Agua Caliente v. Hardin

• Decision Date: 07 June 2000
• Docket Number: No. 99-55251,99-55251
• Citation: 223 F.3d 1041
• Parties: (9th Cir. 2000) AGUA CALIENTE BAND OF CAHUILLA INDIANS, a federally-recognized Indian Tribe; AGUA CALIENTE TRIBAL CORPORATION, a federally-chartered Tribal governmental corporation, Plaintiffs-Appellants, v. GALEN HARDIN, in his official capacity as Tax Compliance Specialist of California State Board of Equalization; JOHAN KLEHS, in his official capacity as member of the California State ANDAL, in his official capacity as member of the California State Board of Equalization; ERNEST J. DRONENBURG, JR., in his official capacity as member of the California State Board of Equalization; JOHN CHIANG, in his official capacity as member of the California State Board of Equalization, Defendants-Appellees. Office of the Circuit Executive
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1041

223 F.3d 1041 (9th Cir. 2000)

AGUA CALIENTE BAND OF CAHUILLA INDIANS, a federally-recognized Indian Tribe; AGUA CALIENTE TRIBAL CORPORATION, a federally-chartered Tribal governmental corporation, Plaintiffs-Appellants, v. GALEN HARDIN, in his official capacity as Tax Compliance Specialist of California State Board of Equalization; JOHAN KLEHS, in his official capacity as member of the California State ANDAL, in his official capacity as member of the California State Board of Equalization; ERNEST J. DRONENBURG, JR., in his official capacity as member of the California State Board of Equalization; JOHN CHIANG, in his official capacity as member of the California State Board of Equalization, Defendants-Appellees.

No. 99-55251

Office of the Circuit Executive

U.S. Court of Appeals for the Ninth Circuit

Argued and Submitted June 7, 2000--Pasadena, California

Filed September 11, 2000

[Copyrighted Material Omitted]

Art Bunce, Law Offices of Art Bunch, Escondido, California, for the appellants.

Herbert Levin, Office of the Attorney General of the State of California, Los Angeles, California, for the appellees.

Appeal from the United States District Court for the Central District of California, D.C. No. 98-CV-05521-R; Manuel L. Real, District Judge, Presiding

Before: Stephen S. Trott, Ferdinand F. Fernandez, and M. Margaret McKeown, Circuit Judges.

McKEOWN, Circuit Judge:

The Agua Caliente Band of Cahuilla Indians and the Agua Caliente Tribal Corporation (collectively "the Tribe") seek a declaratory judgment that federal law precludes imposition of the State of California's sales and use tax on purchases of food and beverages by non-tribal members at a tribal resort on reservation land. The district court determined that the Eleventh Amendment barred the Tribe's claims and dismissed the action for lack of jurisdiction. Citing the Supreme Court's recent treatment of the Ex Parte Young doctrine in Idaho v. Coeur d'Alene Tribe of Idaho, 521 U.S. 261 (1997), the court reasoned that state taxation involved a "core area of state sovereignty," and found that the Young exception to sovereign immunity did not apply. The court also found that the Young exception was inapplicable because the Tribe had an adequate remedy at law: it could pay the disputed tax and then sue in state court for a refund. We conclude that the Tribe's claims fall within the Ex Parte Young exception to the Eleventh Amendment bar, that Coeur d'Alene does not alter the scope of the Young exception in this case, and that the district court therefore erred in concluding that it lacked jurisdiction. Accordingly, we reverse and remand.

BACKGROUND

The Agua Caliente Band of Cahuilla Indians is a federally recognized Indian tribe. In 1959, the Tribe¹ leased certain reservation property to a non-tribal party, which then constructed a hotel on the property. Many years later, in 1992, the Tribe purchased a leasehold interest in the hotel. Pending the issuance of a federal charter for a tribal corporation pursuant to the Indian Reorganization Act of June 18, 1934, 25 U.S.C. S 477, the Tribe transferred that interest to a tribal-owned holding company. In 1994 a charter was granted, the Agua Caliente Tribal Corporation was formed, and the Tribe assumed ownership of 100% of the Corporation's stock. The Tribe then transferred the leasehold interest in the hotel from the holding company to the Corporation, which has operated the hotel since that time.

The hotel is located on land near Palm Springs, California, that has been part of a reservation since 1876, and that is currently held in trust by the United States for the benefit of the Tribe. Known variously as the Spa Hotel Resort, the Spa Hotel Resort & Mineral Springs, and the Spa Hotel and Casino, the hotel features 230 rooms, a natural mineral springs spa, several restaurants and bars, a casino, and various other guest amenities. Patrons of the hotel--primarily nontribal members--purchase food and beverages for consumption on the hotel property. During the time period relevant to this appeal, the Tribe did not collect California's sales or use tax from non-tribal consumers of food and beverages.

In 1998, the California State Board of Equalization assessed the Tribe a use tax collection and remittance liability totaling approximately $354,040, excluding interest and penalties, for the period from 1992 to 1997. This sum corresponded to the amount of unpaid use tax attributable to the Tribe's sale of food and beverages to non-tribal members. The Board informed the Tribe that if it failed to pay the tax within one month, the Department of Alcoholic Beverage Control would suspend its alcoholic beverage license.

Although the Tribe did not dispute the amount of the assessed tax, it did dispute its obligation to pay the tax and immediately filed the underlying action seeking declaratory and injunctive² relief against the California Board of Equalization, the Department of Alcoholic Beverage Control, and the Director of the Department of Alcoholic Beverage Control. The Tribe claimed that food and beverages sold to nonmembers are items of "reservation-based value " because the Tribe adds value in preparation, service, facilities, management and the like. In opposition to the Tribe's request for a temporary restraining order and preliminary injunction, the defendants raised an Eleventh Amendment immunity defense. Following the district court's grant of a preliminary injunction, the Tribe amended its complaint to add as defendants the individual members of the Board of Equalization and to allege a theory of relief under the Ex parte Young doctrine. The Department of Alcoholic Beverage Control and its Director agreed not to suspend the Tribe's liquor license pending the outcome of the litigation and were thereafter dismissed from the case,³ leaving as defendants several individual members of the Board, sued in their official capacities ("the Board").

At the conclusion of a one-day bench trial on the merits of the Tribe's claims, the district court concluded that it lacked jurisdiction because of the Eleventh Amendment and did not reach the merits of the Tribe's allegations. In its findings of fact and conclusions of law, the court reasoned that the Young exception to Eleventh Amendment sovereign immunity does not apply to claims implicating core areas of state sovereignty, including state taxation. Thus, the court held that the Eleventh Amendment barred the Tribe's claims and divested the court of jurisdiction. As an alternative basis for holding that it lacked jurisdiction, the court reasoned that the Young exception does not apply if there is an adequate remedy at law, and the Tribe had such a remedy because it could pay the tax and then sue for a refund in state court on the basis of its federal claims. The Tribe timely appealed, and we have jurisdiction under 28 U.S.C. S 1291.

ANALYSIS

I. Eleventh Amendment

The Eleventh Amendment grants to states a sovereign immunity from suit⁴ that, when invoked, bars adjudication of a dispute in federal court. Although the Amendment itself suggests that the bar is jurisdictional in nature, the Supreme Court recently noted that such an interpretation "has been neither our tradition nor the accepted construction of the Amendment's text." Coeur d'Alene, 521 U.S. at 267. Instead, the Amendment "enacts a sovereign immunity from suit, rather than a nonwaivable limit on the Federal Judiciary's subjectmatter jurisdiction." Id. Though not jurisdictional in the traditional sense, whether the Tribe's claims are barred by the Eleventh Amendment presents threshold issues for our review.

Since the Supreme Court's decision in Ex parte Young, 209 U.S. 123 (1908), courts have recognized an exception to the Eleventh Amendment bar for suits for prospective declaratory and injunctive relief against state officers, sued in their official capacities, to enjoin an alleged ongoing violation of federal law. The Young doctrine is premised on the fiction that such a suit is not an action against a "State" and is therefore not subject to the sovereign immunity bar. The Young doctrine strikes a delicate balance by ensuring on the one hand that states enjoy the sovereign immunity preserved for them by the Eleventh Amendment while, on the other hand, "giving recognition to the need to prevent violations of federal law." Coeur d'Alene, 521 U.S. at 269. And, while the Supreme Court has recently revisited the scope of both the Eleventh Amendment and the Young exception in Coeur d'Alene and in Seminole Tribe of Florida v. Florida, 517 U.S. 44 (1996), the Court has made clear that it does not "question the continuing validity of the Ex parte Young doctrine." Coeur d'Alene, 521 U.S. at 269; see also Doe v. Lawrence Livermore Nat'l Lab., 131 F.3d 836, 839 (9th Cir. 1997) ("The viability of Ex parte Young as traditionally applied survives the Supreme Court's treatment of the issue in Idaho v. Coeur d'Alene[.]"). Our task here is to determine whether the Tribe's claims fall within the scope of the doctrine.

The Tribe has sued various state officials in their official capacities for declaratory relief, specifically seeking a declaratory judgment that application of California's sales and use tax to food and beverage purchases made by non-Indians at the Spa Hotel violates federal law which prohibits state taxation of value-generating activities on reservation land. See California v. Cabazon Band of Mission Indians, 480 U.S. 202 (1987); Washington v. Confederated Tribes of the Colville Indian Reservation, 447 U.S. 134 (1980); Moe v. Confederated Salish & Kootenai Tribes of the Flathead Reservation, 425 U.S. 463 (1976). Based upon traditional Young jurisprudence the Tribe's claims appear to fall squarely within the exception. The Board argues, however, that Coeur d'Alene narrowed the Young doctrine to preclude its application to claims implicating core areas of state sovereignty and that because...