Sac & Fox Nation of Missouri v. Pierce, No. 99-3019

• Decision Date: 30 May 2000
• Docket Number: No. 99-3019
• Citation: 213 F.3d 566
• Parties: (10th Cir. 2000) SAC AND FOX NATION OF MISSOURI; IOWA TRIBE OF KANSAS AND NEBRASKA; KICKAPOO TRIBE OF INDIANS, of the Kickapoo Reservation in Kansas, Plaintiffs-Appellees, v. KARLA PIERCE, Secretary, Kansas Department of Revenue, Defendant-Appellant
• Court: U.S. Court of Appeals — Tenth Circuit

Page 566

213 F.3d 566 (10th Cir. 2000)

SAC AND FOX NATION OF MISSOURI; IOWA TRIBE OF KANSAS AND NEBRASKA; KICKAPOO TRIBE OF INDIANS, of the Kickapoo Reservation in Kansas, Plaintiffs-Appellees, v. KARLA PIERCE, Secretary, Kansas Department of Revenue, Defendant-Appellant.

No. 99-3019

UNITED STATES COURT OF APPEALS, TENTH CIRCUIT

May 30, 2000

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF KANSAS (D.C. No. 95-CV-4152) (31 F. Supp. 2d 1298 & 45 F. Supp. 2d 859)

[Copyrighted Material Omitted]

[Copyrighted Material Omitted] John R. Shordike of Alexander & Karshmer (Stephen D. McGiffert and Mark S. Gunnison of Payne & Jones, Chartered, Overland Park, Kansas; Paul Alexander of Alexander & Karshmer, Washington, D.C.; and Mario Gonzalez, Horton, Kansas, with him on the brief), Berkeley, California, for Plaintiffs-Appellees.

John Michael Hale, Special Assistant Attorney General, Legal Services Bureau, Kansas Department of Revenue, Topeka, Kansas, for Defendant-Appellant.

Before BALDOCK, BRORBY, and LUCERO, Circuit Judges.

BALDOCK, Circuit Judge.

The State of Kansas imposes a tax, subject to enumerated exceptions, on the distribution of motor fuel to retailers within the State. Kan. Stat. Ann. 79-3408(a) (1999 Supp.). The distributor, rather than the retailer, is responsible for remitting the tax. Id. 79-3408(c). When the Kansas Department of Revenue announced its intention to begin collecting tax on motor fuel distributions to retail gasoline stations on Indian lands within the State, three federally-recognized Indian Tribes, the Sac and Fox Nation of Missouri; the Iowa Tribe of Kansas and Nebraska; and the Kickapoo Tribe of Indians of the Kickapoo Reservation in Kansas (the Tribes), filed suit in federal district court to enjoin the State from collecting its tax on fuel distributed to the Tribes' retail stations. The principal issue before us is whether the State of Kansas may impose its motor fuel tax as currently designed on fuel distributed to these retail stations on Indian lands within the State.

I.

The facts underlying this case are not in dispute. The Tribes are the beneficial owners of trust lands within the State of Kansas. The United States holds legal title to the lands in trust for the benefit of the Tribes. Each of the Tribes own and operate retail gasoline stations on these lands. The stations are located along or near Kansas state highways. Prior to May 1995, the Kansas Department of Revenue took the position that the motor fuel tax law as written did not permit the State to tax motor fuel distributed on Indian lands. After the Kansas legislature amended the Kansas Motor Fuel Tax Act in 1995, see Kan. Stat. Ann. 79-3401 to 79-3464f (1997), however, the department reversed its position and this litigation ensued.

In their complaint, the Tribes sought declaratory and injunctive relief against the State based upon both federal and state law. The Tribes invoked the district court's jurisdiction under U.S. Const. art. I, 8, cl. 3 and 28 U.S.C. 1331, 1362, 1367. The Tribes claimed that (1) federal law preempted the motor fuel tax law as applied to the Tribes, (2) the motor fuel tax law as properly construed did not apply to fuel distributed to the Tribes, and (3) imposing the motor fuel tax on the Tribes would irreparably harm their economic viability.

The district court issued both a temporary restraining order, Sac and Fox Nation v. LaFaver, 905 F. Supp. 904 (D. Kan. 1995), and a preliminary injunction, Sac and Fox Nation v. LaFaver, 946 F. Supp. 884 (D. Kan. 1996), against the State. The district court next denied both the State's motion to dismiss the Tribes' complaint based on sovereign immunity, Sac and Fox Nation v. LaFaver, 979 F. Supp. 1350 (D. Kan. 1997), and its motion to reconsider, Sac and Fox Nation v. LaFaver, 993 F. Supp. 1374 (D. Kan. 1998). On cross motions for summary judgment, the court entered judgment for the Tribes and permanently enjoined the State from enforcing its motor fuel tax law against the Tribes. Sac and Fox Nation v. LaFaver, 31 F. Supp. 2d 1298 (D. Kan. 1998).

Addressing a myriad of legal issues, the district court first held the Tribes had standing to pursue their claims against the State. Id. at 1302. Turning to the merits, the court held that (1) tax compacts between the Tribes and State did not prohibit the State from imposing its fuel tax on fuel distributed to the Tribes, id. at 1302-03, (2) the fuel tax exemption for fuel sold or delivered to the United States and its agencies, Kan. Stat. Ann. 79-3408(d)(2) (1999 Supp.), did not encompass the Tribes, Sac and Fox Nation, 31 F. Supp. 2d at 1303-04,¹ but (3) the fuel tax exemption for fuel exported from the State to territories outside the State did encompass Indian lands:

The statute [Kan. Stat. Ann. 79-3408(d)(1) (1999 Supp.)] exempts any fuel transactions where the fuel is exported "to any other state or territory or to any foreign country." From this reading, the court can only conclude that the intent of the Kansas legislature was to exempt any transaction where the fuel was to be sold outside the boundaries of the State of Kansas. As the Act for Admission of Kansas into the Union [Ch. XX, 1, 12 Stat. 126 (1861)] . . . clearly exclude[s] the Indian reservations from the boundaries of the State of Kansas, it is only reasonable that 79-3408(d)(1) provides for an exemption to the transactions involved in this case where fuel is sold to tribal retailers on the recognized reservations.

Sac and Fox Nation, 31 F. Supp. 2d at 1304.

As an alternative basis for issuing a permanent injunction against the State, the court relied on Oklahoma Tax Comm'n v. Chickasaw Nation, 515 U.S. 450 (1995), to hold that although the legal incidence of the fuel tax fell on the distributors rather than the Tribes, the balance of tribal and state interests weighed in favor of the Tribes, thus requiring the court to invalidate the tax as applied to the Tribes. Sac and Fox Nation, 31 F. Supp. 2d at 1304-08. The district court subsequently denied the State's motion to alter the judgment, Sac and Fox Nation v. Pierce, 45 F. Supp. 2d 859 (D. Kan. 1999), and the State appealed. Our jurisdiction arises under 28 U.S.C. 1291. We address each of the State's several challenges to the district court's judgment in turn. We reverse the judgment of the district court and remand for further proceedings.

II.

As a preliminary matter, we address the district court's power to adjudicate this case on the merits. The State contends the district court had no jurisdiction over this controversy because (1) the doctrine of sovereign immunity bars the Tribes' suit, and (2) the Tribes' have no standing to maintain their suit. The district court's determination of subject matter jurisdiction is a question of law which we review de novo. Rosette Inc. v. United States, 141 F.3d 1394, 1395 (10th Cir. 1998). Applying this standard, we reject the State's jurisdictional contentions, and conclude the district court properly exercised jurisdiction over this cause.

A.

In the district court, the Tribes alleged jurisdiction under U.S. Const. art. I, 8, cl. 3 and 28 U.S.C. 1362, as well as under the general federal question and supplemental jurisdiction statutes, 28 U.S.C. 1331, 1367. The Tribes rely on Article I's Indian Commerce Clause which gives Congress the power "[t]o regulate Commerce . . . with the Indian Tribes." Meanwhile, 1362 is a specific grant of jurisdiction to the district court in matters involving Indian tribes: "The district courts shall have original jurisdiction of all civil actions, brought by any Indian tribe . . . wherein the matter in controversy arises under the Constitution, law, or treaties of the United States." The State asserts that neither of these provisions is sufficient to overcome the State's sovereign immunity under the Eleventh Amendment, U.S. Const. amend. XI.

The Eleventh Amendment, as construed by the Supreme Court, generally proscribes federal jurisdiction over suits against nonconsenting states unless Congress has abrogated the states' sovereign immunity in a clear and unequivocal manner pursuant to a valid exercise of its power. Seminole Tribe of Fla. v. Florida, 517 U.S. 44, 54-55 (1996) (holding that Congress lacks power under Article I to abrogate a state's sovereign immunity from suits brought by private parties.). In Blatchford v. Native Village of Noatak, 501 U.S. 775 (1991), the Supreme Court rejected the notion that the Eleventh Amendment "only restricts suits by individuals against sovereigns, not by sovereigns against sovereigns." Id. at 780 (emphasis in original). The Court likewise rejected the notion that the states waived their immunity against Indian tribes when they adopted the Constitution: "We have hitherto found a surrender of immunity against particular litigants [inherent in the constitutional compact] in only two contexts: suits by sister States and suits by the United States." Id. at 781-82 (internal citation omitted). Accordingly, the Court held that the Eleventh Amendment barred an Indian tribe's suit under a state revenue sharing plan against an Alaskan state official, despite the tribe's sovereign status. In so holding, the Court also rejected the notion that 28 U.S.C. 1362 operated as a general waiver of a state's sovereign immunity. Paramount to our analysis, however, was the Court's recognition that in Moe v. Confederated Salish and Kootenai Tribes, 425 U.S. 463 (1976), a case involving an Indian tribe's access to federal court "for the purpose of obtaining injunctive relief from state taxation," the Court had reached a different conclusion. Blatchford, 501 U.S. at 784.

In Moe, the Court upheld an Indian tribe's right to seek injunctive relief from state taxation in federal court. Moe involved, among other things, an attack on Montana's cigarette sales tax as applied to cigarette sales to both Indians and non-Indians on Indian lands. Before reaching the merits, the...