line drawn by the 1979 judgment did not equally divide these two mines. Rather, after partition ninety percent of the land leased to Peabody is now located on the Navajo side of the line. The proceeds from the two mines are subject to the "share and share alike" provision of section 7.
In 1978, the Navajo enacted two taxes, the Possessory Interest Tax ("PIT") and the Business Activity Tax ("BAT"). Both the PIT and BAT apply to Peabody's mining activity on the Navajo Partitioned Lands. The United States Supreme Court upheld the validity of both taxes in Kerr-McGee Corp. v. Navajo Tribe, 471 U.S. 195, 105 S.Ct. 1900, 85 L.Ed.2d 200 (1985).
This action was filed on September 16, 1988 by Peabody and Southern California Edison (collectively, "Peabody") seeking declaratory relief. Southern California Edison operates the Mohave Generating Station and is an interested party because taxes levied on Peabody are passed through to Edison. Peabody claimed that the PIT violated § 640d-6 of the Settlement Act because the tax lacked approval of the Hopi and the Secretary. The Hopi moved to intervene and file a cross-claim against the Navajo. The Hopi's cross-claim alleged that both the PIT and BAT were "proceeds" under § 640d-6. The Hopi claimed entitlement to one-half of the taxes imposed by the Navajo on mining activity within the former Joint Use Area. On April 20, 1989 the Hopi's motion to intervene and cross-claim was granted.
On February 12, 1990 Peabody filed a motion for summary judgment claiming that the PIT violated section 7. The Hopi filed their own motion for summary judgment on March 16, 1990. The Hopi's motion contained two alternative claims. First, the Hopi claimed that the PIT and BAT were invalid because they lacked the approval of the Hopi who remained a co-sovereign over the subsurface mineral estate of the former Joint Use Area. And second, the Hopi claimed that the PIT and BAT were "proceeds" from the subsurface mineral estate subject to the "share and share alike" provision of § 640d-6.
Judge Strand denied Peabody's motion. With regard to the Hopi's motion, Judge Strand denied their first claim. He ruled that the Navajo have exclusive sovereignty over the Navajo Partitioned Lands including the subsurface mineral estate. Judge Strand granted the Hopi's alternative claim. He held that the Navajo's PIT and BAT, to the extent they constitute value derived from the minerals, must be shared with the Hopi.
The Hopi filed a second motion for summary judgment on August 14, 1991. The Hopi claimed entitlement to an undisputed amount of past taxes which had been collected or waived by the Navajo. This motion was denied. Judge Strand ruled that there was a genuine issue of material fact with respect to what extent the PIT and BAT were value derived from the minerals rather than from the surface activity of Peabody on Navajo land.
Trial took place before Judge Van Sickle. The Hopi presented evidence to establish that the PIT and BAT were value derived from the coal. The Navajo presented contrary evidence. At the conclusion of the trial, Judge Van Sickle ruled that Judge Strand's interpretation of the Settlement Act was erroneous. Judge Van Sickle interpreted the term "proceeds" in § 640d-6 to include only value arising from a "commercial transaction." Because taxes are not derived from a commercial transaction, Judge Van Sickle ruled that no portion of the PIT or BAT were proceeds of the coal which must be shared with the Hopi.
1. The district court, Judge Strand presiding, properly ruled that the Navajo have exclusive governmental power over the Navajo Partitioned Lands to the extent that the Navajo may unilaterally impose the Possessory Interest Tax and Business Activity Tax on Peabody's mining activity.
Resolution of this issue involves answering two questions because the Hopi and Peabody have presented alternative theories in challenging the taxes. First, do the Navajo have sovereign governmental power, to the exclusion of the Hopi, over both the surface and subsurface of the Navajo Partitioned Lands? The Hopi claim, in appeal No. 94-15647, that they are co-sovereigns over the subsurface and that the Navajo may not unilaterally impose the PIT and BAT.
Second, even if the Navajo have exclusive sovereignty over the subsurface, does the unilateral imposition of the PIT violate § 640d-6 of the Settlement Act? Peabody claims, in appeal No. 94-15650, that the unilateral imposition of the PIT violates § 640d-6 because the tax lacks approval of the Hopi and the Secretary.
This issue involves interpreting the 1974 Settlement Act and its subsequent amendments to determine if Congress intended to grant the Navajo exclusive jurisdiction. Questions of law are reviewed de novo. United States v. Yacoubian, 24 F.3d 1, 3 (9th Cir.1994).
The district court, Judge Strand presiding, ruled that the Navajo have an exclusive governmental interest in the Navajo Partitioned Lands "from the top of the sky to the center of the Earth." The Hopi appeal this...
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