Auto. United Trades Org. v. State, No. 85661–3.

• Court: United States State Supreme Court of Washington
• Writing for the Court: STEPHENS
• Citation: 285 P.3d 52,175 Wash.2d 214
• Parties: AUTOMOTIVE UNITED TRADES ORGANIZATION, a nonprofit trade association, Appellant, v. The STATE of Washington; Christine Gregoire, in her capacity as Governor of the State of Washington, Liz Luce, in her official capacity as Director, Washington State Department of Licensing, Respondents.
• Decision Date: 30 August 2012
• Docket Number: No. 85661–3.

175 Wash.2d 214
285 P.3d 52

AUTOMOTIVE UNITED TRADES ORGANIZATION, a nonprofit trade association, Appellant,
v.
The STATE of Washington; Christine Gregoire, in her capacity as Governor of the State of Washington, Liz Luce, in her official capacity as Director, Washington State Department of Licensing, Respondents.

No. 85661–3.

Supreme Court of Washington,
En Banc.

Argued Jan. 12, 2012.
Decided Aug. 30, 2012.

[285 P.3d 53]

Philip Albert Talmadge, Sidney Charlotte Tribe, Talmadge/Fitzpatrick, Tukwila, WA, for Appellant.

Rene David Tomisser, Office of the Attorney General, Olympia, WA, Todd Richard Bowers, Office of the Attorney General–CJD, Seattle, WA, for Respondents.

Van A. Collins, Associated General Contractors, Olympia, WA, amicus counsel for American Council of Engineering Companies of Washington, Associated Builders and Contractors of Western Washington, Inland Northwest AGC, Mechanical Contractors Association, National Utility Contractors association of Washington, Oregon–Columbia Chapter, Associated General contractors of America, Puget Sound Chapter, National Electrical Contractors Association, The Associated General Contractors of Washington, Washington Aggregates and Concrete Association and Washington Pavement Association.

Howard Mark Goodfriend, Smith Goodfriend PS, Seattle, WA, amicus counsel for National Federation of Independent Business, Washington Association of Neighborhood Stores and Washington Food Industry Association.

[285 P.3d 54]

Kristopher Ian Tefft, Association of Washington Business, Olympia, WA, amicus counsel for The Association of Washington Business.

Kenneth Wendell Masters, Masters Law Group PLLC, Bainbridge Island, WA, amicus counsel for Washington Oil Marketers Association.

Harry J.F. Korrell III, Davis Wright Tremaine LLP, Seattle, WA, amicus counsel for Washington Policy Center.

STEPHENS, J.

[175 Wash.2d 219]¶ 1 The plaintiff brought suit against Washington State and its officials, challenging the constitutionality[175 Wash.2d 220]of disbursements the State gives to Indian tribes under fuel tax compacts. The trial court dismissed the amended complaint for failure to join indispensable parties—namely, the Indian tribes party to the agreements—under CR 19. We reverse.

¶ 2 We hold the tribes are not indispensable parties under CR 19(b). Although the tribes are necessary parties under CR 19(a) whose joinder is not feasible due to tribal sovereign immunity, equitable considerations allow this action to proceed in their absence.

I FACTS AND PROCEDURAL HISTORY

¶ 3 To avoid taxing Indian tribes or their members in Indian Country, in 2007 the legislature amended and added laws relating to the administration of fuel taxes. S.B. Rep. on S.B. 5272, 60th Leg., Reg. Sess. (Wash. 2007). This legislation authorizes the governor or her delegate to enter into agreements with any federally recognized Indian tribe within the state “regarding motor vehicle fuel taxes included in the price of fuel delivered to a retail station wholly owned and operated by a tribe, tribal enterprise, or tribal member licensed by the tribe to operate a retail station located on reservation or trust property.” RCW 82.36.450(1), (5). Such agreements “may provide mutually agreeable means to address any tribal immunities or any preemption of the state motor vehicle fuel tax.” RCW 82.36.450(1).

¶ 4 Pursuant to this authorization, the State has entered into fuel tax compacts with various tribes. Under most of these compacts, the tribes have agreed to comply with certain statutory requirements in exchange for the State's refunding 75 percent of the state fuel taxes on fuel purchased by the tribes or tribal retailers.

¶ 5 Automotive United Trades Organization (AUTO), a trade association of Washington gasoline and automotive [175 Wash.2d 221]service retailers, believes these compacts give tribal retailers an unfair competitive advantage and enable tribal retailers to undercut nontribal retailers' fuel prices. AUTO filed suit in Grays Harbor County Superior Court against the State, the governor, and the director of the licensing department (collectively, “the State”), alleging the agreements violate the Washington State Constitution. AUTO sought a declaration that the disbursements from the motor vehicle fund are unconstitutional, an order enjoining these payments, and a writ of prohibition preventing the governor and director from authorizing disbursements from the motor vehicle fund to the tribes.

¶ 6 After AUTO amended its complaint to add a federal constitutional claim, the defendants timely removed the action to federal court under 28 U.S.C. § 1441(b). Pursuant to the parties' stipulation, however, the federal district court dismissed the federal constitutional claim and remanded the action to state court.

¶ 7 Shortly thereafter, the defendants moved to dismiss the first amended complaint under CR 12(b)(7) for failure to join the tribes as indispensable parties under CR 19.

¶ 8 The trial court held the tribes were indispensable and granted the motion to dismiss. AUTO sought leave to file a second amended complaint to join the tribal officials who signed the compacts as defendants. The court denied the motion as futile.

¶ 9 AUTO sought direct review in this court under RAP 4.2(a). We retained the matter for hearing and decision.

[285 P.3d 55]

II ANALYSIS

¶ 10 CR 19 addresses when the joinder of absent persons is needed for a just adjudication. Where the feasibility of joinder is contested, courts engage in a three-step analysis. Under CR 19(a), the court first determines [175 Wash.2d 222]whether absent persons are “necessary” for a just adjudication.¹ IF THE ABSENTEES Are “necessary,” the court determines whether it is feasible to order the absentee's joinder. Joinder is not feasible when tribal sovereign immunity applies. See Equal Emp't Opportunity Comm'n v. Peabody W. Coal Co., 400 F.3d 774, 780–81 (9th Cir.2005). If joining a necessary party is not feasible, the court then considers whether, “in equity and good conscience,” the action should still proceed without the absentees under CR 19(b).

¶ 11 The party urging dismissal bears the burden of persuasion. See Gildon v. Simon Prop. Grp., Inc., 158 Wash.2d 483, 495, 145 P.3d 1196 (2006) (citing 7 Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice & Procedure § 1609, at 129 (3d ed.2001)). However, if it appears from “an initial appraisal of the facts” that there is an unjoined indispensable party, “the burden devolves on the party whose interests are adverse to the unjoined party to negate this conclusion and a failure to meet that burden will result in the joinder of the party or dismissal of the action.” 7 Wright, Miller & Kane, supra, § 1609, at 130.

¶ 12 We review a trial court's decision under CR 19 for an abuse of discretion and review any legal determinations necessary to that decision de novo. Gildon, 158 Wash.2d at 493, 145 P.3d 1196. Dismissal under CR 12(b)(7) for failure to join an indispensable party is a “drastic remedy” and should be ordered only when the defect cannot be cured and significant[175 Wash.2d 223]prejudice to the absentees will result. Id. at 494, 145 P.3d 1196 (citing 7 Wright, Miller & Kane, supra, § 1609, at 130).

¶ 13 Because CR 19 is based on and is substantially similar to Fed.R.Civ.P. 19, we may look to the abundant federal cases interpreting that rule for guidance. See Bryant v. Joseph Tree, Inc., 119 Wash.2d 210, 218–19, 829 P.2d 1099 (1992) (looking to federal decisions interpreting rule 11).

¶ 14 On appeal, AUTO advances alternative grounds for reversing the trial court. First, it argues the tribes are not necessary parties under CR 19(a). Assuming they are, AUTO urges joinder is feasible because sovereign immunity does not apply. Should sovereign immunity apply, AUTO contends the action should go forward under CR 19(b) because the tribes are not indispensable. Each of these arguments is considered in turn.

1. The Tribes Are “Necessary” Parties under CR 19(a)(2)(A)

¶ 15 Whether the tribes are necessary parties is governed by CR 19(a)(2)(A). This subsection provides an absentee is necessary when “he claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may as a practical matter impair or impede his ability to protect that interest.” Id. To decide whether this rule is met, we first determine whether the absent party claims a legally protected interest in the action and second, whether the absentee's ability to protect that interest will be impaired or impeded. Wilbur v. Locke, 423 F.3d 1101, 1112 (9th Cir.2005), abrogated on other grounds

[285 P.3d 56]

by Levin v. Commerce Energy, Inc., ––– U.S. ––––, 130 S.Ct. 2323, 176 L.Ed.2d 1131 (2010).

¶ 16 To deserve protection under CR 19(a)(2), the “interest relating to the subject of the action” that is claimed must be sufficiently weighty. A mere financial stake in the action's outcome, or concern about future events that may not come to pass, will not suffice. [175 Wash.2d 224]Makah Indian Tribe v. Verity, 910 F.2d 555, 558 (9th Cir.1990) (citing N. Ala. Envtl. Ctr. v. Hodel, 803 F.2d 466, 468 (9th Cir.1986); McLaughlin v. Int'l Ass'n of Machinists, 847 F.2d 620, 621 (9th Cir.1988)). Instead, the interest must be “ legally protected.” A substantial interest that “arises from terms in bargained contracts” may qualify. Am. Greyhound Racing, Inc. v. Hull, 305 F.3d 1015, 1023 (9th Cir.2002).

¶ 17 Here, the tribes have an interest in receiving payments in accordance with the compacts. AUTO urges that the tribes' interest in contractual benefits cannot be “legally protected,” however, because the contracts violate the Washington State Constitution and “[a]n illegal contract conveys no legally protected rights.” Reply Br. of Appellant at 8. Similar arguments have been roundly rejected by other courts. CR 19 focuses on whether a party claims a protected interest, not whether it actually has one. Am. Greyhound...