781 F.2d 715 (9th Cir. 1986), 85-3509, Squaxin Island Tribe v. State of Wash.

Docket Nº:85-3509.
Citation:781 F.2d 715
Party Name:The SQUAXIN ISLAND TRIBE, et al., Plaintiffs-Appellants, v. The STATE OF WASHINGTON, et al., Defendants-Appellees.
Case Date:January 24, 1986
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit

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781 F.2d 715 (9th Cir. 1986)

The SQUAXIN ISLAND TRIBE, et al., Plaintiffs-Appellants,

v.

The STATE OF WASHINGTON, et al., Defendants-Appellees.

No. 85-3509.

United States Court of Appeals, Ninth Circuit

January 24, 1986

Argued and Submitted Nov. 5, 1985.

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[Copyrighted Material Omitted]

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Miriam L. Chesslin, Hobbs, Straus, Dean, & Wilder, Washington, D.C., for plaintiffs-appellants.

David E. Walsh, Atty. General's Office, Olympia, Wash., for defendants-appellees.

Appeal from the United States District Court for the Western District of Washington.

Before WRIGHT, REINHARDT, and BEEZER, Circuit Judges.

EUGENE A. WRIGHT, Circuit Judge.

In this case we are asked to decide whether the State of Washington may lawfully regulate and tax tribal liquor sales to non-Indians. The tribes challenge the state's use of vendor agreements, claiming that the Liquor Control Board lacks authority to control tribal liquor sales.

FACTS

Appellants are four federally recognized Indian tribes in Western Washington. Each tribe enacted a tribal liquor ordinance authorized by 18 U.S.C. Sec. 1161 1 and established a tribal liquor enterprise. The tribes purchased liquor from out-of-state distributors and sold it through tribal retail stores to Indians and non-Indians. Prices included tribal taxes but excluded state taxes and surcharges applicable to sales by State stores and vendors. Tribal prices were generally fixed lower than in state outlets to attract customers from off the reservations.

Washington maintains a monopoly liquor distribution system. Pursuant to RCW 66.08.050, the Liquor Control Board purchases liquor from distributors and retails it through State stores and vendors at Board-fixed prices. 2

When tribal liquor sales began in 1978, the Board considered these sales illegal and sought to terminate them. In January 1983, the Board adopted an emergency regulation permitting the appointment of tribes as state liquor vendors. WAC 314-37-010. Following the Supreme Court decision in Rice v. Rehner, 463 U.S. 713, 103 S.Ct. 3291, 77 L.Ed.2d 961 (1983), the Board amended the regulation to require a vendor agreement as a condition to tribal sales to non-Indians. When this action was filed, four Washington tribes (none of the appellants)

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had entered vendor agreements with the Board. Each agreement requires prepayment of the cost of the liquor, including all state taxes, at the time of delivery. 3 The agreements also restrict advertising, fix retail prices, and control tribal outlet locations.

The tribes filed for declaratory and injunctive relief to restrain the state from enforcing WAC 314-37-010 or other liquor control laws. 4

In February 1984, the district court granted a preliminary injunction permitting the tribes to sell liquor without state interference. The injunction was conditioned on the posting of adequate security pursuant to Rule 65(c), Fed.R.Civ.P. The state counterclaimed for taxes due.

In July 1984, the district court granted partial summary judgment for the state, finding that (1) the liquor sales tax provisions apply to tribal sales to non-tribal customers and (2) tribes are not authorized to import or possess liquor for retail sale except in conformance with state liquor laws. However, the district court granted the tribes' motion for partial summary judgment, finding "the Washington State Liquor Control Board does not have the authority under WAC 314-37-010 to require Indian tribes to enter into vendor agreements."

In October 1984, the court denied the tribes' motion to dismiss the State's counterclaim for taxes owed. It found the tribes had consented to suit and waived sovereign immunity by electing to sell liquor during the life of the preliminary injunction.

In December 1984, the court entered a final judgment that incorporated its earlier rulings, dismissed the tribes' antitrust claims, dissolved the preliminary injunction, dismissed all claims for permanent injunctive relief, and awarded $190,000 to the state on its counterclaim for taxes due. An appeal was timely filed.

ISSUES

On appeal, the tribes contend that (1) the state is not authorized to tax and control tribal liquor enterprises; (2) the Board's tribal vendor regulation is not authorized under state law and violates due process and equal protection; (3) the district court improperly dismissed the tribes' antitrust claims; and (4) the tribes did not waive sovereign immunity by filing suit, posting security under Rule 65(c), or electing to continue retail liquor sales during the preliminary injunction.

ANALYSIS

I. Standard of Review

This court reviews de novo a grant of summary judgment. See, e.g., Castelli v. Douglas Aircraft Co., 752 F.2d 1480, 1482 (9th Cir.1985). Questions of statutory interpretation are also reviewed de novo. Callejas v. McMahon, 750 F.2d 729, 730 (9th Cir.1985).

II. Jurisdiction

In the judgment of December 3, 1984, the district court stated: "The Court has deemed it unnecessary to complete disposition of the case to reach Plaintiffs' other claims, including ... due process and equal protection claims arising under the Fifth and Fourteenth Amendments...."

The final judgment rule ordinarily would bar review of a judgment which failed to dispose of all claims. Here, the district court apparently believed that its ruling on the state law issue as to tribal vendor agreements obviated the need to reach the federal constitutional claims. This view is consistent with the well-established rule that state issues should be decided first and where state claims are dispositive, federal

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questions need not be reached. Siler v. Louisville & Nashville R. Co., 213 U.S. 175, 193, 29 S.Ct. 451, 455, 53 L.Ed. 753 (1909).

We construe the district court's judgment as an attempt to dispose of all claims in the action, and we find that no practical benefits would accrue from a dismissal for lack of appellate jurisdiction. See Hoohuli v. Ariyoshi, 741 F.2d 1169, 1171 n. 1 (9th Cir.1984) ("If it appears that the district court intended the dismissal to dispose of the action, it may be considered final and appealable."); Wahkiakum Band of Chinook Indians v. Bateman, 655 F.2d 176, 177 n. 1 (9th Cir.1981) ("[W]here ... the trial court believed it was disposing of the entire case and no useful purpose would be served by dismissal, we may exercise our discretion and hear the appeal.")

III. State Authority to Tax and Regulate Tribal Liquor Sales

The tribes appear to challenge the state's authority to regulate or tax tribal liquor sales to non-tribal members. This challenge must fail because tribal sovereignty is not infringed. See Rice v. Rehner, 463 U.S. 713, 720, 103 S.Ct. 3291, 3296, 77 L.Ed.2d 961 (1983) (state licensing requirements for tribal liquor sales to non-Indians do not infringe upon tribal sovereignty); Washington v. Confederated Tribes of the Colville Indian Reservation, 447 U.S. 134, 151, 100 S.Ct. 2069, 2080, 65 L.Ed.2d 10 (1980) (taxation of sales to non-Indians does not "contravene the principle of tribal self-government"); Moe v. Confederated Salish and Kootenai Tribes of the Flathead Reservation, 425 U.S. 463, 96 S.Ct. 1634, 48 L.Ed.2d 96 (1976) (state may impose non-discriminatory tax on tribal sales to non-Indian customers and may require tribal retailer to enforce and collect the tax).

In Rice, the Court upheld California's liquor licensing and distribution statutes as applied to tribal liquor sales. The Court concluded that tribal sovereignty interests were implicated only as to the sale of liquor to tribal members. Id., 463 U.S. at 721, 103 S.Ct. at 3296 Here, the Board is not attempting to collect taxes on tribal liquor sales to tribal members. The tribes' attempt to challenge the tax as applied to non-Indians is without merit. The district court properly disposed of this taxation issue by summary judgment.

The only basis for challenging the state's regulation of tribal liquor sales is that it constitutes a direct burden on tribal members or the operation of tribal government. That challenge also fails. The Court in Rice employed a "backdrop" analysis informed by historical notions of tribal sovereignty and found that "tradition simply has not recognized a sovereign immunity or inherent authority in favor of liquor regulation by Indians." Id. at 722, 103 S.Ct. at 3297. In addition, state jurisdiction over the use and distribution of alcoholic beverages in Indian country arises from important state interests in controlling liquor traffic within its borders. Id. at 724, 103 S.Ct. at 3298. 5

Contrary to the tribe's contention, the State's authority to regulate tribal liquor sales is not preempted by federal law. Section 1161 of Title 18 is a delegation of authority to the state to regulate tribal liquor sales, not a preemption in favor of the tribes. 6 Rice, 463 U.S. at 726, 103 S.Ct. at 3299. "Congress did not intend to make

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tribal members 'supercitizens' who could trade in a traditionally regulated substance free from all but self-imposed regulations." Id. at 734, 103 S.Ct. at 3303.

Nothing in Rice suggests that this preemption analysis would not yield identical results in a "monopoly control" state. Because there is no tradition of sovereign immunity in the area of liquor regulation or taxation and because the activity has potential for substantial impact beyond the reservation, we accord little, if any, weight to an asserted tribal sovereignty interest. Id. at 725, 103 S.Ct. at 3298. 7

The tribes contend the state's pecuniary interest must be balanced against the tribes' need for revenues to sustain the tribes' existence. However, a state tax or regulation is not invalid merely because it erodes a tribe's revenues, even if the tax substantially impairs the tribal government's ability to sustain itself and its programs. Washington v. Confederated Tribes of the Colville Indian Reservation, 447 U.S. 134...

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