Mustang Production Co. v. Harrison

• Decision Date: 23 August 1996
• Docket Number: Nos. 95-6287,95-6292,s. 95-6287
• Citation: 94 F.3d 1382
• Parties: MUSTANG PRODUCTION COMPANY, et al., Plaintiffs--Appellants, v. Alton HARRISON, et al., Defendants--Appellees. WARD PETROLEUM CORPORATION, Plaintiff--Appellant, v. Juanita LEARNED, et al., Defendants--Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1382

94 F.3d 1382

MUSTANG PRODUCTION COMPANY, et al., Plaintiffs--Appellants, v. Alton HARRISON, et al., Defendants--Appellees.

WARD PETROLEUM CORPORATION, Plaintiff--Appellant, v. Juanita LEARNED, et al., Defendants--Appellees.

Nos. 95-6287, 95-6292.

United States Court of Appeals Tenth Circuit.

Aug. 23, 1996.

Steven W. Bugg (Stanley L. Cunningham, with him, on the briefs), McAfee & Taft, Oklahoma City, Oklahoma, for Appellants.

Melody L. McCoy, Native American Rights Fund, Boulder, Colorado, for Appellees.

Elizabeth Anne Peterson, Attorney, Department of Justice (Lois J. Schiffer, Assistant Attorney General, Bradley Scott Bridgewater and Edward J. Shawaker, Attorneys, Department of Justice, and Barbara Coen, of counsel, Office of the Solicitor, with her, on the brief) for amicus curiae United States of America.

Before TACHA, McWILLIAMS, and MURPHY, Circuit Judges.

TACHA, Circuit Judge.

The issue in this case is whether the Cheyenne-Arapaho Tribes of Oklahoma ("the Tribes") may impose a severance tax on oil and gas production on allotted lands held in trust for their members. The appellants are nineteen oil and gas companies and one individual (collectively referred to as "Mustang") who hold oil and gas leases on the allotted lands. The appellees are members of the Business Committee and the Tax Commission, the tribal government entities responsible for promulgating and enforcing the tax at issue. The Cheyenne-Arapaho District Court ("the Tribal Court"), the Tribal Supreme Court, and the federal district court all held that allotted lands are subject to taxation by the Tribes. Mustang Fuel Corp. v. Hatch, 890 F.Supp. 995 (W.D.Okla.1995) (district court opinion in this case). Our jurisdiction arises under 28 U.S.C. § 1291, and we affirm.

BACKGROUND

In 1865, the United States signed a treaty creating a reservation for the Tribes in western Oklahoma. An 1869 Executive Order implemented the treaty and delineated the boundaries of the reservation ("the 1869 reservation"). In 1890, the United States and the Tribes signed an Allotment and Cession Agreement ("the Agreement"), the subject of which was the land within the 1869 reservation as well as other land which had been mistakenly reserved to the Tribe by a treaty signed in 1867. The Agreement took effect by an Act of Congress on March 3, 1891 ("the Act").

Article I of the Act provided that the Tribes would cede to the United States all land mistakenly reserved to the Tribes in the 1867 treaty. Article II stated that, subject to the allotment of land to individual members of the Tribes, the Tribes would cede all land within the boundaries of the 1869 reservation. Article III provided allotments of land to all members of the Tribe "out of the lands ceded, conveyed, transferred, relinquished, and surrendered by Article II." The allotted lands were to be held in trust by the federal government for individual members of the Tribe. All of the allotted lands involved in this case continue to be held in trust.

In April 1988, the Tribes enacted a General Revenue and Taxation Act ("the Tax Act"), which taxes, among other things, oil and gas "produced, severed, saved, and removed from any land within the jurisdiction of the Cheyenne-Arapaho Tribes of Oklahoma." Tax Act §§ 401 & 402. Taxpayers may pay under protest, in which case the disputed money is held in a separate account pending final resolution The Tribes taxed Mustang for oil and gas that Mustang extracted on allotted lands pursuant to oil and gas leases. In 1988, Mustang filed this suit in federal district court challenging the Tribes' authority to tax oil and gas production on allotted lands. The court stayed the action pending Mustang's exhaustion of tribal remedies. In 1989, the Tribal Court held that allotted lands are "a part of the Cheyenne and Arapaho Indian reservation, and that said allotments are 'Indian Country' as the term is defined by federal law, and that said allotments are subject to taxation by the tribal government." The Tribal Supreme Court affirmed, and further held that Congress has not divested the Tribes of their inherent authority to tax activities that occur on allotted lands.

of their protest. Tax Act § 118. After exhausting administrative remedies, a taxpayer may bring an action in tribal court to recover any taxes, penalties, or interest paid under protest or to enjoin the Tax Commission from collecting disputed revenues. Tax Act §§ 151-155.

After Mustang exhausted its tribal remedies, the district court reopened the case and granted summary judgment in favor of the Tribes. The court held that allotted lands are Indian country, and thus subject to tribal jurisdiction and the Tribes' inherent authority to tax activities on tribal lands. Mustang, 890 F.Supp. at 1001-03. Mustang appeals, arguing that under the 1890 Agreement, the Tribe lost jurisdiction over all of the lands in the 1869 reservation, including lands allotted to individual tribal members.

DISCUSSION

I. Standard of Review

This Circuit has never decided what standard a federal court should use to review a tribal court decision regarding tribal jurisdiction. The district court did not clearly articulate what standard it used to review the Tribal Supreme Court's ruling, but noted that the Tribal Supreme Court's decision was "helpful" in resolving the issue in this case. Id. at 999-1000. Mustang urges us to adopt the standard articulated by the Ninth Circuit in FMC v. Shoshone-Bannock Tribes, 905 F.2d 1311, 1313-14 (1990), which requires deference to a tribal court's findings of fact and de novo review of its conclusions of law.

In FMC, the Ninth Circuit relied on the Supreme Court's decision in National Farmers Union Insurance Co. v. Crow Tribe of Indians, 471 U.S. 845, 856-57, 105 S.Ct. 2447, 2454, 85 L.Ed.2d 818 (1985), to determine the appropriate standard of review. Pointing to the Supreme Court's statement that "the orderly administration of justice in the federal court will be served by allowing a full record to be developed in the Tribal Court," id. at 856, 105 S.Ct. at 2454, the FMC court reasoned that a tribal court's factual findings should be reviewed for clear error, 905 F.2d at 1313. The Supreme Court further stated in National Farmers Union that mandatory exhaustion of tribal court remedies is helpful because it provides other courts with the "benefit of their expertise." 471 U.S. at 857, 105 S.Ct. at 2454. The Ninth Circuit interpreted this to mean that while federal courts may be guided by a tribal court's expertise, they have no obligation to defer to a tribal court's decision, and thus legal questions should be reviewed de novo. FMC, 905 F.2d at 1313-14.

We are persuaded by the Ninth Circuit's analysis. We hold 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. Although the district court was imprecise as to what standard it applied in this case, we are satisfied that the court deferred to the tribal court's findings of fact and reviewed de novo the legal question of tribal jurisdiction over allotted lands.

II. Tribal Jurisdiction Over Allotted Lands

Mustang argues that the Tribes do not have authority over the allotted lands and thus cannot tax oil and gas production on those lands. Mustang contends that the Tribes lost jurisdiction over all of the lands in the 1869 reservation, including allotted lands, when the 1890 Agreement disestablished the reservation. According to Mustang, when the Agreement set aside allotted lands for individual tribal members, it also divested the Tribe of its jurisdiction over those lands.

As the district court correctly concluded, however, disestablishment of the reservation is not dispositive of the question of tribal jurisdiction. Mustang, 890 F.Supp. at 1001. In order to determine whether the Tribes have jurisdiction we must instead look to whether the land in question is Indian country. See Indian Country U.S.A. Inc. v. Oklahoma, 829 F.2d 967, 973 (10th Cir.1987) ("[T]he Indian country classification is the benchmark for approaching the allocation of federal, tribal and state authority with respect to Indians and Indian lands."). Indian country encompasses those areas that have been "validly set apart for the use of the Indians as such, under the superintendence of the Government." Oklahoma Tax Comm'n v. Citizen Band Potawatomi Indian Tribe, 498 U.S. 505, 511, 111 S.Ct. 905, 910, 112 L.Ed.2d 1112 (1991) (quoting United States v. John, 437 U.S. 634, 648-49, 98 S.Ct. 2541, 2548-49, 57 L.Ed.2d 489 (1978)).

In Oklahoma Tax Commission v. Sac and Fox Nation, 508 U.S. 114, 123, 113 S.Ct. 1985, 1991, 124 L.Ed.2d 30 (1993), the Supreme Court specifically stated that "Indian allotments, whether restricted or held in trust by the United States," are Indian country. In that case, the state argued that members of the Sac and Fox Nation were subject to state taxation because an 1891 treaty disestablished their reservation. Id. at 121, 113 S.Ct. at 1989. The Court rejected this argument and held that "a tribal member need not live on a formal reservation to be outside the State's taxing jurisdiction; it is enough that the member live in 'Indian country.' " Id. at 123, 113 S.Ct. at 1991.

Mustang argues that Sac and Fox Nation does not apply because the issue in that case was a state's, rather than a tribe's, civil jurisdiction. We agree with the district court, however, that "[t]he issue is analogous--whether one government...