Earl Warren: Mr. Entenman.
Orville Entenman: -- please the Court, Your Honors. In answering the one question, I'll be calling your attention to the Nebraska authority for taxing the leasehold or the interest of Offutt Housing Company in this matter of proceeding. I call your attention to the decision by the Nebraska Supreme Court. It's set out in the record at page 206 quoting from Judge Chappell's opinion. This Court in Ashby versus Peters, a Nebraska case, page 1 -- 206, the last paragraph, held that saved for the purposes of convincing a lease of more than one year is not real estate and also it quotes another case. Generally, a leasehold for a term of years is a chattel real falling within the classification of personal property. For all practical purposes, it maybe equivalent to those absolute ownership. In that connection, he sets out Section 77-1209 of the revised statutes in Nebraska for 1943, which provide all improvements put on leased public lands. I might stop right there and say that was particularly up and go in Nebraska on school lands where they had been leased and the improvements did not become the property of the state or the owner of the school land. It shall be assessed to the owner of such improvements as personal property. Now, the next phrase “together with the value of the lease and listed and assessed in a place where the land is situated. Now after the -- during the construction of Offutt Housing buildings, they were not complete on the assessment date of March 10th, 1952. They were complete -- not completed and that is the date set out by Nebraska for the ownership for personal property. Every person corporation must lease a property they own on March 10th of that year. However, they were completed in June. The law also requires that each one leased for assessment is property valued. That was not done except for some furniture and fixtures. The assessor then later in June assessed this property. First, the fixtures and the office equipment in the amount of $205. The appliances, that was the ranges, the electric stoves or gas stoves, the electric refrigerators, and remember there were 611 of them. The washing machines and equipment of that type purchased by Offutt Housing and placed here also base on chattel mortgages and conditional sales contracts filed in the county, valued them at $69,695. Then the buildings, he arrived with his valuation there by determining that they were only 75% completed on the assessment day of 1952. Then basing his valuation from an inspection also from this mortgage of $4,950,000.He determined that the value of that, 75% complete and assessing it in comparison with light, property in the county, residential property, buildings knowing the value of them and what he was putting on them, he valued that in 1955, $755,000, a $5 million project. I don't think they can complain here that we've taxed any more than Offutt Housing Company's interest. And no objection was made to that assessment. And of course, the Nebraska law provides that where the taxpayer does not file the schedule and the assessor does it, that he must send notice to the taxpayer and he has a right to come in before the board of equalization, that was not done. Then, we've checked the 1953 assessment. Those assessments pair in the complete record or the record here at page 144 (a) and 144 (b).I like to comment just a bit on the distinction between the 1953 and the 1952 assessment. Nebraska getting to some trouble on their revaluations and making comparison between personal property and real estate. And I've point out here, there is no tax on the real estate. In this case, there is no attempt to tax any real estate leased in this case. But in the personal property field, there were some changes. First, they do to a decision in the Nebraska court which mandamus the -- for the -- or the Tax Commission that lengthens State Tax Commission to value property as its actual value. And as a result of that then, you will see in the valuation for 1953, it is now considered 75% or 100% completed, then, all residential property in the state or particularly Sarpy County, partly in Douglas was given a 40% increase on the valuation. For here, there were $4000 houses, that is only valued at $800 and $900. They got them up 40%. In other words, if your assessed value had been a thousand dollars in 1952, in 1953, that would probably been $1400. There was a 40% increase. Well at least, they got the same increase. And --
Earl Warren: Do you consider -- do you consider it necessary to -- to hold that this property is personal property owned by the lessee in order to sustain your tax?
Orville Entenman: Yes.
Earl Warren: If -- if we don't find that this personal property of the taxpayers --
Orville Entenman: Well, I really believe, Your Honor, that this Court, that the -- that the determination of the tax, the validity of the tax is the question for the State of Nebraska in the State Court.And they admit it in the jurisdiction of this Court. I think what this Court has got to be concerned with have we taxed any property of the United States belonging to the Government. Now, the -- the question here and our Court held that this was properly taxed as personal property under the leasehold.
Felix Frankfurter: Well is that -- is that the reason you have with the Chief Justice's question as today, namely, that under your -- under Nebraska's tax system, this must come within the Nebraska court's personal property.
Orville Entenman: That's right.
Felix Frankfurter: And if it doesn't come within the Nebraska court's personal property, it would not be subject to this tax.
Orville Entenman: No, we couldn't.
Felix Frankfurter: That's a matter of Nebraska and that's why -- that's why I gather in the Chief Justice's question that you must hold this is personal property not within the limit of the Federal Constitution with the power vested to do what he did. Is that correct?
Orville Entenman: Well, that's correct. We -- we feel that this -- that it couldn't be taxed as real property. It would be no -- under the Nebraska law.
Felix Frankfurter: -- Nebraska law.
Orville Entenman: That's right. Now --
Felix Frankfurter: The state law determines what its taxes.
Orville Entenman: That's right.
Felix Frankfurter: Now the question is whether that determination collide with anything that --
Orville Entenman: That's -- that's --
Felix Frankfurter: -- constitutes and says you can do it.
Orville Entenman: That's what I do. Whether -- whether we've taxed any Nebraska property or any property of the Government of the United States.
Felix Frankfurter: But your position wouldn't be any different, would it, if Nebraska regarded this as real property and good estate.
Orville Entenman: If the -- if the lease and --
Felix Frankfurter: -- and -- and it was taxed to the real estate.
Orville Entenman: If they can find their tax and assessment to the leasehold --
Felix Frankfurter: How about (Voice Overlap) this very estate --
Orville Entenman: Yes.
Felix Frankfurter: -- suppose Nebraska regard the leasehold as real property --
Orville Entenman: Yes.
Felix Frankfurter: -- both common law statutes probably exactly the same.
Orville Entenman: It would.
Felix Frankfurter: And you label -- label determination for Nebraska.
Orville Entenman: That's right and we --
Felix Frankfurter: And that's the collision problem which is for us.
Orville Entenman: And we contend here that the leasehold is taxable. Now --
Speaker: It is -- in Nebraska Mr. Entenman, if you own a house and lot --
Orville Entenman: Yes.
Speaker: -- distant to me, who would have to pay the taxes?
Orville Entenman: The house and lot both belong to me. I would pay the taxes. There would be no tax on the leasehold. As I say where the leasehold interest has come in to be considered in Nebraska is where the school lands particularly are leased to individuals, and they put the improvements on them. And when that lease is sold, for the period of five or ten years the improvements are sold separately. There -- there's also a sale event. And for taxation purposes, the improvements are taxed separately then the value of the leasehold interest in that public land.
Speaker: That -- that's a special statute.
Earl Warren: Yes.
Speaker: -- relating to the public land.
Earl Warren: Yes. Now, I'm going --
Speaker: It doesn't apply -- it doesn't apply to this situation.
Orville Entenman: We say it does because we say this is public land. That these are the --
Speaker: What limit it to the state public land?
Orville Entenman: No, it does not.
Speaker: Any -- any land belonging to--
Orville Entenman: The public.
Speaker: -- the governmental body.
Orville Entenman: And just --
Speaker: Where -- where is that statute?
Orville Entenman: That was Section 12, Section 77-1209 of the Revised Statutes of Nebraska and I just -- that was set out in page 207 of the record. I just quoted it and it was setout in the Supreme Court Decision at Nebraska.
Earl Warren: Well, Mr. Entenman, do I understand you then that if this Court should conclude that those houses are real property, and the ownership is in the United States that there's nothing we could do here to help you notwithstanding the way we have sovereign immunity in the -- in the 1947 Act.
Orville Entenman: Oh yes. I think -- I don't think that should affect this decision. If you'll find that the leasehold interest here, that the interest that Offutt Housing Company is separate and distinct from the title to the land which we haven't taxed the real estate at all, their land underneath, nor have we taxed any value at this time in the leasehold in that. Now what we have taxed here to arrive at our value is the value of these buildings and as our Nebraska court found here we were taxing the leasehold interest.
Earl Warren: Well I understood you to say though that under Nebraska law, the ownership of those houses must be in the lessee and that they must be considered --
Orville Entenman: No.
Earl Warren: -- as personal property in order for you to have the right to -- to tax -- tax them under Nebraska law.
Orville Entenman: In quoting this Section 77-1209 again, it says, “all improvements put on leased public lands shall be assessed to the owner of such improvements as personal property, then, I claimed the next three words together with the value of the lease. I don't think you have to have both interest there that the value of the lease without the ownership of the building.
Earl Warren: Well that was the point I was trying to get at whether you -- whether you relied entirely of ownership of the -- of the property by the lessee as a personal property or whether -- whether you could consider the -- the interest of the lessee--
Orville Entenman: Yes.
Earl Warren: -- and of the property as -- as the lessee.
Orville Entenman: I think that I should say this. We didn't want to mislead this Court that we distinguish between any valuation there. And I think I can develop that briefly here that there is no value that you can claim that we assess that belong to the Federal Government today in those buildings because the Federal Government has not placed one dime of money into this project. Not one cent. It has come mostly from the manufacturer's trust and whatever money that Carl Wilson built and then he was the President of the Contractor Company and also the President of the Offutt Housing Company that now has a lease. And I -- I wish to point out further here that the -- the tax that is levied on this assessment will never be a burden on the United States.
Felix Frankfurter: Mr. Entenman, may I -- may I ask you this at the core of phrase of the word of Chief Justice just a minute ago. I would like to ask you and perhaps Mr. Stern can do it when he gets on (Inaudible). Is it oversimplifying this case on one aspect by assuming that Nebraska neither used realty of person but taxed an interest whatever interest Offutt Company may have. It's just the meaning of the word interest that Chief Justice said two minutes ago, would the case is always a simplifying case from the point of view of power, the question would be precisely the same as though neither of you could be here arguing the title, leasehold, personal property, realty, but nearly argued whether A there wasn't interest which B Nebraska could tax in the light of the Government's relation to the end of this.
Orville Entenman: We think that is the position that there isn't any -- there would be no other result no matter how you interpreted this. That --
Felix Frankfurter: But then -- then there would be no other results so to speak.
Orville Entenman: I mean in the amount of the assessment.
Felix Frankfurter: We must accept -- we must accept what Nebraska said that this in each view is personal.
Orville Entenman: That's right.
Felix Frankfurter: That is none of our concern.
Orville Entenman: Yes.
Felix Frankfurter: Provided only that it may be nominated with the taxable category.
Orville Entenman: Yes. Now I'd like to point this out further though in -- in denominating this as personal tax. Now, there can never be any lien against the interest of the Government here. And if you will examine this record, they have agreed to pay this tax by the lease. There's a clause right in the lease that they will pay any taxes that are assessed on this property. The mortgage provides that and they will may -- their -- their monthly payments on these FHA Mortgage just like any other requires that they pay a certain amount each month to take care of this tax.
Speaker: What about renegotiations --
Orville Entenman: Of --
Speaker: -- of the lease?
Orville Entenman: Now that, is if there is -- that comes into play only if there is any consent by Congress that this land that this is sitting on should also --
Speaker: But you have to pay -- you have it -- precise works in front of them but they have it, they have to pay any tax to the State on this property.
Orville Entenman: No, that was not the wording of that section. I think there has been some confusing or fusion on that, because that's the Section 6 of the 1947 Act provided there that the lessee's interest --
Stanley Reed: Contrast of -- it's the lease that I'm talking about.
Orville Entenman: Well, the lease has the same thing. They make provision too that there be a -- a renegotiation of the contract in case that Congress would say that the real estate here that is the building that you're sitting on should now be valued at some $350 an acre property. It's the value around there. It can be assessed maybe at a hundred but that has never been assessed since it was -- became the Federal Government. Now I point out here though that there will be no lien, because, first, the statute I just read you gives you -- gives them a personal action in personam that you stated in many other cases here against the Offutt Housing Company not against the United States. And if there is any lien on this leasehold interest, then, I believe that the property, the lien that Nebraska would have be gone if that lease would cancel, we would have nothing.
Hugo L. Black: May I ask you one question?
Orville Entenman: Yes.
Hugo L. Black: I -- I haven't quite understood you. Is there any claim that the interest to this tax, whatever its name or label maybe is less in value than the State has -- has put on for tax purposes?
Orville Entenman: No. We could --
Felix Frankfurter: (Inaudible) money -- money amount of the tax.
Orville Entenman: The tax for the 1952 was $10,000 roughly it's in matter of dollars, and in 1953, due to that change in valuation, it went to $15,000 and I like to have you examine this project analysis in here in which there was a figure for $13000 per street. And Your Honors, I can't see how for really help for 10 blocks the streets is all that's been here, they could ever spend $10,000 or $13,000.
Felix Frankfurter: Is there anything in the record that sheds any light as to the value of this interest, whatever it maybe, the value of the interest in case the Offutt Company ask the permission of the Government to assign it to some other eager investor.
Orville Entenman: Nothing further than the mortgage, I believe, and the conditional sales contracts on the individual.
Felix Frankfurter: And the amount of the mortgage is?
Orville Entenman: $4,950,000.
Earl Warren: Mr. Stern.
Robert L. Stern: May it please the Court. I guess I'd better answer the last question first. There is nothing in the record to show the value of the lessee's interest because nobody made any attempt to valuate a lessee's interest or no one ever claimed that the lessee's interest was being taxed until you got up into the Nebraska Supreme Court.
Felix Frankfurter: But we're not to infer that it's worthless, are we?
Robert L. Stern: I'm not saying that it's worthless, Your Honor, but there's nothing to indicate that it's worth -- it answers Justice Black's contention, we say, there's nothing to indicate that it's worth anything like the value of the buildings because to put it briefly, nobody in his right mind would pay for these buildings under this lease subject to all the restrictions that are on them. The most important which is you can't charge what you want for them, what he would pay there for those same buildings fee simple absolute title. Now, we think the mater case, since -- since there was no attempt to segregate a lessee's interest, the master case is controlling because there, there was a leasehold interest in master and the tax was on the value of the machinery and the Court said there wasn't any attempt to tax the -- to segregate the lessee's interest and the tax is void because it's on the physical property. And here my adversaries are very candid and stating what is the obvious fact from the record in the forms of the testimony that they are trying to tax the buildings and nothing but the building. Now Your Honor asked --
Felix Frankfurter: It wasn't before you move on, the master case, to check my recollection, the master case attached was sought to be imposed on what by common law notice would have been deemed part of the realty, but in Pennsylvania it was thought to be deemed prior to the person, is that right?
Robert L. Stern: I'm not sure if that Pennsylvania whether, it was -- it was on machinery which Pennsylvania --
Felix Frankfurter: Well, that's the Pennsylvania law, I mean anybody else --
Robert L. Stern: I think Pennsylvania law -- under Pennsylvania law, I think it was the other way around. I think it was part of the realty. They've tried to tax it to the landowner, the machinery, but this Court said who owns the machinery is a federal question. The Government owns the machinery, United States and Pennsylvania law isn't controlling as to that. This tax, which is based on the valuation of the machinery, is based on the valuation of Government property and Pennsylvania can't tax that.
Felix Frankfurter: (Voice Overlap)
Robert L. Stern: And they -- and they --
Felix Frankfurter: Because -- because of the incident of the tax fall on what was conceded to be --
Robert L. Stern: Government property --
Felix Frankfurter: -- government property.
Robert L. Stern: That's right.
Felix Frankfurter: Now, well the incidence of the tax here fall on what is considered the government property?
Robert L. Stern: They don't concede that it's a government property --
Felix Frankfurter: Don't bother about it. (Inaudible) no matter what you call it.
Robert L. Stern: The incidence of the tax--
Felix Frankfurter: The government tax here fall on something that it's a government property.
Robert L. Stern: Yes. They don't concede that it's government property, they concede that --
Felix Frankfurter: (Voice Overlap) --
Robert L. Stern: Yes. The lease makes it government property. Under the lease, the buildings are part of the real estate. The lease was a government contract. The intention was to make sure that the buildings are government property as they were completed and by all indicia, they are government property. Now, the only argument which is made --
Felix Frankfurter: Don't bother about their argument.
Robert L. Stern: All right.
Felix Frankfurter: Forget about that. What I want to know is why a property hasn't got an assessable interest in the lease transferrable with the consent of the Government which is an interest apart from anything that the Government cares about and should care about and is therefore taxed.
Robert L. Stern: Well, let me address myself to that. First of all, to clear one piece of deadwood away as far as the constitutional questions are concerned, it doesn't matter whether you call it realty or personally as Your Honor implied. Secondly, if you assume there -- remember we have two points here. If you assume that this whole project is not exempt because it's on a federal on claim, that was my first argument. I spent most of the other day on that. I won't get back to that very much today. If you assume that -- if that -- we're not wholly exempt because of that, then Offutt as a lessee has a lessee's interest which under that -- under that 1947 statute or if you assume it is not unclear which it is, without the 1947 statute, the lessee's interest could be taxed if anybody had valuated a lessee's interest and taxed it, but that hasn't been done in this case. I commend to Your Honor that the opinion of the trial court who was very close to this--that's the Nebraska State Court. He said I know of such finding that they could or couldn't have taxed a lessee's interest, nobody has tried to tax one. I don't know how to evaluate it, there isn't any evidence on that.
Felix Frankfurter: Very well of that if we do not accept your first point, and I find it very difficult to accept it (Inaudible) Then as to your second point, the utmost you can ask is the case be sent back for proper evaluation for this whole interest.
Robert L. Stern: If -- if it gets back to the second point, if the time hasn't expired, Nebraska could assess a leasehold interest.
Felix Frankfurter: On interest, whatever -- whatever they call them as a local law.
Robert L. Stern: Well, that depends on the local law. Up to this case, I don't think that there ever has been any -- there's no Nebraska case indicating how they assess leasehold interest. As Mr. Entenman pointed out on these public school lands, the buildings are owned by the lessee as -- and not by the lessors or the problem has not ever risen. Now --
Felix Frankfurter: If you've had cases only very recently of this Court which make my (Inaudible) assume of the lease, the leasehold interest maybe very valuable.
Robert L. Stern: It can be -- it can be, but in this case, it certainly isn't anyway as near as valuable as a fee because of the controls apart from other things because of the control which the Government puts on this, this is a government project primarily. The Government initiated it, started it, supervised it, and they used this petitioner largely as a manager of the buildings. Now they say that -- that this is worth $5 million. As a matter of fact, his trust put up the money but the Government had to insure the mortgage the Government bears the risk not the manufacturer's trust company.
Speaker: Mr. Stern.
Robert L. Stern: Yes, sir
Speaker: As I understood you yesterday -- the other day, your view as you're arguing this case, I understood you to -- to assert that -- that these -- these properties were completed. These houses were completed and therefore, under Section 11, had become the property of the United States.
Robert L. Stern: Yes, Your Honor. Well certainly by -- this is a continuing suit. Certainly by 1953, they were all completed. The record shows and it's discussed in our reply brief.
Speaker: What years were involved?
Robert L. Stern: In 1952 and 1953 and the future, it's an injunction suit in part. For 1952, 78% were completed by the tax day at least and the people are living in it. Now, without regard for the rest, they were completed and the title was passed to them by March 10th, that's admitted in the record. I -- I don't understand Mr. Entenman. He said the whole thing isn't completed but buildings are completed, there are great many buildings, they're completed as they move along. And now I think I've said and that Mr. Justice Black asked whether the Government has any beneficial interest here or rather in contrary, whether all the beneficial interest was in -- was in the petitioner. And we think first of all an ordinary lessor has a beneficial interest. It's always been assumed that an ordinary lessor has a beneficial interest. The Government here as I said the other day has a greater interest in the ordinary lessor because it controls practically everything that's done with this project which an ordinary lessor can't do.
Felix Frankfurter: That maybe a -- they have control without having monetary interest.
Robert L. Stern: But the controls are exercised through -- through the list, Your Honor in large part as well as --
Felix Frankfurter: I still -- I repeat that although that finding hold on the lessee and yet not have (Inaudible)
Robert L. Stern: Well but --
Felix Frankfurter: And I think it doesn't.
Robert L. Stern: No but this its financial interest -- financial interest comes from insurance of the mortgage and also from its interest in what its military subtenants have to pay.
Felix Frankfurter: The mere fact that it has an interest, doesn't preclude taxing the interest of the -- the other interest and the (Inaudible) case is conclusive adjudication on that.
Robert L. Stern: Oh, well I'd like to address myself I can't -- I have agreed that if this is not treated as wholly exempt because it's in an enclave and interest could have been taxed if any attempt has been made to tax it. But the cases, the SRA case and the (Inaudible) case and others where there was a fair legal title in the Government and the full beneficial ownership was in somebody else. It was a conditional sale on the SRA case but here, none of those cases were leases in which the Government had the same interest as an ordinary lessee -- lessor or more. And that I think makes all the difference in the world. You don't tax an ordinary lessee for the value of the property. Even without these things I'm talking about, the fact that the rent is low doesn't make any difference, the rent is low to serve a governmental purpose. And that shows that the Government is more interested in this project not that it's less interested.
Speaker: (Inaudible)
Robert L. Stern: Oh well, I do -- I do want to make one other observation and it's probably isn't unnecessary. Whether this is -- whether this is realty or personally or something like that could depend upon Nebraska law. Whether this property is owned by the United States or not, whether the lease is controlling, that doesn't depend upon the Nebraska law. That's federal. That's a question for this Court to decide. And the Nebraska decision certainly isn't controlling as to whether this property belongs to the United States. Now, I can't reargue all of what I covered the other day, Your Honor, as -- as to the enclave point. I would suggest however, that -- that my suggestion there that Congress intended in this statute that government property or rather that the lease property should be treated the same as the lease property next door should be treated, should be taxed no more and not -- and not any less is an accurate reflection of Congressional intention. That would mean that if you were in an enclave entirely private property, it could all be taxed and the lessor or the lessee would make any difference. If -- if it were an area where the United States did not have exclusive jurisdiction as of the case and many of the reservation in California, and you're in a state where they tax the leasehold interest as California and some other states then you can tax the lessees interest even without the 1947 statute. If that was declared in his legislative history, just to be declaratory what the law on those states would be anyhow. On the other hand, if you're on an exclusive area where the property next door couldn't be taxed if it were privately owned, then we don't think Congress would have intended this kind of project to be taxed by a local government which doesn't furnish any services for it and would thereby be requiring the military tenants to pay double -- to pay taxes for what they weren't benefiting for and to what they actually were paying for in another way. Now I don't think that Section 6 is clear enough if you follow it through how it came in to the statute and everything if its clear enough that, that was intended to apply to an enclave. To conclude that it was, you have to -- you have to find one that Congress realize they were incorporating Section 6 and not just Section 1 when they wrote the 1949 statute. Of course, the other conditions they were referring to were all in Section 1, 2, 3, 4 and 5 as I said. They clearly weren't incorporated. Then you have to assume Congress believed and knew that Section 6 applied to enclaves. And the history of it indicates that the Congressman there couldn't have thought that it did or what they said when they drafted it, Senator Tydings, Secretary Penny, and Secretary Royal didn't make any sense at all. You got to put both of those things together before you can find that it applies -- it applies to an enclave.
Earl Warren: But Mr. Stern.
Robert L. Stern: Yes, sir.
Earl Warren: Is this 1949 Act, a new grant of authority to the -- to the Secretary to do these things or is it -- is it merely an enlargement of his rights under -- under the 1947 Act?
Robert L. Stern: Well, in part, it's a new grant of authority as far as the leasing is concerned, they referred back to the 1947 Act and removed some of the conditions in Section 1 of that Act. It also grant the Secretary new power to certify to the FHA that this project should be insured and is necessary and the FHA goes along insures it pretty much as a matter of course. You see previously the FHA wouldn't lend unless they thought it was a good commercial project. Now for military basis, as we all know, sometimes they're abandoned and nobody would put his money into a thing like that unless the Government would underwrite the project.
Earl Warren: Well what I mean is this. Is this a -- a new grant of authority or is this just enlarging the provisions of the 1947 Act giving the Government the right to -- to lease in accordance with that Act with the exception of the two limitations that it placed on it, namely, the length of the lease and one other which escape from me at the moment.
Robert L. Stern: It is the latter, Your Honor, except that I think it only refers to Section 1 of the 1947, that's all they meant the authorizing part of the 1947 Act but it is the latter. And now in 1955, as our briefs indicate, they amended it again and took out the reference of the 1947 Act for the future, not to these projects, for future projects, but that indicates that Congress really isn't when it -- when all this litigation is coming along and certainly to some extent was in the public eye that from now on, they aren't -- don't want any of these new projects in the future to be taxed. They took up the reference of the 1947 Act and from then on, nothing on an enclave can be taxed at all. Thank you, Your Honor.


John G. Roberts, Jr.: We'll hear argument first this morning in Case 14-1406, Nebraska v. Parker. Mr. Smith.
James D. Smith: Mr. Chief Justice, and may it please the Court: For over a century, the following three things have been true in the disputed area. First, the non-Indian population has always been greater than 98 percent. Second, the Tribe never exercised jurisdiction. And third, by contrast, the State of Nebraska has governed the disputed area. The story of the disputed area is that of a land that long ago lost its Indian character, if it ever had any. The three things I mentioned at the outset happened for a reason. They happened because it was the -- or the intent of Congress in the context of the times of the 1882 Act that the disputed area would be diminished from the reservation.
Anthony M. Kennedy: If I understand your position correctly, you're not asking us to overrule Solem?
James D. Smith: No. No, Your Honor. We are not asking you to overrule Solem. In fact, what we are asking the Court to do is to imply -- apply the entire Solem rule and, in particular, the compelling third factor of the subsequent circumstances of the land's jurisdictional history. As --
Ruth Bader Ginsburg: From what -- from what you just said and from your brief, I gathered -- perhaps I was wrong -- that you are arguing for a de facto diminishment test; that is, you pointed out the area has been overwhelmingly populated by non-Indians and they -- they -- they haven't attempted before to exercise governing authority.
James D. Smith: Your Honor, we think the de facto diminishment does fit within the third element of the Solem test, which is the subsequent circumstances of -- of after the enactment. And so obviously we would not be opposed to the Court concluding and reaching this decision on the grounds of de facto diminishment. But we also think this case fits within this Court's precedent under Solem, which would involve -- in -- in our view, the third element of the test is particularly strong and compelling in this case, while in Solem, in that particular case, it was -- it was -- I guess I would call fairly easy to distinguish because, as Solem talks about as far as the events, what took place after the Act, the focus should be -- if you're looking at intent of Congress, you should be looking at what Congress is doing after the Act that is reflective of not understanding essentially that they've diminished the reservation.
Antonin Scalia: It's a different Congress. I mean, to say, you know, a later Congress did thus and so, and therefore the earlier Congress, when it enacted a particular statute, must have diminished. That doesn't make any sense.
James D. Smith: It --
Antonin Scalia: And -- and -- and moreover, if -- if the third factor is dispositive, as -- as you assert, you would not -- we would not need the -- the -- the de facto diminishment doctrine whereby, by a sort of, you know, adverse possession, a jurisdiction, whether it's Indians or -- or even a State that used to have a jurisdiction over a particular area has forfeited it by long-, long-accepted usage to the contrary. If -- if that is true and -- and if -- if the third factor is as important as you say, we would not need that doctrine. We -- we would just find diminishment.
James D. Smith: Well, and that would be consistent with the concept that, if a party just -- if they belatedly assert a claim to having sovereign authority over this, as in this case it's over a hundred and some years after the land was open for settlement, that -- there -- at least the Sherrill case, some of the principles in this case would be supportive of de facto diminishment.
Antonin Scalia: As far as --
Ruth Bader Ginsburg: That case didn't involve the -- the diminishment. Diminishment was not an issue.
James D. Smith: That -- that is true. I -- I -- what I was referring to was the -- the principle at least decided in the case as far as a long-standing assumption of jurisdiction by the State over an area that is primarily non-Indian in -- in population land creates justifiable expectations, and if they did have any sovereignty over it, they had long since forfeited.
Antonin Scalia: But that's not what you're arguing here. I -- I -- I understand you're arguing diminishment, not -- not adverse possession, so to speak.
James D. Smith: We are arguing that it's no longer part of the reservation. We are not saying it -- Court could not find it under the de facto, but we do think the facts of this case does fit within Solem. And if -- and if the Court applies the Solem test, the State should prevail in this case, which --
John G. Roberts, Jr.: You don't -- the other side says you did not raise a City of Sherrill argument. Do you agree with that?
James D. Smith: We have -- we have --
John G. Roberts, Jr.: A lot of the -- a lot of the arguments you make seem to sound more in a City of Sherrill-type proposition, but you haven't raised that argument, have you?
James D. Smith: We, I -- I believe in paragraphs -- or pages 22, I think it's 25 of our brief, we are at least citing Sherrill as -- as precedent for the principle of loss of sovereignty, loss of sovereign control by the fact that the State has long exercised the jurisdiction. But our focus --
Ruth Bader Ginsburg: But that's based on what Solem said. Solem did bring up a de facto diminishment. This is on page 471 of the opinion. It says "On a more pragmatic level, we have recognized that who actually moved onto the open reservation lands is also relevant to deciding whether a surplus land Act diminished a reservation. Where non-Indian settlers flooded into the opening portion of the reservation and the area has long since lost its Indian character, we have acknowledged that de facto if not de jure diminishment may have occurred." This was the theme that was picked up in Sherrill, but it's stated in Solem.
James D. Smith: Yes. Yes.
Ruth Bader Ginsburg: And may I -- may I ask a preliminary question? We're talking about a liquor license or alcoholic beverage license and a sales tax on alcoholic beverages. Does the State itself impose such requirements, that is, a licensing requirement and a sales tax?
James D. Smith: The State itself does impose liquor license requirements. They -- they can in -- State of Nebraska has sales taxes, yes, Your Honor.
Sonia Sotomayor: This tax was not imposed by the Tribe -- Tribe. This was a statute of Congress that permitted the Indians to do this, correct?
James D. Smith: My recollection was the Interior Department approved the Tribe's request to have such an ordinance, and then -- the Tribe's ordinance then was in -- in effect.
Sonia Sotomayor: Without jurisdictions, Tribes can't tax at will. They have to get approval for taxation, correct, from the Federal government?
James D. Smith: Your -- your point would be correct, Your Honor. The Tribe has to request it. They have to have an ordinance. It has to be approved by agency of the Federal government. Yes, that -- that is true, but it still involves granting authority to a -- another sovereign.
Sonia Sotomayor: What -- what else -- what else do you lose if this ruling is against you? We've already circumscribed the powers of the Tribes on their own reservations greatly, so what powers do you lose? You've already ceded to the Federal government criminal prosecution powers. So you're not losing out on that. What are you losing out on?
James D. Smith: Well, Your Honor, I -- I -- I take this -- it would be in the context of what are the justifiable expectations of those who live in the disputed area? What would be significantly disrupted as far as their justifiable expectations? I would start off with the first thing -- principle is just who governs you. Your -- we'd be introducing an additional sovereign, the Tribe, into an area which, for over 130 years, the Tribe has not exercised any sovereign authority at all.
Elena Kagan: Mr. Smith, can -- can I take you back to Justice Scalia's question? You know, because usually, at least now, we don't think much of subsequent history of any kind. Now, maybe they thought a little bit more highly of it in the days when Solem was written, but now it would -- it's -- it's pretty much of a stretch to use subsequent legislative history or subsequent history generally when we're dealing with interpreting a statute. I'm just wondering: Is there a reason why it should be more credited here than in any other context?
James D. Smith: The Court's precedent, I believe, recognizes in the area of land surplus acts that Indian land surplus acts are a unique animal from your normal legislative analysis. And that would be because in the context of the times back before the turn of, I guess, two centuries ago in the 1800s, Congress would be doing land surplus acts in which the concept of are we diminishing or not diminishing a reservation was really nothing that Congress thought of. You put that on the basic principle that only Congress can diminish a reservation, it then becomes the problem of how do we determine what Congress intended when, frankly, the reality of the Court's precedent is, it's something that Court -- or Congress generally did not think of. They were inconsistent. And so the Solem test really evolves out of an attempt to determine what was the intent of Congress at the time, which then is why legislative history, subsequent or -- subsequent circumstances takes on greater significance.
Ruth Bader Ginsburg: When did this diminishment idea as a legal concept -- you said when Congress acted, they weren't thinking in terms of diminishment. When did diminishment become the big question?
James D. Smith: Well, it becomes -- it becomes a big question when the issue is is it part of the reservation --
Ruth Bader Ginsburg: But at what point in time? Because you -- I thought you just made this statement that in 1882 Congress wasn't thinking in terms of diminishment.
James D. Smith: It becomes a big issue when the issue is who -- frankly, who has authority to govern? Is this still part of the reservation or not? Does the Tribe have any authority over this area at all? And if it's part of the reservation, it has authority; acknowledged, it is limited authority, but it would have authority over it, because if it's part of the reservation. Now --
Samuel A. Alito, Jr.: On that question, as a practical matter, if the Tribe were to exercise -- go to the outer limits of its authority, what could it do in the city of Pender besides opposing this liquor tax?
James D. Smith: Well, what it can do, it can displace State jurisdiction over environmental regulations that this is a rural farming area. The environment is very important. State regulation is very important. It's what the people have expected. And I could give an example: If you're a farmer, and the guy across the road drops a load of manure in your pond that's being used to feed cattle, you call the State of Nebraska; you want them to come out and you want them to do something. Those regulations would be replaced. You call the State of Nebraska and the response is I'm sorry you've called the wrong number.
Antonin Scalia: What about municipalities? What about self-governing -- or more or less self-governing municipalities? Are there any of those within this area?
James D. Smith: Yes. There are self-governing municipalities. There are villages. County, obviously --
Antonin Scalia: What -- would happen to them? Would they continue to -- to exist?
James D. Smith: They would continue to exist, but you're going to have, what I would say, the ambiguity of the extent of their authority versus the extent of the Tribe's authority. You would have this ambiguity in which is going to be -- I mean, people for 130 years, if you've expected the State of Nebraska, your city council to be exercising local control, and you bring in this outside authority --
Antonin Scalia: Why would they continue to exist? I mean, aren't they creatures of the State? Can the State create municipalities on Indian Reservations?
James D. Smith: I believe -- I believe the State can create the municipalities. The issue is what authority they have when you also have it on Tribal land, because the Tribe --
Sonia Sotomayor: I'm sorry. The Tribe has acceded to State sovereignty and the environment and in all sorts of things. Have they threatened to take away the State's activities in this village?
James D. Smith: Not yet. The issue is going to be --
Sonia Sotomayor: This Tribe is awfully small. You think they are going to have the power to implement all of these things that you are fearful of? To do substitute services to -- they can't tax for it without the government's permission. So how are they going to do all these, and why would they do all these horrible things?
James D. Smith: Well, I don't think it's --
Sonia Sotomayor: I mean, it's nice to have the power of taxation, but they still need the government's approval.
James D. Smith: I don't think it's simply the test of being what -- what will they do. I think the issue is once they have the authority, what --
Sonia Sotomayor: Well, the question of the City of Sherrill says if they try to exercise their powers in a way that's harmful to settled expectations, they might have a remedy in law. That's what City of Sherrill says, but that didn't take away -- the City of Sherrill didn't say the Indians weren't sovereign. It just said they can't exercise the sovereignty. It didn't say it was a diminishment. What they said is they couldn't exercise it because of latches.
James D. Smith: Well, if you say we've introduced a tribe that in theory has authority, but because they've never exercised it, they really have no authority that -- that by itself, I would say, is the inherent ambiguity of what is actually the limits of their authority. You get litigations that start disputing whether -- like under the Montana factors, as far as they could regulate conduct that threatens, has some direct effect on their tribe's integrity, economic security, health and welfare. That's very, very broad. And I -- to me, the -- the answer would be simply to say this is not part of the reservation, rather than every case that comes up when we have litigation and then decide well, you're stopped from doing that.
John G. Roberts, Jr.: Does the Tribe exercise authority in the part of the reservation that's not at issue here?
James D. Smith: Yes. The Tribe absolutely exercises authority in the part that's not part of the reservation. They've stipulated to that, that on the part that's not part of the reservation that they -- that they have ordinances, they provide services, that they enforce their ordinances on the east -- in the eastern part of the railroad, which is the -- clearly within the Tribe and not on the west. So they have had no presence, and they've acknowledged that. They have no Tribal offices, schools, industries, businesses. They've admitted that all of these governmental services are provided by state and local agencies, not the Tribe. That's the public expectation. That's what they expect is --
John G. Roberts, Jr.: In the -- in the western part?
James D. Smith: In the western part.
John G. Roberts, Jr.: Well, what about in the eastern part?
James D. Smith: I'm sorry if I wasn't clear. In our -- in the eastern part, the Tribe does have its ordinances. It does provide services. It does enforce its ordinances and laws in the eastern part, but not in the western part, and never has. All of those services are provided by the State of Nebraska. The State of Nebraska, you name it in the form of government services have been provided by the State of Nebraska, its municipalities, not by the Tribe. This comes in -- we come in; we're going to tax you; we're going to take the money; and maybe you get services, maybe you don't. And, in fact, the idea of local control is if the people in the disputed area are unhappy about what the Tribe is doing, unlike if it's their local city council, they don't get to vote. They don't get to remove them from office --
Elena Kagan: Mr. Smith, I -- I can understand why people might be concerned, for all the reasons that you're talking about. We do have pretty clear and settled law in this area with respect to diminishment, that we've said only Congress can diminish, that the idea is that we're supposed to look to congressional intent. And you say Congress didn't really think in these terms. And there's something that's fair about that. But Congress did use very different language in different ones of these acts, and we've looked to that language as a pretty good guide to suggesting which ones diminish and which ones do not. And it seems as though the language here in -- in the act in which we're concerned -- it's -- it's none of the language that would suggest that Congress diminished this act. So I was wondering if you could talk to that. Is there anything in the language of this statute that suggests a diminishment? Any of the usual kind of we cede everything, we relinquish everything? Like, what's the best you can do on that?
James D. Smith: Appreciate that, Your Honor. And -- and yes, the standard diminishment test starts with looking at the Act. Is there language in the Act? Hagen and Solem both specifically say no particular form of words are required. What we do have in this Act is we've got two areas of the reservation. The area west of the reservation, it's a very well-defined area. It doesn't create a checkerboard effect. What is significant is the different -- the Act treats the area west of the railroad different than the area east of the railroad. Specifically -- and this is a major distinction in Solem -- there is nothing reserved for the Tribe in the land on the west of the railroad, the disputed area. There's nothing reserved for -- in the bullpen, so to speak. There is no reservation of land-use rights. There's no reservation of land-use rights for schools, agency, Tribal religious purposes, no reservation in mineral rights. In Solem those were considered significant factors because what you end up with is that the Tribal headquarters, its governmental headquarters ended up in Solem being in the disputed area.
Antonin Scalia: Counsel, do you agree that City of Sherrill did nothing more than deny particular equitable relief and did not repudiate the proposition of Indian sovereignty over the land in question? Because if you agree with that, then I guess I'm more inclined to give greater weight to the third factor. But if you disagree with it, as I think you ought to, then -- then I don't see why we need the third factor.
James D. Smith: Well, City of Sherrill, it does have the element of the Tribe trying to unilaterally just --
Antonin Scalia: Yes, but it says the Tribe doesn't have sovereignty, is what it says.
James D. Smith: It -- well, it says the Tribe doesn't have sovereignty just to buy land back and get back sovereignty that it had long ago lost --
Antonin Scalia: That's right.
James D. Smith: -- and it applies equitable principles to say you're --
Antonin Scalia: To say -- to say that the Tribe does not have sovereignty.
James D. Smith: Yes. Yes. And I -- and I think it's perfectly reasonable for the Court to reach that conclusion with a land which long ago it lost its Indian character, long ago they've -- they've never exercised any sovereignty, and then show up after the public, the descendants, everyone who's lived there, and after 130 years you suddenly find out we -- we've got an Indian Tribe that somehow has some governmental authority over us. We've never elected them; we don't have any right to vote them out of office. If we don't like what we're going to do, I guess we can complain to somebody, but we can't recall members of the Tribal Council. It's -- it is a recognition that those things happened because that's what Congress intended to have happen, and as Solem looks in the context of the times. As far as that legislative history or what -- what happened afterwards, Solem emphasizes the decades immediately after the Act. And in the decades immediately after this Act, we don't have what Solem talks about, the rife with inconsistencies. What we have is a total, one hundred percent consistent record that everyone understood. This land was diminished. It's not part of the reservation. Congress in -- six years later, and I understand the point about subsequent congressional intent, but at least they did not take an action that would reflect Congress didn't understand what they did.
Elena Kagan: Mr. Smith, on the City of Sherrill point, the Chief Justice asked you before do you agree whether this was -- whether this is waived. And you said, well, we cite City of Sherrill on page 25 or something like that. Below, what was the status of the City of Sherrill argument in the lower courts?
James D. Smith: The -- in the lower courts, the argument -- the argument was made as far as that de facto diminishment can be found. The Eighth Circuit's opinion is what I would call a --
Elena Kagan: I'm not sure quite what that means. Does that mean de facto diminishment under Solem, or does that mean -- Solem -- or does that mean that you talked about City of Sherrill as an independent ground?
James D. Smith: We talked about de facto diminishment as an independent ground. I didn't argue it, but my -- my recollection is Sherrill is not cited for -- as authority for that, but we did make the argument that it was de facto because Solem does say we have recognized de facto diminishment. Mr. Chief Justice, if -- if I may reserve the remainder of my time if there's no further questions.
John G. Roberts, Jr.: Thank you. Mr. Clement.
Paul D. Clement: Mr. Chief Justice, and may it please the Court: The question in this case is whether an 1882 Act of Congress diminished the Omaha Reservation and redrew its boundaries. We think multiple considerations make clear that the Act of Congress did not diminish the reservation, but simply opened up a portion of the reservation for settlement within the existing boundaries. Now the first, and probably most significant, factor is that the text of the statute uses the classic language this Court has identified for opening up a reservation for settlement without creating a diminishment. But secondly, and I think very telling and specific to this statute, at the same time there is no language in the statute that supports a finding of diminishment. I think there is language in the statute. Specifically, the final proviso of Section 8 that is very inconsistent with the idea that what Congress did is draw a new western boundary to the reservation, because the -- that proviso gave Tribal members the right to take their allotments east or west of the right-of-way. And the record reflects that many -- that -- that a number of members of the Tribe took their allotments west of the right-of-way. And importantly, a number of them took their allotments that actually straddled the right-of-way.
John G. Roberts, Jr.: What number? What -- what is the number?
Paul D. Clement: There are 15 --
John G. Roberts, Jr.: Nine?
Paul D. Clement: No, 15, I think -- excuse me -- between 10 and 15, about 850 to 900 acres. But I don't think --
John G. Roberts, Jr.: Out -- out of how many that took allotments?
Paul D. Clement: Out of how many Tribal members? I think there were roughly 300-plus allotments. So it was, you know, three percent. But I think the fact that they were allowed, even though they're small numbers -- I'm not trying to make a -- a volume argument here. I'm making an argument that if what Congress just did is draw a new western boundary to the reservation, it would have been very odd to allow Tribal members to take their allotments off the reservation, and maybe odder still to allow them to take an allotment that essentially was bisected by the new boundary.
John G. Roberts, Jr.: Why would that be odd? They -- they could have taken allotments anywhere, couldn't they --
Paul D. Clement: Anywhere --
John G. Roberts, Jr.: -- within the area that was opened up? Couldn't they have chosen to purchase their --
Paul D. Clement: I don't think --
John G. Roberts, Jr.: -- or take allotments outside the reservation?
Paul D. Clement: I don't think that would have been a logical assumption, given the conception of the time, where I think Congress was thinking in the main that Tribal ownership or Indian ownership went with the reservation status. And I think, again, if you think of this as being a Surplus Land Act that simply opens the reservation up, a portion of it to settlement, then it makes perfect sense to say the Tribal members can take their allotments anywhere on the reservation. But if you think you've really drawn a new boundary to the reservation, then I think it's more than passing strange that you can take allotments to the west of it, or you can take allotment and the new boarder is smack dab through the middle of it. That --
Anthony M. Kennedy: I don't understand the -- your answer to the Chief Justice's question. An Indian who wanted to have an allotment off the reservation, and allotments were generally available, could take that allotment off the reservation if the Indian chose to do so, correct?
Paul D. Clement: No. My position is no, they couldn't. And they could take it west of the right-of-way, but I am saying that's how --
Anthony M. Kennedy: Allotments were only open to non-Indians?
Paul D. Clement: No, no. Before any settlers, non-Indians, came in, the existing Tribal members were allowed to take their allotments.
Anthony M. Kennedy: All right.
Paul D. Clement: And they were allowed to take their allotments anywhere on the preexisting reservation.
Anthony M. Kennedy: All right. So we're not talking about allotments open to the general population?
Paul D. Clement: No. No.
Anthony M. Kennedy: Thank you.
Paul D. Clement: And -- and this is clear from the proviso in Section 8. It's the allotment only for members of the Tribe. And they can take, consistent with the historical understanding, an allotment anywhere on the reservation, including west of the right-of-way. And that seems to me to be very consistent with the idea that the right-of-way is an interesting thing that the Tribe granted through their reservation, but it's not some new boundary. And I think the subsequent history really supports that as well.
Ruth Bader Ginsburg: What do you mean --
Paul D. Clement: I mean, my friend on the other side --
Ruth Bader Ginsburg: But what do you mean, Mr. Clement, of the language that I read from Solem itself which seems to fit this case?
Paul D. Clement: Well, I take that language, Justice Ginsburg, as Justice Marshal writing for the Court saying that when you're in the third factor, when you witness de facto immunity -- I'm sorry -- de facto sort of diminishment, that that may ultimately support a conclusion that there was in fact diminishment as a matter of law. I don't take him to be opening up an entirely different route to finding immunity -- diminishment, rather, that doesn't go through an act of Congress. And I think that's the only way to read the opinion as a whole because when the Court starts the opinion, it says the very first principle in this area is that only Congress can diminish a reservation. And it's perfectly compatible with that to say that when we get to the third factor and we're looking at all sorts of things, we'll look at settlement patterns as part of that. But I don't think it's consistent with that world view to then say that, actually, the third factor is a standalone alternative route to find diminishment, not by congressional action, but by market reaction to a surplus land Act.
Antonin Scalia: Did -- did -- did we cite Solem in Sherrill? I -- I don't really recall.
Paul D. Clement: I -- I -- I don't recall. I --
Antonin Scalia: If it held that, it would have been -- it would have been cited and Sherrill would not have been any big deal.
Paul D. Clement: Well, I -- I -- I think that --
Antonin Scalia: I thought Sherrill was a big deal.
Paul D. Clement: Well, I think -- I think --
Antonin Scalia: Justice Ginsburg wrote it. I think she thought it was a big deal. (Laughter.)
Paul D. Clement: I'm not here to tell you it's not a big deal. I am telling -- I'm here to tell you two things, though. One is that Solem went out of its way to not decide the diminishment issue. So it is clearly an alternative way of thinking about the cases, and I don't think they're coextensive. Which is to say, I think there could be a particular assertion of Tribal authority that you might say violates City of Sherrill principles, even within an undiminished reservation. And I do think it's then critically important that -- my friend on the other side has not raised this argument below. I certainly did not understand it to be an independent argument in this Court. It's all well and good to cite the case, but that doesn't make it an independent argument. Even his amici, who thought that they wanted to bring before this Court the City of Sherrill argument, admitted that the Petitioners hadn't made a City of Sherrill argument.
John G. Roberts, Jr.: But -- but Solem did talk about de facto diminishment. And it seems to me that you've got to recognize when they do that, they're talking about something other than de jure, in other words, pursuant to the law. It's pursuant to the facts on the ground.
Paul D. Clement: I understand, Mr. Chief Justice, but I think there's two ways to talk about de facto v. de jure. One way to talk about it is that they're two totally alternative routes. Another way is to say de facto diminishment means the settlement patterns, and that's something that can inform the ultimate conclusion of whether there's diminishment. And I really think the Court in Solem was using it in that passage in the latter respect. And I think that's the only way to make sense of the case as a whole, because --
Ruth Bader Ginsburg: Except that it's -- it's presented before the Court turns to apply the principles.
Paul D. Clement: Exactly. That's right. It's part of the general principles of the Court --
Ruth Bader Ginsburg: It's -- it's not -- it's not tied to the third factor.
Paul D. Clement: Well, I -- I -- I take, though, that it actually is, in my view, tied to the third factor. I think Justice Marshall was laying out all of the factors, starting with the first and governing principle, being that only Congress can diminish. And he winds up the sort of general principle section with this last thing about de facto/de jure -- de facto diminishment, and then that ties up exactly to his discussion of settlement patterns in the third factor of Solem. And I really think that's the right way to read that opinion. I would like to make one other very important point here, though, is I think the Court should understand that if you were to rule in favor of Petitioners in this case, the parties would essentially have to go back and reconstruct the right-of-way because the railroad is no longer there. There's no Rails-For-Trails program in Thurston County. So if you take a Google map and look at this area, you can't even tell where the right-of-way was. Now, I think that's significant, because if there really was a contemporaneous understanding in the 1950s and 1960s, when the railroad literally pulled up its tracks and left, that the right-of-way was the boundary of the reservation, then I think there would have been some effort to sort of preserve that jurisdictional boundary.
Anthony M. Kennedy: Well -- well -- well, please correct me if I'm wrong from the record. My -- my understanding was in the west portion, the Tribe had done -- had exercised no jurisdiction until the Beverage Control Ordinance recently, but on the east portion, that they had. But then you say, well, we can't tell the difference in east and west.
Paul D. Clement: Well, I -- I -- I --
Anthony M. Kennedy: And I mean, is -- is that reading of the record mistaken?
Paul D. Clement: Well, I -- I think what there is is a practical understanding -- as Justice Sotomayor indicated, this is not a wealthy Tribe that's looking to assert jurisdictions in places that are impractical. So it's made a judgment that most of its efforts are directed at the eastern portion of the reservation. But what I'm saying is --
Anthony M. Kennedy: What -- what -- but does the fact that nothing, if -- if the record is correct -- let's assume the record shows that the Tribe exercised no jurisdiction over the western portion until this alcoholic Beverage Control Ordinance. Is that relevant to the case at all?
Paul D. Clement: I don't think it's dispositive. I think, yes, it's --
Anthony M. Kennedy: Is it relevant?
Paul D. Clement: Yes, relevant.
Anthony M. Kennedy: Why is it -- why is it relevant? To what point?
Paul D. Clement: It -- it -- I think it could be relevant to the third factor of Solem in a case where the situation was very cloudy. But one of the things also to keep in mind is that even before Montana, the authority that a Tribe would have over a principal non-Indian settlement on a reservation is fairly limited. And if you're --
Ruth Bader Ginsburg: Limited to what?
Paul D. Clement: What's that?
Ruth Bader Ginsburg: What -- what -- what does it state beside the alcohol tax -- sales tax? What else, on your theory, could the Tribe do in the way of governance in this area?
Paul D. Clement: I think as a practical matter, Justice Ginsburg, there's two other things that are at stake here, and they both go to the equities of the Indians on the reservation, not the non-Indians, because the non-Indians on the reservation, the Tribal authority is very, very limited. So one thing that is at issue here is the potential to continue the revenue-sharing agreement with the State. And this is something that the State actually came to the Tribe about. And the theory of the revenue-sharing agreement for the fuel taxes is that there are going to be transactions in the western portion of the reservation where it's actually Tribal members that are buying gasoline over there, which does happen, because there are a lot of gas stations over there. And of course, the Tribe would have authority to tax the Tribal members on the reservations for those -- those transactions. So what --
Anthony M. Kennedy: You -- you -- Justice Ginsburg asked you a question, you said, as a practical matter. I thought -- maybe I misinterpreted her question here -- as a legal matter. As a legal matter, if you prevail, can the Tribe cast any doubt on the authority and the jurisdiction of the existing municipality?
Paul D. Clement: No, not at all. What they can do is they can make cooperative agreements with the State of Nebraska to tax Indians when they make purchases in Pender. And the other thing they can do is that, when two Tribal members get in a scuffle in the village of Pender, the Tribal authorities can be contacted, and that matter can be handled in the Tribal courts --
Samuel A. Alito, Jr.: If the City of --
Paul D. Clement: -- rather than the State court.
Samuel A. Alito, Jr.: If the City of Pender is on a reservation, under what authority could the Town of Pender regulate things that go on in Pender?
Paul D. Clement: Under -- under its authority -- first of all -- I -- I mean, you know, let me say two things: One is: I'm not even sure, because of the retrocession under -- after Public Law 280, it's not even clear to me that Nebraska ceded its civil jurisdiction that it enjoyed under 280. The -- the retrocession, as I understand it, was criminal retrocession with the exception of the motor vehicle laws. The second thing: As a practical matter, I think this is very important to understand. The next town east from Pender is the Town of Walthill. It is unambiguously in the reservation boundaries. It is an incorporated municipality of the -- of sort of civil government of Nebraska. In the Winnebago reservation --
Samuel A. Alito, Jr.: Well, just educate me because I -- I don't know the law on this point. Can -- excuse me. Can a State incorporate municipalities within the boundary of a Indian Reservation?
Paul D. Clement: Yes. It can, and it does, and it's quite common. And what this Court -- in fact, this Court in -- in -- in the Seymour case, one of its earliest diminishment cases, confronted a Federal township, Omak, Washington, that had always been a township. There's civil authority there, but it's still on the reservation. And that is actually quite common.
John G. Roberts, Jr.: Does that displace Tribal authority in that area?
Paul D. Clement: No. Because again, remember, the Tribal authority over the non-Indians is so small.
John G. Roberts, Jr.: Well, the -- the -- we're talking about the area. Can Tribal -- Tribal police patrol within the municipality?
Paul D. Clement: I think they probably could. The only, really -- with an eye towards seeing if there were Indians there who were, you know, needing patrolling. And there's some evidence in the record -- this is at Joint Appendix 371 and 372 -- that there were occasional patrols of the Tribe into Pender. There's also a footnote in that same section that says that as a practical matter, when a Tribal member was apprehended in the Village of Pender, the police officer would call over to the Tribal authorities and have them take over the person.
John G. Roberts, Jr.: So there's overlapping jurisdiction? The municipality and the Tribe --
Paul D. Clement: Yes.
John G. Roberts, Jr.: -- within the city?
Paul D. Clement: Within the city. And one other aspect --
John G. Roberts, Jr.: Doesn't that create conflict?
Paul D. Clement: No. It really hasn't created significant conflict. And what eliminates the conflict is your Montana decision which substantially limits the Tribe's authority over the non- --
Ruth Bader Ginsburg: But the -- the liquor tax that we're talking about is not imposed only on Indians, right? It's imposed on everybody who buys liquor in Pender.
Paul D. Clement: It -- it is, but that is the exception that proves the rule, because alcohol on reservations has been a unique Federal authority for as long as there's been Indian Reservations. In fact, this Court had a case in 1911 arising out of the Omaha reservation where it reaffirmed the Federal authority.
Anthony M. Kennedy: So on Indian Reservation lands, I take it Tribal police have jurisdiction over non-Indians as to minor offenses?
Paul D. Clement: I -- I don't think that's actually true on the ground in Nebraska, at least as to the highways. Because when they retroceded authority in 1970 --
Anthony M. Kennedy: Well, you -- you have the example of a scuffle. Suppose an Indian and a non-Indian are in a scuffle. If -- if there's a -- a minor criminal statute making this a minor offense, does the Tribe have jurisdiction over the non-Indian?
Paul D. Clement: I -- I don't think that it would within the Village of Pender. And I think that is a reflection of the very limited authority that the Tribe has over non-Indians --
Anthony M. Kennedy: And that's true with reference to all Indian tribes? Can you cite me any proposition for that?
Paul D. Clement: Well, ultimately, it might be -- it might turn on the scope of the Montana decision. And obviously, this Court has the Dollar General decision in front of it. I want to make one more point, if I could, about the overlapping authorities here, cause the other authority here is Thurston County, if I just finish this one point. Pender is the County seat of Thurston County. Thurston County has -- by State statute since 1922, it's western boundary has been defined as coextensive with the reservation, and there are Tribal members who's one of the council on the county, is a Tribal member. Thank you, Your Honor.
John G. Roberts, Jr.: Thank you, counsel. Mr. Kedem.
Allon Kedem: Mr. Chief Justice, and may it please the Court: In Solem v. Bartlett, this Court explained that once a block of land is set aside as a Indian Reservation and no matter what happens to the title of individual plots within the area, the entire block retains its reservation status until Congress explicitly indicates otherwise. It has not done so here. I'd like to start, if I may, with the question: What would change if this Court were to rule that the reservation is still intact? First of all, with respect to services, States can provide services to members of tribes and nonmembers alike anywhere within the reservation. And the State of Nebraska provides services not only in the disputed area but on the east side as well. Let me give you a very specific example. There's a town called Bancroft, which is split in half by the right-of-way. There's another town called Rosalie, which is clearly within the eastern undisputed part of the reservation. There's a school district called the Bancroft-Rosalie School District, which is administered under the auspices of the State of Nebraska. And that is true notwithstanding the fact that much of the land is on the east side, and true notwithstanding the fact that many members -- many students who go to that school are members of the Tribe.
Ruth Bader Ginsburg: That's what -- what the State can do, but the State wouldn't be obliged to do that, wouldn't be obliged to provide schools?
Allon Kedem: I see no basis for the State to refuse to provide services to its own citizens, especially if they are not members of the Tribe.
John G. Roberts, Jr.: Well, it would be a question of sovereignty.
Allon Kedem: The State --
John G. Roberts, Jr.: This is -- this is the reservation. That's your argument. It's the reservation, and that's not the -- the State land, so we're going to spend our money for schools or whatever on the -- in the State, not on the reservation.
Allon Kedem: The State retains regulatory sovereignty to make laws with respect to its own citizens and nonmembers on a reservation. That's true on the east side. It's true on the west side. I think you also may be left with the impression, after my friend's argument, that the State would stop issuing environmental permits and all of a sudden the Tribe would start issuing them. That is not correct. First of all, the Environmental Protection Agency has been administering on the west side of the reservation, including providing permits for animal feed lots. There's also a permit for wastewater --
John G. Roberts, Jr.: The Environmental Protection Agency, which -- the State or Federal?
Allon Kedem: Federal. Federal. -- including a permit for a wastewater treatment facility, although I believe it discharges into Logon Creek on the east side; so it may not tell us all that much about the jurisdiction.
Anthony M. Kennedy: But our -- our questions have been, suppose that you prevail, what can the State do? And we say, oh, it's a practical matter. Don't worry. They won't do -- the Tribe won't do anything. The Tribe won't do anything. What could the Tribe do?
Allon Kedem: What could the Tribe do?
Anthony M. Kennedy: Yes, to regulate nonTribal members.
Allon Kedem: So the things that the Tribe could do would be any express delegation of authority from Congress. The only one that we've heard about is the alcohol ordinance. Beyond that, the State and Tribe could go back --
Ruth Bader Ginsburg: We heard about the fuel -- the revenue sharing of the fuel.
Allon Kedem: That's right. There was an agreement to share revenue fuel, although that was something that the State entered into voluntarily with the Tribe. Beyond that, the Tribe would have to fall under one of the two Montana exceptions, which are, as this Court is aware of because of the Dollar General case, very limited.
John G. Roberts, Jr.: I suppose one reason the Tribe might -- might not provide services is because the area is 98-point-whatever percent nonTribal, right?
Allon Kedem: I think that's absolutely correct.
John G. Roberts, Jr.: So they would be -- any services would be for the -- how many? Nine -- nine Indians in the area or 15?
Allon Kedem: Pardon?
John G. Roberts, Jr.: How many non-Indians own land in the western part?
Allon Kedem: It's almost entirely non-Indian in the western part. And for the --
Antonin Scalia: Couldn't the Tribe enact ordinances that govern the Indians in the -- in the western part?
Allon Kedem: They could, but if we're talking about the effect on nonmembers, they would have to fall under the one -- one of the two Montana exceptions.
Antonin Scalia: Okay. But at least as to Tribal members in the west --
Allon Kedem: That's right. Tribal members on the reservation --
Antonin Scalia: -- they would be subject to the Tribe's jurisdiction which they otherwise would not?
Allon Kedem: I think that that's accurate. If I could go to the City of Sherrill argument, which got brought up a lot today. I think this case is extremely different from the City of Sherrill for a number of reasons, but let me give you two big ones. In the City of Sherrill, this Court held that principles of equity restrained the Tribe from trying to resurrect a claim of inherent sovereign immunity. In this case by contrast, first of all, we're not just talking about the Tribe's jurisdiction. We're talking about the jurisdiction of the United States as well. And second of all, we're not talking about a claim of inherent authority. This is authority exercised pursuant to a Federal statute, 18 U.S.C. 1161. And it -- for that reason, principles of equity simply don't apply here. Moreover, in City of Sherrill --
Antonin Scalia: I don't understand that. Try -- try it again.
Allon Kedem: Sure.
Antonin Scalia: Principles of equity do not apply here?
Allon Kedem: They do not apply in the same way. So in City of Sherrill the Court applied a latches-type reasoning. But latches would not apply to prevent the exercise of authority under a Federal statute, an express delegation of authority under Federal law.
Antonin Scalia: Why not?
Allon Kedem: Because that's what the Court said, for instance, in the copyright decision that Justice Ginsburg recently wrote, which is that when you have background principles of equity, they are presumed not to be -- apply and be displaced when there is a substantive law that Congress passes to deal with the same issue.
John G. Roberts, Jr.: There's a law that authorized the imposition of these taxes in the western part of the reservation.
Allon Kedem: The law authorizes the exercise of this authority if there is a reservation and if the Tribe applies to the Department of the Interior, which has to approve the ordinance.
John G. Roberts, Jr.: Well, doesn't that beg the question? The question was whether or not this reservation has been diminished. So it's not the reservation.
Allon Kedem: Well, that's the question with respect to the application of the statute. But when we're talking about City of Sherrill, we're talking about background equitable principles. And I'm simply making the point that those principles don't apply when you have an express congressional statute dealing with the same issue.
Sonia Sotomayor: If the City of Sherrill did apply --
Allon Kedem: Pardon?
Sonia Sotomayor: If the City of Sherrill did apply, hypothetically -- I'm not nay-saying all the differences you're pointing out -- would you lose?
Allon Kedem: No. Because again --
Sonia Sotomayor: Explain why not.
Allon Kedem: -- we're not talking about just what the Tribe can do. We're also talking about the jurisdiction of the United States as well. And there's certainly nothing in the City of Sherrill which suggests that the jurisdiction of the United States pursuant to a congressional creation of a reservation can be curtailed by the Tribe's failure to exercise authority in the disputed area.
Antonin Scalia: Frankly, I'm more -- I'm more inclined to vote your way if the City of Sherrill does apply than if the City of Sherrill doesn't apply. What you're telling me is, unless you get there through Solem, it doesn't matter whether the State and non-Indians have for generations viewed this land as their own. That's what you're telling me, right?
Allon Kedem: Well, I'm telling you that to the extent City of Sherrill applies, it applies to a very different question, not the question as to where the borders of the reservation are. It applies to the question what can the Tribe as a basis of its inherent sovereignty do? Now, it might under different circumstances if the Tribe tried to repurchase a bunch of land --
Antonin Scalia: That's not what city -- that's not what Sherrill said. Sherrill said the Tribe had no jurisdiction. It said it had no sovereignty over the area anymore.
Allon Kedem: Again, the diminishment question goes not just to the Tribe's sovereignty but the jurisdiction as well of the United States. And if we're talking about expectations, another point that I would make is that the single best evidence of what these parties could have expected is the retrocession, because that was a unique moment in which the State of Nebraska and the United States talked directly and officially to one another about the burdens and responsibilities for exercising jurisdiction in the reservation. And the United States in the Federal register as official can be said the entire reservation remains intact. And the State of Nebraska, as we point out in our brief, had exactly the same understanding. The assistant attorney general for Nebraska came and testified before Congress that all of Thurston County is within the Winnebago and within the Omaha Reservation.
Antonin Scalia: That determines the meaning of the 1882 statute.
Allon Kedem: Not in the least. It goes to --
Antonin Scalia: That's what I think.
Allon Kedem: I was simply responding to the point that the expectations here might be all in the same direction. I would also point to 30 years of Nebraska revenue rulings, all of which say, point blank, Pender is still part of the reservation. I would also point to the definition of Thurston County. As my friend pointed out, Pender is the county seat. I think it's implausible to know that the -- to assert that the State of Nebraska wouldn't know that its own law specifies that all of Thurston County is within the reservations of the Omaha and the Winnebagos. I would also like to address, if I could, the tipping point theory that I think emerges from Petitioner's reply brief, and that's the idea that in 1872, Congress tried but failed to diminish the reservation because there were only about 300 acres sold. But in 1882, it succeeded because a lot more land was sold. I think there are a lot of problems with this theory. First of all, if that was what Congress had in mind, presumably it would have specified some way to know when the tipping point had been reached: Some percentage of land sales, some other measure of success. There's nothing about that in the text. There's nothing about that in the legislative history. Second of all, the concept that Congress could attempt but fail to diminish a reservation, as my friend said that it did in 1872, is a concept that is wholly foreign to this Court's jurisprudence, which makes clear that Congress has plenary power. And finally, I think this Court should be very reluctant to assume that Congress implicitly transferred any part of its authority to change the borders of an Indian reservation to private parties and made it contingent on what this Court in Dakota referred to as uncertain future sales.
John G. Roberts, Jr.: Well, is that saying there's no such thing as de facto diminishment?
Allon Kedem: I think that de facto diminishment, if you think of it as some sort of freestanding alternative path to change the boundaries of a reservation, I do agree that it doesn't exist. But if you're talking about it --
John G. Roberts, Jr.: How is that consistent with the language in Solem that Justice Ginsburg read?
Allon Kedem: I -- I think it's a little bit hard to know exactly what the court meant. This Court has never found de facto diminishment. All seven of its surplus land cases were decided on the basis of congressional intent. And then there were sometimes a few sentences thrown in about how the status quo wouldn't change very much. I want to leave you with one more point.
Antonin Scalia: What about Sherrill?
Allon Kedem: Pardon?
Antonin Scalia: What about Sherrill?
Allon Kedem: Sherrill is very explicit, but it is not a diminishment ruling. There's a footnote in City of Sherrill which makes very clear that it is not deciding the diminishment issue or the jurisdiction of the United States.
John G. Roberts, Jr.: What's -- what's vague about the language where non-Indian settlers flooded into the opening portion of a reservation and the area has long since lost its Indian character, we have acknowledged that de facto, if not de jure diminishment may have occurred.
Allon Kedem: I think you have to read that sentence in light of Yankton Sioux, which says that when you're talking about the subsequent treatment of the area and pattern of settlement, those are relevant only insofar as they bear on the touchstone of the inquiry, which is congressional intent. If I can make one final --
John G. Roberts, Jr.: Well, I think if you look at the passage, it goes on, then, to discuss in addition to that, then we look to subsequent demographic history as an additional clue as to what Congress meant. I -- I read those as the two different paragraphs as making two different points.
Allon Kedem: I think you could definitely read it that way if you just had Solem. I think if you read Solem in light of Yankton Sioux, you reach a different result. If I could make one final point about unsettling expectations. There are more than 300 Federally-recognized Indian reservations all throughout the United States. The single most unsettling thing that this Court could do would be to suggest that the borders of those reservations depend not on what Congress said about them, but on shifting demographic patterns or who provides what services where. If there are no further questions.
John G. Roberts, Jr.: Thank you, counsel. Mr. Smith, you have four minutes remaining.
James D. Smith: Thank you, Your Honor. Where do I start? Let's start first with -- pointed out to me by co-counsel that a misstatement I made in response to Justice Kagan. The Eighth Circuit briefs do cite Sherrill in support of the proposition for de facto diminishment. My apology. I hadn't argued at that point, but it is there in the Eighth Circuit. I would cite to the Joint Appendixes so the Court is aware exactly where it can find that undisputed, as far as the demographics, the jurisdictional history, JA 215 to JA 216, JA 318 to JA 319, JA 609 to JA 611. The -- the concept that, gee, nothing really big's going to change, having the Tribal police show up in their police vehicles patrolling the streets because it's on Tribal land is going to be a huge disruption of expectations. My background is in criminal law. I know if you have a crime you're investigating, you don't know -- not all crimes, you know, there's not a sign saying gee, this was committed by an Indian; this was committed by a non-Indian. You have a lot of who-done-its in which the question is who's supposed to investigate, and you have this overlapping jurisdiction where law enforcement itself is confused as to who's supposed to be investigating when they don't even know, maybe, who the perpetrator is. The idea that a Tribal member of a State governmental authority is somehow shows --
Antonin Scalia: Excuse me. Wouldn't -- wouldn't the latter be the case with respect to any municipality that's within a reservation? We've been told there are a lot of those. And -- and wouldn't that -- wouldn't that be a problem in all of those, being that you have overlapping jurisdiction of Tribal police and municipal police? And until you know who the perpetrator is, you don't know which one has jurisdiction.
James D. Smith: It's a problem if you know, and chose to live on an Indian reservation. It -- it -- I mean, that exists. What's different in this case is the history is 130 years of people who believe and chose. And they are not living on an Indian reservation; they are living in the State of Nebraska. I call the State patrol. The Tribal police are not patrolling up and down my street. That's the difference. It's the justifiable expectations of the people who live there.
Stephen G. Breyer: Their point is, the government says, fine, make that argument. Make it under the rubric City of Sherrill. Maybe you make it when you go down on remand or something, but it is workable to divide the issue into two parts. The first issue is what's the reservation, and the second issue is what can you do on the reservation? When you get to question two, if the Tribe has made no assertion of jurisdiction, nobody even knows about it for 150 years. Maybe it's basically unfair to let them do what they want to do. And that depends on a lot of factors, such as what Congress says. So what do you think of that argument? Let's leave it for later. Nobody's argued it.
James D. Smith: Glad I didn't answer what I thought of that argument. Your Honor, it is still -- invites the litigation over what is the extent of the power. Who's got the power to govern? What is the extent of their power? Uncertainty, when you have expectations, you live in an area where the State governs you, and then to say we can go back and litigate all these issues is -- is just not what the public expects. The people in Pender, this is a big deal. They care about this. They have expectations. It's a big deal whether a Tribe -- Tribal Council has authority over us. We don't get to vote for them. Their Constitution doesn't even allow us to appear at their public meetings. The concept that somehow or other we can't find the right-of-way because it's not on Google is frankly silly. It's very easy to go back, do surveys, find exactly where the right-of-way is.
John G. Roberts, Jr.: Thank you, counsel.
James D. Smith: Thank you, Your Honor.
John G. Roberts, Jr.: The case is submitted.