Department of Revenue of State of Iowa v. Investment Finance Management Co., Inc., 86-2383

• Decision Date: 03 December 1987
• Docket Number: No. 86-2383,86-2383
• Parties: DEPARTMENT OF REVENUE OF the STATE OF IOWA, Appellant, v. INVESTMENT FINANCE MANAGEMENT CO., INC. and The Winnebago Tribe of Nebraska, a federally recognized Indian Tribe, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 790

831 F.2d 790

DEPARTMENT OF REVENUE OF the STATE OF IOWA, Appellant, v. INVESTMENT FINANCE MANAGEMENT CO., INC. and The Winnebago Tribe of Nebraska, a federally recognized Indian Tribe, Appellees.

No. 86-2383.

United States Court of Appeals Eighth Circuit.

Submitted May 15, 1987.

Decided Oct. 22, 1987.

Rehearing Denied Dec. 3, 1987.

Thomas M. Donahue, Asst. Atty. Gen., Des Moines, Iowa, for appellant.

F. Browning Pipestem, Norman, Okl., for appellee Winnebago Tribe of Nebraska.

Stanley E. Munger, Sioux City, Iowa, for appellee Investment Finance Management Co., Inc.

Before FAGG, Circuit Judge, BRIGHT, Senior Circuit Judge, and WOLLMAN, Circuit Judge.

WOLLMAN, Circuit Judge.

The Iowa Department of Revenue (Department) appeals from the judgment of the district court ¹ dismissing the action for lack of proper subject matter jurisdiction. We reverse and remand with instructions to remand to state court.

The Winnebago Tribe of Nebraska (Tribe) is a federally recognized Indian tribe that exists on reservation lands primarily in Nebraska but also including a small area of land in Iowa near Sloan, Iowa. Since October, 1984, the Tribe has operated "Winn-A-Bingo," a high stakes bingo enterprise on the portion of the reservation lying within the state of Iowa. Winn-A-Bingo is operated by Investment Finance Management Co., Inc. (IFM) under a contract with the Tribe.

The Department sent IFM a tax-due notice in late 1985 in the amount of approximately $240,000, followed in early 1986 by a garnishment of IFM's account in the Sloan State Bank, valued at approximately $53,800. IFM's answer to the garnishment notice in state court alleged that it was not the owner of the garnished funds. The Tribe petitioned to intervene, alleging that it owned the garnished funds, and petitioned to remove the action to the United States District Court for the Northern District of Iowa. The Department asserted no objection to either of these petitions, and the action was removed.

On June 27, 1986, in response to the Tribe's motion, the district court ordered the case dismissed for lack of jurisdiction on the ground that the Iowa state court lacked subject matter jurisdiction. On October 6, 1986, the district court entered an order granting both IFM's motion to amend the judgment, releasing the garnishment, and the Department's motion to stay execution of the judgment pending an appeal.

Prior to June 19, 1986, removal of an action from state court to federal court was conditioned upon the existence of subject matter jurisdiction in the state court. 14A C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure Sec. 3721, at 195 (2d ed. 1985) (Federal Practice and Procedure ) (citing Lambert Run Coal Co. v. Baltimore & Ohio R.R. Co., 258 U.S 377, 382, 42 S.Ct. 349, 352, 66 L.Ed. 671 (1922) (Brandeis, J.) ("[i]f the state court lacks jurisdiction * * * the federal court acquires none, although it might in a like suit originally brought there have had jurisdiction")). Although this rule was frequently criticized, see 14A Federal Practice and Procedure Sec. 3721, at 199, and Sec. 3722, at 284, it was expressly endorsed by the Supreme Court as recently as 1983. See Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 24 n. 27, 103 S.Ct. 2841, 2854 n. 27, 77 L.Ed.2d 420 (1983) (if a state court lacked jurisdiction, "the proper course for a federal district court to take after removal would be to dismiss the case altogether * * *"). The June 19, 1986, amendment to the federal removal statute, 28 U.S.C. Sec. 1441, ² is inapplicable because this action was commenced in state court prior to its enactment. Broadway v. San Antonio Shoe, Inc., 643 F.Supp. 584, 585 n. 2 (S.D.Tex.1986); 14A Federal Practice and Procedure Sec. 3721, at 9 (Supp.1987).

Under the old rule, a case falling within the exclusive jurisdiction of the federal courts cannot be removed to the federal courts. 14A Federal Practice and Procedure Sec. 3721, at 199. The United States Constitution grants the federal government "exclusive authority over relations with Indian tribes." Montana v. Blackfeet Tribe of Indians, 471 U.S. 759, 764, 105 S.Ct. 2399, 2402, 85 L.Ed.2d 753...