Court Opinion

ID: 3016049
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:15:04.262268+00
Date Added: 2024-06-11T11:46:57.427802
License: Public Domain

___________

                           No. 95-1526
                           ___________

Reservation Telephone            *
Cooperative; Consolidated        *
Telephone Cooperative;           *
West River Telecommunications    *
Cooperative,                     *
                                 *
     Plaintiffs-Appellants,      *
                                 *
Mountrail-Williams Electric      *
Cooperative,                     *
                                 *
     Plaintiff,                  *
                                 *
Jay Sandstrom; A. Neal           *
Hendrickson,                     *
                                 * Appeal from the United States
     Plaintiffs-Intervenors,     * District Court for the
                                 * District of North Dakota.
     v.                          *
                                 *
Three Affiliated Tribes of the *
Fort Berthold Reservation;       *
Three Affiliated Tribes Tribal *
Business Council; Three          *
Affiliated Tribes Tax            *
Commission; Wilbur D.            *
Wilkinson, Chairman, Tribal      *
Business Council; Joseph J.      *
Walker, Director, Tax            *
Commission,                      *
                                 *
     Defendants-Appellees.       *
                                 *
--------------                   *
                                 *
State of North Dakota;           *
United States of America,        *
                                 *
     Amicus Curiae.              *
                            ___________

                  Submitted:    November 16, 1995

                      Filed: January 30, 1996
                           ___________

Before BOWMAN, BEAM, and MORRIS SHEPPARD ARNOLD, Circuit Judges.
                           ___________
BEAM, Circuit Judge.

     Three telephone cooperatives (the Cooperatives) challenge the
authority of the Three Affiliated Tribes of the Fort Berthold
Reservation (the Tribes) to impose a possessory interest tax on
their telephone lines and rights-of-way located within the
Reservation. The Cooperatives contend that federal law governing
the construction and operation of telephone lines on Indian
reservations preempts the Tribes' right to tax the Cooperatives'
telephone interests.    The district court1 dismissed the action
without prejudice, holding that the Cooperatives must first exhaust
their tribal remedies before challenging the tax in federal court.
We affirm.

I.   BACKGROUND

     The   Cooperatives,    Reservation    Telephone   Cooperative,
Consolidated     Telephone    Cooperative,     and    West    River
Telecommunications Cooperative, are organized under the laws of
North Dakota. Each Cooperative provides telephone service to the
Fort Berthold Reservation (the Reservation) through telephone
cables crossing Reservation lands by virtue of rights-of-way
granted by the Secretary of the Interior. Congress authorized the
Secretary of the Interior to grant these rights-of-way in Section
3 of its Act of March 3, 1901, 31 Stat. 1083 (codified at 25 U.S.C.
§ 319) (1901 Act). The 1901 Act further authorizes the Secretary
of the Interior to tax telephone lines for the benefit of Indian
tribes, but leaves intact the authority of state, territorial, or
municipal authorities to assess a tax on telephone lines laid
pursuant to federal rights-of-way.2

     1
     The Honorable Patrick A. Conmy, United States District Judge
for the District of North Dakota.
     2
         Section 3 of the 1901 Act provides:

                                  -2-
     In 1990, the Tribes enacted a tax on interests in real and
personal property located within the exterior boundaries of the
Reservation and used for business or profit.     Three Affiliated
Tribes of the Fort Berthold Reservation Tribal Tax Code
(hereinafter Tribal Tax Code), Ch. 7. This possessory interest tax

     The Secretary of the Interior is authorized and empowered
     to grant a right of way, in the nature of an easement,
     for the construction, operation, and maintenance of
     telephone and telegraph lines and offices for general
     telephone and telegraph business through any Indian
     reservation, through any lands held by an Indian tribe or
     nation in the former Indian Territory, through any lands
     reserved for an Indian agency or Indian school, or for
     other purpose in connection with the Indian service, or
     through any lands which have been allotted in severalty
     to any individual Indian under any law or treaty, but
     which have not been conveyed to the allottee with full
     power of alienation, upon the terms and conditions herein
     expressed.   No such lines shall be constructed across
     Indian lands, as above mentioned, until authority
     therefor has first been obtained from the Secretary of
     the Interior, and the maps of definite location of the
     lines shall be subject to his approval. The compensation
     to be paid the tribes in their tribal capacity and the
     individual allottees for such right of way through their
     lands shall be determined in such manner as the Secretary
     of the Interior may direct, and shall be subject to his
     final approval; and where such lines are not subject to
     State or Territorial taxation the company or owner of the
     line shall pay to the Secretary of the Interior, for the
     use and benefit of the Indians, such annual tax as he may
     designate, not exceeding $5 for each ten miles of line so
     constructed and maintained; and all such lines shall be
     constructed and maintained under such rules and
     regulations as said Secretary may prescribe. But nothing
     herein contained shall be so construed as to exempt the
     owners of such lines from the payment of any tax that may
     be lawfully assessed against them by either State,
     Territorial, or municipal authority; and Congress hereby
     expressly reserves the right to regulate the tolls or
     charges for the transmission of messages over any lines
     constructed under the provisions of this section:
     Provided, That incorporated cities and towns into or
     through which such telephone or telegraphic lines may be
     constructed shall have the power to regulate the manner
     of construction therein, and nothing herein contained
     shall be so construed as to deny the right of municipal
     taxation in such towns and cities.

                               -3-
is assessed on 100 percent of the actual value of the possessory
interest as determined by the Tribal Tax Commission (Tax
Commission). Tribal Tax Code § 706(3). According to the Tribal
Tax Code, any person or entity interested in challenging the Tax
Commission's assessment or determination of exemptions or refunds
must first initiate an administrative appeal to the Tax Commission.
Tribal Tax Code § 502.     Appeals from final actions of the Tax
Commission may then be made to the tribal court, but such appeals
are conditioned upon prepayment of the taxes assessed by the Tax
Commission. Tribal Tax Code § 506(1).

     Under tribal law, the Cooperatives' property interests
situated within the Reservation are subject to the possessory
interest tax and to the Tax Code's remedies and appeal provisions.
Accordingly, in January 1992, the Tax Commission sent the
possessory interest tax forms to the Cooperatives with a letter
indicating the Tribes' intent to collect the taxes. Subsequently,
the Tribes sent a notice to the Cooperatives setting May 30, 1992,
as the deadline for filing possessory interest tax returns.

     On May 28, 1992, in an attempt to avoid paying the taxes, the
Cooperatives filed an action for declaratory judgment in the United
States District Court for the District of North Dakota.         The
Cooperatives asserted various grounds for invalidation of the
tribal tax,3 and sought to enjoin the Tribes from enforcing the
tax. The district court initially stayed the action pending our
decision in Duncan Energy Co. v. Three Affiliated Tribes of the
Fort Berthold Reservation, 27 F.3d 1294 (8th Cir. 1994), cert.
denied, 115 S. Ct. 779 (1995), a case involving a challenge to the

        3
        The Cooperatives alleged that: 1) the tribal tax was
preempted by the 1901 Act; 2) the Tribes lacked express
Congressional delegation to tax the telephone interests; and 3) the
taxing ordinance violated the Equal Protection, Due Process, and
Commerce Clauses of the United States Constitution.       Only the
preemption argument has been raised on appeal.

                               -4-
very possessory interest tax at issue in this case.            Upon
receiving our decision in Duncan Energy, the district court again
stayed the action.    The district court held that Duncan Energy
required the Cooperatives to present their arguments to the tribal
court before the federal court action would be allowed to proceed.
Shortly thereafter, upon a motion by the Cooperatives, the district
court amended its stay order to provide instead that the case be
dismissed without prejudice pending exhaustion by the Cooperatives
of their tribal remedies. This appeal followed.4

II.   DISCUSSION

     The Cooperatives argue that the district court erred in
requiring them to exhaust their tribal remedies. They contend that
this action falls under one of the exceptions to the exhaustion
doctrine first recognized in National Farmers Union Ins. Cos. v.
Crow Tribe of Indians, 471 U.S. 845 (1985).    We disagree with the
Cooperatives' interpretation of the pertinent exception and hold
that the Cooperatives are required to exhaust their tribal remedies
before pursuing their claims in federal court.

     The rule requiring exhaustion of tribal remedies in matters
related to reservation affairs is an important aspect of the
federal government's longstanding policy of supporting tribal self-
government. See, e.g., National Farmers Union, 471 U.S. at 856;
Iowa Mut. Ins. Co. v. LaPlante, 480 U.S. 9, 14 (1987).       Tribal
courts play a vital role in tribal self-government, and respect for
that role requires, as a matter of comity, that examination of
issues of tribal sovereignty and jurisdiction be conducted in the

       4
       Prior to oral argument in this case, the Tribes moved to
dismiss this appeal for lack of an appealable order.           An
administrative panel of this court denied the Tribes' motion. On
appeal, the Tribes renewed the arguments asserted in their motion
to dismiss. We now reaffirm our earlier administrative decision
and find that we have jurisdiction to hear an appeal from the
district court's order of dismissal.

                               -5-
first instance by the tribal court itself. See National Farmers
Union, 471 U.S. at 856; Duncan Energy, 27 F.3d at 1299.

     In accordance with these principles, the United States Supreme
Court has recognized few exceptions to the general requirement of
exhaustion of tribal remedies.     In National Farmers Union, the
Supreme Court enumerated these exceptions, stating that exhaustion
would not be required "where an assertion of tribal jurisdiction
`is motivated by a desire to harass or is conducted in bad faith,'
or where the action is patently violative of express jurisdictional
prohibitions, or where exhaustion would be futile because of the
lack of an adequate opportunity to challenge the court's
jurisdiction."    National Farmers Union, 471 U.S. at 856 n.21.
(internal citations omitted). Barring the presence of one of these
exceptions, a federal court should stay its hand in order to give
tribal forums the initial opportunity to determine cases involving
questions of tribal authority. Iowa Mutual, 480 U.S. at 15-16.

        We recently followed the rule of exhaustion in Duncan
Energy. There, oil and gas companies brought a federal action to
challenge the Three Affiliated Tribes' power to enforce their
possessory interest tax and certain employment regulations against
nontribal members on non-Indian fee lands. The companies asserted
that exhaustion of tribal remedies was not required in their case,
claiming that the Supreme Court's decisions in National Farmers
Union and Iowa Mutual were inapplicable to cases involving fee
lands. Duncan Energy, 27 F.3d at 1300. We rejected the companies'
narrow interpretation of the exhaustion doctrine and held that the
companies were required to exhaust their tribal remedies before
challenging the validity of the tax and employment ordinances in a
federal action. Id. at 1300.

     The Cooperatives do not dispute the general contours of the
exhaustion doctrine, but argue that the doctrine is inapplicable in
this case. The Cooperatives contend that the language of the 1901

                               -6-
Act preempts tribal authority to tax telephone interests on Indian
reservations, and therefore the Tribes' endeavor to tax the
Cooperatives' telephone lines and rights-of-way is an "action"
violative of an "express jurisdictional prohibition[]"      which,
under National Farmers Union, exempts the Cooperatives from the
requirement of exhaustion. The Cooperatives further assert that
Duncan Energy is distinguishable from this case, since the
plaintiffs in Duncan Energy did not present a preemption argument
or attempt to position their case under one of the exceptions to
exhaustion. The Cooperatives instead seek to align their case with
Blue Legs v. United States Bureau of Indian Affairs, 867 F.2d 1094
(8th Cir. 1989), and Northern States Power Co. v. Prairie Island
Mdewakanton Sioux Indian Community, 991 F.2d 458 (8th Cir. 1993).
In both of these cases, the plaintiffs claimed that certain tribal
actions were preempted by federal law, and we held that the suits
could proceed without exhaustion of tribal remedies. These cases,
the Cooperatives contend, support the conclusion that federal
preemption of tribal authority to tax telephone interests places
their claim squarely within the second exception to the exhaustion
doctrine.

     We find the Cooperatives' reading of the National Farmers
Union language exempting from exhaustion "action[s] . . . patently
violative of express jurisdictional prohibitions" both incongruous
and inconsistent with the policy of tribal self-governance
underlying the exhaustion doctrine. A plain reading of National
Farmers Union demonstrates that this exception refers to specific
prohibitions on designated tribal remedies or to prohibitions on a
tribal forum's assertion of jurisdiction over a dispute.       The
exception does not, as the Cooperatives contend, address express
jurisdictional prohibitions on the underlying tribal enactment
which forms the basis of the plaintiff's challenge in federal
court.     The Cooperatives' interpretation of the express
jurisdictional prohibition exception would render the exhaustion
requirement virtually meaningless, allowing a tribal court to

                               -7-
assert jurisdiction over an action only after a federal court had
effectively determined the merits of the case.            Such an
interpretation runs contrary to the Supreme Court's admonition in
National Farmers Union that the orderly administration of justice
in the federal courts is best served by "allowing a full record to
be developed in the Tribal Court before either the merits or any
question concerning appropriate relief is addressed." 471 U.S. at
856.   As the district court in this case aptly observed, if a
federal court "accepts the reasoning that a party does not have to
exhaust tribal remedies in a case where the party says the
underlying tribal action is preempted, there will never be an
exhaustion rule."     Reservation Telephone Coop. v. The Three
Affiliated Tribes of the Fort Berthold Reservation, No. A1-92-111,
mem. op. at 3 (D.N.D. Feb. 1, 1995).       Rather than accept that
reasoning, we find, as other courts have, that the appropriate
inquiry at this stage of the litigation is whether a tribal forum's
assertion of jurisdiction, or any other designated remedy, violates
an   express   jurisdictional   prohibition   and  thus   precludes
exhaustion. See, e.g., Texaco, Inc. v. Zah, 5 F.3d 1374 (10th Cir.
1993).

     Contrary to the Cooperatives' assertion, our decisions in Blue
Legs and Northern States Power support this approach. In those
cases, this court excused the plaintiffs from exhaustion not
because a tribe's exercise of authority over an activity was
preempted by federal law--although it might have been--but because
the very tribal remedies which the plaintiffs would have had to
exhaust before challenging tribal authority in federal court were
preempted by express statutory provisions.      In Blue Legs, for
example, tribal members sued their tribe and the Bureau of Indian
Affairs in federal court for failing to maintain Reservation
garbage dumps in conformity with the federal Resource Conservation
and Recovery Act of 1976 (RCRA).   We rejected the tribe's argument
that the plaintiffs must first bring suit in tribal court, noting
that the RCRA placed exclusive jurisdiction for suits brought under

                               -8-
the RCRA in the federal courts. Blue Legs, 867 F.2d at 1097-98.
In Northern States Power, the operators of a nuclear plant brought
suit against the tribe arguing that tribal ordinances regulating
nuclear materials were preempted by the Hazardous Materials
Transportation Act (HMTA).    The tribal ordinances required that
nuclear transporters file an application for a tribal transporting
license within 180 days of each nuclear shipment, and set forth a
licensing review process. Northern States Power, 991 F.2d at 459.
The HMTA, however, contained a provision which specifically
preempted tribal requirements creating "an obstacle to the
accomplishment" of the goals of the HMTA. Id. at 460-61. We held
that the remedies set forth in the tribe's license application
process created such obstacles and were therefore preempted.
Because these remedies were preempted, we found nothing left for
Northern States Power to exhaust. Id. at 463.

     The federal acts at issue in both Blue Legs and Northern
States Power, therefore, expressly addressed conflicts between
tribal   remedies   governing   particular    subject  areas   and
corresponding federal policies governing those areas. Because both
Acts expressly prohibited the particular tribal remedies,
exhaustion of those remedies was not required. In contrast, the
1901 Act contains no provisions which prohibit designated tribal
remedies or reflect a preference for initial adjudication of
telephone interest tax disputes in a federal forum. Nothing in the
1901 Act places an "express jurisdictional prohibition[]" on
assertion of jurisdiction in this case by either the Tribal Tax
Commission or the tribal court.     Thus, this action cannot fall
within the second exception to the exhaustion doctrine.5   We hold

     5
      We also disagree with the Cooperatives' suggestion that the
1901 Act so obviously preempts a tribal tax on telephone interests
that exhaustion in tribal court would be futile or a waste of
resources.   We note, however, that even if the tax itself were
clearly preempted, nothing in Supreme Court precedent indicates
that such a case would be exempt from exhaustion.      Even in an
instance of clear preemption of an underlying tribal enactment,

                               -9-
that Duncan Energy controls this action and requires the
Cooperatives to exhaust the administrative and adjudicative
remedies outlined in the Tribal Tax Code before presenting their
preemption arguments to a federal court.

III. CONCLUSION

     For the reasons stated above, we affirm the decision of the
district court dismissing this case pending exhaustion of tribal
remedies by the Cooperatives.

     A true copy.

          Attest:

                  CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.

principles of    comity would arguably support a rule which gives a
tribal court    the first opportunity to declare the law invalid.
Nevertheless,    we need not decide this issue at this juncture
because we do   not find the 1901 Act to present such a case.

                                 -10-