Matheson v. Gregoire

• Decision Date: 10 July 2007
• Docket Number: No. 35067-0-II.,35067-0-II.
• Citation: 161 P.3d 486,139 Wn. App. 624
• Court: Washington Court of Appeals
• Parties: Paul M. MATHESON, Appellant, v. Christine GREGOIRE, Governor of the State of Washington; Cindi Yates, Director; Gary O'Neil, Assistant Director, Washington State Department of Revenue; Washington State Department of Revenue; M. Carter Mitchell, Tobacco Tax Control Enforcement Program Manager; Washington State Liquor Control Board; State of Washington; Chad R. Wright, Cigarette Compact Department Administrator, Puyallup Tribe of Indians; and The Puyallup Tribe of Indians, Respondents.

161 P.3d 486

139 Wn. App. 624

Paul M. MATHESON, Appellant, v. Christine GREGOIRE, Governor of the State of Washington; Cindi Yates, Director; Gary O'Neil, Assistant Director, Washington State Department of Revenue; Washington State Department of Revenue; M. Carter Mitchell, Tobacco Tax Control Enforcement Program Manager; Washington State Liquor Control Board; State of Washington; Chad R. Wright, Cigarette Compact Department Administrator, Puyallup Tribe of Indians; and The Puyallup Tribe of Indians, Respondents.

No. 35067-0-II.

Court of Appeals of Washington, Division 2.

July 10, 2007.

Robert Eugene Kovacevich, Robert E. Kovacevich PLLC, Spokane, WA, for Appellant.

Heidi A. Irvin, David M. Hankins, Atty. Generals Office/Revenue Div., Olympia, WA, John Howard Bell, Puyallup Indian Tribe, Tacoma, WA, for Respondents.

PENOYAR, J.

¶ 1 The Puyallup Tribe (the Tribe) and the Washington Department of Revenue (the State) entered into an Agreement (the Agreement) regulating imposition of taxes on cigarette sales in Indian country.¹ Paul Matheson, a tribal member and cigarette retailer, sued both the State and the Tribe, alleging that the Agreement was illegal on several grounds. The trial court dismissed the Tribe as a defendant due to its sovereign immunity. Then, finding that the Tribe was an indispensable party, it dismissed the complaint altogether. Matheson appeals, arguing that the trial court erred in finding the Tribe indispensable and in dismissing the case. The trial court was correct in recognizing the Tribe's sovereign immunity and in finding that it was an indispensable party. We affirm.

FACTS

¶ 2 On April 20, 2005, the Tribe entered into an Agreement with the State governing the taxation of cigarettes sold by the Tribe and Tribally-licensed retailers in Indian country. The Washington Legislature previously authorized the Governor to enter into such an Agreement, and the Agreement took effect immediately. See RCW 43.06.465.

¶ 3 The Tribe agreed to impose and maintain a retail tax on cigarettes that would increase in lockstep with any future increase in the State cigarette tax. In return, the State agreed to waive its right to collect State cigarette sales and use taxes on transactions from "the Tribe, Tribally-licensed retailers, state licensed wholesalers . . . or retail buyers." Clerk's Papers (CP) at 101. Additionally, the Tribe agreed to provide the State 30 percent of the revenue from the new cigarette tax. The Agreement also (1) limits the Tribe and Tribally-licensed retailers' acquisition of cigarettes to wholesalers or manufacturers licensed by the State to sell cigarettes wholesale, and (2) requires that all cigarettes sold by Tribally-licensed retailers and the Tribe bear a Tribal tax stamp that includes the wholesaler's serial number. The Tribe also agreed to impose the tax on sales to tribal members.

¶ 4 The State and the Tribe divided enforcement responsibilities under the Agreement — the State agreed to enforce against non-Tribal and non-member wholesalers, and the Tribe agreed to enforce against member retailers.

¶ 5 On May 10, 2005, Matheson filed a complaint in Thurston County Superior Court against both State² and Tribal³ defendants for injunctive relief, declaratory judgment, and damages. In his complaint, he requested in part that the court (1) find RCW 43.06.450-460 (granting the Governor the authority to enter the Agreement) unlawful and unenforceable; (2) hold any resulting agreement unenforceable; (3) enjoin the State and Tribal defendants from either reaching an agreement or enforcing it; and (4) grant him monetary damages, costs, and attorney fees. He later filed an amended complaint, but neglected to either file a motion to amend or obtain the State's consent to amend. Therefore, the trial court granted the State's motion to strike the complaint.⁴

¶ 6 The Tribe filed a motion to dismiss, which the State defendants joined, arguing that it and its officials were protected from suit due to sovereign immunity. The State later filed another motion to dismiss, arguing that the Tribe was an indispensable party under CR 19. On May 26, 2006, the trial court dismissed the Tribe on the basis of sovereign immunity, found that it was an indispensable party, and therefore dismissed the State. Matheson filed a motion for reconsideration, which was denied on June 9, 2006.

¶ 7 However, two days before the court's decision on his motion for reconsideration, Matheson filed a motion to serve a second supplemental complaint, noting it for hearing on July 7, 2006. In this new complaint, Matheson added a new plaintiff and two new State defendants, removed all Tribal defendants, and asked for a refund of cigarette taxes paid.

¶ 8 On July 6, 2006, one day before the scheduled motion hearing, Matheson filed a notice of appeal of the trial court's order denying his motion for reconsideration. The next day, the parties stipulated that the trial court would not consider Matheson's second supplemental complaint due to this appeal.

ANALYSIS

I. Dismissal of Tribal Defendants — Tribal Sovereign Immunity

A. Sovereignty Issues Raised by Matheson

¶ 9 Matheson generally assigns error to the trial court's dismissal of his complaint but he fails to specifically assign error to the trial court's dismissal on the basis of sovereign immunity. Indeed, he does not specifically address the Tribe's sovereign immunity in his opening brief but instead makes claims regarding only "antitrust immunity" and "tribal sovereignty." Appellant's Br. at 16, 18. While Matheson does address tribal sovereign immunity in his reply briefs, none of these arguments are persuasive.

¶ 10 For example, Matheson contends that the Tribe's sovereign immunity "has been waived by ceding control to the State to regulate on-reservation tribal retailers." 1 Appellant's Reply Br. at 6.⁵ However, to support this claim, he does not rely on a case regarding tribal sovereign immunity, but on a case addressing a tribe's assertion of jurisdiction over non-members. See Cordova v. Holwegner, 93 Wash.App. 955, 966, 971 P.2d 531 (1999). Matheson then states that "jurisdiction determines immunity in this case," but he offers no legal authority or precedent to support that statement. 1 Appellant's Reply Br. at 7.

¶ 11 Matheson later states that "[t]he contemporary rule is that the Puyallup Tribe has no immunity when it has no jurisdiction to tax since Indians no longer have a right to govern persons other than themselves." 1 Appellant's Reply Br. at 9. He then cites Montana v. United States, 450 U.S. 544, 565, 101 S.Ct. 1245, 67 L.Ed.2d 493 (1981), for the proposition that "inherent sovereign powers of an Indian tribe do not extend to the activities of non-members of the tribe." 1 Appellant's Reply Br. at 9. This statement neither supports Matheson's "contemporary rule" nor has any application or bearing on the issue of the Tribe's sovereign immunity.

¶ 12 Additionally, Matheson argues that the Tribe's agreement to raise its tax automatically, in lockstep with the State, constitutes "off-reservation conduct and joint control." 2 Appellant's Reply Br. at 2. Matheson appears to contend that the Tribe is subject to State law when it goes off-reservation, but this is unclear. He states that "[w]here joint control is shared by agreement, a tribe has no immunity," but again does not offer legal authority to support that statement. 2 Appellant's Reply Br. at 2.

¶ 13 Matheson relies on a recent U.S. Supreme Court case, Wagnon v. Prairie Band Potawatomi Nation, 546 U.S. 95, 126 S.Ct. 676, 163 L.Ed.2d 429 (2005), for the proposition that "taxing non-Indian wholesalers who sold to on-reservation Indians did not violate tribal sovereignty." Appellant's Br. at 18. Matheson confuses a violation of tribal sovereignty with a waiver of tribal sovereign immunity. In Wagnon, the tribe was the plaintiff — the opinion does not discuss the issue of tribal sovereign immunity. Furthermore, Wagnon did not address a tax mutually agreed to by a tribe and the state, but a state tax imposed on gasoline distributors (not retailers), both on and off the reservation. Wagnon, 546 U.S. at 99-100, 126 S.Ct. 676.

¶ 14 Matheson also argues that the Tribe had no immunity from suit "as it had no congressional permission to enter into the contract." 2 Appellant's Reply Br. at 7. He contends that the Tribe should have remained a party to the declaratory judgment claim because it was a participant in price fixing. These arguments fail to grasp the fundamental nature of sovereign immunity, which does not prevent sovereigns from entering into contracts but, instead, protects them from lawsuits. Sovereign immunity protects a tribe from suit absent an unequivocal waiver. Santa Clara Pueblo v. Martinez, 436 U.S. 49, 58, 98 S.Ct. 1670, 56 L.Ed.2d 106 (1978).

¶ 15 Finally, Matheson claims that "the Puyallup Tribe went off the reservation to require Matheson to buy his inventory exclusively from wholesalers licensed by the [S]tate," and therefore the Tribe is subject to state court jurisdiction. 2 Appellant's Reply Br. at 2. However, neither the record nor the cases Matheson relies on support this proposition. Tribal sovereign immunity protects tribes from suits arising from both governmental and commercial activities, whether conducted on or off a reservation. Wright v. Colville Tribal Enter. Corp., 159 Wash.2d 108, 112, 147 P.3d 1275 (2006) (citing Kiowa Tribe of Okla. v. Mfg. Techs., Inc., 523 U.S. 751, 754-55, 760, 118 S.Ct. 1700, 140 L.Ed.2d 981 (1998)).

B. Application of Sovereignty Principles

¶ 16 Personal jurisdiction over a party asserting tribal sovereign immunity is a question of law we review de novo. See Anderson & Middleton Lumber Co. v. Quinault Indian Nation, 130 Wash.2d 862, 876, 929 P.2d 379 (1996).

¶ 17 Under federal law, tribal sovereign immunity comprehensively protects recognized American Indian tribes from suit absent explicit and "unequivocal" waiver or...