Hoopa Valley Tribe v. Nevins

• Decision Date: 28 July 1989
• Docket Number: 88-1662,Nos. 88-1560,s. 88-1560
• Citation: 881 F.2d 657
• Parties: The HOOPA VALLEY TRIBE, a federally recognized Indian tribe on its own behalf and on behalf of its enrolled members, and Hoopa Valley Timber Corporation, a tribal enterprise of the Hoopa Valley Tribe, Plaintiffs/Appellees/Cross-Appellants, v. Richard NEVINS, Conway H. Collin, Ernest J. Dronenburg, William F. Bennett, and Kenneth Cory, as members of the California State Board of Equalization; California State Board of Equalization; and State of California, Defendants/Appellants/Cross-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 657

881 F.2d 657

The HOOPA VALLEY TRIBE, a federally recognized Indian tribe on its own behalf and on behalf of its enrolled members, and Hoopa Valley Timber Corporation, a tribal enterprise of the Hoopa Valley Tribe, Plaintiffs/Appellees/Cross-Appellants, v. Richard NEVINS, Conway H. Collin, Ernest J. Dronenburg William F. Bennett, and Kenneth Cory, as members of the California State Board of Equalization; California State Board of Equalization; and State of California Defendants/Appellants/Cross-Appellees.

Nos. 88-1560, 88-1662.

United States Court of Appeals Ninth Circuit.

Argued and Submitted June 8, 1989.

Decided July 28, 1989.

Julian O. Standen, Deputy Atty. Gen., State of Cal., Dept. of Justice, San Francisco, Cal., for defendants/appellants/cross-appellees.

Terence L. Thatcher, Pirtle, Morisset, Schlosser & Ayer, Seattle, Wash., for plaintiffs/appellees/cross-appellants.

Appeal from the United States District Court for the Northern District of California.

Before FARRIS, THOMPSON and TROTT, Circuit Judges.

FARRIS, Circuit Judge:

The California State Board of Equalization appeals the district court's grant of summary judgment in favor of the Hoopa Valley Tribe. The district court held that federal law preempts the imposition of the California timber yield tax, Cal.Rev. & Tax Code part 18.5, on the harvest by non-Indian purchasers of timber owned by the tribe. The Hoopa Valley Tribe appeals the district court's denial of its motion for attorney's fees. We affirm both determinations.

BACKGROUND

A. The Tribe

The Hoopa Valley Indian Reservation, the ancestral home of the Hoopa Valley Tribe, was established in 1864 and is the The remoteness of the reservation and the destruction of fish resources in the Klamath-Trinity River system limit tribal employment opportunities to the timber industry. The tribe relies almost exclusively on timber-related revenues for supporting the tribal budget. See id. The tribe established the Hoopa Timber Corp. in 1976 to improve the tribe's economic return from tribal timber resources. The corporation is neither a tribal nor a state corporation. Instead, it is a wholly-owned subordinate organization of the tribe, established under Art. IX, Sec. 1(p) of the tribal constitution. Management of tribal timber is provided by staff of the U.S. Bureau of Indian Affairs. See 25 C.F.R. part 163. The BIA sells tribal timber by competitive bidding to both the Hoopa Valley Timber Corp., which in turn processes the timber and sells it to off-reservation companies, and to private companies. Standard timber industry practice is for the timber owner to bear the economic burden of timber taxes imposed on timber purchasers.

largest and most populous in California. See 8 Smithsonian Institution, Handbook of North American Indians 164-76 (W. Sturtevant ed. 1978); 1 Kappler 815 (1904) (executive orders); 13 Stat. 39 (1864). The reservation is located in Humboldt County, approximately 60 miles northeast of Eureka between the Coast Ranges and the Salmon-Trinity Alps Wilderness Area. This litigation concerns the portion of the reservation known as "the Square," an area approximately 12 miles on a side containing prime timber lands of pine, cedar, and Douglas fir. See Handbook, supra, at 176. Out of the 88,666 acres in the Square, title to 85,430 acres is held in trust for the tribe by the United States. Virtually all of that land is commercial timber land. An additional 600 acres of privately-owned land within the Square contains commercial timber. Id.

The population of the Hoopa Valley Reservation is approximately 60% Indian and 40% non-Indian. The tribe has approximately 1,650 members. The tribe, county, state, and federal government all fund public services for the reservation. The state maintains State Highway No. 96, the principal route to and through the reservation, which also serves several towns to the north of the reservation. The tribe and the Bureau of Indian Affairs fund fire protection, education, public utilities, subsidized housing, recreational, and economic development programs and maintain 427 miles of local roads. The state and the tribe share the costs of local law enforcement. Welfare and health care costs are shared by the state, the federal government, and the tribe.

B. The Tax

In California, all real property, with certain exceptions, is subject to an ad valorem property tax. Cal. Const. art. XIII, Sec. 1; see also Cal.Rev. p Tax Code Sec. 104. To promote sound timber management, conservation, and production, in 1976 the state modified the ad valorem tax as it applied to timber and replaced it with a yield and reserves tax, collectively known as the timber yield tax. Cal.Rev. & Tax Code Secs. 38101-38908 (timber reserves tax repealed by 1982 Cal.Stat., Ch. 1058); see generally W. Unkel & D. Cromwell, California's Timber Yield Tax, 6 Ecology L.Q. 831 (1978). The yield tax is assessed at the time of harvest on the value of timber at the time of harvest and is imposed on the first entity to acquire ownership of felled timber. Cal.Rev. & Tax Code Sec. 38104-38110. If the first owner is exempt from taxation, the timber yield tax is due from the first non-exempt person to acquire legal or beneficial title to the timber. Sec. 38104; Cal.Adm.Code Pub.Rev.R. 1026.

C. Procedural History

The tribe filed suit in October 1982, challenging the application of the tax both to private companies who purchase tribal timber directly from the BIA and to private companies who buy from Hoopa Timber Corp. or other Indian-owned firms. The district court granted partial summary judgment to the tribe on the grounds of

                federal preemption. 1   Hoopa Valley Tribe v. Nevins, 590 F.Supp. 198, 199 (N.D.Cal.1984).  The court did not address the tribe's alternative argument, that the tax was invalid because it infringed tribal sovereignty.  Id.  On December 30, 1987, the district court entered final judgment, awarding the tribe $368,659.15 in damages, the stipulated total of timber taxes on tribal timber collected by the state from 1977-82, and $249,016.32 in pre-judgment interest
                

DISCUSSION

The district court had jurisdiction under 28 U.S.C. Secs. 1331 and 1362. We have jurisdiction under 28 U.S.C. Sec. 1291. The federal jurisdictional barrier to suits challenging state taxes imposed by 28 U.S.C. Sec. 1341 does not bar such suits by Indian tribes. Moe v. Salish and Kootenai Tribes, 425 U.S. 463, 470-75, 96 S.Ct. 1634, 1639-42, 48 L.Ed.2d 96 (1976).

We review de novo the district court's grant of summary judgment. Harkins Amusement Enter v. General Cinema Corp., 850 F.2d 477, 482 (9th Cir.1988), cert. denied, --- U.S. ----, 109 S.Ct. 817, 102 L.Ed.2d 806 (1989). We review the district court's denial of attorney's fees under Sec. 1988 for abuse of discretion; however, we review de novo the legal principles the district court relied upon for its decision. Lewis v. Anderson, 692 F.2d 1267, 1269 (9th Cir.1982).

A. Validity of the Tax

The district court found "that the exercise of state authority in assessing the timber yield tax against companies which purchase Tribal timber from BIA or from HTC or other Indian-owned firms is preempted by the pervasive federal regulation of Indian timber and is thus in violation of federal law." Hoopa Valley, 590 F.Supp. at 203. On appeal, California argues that its interest in imposing the tax outweighs the federal and tribal interests at issue.

Preemption analysis in Indian tribal cases "requires a particularized examination of the relevant state, federal, and tribal interests." Cotton Petroleum Corp. v. New Mexico, --- U.S. ----, 109 S.Ct. 1698, 1707, 104 L.Ed.2d 209 (1989) (quoting Ramah Navajo School Board v. Bureau of Revenue, 458 U.S. 832, 838, 102 S.Ct. 3394, 3398, 73 L.Ed.2d 1174 (1982)). The question of whether federal law, which reflects related federal and tribal interests, preempts state activity is not controlled by the standards of preemption developed in other areas. Id. Ambiguities in federal law are to be construed generously in favor of the tribe; no specific congressional intention to preempt state activity is required. Id.; White Mountain Apache Tribe v. Bracker, 448 U.S. 136, 142-43, 100 S.Ct. 2578, 2583, 65 L.Ed.2d 665 (1980); accord Crow Tribe of Indians v. Montana, 819 F.2d 895, 898 (9th Cir.1987), aff'd, --- U.S. ----, 108 S.Ct. 685, 98 L.Ed.2d 638 (1988). If the state law interferes with the purpose or operation of a federal policy regarding tribal interests, it is preempted. Crow Tribe, 819 F.2d at 898.

Indian lands are exempt from state real property taxes. The Kansas Indians, 72 U.S. (5 Wall.) 737, 18 L.Ed. 667 (1866); see McClanahan v. Arizona State Tax Comm'n, 411 U.S. 164, 169-71, 93 S.Ct. 1257, 1260-62, 36 L.Ed.2d 129 (1973). Federal policy encourages the economic development of tribal lands. White Mountain, 448 U.S. at 143, 100 S.Ct. at 2583. Federal laws and policies comprehensively support and regulate the harvest of timber on tribal lands. Id. at 145-49, 100 S.Ct. at 2584-87.

State taxes or regulations that interfere with tribal activities may be preempted if the tribal activity the state seeks to affect involves goods produced on the reservation. Compare Washington v. Confederated Tribes of Colville Indian Reservation, 447 U.S. 134, 155, 100 S.Ct. 2069, 2082, 65 L.Ed.2d 10 (1980) (upholding state tax on on-reservation sales of cigarettes to non-Indians because product obtained off-reservation) In Crow Tribe, we invalidated Montana's coal severance tax as applied to coal mined from tribal lands because the tax had a financial impact on tribal resource development activities. 819 F.2d at 899-900. Montana argued that its severance tax on coal did not burden the tribe's economic interests because the tax was imposed on the tribe's lessee, a private company, and not the tribe. 819 F.2d at 899. We rejected the argument because the taxes ultimately reduced the royalty received by the tribe. ² Id.

                with California v.

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