Dillon v. State of Mont.

• Citation: 451 F. Supp. 168
• Decision Date: 03 May 1978
• Docket Number: Civ. No. 1188.
• Parties: DeWitt DILLON, Harlen Iron, Walt Pease, Eddie Alden, Vincent Charles, Owen Snell, Alden Big Man, Benjamin Big Man, Tim Rondeau, Robert Other Medicine, Willis Medicine Horse, Phillip White Clay, Harlan Reed, Paul Deputee, Vern E. Gibbs, Loretta L. Bell, John Doe, Jane Doe, and all others similarly situated, Plaintiffs, v. The STATE OF MONTANA, Robert L. Woodahl, Acting as Attorney General, and the Department of Revenue of the State of Montana, Keith Colbo, Director, and Joe Does, Jane Does, and John Doe Corporations, Defendants.
• Court: U.S. District Court — District of Montana

451 F. Supp. 168

DeWitt DILLON, Harlen Iron, Walt Pease, Eddie Alden, Vincent Charles, Owen Snell, Alden Big Man, Benjamin Big Man, Tim Rondeau, Robert Other Medicine, Willis Medicine Horse, Phillip White Clay, Harlan Reed, Paul Deputee, Vern E. Gibbs, Loretta L. Bell, John Doe, Jane Doe, and all others similarly situated, Plaintiffs, v. The STATE OF MONTANA, Robert L. Woodahl, Acting as Attorney General, and the Department of Revenue of the State of Montana, Keith Colbo, Director, and Joe Does, Jane Does, and John Doe Corporations, Defendants.

Civ. No. 1188.

United States District Court, D. Montana, Billings Division.

May 3, 1978.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Thomas J. Lynaugh, Thomas K. Schoppert, Lynaugh, Fitzgerald, Schoppert, Skaggs & Essman, Billings, Mont., for plaintiffs.

Mike Greely, Atty. Gen. for the State of Montana, Robert W. Corcoran, R. Bruce McGinnis, State Dept. of Revenue, Helena, Mont., for defendants.

BATTIN, District Judge.

The plaintiffs are Indians purporting to represent various subclasses of Indians employed within the confines of Indian reservations in Montana. They brought this class action seeking a declaration that the State of Montana may not constitutionally impose its income tax on income earned by Indians on a federally recognized reservation. The complaint also seeks an injunction against collection of the tax and a refund of taxes allegedly illegally collected since 1968.

Defendants' motion to dismiss for want of jurisdiction was denied by order of the Court dated June 24, 1976. That order also expressed the Court's agreement that the action be maintained as a class action. Thereafter, the case was submitted for disposition on cross-motions for summary judgment.

I. Motion to Reconsider

The defendants have moved the Court to reconsider its July 1, 1976 order directing that this case be resolved by summary judgment on grounds that the complexity and importance of the issues herein require a trial. The defendants' motion to reconsider is denied. The question presented here is purely one of law: What is the reach of the Supreme Court's decision in McClanahan v. Arizona State Tax Commission, 411 U.S. 164, 93 S.Ct. 1257, 36 L.Ed.2d 129 (1973)? The plaintiffs have filed responses to interrogatories which detail the factual status of each plaintiff, and the defendants have stipulated that additional plaintiffs may be added to ensure that each subclass is adequately represented. Summary judgment is thus an appropriate remedy, as no further factual exposition is necessary to resolve the legal question. See, 6 Moore's Federal Practice, ¶ 56.16, at 661 (2nd ed. 1976).

II. Class Action

Conditional consent to the maintenance of this lawsuit as a class action was given in the order of this Court dated June 24, 1976. The parties have increased the number of subclasses by stipulation so that now the plaintiffs purport to represent six separate groups. Maintenance of this case as a class action is permissible.¹

It is clear from the Supreme Court's analysis in McClanahan that the State's power to tax on-reservation income of an Indian is dependent on the peculiar relationship between the reservation in question and the federal government. Here, the plaintiffs are, with one minor exception,² all employed within the confines of the Crow Reservation. No treaty or statute dealing with any other Montana reservation is cited. The issue under consideration is confined to the application of Montana's income tax laws to income earned by members of the following subclasses of the class of Indians employed within the boundaries of the Crow Indian Reservation because it is unclear whether these plaintiffs adequately or properly represent the interests of Indians employed elsewhere than on the Crow Reservation:

(A) Enrolled members of the Crow Tribe who reside on and derive their entire income from within the boundaries of the Crow Reservation;

(B) Enrolled members of the Crow Tribe who derive their entire income from within the boundaries of the Crow Reservation but who reside off the Crow Reservation;

(C) Enrolled members of a federally recognized tribe, other than the Crow Tribe, who reside on and derive their entire income from within the boundaries of the Crow Reservation;

(D) Enrolled members of a federally recognized tribe, other than the Crow Tribe, who derive their entire income from within the boundaries of the Crow Reservation, but who reside off the Crow Reservation;

(E) Indian persons, not enrolled as a member of any federally recognized tribe, who reside on and derive their entire income from within the boundaries of the Crow Reservation;

(F) Indian persons not enrolled as a member of any federally recognized tribe, who derive their entire income from within the boundaries of the Crow Reservation but who reside off the reservation.

III. Discussion

The leading case on state taxation of Indian income is McClanahan v. Arizona State Tax Commission, 411 U.S. 164, 93 S.Ct. 1257, 36 L.Ed.2d 129 (1973). In McClanahan, the plaintiff was an enrolled member of the Navajo Tribe residing on the Navajo Reservation. She earned all of her income for 1967 from her employment on the reservation. She filed an administrative protest against the withholding of state income tax from her reservation wages. When no relief was forthcoming, she brought a class action in state court, demanding refund of the taxes withheld and a declaration that the state lacked authority to collect the tax.

The Arizona court dismissed for failure to state a claim, and the state Supreme Court affirmed. That court held, on the basis of Williams v. Lee, 358 U.S. 217, 79 S.Ct. 269, 3 L.Ed.2d 251 (1959), that the collection of state income tax was proper since it did not infringe on the "rights of the Navajo tribe of Indians to be self-governing."

On certiorari, the Supreme Court reversed. The Court confined its inquiry to "the narrow question whether the State may tax a reservation Indian for income earned exclusively on the reservation." 411 U.S. at 168, 93 S.Ct. at 1260. The Court concluded that Congress had not conferred upon the State the power to tax.³ Further support for the Court's conclusion was found in the recognition of Indian tax exemptions in the provisions of the Buck Act, 4 U.S.C. § 105, et seq. It noted the general authority to impose state taxes within federal areas does not "authorize the levy or collection of any tax on or from any Indian not otherwise taxed." 4 U.S.C. § 109. Finally, the Court observed that Arizona had not assumed civil or criminal jurisdiction over the Navajo Reservation under 25 U.S.C. § 1322, and that it apparently lacked any means with which to collect the tax. The Court held that these factors foreclosed any grant of tax jurisdiction to the State of Arizona.

A most significant aspect of the McClanahan decision is the Court's analysis of the concept of tribal sovereignty,⁴ a touchstone of Indian law decisions since the time of John Marshall. See, e. g., Worcester v. Georgia, 31 U.S. (6 Pet.) 515, 8 L.Ed. 483 (1832). The rule laid down in McClanahan was summarized by the Ninth Circuit in Fort Mojave Tribe v. San Bernardino County, 543 F.2d 1253 (9th Cir. 1976), cert. denied 430 U.S. 983, 97 S.Ct. 1678, 52 L.Ed.2d 377 (1977). The Court stated:

Although the Indian sovereignty doctrine is still relevant, "because it provides a backdrop against which the applicable treaties and federal statutes must be read," it is no longer the major focus of analysis. McClanahan, 411 U.S. at 172 93 S.Ct. 1257. . . . Instead we must carefully analyze the applicable federal statutes to determine whether state action has been pre-empted. If not, the state statute need only satisfy the Williams test, viz. that it not infringe on the rights of reservation Indians to make their own laws and be ruled by them.

543 F.2d at 1255-56.

In applying the McClanahan analysis, it is necessary to examine the applicable treaties and statutes to determine if taxation of the reservation income of a nonresident or an unenrolled Indian is consistent with the extent of the state's power. If statutory power exists, and if its exercise does not infringe upon tribal self-government, the tax may be imposed.

A.

Montana has apparently conceded that Congress's treatment of the Crow Reservation is substantially similar to that of the Navajos as outlined in McClanahan.⁵ The treaty creating the Crow Reservation provides that the reservation land be "set apart for the absolute and undisturbed use and occupation of the Indians." 15 Stat. 649. Montana's Enabling Act, 25 Stat. 676, and Constitution contain provisions closely paralleling those cited in McClanahan as being strongly indicative of a Congressional intent to withhold from the state the authority to tax within reservation boundaries. These provisions place this case squarely within the rules of the McClanahan case with respect to enrolled Crows residing on the reservation. Do the additional factors of lack of enrollment or lack of residency require application of a different rule?⁶

B.

Residency on the reservation is a requirement to bring a particular taxpayer within the rule announced in McClanahan. The decision in McClanahan is based on the territorial principles which go back to Mr. Chief Justice Marshall's opinion in Worcester v. Georgia, supra.⁷McClanahan holds that where Congress has set aside a portion of territory within a state and retained absolute jurisdiction of the tribes, the state's taxing authority is preempted. The principle applies here. The Fort Laramie Treaty of 1868 set aside the Crow Reservation for the exclusive use of the Indians, and Montana's Enabling Act recognizes the exclusive jurisdiction of the tribes and the federal government. Within the jurisdictional enclave of the reservation, the State has no power to impose its tax.

The distinction between the plaintiff in McClanahan and the plaintiffs representing...