Desert Water Agency v. U.S. Dep't of the Interior

• Decision Date: 07 March 2017
• Docket Number: No. 14-55461,14-55461
• Parties: DESERT WATER AGENCY, Plaintiff-Appellant, v. UNITED STATES DEPARTMENT OF THE INTERIOR; Kevin Haugrud, Acting U.S. Secretary of the Interior; United States of Bureau of Indian Affairs; Michael S. Black, Acting Assistant Secretary of Indian Affairs, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

849 F.3d 1250

DESERT WATER AGENCY, Plaintiff-Appellant,

v.UNITED STATES DEPARTMENT OF THE INTERIOR; Kevin Haugrud, Acting U.S. Secretary of the Interior; United States of Bureau of Indian Affairs; Michael S. Black, Acting Assistant Secretary of Indian Affairs, Defendants-Appellees.

No. 14-55461

United States Court of Appeals, Ninth Circuit.

Argued and Submitted August 3, 2016, Pasadena, California

Filed March 7, 2017

Roderick E. Walston (argued) and Steven G. Martin, Best Best & Krieger LLP, Walnut Creek, California, for Plaintiff-Appellant.

Matthew Littleton (argued), John H. Turner, Jr., Elizabeth Ann Peterson, and William B. Lazarus, Attorneys; John C. Cruden, Assistant Attorney General; Environment & Natural Resources Division, United States Department of Justice, Washington, D.C.; Bethany Sullivan and Jennifer L. Turner, Office of the Solicitor, United States Department of the Interior, Washington, D.C.; for Defendants-Appellees.

Before: Diarmuid F. O'Scannlain, Johnnie B. Rawlinson, and Consuelo M. Callahan, Circuit Judges.

OPINION

O'SCANNLAIN, Circuit Judge:

We must decide whether a political subdivision of the State of California has standing to challenge a federal regulation it believes might preempt certain taxes and fees it assesses against non-Indians who have leased lands within an Indian Reservation.

I

A

The Desert Water Agency ("DWA") is a political subdivision of the State of California.¹ DWA provides water supplies and water services to businesses and residences in Riverside County. DWA charges those parties a variety of fees and taxes in order to recoup its costs and expenses. Parties subject to DWA's charges include non-Indians who lease lands from the Agua Caliente Band of Cahuilla Indians (the "Tribe") within the Agua Caliente Indian Reservation. The lessees have erected a variety of permanent establishments within the reservation, including homes and businesses such as hotels, restaurants, and stores. DWA imposes its charges on the lessees themselves, and not on the Tribe or its members.

The United States Department of the Interior ("Interior") is an executive department charged, among other duties, with managing and administering the lands of Indian reservations. The Bureau of Indian Affairs ("BIA") is an agency within Interior that oversees programs, activities, and operations relating to Indian lands and affairs. 25 U.S.C. § 2.

One of Interior's responsibilities is to approve the leasing of Indian land to third parties. See, e.g. , id. § 415(a). Interior has promulgated a host of regulations governing the administration of such leases, codified at 25 C.F.R. part 162. Beginning in 2011, Interior overhauled such regulations through notice and comment rulemaking; the new rules became effective January 4, 2013. See Residential, Business, and Wind and Solar Resource Leases on Indian Land, 77 Fed. Reg. 72,440 (Dec. 5, 2012) (codified at 25 C.F.R. pt. 162).

Among the new regulations is 25 C.F.R. § 162.017, entitled "What taxes apply to leases approved under this part?" The relevant subsection states that, "[s]ubject only to applicable Federal law, the leasehold or possessory interest is not subject to any fee, tax, assessment, levy, or other charge imposed by any State or political subdivision of a State. Leasehold or possessory interests may be subject to taxation by the Indian tribe with jurisdiction." 25 C.F.R. § 162.017(c). Subsection (a) applies the same language to "permanent improvements on the leased land," while subsection (b) does likewise for "activities under a lease conducted on the leased premises." 25 C.F.R. § 162.017(a)–(b).

Concerned by the possibility that Interior had just attempted to preempt its charges, DWA promptly brought suit in federal district court under the Administrative Procedure Act, 5 U.S.C. § 702, naming Interior and the BIA as defendants.

B

Before describing the substance of DWA's complaint, it will be helpful to summarize the law that has long governed Indian preemption claims.

For many decades courts have struggled to determine whether and when States may regulate the conduct of non-Indians engaged in activities on tribal lands. In White Mountain Apache Tribe v. Bracker , 448 U.S. 136, 100 S.Ct. 2578, 65 L.Ed.2d 665 (1980), the Supreme Court held that courts must undertake a fact-specific balancing test in order to decide whether federal law preempts any particular state effort to regulate non-Indian conduct on tribal lands. Bracker explains that "[t]his inquiry is not dependent on mechanical or absolute conceptions of state or tribal sovereignty, but has called for a particularized inquiry into the nature of the state, federal, and tribal interests at stake, an inquiry designed to determine whether, in the specific context, the exercise of state authority would violate federal law." Id. at 144–45, 100 S.Ct. 2578.

C

DWA's complaint advances two different theories, each premised on a different interpretation of § 162.017. DWA's first claim is that § 162.017's reference to "applicable federal law" incorporates the Bracker test and other existing federal statutes, such that § 162.017 does not effect any substantive change in federal Indian preemption law. If we agree with such interpretation, DWA asks for a declaratory judgment stating that § 162.017"does not apply to and preclude the application of DWA's charges upon lessees of lands within the Agua Caliente Indian Reservation, because DWA's charges fall within the exception provided in the regulation for taxes and other charges authorized under ‘applicable federal law.’ " In other words, DWA is asking us not only to say that Bracker is still the law of the land, but also to declare that, under Bracker , all of DWA's charges are enforceable and definitively not preempted.

DWA's alternative claim is that if § 162.017 does not incorporate Brackerand related statutory law—in other words, if § 162.017 purports to displace existing law and to preempt DWA's charges immediately, of its own force—then § 162.017 must be declared invalid on the theory that Interior had no authority to issue legislative rules preempting DWA's charges.

Despite its apprehensions about § 162.017, DWA's complaint does not allege that it has changed its behavior in any way (for example, by ceasing to assess charges). Nor does its complaint allege that Interior or the BIA has threatened to take any enforcement action against DWA in response to its decision to continue assessing charges. And the complaint does not allege that any leaseholders have withheld payment or objected to paying DWA's charges.²

The district court dismissed DWA's complaint for lack of standing. The district court emphasized that DWA's complaint never alleged that any leaseholder had refused to pay charges; never alleged that Interior or the BIA had threatened or planned any enforcement proceeding against it; and never alleged that DWA had done anything to change its behavior in response to § 162.017. Hence, the district court concluded that there is no evidence that DWA had suffered (or immediately would suffer) injury of any sort due to the regulation.

The district court also held that DWA's suit is not prudentially ripe. The district court reasoned that even if the regulation purports to change existing law by operating to preempt State taxes on applicable leases, it is not yet clear whether any of DWA's charges would be affected, because the regulation also has a "grandfather clause" stating that it does not apply to certain leases approved before January 4, 2013. The district court also reasoned that DWA has not shown any hardship, again for the reason that DWA has not alleged that it has changed its behavior or that any lessees have refused to pay.

DWA timely appealed.

II

A

We review the district court's standing and ripeness determinations de novo. La Asociacion de Trabajadores de Lake Forest v. City of Lake Forest , 624 F.3d 1083, 1087 (9th Cir. 2010). The parties on appeal have largely collapsed their discussion of the two concepts into a discussion of standing. We will do the same.

B

The "irreducible constitutional minimum of standing" consists of three elements: the plaintiff must have (1) suffered an injury in fact; (2) that was caused by the defendant's challenged conduct; and (3) that would be redressed by the remedy the plaintiff seeks. Lujan v. Defs. of Wildlife , 504 U.S. 555, 560–61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992).

In order to determine whether DWA has standing to challenge § 162.017, we must first decide what exactly § 162.017 purports to do—that is, in what way, if any, it purports to change the authority States like California currently enjoy to tax non-Indian lessees on tribal lands. The parties disagree sharply about how best to understand § 162.017. But only by first determining what that regulation means can we determine how (if at all) it injures DWA, and to what extent (if any) such injury would be redressed by the declaratory judgment DWA seeks.³

On appeal, DWA argues that it has standing to bring this lawsuit because, it claims, § 162.017 purports to preempt its laws directly and immediately. That is, DWA believes that the agency meant § 162.017 to displace the Bracker balancing test and to command DWA to change its behavior immediately by ceasing to charge leaseholders on tribal lands. DWA's briefing is devoted overwhelmingly—almost exclusively—to the proposition that a State has standing to challenge a federal statute or regulation that preempts its laws.

Interior's view is the polar opposite. According to Interior, DWA fundamentally misunderstands § 162.017. Interior says that, so far as preemption is concerned, § 162.017 has no legal effect at all: it does not purport to preempt any specific state taxes—including DWA's—or to alter the judge-made and judge-administered balancing test that has governed Indian preemption cases since at least 1980, when the Supreme Court decided Bracker . The only thing § 162.017 does, according to Interior, is to state...