Quantum Entertainment, Limited v. Acting Southwest Regional Director, 44 IBIA 178 (2007)

• Court: Interior Board of Indian Appeals

Order Affirming in Part, Abstaining in Part, and Dismissing in Part Docket No. IBIA 04-21-A March 27, 2007

Quantum Entertainment Limited (Appellant) seeks review of an October 23, 2003 decision (Decision) of the Acting Southwest Regional Director, Bureau of Indian Affairs (Regional Director; BIA). The Regional Director concluded that an August 1, 1996 gasoline distribution business management agreement (Agreement) signed by Appellant, the Santo Domingo Pueblo (Pueblo), and Kewa Gas, Limited (Kewa) was subject to BIA approval under the version of 25 U.S.C. § 81 that was in effect in 1996 ("Old Section 81"), and concluded that the Agreement was invalid because it had not received such approval. The Regional Director declined to approve the Agreement retroactively and demanded that Appellant vacate the Pueblo's property on which the gasoline distribution business was located and disgorge proceeds that Appellant had received under the Agreement.

As a threshold matter, we conclude that Appellant has standing to challenge the Regional Director's determination that Old Section 81 applies to the Agreement and that it is subject to Secretarial approval. On the merits of that issue (1) we affirm the Regional Director's choice of law to review the Agreement under Old Section 81 rather than under the statute as amended in 2000 ("New Section 81"), and (2) with respect to the Regional Director's conclusion that the Agreement is subject to BIA approval under Old Section 81, we affirm in part but also abstain in part based on collateral judicial proceedings involving the Department of the Interior (Department).

Assuming for purposes of this appeal that Old Section 81 requires that the Agreement be approved by BIA in order to be valid, we conclude that Appellant lacks prudential standing to challenge the Regional Director's decision declining to approve the Agreement retroactively. In reaching our conclusion, we overrule Hattum v. Great Plains

Regional Director, 36 IBIA 79 (2001) because the summary disposition by the Board of Indian Appeals (Board) of the standing issue in that case does not withstand the weight of contrary judicial precedent.

With respect to the portions of the Regional Director's decision declaring the Agreement invalid and the proceeds unauthorized, and demanding remedial action, we affirm in part and dismiss in part. Appellant has standing to challenge the Regional Director's authority to include declarations in his decision regarding the invalidity of the Agreement and the unauthorized status of proceeds received under it. We conclude on the merits that the Regional Director did have authority to state in a decision what the statute by its own terms clearly provides.

To the extent that the Regional Director's decision may be read as purporting to issue a legally-binding judgment or order against Appellant to vacate the premises and to repay proceeds, we conclude that the Regional Director's disclaimer on appeal of any such intent, and Appellant's acceptance of that disclaimer, has rendered this portion of Appellant's appeal moot. In addition, with respect to the Regional Director's demand for full repayment of proceeds without allowing any setoff for the value of Appellant's services, the Regional Director on appeal impliedly disclaimed any intent to have made a quantum meruit determination under Old Section 81. While that disclaimer may not render the quantum meruit issue moot, we conclude that this issue is not ripe for our review.

Finally, we reject Appellant's claims that the Regional Director denied it due process by issuing his decision without providing Appellant with advance notice and an opportunity to submit its views. The Regional Director's decision was neither final nor effective, pending resolution of this appeal, and Appellant has been afforded a full opportunity to present its views and have them considered prior to a final Departmental determination.

Background

1. Introduction

   This case involves a long-term Agreement signed in 1996 by Appellant, the Pueblo, and Kewa (a tribally-created entity) under which Appellant was to manage and operate a gasoline distribution business owned by Kewa on lands leased by Kewa from the Pueblo. The Agreement was intended, at least in part, to allow the parties to benefit from a tax

   exemption available to Indian tribes. 1/ The parties apparently performed under the Agreement for seven years, until the Regional Director issued his decision declaring that the Agreement was subject to Old Section 81 and was invalid for lack of BIA approval.

   In order to give context to the facts of this case, we first describe and provide background on the statute at issue in this appeal 2014 25 U.S.C. § 81. We then describe the facts giving rise to this appeal.

2. 25 U.S.C. § 81

   In 1871, Congress first enacted what later was codified as 25 U.S.C. § 81. 2/ From 1872 to 2000, with a minor exception not relevant here, the statute remained unchanged and provided in relevant part as follows:

   No agreement shall be made by any person with any tribe of Indians * * * for the payment or delivery of any money or other thing of value * * * in consideration of services for said Indians relative to their lands * * * unless such contract or agreement be executed and approved [by the Secretary of the Interior (Secretary)]. * * * All contracts or agreements made in violation of this section shall be null and void, and all money or other thing of value paid to any person by any Indian or tribe, or any one else, for or on his or their

   1/ In 1996, New Mexico's Taxation and Revenue Department, after reviewing both New Mexico state tax law and principles of Federal law, ruled that an Indian entity gasoline distributor (e.g., Kewa), operating on Indian reservation land (e.g., the Pueblo's land), would be exempt from the State's gasoline receipt tax. See Revenue Ruling 640-96-1; see generally Oklahoma Tax Comm'n v. Chickasaw Nation, 515 U.S. 450 (1995) (State of Oklahoma could not apply its motor fuels tax to fuel sold by the Chickasaw Nation's retail stores on tribal land when the legal incidence of the tax fell on the tribal retailer).

   Although Chickasaw struck down Oklahoma's tax as applied to the tribe, the Court and the parties recognized that the State could achieve the same revenue objective by amending its law so that the legal incidence fell on the consumer and the tribe had to collect and remit the tax. 515 U.S. at 460. Thus, the New Mexico Taxation and Revenue Department's recognition of a federal tax exemption available to an Indian entity gasoline distributor was based on the structure of the State's gasoline receipt tax in 1996.

   2/ Initially, the provision was attached to an appropriations bill. Act of March 3, 1871, ch. 120, § 3, 16 Stat. 570. In 1872 it was enacted as permanent legislation. Act of May 21, 1872, ch. 177, §§ 1, 2, 17 Stat. 136.

   behalf, on account of such services, in excess of the amount approved by the * * * Secretary for such services, may be recovered by suit in the name of the United States * * *.

   25 U.S.C. § 81 (1994); cf. R.S. § 2103 (1878). 3/

   Congress enacted Old Section 81 to "protect the Indians from improvident and unconscionable contracts." Altheimer & Gray v. Sioux Mfg. Corp., 983 F.2d 803, 805 (7th Cir. 1993) (quoting In re Sanborn, 148 U.S. 222, 227 (1893)). The statute has been characterized as "unabashedly paternalistic," TTEA v. Ysleta Del Sur Pueblo, 181 F.3d 676, 682 (5th Cir. 1999), and as reflecting "Congressional concerns that Indians, either individually or collectively, were incapable of protecting themselves from fraud in the conduct of their economic affairs," S. Rep. No. 106-150, at 2 (1999).

   In 2000, Congress repealed and replaced Old Section 81 with New Section 81, the Indian Tribal Economic Development and Contract Encouragement Act of 2000, Pub. L. No. 106-179, 114 Stat. 46 (Mar. 14, 2000), codified at 25 U.S.C. § 81 (2001). New Section 81 provides that "[n]o agreement or contract with an Indian tribe that encumbers Indian lands for a period of 7 or more years shall be valid unless that agreement or contract [is approved by the Secretary or his designee]." Id. § 81(b). New Section 81 required the Secretary to issue regulations identifying the types of agreements or contracts that are not covered by the statute.

   As described in the legislative history, New Section 81 "eliminate[d] the overlybroad scope of [Old Section 81]" so that the statute would "no longer apply to a broad range of commercial transactions." S. Rep. No. 106-150, at 9. Instead, New Section 81 is intended to "only apply to those transactions where the contract between the tribe and a third party could allow that party to exercise exclusive or nearly exclusive proprietary

   3/ In addition to the quoted provisions, Old Section 81 provided that in suits for recovery brought in the name of the United States, "one-half thereof shall be paid to the person suing for the same, and the other half shall be paid into the Treasury for the use of the Indian or tribe by or for whom it was so paid." Suits brought under this provision are termed "qui tam" actions, shorthand for the Latin phrase describing actions brought by a private party in the name of the king. See "qui tam action," Black's Law Dictionary 1282 (8th ed. 2004).

   control over the Indian lands." Id. 4/ New Section 81 also eliminated the qui tam provision and omitted statutory remedies for contracts or agreements that are rendered invalid for lack of Secretarial approval. 5/ New Section 81 was intended reduce the degree of Federal paternalism in favor of tribal self-determination and autonomy, and in favor of reservation economic development. Id. at 2, 9. See also Notice of Proposed Rulemaking, 65 Fed. Reg. 43,952-53 (July 14, 2000) (discussing Senate Report language concerning reduced scope of New Section 81).

3. The Gasoline Distribution Business and the Agreement

   On August 14, 1996, the Pueblo Tribal Council...