Central Machinery Co. v. State

• Decision Date: 12 December 1986
• Docket Number: No. 18493-PR,18493-PR
• Citation: 730 P.2d 843,152 Ariz. 134
• Parties: CENTRAL MACHINERY COMPANY, an Arizona corporation, Plaintiff-Appellee, v. STATE of Arizona, Defendant-Appellant.
• Court: Arizona Supreme Court

Page 843

730 P.2d 843

152 Ariz. 134

CENTRAL MACHINERY COMPANY, an Arizona corporation, Plaintiff-Appellee, v. STATE of Arizona, Defendant-Appellant.

No. 18493-PR.

Supreme Court of Arizona, In Banc.

Dec. 12, 1986.

Rodney B. Lewis, Sacaton, for plaintiff-appellee.

Robert K. Corbin, Atty. Gen., Anthony B. Ching, Sol. Gen., Phoenix, for defendant-appellant.

HAYS, Justice.

The state petitioned this court to review an opinion of the court of appeals that upheld the trial court's award of attorney's fees under 42 U.S.C. § 1988 in favor of Central Machinery Company. We granted review and have jurisdiction pursuant to Ariz. Const. art. 6, § 5(3), A.R.S. § 12-120.24 and Rule 23, Ariz.R.Civ.App.P. 17A A.R.S.

We granted review of the following two issues: (1) whether the court of appeals, by finding that Gila River Farms would bear legal fees throughout the litigation and that any recovery of fees by Central Machinery would be transmitted to Gila River Farms, improperly conferred standing on Central Machinery to bring a cause of action under 42 U.S.C. § 1983; (2) whether the original tax refund claim in state court is a claim within federal Civil Rights Act of 1871, 42 U.S.C. § 1983, and thereby support an award of attorney's fees pursuant to 42 U.S.C. § 1988.

This litigation has a long history. In 1974, Central Machinery Company sold a number of tractors to Gila River Farms, an enterprise of the Gila River Indian Community. Arizona state sales tax of $2,916.62 was included in the price. Gila River Farms paid the invoice amount with the understanding that if Central Machinery was not liable for the tax, the company would refund any amount it recovered from the state to Gila River Farms.

Central Machinery paid the tax under protest and, after exhausting administrative remedies, filed an action in superior court to recover the tax. See A.R.S. § 42-1339(B). ¹ The trial court ruled that Central Machinery was not liable for the tax. The state appealed. This court reversed. State v. Central Machinery Co., 121 Ariz. 183, 589 P.2d 426 (1978). Central Machinery subsequently appealed the decision to the United States Supreme Court. The Court held that the Indian trader statutes, 25 U.S.C. §§ 261-264, preempted Arizona's imposition of state sales tax on the transaction. ² Central Machinery Co. v Arizona State Tax Comm'n, 448 U.S. 160, 165-66, 100 S.Ct. 2592, 2596, 65 L.Ed.2d 684 (1980).

On remand, Central Machinery sought attorney's fees based on the Civil Rights Attorney's Fees Awards Act of 1976, 42 U.S.C. § 1988. The trial court awarded attorney's fees under this statute in the amount of $53,165 and the Arizona Court of Appeals affirmed the award. Central Machinery Co. v. Arizona, 152 Ariz. 131, 730 P.2d 840 (Ct.App. 1985). The state petitioned this court. We reverse.

The state has raised several challenges to the decision below. First, the state contends that Central Machinery has no standing to bring a cause of action under § 1983. Second, even if standing was properly recognized, the state asserts that the Indian trader statutes do not support a claim cognizable under § 1983. The state claims that not only do the Indian trader statutes not create any "enforceable rights" in favor of either Central Machinery or the Indian tribe, but the trader statutes also contain exclusive remedies that preempt any § 1983 action. Finally, the state argues that, based on the facts of this case, neither the supremacy clause nor the commerce clause provides a constitutional basis for a § 1983 cause of action.

I. STANDING

The state contends that Central Machinery is without standing because no agreement exists between Central Machinery and Gila River Farms whereby any attorney fees recovered under § 1988 would be paid back to Gila River Farms. The trial court, however, determined that such an agreement existed. On review, the court of appeals resolved this question in favor of Central Machinery.

The parties' Second Agreed Statement of Facts states:

The Plaintiff has agreed with Gila River Farms that if any monies are recovered by the Plaintiff as a result of its action herein, the Plaintiff will remit to Gila River Farms the monies so recovered (emphasis added).

The state argues that "any monies" recovered cannot include attorneys fees and, therefore, Central Machinery has no standing to sue for recovery of the fees. The basis for the state's argument is that although the Second Agreed Statement of Facts was signed by the attorneys in June 1976, § 1988 did not become effective until October 19, 1976. The existence or nonexistence of § 1988 does not, though, affect the validity of the agreement. The parties were capable of agreeing that all monies recovered would be turned over to Gila River Farms without having to anticipate all possible sources of monies recoverable by Central Machinery. Furthermore, Central Machinery admitted in a response to the state's motion for reconsideration that "the award of ... attorney's fees ... will be disbursed to Gila River Farms in accordance with the Agreed Statement of Facts." This admission is a binding construction of the agreed statement of facts and is sufficient to give Central Machinery standing to bring the motion for attorney's fees. We hold that Central Machinery has standing to bring this motion in its own right and is therefore a proper party to this suit.

The state also makes a quasi-standing argument. According to the state, even if Gila River Farms was eligible for an award pursuant to § 1988, Central Machinery still could not prevail. The state argues that Central Machinery is not eligible for attorney's fees because the Indian trader statutes were designed to benefit Indians and not Indian traders. The state's argument is simply an assertion that Central Machinery's standing to bring the original action does not translate into "standing" for a related § 1988 motion. We reject this argument because the United States Supreme Court has held that § 1988 is not limited to any particular subclass of § 1983 actions. Maher v. Gagne, 448 U.S. 122, 128, 100 S.Ct. 2570, 2574, 65 L.Ed.2d 653 (1980), relying on Maine v. Thiboutot, 448 U.S. 1, 100 S.Ct. 2502, 65 L.Ed.2d 555 (1980). Central Machinery had standing to prosecute the original action. If the original action was cognizable under § 1983, then attorney's fees should be awarded to Central Machinery.

II. ATTORNEY'S FEES AWARD PURSUANT TO § 1988

Both parties agree that federal law controls any award of attorney's fees. Consequently, we only need determine whether attorney's fees were properly awarded under 42 U.S.C. § 1988. Section 1988 authorizes an award of attorney's fees in certain enumerated civil rights actions.

In any action or proceeding to enforce a provision of sections 1981, 1982, 1983, 1985, and 1986 of [Title 42], ... the court, in its discretion, may allow the prevailing party, other than the United States, a reasonable attorney's fee as part of the costs.

42 U.S.C. § 1988 (emphasis added).

Section 1983 creates civil liability for

[e]very person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, ....

42 U.S.C. § 1983 (emphasis added).

Central Machinery argues that it is entitled to § 1988 attorney's fees because its original action for a tax refund is cognizable under § 1983. Although Central Machinery was the prevailing party in the underlying lawsuit, its successful claim was not brought pursuant to § 1983. ³ We must, therefore, now determine if the action for a tax refund was an action to secure "rights, privileges, or immunities secured by the Constitution and laws...." If Central Machinery's original action implicated either statutory or constitutional rights protected by § 1983, then the original award should be upheld. Maher, 448 U.S. at 128-29, 100 S.Ct. at 2574 (1980) (§ 1988 applies to all § 1983 violations).

STATUTORY BASIS FOR § 1983 ACTION

Section 1983 provides a remedy for any deprivation, under color of state law, of rights created by the United States Constitution or federal statutes. Central Machinery's original claim was that Arizona could not tax a transaction between Central Machinery and the Indians because the Indian trader statutes had preempted the field of trading with Indians on reservations. Central Machinery was successful with this argument before the United States Supreme Court.

Unquestionably, then, Central Machinery's suit vindicated an interest protected by federal law. Central Machinery argues that Maine v. Thiboutot, supra, recognizes such interests as within the ambit of § 1983. In Maine, the Supreme Court held that the phrase "and laws" in § 1983 refers to any federal law and not just civil rights laws or equal protection laws. 448 U.S. at 6-7, 100 S.Ct. at 2505. Accordingly, Maine has been widely construed as authorizing § 1983 actions whenever a plaintiff was adversely affected by a violation of federal law under color of state law. See, e.g., Maine, 448 U.S. at 11, 100 S.Ct. at 2508 (Powell, J., dissenting) ("The Court holds today, almost casually, that 42 U.S.C. § 1983 creates a cause of action for deprivations under color of state law of any federal statutory right"); In re Haussman, 96 A.D.2d 244, 468 N.Y.S.2d 375 (N.Y.App.Div.1983); Wartelle & Loudan, Private Enforcement of Federal Statutes: The Role of the Section 1983 Remedy, 9 Hast. Const. Law Quart. 487, 487 (1982) (Maine gave 42 U.S.C. § 1983 "an interpretation that, for the first time in the section's 110-year history, matched the breadth of its literal language"); Note, The Application of Section 1983 to the Violation of Federal Statutory Rights--Maine v. Thiboutot, 30 DePaul L.Rev. 651, 657 (1981) (court majority...