Gila River Indian Community v. Waddell

• Decision Date: 26 June 1992
• Docket Number: No. 90-16838,90-16838
• Citation: 967 F.2d 1404
• Parties: GILA RIVER INDIAN COMMUNITY, Plaintiff-Appellant, v. Paul WADDELL, as Director of the Department of Revenue of the State of Arizona, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1404

967 F.2d 1404

GILA RIVER INDIAN COMMUNITY, Plaintiff-Appellant, v. Paul WADDELL, as Director of the Department of Revenue of the State of Arizona, Defendant-Appellee.

No. 90-16838.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Feb. 12, 1992.

Decided June 26, 1992.

Rodney Lewis, Gila River Indian Community, Sacaton, Ariz., W. Scott Bales and G. Murray Snow, Meyer, Hendricks, Victor, Osborn & Maledon, Phoenix, Ariz., for plaintiff-appellant.

Patrick Irvine, Asst. Atty. Gen., Phoenix, Ariz., for defendant-appellee.

Appeal from the United States District Court for the District of Arizona.

Before: FLETCHER, NELSON and FERNANDEZ, Circuit Judges.

FLETCHER, Circuit Judge:

The Gila River Indian Community (the Tribe) appeals the district court's dismissal of its action for declaratory and injunctive relief. The Tribe sought to enjoin Paul Waddell, in his capacity as Director of the Arizona Department of Revenue (the State), from imposing a tax on the sale of tickets and concessionary items in connection with the sporting and cultural activities that take place on the Gila Reservation. The Tribe claimed that the doctrines of federal preemption and tribal sovereignty preclude the State from levying taxes on entertainment events occurring wholly on reservation property. The district court dismissed the Tribe's suit for failure to state a claim. We reverse.

I.

We accept the allegations of fact found in the Tribe's complaint as true for purposes of reviewing the dismissal of its action for failure to state a claim. Abramson v. Brownstein, 897 F.2d 389, 391 (9th Cir.1990). The Tribe consists of the confederated Pima and Maricopa Tribes of Indians and enjoys official status under the Indian Reorganization Act of 1934, 25 U.S.C. § 461 et seq. (1988). Pursuant to that Act, the Secretary of the Interior has approved the Tribe's constitution and bylaws. The United States holds fee title to most of the Tribe's reservation in trust for the Tribe. The reservation borders the Phoenix Metropolitan Area in Arizona.

In the early 1970s, the Tribe constructed a lake and marina on its reservation wholly from federal funds. With the assistance and supervision of the Bureau of Indian Affairs, the Tribe sought to develop these facilities, known as Firebird Lake and the Sun Valley Marina, in a manner that would foster its economic growth. It chartered the Sun Valley Marina Corporation (Sun Valley), a tribal entity, and leased to it the Firebird Lake property. This lease was authorized by the Secretary of the Interior pursuant to 25 U.S.C. § 415 (1988), which provides that the Secretary must review and approve the lease of all lands held in trust for a tribe by the United States.

In April of 1983, Sun Valley subleased four separate parcels of the Firebird Lake property, including the lake, to a non-Indian partnership known as Firebird International Raceway Park (Firebird). The lease, which again was approved by the Secretary of the Interior, provided that Firebird would construct substantial improvements on the property in order to conduct motor and aquatic racing events. Pursuant to the lease, Firebird built improvements around the lake to facilitate boat racing, constructed a drag strip and other racing tracks for automobiles, erected bleachers to seat more than fifteen thousand people, and built picnic facilities, restrooms and concession stands. Under the terms of the lease, these improvements belong in their entirety to the Tribe. Firebird further pays the Tribe a sizeable base rent annually, as well as a graduated percentage of its gross receipts in excess of four million dollars. In addition, the Tribe taxes the sale of tickets and concessions by Firebird. Firebird, which employs a significant number of Tribal members in connection with its operations, began holding racing events at the Tribe's facilities in the summer of 1983.

Firebird subleased, with the approval of the Secretary and the Tribe, a portion of the Gila property to another non-Indian entity, the JBD Corporation (known as Compton Terrace), for the construction and operation of an amphitheater for the performing arts. In accordance with the terms of the sublease, Compton Terrace built a theater, restrooms and dressing facilities, and Firebird constructed additional concession buildings and a road leading to various parking areas. These improvements also belong to the Tribe. The Tribe further receives a percentage of Compton Terrace's gross receipts for each performance, and places a sales tax on theater tickets, concessions and souvenirs. As in the case with Firebird, Compton Terrace employs a significant number of Tribal members in connection with its operations. Compton Terrace began putting on shows at the Tribe's facilities in late 1984.

The State assessed its transaction privilege tax of five percent on Compton Terrace's ticket revenues during the 1987 and 1988 seasons. It has also advised Firebird that it must commence paying the same tax in connection with the sporting events which it conducts on the Tribe's property. On May 31, 1990, the Tribe filed the instant suit seeking declaratory and injunctive relief from the imposition of the State's taxes on events occurring on its reservation.

II.

The district court has jurisdiction under 28 U.S.C. §§ 1331 and 1362. The barrier posed by 28 U.S.C. § 1341 to suits in federal court challenging the assessment, levy or collection of State taxes does not apply to actions commenced by an Indian tribe. Moe v. Confederated Salish & Kootenai Tribes, 425 U.S. 463, 470-475, 96 S.Ct. 1634, 1639-1642, 48 L.Ed.2d 96 (1976); Hoopa Valley Tribe v. Nevins, 881 F.2d 657, 659 (9th Cir.1989), cert. denied, 494 U.S. 1055, 110 S.Ct. 1523, 108 L.Ed.2d 763 (1990). We have jurisdiction under 28 U.S.C. § 1291.

We review de novo a district court's dismissal of an action for failure to state a claim. Abramson, 897 F.2d at 391 (9th Cir.1990). "Dismissal is improper unless 'it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.' " Love v. United States, 915 F.2d 1242, 1245 (9th Cir.1990) (quoting Gibson v. United States, 781 F.2d 1334, 1337 (9th Cir.1986), in turn quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957)). Because the district court erred in determining that the Tribe can establish no circumstances under which relief would be warranted from Arizona's taxation of non-Indian enterprises doing business on reservation property, we reverse.

III.

The Supreme Court has addressed on a number of occasions the efforts of states to impose taxes on non-Indians conducting business on Indian reservations, and has repeatedly declared that there exists "no rigid rule" governing such exercises of State authority. White Mountain Apache Tribe v. Bracker, 448 U.S. 136, 142, 100 S.Ct. 2578, 2583, 65 L.Ed.2d 665 (1980). Instead, the Court has emphasized the need to assess on a case-by-case basis the applicability of "two independent but related barriers to the assertion of state regulatory authority over tribal reservations...." Id. These barriers are the doctrines of federal preemption and tribal self-government. "[They] are independent because either, standing alone, can be a sufficient basis for holding state law inapplicable to activity undertaken on the reservation or by tribal members." Id. at 143, 100 S.Ct. at 2583.

A.

The Court has stressed that the standards generally used to determine whether a state law is preempted by federal enactments do not apply in cases where a state seeks to extend its authority onto Indian reservations. The Court has thus rejected the notion that an explicit statement of Congressional purpose is required to preempt the application of state taxes to activities occurring on-reservation. "[The state's] argument is reduced to a claim that [it] may assess taxes on non-Indians engaged in commerce on the reservation whenever there is no express congressional statement to the contrary. That is simply not the law. In a number of cases we have held that state authority over non-Indians acting on tribal reservations is preempted even though Congress has offered no explicit statement on the subject." White Mountain Apache Tribe v. Bracker, 448 U.S. at 150-51, 100 S.Ct. at 2587-88 (citations omitted).

Rather than relying on the normal principles of preemption, the Court has declared that a determination as to whether a state's efforts to regulate non-Indians engaging in on-reservation activity are preempted "call[s] 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 145, 100 S.Ct. at 2584. Thus, "State jurisdiction is pre-empted by the operation of federal law if it interferes or is incompatible with federal and tribal interests reflected in federal law, unless the state interests at stake are sufficient to justify the assertion of state authority." New Mexico v. Mescalero Apache Tribe, 462 U.S. 324, 334, 103 S.Ct. 2378, 2386, 76 L.Ed.2d 611 (1983). See also Cotton Petroleum Corp. v. New Mexico, 490 U.S. 163, 176-77, 109 S.Ct. 1698, 1707-08, 104 L.Ed.2d 209 (1989); Ramah Navajo School Bd. v. New Mexico, 458 U.S. 832, 837-38, 102 S.Ct. 3394, 3398-99, 73 L.Ed.2d 1174 (1982); Hoopa Valley, 881 F.2d at 659. In conducting this balancing of federal, tribal and state interests, the Court has added that "[t]he traditional notions of Indian sovereignty provide a crucial 'backdrop' against which any assertion of state authority must be assessed," as does the fact that "both the tribes and the Federal Government are firmly committed to the goal of promoting tribal self-government, a goal embodied in numerous federal statutes." Mescalero, 462 U.S. at 334-35, 103 S.Ct. at 2386-87 (citations omitted).

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