Herpel v. Cnty. of Riverside

Citation45 Cal.App.5th 96,258 Cal.Rptr.3d 444
Decision Date10 February 2020
Docket NumberE070618
CourtCalifornia Court of Appeals
Parties Heidi L. HERPEL et al., Plaintiffs and Appellants, v. COUNTY OF RIVERSIDE et al., Defendants and Respondents; Larry W. Ward, as County Assessor, etc., Real Party in Interest and Respondent.

Winston & Strawn, Sean D. Meenan, Morgan E. Stewart, San Francisco, and Lauren Gailey for Plaintiffs and Appellants.

Gregory P. Priamos, County Counsel, and Ronak Patel, Deputy County Counsel; Perkins Coie, Jennifer A. MacLean, Benjamin S. Sharp, and Meredith R. Weinberg for Defendants and Respondents.

OPINION

RAPHAEL, J.

This case concerns whether Riverside County may impose a tax on possessory interests in federally owned land set aside for the Agua Caliente Band of Cahuilla Indians or its members. In 1971, this court held that it may, holding in part that federal law did not preempt the tax. ( Palm Springs Spa, Inc. v. County of Riverside (1971) 18 Cal.App.3d 372, 95 Cal.Rptr. 879.) The tax was also upheld that year by the Ninth Circuit. ( Agua Caliente Band of Mission Indians v. County of Riverside (9th Cir. 1971) 442 F.2d 1184.) Since those decisions nearly half a century ago, the United States Supreme Court has articulated a new preemption framework in considering whether states may tax Indian interests, and the Department of the Interior has promulgated new Indian leasing regulations, the preamble of which states that state taxation is precluded. Nevertheless, we conclude, as we did in 1971, that this possessory interest tax is valid.1

I. FACTUAL AND PROCEDURAL HISTORY

The Agua Caliente Band of Cahuilla Indians (the Tribe) is a federally recognized tribe with over 400 members.2 Its reservation encompasses approximately 31,000 acres, spread in a checkerboard pattern, across three cities in Riverside County—Palm Springs, Rancho Mirage, and Cathedral City—as well as unincorporated county areas. Some of that land is owned in trust by the federal government for the benefit of the Tribe (Tribal Trust Land), and some is owned in trust for the benefit of one or more Tribe members (Allotted Land). Although only somewhere between eight to 16 acres of Allotted Land were leased out by Tribe members around the time this court decided Palm Springs Spa in 1971, members currently lease out approximately 4,300 acres of Allotted Land under approximately 20,000 lease arrangements. The amount of Tribal Trust Land leased out is trivial in comparison: the Tribe currently leases out only about 15 acres of Tribal Trust Land.

Plaintiffs and appellants Heidi L. Herpel, Judith Fabris, Barbara Etherington, and Roger Etherington each hold a leasehold or other possessory interest in Allotted Land. In 2014, they filed a putative class action against defendants and respondents County of Riverside (the County) and Don Kent, the Riverside County Treasurer-Tax Collector, and against real party in interest and respondent Larry W. Ward, the Riverside County Assessor-County Clerk-Recorder (the Assessor; collectively, defendants). The complaint contained several causes of action, all premised on the contention that the County's possessory interest tax is preempted by federal law as applied to them. The complaint generally defined the class as all lessees of "Indian Land within the County," thereby suggesting the possible inclusion of leased lands of other tribes, but the parties later agreed to limit the class to only possessory interest holders of Allotted Land or Tribal Trust Land (i.e., land owned for the benefit of the Agua Caliente Band of Cahuilla Indians or its members). Notably, the Tribe is not a party to this case.

The parties filed two rounds of cross-motions for summary judgment or adjudication. Taken together, the motions focused almost entirely on whether the possessory interest tax was preempted by federal law on any of three grounds, one based on an interest balancing test announced in White Mountain Apache Tribe v. Bracker (1980) 448 U.S. 136, 100 S.Ct. 2578, 65 L.Ed.2d 665 ( Bracker ); one based on a federal regulation, 25 Code of Federal Regulations part 162.017 ( part 162.017 ); and one based on a federal statute, title 25 United States Code section 5108 ( § 5108 ; originally enacted as 25 U.S.C. § 465 ). In adjudicating these motions, the trial court determined that section 5108 did not apply, that part 162.017 did not preempt the tax, and that disputed issues of material fact precluded any judgment as a matter of law under the balancing test stated in Bracker. The case thus proceeded to trial.

The trial court bifurcated the issues such that the question of preemption under Bracker would be resolved before any class was certified. On stipulated facts, the trial court concluded that the possessory interest tax was not preempted under Bracker.3 Because such a finding rendered class certification unnecessary, the trial court entered judgment in favor of defendants.

II. ANALYSIS

On appeal, plaintiffs reassert that the possessory interest tax is preempted by federal law under Bracker , part 162.017, and section 5108. "We apply a de novo standard of review ... because federal preemption presents a pure question of law [citation]." ( Farm Raised Salmon Cases (2008) 42 Cal.4th 1077, 1089, fn. 10, 72 Cal.Rptr.3d 112, 175 P.3d 1170.) However, "when conflicting inferences may be drawn from undisputed facts, the reviewing court must accept the inference drawn by the trier of fact so long as it is reasonable." ( Boling v. Public Employment Relations Board (2018) 5 Cal.5th 898, 913, 236 Cal.Rptr.3d 109, 422 P.3d 552.) "The party who claims that a state statute is preempted by federal law bears the burden of demonstrating preemption."

( Bronco Wine Co. v. Jolly (2004) 33 Cal.4th 943, 956, 17 Cal.Rptr.3d 180, 95 P.3d 422.)

As we explain, neither Bracker , part 162.017, nor section 5108 preempts the possessory interest tax here.

A. Bracker Balancing Test

Decided in 1980, Bracker articulated a new framework for evaluating when a state may "assert[ ] authority over the conduct of non-Indians engaging in activity on the reservation." ( Bracker, supra , 448 U.S. at p. 144, 100 S.Ct. 2578.)4 There, the United States Supreme Court stated that "there is no rigid rule by which to resolve the question whether a particular state law may be applied to an Indian reservation or to tribal members." ( Bracker, supra , 448 U.S. at p. 142, 100 S.Ct. 2578.) "The unique historical origins of tribal sovereignty make it generally unhelpful to apply to federal enactments regulating Indian tribes those standards of pre-emption that have emerged in other areas of the law. Tribal reservations are not States, and the differences in the form and nature of their sovereignty make it treacherous to import to one notions of pre-emption that are properly applied to the other." ( Id. at p. 143, 100 S.Ct. 2578.) Therefore, when evaluating the activity of non-Indians in this context, courts must "examine[ ] the language of the relevant federal treaties and statutes in terms of both the broad policies that underlie them and the notions of sovereignty that have developed from historical traditions of tribal independence. This 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 pp. 144-145, 100 S.Ct. 2578.) "Ambiguities in federal law" should be "construed generously in order to comport with ... traditional notions of sovereignty and with the federal policy of encouraging tribal independence." ( Id. at pp. 143-144, 100 S.Ct. 2578.)

The high court has applied the Bracker interest balancing test to state taxes on three occasions, including Bracker itself.5

Bracker concerned whether Arizona could impose a motor carrier license tax and use fuel tax on Pinetop, a non-Indian timber harvesting corporation operating solely on an Indian reservation. ( Bracker, supra , 448 U.S. at pp. 137-138, 100 S.Ct. 2578.) After evaluating the "nature of the state, federal, and tribal interests at stake," the court held that Arizona could not impose the taxes. ( Id. at pp. 145, 148, 100 S.Ct. 2578.)

The strong federal interest arose because the federal government's regulation of Indian timber harvesting was "comprehensive": it "[took] the form of Acts of Congress, detailed regulations promulgated by the Secretary of the Interior, and day-to-day supervision by the Bureau of Indian Affairs." ( Bracker, supra , 448 U.S. at p. 145, 100 S.Ct. 2578.) Regulations covered "a wide variety of matters," and under them, the Bureau of Indian Affairs (the Bureau) "exercise[d] literally daily supervision over the harvesting and management of tribal timber." ( Id. at p. 147, 100 S.Ct. 2578.) Importantly, such regulations covered roads developed by the Bureau: the "administration and maintenance" of Bureau roads were funded by the federal government with contributions from the tribes. ( Id. at p. 148, 100 S.Ct. 2578.)

A strong tribal interest resulted because the tribe's sovereignty and ability to advance its own interests would have been hampered by the taxes. ( Bracker, supra , 448 U.S. at p. 151, 100 S.Ct. 2578.) As Bracker noted, it was "undisputed that the economic burden of the asserted taxes [would] ultimately fall on the [t]ribe" because a tribal entity had "agreed to reimburse Pinetop for any tax liability incurred as a result of its on-reservation business activities." ( Id. at pp. 140, fn. 7, 151, 100 S.Ct. 2578.) Moreover, "the imposition of state taxes would [have] adversely affect[ed] the [t]ribe's ability to comply with the sustained-yield management policies imposed by federal law." ( Id. at pp. 149-150, 100 S.Ct. 2578.) Expenditures made "to ensure the continued productivity of the forest" were "largely...

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  • Sifferman v. Chelan Cnty.
    • United States
    • Washington Court of Appeals
    • September 28, 2021
    ...that was not acquired pursuant to the IRA or pursuant to the Act of July 28, 1955. For example, in Herpel v. County of Riverside , 45 Cal. App. 5th 96, 118-22, 258 Cal. Rptr. 3d 444 (2020), the court held that § 5108 did not expressly preempt a tax on possessory interests of leased land tha......
  • Letterman Digital Arts Ltd. v. City of S.F.
    • United States
    • California Court of Appeals Court of Appeals
    • December 30, 2020
    ...the possessory interest] and the leased fee interest [i.e., the nonpossessory interest]"); see also Herpel v. County of Riverside (2020) 45 Cal.App.5th 96, 107, 258 Cal.Rptr.3d 444 ("when an exempt or immune entity leases its property, ‘[i]t creates valuable privately-held possessory intere......
  • Sifferman v. Chelan Cnty.
    • United States
    • Washington Court of Appeals
    • September 28, 2021
    ...land that was not acquired pursuant to the IRA or pursuant to the Act of July 28, 1955. For example, in Herpel v. County of Riverside, 45 Cal.App. 5th 96, 118-22, 258 Cal.Rptr.3d 444 (2020), the court held that § 5108 did not expressly preempt a tax on possessory interests of leased land th......
  • Letterman Dig. Arts Ltd. v. City of S.F.
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    • December 30, 2020
    ...[i.e., the possessory interest] and the leased fee interest [i.e., the nonpossessory interest]"); see also Herpel v. County of Riverside (2020) 45 Cal.App.5th 96, 107 ("when an exempt or immune entity leases its property, '[i]t creates valuable privately-held possessory interests' "). 11. A......
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1 books & journal articles
  • Tax Alert
    • United States
    • California Lawyers Association California Trusts & Estates Quarterly (CLA) No. 26-2, January 2020
    • Invalid date
    ...distribution.IV. STATE CASES AND RULINGS—STATE AND LOCAL TAX A. Heidi L. Herpel et al. v. County of Riverside et al. (Feb. 10, 2020) 45 Cal.App.5th 96 Members of the Agua Caliente Band of Cahuilla Indians, a federally recognized tribe, challenged the authority of the County of Riverside to ......

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