Moses v. Kinnear, 71-2605

• Decision Date: 09 January 1974
• Docket Number: No. 71-2605,71-2672.,71-2605
• Citation: 490 F.2d 21
• Parties: Jack MOSES, Puyallup Tribe, Plaintiffs-Appellants, v. George KINNEAR, as director of the Department of Revenue, State of Washington, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

490 F.2d 21 (1973)

Jack MOSES, Puyallup Tribe, Plaintiffs-Appellants, v. George KINNEAR, as director of the Department of Revenue, State of Washington, Defendant-Appellee.

Nos. 71-2605, 71-2672.

United States Court of Appeals, Ninth Circuit.

November 2, 1973.

As Amended January 9, 1974.

John Sennhauser (argued), of Seattle Legal Service Center, Seattle, Wash., Arthur Knodel, Tacoma, Wash., for plaintiffs-appellants.

Timothy R. Malone, Senior Asst. Atty. Gen. (argued), Olympia, Wash., Slade Gorton, Atty. Gen., James A. Furber, Sp. Asst. Atty. Gen., Tacoma, Wash., for defendant-appellee.

Before BARNES and CHOY, Circuit Judges, and JAMESON,^* District Judge.

JAMESON, District Judge:

This is a consolidated appeal from a district court order staying proceedings in two cases "pending exhaustion of state remedies by plaintiffs".

These actions were commenced by plaintiff-appellant Jack Moses, an enrolled member of the Puyallup Tribe, and Corwin King, an enrolled member of the Samish Indian Tribe, against defendant-appellee, the Director of the Washington Department of Revenue, seeking declaratory and injunctive relief against the imposition of excise taxes by the State of Washington upon the sale, possession and use of cigarettes and other tobacco products sold by Moses on Indian trust land outside the exterior boundaries of the Puyallup Reservation¹ and by King on land within the exterior boundaries of the Reservation. The district court granted leave to appellant Puyallup Tribe to intervene as a party plaintiff in both actions.

On August 6, 1971 the district court entered an order applicable to both cases assuming, but not deciding, that it had jurisdiction and staying all proceedings pending exhaustion of state remedies. Jack Moses and Puyallup Tribe appealed from the stay order.² The issues on this appeal are (1) whether the stay order of the district court is appealable; and (2) if so, whether the stay order was proper.

Following oral argument on appeal an order was entered deferring a ruling in these cases until the Supreme Court decided three cases in which certiorari had been granted or probable jurisdiction noted, i. e., Mescalero Apache Tribe v. Jones et al., McClanahan v. Arizona State Tax Commission, and Tonasket v. The State of Washington.³

Mescalero Apache Tribe and McClanahan were decided on March 27, 1973.⁴ On April 24, 1973 a per curiam was entered in Tonasket reading as follows:

"The judgment of the Supreme Court of Washington is vacated, and the case is remanded to that Court for reconsideration in light of §§ 6 and 7 of c. 157, 1972 Session Laws of the State of Washington, and this Court\'s decision in McClanahan v. Arizona State Tax Comm\'n, No. 71-834 (March 27, 1973)." 411 U.S. 451, 93 S.Ct. 1941, 36 L.Ed.2d 385.

Counsel were invited to comment on the effect of these decisions of the Supreme Court and whether a decision on this appeal should be deferred until the Supreme Court of Washington reconsiders its decision in Tonasket. In response appellee states that "The issues of state law, for the resolution of which the U.S. Supreme Court remanded the Tonasket case to the state supreme court, may well have a bearing on the merits of the present controversy" and that a full resolution on the merits cannot be obtained until Tonasket is finally determined. Appellee urges that the State of Washington be permitted to proceed with the action in the Pierce County Superior Court; that this court no longer defer a decision; and that the order of the district court be affirmed.

Appellants argue that the reconsideration of Tonasket will not necessarily have a bearing on these cases and that the district court will be able to render a decision based on "present federal law", including the decision in McClanahan. In the alternative, appellants urge that the decision on this appeal be deferred further until the Washington Supreme Court has reconsidered Tonasket, so that this court will be in a better position "to instruct the District Court as to what issues should be considered if and when the case is remanded".

We have concluded to remand now to the district court for further consideration in the light of this opinion.

Appealability of Stay Order

Appellee contends that the stay order is not an appealable order under 28 U.S.C. § 1291, which provides, in pertinent part: "The courts of appeals shall have jurisdiction of appeals from all final decisions of the district courts of the United States * * *." It is argued that the stay order is not a "final decision".

The rule here applicable was summarized in 9 Moore's Federal Practice, para. 110.20 4.-2 at 251 (2d ed. 1973) as follows:

"If there is no action pending in a state court⁵ and the district court stays the action before it and directs the parties to go to the state court to obtain a ruling as to what the state law is, the stay is appealable as a final order under 28 U.S.C. § 1291. If injunctive relief is sought in the district court action, such a stay is also appealable as a denial of an injunction under 28 USC § 1292(a) (1)."⁶

We conclude that the district court's order staying proceedings "pending exhaustion of state remedies by plaintiffs" is an appealable order under 28 U.S.C. §§ 1291 and 1292(a) (1).

Subject Matter Jurisdiction

Assuming, without deciding, that it had jurisdiction, the district court stated that "upon the record now presented it is clear the Court should not interfere with exercise of state tax power where adequate remedies are available to plaintiffs in the courts of this state," citing 28 U.S.C. § 1341, which provides:

"The district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State."

At first glance it would appear that § 1341 bars this action. There are exceptions to § 1341, however, and one of them is applicable here.

The Supreme Court has said that "§ 1341 does not act as a restriction upon suits by the United States to protect itself and its instrumentalities from unconstitutional state exactions." Department of Employment v. United States, 385 U.S. 355, 358, 87 S.Ct. 464, 467, 17 L.Ed.2d 414 (1966). This rule, commonly known as the federal instrumentality doctrine, has its clearest application in cases where the United States is both a plaintiff and "has in fact a proprietary interest". United States v. Arlington County, Commonwealth of Virginia, 326 F.2d 929, 931 (4 Cir. 1964).⁷ However, the instrumentality doctrine has also been held applicable where the Government sues on behalf of a private party in order to protect and enforce its policies with respect to those in whom the United States has a special interest, though perhaps not a proprietary one.⁸ The doctrine also applies where the United States is not a party plaintiff, if the suit could have been brought by the United States and is in fact brought by parties who could properly be co-plaintiffs with the United States. Agua Caliente Band of Mission Ind. v. County of Riverside, 442 F.2d 1184, 1186 (9 Cir. 1971), cert. denied, 405 U.S. 933, 92 S.Ct. 930, 30 L.Ed.2d 809 (1972).

There can be no doubt that the United States has a special interest in its ward Indians, with respect to which the Government "has charged itself with moral obligations of the highest responsibility and trust". Seminole Nation v. United States, 316 U.S. 286, 297, 62 S.Ct. 1049, 1054, 86 L.Ed. 1480 (1942). This "special interest" has manifested itself in the form of a federal policy to protect Indians and Indian property from state taxation. This was recognized most recently in McClanahan, supra at 170-171 of 411 U.S., at 1261 of 93 S.Ct., where the Court quoted with approval "a leading text on Indian problems" as summarizing "the relevant law: `State laws generally are not applicable to tribal Indians on an Indian reservation except where Congress has expressly provided that State laws shall apply. It follows that Indians and Indian property on an Indian reservation are not subject to State taxation except by virtue of express authority conferred upon the State by act of Congress.' U. S. Dept. of the Interior, Federal Indian Law 845 (1958) * * *."

28 U.S.C. § 1362 provides:

"1362. Indian tribes. — The district courts shall have original jurisdiction of all civil actions, brought by any Indian tribe or band with a governing body duly recognized by the Secretary of the Interior, wherein the matter in controversy arises under the Constitution, laws, or treaties of the United States."⁹

While § 1362 does not confer jurisdiction with respect to the claims of Moses¹⁰ and the statutory basis of jurisdiction is not expressly alleged, it seems clear from the allegations of the complaint that the district court has jurisdiction under 28 U.S.C. § 1331.

We conclude that the district court has subject matter jurisdiction over appellants' claims, under 28 U.S.C. §§ 1331 and 1362, and that this jurisdiction is not defeated by 28 U.S.C. § 1341, since it falls within the instrumentality doctrine's exception to the jurisdictional bar of § 1341.

Having concluded that the district court has jurisdiction, we turn to the other rather complex factual and procedural issues raised by the respective parties and which should be resolved initially by the district court in the light of comments in this opinion.

Impact of Tonasket, McClanahan, and Mescalero

In view of the remand of Tonasket to the Supreme Court of Washington for further consideration, the district court may properly stay further proceedings in these cases pending the resolution of any state law issues in Tonasket. It seems clear, and the parties apparently agree, that the resolution of the state law issues in Tonasket may have some bearing on the determination of these cases on the merits.

The Supreme Court of Washington was also directed to reconsider Tonasket in the light of McClanahan, wher...