Full text of "Sovereign immunity : hearing before the Committee on Indian Affairs, United States Senate, One Hundred Fifth Congress, second session : oversight hearing to provide for Indian legal reform"

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S. Hrg. 105-303, Pt. 1

105-303/pt.i SOVEREIGN IMMUNITY

HEARING

BEFORE THE

COMMITTEE ON INDIAN AFFAIRS
UNITED STATES SENATE

ONE HUNDRED FIFTH CONGRESS

SECOND SESSION

OVERSIGHT HEARING TO PROVIDE FOR INDIAN LEGAL REFORM

MARCH 11, 1998
WASHINGTON, DC

PART 1

UNIVERSITY 0»
ILLINOIS LIBRARY
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rg. 105-303, Pt. 1

HEAKING

BEFORE THE

COMMITTEE ON INDIAN AFFAIRS
UNITED STATES SENATE

ONE HUNDRED FIFTH CONGRESS

SECOND SESSION

OVERSIGHT HEARING TO PROVIDE FOR INDIAN LEGAL REFORM

MARCH 11, 1998
WASHINGTON, DC

PART 1

U.S. GOVERNMENT PRINTING OFFICE
47-201 CC WASHINGTON : 1998

For sale by the U.S. Government Printing Office

Superintendent of Documents, Congressional Sales Office, Washington, DC 20402

ISBN 0-16-057174-X

COMMITTEE ON INDIAN AFFAIRS

BEN NIGHTHORSE CAMPBELL, Colorado, Chairman
DANIEL K. INOUYE, Hawaii, Vice Chairman
FRANK MURKOWSKI, Alaska KENT CONRAD, North Dakota

JOHN McCAIN, Arizona, HARRY REID. Nevada

SLADE GORTON, Washington DANIEL K AKAKA, Hawaii

PETE V DOMENICI, New Mexico PAUL WELLSTONE, Minnesota

CRAIG THOMAS, Wyoming BYRON L. DORGAN, North Dakota

ORRIN G HATCH, Utah
JAMES M. INHOFE, OKLAHOMA

Gary BOHNEE Majority Staff Director
Patricia M. Zell, Minority Staff Director I Chief Counsel

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CONTENTS

Page

Statements:

Allen, W. Ron, President, National Congress of American Indians 30

Anderson, Michael, Deputy Assistant Secretary for Indian Affairs, De-
partment of the Interior 13

Campbell, Hon. Ben Nighthorse, U.S. Senator from Colorado, chairman,

Committee on Indian Affairs 1

Chambers, Reid, Esquire, Sonosky, Chambers and Endreson 48

Gorton, Hon. Slade, U.S. Senator from Washington 4

Harris, Michael, Esquire, Tahlequah, OK 26

Inouye, Hon. Daniel K, U.S. Senator from Hawaii, vice chairman, Com-
mittee on Indian Affairs 2

Istook, Hon. Ernest J. Jr., U.S. Representative from Oklahoma 6

Jarboe, Mark, Esquire, Dorsey and Whitney, LLP 32

Jordan, Derril B., Associate Solicitor, Division of Indian Affairs, Depart-
ment of the Interior 13

Klein. Jeffrey, Assemblyman, New York State Assembly, Albany, NY 38

Kwail, David, President, Inter-Tribal Council of Arizona 46

LaHood, Hon. Ray, U.S. Representative from Illinois 8

Lattauzio, John, Chief Executive Officer, J&J Mini-Markets, Alamogordo,

NM 40

LeClaire, Thomas, Director, Office of Tribal Justice, Department of Jus-
tice 15

Love, Greg E., Chairman of the Board, Love's Country Stores, Inc., Okla-
homa City, OK 42

Martin, Phillip, Chief, Mississippi Band of Choctaw Indians 29

Morrison, Scott, Ms., Esquire, Wilburton, OK 28

Pyle, Gregory E., Chief, Choctaw Nation of Oklahoma 45

Randall, R.A., Judge, Minnesota State Court of Appeals 23

Van Norman, Mark, Deputy Director, Office of Tribal Justice, Depart-
ment of Justice 15

Appendix

Prepared statements:

Allen, W. Ron 370

Appeney, Arnold, Chairman, Shoshone-Bannock Tribes 516

Black, Burton, President, Black Oil Company on behalf of the Petroleum

Marketers Association of America (with attachments) 524

Chambers, Reid (with attachments) 489

George, Keller, President, United South and Eastern Tribes 537

Harris, Michael (with attachments) 334

Hualapai Tribal Nation 541

Inhofe, Hon. James M., U.S. Senator from Oklahoma 55

Inouye, Hon. Daniel K, U.S. Senator from Hawaii, vice chairman, Com-
mittee on Indian Affairs 53

Istook, Hon. Ernest J. Jr., U.S. Representative from Oklahoma (with

attachments) 58

Jarboe, Mark (with attachments) 380

Jicarilla Apache Tribe 549

Jones, Sr., Gilbert, President, Fort McDowell Mohave-Apache Indian

Community 558

Jordan, Derril B. (with attachments) 90

Klein, Jeffrey 56

Kwail, David 480

LaHood, Hon. Ray, U.S. Representative from Illinois 88

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Prepared statements — Continued

Lattauzio, John (with attachments) 432

LeClaire, Thomas (with attachments) 104

Love, Greg E 442

Martin, Phillip (with attachment) 350

Morrison, Scott Kavla 341

Murphy, Charles W., Chairman, Standing Rock Sioux Tribe, Fort Yates,

ND 572

Muscogee (Creek) National Council (with attachments) 531

Newman, James D., Executive Vice President, NOCO Energy Corp 580

Pyle, Gregory E. (with attachments) 455

Randall, R.A. (State of Minnesota in Court of Appeals C8-96-1024) 118

Santa Ana Pueblo 583

Taylor, Jr., Wayne, Chairman, Hopi Tribe 590

Wellstone, Hon. Paul, U.S. Senator from Minnesota 55

Additional material submitted for the record:

Agreement Between the State of Minnesota and the Mille Lacs Band

of Ojibwe Indians 599

Cigarette Tax Gap 622

Ho-Chunk Nation Trial Court Report on Tribal Sovereignty 627

Independent Analysis Prepared tor the Six Tribal Jurisdictions of West-
ern Nevada 686

Kiowa Tribe of Oklahoma v. Manufacturing Technologies, Inc 720

Letters from:

Cook, Gary, President.Paris Fire Extinguisher Co 742

Glowski, Joe E., Owner, Glowski and Company 743

Harris, Roland J., Chairman, Mohegan Tribal Council 744

Keeler, Bradford R., President, Association on American Indian Affairs,

Inc 746

Shibles, Judge Jill E., President, National American Indian Court Judges

Association (with resolution) 750

Stewart, Jon D., President, Tri Star Marketing, Inc 755

Swanson, Jill S., Vice President of Development and Human Resources,

Uni-Mart 756

Tatum, MBA, Daniel L, Executive Director, Sacramento Urban Indian

Health Project, Inc 758

Young, John A., President, Society for Applied Anthropology 759

OVERSIGHT HEARING ON TRIBAL SOVEREIGN

IMMUNITY

WEDNESDAY, MARCH 11, 1998

U.S. Senate,
Committee on Indian Affairs,

Washington, DC.
The committee met, pursuant to other business, at 9:35 a.m. in
Room 216, Hart Senate Building, Hon. Ben Nighthorse Campbell
(chairman of the committee) presiding.
Present: Senators Campbell, Inouye, Gorton, and Dorgan.

STATEMENT OF HON. BEN NIGHTHORSE CAMPBELL, U.S. SEN-
ATOR FROM COLORADO, CHAHtMAN COMMITTEE ON INDIAN
AFFAHIS

The Chairman. We will now begin with the committee's first
hearing of the year on S. 1691. Today, we will deal with contracts
involving tribes and second, the collection of State taxes on sales
made by tribes to non-Indians.

S. 1691, introduced by Senator Gorton, is arguably the most
meaningful legislation since the Termination Era of the 1940's and
1950's, in my opinion. In fact, some have suggested that it is really
a bill of the 1990's for termination. Whichever view you take, how-
ever, these hearings really are about whether the aboriginal Ameri-
cans, the first Americans, are members of this Nation first or mem-
bers of a multitude of nations within this Nation.

My own view is they can be both, should be both and are both.
My view, of course, is not universally held and I respect that.

Immunity from lawsuits is an attribute that three sovereigns —
the United States Government, the States, and the tribes — have in
varying degrees as a tools to protect their treasuries and to ensure
their viability. Immunity has been a key ingredient to the develop-
ment of all three governments.

Federal, State, and tribal governments have voluntarily waived
their immunity and allowed themselves to be sued and continue to
do so. After decades of failed Federal policies, Indian tribes in re-
cent years have begun to fulfill the promise that President Richard
Nixon made in announcing his self-determination policy of building
stronger governments and economies.

These efforts have brought higher levels of interaction and en-
gagement between tribes and local governments, non-Indian busi-
nesses and non-Indians too. These efforts I support and encourage
and will continue to encourage. As is with human nature, along

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with more economic activity and job creation, more levels of inter-
action and engagement, there often comes more conflict and dialog.

We will receive testimony today regarding commercial contracts
involving Indian tribes and the collection of retail taxes on sales
made to non-Indians. There will be three hearings, as most people
know. Let me also say that the kind of major changes in Federal
law regarding Indians contemplated by S. 1691 should not be taken
lightly.

If enacted, this legislation would have a significant impact on
tribal governments and Indian people. As the committee proceeds,
I'm hopeful we can fairly review the issues in this legislation and
hammer out reasonable approaches to the problems faced by tribes
and other interested parties.

We will also have a hearing on April 7 in Seattle, WA, which you
may like to attend, people in the audience, if you are in that area.
The actual location is still being worked out. We will also at that
time be dealing with civil and property rights.

We will do another hearing on April 9 in Minneapolis, MN deal-
ing with torts.

This is obviously a very emotional issue for people from both
sides. I would simply encourage those in the audience and those
testifying to observe the decorum of the Senate and would remind
people that their full statements will be included in the record.

Because we have so many people who wish to testify, we simply
had to put some limits on the total number and some did not get
to testify, but those people who have written statements they
would like to be introduced in the record, those will be completely
included and will be studied by all of us here on the committee.

We also will be enforcing the 5-minute rule because we have a
number of votes today and we do have some limited time.

With that, I'd like to turn to the vice chairman, Senator Inouye,
if you have an opening statement.

STATEMENT OF HON. DANIEL K. INOUYE, U.S. SENATOR FROM
HAWAII, VICE CHAIRMAN, COMMITTEE ON INDIAN AFFAHIS

Senator Inouye. Thank you very much, sir.

The committee meets this morning to address matters that ap-
parently have given rise to the introduction of a measure by our
colleague and friend, the senior Senator from the State of Washing-
ton.

If we are to properly address these matters, we must have a
clear understanding of the historical and legal context in which
they operate. Indian tribes and nations are governments. Should
there be any doubt about the accuracy of this statement, we need
only to look to the writings of our founding fathers and the subse-
quent debates in the Continental Congress.

It is there that we find some of the earliest recorded observations
of the governmental structure of the Confederacy of the Iroquois
Nations. In fact, I believe it is abundantly clear that the Iroquois
Confederacy's form of government was the model of government
that our founding fathers ultimately adopted in forming and orga-
nizing the government that was to become the United States of
America.

Should one desire further evidence that Indian nations are sov-
ereign governments, we can look as well to the fact that the United
States entered into treaties with the Indian nations, 800 of them.
Our Constitution makes clear that treaties are the documents
which express the legal relationships between sovereigns and that
as such, they are the highest law of the land.

Beginning in 1832 and for 166 years thereafter, the U.S. Su-
preme Court recognized and has consistently reaffirmed the inher-
ent sovereignty of the Indian nations. Over the course of our his-
tory as a Nation, the U.S. Congress, with the approval of every
President of the United States, has enacted into Federal law, lit-
erally hundreds of legislative initiatives that are premised upon the
fundamental principle that the Indian nations are sovereign gov-
ernments. This is where we begin. This is the foundation of law
and policy upon which our relationships with the Indian nations
have been built, shaped, and defined for well over 200 years.

My colleague's bill, as I understand it, would divest the Indian
nations of their governmental status and relegate them to the sta-
tus of individuals or private corporations for the purpose of legal
actions in State and Federal courts. Given this dramatic and some
would say radical departure from the well-established course of our
history and our laws, I believe it is only natural to inquire what
may be in law or in fact that would require us to so abruptly aban-
don what has stood for so long.

In the area of taxation, the U.S. Supreme Court has established
the law in the case of Montana v. The United States. There, the
Court stated,

To be sure Indian tribes retain inherent sovereign power to exercise some forms
of civil jurisdiction over non-Indians on their reservations, even on non-Indian fee
lands, a tribe may regulate through taxation, licensing or other means, the activities
of non-members who enter the consensual relationship with the tribes or its mem-
bers through commercial dealings, contracts, leases or other arrangements.

We have ample evidence that State and tribal governments are
not only capable of, but regularly do enter, compacts and agree-
ments addressing matters of taxation. Just a few months ago, sev-
eral such agreements entered into by the State of Washington and
some of the tribal governments in Washington State were made
available to this committee.

Of course they are not alone. Taxation agreements have been en-
tered into by States and tribes all over the country. Because both
State and tribal governments are recognized as having the author-
ity to tax, these agreements typically address matters such as the
exercise of those authorities by each government, the apportion-
ment of taxation, and the manner in which taxes are to be col-
lected.

These agreements customarily also provide one or more mecha-
nisms for the resolution of disputes should they arise. These may
include mediation, arbitration or an agreement that the parties will
seek determination by a court of competent jurisdiction.

If a judicial determination is the mechanism elected by the gov-
ernments for the resolution of any disputes that may arise, it is
also common that mutual waivers of their respective rights to as-
sert sovereign immunity are contained in their agreement or com-
pact. These compacts and agreements are consistent with the man-

ner in which the governments of our Nation have always defined
and shaped their relationship with one another.

I'm not aware of any compelling body of evidence that would
warrant the taking of a unilateral action by a third government,
one which is not a party to the matters at issue. I know of no
precedent for the fashioning of a cause of action that the authorizes
one government to bring claim against another government but
bars the other government from having its claims heard.

Supreme Courters expressly rejected this notion in a case known
as Blanchfalt v. The Native Village of Nortak on the grounds that
there must be a mutuality of consent by both governments to be
sued and sue.

Having reviewed the written testimony submitted to the commit-
tee for today's hearing, let us also be clear that what some would
seek from this body is not an alternative means of collecting State
taxes, but rather, action by the Federal Government to assert and
assure that commercial activities conducted on Indian lands are
rendered incapable of competing in a free marketplace.

Mr. Chairman, in compliance with the spirit of this meeting, my
statement is exceedingly long because of the important nature of
the matter being discussed, I request that the remainder of my
statement be made a part of the record.

The Chairman. Without objection, it will be included in the
record.

[Prepared statement of Senator Inouye appears in appendix.]

Senator Inouye. I would also suggest, which I did not do at the
budget, I would suggest that the letter of views and estimates be
given the widest circulation because it sets forth in rather clear,
precise language what the needs of Indian country are.

The Chairman. Without objection, that also will be done.

I would now go to Senator Gorton.

I would remind everyone who came in after my statement, this
is the first of three hearings. This one primarily will deal with con-
tracts and taxes. The one in Washington will deal primarily with
civil and property rights and the last one in Minneapolis will deal
primarily with torts.

Senator Gorton.

STATEMENT OF HON. SLADE GORTON, U.S. SENATOR FROM

WASHINGTON

Senator Gorton. Mr. Chairman, I shouid like to start by saying
that in listening with care to your own opening statement, I was
encouraged by the proposition that you laid out that there is a
problem with which this bill deals and there may very well be a
method by which to accommodate the very real and legitimate
needs and interests of all the contending parties. It's obviously
early in this game, but your openness to some suggestions of that
nature is extremely welcome.

The Supreme Court of the United States, to put the question of
sovereignty precisely, has described Indian tribes as domestic de-
pendent sovereigns. That is the nature of their sovereign. It is not
unlimited. They are a part of the United States of America, they
are subject to the Constitution.

The issue that we are dealing with in this bill has nothing to do
with sovereignty or, for that matter, with domestic dependent sov-
ereignty. It has to do with the rights of individual citizens of the
United States and organizations within the United States, govern-
mental and otherwise, to seek a redress of grievances in the courts
of the States of the United States and in the United States courts
when they allege that some wrong has been done to them.

It is interesting with respect to this taxation that we are faced
with the situation here today in which the Supreme Court of the
United States has repeatedly ruled that transaction taxes on trans-
actions conducted by Indian business enterprises with non-Indians
are subject to State taxation.

Ironically enough, one of those cases was one I argued in the
U.S. Supreme Court and it arose out of a lawsuit against the State
of Washington by an Indian tribe. The sovereignty of the State of
Washington was not implicated by the fact that an Indian tribe
could take it into a Federal court and make a claim that those
taxes were not collectible.

The Supreme Court rejected that claim. It said, in fact, those
taxes were collectible, were appropriately collectible, and yet al-
though that case is now 18 years old, the Indian tribes in the State
of Washington have consistently and for that entire period of time
refused to collect the tax which the Supreme Court of the United
States has said was due and owing and to turn it over to the State
of Washington.

This year, our State Department of Revenue estimates that will
cost the State treasury some $64 million, no small amount, $64
million in selling cheap cigarettes, cheap cigarettes, Mr. Chairman,
something that it seems to me is now the national priority to avoid,
encouraging a greater degree of smoking, competing unfairly with
non-Indian enterprises, and depriving the State treasury of money
that it uses for schools and for other purposes, of which the mem-
bers of those Indian tribes are full and complete beneficiaries as
they are citizens of the State of Washington.

The Supreme Court has dealt with this question of tribal immu-
nity. At least one member of the Supreme Court of the United
States would remove that immunity by judicial fiat, said that it is
such an anachronism that it impinges on potentially the constitu-
tional rights of other citizens of the United States.

The majority of the Supreme Court, however, has stated explic-
itly that this is an issue with which the Congress should deal. This
is an issue with which the Congress should deal. The Supreme
Court makes it very clear that Congress has plenary rights in this
field as it is dealing with domestic dependent sovereigns.

Is it necessary for a governmental Dody to be free from litigation
in order to carryout its governmental functions? If so, the United
States of America is no longer sovereign because on a wide range
of issues, it can be sued. If so, no State is sovereign; no local gov-
ernment has appropriate governmental bodies. If a local govern-
mental body or a State commits a tort or breaches a contract, it
can be taken into court.

This bill asks no more and no less than that Indian tribes be
subjected to the same degree of responsibilities as others are. They
should not be able to evade taxation which is due and owing.

They should be able to contest whether or not the tax is due and
owing and I want to emphasize that nothing in this bill changes
the substantive law relating to the relationships between Indians
and non-Indians or between Indian tribal governments and non-In-
dian governments or non-Indian individuals. It doesn't change the
law at all. It simply gives the courts, the States and the United
States the right to make a determination as to what that law is
in a given case.

The most fundamental elements of our constitutional doctrines
are the rights of due process and equal protection. In controversies
with Indian tribes, non-Indians and State governments and local
governments are denied the due process of law and are denied the
equal protection of the laws because they cannot vindicate them in
neutral courts representing all of the people of the United States.

The Montana case cited by Senator Inouye is totally irrelevant
to this controversy. This bill, if it's passed, will not remove any ju-
risdiction Indian tribes may have over lands on the reservation,
any ability they may have to impose taxes on those reservations.

What it will do is say that if someone disagrees with the exercise
of those rights, that person has the ability to go into a court and
find out whether or not the exercise of those rights by the tribe is
in accordance with the laws of the United States but the sub-
stantive relationships will not be affected by this law at all.

I find it astounding that in the last decade of the 20th century,
there should be governmental bodies in the United States who
claim the right to be able to run other people, to be able to violate
decisions of the Supreme Court of the United States, and to do so
with impunity. It is astounding that any government should make
such a claim and claim to be a part of the democratic system here
in the United States.

The Chairman. We will go ahead and proceed with our first two
people to testify. That will be Ernest Istook, a member of Congress
from Oklahoma and second, Ray LaHood, a member of Congress
from Illinois.

Congressman Istook, if you'd like to proceed.

STATEMENT OF HON. ERNEST J. ISTOOK, Jr., U.S.
REPRESENTATIVE FROM OKLAHOMA

Mr. Istook. Thank you very much, Chairman Campbell, Senator
Inouye and Senator Gorton.

I'm very pleased to have the opportunity to testify before your
committee this morning to discuss one of the problems that not
only relates to jurisdiction, but relates to public safety, to our
transportation system, and certainly as Senator Gorton has indi-
cated, to equal protection of the laws because I think that is a goal
to which we all aspire and when we find that it is lacking, we cer-
tainly all wish to correct it.

For 2 years in the House, Congressman Pete Visclosky of Indiana
and I have been working together to ensure that the tax networks
of State and local governments are protected from unscrupulous
businesses which are refusing to collect the proper sales and excise
taxes and we also have as our goal to try to encourage fair competi-
tion between Indian and non-Indian businesses.

Our efforts have not been and will not be to try to limit the abili-
ties of tribal governments which have tax agreements with their
neighbors. We certainly have every desire to assist in stimulating
the development of Indian businesses and the efforts by the tribes,
but to do so on a fair and equal footing.

We've based our efforts, of course, on rulings of the U.S. Supreme
Court which has evaluated the treaties signed by the Federal Gov-
ernment and the Indian tribes, as well as the underlying system
of Federal laws which have been enacted. I find that there are cer-
tain myths that abound.

Frequently I hear people assert that Congress cannot clear up
the problems because of Indian treaties or because of what some
people assert to be sovereign rights of Indian tribes. That is not
what the U.S. Supreme Court has ruled. The standards are very,
very clear.

As you know, I'm sure, the Supreme Court has ruled that Indian
tribal members are exempt when they are dealing with a tribal
business from State and local sales and excise taxes but that non-
tribal members who are purchasing items through these tribal
businesses or on Indian trust lands are not exempt from those
taxes. So the tribe's taxing authority extends over its tribal mem-
bers but it cannot undo the taxing authority of the State govern-
ment or the local government where the business may be situated
when they are conducting business activities with persons who are
not members of the Indian tribe.

The Supreme Court has ruled that States have the right to as-
sess taxes on sales to non-Indians, but the right has been meaning-
less when tribal businesses cannot be required to collect the taxes
on non-tribal sales as must be done by other businesses. So as the
Supreme Court makes clear, the exemption is very, very limited
and applies only to sales to tribal members through a tribal busi-
ness.

Unfortunately, through making claims to the contrary which are
often pronounced in public statements and mislead people, frankly,
some tribes have been exploiting their exemption leading non-tribal
purchasers to believe that they don't owe the sales, fuel, tax or the
excise tax because the tribes are not charging them. The steep dis-
count that results when they don't apply the tax is a powerful lure
to attract customers to come and to leave their normal business re-
lations with non-tribal businesses. It's a very simple phenomena.

All of us have seen a situation where we go to an intersection,
there are two or more gas stations or convenience stores selling
gasoline and we look at the prices. If one has a differential that is
significantly below the other, we take our business there. It is a
business that is very, very responsive to pricing.

Thus, the tribes can sell gasoline without charging the typical
State fuel tax of 20 to 30 cents a gallon or the typical State ciga-
rette tax of 40 to 60 cents a pack. This drives legitimate taxpaying
competition out of business for miles around. That's the first prob-
lem.

The second problem is it destroys the tax base, the tax base that
creates the network of roads on which we, Indians and non-Indi-
ans, drive which creates the network of schools, which creates the
network of public safety, of health care systems. All of these things

are dependent upon the very State and local taxes which are being
evaded by the customers of the tribal businesses and with the com-
plicity — in fact, the encouragement of certain tribes themselves.

The problem is getting worse. The loss that Senator Gorton has
mentioned to multiple States is extraordinary and it's growing larg-
er because the Federal Government keeps enabling tribes to have
better business locations, not because the land is historically part
of any tribal land or land that once was part of the tribe, but sim-
ply because it has a prime location for purposes of business. The
effect is to create a patchwork quilt of where we may have the trib-
al trust lands.

Congress has created the difficulty as the court decisions make
abundantly clear and the answer must also come from the Con-
gress itself. We would not sit still if the government of a foreign
nation — Canada, France, China — through some of the businesses
with which they are affiliated came into the United States, estab-
lished local businesses and said, we are not going to collect the
State and local taxes that are ordinarily collected.

We wouldn't see fit, we wouldn't stand still for any argument
that says, well, they're a different government, therefore, our laws
don't apply. The U.S. Supreme Court has made it clear the laws
do apply. Congress needs to enable the laws to be enforced in an
equal manner with equal protection of the laws so that tribal busi-
nesses and those with whom they compete have certainty and they
don't have an advantage that comes from tax evasion, but they
have an advantage that comes from their own initiatives, their own
business acumen, and their own efforts. Congress needs to act to
end this practice of marketing tax evasion.

Certainly I commend Senator Gorton and I commend Mr.
LaHood and the other members of the House who have been work-
ing on this issue also.

I thank you, Mr. Chairman, for the chance to testify with you
this morning.

[Prepared statement of Mr. Istook appears in appendix.]

The Chairman. I thank you for your appearance. Were you going
to stay for a few moments?

Mr. Istook. Yes, sir; I will.

The Chairman. Congressman LaHood, if you'd like to proceed?

STATEMENT OF HON. RAY LaHOOD, U.S. REPRESENTATIVE

FROM ILLINOIS

Mr. LaHood. Thank you, Chairman Campbell, Senator Inouye,
and Senator Gorton.

Thank you very much for the opportunity. It is a privilege and
an honor to be here today.

I have come here to speak about an issue that I believe is very
important to our Native American tribes, our States and to our
transportation policy, the collection of motor fuel taxes on Native
American lands.

As a member of the House Transportation and Infrastructure
Committee, I know firsthand how important the gas tax is to the
maintenance and construction of our vast infrastructure system.
The gas tax, as I'm sure you are aware, directly supports the ef-
forts of State and Federal Government in building and repairing

our Nation's roads and bridges. In order for our States to play their
role in the transportation system, they need to be sure they are col-
lecting all of the motor fuel taxes.

Unfortunately, that is not currently the case. Currently, some
Native American tribes do not always collect and remit gas tax re-
ceipts to the appropriate State government. This practice has cost
the States a significant amount of revenue that could have been
used to pay to improve roads and bridges.

Lost revenue estimates for some States are in the millions. It is
estimated that Oklahoma, alone, lost roughly $13 million in motor
fuel tax receipts for fiscal year 1996. Many other States are also
adversely affected, including the States of Washington, Oregon,
Idaho, New Mexico, Kansas, Michigan, and New York.

I believe this problem of unremitted and uncollected gas taxes
should be addressed and I plan to offer a bill shortly that will ad-
dress this problem, and I will keep a very close eye on what hap-
pens here in the Senate.

My plan would prohibit the Secretary of Transportation from al-
locating funds for public land highways on Indian lands and res-
ervations unless either the Indian tribe had entered into a written
agreement with the State in which the highway is located and pro-
vides procedures for the payment and collection motor fuel taxes
that are sold to non-Native Americans by a retail establishment
that is located on such land, or the Indian tribe refuses to enter
into a written agreement but the allocation of the funds is essential
to the construction and maintenance of a highway or road that is
a critical component of the National Highway System.

These provisions would take effect six months after the date of
enactment of such a plan in order to allow tribes and the States
some time to negotiate agreements.

I do want to stress the aim of this plan is to ensure that non-
Native Americans pay and are assessed the gas tax. This plan is
not intended to infringe on tribal sovereignty. Rather, it is meant
to encourage the tribes to work cooperatively with the States in
order to formulate a mutually agreeable compact on the subject of
motor fuel taxation.

I'm firmly convinced that this approach would yield numerous
benefits. First, it would help ensure that States have adequate
funds for road maintenance and construction. Secondly, it would
end an inherent unfairness posed by the sale of tax-free fuel on Na-
tive American lands. Third, it would preserve jobs and keep busi-
nesses open. The current situation heavily impacts petroleum re-
tailers.

Many purchasers or motor fuel, both gasoline and diesel, are
likely to travel to Indian lands because they know they can avoid
paying State and local motor fuel taxes. The motive to do this can
be great for many drivers. In fact, in some States, the tax on gaso-
line can be as high as 34 cents per gallon and 28 cents per gallons
for diesel.

The sale of tax-free fuel poses serious concerns for retailers who
must pay the tax and who are located within a reasonable distance
of Indian reservations because the Native American tribal estab-
lishments, by selling gas at lower prices without the tax, have the

potential to put countless numbers of establishments out of busi-
ness.

For example, avoiding the tax on diesel fuel for a typical truck
with a 250-gallon tank can mean savings of $70-plus, a sufficiently
large amount to justify a trucker to travel to Native American
lands to refuel his or her truck. At the very least, a trucker could
plan or time his or her routes to ensure they purchase tax-free fuel
on Native American lands.

I believe these arguments, because of their impact on road main-
tenance and construction, and on the Highway Trust Fund, more
than justifies the scrutiny by this committee into this matter. I
look forward to working with this committee and any others who
are interested in this subject.

Again, I thank you very much.

[Prepared statement of Mr. LaHood appears in appendix.]

The Chairman. Thank you both for appearing. I have just a cou-
ple of questions.

Just looking through your testimony, Congressman Istook, on
page 2, you list a number of States who have lost revenue. There's
a good number, it lists a bunch of them. I don't notice where those
statistics came from? Did you research each State to get those sta-
tistics?

Mr. Istook. We have information that we've received from the
tax-collecting agencies and various State tax commissions. The rea-
son that we don't have an overall national figure is we don't have
a full compilation from all of the States. That is why we have lim-
ited this information to those States from which we have received
that information.

Certainly my staff will be happy to share with yours the specifics
of how those particular figures were compiled.

The Chairman. If you would share that with the committee, I
would appreciate it.

Mr. Istook. Yes, sir.

The Chairman. Congressman LaHood, let me ask you just one
thing. There are a number of compacts in Indian country dealing
with all kinds of things from gaming to taxation. I understand, as
an example, there are 18 compacts in the State of Washington
alone between the State and tribes dealing with the cigarette tax.

I happen to be a big states rights guy and a local government
guy and I'm sure you both are too. To my knowledge, there is noth-
ing in the courts or in legislation now that prevents tribes and
States from entering into compacts dealing with taxation. I guess
I should ask you what would be the benefit of trying to force
through Federal legislation if that opportunity already exists?
Shouldn't we rather encourage States and tribes to enter compacts
to deal with the inequity in taxation?

Mr. LaHood. I certainly would have no problem with that. I
think the dilemma is the issue I've tried to highlight is the fact
that we collect the gasoline tax, which goes into the highway trust
funds. We would have the impetus at that point to try to have
States and tribes enter into these contracts.

I would agree with you there is nothing that would prohibit them
from doing it, but what I would say is that I think we have a little
bit of a hammer here at the Washington, DC level, at the Federal

level, to maybe try and encourage this where encouragement has
not been given in the past.

Mr. ISTOOK. If I may, Mr. Chairman?

The Chairman. Yes.

Mr. ISTOOK. As we understand it, approximately one-fifth of
tribes actually have compacts with the States on all fronts. It's a
little misleading. It may not be one-fifth of the tribes, but it's one-
fifth of the possible compacts because you have different types of
taxes.

The difficulty is because of the inaction by Congress, there is no
incentive for the tribes to enter into a compact if they can thumb
their nose at the State law and there is no consequence for them,
why then should they enter into a compact?

I believe, and it's been my approach in legislation, that the tribes
should either be complying with the State law and collecting the
taxes or have some agreement with the State which may impose
a lesser burden upon them, but right now, there is simply no incen-
tive, there is an imbalance of negotiating power because Federal
law gives no enforcement mechanism to the States and the tax eva-
sion continues. Even though it's not tax avoidance, the U.S. Su-
preme Court said it's tax evasion.

The Chairman. Thank you.

Senator Inouye, did you have any comments or questions?

Senator Inouye. I just have a question. Would it be proper for
the U.S. Government to tax the District of Columbia on its lottery
income?

Mr. Istook. If that question is proposed to me, we are not seek-
ing to have lottery income in Washington, DC taxed. We could talk
about whether that involves interstate commerce and whether it's
a proper subject of Federal taxation, or whether you could single
out the District of Columbia as opposed to any other jurisdiction,
but I'm not proposing any such thing there. I don't think anyone
is proposing a tax on the Indian tribes.

It's very clear, in legislation certainly that I've sponsored, that
we are only talking about collecting the taxes which the U.S. Su-
preme Court has ruled are due and are owing by the non-tribal
members who are doing business with the tribal businesses.

Senator Inouye. Do you think it would be proper for the U.S.
Government to tax the State of Nevada for gaming income?

Mr. Istook. No; I don't think if the tax were on gaming income,
and I don't think that we're talking here about any sort of income
tax. I don't think anyone has proposed an income tax on the income
of Indian tribes. All we've talked about is having individuals who
deal with the tribe pay the same taxes they would be paying if they
were dealing with a non-tribal business and buying gasoline, ciga-
rettes, or whatever it may be.

Senator Inouye. Does your bill call for the taxation of commer-
cial or retail sales?

Mr. Istook. It does not create any taxes of that. It says only that
the existing State laws for payment of fuel or excise or sales taxes
on retail transactions should be collected by the Indian tribe on
their transactions with non-tribal members. So it only calls for the
ability to enforce those existing laws under the guidelines estab-
lished by the Supreme Court.

Senator Inouye. Thank you.

The Chairman. Senator Gorton.

Senator Gorton. No questions.

The Chairman. If I might just ask one thing. This committee
deals with Indian gaming, as you know. Last year, there was a de-
cision — I guess 1V-2 years ago — called Seminole v. Florida in which
the courts held that States do not have to, in fact, negotiate in good
faith with the tribes on reaching a compact with gaming.

If you flip over that coin, what I'm understanding from listening
to you is that tribes should have to come to the table, there should
be legislation that requires them to come to the table and reach a
compact but doesn't that fly in the face of what the courts have al-
ready held for the States, that they don't have to?

Mr. ISTOOK. No; and I think the distinction here, Senator, is the
difference between when you're talking about gaming and when
you're talking about cigarette taxes, gasoline taxes and so forth. No
one needs a compact with a State Government to establish a con-
venience store, or a gas station. That's already permitted by law.
Therefore, if you want to go into that business, you can just estab-
lish the business. The question then is whether you will comply
with the law to the same extent as anyone else and collect the tax
from your customers and then remit it to the State taxing author-
ity.

The difference between that and gaming is that in the case of
gaming, there are multiple state laws regarding gambling, you
can't even get into that business period under most circumstances
in most States. There you're asking a tribe to compact before seek-
ing to set up a business that normally could not be established in
that particular State. Therefore, you have a very different situation
on whether a compact is necessary or not.

The Chairman. Congressman LaHood, did I understand you to
say you are introducing a bill that would require the collection of
taxes?

Mr. LaHood. There would be an opportunity for tribes to enter
into agreements with States.

The Chairman. It would primarily deal with sales of gasoline
and cigarettes?

Mr. LaHood. That's correct.

The Chairman. Would it have any effect on, for instance, profits
from casinos or other things that are not sales related?

Mr. LaHood. No, sir; my bill deals with the issue of the collec-
tion of the gasoline tax and/or the lack thereof and the impact that
has had on States, particularly in their ability to deal with trans-
portation and infrastructure.

The Chairman. If there are no further questions, I appreciate
both of you coming today.

I know your testimony was more extensive in its written form
than you had time for, but that will be included in the record.

Mr. Istook. Thank you.

The Chairman. We will now go to the first panel. That will be
Derril B. Jordan, Associate Solicitor, Division of Indian Affairs,
U.S. Department of the Interior and Thomas LeClaire, Director, Of-
fice of Tribal Justice, U.S. Justice Department.

We will take you in that order. If Derril will start first, then we
will go on to Tom.

STATEMENT OF DERRIL B. JORDAN, ASSOCIATE SOLICITOR,
DIVISION OF INDIAN AFFADIS, DEPARTMENT OF THE INTE-
RIOR, ACCOMPANIED BY MICHAEL ANDERSON, DEPUTY AS-
SISTANT SECRETARY FOR INDIAN AFFAIRS

Mr. Jordan. Mr. Chairman and members of the committee,
thank for your the opportunity to testify today on the principle of
tribal sovereign immunity and say that we welcome this hearing
this morning and hearings that are yet to come. We believe the
Senate and everyone involved in this issue needs as much informa-
tion as possible before considering waiving tribal sovereign immu-
nity in the courts of other governments.

As several of the Senators have already mentioned this morning,
tribes are sovereign governments and have been recognized by the
United States since the earliest days of our Nation. This Congress,
the Supreme Court and the other courts of our country have also
long recognized that sovereign immunity is an attribute of tribal
sovereignty in the same way that it is an attribute of the sov-
ereignty of other governments within our system.

The question that is now before Congress is whether or not Con-
gress will abandon its support for tribal self-government and tribal
sovereignty by seeking to unilaterally eliminate or diminish tribal
sovereign immunity.

We are aware of no comprehensive studies that have compared
the exercise of tribal sovereign immunity by tribes on one hand
versus the exercise of sovereign immunity by the State and Federal
Governments on the other hand. Yet, proponents of the measures
to waive tribal sovereign immunity continue to rely on what we be-
lieve are a set of invalid assumptions.

Those assumptions are that tribes always exert their sovereign
immunity, never waive it, on one hand, and that the States and
Federal Government always waive and never exercise their sov-
ereign immunity on the other. We believe those assumptions are
unfounded because, on the one hand, it under estimates the degree
to which the Federal Government and the State governments exer-
cise their immunity and it overestimates the degree to which tribes
utilize their immunity in defending lawsuits.

Tribes frequently waive their sovereign immunity, both in tribal
codes and statutes, through water rights agreements that are ap-
proved by this Congress, through business contracts, insurance rid-
ers and subordinate entities.

Even if a comprehensive study were conducted that dem-
onstrated there is indeed a difference between the degree and fre-
quency with which tribes waive their immunity or exert their im-
munity on one hand versus the Federal and State governments on
the other, we don't think that alone is enough to justify unilaterally
waiving tribal sovereign immunity in the courts of other govern-
ments. That's because we believe it is necessary to, first of all, un-
derstand the circumstances and the environment in which tribal
governments exist and operate.

This committee is certainly well aware of the conditions on In-
dian reservations, the physical infrastructure that is either com-

pletely lacking or woefully inadequate, the health conditions on
reservations that are far below the health conditions of the rest of
the population in our country, the high rates of unemployment and
the attendant substance abuse problems — alcohol, drugs — and high
suicide rates that exist on Indian reservations.

These are real problems that confront tribal governments that
demand tribal governments to provide services to their people, to
provide economic opportunity and to help people and families in
distress. These services cost money. Tribes do not have near the
wherewithal and the means to raise governmental revenues that
the Federal and State governments have.

One should not be alarmed or surprised to find that in fact tribal
governments may be, understandably, more reluctant to waive
their immunity, scared to do so because of what it will mean to
tribal government. In fact, I think it's safe to say that without the
ability to raise sovereign immunity, most tribal governments would
cease to be able to exist to provide services to their people.

With regard to the issue of taxation, tribal-State tax disputes,
the Department believes it would be fundamentally unfair at this
time to waive tribal sovereign immunity at a time when the Su-
preme Court has been reinforcing the immunity of the States.
Right now with mutual immunity that exists, both the tribes and
States are immune to suit. This encourages tribes and States to
deal with each other as mutual sovereigns and to work together to
solve their problems.

Nobody has an upper hand in these negotiations because nobody
can walk away from the table and take the other party to court.
Both parties must stay there and try to find a way to reach mutu-
ally satisfactory solutions.

If tribal sovereign immunity is waived, we believe that will re-
move the incentive of many States, maybe not all but many States,
to deal with tribes on a sovereign-to-sovereign basis.

With regard to contractual disputes, again, we do not believe it
is necessary for Congress to enter into this area. Because of hear-
ings like this one, the hearing in 1995, and the many Supreme
Court cases and other cases, both at the Federal, State and also
the tribal levels, any party seeking to do business with an Indian
tribe is well aware of the immunity of tribes and has an ample op-
portunity to negotiate for a waiver to protect its interest.

Let me conclude by thanking the committee for the opportunity
to testify this morning. I certainly would be happy to answer any
of your questions.

[Prepared statement of Mr. Jordan appears in appendix.]

Mr. Anderson. Mr. Chairman, with your indulgence, may I
spend just a few minutes?

The Chairman. Please identify yourself for the record.

Mr. Anderson. Michael Anderson, Deputy Assistant Secretary
for Indian Affairs, Department of the Interior.

I iust wanted to respond to Senator Gorton's comments that he
made on our written record but also to talk a little bit about some
of the comments made this morning.

First, Mr. Chairman, you announced at the start of this hearing
that if there is a problem, Congress should take action. I think

that's a very critical statement because at this time, we've not been
shown there is a problem that requires a congressional solution.

We mentioned the State taxation agreements and I think it
should be clear on the record that Congress should only make deci-
sions if there truly is a problem, which has not been identified yet.
The hearings in Minnesota and Washington State, we will certainly
follow with interest, but at least at the Department, we've not seen
there is a problem that requires a congressional solution.

Second, you mentioned accommodation and certainly there are
non-Federal solutions that could lead to accommodation whether
it's explaining to tribes they have Federal tort claim remedies for
people who are injured on the reservation through Federal lawsuits
against the Federal Government, and also the insurance mecha-
nisms if it's at a lower cost that may give them the ability to waive
their sovereign immunity. So there are certainly non-Federal solu-
tions here as well.

I also wanted to note with regard to Senator Gorton's statement
that Indian tribes are claiming the right to wrong other people,
we've certainly heard no Indian tribes making that claim. Cer-
tainly, that should not be confused with the ability of tribes to as-
sert sovereign immunity, but I don't think anyone in this audience
of tribal leaders or others is saying we claim the right to wrong
other people. It's simply not something that is asserted or done.

Congressman IstooK also mentioned this morning that States are
losing millions of dollars. When we first heard that claim last year
during some of the rider amendments, we were very concerned
about those figures and called tax revenue agents and also the Bu-
reau of Alcohol, Tobacco and Firearms to see are these figures real-
ly accurate.

What the tax revenue agents have done in the States is said,
how much are Indians selling to Indians and non-Indians and
what's the calculation if the States could tax on those reservations?
Those figures were far out of line to actually what the States could
collect.

Of course the States always have the remedy of precollection, so
that's something the Supreme Court has affirmed. So I think there
are many non-Federal solutions here that if actively supported by
the Congress, by the tribes, by State governments as well, could
help find a solution to this issue.

Thank you.

The Chairman. Tom.

STATEMENT OF THOMAS LeCLAIRE, DIRECTOR, OFFICE OF
TRIBAL JUSTICE, U.S. DEPARTMENT OF JUSTICE, ACCOM-
PANIED BY MARK VAN NORMAN, DEPUTY DIRECTOR, OF-
FICE OF TRD3AL JUSTICE

Mr. LeClaire. Good morning, Mr. Chairman. Good morning,
Senator.

My name is Tom LeClaire. I'm the Director of the Office of Tribal
Justice at the Department of Justice. Joining me here this morning
is Mark Van Norman and he's Deputy Director in my office.

Congress and the executive branch acknowledge the importance
of working with Indian tribes within the framework of government-
to-government relations when tribal self-government, tribal land

and natural resources, or treaty rights are at issue. In our work
within that framework, the Justice Department is guided by fun-
damental principles that have governed the relations between the
United States and Indian tribes for over 200 years. The adminis-
tration and the Attorney General honor the United States' commit-
ments to Indian tribes.

Congress has recognized that the United States has a trust re-
sponsibility to Indian tribes that includes the protection of the sov-
ereignty of each tribal government. Under the Federal trust re-
sponsibility to Indian tribes, the United States should exercise the
highest standard of care in matters of tribal self-government.

Continued recognition of tribal sovereign immunity is an impor-
tant part of the Federal Government's protection of tribal self-gov-
ernment, which furthers the United States' longstanding policy of
encouraging Indian self-determination and economic development.

Sovereign immunity is a fundamental aspect of sovereignty
which protects a government from suit to avoid undue intrusion on
governmental functions or depletion of the government's treasury
without legislative consent. Congress carefully considers any waiv-
er of Federal sovereign immunity, mindful of potential impacts on
Federal governmental functions and our treasury.

As to States, the 11th amendment to the Constitution of the
United States embodies the principle of sovereign immunity and
protects the dignity and respect afforded to the States in our Fed-
eralist system. States routinely rely on their sovereign immunity to
bar suits to which they do not consent and have done so to bar
suits by Indian tribes before the U.S. Supreme Court in three cases
within the past 10 years.

States normally reserve sovereign immunity to protect discre-
tionary government functions from suit. States also frequently limit
government liability from monetary damages and bar recovery for
exemplary and punitive damages.

Indian tribes are sovereigns that predate the formation of the
United States. Accordingly, absent tribal government waiver or
congressional abrogation, Indian tribes retain sovereign immunity
as an aspect of inherent tribal sovereignty.

Congress has acted to protect tribal sovereign immunity and has
provided appropriate venues for dispute resolution that do not jeop-
ardize tribal government functions or financial solvency such as the
Indian Self-Determination and Education Assistance Act
[ISDEAA], which extends Federal Tort Claims Act coverage to
claims against Indian tribes acting under ISDEAA contract. The
ISDEAA preserves tribal sovereign immunity while providing
mechanisms for compensating injured parties.

In our view, the longstanding Federal recognition of tribal sov-
ereign immunity does not raise significant policy concerns in the
area of contract claims. The doctrine of tribal sovereign immunity
is well known and an Indian tribe's immunity from suit does not
leave a potential commercial partner unable to protect its interest.
I have listed a number of those protective mechanisms in my writ-
ten testimony.

In the area of tort claims, the Department of the Interior informs
us that Indian tribes have obtained automobile, property owner's,
and general liability insurance to ensure against tort claims by in-

dividuals. The ISDEAA extension of Federal Tort Claims Act cov-
erage for certain claims against Indian tribes arising out of per-
formance of those contracts provides further protection. In our writ-
ten testimony, we have suggested a framework for making insur-
ance coverage accessible while protecting tribal governmental func-
tions.

Indian tribes or reservation Indians are subject to tribal law and
accordingly, are generally exempt from State taxation and regula-
tion in Indian country. When Indian tribes or individual Indians
generate value through economic activities within their reserva-
tions, Federal law may also preempt State taxation of non-Indians
engaging in commerce with them. In contrast, under prevailing Su-
preme Court rulings where Indian tribes or individual tribal retail-
ers market prepackaged goods to non-Indian without adding res-
ervation value, the non-Indian consumers may be liable to pay non-
discriminatory State taxes on the transaction.

The Supreme Court has recognized that States and Indian tribes
may enter mutually satisfactory tax agreements and to avoid
undue burdens on commerce and facilitate tax collection. Seventeen
States have entered into such tax agreements with Indian tribes.
In our view, such agreements are the best mechanisms for mutu-
ally satisfactory resolution of tax collection issues between States
and tribes.

Thus, we concur with the Interior Department, legislative waiver
of tribal sovereign immunity in this area is unwanted.

The Interior Department informs us that Indian tribes frequently
enact their own waivers of sovereign immunity and like the Fed-
eral and State governments, Indians would limit their waivers of
sovereign immunity to tribal courts.

Tribal courts are central institutions of self-government because
they are important forums for ensuring public health and safety
and for adjudicating disputes affecting personal and property rights
in Indian country. Tribal courts give life to tradition and values
embodied in tribal law and are essential to the political integrity,
culture and identity of tribes.

That's why we continue to work cooperatively with the Depart-
ment of Interior in trying to increase funding to those fundamental
institutions and increase training opportunities for the personnel
involved in tribal courts.

In conclusion, the Justice Department respectfully suggests that
to the greatest extent practicable, legislation dealing with tribal
sovereign immunity should be developed based on consultation and
consensus with Indian tribes. In our view, legislation in this area
should preserve tribal governmental solvency, authority and func-
tions, including tribal court authority and tribal sovereign immu-
nity.

Thank you, Mr. Chairman.

[Prepared statement of Mr. LeClaire appears in appendix.]

The Chairman. Thank you.

I want to share something with you. I think I'm the only member
in the U.S. Congress that actually lives on a reservation within the
boundaries of the reservation in Colorado, so I'm very well aware
of the problems that Indian people face with education and high

school dropouts, alcoholism and all the rest and I'm a supporter of
the sovereign immunity issue.

There is some things going on out there in Indian country that
I think really are driving this bill and these hearings. I might men-
tion one. We won't get involved in it because it's in the courts, but
I wanted to tell you about it.

In a court case going on now between Amoco and the owners of
some individual properties within the reservation I live on — it's
checkerboarded like some are in the United States — recently courts
held that the tribe owns all of the coalbed methane gas because it's
a property of coal. In that appellate court, it was a three-person de-
cision that overturned a lower court. I see you nodding, so I'm sure
you're aware of it.

Whether the courts are right or wrong, they're going to review
that, the full court is, I can tell you when we deal with taxation
and talk about potential backlash and what happens, this is what
happened in that case where it is now.

The county, LaPlata County of Colorado, collects about one-fifth
of all the revenue from the taxes that are now levied on the non-
Indian owners of those natural gas wells within the boundaries of
the reservation. They're on private property and bought pieces
years ago.

Some of those people built homes based on the ability to pay
back the banks for the house. All of those royalties have now been
put in escrow and held up by Amoco until the final court decision
is made about who owns the gas.

The first thing that happens if the courts do not reverse their de-
cision somewhere along the line is that the county will lose about
one-fifth of all its revenue. So they've already said what they are
probably going to do, if they lose it, is raise the property taxes on
the very people that are going to lose their homes. Meanwhile, the
tribe will not have to pay any taxes at all on those revenues the
court is holding for them.

I'm not really taking sides in this but I can tell you it's one of
the things that has kind of created a backlash and the question of
why we're here today. I don't know if you read the newspapers this
week but the New York Times, the LA Times, Rocky Mountain
News, USA Today, all had front page stories this last week dealing
with tribal sovereignty and partly about taxation.

So regardless of what side you're on in this thing, when you say
there is really no problem and it's not hurting people, I can tell you
that I know some people that are hurt. We can go back in history
and discuss a lot of things about who was wrong and who got hurt,
but what we're faced with right now I think are some things that
are clearly going to fly in the face of nobody getting hurt and no
problem.

There is a problem. If nothing else, it's with the perception that
all people aren't being treated equal and that's why we're here.

I wanted to pass that on to you and if you haven't looked up that
case or watched it, they tell me that will set a precedent for lit-
erally all natural gas in the United States that's being drilled with-
in the boundaries of the reservations no matter who owns it. It
may be a major decision dealing with hundreds of billions of dollars

over the long run. Either way, somebody is going to get hurt in
that court decision. I'm absolutely convinced of it.

Mr. Jordan. If you don't mind, I'd like to respond to that. We
are very much aware of that case.

First of all, it doesn't involve taxation. It's not a case involving
the tribe trying to tax anybody. This is a tribe claiming ownership
of the coalbed methane gas.

The Chairman. That's right. It really involves the loss of taxes
from the other side of the equation.

Mr. Jordan. And the other thing is these are Federal courts that
are making these decisions. Clearly, as you noted, someone is going
to get hurt, but it's not because of sovereign immunity, it's not be-
cause there's a tribal court involved that's not providing someone
with a fair hearing and an opportunity for due process and so forth.

The Chairman. That's true. Nobody is denying that or said
there's not an opportunity for due process. What I was really get-
ting to was the potential backlash that drives bills like this.

Mr. Anderson. The comment I was making is that sovereign im-
munity and the waiver wouldn't solve that situation. Certainly
there are consequences from however that case is resolved. This is
an interpretation of the Federal Reserve rights when the Federal
Government transferred it to the tribe, how much was the coal
methane reserved or not. Say the tribe is correct, that means
they've lost the benefit for 67 years of revenues.

The Chairman. So they've been hurt already because they've lost
years and years of what that revenue would have been. If you tell
that to a non-Indian who is losing her home, if you think they're
going to be understanding about it, you're wrong. It's a terrific
backlash building in Indian country because of things like that.

I'm not trying to say who is right and who is wrong because I
know both sides have been hurt in the history of the United States.

Senator Gorton, did you have any comments or questions?

Senator Gorton. Yes; Mr. Jordan has taken me straight back to
law school and the marvels of the sometimes brutal implications of
the common law.

He tells us any two parties seeking to do business with the tribe,
the concept of caveat emptor should prevail. Mr. Chairman, caveat
emptor is Latin for let the buyer beware. The old situation is if you
got defrauded in the contract, tough. That's very interesting.

Would you tell me what other areas of the law Mr. Jordan, you
think the caveat of caveat emptor should apply?

Mr. Jordan. The issues with which we're dealing today, I think
particularly with regard to contracts.

Senator Gorton. My question was, as a lawyer, are there some
others? Should caveat emptor apply when the State signs a con-
tract with an individual; should it apply between individual citi-
zens, or is it only Indian tribes that should benefit from the doc-
trine of caveat emptor?

Mr. Jordan. I think it generally applies within the area of com-
mercial dealings. I have a case before me

Senator Gorton. You do? You think that caveat emptor gen-
erally applies in commercial transactions?

Mr. Jordan. There may be some judicially and statutorily carved
out exemptions to that, but generally, it applies. If you'll let me an-

swer, I have a case here that was given to me yesterday. The name
of the case is Federal Sign v. Texas Southern University. I haven't
had a chance to read it but poked through it quickly last night.

It's a decision decided June 20, 1997 by the Supreme Court of
the State of Texas. Let me read you one passage of this case.

Sovereign immunity embraces two principles — immunity from suit and immunity
from liability. First, the State retains immunity from suit without legislative con-
sent, even if the State's liability is not disputed.

Senator GORTON. Mr. Jordan, with all respect, I asked you
whether or not there were other transactions except those Indians
in which the doctrine of caveat emptor should apply?

Mr. Jordan. I think I answered you that generally, within the
realm of commercial dealings.

Senator Gorton. I'll accept that as your understanding of the
law.

Mr. LeClaire, Is the position of your department that not only
does the doctrine of sovereign immunity protect Indian tribes from
any kind of lawsuits by the States in which they are located or in-
dividuals in the States with respect to on the reservation Indians,
but it's the administration's view it should apply to businesses run
by Indians off- reservation as well. Is that the thrust of the position
of the United States in Kiowa Tribe v. Manufacturing Tech-
nologies?

Mr. LeClaire. I think our position in Kiowa reflects the reality
that much of the commerce that occurs involving Indians occurs
both on and off the reservation, particularly when dealing with con-
tractual relations.

It would be our position that when the tribe acts in its sovereign
capacity, in such acts the doctrine of sovereign immunity applies.
What we've said is that in dealing with commercial arrangement,
the parties, being on notice that sovereign immunity is an issue,
can make other arrangements to deal with that and protect each
other's interests.

Senator GORTON. You regard the conduct of business enterprises
and competition of private enterprises as an exercise of sovereignty
when they're conducted by the tribe?

Mr. LeClaire. When they're conducted by the tribe as a tribal
government.

Senator GORTON. So the Government of the United States be-
lieves it should apply off-reservation as well as on-reservation?

Mr. LeClaire. When it's in the capacity you've outlined, yes.

Senator Gorton. If this bill were cast in a form of saying that
tribal sovereign immunity is waived by the tribes in the courts of
the United States to the same extent that the United States itself
has waived sovereign immunity and in the courts of the various
States to the same extent that the States have waived their sov-
ereign immunity, would you then be in agreement with the bill?

Mr. Jordan. With the 50 States, they are all over the board.
There are some States like Texas that have essentially no waiver
absent legislative enactment and others have standing waivers that
require you to file certain administrative notices and so forth.

With regard to the United States, again, there are areas where
the United States has waived its immunity and others where it has
not. So it is pretty much across the board.

Again, to get back to my opening statement, when you look at
the realities of tribal government in terms of the needs that they
have to meet and the available resources, it may not be appropriate
that tribal immunity be waived to the extent the United States' im-
munity is waived.

The United States certainly and the States have much greater
ability to defend lawsuits and also to pay judgments. The cost of
defending an action on the basis of sovereign immunity alone, just
filing motions to dismiss, can cost a tribe hundreds of thousands
of dollars.

I, as a former tribal attorney, have seen the bills at both ends.
I've generated them and I've seen them come in the door. It can
be very expensive just to defend these lawsuits.

Senator Gorton. So sovereign immunity ought to be more avail-
able for poor governments than for wealthy governments. That
would be appropriate for the State to say small towns and the ones
without a big tax base ought to have sovereign immunity?

Mr. Jordan. I can't speak to the issue of towns because I think
in different States, municipalities enjoy different levels of immu-
nity, but with regard to the States, each of the 50 States has made
its own choice.

Senator Gorton. Let's put it the other way. Should we then
waive sovereign immunity for those Indian tribes that are now
wealthy?

Mr. Jordan. There are probably a few that I guess one might
qualify as wealthy, but again, I think if you compare resources to
need, I don't think there is any question

Senator GORTON. Would it be okay to waive sovereign immunity?

Mr. Jordan. I think just like the States have the right to waive
their immunity and make those decisions for themselves, I think
in the spirit of the policies of this Congress and this Administration
of self-government and self-determination, that tribes ought to be
free to choose to what degree they will waive their immunity.

Senator Gorton. While one has to refresh one's memory after a
number of years, I have here the Supreme Court's decision in the
Colville case. In that case, the tribe and the United States of Amer-
ica sued the State of Washington successively in lower court, but
in fact, the State of Washington was the defendant in that case.

The State of Washington was asserting the right to require In-
dian cigarette sellers to purchase and affix on the cigarette pack-
ages they sold to non-Indians, State tax stamps. The Supreme
Court of the United States affirmed the right of trie State of Wash-
ington in that case that these transactions were taxable.

I think you described the holding rather disingenuously in your
statement that they allowed us to tax the State of Washington to
impose requirements on the Indian tribes. For 18 years now, the
Indian tribes have refused to abide by that decision of the Supreme
Court and engage in purchasing those State tax stamps and
affixing them to cigarettes.

The Supreme Court, quite evidently, determined that exemption
from taxation under those circumstances was not an attribute of
sovereignty, that it was an appropriate exercise of State respon-
sibility. You still take the position that the State of Washington
should not be permitted to sue the tribe, the owner of those busi-

ness enterprises to enforce an obligation which the Supreme Court
of the United States has determined to be valid?

Mr. LeClaire. I think we take the position that what has
worked the best has been when the two sovereigns have reached
agreements. I understand in Washington, quite a few of the tribes
have reached such an agreement.

Senator Gorton. The question is, you have a Supreme Court
that says the State has this right. Your position is, the State
should not be able to enforce that right, it should have to negotiate
with it. It doesn't have to negotiate with me over whether I pay my
taxes or you, but when the Supreme Court has stated that this is
the law, your view is the State should not have the right to enforce
that law, it should have to negotiate whether or not the other party
wants to obey the law and the extent to which it wants to obey the
law?

Mr. LeClaire. I think it's a question of where the tax falls. We
agree the tax would apply, but there are diverse mechanisms to re-
cover that tax. One of the ways that we have suggested is going
through the wholesalers to ensure that the tax is paid.

If the point is for the State to ensure that the tax is paid, the
question then becomes whether or not there is a mechanism to col-
lect those taxes. The question becomes should that responsibility
fall on the tribes or could there be another way that is less intru-
sive to collect those taxes.

We suggest that by imposing the tax at the wholesale level, the
tax is collected and the tribe's immunity

Senator Gorton. In 18 years, the State has found the only way
it can enforce it is to find a spy someplace or another and seize the
cigarettes as they are on the roads of the State. I suppose they
probably catch maybe 2 percent in that fashion because the bonded
wholesalers are outside of the State and you can't require a whole-
saler in Idaho to put Washington State tax stamps on his ciga-
rettes.

My frustration with your position is, here you have a case that
your predecessors argued in the Supreme Court, you lost it. The
Supreme Court said the State had the right to say to the seller on
the Indian reservation, purchase and put the tax stamps on those
cigarettes. They don't do it, they defy it. They defy the law. You
say the State should not be able to enforce its tax laws in exactly
the way it would enforce them against anyone else and the only
way which is deemed to be effective, but they have to do it some
other way. That's your view?

Mr. LeClaire. I think our view is that we would not ask the
Congress to intervene and have a blanket waiver of sovereign im-
munity to accomplish a specific resolution of a problem in Washing-
ton that might be resolved by agreement.

Senator Gorton. It's a problem in more than one State. Would
you allow it just for the purpose of cigarette taxes, sovereign immu-
nity?

Mr. LeClaire. We would not support the notion of a blanket
waiver of sovereign immunity when there are other resources avail-
able before we implement Federal legislation.

Senator Gorton. I understand his position, Mr. Chairman.

The Chairman. I'm not going to try and compare court cases
with two attorneys, not that I have anything against attorneys. I'm
really interested in trying to find an equitable solution for non-In-
dians and Indians.

Mr. Jordan, before the Federal Government takes land into trust
on behalf of a tribe, is it required to consider the tax consequences
of the decision?

Mr. Jordan. Yes; it is under our regulations of 25 C.F.R., Part
151.

The Chairman. Would a broad waiver of tribal immunity require
the Department to participate in defending a wider range in new
areas? If we did waive tribal immunity, would that require the De-
partment to participate in bigger, broader defense of a wider range
of activities?

Mr. Jordan. Yes; it would, if a tribe asked us to intervene or to
defend them, yes, it would.

The Chairman. Tom, do you think State courts would be neutral
forums?

Mr. LeClaire. I think the tribes do not necessarily consider the
State courts to be neutral forums. There seems to be some distrust
on both sides. As a policy matter, we think the tribal courts are in-
stitutions of tribal government. We've been supporting them, we've
been trying to increase funding to those courts, and we believe they
provide tribal governments with the best location for adjudicating
disputes that occur within the boundaries of that tribal govern-
ment.

The Chairman. Those are the only comments or questions I had.
I appreciate you being here this morning.

We'll move along with panel two. First will be Judge R.A. Ran-
dall, Minnesota Court of Appeals, St. Paul, MN; Michael Harris,
Attorney-at-Law from Tahlequah, OK; Scott Morrison, Attorney-at-
Law from Wilburton, OK; Phillip Martin, Chief, Mississippi Band
of Choctaw Indians; Ron Allen, President, National Congress of
American Indians and Mark Jarboe, Dorsey and Whitney, LLP,
Minneapolis, MN.

We will try to encourage you to limit yourself to this 5 minute
rule and turn in all of your extended comments in writing for the
record.

STATEMENT OF R.A. RANDALL, JUDGE, MINNESOTA STATE
COURT OF APPEALS

Judge Randall. Thank you.

It is going to be difficult in the limited time available to even
begin to go through the salient points that are needed in relation
to Senator Gorton's proposed bill, contracts, taxes, the core issue,
tribal immunity, tribal sovereignty, so we appreciate the chance to
have forwarded things to the record first.

What I am to say and what I have submitted comes from two
published opinions which have been widely circulated — Cohen v.
Little Six, 543 N.W.2d, 376, 1996 and Granite Valley Investors v.
Jackpot Junction, 559 N.W.2d, 135, 1997. Those are a part of the
record. I would encourage those interested to read them in their
entirety if that is possible.

I came here today with some friends and colleagues, Cherokee
Attorney Michael Harris, Choctaw Attorney, Scott Morrison, and a
friend, Rosie Burlinson to talk about why this presently held view
of sovereignty with the inherent tribal immunity from suit has
been turned on its head and deprives the people living within a
reservation boundaries, whether Indian or non-Indian, of the most
precious rights possible, the benefits of that State constitution and
the U.S. Constitution and the Bill of Rights.

What is happening on reservations today has become a form of
an autocratic collective, all of the power goes to the tribal council
and the individual rights have been submerged. That is why, Sen-
ator and the panel, across this country 75 to 80 percent of Indian
people no longer live on reservations. That's all in my opinion.

There is only a tiny fragment of people still living within reserva-
tion boundaries. Once they leave a reservation, they are entitled to
all the benefits of their Constitution, in my case, Minnesota, Colo-
rado, Oklahoma, and of course the U.S. Constitution. Once they go
back inside, those rights disappear.

Things that Indian tribes need to protect their right to develop
as any other city, town or unit of local government are in place al-
ready under the State and Federal Constitution, if you choose to
use them. There is a limited form of immunity for cities, towns,
counties, and school districts. They are administered by the State
legislature in proper legislative forums. As you said, Senator, you
believe in States' rights and I think all of us do.

If you organized the reservations like all other cities and towns
in the State where the 80 percent of the Indian people reside, they
would have this limited immunity, they would have a complete ab-
sence of taxation on municipal buildings. There is no income or
property taxes on the government buildings in Seattle, Spokane,
Keno, Las Vegas, and Denver.

So the present form of government has been sufficient for all of
us in this country, including all Indian people living off a reserva-
tion. What has happened somehow is that when you move back
onto it, you take away from these people their protections — that's
why we're here — you have to understand the following.

On any piece of reservation or trust land, there is no guarantee
the State constitution, the U.S. Constitution and its precious Bill
of Rights control. There are no guarantees that civil rights acts,
Federal or State legislation against age discrimination, gender dis-
crimination, or sexual discrimination will be honored. There are no
guarantees of the Veterans' Preference Act, no civil service classi-
fication to protect employees, no guarantees of OSHA, no guaran-
tees of the Americans with Disabilities Act, no guarantees of the
right to unionize, nor the right to teacher tenure laws, no right to
the benefit of Federal and State whistleblower statues, no guaran-
tees against blatant nepotism, no guarantees of a fair and orderly
process concerning access to reservation housing, no freedom of the
press and no freedom of speech.

They may claim they are there, but the court cases you've been
referring to are replete with distinct cites set out in my opinion
that for some, to me, inexplicable reason, the U.S. Constitution
does not imply in its entirety within reservation or trust land
boundaries.

In my opinions as a judge, neither the Congress, nor the Oval Of-
fice, nor the judiciary, has the power to revoke the constitutional
amendment giving all U.S. citizens, which American Indians are,
all the rights and privileges of each individual State they reside in.
You cannot do it without going through the cumbersome process of
modifying the U.S. Constitution.

Yet, somehow de facto, that has been done. You do not have all
the individual rights of your State constitution whether Indian or
non-Indian, if you live on or pass through a reservation or trust
land.

It is ironic that every time an American Indian sets one foot off
a reservation, he's now guaranteed the benefits of that State con-
stitution of which he's a citizen, the U.S. Constitution and the Bill
of Rights. It is only within these enclaves that we have this amor-
phous, generic form of government.

There has been some reference to tribal courts. I do not know
where to begin and I can see my lights are running out but every
State has a constitution setting up a form of courts, generally ap-
pellate and trial. The U.S. Constitution, you are familiar with.
Those judges are independent, either elected by the people or ap-
pointed by the Governor or the President with consent of the Sen-
ate. There are constitutions to follow.

There is no such thing with tribal courts. There are 556 feder-
ally-recognized reservations in this country. I'm totally familiar
with those in Minnesota and several others. Take a look at the ac-
tual structure of any tribal court and see if you think that's a pos-
sible place for these people to see redress.

They may or may not have lawyers or judges, they may or may
not have passed the bar, they may or may not have criminal
records, they are not elected by the people and not appointed by
the Governor or President with the advice and consent of the Sen-
ate. They have no independence.

If you need to protect the culture and spirituality, this is in my
opinion, that can be done as we do it for the 99 percent of Ameri-
cans who do not reside on reservations. We treasure the First
Amendment in this country. The one place where you cannot en-
force it is on a reservation. There is no freedom of speech and free-
dom of the press on a reservation or trust land.

We have in this country besides the major religions, Christian
and non-Christian, sects, Amish, Mennonite and they are all State
citizens of their States, enjoy all the protections of that State. The
one place you can't guarantee those protections is inside a reserva-
tion boundary. The tribal courts have no enforcement mechanism,
they have no body of law based on their State's constitution; that
would be fine if they were a foreign country but they are not.

The very fact that we are here, the very fact Congress has the
power to eliminate tribal immunity, leave it alone or increase it, as
all court cases prove, shows they are under the plenary power of
Congress, as all of us are. There is no case ever that equates any
Indian tribe, nor any of our 50 States in the same category as Can-
ada, Mexico, or New England.

I'm going to finish soon but the dynamics of this are, to protect
the rights of Indian people within reservation boundaries, the sys-

tern in place since 1787 and the admission of the last State, Ha-
waii, will do fine.

The Chairman. Your Honor, I hate to interrupt you but as I
mentioned earlier, there is a series of three hearings. This one was
not primarily focused on civil rights, it's primarily focused on tax-
ation, contracts, and taxes.

Judge Randall. May I respond?

The Chairman. I appreciate your testimony and I find it very in-
teresting, enlightening, and educational, but we want to try to keep
the focus. Otherwise, all witnesses will be getting off on all kinds
of things that we simply won't have time to deal with in today's
forum.

Judge Randall. May I respond and then I'll close.

The topic today is contracts and taxation. Our government is a
contract between the governing body and its people. The 13 original
colonies contracted only certain rights to the Federal Government
for a union; the next 37 States did also. All rights of people be-
tween their governing bodies are a contract.

The best way to enforce these contracts in lobbying, commercial
dealings, taxes and who gets taxed, is to observe the dictates of
that State constitution as all Indian people are entitled to, and the
dictates of the U.S. Constitution and the Bill of Rights. That is our
contract with each other.

I appreciate the time to come here.

[Prepared statement of Judge Randall appears in appendix.]

The Chairman. Thank you.

We'll now go to Michael Harris.

STATEMENT OF MICHAEL HARRIS, ESQUIRE, TAHLEQUAH, OK

Mr. Harris. I appreciate the opportunity to address the commit-
tee. It seems fitting since John Marshall's Cherokee cases are
largely responsible for this discussion that somebody from the Na-
tion be present to continue to add to the confusion.

Senator Gorton took me back to law school as well and I started
thinking about what a contract is. The first thing I learned in law
school was it is a legally, enforceable agreement. Immunity fore-
closes enforcement of any agreement.

Sovereign immunity is not an inherent attribute of sovereignty.
It was a doctrine which was an extension of a device legitimizing
the rule of the monarchy, the divine hierarchy of the kings. We re-
tained it in our common law but for different reasons.

It was thought at the time that any award against the govern-
ment by the judiciary was a violation of the separation of powers,
a disbursement of public moneys in favor of one citizen. However,
the Federal Government and every State in this Union has abro-
gated to some extent their immunity because they realized that an
injustice visited on one citizen is an injustice visited on all citizens
wnen it's practiced by your government.

This principle has gained favor in every government except tribal

Sovernment. It's hard to explain to people what life is ana how to
o business in Indian country witn people who think it's ade-
quately defined by section 1151, title 18. To know what Indian
country means is to know what sovereign immunity means and the
hysteria that surrounds any discussion of immunity always speaks

louder than an advocate opposing it. This alarm is not only mis-
placed, it's subversive.

Once you understand that sovereignty and* sovereign immunity
are different attributes with different aspects, then you can com-

Erehend the injury tribal members are subjected to on a routine
asis. It's like watching the drowning man ask for a glass of water.
Immunity is as necessary to sovereignty as duct tape is to a good
architect.

Sovereign immunity was conferred by judicial decision. This was
based on unsupported presumptions and specious reasoning and
the most well worn contention is it promotes economic development
and self-sufficiency. This opinion kind of reflects an attitude that
economic development is some sort of seismic event that issues
forth from the ground to be enjoyed by the patient and watchful.

If modern economists agree on nothing else, they agree it's pro-
moted by the proper business climate. If sovereign immunity were
meaningful in any significant sense, why historically do Native
Americans continue to rank at the bottom of all social and eco-
nomic indicators, why is tribal unemployment averaging 50 percent
and why with the enormous advantage and competitive edge of ex-
emption from State taxes, Federal taxes and immunity from suit
have no Indians completely dominated the market in every way?

The truth is tribal immunity deters growth, prosperity and eco-
nomic independence. Non-tribal sources of investment and capital
are understandably reluctant to negotiate agreements with tribes
who are immune from suit. Legal uncertainties, high transaction
costs and the very real threat that any agreement you enter will
be found unenforceable are an impediment to commercial inter-
action between Indian tribes and non-Indians.

These obstacles are not as easily dispatched as some would sug-
gest by including some contractual boilerplate of waiver of sov-
ereign immunity, selection of law, selection of forum, because no
agreement can bind if a person who contracts doesn't have the au-
thority. This is not altogether clear.

Often there is considerable disagreement within a tribe who has
the authority to contract. It's not uncommon at all for a judicial
proceeding to determine well into the performance of a contract en-
tered into by a chief or a tribal chairperson that it violated the sep-
aration of powers by dispersing moneys — that's a legislative func-
tion deferred to the council.

A contractor can't be certain that any subsequent enactment of
law by the council will invalidate the agreement. Unless there is
a law to the contrary, there is nothing that prevents any law from
having retroactive effect as well as prospective effect.

These problems vary from tribe to tribe in frequency and mag-
nitude because tribes are as different as the cultures they rep-
resent. No complement of competent lawyers can guarantee safe
passage negotiating tribal law.

A local law firm in Washington, DC, Swidler and Berlin, 175 law-
yers, is stuck in Federal litigation right now and in tribal court
with the Cherokee Nation. Another law firm in Tulsa is in State
court.

The Chairman. Mr. Harris, we're going to have to go on. We're
going to have to stick closer to our time schedule.

[Prepared statement of Mr. Harris appears in appendix.]

The Chairman. I will now go to Scott Morrison from Wilburton,

OK.
I would remind the panel that we're going to be dealing with civil

rights, social problems, law enforcement and tribal jurisdiction and

so on. We're going to try to keep the focus of this to taxation and

contracts.

STATEMENT OF SCOTT MORRISON, ESQUIRE, WILBURTON, OK

Ms. Morrison. Yes, sir; I can appreciate that but life often isn't
clean and doesn't fit into one particular pigeon hole.

One of my most troubling concerns is where tribal sovereign im-
munity is being extended to. It's being extended to even against the
Federal Government. The Eighth Circuit is considering whether or
not it extends in the criminal area with Darrell Wadena's argu-
ment; the Seventh Circuit has decided that sovereign immunity ap-
plies in a false claims act on the civil side.

It's very troubling when even the Federal Government cannot
sue a tribe. The tail is wagging the dog when that happens and
we've got serious problems.

The situation Id like to talk about, and I have personal experi-
ence, is a Federal contract with a tribe where my own tribe con-
tracted Federal criminal jurisdiction and exercised it through a
tribal court. However, when we tried to seek redress under the
Federal Torts Claims Act, tribal sovereign immunity is being as-
serted against us.

The woman behind me is Rosie Burlinson. The arrest came out
of passing out literature, passing out a one-page pamphlet. Ms.
Burlinson was arrested for videotaping the arrest of a 64-year-old
grandmother, and Major Dry was arrested 30 minutes later.

When our tribe adopted our constitution in 1983, we never grant-
ed criminal jurisdiction to our tribe.

The Chairman. What tribe is it?

Ms. Morrison. It's the Oklahoma Choctaw Tribe. We decided our
government could not be trusted with criminal jurisdiction over us.
As it turns out, we were right, yet in 1990 when the Bureau of In-
dian Affairs signed a contract to exercise Federal criminal jurisdic-
tion to our tribe, under Public Law 96-638 contract, from 1991
through 1995, our tribe received over $1 million but they only ar-
rested three people. Our tribal membership is over 100,000. From
1995 until present, our tribe has received a second $1 million and
they have only prosecuted a total of 15 people in these 5 years. Of
the 15, 6 were members of Choctaw for Democracy, a group that
wants civil rights, our basic concern. We want relief from tyranny,
we want to have access to a court.

My written testimony discusses this in greater detail. Choctaw
for Democracy may be viewed as whiners but in my written testi-
mony, I included a list of nine cases we have in tribal court, Fed-
eral court, State court.

The Chairman. Your complete written testimony will be put in
the record.

Ms. Morrison. This is the writ, an example of the documents
that we file. We have fought this for over 2 years. This is one docu-
ment, a writ of habeas corpus that documents the problems that

we've had in our tribal court. This was dismissed in a one-line
order from Judge Seay and now it's on appeal to the 10th Circuit.

When our tribe receives millions of dollars from the Federal Gov-
ernment under Public Law 93-638 contracts and self-government
compacts, who can sue if we can't sue because of sovereign immu-
nity and the Federal Government can't sue because of sovereign
immunity? What do we do? Where else can we go?

The voter registration list which is maintained through Federal
funds, a Public Law 93-638 contract, is not available to all can-
didates and if all candidates don't have access to our voters which
are scattered across the world, then we simply cannot vote the
bums out.

Without review in Federal court, Choctaw citizens and other citi-
zens are simply at the mercy of a government that's out of control
and has proven itself capable and willing to harass and intimidate
tribal members. I think the Choctaw Nation is just a microcosm of
what's going on all across the country.

With the current trend of the law, sovereign immunity will ex-
tend even against the Federal Government, then I think everyone
has serious problems and we need to take a serious, realistic look
at it. The whole point of sovereign immunity was to protect unique
customs and traditions. However, when it's gotten to a point where
unique customs and traditions are no longer valued in Indian coun-
try, we have a problem.

Our tribe basically has taken the position we are a business, that
we are a mere corporation. When we become just a business, then
there is no unique customs and traditions to protect. Customs and
traditions for Choctaws is loving one another, respecting one an-
other and respecting diverse opinions. That's not happening.

So if the purpose of sovereign immunity is to protect unique cus-
toms and traditions, once they are gone, what's the point of sov-
ereign immunity? We've simply become a business. I, as a Choctaw
woman and the woman standing behind me, are not a business. We
are human beings and we deserve respect and dignity and that's
all we're asking for.

Thank you.

[Prepared statement of Scott Kayla Morrison appears in appen-
dix.]

The Chairman. Chief Martin. I would remind the panel to try to
keep their comments to taxation or contracts.

STATEMENT OF PHILLIP MARTIN, CHIEF, MISSISSIPPI BAND
OF CHOCTAW INDIANS

Chief Martin. Thank you for this opportunity.

There's been a lot of lawyer talk here, so there's no need to get
into that.

I've been working for the tribe 40 years and we have grown from
about 5,000 to over 8,000 people. Back in 1945, there was very lit-
tle opportunity for Choctaws. They were not allowed in the public
schools and jobs were scarce, Choctaws weren't working perma-
nently, so we decided that if we're going to live here, if we're going
to maintain our culture, our way of life, then we were going to have
to do something about it.

47-201 98-2

On that basis, what really got us going was the Office of Eco
nomic Opportunity grant that was made directly to the tribe for
them to plan, design and implement. That was to me the beginning
of tribal government in our case we didn't get recognized by the
Federal Government until 1945. From 1830 to 1945, we were not
citizens of anybody. If we were, we weren't enjoying the benefit of
citizenship.

I hear a lot of talk today about how bad tribal governments are.
Well, this act should not be at all because if you make a study
you're going to find a lot of tribes are trying to develop economy
on their reservation, they're going to have to allow limited sov-
ereignty waivers, they're going to nave to take the risk to become
more dependent on themselves.

I believe this sovereignty business is not needed by tribes. The
act is not in the best interest of government or this country. If it
wasn't for the sovereignty, I would not have been able, the tribe
would not have been able to make the progress we have.

Let me cite a few. In 1979, we first opened a small plant doing
work for General Motors. They didn't come in with a lot of money,
they gave us one-half of a million dollar contract and we borrowed
the money and paid on the plant and equipment, and operating
funds. That was a small contract until they saw we could produce.
They saw we could do a quality product, deliver the product on
time at a competitive rate. So word got around in the automotive
industry that there was a minority enterprise and a tribe that can
compete.

We did not have a contract. Whatever two parties make and
agree upon is what I call a contract. You don't need a law to say
you have to waive your sovereign immunity. The big companies
find out within a year's time whether you're going to produce a
quality product or meet their schedule. If you don't do that, they'll
let you go. So far, our people have risen to the occasion and we
have been very successful in my judgment.

We have 10 manufacturing plants as well as business operations.
We employ nearly 6,000 people of all races. We borrowed a lot of
money to do this.

I might add that the Indian Finance Act is one of the best acts
for tribes to get into tribal government because it can guarantee
your loan up to 90 percent. Before then, I was trying to get a loan
from the local banks and they wouldn't even talk to me. Today, we
have bankers and investors all standing around to see if they can
get something going with us.

To me, you will do harm if you insist on this being approved by
the Congress. We're going to be out there fighting you. We value
our right to self-determination and nobody can expand on those
concepts if they're restricted.

Thank you.

[Prepared statement of Chief Martin appears in appendix.]

The Chairman. Ron Allen, if you'd like to proceed?

STATEMENT OF W. RON ALLEN, PRESIDENT, NATIONAL
CONGRESS OF AMERICAN INDIANS

Mr. Allen. Thank you, Mr. Chairman, Vice Chairman Inouye
and Senator Gorton. It's always an honor and pleasure to be able

to come before you on the various issues you address that affect In-
dian country.

I'm here representing the National Congress of American Indi-
ans. It's always an honor to follow such leaders as Chief Phillip
Martin because he and other tribal leaders who have been fighting
for our sovereignty and the rights of tribal governments to co-exist
in the American political system put the fire and the passion in all
of us who are championing this nght every day and every year as
we experience these different proposals that we believe undermine
the fundamental Federal tribal relationship that has existed and
been recognized in this country for 200 years.

We're concerned about this legislation and we, quite frankly, ob-
ject to it, because we believe it is reversing 25 years of policy that
this Congress has administered and advanced to strengthen the
tribal governments, to strengthen their self-determination and self-
governance capacities, to assist tribal governments in pursuing
self-sufficiency goals and to achieve our objectives economically.

We're very concerned about the campaign of what we believe is
misinformation. When you bring cases before us and examples, we
believe we can respond to them tenfold with more examples of suc-
cesses.

If you want to talk about taxation issues, we can show you how
it is working. If you want to show us an example where it isn't
working, we can show you ten examples where it is working.

We do not live in a perfect political system. This Congress is
dealing with problems every day. We have those problems in In-
dian country too. We believe they can be resolved. We believe there
are constructive and progressive answers to the issues being raised.

The notion that the American Indian and Alaskan Native Tribes
do not honor the Constitution and the fundamental rights of the
Constitution is preposterous. We absolutely honor and respect it.
Our whole governmental system is structured around it. One of the
things we advocate is this Congress should be honoring its commit-
ments and its obligations to our tribal governments.

You have proposed three hearings of which this is one to talk
about the various issues that affect sovereign immunity and we ap-
preciate you're methodically trying to address them so we can me-
thodically respond to them with what we believe is true informa-
tion regarding each of these issues.

On taxation issues, yes, there are certain issues out there that
we hear about but we can show you hundreds and hundreds of
agreements that have been identified earlier where we do have
agreements, where we do have negotiations between the tribes and
the States on these taxation issues.

We think the numbers being thrown out are wrong, we think
they're preposterous. Also, we would emphasize that quite frankly,
these State governments have an obligation to Indian tribes and
they have not lived up to those obligations and the majority of
those revenues do not go back to the Indian communities that are
among the most impoverished in this Nation in each and every one
of those States, which has irritated us and has been the subject of
these negotiations for tax recoveries.

The issues for us in that area, we can resolve them. We can re-
solve it between States and the tribes. This Congress should not be

using heavy-handed legislation initiatives to advance that agenda,
you should be providing incentives out there to assist the tribes
and the State governments in terms of issues that they have a mu-
tual concern regarding where these taxes should go and how they
should be used to the benefit of all the people in the State, of which
Indian people are also citizens and have needs for roads, health
clinics, schools and housing assistance, et cetera. Our moneys are
used for our government just like any other government.

With regard to contracts, we do emphasize and appreciate the
comments made by the administration representatives. Contracts
with businesses and tribal governments and our businesses are
ones that should be voluntary. It should be recognized to be vol-
untary. If it's a big contract of any great magnitude, then they
should be bringing along their attorneys and understand Indian
law. They should understand exactly where redress and remedies
are if they're going to be in violation. They should recognize there
is a tribal court system that they will be utilizing to address those
remedies. If they do not like that, they should be negotiating alter-
natives. We believe that is appropriate.

I want to emphasize I believe there are constructive solutions
and we have emphasized that with this Congress. This Congress
has recognized that the courts need to be strengthened. We agree
with that. The Congress has not stepped up, in our opinion, to
meaningful address the financial needs of our court systems to
bring them to the level we want. The Tribal Justice Act of 1993-
94 was one that emphasized that point.

There is no such thing as a neutral court. There are courts that
adjudicate good law and understanding of the law. That's what we
want. We do not want to lose that authority. We think it's an atroc-
ity to try to divert tribal issues to State and Federal courts. It
would flood them, it would cause problems and quite frankly, those
judges don't have as good a fundamental knowledge of Indian law
as the tribal court judges do.

We would emphasize as you move forward in this legislation,
please don't advance legislation based on generalizations and anec-
dotal situations that you may think are atrocity and the norm in
the country. They are not. Most of these issues are local issues and
they should be resolved at the local level.

Last, we believe this Congress has a fundamental obligation to
live up to its responsibility to tribal governments, to protect tribal
government status because we can and will coexist with the Amer-
ican political system. We belong here.

Thank you.

[Prepared statement of Mr. Allen appears in appendix.]

[Applause.]

The Chairman. This isn't a football hearing where we choose up
sides and cheer for our guys. This is a U.S. Senate hearing and
we'd appreciate staying within the decorum of this hearing.

Mark, if you'd like to finish, please.

STATEMENT OF MARK JARBOE, ESQUIRE, DORSEY AND
WHITNEY, LLP

Mr. Jarboe. Thank you for inviting me to appear. I hope my
presence will be helpful to the committee.

I will focus my remarks on the subject of contracts but I'd first
like to make an observation. Early this morning in connection with
the testimony of Representatives Istook and LaHood, Mr. Chair-
man, you referred to the Supreme Court's recent Seminole decision.
Under Seminole, a State, even though required by Federal law to
negotiate a gaming contract with a tribe under the Indian Gaming
Regulatory Act, can refuse to do so. If it doesn't, no action can be
taken against it. The tribe has absolutely no recourse.

I submit, Mr. Chairman, that one should reasonably expect that
if there are Federal requirements that States and tribes enter
agreements on the collection of sales and excise taxes, and if the
only consequences for failure to reach an agreement fell on the
tribes, as they would under the proposals of Representatives Istook
and LaHood, there would be no incentive for the States to enter
those agreements and there would be no recourse for the tribes if
the States refuse to do so, just like under Seminole.

Turning to the issue of contracts, I'm a partner in a law firm of
450 lawyers. We're a worldwide business law firm, representing 36
tribal governments, representing people doing business with
tribes — -banks, investment bankers, construction contractors, equip-
ment providers.

From this vantage point, and from our experience in Indian
country, I can testify from personal experience, that tribal sov-
ereign immunity is not an obstacle to contracting with Indian
tribes. It is an issue, yes, an issue that has to be addressed in the
give and take of contractual negotiations, like any other issue, but
it is not an obstacle.

The reason that it can be dealt with and the reason that it is
being dealt with successfully is first, contracts, as President Allen
said, are voluntarily agreements, entered into by two willing par-
ties and unless both sides are satisfied that the total sum of advan-
tages in the contract outweighs the disadvantages, they're not
going to enter into them. Both sides have to be satisfied on all
points, including the issue of tribal sovereign immunity.

Second, tribes, in order to enter the stream of commerce as they
have been doing more and more in the last 10 years, have come
up with creative ways that deal with the sovereign immunity issue,
that deal with it in ways that serve their purposes, that meets the
needs of the people with whom they are contracting, and that satis-
fies their own basic tribal values.

May I remind the committee that the evolution of sovereign im-
munity in the Federal Government and the 50 States took place
over decades and it all worked out differently. There is no model
waiver of sovereign immunity act promulgated by the National
Commission on Model State Laws. There is no comparable uniform
waiver of sovereign immunity act. Each State does it differently,
each tribe does it differently.

Permit me to give you some examples, recent examples of trans-
actions in which I participated. The Las Vegas Paiute Tribe in Ne-
vada is developing a golf resort on 4,000 acres of tribal land just
outside of Las Vegas. Before it started to finance that project, it did
three things, two of which are instrumental here.

First, it established as a division of tribal court, a tribal commer-
cial court. The tribal commercial court has jurisdiction over all con-

tract and civil matters where the amount in controversy exceeds
$50,000. The judges of that court have to be licensed attorneys.
They don't have to be tribal members, but they have to be licensed
attorneys.

That court applies the substantive contract law of the State of
Nevada, adopted as tribal law, but this is a division of tribal court,
not a State court.

The other thing the tribe did was hold a secretarial election to
amend its tribal constitution. It went that far to include in the con-
stitution a contract prohibiting the tribe from taking any action to
impair the obligation of contracts. Such a provision appears in the
Federal Constitution and applies against the States. It doesn't
apply to the Federal Government, it doesn't apply to tribal govern-
ment, but the Las Vegas Paiute Tribe applied that to itself.

That has been sufficient for the tribe to borrow four times from
Bank of America a total amount in excess of $25 million to finance
its golf resort development and all of those loans transactions are
enforceable in the Las Vegas Paiute Tribal Commercial Court.

Other tribes have set up similar courts. The Mohegan Tribe has
set up a Tribal Gaming Disputes Court, 60 attorneys are licensed
to practice there. It's similar to the Paiute.

The Cow Creek Band of Umpqua Tribe of Indians in Oregon has
adopted a tribal arbitration code under which contracts in which
the tribe agrees to arbitrate disputes are specifically enforceable in
tribal court, the obligation to arbitrate is enforceable in tribal
court, and the arbitration award is specifically enforceable in tribal
court. That earlier this month was sufficient for the tribe to enter
into a contract with a service provider to its tribal health facility.

In Washington State, the Colville Confederated Tribes have es-
tablished CoTville Tribal Enterprise Corporation, a tribal instru-
mentality to carry out the tribal businesses. CTEC recently bor-
rowed $10 million from Key Bank of Washington where the en-
forcement mechanism is a waiver of sovereign immunity from
CTEC, not from the tribes but from CTEC, and only in Colville
Tribal Court. That was satisfactory to Key Bank of Washington.

The Confederated Tribes of the Grand Ronde Reservation simi-
larly set up a tribal corporation for its Spirit Mountain Develop-
ment Corporation which has borrowed from John Hancock Mutual
Life Insurance Company $25 million in order to finance that tribe's
development operation.

Waivers of immunity by the tribal corporation but not by the
tribe are negotiated out. These are different techniques that those
tribes have found appropriate for their circumstances and large
and small contracts are enforceable through those techniques
through voluntary negotiation.

[Prepared statement of Mr. Jarboe appears in appendix.]

The Chairman. Thank you, Mr. Jarboe.

First of all, I was very interested in the comments you made
about the tribal commercial court and the other courts you men-
tioned used by the Colville and other tribes. Are those being used
as models for any other tribes that you know of?

Mr. Jarboe. Not that I know of. A copy of the Las Vegas Paiute
Tribal Court Code is submitted along with my written testimony.
The Cow Creek Band of Umpqua Tribe of Indians has set up some-

thing similar. As I mentioned, Mohegan and other tribes are doing
the same but there is no kind of model that's out there.

The Chairman. You have submitted that in your testimony?

Mr. Jarboe. Yes; I have.

The Chairman. Chief Martin, as I understand your tribe, the
Choctaws in Mississippi are in about the top four or five employers
in the whole State of Mississippi, correct?

Chief Martin. Yes; that's what they tell me. We're the largest
employer in our county.

The Chairman. You mentioned some are Indian and some are
non-Indian. You have a contract with GM to make seat harnesses?

Chief Martin. We started with General Motors but they decided
to go to Mexico, but we're doing business with Fortune 500 compa-
nies, Ford Motor Company, Chrysler, American Greetings Corpora-
tion.

The Chairman. Do you also sell commodities or gasoline and
cigarettes as an example?

Chief Martin. I don't smoke. We have one smoke shop on the res-
ervation.

The Chairman. Do you have a form of agreement with the State
of Mississippi?

Chief Martin. The agreement was that they would have to pay
tax and they are.

The Chairman. So they do?

Chief Martin. Yes; we sell gasoline on the reservation but what-
ever tax has to be paid, we pay that.

On retail, we sat down with the State and at the time we were
negotiating there was very little money on the reservation from
sales, so they give us the authority to go ahead and collect the tax
and keep it.

What they wanted to do was develop fair taxation so the people
wouldn't be hollering unfair tax, so we got that worked out and we
collected our own tax and we don't have to send it to the State.

The Chairman. Under S. 1691 which would waive immunity re-
garding contracts, do you believe that would hinder your tribe's
ability to create jobs and wealth within your tribe?

Chief Martin. I believe so because we've been operating as a
business should operate, deal with whoever you want. There's no
give and take. What we're working toward is win-win. If our part-
ner is going to benefit and we're going to benefit, then we've got
a good contract.

In the case of dispute, we have provisions in there for outside
hearings, we can set up independent groups or we can go to one
of the Federal agencies.

The Chairman. You have a method of arbitration?

Chief Martin. Also, the sovereign immunity part, we waiver up
to the amount of money they're going to invest in the project. If it's
$2 million, then we waive that much. I believe both sides have to
have a good deal. If something happens that we're in breach, then
they can take action against us. If they're in breach, we're going
to do the same thing.

The Chairman. Under that waiver, if a company you entered an
agreement with makes a substantial investment on the reservation,

under that waiver if something goes wrong, they could sue to re-
cover their investment?

Chief Martin. Yes; on the reservation, the tribe has to own the
building, equipment, those types of things. The tribe has to pur-
chase that and the operator comes in.

The Chairman. Ron, you mentioned a number of contracts. I
thought you said something like hundreds. Do you have any defini-
tive number of the number of contracts that are in place now with
States dealing with taxation?

Mr. Allen. No; we don't know the exact number. We will compile
that because we know that is a fact that needs to be clarified. We
know there are tribes all over the Nation that have these tax
agreements with the States over cigarettes, liquor or gasoline sales.
That's a matter of record out there.

The Chairman. Senator Inouye, did you have some questions?

Senator Inouye. No.

The Chairman. Senator Gorton.

Senator Gorton. Mr. Jarboe, if the bill that is subject of this
hearing were the law, would it have prohibited any of the agree-
ments for tribal jurisdiction over contract disputes that you de-
scribed to us?

Mr. Jarboe. I believe so because under S. 1691, parties contract-
ing with Indian tribes could simply sue the tribes in State court or
if there were to be Federal jurisdiction, the Federal court, and
there would be absolutely no reason at all for the contracting par-
ties to agree to negotiate the issue of immunity and court jurisdic-
tion.

If there's a balance here in terms of the various things under ne-
gotiation, this would be weighing down one side of the balance with
one stomp.

Senator Gorton. In any contract between two contracting par-
ties whether it involves Indian tribes or not, the court jurisdiction
is there but the contracting parties can agree to binding arbitration
and waive their rights to go into courts. My question was whether
or not anything in this bill would prohibit the tribe from insisting,
in connection with such a contract, on the jurisdiction of its own
courts. Nothing in the bill would, would it?

The bargaining position might be somewhat removed, but if the
tribe felt that was important, it could insist on that as a condition
of any such contract, could it not?

Mr. Jarboe. Freedom of contract would permit the tribe to do
that. You're right, Senator, the bargaining position would be dras-
tically changed.

Senator Gorton. Mr. Allen, in the tax case I asked the Adminis-
tration witnesses about, the Supreme Court 18 years ago said the
State, the State of Washington, "may validly require the tribal
smoke shops to affix tax stamps purchased from the State to indi-
vidual packages of cigarettes prior to the time of sale to non-mem-
bers of the tribe." I assume you don't agree with that decision, but
it is the law of the land.

It is your position that tribes, through the exercise of sovereign
immunity, should be able to defy that decision and refuse to affix
those tax stamps prior to the time of sale to non-members of the
tribes?

Mr. Allen. Actually, that's not correct, Senator. We, as a matter
of practice with the State, have an agreement with them regarding
our allocation of cigarettes that are allocated to the tribes and their
cigarette shops. That allocation is based on our tribal membership.
It was a technique the State used to avoid having to figure out how
much sales was sold to non-Indians and how much was sold to In-
dians. They collect our tax and the cigarettes we sell are stamped.

Senator Gorton. You're speaking now with respect to your own
tribe but you feel that tribes, in general, if they wish to do so, may
ignore that specific statement by the Supreme Court, refuse to pur-
chase tax stamps in advance and before they have sold cigarettes
by the exercise of their sovereign immunity?

Mr. Allen. With regard to coming from non-Indian sources, yes.
We believe that we have authority between the tribes as a matter
of commerce, as authorized in the Commerce Clause, that we can
have intertribal commerce. So if we are to buy cigarettes from each
other, from tribes, that is not within the State jurisdiction. The law
does not address that particular matter.

When it comes from sales of distributors within the State's juris-
diction, then as far as I'm concerned, the law says what it says and
we have to comply with it. We in Washington State do comply with
it.

Senator Gorton. The State Department of Revenue informs me
as of this week, the cost to the State of the sale of non- tax ciga-
rettes to non-Indians is $64 million a year.

Mr. Allen. We heard that too and we dispute that calculation.

Senator Gorton. So you say no cigarettes are being sold to non-
Indians on Indian reservations without State tax stamps on them?

Mr. Allen. That, I don't know. I know sales is being sold to non-
Indians, but I know the system we use now, it is calculated in the
allocation system that we have.

Senator Gorton. I guess I can't get a straight answer out of you.

Mr. Harris, once again, would you simply refresh me and the
panel on what you learned the definition of a contract was?

Mr. Harris. An agreement which is legally enforceable.

The Chairman. Let me ask just one last question. It's my under-
standing that cigarettes sold on reservations are not legal for re-
sale. Is that correct? If you buy them on the reservation and don't
pay taxes on them, is there a different stamp on them? What is to
prevent somebody from buying a semi-load of cigarettes on the res-
ervation, if you didn't have to pay taxes, and taking them down-
town and putting them back on the market and reselling them? Is
there something in place now that deals with that?

Senator Gorton. The answer is, the State, under those cir-
cumstances, would put the guy in jail because he wouldn't be a
member of the tribe and he'd be off the reservation.

Mr. Allen. That's correct.

The Chairman. Thank you and I thank this panel for appearing.
If you have further comments, we will put them in the record.

Chief Martin. A couple of requests. First, I understand you're
going to be having hearings throughout the country?

The Chairman. Not throughout the country. We're going to do
two more but we are limited by budget constraints. We can't re-

quest to do them in a number of States. We simply can't do it.
There will be one in Seattle and one in Minneapolis.

Chief Martin. It seems like every Indian problem comes along,
everybody goes west but we have 23 recognized tribes. I think we
deserve more attention than that. If you can consider and do it,
having a hearing at Philadelphia, Mississippi, we can show people
what progress we have made in our community.

We're not here just to hope we're going to do something; we're
here because we've done things that have improved the lives of not
only Indian people, but our neighbors in the community as well as
the State.

We don't pay direct tax to the State but indirectly, we pay a lot
of tax to them.

The Chairman. We'll have staff look at our budget and see where
we are. We can't give any assurance we'll do that, but we may.

Did you have a final comment, Judge?

Judge Randall. I'll leave you with one thing, Senator. Perhaps
you've heard it. It's an old Navajo wind chant

Remember all that you have been told here today for everything forgotten will not
disappear but it will return to the circling winds.

I appreciate what the panel has to do and what it has to deal
with. Vaya con Dios.

The Chairman. We'll now go to the last panel. That will be Jef-
frey Klein, New York State Assemblyman; John Lattauzio, Chief
Executive Officer, J&J Mini-Markets, Alamogordo, NM; Tom Love,
Love's Country Stores, Oklahoma City, OK; Gregory E. Pyle, Chief
of the Choctaw Nation, Oklahoma; David Kwail, President, Inter-
Tribal Council of Arizona and Reid Chambers of Sonosky, Cham-
bers, Sachse and Endreson.

We will start in that same order with Mr. Klein going first.

STATEMENT OF JEFFREY KLEIN, ASSEMBLYMAN, NEW YORK
STATE ASSEMBLY, ALBANY, NY

Mr. Klein. Good morning, Mr. Chairman, members of the com-
mittee.

My name is Assemblyman Jeff Klein. I represent the 80th As-
sembly District in the New York State Assembly. I represent parts
of Bronx County in New York City.

I'm appearing today as a representative of concerned New York
State officials who believe the issue of Native American State ex-
cise tax evasion has reached crisis proportions in our State.

I would like to begin by stating that I am not advocating that
States tax Native Americans. I'm here to request that State gov-
ernments be given absolute authorization from Congress to allow
for the collection of State excise taxes imposed on non-Native
Americans when these non-Native Americans purchase commod-
ities such as cigarettes and motor fuel from Native American tribes
or tribal corporations.

Two years ago, I uncovered a proliferation of illegal or bootleg
cigarettes being sold throughout New York State. My investigation
revealed that smuggling groups are illegally importing cigarettes
from low tax States such as North Carolina and Virginia and sell-
ing the contraband to hundreds of illicit retailers across our State

at a far lower price than legal wholesalers and retailers can pro-
vide.

The New York State Department of Taxation and Finance esti-
mated that the State loses approximately $70 million and the city
of New York $12 million in cigarette tax revenue due to this illegal
trade. The State and various localities are hard hit by the scam be-
cause approximately $7.80 per legal carton of cigarettes sold, about
one-third the price of a carton, goes to the State and local govern-
ments via excise and sales tax.

Under my Cigarette Tax Enforcement Act of 1996, storeowners
can face a complete revocation of their license to sell cigarettes for
a 5-year period if caught more than three times selling bootleg
cigarettes. The law also requires that the Department of Taxation
and Finance notify the Director of the Lottery Commission of any
violations of the cigarette tax law and states that a retailer's li-
cense to sell alcohol may also be revoke for violating the statute.

In the 2 years since the law took effect, the State has collected
an additional $30 million in excise tax. However, the growing prob-
lems of Native American tax evasion undermines all headway this
law made in the fight to stop these bootleggers by making it tempt-
ing to buy untaxed cigarettes sold within our own State borders.

The State will continue to be hard hit by opportunists who im-
port cigarettes from reservations and resell them to illicit retailers
throughout the State. There is no need for these opportunists to
make the long trip to North Carolina or Virginia, they only have
to make a short trip to their local reservation.

In fact, in some cases, the drive may not even be necessary.
Many Native American reservations throughout New York State
advertise they will ship tax free cigarettes via United Parcel Serv-
ice anywhere in the State and proudly advertise they do not report
to any tax authorities. Yes, they even collect credit cards.

In 1994, a U.S. Supreme Court ruling allowed States to impose
sales tax on Native American sales to non-Native American cus-
tomers. This decision allows the State of New York to enforce col-
lection of taxes against wholesalers or distributors of gasoline, die-
sel fuel and cigarettes.

It should be noted that the State of New York spent 6 years and
an untold amount of money and time on this lawsuit. The New
York State Department of Taxation and Finance still estimates we
are losing $300 million in annual tax revenue in uncollected excise
tax on the sale of cigarettes and motor fuel. Approximately one-
third of this loss is attributed to cigarettes and one-third to motor
fuel.

In fact, the problem of untaxed out-of-state cigarettes I identified
2 years is mild when compared to the unabated and accelerated
growth of new Native American convenience stores, duty-free ware-
houses and gasoline outlets opening up all over our State, doing a
flourishing business selling tax-free products to Native and non-
Native Americans alike.

In addition, as State petroleum taxes have increased to finance
roads, bridges, and transit, the disparity of prices charged by off-
reservation retailers and on-reservation Native American retailers
aggressively advertise and market their self-imposed illegal exemp-

tions from State taxation to non-Native American purchasers by
selling motor fuel at low discount prices.

I believe today that Senator Gorton's proposal is an extremely
positive development in terms of New York's plight, offering a tan-
gible, realistic means to address this issue. In particular, section 3
offers a ray of hope for retailers struggling to stay in business.

This section would provide a State with an absolute right to sue
a tribe in Federal court to collect lawfully imposed State excise
taxes on sales to non-Native Americans. Under this section, a tribe
would also waive its tribal sovereign immunity only to the extent
necessary for a State to enforce the obligation imposed by this sec-
tion. Thus, a tribe could not hide behind the veil of sovereign im-
munity to escape the obligation which the U.S. Supreme Court has
sanctioned.

On behalf of New York State and the thousands of small busi-
nessmen and women who are struggling to survive against the un-
fair competition of untaxed sales to non-Native Americans by Na-
tive American tribes, I applaud this hearing to allow an open dis-
cussion of this very important issue. I thank Senator Gorton and
his colleagues for introducing this legislation.

I appreciate your courtesy in hearing my testimony. I'd be happy
to answer any questions.

[Prepared statement of Mr. Klein appears in appendix.]

The Chairman. Before we go on, did you have something in your
testimony, perhaps copies of the so-called ads the tribes are taking
out?

Mr. Klein. Yes; I do, Senator. I have a whole folder.

The Chairman. Would you turn in some of those, please?

Mr. Klein. I certainly will.

The Chairman. We will now go to Mr. John Lattauzio.

STATEMENT OF JOHN LATTAUZIO, CHIEF EXECUTIVE
OFFICER, J&J MINI-MARKETS, ALAMOGORDO, NM

Mr. Lattauzio. My name is John Lattauzio. I am President of
J&J Mini-Markets of Alamogordo, NM.

J&J operates six convenience stores in New Mexico with motor
fuel operations and we're located in the southern part of the State.

I'm appearing today in my capacity as a member of the Board
of The National Association of Convenience Stores, as a member of
the Petroleum Marketers Association of American. I am also privi-
leged to serve on the board of the New Mexico Petroleum Market-
ers Association.

As an initial matter, I would like to thank you for calling this
hearing today. For years, NACS and PMAA and other petroleum
marketing organizations have called for congressional attention to
the issue of State tax evasion by Native American tribes and Na-
tive American corporations. We welcome this hearing on this im-
portant issue and thank the committee for allowing us the oppor-
tunity to express our concerns.

I want to be clear regarding the issue under discussion. NACS
and PMAA do not advocate and have not advocated permitting
States to tax Native American tribes, tribal corporations or tribal
members. Instead, NACS and PMAA advocate the States receive
an express authorization from Congress to enforce U.S. Supreme

Court decisions that Native American tribes and tribal corporations
must collect and remit excise taxes imposed on non-Native Ameri-
cans when these non-Native Americans purchase commodities such
as motor fuels and tobacco products from Native American tribes
or tribal corporations.

This issue is fairly easy to understand. When an non-Native
American customer buys 10 gallons of gasoline from one of my
stores in New Mexico, I am required to add 17 cents per gallon to
the cost to the customer and State gasoline excise taxes.

If, on the other hand, a tribal member buys the same 10 gallons
of gasoline from a tribe-owned convenience store, the Supreme
Court has stated that the State gasoline excise tax may not be im-
posed. These two fact patterns are not in dispute.

Under a third scenario, however, the Supreme Court has stated
that if a non-Native American buys 10 gallons of gasoline from a
tribe-owned convenience store, then the State gasoline excise tax is
to be imposed on the non-Native American and the tribe has an ob-
ligation to assist the State by collecting and remitting this tax to
the State. It is this third scenario that is at issue here today.

We're not talking about taxing Native Americans; we are talking
about taxing non-Native Americans and the responsibility the Su-
preme Court has stated tribes have to assist the States in collect-
ing these excise taxes from non-Native Americans.

The Court, in a series of decisions, stretching back three decades
has examined the issue of Native American state excise tax evasion
closely and issued an invitation for Congress to address this prob-
lem.

First, the Court has settled the question as to whether Native
American tribes must collect and remit State excise taxes on motor
fuels and tobacco products imposed on non-Native Americans when
it is a Native American tribe or tribal corporation that sells these

Eroducts to non-Native Americans. The Court has held that tribes
ave the obligation to assist the States by collecting and remitting
these taxes on non-Native Americans.

Second, due to the doctrine of tribal sovereign immunity, the
Court has stated that the States generally cannot enforce this obli-
gation on Native American tribes. In other words, the States have
the right to require the assistance of the tribe, but do not have the
method for enforcing that right.

Third, the Court has stated only the Congress has the authority
under the Constitution to correct this legal inconsistency. Thus, if
Native American excise State tax evasion is to be curbed, it is up
to the Congress to act. This is the reason for my appearance before
you today.

NACS and PMAA respectfully urge this committee to consider
and adopt legislation to give States the right to enforce the tribes'
obligation to collect and remit lawfully imposed State excise taxes
on sales to non-Native Americans by Native American retailers. Ac-
cording to the Supreme Court, only Congress has the authority to
grant this relief.

My home State of New Mexico is currently grappling with this
legal disconnect. Truck stops, convenience stores and smoke shops
operated by Native American tribes will be evading approximately
$14 million in State excise taxes on motor fuels and tobacco by the

end of this year. These tribes are not paying to the State either the
17 cents per gallon State excise tax on gasoline or the 32 cents per
pack excise tax on cigarettes when they sell these products to non-
Native Americans.

As a direct result, New Mexico's tax base is diminished at a time
of record demands on State government. In addition, motor fuels
and tobacco retailers such as myself and other New Mexico market-
ers find it impossible to compete against a group with such a cost
advantage, a cost advantage achieved only through tax evasion.

New Mexico is not alone in facing this problem. To varying de-
grees, the following States are grappling with motor fuels or to-
bacco excise tax evasion by Native American tribes: New York,
Michigan, Oklahoma, North Dakota, Arizona, California, and
Washington. Together it has been estimated that States are losing
$500 million in tax revenues annually from Native American excise
tax evasion.

NACS and PMAA support the approach taken by Senator Gorton
in section 3 of S. 1691 to address tnis issue. Simply stated, this sec-
tion of Senator Gorton's legislation would give a State the express
right to sue a tribe in Federal court to collect lawfully imposed
State excise taxes on sales to non-Native Americans.

My company and other private parties would not be permitted a
cause of action under section 3. Only a State could bring such suit
against a Native American tribe. Thus any argument that this sec-
tion would subject tribes to scores of frivolous lawsuits simply is
not supported.

This section also would require a tribe to waive its tribal sov-
ereign immunity only to the extent necessary for a State to enforce
the obligations imposed by this section. Section 3 would not require
a blanket waiver of sovereign immunity. Instead, it would simply
stop a tribe from hiding behind a legal loophole to escape the obli-
gation the Supreme Court has sanctioned.

It is important to me and NACS and PMAA that our support for
section 3 is not mischaracterized. We are not seeking to vilify Na-
tive Americans or even those Native American retailers that are
evading these taxes. Given the opportunity, I am sure that I and
other members of NACS and PMAA would take advantage of a
loophole that would allow us to avoid paying State or Federal
taxes. That would not make us bad people, that would make us
business people.

NACS and PMAA support the economic development success of
Native American tribes and corporations and would welcome the
opportunity to assist these tribes and corporations in achieving
their success.

I want to thank you for this opportunity to appear before you
this morning. I'll be happy to answer any questions.

[Prepared statement of Mr. Lattauzio appears in appendix.]

The Chairman. Mr. Love.

STATEMENT OF GREG E. LOVE, CHAIRMAN OF THE BOARD,
LOVE'S COUNTOY STORES, INC., OKLAHOMA CITY, OK

Mr. Love. Good morning, Mr. Chairman.

My name is Greg Love. I'm president of Love's Country Stores,
a chain of 127 convenience stores and motor fuel outlets operating

in eight western States, including Oklahoma, New Mexico, and Ari-
zona. Love's is headquartered in Oklahoma City, OK.

I'm appearing here today on behalf of the Society of Independent
Gasoline Marketers of America and NATSO which represents the
truck stop industry.

Petroleum marketers in Oklahoma and other States have been
facing the issue of Native American State excise tax evasion for
over 15 years. A public examination of this issue is long overdue.

I'm here today for one very simple reason, to tell this committee
about motor fuel excise tax evasion by Native American tribes in
Oklahoma. You may hear other testimony today that asserts this
tax evasion problem no longer exists in Oklahoma, nothing could
be further from the truth.

We must all be clear in our understanding of the type of tax eva-
sion at issue. This issue is not about Native Americans evading
State excise taxes imposed on the tribes. The U.S. Supreme Court
has stated conclusively that States do not have the authority to im-
pose State excise taxes on the tribes. SIGMA and NATSO do not
dispute the court's position on this very narrow issue.

The tax evasion that is at issue here is evasion of a tribe's obliga-
tion to collect State excise taxes when a non-Native American pur-
chases gasoline or diesel fuel from a tribal truck stop or conven-
ience store.

The Supreme Court has stated repeatedly that tribes have an ob-
ligation to act as an agent of the State in collecting these State ex-
cise taxes from non-Native Americans, just as my company has an
obligation to assist the State in collecting the taxes for purchases
at our stores.

For many years, in Oklahoma, Native American tribes refused to
fulfill this obligation and this refusal placed my company and oth-
ers at a severe competitive disadvantage. Simply stated, the Native
American State excise tax evasion places us in a position in which
it was impossible for our company to make a profit on our oper-
ations that competed directly with Native American stations.

Let me give you an example of this competitive disadvantage. We
prepared an actual profit and loss statement for one of our stores
that has been in direct competition with a tribal travel plaza. In
1995, our company experienced a loss from that particular store of
just over $5,000 on sales of $6.5 million. If a Native American tribe
owned that store and evaded payment of State taxes, that store
would have made a profit of over $925,000 on the same sales level
and same expenses, other than the tax. This example illustrates
just how profitable this tax evasion can be.

In response to exactly this type of situation, we petitioned our
State government in Oklahoma for a solution. To its credit, our
government responded. Not once but twice Oklahoma was forced to
take Oklahoma tribes all the way to the United States Supreme
Court in its attempts to enforce the State motor fuel excise tax
laws.

Finally, in 1996, Oklahoma was able to reach an agreement with
several of the most active tribes in the motor fuels retailing busi-
ness in Oklahoma. In return for the fulfillment of the tribe's obliga-
tion to collect and remit motor fuel excise taxes to the State, par-
ticipating tribes are to receive a payment from the State equal in

fiscal year 1999 to 4.5 percent of all State collections of motor fuel
excise taxes. That's the compact the State signed with some of the
tribes.

On paper, this agreement should have solved our State's prob-
lem. Unfortunately, it didn't. First, only 9 of Oklahoma's 39 reg-
istered Native American tribes have signed the agreement. That
means that over 75 percent of Oklahoma's tribes are not bound by
this agreement and are not required to collect and remit State ex-
cise taxes on the motor fuel purchased by non-Native Americans at
the retail outlets.

Second, the agreement is entirely voluntary on the tribes' part.
Those tribes that have signed the agreement may withdraw from
the agreement at any time and return to the price of excise tax
evasion.

Third, the agreement does not prevent Native American tribes
from evading State excise taxes either manufacturing gasoline or
diesel fuel themselves, or by importing these motor fuels from out-
side the State, which is very important. The State enforcement on
its taxes of interstate sales is problematic without the support of
the Federal Government and without some direction from Con-
gress.

Attached to my testimony are letters and articles from represent-
atives of Oklahoma tribes that indicate they are trying to import
motor fuels from Texas and New Mexico to evade the excise tax col-
lection system set up by the State of Oklahoma.

Fourth, this compact agreement covers only excise taxes on
motor fuels. It does not cover sales or excise taxes on tobacco prod-
ucts. The State of Oklahoma does have a compact with the tribes
on tobacco but it's a separate deal.

In short, any testimony you may hear today that the problem
Oklahoma has experienced with Native American excise tax eva-
sion has been solved is inaccurate. Instead, the Oklahoma solution
is no more than a stop gap, band-aid solution which has not been
effective in stopping all tax evasion and likely will unravel further
in the near future.

Why did the State of Oklahoma enter into this seemingly one
sided agreement with the tribes? The answer to that question is
simple, lack of bargaining power. Under Supreme Court decisions,
the State has the right to these State excise taxes but does not
have the ability to enforce that right when Native Americans do
not fulfill their obligation to collect and remit the taxes.

Without the ability to petition our judicial system for a remedy,
the State of Oklahoma has a right without remedy.

This committee in particular and Congress in general has the
ability to alter this balance of bargaining power. SIGMA and
NATSO urge this committee to pass legislation that gives States
the express authority to sue Native American tribes in Federal
court tor evading State excise taxes on motor fuel and tobacco
when these products are purchased by non-Native Americans at
Native American stores.

The Supreme Court has stated it is up to Congress to authorize
such lawsuits. SIGMA and NATSO urge Congress to pass such leg-
islation.

Thank you, Mr. Chairman.

[Prepared statement of Mr. Love appears in appendix.]
The Chairman. Thank you.
Chief Pyle.

STATEMENT OF GREGORY E. PYLE, CHIEF, CHOCTAW NATION

OF OKLAHOMA

Chief Pyle. I'm Gregory Pyle, Chief of the proud Choctaw Nation
of Oklahoma. We're the third largest Indian tribe in the country.
On behalf of 107,000 members, I want to express my sincere appre-
ciation to come before this committee.

Tribal sovereignty is the lifeblood of the American Indian's abil-
ity to maintain our culture, our heritage and our right of self deter-
mination. For many years, our people were on the bottom rung of
the social and economic ladder in the country. After the passage of
the Indian Self-Determination Act, the U.S. policy changed to one
of tribal self determination and economic development.

American Indian tribes were encouraged to become self-suffi-
cient, free of Federal financial dependency. For every dollar Indian
tribes make and put back into assistance for our citizens, this is
a dollar less we are dependent on the Federal and State govern-
ments. If tribes were not considered sovereign entities and not re-
cipients of Federal funding, the burden of responsibility for the
care of these citizens would fall back on the State and Federal Gov-
ernments.

Sovereign immunity can be a positive force for all people, Indian
and non-Indian alike, when used appropriately. Our profits are not
used to make individuals wealthy or to compensate shareholders.
We use our profits for such basic things as educating our children,
improving our peoples' health care, providing safe and decent hous-
ing and other causes, things which most Americans today take for
granted. These are the goals and purposes of Choctaw tribal enter-
prises.

There are 4,100 retail fuel outlets in Oklahoma today, 18 of these
are tribally owned. Choctaw Nation owns 8 of these fuel stops. We
have entered into a compact with the State and they collect 100
percent of all taxes not only in Choctaw country, but for the entire
State simply because they collect it at the refinery.

Because of our gaming revenues, economic development ventures
and money earned from our fuel tax compact with the State of
Oklahoma, the Choctaw Nation of Oklahoma has begun tribally
funded programs to provide eyeglasses, dentures, hearing aides and
other medical equipment for our tribal members.

Recently, we added $100,000 to our energy assistance program so
our people would not be cold this winter. We recently put in
$200,000 for scholarships so that our kids can go to college for the
first time in their entire family. We also allocated $400,000 for des-
titute Indians that have no other place to live. We put $100,000
into Boys and Girls Clubs in several counties. We have the highest
unemployment rate in the State and the Nation in our country.

These programs are wonderful examples of how tribal sov-
ereignty benefits both American Indians and non-Indian commu-
nities by sharing State, Federal, private and tribal resources. We
are in the process of constructing an American Indian Center at
Eastern Oklahoma State College in Latimer County, OK. This will

reduce the tremendous dropout rate of 85 percent among Indian
populations, unheard of in trie non-Indian culture today.

The tribal council has contributed $1.2 million in tribal funds,
most of which is 100 percent out of the State compact funds. The
Choctaw Nation has created 1,500 new jobs, out of 107,000 people.
We're building a new hospital, and not waiting for the Federal Gov-
ernment to build it for us. The old hospital was started in construc-
tion in 1929 and we do need a new hospital. We're utilizing exist-
ing health dollars, fuel tax dollars, gaming dollars, tribal economic
development dollars. This is going to provide immediate services to
our Indian people and will reduce the burden of the U.S. Govern-
ment.

The Federal Government projected $39 million for construction of
this facility and we are building it for $22 million, thereby saving
the tax dollars to the U.S. Government of $39 million.

I would like to point out last year alone, gaming revenues al-
lowed 500 additional higher education scholarships to be awarded
to Choctaw youth. This year, we anticipate over 1,000 Indian chil-
dren will be able to go to a university of their choice because we
have gaming and fuel tax revenue.

I urge this committee and the Senate on behalf of the citizens of
the Choctaw Nation to defeat legislation that would strip us of our
sovereignty and our ability to care for our children, our elders and
our disadvantaged citizens.

Yakoke. Thank you and may God bless you.

[Prepared statement of Chief Pyle appears in appendix.]

The Chairman. We will now go to David Kwail.

STATEMENT OF DAVID KWADL, PRESIDENT, INTER-TRD3AL
COUNCEL OF ARIZONA, INC.

Mr. Kwail. Mr. Chairman, members of the committee, tribal
leaders and staff, thank you for inviting your Inter-Tribal Council
of Arizona to testify in this important issue.

My name is David Kwail. I am President of the Inter-Tribal
Council of Arizona. This statement is made on behalf of the 19
member tribes of the Inter-Tribal Council of Arizona.

More than one-half of all reservation lands, 25 million acres, and
one-half of the American Indian reservation population in the
United States are in Arizona. Generally, there are few non-Indian
residents on reservations in Arizona.

This hearing is about whether the United States will honor its
sacred word to the Indian Nations to respect and protect the sov-
ereignty of our permanent tribal homelands. The United States has
given its word on countless occasions in order to secure treaties
and agreements with us. Somehow, because of the passage of time
or politics, economic convenience or outright racism, we are repeat-
edly required to remind the United States of its sacred word. To
the American Indian tribes and nations our word and that of the
United States never gets too old to keep.

The origin of the law of sovereignty is the same for all nations.
Under international law and the law of nations, it is the vital prin-
ciple upon which the U.S. Constitution and the treaties with the
American Indian nations was built, the right to govern our affairs
within the boundaries of our perspective nations. The United

States and our nations each have the power to govern our citizens
through the adoption of our governing documents.

The right of Indian tribes to govern the activities within our ter-
ritories has been recognized for over 500 years. Spain made trea-
ties with the Indian nations of the west under the law of nations.
Britain, France, Holland, Russia, the United States, and Mexico
followed in this tradition.

In the southwest, treaties made between Mexico and the United
States required the United States to recognize and honor earlier
commitments made to tribes by Spain and Mexico. The treaties of
Guadalupe Hidalgo, the Gadsden Treaty and the treaties with the
Apache Nation and the Navajo Nation govern the relationship of
the United States and tribes in Arizona.

Treaties are the supreme law of the land under the Constitution.
Congress, as a condition, described the precise condition under
which the States including Arizona and New Mexico would be per-
mitted to enter the Union. To remove any implication of a State
claim under the constitutional property clause, Congress, in the en-
abling act, required the States of Arizona and New Mexico to spe-
cifically disclaim all rights. Certain Federal lands and lands owned
are held by an Indian or an Indian tribe.

In addition, Congress required a number of other provisions for
the benefit of Indians to specifically preclude New Mexico and Ari-
zona from taxing Indians on Indian lands within Indian country.
Finally, the benefit of the Indians to specifically confirm the poli-
cies that have existed from the time of the Articles of Confed-
eration to this date, Congress specifically required Arizona and
New Mexico to refrain from exercising any jurisdiction or control
over Indian tribes or their property.

It also required the States to acknowledge that the absolute ju-
risdiction which all parties understood to be exclusive rested with
Congress.

Over the centuries, fueled by greed and racism, our tribes have
suffered repeated attacks. Many would subject us to suits in State
and Federal courts. For sure the purpose is to exhaust and destroy
us. The U.S. Supreme Court has said the power to regulate is a
power to destroy. The concept of a State vesting any tribunal with
the power to enforce or extinguish rights and duties is built upon
the fundamental concept of power.

Anyone who is not a member of an Arizona tribe who wishes to
enter the reservation for business or personal reasons can avail
himself to the rights and remedies under the tribal law.

In addition, the United States Code [U.S.C.] and the Code of Fed-
eral Regulations set forth additional requirements for contracts,
leases and permits and trading within the Indian Federal reserva-
tion. If additional regulation and legislation was thought to be
needed, the U.S. Department of the Interior and the Department
of Justice would present proposed legislation to Congress under the
Federal-State enabling acts, the constitutions of many western
States, including Arizona. States are precluded from taxing Indi-
ans, Indian tribes and Indian property. Tribes have reserved the
right to levy and collect taxes.

Let me get to S. 1691.

The Chairman. We will ask you to make that very brief.

Mr. Kwail. The tribes of Arizona unanimously oppose the legisla-
tion in any form that would violate the sacred word of the United
States made to us over the last two centuries.

Thank you.

[Prepared statement of Mr. Kwail appears in appendix.]

The Chairman. Mr. Chambers, if you'd like to finish this panel?

STATEMENT OF REID CHAMBERS, ESQUIRE, SONOSKY,
CHAMBERS, SACHSE AND ENDRESON

Mr. Chambers. Thank you. I thank the committee for the honor
of inviting me to make this presentation.

I'll limit my oral testimony to one question and that is why the
Congress should not waive the sovereign immunity of Indian tribes
to permit States to sue them to collect State taxes on non-Indians
doing business with Indians on reservations.

There are four reasons why Congress shouldn't do this.

The first reason is that, as the Supreme Court ruled in the Pota-
watomi case seven years ago, there are adequate remedies avail-
able. The Court mentioned a number of them — precollection of the
taxes from the first entry into the State, suits against individual
Indian retailers, indeed even the possibility of suits against tribal
officials for acting contrary to the law, and perhaps most impor-
tantly, the possibility of making intergovernmental agreements
with the tribes.

In my testimony, I set forth 19 States, the majority by far with
Indian reservations, that have entered into such agreements with
most tribes in those States. My information is that 18 tribes in the
State of Washington have entered into tax agreements with that
State. Our information is that 17 tribes in Oklahoma have done so
with cigarette taxes and there was testimony about 9 doing it on
motor fuels taxes. New Mexico has agreed to exempt, as a matter
of State statute, transactions on Indian reservations from the State
tax. So I don't think it's accurate to talk about that as tax eva-
sion — or, where there is an agreement, to talk about that as tax
evasion. I think there are adequate remedies for States.

Now let me address Senator Gorton's question to Associate Solici-
tor Jordan — what about the tribes that don't have an agreement?
There's several reasons there why the waiver should not be enacted
in these situations.

One is that it's not clear, as some witnesses have suggested, that
in a transaction between an Indian and a non-Indian, the trans-
action is inevitably taxable with respect to the non-Indian. The Su-
preme Court has not adopted a clear test in that regard. In Senator
Gorton's Colville case, my recollection, and I don't have the case be-
fore me, is that Justice White talked about the preemption test
turning on an accommodation between the tribal interest, the State
interest and the Federal interest.

Later that year in the Bracker case, I think just 2 weeks later,
the Supreme Court articulated the test that has applied ever
since — which requires a particularized inquiry into the various in-
terests that are involved, a balancing test. The Court held in
Bracker that a highway use tax could not be imposed on a non-In-
dian contractor doing business with a tribe on the reservation. The
same day or the day after in the Central Machinery case, it held

that a gross receipts tax could not be collected on a contractor sell-
ing tractors to a tribe on a reservation in Arizona.

In the Warren Trading Post case, it held that a gross receipts tax
could not be collected on a non-Indian trader doing business with
Indians. In the Ramah case, the Supreme Court held similarly —
no State tax on a contractor constructing a school.

Even in the cigarette area, the courts have looked to complicated
questions like where the legal incidence of the tax is. So in Okla-
homa, the Supreme Court held in the Chickasaw case that the
taxes could not be imposed because the legal incidence was not on
the ultimate purchaser of the cigarettes. So it's not fair to talk
about that as evading taxes.

What actually happens here, when these cases go to court — and
I sit as a private lawyer and I've represented tribes for 22 years,
trying to advise them about the law — is that the law is uncertain
about when States can tax non-Indians on reservations. Therefore,
the outcome of litigation is uncertain and the litigation is costly
and burdensome. If it's going to be, as S. 1691 proposes, litigation
in Federal court, it's going to be burdensome on the Federal courts
or on any court that has to consider it.

The other point I want to make is that tribal immunity should
not be waived because waiving it does not treat tribes like other
governments. This bill is not going to treat tribes equally with
State or the United States. No one would think of waiving the Fed-
eral Government's sovereign immunity and having them sued in
State court and having State law apply to the Federal Government.
It would be unthinkable, in fact unconstitutional, to waive the im-
munity of States to be sued anywhere other than State courts or
for the Congress to waive the immunity of States and set the terms
of that. If S. 1691 passes, the tribes would be the only sovereign
in this country that would be subjected to suit in other courts or
have the standards of the other sovereign set what the terms of the
waiver would be.

Last, if you're going to consider the matter, and I urge that you
not, but if you do, I urge you to consider the economic impact of
decisions like the Colville decision. One reason they've been bitterly
resisted is that they disfavor commerce with Indian tribes.

The economic impact of Colville is that for a tribe has no ability
to give incentives to people to do business with the tribe. Indeed,
the tribe has to give up its own taxing power to have an equal
playing field with the non-Indians.

So what Colville does is disfavor commerce with the poorest peo-
ple in the country. That is why, I think, New Mexico statutorily ex-
empts these transactions from taxation and if Congress is going to
consider the matter, you should consider doing that.

Thank you very much, Mr. Chairman.

[Prepared statement of Mr. Chambers appears in appendix.]

The Chairman. Thank you. It's nice we've got so many experts
on the Supreme Court decision around here. Being a jeweler in my
private life didn't prepare me for all these in-depth discussions.

I had a couple of questions but first I would tell this panel and
the preceding panel that Senator Inouye did have to leave but he
has a number of questions he would like to submit for the record

to you and if you could get those back in writing. That same re-
quest would apply to the Former panels.

You brought up a number of interesting things to me, Mr. Cham-
bers. I'd like to ask this question to Tom Lattauzio.

As I understand the court decision, and perhaps Senator Gorton
can help me because he certainly knows more about this than I do,
there are several suggested options — they could stop shipments,
they could stop them from traveling on the highways, they could
tax them at the wholesale level, bring suits against tribal officials
and so on. There's things in place as options now.

He mentioned that characterizing it as illegal tax evasion, par-
ticularly in Mexico, as I understand it, even though the Supreme
Court said they would tax, there is an exemption in the State of
New Mexico. The State legislature made tnat exemption. How
could they be characterized as illegal tax evasion if the State gave
them that exemption?

Mr. Lattauzio. Senator, I'm not prepared to answer that ques-
tion but I'd be happy to get you an answer and submit that to you
in writing.

The Chairman. That will be fine. I might say perhaps you need
to speak in another forum too and that is in your State legislature
if you think they're actually doing something legal in their State.

That's really the only question I had. Senator Gorton, you may
have several?

Senator Gorton. Mr. Chambers is a considerably greater expert
on these tax laws than I am in spite of my now relatively ancient
experience but I think the answer to the points he made is really
quite simple. It is certainly true that there are some kinds of trans-
actions on Indian reservations involving non-Indians that the Su-
preme Court has determined are not taxable by the States and
there are certainly other kinds of transactions in which that is an
open question.

The passage of section 3 of this bill would not change that at all.
It doesn't make taxable transactions that are not taxable now, it
simply allows a State to collect a tax when the court says the
transaction is taxable now.

The statement I think in Mr. Love's statement is the appropriate
one. You have a situation in which the Supreme Court has said
there is an obligation on the part of Indian enterprises to assist the
State in the collection of taxes that the State has validly imposed,
but there is no remedy for that right. In spite of the fact the Su-
preme Court has said there is that right, the State can't enforce
that right.

That is as paradox and it is an utter injustice that exists almost
nowhere else in our legal system. I do not attempt in this bill to
say that the tax laws are different, that transactions not now tax-
able should be taxable. I simply say the State ought to be able to
collect the taxes the Supreme Court says are validly its own.

I would like the three first witnesses here to comment on the
real world. We hear from the Department of Justice and these
other people that there is no problem. I assume you shouldn't be
here because there really isn't a problem, there is no discrimination
against non-Indian business people whose businesses are located
near reservations.

My figure is $64 million in the State of Washington

Mr. KLEIN. $300 million, Senator.

Senator Gorton. They're just not real, it's not there. There is no
problem. I just wonder if any of you feel a little bit put upon by
naving your tax dollars spent by the government of your United
States and the Department of the Interior and the Department of
Justice telling you your States ought not to be able to collect taxes
that are validly due those States and if non-Indian businessmen
are driven out of business by unfair competition, that's just tough.

Mr. Klein. I certainly hear enough about it, Senator and that's
what urged me to write my original legislation which had to do
with the untaxed cigarettes coming in from other States such as
Virginia and North Carolina.

Lo and behold, 2 years later, that's really mild compared to what
is happening now with the Native American non-taxed cigarettes
coming in all over the city of New York as more and more of these
convenience stores, mail order houses, gasoline stations start com-
ing about. So it's a very serious problem.

We have regulations on our books in the State of New York to
collect the tax. We even have the Supreme Court decision which
was argued personally by our attorney general, the Itia case which
said we can enforce our regulations and collect the taxes, but un-
fortunately we're not doing that. That's why I think we're losing
this excise tax, cigarettes and motor fuel combined to the tune of
$300 million.

Senator Gorton. New York does not discriminate against mem-
bers of Indian tribes who are residents and citizens of the State of
New York in providing the services that these taxes finance?

Mr. Klein. Absolutely not.

Senator Gorton. So they're entitled to all tax paid services?

Mr. Klein. Absolutely, roads, bridges.

Senator Gorton. But they don't want to collect the taxes even
from non-Indians?

Mr. Klein. That seems to be it. Again, as I said before, we're not
talking about taxing Native Americans. We're talking about taxing
non-Native Americans who purchase taxable goods.

Senator Gorton. Mr. Love, you stated and I tended to get this
from Chief Pyle as well, the agreement with some of the tribes with
respect to motor vehicle fuel taxes is collected at the level of the
refinery?

Mr. Love. Yes, Senator.

Senator Gorton. So now you find tribes buying their motor vehi-
cle fuel from outside the State?

Mr. Love. Whether that's happening or not, I don't know but it's
very possible that it could be happening.

Senator Gorton. That would be outside the scope of these agree-
ments?

Mr. Love. Sure. If they were to bring product in from a State
where the tax was not precollected as we're calling it here today,
that could happen.

Senator Gorton. Mr. Chairman, with respect to this panel deal-
ing with taxes only and with section 3 only, the only potential
plaintiffs are States, the 50 States in the United States and all the
statute does is create a remedy where there is already a right.

We have several statements. You and I discussed the fact that
more people wanted to be with us.

The Chairman. Without objection, all the statements will be in-
serted.

Senator Gorton. So anyone on either side who has a written
statement can have it included.

The Chairman. Absolutely.

Mr. Love, how far is your nearest store from what you might call
a tribal competitor store?

Mr. Love. We have one store across the street.

The Chairman. You may not be able to answer this but you
might try to find this information for the panel, do you know if the
State of Oklahoma has ever calculated the economic advantages of
having tribal lands within the State including such things as tour-
ism, Federal grants, tribal enterprises, sale of tribal arts in non-
Indian galleries and stores and all those kinds of things where it
has been an economic advantage to the State to have Indian tribal
lands?

Mr. Love. Yes; I'm sure that has been done. The State of Okla-
homa is 80 percent to 90 percent Indian land.

The Chairman. I noticed with interest that license plates of
Oklahoma, the signs when you enter Oklahoma, many of the bro-
chures in different cities, towns, communities, always use Indian
images or Indian appearances or Indian tribal cultural things as
sort of a lure to bring people into the State of Oklahoma.

Mr. Love. That's very true.

The Chairman. I've been many times to what is called Red Earth
in Oklahoma City, a huge celebration and I don't know what the
economic impact is in Oklahoma City for that but I'd imagine it
would be considerable as all those seem to be now. I'd be interested
in knowing that and if you have any access to that information, I'd
like to have it. If you don't, we might be able to get that from the
State itself.

With that, I have no further questions but there are a number
that will be submitted by our different members who could not be
here today.

[Questions and the answers appear in appendix.]

The Chairman. I would remind everyone in the audience, this is
the first of three hearings, if you have additional information you'd
like to submit for all three of those. This records of this particular
one will stay open for 2 more weeks if you have additional com-
ments.

With that, thank you for your appearance and this committee is
adjourned.

[Whereupon, at 12:48 p.m., the committee was adjourned, to re-
convene at the call of the Chair.]

APPENDIX

Additional Material Submitted for the Record

Prepared Statement of Hon. Daniel K. Inouye, U.S. Senator from Hawaii,
Vice Chairman, Committee on Indian Affairs

The committee meets this morning to address matters that apparently have given
rise to the introduction of a measure by our colleague and friend, the senior Senator
from Washington State.

If we are to properly address these matters, we must have a clear understanding
of the historical and legal context in which they operate.

Indian Tribes and Nations are governments. Should there be any doubt about the
accuracy of this statement, we need only to look to the writings of our founding fa-
thers and the subsequent debates of the continental Congress. For it is there that
we find some of the earliest recorded observations of the governmental structure of
the Confederacy of the Iroquois Nations.

In fact, it is abundantly clear that the Iroquois Confederacy's form of government
was the model of government that our founding fathers ultimately adopted in form-
ing and organizing the government that was to become the United States of Amer-
ica.

Should one desire further evidence that Indian nations are sovereign govern-
ments, we can look as well to the fact that the United States entered into treaties
with the Indian nations.

Our Constitution makes clear that treaties are the documents which express the
legal relationships between sovereigns, and that as such, they are the highest law
of the land.

Beginning in 1832 and for 166 years thereafter, the United States Supreme Court
recognized and has consistently reaffirmed the inherent sovereignty of the Indian
nations.

Over the course of our history as a Nation, the United States Congress, with the
approval of every President of the United States, has enacted into Federal law lit-
erally hundreds of legislative initiatives that are premised upon the fundamental
principle that the Indian nations are sovereign governments.

So this is where we begin — this is the foundation of law and policy upon which
our relationships with the Indian nations have been built, and shaped and defined
for well over 200 years.

My colleague's bill, as I understand it, would divest the Indian nations of their
governmental status and relegate them to the status of individuals or private cor-
porations for purposes of legal actions in State and Federal Courts.

Given this dramatic, and some would say radical departure from the well-estab-
lished course of our history and our laws, I believe it is only natural to inquire what
it may be, in law or in fact, that would demand or require us to so abruptly abandon
what has stood for so long.

In the area of taxation, the U.S. Supreme Court has established the law, in the
case of Montana v. the United States. There, the Court stated, "to be sure, Indian
tribes retain inherent sovereign power to exercise some forms of civil jurisdiction
over non-Indians on their reservations, even on non-Indian fee lands. A tribe may

(53)

regulate, through taxation, licensing, or other means, the activities of non-members
who enter consensual relationships with the tribes or its members, through commer-
cial dealing, contracts, leases, or other arrangements."

We have ample evidence that State and tribal governments are not only capable
of, but regularly do enter into compacts and agreements addressing matters of tax-
ation.

Just a few months ago, several such agreements — entered into by the State of
Washington and some of the tribal governments in Washington State — were made
available to this committee. Of course, they are not alone. Taxation agreements
have been entered into by States and tribes all over the country.

Because both State and tribal governments are recognized as having the authority
to tax, these agreements typically address matters such as the exercise of those au-
thorities by each government, the apportionment of taxation, and the manner in
which taxes are to be collected. These agreements customarily also provide one or
more mechanisms for the resolution of disputes, should they arise. These may in-
clude mediation, arbitration, or an agreement that the parties will seek a deter-
mination by a court of competent jurisdiction.

If a judicial determination is the mechanism elected by the governments for the
resolution of any disputes that may arise, it is also common that mutual waivers
of their respective rights to assert sovereign immunity are contained in the agree-
ment or compact.

These compacts and agreements are consistent with the manner in which the gov-
ernments of our union have always defined and shaped their relationships with one
another.

I am not aware of any compelling body of evidence that would warrant the taking
of a unilateral action by a third government — one which is not a party to the mat-
ters at issue.

I know of no precedent for the fashioning of a cause of action that authorizes one
government to bring a claim against another government but bars the other govern-
ment from having its claims heard. The Supreme Court has expressly rejected this
notion in a case known as Blatchford v. The Native Village of Noatak, on the
grounds that there must be a mutuality of consent by both governments to sue and
be sued.

Having reviewed the written testimony submitted to the committee for today's
hearing, let us also be clear that what some would seek from this body, is not an
alternative means of collecting State taxes, but rather action by the Federal Govern-
ment to assure that commercial activities conducted on Indian lands are rendered
incapable of competing in a free market place.

Today, we are increasingly aware that we live in a global economy. Our markets
are sensitive to events far beyond our shores. In Hawaii, we say that when the
economies of the Pacific Rim Countries sneeze, our economy gets a cold.

The strength of our national economy is however equally dependent upon and sen-
sitive to our domestic markets. And though few too many have elected to ignore this
reality for far too long, the strength of Indian reservation economies is no less cru-
cial to our economic well-being as a Nation.

Several years ago, a Harvard professor, Joseph Kalt, reported to this committee
that after years of studying the economies of Indian country, there was one singular
factor that could predict a strong tribal economy better than any other. That was
the extent to which a tribal government exercised its sovereignty and had the nec-
essary infrastructure to carryout its full array of governmental responsibilities.

Ours is a Nation that jealously guards the free market nature of our national
economy. Sometimes we make mistakes. Usually, it is when we allow government
to favor one economic interest over another.

I fully intend to stand with my colleagues in the Senate to assure that this Gov-
ernment lives up to its promises of fair and honorable dealings with the Indian na-
tions. Together, we will do all that we can to assure that tribal governments and
their citizens are not foreclosed from pursuing the economic opportunities that our
laws and our constitution guarantee to all Americans.

And I would call upon those who do business in Indian country-the bankers, the
corporations, the major industries-to join us in protecting these investments and
these relationships that have been forged not out of political influence but rather
as a function of honest, fair, arm's-length dealings amongst equals on the now infa-
mous "level playing field".

In the field of contracts, it is well known that the Federal Government, the State
governments and their political subdivisions, as well as tribal governments, enter
into contracts — thousands upon thousands of contracts — on a daily basis.

Typically, the parties to these contracts will not only seek to define the nature
of their relationship under the contract, they will also identify what route they will
pursue should a dispute arise from their dealings.

It is a well-known fact of every day life in America, that if the parties elect to
resolve their disputes in a judicial forum, there must be an express consent by any
government that is party to a contract to be sue and be sued.

Usually, if a government consents to suit, it will be for purposes of actions
brought in the courts of that sovereign. In most cases, for instance, the parties to
a contract cannot, by virtue of their agreement alone, confer jurisdiction upon the
courts of another sovereign.

These are well understood principles of contract law-perhaps the oldest body of
law on our planet.

As Americans, it is such a fundamental tenet of our constitution and our laws-
that Government shall not interfere with the right of parties to freely enter into con-
tracts with one another-that unless we intend to contract to engage in some crimi-
nal or otherwise illegal activity, we have come to rely on our constitutional protec-
tions against government intrusion in private relationships.

Our forefathers fought hard for this principle-many lives have been sacrificed to
protect this freedom.

The better course of action, in my view, it to make certain that our citizens know
that governments must consent to suit — and thereby assure that such consent is se-
cured, if it be the course of action preferred by the parties to a contract.

It seems clear to me that if tribal governments refuse to waive their sovereign
immunity to suit in a contract setting, there will be those who will elect not to do
business with the tribal government, the loss of a contract opportunity will fall on
the tribal government.

Let us not take any step which would impose between the freely-contracting par-
ties — the mighty hand of the Federal Government.

Our Supreme Court Rulings have made it abundantly clear-when constitutional
rights are implicated, any remedy must be narrowly tailored to address the harm
identified.

Let us ever be mindful of what is at stake — our history, our laws, our constitu-
tionally-protected rights as citizens of this great Nation.

Let us proceed carefully and rationally. If there are solutions needed to problems
that are articulated here today, let us be certain that we have considered all pos-
sible alternatives before we cast aside that which we consider most precious in this
Nation — our freedom and our laws.

Prepared Statement of Hon. James M. Inhofe, U.S. Senator from Oklahoma

I would like to thank the chair for holding this hearing, and I look forward to
reviewing the thoughts and opinions expressed by the participants.

After reviewing the American Indian Equal Justice Act, I am particularly inter-
ested in reviewing testimony on section 3, the collection of State taxes. Although
Oklahoma and several tribes have taken positive steps to rectify the contentious
State gas tax issue, I remain concerned with possibilities that many of Oklahoma's
small business owners may face an unfair competitive advantage. Our responsibility
to examine the bounds of tribal immunity must carefully determine a fair method
of recourse for non-tribal entities while avoiding unnecessary tribal government sub-
jection to State and Federal jurisdictions. I am hopeful that through these discus-
sions a complete understanding and mutual consensus can be reached.

I would like to thank each of the participants who have come from all corners of
the country to share their valuable insight and perspectives on tribal sovereignty.
And, I also thank fellow Oklahomans and personal friends, The Honorable Ernest
Istook, Chief Greg Pyle of the Choctaw Nation, Greg Love from Love's Country
Stores, Michael Harris of Michael D. Harris Law Office, and Ms. Scott Morrison,
Attorney at Law — for the sacrifices they have made to be here today.

Prepared Statement of Hon. Paul Wellstone, U.S. Senator from Minnesota

Mr. Chairman, I am pleased that we have this opportunity to discuss Indian sov-
ereign immunity, and how it relates to contracts and State excise taxes. This com-
mittee is the proper forum to address such concerns, which are often raised by Sen-
ator Gorton, and I appreciate this chance to share my views on this important mat-
ter.

I strongly oppose efforts to impose limits on tribal sovereign immunity from suit.
All governmental entities are endowed with immunity to protect their official ac-

tions from undue judicial interference. To waive tribal sovereign immunity would
open up tribes to a barrage of lawsuits, which would severely limit their abilities
to conduct governmental operations.

In addition, limiting tribal sovereign immunity would undercut tribal self-deter-
mination efforts. The great importance of Indian self-determination policies as they
relate to economic development on reservations can easily be seen in my State of
Minnesota. Significant jobs have been created in Indian communities where unem-
ployment hasl>een 50 percent or higher. Indian welfare recipients have become In-
dian taxpayers. Revenues have been generated for Indian tribes, permitting them
to begin to make inroads into the huge unmet needs created by inadequate Federal
funding.

Rather than waiving sovereign immunity from suit, a better approach is promote
continued dialog between States and tribes. In my State of Minnesota, the govern-
ment to government relationship between the tribes and the State continues to be
open ana respectful. I certainly hope the positive relationship between the tribes
and the State of Minnesota is maintained. Unfortunately, I am concerned that rela-
tionship, as well as the relationships of other State governments with the Indian
tribes within their borders, would suffer if Congress were to approve a measure
which significantly undermined tribal sovereignty.

I have heard from every tribe in Minnesota repeatedly regarding their concerns
about proposals to limit tribal sovereign immunity, even on a limited basis. They
have all voiced their strongest and most vehement opposition to such proposals. If
tribes are forced to limit their sovereignty in certain areas — then look out, it's a slip-
pery slope — more attempts to undermine tribal sovereignty would be sure to follow.

I can not stress enough that American Indian sovereignty and economic develop-
ment go hand in hand. A wise American Indian female leader and Founding Presi-
dent of the First Nations Development Institute, Rebecca Adamson, once said, ^Ve
cannot educate our children; we cannot preserve their health; we cannot protect
their well-being; if our livelihood is dependent others. Tribes will emerge from de-
pendency only by developing the capacity to control their economic future." When
she said this she laid out the key to economic development: that is the preservation
of American Indian sovereignty. I agree with her 100 percent.

Prepared Statement of Assemblyman Jeffrey Klein, New York State

Assembly

Good Morning, Mr. Chairman. Mv name is Assemblyman Jeff Klein. I represent
the 80th Assembly District in the New York State Assembly. My district includes
parts of Bronx County in New York City.

I am appearing here today as a representative of concerned New York State offi-
cials who believe that the issue of Native American State excise tax evasion has
reached crisis proportions in our State. I would like to begin my comments by stat-
ing that I am not advocating that States tax Native Americans. I am here to request
that State governments be given absolute authorization from Congress to allow for
the collection of State excise taxes imposed on non-Native Americans when these
non-Native Americans purchase commodities such as cigarettes and motor fuel from
Native American tribes or tribal corporations.

Two years ago, I uncovered the proliferation of illegal or bootleg cigarettes being
sold throughout New York State. My investigation revealed that smuggling groups
are illegally importing cigarettes from low tax States, such as North Carolina and
Virginia, and selling the contraband to hundreds of illicit retailers across our State
at a far lower price than legal wholesalers and retailers can provide. The New York
State Department of Taxation and Finance estimated that the State loses approxi-
mately $70 million and the city $12 million in cigarette tax revenue due to this ille-
gal trade. The State and various localities are nard hit by this scam because ap-
proximately $7.80 per legal carton of cigarettes sold, about one-third of the price of
a carton goes to State and local governments via excise and sales tax.

Under my cigarette Tax Enforcement Act of 1996, store owners could face a com-
plete revocation of their license to sell cigarettes for a 5-year period if caught more
than three times selling boolieg cigarettes. The law also requires that the Depart-
ment of Taxation and Finance notify the Director of the Lottery Commission oi any
violations of the cigarette tax law, and states that a retailer's license to sell alcohol
may be revoked as well for violating the provisions of the law. In fact, in the 2 years
since the law took effect, the State has collected an additional $30 million in excise
tax. However, the growing problem of Native American tax evasion undermines all
headway this law made in the fight to stop these "buttleggers" by making it tempt-
ing to buy untaxed cigarettes sold within our own State borders.

The State will continue to be hit hard by opportunists who import cigarettes from
reservations and resell them to illicit retailers throughout the State. There is no
need for these opportunists to make the long trip to North Carolina or Virginia, they
will only have to make a short trip to their local reservations. In fact, in some cases
the drive may not even be necessary. Many Native American reservations through-
out New York State advertise that they will ship tax free cigarettes via United Par-
cel Service anywhere in the State, and they proudly advertise that they do not re-
port to any tax authorities. And yes, they even accept credit cards.

A 1994 United States Supreme Court ruling allows States to impose sales tax on
Native American sales to non-Native American customers, this decision allows the
State of New York to enforce the collection of taxes against wholesalers or distribu-
tors of gasoline, diesel fuel, and cigarettes.

It should be noted that the State of New York spent 6 years and an untold
amount of time and money on this lawsuit and as the New York State Department
of Taxation and Finance estimates we are still losing $300 million in annual tax
revenue in uncollected excise tax on the sale of cigarettes and motor fuel. Approxi-
mately one-third of this loss is attributed to cigarettes and two -thirds to motor fuel.

In fact, the problem of untaxed out-of-state cigarettes I identified 2 years ago is
mild when compared to the unabated, and accelerated growth of new Native Amer-
ican convenience stories, duty free warehouses, and gasoline outlets opening up all
over our State doing a flourishing business selling tax-free products to Native and
non-Native Americans alike.

In addition, as State petroleum taxes have increased to finance roads, bridges,
and transit the disparity of prices charged by off-reservation retailers and on-res-
ervation Native American retailers aggressively advertise and market their self-im-
posed illegal exemptions from State taxation to non-Native Americans purchasers
by selling motor fuel at low "discount" prices.

Senator Gorton's proposal is an extremely positive development in terms of New
York's plight, offering a tangible, realistic means to address this issue. In particular,
section 3 offers a ray of hope for retailers struggling to stay in business. This section
would provide a State with an absolute right to sue a tribe in Federal court to col-
lect lawfully imposed State excise taxes on sales to non-Native Americans.

Under this section, a tribe would also waive its tribal sovereign immunity only
to the extent necessary for a State to enforce the obligations imposed by this section.
Thus, a tribe could not hide behind the veil of sovereign immunity to escape the
obligation which the United States Supreme Court has sanctioned.

On behalf of New York State and the thousands of small businessmen and women
who are struggling to survive against the unfair competition of untaxed sales to
non-Native Americans by Native American tribes, I applaud this hearing to allow
an open discussion of this very important issue and I thank Senator Gorton and his
colleagues for introducing this legislation.

Mr. Chairman, I appreciate your consideration of my testimony. I would be happy
to answer any questions you or the committee may have.

Congressman Ernest lstook

3/11/98

P*e 1

Testimony of Congressman Ernest J. lstook, Jr

Senate Committee on Indian Affairs

March 11, 1998

Good morning. Chairman Campbdl, Senator Inouye, Members of the Committee. It is my great
pleasure to appear before the Senate Committee on Indian Affairs this morning to discuss one of the
jurisdictional problems which exist between local. State, and Tribal governments

For two years Congressman Peter Visclosky and I have worked to ensure that the tax schemes of State
and local governments are protected from unscrupulous businesses which refuse to collect the proper sales and
excise taxes, as well as to try and encourage fair competition between Indian and non-Indian businesses. Our
efforts have not been to try and limit the abilities of Tribal governments which have tax agreements with their
neighbors, but with the Tribes and individual Indians which operate businesses without regard for the
communities in which they live.

We have based our efforts on the rulings of the Supreme Court, which has evaluated the treaties signed
by the Federal go v er nm e n t and Indian tribes. As you know, the Supreme Court has ruled that Indian tribal
members are exempt from State and local sales and excise taxes , but that non-Indians purchasing items on
Indian trust lands are not exempt from those taxes. Even though the Supreme Court has ruled that states have
the right to assess taxes on sales to non-Indians 1 , the right has been meaningless when tribal businesses could

1 These excerpts «re from decisions of the United Slate* Supreme Court:

"It can no longer be argued that the Indian Commerce Clause, of its own force, automatically ban all state
taxation of matters significantly touching the political and economic interests of the tribes'

"The State may some times impose ■ noodiscri minatory tax on non-Indians customers doing business on the

(Suur of Washington v. Colvilie. June 10, 1980)

Enrolled tribal m e m bers purchasing cigarettes on Indian reservations are exempt from New York cigarette tax, but
ins making such purchases are not."
"On reservation cigarette sales to persons other than reservation Indians, however, are legitimately subject to state

Congressman. Ernest Istook

3/11/98

Page 2

not be required to collect the taxes on non-tribal sales, as other businesses must. As the Supreme Court
decisions make dear, only sales to members of the tribe are properly exempted from such local and state

taxes. Unfortunately, some tribes have exploited this exemption, leading non-tribal purchasers to believe they
do not owe the sales, fuel or excise taxes on these transactions, since the tribes do not charge them. The steep
discount price is a powerful lure attracting customers from nearby non-tribal businesses (and even from great
distances). Thus, the tribes can sell gasoline without charging the typical $.20-30 per gallon state fuel tax, or
the $.40-60 per pack cigarette tax. The first problem is tha t this drives legitimate, tax-paving
competition out of business for miles around The second problem is that it destroys the tax base that states
and cities use to finance roads, schools, parks, housing, etc.

The problem is rapidly getting worse. 2 Currently, the State of New York estimates tax losses at S65

"Without the simple expedient of having the retailer collect the sales tax from non-Indian purchasers, it is clear that
wholesale violations of the law by the Utter class will go virtually unchecked. "

"We reject the proposition [that] the 'principles of federal Indian law, whether stated in terms of pre-emption, tribal
self government, or otherwise, authorize Indian tribes thus to market an exemption from state taxation to persons who would
normally do their business elsewhere. "

"In particular, these cases [cites precedents] have decided that States may impose on reservation retailers minimal
burdens reasonably tailored to the collection of valid taxes from non Indians."

(Department of Taxation and Finance of New York v. Attea, June 13, 1994)

"We conclude that under the doctrine of tribal sovereign immunity, the state may not tax such sales to Indians, but
remains free to collect taxes on sales to non tribal members."

■Congress has always hem at liberty to disown with surii trihal immunity nr tn limit It."

(Oklahoma Tax Commission v. Potawatomi, Feb. 26, 1991)

"But if the legal incidence of the tax rests on the non-Indian, no categorical bar prevents enforcement of the tax; if
the balance of federal, state, and tribal interests favors the State, and federal law is not to the contrary, the State may impose
the tax."

(Oklahoma Tax Commission v. Chickasaw, June 14, 1995)

' The threat is greater to the tax bases than to businesses, because some businesses are protecting themselves by making
agreements with the tribes. They enter into a partnership so an existing business becomes tribal property, gaining the trust
status and tax advantages, with the extra profits then split. It works under the "If you can't beat 'em, join 'em" theory. It
is attractive for many businesses. For example, one business with 40 gasoline stations in Oklahoma was offered a deal with
a tribe, which showed it bow this special arrangement could try to evade dozens of different taxes and regulations, saving
the business over $3-million per year. But whenever a business does so, it increases and accelerates die problem of unfair

Congressman Ernest Istook

3/11/98

Page 3

million for untaxed cigarettes and $35 million for untaxed motor fuels, Washington State is losing $63
million per year on untaxed cigarettes, Michigan is losing $103 million per year in cigarette, motor fuel and
general use taxes, Oklahoma is losing S27 million per year in cigarette taxes, California is losing between
S30-S50 million per year in cigarette taxes, Kansas is losing S3 million per year in cigarette and motor fuel
taxes. New Mexico is losing $4.5 million in motor fuel taxes, and Wisconsin is losing $6 million. These
losses are to the state treasuries only; they do not include revenue lost to local governments The total
national loss likely surpasses $1 billion annually

Some have made the argument that many of the Tribes have existing agreements in place so their is no
reason for legislation Often opponents cite the figure of 200 tribes in 1 8 States as having tax compacts. This is
a deceiving argument. This figure comes from a 1995 the Arizona Legislative Council study of State-Tribal tax
compacts What these people are not telling you is that the 200 figure counts many tribes 2, 3, 4, or even S
times so that the total possible is 960, which is ridicules because there are fewer than 260 tribes in the lower 48
States. What this study DOES reveal is that only 20.8% of the Tribes have compacts on cigarettes, motor fuels,
liquor, sales/use, or other tax categories. I attach a summery from the Arizona Legislative Council study for the
record To those States and tribes which have acted responsibly I congratulate you, but the overriding fact is
that relatively few tribes actually have tax compacts with the States.

Additionally, some have made the argument that Oklahoma no longer has a problem with Tribal
compacts. While it is true that Oklahoma has compacts with some Tribes on cigarette and motor fuel, a majority
of the Tribes are not members of the compact. Moreover, some Tribes are importing untaxed motor fuel into
the State in violation of the motor fuel tax compact Due to the nature of Tribal sovereign immunity the State
has little recourse with this violation of the motor fuel compact Additionally, the federal Bureau of Alcohol,
Tobacco, and Firearms (BATF) has an ongoing investigation into the evasion of Oklahoma state cigarette taxes

competition, and further diminishes the tax baae. There ia no corresponding "eacape" for state or local government*.

Congressman. Ernest Istook

3/11/98

Page 4

by non-compact Indian tribes who are selling cigarettes tax free to non-Indians. The BATF estimates Oklahoma
is losing $27 million per year due to this tax evasion.

Exacerbating this situation is that many of the tribes which have acted responsibly and have enacted
tribal taxes, or have entered into tax compacts with the State cannot always enforce the collection of those taxes
on trust land held for an individual Indian. I cite a recent example from upstate New York where the Tribe, after
years of effort to collect the Tribal tax from a business owned by an individual Indian, eventually bulldozed four
smokeshops for failure to collect the Tribal tax.

The problem is accelerating as tribes acquire retail business property in areas previously not associated
with the tribes, creating a patchwork quilt of businesses where customers can avoid paying the routine taxes
which all other businesses must charge and collect This not only creates grossly unfair competition, but it robs
states and communities of the revenues which are necessary to fund our schools, our roads, public safety, public
health and other key services provided by state and local government. By ownership, lease or operating
agreements, the Tribes can use the property to operate truck stops, gasoline stations, convenience stores and
retail outlets without charging state or local fuel, sales, or excise taxes

Once land is transferred by the federal government into trust, this problem is not reversible. The law
permits the BIA to transfer land into trust at any location. It need not be adjacent to any tribal lands, nor be part
of any former or claimed tribal property, nor even be in the same area or state where the tribe may be. The
quantity of land and the location are unrelated to the population of the tribe, or to its economic circumstance '

1 Indeed, u the U.S. Eighth Circuit Court of Appeals has ruled, the current federal law is to loose that, "By its literal terms,
the statute permits the Secretary [of Interior, who oversees the BIA] to purchase a factory, an office building, a residential
subdivision, or a golf course in trust for an Indian tribe, thereby removing these properties from state and local tax rolls.
Indeed, it would permit the Secretary to purchase the Empire State Building in trust for a tribal chieftain as a wedding
present. There are no perceptible "boundaries," no "intelligible principles," within the four comers of the statutory
language that constrain this delegated authority — except that the acquisition must be "for Indians." (State of South Dakota
v. U.S. Department of the Interior, 69 F.2d 878, 1995.) The Eighth Circuit declared the underlying act of Congress
unconstitutional; unfortunately the U.S. Supreme Court did not address the issue, but remanded the case to consider other

47-201 98-3

Congressman Ernest Istook
3/1 1/98
Page 5

The key is to prevent such transfer s before they hcppen, except far tribes who agree to collect and remit taxes
paid by their customers, the same as all other American businesses must do

As the U.S. Supreme Court has stated, the problem does not involve Indian tribes' claims of "sovereign
im m un ity", nor our treaty obligations with Indian tribes. (See Footnote 2.) As Supreme Court decisions have
made clear, it is Congress which has created this problem. Therefore, it is Congress which must correct it

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Arcana Uguloirw Council

Senate Indian Affairs Committee
Questions for the Record
Submitted to Congressman Istook

Question 1:

Has the State of Oklahoma ever calculated the economic advantages it receives
as a result of the tribal lands in the state, including tourism and accelerated
depreciation from non-Indian business under the Federal tax code?

Response:

I am not aware of any recent calculations of the economic advantages Oklahoma
receives as a result of having tribal lands in Oklahoma.

Question 2:

/ understand the State of Oklahoma has changed the legal incidence of its motor
fuel tax so that it is paid at the wholesale level and that, as a result, tax revenues
have jumped significantly. Can you comment on this development?

Response:

I attach a chart from the Oklahoma Tax Commission detailing tax revenues for the
first 12 months of the Oklahoma State Tax Compact, [attachment 1] The chart shows that
revenues, after payments to tribes, have increased about 2.6 % since the inception of the
tax compacts. For comparison I attach a study by the Petroleum Marketers Association of
America which discusses the effect of changing the point of taxation to the refinery nation-
wide, [attachment 2]

Question 3:

It has been stated that there are bigger problems in halting illegal, out-of-state
(non-Indian) shipments that do not include payment of state sales taxes. Can you
comment?

Response:

I have made inquiries with the Oklahoma Tax Commission (OTC) about the illegal,
untaxed, out-of-state motor fuel shipments by non-Indians. The OTC informs me that
they are unaware of any attempts by non-Indians to import illegal, untaxed motor fuel.

Question 4 [From Chairman Campbell]:

Chairman Campbell:

»Jj«ookok05>j»q\WP\Seo«te Indian Affmoi Committee. doc 5Z2&98 2:41 PM

Did you research each state to get those statistics? [from page two of my written
testimony dealing with tax loss]

Response:

This information was gathered three ways:

First, my staff called every State Tax Commission and asked if the State was losing
tax revenue on sales of retail items to non-Indians from non-compact tribal businesses
located on Indian trust lands.

Second, the Bureau of Alcohol, Tobacco, and Firearms compiled a study of tax
loss due to the evasion of state cigarette taxes by non-compact smokeshops. I attach a
copy of the study, [attachment 3]

Additionally, on January 30 of this year I wrote to all State Tax Commissions
requesting information about tax loss due to the sale of untaxed hems by non-compact
tribal businesses. To date, however, I have not received responses from all tax
commissions. I attach a copy of my January 30 letter, [attachment 4]

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Attachment 2

TAX EVASION AND THE POINT OF COLLECTION

John J Huber. Vice President and Chief Counsel, Petroleum Marketers Association of America
Ethel Hombeck, Hombcck Energy Research Services

There's hardly an issue of greater concern to marketers than the collection of taxes and ensuring that
everyone who is selling fuels is paying the same tax. In the late 1980s and early 1990s, marketers, the
Department of Justice and the Treasury Department all approached Congress with the goal of
eliminating tax evasion. These efforts culminated in the passage of the Omnibus Budget Reconciliation
Act of 1993 which moved the point of collection for diesel fuel to the terminal rack and imposed a dye
system for this fuel. The Internal Revenue Service claims that the change in the point of collection for
diesel fuel at the federal level has substantially increased tax revenues, although this has undoubtedly
been at least partially offset by the need to hire several hundred additional agents to enforce this new
system. But for marketers, the new system has meant increased paperwork burden and storage and
distribution problems.

Following the federal lead, a number of states have already adopted a rack point of collection for
diesel taxes, and several more are considering implementing such a system. The impetus for making
such a change seems to be the assumption that changing the point of collection will result in a net
increase in tax collections. Certainly that is the promise and hope of many state tax officials, but is it a
reality? To assess whether the movement in the point of collections does, in fact, guarantee increased
revenues, we examined tax collections as reflected by sales volumes reported by state tax agencies in
1993. 1994, 1995, and 19%.

If the change in collection procedure had the large positive impact on revenues claimed by proponents,
then a movement in the point of collection should result in an immediate, measurable and observable
increase in taxable sales. Sales data do not, in fact, show any discernible pattern in states that have
made a change compared with states that have not. The attached table shows state level taxable sales
of diesel fuel for the period 1993 through 1996 as collected by the Federal Highway Administration,
(1997) data is still being processed. Effective dates are indicated for those states that have changed
their point of collections to the terminal rack.

Nine states listed have changed the point of collection during the period shown. One state (California)
changed its system during 1995, and five additional states made the change during 1996. While this
results in limited data for making cross comparisons, the information does not show any consistent
pattern.

During 1996, diesel fuel sales for the United States increased nearly 4 percent compared with 6.8
percent in the previous year. In California, which changed its collection procedure in mid- 1995. 19%
sales increased 0.9 percent, sales during 1995 increased 3.6 percent (less than the national average),
and sales in 1994. before the change, increased at more than twice the national average. In South
Carolina and Florida, each of which changed their collection system during the year, sales decreased in
19%. Following January 19% changes, sales in North Carolina increased 2.5 percent, less than the
national average, while in South Dakota the increase in sales was just about the same as the change at
the national level. In Iowa, sales continued to increase for the third straight year.

Conversely, there were quite a few states that made no tax collection change that experienced
unusually large changes in diesel sales during that period. In fact 10 states (that made no change)
reported increases in diesel sales in excess of 10 percent.

Although the evidence remains limited, there is still not a consistent pattern of increasing sales that can
be attributed to changes in tax collection procedures. Rather it would appear that other variables will
have a stronger impact on tax collections. These may include the growth in the economy, better
enforcement, or perhaps changes in the analytical method for collecting the data. Thus, the promise of
improved collections through a change in a collection procedure is likely to be a hollow if not false
promise.

A switch to the terminal rack also may impact the type and amount of enforcement. When the federal
system was switched, resources were dedicated to the on-road enforcement system and several
hundred inspectors were hired for this task. Additionally, closer monitoring and inspection of terminals
was required. Thus, a state that switches to the rack will have to place new emphasis on both on-road
enforcement and terminal level compliance. The question arises whether the state will be able to
eliminate the downstream enforcement activities such as auditing service stations, truckstops, trucking
companies or marketers.

It is our opinion that audits of these downstream facilities will still be necessary. Unlike the federal
system which has a uniform tax nationwide, states have taxes on diesel ranging from 7.5 to 27.5 cents
per gallon or a difference of 20 cents per gallon. If cheating on excise taxes of 24 cents a gallon
resulted in evasion approaching $ 1 billion per year, we would certainly anticipate that the differentials
in state taxes will continue to provide sufficient incentive to evade taxes. Of particular concern are
tracking and monitoring gallons that enter a terminal, leave a terminal, and are distributed either in that
state or in an adjacent state. Without this information it will be impossible to determine whether the
gallons have been assessed the correct tax. Further, while it may not be necessary to process
information returns regarding this information, all facilities need to have the information and the states
must be willing and able to conduct thorough audits to ensure all taxes have been paid. It is our
opinion that without such audits which will continue to require significant manpower, the system is
essentially waiting for persons to develop a scheme to exploit this differential and evade taxes.

In conclusion, the decision as to whether the point of collection should be moved is a decision that is
best made by evaluating the current tax system in the state and its effectiveness. There is no clear
evidence suggesting that a collection change will result in an automatic increase in tax collections. In
collecting motor fuel taxes, there are no sure bets. The amount of tax, the differentials between states
and the experience of organized crime in this area will continue to make evading these taxes attractive
to the unscrupulous and the criminal element. If statutory changes were adequate to control behavior,
bootlegging would not have occurred during prohibition, and no illegal drugs would be flowing into
the United States in the 90' s.

Sales of special fuels, by state. 1993-1996 (oooooo gallons)

1993 1994 1995 1996 %ch94 %ch95 %ch96 %ch93-96

AL 5874 6590 6964 650.7 12.2 5.7 -6.6 10.8

1425

304

795

35.1

•76.7

1626

-561

•75.4

AZ-1/98

4745

463.5

4943

545.7

•2.3

137

153

4290

4723

4903

4977

103

1.4

163

CA-7/96

18533

23356

2.109.7

2.129.1

144

2635

2693

2659

2745

-35

1973

1995

2007

3215

■55

599

627

551

623

93.4

59.7

131

-94

204

215

214

21.1

-33

-14

FL-7/9T

9325

963.4

13045

9713

•33

4.1

1.003.7

13603

1.1153

13553

215

353

260

31.7

275

405

215

-133

46.4

565

1645

1904

199.1

1863

-25

114

145

«.

1.0123

7343

1.1249

991.4

•27.4

53.1

-20.7

-115

M-KV93

6555

937.7

9793

1.0425

215

IA-1/B6

3493

380.9

4135

4623

116

323

321.4

300.4

3453

3553

15.1

2.7

105

6690

5909

562.1

5985

•143

•1.4

-131

409.7

449.7

4645

5116

245

1155

1295

130.7

1363

131

173

3433

3103

326.0

3577

-9.4

9.7

271.4

299.1

3163

315.1

6.1

-0.4

16.1

MH/B3

726.7

7315

742.7

778.4

0.7

7.1

3743

422.1

4573

4963

125

6.1

29.4

349.1

3623

3783

4037

4.4

6.7

155

691 1

7399

743.4

7723

11.7

139.4

159.7

1593

1415

134

-113

2605

2659

314.4

3393

9.7

104

30.1

1763

174.7

179.7

2493

-05

1.1

393

395

535

599

939

913

124

•34

137

4605

5613

4905

5345

223

-12.7

16.1

NM-1992

2415

226.1

3093

3199

•6.4

36.7

31.1

6633

9173

9216

9315

NC-1/96

6663

7723

7805

7993

155

1.1

20.1

1115

1315

134.4

137.1

173

234

1.000 3

1.1153

13035

13935

115

263

OK-10/B6

4333

4793

4975

5449

105

255

349.1 "

3585

389.7"

113

PA-1CV97

13925

1.1555

1304 7

1.1775

•23

36.4

423

445

141

■caw

4105

524.4

4939

4913

275

-114

-04

125

SO-1*6

1145

1374

1379

1433

205

0.1

244

TN-1/96

6483

9794

730.1

7559

4.7

164

1.7055

1364.4

1559.4

2.1707

153

-0.3

105

273

irr

191.1

211.4

260.1

2569

106

233

-13

34.4

703

743

669

99.1

173

10.7

36.1

6296

6923

9903

790.7

8.4

10.1

205

352.7

4663

4999

4923

315

357

2125

2123

2215

133.7

4.4

-39.7

-37.1

RMM

5229

5969

5695

6015

152

WY-1/97

2079

1999

2145

2393

-43

6.1

113

151

US'

233103

24379.7

263505

273495

4.1

16.4

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EPNESTJ BTOOK.JR . _ . ii.c-o.iuu-.

Attachment 4

1301) J3*-l\ll

Thsmutv. Postal Suva j

Congretf* of the fclmteo States

l)ousr of fcrprrsrntatiurs

taar Comrt Piaoi
UMMX MHS. A*o Education i«Ti m

HAno-^s^^-rv 8Ha*hincjton. BC 20515-3605 , *^3^iiSL^ ,,

atT^*, January 30, 1998 ""J1TZ1""

(kwuKjCMroucvCOMMmti '"^wfrtMnTT''

Commissioner Micheal Urbach '" «■ "» ■"■

State Dept of Taxation and Finance
W A Harriman Campus
Albany, NY 12227

Dear Commissioner Urbach

In anticipation of legislation introduced in Congress, I am requesting information
on tax issues states are encountering with Federally recognized Indian tribes. Specifically,
I am interested in the tax agreements states have with tribes on retail sales and excise taxes
on sales to non-Indians occurring on Indian lands.

This information will greatly assist me in examining Native American tax issues, in
addition to understanding how individual states regulate and levy taxable goods on
Native American Reservations.

If you could please take time out to answer these particular questions, it would be
most appreciated I request a response by May 1, 1998. If you have any questions, please
call John Albaugh, of my staff, at (202) 22S-2132. Thank you in advance for your
consideration.

Very Truly Yours,

C~~^^L*£z£

Ernest J. Istook, Jr.
Member of Congress

1 . What exemptions, if any, does your state allow Native Americans businesses?

2. Is the exemption(s) listed above listed in the number 1 specific statutory language?
Yes No

If yes, please provide a statutory site.

If no, what authority do you use?

3. At what point is motor/diesel fuel taxed in your state''

Gasoline/Diesel

Receipt by supplier Sale by supplier

Distributor Distributor

Wholesaler Wholesaler

Retailer Retailer

User User

Other Other

4. Is the one identified in question 3 considered the taxpayer, or are they an agent of
the state, collecting taxes from the end user of the state behalf?

5. Do you have any agreements with any tribes related to taxes on motor fuel?
Yes No

If yes, briefly describe, your arrangements. Do you have an motor fuel tax
agreement with each tribe in your state? If no, why not?

6. Do you have any agreements with any tribes related to taxes on tobacco ?
Yes No

If yes, briefly describe your arrangements Do you have an agreement with
each tribe in your state? If no, why not?

7. Have you or do you currently have litigation issues 9 If so, please provide a brief
description.

8. If your state does not have tax agreements with Indian tribes and is losing tax
revenue due to the sale of non-taxed items to non-Indians, what is the amount
of this tax loss?

far*!

DEPARTMENT OF THE TREASURY

BUREAU OF ALCOHOL, TOBACCO AND FIREARMS

WASHINGTON, DC 20226

Attachment 3

DIRECTOR

MAY 2 9 1 .997

Honorable Ernest J. Istook, Jr.
U.S. House of Representatives
Washington, DC 20515-3605

Dear Mr. Istook:

This is in response to your letter dated April 15,
1997, concerning the evasion of cigarette taxes on
Indian lands in Oklahoma and the national ramifications
of this problem. You have asked us to respond to a
series of questions regarding the Bureau of Alcohol,
Tobacco and Firearms' (ATF) investigations into the
loss of State revenue due to contraband cigarette
sales.

By way of background, Congress has determined that
extensive trafficking in cigarettes to defeat State
excise taxes constitutes a significant problem
affecting interstate and foreign commerce. Congress
recognized that primary responsibility for cigarette
tax enforcement lies at the State level, but concluded
that the Nation would benefit from Federal assistance
concentrated in those areas beyond the jurisdictional
and resource capabilities of State agencies. On
October 25, 1978, Congress passed Pub. L. No. 95-575,
and the law was enacted on November 2, 1978. This
statute made trafficking in contraband cigarettes a
violation of Federal law, and authorized the Secretary
of the Treasury to prescribe rules and regulations to
implement the provisions of the law.

The Contraband Cigarette Trafficking Act (CCTA)
(18 U.S.C. SS 2341 -2346) makes it unlawful for any
person to ship, transport, receive, possess, sell,
distribute, or purchase in excess of 60,000 cigarettes
(5 cases) which bear no evidence of State tax payment
in the State in which cigarettes are found, if such
State requires indicia of payment of such State taxes.
Violations of the CCTA are punishable by a monetary
fine, imprisonment of not more than 5 years, or both.

-2-
Honorable Ernest J. Istook, Jr.

CCTA violations could, depending on the specific
circumstances of each case, serve as the basis for
prosecutions under the wire fraud (18 U.S.C. S 1343),
mail fraud (18 U.S.C. S 1341), money laundering
(18 U.S.C. S 1956), and The Racketeering Influenced and
Corrupt Organization Act (18 U.S.C. S 1962) statutes.

In response to your specific guestions, we can provide
the following information.

1. What is the estimated tax loss to the State of
Oklahoma due to the evasion of cigarette taxes on
Indian land?

Based on our ongoing investigations, we estimate that
the State of Oklahoma has lost an estimated $27 million
annually in revenue.

2. What amount has ATF expended, in both man hours and
dollars, to investigate this problem?

In the past 6 months, ATF has expended more than
$150,000 in investigative costs associated with
potential Oklahoma CCTA violations. This includes
personnel time and other types of expenditures.

3. What is the estimated amount of tax loss nationally
due to the evasion of State cigarette taxes on Indian
lands?

In response to your inguiry, our Wine, Beer and Spirits
Regulation Branch conducted a telephone survey of State
Tax Administrators in 28 States. For those States
where statistics were available, reported annual losses
in revenue ranged from between $30-50 million in
California to $129,000 in South Dakota. New York and
Washington reported an annual loss of $65 and $63
million, respectively, and Michigan reported an annual
loss of $75 million. Twenty-four States were unable to
provide an estimate of revenue lost due to the evasion
of cigarette taxes. However, all indicated this is a
large scale problem that cannot be controlled at the
State level.

Honorable Ernest J. Istook, Jr.

4. What amount would ATF require, in both man hours
and dollars, to investigate this problem nationwide?

ATF has identified the following additional States
where CCTA violations are occurring and where
investigations will be conducted: Washington,
North Carolina, Louisiana, Michigan, New York,
Arizona, and New Mexico. It is estimated that the
investigations in Oklahoma and Kansas will cost
$2 million to complete. Overall, we project that all
these investigations will cost approximately $8 million
in salaries, travel, per diem, and miscellaneous
expenses such as equipment, State and local overtime
pay, transcripts, and purchase of supplies.

5. Please provide information about all diversion
cases ATF has investigated, over the past two years
(1995 and 1996), in which an Indian tribe was involved.

ATF is involved in 60 ongoing CCTA investigations.
Of this number, 25 indicate the involvement of Native
Americans. One of these cases, United states v.
Baker , 63 F.3d 1478 (9th Cir. 1995), resulted in CCTA
convictions involving an excess of one million dollars
in fines and forfeitures. However, we cannot provide
specific information concerning ongoing criminal
investigations .

Please be assured that we are actively pursuing
all possible leads and have implemented several
investigative strategies to assist us in attempting to
eradicate this problem in Oklahoma and other affected
States.

Sincerely yours,

yjohn W. Magaw
Director

Statement

Congressman Ray LaHood (R-IL)

on the Collection of Motor Fuel Taxes
on Native American Lands

Senate Committee on Indian Affairs

March 11, 1998

Thank you, Mr. Chairman, for allowing me this opportunity to testify before your
Committee. It is truly a privilege and an honor to be here today.

I have come here to speak about an issue that, I believe, is very important to our
Native American tribes, our states, and to our transportation policy: the collection of
motor fuel taxes on Native American lands. As a member of the House Transportation
and Infrastructure Committee, I know first-hand how important the gas tax is to the
maintenance and construction of our vast infrastructure system.

The gas tax, as I am sure you are aware, directly supports the efforts of state and
federal governments in building and repairing our nation's roads and bridges. And, in
order for our states to play their role in the transportation system, they need to be sure that
they are collecting all of their motor fuel taxes. Unfortunately, that is not currently the
case.

Currently, some Native American tribes do not always collect and remit gas tax
receipts to the appropriate state government. This practice has cost the states a significant
amount of revenue that could have been used to improve roads and bridges. Lost revenue
estimates for some states are in the millions. It is estimated that Oklahoma, alone, lost
roughly $13 million in motor fuel tax receipts for FY'96. Many other states are also
adversely affected, including: Washington State, Oregon, Idaho, New Mexico, Kansas,
Michigan and New York. I believe this problem of unremitted and uncollected gas taxes
should be addressed, and I plan to offer a bill shortly that will address this problem.

My plan would prohibit the Secretary of Transportation from allocating funds for
public lands highways on Indian lands and reservations unless either (a) the Indian tribe
has entered into a written agreement with the state in which the highway is located that

provides procedures for the payment and collection of motor fuel taxes that are sold to a
non-Native American by a retail establishment that is located on such land, or
(b) the Indian tribe refuses to enter into a written agreement and/but the allocation of the
funds is essential to the construction or maintenance of a highway or road that is a critical
component of the National Highway System. These provisions would take effect 6
months after the date of enactment of such plan in order to allow the tribes and the states
some time to negotiate compact agreements.

I do want to stress that the aim of this plan is to ensure that non-Native Americans
pay and are assessed the gas tax. This plan is not intended to infringe on tribal
sovereignty, rather, it is meant to encourage the tribes to work cooperatively with the
states in order to formulate a mutually-agreeable compact on the subject of motor fuel
taxation.

I am firmly convinced that this approach would yield numerous benefits.
First, it would help ensure that states have adequate funds for road maintenance and
construction. Second, it would end an inherent unfairness posed by the sale of tax-free
fuel on Native American lands. And, third, it would preserve jobs and keep businesses
open. The current situation heavily impacts petroleum retailers. Many purchasers of
motor fuel, both gasoline and diesel, are likely to travel to Indian lands, because they
know they can avoid paying state motor fuel taxes. And, the motive to do this can be
great for many drivers. In fact, in some states, the tax on gasoline can be as high as 34
cents per gallon and 28 cents per gallon for diesel.

The sale of tax-free fuel poses serious concerns for retailers who must pay the tax
and who are located within a reasonable distance of the Indian reservation, because the
Native American retail establishments, by selling gas at a lower price (i.e., without the
tax) have the potential to put countless numbers of establishments out of business. For
example, avoiding the tax on diesel fuel for a typical truck with a 250 gallon tank could
mean savings of $70— a sufficiently large amount to justify a trucker traveling to Native
American lands to refuel his or her truck. At the very least, a trucker could plan or time
his or her routes to ensure that they purchase tax-free fuel on Native American lands.

I believe these arguments, because of their impact on road maintenance and
construction and on the highway trust funds, more than justify the scrutiny by this
committee into this matter. I am eager to work with the Committee on this issue. I
appreciate, Mr. Chairman, your allowing me to raise this issue today. Thank you.

STATEMENT OF DERRIL B. JORDAN

ASSOCIATE SOLICITOR, DIVISION OF INDIAN AFFAJRS

UNITED STATES DEPARTMENT OF THE INTERIOR

BEFORE THE

SENATE COMMITTEE ON INDIAN AFFAIRS

CONCERNING TRIBAL SOVEREIGN IMMUNITY

MARCH 11, 1998

Mr. Chairman and Members of the Committee, thank you for the opportunity to testify today on
the principle of tribal sovereign immunity and the important role it plays in helping to preserve
tribal governments as viable members of the family of sovereigns recognized by the Constitution
and federal law.

The United States has recognized the sovereignty of Indian tribes from the very beginning of the
Republic. There are presently over 500 federally acknowledged tribes within the borders of the
United States. Congress recently expressly affirmed the sovereign status of tribes in the 1994
"Federally Recognized Indian Tribe List Act," stating, "the United States has a trust
responsibility to recognized Indian tribes . . . and recognizes the sovereignty of those tribes." In
the Act, Congress validated the authority of the Secretary of the Interior to maintain a list of
acknowledged tribes. In publishing this list, the Secretary has consistently indicated that listed
tribes possess "...immunities and privileges... by virtue of their govemment-to-government
relationship with the United States..." 60 Fed. Reg. 9250, 9251 (1995); 25 C.F.R. § 83.2 (1996).
Regardless of their size, whether in terms of members or territory, or the form of their
organization, all federally recognized tribes enjoy the same basic responsibilities, powers,
limitations and obligations.

As Senator Inouye noted in his comments during the Committee's hearing on this same issue in
September of 1996, one of the attributes of sovereignty is immunity from suit if a tribe has not
consented to the action. Senator Inouye further noted that Alexander Hamilton acknowledged
this basic attribute of sovereignty in Federalist No. 81. Moreover, case law supports tribal
sovereignty, as well. (See Santa Clara Pueblo v. Martinez . 436 U.S. 49, 58 (1978) "Indian tribes
have long been recognized as possessing the common-law immunity from suit traditionally
enjoyed by sovereign powers," citing Turner v. United States . 248 U.S. 354, 358 (1919) and
United States v. United States Fidelity & Guaranty Co. . 309 U.S. 506, 5 1 2-5 1 3 ( 1 940). and
others.) In American Indian Agriculture Credit Consortium v. Standing Rock Sioux Tnbe. 780
F.2d 1374, 1378 (1985), the Eighth Circuit noted, "Indian tribes enjoy immunity because they
are sovereigns predating the Constitution" (citations omitted). (See also Puvallup Tribe v.
Washington Game Dco't . 433 U.S. 165, 172-73 (1977)). Most recently, the Supreme Court in
Oklahoma Tax Comm'n v. Potawatomi Tribe. 498 U.S. 505 H9911 stated:

A doctrine of Indian tribal sovereign immunity was originally enunciated by this
Court and has been reaffirmed in a number of cases. . . . Congress has
consistency reiterated its approval of the immunity doctrine [in Acts which]
reflect Or gress' desire to promote the "goal of Indian self-government, including
its 'ovenv ing goal' of encouraging tribal self-sufficiency and economic
development." 498 U.S. at 5 1 (citations omitted).

The Supreme Court concluded that, "Under these circumstances, we are not disposed to modify
the long-established principle of tribal sovereign immunity." Id- Thus, Indian tribal sovereign
immunity retains its full vitality.

The question now is whether Congress should act in a way that would eliminate or diminish the
vitality that tribal sovereign immunity has long enjoyed in Congress and before the various
courts of our Nation. The Administration's answer to that question is no.

Although we are aware of no comprehensive study detailing the degree to which federal and state
governments and tribes have waived their sovereign immunity, we believe it is likely that recent
proposals to abrogate tribal sovereign immunity have been based on the erroneous assumption
that tribal governments are the only governments in our country that exercise the full scope of
their immunity. We believe this assumption is erroneous because it underestimates the frequency
with which federal and state governments raise sovereign immunity as a defense to lawsuits,
while at the same time overestimating the frequency and nature of instances in which tribal
sovereign immunity is invoiced. Tribes frequently waive their immunity through tribal codes
and statutes, water rights agreements, business contracts, insurance riders and economic
development-oriented subordinate entities. Moreover, even if a comprehensive review of
sovereign immunity was undertaken which showed differences in the frequently and nature of the
exercise of this right by federal and state governments as compared to tribes, such a showing
would not provide a sufficient basis for unilaterally eliminating tribal sovereign immunity. In
order to understand more fully why tribes exercise sovereign immunity, one must understand the
environment within which tribal governments exist and operate.

Tribal sovereign immunity serves an important purpose in protecting and promoting Indian tribal
self-government. The Supreme Court has recognized that "the common-law sovereign immunity
possessed by the tribe is a necessary corollary to Indian sovereignty and self-government"
(citations omitted). Three Affiliated Tribes v. Wold Engineering. 476 U.S. 877, 890 (1986).
Similarly, in Oklahoma Tax Comm'n v. Citizen Band Potowat omi of Oklahoma. 498 U.S. at
5 10, the Court explained that Congress "has consistently reiterated its approval of the immunity
doctrine," reflecting its desire to promote its "goal of Indian self-government, including its 'over-
riding goal' of encouraging sufficiency and economic development" (citations omitted).
Moreover, as the court noted in Martinez . 436 U.S. at 64-65, a finding that Congress waived
tribal immunity in federal courts "would also impose serious financial burdens on already
' financially' disadvantaged tribes" (citation omitted).

The lower federal courts have recognized this principle as well. In American Indian Agricultural
Credit Consortium v. Standing Rock Sioux Tribe . 780 F. 2d 1374. 1378 (8th Cir. 1985), the court
pointed out that "immunity is thought ncccss; <-y to promote the federal policies of tribal self-
determination, economic development and ri 'ural autonomy." In Maryland Casualty Co. V
Citizens Nat'l Bank of West Hollywood . 361 -.2d 517, 521-22 (5th Cir. 1966). the court found
that tribal sovereign immunity is necessary to protect tribal assets from claims and judgments
that would soon deplete tribal resources.

Tribal courts have also recognized the importance of sovereign immunity. ( See Rowland v.
Hoopa Vallev Tribe . 21 Indian L. Rep. 6087, 6088 (Hoopa Valley Ct. App., Sept. 29, (1992)
"[t]he purpose of sovereign immunity is to preserve the autonomous political existence of the
tribes and tribal assets"; and Guardipee v. Confederated Tribes of the Grand Ronde Community
of Oregon . 19 Indian L. Rep. 6111 (Gr. Ronde Tr. Ct., 1992) citing Maryland Casualty Co.
"tribal sovereign immunity is necessary to preserve and protect tribal assets from claims and
judgments that would soon deplete tribal resources").

In Puerto Rico Aqueduct & Sewer Authontv v. Metcalf & Eddv. Inc. . 506 U.S. 139, 1 13, S. Ct.
684, 687 (1993), the Court recognized that one of the primary benefits of sovereign immunity is
the right not to be sued, including the right to avoid the costs and general consequences
associated with discovery and trial. The need to avoid such costs is just as important to tribal
governments as it is to the federal government and states. Given the tenuous financial condition
of most tribal governments, it is likely much more important to tribes.

This Committee is keenly aware of the conditions that exist on most reservations. Tribal
infrastructures for roads, community water and sewer services and other amenities that most non-
Indian communities take for granted are either absent or woefully inadequate. Health conditions
are generally poor, and suicide, alcoholism and unemployment rates on most reservations are far
above those in the rest of our Nation. Whatever the source of tribal revenues, ihe needs of the
overwhelming number of tribal communities far exceed the available financial resources.
Moreover, tribal governments do not have the same ability to raise revenue as the federal
government or the states. Given the disparity between needs and resources, it is unreasonable for
Congress to expect that the tribal exercise of sovereign immunity will be similar to or
coextensive with the exercise of sovereign immunity by federal or state governments. As the
case law cited in this testimony acknowledges, tribal sovereign immunity is an important
corollary to tribal self-government. Without sovereign immunity, the assets of many tribal
governments would soon be depleted to the point where meaningful self-government would be
untenable.

In any discussion of tribal sovereign immunity in which the exercise of this right is compared to
that of states it is important to note that states are afforded the opportunity to waive their own
immunity in accordance with their own limited terms. While Congress has abrogated states'
sovereign immunity in certain limited circumstances, by contrast. Congress has in recent years
considered unilaterally providing broad, unlimited waivers of tribal sovereign immunity in the

courts of other sovereigns, principally federal and state courts. Proponents of these measures
argue that tribal courts are biased against non-tribal litigants. Arguments alleging bias against
non-tribal litigants in tribal courts are usually based on anecdotal evidence which is often
inconclusive or not probative. Another argument often used to support waiving tribal immunity
is that tribes can then be sued in state and federal courts, the only forum b<- ieved to be neutral.
This argument fails to consider that state courts, in particular, may be biased against tribes.
Congress has historically recognized that states should not have judicial authority over Indian
tribes. The phenomenon of inhospitable and unfair treatment of Indians by states is not new, as
the Supreme Court noted over a hundred years ago when it stated, "[Tribes] owe no allegiance to
the States and receive from them no protection. Because of the local ill feeling, the people of the
States where they are found are often their deadliest enemies." United States v. Kaeama . 118
U.S. 375,384(1886).

While tribes have been somewhat more willing to have their disputes resolved in federal courts
than in state courts, the resolution of civil disputes arising on the reservation often requires the
application and interpretation of tribal laws, customs and traditions. Often federal courts are not
well suited to interpret tribal laws. (Cf. Martinez . 436 U.S. at 71, wherein the Supreme Court
recognized that resolution of many civil disputes arising under 25 U.S.C. §1302 of the Indian
Civil Rights Act will depend upon questions of tribal tradition and custom which tribal forums
are likely to be better able to evaluate than federal courts.)

With regard to tax disputes between tribes and states, the Administration believes that it is
inappropriate for Congress to waive tribal sovereign immunity at a time when the Supreme Court
has been confirming the sovereign immunity of states in suits brought by tribes. (See Idaho v.

Coeur d'Alene Tribe of Idaho . U.S. , 1 17 S. CT. 2028 (1997). Tribe's claim against

Idaho officials alleging ownership of bed, banks and submerged lands of all navigable
waterways within boundaries of the Reservation, including Lake Coeur d'Alene, did not fall
under Ex parte Young exception and was therefore barred by the Eleventh Amendment;

( Seminole Tribe of Florida v. Florida . 517 U.S. , 116S. Ct. 1416(1996). Congress lacks

authority under the Indian Commerce Clause of the United States Constitution to waive Eleventh
Amendment immunity of States with regard to suits brought by Tribes under the Indian Gaming
Regulatory Act; and ( Blatchford v. Native Village of Noatak . 501 U.S. 775 (1991). 28 U.S.C.
§1362 granting jurisdiction to federal district courts to hear "all civil actions brought by any
Indian tribe" does not constitute a waiver of Alaska's Eleventh Amendment immunity to suit.)

It would be fundamentally unfair to expose tribes to suits by state governments when tribes are
unable to sue states. Currently both tribes and states are immune to suit. This mutual immunity
to suit encourages tribes and states to deal with each other as sovereigns and often results in
govemment-to-government negotiations between tribes and states on tax and other issues of
mutual concern. Neither party has the upper hand in such negotiations. Rather, each sovereign
must respect the views and needs of the other and both must work toward mutually satisfactory
accommodations on important issues. Waiving tribal sovereign immunity would effectively
remove the incentive of states to deal with tribes as fellow sovereigns.

47-201 98-4

Widespread disagreement exists among officials within state governmental officials exists as to
whether it is necessary to waive tribal sovereign immunity in order to resolve tribal/state
disputes, h a letter dated September 10, 1997, Governor Gary Locke of Washington expressed
his concerns to Senator Slade Gorton concerning Sections 1 18 and 120 of the Department of the
Interior's \ cal 1998 Appropriations Bill, (H.R. 2107). If enacted. Section 118 would have
effected a waiver of tribal sovereign immunity upon receipt of TPA funds and Section 120 would
have provided for means testing of tribal TPA allocations. Governor Locke stated in his letter
that, in his view, those provisions would "undoubtedly weaken the political, social and economic
infrastructure needed to ensure healthy, stable tribal communities." He concluded by stating that
he believed that the provisions "would negatively impact all of Washington's citizens, as well as
tribes and communities throughout the country." Similarly, the attorneys general of eight states,
in a letter to President Clinton dated September 3, 1997 regarding Sections 1 18 and 120 of H.R.
2107, stated that those provisions "would drive a wedge into the heart of the doctrine of tribal
sovereignty which has protected native cultures and native rights and has served as the
foundation of Indian self-government in this country."

Regarding contractual disputes, the Administration's view is that there is no need for Congress to
waive tribal sovereign immunity. A non-Indian party entering into a contractual relationship
with an Indian tribe has the opportunity to negotiate and bargain for a waiver of immunity from
the tribe or the subordinate entity that will enter into the contract for the tribe. There are many
federal, tribal and state court cases recognizing and applying the doctrine of tribal sovereign
immunity. Any party seeking to do business with a tribe has ample notice of the doctrine and
ample opportunity to negotiate a waiver to protect its interests. The concept of caveat emptor
should prevail in these circumstances.

We direct to Committee's attention to the 1991 Report of the United States Commission on Civil
Rights. After extensive hearings, the Commission rejected the call for a waiver of tribal
sovereign immunity and instead recommended that before waiving tribal immunity, "Congress
should afford tribal forums the opportunity to operate with adequate resources, training and
funding, and guidance, something that they have lacked since the inception of the ICRA."

In conclusion, it is the Administration's view that there is no documented need for Congress to
waive unilaterally tribal sovereign immunity. Such a sweeping curtailment of tribal sovereignty
would be reminiscent of the Termination Era.

I am pleased to have had the opportunity to present the views of the Department of the Interior
on this subject and I will be happy to answer questions of the Committee.

United States Department of the Interior

OFFICE OF THE SOLICITOR

Washington. DC 20240

MAY I 9 (998

Honorable Ben Nighthorse Campbell

Chairman

United States Senate

Committee on Indian Affairs

Washington, D.C. 20510

Dear Mr. Chairman:

It is my pleasure to provide answers to supplemental questions received following the

Committee's March 11, 1998, hearing on tribal sovereign immunity.

Should you have any questions concerning the enclosed responses, please contact my office at

(202)208-3401.

Sincerely,

/ ~> n /

i t

Derril B. Jordan

Associate Solicitor - Division of Indian Affairs

Enclosure

Does the federal government's trust obligation include the responsibility to protect tribal
self-government?

Yes.

Protection of tribal self-government is an important aspect of the trust responsibility, broadly
conceived, that the federal government has assumed. The United States has recognized Indian
tribes as sovereign governments from the very inception of our Nation. See. Worcester v.
Georgia. 31 U.S. SIS, 544-50 (1832) (discussing the history of tribal-colonial treaty making and
the respect for tribal sovereignty demonstrated by colonial powers, and subsequently the United
States itself beginning with the commencement of the Revolutionary War). The Court noted
again that "Indian nations had always been considered as distinct, independent political
communities". Id- at SS8. S_e_£ also F. Cohen, Handbook of Federal Indian Law 232 (1982 ed.)
(hereinafter "Cohen") (European nations, and subsequently the United States, recognized the pre-
existing sovereignty of Indian tribes).

In Worcester, the Court held that certain laws of the State of Georgia were unconstitutional. The
purposes of the Georgia laws at issue included, among others, the extension of State laws into
Cherokee country, the abolition of Cherokee laws and institutions, and the obliteration of the
Cherokees as a distinct, politically independent self-governing people. Id. at 541. The Court
held that these laws were unconstitutional because they interfered with the regulation of Indian
affairs by the United States and because they were "in direct hostility with [several] treaties"
between the United States and the Cherokee Nation which "recognize the pre-existing power of
the nation to govern itself." Id- at 561 .

Since the Court's decision in Worcester, the United States' responsibility to Indian tribes as
domestic dependent nations has been understood to include the responsibility of protecting tribal
self-government. See Cohen at 234 (pursuant to Worcester , the "United States has assumed a
fiduciary obligation, insuring the tribes' continued integrity as self-governing entities within
certain territory" and 361 (federal protection of tribal self-government is an important aspect of
the trust relationship).

Indeed, Congress has legislated on the basis that protection of tribal self-government is an
important aspect of the Federal trust responsibility. In declaring its policy when enacting the
Indian Self-Determination and Education Assistance Act (ISDEAA), Congress stated that it
"recognizes the obligation of the United States to respond to the strong expression of the Indian

people for self-determination "25 U.S.C. § 450a (a). As amended by Pub. L. 100-472, §

102, 25 U.S.C. § 450a (b) commits the United States "to supporting and assisting Indian tribes in
the development of strong and stable tribal governments" as part of Congress' "commitment to
the maintenance of the Federal government's unique and continuing relationship with, and
responsibility to, individual Indian tribes . . . through the establishment of a meaningful Indian
self-determination policy . . . ."

More recently. Congress enacted the "Federally Recognized Indian Tribe List Act of 1 994." Pub.
L. 103-454, Title I (codified at 25 U.S.C. §§ 479a - 479a- 1 ). Congress found that "the United

States has a trust responsibility to recognized Indian tribes, maintains a govemment-to-
govemment relationship with those tribes and recognizes the sovereignty of those tribes".
Subsection 103 (2). Subsection 103 (5) further states that "Congress has expressly repudiated the
policy of terminating recognized Indian tribes, and has actively sought to restore recognition to
tribes that previously have been terminated".

The Act validates the authority of the Secretary to maintain a list of federally recognized tribes.
In publishing this list, the Secretary has consistently indicated that listed tribes possess "the
immunities and privileges available to other federally acknowledged Indian tribes by virtue of
their government-to-govemment relationship with the United States, as well as the
responsibilities, powers, limitations and obligations of such tribes." 60 Fed. Reg. 9250, 9251
(1995); 25 C.F.R. § 83.2 (19%).

One of the immunities that tribes, as members of the family of sovereigns in our Nation, have
long been understood to enjoy is sovereign immunity from suit. Santa Clara Pueblo v. Martinez .
436 U.S. 49, 58 (1978)("Indian tribes have long been recognized as possessing the common-law
immunity from suit traditionally enjoyed by sovereign powers," citing Turner v. United States .
248 U.S. 354, 358 (1919) and United States v. United States Fidelity & Guaranty Co. . 309 U.S.
506, 512-513 (1940), and others).

Tribal sovereign immunity serves an important purpose in protecting and promoting Indian tribal
self-government. The Supreme Court has recognized that the sovereign immunity possessed by
the tribe is a "necessary corollary to Indian sovereignty and self-government" (citations omitted).
Three Affiliated Tribes v. Wold Engineering . 476 U.S. 877, 890 (1986). Similarly, in Oklahoma
Tax Comm'n v. Citizen Band Potowatomi of Oklahoma . 498 U.S. at 510, the Court explained
that Congress "has consistently reiterated its approval of the immunity doctrine," reflecting its
desire to promote its "goal of Indian self-government, including its 'over-riding goal' of
encouraging sufficiency and economic development" (citations omitted). Moreover, as the court
noted in Martinez . 436 U.S. at 64-65, a finding that Congress waived tribal immunity in federal
courts "would also impose serious financial burdens on already 'financially' disadvantaged
tribes" (citation omitted).

The lower federal courts have recognized this principle as well. In American Indian Agricultural
Credit Consortium v. Standing Rock Sioux Tribe. 780 F. 2d 1374, 1378 (8th Cir. 1985), the court
pointed out that "immunity is thought necessary to promote the federal policies of tribal self-
determination, economic development and cultural autonomy." In Maryland Casualty Co. V.
Citizens Natl Bank of West Hollywood . 361 F.2d 517, 521-22 (5th Cir. 1966), the court found
that tribal sovereign immunity is necessary to protect tribal assets from claims and judgments
that would soon deplete tribal resources.

Given the critical importance of tribal sovereign immunity in preserving tribal self-government,
the broad-based, unilateral waiver of tribal sovereign immunity that is contemplated by
legislation such as S. 1691 would critically undermine tribal self-government. In practical terms,
it may result in termination for a number of tribes, and would stand in stark contrast to Congress'
declaration when enacting the Federally Recognized Indian Tribe List Act of 1 994 that it "has

expressly repudiated the policy of terminating recognized Indian tribes". The preservation of
tribal sovereign immunity is an important corollary to protecting tribal self-government. The
unilateral waiver of tribal sovereign immunity, in both state and federal courts, that is
contemplated by S. 1691, is inconsistent with the trust responsibility the United States has
assumed to preserve tribal self-government.

2. Would a broad waiver of tribal immunity require the Department to participate in
defending a wide range of new areas?

While it is difficult to predict with certainty, we would anticipate an increase in litigation.

Challenges to tribal sovereign authority are not usually limited to challenges to the methods or
manner through which tribal authority is exercised; such challenges usually go to the very
existence of tribal authority. For example, see. Washington v. Confeder ated Tribes of the
Colville Indian Reservation . 447 U.S. 134 (1980) (challenge to Tribes' authority to impose a
sales tax on cigarette purchases made on the Reservation by non-tribal members); Merrion v.
Jicanlla Apache Tribe. 455 U.S. 130 (1982) (challenge to Tribe's authority to impose a severance
tax on oil and gas produced on tribal lands); Kerr-McGee Corp. v. Navajo Tribe. 471 U.S. 195
(1987), (challenge to the Navajo Nation's authority to impose a Possessory Interest Tax and a
Business Activity Tax to a non-Indian company doing business on the Reservation); National
Farmers Union Ins. Co. v. Crow Tribe. 471 U.S. 845 (1985) and Iowa Mutual Ins. Co. v.
LaPlante. 480 U.S. 9 (1987) (challenges to the tribal courts' jurisdiction over cases brought by
tribal members against non-Indians stemming from on-reservation conduct); and FMC Corp v.
Shoshone-Bannock Tribes . 905 F.2d 1311 (9th Cir. 1990), (challenge to the Tribes' authority to
apply its employment preference ordinance to a non-Indian employer located on fee lands within
the boundaries of the Tribes' Reservation).

A broad waiver of tribal immunity would likely lead to a significant increase in the number of
such challenges to tribal authority. Although in certain case suits for injunctive relief may be
brought against tribal officials (see Santa Clara Pueblo . 436 U.S. at 59) just as they can against
officials of a state that is itself protected against suits under the Eleventh Amendment (see Ex
Parte Young . 209 U.S. 123 (1908)), the availability of relief -- especially monetary relief - from
the Tribe itself could produce a significant inducement for litigation. Tribes would look to the
United States, acting through the Departments of Interior and Justice, to intervene or appear as
amicus curiae in such cases. Responding affirmatively to tribal requests would be consistent
with the United States' trust responsibility to preserve the self-governing status of tribes in those
instances when federal statutory and case law supports the tribe's possession and exercise of the
challenged authority. Evaluating requests for involvement in these cases, not to mention
responding affirmatively to these requests, is almost certain to require the utilization of
additional Federal resources.

3. Before the Federal government takes land into trust on behalf of a tribe, is it required to
consider the tax consequence of this decision?

Under 25 C.F.R. §§151. 10 and 151. 11, when the Secretary is determining whether to take off-
reservation land in trust, he must consider, among other factors, "the impact on the State and its
political subdivisions resulting from the removal of the land from the tax rolls." 25 C.F.R. §
151.10(e).

4. How would the waiver of tribal immunity affect the Department of Interior's ability to
foster and support the Federal government's policy goals of tribal self-determination and
self-sufficiency?

The key to tribal self-determination and self-sufficiency is the availability of adequate tribal
governmental revenues. Tribes are governments and are responsible for delivering a variety of
services to their members and other persons residing and doing business within tribal territory.
No government can provide roads, schools, community sanitation systems, law enforcement
services, courts, social services and other programs without substantial and reliable sources of

In Puerto Rico Aqueduct & Sewer Authority v. Metcalf & Eddv. Inc. . 506 U.S. _, 1 13, S. Ct.
684, 687 (1993), the Court recognized that one of the primary benefits of sovereign immunity is
the right not to be sued - the right to avoid the costs and general consequences of the risks of
trial and discovery. The need to avoid such costs is just as important to tribal governments as it
is to the United States and the States. In fact, given the tenuous financial condition of the
overwhelming majority of tribal governments, it is probably much more important to tribes. In
addition, the opening of already strapped tribal treasuries to the payment of damages would serve
to threaten the viability of many tribes. Given the existing uncertain financial status of most
tribes, the additional burdens that a broad waiver of immunity would place on tribes would make
the provision of governmental services such as roads, schools, community sanitation systems,
law enforcement services, courts, social services and other programs more challenging.

From an economic development perspective, it must be understood that the vast majority of
tribes lack a tax base from which to raise governmental revenues. As a result, tribes must engage
in commercial activities to raise these revenues. Tribal governments are the source of or the
conduit for most investment on the majority of reservations. If tribal governmental resources are
depleted due to exposure to "the costs and general consequences associated with discovery and
trial" and the payment of money from limited tribal resources, tribal governments will have
fewer revenues to invest in reservation-based economic development. This will mean, in turn,
fewer revenues to the tribal government, and less jobs for members. Tribes and their members
will be swept even further into the cycle of poverty and despair that has been commonplace on
too many reservations. If Congress legislates a broad waiver of tribal immunity, this cycle may
become inescapable to many tribes and their members.

In short, exposing tribal governments to unlimited lawsuits will deprive tribal governments of
badly needed revenues that would otherwise be used to provide important governmental services
and investments that would lead to jobs for members, infrastructure development, and additional

100

governmental revenues. Tribes would remain dependent on the federal government to maintain
the barest minimum of services, and the Federal government's goals of tribal self-determination
and self-sufficiency would be severely compromised if not completely undermined.

5. If tribal immunity is waived, what would be the immediate or long-term impact, if any,
on the Federal government itself, either directly or indirectly?

A waiver of tribal sovereign immunity would have both immediate and long-term impacts to the
Federal government that would be both direct and indirect.

For example, section 4 of S. 1691 provides that the district courts of the United States shall have
original jurisdiction over civil suits involving Indian tribes and arising under the Constitution,
laws or treaties of the United States, and over civil causes of action against tribes sounding in
contract and tort. The grant of jurisdiction to hear cases arising under the Constitution, laws or
treaties of the United States could be interpreted to confer federal court jurisdiction over intra-
tribal disputes involving tribal membership, tribal election disputes and other internal matters
because claims of this nature are usually based at least in part on the Indian Civil Rights Act
(ICRA). Federal courts do not currently exercise jurisdiction over matters of this nature. The
influx of all of these types of cases would undoubtedly add to the already burgeoning case loads
of both the federal district courts and the circuit courts of appeal.

As explained in the answer to Question 2, the waiver of tribal immunity would also increase the
responsibilities of the Departments of Interior and Justice and require the utilization of additional
Federal resources.

6. Your testimony indicated that the costs of defending against claims includes costs of
discovery and trial as well as any judgment that might result. Who would ultimately bear
the burden of these costs?

Tribal governments would bear the burden of defending against the claims and paying the
judgments that would result from a waiver of tribal sovereign immunity. In addition, in
situations in which the United States agrees to intervene in litigation pursuant to its trust
responsibility to protect tribal self-government, the United States would also bear the costs of
trial and discovery.

7. In addition to the tribal governments themselves and the individual tribal membership,
would the Federal government ultimately bear any of this burden either directly or
indirectly?

Please see the answers to Questions 2, 5 and 6.

101

Under the Self-Determination and Education Assistance Act tribes can contract to
perform Federal government functions. These contracts included indirect contract
support costs. Would a waiver of tribal immunity increase these costs?

Yes.

Most services the Federal Government performs for the benefit of a tribe are contractible under
the Indian Self-Determination and Education Assistance Act (ISDEAA). 25 U.S.C. § 450fl»(l).
These programs include public safety and justice, tribal government, roads, fire management,
education, social services, and health care through the Department of Health and Human
Services. The ISDEAA specifically provides that professional services supportive of a
contracted program are allowable costs. 25 U.S.C. § 450j-l(k)(7). Further, the ISDEAA
requires the Departments to fund all indirect costs associated with ISDEAA contracts. 25
U.S.C. § 450j- 1(a)(2). Therefore, under a blanket waiver of tribal immunity, the costs of
professional services to defend a lawsuit which arose from actions associated with a contracted
program would be indirect costs associated with an ISDEAA contract. Thus, it is likely that
indirect contract support costs would increase.

9. The Federal Tort Claims Act was extended to cover tribal self-determination contracts
and compacts. How would a waiver of tribal immunity that includes these contracts and
compacts affect the application of the FTCA?

The Federal Tort Claims Act (FTCA) is a limited waiver of Federal sovereign immunity. It
provides that the Federal government will stand in the shoes of an employee of the Federal
government in actions for money damages caused by the negligent or wrongful act or omission
of that employee acting within the scope of his or her employment. The ISDEAA provides that
tribal employees performing work under an ISDEAA contract are deemed federal employees for
the purposes of FTCA coverage. S_ee generally . 25 C.F.R. § 900. 1 80 et sgg,. Thus, under
current law, the United States substitutes itself for a tribal employee in any negligence claim
arising out of performance of an ISDEAA contract. The limitations of the FTCA are extended to
this claim and any damages are paid pursuant to the FTCA, e.g. from the U.S. Treasury and not
the tribe. Moreover, the FTCA has many provisions that protects the United States such as the
"judicial or legislative immunity defense, 25 U.S.C. § 2674, exclusiveness of FTCA remedy, 28
U.S.C. § 2679, limitations of attorneys fees", 25 U.S.C. § 2678, and others.

If enacted, it is possible that S. 1691 may be interpreted by a court to constitute a repeal of or
remedy in addition to the FTCA coverage for ISDEAA contracts and compacts. The repeal of
FTCA coverage would have a dramatic effect on tribes and tribal organizations. Currently,
FTCA covers all negligence claims including medical malpractice. If the coverage were to be
eliminated, tribes would be required to purchase separate negligence insurance and this would
increase the tribe's indirect costs dramatically. Once again, Congress, in order to facilitate
compliance with its own directive as set forth in 25 U.S.C. § 450j- 1(a)(2), would need to fund
these increases. In 1 988 Congress decided that it would be more economical to extend FTCA
coverage to ISDEAA contracts than to include funding for insurance coverage. When enacting
the 1988 amendments to the ISDEAA, the Committee report stated.

102

As originally enacted, the Self-Determination Act authorized either Secretary to require
that tribal contractors must obtain liability insurance. The Act also precluded insurance
carriers from asserting the tribe's sovereign immunity from suit. In practice, the costs of
such liability insurance have been taken from the amount of funds provided to the tribal
contractor for direct program costs or for indirect costs. The Committee is concerned that
tribal contractors have been forced to pay for liability insurance out of program funds,
which in turn, has resulted in decreased levels of services for Indian beneficiaries. It is
clear that tribal contractors are carrying out federal responsibilities. The nature of the
legal liability associated with such responsibilities does not change because a tribal
government is performing a Federal function. The unique nature of the legal trust
relationship between the Federal Government and tribal governments requires that the
Federal Government provide liability insurance coverage in the same manner as such
coverage is provided when the Federal Government performs the function. Consequently,
section 201(c) of the Committee amendment provides that, for purposes of the Federal
Tort Claims Act, employees of Indian tribes carrying out self-determination contracts are
considered to be employees of the Federal Government. S. Rep. 274, 100th Cong., 1
Sess., 1987, 1988 reprinted in 1988 U.S.C.C.A.N. 2620.

10. Your testimony indicated that several state officials had expressed their opinion that any
waiver of tribal immunity would "weaken the political, social and economic
infrastructure of tribal communities and impact all state citizens." Could you expand on
that theme with more detail?

The statement referenced in the question was made by Governor Gary Locke of the State of
Washington in a letter to Senator Slade Gorton. The letter, dated September 10, 1997, addressed
section 120 of H.R. 2107, the Interior and Related Agencies Appropriations Bill for the current
fiscal year. Governor Locke's statement suggests that he is aware that a broad-based waiver of
tribal sovereign immunity would deprive tribal governments of much needed revenues that
would otherwise be utilized to provide services to reservation residents and that would be
invested in the reservation economy. His letter further suggests a realization that depriving
tribes of needed revenues would result in increased poverty in tribal communities, and a greater
dependence of tribal members on many state benefits and programs for which they are eligible.
Finally, Governor Locke letter also suggests his understanding that economically healthy tribal
communities contribute to the economic health of surrounding non-Indian communities.

1 1 . Instead of waiving tribal immunity, your testimony indicates that tribal forums need to be
strengthened. What resources are available to or needed by tribes in order to achieve
this?

Tribal justice systems remain the most appropriate forums for the adjudication of disputes
involving Indians on tribal reservations. Congress recognized the importance of tribal courts in
passing the 1992 Indian Tribal Justice Support Act, 25 U.S.C. § 3601(6), although no funds have
been appropriated for its implementation. The President's Fiscal Year 19% budget request
included funds to implement the Indian Tribal Justice Support Act, but Congress did not provide
the funds and cut the BIA budget by 8% below FY 1995 funding levels.

103

Despite limited funding, tribes have developed systems to try and cope with the growing
demands of tribal communities and changing tribal economies. The vast majority of tribes do
not have the resources or revenues to develop the justice systems they envision. Many tribal
courts do not have adequate funds to provide basic needs such as adequate physical facilities in
which to house a court system, computerization, legal libraries, training forjudges and other
court personnel and legally trained law clerks to assist judges.

In September 1995, as mandated by the Indian Tribal Justice Support Act, the Bureau of Indian
Affairs competitively awarded a contract to a non-federal entity to conduct a survey of conditions
of tribal justice systems and Courts of Indian Offenses. Results of the survey will be received
and completed in the near future. This study will determine resources and funding, including
base support funding, needed to provide for expeditious and effective administration of justice.

12. In order to manage the increased risk of loss of tribal assets, tribes would need to acquire
increased liability insurance. Is this insurance generally available to all tribes? From
what source?

Yes.

Many Indian tribes have obtained automobile, property owners' and general liability insurance
from commercial insurance companies to insure against tort claims by individuals. Some tribes
have developed self-insurance programs, and have purchased re-insurance coverage in cases
when claims exceed available revenues under the self-insurance program. The ISDEAA
extension of Federal Tort Claims Act coverage for certain claims against Indian tribes arising out
of performance of ISDEAA contract programs by tribal governments also helps to protect tribes.
Insurance and the ISDEAA extension of FTCA coverage preserve sovereign immunity while also
providing remedies for persons who may be injured by tribal activities.

Some tribes may be charged excessive rates for insurance from commercial providers. The
Committee may wish to consider whether it is advisable to improve access for Indian tribes to
affordable insurance for all tribal activities.

104

department of fustier

STATEMENT

THOMAS L. LECLAIRE

DIRECTOR

OFFICE OF TRIBAL JUSTICE

BEFORE THE

COMMITTEE ON INDIAN AFFAIRS
UNITED STATES SENATE

CONCERNING
TRIBAL SOVEREIGN IMMUNITY

PRESENTED ON
MARCH 11, 1998

105

TESTIMONY ON TRIBAL SOVEREIGN IMMUNITY

Before the Senate Committee on Indian Affairs

March 11, 1998

Mr. Chairman and Members of the Committee, good morning and
thank you for inviting the Justice Department to testify on the
important subject of tribal sovereign immunity. I am Thomas L.
LeClaire, Director of the Office of Tribal Justice, Department of
Justice .

Congress and the Executive Branch acknowledge the importance
of working with Indian tribes within a framework of government-
to-government relations when tribal self-government, tribal land
and natural resources, or treaty rights are at issue. In our
work within that framework, the Justice Department is guided by
fundamental principles that have governed the relations between
the United States and Indian tribes for over two hundred years.

Since the formation of the Union, the United States has
recognized Indian tribes as "domestic dependent nations" that
exercise governmental authority over their members and their
territory. In numerous treaties and agreements, our Nation has
guaranteed the right of Indian tribes to self-government 3 and
pledged to protect Indian tribes. 4 The Administration and the
Attorney General honor the United States' commitments to Indian
tribes .

Congress has recognized that "the United States has a trust
responsibility to [Indian tribes] that includes the protection of
the sovereignty of each tribal government." 5 Under the Federal
trust responsibility to Indian tribes, the United States should

106

exercise the highest standard of care in matters of tribal self-
government .

Continued recognition of tribal sovereign immunity is an
important part of the Federal Government's protection of tribal
self-government, which furthers the United States' longstanding
policy of encouraging Indian self-determination and economic
development .
THE DOCTRINE OF SOVEREIGN IMTONITY

Sovereign immunity is a fundamental aspect of sovereignty,
which protects a government from suit to avoid undue intrusion on
governmental functions or depletion of the government's treasury
without legislative consent.

Under federal law, the doctrine of sovereign immunity is
well settled, and fundamental maxims guide the federal courts in
cases that touch on the United States' sovereign immunity:

• The United States is immune from suit in the absence of
an affirmative waiver of immunity;

• Only Congress may waive the sovereign immunity of the
United States;

• A waiver of the sovereign immunity of the United States
must be unequivocally expressed; and

• Waivers of the sovereign immunity of the United States
are strictly construed in favor of the sovereign.

Congress carefully considers any waiver of federal sovereign
immunity, mindful of potential impacts on federal governmental
functions and our treasury. Waivers of the sovereign immunity of

107

the United States are usually limited to the federal courts.
Where the United States has not waived its sovereign immunity,
the Federal Government regularly relies on its immunity to bar
suits .

In regard to the states, the Eleventh Amendment of the
Constitution of the United States embodies the principle of
sovereign immunity and protects the dignity and respect afforded
to the states in our federalist system. Absent state consent
or congressional abrogation pursuant to a valid exercise of
power, sovereign immunity bars suits by foreign nations, Indian
tribes and private individuals against the states in federal
court. It likewise bars suits by foreign nations, Indian
tribes, and private individuals against states in their own
courts absent state consent or an Act of Congress. 10 States
regularly rely on their sovereign immunity to bar suits to which
they do not consent. 11 States have relied on the Eleventh
Amendment to bar suits by Indian tribes before the United States
Supreme Court in three cases within the past ten years. 12

When states waive their sovereign immunity, they guard state
governmental functions and state treasuries and often limit their
waivers of immunity to actions before the state courts. In state
statutory waivers of immunity for tort actions, states reserve
sovereign immunity to protect discretionary government functions
from suit. 1 States also frequently limit government liability
for monetary damages and bar recovery for exemplary or punitive
damages . 14

108

THE SOVEREIGN IMMUNITY OP TRIBAL GOVERNMENTS

"Indian tribes are sovereigns" which predate the formation
of the United States. 15 Accordingly, absent tribal government
waiver or congressional abrogation, Indian tribes retain
sovereign immunity as an aspect of inherent tribal sovereignty.
Under the federal -tribal governmental relationship, it is well
settled that only Congress or the governing body of an Indian
tribe may waive a tribe's sovereign immunity from suit. 16

Congress has acted to protect tribal sovereign immunity and
has provided appropriate venues for dispute resolution which do
not jeopardize tribal government functions or financial solvency.
The Indian Self -Determination and Education Assistance Act (the
"ISDEAA"), for example, authorizes Indian tribes to contract with
the Secretaries of the Interior and Health and Human Services to
perform governmental functions that their departments otherwise
would perform in Indian country. The ISDEAA provides that
the Secretary of the Interior should assist Indian tribes in
obtaining insurance and prohibits the insurers from raising
tribal sovereign immunity as a defense to a covered claim. The
ISDEAA extends Federal Tort Claims Act coverage to claims against
an Indian tribe directly "resulting from the performance of
functions under . . . [an ISDEAA] contract." 18 The ISDEAA
preserves tribal soverign immunity while providing mechanisms for
compensating injured parties.

A. Contract Claims

In our view, the longstanding federal recognition of tribal

109

sovereign immunity does not raise significant policy concerns in
the area of contract claims. The doctrine of tribal sovereign
immunity is well known and an Indian tribe's immunity from suit
does not leave a potential commercial partner unable to protect
its interests. 2 For example, a retailer may request advance
payment from a tribal government. A prospective business partner
may choose, to contract with subordinate tribal corporations or
entities that have waivers of sovereign immunity in their
organizational documents. A joint venturer may request that the
tribe consent to suit in the contract that establishes the joint
venture with the tribe. Or, a prospective commercial partner may
negotiate transaction specific waivers of sovereign immunity or
security arrangements such as escrow accounts, bonds, or letters -
of -credit to ensure against financial loss from non-performance
of the contract by the tribal government . These mechanisms are
available under existing law and simply require sound business
planning to implement them.

B. Tort Claims

The Department of the Interior informs us that many Indian
tribes have obtained automobile, property owners', and general
liability insurance to insure against tort claims by individuals
and the ISDEAA extension of Federal Tort Claims Act coverage for
certain claims against Indian tribes arising out of performance
of ISDEAA contract programs by tribal governments. Insurance and
the ISDEAA extension of FTCA coverage preserve sovereign immunity
while also providing for coverage of tort claims against tribes.

110

The Committee may wish to consider whether it is advisable
to improve access for Indian tribes to affordable insurance for
tribal commercial activities. For example, the United States
might charter an intertribal insurance corporation to provide
insurance for tribal commercial activities, with insured Indian
tribes as shareholders. The Indian tribes would pay insurance
premiums to the intertribal insurance corporation and obtain
insurance. Covered tort claims could be made against the
corporation directly, rather than against the Indian tribes. The
insurance corporation could be barred from raising sovereign
immunity as a defense to a covered claim (as under the ISDEAA)
and recovery against the insurance corporation could be limited
to the relevant policy limits. Punitive damages could be barred.
Such an arrangement would build on the existing models in the
ISDEAA, without impairing tribal sovereign immunity, and could
provide needed institutional infrastructure for Indian country.

C. State Taxation in Indian Country

Indian tribes and reservation Indians are subject to tribal

law and accordingly, are generally exempt from state taxation and

regulation in Indian country. As the Supreme Court explains:

The Constitution vests the Federal Government with
exclusive authority over relations with Indian tribes.
Art. I, S 8, cl . 3 . . . . As a corollary to this
authority, and in recognition of the sovereignty
retained by Indian tribes even after the formation of
the United States, Indian tribes and individuals
generally are exempt from state taxation within their
own territory.

When Indian tribes or individual Indians generate value through

economic activities within their reservations, federal law may

Ill

also preempt state taxation of non- Indians engaged in commerce
with them. 22

In contrast, under prevailing Supreme Court rulings, where
Indian tribes or individual tribal retailers market prepackaged
goods to non- Indians, without adding reservation value, the non-
Indian consumers may be liable to pay non-discriminatory state
taxes on the transactions. 25 In such circumstances, the Indian
tribes also have authority to tax the non- Indian consumers, but
the states are not required to provide credit for tribal taxes on
the same transactions, so a dual tribal -state tax burden on
reservation commerce with non- Indians is possible. Many tribes
remain reluctant to "stack" tribal taxes and state taxes.

The Supreme Court has recognized that states and Indian
tribes may enter "mutually satisfactory" tax agreements, 24 and to
avoid undue burdens on commerce and facilitate tax collection,
seventeen states have entered into such tax agreements with
Indian tribes. These agreements vary. Some state -tribal tax
agreements provide that the state will forgo its taxes, and the
Indian tribe may retain all tribal taxes from sales to non-
Indians, provided that the tribal taxes approximate the amount of
state taxes that would otherwise be imposed. Other agreements
call for a division of the taxes on sales to non- Indians between
the state and the tribe to avoid dual taxation while others are
simply collection agreements.

In our view, agreements are the best mechanisms for mutually
satisfactory resolution of tax collection issues between states

112

and tribes. If states and tribes are unable to reach agreement,
however, states may impose their taxes at the wholesale level to
collect states taxes on prepackaged goods that are destined for
sale to non- Indians before they are imported to Indian country. 25
Thus, we concur with the Interior Department, legislative waiver
of tribal sovereign immunity in this area is unwarranted.
TRIBAL SELF-GOVERNMENT AND TRIBAL COURTS

The Interior Department informs us that Indian tribes
frequently enact their own waivers of sovereign immunity. We
would expect that, just as the United States regularly limits
federal waivers of sovereign immunity to the federal courts and
states regularly limit their waivers of sovereign immunity to
state courts, Indian tribes regularly would limit their waivers
of sovereign immunity to tribal courts. 26 Accordingly, in
considering tribal sovereign immunity, it is important to bear in
mind the full significance of tribal court authority to tribal
self-government .

Tribal courts are central institutions of self-government
because they are "important forums for ensuring public health and
safety" and for adjudicating "disputes affecting personal and
property rights" in Indian country. Tribal courts give life to
traditions and values embodied in tribal law and are essential to
the political integrity, culture, and identity of tribes. 27

Recognizing the importance of tribal courts as institutions
of justice, the Justice Department has been working cooperatively
with the Interior Department to assist tribal courts. Tribal

113

leaders have often requested support for tribal courts, and, in
response, the Justice Department's Office of Policy Development
established a Tribal Courts Project to assist them by developing
innovative training, providing information, and encouraging
cooperation between the federal, state, and tribal court systems.
To complement these efforts, the Department's Bureau of Justice
Assistance has funded grants to improve cooperation between
federal, state, and tribal courts and funded training for tribal
judges at the Federal Judicial Center and the National Judicial
College. The Office of Justice Programs is working with tribal
courts through our Drug Courts Program and Violence Against Women
Programs, among others. For FY '99, the Justice Department will
seek increased funding to assist tribal courts. Our goal in
undertaking these efforts is to help ensure that tribal courts
may take their place as partners with state and federal courts in
the nationwide administration of justice.
CONCLUSION

The Justice Department respectfully submits that, to the
greatest extent practicable, legislation dealing with tribal
sovereign immunity should be developed based on consultation and
consensus with Indian tribes. In our view, legislation in this
area should preserve tribal governmental solvency, authority, and
functions, including tribal court authority and tribal sovereign
immunity.

Thank you for inviting the Justice Department to present its
views on this important matter today.

114

1. See 8-9- . 25 U.S.C. §5 3601, 3701; Executive Memo, on Government-to-
Government Relations with Native American Tribal Governments, 59 Fed. Reg. 22951
(1994); Proclamation of American Indian Heritage Month, 57 Fed. Reg. 56801
(1992); U.S. Dept. of Justice Policy on Indian Sovereignty and Government-to-
Government Relations with Indian Tribes, 61 Fed. Reg. 29424 (1996).

2. In Oklahoma Tax Comm'n v. Citizens Band Potawatomi Indian Tribe . 498 U.S.
505, 509 (1991), the Supreme Court explained that "Indian tribes are 'domestic
dependent nations' that exercise inherent sovereignty over their members and their
territory." Id. (quoting) Cherokee Nation v. Georgia . 30 U.S. (5 Pet.) 1, 17 (1831).

3. In Ex Parte Crow Dog . 109 U.S. 556, 568-69 (1883), for example, the Supreme
Court explained that under the Treaty of 1868 with the Sioux, "among the arts of
civilized life, which it was the very purpose of all these arrangements to introduce and
naturalize among [the Indians], was the highest and best of all, that of self-
government." Earlier, in the seminal case Worcester v. Georgia . 31 U.S. (6 Pet.) 515
(1832), the Court had ruled that the Treaty of Holston "recogniz(ed) the national
character of the Cherokees, and their right of self-government."

4. For example, the 1 786 Treaty between the United States and the Shawnee Nation
proclaims, "The United States do grant peace to the Shawanoe nation, and do receive
them into their friendship and protection. ..." 7 Stat. 26. The 1 785 Treaty with the
Cherokee Nation extends federal protection and recites that "the Indians may have full
confidence in the justice of the United States." 7 Stat. 18. These treaties are
exemplary of Indian treaties of that period. The United States also pledged that Indian
reservations would be preserved as the "permanent homes" of the Indian peoples.
See Treaty with the Sioux, 1868, 15 Stat. 635. Consistent with these treaty
pledges, the Supreme Court has held that Indian tribes retain essential rights
"necessary to make their reservations livable." Montana v. United States , 450 U.S.
544, 566 n. 15 (1980).

5. 25 U.S.C. § 3601(2); see also 25 U.S.C. §§ 450, 1451, 1601, 2501-2502,
3701, and 4101.

6. See generally Lane v. Pena . 518 U.S. 187 (1995); United States v. Nordic Village ,
503 U.S. 30 (1992).

7. §e§ e.g.. Smith v. United States . 507 U.S. 197 (1993) (widow of employee of
government contractor was barred by sovereign immunity from asserting wrongful
death claim for accidental death occurring in Antarctica); Lane v. Pena . supra
(merchant marine's claim for money damages arising out of wrongful termination
barred by sovereign immunity).

8. Idaho v. Coeur d'Alene Tribe . 117 S.Ct. 2028, 2033 (1997).

115

9. Monaco v. Mississippi . 292 U.S. 313 (1934) (Eleventh Amendment bars suit by
foreign nation against a state in federal court); Blatchford v. Native Village of Noatak ,
501 U.S. 775 (1991) (Eleventh Amendment bars suit by Indian tribe against a state
in federal court); Hans v. Louisiana . 134 U.S. 1 (1890) (Eleventh Amendment bars
suit by private citizen against a state in federal court).

10. See e.g.. Ashland Equities Co. v. Clerk of New York County . 493 N.Y.S.2d 133
(N.Y.App.Div. 1985).

1 1 . For example, under the related doctrine of legislative immunity, the Supreme
Court held on March 3, 1 998 that local legislators enjoy absolute legislative immunity
for their actions as legislators. Boqan v. Scott-Harris . S.Ct. (1998).

12. Idaho v. Coeur d'Alene Tribe , supra ; Seminole Tribe v. Florida . 1 1 6 S.Ct. 1114
(1996); Blatchford v. Native Village of Noatak . supra .

13. Everett v. Willard . 468 So. 2d 936 (Fla. 1985) (sheriff's decision to permit
intoxicated motorist to drive on after stop involved an exercise of a discretionary
function shielded by state sovereign immunity, and sheriff's department was immune
from a tort action brought by an innocent third party after a subsequent collision with
the intoxicated driver).

14. For example, the State of Nevada limits its monetary liability in tort actions to
$50,000 and bars recovery for exemplary and punitive damages. N.R.S. § 41 .025.
The State of Colorado generally limits the monetary liability of public entities in tort
actions to $1 50,000 for an injury to one person arising out of a single incident. For
injuries to two or more persons arising out of a single incident, the monetary liability
of public entities is generally limited to $600,000, and punitive damages are generally
barred. C.R.S.A. §24-10-114. The State of Texas has granted permission to sue the
state for certain claims, but "permission to sue does not waive to any extent [the
state's] immunity from liability," so a subsequent legislative appropriation may be
necessary to satisfy resulting judgements. V.T.C.A. § 107.002; cf. Federal Sign v.
Texas Southern University . 951 S.W.2d 29 (Tex. 1997) (contractor barred from suing
state university for money damages without consent).

15. Blatchford v. Native Village of Noatak . 501 U.S. at 779; see Worcester v.
Georgia . 31 U.S. at 558-561.

1 6. Oklahoma Tax Comm'n v. Citizens Band Potawatomi . supra : Santa Clara Pueblo
v. Martinez . 436 U.S. 49 (1978); Puvallup Tribe v. Department of Game . 433 U.S.
165 (1977); United States v. U.S. Fidelity & Guaranty Co. . 309 U.S. 506 (1940).

17. 25 U.S.C. §§ 450 et sea.

18. 25 U.S.C. § 450f.

116

19. 25 U.S.C. § 450n.

20. For example, in a publication entitled, "A Guide to Mortgage Lending in Indian
Country" (1997), the Comptroller of the Currency explains:

Sovereign immunity is a governmental immunity that prevents a court
from entering orders against the government in the absence of a clear
waiver. As governments, Indian tribes enjoy sovereign immunity from
suit under federal common law. Tribal sovereign immunity is similar to
the sovereign immunity of the United States or of individual states.
Although tribal sovereign immunity does not cover individual Indians, it
does extend to tribal government agencies, such as Indian housing
authorities.

id. at 9; see also Office of the Comptroller of the Currency, Department of Treasury,
"Providing Financial Services to Native Americans in Indian Country," (1997) at 6
(successful "banks have established good working relationships with the tribes to
address the issues of sovereign immunity. . ."). Similarly, one of the leading
commentators on federal civil court practice explains: "Native American tribes are
sovereigns. . . . ITlhe Supreme Court has held that Native American tribes have
immunity from suit by states." D. Coquillette, et aj., Moore's Federal Practice §
123.10(6] (1997). Thus, the business and financial community have reasonable
notice that Indian tribes possess sovereign immunity.

21. Montana v. Blackfeet Tribe . 471 U.S. 759, 764 (1985).

22. In New Mexico v. Mescalero Apache Tribe , 462 U.S. 324 (1 983), for example,
the Supreme Court held that non-Indian hunters using a tribal hunting enterprise on
reservation lands were exempt from state hunting regulations. The Court explained
the basis for its decision as follows:

The Tribe has engaged in a concerted and sustained undertaking to
develop and manage the reservation's wildlife and land resources
specifically for the benefit of its members. The project generates funds
for essential tribal services and provides employment for members who
reside on the reservation. . . . The Tribal enterprise . . . clearly involves
"value generated on the reservations by activities involving the Tribe."

Id., at 340. Accordingly, the State had no authority to impose license requirements
and fees on non-Indians using the valuable hunting resources generated by the Tribe
on its reservation. See White Mountain Apache Tribe v. Bracker , 448 U.S. 136
(1980) (non-Indian engaged in reservation timber production with Indian tribe was
exempt from state motor fuel taxation).

23. Washington v. Colville , 447 U.S. 134 (1980) (prepackaged cigarettes).

117

24. Oklahoma Tax Comm'n v. Citizens Band Potawatomi . 498 U.S. at 514 applying
25 U.S.C. § 476; see Department of Taxation and Finance v. Milhelm Attea & Bros..
Inc. . 512 U.S. 61, 72 (1994).

25. Oklahoma Tax Comm'n v. Citizens Band Potawatomi . supra .

26. The Menominee Tribe has enacted a statute "waiving immunity in tribal court."
R. Clinton, N. Newton & M. Price, American Indian Law: Cases and Materials (1991)
at 342; see also Williams v. Lee . 358 U.S. 217 (1959) (absent a contrary statute,
tribal court jurisdiction in civil cases against Indians in Indian country is exclusive of
state court jurisdiction); Kennerlv v. District Court , 400 U.S. 423 (382) (same); Fisher
v. District Court . 424 U.S. 382 (1976) (same). We note that state government are
at times hostile to tribal self-government, see Cherokee Nation , supra (despite treaty
recognizing tribal self-government, state legislature purported to outlaw tribal self-
government), so Indian tribes would not view state courts as "neutral" forums.

27. 25 U.S.C. § 3601.

118

STATE OF MINNESOTA

IN COURT OF APPEALS

C8-96-1024

Granite Valley Hotel Limited Partnership,

d/b/a Granite Valley Hotel,

Respondent,

vs.

Jackpot Junction Bingo and Casino,

a Business Enterprise of the Lower Sioux Indian Community,

Appellant.

Filed February 18, 1997

Affirmed

Forsberg, Judge*

Concurring Specially, Randall, Judge

Redwood County District Court
File No. C49614

John E. Jacobson. Joseph F. Halloran, Jacobson, Buffalo, Schoessler &. Magnuson, Ltd.,
810 Lumber Exchange, 10 South Fifth Street, Minneapolis, MN 55402 (for Appellant)

Timothv W. Nelson. Nelson Personal Injury Attorneys, 1010 West St. Germain. Suite
440. St' Cloud, MN 56301 (for Respondent)

Considered and decided by Randall, Presiding Judge, Davies, Judge, and Forsberg,
Judge.

* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant
to Minn. Const, an. VI, § 10.

119

SYLLABUS

When a state district court and an Indian community's tribal court have concurrent
jurisdiction over an action, the district court may properly decide issues of sovereign immunity
and jurisdictional consent without deferring to the jurisdiction of the tribal court, if retention
of jurisdiction does not interfere with matters of tribal self-government.

OPINION
FORSBERG, Judge

This case arises from a breach of contract action filed by respondent, Granite Valley
Motel Limited Partnership (Granite Valley), 1 against appellant, Jackpot Junction Bingo
L Casino (Jackpot Junction), seeking monetary damages for Jackpot Junction's alleged
breach of a motel occupancy agreement. On a pretrial motion, the trial court declared
that it had jurisdiction over the case and that Jackpot Junction's owner and operator, the
Lower Sioux Indian Community (Community), had effectively waived its sovereign immunity.
Jackpot Junction appeals the order declaring jurisdiction, arguing the trial court erred in
refusing to defer to the jurisdiction of the Community's tribal court for determination of
whether the Community effectively waived its sovereign immunity and consented to the
jurisdiction of Minnesota courts. We affirm.

1 Because the original action was tided as such, the case name reflects respondent's
identity as "Granite Valley Hotel Limited Partnership " However, we refer to respondent
as "Granite Valley Motel Limited Partnership, " the name under which it is registered with
the Secretary of State.

120

FACTS

On November 14, 1991 , Granite Valley and Jackpot Junction entered into a written
agreement whereby Jackpot Junction, through the Community, guaranteed occupancy of
a certain number of rooms in the Granite Valley Motel (motel) in exchange for Granite
Valley constructing the motel. The contract provided that if the agreed-upon occupancy
percentage was not satisfied, Jackpot Junction was obligated to pay to Granite Valley an
amount equal to the charter rates for the balance of the unsold rooms . Because construction
of the motel would require substantial capital, and the motel's only purpose was to serve
Jackpot Junction patrons, Granite Valley required safeguards in the form of contract provisions
waiving sovereign immunity and consenting to jurisdiction of Minnesota courts. Allen
J. Kokesch. general manager of Jackpot Junction and purported representative of the
Cornmunity. initiated the contract talks and ultimately signed the contract as "General manager,
on behalf of The Lower Sioux Indian Community."

Jackpot Junction performed under the contract until approximately 1993, when
it refused to continue paying for unsold rooms. That same year, the Community created
its own tribal court, and lateT began construction on a new motel located on reservation
property . On October 27, 1 995 , Granite Valley filed a complaint against Jackpot Junction
in Minnesota district court, alleging breach of contract. Jackpot Junction moved the court
to dismiss the action on the grounds of sovereign immunity, invalid consent to jurisdiction,
and the doctrine of comity. In response, Granite Valley moved the court for a declaration

121

of jurisdiction, which the court granted. Jackpot Junction now appeals the order declaring
jurisdiction.

ISSUE

When a state district court and a tribal court have concurrent jurisdiction over an
action, does the doctrine of comity require the district court to defer to the tribal court's
jurisdiction for resolution of sovereign immunity and jurisdictional consent issues?

ANALYSIS

When a trial court goes beyond the pleadings on a motion for dismissal, this court
reviews the trial court's decision under a summary judgment standard. Minn. R. Civ.
P. 12.03; McAUisterv. Independent Sch. Dist. No. 306, 276Minn. 549, 551, 149N.W.2d
81 , 83 (1967). On appeal from summary judgment, we determine whether there are any
genuine issues of material fact and whether the trial court erred in its application of the
law. State b\ Cooper v. French, 460 N. W. 2d 2.4 (Minn. 1990). Review under this standard
is appropriate here because the trial court issued its order upon consideration of both the
pleadings and supporting affidavits.

Jackpot Junction's challenge rests on the theory that notwithstanding a valid exercise
of jurisdiction by a state district court, the court must, as a matter of law, defer to the
Communi ty ' s tribal court for determination of whether the Community effectively waived
its sovereign immunity and consented to the jurisdiction of Minnesota courts. We disagree.

When both a state court and a tribal court have jurisdiction to entertain a dispute
involving questions central to the governance of an Indian tribe, the doctrine of comity

-4-

122

generally divests state courts of jurisdiction as a matter of federal law if retention of
jurisdiction by the state court would interfere with matters of tribal self-government. Iowa
Mut. Ins. Co. v. LaPLmte, 480 U.S. 9, 14-15, 107 S. Ct. 971, 975-76 (1987); see National
Farmers Union Ins. Cos. v. Crow Tribe of Indians, 471 U.S. 845, 856-57, 105 S. Ct.
2447, 2454 (1985) (reversing exercise of jurisdiction on grounds that exhaustion of tribal
remedies is required before claim can be entertained by federal court).

Deferral to a tribal court for exhaustion of remedies is not based on whether a trial
court properly has jurisdiction over an action. Hammer v. Lower Sioux Convenience
Store, 535 N. W.2d 379, 380 (Minn. App. 1995). Rather, it is grounded in the federal
policy of promoting tribal self-government. Id.; see also Iowa Mut. Ins., 480 U.S. at
16, 107 S. Ct. at 976 (holding that federal policy supporting tribal self-government "directs
a federal court to stay its hand in order to give the tribal court a full opportunity to determine
its own jurisdiction'") (citation omitted). Thus, the question before us is whether the facts
and legal theories underlying this case require analysis of issues central to the governance
of an Indian tribe, which must be heard by a tribal court. We hold they do not.

Jackpot Junction contends that this case begs the question of proper delegation of
authority to Kokesch, and, therefore, it is necessary to review the Community's delegation
documents and procedures. However, the facts of this case present issues of contract
interpretation and apparent authority, rather than actual authority. In rendering its decision,
the trial court reviewed the contract, pleadings, and affidavits submitted by both parties,
without having to re son to tribal documents or procedures for guidance . While examination

-5-

123

of tribal documents may be necessary to resolve a question of actual authority, apparent
authority is a question for the trier of fact to decide after considering the parties' dealings
under the contract, the defendant's actions, and other outward manifestations of delegation
of authority. See Hagedom v. Aid Ass 'n for Lutherans, 297 Minn. 253, 257, 21 1 N. W.2d
154, 157 (1973) (holding apparent authority presents question for trier of fact). Under
these circumstances, we conclude the trial court's exercise of jurisdiction and determination
of the Community's waiver of sovereign immunity does not "undermine the authority of
the tribal courts" or "infringe on the right of the Indian[ ] [tribes] to govern themselves."
See Williams v. Lee, 358 U.S. 217, 223, 79 S. Ct. 269, 272 (1959) (disallowing state
exercise of jurisdiction that would intrude upon authority of tribal courts over reservation
affairs).

Jackpot Junction next urges that this court's recent decision in Kkanmer is dispositive
in this case. In Klammer, the Community was the defendant, and we deferred to the tribal
court for resolution of jurisdictional and sovereign immunity issues. Klammer, 535 N.W.2d
at 382. However, Klammer is distinguishable from this case. First, the basis of the action
in Klammer was property damage that occurred on the premises of the Indian reservation,
id. at 379. whereas this case involves a contract performed off the reservation. Second,
unlike the situation here, the Community in Klammer did not explicitly waive its sovereign
immunity or consent to jurisdiction of the Minnesota courts. See generally id. at 380.
Because our determination of the Community's sovereign immunity and consent to jurisdiction

124

in Klammer necessitated examination of tribal documents such as the "sue and be sued

clause" contained in Community documents, that action involved issues of the Community's

self-government. Here, however, none of these documents are at issue. Thus, Klammer

does not impact our ruling today.

Finally. Jackpot Junction's interpretation of the exhaustion rule as applied to these

facts would effectively render all waiver and consent provisions in this context impotent.

As a result, the Community's economic independence, which forms the basis of the

Community's self-determination, would most likely suffer. When the Seventh Circuit

confronted a similar fact situation, it noted:

[Economic independence is the foundation of a tribe's self-determination.
If contracting parties cannot trust the validity of choice of law and venue
provisions, [the Indian business] may well find itself unable to compete and
the Tribe ' s efforts to improve the reservation' s economy may come to naught .

Altheimer & Gray v. Sioux Mfg. Corp., 983 F.2d 803, 815 (7th Cir. 1993), cert, denied,

510 U.S. 1019(1993). This is surely the case here, where the Community actually performed

under the contract for several years before deciding to breach the contract and build its

own motel. For the above reasons, we hold the trial court did not err in refusing to defer

to the Community's tribal court for determination of whether the Community effectively

consented to jurisdiction of the Minnesota courts and waived its sovereign immunity.

DECISION

Because the district court in this case may decide contract and apparent authority

issues without interfering with matters of tribal self-government, the court need not defer

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to the jurisdiction of the tribal court for resolution of whether the Community effectively
waived its sovereign immunity or consented to state court jurisdiction.
Affirmed.

FZL*i '1*7

-8-

47-201 98-5

RANDALL. Judge (concurring specially).

In Indian country it is what you know, not what you read. The truth is in
the shadows, in the wind, in the water, in the rocks, and in the silence.

Gerry Spcnce. the noted Wyoming trial attorney, is a self-styled "gunner for

justice." Spcnce, who has a deserved reputation for backing up what he says, learned

early in life the importance of not just reading, but thinking; of not just looking, but

seeing: of not just hearing, but listening. In his book, With Justice for None, he uses

a quote from Thomas Hobbes to make the point:

Although I respect the valuable insights of some academicians, and
shamelessly cite them as authorities whenever it serves my purpose, I
believe their conclusions are often flawed, for they have failed to expose
themselves in the workplace of the law, in the pits where the killing is done
and the most pungent truths revealed. Naturally my kind likes the boast of
Thomas Hobbes: "Had I read as much as other men. I should have known
as little as other men."

Gerry Spence. With Justice for None, at xi (1989).

Albert Einstein, himself one of the most gifted thinkers and theoreticians of all

time, also knew the importance of participation in life and hands-on experience to

supplement that which can be gained from books, and at times to learn what cannot be

understood from books at all. Einstein was an acknowledged opponent of armed conflict

and. thus, also an opponent of virulent "nationalism" and excessive trumpeting of

"sovereignty." The fledgling League of Nations in 1931 "encouraged an exchange of

letters between leaders of thought" for the purpose of bringing to bear the best minds of

the lime on the problem of war, a subject which to Einstein was "the most insistent of all

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the problems civilization has to face." As part of the collection of letters, Einstein wrote

a letter of four pages to Dr. Sigmund Freud, which was later published in a limited

edition under the title "Why War?"

In pertinent part, Einstein said:

These are the actions which have always been successful when the goal was
to bring together larger political communities, and in this way to prevent
armed conflict between diem. The road to international security demands
the unconditional renunciation by all nations of part of their freedom of
action and sovereignty. I doubt that there is another way to international
security.

* * * The desire for power makes the ruling party of a nation resist
any limitation of its rights to sovereignty; the leaders feel their position of
power threatened, as do industrialists whose economic strength is based on
armaments and war.

Albert Einstein, \\7iy War? (1933). Einstein then went on to discuss a question that

puzzled him, namely how groups of people could permit themselves "to become aroused

to die point of insanity and eventual self-sacrifice " " * ." Id.

In answering his own question as to how communities of people could get so far

off track, he pointed unerringly to the inability of the "ivory tower crowd" to contribute

to the formation of social justice in a multicultural world, war being the extreme example

of social injustice. Einstein said:

This leads me to a last question: is it possible to so guide the
psychological development of man that it becomes resistant to the psychoses
of hate and destruction? I am not thinking only of the so-called uneducated.
In my experience, it is much more the so-called intelligentsia who succumb
most readily to mass suggestion, because they are not used to drawing
immediately from experience but encounter life in its most easily and
completely understood form-the printed page.

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id.

It can be said that the unlikely trio of Thomas Hobbes. Gerry Spence. and Albert
Einstein would have been able to contribute to the serious and institutionalized problems
facing Indian country today. You see, all three had the courage to face issues of social
justice, not shy away from them.

I concur specially in the result, our affirmance today of die trial court on all issues.
That affirmance takes but a quick look at prevailing contract law. The essence of
contract law is that parties should do what they say they will do. Our decision here
assures simply that, as Justice William Mitchell once said, "just debts will be paid." But
I have to add to the analysis of my colleagues to cover the real issue of whether
appellant, a recognized Indian reservation, is a true "Sovereign Nation." or is rather a
semi-sovereign governmental entity. Appellant demands an answer to that issue. I
suggest that case law. when read, not just cited, makes it clear that reservation tribal
governments are not true independent sovereigns, but rather semi-sovereign entities totally
under the jurisdiction of the United States Congress and the United States Supreme Court.
In fact, there are no cases that state otherwise.

The eleven American Indian reservations in mis state, the four Dakota Sioux
(including appellant) south of the metro area, and the seven Anishinabe/Ojibwe
reservations in the northern half of die state are simply eleven semi-sovereign
governmental entities, but. tragically, eleven semi-sovereign governmental entities mat

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129

do not extend the basic rights of die Minnesota Constitution and the United States
Constitution to their people.

This lawsuit on its face is a simple breach of contract lawsuit for money damages
brought by respondent against appellant. But appellant, in its reply brief, challenged this
court to go outside the black letter, four corners of the contract (the contract itself, the
court fde. and the entire record to date show an alleged blatant breach of that contract by
appellant) and address issues of sovereignty and sovereign immunity. I accept the
challenge. Appellant has a right to that. It is entitled to a legal analysis.'

I agree with appellant that "sovereignty" and sovereign immunity is the only real
issue in this case. If it were not for this issue, both appellant and respondent, as they
agreed to in writing, would be presenting their respective claims and defenses in the
Minnesota District Court for the Fifth Judicial District, Redwood County, where this case
started and from where the appeal came to this court. But as appellant's brief states:

: An early comment on the length of this concurrence is
appropriate. As Tolstoy might have said, "Anna Karenina is long,
but I believe it to be worthwhile. I have written another book
called War and Pmace . I suggest it would be helpful in
understanding the historical perspective of my homeland, Russia,
and why I love it so much to read them both."

I suggest that Cohen v. Little Six, Inc., 543 N.W.2d 376
(Minn. App. 1S96) (Randall, J., dissenting), aff'd (Minn. Jan. 21,
1997) , be reread along with this opinion. The two opinions, taken
together, just begin to scratch the surface of the history of
American Indian people and their struggle for social justice. But
the two, taken together, may, like War and Peace, show how a
trickle of blood from a scratch can escalate to a river, and then
to a raging flood.

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130

In reality, Granite Valley alleges that it has an enforceable contract with a
sovereign tribal government, and that the contract may be enforced in State
Court based on the purported assent of that government. These assertions
require a court's analysis to go beyond simple notions of contract law, to
also address issues of sovereignty and sovereign immunity.

Appellant's reply brief further declares:

With this backdrop, the District Court should have looked at the core
challenge to the contract in this action: The authority, or lack thereof,
of a non-Indian to waive tribal sovereign immunity. In addressing this
challenge the Court undoubtedly would be required to evaluate tribal
sovereign immunity, relevant tribal resolutions or ordinances regarding
waivers of immunity, and possibly the common practice and custom of die
Community in waiving its immunity.

(Emphasis added.)

The facts are simple and not in dispute. Respondent Granite Valley Motel is a
limited partnership consisting of eight individual investors. Appellant Jackpot Junction
is a business enterprise of the Lower Sioux Indian Community and operates as a casino
on Indian land near Morton. Minnesota, in Redwood County.

Appellant wanted an off-reservation motel close enough for its patrons.
Respondent was willing to consider a substantial investment but needed a guaranteed
occupancy of a certain number of rooms in its motel, as without guaranteed occupancy
(meaning guaranteed cash flow) by appellant, there would be no reason for respondent
to construct a motel in a relatively isolated area. Appellant understood this fully and
completely, and as a part of the negotiations agreed in the written contract that appellant
would guarantee occupancy of a certain number of rooms until 1999.

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131

Respondent wanted a specific waiver of sovereign immunity and a specific consent

to Minnesota state court jurisdiction written into the contract as part of the negotiations

and before respondent would sign it. Appellant understood these negotiations and

consulted with an attorney about them. The uncontradicted affidavit of plaintiff J. P.

Martin is part of the trial court record. It said in pertinent part:

I had discussions with Mr. Kokesch about the issue of sovereign immunity
and he told me that he had talked to another individual by the name of
Bluedog, and that I should go ahead and put that clause in the contract if I
was concerned about that issue.

Appellant and respondent expressly wrote into the contract a waiver of immunity and an

express consent to Minnesota state court jurisdiction. Nothing was put into the contract,

or even discussed by appellant, formally or informally, that they wanted to "reserve the

right to back out" of this express waiver of immunity. Neither the negotiations nor the

written contract contained any reference to appellant's tribal court system. As of the date

of the signing of the contract, appellant did oot have its own tribal court system. They

created one later. (Evidence is accumulating that the fairly recent creation of tribal courts

in Minnesota may be part of a calculated plan by tribal governments and their advisors

to create a totally controlled in-house court system to shield themselves from lawsuits and

accountability in state district court where the mandates of state and federal constitutions

apply.')

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132

The contract was formalized in writing and appears in full in respondent s brief
The contract is dated November 6, 1991 and was signed on November 14. 1991 in the
following manner:

Yours truly,

GRANITE VALLEY MOTEL LIMITED PARTNERSHIP
By: Hall &. Associates, Inc.

Its Managing General Parmer

By: /$/ Greg Hall
Greg Hall. C.E.O.

Agreed and acknowledged this 14 day of November, 1991, by The
Lower Sioux Indian Community, owner and operator of Jackpot
Junction Bingo and Casino.

/s/ Allen J. Kokesch

Genera] Manager, on behalf of The

Lower Sioux Indian Community

The contract contains five sections. The second section shows the term of

appellant's guarantee to respondent. This section is pan of the breach and states:

2. Term of Guarantee. This is a continuing guarantee, for the term
commencing on commencement of occupancy of the motel and ending
December 31. 1999.

Appellant unilaterally breached this contract in 1993 and refused to perform under its

terms.

That same year, appellant created its own tribal court under its own jurisdiction,

which tribal court appellant now wants to hear this lawsuit first. Appellant then went on

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138

to construct its own motel on reservation property which directly competes with
respondent's. At the same time, appellant continued an ongoing breach of its contract
with respondent. The waiver of immunity and consent to jurisdiction in Minnesota
district courts is set out in the third section, which states:

3. Waiver. The Guarantor hereby waives sovereign immunity by
virtue of its status as an independent Indian Nation and consents to
jurisdiction of the Courts of the State of Minnesota in the interpretation and
enforcement of this contract of guarantee.

Appellant, as "Guarantor," continued on in the fourth section, which states:

4. Character of Obligation. The obligation of the Guarantor is a
primary and unconditional obligation binding upon this Guarantor, its legal
representatives, successors and assigns.

After appellant unilaterally breached the contract and refused any consideration to
respondent, respondent, pursuant to the contract, sued in the closest Minnesota district
court with venue and jurisdiction. The trial court, which we affirm today, found that
with die words of the contract clear and unambiguous, there was no need to look beyond
the four corners of die contract.

The trial court, in ruling that respondent had the right to bring this lawsuit in

district court and that the trial court had the authority to keep the lawsuit there, stated in

its memorandum:

At this stage of the proceedings the contract must be examined on its
face. The contract under the heading "Waiver" states, "The Guarantor
hereby waives sovereign immunity by virtue of its status as an Indian
Nation and consents to jurisdiction of the Courts of the State of Minnesota
in the interpretation and enforcement of this contract of guarantee." The
document is signed by a representative of plaintiffs, as well as Allen J.

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134

Kokcsch. General Manager, on behalf of The Lower Sioux Indian
Community. Above Mr. Kokesch's signature is an acknowledgment "by
The Lower Sioux Indian Community, owner and operator of Jackpot
Junction Bingo and Casino."

In its memorandum, the trial court went on to state:

At this stage of the proceedings the Court must give great deference
to the face of the contract, which contains the explicit waiver of sovereign
immunity referred to above. If assertions by affidavit at this early stage of
the proceeding were sufficient to remove this matter to tribal court, then the
clear waiver of sovereign immunity clause in the contract would be without
meaning.

(Emphasis added.)

In its memorandum, the trial court pointed out that even the United States, a true

sovereign, can consent to be sued, waive its sovereign immunity, and further stated

that when consent to be sued is given, the terms of the consent establish the
bounds of a court's jurisdiction. United States v. Mitchell, 445 U.S. at
538; United States v. Shenood. 312 U.S. 584, 586, 61 S. Ct. 767, 769,
(1941): Reynolds v. United States. 643 F.2d 707, 713 (10th Cir.), cert,
denied. 454 U.S. 817, 102 S. Ct. 94 (1981).

The court finds that this contract does contain an expressed waiver
of sovereign immunity, and as such establishes this Court" s jurisdiction over
the above-entitled matter.

Appellant, in attempting to get out of a contract which it signed and a contract for
which it has yet to allege a defense on the merits, spends most of its energy in its brief
arguing that Klammer v. Lower Sioux Convenience Store, 535 N.W.2d 379 (Minn. App.
1995), controls.

Once the facts of Klammer are read, it is clear that it is distinguishable and does
not have relevance to the legal issue here, other than to buttress our affirming the trial

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court. In Klammer. there was neither a negotiated consent to jurisdiction nor a negotiated
waiver of immunity clause. There could not have been. Klammer was a spontaneous tort
which resulted in property damage. In Klammer, a non-Indian patron of a convenience
store owned by the Indian Community sued the Indian Community for property damage
when a ruptured hose at the store sprayed fuel over him and the passengers in his car.
Id. at 380.

Obviously. Klammer and the convenience store owners did not sit down together
and bargain out in writing where jurisdiction would lie and whether immunity would be
waived if he should drive up to the store and have fuel sprayed on him. Thus, because
it was a spontaneous inadvertent act happening on a reservation, the Klammer court felt
compelled to go through an analysis of concurrent jurisdiction and comity. Our decision
in Klammer points out the murky swamp that state and federal courts find themselves
mired in when they attempt, in good faith, to research "appellant's version of
sovereignty . " The Klammer court ended up comparing identical tribal constitutional
provisions of two different tribes and concluding that identical wording in the two
constitutions could be interpreted two different ways. Id. at 382-83.

A semi-sovereign governmental entity is a large category including the 50 states
of the United States of America and the many counties, towns, cities, school districts, etc.
within a state that are also governmental entities with some limited or qualified immunity
from lawsuits. All semi-sovereign governmental entities have carefully structured limited
or qualified immunity to make certain discretionary decisions without fear of being sued.

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136

All semi-sovereign tribal entities should have a right to this once their organizations, as
law-abiding municipalities subject to state law, including the Minnesota Constitution, and
the federal Constitution, are in place. This is the only way to give Indian people half a
chance to make it to the twenty-first century.

So far, we have not seen fit to require tribal governments to abide by the United
Slates Constitution, its Bill of Rights, and individual state constitutions. This is both
morally and legally inexcusable, as it is a race-based distinction-not helping a race, but
killing a race.

This is the black hole we put ourselves into as long as we avoid the hard issue of
sovereignty, which appellant has correctly framed as the real issue in this case. I
respect appellant for articulating the real issue.

Economic transactions and commercial intercourse between off-reservation entities
and tribal governments is already beginning to seriously decline to the disadvantage of
Indian people. Sovereignty, as now used, is causing the disintegration of tribal
Government credibility This deterioration of tribal credibility is noted in federal court
cases.

When faced with facts similar to ours, the Seventh Circuit Court of Appeals has
refused to defer to a tribal court. See Altheimer & Gray \. Sioux Mfg. Corp., 983 F.2d
803. 815 (7th Cir. 1993) (holding mat tribal exhaustion doctrine did not require stay of
proceedings in federal court). In Altheimer, an Illinois corporation brought suit against
an Indian manufacturing corporation for breach of contract. Id. at 807. The panics

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signed a letter of intent, upon which the contract was based that included a waiver and

consent provision almost identical to the one in this case. Id. The Altheimer court held

that it is necessary in every exhaustion rule case to examine the factual circumstances of

the case "in order to determine whether the issue in dispute is truly a reservation affair

entitled to the exhaustion doctrine." Id. at 814.

Significantly, the Altheimer court held that by including the waiver and consent

provision in its contract, the Indian community "wished to avoid characterization of the

contract as a reservation affair by actively seeking the federal forum." Id. at 815.

Altheimer further stated:

In the Letter of Intent, [the Indian company] explicitly agreed to submit to
the venue and jurisdiction of federal and state courts located in Illinois. To
refuse enforcement of this routine contract provision would be to
undercut the Tribe's self-government and self-determination. The Tribe
created [the company] to enhance employment opportunities on the
reservation. * * * [E]conomic independence is the foundation of a tribe's
self-determination. If contracting parties cannot trust the validity of choice
of law and venue provisions, [the Indian company] may well find itself
unable to compete and the Tribe's efforts to improve the reservations'
economy may come to naught.

Id. (emphasis added).

A recognized exception to the normal regard for "comity" is bad faith. The

requirement does not apply where

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.

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138

\ational Farmers Union r. Crow Tribe. 471 U.S. 845. 856 n 21. 105 S Cl 2447. 2454
n.21 (1995) (quoting Juidice v. Vail. 430 U.S. 327, 338. 97 S. Ct. 121 1. 1218 (1977))

The undisputed facts here fit precisely within the "bad faith exception" to the
exhaustion rule. Appellant intentionally waived sovereignty and consented to state court
jurisdiction to get economic benefits from respondents. Appellant operated for two years
under the contract and took the benefit of the contract. It breached the contract in 1993
and started construction of its own hotel on reservation property. Appellant's decision
to breach the contract was the product of pure opportunism and not the product of any
"cultural decision' to have its own hotel. At the same time its own hotel was
constructed, appellant instituted its own tribal court that would be a friendly forum for
appellant, which is perhaps more than a coincidence.

Now. examine the "court" that appellant insists should have the privilege of
original jurisdiction, the absolute right to first look at the issues. This is the court that
appellant infers could do a better job than a Minnesota district court examining the
"authority, or lack thereof, of a non-Indian to waive tribal sovereign immunity." After
examining appellant's brief and the tribal constitution of appellant, me remark about a
non- Indian perhaps not having the authority to waive immunity is a nonargument at best,
an inherendy racist remark at worst. I question whether the argument is even appropriate
to voice in a legal brief. In the Minnesota Court of Appeals, the Minnesota Supreme
Court, and our state trial courts, each having state-wide jurisdiction, there are judges
representing both genders and all four colors, red, black, yellow and white. My use of

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descriptive colors is not belittling, but cultural to Native people. In Indian culture, these
four colors are considered sacred, representing the four winds, the four directions, the
four great races, and other symbolism. What I write about the four colors is true and
culturally correct enough for analysis.

The four colors accurately describe our multi-cultural state and country. All "real"
judges, state and federal, have the inherent power on cases that come before them to
reflect on and decide die merits irrespective of their own particular race and irrespective
of the race, creed or culture of litigants.

Appellant's argument about non-Indian versus Indian becomes arrogant and fatally
flawed. The Lower Sioux Judicial Code itself, the one appellant wishes to control the
outcome of this case, does not even require that the judges have Indian blood to any
degree. That is not surprising. Throughout the Indian reservations in this state that have
tribal courts. non-Indians, at times, have served on some or all of them. Appellant's
constitution in Chapter 3 provides:

JUDGES

Section 1. Number of Judges.

The Tribal Court shall have a panel of three judges, a Chief Judge and two
Associate Judges, at least two of whom shall be lawyers experienced in the
practice of Tribal and federal Indian law and licensed to practice in the
highest court of any state. By resolution, the Lower Sioux Community
Council may increase the number of Associate Judges.

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140

There is nothing in the rest of Chapter 3 indicating that an> quantum of Indian
blood is needed. What the constitution and the judicial code make clear is that the
reservation business council (the equivalent of a mayor and city council members) itself
maintains absolute control over the qualifications, appointments, salaries, and hiring and
firing of those who serve as tribal judges. Appellant allows a nonlawyer to be a judge.
Appellant requires that the other two judges on its three-judge panels be licensed to
practice in any of the 50 states. Thus, appellant's court claims the authority over the
liberty and property of Minnesota Indians and Minnesota non-Indians alike without
adhering to the slightest shred of qualification under the laws of Minnesota and the
Minnesota Constitution pertaining to the appointment, qualifications, selection, and
disciplining of state judges. The Minnesota Supreme Court retains to itself (as the
supreme courts of most states presumably do) the final determination on who shall be
allowed to take the Minnesota State Bar examination and who is qualified to be swom in.
They retain to themselves the final authority to consider the fitness of a judge, including
all discipline, from mild censure up to removal from office. All lawyers and judges in
Minnesota know these rules and submit to them and all other Minnesota legislation that
affects our courts. Now, to the point. Neither the Minnesota Supreme Court nor the
Minnesota Legislature has any authority or control whatsoever over who any tribal
government chooses to call a "judge."

Appellant's Judicial Code, under "Qualifications" provides:

Section 4. Qualifications.

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141

In addition to the qualification requirements in Section 1 , each judge
must also be 25 years or older. The following individuals may not serve
the Community as judges of the Tribal Court:

(a) The Clerk of Court, Assistant Clerks, and members of the Lower Sioux
Community Council;

(b) Those who have been convicted by a court of the United States or of any
State of the United States for a felony, as a felony is defined by the laws
of that jurisdiction or misdemeanor within one year immediately preceding
the proposed appointment or contract as judge or justice.

(Emphasis added.)

It must be observed that since appellant claims the right to set judicial
qualifications, or the lack thereof, it could, with impunity, reduce the time after
conviction for a crime from twelve months down to twelve days, or do away completely
with this "hinderance." It has the authority, by amendment, to do away with the
requirement that two of the three tribal court judges be lawyers admitted to practice
before any state. Under its version of "sovereignty" and its judicial code, three lay
persons that it decides to appoint, all previously convicted of a crime, could decide the
libern and property of all state residents. Indian and non-Indian, who come before them.

Each of the eleven Minnesota reservations claims it is an individual sovereign and
thus can have its own rules and its own constitutions. All eleven cite the same cases and
arguments that appellant cites here to support their claim for their own "independent
courts' and their own "sovereignty." Thus, it is appropriate to consider abuses on other
reservations, as each of the eleven claims it would have the authority to do likewise if it
so wished. They might say, "Well, we would never do that," but they would always

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retain ihc right to chance their mind under their version of "sovereignty" and do that.
Just ask them.

On one reservation in this state, there is in place what I consider to be the worst
individual case of abuse of judicial process, and abuse of a state citizen, that 1 have ever
seen.

A Red Lake ordinance allowing tribal judges to overturn jury
verdicts will face its first constitutional test in a federal court's response to
a habeas corpus petition by Ronald Smith.

Smith was found not guilty of marijuana possession Jan. 25 by five
of six Red Lake jurors. But Chief Magistrate Wanda Lyons, citing a Red
Lake ordinance passed just two weeks earlier, overturned the verdict
and remanded Smith to the reservation jail, where he is currently
serving a 150 day sentence.

A petition of Habeas Corpus from a prisoner requires a federal court
to rule on whether that detention is in violation of the petitioner's
constitutional or legal rights.

Passed Jan. 9 by a nearly unanimous vote of the tribal council. Red
Lake Ordinance 407.1 15 stipulates that "the judge in a criminal case may
render a verdict contrary to that reached by the jury." Although a jury
determination of guilt still requires such a finding by "all the jurors except
one." the presiding judge could arbitrarily, and without explanation, set
aside a guilty or not guilty verdict.

Smith's brief for Habeas Corpus asserts that the law renders the jury
process irrelevant. "The Tribe, by enacting Section 407.115. has clearly
taken the position that its members are not entitled to a jury trial in criminal
cases." states the brief prepared by Minnetonka attorney Richard
Meshbesher. The attorney argues that the law is contrary to the fourth and
six [sic] amendments to the U.S. Constitution, as well as a violation of the
Indian Civil Rights Act's guarantee of "due process of law."

Prosecutor attorney Denfield Johnson referred questions on the
subject to his "bosses," the Red Lake Tribal Council. Council chairman
Bobby Whitefeather and secretary Judy Roy were unavailable for comment.

Jeff Armstrong. Red Lake man jailed, sentenced after not guilty jury verdict. Native

American Press. Mar. 8. 1996. at 1 (emphasis added).

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I have no knowledge that even in any pan of the deep South between the
Emancipation Proclamation in 1863 and Brown v. Board of Educ, 347 U.S. 483. 74 S.
Ct. 6S6 (1954), in 1954, any sitting judge, trial or appellate, claimed the right in a
criminal case to take a verdict of not guilty away from a jury, convict the defendant, and
sentence him to imprisonment.

The outcome of the above-described travesty was that defendant's attorney brought
a writ of habeas corpus in federal court and while the magistrate was taking the matter
under advisement, the tribal government and its prosecutors folded and plea bargained the
matter out. They knew better than to risk a full and open public hearing on the record
on this issue.

The sequence of events makes it clear, by definition, that Indian tribes are not true
"Sovereign Nations." but remain, as always, subject to the plenary power, and the will
ami *o:npleie control of Congress, and ultimately the federal judiciary. If they were truly
sovereign, there would not have been a legal writ in the nearest federal court, thus
denoting jurisdiction and power over the proceeding there. Neither the tribal court nor
the tribe even attempted to keep the matter out of federal court on the grounds that a
Minnesota federal court had no right to hear it. The deeper issue is. why such a
complete lack of oversight over important constitutional guarantees on Indian
reservations, an oversight to the point where this tribal ordinance was passed and actually
enforced, and would still "be in force" and hidden from public view except for exposure
by the press.

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In Minnesota when you have successfully passed the Minnesota Bar examination
and have been sworn in. your admission to the nearest federal district court and the
federal system, although ceremonial, is automatic. A licensed attorney, not under some
form of suspension, can go into any court in this state without fear and represent his or
her client. On reservations throughout Minnesota, tribal governments have set extra
qualifications over and above admission to the Minnesota Bar, have at times refused to
admit licensed members of the Minnesota Bar to its tribal courts, and at times have
prevented litigants in tribal court from bringing in the attorney of their own choosing.
Some tribal courts in this state do not let you bring in your own attorney on family law
matters, but instead give you a "court-appointed advocate" who may or may not be an
attorney.

Whether advocates are attorneys or not. they are selected by tribal government
Their qualifications, or lack thereof, are set by tribal government and their hiring,
salaries, and discharge are under the control of tribal government.

Recently a non-Indian woman living outside a reservation started a divorce action
with her Indian spouse, who was enrolled on a reservation. She commenced a lawsuit
in a proper state district court with venue and jurisdiction. He commenced his lawsuit
in die tribal court. The tribal court somehow obtained jurisdiction on her divorce,
including matters of child custody, and she was required to go into tribal court without
her attorney and instead with a court-appointed advocate. Although technically the tribal
court gave a version of joint legal and physical custody and visitation, etc.. she has had

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a tremendous hardship getting visitation off the reservation to the point where her own
attorney suggested, only half in jest, that if she was on the reservation and could get her
children into a car. it would be wise to speed across the reservation borders and attempt
to bring the minor children within the venue of the local state district court. She and
others similarly situated have faced severe obstacles in getting visitation and in the
collection of child support from on-reservation obligors. Minnesota's normal
legislatively-mandated enforcement provisions run into serious problems when the obligor
lives and works on a Minnesota reservation. It can be noted that the off-reservation
spouse can be either Indian or non-Indian; he or she will still have the same problems in
reservation tribal courts when going up against a reservation resident.

It has become common knowledge throughout the state for attorneys whose clients
have commercial or personal dealings with reservations that tribal courts should be
avoided if possible.

There is a cruel irony in the case before us. It is that appellant would have had
every single right to go into state district court and demand that its contract be honored
by respondent if respondent had committed the alleged open and blatant breach. I suggest
that appellant" s attorney, if respondent had breached the contract, would have
immediateh sued the matter out in state district court, as would be his right, to ensure
that his client, tribal government, would have a full and fair hearing in an independent
state judicial forum with the power to grant the judgment and the power to enforce it
against respondent if respondent's breach was proven.

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After the courts of this state, trial and appellate, have gone out of their way to
construe, on behalf of tribal government, the consent to sue and be sued clauses and
waiver of jurisdiction, in favor of tribal government, here is appellant's position today.
Even with a specific waiver in place that they do not deny, they refuse to willingly come
into state district court to which they would have an absolute right of access if they so
chose.

Indian people living on reservations know that change must come and they know

they will suffer economically if change does not come, since without change, tribal

government credibility will disappear. As the Altheimer court noted:

If contracting parties cannot trust the validity of choice of law and venue
provisions, [the company] may well find itself unable to compete and the
Tribes efforts to improve the reservation's economy may come to naught.

983 F.2d at 815.

The recent flow of Minnesota cases, trial and appellate, have had nothing to do
with cultural preservation. They have to do only with money and a tribal government's
continued insistence on the right to be unaccountable to anyone, Indian or non-Indian, in
any state court, unless they choose to go to state court. Otherwise they try to force
panics into their own hired tribal courts.

The bulk of Minnesota cases have involved reservations with Indian gamine
casinos stubbornly refusing to defend the merits of any case in state court.

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It is not known to all readme this opinion that the following list of state and federal

constitutional guarantees and rights are not in place for Minnesota Indians domiciled on

a reservation:

There is no guarantee that the Minnesota Constitution, the United States
Constitution and its precious Bill of Rights will control. There are no
guarantees that Civil Rights Acts, federal or state legislation against age
discrimination, gender discrimination, etc. will be honored. There are no
guarantees of the Veteran's Preference Act, no civil service classification
to protect tribal government employees, no guarantees of OSHA, no
guarantees of the American with Disabilities Act (1990), no guarantees of
the right to unionize, no right to Minnesota's teacher tenure laws, no right
to the benefit of federal and state "whistleblower" statutes, no guarantees
against blatant nepotism, no guarantees of a fair and orderly process
concerning access to reservation housing, and no freedom of the press and
no freedom of speech. In other words, all the basic human rights we take
for granted, that allow us to live in dignity with our neighbors, are not
guaranteed on Indian reservations under the present version of
'sovereignty."

In Tom v. Sutton, die court stated in part:

This holding is consistent with other judicial decisions finding the
Constitution inapplicable to Indian tribes. Indian courts and Indians on the
reservation.

533 F.2d 1101. 1102-03 (9th Cir. 1976).

It is ironic that every Minnesota Indian who resides one foot off a reservation, is

guaranteed the benefits of the Minnesota Constitution and the United States Constitution

and its Bill of Rights. It is only on eleven liny enclaves within this state that this state's

residents are deprived of due process of law and deprived of the benefits of the state and

federal constitutions.

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This opinion is not meant to slate that ever) single one of the eleven reservations
practices all of the above enumerated abuses. But this opinion is meant to state that the
above enumerated abuses have taken place in at least some places and are taking place
today, and any inquiry into a tribal government council as to whether they will fully
honor the Minnesota Constitution and the United States Constitution is met with the same
rigid response: in effect, we may or we may not, but whatever we do will be totally up
to us and our "sovereignty."

Even the federal government, although it prolongs the present inept version of
sovereignty, knows better. The federal government recognizes that tribal governments
and reservations do not act independently, but under the will of Congress. When the
federal government decides to act, it pays no attention to claims of sovereignty. Such is
the case with serious felonies, such as those tried to a conclusion in 1996 involving two
different northern Minnesota reservations. One of the first defenses of the defendants
was that the federal district court (meaning the federal government) could not do anything
about the alleged crimes and could not put the defendants in harm's way before a federal
jury, because whatever was alleged to have happened, happened on a reservation and,
thus, the reservation's sovereign immunity protected the defendants from accountability
in federal district court.

The defense was listened to and then immediately swept away. The defendants
were put on trial in federal district court in St. Paul, Minnesota. Ironically, all
defendants enjoyed in federal district court an absolute guarantee to all rights mandated

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under the United Slates Constitution, which rights they would not have been guaranteed
if they had been tried in their own tribal courts. To any knowledgeable observer of tribal
reservation courts and of how they are controlled by tribal government, any trial in a
tribal court involving these defendants would have been a meaningless sham. You see,
tribal governments, such as appellant here, claim the power to isolate and immunize
themselves even from their own tribal courts. This is something not even a true
sovereign dares do. The United States Supreme Court, not the Executive Branch,
retained control over the Watergate investigation and the Nixon tapes. Indian tribal
government and their advisors claim an immunity Congress does not even give to itself
or the Oval Office or the federal judiciary. Nor has the Oval Office or the federal
judiciary ever claimed for itself total immunity. No person in this country is totally free
of a possible federal indictment for misuse or abuse of the public trust or for misfeasance
and nonfeasance. President Ford granted to former President Richard Nixon an
unconditional pardon for possible acts committed while in the Oval Office. Ford did not
gran; Nixon the pardon because Nixon had total sovereign immunity for acts committed
while in the Oval Office; Ford granted Nixon the pardon because he did not.

Appellants Judicial Code in Chapter II entitled "Jurisdiction" in Section 3(a)
provides:

Section 3. Suits Against the Tribe.

(a) Sovereign Immunity of Tribe . The sovereign immunity from suit of
the Tribe and every elected Lower Sioux Community Council
member or tribal official with respect to any action taken in an

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official capacity or in the exercise of the official powers of any such
office, in any court, federal, state or tribal is hereby affirmed:
nothing in this Code, with the exception of subsection (d) of this
section, shall constitute a valid waiver of the Tribe's sovereign
immunity. The Tribal Court shall have no jurisdiction over any
suit brought against the Tribe in the absence of an unequivocally
expressed waiver of that immunity by the Lower Sioux Community
Council.

(Bold emphasis added.)

In Section 3(d), respondent waives its own sovereign immunity and consents to the

tribal court hearing the suit, just for the limited purpose of determining "the eligibility

of Tribal members for per capita payments made pursuant to a Lower Sioux Community

in Minnesota Tribal plan to distribute funds from Tribal Gaming enterprises."

Respondent, Granite Valley, is a group of individuals being threatened with
the possible deprivation of their property by tribal judges over whom they
have absolutely no input. Why is this startling, even profound? The
answer is thai it exists nowhere else in this country.

The partners in respondent and all members of the Lower Sioux Community have.

as the\ should, the right of a direct vote on all state district court judges in their judicial

district, all intermediate appellate judges in this state, and all members of the Minnesota

Supreme Court. All of the partners in respondent and the members of the Lower Sioux

Community enjoy a direct voice in the election of state representatives, senate

constitutional officers, and the governor. They therefore have a direct vote over those

by whom they will be governed, and a direct vote for governor, which is an indirect vote

for the state judges that a governor appoints.

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In the federal system, both Indians and non-Indians enjoy a direct vote for United
States senators and, through the electoral college, an indirect vote for the president .
Thus, although federal judges do not submit to direct election, Indians and non-Indians,
as American citizens, can vote for those who control the appointment of federal judges,
i.e., the President and members of the United States Senate. Conversely, the partners
in respondent have absolutely no input into the selection or appointment of tribal judges.

Ironically, the northern Minnesota defendants who stood trial in St. Paul federal
district court enjoyed a number of constitutional guarantees that would not have been
guaranteed in their own reservation tribal courts. They enjoyed constitutional guarantees
to the right to pick the best possible criminal defense attorney they could afford. They
were able to afford some of the finest in Minnesota.

If they had pleaded poverty, they would have been assigned one of the many
excellent federal court public defenders. They enjoyed a constitutional guarantee to a
trial b> a jury. They enjoyed a constitutional guarantee to a trial conducted by an
independent and neutral federal judge, a federal judge enjoying objective qualifications
for that post. They enjoyed a constitutional guarantee to an orderly and thorough
appellate court process up to the United States Supreme Court, all before independent,
neutral, and qualified judges.

The defendants enjoyed, as they would not have done in tribal courts, a
constitutional guarantee to the right of a not guilty verdict by the jury on whatever count
or counts the jury found the prosecutor did not prove beyond a reasonable doubt. Of the

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multiple counts against all defendants, some defendants had more than others. The two
different federal juries returned some counts of not guilty. The federal trial judge took
no further action on the not guilty counts. The federal prosecutor did not request any.
Those not guilty verdicts stand forever.

The two sets of federal criminal cases to which 1 have referred, and to which it is
proper to refer, as they are part of an open public judicial record, are not about anything
more, tragically, but greed.

As a former criminal defense attorney for 17 years, both in private practice and
as a part-time public defender, and as an appellate judge for 13 years, I have a deep
appreciation for the difference between pretrial allegations, in either criminal complaints
or indictments, and what is later proven, or found to be unproven. after a full trial.
Routinely, pretrial allegations, no matter how strongly stated, result in not guilty verdicts
in state and federal courts. On some occasions, pretrial allegations are found not only
to not be proven by a reasonable doubt: at times the evidence at trial may show the
pretrial allegations to be nearly or totally unfounded.

But after a full and fair jury trial in state or federal court, and after a jury has
rendered a verdict of guilty by proof beyond a reasonable doubt, the highest standard in
any case in any court in this country, those convictions stand as an open public record
that the defendants, after having been given their constitutional right to a fair trial, were
found guilty by proof beyond a reasonable doubt.

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In the iwo sets of trials involving Northern Minnesota reservation tribal council

members and advisors, the pretrial allegations included multiple counts of:

conspiracy to defraud the United States/misapplication of tribal funds;
embezzlement; interstate commerce/money laundering; civil rights
conspiracy; mail fraud; conspiracy scheme to defraud the United States;
theft misapplication of tribal funds-aiding and abetting; theft involving
program receiving federal funds; scheme to defraud; aiding and abetting.

At the conclusion of the two lengthy trials involving multiple defendants, the

verdicts of guilty included:

conspiracy to defraud the United States/misapplication of tribal funds:
embezzlement; interstate commerce/money laundering; civil rights
conspiracy: mail fraud; conspiracy scheme to defraud the United States;
theft 'misapplication of tribal funds-aiding and abetting; theft involving
program receiving federal funds; scheme to defraud: aiding and abetting.

Thus, two of eleven, or close to 20 percent of all tribal governments in Minnesota,
were found to contain systemic and institutionalized corruption, and the evil that
corruption brings. The evidence at trial revealed that this systemic and institutionalized
mismanagement stemmed from unaccountable casino money. The unaccountability stems
directly from the lack of state and federal oversight. That lack of oversight is directly
attributable to tribal "sovereignty." The investigation of other Minnesota reservations
with gaming casinos continues today.

This mismanagement is a direct result of the "myth of sovereignty" protecting
tribal leaders and tribal government from the normal rules of federal and state
accountability. It has been noticed by Indian and non-Indian leaders alike.

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Robert A. Fairbanks is an enrolled member of the Minnesota Leech Lake Ojibwe
Reservation and presently resides in Oklahoma. A small portion of his resume includes
the following: Juris Doctor, University of Oklahoma; Master of Laws, Columbia
University; Master of Education in Teaching Math and Science, Harvard University;
Master of Arts in Medical Science, Stanford University; Master of Business
Administration, Oklahoma City University; Master of Criminal Justice Administration.
Oklahoma City University; Colonel, United States Air Force, Judge Advocate Corps;
former Editor-in-Chief. American Indian Law Review; President and Executive Director
of the Native American College Preparatory Center; and author of dozens of articles,
notes, and book reviews relative to the history of American Indian people in America.

Fairbanks, after looking back at these sets of trials and after examining the present

situation on Indian reservations, recently stated:

The Minnesota Chippewa Tribe in 1997: A new beginning, or the
beginning of the end?

1996 was a benchmark year in the history of the Minnesota
Chippewa Tribe due to federal felony convictions of longtime political
leaders at Leech Lake and White Earth Reservations. ■ * ■

More than just revealing far-reaching and entrenched corruption
in tribal government, the convictions and post-conviction events at Leech
Lack and White Earth reservations and within the Tribal Executive
Committee of the Minnesota Chippewa Tribe expose the fragility of the
tribe's claim to sovereignty. The tribal body politic, if some measure of
sovereignty is to be preserved, can no longer afford to ignore the
wrongdoing of their political leaders.

Political Aftermath

At Leech Lake the convictions did little to rid tribal government of
the clutches of unscrupulous tribal officials. * * * To stymie " " • reform
efforts, they have held numerous illegal tribal council meetings, passed
illicit legislation and wasted untold amounts on attorney fees. The result

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has been governmental chaos and an expose of the depth of corruption in
Leech Lake government.

Furthermore, the action, or more correctly the lack of reaction, of
the Minnesota Chippewa Tribe Tribal Executive Committee to the federal
convictions of four of its members * * * suggests tribal corruption
extends beyond those convicted. * * *

[TJhe nonfeasance of the executive committee reveals a pervasive
political ethic of criminality within the leadership of the Minnesota
Chippewa Tribe. It is, indeed, remarkable that at their federal sentencing
hearing [convicted tribal officials] refused to accept personal responsibility
for their wrongdoing. Instead, they chose to blame others for their
downfall, including the disingenuous argument that the federal government
was at fault. They argued that the federal government was responsible
because it created the business committees and, therefore, made it possible
for them to lie, cheat and steal. By making this silly argument, they

revealed their lack of character and personal criminal ethic.

» * « *

Sovereignty Endangered

The Minnesota Ojibwe will soon learn that the American people
will not tolerate, and continue to finance, such political bungling. The

post-conviction political events, coupled with the fact that the Minnesota
Ojibwe have lost almost all their land and very few remember the Ojibwe
language, argue strongly for the conclusion that the Leech Lake and White
Earth Ojibwe. and other similarly situated Minnesota Chippewa Tribe
reservations, do not possess the capacity of sovereign political
personalities. In fact, they are in grave danger of losing the scintilla of
government they have remaining.

* » V

However, before any significant constitutional reform can be
achieved, the Minnesota Chippewa Tribe body politic must accept the fact
that the tribe lacks any reasonable measure of inherent sovereignty. In
fact and law, the tribe is a creation of the federal government under the
Indian Reorganization Act of 1934 and can be abolished by the plenary
authority of Congress at any time. The federal government, of course, can
insidiously decide and quodlibet to the contrary by merely reducing, or
eliminating, federal funding of tribal programs. Denying political reality
will not foster constructive constitutional reform.

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Robcn A Fairbanks. The Minnesota Chippewa Tribe in 1997: A new beginning, or the
beginning of the end?. Native American Press. Dec. 27. 1996. at 6 (emphasis added).

1 recognize that two out of eleven is a small sampling to draw hard and fasi
conclusions from. But I will also state, on the other hand, that if in a small, sparseh
populated county in Minnesota, approximately 20 percent of the mayors and city councils
in cities in that county went through a trial that determined theft, fraud, kickbacks,
swindle, corruption, and vote rigging had been in place in those towns for years, it goes
without saying that the citizens of those towns, the area legislative representatives, the
state attorney general's office, and the state auditor's office would set their teeth and
grimly determine to find out how those conditions existed for so long.

You see, the guilty verdicts in those two sets of trials were not about a single act
or two of spontaneous theft or embezzlement. The guilty verdicts were not about instate
residents defrauding out-of-state strangers over the telephone. Rather, the evidence and
the guilty counts showed a pattern of years and years of corruption, and the evidence
forming die basis for the convictions proved beyond a reasonable doubt that defendants
were stealing from their own people.

All persons found guilty are and remain human beings, brothers and sisters to the
rest of the state. The unaccountability they took advantage of is a direct result of die
presendy held view of "sovereignty," a view that denies to state officials the right to
investigate, protect, and regulate their own citizens living on Minnesota reservations.

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All elected officials, state and federal, executive, legislative, and judicial, must
shoulder their respective share of the shame stemming from the institutionalized neglect
of Indian people. Due process and justice demand an immediate move toward
formulating sound public policy to ensure this never happens again.

We have stretched the law, contorted it, and tortured it to promote the view of
"sovereignty" that tribal governments or reservation business councils want as "the law."
This has taken us to depths that could not be fathomed for any other racial, ethnic, or
cultural group in this country.

The case of Cabazon Band of Mission Indians v. County of Riverside, 783 F.2d
900 (9th Cir. 1986*. which needs to be read thoroughly, not just cited, and then
thoroughly understood, is puzzling. Carried to its logical extreme, it could be renamed
"The Indian Gaming and Reservation Nonaccountability Act." Briefly, the Cabazon Band
resides in California. California for years had various forms of gambling, but under
control of its state legislature and its state courts. If the Cabazon court had said that if
California Indian people were being prevented by reason of their race from participating
in California^ regulated forms of gambling, that is constitutionally improper, it would
be a wonderful and clear decision and the court could have stopped there. But the
Cabazon court went on to expand and give the Cabazon tribe gambling unregulated by
the State of California, id. at 903. Unregulated gambling is a type of gambling the State
of California never gives to its own residents.

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When Cabazon members gamble off the reservation, state regulations apply . When
they gamble on their reservation, state regulations do not. Yet the Cabazon band
members are residents of California in both places.

Cherokee Nation v. State of Georgia, 30 U.S. (5 Pet.) 1 (1831), and its progeny,
like Cabazon, further increase the isolationism and the red apartheid that is now
separating American Indian people from all other cultures and races. That apartheid
cannot be justified on the grounds that lack of accountability and "self-determination" and
"self- governance" is good for Indian people, and thus, we will close our eyes to
constitutional improprieties. The lack of state and federal constitutional guarantees make
today's life on reservations intolerable to Indian people who are not on the good side of
the reservation business council; they have no practical recourse to state or federal courts
when they are on the "bad side." They have learned about their own "tribal courts."

Cherokee Nation needs our attention because it is the seminal case defining Indian

tribes as "domestic dependent nations" and describing their relationship to the United

States as "that of a ward to his guardian." The majority opinion delivered by Chief

Justice John Marshall describes the issue:

This bill is brought by the Cherokee Nation, praying an injunction
to restrain the State of Georgia from the execution of certain laws of that
State, which as it is alleged, go directly to annihilate the Cherokees as a
political society, and to seize, for the use of Georgia, the lands of the
nation which have been assured to them by the United States in solemn
treaties repeatedly made and still in force.

30 U.S. (5 Pet.) at IS (emphasis added).

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The Supreme Court sets out the standing of the United States to its Indian people.

and discusses how "they look to our government for protection."

Their relation to the United States resembles that of a ward to his guardian.
They look to our government for protection; rely upon its kindness
and its power; appeal to it for relief to their wants; and address the
President as their great father.

Id. at 17.

The Supreme court then points out that if they wanted to hear the petition of the

Cherokees. it would certainly be a great idea for the Court to address the listed

grievances.

If the courts were permitted to indulge their sympathies, a case better
calculated to excite them can scarcely be imagined.

Id. at 15.

Among the listed bill of particulars by the Cherokees. including a claim that the

State of Georgia was unilaterally breaching previously signed treaties, taking the

Cherokees land, and expelling them out of the state, one specific bill of particular is

remarkable. It is remarkable because petitioner Cherokee Nation set out. with no dispute.

that one of their members had been sentenced to death by hanging by the State of

Georgia, and after the Chief Justice of the Supreme Court signed a "writ of error"

forbidding the execution, the State of Georgia went ahead and executed Corn Tassel.

Georgia stating that "this was no business of the Supreme Court of the United States."

The individual called in that bill Corn Tassel, and mentioned as
having been arrested in the Cherokee territory under process issued under
the laws of Georgia, has been actually hung, in defiance of a writ of error

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allowed by the Chief Justice of this court to the final sentence of the court
of Georgia in his case. That writ of error having been received by the
governor of the State was, as the complainants are informed and believe.
immediately communicated by him to the Legislature of the State, then in
session; who promptly resolved, in substance, that the Supreme Court of
the United States had no jurisdiction over the subject, and advised the
immediate execution of the prisoner under the sentence of the State court,
which accordingly took place.

Id. at 12-13.

This listed "grievance" is remarkable because I cannot find at any time in any of
our SO states that a slate execution has ever taken place in direct defiance of the United
States Supreme Court. It is also remarkable that from the opinion it is apparent the
Supreme Court acted no further against the State of Georgia, rather than to note what
happened.

The majority opinion further discusses in detail how Indian tribes are not the

equivalent of a foreign Sovereign Nation.

fY]et it may well be doubted whether those tribes which reside within the
acknowledged boundaries of the United States can. with strict accuracy, be
denominated foreign nations.

Id. at 17.

Then the majority concludes with the holding of the case, which is. that if wrongs

had been afflicted, and if even greater wrongs for Indian people are on the horizon, the

Supreme Court is not able to lend a hand at this time.

If it be true that the Cherokee Nation have rights, this is not the
tribunal in which those rights are to be asserted. If it be true that wrongs
have been inflicted, and that still greater are to be apprehended, this is not
the tribunal which can redress the past or prevent the future.

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The motion for an injunction is denied.
Id. at 20.

Cherokee Nation is a real case and it sets out two important truths. The first truth
is thai on the narrow legal issue of whether federally-recognized tribes are the equivalent
of a true Sovereign Nation like Canada or Mexico, it is clear that they are not. All of
Cherokee Nation's progeny, from the date of its release to 1997, continue to reiterate that
Indian tribes are under the will and defeasance of Congress and that Congress has total
"plenary power" over tribes.

The second truth to be taken from Cherokee Nation is that from that day to today,
the federal government has engaged in a failed Indian policy; partial failure at times and
total failure at others, but always a failure, because both before and after 1924 when the
American Indian was finally accepted as an American citizen, the American Indian has
ncA er b.-en extended all the rights, privileges, and obligations of statehood and American
ciiizi-nship. Right today, the rights, privileges, and obligations of the Constitution of the
State of Minnesota and the U. S. Constitution are not guaranteed to Indian people
domiciled within the boundaries of Minnesota's Indian reservations.

In attempting to reconcile the different descriptions of Indian tribes in the many
feder.tl cases that, like Cabazon, at times carelessly use the terms "sovereignty," "semi-
sovereignty." "domestic dependent nation," and "ward of the government"
interchangeably, hard-working trial judges and appellate judges throughout this state are
nou caught in a cross-fire, with everyone struggling to do the right thing.

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Clear example. Cases are suiting to flood our courts over which driving laws and
safety statutes of the State of Minnesota can be enforced on Indian reservations. That has
broken down into near illogical subgroupings, such as: severity of transgression, those
living on reservations; those driving onto reservations from the outside; those driving
from reservations on to public roads, etc. These contorted subgroupings are sucking us
into the black swamp of internal inconsistency.

I am describing the 'criminal /prohibitory" dichotomy versus the "civil/regulatory"

analysis laid out in State r. Jackson, N.W.2d , No. C8-96-1668, 1997 WL

18304 (Minn. App. Jan. 21, 1997); State v. Stone, N.W.2d , No. C9-96-1291.

1996 WL 721562 (Minn. App. Dec. 17, 19%); Bray v. Commissioner of Pub. Safety.
555 N.W.2d 757, 760 (Minn. App. 1996). All three panels have struggled to do the
right thing, some finding that certain illegal driving conduct is civil/regulator) and some
finding that certain illegal driving conduct is criminal/prohibitory.

With no other race, creed, or culture would we spend a minute struggling to find
distinctions that do not exist on an issue so serious as the right of state residents. Indian
and non- Indian alike, to expect that all other drivers they meet are bound by our state 's
motor vehicle safety laws.

Here is the simple honest answer: The State of Minnesota does not regulate
drunken driving, it prohibits it. The State of Minnesota does not regulate speeding,
reckless driving, or careless driving, it prohibits them. The State of Minnesota does not
regulate driving without insurance or driving without up-to-date registration and current

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license plates, it prohibits them. The State of Minnesota does not regulate driving
without a license, it prohibits it. The State of Minnesota does not regulate failure to have
a child restraint, it prohibits it.

The State of Minnesota regulates legal conduct. It prohibits illegal conduct. Clear
example. A highway with a posted speed limit of SS miles per hour. The state regulates
driving conduct up to 55 miles per hour. That is legal conduct. Over 55 miles per hour
you are not regulated, you are prohibited. If on that road the county or the state is doing
some work and establishes a construction zone with a sign that says "temporary speed
limit 40 miles per hour," legal driving conduct up to 40 miles per hour is regulated.
Driving conduct over 40 miles per hour is no longer regulated, it is prohibited. The state
regulates driving with the minimum amount of liability insurance, 30/60. If you have that
or more, you are legal and you are regulated. If you have less than 30/60 limits, or none
at all. that driving conduct is not regulated, it is prohibited.

Everyone in the judiciary tries its best to be ethical and fair. The inconsistent
swamp we are in is a direct result of incongruous spinoffs of "tribal sovereignty" and
"tribal immunity."

The cases coming before the court on the issue of sovereignty are coming from
Minnesota's eleven Indian reservations. Appellant has placed sovereignty in issue. I
have accepted appellant's request to address sovereignty. Appellant's attorney has every
ethical right to promote his client's interests and to put at issue whatever he feels he must

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do to protect his client's interests. 1 have an obligation to give the attorney and his client
my answer and my legal analysis.

It is helpful to start with the status of Minnesota's eleven recognized reservations,
seven Anishinabe/Ojibwe, and four Dakota Sioux. Although they range in size from
under 100 acres in southern Minnesota to thousands of acres in northern Minnesota, they
contain as residents an extremely small percentage of our population. The most recent
figures available show approximately 12,000 Indian people spread out in those eleven
different reservations. The four Dakota Sioux are small in size and small in number.
Their combined residency is about 1500. The other approximate 10,500 Minnesota
Indians living on reservations are spread out among the seven northern Minnesota Ojibwe
reservations. Actual populations on reservations range from under 200 to perhaps 3,000.
There are a total of approximately 60,000 identified American Indians in the State of
Minnesota. The other approximate 48,000 do not domicile on a reservation but reside
in all other pans of the state where the Minnesota Constitution and the United States
Constitution, with its Bill of Rights, control their rights and privileges and their
obligations. If the} go back to the reservation, they are stripped of those guarantees. If
they leave the reservation again, those guarantees come back to protect them.

The eleven reservations have a total of 17 exclusive gaming franchises, including
16 Las Vegas style casinos, some large, some small, and one bingo franchise. Because
there is no open meeting law, because there is no freedom of the press, because there is
no forum to change that. Indian casino interests keep the total gambling revenues on

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Indian reservations hidden as much as possible from tribal enrollees and from the public
eye.

Although the actual figures are kept hidden by the reservation business council and
their casino managers, we know from various sources, shop talk, publications, and
comparisons to known figures from regular casinos of similar size, that the money
pouring into the 17 Minnesota Indian gaming franchises is substantial.

It can be said that their combined "handle" is between 2.5 and 3 billion dollars
annually. "Handle" or "drop" is the total amount wagered. Then we know that the range
of cash back or payout to customers is within the range of 80 percent to 90 percent of
that amount. Thus, the amount of cash retained by the casinos called gross profit would
be approximately 250 million to 300 million at 10 percent in retainage. and 500 million
to 600 million at 20 percent retainage. That figure represents gross profit, a rather loose
term, but a sufficient one for these computations. Then from gross profit must be
subtracted the costs of doing business to arrive at the net profit. Well-managed gamine
casinos historically enjoy an excellent ratio of net profit to gross profit. That, simply and
with no further explanation, explains the billions and billions of dollars poured into Las
Vegas style casinos in Nevada, in New Jersey, and now in Indian casinos dotting this
country since the 1940s. The net profit margin can be as much as 50 percent. Thus,
simple arithmetic from the above range of gross profits shows a possible combined net
to die 17 franchises of some 100 to 200 million dollars on up through 250 to 300 million
per year. That is a lot of money.

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South Minneapolis, between Franklin and Lake Street, has one of the largest urban
Indian populations in this country. They belong primarily to Minnesota's Dakota and
Ojibwe reservations. They know nothing of these figures. Some may receive a small
pittance; most receive nothing. Their life is a struggle for survival. They do not know
of, much less discuss. Cherokee Nation, 30 U.S. (5 Pet.) 1, Lone Wolf v. Hitchcock,
187 U.S. 553, 23 S. Ct. 216 (1903), Cabazon, 783 F.2d 900, Gavle vs. Little Six, Inc.,
555 N.W.2d 284 (Minn. 1996), etc. They are mostly concerned with getting through the
day. getting enough to eat. and having a warm place to sleep. They assume that social
justice for Indian people, like all important matters, is somehow handled by men and
women in tailored suits going quietly to and fro in the executive, legislative, and judicial
branches, talking about important things with each other in marbled halls and paneled
chambers.

There are people out there on reservation business councils, and their advisors,
intimately connected to the management of that tribe's casinos, who know far more than
I the truth and accuracy of my approximations. Anyone wishing to come forward in a
public forum and on a public record and correct me as to whether I am high or
conservative would provide a relief to me and to Indian people. Then all would know
the exact figures. All city residents with a well-managed and state-regulated municipal
business entity know exactly how much belongs to them. This is simple and can be done
It occurs, dozens of times, hundreds of times per year in this state, as all cities, villages,
unincorporated townships, etc. maintain carefully calculated and open financial records

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for the residents and all appropriate state agencies that are entitled to examine those
records. It is done by employing, as a normal cost of doing business, an outside and
fully objective and independent major accounting firm to do a complete and thorough
certified financial statement.

In Minnesota, like in other states, whether you are a for-profit corporation, a
nonprofit corporation, or a municipal corporation running a business entity, you are
subject to applicable state and federal laws and regulations. That ensures accountability
of the owners, investors, managers, officials, and residents of the towns involved. The
one exception in Minnesota is tribal government. Yet in Minnesota, all members of a
tribe, whether living on or off the reservation, are full-blown Minnesota residents and
American citizens.

For now, fair and full public disclosure of casino and other tribal government
pro.^eds is denied to all Minnesota Indians, whether they are off-reservation enrollees
or reside right on the reservation 100 yards away from the casino that they are told
"belongs to them."

If in Minnesota, eleven small towns totalling approximately 12,000 residents had
within them 17 different gaming casinos, all would be well in those towns. With state
regulation and the laws controlling a municipality's accounting for its revenues, I suggest
city planners from towns in Minnesota and other states would make yearly pilgrimages
to those casino towns to get city planning and lifestyle ideas. Instead, we have a situation
on our eleven reservations where there is still poverty, illiteracy, inadequate medical care,

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crime, violence, alcohol abuse, drag abuse, domestic abuse, sexual and physical assaults,
lawlessness, incest, and all the other societal ills that plague small towns and large cities.

On Minnesota reservations, even those with the potential for vast revenues, there
is a "poverty of the spirit" that no amount of money can salve. See Mark Aamot, Greed
vs. Culture?, The Circle, Feb. 1996, at 5. The article refers to the reservation the
smallest in size, but the richest in revenues, the Shakopee Dakota Community with its
Mystic Lake Casino. The article details how on a reservation with the most lucrative
casino, culture and togetherness get drowned in the fight for control over the money.

My concurrence is decidedly not anti-casino gambling and for those who have read
my dissent in Cohen, 543 N.W.2d at 382-408, they will know this is true. What I am
pointing out is the tragic mismanagement of what should be a legitimate bonanza for
Minnesota Indians, previously impoverished for decades. This tragic mismanagement
flows directly from the failed governmental Indian policy of "sovereignty. " The
simple but institutionalized change which is necessary, and must be done quickly, is for
the federal congress, federal judiciary, state legislatures, and state courts in some fashion
to confer full rights of statehood on residents of Indian reservations. When the casinos
are located within a Minnesota municipality with all the attendant rules and regulations
and open government laws required by that designation, the people will be guaranteed the
right to know what those proceeds are. The way it is today, they do not, and are
deliberately kept in the dark by the reservation business councils and casino managers.

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There are many examples in Minnesota of the proper handling of money by
municipalities. For decades, municipalities have owned municipal liquor stores, waste
and sewer treatment plants, public utilities, garbage disposal companies, and other
businesses. There is nothing wrong with a Minnesota municipality making money at a
municipally-owned enterprise. Properly accounted-for dollars help the quality of life by
supporting needed services without adding to the tax load.

Even though there are significant gaming revenues, Minnesota and federal
taxpayers still are asked to supply to Minnesota reservations with such things as HUD
housing. Bureau of Indian Affairs-financed reservation schools, Indian Health Service,
AFDC benefits to those who qualify', and other benefits. Each of the above-enumerated
uses of taxpayer funds for appropriations for people living on reservations is ethical and
appropriate. The people living on reservations share exacdy the same class as myself,
all readers of this opinion and all residents of this state. The class is Minnesota residents
and United States citizens. It has always been permissible to target groups within this
state that need legitimate financial aid and then give it to them.

But the gambling money must be accounted for. That is so in Minnesota towns
and villages: that is so on federal enclaves, of which Indian reservations are a type. For
instance, on military reservations, the profits, whether lucrative or modest, from
commissaries, post exchange stores, etc. are subject to rules, regulations, and accounting.
The budget of Congress and the Oval Office is a public record.

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The majority of Indian casinos in Minnesota and in this country have failed to
comply with the federal gaming act which is supposed to regulate them.

This week the National Indian Gaming Commission (NIGC) released
a copy of the Report to the Secretary of the Interior on Compliance With
the Indian Gaming Regulatory Act (IGRA) by the nation's tribal casinos.
The Report, which was dated September 30, 1996, found that only 32 of
the country's 274 tribal gaming operations complied with all eight
requirements of the IGRA.

As far as Minnesota is concerned, the Report found that only six of
(he state's 16 tribal casinos were in full compliance with the Act

William J . Lawrence, Most Casinos in state, U.S. failed to comply with federal gaming

act, Native American Press, Dec. 20, 1996, at 4.

Appellant here. Jackpot Junction, is included on the lengthy list of tribal gaming

operations not in compliance. This article stated:

The Report cited the 11 other tribal casinos for the following
violations:

Jackpot Junction Casino, owned and operated by the Lower Sioux
Indian Community, for failure to be licensed by the tribe and for failure to
submit audits to NIGC • " ■ .

Id.

Thirty-two out of 274 is not even enough Indian gaming casinos in compliance in
this country to construct an accurate model of how it should be done right!

The following truth must be noted. The hundreds of millions of dollars per year
generated by the casinos are not even split fairly among the approximate 60,000 Indian
people in this state. Only a tiny few of the 48,000 off-reservation enrollees ever share
in any per capita distribution by the reservation business council of net gambling

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proceeds. Those tin> few off-reservation enrollees who share only got their share after
finding themselves pitted against their own tribal leaders who resisted such sharing, and
after bitter struggles in federal court. Other than those tiny few, the approximate 48,000
off-reservation but bona fide enrollees get nothing from the proceeds of their tribes*
casino income.

What happened to the gross and net revenues from those 17 gambling franchises
that I described above? The answer lies in the two previously-described sets of trials
from northern Minnesota reservations with casinos. Those casinos were "managed"
under the presently held view of "sovereignty." Thus, the total unaccountability and the
resulting criminal convictions happened. The results of those criminal trials will forever
stand as a public record in mute testimony to the utter failure of present American Indian
policy.

Those trials had tragic results for all state residents. Indian and non-Indian alike.
There is no triumph, only sadness, in my description of what happened. But federal trials
are a matter of public record, open to all. and judicial opinions rightfully can refer to
public documents when appropriate.

It is only the "intelligentsia" that Einstein referred to that neither understand nor
accept the truth in Indian country. As I previously stated, tribal government leaders,
their advisors, and the casino managers know far belter than I or anyone else the true
figures as to the flow of money. Tribal governments know that the "winds of change are
coming." The two sets of previously-described public trials, together with the intensive

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investigation preceding them, have put tribal governments on notice that the end of total
unaccountability to their own people is coming.

There are four distinct sets of outrage. The first outrage belongs to Indian people
living on reservations. They have no state or federal constitutional guarantees, no open
records as to casino money, no state regulated open and honest elections, no Minnesota
state auditor, no secretary of state, and no state attorney general to look over the shoulder
of government leaders as is done in all other Minnesota towns.

The second outrage belongs to Indian people enrolled in a tribe but living off of
the reservation. They are often ineligible to run for tribal government office, they have
no guarantee that their absentee ballots are counted correctly, they have to fight for a
piece of the per capita distribution or get none at all, and they have no input in how the
tribal government spends money on their reservation.

The third outrage belongs to state residents. Indian or non-Indian, who cannot walk
onto a reservation and feel safe on any part of the reservation, including, but not limited
to. the gaming casino because city, county, and state law enforcement authorities are
hamstrung most of the time, and forbidden some of the time, from even attempting to
enforce state laws that promote the safety and welfare of people on reservations. State
residents. Indian or non-Indian, cannot even sue a tribal casino for serious injuries that
the plaintiffs claim were caused by the casinos neglect.

The fourth outrage belongs to Minnesota and American taxpayers who are expected
to fork out millions of tax dollars a year for various support services for people living on

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Indian reservations and then are denied the normal accounting we get from state
government and the federal government as to annual budgets.

To further add to the misery of Indian people, rightfully entitled to a fair
accounting of gross and net profits from their casinos, but not getting it, is the growing
probability that when Minnesotans and others who gamble fully realize the total lack of
protection they have once they step inside a casino, the number of those coming to
gamble will decline. Then the casinos will begin to sink financially and may eventually
close. The specter of competition is here.

Clear example. Assume that the State of Minnesota authorized a Minnesota
municipality or a private group of investors to build a large and comfortable Las Vegas
style casino somewhere in central Minnesota or in the Twin City metropolitan area. It
is a matter of public record that for the last few years various state legislators have
discussed openly whether there should be state-based or privately-owned gaming in direct
competition with reservation casinos. No one can discount this possibility.

Now assume that after state and region-wide publicity, this new Minnesota casino

opened, and as eager and curious patrons came through the front door on opening day,

they were met b\ a huge, neatly lettered, painted sign above the door with individual

paper copies for all who entered. Assume the sign above the door said the following:

ACCOUNTABLE CASINO

Welcome to Minnesota's first and only accountable casino. The
management hereby makes the following pledge to all customers, all

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employees, and all individuals and business entities that do business with
us:

We understand that we are subject to the United States Constitution,
its Bill of Rights, the Minnesota Constitution, and all lawfully passed
Minnesota, state and local, legislation or ordinances that affect our right to
do business. We agTee to be bound by state and federal laws, including
without limitation, civil rights acts, laws protecting veteran's preference.
OSHA, social security withholdings, workers' compensation, laws against
age, race, color, and gender discrimination, zoning ordinances, labor rights
to attempt unionization, and all other such matters.

We reserve the right to vigorously defend on the merits any charge
against us or our employees wherein it is claimed we are civilly or
criminally liable. But we understand fully and accept that we are under the
lawful jurisdiction of all law enforcement agencies. That includes, without
limitation, city police, county sheriffs, the resident county attorney, the
attorney general of the State of Minnesota, and all other agencies and sub-
agencies of the State of Minnesota that regulate business enterprises,
including those of this type.

We fully understand and agree to unqualifiedly submit to the
jurisdiction of Minnesota state district courts and its appellate process, and
Minnesota federal district courts and their appellate process when state or
federal issues arise. We reserve the right to any and all legitimate defenses,
including without limitation the normal qualified immunity involving
discretionary decisions of duly elected council members. We reserve the
right to attempt to move causes of action wherein we are sued from state
court to federal court or from federal court to state court if our attorneys
advise us that we should do that to protect our interests. But we agree that
we are required to defend on the merits in either a state and federal court.

We pledge not to take money from this casino and set up a system
wherein we set the qualifications for and control the selection of "judges"
paid by us to entertain lawsuits by others against us.

Our defenses to lawsuits will include, without limitation, defenses on
the merits on such matters as statutes of limitation, collateral estoppel,
laches, etc.

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It is our intention to make a fair profit from this casino for our
shareholders if we are privately owned, and for residents of this
municipality if wc are a municipal corporation. But we will not do so at
the expense of your dignity and rights. We will not cheapen our own by
so doing. If we are a privately-owned casino, our books will be open to the
appropriate taxing authorities, state and federal, and all income taxes,
excise taxes, sales taxes, etc. collected will be paid to the appropriate
authorities. If we are a municipally-owned business, we understand that we
are subject to open meeting laws, freedom of the press, display of all of our
public records to our residents at appropriate times, and all other laws
regulating municipal! y-owned businesses.

We accept the authority of the State of Minnesota, through its State
Auditor, to examine our books as required.

We accept the authority of the State of Minnesota, through its
Secretary of State, to monitor and regulate our municipal elections so that
all qualified voters have their votes counted fairly.

If there are any allegations against us, civil or criminal, we reserve
the right to hire attorneys to defend us. But we understand there will be an
independent judicial forum for the respective claims and defenses to be
heard.

If the above were the case, it would not be long before the seventeen Indian
gaming franchises would suffer financial distress, and then close, one by one.

There is nothing "ami-casino" in what I say. I am "ami-anything" that runs to the
detriment of the people it is supposed to serve. If there are to be Indian gaming casinos
or other tribal business enterprises, I am for healthy, regulated, accountable casinos and
other businesses run by properly elected public officials, under Minnesota state laws
regulating municipalities. Nothing bad can happen from the change that I suggest must
come, meaning the change from "federal tribal enclaves" to Minnesota municipal towns,
villages, or cities, whatever form is chosen. The present existing gaming casinos have

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"grandfather" rights. It is just that the gaming casinos need to be operated like all other
municipally-owned business entities, open, accountable, and subject to Minnesota's laws
on open meetings and open public records.

The foundation of the myth of sovereignty and its concomitant evils is that the
federal government has never entrusted American Indian people with the ownership
of reservation land. This is unlike any other race, color, or ethnicity. It is time.
Reservation residents must be given the right of ownership in fee simple. Since 99
percent plus of Americans have this right, the tiny percentage of Americans living on
reservation land are being discriminated against to the full extent of the law. There is
somewhere between perhaps 600.000 to 900,000 Indian people in this country actually
living on the 554 scattered federally-recognized reservations. All Indian people living off
the reservation can own land in fee absolute. A tribal government can do little or nothing
without the approval of a federal agency, some arm of the federal government. Indian
people, generally, living on a reservation cannot. This prohibition applies whether it is
called reservation land, trust land, or allotted land. It may be "deemed to be die tribe's."
but it lacks the pure ownership indicia of fee simple absolute.

This will take federal congressional action and the guidance of the federal
judiciary, but I am setting out the reasons why it has to be considered, and considered
quickly.

All municipal governments in this state and country own land, as do their
residents, in fee simple. Many municipalities have valuable land, including but not

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limited to lake front property, riverfront property, commercial land suitable for private
investors to buy and develop, etc.

The Cherokee Nation nineteenth century, antiquated, questionable, and patronizing
"government/ward status" continues to keep Indian people on reservations in a tribal state
of dependency on either state and federal handouts or expansion of the increasingly
unaccountable gambling. See Cherokee Nation, 30 U.S. (1 Pet.) at 17 (noting that tribes'
"relation to the United States resembles that of a ward to its guardian").

Give them their land! Without ownership, there is no chance of attracting home
owners and businesses.

If Indian reservations are reorganized as standard Minnesota cities and towns, the
flight of Indian people off their reservations to the "free part" of the state will be halted,
and hopefully reversed. Today, 75 percent to 80 percent of all enrollees in Minnesota
have turned their back on reservation life because of tribal politics, unaccountability.
institutionalized nepotism, and fear. On the other hand, as a normally regulated town
under Minnesota laws and Minnesota courts, professional and white collar people of
Indian descent might consider moving back to the reservation. Now. because of the
inability to buy or build a home, because of the questionable quality of reservation
schools, because of the total lack of job security (even for those hired by tribal
government as advisors), because of the lack of a stable state-regulated police force, even
those pretending to adhere to the security blanket of "sovereignty," choose not to live as

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permanent residents on the reservation. If you ask them point blank. "Why not?" their
moment of awkward silence will be the truth.

When you examine the status of Indian people today, it is clear that even after the
1924 passage of what can be called the American Indian Citizenship Act, see Act of June
2. 1924. 43 Stat. 253, now codified at 8 U.S.C. § 1401(b) (1994), acceptance of
American Indian people as individuals, endowed with every right to individually demand
the benefits of a state constitution and the federal constitution, has never been granted
by the United States Congress or mandated by the United States Supreme Court .

Under the pretense of "sovereignty," we deny Indians living on reservations the
most basic rights given all other Americans, the right to own land and the rights,
privileges, and obligations of state constitutions and the federal constitution. Instead, the
federal government holds reservation land "in trust" on behalf of the Indians. Oklahoma
Tax Comm'n v. Texas. 336 U.S. 342. 355. 69 S. Ct. 561. 568-69 (1949) (stating that
the "allotted Indian lands held in trust by the United States [are] 'an instrumental!:)
employed by the United States for the benefit and control of this dependent race.'")
(citation omitted, emphasis added.)

Many Indian reservations in this country are small . Some consist of a few hundred
acres or less. Some consist of a few thousand acres. A few reservations, particularly
in the western states, comprise a few hundred thousand acres or more. The Navajo
reservation, occupying parts of two states. New Mexico and Arizona, and the Crow
reservation in Montana would be two examples of our larger reservations. We need not

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be afraid to give these tribes and their people land ownership of hundreds of thousands
of acres in fee absolute. If the reservation boundaries contain that much land now, all
that means is that before various federal agencies, and the U. S. War Department, acting
under the control of Congress, stole Indian land and then set the reservation boundaries,
the Indian people thereon owned millions of acres! When we established reservation
boundaries and forced Indian people within those boundaries, we always downsized their
former holdings, we never "upgraded."

The present reservation system preserves isolationism and red apartheid. From
1619. when the first slaver hit America's eastern shores, until 1863, when Lincoln
proclaimed the Emancipation Proclamation, we had slavery, pure and simple. But after
emancipation and quick passage of the Thirteenth, Fourteenth, and Fifteenth
Amendments, no thought was given to appropriating lands from the defeated South and
handing them over to American blacks and telling them to set up their own
"plantations/reservations," where as long as they stayed within the borders they could
pretty much do what they wanted, pretty much elect who they wanted to, and those
elected could pretty much do what they wanted to anybody within the boundaries.

We did not force now full-fledged American black citizens onto
"plantations/reservations . " But both before and after 1924 and passage of the American
Indian Citizenship Act, we forced Native people to live on reservation/plantations to
enjoy the benefit of "sovereignty." We say to no other race, color, or culture, "you are
free to leave the reservation and step into the free part of the state where the state

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constitution is in force, but the second you step back across the line, state and federal
constitutional guarantees, and the right to own your own land, disappear."

America's history is replete with both subliminal and overt nonacceptance of Indian
people. See "Indian Wars of the Nineteenth Century." By my use of the word
"nonacceptance," those living who were involved in a direct or peripheral way with the
legal analysis leading to Brown v. Board of Education, (and anyone studying the history
of that case) will recall that the nonacceptance of colored children in all white schools
was testified to at length in various public records as being so dysfunctional, so
destructive of normal hoped-for emotional adolescent growth patterns, that by starting
with the emotional and psychological sickness suffered by colored children, the grown-
ups finally said, "there ought to be a law against it." 347 U.S. at 483, 74 S. Ct. at 686.

They should have paid attention to the little children far earlier. These same
patterns of arrested development and psychological disability from nonacceptance plagues
not just the young, but all Indian people domiciled on reservations.

As we pushed westward in the 1900s and took over Indian land and called it
federal territories, then accepted those territories as states, after referendums. all persons
in that former territory had a right to be a resident of mat state, all except the Indian
people who. during the westward push, had been physically herded onto reservations.

As residents of any county in Minnesota, off-reservation enrollees have far more
self-determination" and "self-governance" than anyone living on an Indian reservation.
Indian reservations are subject to the "will and defeasance of Congress." They are

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subject to the "plenary power" of Congress. Off-reservation enrollees and other
Americans are not so subject. The Tenth Amendment to the United States Constitution
states:

The powers not delegated to the United States by the Constitution,
nor prohibited by it to the states, are reserved to the states, respectively, or
to the people.

U.S. Const, amend. X.

Today, Indian reservations are nothing more than thinly disguised federal enclave
"plantation/reservations." Freedom as a state resident and as an American protected by
die Tenth Amendment lies off the reservation, not on it.

Off-reservation tribal enrollees can buy and sell a home, buy and sell a business,
own land, mortgage it, vote for city, county, and state officials, knowing that the
secretary of state monitors those elections. They can demand to review public records
at appropriate times. If they feel aggrieved on any cause, the nearest Minnesota district
court with venue and jurisdiction will entertain their claim. They must prove it, but
they will have a forum to entertain their claim.

When the State of Minnesota had virtual sovereign immunity, the Minnesota

Supreme Court, at least at that time, had the good sense of social justice to insist that the

legislature waive it for legitimate claims of their citizens. In Spanel v. Mounds View

Sch. Dist. So. 621. the court stated that it was

unanimous in expressing its intention to overrule the doctrine of sovereign
tort immunity as a defense with respect to tort claims against school
districts, municipal corporations, and other subdivisions of government on

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whom immunity has been conferred by judicial decision arising after the
next Minnesota Legislature adjourns, subject to any statutes which now or
hereafter limit or regulate the prosecution of such claims. However, we do
not suggest that discretionary as distinguished from ministerial activities, or
judicial, quasi -judicial, legislative, or quasi-legislative functions may not
continue to have the benefit of the rule. Nor is it our purpose to abolish
sovereign immunity as to the state itself.

264 Minn. 279. 292-93, 118 N.W.2d 795, 803 (1962).

The Spanel court characterized the doctrine of sovereign immunity as "archaic"
and stated that it would overrule it as a defense with regard to ton claims brought against
school districts, municipal corporations, and other subdivisions of government on whom
immunity was conferred by judicial decision, arising after the 1963 Minnesota Legislature
adjourned, subject to any statute presently, or subsequently limiting or regulating
prosecution of such claims. Id.

If the doctrine of sovereign tort immunity is archaic as to a state of 4.6 million
residents, it is even more archaic to eleven tiny scattered enclaves with a total of
approximately 12.000 state citizens living on them. The changeover, from unregulated
reservations to Minnesota towns and municipalities, will cause no damage whatsoever to
the right of tribal government to continue to make the decision necessary to serve their
residents. All Minnesota municipal entities, from the state itself on down to city
councils, towns, school districts, etc., share a limited immunity for purposes of those
discretionary decisions needed to make and implement sound public policy. See Minn.
Stat. § 446.03. subd. 6 (1996) (excepting municipalities from ton liability against "(a]nv
claim based upon the performance or the failure to exercise or perform a discretionary

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function or doty, whether or not the discretion is abused"); see also Waste Recover)
Coop. r. County of Hennepin, 504 N.W.2d 220, 230 (Minn. App. 1993) (noting that
"discretionary function immunity protects a governmental act that 'involves a balancing
of policy objectives'") (citation omitted).

When they become municipalities, Indian reservations, like all Minnesota towns,
will enjoy the same rights, privileges and obligations as do every other governmental
entity in this state. But for now they stand out as a glaring exception to the maxim that
no person or entity "is above the law."

Gavle . 555 N.W.2d 284, is the law and we have to deal with that. Between 1834
and the Emancipation Proclamation, which went into effect on January 1, 1863, Dred
Scott v. Sandford. 60 U.S. (19 How.) 393 (1886), was the law and we had to deal with
that. Between January 1. 1863. and Brown v. Board of Education. 347 U.S. 483. 74
S. Ct. 686. in the fall of 1954, black apartheid was the law and we had to deal with that.
Thus, it is permissible to explain existing law to explore its ramifications and see whether
appropriate changes should be considered.

The complaint in Gavle is a public record and thus can be reviewed by all. The
complaint is a 25-page document carefully detailing allegations including, but not limited
to, physical abuse, sexual abuse, coercion, terroristic threats, job loss, impregnation, and
other alleged abuses. The complaint contains carefully-detailed allegations that several
of the claimed torts took place on Mystic Lake Casino property with the knowledge and
consent, and at times the aiding and abetting, of casino employees. If you substitute for

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the named defendant and the tribal corporation in Gavle. the governor, attorney general,
any constitutional officer, any sitting judge, any state senator, or any member of the
house of representatives, and the state agency that employs them, the plaintiff would have
a forum to attempt to keep both the defendant and the governmental entity in as a co-
defendant. The plaintiff would have an acknowledged uphill batUc. There is far more
red tape in suing a governmental entity than in suing an individual. This red tape has a
legitimate purpose. Governmental entities in Minnesota (and elsewhere) are clothed with
a carefully crafted limited or qualified semi-sovereign immunity from certain types of
acts. See Minn. Stat. § 446.03, subd 6 (1996) (listing specific instances where a
municipality max be studded from ton liability). Discretionary /ministerial, official
immunity, discretionary immunity, common law immunity are known examples of how
a governmental entity can be shielded from a lawsuit either started against itself alone or
when the entity is named as a co-defendant But in recognition of the need for social
justice for its citizens, carefully crafted exceptions are built into the law to allow a
plaintiff a due process opportunity to crack the veil of sovereignty. Span el sets out the
sound reasoning and logic. 264 Minn, at 292-93, 1 18 N.W.2d at 803. The point is. no
plaintiff in this state is denied a forum to at least argue that they should have a chance
to prove they qualify for one of the recognized exceptions. The Gavles of the world are
denied an independent forum when the defendant is an Indian reservation's tribal
government or their "business arm." a gaming casino.

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Between the 1834 release of Drtd Scott and the 1863 Emancipation Proclamation
(followed quickly by the Thirteenth, Fourteenth and Fifteenth Amendments, to complete
the concept that no one can be enslaved), slavery as an acceptable American institution,
with its attendant evils too numerous to mention, was unexplainable if the goal of the
judicial system is justice. In that time frame, slavery was legal; but it remained
unexplainable.

Between 1896 and 1954. state-sanctioned black apartheid (the Plessy v. Ferguson,
163 U.S. 537, 16 S. Ct. 1138 (1896) (Harlan, J., dissenting), separate but equal
doctrine), with its attendant evils too numerous to mention, was unexplainable if the goal
of the judicial system is justice. In that time frame, black apartheid for states that so
chosj to practice it was legal: but it remained unexplainable.

Today, the result in Gavle is unexplainable if the goal of the judicial system is
jus:;... It is legal, based on "sovereignty." with its attendant evils of lack of state and
fedcn.1 constitutional guarantees; its attendant evil of unaccountability: but it remains
uiivAplainable.

If the goal of the judicial system is not justice, then the judicial system becomes
unexplainable.

I recognize that justice is guaranteed to no one: but can we consciously, as human
beings, deny other human beings the first step, a legal forum, to attempt to invoke
justice?

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Normally Minnesota docs noi leave plaintiffs suing a governmental emit)
"hanging out to dry" from the outset of a case by staling, "we do not care what your
claim of proof may be. You are not entitled to a forum to voice it against us. Go pursue
the individual. It is none of our concern."

The City of Minneapolis for the last few years has been hit with a series of
lawsuits alleging excessive force by their police officers. The City vigorously defends
on the merits. They use every available defense, including their limited sovereign
immunity, but they never start the lawsuit by stating, "this is between the plaintiff and
the police officer. Whatever the two of you end up doing is your own business."

Minneapolis stands behind the officer with its financial assets. If the plaintiff
obtains a judgment against the officer and/or the City of Minneapolis, the City of
Minneapolis and its taxpayers honor their commitment. They pay their just debt.

The case before us is about a semi-sovereign tribal government that does not even
wish to appear in a state court to present a defense.

I use the term "semi-sovereign" to describe Indian reservations and their tribal
government, the reservation business councils. Thus. I need to take some time now and
attack a myth, a myth that, like a sighting of "Elvis," you can squelch and bury, but that
is resurrected when somehow, somewhere, another individual claims that he has seen
"Elvis."

The "Elvis sighting" is a stubborn belief of some individuals, some of the
"intelligentsia." that each Minnesota Indian reservation is like a true Sovereign Nation.

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"a nation within a nation." The backup argument is that members of a reservation enjoy
"dual citizenship," dual as in citizens of the United States of America, and citizens of
some equivalent foreign independent nation, an Indian tribe.

I can only point out again that none of the normal attributes of a true sovereign
nation or a true independent foreign country has ever been attributed to our federally-
recognized Indian tribes.

Real sovereignty includes, without limitation, the right to seal one's
borders, declare war, make peace, coin one's own currency, design and
distribute one s own postage stamps, nationalize essential industries such as
radio, telephone, communications, steel, oil nationalize industries belonging
to foreigner? , control immigration, set quotas, forbid emigration, apply for
a seat in the United Nations, etc.

Cohen v. Utile Six, Inc.. 543 N.W.2d 376, 386 (Minn. App. 1996) (Randall, J.,

dissenting^, affd (Minn. Jan. 21. 1997).

Gavle contained the most recent pronouncement of the Minnesota Supreme Court
on this issue of whether tribes are true sovereign nations. Gavle laid that myth to rest.
In pertinent part. Gavle slated. "Because we have jurisdiction to hear Gavle' s claim, and
we choose to exercise it. we now address the issue of sovereign immunity." Id. at 292.

First of all. no Minnesota state court would have any jurisdiction over a claim by,
for instance, residents of Canada against the Canadian government, a true sovereign
nation Then Gavle goes on to say, "It is settled law that tribes have the privilege of
sovereign immunity, granted to them by Congress, and existing at the sufferance of

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Congress." Id. (citing Rice r. Refiner. 463 U.S. 713, 719. 103 S. Ci. 3291, 32%
(1983) (emphasis added)).

All federal cases on this issue have repeated the settled law that tribes are under
the will, defeasance, and sufferance of Congress.

Decided in 1831, Cherokee Nation, the seminal case on "sovereignty" from which

all other relevant cases flow, provides in part:

Though the Indians are acknowledged to have an unquestionable, and.
heretofore, unquestioned right to the lands they occupy until that right shall
be extinguished by a voluntary cession to our government, yet it may well
be doubted whether those tribes which reside within the acknowledged
boundaries of the United States can, with strict accuracy, be denominated
foreign nations. They occupy a territory to which we assert a title
independent of their will, which must take effect in point of possession
when their right of possession ceases. Meanwhile they are in a state of
pupilage. Their relation to the United States resembles that of a ward to
his guardian.

30 U.S. (5 Pet.) at 16 (emphasis added).

Actually. Cherokee Nation sets the record straight. The case sets out
unequivocally that Indian tribes are not true sovereign states or nations.
Cherokee Nation labelled the tribes "domestic dependent nations." Id. at
17. Cherokee Nation is accurate when it uses the term "domestic" as. b>
definition. American Indian tribes are in die U.S.. not a foreign country .
Cherokee Nation is totally accurate when it uses the term "dependent."

Cohen. 543 N.W.2d at 385.

The sums of Indian tribes as "sovereign" is purely an artificial creation of

Congress. It exists only at the sufferance of Congress and is subject to complete

defeasance. United States v. Wheeler. 435 U.S. 313, 323. 98 S. Ct. 1079. 1086 (1978).

In other words. Congress may completely eliminate tribal immunity. Recently, the

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Supreme Court confirmed that "Congress has always been at liberty to dispense with such

tribal immunity or to limit it." Oklahoma Tax Comm'n v. Citizen Band Potavatomi

Tribe, 498 U. S. 505, 510, 111 S. Ct. 905, 910 (1991).

Lone Wolf, 187 U.S. 553, 23 S. Ct. 216, on treaties is instructive. Lone Wolf

states, in pan:

The power exists to abrogate the provisions of an Indian treaty,
though presumably such power will be exercised only when circumstances
arise which will not only justify the government in disregarding the
stipulations of the treaty, but may demand, in the interest of the country and
the Indians themselves, that it should do so. When, therefore, treaties were
entered into between the United States and a tribe of Indians it was never
doubted mat the power to abrogate existed in Congress, and that in a
contingency such power might be availed of from considerations of
governmental policy, particularly if consistent with perfect good faith
towards the Indians.

Id. at 566, 23 S. Ct. at 221.

Lone Wolf repeats, not the sovereign status of Indians, but their dependent status:

In one of the cited cases it was clearly pointed out that Congress possessed
a paramount power over the property of the Indians, by reason of its
exercise of guardianship over their interests, and that such authority might
be implied, even though opposed to the strict letter of a treaty with the
Indians.

X * X X

It seems to us that this is within the competency of Congress. These Indian
tribes are the wards of the nation. They are communities dependent on the
United States.

Id. at 565-67. 23 S. Ct. at 221-22 (citations omitted).

Lone Wolf also puts to rest any idea that the land beneath reservations is not

United States soil, but rather, is land belonging to a foreign or sovereign nation:

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But the right which the Indians held was only thai of occupancy . The fee
was in the United States, subject to that right, and could be transferred by
them whenever they chose. The grantee, it is true, would take only die
naked fee, and could not disturb the occupancy of the Indians: that
occupancy could only be interfered with or determined by the United States.
It is to be presumed that in this matter the United States would be governed
by such considerations of justice as would control a Christian people in
their treatment of an ignorant and dependent race. Be that as it may. the
propriety or justice of their action towards the Indians with respect to their
lands is a question of governmental policy, and is not a matter open to
discussion in a controversy between third parties, neither of whom derive
# title from the Indians.

Id. at 565. 23 S. Ctat221.

Preceding Lone Wolf, we had Ward v. Race Horse, 163 U.S. 504, 16 S. Ct. 1076

(1896), telling us:

That 'a treaty may supersede a prior act of congress, and an act of congress
supersede a prior treaty.' is elementary. * * ■ In the last case it was held
that a law of congress imposing a tax on tobacco, if in conflict with a prior
treat) with the Cherokees. was paramount to the treaty.

Id. at 51 1. 16 S. Ct. at 1078 (citations omitted).

Lone Wolf and Race Horse tell the truth.

Thus, when federal and state court cases carelessly use the term "sovereign
immunity" without taking the time to point out that it is a limited sovereign immunity,
limited by Congress, which can eliminate and abrogate it totally if it so chooses, they
keep alive the "myth of sovereignty."

A governmental entity calling itself a "Sovereign Nation," that concedes it is under
the will of a higher governmental entity, is not sovereign, but dependent and semi-
sovereign. Put another way. "Indian sovereignty" is a classic legal oxymoron.

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We are still haunted by John Marshall's brilliant, evasive compromise,
whose definition of Indian tribes as "domestic dependent nations'
bequeathed a contradiction in terms that continues to confuse our thinking
about Native Americans to the present day.

Fergus M. Bordewich, Killing the White Man's Indian, at 338 (1996).

What failed federal governmental Indian policy has done is give reservation
business councils absolute power when it should only be limited power in line with the
limited power of other mayors and city councils within this state.

A last example, if one need be given, was draft resistance by American Indians
based on their version of "sovereignty."

As I stated in Cohen:

During World War II and the Vietnam War, a test of sovereignty
presented itself. Essentially, American Indians raised the issue of whether
they were citizens of the U.S. subject to the draft or whether they were
sovereign or quasi-sovereign inhabitants of a sovereign or quasi-sovereign
reservation and. thus, not subject to the draft. The federal courts listened
politely and then ruled immediately that American Indians were U.S.
citizens subject to the draft. See, e.g.. United States v. Rosebear. 500
F.2d 1102 (8th Cir. 1974) (holding that induction of Indian, who was
United Slates citizen within the meaning of the Selective Service Act, is not
precluded from military service by quasi-sovereignty of Indian nations, lack
of full citizenship by Indian people, or treaty commitments): Williams v.
United States, 406 F.2d 704 (9th Cir. 1969). cert, denied 394 U.S. 959.
89 S Ct. 1307 (1969) (holding member of Western Shoshone Nation of
Indians subject to Universal Military Training and Service Act and not
exempt by Treaty between the United States and Western Shoshone); Ex
Parte Green. 123 F.2d 862 (2d. Cir. 1941) (holding that even if treaty
status between U.S. and Indian tribe were valid. Congressional action
superseded the treaties and made tribe member a citizen for purposes of
WWII military service); United States v. Cook, 383 F.Supp 353
(N.D.N.Y. 1974) (holding that appellant was subject to Military Service
Act of 1967 even though a member of Six Nations of Indians). * * *

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Sovereignty is a phrase we have mouthed for over 200 years, but this
country has never, at any time, treated Indian tribes with any of the
courtesy, nor respect accorded a true sovereign state or nation, such as a
Canada. Mexico, Great Britain, etc. None of the normal attributes of a true
sovereign nation or foreign county has ever been gifted to, or attributed to,
Indian tribes. Real sovereignty includes, without limitation, the right to
seal one's borders, declare war, make peace, coin one's own currency,
design and distribute one's own postage stamps, nationalize essential
industries such as radio, telephone, communications, steel, oil, nationalize
industries belonging to foreigners, control immigration, set quotas, forbid
emigration, apply for a seat in the United Nations, etc.

Cohen, 543 N.W.2d at 384, 386.

As stated by Ralph K. Andrist in The Long Death: The Last Days of the Plains

Indian, 246 n." (1993):

Actually, there was no writing of treaties with Indian tribes after
1 871 . when the entire ridiculous pretense that tribes were sovereignties was
abolished. It would be pleasant to be able to report that the change was
made because common sense prevailed, but such was not the case.

In a 1996 American Indian Law Review article. Robert A. Fairbanks stated in

pertinent pan:

[Reservation casinos -- the alleged economic salvation of the Native
American peoples -- are subject to extensive federal regulations and
reluctant state acquiescence. Given federal plenary power. Native
American self-determination and sovereignty are illusory.

« at m m

The various Native American nations negotiated and executed over
three hundred treaties with the United States of America before Congress
declared in March 1871 that "no Indian nation or tribe within the territory
of the United States shall be acknowledged or recognized as an independent
nation, tribe, or power with whom the United States may contract by treaty

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Robert A Fairbanks. Native American Sovereignty and Treaty Rights: Are They
Historical Illusions?. 20 American Indian L. Rev. 141, 142, 146 (1996).

What the federal government has failed to do with their dependent wards is set up
a structure for Indian people that will give them a chance to live in peace and to have the
full input into their city council's government and the full force of the state constitution
of the state they live in to enforce their rights, both under that state's constitution, and
the United States Constitution. That structure is full statehood, meaning entitlement to
all the rights, privileges and obligations of being a state resident. That can be
accomplished by going through the needed legislation to rum Indian reservations into
towns and cities. Many reservations in this country are "checker-boarded." There is
some private land within the reservation borders which is owned by an Indian or a non-
Indian. Nothing changes for those already holding private ownership. They will simply
be residents of a state town within a state county within a state.

To have true dual citizenship, you need two independent Sovereign Nations, such .
as the United States and Canada. England, or France. American Indian people only have
citizenship in one true sovereign, the United States of America. Their other "citizenship"
is as a dependent ward of Congress when they live on a reservation or other tribal land.
In this ward-like status, they do not even enjoy the state's rights that they do the minute
they leave the reservation. In reality, reservation-domiciled Native people have one
citizenship. American. The other "citizenship" is a black hole containing only a lack of

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rights, not rights. If you want to give American Indians freedom, give them full

statehood They are 'somewhat familiar with being residents of federal enclaves."

As a parallel, the City of Washington, D.C. is a type of federal enclave, like

federally-recognized Indian reservations. It is under the power of Congress. It does elect

its own mayor and city council members, and they, like all other municipal officials, have

the previously described limited or qualified sovereignty in their municipal decision

making. But an independent "Sovereign Nation" it is not. Indian tribes are not

independent "Sovereign Nations." The residents of the District of Columbia and

Congress and any person in this country with a cursory knowledge of the town

understands that.

the District of Columbia, a unique federal enclave over which 'Congress
has * " ■ entire control " * " for every purpose of government. ' Kendall
r. United States. 12 Pet.. 524, 619 (1838). ■ • • Congress' power over the
District of Columbia encompasses the full authority of government, and
thus, necessarily, the Executive and Judicial powers as well as the
Legislative. This is a power that is clearly possessed by Congress only in
limited geographic areas.

Sorthern Pipeline Const, v. Marathon Pipe Line Co., 458 U.S. 50, 75-76, 102 S. Ct.

2858. 2874(1982).

Yet "enlightened" elected state and federal officials continue to deny the true sums

of Indian tribes. Why do they insist on putting on the blinders? The answer is. it is a

subliminal patronizing racism and they use it to distance themselves from truly accepting

Indian people as full-fledged state residents and citizens of the United States of America.

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America and Minnesota were in bloody warfare with the American Indian people
throughout the entire nineteenth century and pans of the seventeenth and sixteenth
centuries. (See Dakota Conflict, 1862). The conflict on reservations today is "warfare"
between those who want accountability and the protection of state constitutions and the
protection of the federal constitution, and those who want to preserve the status quo.
since they hold the reins of tribal government and the purse from the windowless counting
rooms of Indian casinos.

For those who wish to continue to pretend that the 554 federally-recognized Indian
reservations in this country are separate independent "nations within a nation," I can only
point out the obvious. Does that mean to our present 100 senators we add 1108 and
several hundred more to the house of representatives? Do we add 554 more state militia
or national guards? One recently convicted tribal official on his way to federal prison
stated that b\ the twenty-first century he expected that each tribe should be able to apply
to the United Nations for recognition as a foreign nation. That would give the United
States not one. but a total of 555 votes in the United Nations. Does anyone really take
serious the notion that within the borders of the United States, there are the equivalent
of 554 downsized versions of Andorra. Benin, Gabon, Micronesia, Samoa, etc.. and
some of the other "postage stamp" size countries that have sovereign independence and
a vote in the United Nations.

If you want to "Balkanize" this country on the basis of race, culture, and ethnicity,
then you should spend some time on the north/south Ireland border, in Israel/Palestine.

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in India/Pakistan, in Russia 'Chechnya, and particularly in Slovenia, Croatia. Serbia.

Bosnia, Herzigovena. In former Yugoslavia, just shut up and just listen. Let the dead

speak to you before you make your final decision. Go if you want. Tight, shed your

blood, die if you must. If you survive, then come back and tell us how unifying it is for

the United States of America, with its SO states, to have within our borders SS4 tiny

"nations within a nation," each claiming their version of "sovereignty" and their version

of an "independent tribal court."

In the Time essay for December 30, 1996, Charles Krauthammer observed:

It is possible that with time our mania for identity politics too will fade,
perhaps shamed and deterred by the example of such Balkanized wrecks as
Bosnia and Rwanda.

Charles Krauthammer, Alger and O.J. , Time. Dec. 30, 1997, at 174.

I agree with the various cases that rationally discuss Indian reservation semi-
sovereignty in terms of an issue thai needs Congress's attention. But I am tired of
blaming the intolerable situation on Minnesota reservations entirely on the federal
government. The federal government shares the blame, but states are not helpless as to
their own citizens. I am tired of having to name someone as an oppressor every time
there is a victim. 1 am tired of the insufferable politically correct culture of the 1990s
which strangles us as a state, and prevents us from addressing the thorny issue of
discrimination openly and honestly.

The fifty semi-sovereign states in our federal union are not helpless.

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Under the Minnesota Constitution we can give our citizens more rights than under
the federal constitution. We simply cannot give less. All states have the same privilege.

A few years ago, the Minnesota Supreme Court gave the old order Amish in
Minnesota greater religious freedom than required by the U. S. Constitution. We know
that because the Minnesota Supreme Court in State v. Hershberger, 444 N.W.2d 282.
289 (Minn. 1989) (Hershberger I) specifically exempted the Amish in Minnesota from
displaying slow-moving vehicle signs on their buggies (statute requiring display of slow-
moving vehicle emblem violated freedom of conscience rights protected by Minnesota
Constitution when statute was applied to Amish defendants, who held sincere religious
belief against use of emblem, where state failed to demonstrate that both freedom of
conscience and public safety could not be achieved through alternative means of Amish
defendants' use of white reflective tape and lighted red lantern).

Following Hershberger I, the State of Minnesota successfully petitioned the United
Slates Supreme Court for certiorari. The United States Supreme Court • remanded
Hershberger to the Minnesota Supreme Court with a terse message and a cite to one of
its original cases. Minnesota v. Hershberger, 495 U.S. 901, 110 S. Ct. 1918 (1990i
(Hershberger II) (citing Employment Div. v. Smith. 494 U.S. 872. 110 S. Ct. 1595
(1990)i.

When you read Smith, it is clear the Supreme Court's message was "Minnesota,
rethink how much religious freedom over and above what this court would grant that you
should grant." The Minnesota Supreme Court, at least at that time, said "tough." and

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they wrote Hershberger III, preserving the right of old order Amish under the Minnesota
Constitution to a greater degree of religious freedom than the Supreme Court felt
appropriate. State v. Hershberger, 462 N.W.2d 393. 398 (Minn. 1990).

None of us can do everything, but each of us can do at least something.
Minnesota has a right to look to its own state constitution, to see that the rights of its
residents living on reservations have at least the same rights as Minnesota Indians not
living on the reservation One of the rights all Minnesotans enjoy is the right following
a not guilty verdict in a criminal trial to be forever freed from a "judge" who claims the
power to set aside a defendant's verdict of not guilty, render a verdict of guilty, and
imprison the defendant.

The federal government not only need not fear state regulation of Indian people
and Indian tribes, but must recognize that it is the only way to give Indian tribes true
freedom and the constitutional benefits of the Tenth Amendment to the Bill of Rights.

As federal wards since Cherokee Ration, they have had their entire country, we
call it America, stolen from them by us or bought by us with inconsequential money as
a result of mostly unconscionable treaties. The push from the east coast to the west coast
was not impeded by the federal judiciary (I can only assume that state judges then fell as
helpless as some seem to feel today). The death of Indian people from outright war and
genocide, coupled with white man's diseases such as small pox, cholera, whooping cough
(diphtheria), and others amounted to millions of Indian people. At one point around the
turn of the twentieth century. Indian people came close to extinction.

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The federal government and the federal courts cannot possibly micromanage the
lives and rights of the 12.000 Indian people in Minnesota living on reservations, nor the
others in the other 553 reservations. The sordid history of Indian people from 1787
through 1 997 proves that issue. On the other hand, the 75 percent to 80 percent of Indian
people who do not live on reservations but live in the free part of their home state have,
since 1787. enjoyed all the rights of the United States Constitution and all the rights of
the respective state constitutions. The federal government does not micromanage that
group, which is the vast majority of American Indian people. The federal government
allows them to live as all the rest of us do, as citizens of their respective states.

The federal courts are incapable of micromanaging Indian people on reservations.
They do not get involved in the bread and butter legal issues that about 95 percent of life
is all about. You see. whether Indian or non-Indian, original federal court jurisdiction
over the issues of state residents is fairly rare. Federal courts do not handle divorces,
adoptions, family custody, probate matters, buying and selling of homes and businesses,
intrastate commerce of business (except bankruptcy), the enforcement of state traffic
statutes, and totally state-related crime, and the multitude of other matters that state
courts handle. If state courts did not handle the daily lives of its residents, the federal
court system would sink under the case load in weeks.

The federal government and the federal courts always retain the right to look over
the shoulder of the state courts and state legislatures. The federal courts are there to
ensure that state constitutions give as many rights as. or more than, the United States

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Constitution and do not attempt to give less. The federal courts are there to look over
the shoulder, for instance, of a state correctional system and put it "on paper" when
extraordinary measures are needed. But the only true freedom for Indian people will be
when the federal government and the federal courts require state legislatures and state
courts to take over the regulation of Indian reservations, just like states regulate all towns
and cities within their borders. State legislatures and state courts today are required to
regulate the lives of the 99 percent of the citizens in America who do not live on Indian
reservations, and that number includes most Indian people.

We fought the Civil war, or the War Between the States, to free black citizens
from having to live on plantations. We did not fight the bloodiest war in this country's
history to force black Americans onto plantations. Yet today, we have a "reservation
system" for American citizens where state and federal constitutional guarantees are not
in place, as they were not in place on plantations prior to 1863.

How did we arrive at the above-mentioned anomalies, inconsistencies, injustices,
and unaccountability in Minnesota, a state that prides itself on social justice and equality
for all?

Part of the answer lies in what has been described as "the noble savage mentality. "

The Native American Press recently predicted the resistance of the "noble savage

mentality crowd" to removal of the "veil" of tribal sovereign immunity:

Depending upon your perspective in the Native community, Judge
Randall's dissent in the Cohen case is either the best or worst thing that
could have happened to Indian tribal government since the landing of

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Columbus back in 1492. Due to the potential magnitude of die impact of
this dissent to the current concept of Indian tribal sovereignty we have
decided to carry it verbatim on pages 2, 5. 8, 9 and 10 of this edition.

In his 69 page (legal) dissent, Judge Randall traces the origin and
historical evolution of the concept of Indian tribal sovereignty. He calls it
"more illusion than real, a Potemkin Village, mush when it was written and
mush today and a throw back to the Separate but Equal doctrine, struck
down in 1954, by the U.S. Supreme Court in Brown v. Board of
Education."

For a judicial document, the dissent is interesting, thorough, well
written and even eloquent at times. It reveals a writer well versed in Indian
law, Indian history and Indian culture. For its intrusion into near sacred
tribal ground, it is not without sensitivity and appears to come from the
author's heart rather than from any vendetta.

This piercing of, or perhaps more appropriately the great ripping in,
the veil of tribal sovereign immunity by Judge Randall was long overdue.
It will certainly not go unchallenged by tribal officials, the Indian bar, the
noble savage mentality crowd and the others benefiting from the charade.

It is high time that those in these groups are not allowed to hide their
criminal conduct, their lack of accountability, their denying us our civil
rights, their incompetence and their other exploitations and greed behind
this anachronism of the 17th century.

Perhaps, the only major point that Judge Randall missed in his
dissent is the fact that over 75 percent of the Indian people in Minnesota
today do not live on reservations and have in effect already rejected the
concept of sovereignty as currently practiced in our tribal governments.

It wasn't too may moons ago that several of us in this column
predicted that the greed generated by the so called return of the New
Buffalo (gaming) would hasten the demise of tribal sovereignty and
seriously erode what was left of our native culture.

Thanks. Judge Randall, for being the first to have the courage to
stand up and be counted and give us back our dignity. For it is time that
we shed the guardian/wardship relationship with the federal government and
become as you say it, real Americans.

William J. Lawrence, Thanks Judge Randall for giving us back our dignity. Native

American Press. Mar. 1, 1996, at 4.

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Well-meaning individuals with the "noble savage mentality* fall prey to the
charade that people residing on reservations are somehow primitive unspoiled children
of nature, and when you visit them, like when you visit the Minnesota Zoo and view
endangered species in an enclosed atmosphere, you are warned about bringing any
contamination into that closed sphere so that nothing will disturb the precious ecological
system. The "contamination" that so far has been prevented from "contaminating" Indian
reservations is the Minnesota Constitution, the United States Constitution, the Bill of
Rights, and all of the previously cited state and federal rights we take for granted.

The reference to "noble savage mentality" is not meant to be critical of any judicial

brethren who think differently from myself. Rather, it is to point out the historically

obvious, that when serious explosive issues of social justice and human rights are

involved, courts differ. Justice Harlan, the lone dissenter in Plessy r. Ferguson, stated

about his colleagues:

In my opinion, the judgment this day rendered will, in time, prove to
be quite as pernicious as the decision made by this tribunal in the Dred
Scott Case.

16? U.S. 537. 559. 16 S. Ct. 1138, 1146 (1896) (Harlan. J., dissenting).

Analogies are proper forms of communication, often persuasive, and in Justice
Harlan's case, compelling. I like Justice Harlan's position in 1896. I like mine
today.

Justice Harlan suffered through 58 years of being thought wrong by most of his
colleagues. In 1954, the United States Supreme Court gave Justice Harlan bis life back

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through Brown v. Board of Education . which laid to rest the notion that a nation and its
people could live in peace and harmony with the different races classified, then isolated,
and then called "separate but equal."

This entire issue of "sovereignty" rests on true red apartheid. The American
Indian will never be accepted in this state, in this country, until we recognize this "red
apartheid" for what it really is, a pancake makeup cover-up of Plessy. 163 U.S. at 551 .
16 S. Ct. at 1143 (holding that "equal but separate [railroad] accommodations for the
white and colored races" was constitutional). No further cite, other than Plessy, is
needed. I can only note, "Haven't we learned anything?" To get around Brown v.
Board of Education and to accomplish the agenda of keeping American Indian people,
at least while on reservations, dependant wards of the United States Government, legal
writers from time to time have attempted to classify American Indians, not as a racial
class, but as a "political class."

Morton » . Mancari attempts to sidestep the bitter truth that Indian sovereignty is
a race-based classification by stating that it is not race based, but is rather a "politically
ba<ed difference." 417 U.S. 535, 553 n.24, 94 S. Ct. 2474. 2484 n.24 (1974) (stating
that preferences for American Indians are not racial, but political, when the preferences
apply to members of federally-recognized tribes).

The reader need only to walk through this classification and apply your own
common sense and judgment to see its inherent fatal inconsistency. With four generally
recognized races, red. yellow, black, and white, why is red. the American Indian, called

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a "political class?" If the federal!) -recognized American Indian is truly a political class,
and not a racial class, it means, by definition, that all state and federal laws and all civil
rights acts forbidding racial discrimination no longer protect Indian people. Since they
are not a "race," they cannot come under die protection of laws forbidding racial
discrimination. When this, is thought through, and its implications made clear, I suggest
those legal writers are going to say the equivalent of "Oops, we misspoke." What we
meant to say is they are both a racial class for purposes of protecting them from racial
discrimination, as all American citizens are. and a political class' for purposes of job
preference and life on a reservation. Now why are only Indian people both race based
and politically based? The other three races comprising 99 percent of America are not.
Assume an Ojibwe. or Sioux, or Cherokee, an enrolled member of a federally-
recognized tribe, has a job with the State of Minnesota in one of its many political
divisions or agencies. Then assume that person, whether in a classified or unclassified
position, is fired solely (job performance is not involved) because that person is an
Indian. Assume that person brings a lawsuit citing federal and state antidiscrimination
acts and the Minnesota Human Rights Act. Minn. Stat. § 363.01-. 20 (1996i. Assume
the attorney for the defendant agency sails into court and makes a motion for summar>
judgment on the grounds that under Morton v. Mancari and its progeny, federally-
recognized Indian people have now been unidentified as a race and, therefore, th?
Minnesota Human Rights Act. and other like laws, does not protect them. I would hope
that the defense attorney has negotiated for a straight hourly fee contract and not a

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retainer contingent upon success. If you are not going to inject truth into this debate, get
out of the debate.

Ironically, the only place in the State of Minnesota where there is blatant and
intentional civil rights violations and blatant and intentional discrimination with impunity
is on Indian reservations and in their gaming casinos. The Minneapolis Star Tribune, as
part of a lengthy front-page story, stated in pertinent part:

They can't get hearings on the merits of their cases. The
commission tells them it typically cannot enforce U.S. civil-rights laws in
tribal casinos. And federal judges tell people they must take their cases to
tribal court.

State judges and the Human Rights Department deliver similar
messages.

Until last year department officials believed they had enough leverage
to persuade tribes in some cases to settle complaints. But that leverage
ended when the Minnesota Supreme Court ruled in November that Jill
Gavle. a former Mystic Lake employee, couldn't sue the casino alleging
sexual harassment.

"That court decision makes it pretty clear that we don't have
jurisdiction to force a casino to do anything," said Ken Nickolai, acting
deputy director of the Human Rights Department.

"If they want to tell you to take a bike, they can," said John
Gibson, an enforcement officer for the department.

Pat Doyle. Today's Focus: Casinos and civil rights. Star Tribune. Jan. 28. 1997, at 1

(emphasis added).

We have been warned before about the fatal inconsistencies between the American

Indian Citizenship Act of 1924 and the post- 1924 preservation of the reservation system

with its so-called "sovereignty." See Theodore W. Taylor, Commentary on "Tentative

Final Report" of the American Indian Policy Review Commission, Apr. 18, 1977, and

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the Separate Dissenting Views of Congressman Uoyd Meeds. D-Wash., Vice Chairman
of the American Indian Policy Review Commission .

I use the term "herd" not lightly, but after careful thought. Native people arc
forced to live on a reservation "if they want to enjoy all the wonderful benefits of
sovereignty," which some seem to think is for their betterment. So the second they move
off the reservation, they are not entitled to thjs "betterment." Minnesota off-reservation
Indians are forced "to suffer the slings and arrows of the Minnesota Constitution, the
federal constitution, and its Bill of Rights."

When you study the history of reservations, it becomes clear that the wiser and the
more courageous the Indian leader, the more he fought being herded onto a reservation
for himself and his people. Chief Joseph (Nez Perce). Quanah Parker (Comanche),
Geronimo (Apache), and Sitting Bull and Crazy Horse (Lakota Sioux) were the last of
the proud warrior chiefs to be forced onto reservations. If reservation life on federal
enclaves was so great, would they not have clamored to get on. rather than fight and shed
blood to stay off?

Today, an ugly reason for the bitter, divisive battle to preserve the status quo on
reservations with economic development, principally Indian gaming casinos, is the
growing flow of thousands and thousands of dollars by tribal government and its casino
interests into the coffers of state and national candidates, and both national parties.
Democrat and Republican.

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Is this relevant in a judicial opinion? It is. It relates directly to sovereignty. I
will quote from recognized independent newspapers. Newspapers, like scholarly journals,
like treatises, like published books, like sociological studies in Brown v. Board of
Education, have a legitimate place in legal opinions.

The Wall Street Journal broke the story on July 12, 1996 in Midwest Indian Tribes
Flex Washington Muscle In Successful Drive to Sink Rival Gaming Project, by staff
reporters Jill Abramson and Glenn R. Simpson.

Then, on August 10, 1996, the Minneapolis Star and Tribune published Tribes'
political acumen growings by Greg Gordon, Star Tribune Washington Bureau
Correspondent.

Both newspaper articles show the thousands of dollars which were funnelled
directly to the two major political parties to promote the donors' agenda. The donors
were tribal councils and their casino interests.

Let us pause. A federally-recognized tribal government comes under the purview
and autfiority of laws surrounding political contributions. They may be state laws. They
may be only federal laws, but they cannot escape scrutiny.

In Minnesota, corporations are specifically prohibited from contributing funds in
support of or in opposition to a campaign for political office. Minn. Stat. Ann.
§ 21 IB. 15. subd. 2 (West 1997). Foreign corporations violating this law face a fine of
up to $40,000 and may be excluded from doing business in the State of Minnesota Id.
subd. 7.

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Minnesota municipalities are regulated. The mayor and the city council are
forbidden from taking municipal monies and writing checks directly to candidates for
political office. There are legitimate means that all entities can employ, PACs, registered
lobbyists, etc., but with any type of corporation, the scrutiny becomes intense and civil
and criminal liability a possibility.

Federal law restricts corporate campaign contributions even more severely than
Minnesota law. barring certain contributions by any corporation. 2 U.S.C. § 441b (1994)
(prohibiting certain contributions by any corporation in connection with federal elections).
Severe restrictions apply to federally incorporated Indian tribes and other federally
incorporated entities. 25 U.S.C. § 477 (1994) (barring contributions in connection "with
any election to any political office, or in connection with any primary election or political
convention or caucus held to select candidates for any political office") (emphasis added).

Federal l\ -recognized Indian tribes contributing directly to political candidates are

in a "grey area" when 25 U.S.C. § 477. 2 U.S.C. § 441b(a). and other pertinent

Minnesota state and federal laws are read together. Section 441b(a) states:

It is unlawful for any national bank, or any corporation organized by
authority of any law of Congress, to make a contribution or expenditure
in connection with any election to any political office, or in connection with
any primary election or political convention or caucus held to select
candidates for any political office, or for any corporation whatever * * * .

2 U.S.C. § 441bu) (emphasis added).

The two newspaper articles cited above are of public record. The matters

contained therein revolve around issues of tribal government. I can only note that if

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appellant and other tribal governments persist in positioning themselves as "sovereign
nations." then the "Indonesian" and the "Asian" problem of potentially illegal political
contributions will be added to the scrutiny the above-cited laws call for.

If Indian tribal entities and their representatives undergo the same scrutiny as is
expected of all other individuals and entities in this state and in this country on issues of
political contribution and all is well, then all is well. If all is not well, then all is not
well.

There is a complete lack of information on tribal council business as compared to
what we normally get relative to city, state, and federal business. It must be noted that
Minnesota's guarantees of freedom of the press, open meetings, and disclosure of public
records are not enforced on Indian reservations. As a direct result, of the eleven
reservations in this state with their approximate 12.000 members, not one single
reservation has on its land an independent, privately-owned newspaper with an
independent owner/publisher to bring the news about the reservation to readers both on
and off the reservation. Many small towns in this state with populations roughly
comparable to those of the eleven different reservations contain a locally-owned, truly
independent newspaper or are serviced by major metropolitan dailies. On the other hand,
no small town local independent newspaper or major metropolitan daily goes into
reservation business council headquarters, as is common in all other government buildings
in this state, and gets information because they want it, and because by law they can get
it.

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Minnesota's laws mandating freedom of public information to the press and to its
citizens is forcefully protected everywhere in this state except on our Indian reservations
The failed federal policy of "sovereignty" prevents Indians on and off the reservation, and
all other people on and off the reservation, from inquiring into tribal government.

Thus, much of what needs to be known, what needs to be exposed so that truth
flows over the issue, is hidden from the light. The "darkness" on Indian reservations has
been chronicled.

Noted Indian author Jim Northrup. Jr.. a decorated Marine Corp. veteran from
Vietnam, a state and nationally recognized writer on Indian country, said the following
in the December 1996 issue of "The Circle." The Circle is subtitled "News from a
Native American Perspective . . . (The Circle is a newspaper housed and published in
Minneapolis. It could never survive if housed and published on a reservation.! In his
regular column. "Fond du Lac Follies." Jim Northrup stated in pertinent pan:

I went to the Reservation Business Committee's open meeting. This
quarterly meeting was held in the Black Bear Casino. Remember when we
used to have monthly open meetings?

What a disappointment.

Secretar\ Treasurer Pete Defoe refused to give out information about
how much money the RBC members make. So much for open government
He said no in spite of the fact that he signed an August request to make
such information available. 1 would really like to see the RBC's income tax
forms.

Two lawyers spoke to the people about 1837 Treaty litigation and a
20 million dollar offer to settle a claims dispute. The droning lawyers
almost put people to sleep. I wondered about those lawyers.

My friends from Scotland report the Association of Native American
tribes is still doing a good job of educating the Scottish people about us.

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1 bel it is hard for them to explain what the RBC is and how they work.
I am longing for Scotland

Jim Northrup. Jr.. Fond du Lac Follies, The Circle, Dec. 1996, at 9.

Jim Northrup wears the "shield" of freedom of speech and wields the "lance" of
the pen.

With no legislative oversight, no state judicial oversight, no freedom of speech and
freedom of die press on Minnesota reservations, the reservation business councils with
their gaming casino money go unchecked.

Another recent article by Jim Northrup stated in pertinent part:

On December 3. an application was received by the Fond du Lac
Reservation Business Committee. The application for a gambling license
is required under FDL Ordinance #09/93, as amended.

The application was submitted by the Board of Directors of Fond du
Lac Management. Inc. The letterhead lists the following Board members:
Robert B. Peacock-Chairman, Peter J. Defoe-Secretary /Treasurer and
members are Daryold Blacketter, George Dupuis and Clifton Rabideaux.

Hey-wait a minute! These are the same guys that sit as members of
the Reservation Business Committee. Did they really ask themselves for a
license? Want to guess what the vote was?

I wasn't there so I will have to surmise what happened at the
meeting. Did the Chairman/Chairman ask for the license or was it one of
the other voting members? Were they sitting on one side of the table as
applicants and then on the other side of the table as voting members?

1 think the Management Company should have regular citizens on the
Board in addition to the RBC members.

It has been happening like this since the Ordinance was passed by the
RBC in 1993. It ain't pretty but it is what passes for democracy on the

Fond du Lac Reservation.

■

Jim Northrup. Jr., Fond du Lac Follies, The Circle. Jan. 1997, at 9.

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It is sufficient to say that if Minneapolis or St. Paul gets a lucrative professional
sports franchise under the partial or full ownership of that city, their city councils will
not enjoy this kind of power.

Where is the "main stream press" in this state on this issue? I suggest they try to
go to reservation business council meetings and demand their right to attend and their
right to full and complete copies of all public documents under Minnesota open meeting
law. Minn. Stat. § 471 .705 (1996). 1 suggest the main stream press go to every "tribal
court" in Minnesota and demand a complete and full list of all constitutions, statutes,
internal rules, court rules, copies of past decisions, etc., the same as they can do today
to any state or federal court in Minnesota.

There is another piece to the puzzle as to how we have arrived in the State of
Minnesota, long known for its openness, in the corrosive and mismanaged atmosphere
of tribal governments and their gaming casinos. That piece is the fierce opposition of
those who oppose the Indian people crying for social justice and accountability: and the
fierce opposition to those who support Indian people in their struggle.

An article from the October 25, 1996. Native American Press, entitled Judge
Randall Cut from Race Bias Task Force Meeting, stated:

At a meeting on Thursday, October 17 some of the primary
beneficiaries of tribal sovereignty used their influence to stifle the voice of
a true advocate for Indian rights.

" " " Tribal culture and jurisdiction were primary topics of discussion.

The first judicial district's Race Bias Task Force and the American
Indian Bar Association of Minnesota sponsored the meeting. Since it was

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created in 1994. the First district Race Bias Task Force has been very active
in promoting educational programs on cultural diversity. * • *

Judge Spicer. chairman of the First district's Race Bias Task Force
and a district court judge in Dakota County, wanted a state judge to speak
at the meeting on the Indian Child Welfare Act. When someone suggested
Judge R.A. (Jim) Randall, Spicer rightly believed that Judge Randall
sounded like the perfect candidate. As described in the August 9, 1996
issue of the Native American Press. Judge Randall, a judge on the
Minnesota Court of Appeals, has a long history of standing up for Indian
people. He has defended, promoted, and advocated on behalf of Indian

people, Indian culture and Indian rights for over 35 years.

* • » *

Based on this information. Judge Spicer naturally thought that Judge
Randall would be an informative, interesting, and thought-provoking
addition to any discussion about Indian culture, rights, and sovereignty.
Judge Spicer didn't realize that his invitation to Judge Randall would be
vetoed by the powerful and influential lobby that promotes tribal
sovereignty.

* * " The American Indian Bar Association threatened to withdraw
their sponsorship of the meeting if Judge Randall spoke. Could it be that
these powerful attorneys of Indian law are afraid of what Judge Randall has
to say?

X K X X

The Race Bias Task Force and the American Indian Bar Association
could not Find any other state or district court Judge willing or able to speak
knowledgeabh about the issues, so no one from a state court spoke at the
meeting.

K K M M

Judge Spicer recently resigned his position as chairman of the First
district's Race Bias Task Force. When asked why he resigned. Judge
Spicer said. "What happened to Judge Randall was wrong. To me it was
a freedom of speech issue. I felt morally bankrupt when it was all over and
felt the only thing I could do was resign. I am still going to be on the Race
Bias Task Force, but not as its chairman."

Julie Shortridge. Judge Randall Cut from Race Bias Task Force Meeting. Native

American Press. Oct. 25. 1996. at 1.

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What is remarkable about the above is that the Racial Bias Task Force is an
official body promoted by the Minnesota legislature with the Minnesota Supreme Court
monitoring policy and implementation throughout the courts in this state. The policy and
implementation can be explained by a single statement. The Racial Bias Task Force is
to promote openness about our multicultural state and expand our knowledge and our
acceptance of our diverse population. As the Native American Press article sets out, this
is hardly the case when the Racial Bias Task Force's implementation steps on the toes of
tribal governments and their casino interests.

That people disagree from time to time with a judge after the release of an opinion
(those involved in the opposition to my presence at the Race Bias Task Force meeting
will concede what happened was a direct result of their disagreement with my dissent in
Cohen i is a nonissue. Throughout this state, throughout this country, in state and federal
court systems thousands of dissents and concurrences paper our law libraries. Dissents.
concurrences, and majority opinions that some disagree with, come in a weekly stream
from the Minnesota Intermediate Court of Appeals and the Minnesota Supreme Court.
The same is true of all levels of appellate review in the federal system.

The response from those in Indian country concerned about true freedom and true
openness on the issue of "sovereignty" was immediate. Within days, the Native
American Press received the following letter from a respected Ojibwe author, essayist and
writer of regular monthly columns for various Indian newspapers:

To the editor:

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The recent report concerning the banning of Judge Jim Randall from
a meeting of the Race Bias Task Force was certainly a disappointment, but
not a great surprise.

Randall has proven himself a friend and advocate of the Native
American community many times over while those who seek to stifle his
voice have done little but promote themselves and protect their income.

Apparently those who felt threatened by Randall, (who may know
more about tribal culture, history and law than they do) decided to protect
their public image by keeping him out of the debate.

Many despots use this tactic to strangle the spirit of truth. If you
don't like an opinion use your position of power and influence to ban it.
That's the message that such small-minded conduct sends.

But it also raises questions about the American Indian Bar
Association. Why DID the association threaten to withdraw their support
of the meeting if Randall was allowed to speak?

At an>' rate the banning of Randall has succeeded in making us all
poorer.

It's our loss when knowledgeable, thoughtful, radical words are
deleted from the commons where ideas are formed and offered for
discussion and debate by those who fearlessly and shamelessly protect our
right to consider them and in the process find our horizons expanded and
our lives enriched.

Yours in the struggle:
Anne M. Dunn
Cass Lake. MN

Anns M. Dunn, Concerned with the Banning of Judge Randall from a RBTF Meeting.

Native American Press. Nov. 1, 1996. at 4.

State and federal trial and appellate judges speak regularly at public forums,
symposiums. CLE courses, MILE courses, and at conferences and other meetings open
to the public in public buildings. The Dakota County courthouse is a public building in
this state wherein not just silting judges, but more importantly, all citizens may come and
listen, and if invited to speak, may speak their mind. Silencing a sitting judge, any

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elected official, any citizen, in a public building, calls into serious question the motives

of those responsible.

In the previous reference to Albert Einstein's letter, just substitute "casino

managers" for "industrialists." Then examine Einstein's further commentary:

[H]ow is it possible that this group, such a small minority, can make
subservient to its desires the masses of the people who by a war stand only
to lose and to suffer? The immediate answer is: the minority, the ruling
class, is in possession of the schools, the church and the press. By these
means it rules and guides the feelings of the majority of the people and
bends them to compliance.

Albert Einstein, Why War? (emphasis added).

The "ruling class" can be paralleled to those in charge of tribal government and
their casinos who wish to preserve the status quo.

The querencia is that part of the bull-fighting arena where the bull chooses to make
his stand in what he knows to be a life and death struggle with the matador. The
querencia of public debate on social justice for Indian people has to be moved to the open
air of a public forum and out of the windowless counting rooms of the reservation
casinos. That debate is becoming a life and death struggle.

In 1997. and going back a few years. Minnesota's Indian reservations are starting
to drown in a sea of litigation, state and federal, federal indictments, and federal
investigations. There is a corrosive cancerous atmosphere within small cliques of people
on reservations fighting each other. Tribal governments have to be allowed to organize
under Minnesota laws pertaining to municipalities. Without that abilitv. reservation

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residents can never be guaranteed constitutional governments, fairly elected tribal
officials, and a fair share of the gaming proceeds. They must be allowed to take title to
their own land. The "federal ward relationship" from Cherokee Nation to today, as we
approach the twenty-first century, is a vicious formidable obstacle that may not allow
Indian people on reservations to make it to the twenty-first century. Cherokee Nation,
30 U.S. (5 Pet.) at 16 (characterizing the relationship between Indian tribes and the
United States Government as one "resembl[ing] that of a ward to his guardian.").

Paul Tillich, the eminent German theologian and philosopher (1886-1965). wrote
prolifically throughout his life using themes such as salvation, redemption, the struggle
to recognize right from wrong, and the ongoing struggle for justice and truth.

In one of his essays entitled, "The God above God" from his book The Courage
To Be (1952). Tillich discussed how "the courage to be" is sometimes found in the God
(truth), who appears when surety about the existence of God (truth) disappears in the
anxiety of doubt.

Tillich discussed, if I might paraphrase, that "grey mist of the soul" that appears
at 3:00 in the morning when we lie awake in the anxiety of doubt, while the forces of
darkness battle with the angel of truth in the "morgue of our conscience. "

From examining their biographies and the history of their times, it is certain that
President Lincoln on the question of slavery, and Justice John Harlan on the question of
separate but equal, black apartheid, "knew 3:00 in the morning. " History graciously has

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manacles and chains But life has to go on! Brown r. Board of Education held
unequivocally that segregation or apartheid based solely on the basis of race was a
deprivation of the equal protection of the laws guaranteed by the Fourteenth Amendment
to the federal Constitution. Brown, 347 U.S. at 495. 745 S. Ct. at 692. Brown was
used as a touchstone, a lodestar, for the eradication of all other laws denying equal
protection based solely on race. Rights too numerous to mention included, without
limitation, voting rights, employment rights, housing rights, public accommodation rights,
association and group activity rights, and a host of others.

Brown v. Board of Education did not exclude any race or color or ethnic group
from its holding. It did not with specificity name Indian children, Hispanic children.
Latin children. Chicano children. Korean children. Chinese Children, etc. But it included
the all-encompassing "colored children." No one was excluded. Id. at 494, 74 S. Ct.
at 691 ("'Segregation of white and colored children in public schools has a detrimental
effect upon the colored children.'") (quoting the findings of fact of the lower court).

Although Brown spoke specifically to the segregation of children in public schools
under the guise of separate but equal, both its proponents and its opponents knew it was
not limited to "children of school age," Both sides knew it included all persons
regardless of age within its holding.

Today, the Minnesota Indian tribal reservation system is isolationism and red
apartheid. It is the black apartheid practiced in this country before Brown v. Board of
Education It is simply wrapped in another color.

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Indian people residing in Minnesota but not on a reservation are
guaranteed the benefits of the Minnesota Constitution and the United States
Constitution and its Bill of Rights

Indian people living on Minnesota reservations are not.

Indian people not living on reservations are guaranteed a voting
process for their city, county, and state elections regulated by the Minnesota
legislature, the Secretary of state.

Indian people living on Minnesota reservations are not.

Indian people in Minnesota not living on reservations are guaranteed
the right and ability to buy and sell the home they live in.

Indian people living on Minnesota reservations are not.

Indian people in Minnesota not living on reservations are guaranteed
that when tried for criminal offenses in a constitutional court and acquitted,
they are freed.

Indian people living on Minnesota reservations are not.

Indian people in Minnesota not living on reservations are guaranteed
the benefit of all federal and state civil rights laws.

Indian people living on Minnesota reservations are not.

Indian people in Minnesota not living on reservations are entitled to
the benefit of OSHA laws; Americans with Disabilities Act laws.
Indian people living on Minnesota reservations are not.

Indian people in Minnesota not living on reservations are guaranteed
the right to civil service classification laws: teacher tenure laws; National
Labor Relationship Act laws pertaining to the right to unionize.

Indian people living on Minnesota reservations are not.

Indian people in Minnesota not living on reservations are guaranteed
freedom from discrimination based on gender, age, religion, race; and all
other state and federal laws that protect the broad state and federal
constitutional guarantees of citizens in this country.

Indian people living on Minnesota reservations are not.

Indian people living in Minnesota not on a reservation have a
constitutional guarantee of direct access to state and federal courts in
Minnesota.

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222

Indian people living on Minnesota reservations do not.

Indian people living in Minnesota not on a reservation are treated the
same as all other Americans. Brown v. Board of Education protects them.

Indian people living on Minnesota reservations do not have that protection.

See Tom v. Sutton, 533 F.2d 1 101, 1 102-03 (holding federal constitution inapplicable to

Indians on reservations).

If the pernicious dichotomy 1 have outlined leads to the observation that Indian
people (American citizens) living on Minnesota's reservations are not treated "separate
but equal" (which would be unconstitutional), but are rather treated "separate but less
equal,' then the compelling mandate of Brown v. Board of Education becomes even
more compelling that immediate unflinching attention be paid to this issue of social justice
and the necessary corrective measures taken.

Sutton remarkably states that the Gideon v. Wainwright, 372 U.S. 335, 83 S. Ct.

792 (1963), constitutional guarantee to appointed counsel does not apply to "Indian

courts" in criminal trials and is not a constitutional right guaranteed to Indians living on

the reservation. The Sutton court went on to state in pan:

This holding is consistent with other judicial decisions finding the
Constitution inapplicable to Indian tribes. Indian courts and Indians on the
reservation.

533F.2dat 1102-03.

Sutton is a lesson in the history of the denial to those domiciled on an Indian

reservation of the most basic rights we enjoy as American citizens.

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A respected United States Senator, a recognized expert on constitutional law,
former North Carolina Senator Sam Ervin, introduced a bill in 1965 to ensure thai
American citizens living on Indian reservations were protected from their tribal leaders,
just like the United States Constitution protects all citizens from the arbitrary power of
the United States government. It can be assumed that Senator Ervin, with his tremendous
legal background, understood the serious implications of parallel governments in this
country for Americans where in one track the U.S. Constitution (and thus the state
constitutions) were in place, and another parallel track where they were not. Tribal
leaders aided by the Department of the Interior and the Bureau of Indian Affairs appeared
in opposition to Senator Ervin 's proposition that Indian tribes adopt the United States
Constitution "in toto" and they were successfid in defeating Senator Ervin.

The clear import of the statute is that a criminal defendant may be
represented by counsel but only at his own expense.

This interpretation is further supported by the legislative history of
the Indian Civil Rights Act. In 1965, Senator Ervin introduced a bill which
would have restricted the Indian tribes, in exercising their powers of local
self-government, to the same extent as imposed on the United States
government by the United States Constitution. However, when hearings on
this bill before the subcommittee of the Senate Judiciary Committee were
convened, representatives of various Indian tribes appeared in
opposition to the adoption of the federal constitution in toto. As a result
of the objections to Senator Ervin' s bill, the Department of the Interior
submitted a substitute bill which guaranteed only specific enumerated
rights to the Indians.

Sutton. 533 F.2d at 1104 (emphasis added).

The final bill had several notable exceptions to the requirement that federal and

state governments observe the Constitution of the United States.

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224

The subcommittee endorsed the substitute bill and. in its summary
of the report, stated:

'The Department of Interior's bill would, in effect impose
upon the Indian governments the same restrictions applicable
presently to the Federal and State governments with several
notable exceptions, viz., the 15th amendment, certain of the
procedural requirements of the 5th, 6th, and 7th
amendments, and in some respects, the equal protection
requirement of the 14th amendment.' The summary of the
report was subsequently adopted and endorsed by the Senate
Judiciary Committee.

Id. at 1 104.

The American Indian Citizenship Act, Section 1401(b) states:

§ 1401. Nationals and citizens of United States at birth.

The following shall be nationals and citizens of the United States at birth:

X K K M

(b) a person bom in the United States to a member of an Indian.
Eskimo. Aleutian, or other aboriginal tribe: Provided, That the granting of
citizenship under this subsection shall not in any manner impair or
otherwise affect the right of such persons to tribal or other property:

8U.S.C. § 1401(b).

Some may argue that the surviving of "tribal and property rights" enables this

unconstitutional due process to continue. In terms of property rights, section 1401(b) is

nothing but a reiteration of longstanding law that applies to all landowners.. At one time

in America, there were no organized states. Then there were 13, and then one by one

we moved to 50. People owning land in a territory which later became a state retained

their rights of ownership in that land. Today, when unincorporated townships become

cities or towns, or are merged into cities or towns, the property landowners come under

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new laws and regulations and the legal dynamics of governance changed, but their land
title does not. This country has always recognized this principle. If Indian tribes owned
land prior to 1924 or have residual gathering rights from treaties signed before 1871.
American citizenship would not diminish those property rights. But "tribal tradition,'' if
it results in the denigration of human rights and civil rights, had to change when full
American citizenship was granted in 1924. If not, you have, as I point out, classic red
apartheid, apartheid between Indian people living on reservations who are denied
constitutional guarantees and Indian people living off the reservation who enjoy all state
and federal constitutional guarantees.

Clear example: in 1924 no state, no law enforcement personnel, no state or
federal judges granted their citizens the constitutional rights of In re Gault, 387 U.S. 1,
87 S. Ct. 1428 (1967): Miranda v. Arizona. 384 U.S. 436, 86 S. Ct. 1602 (1966):
Gideon, 372 U.S. 335. 83 S. Ct. 792 (1963): Wong Sun v. United States 371 U.S. 471.
83 S. Ct. 407 (1963»: Mapp v. Ohio. 367 U.S. 643. 81 S. Ct. 1684 (1961). etc. But
when those cases went into effect, no state or federal court that had previously not
granted them (because they had not been articulated) was exempt from protecting those
guarantees in die future. No state had "grandfather rights" in what had formerly been
considered due process, but is now considered a constitutional abuse of due process.

Yet today, "Sutton reasoning" purports to allow Indian tribes and Indian tribal
courts to ' 'cherry-pick" die constitutional guarantees and the due process that they want
to extend to die residents of the reservation. At the same time, those very same

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residents, the minute they are one foot off the reservation, have a right to demand, and
we will give them, every single enumerated constitutional right existing in 1924 right on
through all expanded constitutional rights to this month in 1997.

The fair, the hard but true conclusion is that this duality of on-reservation life and
off-reservation life is red apartheid. I respectfully argue that Brown v. Board of
Education and its progeny excluded no one from the power of its protection.

The ill treatment, and the denial of the most basic rights continue on reservations
if the tribal council so votes. This is not to state that there are civil rights and denials of
due process of constitutional dimension on all of the over 500 federally-recognized tribes
in this country. This is not to state that there is systemic and institutionalized
mismanagement on all of the over 200 Indian gaming franchises in this country. But this
concurrence is to state that there are documented abuses and documented mismanagement,
and there can never be constitutional guarantees of due process on any of the 554
federally-recognized tribes until we recognize, and then admit, that red apartheid exists,
and take the necessary corrective measures to bring every citizen in this country under
the federal constitution and their state constitution "in toto."

An article about the Laguna Pueblo in the December 20, 1996 issue of the Native

American Press stated in pertinent part:

JUDGE REFUSES TO ALLOW WOMAN ON TRIBAL BALLOT.
A Laguna Pueblo judge has ruled that a woman cannot run for the office of
tribal treasurer in Monday's election, but voters will decide whether women
should be allowed to break into Laguna politics. Tribal Judge Melvin Stoof
on Thursday upheld a Laguna Tribal Council decision that Emily

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Cheromiah. 44, could not seek the post of treasurer on the grounds that
tribal traditions prohibit women from running for office. While voters
won't be voting on Ms. Cheromiah specifically, they will be asked to
decide whether women in general should be allowed to run in future
elections for tribal offices of treasurer, secretary, interpreter and as council
delegates from the six Laguna villages.

Judge Refuses to Allow Woman on Tribal Ballot. Native American Press, Dec. 10,

1996. at 2.

It can be noted that on the Laguna Pueblo, a 1992 ballot question asked "voters
for their input on the role of women in tribal politics." The proposition allowing women
on the tribal ballot was passed by a vote of 730 to 425. But following the vote, tribal
councilors said "the 1992 vote was not binding."

Since 1924. all women and minorities, including all Indian people living in any
pan of their state except on a reservation, have enjoyed tremendous advancements in the
are.; of social justice and the right to the full protection of their state constitution and the
U. S. Constitution. Why have we left those Indian men and women who choose to reside
on their home reservation locked in the Eighteenth and Nineteenth Century? The legal
dynamics of 1924 when American citizenship was conferred on America's Indian people
ha io stand for something.

I can only note that until state and constitutional guarantees are firmly in place, any
Indian tribal government, on a given day, can decide to extend some rights to reservation
members and then the next month or the next year change their mind and take it away
or limit it.

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The civil rights abuses and the denials of due process reflected in this opinion
affect men and women alike, affect Indians and non-Indians alike. The criminal
defendant in Sutton, and the criminal defendant in Red Lake v. R. Smith were Indian
men. The Laguna Pueblo "tradition" involved Indian women. The plaintiffs in Gavle
and Cohen were non-Indian women. The respondent in this case is a non-Indian business
entity. Put another way, anyone who enters onto an Indian reservation or touches it in
a commercial way is subject to a possible lack of state and federal constitutional
guarantees. This condition, this "black hole" in the federal constitution, exists nowhere
else in the United States of America. For those members of well-managed reservation
business councils, for those reservation business councils that operate well-managed
Indian gaming casinos, they need to come forward and help take an open and honest lead
for the needed reforms so that all do not eventually get dragged down.

Recently, tribal members from across the country assembled in Washington. D.
C. "to protest threats to their sovereignty." The protest was not about Native culture.
The protest was against legislation passed by the State of Rhode Island that affected
Indian gaming in Rhode Island. The state legislation was "aimed at leveling the playing
field on all parties seeking to open a casino. "

One Minnesota tribal leader was quoted as stating. "We're going to put the 105th
Congress on notice that Indian tribes will not tolerate attacks on their sovereignty. " Brian
Bakst. American Indians demonstrate at Capitol to protest 'attacks on sovereignty ■',
Native American Press, Jan. 24, 1997, at 1, 3.

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I can only noie the obvious. Between Cherokee Nation, Oklahoma Tax
Commission v. Texas. Rice v. Refiner. Gavle. United States v. VHteeler. Lone Wolf,
and Race Horse, and all of their respective progeny, it is beyond dispute that the
Congress of the United States of America has Indian tribes under its plenary power and
has total control over tribes to the point where their immunity can be limited or
completely eliminated. Thus, the January 1997 demonstration at our Nation's Capital,
put another way, was as ineffective, futile, and arrogant, as any group of American
citizens traveling to Congress "to demand" that Congress stop passing laws affecting
taxation, clean air, clean water, civil rights acts, the budgets of federal agencies, and the
budget for the Pentagon'

The protesters' argument cannot be taken seriously if constitutional guarantees for
Indian people living on reservations, and all those who come in contact with reservations,
are finalh going to be put in place.

The "protest" was not about culture or anyone's way of life. It was a protest
against an attempt by the State of Rhode Island to regulate gaming casinos within its
borders. Rhode Island, like all states that sanction any type of gambling, has in place
state regulations emphasizing accountability.

The issue today that is covered in this opinion is not, and has never been, about
freedom of culture and freedom of religion. The United States of America and its 50
states are among the finest places in the world to enjoy constitutional guarantees of
freedom of culture and freedom of religion. Christians of all sects, practitioners of

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Judaism of all sects, Muslims, Buddhists, etc., anyone who uses churches, temples,
synagogues, mosques, etc. have rigid protection laws in place, and a history of rigid
enforcement. Smaller groups that might be considered out of the main stream enjoy the
identical protection in this country. Some examples might include, without limitation.
Amish. Mennonites, Hutterites, Hasidic Jews, strict fundamentalist sects, Evangelical or
Charismatic sects, etc.

Religion and culture are used, cruelly, by tribal business interests to act as "the
point" or shield for the tribal business interest's all-consuming desire to remain free of
the normal rules of accountability that surround the federal government and its agencies,
that surround state government and its agencies, and that surround municipalities within
a state's border.

A year ago, Washington, DC. played host to a conference called "The National

Summit on Ethics and Meaning." A contributing editor to Harper's Magazine who

attended the conference had the following observation about the different uses the trend)

buzz word "religion" is today attached to:

I whispered to myself Charles's phrase last days, last days and pursed my
lips and gritted my teeth and tried to keep my mind sharp and my heart
open as I heard with astonishment-among educated and privileged people-
some of the worst nonsense 1 have come across in more than forty years of
listening to people in public places butcher truth and sell themselves to
others.

Peter Marin, Essay. An American Yearning. Harper's Magazine, at 37 (Dec. 1996).

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That observation comes to mind as I examine the issues in this case and others.

issues of "sovereignty" wherein, in truth, the issues are only about dollars.

Why is social justice in this country today always about the

money?! Indian "sovereignty" today is used principally for three reasons:
(1) for the tribal government and its casino interests to shield tribal
enrollees on and off the reservation from how much money is being taken
in: (2) as a shield for alleged law breakers to attempt to avoid prosecution

under applicable state and federal criminal laws (see Jackson, N.W.2d

_, No. C8-96-1668, 1997 WL 18304 (Minn. App. Jan. 21, 1997); Stone,

N.W.2d , No. C9-96-1291, 1996 WL 721562 (Minn. App. Dec.

17, 1996); Bray, 555 N.W.2d 757; and the above-referenced sovereign
defense of the tribal officials in federal district court in 1996); and (3) as
a shield to keep from having to answer as defendants in bona fide civil
lawsuits (see Gavle, 555 N.W.2d 284, and this case).

The black african slave trade was also about the money! White
slavery was about the money! The importation of Chinese people (we
called them "coolies" then) in the nineteenth century to complete our
railroads from the east to the west was about the money! Mexican Braceros
stoop-picking lettuce and sugar beets, and denied the benefits of
unionization was about the money!

There is a ray of hope. Sutton has never been reviewed by the U. S. Supreme
Court. It has never been cited as a constitutional exception to Brown v. Board of
Education. What Sutton purports to say is that individual Indian tribes have the right to
pick and choose what constitutional guarantees, what amendments to the Bill of Rights
they and their "tribal courts" will grant to American Indians domiciled on the reservation.
This must give us serious pause.

If the voices of Indian and non-Indian people who know that wholesale
institutionalized change must come, and come quickly, before the cancer of red apartheid
becomes incurable, are not heard (meaning the present isolationism and apartheid of

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reservation life is continued) we might as well do Minnesota reservations the courtesy of
appropriating money from Minnesota taxpayers and the federal treasury to ensure that
their water fountains are equal to ours, that their lunch counters are equal to ours, that
the tribal courts have as many computers and books as we do, and that their schools are
equal to ours!

We put up with slavery from 1619 to 1863. We put up with black apartheid from
1863 to 1954. It is now 73 years since the American Indian Citizenship Act of 1924.
The state courts, federal courts, state legislatures, the federal Congress, state executives
and federal executives have had enough history to "make things right."

Using Brown v. Board of Education, laws passed by Congress, and executive
proclamations (see Emancipation Proclamation) as a vehicle, we immediately need to put
into motion case law and statutes conferring on all American Indians full statehood and
full right to die United States Constitution and its Bill of Rights regardless of where they
live in America. If there is confusion or uncertainty on how best to accomplish this
overriding need. Marbury v. Madison. 5 U.S. (1 Cranch) 137 (1803). wisely
denominated the tie breaker.

We need to establish Indian reservation boundaries and begin "the municipal
process' of bringing them under county, township, and city forms of government. The
mechanics can be worked out. Minnesota's Municipal Commission, Minn. Stat. §§
414. 01-. 09 (1996), and similar state agencies in other states, have been in business for

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years. We have the ability. We platted and land-titled this entire country from Plymouth
Rock west to the Pacific Ocean.

We need to move as quickly as possible to abolish all tribal courts and as
expeditiously and efficiently as possible move all pending matters into the nearest state
or federal district court with venue and jurisdiction.

The issue before us, tribal courts and their "comity" and "jurisdiction," is simple.
After consultation between federal, state, and tribal leaders as to how to allow an orderly
transfer of all pending matters to the nearest state court, meaning the nearest independent
court, tribal courts should be abolished overnight. Nothing would be lost for people on
reservations because as state citizens they should have the right now to direct access to
Minnesota district courts to plead their cases and to plead their defenses. See Minn.
Const, art. 1, § 4 (stating "[t]he right of trial by jury shall remain inviolate, and shall
extend to all cases at law without regard to the amount in controversy"). Other state
constitutions similarly protect their state residents. See, e.g., Lambert v. Rypzik, 886
P. 2d 378 (Mont. 1994). In Lambert, an enrolled member of an Indian tribe brought a
personal injury action in Montana state district court against a non-resident motorist for
injuries arising out of a car accident that occurred within the boundaries of appellant's
tribal reservation. The defendant motorist moved to dismiss the action "for lack of
subject matter jurisdiction." The district court dismissed the lawsuit, believing it was
guided by precedent that stated the jurisdiction of the tribal court pre-empted the
jurisdiction of the state district court.

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The Montana Supreme Court made short shrift of the argument and stated flail>
that plaintiffs (Montana Indians), as full Montana citizens, had an absolute right under
the Montana Constitution to sue non-Indians in Montana state court. The court said that
the failure to recognize this right to sue would deprive an Indian plaintiff of due process
and equal protection of the law under the Montana Constitution. Id. at 380.

To accommodate litigants, Hennepin County and Ramsey County court trial
judges, for instance, have for years maintained moving locations within the Twin Cities
suburbs to sen ice their constituents. Arrangements can be made to hold state district
court hearings on Indian reservations. We are only talking about bringing an additional
12.000 people into our state constitutional provisions who are now denied them. They,
like the rest of us. are entitled to direct access to our constitutional state courts. If the
tribal courts do not dissolve immediately, why cannot Indians living on a reservation have
the unambiguous undeniable right to opt out of that court system and transfer their cause
of action, whether civil or criminal, to the nearest state district court with venue Brown
v. Board of Education would seem to mandate that you cannot impose inferior tribunals
on one set of citizens.

Other problem areas will arise, needs will come to the surface, but it can be done.
This country survived slavery, black apartheid. World War I. the Great Depression, and
World War II. When it is essential to make things right. America has always passed the
test.

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The solutions of constitutional dimensions are straight forward. Give Indians
living on reservations full statehood; give them state-regulated municipal forms of
government: allow them to own their land in fee simple: do immediate audits of all Indian
gaming casinos through a cooperative effort of state and federal agencies. We do that
now with all banks in this country. Bank examiners make regular audits at irregular
times to ensure that the money that is supposed to be there, is there. Periodic bank
examination works to the benefit of the bank. It ensures confidence in them by the
public. The periodic examinations work to the benefit of the public, it maintains that
confidence. The General Accounting Office (GAO), an official branch of the federal
government, has the right to monitor federal enclaves, federal agencies, and anything else
Congress directs it to, over which Congress has plenary power.

Whenever states or the federal government grant lucrative commercial franchises,
which at times can amount to a partial or full monopoly of certain kinds of commerce,
carefully crafted state and federal regulations work together to ensure that the public trust
will not be abused and that public money will be accounted for.

The Securities and Exchange Commission (SEC), the Federal Communications
Commission (FCC), and the Federal Trade Commission (FTC) are but a few examples
of the numerous federal agencies, which, with their parallel state counterparts, protect the
public interest in such areas as securities, registration and their buying and selling, the
awarding of airwave rights for radio and television stations, and the selling of insurance
and real estate.

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The awarding by states of the right to operate a gaining casino, lotteries, pull tabs,
horse racing, parimutuel betting, etc. are all tightly controlled by state and federal
regulations for the same sound reasons.

Several years ago, the federal government took the fairly unusual, but perfecil)
legal, step of taking over control of the Central States' Pension Funds of the Teamsters'
Union. It was highly charged politically, but it had to be done to protect the assets and
the pensions of the members. Duly appointed officials assisted and supervised the Funds'
Trustees to ensure an open and orderly accounting of funds received and funds disbursed.

We have never had the decency and the concern for Indian people to ensure that
when we granted monopolistic gaming franchises to Indian tribes, those franchises were
accompanied by the necessary state and federal regulations needed to guarantee that funds
received and funds distributed were accounted for and the intended beneficiaries fully
protected.

The ownership of Indian gaming casinos by the tribes is not the issue. State and
federal regulation and open and full accounting is. All Americans, whether Caucasian
or of color, anywhere off a reservation engaged in any of the above-named commercial
enterprises are equally subject to the appropriate state and federal regulations and
authorities regardless of race, culture, or creed.

A federal district court in Minnesota in 1996 went through two lengthy trials,
previously described in this opinion, trials which involved multiple defendants and
multiple counts, trials where the investigations started back six to eight years ago. To

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prevent similar trials from happening again, would it not be appropriate to check with the
federal prosecutor's office, his staff and his investigators, to see whether they had any
suggestions for the type and frequency of complete audits (as all state and federally
chartered banks, regardless of minority ownership or not, are subject to) and other
concrete and sensible suggestions to ensure that casino revenues are properly accounted
for to all tribal enrollees and the public? Just go ask them.

Direct federal and state law prosecutors to consider full or partial amnesty in as
many cases as possible. Thorough audits will uncover mismanaged funds. That is a
given. But it is more important that the money be returned to its rightful owners, Indian
people, and that the casinos get off to a good start than it is that we spend precious time
pointing fingers and going through criminal trials, except possibly those that cannot be
avoided.

The stale federal issue of "gathering rights" in ceded territory remains open in the
Minnesota-Wisconsin area and in other scattered areas in this country. Not all of our 50
states have federally-recognized tribal reservations within their borders and not all those
reservations have ceded territory /gathering rights issues. But Minnesota and neighboring
states do and the issue is important, volatile, and bitterly divisive. Thus, it needs to be
addressed, as ceded territory/gathering rights revolve around "sovereignty." Gathering
rights in ceded territory have, and are entitled to have, a life of their own even after the
present day version of "sovereignty" is mercifully exposed, eradicated, and replaced with
full statehood and full citizenship rights.

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The reason gathering rights have a life of their own is that they predate 1871 , the
year that the U.S. Congress emphatically announced that no more treaties would be
signed with Indian tribes because Indian tribes were not independent foreign sovereign
nations. But Congress rightfully acknowledged the validity of treaties signed before that
year. Thus, present ceded territory/gathering rights cases in federal court must play out
until the existence of residual gathering rights from the nineteenth century, if any, is
known.

Federal trials to date have found that some residual gathering rights exist: and have
found in other cases that gathering rights were fully bargained away (through treaty or
other agreement or congressional act). For the residual treaty gathering rights that are
found to exist (after the appellate process grinds to a close), fair compensation is due
those individuals and tribes whose gathering rights have been found to exist. Any
gathering rights found to exist will impact a substantial portion of Minnesota and
Wisconsin outside of present reservation boundaries. Business people and homeowners
alike in the affected ceded territories are legitimately worried about the possible eventual
outcome on their land titles and on their property values and the issue of who will have
what ingress and egress to their land which they formerly thought to be theirs
unconditionally. Indian people with gathering rights have legitimate concerns about
getting what is rightfully theirs. At this point, state and federal government, with the
undisputed power of eminent domain, needs to step in quickly and begin the process of
condemnation of whatever residual gathering rights in ceded territories are found to still

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exist. The power of eminent domain belongs to state and federal governments. There

is a simple two-prong test. It must be for public use and just compensation must be paid.

Just compensation can be determined by pretrial agreement or either side can demand a

right to a jury trial and the appellate process on what is fair compensation. The power

of eminent domain is most used with the condemning of land, but it is also used for other

types of property.

Personal property is subject to the exercise of the power of eminent
domain. Intangible property [is] within the scope of this sovereign
authority as fully as land or other tangible property.

Waste Recovery Coop. v. County of Hennepin, 504 N.W.2d 220, 227, (Minn. App.

1993) (quoting 1 Julius L. Sachman & Patrick J. Rohan, Nichols' The Law of Eminent

Domain § 2.1 [2] (3d ed. 1993)).

The same is true with the federal power of eminent domain.

And it is clearly established that the power of eminent domain extends both
to intangibles, see Cincinnati v. Louisville & Nashville R. R. Co.. 223
U.S. 390. 400, 32 S. Ct. 267, 56 L.Ed. 481 (1912). and to the product- of
intellectual activity, see Interdent Corp. v. United States. 488 F.2d 1011.
203 Ct.Cl. 296 (1973) (per curiam).

Nixon v. Administrator of Gen'l Svcs., 408 F. Supp. 321, 357 n.49 (D.D.C. 1976).

The residual gathering rights in ceded territory need to be fairly assessed and then

taken through the power of eminent domain. There is nothing illegal or racial in this

process. During the 1960s when the federal interstate system spread throughout this

country, at times like quack grass, individual homes, businesses, and at times whole

neighborhoods like the minority Rondo neighborhood in St. Paul, Minnesota, were

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swallowed up. Mechanical issues of should the highway go here or should it be moved
over there are always with us. But no one owning a home or a business could ever
dispute that the power of eminent domain has survived all constitutional attacks once the
first prong of public use is met; only the issue of what is fair compensation remains.

In Minnesota, approximately 60,000 American Indians, and perhaps some in other
states who have enroll ee rights in Minnesota, are affected. I suggest the amount of
money that will finally be assessed as fair compensation will be large. It will take a little
bit of work, and perhaps some difficult work, to distribute those funds to the proper
people, both on and off-reservation enrollees. in proper shares. The proportion or
percentage of those shares is purely mechanical, that can be worked out later. With only
60.000 Indian people in Minnesota and only several thousand more around the country
(I suggest that less than half of Indian people in this country will even be affected, as
most do not have this issue), the distribution in a fair manner can be accomplished. Each
year the Internal Revenue Service, to name one federal agency, collects from American
people and businesses approximately 1.3 trillion dollars. Every year Congress, another
branch of government, redistributes it.

I am fully aware that the gathering of fish, animals, berries, medicinal plants, and
herbs is a traditional pan of American Indian culture. I am also fully aware that the
spearing of walleyes during the spring spawning season is legitimately cultural. Spring
is the "gathering season" for those fish. But the giving up of the right to gather in ceded
territory land is no price to pay at all for the cessation of the bitterness and the corrosive

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atmosphere that this issue has visited on this entire state and neighboring states for most
of the last decade and with no end in sight. With the compensation to be divided among
a relatively small group of people, it will be a legitimate financial windfall.

Both on and off-reservation enrollees who are affected will retain the following:
They will retain all the same hunting, fishing, wild rice harvesting, and berry picking
rights, etc. that all state citizens enjoy now. In addition, they will have the financial
ability with which to pursue such things as the ownership of game farms, buffalo herds,
(the Lakota Sioux and other tribes in South and North Dakota have been doing this for
the last feu years), deer farms, the purchase of private lands for hunting and fishing, as
many people. Indian and non-Indian, do now, and other avenues, to make up for just the
partial loss of present hunting and fishing rights. I use the term partial because it will
only be the loss of hunting and fishing (gathering rights) privileges in certain parts of
certain states where, quite truthfully, only a relatively small number of Indian people
today even exercise those rights. In return, they are guaranteed by law fair
compensation. That is all any citizen is guaranteed. The power of eminent domain can
be used ethically and legally for a public use and to promote the public good.

Most certainly there will be these and other important legal issues of social justice
for Indian people that will need addressing in the future. If 1 have to write further. I
retain a pen. But die next time I would rather put the pen down and ask those who have
questions to retrace with me the parts of the last five decades that I have spent in Indian
country and with Indian people. I will show you beauty.

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I will show you the beauty of school teachers, without tenure and job security,
struggling to teach their young students the value of self-esteem and education on
reservations where the schoolhouse roof leaks and the casino roof does not.

I will show you the beauty of the Indian way of life, of sharing, of concern for the
young and the elderly, of respect for culture and tradition when culture and tradition are
not embroiled in the power struggle for control of tribal government and the reservation
casino.

I will show you the beauty of a young Indian woman, a composer, singer, and
songwriter, a young woman engaged in the struggle for freedom, singing softly but
fiercely of "the storm that's vowed to rage."

The hard issue of "Sovereign Nation" versus the realities of Indian tribes as semi-
sovereign governmental entities under the plenary powers of Congress has to be addressed
immediately and decisively. Then, the proper reforms to bring all the Americans living
on Indian reservations under the protection of their respective state constitution and the
United States Constitution must be addressed with the same unflinching resolve that the
U. S. Supreme Court, without the benefit of precedent, and flying in the face of
precedent, firmly established in Brown. Brown was the watershed in our multi-cultural
country's agonizing search, at times bloody, for social justice without apartheid.

A weak defense of the Dred Scon court would be that laws against slavery were
not put into the final draft of the Constitution, and that, "after all, slavery represents the

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norms and values of part of this country." Recently retired Federal Circuit Court Judge

Leon Higginbotham. Jr. concluded:

[D]espite the legalese in the Dred Scott opinion, it was "nothing
more than a Southern manifesto on the institution of slavery."

Yale Kamisar. Jim Crow on the Bench, New York Times Book Review, Nov. 24, 1996.

at 10.

But if it cannot be said that the Dred Scott court went "belly up," it can be argued
that the Plessy majority went belly up. Judge Higginbotham came to the conclusion that
Plessy may have been a more catastrophic racial decision than Dred Scott. He felt so
because Plessy was decided twenty-five years after the Thirteenth, Fourteenth, and
Fifteenth Amendments were adopted.

Judge Higginbotham points out that

in die course of upholding segregation laws, the Plessy Court relied on a
number of cases that were decided before the adoption of the Civil War
amendments. He calls the case "the final and most devastating judicial step
in the legitimization of racism under state law."

Id. at 10.

The length of this opinion, with majority and concurrence is far less than the
length of Dred Scott. I know that the majority, concurrences, and dissents in Dred Scott
were studied carefully, as the issue was important. The issue here j'j also important.

In 1954 with Brown. "America's ship on course for social justice" righted itself
in words so clear that, despite strong opposition from the Southern block in Congress,
President Eisenhower, himself personally not sure that Brown should have been written.

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set his jaw and declared that if this is the law, federal troops, if necessary, will enforce
the law.

American Indian people had been granted citizenship for 30 years before the
passage of Brown. Yet today, they have to leave their homes on the reservation to get
the benefits of Brown and its progeny. The day they set foot back on their reservation,
they are cast backwards into the time warp of apartheid.

That time warp has been accompanied by the lucrative monopoly in several states
of Las Vegas style gaming casinos. That American Indian people have something coming
for the total colonization of their country by Indo- Europeans is not in dispute. But 554
tiny federal enclaves where state and federal constitutional guarantees are not in place,
and the proceeds from the gaming casinos are not subject to state laws requiring
municipalities to account for every penny of their municipality's dollars has come to mean
a cruel hoax. Until there is the same accountability that all municipally -owned business
entities are subject to. Indian gaming will continue to be a cancerous sore on those Indian
people who have not yet left their reservation.

The denial of state and federal constitutional guarantees effects all Indians and non-
Indians that live on or visit or touch a reservation. The defendant Ronald Smith from
Red Lake. Minnesota and the defendant Rolf Tom from the Lummi Reservation in the
State of Washington were Native Americans denied clear cut state and federal
constitutional guarantees. Sylvia Cohen and Jill Gavle were non-Indian women who were
denied the constitutional guarantees of state or federal district court jury trials for injuries

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alleged to have happened on a reservation. Put another way, the cloud of denial of due
process on reservations operating under "sovereignty" touches everyone.

It is significant that the knowledge that "all people need to be treated alike."
memorialized in Brown v. Board of Education, was foreshadowed in 1877 by a great
American Indian chief and leader. With our present scant but growing knowledge of
American Indian history and culture, there are a few names which may be recognized by
many readers, some school children. Chief Sitting Bull, Crazy Horse, Seneca, Chief
Seattle. Geronimo, and Red Cloud are but a few. I apologize for not mentioning all
others who deserve mentioning.

The one I am referring to is Chief Joseph (Young Joseph) of the Nez Perce Tribe
(1840-1904). Students of American Indian history are familiar with Chief Joseph"s epic
struggle with the United Slates Cavalry in 1877 to bring his people over 1 .000 miles from
Or-.'gon through Montana toward Canada where he knew freedom lay. It is ironic that
he knew freedom lay in a country that was not his, Canada, and did not lax in the country
that was his. America. For over 1 .000 miles of rough terrain and inclement weather, his
small band of warriors fought off. in one of the most famous rear guard actions in
American military history, the might of the U. S. Cavalry. The military tactics and the
bravery of Chief Joseph and his warriors have been compared to the First Marine
Division in late winter of 1950, coming out of the Chosin Reservoir in Korea while
holding off several enemy divisions. The Nez Perce warriors struggled to protect the
elderly, their young, and their women with the hope of reaching Canada safely. On

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246

September 30, 1877, with most of his warriors dead or wounded and his people starving

and jusi in view of the Canadian border and freedom. Chief Joseph surrendered to federal

troops saying:

It is cold and we have no blankets. The little children are freezing
to death. My people, some of them, have run away to the hills, and have
no blankets, no food, and no one knows where they arc-perhaps freezing
to death. I want to have time to look for my children and see how many
of them I can find. Maybe I shall find them among the dead. Hear me,
my chiefs, 1 am tired. My heart is sick and sad. From where the sun now
stands, I will fight no more forever.

Jim Robbins, Into the Storm, Conde Nast Traveler. Sept. 1996. at 166 (quoting Chief

Joseph from Oct. 5, 1877).

The article detailing the above went on to state:

The fighting had ended, but the dying was not yet over. Despite a
promise by General Nelson Miles that they could return to their homeland
if they surrendered, the Nez Perce were forced into exile in Oklahoma,
where more people died of disease than had died during the four months of
war. Despite pleadings to be able to return to their homeland, some were
sent to Washington State to live on a reservation there, some went to Idaho,
and a few remained in Canada. Charles E. Wood, an aide to General
Howard, summed up much when he wrote. 7 think that, in his long career,
Joseph cannot accuse the government of the United States of one single act
of justice. "

Id. (emphasis added).

If mere is an American Indian leader one might mink would strive for isolationism,
for the apartheid appellant seeks, those unknowledgeable in what it means to be a true
leader of his people would think it would be Chief Joseph. It is not.

Rather, he said as part of a longer speech the following:

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247

I know that my race must change. We can not hold our own with
the white men as we are. We only ask an even chance to live as other men
live. We ask to be recognized as men. We ask that the same law shall
work alike on all men. If the Indian breaks the law, punish him by the law.
If the white man breaks the law, punish him also.

Let me be a free man-free to travel, free to stop, free to work, free
to trade where I choose, free to choose my own teachers, free to follow the
religion of my fathers, free to think and talk and act for myself— and I will
obey every law, or submit to the penalty.

Whenever the white man treats the Indian as they treat each other,
then we will have no more wars. We shall all be alike-brothers of one
father and one mother, with one sky above us and one country around us,
and one government for all. Then the Great Spirit Chief who rules above
will smile upon this land, and send rain to wash out the bloody spots made
by brothers' hands from the face of the earth. For this time the Indian race
are wailing and praying. I hope that no more groans of wounded men and
women will ever go to the ear of the Great Spirit Chief above, and that all
people may be one people.

In-mut-too-yah-lat-lat has spoken for his people.

YOUNG JOSEPH
Washington City. D.C.

Young Joseph. An Indian's Views of Indian Affairs, The North American Review, at

433 (Jan. 18~9i (emphasis added).

It is time. In 1 A.D, the Nazarene was born: North America was populated with
its indigenous aboriginal people. In 1607. we came, and started pushing the American
Indian west. In 1787, we formed a new country that did not include the American Indian
as a citizen

In 1863. the Emancipation Proclamation came and went and the American Indian
was not treated as if he were part of it.

CS-122

248

In 1876, the Plains Indians made their "last stand" against (he U.S. Cavalry's
orders to herd them on to reservations.

In 1891 . all resistance to being herded on to reservations was broken at Wounded
Knee, South Dakota. Reportedly, as some of the cavalry killed men. women, babies, and
young children with gun shot and saber, some were heard to say, "Here's one for
Custer."

1896 came, and although the majority in Plessy only sanctioned black apartheid,
the American Indian shared in the brunt of its brutal application.

1924 and the Immigration and Nationality Act, 8 U.S.C. § 1401(b), came. It is
just that it did not make the American Indian full citizens. Rather it continued the
federal-ward relationship which is now a dagger poised at the heart of Indian people.

1954 and Brown v. Board of Education came. Ironically. Plessy was not meant
to include the American Indian, but did. Brown v. Board of Education in 1954 was not
meant to exclude the American Indian, but did. At least it has been interpreted that way
by some.

It is now anno Domini. 1997. 390 years since we set foot, as outsiders, on
Plymouth Rock. It is time.

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249

History leaches us that when a group of people have been held down too long,
oppressed too long by those who should protect diem, the Hunter, Justice, emerges from
the shadows and the silence, and then hunts patiently and mercilessly for its prey,
injustice, and devours it.

Truth. Ogichida the Warrior, will always survive. It always has.

Judfe R7A. Randall
February 11, 1997

Epilogue

My concurrence becomes a brief, an advocacy for social justice for Indian people.
That is permissible. Judges brief a case, then advocate for justice every time they lift a
pen. There are majorities, concurrences, and dissents; none advocate for injustice.

As 1 examine appellant's request to our court to address the core issue of

so\ ereignt\ . I can appreciate the observation of George Koruid, the Hungarian patriot.

at times called his country's most distinguished writer:

I am writing my most hazardous book. I have been sentenced to
examine myself. To dissect myself in the morgue of my own conscience.
To understand without resentment, without self-justification. To describe
what hurts, even if that means going beyond the permissible.

Georse Konr£d. A Feast in the Garden, at 4 (1989) (emphasis added).

CS-124

250

Today. Minnesota Indian reservations are in various stages of mismanagement,
divisiveness. and suffering the effects of past corruption. Some are close to death throes,
as dissident groups battle for control, and no state or federal agency has the courage to
take a decisive stand, take charge, and bring peace to the people.

The present version of "sovereignty" denying reservation residents the benefits of
the Minnesota Constitution, the United States Constitution, its Bill of Rights, denying them
accountability from tribal government and exempting them from constitutional obligations
of due process imposed on the rest of America, is the filthiest piece of misguided
patronizing racism this side of hell.

Koiuad went on:

Lord, give me the grace of veracity, and enlarge my memory. My
philosophy can be found in what I did; it is written on my face. To the
question. "What is the meaning of Life?", each man answers with his own.

I'd rather be honest than virtuous If virtue means the approval of
m\ contemporaries for thinking what they think. I can do without virtue.
Every one is convinced that he is moral, at the center of the great hall of our
consciousness, each of us sits in blossoming perfection.

Id. at 5. 6.

In the Nineteenth Century, the United States War Department and the buffalo

hunters almost completed, but did not quite succeed in, the destruction of the American

Indian as a people. The myth of sovereignty, if unexposed, will finish the job that our

War Department and the buffalo hunters fell short of doing.

CS-125

251

This opinion is not a criticism of any one person or any one thing. It is the truth.
It is taken directly from public records. The truth I then coupled with analytical
reasoning from precedent, from Cherokee Nation and its progeny, on forward to. most
importantly, Brown v. Board of Education and its predecessor, Justice Harlan's
monumental dissent in Plessy.

There is language, I hope persuasive, on an issue of social justice. That is proper.
From lime to time on issues of social justice, persuasive language can include analogies,
metaphors, and references to essays containing critical thought.

The language may seem strong, but so what. I read Brown v. Board of
Education. It seemed strong language to me. I read Dred Scott (it redefined the phrase
"turcid formalistic prose"). It seemed strong language to me. I read the Plessy v.
Ferguson majority. It seemed strong. Harlan's dissent seemed stronger to me. but
apparently was too weak to convince even as much as one colleague. It took 58 years
to be persuasive, but his place in history is secure. We know his name. Without looking
it up. name me all the majority writers in Plessy. Name me three? Name me one?

Is there a place for relentless and unrelenting dissents and concurrences on issues
of social justice? There is. For years the United States Supreme Court on death penalty
cases had systemic, institutionalized, and unrelenting dissents from Justice Brennan and
from Justice Marshall. At times the two were joined by others.

CS-126

In one of his last official acis as a member of the United Slates Supreme Court.

Justice Blackmun did not suggest he might consider opposition to the death penalty in the

future, he promised it! In Collins v. Collins, Justice Blackmun stated in part:

From this day forward. 1 no longer shall tinker with the machinery
of death. For more than 20 years I have endeavored-indeed, I have
struggled-along with a majority of this Court, to develop procedural and
substantive rules thai would lend more than the mere appearance of fairness
to the death penalty endeavor. Rather than continue to coddle the Court's
delusion that the desired level of fairness has been achieved and the need
for regulation eviscerated, I feel morally and intellectually obligated simply
to concede that the death penalty experiment has failed. It is virtually self-
evident to me now that no combination of procedural rules of substantive
regulations ever can save the death penalty from its inherent constitutional
deficiencies.

114 S. Ct. 1127, 1130 (1994) (Blackmum, J., dissenting).

I promised Indian people I would try to find a solution to the serious internal
conflict on reservations today; conflict pitting Indian against Indian, Indian against non-
Indian. 1 promised 1 would do that with the backdrop of the U. S. Constitution as the
"safe harbor." I promised I would dig into the earth, the land of their ancestors, and try
to find the "sword turned plow share."

Those who do not know Justice Blackmun may argue that he did not risk his
judicial integrity when promising further relentless opposition to the death penalty. They
will point out that he made the promise toward the end of his term on the United States
Supreme Court.

I do not know Justice Blackmun to be a judge to break a promise. There are
promises to keep.

CS-127

STATE OF MINNESOTA
IN COURT OP APPEALS

C6 95-928

Scott County

District Court File No. C9501701

Sylvia Cohen.

Appellant.

vs.

Little Six. Inc.. d/b/a
Mystic Lake Casino.

Respondent.

Short. Judge
Dissenting. Randall. Judge

Clinton Collins. Jr.

Janie L. Fink

Clinton Collins & Assoc.. P.A.

821 Marquette Avenue

Suite 2500F

Minneapolis. MN 55402

Steven F. Olson

Blue Dog. Olson & Small.

P.L.L.P.
5001 W. 80th Street. Suite 670
Minneapolis. MN 55437

Joseph Plumer

McDonough. Wagner & Sherry.
P.A

14501 Granada Drive. Suite 200
Apple Valley. MN 55124

Filed. February 13. 1995
Office of Appellate Courts

SYLLABUS

A business corporation created under tribal law, owned and
controlled by the tribe, and operated for governmental purposes enjoys
sovereign immunity. State courts have no subject matter Jurisdiction over
such a corporation under Public Law 280. 28 U.S.C. § 1360. In the absence
of an applicable federal statute, state courts cannot assert Jurisdiction over
disputes arising entirely on the territory of an Indian reservation.

Affirmed.

47-901 OS _ o

254

Considered and decided by Randall. Presiding Judge. Short. Judge,
and Peterson. Judge.

OPINION
SHORT. Judge.

Sylvia Cohen argues an Indian gaming casino Is subject to the
Jurisdiction of Minnesota state courts, and the trial court erred or violated
her due process rights by dismissing her personal injury suit against Mystic
Lake Casino.

FACTS

On October 7. 1994. Sylvia Cohen entered Mystic Lake Casino in
Prior Lake. Minnesota. As Cohen attempted to sit on a chair in front of a slot
machine, the chair "snapped from underneath her." and Cohen fell to the
floor. She claims the fall caused injuries that required hospitalization.

Cohen brought a personal Injury action against Little Six. Inc. (LSI),
d/b/a Mystic Lake Casino. LSI was created by tribal ordinance and is owned
and controlled by the Shakopee Mdewakanton Sioux Community
("community"). The community is a federally-recognized Indian tribe, which
operates under a constitution approved by the Secretary of the Interior. The
casino is located on reservation land.

Without answering the complaint. LSI moved to dismiss on the
basis of lack of Jurisdiction. The trial court held LSI enjoys sovereign
immunity, and dismissed Cohens lawsuit for want of Jurisdiction.

255

ISSUES

I. Do Minnesota state courts have Jurisdiction over a dispute In
which the sole defendant Is a tribal business corporation,
controlled by the tribe for governmental purposes, and the
underlying events occurred entirely on an Indian reservation?

II. Does dismissal for want of jurisdiction violate Cohens right to
due process?

ANALYSIS

The Jurisdiction of courts and the constitutionality of state action
present questions of law. which we review de novo. Rupp v. Omaha Indian
Tribe, 45 F.3d 1241. 1244 (8th Cir. 1995) (reviewing the trial courts
Jurisdictional rulings de novo): see Estate of Jones v. Kvamme. 529 N.W.2d
335. 337 (Minn. 1995) (evaluating the constitutionality of a statute de novo).
We are asked to decide whether state courts possess jurisdiction over a tort
claim brought against a tribal corporation, controlled by the tribe for
governmental purposes, for injuries sustained on the reservation and
whether dismissal for want of Jurisdiction infringes on Cohens consti-
tutional right to due process.

While sovereign immunity and lack of subject matter jurisdiction
both deprive courts of the authority to hear certain matters, they differ In
that parties may waive the former jurisdictional defect, but not the latter. In
re Prairie Island Dakota Sioux. 21 F.3d 302. 304-05 (8th Cir. 1994).

A Sovereign Immunity

Indian tribes have long possessed the immunity enjoyed by
sovereigns at common law. Santa Clara Pueblo v. Martinez, 436 U.S. 49. 58.

256

98 S Ct. 1670. 1677 (1978) While Congress has enacted many exceptions
to the absolute immunity enjoyed by foreign sovereigns, these restrictions
do not apply to sovereign Indian communities In re Greene. 980 F.2d 590.
594 (9th Clr. 1992). cert, denied. 114 S. Cl 681 (1994); see Sac & Fox
Nation v. Hanson. 47 F.3d 1061. 1064-65 (10th Clr.) (refusing to apply
commercial exception of the Foreign Sovereign Immunities Act to Indian
communities), cert, denied. 116 S. Ct. 57 (1995): see also 28 U.S.C.
§§ 1602-1611 (1988) (Foreign Sovereign Immunities Act of 1976). Absent
a clear congressional or tribal waiver, common law notions of Immunity
apply to Indian tribes. Sac & Fox Nation. 47 F.3d at 1063 (quoting
Oklahoma Tax Comm'n v. Citizen Band Potawatomi Indian Tribe. 498 U.S.
505. 509. 1 1 1 S. Ct. 905. 909 (1991) and Santa Clara Pueblo. 436 U.S. at
58. 98 S. Ct. at 1677). Any waiver must be express and unequivocal and
cannot be implied. Santa Clara Pueblo. 436 U.S. at 58-59. 98 S. Ct at 1677
(quoting United States v. Testan. 424 U.S. 392. 399. 96 S. Ct. 948. 953-54
(1976) (quoting United States v. King. 395 U.S. 1. 4. 89 S. Ct. 1501. 1503
(19691)).

Cohen argues the trial court erred in allowing LSI. a separate legal
entity, to assert the tribe s sovereign Immunity as a Jurisdictional defense.
However, case law establishes that a corporation organized under tribal laws,
controlled by the tribe, and operated for governmental purposes can assert
the tribe s immunity as a defense. See. e.g.. Elliott v. Capital Intl Bank &
Trust. 870 F. Supp. 733. 733-35 (E.D. Tex. 1994) (dismissing, on immunity
grounds, an action against a limited liability bank, which was chartered.

257

governed, and owned by an Indian tribe); Namekagon Dev. Co. v. Bols Forte
Reservation Housing Autre. 395 F. Supp. 23. 26 (D. Minn. 1974)
(acknowledging tribes can confer immunity upon tribally-owned and
-created corporations), ajjd, 517 F.2d 508 (8th Clr. 1975); Duluth Lumber
&. Plywood Co. v. Delta Dev.. Inc.. 281 N.W.2d 377. 378. 383-84 (Minn.
1979) (determining a tribally- created corporation fulfilling a governmental
purpose was equivalent to the tribe, but lacked sovereign lnvrunlty because
of an express waiver): see also Dixon v. Picopa Constr. Co.. 772 P.2d 1 104.
1109-11 (Ariz. 1989) (holding a tribally-created corporation did not enjoy
Immunity because it was a simple business venture, having no responsibility
for promoting tribal welfare or development). This approach is consistent
with applications of the absolute common law immunity formerly enjoyed by
foreign sovereigns. See. e.g.. In re Investigation of World Arrangements with
Relation to the Production. Transportation. Refining & Distribution of
Petroleum. 13 F.R.D. 280. 288-91 (D.D.C. 1952) (recognizing a corporation's
power to invoke sovereign immunity because it was organized under British
law. was controlled by the British government, and served the government's
purpose of ensuring access to oil). Even under the restricUve view of
sovereign immunity, corporations owned by foreign governments are
entitled to assert Immunity unless they fall within an exception contained In
the Foreign Sovereign Immunities Act. 28 U.S.C. §§ 1603(a) (a "foreign
state" Includes Its agencies and instrumentalities). 1603(b) (an "agency or
instrumentality of a foreign state" includes an entity In which the foreign

state holds a majority share). 1604 (a foreign stale enjoys immunity unless
It falls within one of the act s exceptions).

The record establishes: (1) LSI was created by tribal ordinance:
(2) the community owns LSI s single share of stock: (3) members of the
tribe's General Council may call special meetings of the corporation: (4) all
community members may vote at LSI meetings: (5) LSI cannot exercise
many of its powers. Including approval of Its annual budget, without consent
of the tribe's voting members: and (6) LSI s purpose, as set forth In its
articles of incorporation, is to "seek • • • to Improve the business, financial,
or general welfare of the Corporation, the Members of the Corporation, and
the Community.' Raising revenue and redistributing it for the welfare of a
sovereign nation is manifestly a governmental purpose. Because the tribe "
created, owns, and controls LSI to further a legitimate governmental
purpose. LSI is entitled to assert the tribe's sovereign Immunity. But see
Cavle v. Hale Six. Inc.. 534 N.W.2d 280. 284 (Minn. App. 1995)
(considering LSIs activities nongovernmental In nature), review granted
(Minn. Sept. 28. 1995). »

Cohen also argues operation of a gaming hall under the authority of
the Indian Gaming Regulatory Act (IGRA). 25 U.S.C. §§ 2701-2721 (1988 &
Supp. V 1993). Is a waiver of sovereign Immunity. However, that statute
creates only a limited waiver. See Maxam v. Lower Siowt Indian Community.

1 However, under a common law sovereign Immunity analysis, the
activity's purpose, not Its nature, controls the result. See In re World
Arrangements. 13 F.R.D. at 288-91 (recognizing the immunity of
governmental corporation because of the purpose it served).

259

829 F. Supp. 277. 281-82 (D. Minn 1993) (holding the 1GRA waives
sovereign Immunity for enforcement actions, but not suits for money
damages); Ross v. Flandreau Santee Sioux Tribe, 809 F. Supp. 738. 745
(D.S.D. 1992) (same); see also Davids v. Coyhls. 869 F. Supp. 1401. 1407.
1410 (E.D. Wis. 1994) (holding the IGRA does not waive sovereign Immunity
even for enforcement actions). LSI s operation of a gaming hall subjects It to
a non-tribal court s authority to enforce compliance with the IGRA. not
claims for money damages.

Cohen also argues the community waived sovereign Immunity by
registering as a foreign corporation In Minnesota. See Minn. Stat. § 303.13.
subd. 1 (1994) (subjecting registered foreign corporations to service of
process). However, appointment of an agent for the service of process
waives only personal jurisdiction defenses, not sovereign immunity.
Canadian Overseas Ores v. Compania de Acero del Pacifico. 528 F. Supp.
1337. 1346 (S.D.N.Y. 1982). affd. 727 F.2d 274 (2nd Cir. 1984); see Duluth
Lumber, 281 N.W.2d at 383 (holding that an entity subject to state court
Jurisdiction may still assert sovereign immunity as a defense).

Cohen further argues registration as a foreign corporation
constituted a waiver of sovereign immunity because foreign corporations
shall be subject to the laws of this state." Minn. Stat. § 303.09 (1994).
While that statute provides a means of gaining personal Jurisdiction, it does
not waive sovereign immunity. See Rykojf- Sexton. Inc. v. American

Appraisal Assocs .. 469 N.W.2d 88. 90 (Minn 1991) (applying the statute as a
means of gaining personal Jurisdiction): State ex ret Ohsman & Sons v.
Starkweather. 214 Minn 232. 235-36. 7 N W.2d 747. 748-49 (1943)
(describing the statute s function as a method of achieving personal
Jurisdiction over a foreign corporation): see also Canadian Overseas Ores.
528 F. Supp. at 1346 (submission to personal Jurisdiction does not waive
sovereign Immunity); Duluth Lumber. 281 N.W.2d at 383 (concluding that,
even If the court otherwise had Jurisdiction, tribal sovereign Immunity might
bar suit). Even If we concluded the statute amounted to a choice-of-law
provision, there Is no basis on which to find a clear and unequivocal waiver
of sovereign immunity. See American Indian Agric. Credit Consortium v.
Standing Rock Sioux Tribe. 780 F.2d 1374. 1379-81 (8th Clr. 1985)
(finding no waiver of sovereign immunity in a promissory note containing a
choice-of-law clause). While a choice-of-law clause sets forth the rules
governing the parties duties and obligations. It does not constitute an
explicit statement that the parties have agreed to submit disputes regarding
those rules to adjudication in a particular forum. See id. at 1380-81
(implying courts should not transform a choice-of-law clause into a choice of
forum). By registering In Minnesota as a foreign corporation, the community
did not unequivocally waive sovereign immunity.

261

B Subject Matter Jurisdiction*

By virtue of the United States Constitution, the federal government
enjoys paramount authority over Indian tribes. Williams v. Lee. 358 U.S.
217. 219-20 & n.4. 79 S. Ct. 269. 270 & n.4 (1959): Maryland Casualty Co.
v. Citizens Natl Bank. 361 F.2d 517. 520 (5th Cir). cert, denied. 385 U.S.
918. 87 S. Ct 227 (1966). Thus, state courts cannot exercise subject matter
Jurisdiction over Indians or activities on Indian lands unless a federal statute
provides for such Jurisdiction, or the exercise of Jurisdiction will not
Infringe upon Indians' right to self- governance. Williams. 358 U.S. at 220.
79 S. Ct. at 270-71: Duluth Lumber, 281 N.W.2d at 380-82.

Public Law 280 (28 U.S.C. § 1360(a) (1988)) provides Minnesota
state courts shall, except with regard to activities occurring on the Red Lake
Reservation, "have Jurisdiction over civil causes of action between Indians or
to which Indians are parties." While Public Law 280 applies to actions
involving "Indians." this grant of Jurisdiction does not apply to Indian tribes.
thus preserving the vitality of Indian sovereignty and preventing the
transformation of Native American communities into "little more than
'private, voluntary organizaUons.' " Bryan v. Itasca County. Minn.. 426 U.S.

2Although the trial court never reached the question. LSI argues
Minnesota state courts lack subject matter Jurisdiction over this case. While
we typically review only questions decided by the trial court, subject matter
Jurisdiction presents an issue falling outside of this general rule. See Minn.
R. Civ. P. 12.08(c) (providing that a party may question subject matter
Jurisdiction at any time): Berke v. Resolution Trust Corp., 483 N.W.2d 712.
714 (Minn. App. 1992) (resolving a claimed lack of subject matter Jurisdic-
tion raised for the first time on appeal), review denied (Minn. May 21.
1992).

262

373. 388-89. 96 S. Ct 2102. 2111 (1976) (quoting United States v. Mazurie.
419 U.S. 544. 557. 95 S. Ct. 710. 718 (1975)). Thus, the federal statutes
Jurisdictional gap protects against Infringement on the tribe's status as a
sovereign. See Parker Drilling Co. v. Metlakatla Indian Community, 451 F.
Supp 1 127. 1 139 (D. Alaska 1978) (construing Public Law 280 as having
more In common with sovereign Immunity than with traditional notions of
subject matter jurisdiction). Under these circumstances, it would be
Illogical to Impute the tribe's status to LSI for sovereign Immunity purposes,
but to prevent LSI from sharing other Jurisdictional defenses designed to
safeguard the tribe s sovereign status. See In re World Arrangements. 13
F.R.D. at 290-91 (allowing a British corporation to assert sovereign immunity
because It was owned and controlled by Britain for a governmental purpose
and. thus, was indistinguishable from the sovereign). As a consequence, we
construe Public Law 280 as Inapplicable to tribal corporate entitles that are
equivalent to the tribe for purposes of sovereign Immunity. See Bryan. 426
U.S. at 388-89. 96 S. Ct at 21 1 1 (holding Public Law 280 does not confer
Jurisdiction over tribes). Duluth Lumber, 281 N.W.2d at 378. 383-84
(treating a tribally-created corporation, serving a governmental purpose, as
the tribe); cf. Parker Drilling. 451 F. Supp. at 1139 (holding a federally-
Incorporated tribe not to be an "Indian" for purposes of Public Law 280).

In the absence of a federal law authorizing state court Jurisdiction,
states may exercise jurisdiction over matters involving Indians if doing so
will not Infringe on their right to self- governance. Williams. 358 U.S. at
220. 79 S. Ct. at 270-71; Duluth Lumber. 281 N.W.2d at 380-82. If

263

jurisdiction does not attach under Public Law 280 and the disputed events
occurred wholly within the confines of an Indian reservation, state court
Jurisdiction over the matter Interferes with tribal self- governance. Duluth
Lumber. 281 N.W.2d at 382. Because we conclude Jurisdiction Is unavailable
under Public Law 280 and the events giving rise to Cohen's cause of action
transpired wholly within the reservation, we lack authority to hear the
merits of this actlon.3

II.
Cohen argues the Jurisdictional Immunities afforded to Indian tribes
leave her without a remedy and. thus, violate her right to due process. We
disagree. Cohen has not been deprived of her day in court, but only of her
day in the court of her choice. See Bank of Okla. v. Muscogee (Creek)
Nation. 972 F.2d 1166. 1169 (10th Cir. 1992) (finding no due process
violation in the relegation of the plaintiffs claim to tribal court). Moreover,
there is no state action that is necessary to a due process claim; the tribe's
assertion of sovereign immunity is not an affirmative act. but a claim of
status. Greene. 980 F.2d at 596. Similarly, a proper dismissal for lack of
Jurisdiction serves merely as recognition of the court's lack of authority to

3 Even if the trial court had concurrent subject matter Jurisdiction over
this dispute, federal policy would require it to abstain from acting with
regard to the matter until after its final resolution In tribal court. See Bo wen
v. Doyle. 880 F. Supp. 99. 123. 127 (W.D.N.Y. 1995) (holding even if they
have jurisdiction and the matter is not currently pending before a tribal
court, state courts must abstain from hearing suits arising on reservations
until after tribal courts have resolved the matter): Smith v. Babbitt 875 F.
Supp. 1353. 1366-67 (D. Minn. 1995) (stating a non-tribal court must
abstain from hearing a matter arising on Indian land until the plaintiff has
exhausted its remedies in tribal court).

264

acl. See Duenow v. Lindeman. 223 Minn 505. 511. 27 N.W.2d 421. 425
(1947) (quoting Sache v. Wallace. 101 Minn. 169. 172. 112 N.W. 386. 387
(1907) and stating subject matter Jurisdiction Is the authority to hear and
determine the particular questions the court assumes to decide)

DECISION

First. LSI may assert the tribe's sovereign Immunity. Second, no
federal statute authorizes state jurisdiction over this case and state court
Jurisdiction would infringe on tribal self- governance. And third, by
dismissing this action for want of Jurisdiction, the trial court did not violate
Cohen's right to due process.

Affirmed.

ii- «v«vT ^v ^

265

RANDALL. Judge (dissenting)

A treaty is a contract.
A contract is a promise.

"The government made us many premises, more than I car.
remember, they never kept but one. they promised to take our land
and they tcr:<* it . "

Red Cloud (Mahpiua Luta'

Oglala Lakota

The government could not keep its own citizens out
of the Sioux lands, any more than it had been able to
keep them out of any other Indian treaty land, in spite
of solemn pledges, since the time when the land just
across the Appalachians was the West. It was now up to
the Indian Bureau to find some way to legalize this
latest tresoass.

Actually, there was no writing of treaties with
Indian tribes after 18"i, when the entire ridiculous
pretense that tribes were sovereignties was abolished.
It wculd be pleasant to be able to report that the change
was made because common sense prevailed, but such was net
the case.

Ralph K. Andrist, The Long Death: The Last Days of the Plains

Indian 246 (1593) (emphasis added i .

Justice Blackmun, in Puyallup Tribe. Inc. v. Department of

Sarr.e State cf wash. , expressed doubts about the "continuing

vitality ir. this day cf the doctrine of tribal immunity" and

suggested that "the doctrine may well merit re -examination in an

appropriate case." 433 U.S. 165, 176-75, 97 s. Ct . 2616, 2624

'15": (Blackmun, J., concurring). Justice Stevens later declared

the doctrine of sovereign immunity to be "founded upon an

anachronistic fiction." Oklahoma Tax Comn'n v. Potawatorr.i Indian

Tribe . 456 U.S. 505, 514, 111 S.Ct. 905, 912 (1991) (Stevens, J.,

concurring .

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266

Moreover, mere casual inquiry reveals that by
and large the governmental powers actually
exercised by contemporary tribal governments
are those gratuitously granted by the federal
government . Those powers are found in the
Indian Reorganization Act of 1932. an Act of
the United States Congress. Besides being
severely limited in scope, those powers can be
amended, or eliminated for that matter, at the
whim of Congress Thus, the governmental
powers exercised by contemporary tribal
governments are more illusion than real .

Robert A. Fairbanks, The Tribal Sovereignty More Illusion Thar.

Real . The Native American Press/Ojibwe Hews, Nov. 3, 1995, at 4.

I respectfully dissent. As the majority sets out, appellant
Sylvia Cohen was injured in the Mystic Lake Casino in Prior Lake,
Minnesota. The casino is managed by respondent Little Six, Inc.
(LSI) , c c a Mystic Lake Casino. LSI is a branch and a part of the
Shakopee Mdewakantcr. Sioux (Dakota! Reservation. Appellant
commenced a standard personal injury action against respondent in
the Minnesota District Court for Scott County, wherein the Shakcpee
reservation lies.

Respondent essentially asserts that the Mystic Lake Casir.c is
an authorized branch of the tribal government of the reservation
and thus asserts that the reservation is immune fror\ lawsuits cf
this type, subject to certain narrow exceptions. It asserts that
no such exception exists here.
Sovereignty I.

Respondent's primary defenses center around its contention
that Indian tribes are "sovereign" and thus may exercise inherent
sovereign powers, which include immunity from lawsuits, unless they
expressly waive this "sovereign immunity" and consent to be sued

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267

Respondent raises other arguments as well, all cf which have
the claim cf sovereignty at their cere. For example, it argues
that the reservation's tribal court has original jurisdiction over
this matter, if anyone does, and appellant must first take her
claim to tribal court. Respondent additionally argues its casino
is a tribal enterprise and that reservation's interests strongly
outweigh the state's interest in providing Minnesota citizens
access to Minnesota district courts for civil lawsuits. Respondent
further argues that appellant's lawsuit impermissibly infringes or.
tribal interests that have been recognized by the federal
government and that those tribal interests include an Indian
tribe's right to protect its tribal assets, its culture, its
identity, its religion or spirituality, and its right to self-
governance and self -deterrr.inaticn . All cf these arguments are
based en sovereignty.

Respondent concedes there are already many recognized inroads
tc this concept cf "sovereignty." There may be federal and state
jurisdiction over criminal -atters on Indian reservations . Publi:
Lav 2 = 1, which includes the State cf Minnesota, specifically
confers certain jurisdiction on state district courts for incidents
happening on reservations. See 28 U.S.C. § 136C a! (granting
Minnesota courts limited civil jurisdiction over actions "between
Indians or tc which Indians are parties" and "which arise in the
areas of Indian Country".. Respondent argues that Public Law 25:
does not apply tc this set cf facts because it, as a defendant in
a personal injury lawsuit, is not an individual Indian, but is an

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268

Indian tribal er.-.erprise. and chat Public Law 260. to date, has
been construed to not include tribes within its purview. See.
e.Q. . Brvar. v !tasca Count-/. 426 U.S. 3~3. 3S9, 96 S. Ct . 2102,
2111 H5"** Be that as it may. the already recognised exceptions
to claims cf sovereignty are incompatible with any belief that
there is true sovereignty on Indian land. True sovereignty and
true immunity from Minnesota state courts and this country's
federal courts exists in Canada and Mexico, for instance. Cur
neighbors tc the north and south are, in every sense of the word,
true sovereign states or sovereign nations. The reason is sir.ple.
They are net in the United States. Cn the ether hand, respondent
is in Minnesota, on Minnesota and U.S. land, and the reason for
that is sir-pie. Respondent is a Minnesota corporation, its
residents are all full-blown Minnesota citizens and full-blown U.S.
citizens, and respondent and its residents are every bit a part of
this state, a part cf this country, as the rest cf Minnesotans.

The r.a:crity notes that respondent, tc buttress its claim of
sovereign irr.ur.ity. registered as a "fcreign" corporation in
Minnesota. r.espcr.der.t accurately describes itself as "a
corporaticn w.-.clly- owned and operated by a federally recognized
Indian Tribe ithe Shakopee Mdewakantcn Sioux (Dakota! Community)."
I agree with respondent's characterization. If the Minnesota
Secretary cf State allowed filing as a foreign corporation, either
because respondent is an Indian tribe, or because respondent
incorporated m Delaware or some ether state, but registered here
tc do business here, it changes nothing.

D-4

As respondent states, it is the Shakopee Mdewakanton Sioux
(Dakota) Community. Although the Plains Indians moved around
hundreds cf years ago without regard to the political borders we
call "states." respondent, a branch of the Sioux Nation, has its
historical roots in Minnesota, virtually all of Minnesota at one
time was "Dakota Country." A few hundred years ago, the Anishinabe
Ojibwe, after a protracted and fierce struggle, drove the Dakota
people south and west cut cf central Minnesota. But respondent's
official name, "Mdewakar.ton, " which they bear proudly, roughly
translates into "Dwellers cf the Spirit Lake." Spirit Lake, or
Mystic Lake, is Lake Mille Lacs. Thus, respondent is historically
grounded in Minnesota. Its official name, Mdewakanton, meaning
literally from the Lake Mille Lacs area of Minnesota, distinguishes
it from other branches cf the Sioux Nation. The Yankton (South
Dakota , and ether subdivisions cf the Teton Sioux (as respondent
is i are also historically grounded in identifiable areas in a
particular state. The Mir.niccr.ju Sioux (Teton; are associated with
the Cheyenne River reservation (South Dakota 1 ,• the Hur.kpapa Sioux
(Teton with the Standing Rock reservation, which borders North and
South Dakota,- the Oglala Sioux 'Teton) are associated with the Pine
Ridge reservation in South Dakota, and so on.

Further, all residents cf respondent, including respondent's
board cf directors, elected chief, and council members, are full-
bodied residents cf the State of Minnesota. They are entitled to
vote in Minnesota, go to public schools if they choose, run fcr
public office in Minnesota if they choose, and in every bit cf the

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270

term, are full normal Kmr.esctans Minnesota owes them that They
are. Pespcr.der.t " s residents do not vote in state and national
elections ir. North or South Dakota, or Iowa, or Wisconsin. They
are not residents of those states. Regardless of what state
respondent chose for incorporation, its reservation, its people,
its casino at issue, its headquarters, and its home land are in
Minnesota. Thus, I will continue to use the term Minnesota
corporation to describe respondent. If another court should choose
to call respondent a fcreigr. corporation, it would change neither
my legal analysis one line, nor history one day.

Continuing on, as Andrist said, "the entire ridiculous
pretense that trices [are; sovereignties" should have been done
away with a long time ago. Andrist, The Lone Death at 24€.

During Wcrld War II and the Vietnam War, a test of sovereignty
presented itself. Essentially. American Indians raised the issue
of whether they were citizens of the U.S. subject to the draft or
whether they were sovereign or quasi-sovereign inhabitants of a
sovereign cr quasi-sovereign reservation and, thus, not subject to
the draft. The federal ccurts listened politely and then ruled
immediately that American Indians were U.S citizens subject to the
draft. See, e . = . . United States v. Rosebear . 500 F.2d 1102 (8th
Cir. IS"-; i holding that induction of Indian, who was United States
citizen within the meaning cf the Selective Service Act, is not
precluded from military service by quasi -sovereignty of Indian
nations, lack cf full citizenship by Indian people, or treaty
commitments . Williams v United States . 406 F.2d "04 (9th Cir.

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271

1969), cert . denied 39-; U.S. 959. 59 S Ct. 1307 (1969* (holding
member of Western Shoshone Nation cf Indians subject to Universal
Military Training and Service Act and net exempt by Treaty between
the United States and Western Shoshone 1 , Ex Parte Green . 123 F.2d
862 (2d. Cir. 1941. > vhoidmg that even if treaty status between
U.S. and Indian tribe were valid. Congressional action superseded
the treaties and made tribe member a citizen for purposes of WWII
military service); United States v. Cook . 383 F . Supp 353 (N.D.N. Y.
1974) (holding that appellant was subject to Military Service Act
of 19€~ even thegh a member of Six Nations cf Indians) ,• United
States v. Crais . 353 F.Supp. 121 (D.Minn. 1973) (court found no
inconsistency in recognizing certain unique Indian rights
pertaining to modes cf self-government, hunting and fishing rights
and in deeming Indians to be citizens within the meaning of
Selective Service law.'

I am net at all surprised by the result. I can only note
that, in tire cf war, this country has accepted volunteers from
true foreign zr sovereign countries. But we have not been in the
habit cf ir.vzluntary induction, drafting against their will, bona
fide citizens cf sovereign nations.

It can he noted that during World War II, foreign born people
residing m America, who had not yet been naturalized or in other
ways attained citizenship, were subject to the military draft. But
the point is still made, as those foreign born residents were
drafted only because they resided in the U.S. We were not drafting
tourists from foreign countries nor were we drafting foreign born

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272

r.cn- residents from foreign countries We were drafting them
because they lived here In contrast, the American Indian's
position was they cculd net be drafted off the reservation because
it was sovereign or quasi-sovereign soil. That argument failed
completely.

If during World War II and the Vietnam War we had drafted
(with serious criminal penalties for refusal) sovereign or quasi-
sovereign American Indians off of sovereign or quasi -sovereign non-
American soil, and sent them to war, to fight honorably, to put
themselves in harr's way. to suffer serious injury and death, I
would like to be the lead plaintiff's attorney in that class action
lawsuit. However, there never was nor will there be any such
lawsuit because, in truth, we were net demg anything of the kind.
We were drafting full-blown ",' .£. citizens, residents of the
individual states, :.r.: the armed forces, tc serve honorably along
with all ether draf table males regardless of race or color.

While overseas and under fire, the American Indian was
accepted and fully integrated. Why. when he returned tc this
country, de we put hir. back on a private enclave, unlike all other
returning soldiers of oclor, and tell him that as long as you stay
there, you are en some sort of "sovereign soil?" To me, it is the
cruelest kind of joke, to trumpet "sovereignty," as we do here, by
forbidding appellant, a Minnesotan, from suing a Minnesota
corporate entity in Minnesota state court; but in time of war, this
great shield of sovereignty is exposed for what it truly is, a
Pctemkir. Village.

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273

Respondent ' s brief repeats a long line cf federal and state
cases discussing the issues cf Indian sovereignty. One of the
seminal cases that respondent cites in support of its position and
one that has never been expressly overruled is Cherokee Nation vs
State of Georgia decided in 1631. 30 U.S. (5 Pet.) 1 (1831)
Actually, Cherokee Nation sets the record straight. The case sets
out unequivocally that Indian tribes are not true sovereign states
or nations. Cherokee Nation labelled the tribes "domestic
dependent nations." Id . at 17. Cherokee Nation is accurate when
it uses the term "domestic" as, by definition, American Indian
tribes are in the U.S., not a foreign country. Cherokee Nation is
totally accurate when it uses the term "dependent". The federal
government has made Indian tribes wards of government since this
country was founded right up to the present. I suggest this
acknowledged dependency is not compatible with any claim of true
sovereignty. See Id . (stating "itjheir relation to the United
States resembles that cf a ward to his guardian.")

The Indian tribes' virtual total dependence on the federal
government for mcr.ey , grants, permission to build this, permission
to buy cr sell that, permission to get into the casino business,
etc., is exemplified by the partial federal government shutdown in
late 1955 and early 1996. Articles appeared in various Indian ani
non- Indian newspapers detailing the hardships on reservations
because of the slow down cr shutoff of the Bureau of Indian Affairs
and other sources of federal support.

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274

The federal government views its obligations tc Indian
reservations as real and mandatory. in contrast, unlike how we
view fore.gr. aid to true sovereign nations as an optional decision
of each Congress and President .

Respondent, with its successful Mystic Lake Casino, and the
Mashantucket Pequot, with its successful Foxwood Resort and Casino
in Connecticut, may be exceptions to tribal dependency. But these
two tribal casinos, out of the few hundred now dotting this
country, are true exceptions.

In large parts of this country, the rule for reservations is
that poverty, lack of adequate housing, medical care, educational
opportunities, and work equal or surpass that of many Third World
countries. This problem is partially due to the continuous
conflicts between state law, federal law, and tribal constitutions,
with the end result being there is often is no true line to
authority with the power tc lock into conditions and issues and
rule with the force of law what has to be done tc correct the
situation. Cr. the other hand, townships, villages, cities,
counties, etc. in the State of Minnesota have a known rule of law,
state statutes and the Minnesota Constitution, to operate under,
and its citizens have a clear line to a neutral detached judicial
body with the power to hear and redress wrongs. We call it the
Minnesota district Court system.

If we are honest, we must concede that hopes for a thriving
multi-r.il lion dollar casino like Mystic Lake or Foxwood on every
reservation, tc cure all ills, is no hope at all. There is no

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275

guarantee the few eminently surressful Ir.diar. casinos will have the
ability forever to continue at thei: present levels. More
importantly, there is absolutely no way that every single trite in
this country, large and small alike, will have a Foxwocd or a
Mystic Lake. The 50 states could not possibly absorb 500 to 2500
casinos of this type, of this size. We need to concede, because we
must concede, that it would be impossible for all 50 states to have
the equivalent of a Las Vegas and a Reno within their borders.
That many casinos would kill each other off and drain vast amounts
of money out of other businesses. The real issue is why are we
putting the American Indian in a position where unless they get a
successful casino off the ground, they remain in utter poverty. On
some of the poorer Indian reservations in this country, their
theoretical right to negotiate with the state for a garbling
compact (providing they can entice outside investors and cutside
professional consultants into helping them in return for a large
piece of the pie) , would likely be traded for a chance at a real
job, and a hot real. Put another way, or. what other class :f our
citizens do we impose the obligation to put up a gambling casino or
some other economic enterprise before they are deemed worthy of the
normal help and assistance we give to non- Indian Americans who do
not have to first claim to be residents of some sovereign entity or
tribe?

The truth of the matter is, Indian reservations and their
inhabitants are semi -dependent or totally dependent wards of the
federal government. This is reality. It is not sovereignty.

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276

But somehow, through the years, "domestic dependent nation"
has come to be used interchangeably with "sovereign state", cr
"quasi- sovereign state", cr "sovereign tribes", and different
variations thereof .

Thus, the cere issue which needs to be addressed prior to
developing the actual facts cf this case and discussing ether
issues such as tribal courts, self-determination. and the
unquestioned need to protect Indian identity. culture,
spirituality, and dignitv, is sovereignty.

Any hint in Cherokee Nation ;if there was any. , and any
inference or outright statement in any of its progeny that purports
to treat Indian tribes as sovereign or quasi -sovereign entities was
mush when it was written, and is mush today. "Dependent," yes.
"Sovereign," net now, net ever. I do net care what we have said or
put in writing. Our actions speak louder than our words.
Sovereignty is a phrase we have mouthed for over 2C: years, but
this country has never, at any time, treated Indian tribes with any
of the courtesy, nor respect accorded a true sovereign state or
nation, such as a Canada. Mexico. Great Eritain, etc. !.'one of the
normal attributes of a true sovereign nation cr foreign county has
ever been gifted to, cr attributed tc, Indian tribes. Real
sovereignty includes, without limitation, the right to seal one's
borders, declare war, make peace, coin one's own currency, design
and distribute one's own postage stamps, nationalize essential
industries such as radio, telephone, communications, steel, oil.
nationalize industries belonging tc foreigners. control

277

immigration, set quotas, forbid emigration, apply for a seat m the

United Nations, etc. Sovereignty is defined as:

The suprer-.e, absolute, and uncontrollable power by
which any independent state is governed; supreme
political authority; paramount control of the
constitution and frame of government and its
administration; the self -sufficient source of political
power, from which all specific political powers are
derived; the international independence of a state,
combined with the right and power of regulating its
internal affairs without foreign dictation,- also a
political society, or state, which is sovereign and
independent .

The power to do everything in a state without
accountability, --to make laws', to execute and to apply
them, to impcse and collect taxes and levy contributions,
to make war or peace, to form treaties of alliance or of
commerce with foreign nations, and the like.

Black's Law Dictionary, 1231 (5th ed. 19"5 .

Indians and Indian tribes, on the other hand, have been
treated by this country, at times, in a way that would not be
countenanced by the Geneva Convention or any of its predecessor
rules cf war controlling the treatment of prisoners and combatants.

Cherokee Nation itself is instructive. It discussed the

intentions cf the State cf Georgia to uprcct the Cherokee Nation

from its historical lands and bodily force it out of the state at

gunpoint in violation of a treaty. The Cherokee Nation court

indicated that there might be an injustice here, but solemnly

concluded the poor Indians had no standing to sue and that the

United States Supreme Court had no jurisdiction to hear their plea.

In so holding the court stated:

If it be true that the Cherokee Nation have rights,
this is net the tribunal in which those rights are to be
asserted. If it be true that wrongs have been inflicted,
and that still greater are to be apprehended, this is not

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the tribunal which car. redress the past or prevent the
future .

The rrtion fcr ar. injunction is denied.

Cherrkee Naticr. 3C " . S. at Z'.

The Cherokee court did leave us with the following:

Though the Indians are acknowledged to have an
unquestionable, and, heretofore, unquestioned right to
the lands they occupy until that right shall be
extinguished by a voluntary cession to our government,
yet it may well be doubted whether those tribes which
reside within the acknowledged boundaries of the United
States can, with strict accuracy, be denominated foreign

nations. They may. more correctly be denominate

domestic dependent nations. They occupy a territory to
which we assert a title independent of their will, which
must take effect in point of possession when their right
of possession ceases. Meanwhile they ar e in a state cf

pucilaae. Their relation to the United States resembles

that of a ward to his guardian.

They look to our government for protection,- rely
upon its kindness and its power,- appeal to it for relief
to their wants,- and address the President as their great
father. They and their county are considered bv foreign
nations, as well as by ourselves, as being so completely
under the sovereignty and dominion o f the Uni ted States
that any attempt to acquire their lands, or to forr.
political connection with them, would be considered by
all as an invasion of our territory, and an act of
hostility.

Id. at 17 (emphasis added .

Following Cherokee fatten , and other cases solemnly discussing

Indian sovereignty and right en through the rest of the 19th

Century, as we pushed west tc the Pacific Ocean, we either bought

below the market price or stole virtually ever/ acre of Indian land

between the East Coast and the West Coast. During that time span,

with dozens, if not hundreds, of state and federal court cases

ringing with the solemn term "sovereignty", "domestic dependent

nation", etc.. this country was responsible for the Cherokee Trail

cf Tears ir. 1630,- the :.'ava;o Long Walk in the 186Cs, the Sand Creek

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279

Massacre a; Washita Rive: ir. 186-;. the violation of the Fort
Lararr.ie Treaty of 18€8. the lengthy battle against Chief Joseph of
the Nez Ferce in the :=~Cs. the Wounded Knee Massacre cf 189C, and
ether similar actions, tec numerous to mention (but can be looked
up and verified. , totally incompatible with any version of
sovereignty. Look at what we do, not what we say.

Could this conduct be justified if individual Indians were
true foreign nationals cf a true sovereign or foreign state? The
answer is. of course not. This country, at its worst, has always
given some nod tc the rules of war, even under the most trying of
combat conditions. The history of Indian warfare lacks this nod.

The history cf Indian "warfare" lacks even the pretense that
we were warring against sovereignties, as Congress and the
President did not bother to go through the formalized process of
declaring war against the Indians that we went through in the
colonial war for independence, World War I, and World War II. At
one time anyway, the formalized process by which Congress and the
Fresider.t declared war was thought essential to our concept of
honor. Indian warfare, including the intentional killing of
r.cncombatar.ts , women, and children, proceeded without this honor.

Could this conduct be justified because it was net until 1924
that the U.S. government get around to acknowledging that American
Indians were official citizens of the United States? See Act of
June 2, 1=24, ch. 222, 43 Stat. 252, e U.S.C. § 3, (now included in
6 U.S.C. § 14C1) . No, I do not think so. In roughly the same time
frame, from 16CC tc 190C, as we moved west and absorbed Indian

D-15

country, the area*, waves of immigrants came tc the United States
When t.-.-r.- arrived, immigrants were all true foreign nationals of
true foreign states Althougr. many, because of poverty, had to
walk or ride by boxcars to homes and jobs, none were forcibly
herded into boxcars at the point of a gun. None were taker,
hundreds of miles from lands that were ccncededly theirs and where
they wished to live, to lands hundreds of miles away that were not
theirs and where they did net wish to live. Only Indians.

The Fort Laramie treaty of 1E6E. and the history of the Black
Hills, with its identity to the Plains Indians, particularly the
Lakota Dakota Sioux, Cheyenne, Arapaho, are instructive, cannot be
denied, and represent, cr. so well, our treatment of Indians and
Indian trices as a so-called sovereign people. First of all, to
get frcr. the East Coast tc the Elack Hills in South Dakota, we
broke, cr unilaterally r/ccified or ignored, in whole or in part,
every treaty which, if honored, would have kept us cr. the east
coast .

Lcr.e Wolf v. Kitcr.ccok . 16" U.S. £53, 23 S. Ct . 216, (19C3^.

cr. treaties is instructive. Like Cherokee Nation, this United

States Supreme Court case has never been overruled. Lone Kclf

states . m part :

The power exists to abrogate the provisions of an
Indian treaty, though presumably such power will be
exercised only when circumstances arise which will net
only justify" the government in disregarding the
stipulations of the treaty, but may demand, in the
interest of the country and the Indians themselves, that
it should do so. When, therefore, treaties were entered
into between the United States and a tribe of Indians it
was never doubted that the p£wej[ to abrogate existed in
Congress, and that in a contingency such power might be

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281

availed cf frcr considerations cf gcvernrer.t al policy,
particularly if consistent with perfect good faith
towards the Indians.

Id. at 566. 2 3 S. Tt at 221.

Lone Wclf makes short work cf sovereignty, in the sense that

a Canada, a Mexicc. cr a Great Britain are true sovereigns. Lone

wolf makes it clear that Indian tribes are not .

After an experience of a hundred years of the
treaty-making system of government Congress has
determined upon a new departure, - -to govern them by acts
cf Congress. This is seen in the act of March 3, 1871,
embodied in § 2CPS of the Revised Statutes: 'No Indian
nation or tribe, within the territory of the United
States, shall be acknowledged or recognized as an
independent nation, tribe, or power with whom the United
States may contract by treaty,- but no obligation of any
treaty lawfully made and ratified with any such Indian
nation cr tribe prior to March 3d, 1671, shall be hereby
invalidated cr impaired.'

Lone Wolf repeats, not the sovereign status of Indians, but

their dependent status:

In one of the cited cases it was clearly pointed out that
Congress possessed a paramount power over the property of
the Indians, by reason of its exercise cf guardianship
over their interests, and that such authority might be
implied, even though opposed tc the strict letter of a
treatv with the Indians.

It seems to us that this is within the competency of
Congress. These Indian tribes are the wards of the
nation. They are communities dependent on the United
States.

Id. 167 U.S. at =65-€7, 23 S. Ct . at 221-22.

Lone Wolf alsc put to rest any idea that the land beneath

reservations is net United States soil, but rather, is land

belonging tc a foreign or sovereign nation:

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282

But the right wr.icr. the Indians held was only that
cf cccupar.ry . The fee was in the United States, subject
tc that right, and cc.ld te transferred by then-, whenever
they chcse The grantee, it is true, would take cr.ly the
naked fee. and could nc: disturb the occupancy of the
Indians, that occupancy cculd only be interfered with or
determined by the United States. It is to be presumed
that in this matter the United States would be governed
by such considerations of justice as would control a
Christian people in their treatment of an ignorant and
dependent race. Ee that is it may, the propriety or
justice of their action towards the Indians with respect
to their lands is a question cf governmental policy, and
is not a matter cpen tc discussion in a controversy
between third parties, neither of whom derive title from
the Indians.

id. ie~ U.S. at Siz. :i* S. C: at 2::.

Preceding Long VCclf ve had Ward v. Race Mors* l€3 U.S. 504,

16 S. Ct . L37€ (1656*. telling us

that 'a treaty may supersede a prior act of congress, and
an act of conaress supersede a prior treaty, ' is
elementary. Feng Yue Ting v. U.S., 149 U. S. 6S£, 13
Sue. Ct . 1C16; The Cherokee Tobacco, 11 Kail. 621. In
the last case it was held that a law of congress imposing
a tax on tobacco, if in ccnflict with a prior treaty with
the Cherckees. was paramount tc the treaty.

Id. at 511, 16 S. Ct. at lC"e.

I suggest Lcr.e vcclf and Race Horse tell the truth.

Cur attitude tc»ard the Black Kills shows how we abandoned any
pretense cf the were "scvereix-.ty" when it was deemed tc be in cur
best interests. With the great expansion westward during the Civil
Kar and pest -Civil War era, a big public effort was made by the
United States government and its military arm, the U.S. Army, tc
convince the Indians that westward expansion would halt at the
Elack Kills and that no further expansion into their territory
would take place without their express consent. The Black Kills
and surrcundmg territories, including parts cf other states, were

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283

recognized as Indian territory. As settle: s moved west following
the Civil War. the U.S. Army and a young cavalry officer by the
name of George Custer were ser.t :: the Black Hills to protect the
Indians from illegal encroachment by white settlers, at least for
a while. But when gold was discovered by the Army and some white
prospectors ::. the Black Hills, the gold rush was on, and settlers,
miners, prospectors, and land speculators began to pour into what
was cor.cededly Indian territory. The U.S. government and its
military arm now had an important decision to make. Would it use
the Army :: protect the Indians rrom the illegal trespass, and in
the process run the risk of having tc injure, or even kill, white
trespassers, or vcuid the U.S. Army, in violation of the treaty,
move into the Elack Kills Indian territory and protect white
trespassers, while running the risk of having to injure and
possibly kill Indians. We made the obvious choice.

Tc argue there is any vitality tc the word sovereignty is tc
ignore history.

America ana the United States, had two chances tc confer true
sovereignty upon Indians. The first missed opportunity was not our
fault. The second was. The first opportunity belonged tc
Columbus, who in 1492, because cf a cloudy sextant, dropped anchor
in the Caribbean, and loudly proclaimed that he had found India and
was now going tc trade. If he had gone ashore, looked around and
tried to communicate intelligently with the native people living
there, he could have ordered his crew back onto the ship and said,
"Come en boys, this is somebody else's land. We are turning around

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and going back to our home We mill tell other Europeans to stay

in Europe." He did net d: that .

The second tine, the 'J.S had the opportunity to confer true

sovereignty or. Indian peeple and India:-, tribes and treat then-, as

■uch. That opportunity came at the front end of our westward

expansion. The Mississippi F.iver, stretching virtually from the

Canadian border south to the Gulf of Mexico and present day

Louisiana was a recognizable, distinct and easily ascertainable

border (just follow the river 1 . At that time, there was even some

discussion abcut recognizing it as a firm border between the U.S

and Indian country. But like all ether discussion concerning

Indian rights, it did net translate into action. Ke could have

recognized the Mississippi as cur national border just as we

recognize the Rio Grande as the herder between the southwestern

U.S. and Mexico, or as the northern border between the U.S. and

Canada is recognized. Then, whatever the Indian tribes did west cf

the Mississippi would have been their own business. They could

have continued to roar, free in s-all bands, or organized into

counties, regions, or prcvinces. In other words, they would have

had the same opticr.s citizens of Mexico and Canada have. But we

did net. Instead, we did the following:

1851
Treaty of Traverse des Sioux. After years of mounting
pressure from white settlers and facing huge debts to fur
traders, the people of the Eastern Dakota Nation sign a
treaty giving up all of their lands west of the
Mississippi River. However, the U.S. Senate strikes out
the provision granting the Dakota a reservation in
Minnesota . Territorial governor Alexander Ramsey saves
the deal by getting the president to allow the Dakota a
reservation on a five-year lease. The Dakota are

285

relocated :: a strip cf land bordering the Minnesota
River in west -central Minnesota.

1858
Dakota leaders en a diplomatic visit tc Washington D.C.
are told they did not own the reservation land. Faced
with more debt and threatened with expulsion, they are
forced to sell the northern half of their reservation.

Timeline of Events Leadir.s L'r tc the Dakota Conflict and Exile. The

Native American Press/Ojibwe News, Jan. IE. 1996, at 8.

Two cf Minnesota's storied historical figures, Alexander
Ramsey and Henry Sibley, were leaders in this land grab of Dakota
Country by Minnesota.

Another article in this newspaper shows in stark detail how
after the American Indian was pushed just west of the Mississippi
River, the pushing continued unabated through western Minnesota,
and all of South and I.'orth Dakota .Dakota Territory* , continuing
into Nebraska and Montana, and finally in 1E71, a part of the few
tribes remaining, particularly some cf the Dakota Sioux, accepted
the inevitable and fled ncrth into Canada. They did not stick
around tc await the inevitable, which would have been getting
pushed into the Pacific Ccean:

We had the chance tc confer true sovereignty upon Indian
tribes m the grasp cf cur hands. Instead, we opted for make
believe sovereignty, as we have new, and pushed forward to the west
with a governmental policy, that at times involved extermination
and genocide, and at other times involved pushing the Indians west,
south, and north, onto the most undesirable parts of the territory
and states we developed. Today, there are a few tribes whose
reservations contain some valuable oil, gas, mineral, coal, and

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An om no i/\

timber rights. Th-? Navaj; Zir.ii in New Mexico and Arizona, the
Crcv in Mcr.tar.a. :he Cherckee ir. Ckiahcma, to mention a few. do
have ir. sc~e zlntes valuatle natural resources. However, this is
entirely due tc accident, net by design

Ralph K. Ar.dnst. ir his cock The Lsr.q Death: The Las? Davs cf
the Plains I.-.diar. recounts in detail the period of westward
expansion that I have just touched en.

I note that seme of the precedent cited in the case before us
mentions treaties as some scrt of foundation for "Indian
sovereignty." I jcir. with Andnst in asking: Why did anyone pay
attention tc this "ridiculous pretense?" Honestly, I believe it is
best that v= dc net bring up the term "treaty." My question would
be, which cr.e? : kr.su of ne r.a;or treaty that we have not broken.
If the U.S. and its constituent states started talking seriously
about treaties, I suggest ve Indc- European Caucasians, African-
Americans, and Asian Americans pack our bags, book passage en the
next stea-.er. and head back tc where we came from

If treaties are tc be honored then we are en someone else's
land .

The final word on treaties is best expressed by the United
States Supreme Court in Lone Keif , when it states that when all is
said and d"£. Congress has complete power over Indian tribal
property and Congress can abrogate the provisions of an Indian
treaty at any time. Lone Wolf . IS" U.S. at 56€, 23 S. Ct . at 221.

Reading Cherokee Nation . Len* Wolf, and other federal cases
solemnly discussing Indian sovereignty, as if it were a viable

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issue. I fe~l ar if I a- m a time warp, reading Dred Scott v

Sandford . €2 \! S 15 Hew. 393 :E5r . cr Plessv v. Ferguson. 163

U.S. 53". 1c S. Ct . 113c. 1S9€>. as if these cases were still the

law of the land. I note that in Flessy . Justice Harlan, the lone

dissenter, watching the Court give continued life to separate but

equal by solemnly discussing whether colored people could be kept

separate from white people as long as they were "kept equal" to

white people, made the sa-e observation that I make today watching

the court's solemn discussion about Indian sovereignty:

In my opinion, the judgment this day rendered will,
in time, prove tc be quite as pernicious as the decision
made by this tribunal in the C-red Scott Case.

Id at 55?, 1£ S. Ct . at 11-St iJ. Harlan, dissenting).

If Justice Harlan were alive today, I suggest he would state
that he did not write the dissent m Flessy . I suggest he would
state that he wrote the majority, that he wrote the law of the
land, but that it took the Supreme Court and this" country 56 years,
until Erovr. v. Board of Education decided in 1954, to realize it.
S_£- =r:vr. v. Board of Education of Tapska. 347 U.S. 4E3. 4 = 5, 74 S.
Ct . 6s=. €-1 1954 holding "separate but equal" treatment of races
is unconstitutional .

The parties here are all Kinnesotans, and all Americans. That
gets lost m the shuffle of sovereignty. Any argument that
American Indians are different from the rest of us and, therefore,
are sovereign cr quasi -sovereign, and reside on sovereign or
foreign land, is put to rest by cur actual treatment of them, and

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288

fcy the fact that in :?24 by the Citizenship Ac:, we conferred full
U.S. cit izer.s-i? on American Indians.

The Sca:e cf Minnesota, and its residents, whether Indian or
non- Indian. are not in any way. shape, or form a true sovereign.
We might carelessly throw the term around, but in truth, we are
not. We are individual citizens of a state that is part of a
highly organized federation of states, comprising one indivisible
sovereign, the United States of America. This state, and the other
49 components, might throw the term "sovereign" around at the
quadrennial presidential nominating conventions, as in "the Great
Sovereign State of Florida casts 42 sunshiny orange juice filled
votes fcr candidate "x." the next great president of this here
great U. S. cf A." But after the convention we are all back to
being just states within one indivisible country.

Fcr instance. Minnesota is "sovereign or independent" cf North
Dakcta. tc the extent that en our election day, North Dakota
residents those who have nc intention of changing that status) ,
cannot pcur ••.illy-r.illy across our border and vote in. or run fcr
local and state office. But neither Minnesota as a state, nor its
individual citizens, is sovereign to the point where its
legislature courts could, for instance, unilaterally declare us
free cf the draft should it ever be reinstated. Minnesota is not
a true sovereign. The Minnesota legislature 'courts cannot declare,
for example, that any Minnesotan 16 years cf age or older can run
for president cf the United States. Nor does the State of
Minnesota ani its legislature courts have the power tc rule that no

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289

Minnesrtar. car. e-er be president. If we had such enumerated
powers. we would be sovereign. We do not, we are not. The
Xmnesota Ir.di.v. i£ right there with the rest of the non- Indian
Minnesotar.s . We are all equally endowed with the same rights, the
same privileges, the same obligations, and the same limitations.

I note that waiting until 1924 to "confer full U.S.
citizenship on American Indians," has to redefine "irony". The
earliest anyone else in this country can claim to have relatives
bom here is the l~th Century.

We took this land, by fire and sword, from its owners of
record, the British, who took part of it from the Indians and the
French. We then took all the rest.

Most U.S. citizens trace their ancestry back perhaps 50 to 200
years. Precious few insist they have blood lineage to someone who
set fcot or. Plymouth Rock cr at Jamestown. The Anishinabe/Ojibwe
trace their roots m northern Minnesota back a few thousand years.
Certain tribes ir. southwestern U.S. trace their ancestry back
perhaps i: :: :: thousand years. Whether Columbus or Viking
explorers were tr.e first European to set foot on this continent is
cf no consequence. The Kepi Village in northern Arizona, and the
Acoma Pueclc Sky City m New Mexico compete for the title of the
oldest c-r.tir.ucusly occupied town cr settlement in the U.S. Both
can show proof of an active civilization from approximately eoo to
900 A.C. to the present.

Put another way, to say that Columbus discovered America, is
to state that Sri Lanka discovered NFL football.

D-IS

Ever. :!\* politically correct tenr. we us* today for Indians.
which is "Native Americans." although accurate, it subliminal ly
patronising. If we feel a need to add the modifier "Native" tc the
term Africans, the rest of us ought to call ourselves "recently
arrived" or "transplanted" Americans. If any modifier is needed
preceding the term Indian, it ought to be "first American" or "real
American" cr "true American." That they have not been treated as
such cannot deny the fact that they are. The doctrine of
sovereignty that we are discussing today is a myth that never
existed. Andrist and I agree, the reality of history cannct be
ignored.

That American Indians should own this country, should be its
true sovereigns, and would be. if history could be rolled back, is
• mere than an interesting issue. But history cannot be rolled
beck. *■-- cannot land at Plymouth Rock and then turn around and go
back east tc our home. We can no longer step at the Mississippi
River, and we can nc longer not occupy one foot west of it. He
cannot give the Louisiana Purchase tack to France and require
France tc give it tack tc the atoriginal indigenous people from
whor. they stole it. *"e cannot give Alaska tack to the Russians and
require Russia to give it back to the aboriginal indigenous people
from whor. they stole it.

Ncr has it ever been seriously discussed, and I do not,
whether we should undo the 1924 Citizenship Act and decide that
since Indians are now not U.S. citizens, they ought to be afforded
some kind c* foreign national cr sovereign status.

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If cne takes sovereignty :c its natural and logical
conclusion, would that mean when an American Indian immigrates off
his or her reservat :zr. . would cur Iram15rats.cn and Naturalization
Service come into play? Would Indians then need visas and
passports to "come into town"" Then do we set quotas? Do we deny
entry? That is exactly how we handle prospective visitors and/or
immigrants from Europe, Central and South America, and other parts
of the world. When you come tc this country as a foreigner, a
resident of a foreign or sovereign nation, you must come with an
official status such, as a tourist with a passport and a temporary
visa, or a work penr.it, or a visa for educational reasons. If you
want to stay permanently, you are subject to quotas and depending
on your job or occupation, your chances of gaining entry are either
enhanced or decreased. With the American Indian, we do none of
that. We ought not to, because we cannot. They are U.S. citizens
and residents of an individual state.

I conclude we have to accept what we have done. We have to
consider A-sncar. Indians ar.o" their tribes as full co-equal
citizens of both the United States and Minnesota. It sounds
strange to say that, because of course, we ought to,- they are full
Minnesotans . Thus, what is strange to me, is that despite the
overwhelming, undeniable fact that Minnesota Indians are full
Minnesotans and full U.S. citizens, we still persist in treating
American Indians en some sort of parallel tract, some sort of
"separate but equal" treatment which we denounced in 1954 with

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292

Brown •• Z'.iti zi Educi;;^, I recall that Srcwr. applied co all

races and tilers. I iz not recall any exceptions
Tribal Courts II

Respondent further argues that appellant' s rights can te fully
vindicated in the reservation or community tribal court Upon
examination. Indian tribal courts suffer from two serious
deficiencies, cne pessirly correctable, the other lethal.

The correctable deficiency is that tribal courts are not
organized I speak ncv cf the State of Minnesota, but the same
deficiency applies tc every state under the constitution of the
State of Minnesota that frar.es our independent judiciary. That is,
Article v: cf the Constitution of the State of Minnesota. Tribal
courts are alsc not sue:ecc tc Article I, Section •; of the
Constitution cf the State cf Minnesota which guarantees to
Minnesotans "the right cf trial by jury."

Alsc, net all Indian judges in the State of Minnesota are
attorneys licensee tc practice law in the State of Minnesota they
dc not have tc ce licensed because they are not under the
;unsdicci en cf the Minnesota Supreme Court and the Minnesota
Legislature . The various trices with tribal courts retain the
right tc appoint whor. they want. Respondent's attorney stated at
oral argur.ent that the tribal court judges for respondent's tribal
court are attorneys. But if that be so for respondent now, it is
not necessarily so for respondent in the future, and it is not
presently so for the various tribal courts throughout this State.

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293

At times in cur recent history, Minnesota tribal courts have
had nor.- lawyers as judges, have had lawyers who have passed the tar
in ether jurisdictions, cut 'not Minnesota, and lawyers who have
never passed any bar. Indian tribal courts, unlike all other
courts in Minnesota, are not under the direct supervision of the
Minnesota Supreme Court. Normally, a plaintiff or defendant
anyvhere within the four corners of the State of Minnesota, whether
a resident or non-resider.t , has a straight forward set of Minnesota
rules and statutes that can te counted on for uniformity. The same
is not true ir. the Indian tribal courts where the makeup,
composition, rules and regulations, attitude toward state and
federal precedent, and decisions when tc give a jury trial or not,
can and do differ.

A recent issue of Judicature was devoted to Indian tribal
courts and justice. See "r Judicature 105, Nov. -Dec. 1995.- The
issue was aimed at promoting the concept that they are viable and
somehow can exist alongside the already established state and
federal judiciaries which provide a legal fcrum for all citizens
(Indian and non- Indian . To read the magazine is educational, but
tc me dees nothing more than confirm the complete injustice of
attempting to subdivide American citizens by race and establish
parallel race-based court systems. I do not speak now cf
conciliation courts or alternative dispute resolution, or "talking
circles." These are all forms of delivering justice to our people
that must to be encouraged if we are to survive without drowning ir.
the sea of bitter litigation and the bitter emotions that fcllcv

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bitter litigation What : we talking ato-t is atte-ct ;r.g tc
formalise a parallel Indian tribal court system purporting to .-.ave
equal, and at times paramount, jurisdiction over s^tate and federal
courts .

The article entitled Resolving State-Tribal Junsdicti—^
Dilemmas is pointed, objective, and simply displays, at least tc
me. the insoluble incongruities, the justice denying anomalies that
abound when we attempt to interject a third parallel race-based
court system along side our two historical court systems. Id. at
154-5€.

In ccrrr.er.tir.g on the jurisdictional problems, the article

notes the following examples:

k non- Indian father is not prosecuted for
misdeneanor abuse of his Indian child on an Indian
reservation because the tribe lacks jurisdiction to
prosecute non- Indians, the state lacks jurisdiction tc
prosecute offenses involving Indians and committed in
Indian country, and the U.S. attorney lacks resources tc
prosecute misdemeanors.

Tribal police decline tc enforce a state domestic
violence protective crder recognised by the tribal court
because they have no authority to arrest a non-Indian
sccus* fcr violating the order.

k non- Indian spouse receives a default divorce and
child custody decree in state court about the same time
as the Indian spouse receives a similar decree in tribal
ccurt .

These and similar occurrences are certainly fairly
common and illustrate the problems inherent m
limitations of tribal jurisdiction. Another hypothetical
provides even more food for thought: Bonnie, an Indian,
and Clyde, a non- Indian who resides with Bonnie in Indian
country, rob the tribal casino, receive a speeding ticket

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in Fhoenix, rot a convenience store In California, and
trespass on t.-.e teach in Mexico. The/ could both be
fully prosecuted cy all jurisdictions in which they
committed their offenses except the Indian tribal
jurisdiction where they reside and where they committed
the most serious crime. The tribe would only prosecute
Bonnie for a misdemeanor and could not prosecute Clyde at
all.

Stanley G. Feldmar. £■ David L. Witney, Ress-vino State-Tribal

Jurisdicr "-" na - Cilemr.as . 79 Judicature 109. 154-55, Nov. -Dec.

1995.

Although I respect the right of Indian tribes to move for
self -deterrr.ir.aticr. and will address that later in this opinion, I
can appreciate appellant's lawyer's desire to have his client's
civil suit involving issues of negligence and serious personal
injuries, heard in a neutral state court with established known
rules and procedures and a history of fair dealing.

This state, this country has the power to establish Indian
tribal courts ir. total cor.f ormity with the laws of each particular
state, and ir. total conformity with the rules controlling our
federal judicial system. Do we have the will? If we deem Indian
tribal courts essential, and deem it appropriate for them to have
jurisdiction witr.in the rules, over people of all races, sc that
people of all races have access and do not feel intimidated, we can
set the- up within the framework of the Minnesota small claims or
conciliation court system. See Minn. Stat. §§ 491A.01-.03 (1994)
(establishing conciliation court system: . Such a system would give
a litigant direct access to state district court following an
adverse decision and then full appellate review by this court, with
the right of petition to the Minnesota Supreme Court. A Minnesota

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£90

conciliation court gives any locality the option of handling small
or local issues internally, but protects each party's right to at
least cr.e hearing de novo in state district court. We also have
the power to set up a standard Minnesota district court, state or
federal, as the Minnesota Legislature or Congress chooses,
organized exclusively, or for the most part, with Indian issues and
staffed with Indian personnel. There are zero controls or
regulations forbidding governors and presidents from actively
recruiting and appointing qualified minorities to the bench. Since
approximately the 1970s, at both the state ar.d federal level.
qualified women and candidates of color have been actively
recruited and appointed to correct imbalances on state and federal
benches where the bulk, or at times all, of the appointees were
white males. We have the power and the right to correct this
imbalance. Do we have the will"

The deeper issue is why we are even talking about "Indian
tribal courts" where a Minnesota non- Indian venturing onto a
reservation. as appellant did here. can have her direct
constitutional access to state district court derailed. Appellant
might accept this different, and even perhaps arbitrary, treatment
if she were a tourist in Canada or Mexico. But she is not a
tourist anywhere in this lawsuit. She is a Minnesota resident,
dealing with a Minnesota corporation concerning an accident on land
in Minnesota.

There are parts of this country, counties, or regions in the
deep south, parts cf the southwest, and sections of our large

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297

cities, where there ar* large concentrations of African-Americans,
Hispanic, and Asiar.-A-encans . For example, "Chinatowns" are
viable and respected sections of at least two major cities, San
Francisco and New Vcr/.. that have been so identified for decades.
In these areas, well over 50% of the inhabitants may belong to a
particular race or ethnic background. Why do we not have "African-
American courts," "Hispanic courts," "Chinese courts," or "Korean
courts?" Why do we not have special court systems in those areas
where outsiders, that is, nonresidents, do not have automatic
access to that state's district court system for redress of wrongs.
but must first ^ubr.it their claim to a local or ethnic court? I
suggest that if we tried to establish "racially based courts, " the
constitutional issue of the denial of due process issue, the race-
related and race-raitir.g issues, and the ill-will and divisiveness
that would follow would serve tc cvercome us as a country.

Ke try to go c_t cf our way m Minnesota, and hopefully other
states in the federal court systerr. do as well, to ensure equal
access and fair treatr.er.t tc all people, whether plaintiffs or
defendants, of any race, cclcr. creed or ethnic origin. Why here,
are we tolerating segregating out the American Indians by race and
allowing them to rr.air.tair. a parallel court system and further,
subjecting nor.- Indians to it? To me, this is red apartheid. I
believe this entire issue of "sovereignty" rests on true red
apartheid. The American Indian will never be fully integrated into
this state, r.cr into this country, until we recognize this "dual
citicer.sr.ip" for what it really is, a pancake makeup coverup of

iv. v.-.ich allcved "separate bur equal" treatment. Sxe p?.eisy .
163 US at £51. il S. C: at 1143 (holding that "equal but separate

accomr.cdaticr.s for the white and eclcred races" for railroad
passengers was constitutional!.

Nc further cite, other than this reference to Plesiy is
needed. : car. only note. "Haven't we learned anything?"

The lethal flaw of Indian tribal courts is that they are not
independent autonomous bodies. The tribal courts are not
independent of the executive and legislative branch of tribal
government as is needed to ensure justice for the people who come
before it. Karhury v. Madison . 5 U.S. .1 Cranch) 13" (1603 . and
its prcger.y decided this a long time age. Mar bury is reference
enough .

Fcr a general review of tribal courts and the problems
therein, and their differing fcrrnativa stages throughout this
country. I refer to Michael Taylcr. v.s:lerr. Practice in the indiar.
Ccurts . i: V. Pudget Sound L. Rev. 231 15e~! . The Right to Counsel

ir. Kativs ^-.enrar. TxifcA- CSUriE; Tribal SPVfrtiqnyy azi

^=r«»:=n»: C=r.-r=l. 31 An. Cria. L. Rev. 1291 (1994. . Margery K.
■revs & Srenda C. Zesr.cnd. K=r.tana Tribal Courts: Influancina the
Pi'.tleg-tr.-. =f Confmarin- Indian Lav. 52 Mont. L. Rev. 21*
;1991. .

The essence, the sine qua nor. of tribal courts is that their
existence r«i i on « «-.-»r«i«itv. if sovereignty is exposed, there
is r.c need fcr separate tribal courts. American Indians, like

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American blacks. American whites, American Asians, are already
guaranteed equal access to cur state and federal court systems.

The lethal flaw, the lack cf an independent judiciary in
Indian tribal courts, results frcn the fact that all tribal judges,
including respondent's tribal judges, are appointed by the
executive legislative ruling body. The appointing authority for
tribal judges might be called the reservation business committee,
or the tribal executive committee, or the reservation board, or the
community committee, but it is always the same. Those elected to
run the reservation have full power to select, appoint, hire, and
fire the judges. Tribal court judges may be "appointed" for a
fixed term, but there is nothing inherently unconstitutional about
their being fired or replaced in mid-term. They are simply not
protected by the same constitution and the same rules governing
Minnesota judges, net tc mention the constitution and rules
protecting the independence cf federal judges.

The situation on reservations, including on respondent's, can
be likened tc a situaticr. where the mayor and city council cf St.
Paul and Minneapolis select and appoint all the judges who have
jurisdiction m those two cities. -If there is to be county-wide
jurisdiction, the county commissioners in those two counties
select, appoint, set the salaries for, and hire and fire the
judges. Judges in those cities or those communities, like all
well-intentioned judges, would strive to do their utmost to deliver
justice. But the perception of potential conflict, and the actual
conflict, when the defendants in a lawsuit were the appointing

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authority . is tec tig and too dangerous an elephant to ignore. In

recer.: years :r. Minnesota, an lndiar. tribal judge in a lawsuit

found for plaintiffs whs were challenging the incumbents in a

tribal election. The Indian judge found enough irregularities lr.

the election tc grant plaintiffs a hearing and limited discovery on

the claimed election fraud. The incumbents. the

executive legislative branch of the tribe, whose election was being

challenged, appealed to an Indian appellate court who upheld the

tribal judge. The reservation business committee then fired the

tribal judge.

I subscribe to three Indian newspapers: The Circle. The

Native American Press /Ojibwe News, and News Fran Indian Country -The

Native's Native Journal. One is a weekly, and two are monthly.

Virtually every issue for the past three or four years has

ccr.tair.es editcrials and cr letters to the editor from residents of

reservations, cr these with reservation rights living off the

reservation, co-plaining about the perceived arbitrary use of power

by reservacicr. governing bodies and the failure of the Indian

tribal court to look ir.tc. let alone correct, the alleged

irregularities. One such editorial contained the following

comment :

And, most telling of all, the inability of the body
politic of each reservation to rectify the corruption
without the aid of the United States Attorney in
collateral criminal proceedings proclaims to the State of
Minnesota and the United States that at least two
Minnesota Ojibwe reservations do not deserve the respect
of a sovereign entity.

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301

Robert A Fairbanks. LttStl Lake White Earrh Lawsuits Prove

PififiinC"— - f liAfcil ' Severe iqn:y' ■ The Native Aaerican

Pr«»«/Ojibw« News Dec. 14, 1955.

Another article contained the following:

Seven members of the Turtle Mountain Band of
Chippewa say their civil rights are being violated and
want* a federal judge to intervene in a year- long
political battle.

'The tribal system is not providing remedies to
members of the tribe, ' said Lynn Boughey, a Minot
attorr.ev representinc the seven. 'It's a state of

anarchy'. '

Turtle Mo untain tribal Member to File Lawsuit Against Tribe. Native

An. Press Feb. 2, 1996 at 1.

At times dissidents, out of desperation, have gone into the

U.S. district courts fcr relief. That happened recently in

Minnesota. A Minnesota federal district court judge ruled in

October cf lrr= that the federal government does have the power tc

overturn a Minnesota Indian tribe's vote to change its rules in

such a way that would allow r.cre people to share in the gambling

prcfits than previously shared. £££ Shakopee Mdewakanton Sioux

(Dakcta Community v. Babbitt . 906 F.Supp. 513 (D.Minn. 1995). As

one newspaper reported about the decision:

The federal government has the power to overturn a
Minnesota Indian tribe's vote to change its rules in a
way that would allow hundreds of people to share profits
from Mystic Lake Casino, a judge has ruled.

U.S. District Judge Richard Kyle this week upheld a
decision made in June by Ada Deer, director of the U.S.
Bureau of Indian Affairs. Deer acted to nullify the
referendum held in April by the Shakopee Mdewakanton
Dakota Community.

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Questions were raised about the eligibility of some
voters who stood to benefit financially from the rule
change. Voters chose to waive blood requirements for
descendants of current or former tribal members Each
member who is 18 or older is eligible tc each receive
about S5SC.3CC a year in profits from the Prior Lake
Casino

--Associated Press

Judge: Government Can Nullify Tribal Vnr«» Minneapolis Star Trib. .

Oct. 26. 1995, at E-3.

Recently another newspaper reported:

Tribal officials are not immune from prosecution in
federal court for criminally violating the civil rights
of their constituents, according tc a recent U.S.
District Court opinion.

Jeff Armstrong, Court Rejects Sove reign Immunity Claims of Indicted

White Earth Officials . Native An. Press, Feb. 2, 1996, at 1.

Ccincider.taily, the reservation in question, with the voter

eligibility issue, is respondent. Assumedly, the present governing

body of the Shakcpee reservation can appeal that decision through

the federal court system. But "so much fcr sovereignty" and the

exclusive right cf tribal courts to hear disputes arising on

reservations. This is an issue involving the eligibility cf voters

]us: en the reservation. Nowhere else in Minnesota. If there ever

was such a thing as a truly private tribal issue, this would be it.

If there was ever an issue perfectly fit for the independent tribal

courts of a sovereign nation to decide without outside

interference, this would be it. To the contrary, a Minnesota

federal district court has jurisdiction. Now consider that

Minnesota federal district courts are not in the habit of hearing

election issues arising out of local or regional elections held ir.

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Canada or Mexico. I will not do any research on that subject. I
will guess that Xir.nescta federal district courts do not hear
election issues arising cut cf local or regional issues in Canada
or Mexico because our courts have no jurisdiction, because Canada
and Mexico are sovereign nations. I will guess that a Minnesota
federal district court heard an intratribal election issue on
respondent's reservation because the Minnesota federal district
court had jurisdiction because respondent's reservation is on U.S.
land and subject to federal jurisdiction. The land might be called
reservation land, or "Indian Trusts Land," but it is undeniably in
America, and part cf the United States cf America.

This is yet one r.cre example of why there is no real
sovereignty en reservations, including respondent's. What there
is, is a continuation cf this ward cf the government status that
the U.S. government has never been able to deal with. It would be
intolerable in the 195's tc even ccnsider a system whereby all
white Americans or all black Americans, or all Asian Americans,
were for no reascn ether than ecler and race, designated dependent
wards cf the federal gcvernment . But somehow on reservations we
tolerate this .

For what other classification of U.S. citizens, by color or
race, do we tolerate a government agency with control over our
lives. Ke have a Bureau of Indian Affairs (BIA) , but we do not
have a Bureau of Black Affairs, nor a Bureau of White Affairs, nor
a Bureau of Asian Affairs, with the power to give funds, withhold

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funds, cr permit people of that color t: pursue a certain economic
plan, but net others

It. speaking about cur federal government's hepe that somehow
the BIA can make This all better without the necessity of really
coming tc grips with the issue of sovereignty, the myth of
sovereignty as I and others call it, James Northrup, a noted O^ibve
writer and commentator from Northern Minnesota, recently had in his
syndicated column, "Fond du Lac Follies" the following question and
answer:

Question: Who invented the BIA?
Answer: Someone who really hated us:

The preservation of Indian tribal courts, without integrating
then fully into our state and federal judicial system, is just one
mere bit of stark evidence that although we call Indians
"Americans" have tc--they are 1 , we treat chem differently than we
treat other Americans.
Preservation cf Identity III.

The core issue, or. which I agree with respondent, is that the
-protection cf this trite' s .or any tribe's; culture, identity.
assets, religion sp.rituality, and ability to live in its own way
is paramount .

But I can only -note that these are exactly the same goals fcr
all peocle in thi s g- a te. for all colors and all races.

Respondent's members are citizens of Minnesota and full U.S.
citizens. They can be treated as such, and nusi be treated as
such. But more importantly, we can protect them as citizens and

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still protect their inalienable right to be different, as we do now
with all ether religions, races, colors, and ethnic groups. We do
not have tc pretend that Minnesota/American Indians are "sovereign"
(which really means "wards of the government") to allow them to
live as they want to live.

This country not only protects identifiable religions, but
does so at a tremendous cost of hundreds of millions of taxpayer
dollars, taken from individuals who in fact may not belong to any
organized religion. We exempt from the normal burden of commercial
and residential real estate taxes recognizable churches,
synagogues , mosques, etc. This amounts to hundreds of millions of
dollars of a direct subsidy by state and federal taxpayers to those
who belong tc certain religions. In addition, members of a
recognized religion, or for that matter, non-members, can give
contributions tc a qualified religion and have a direct deduction
against their inccr.e tax and the church does not have to report
that money as taxable income . This is another form of direct
subsidy cf ir.illicr.s of cellars to organized religion. We do the
sa-e fcr r.cr.- religicus eleemosynary organizations, qualified
organizations, and foundations. We taxpayers subsidize outright
individuals and business entities for profit. We do this through
the forr. of tax breaks, tax subsidies, outright grants, government
loans at low interest rates, or government loans at no interest tc
enterprise zones, and tax increment financing. In addition, we
taxpayers subsidize areas and the people living in those areas, who
qualify for state and federal relief due tc calamities, such as.

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fire, flood, drought, hurricanes, earthquakes, cyclones, etc If
you are a taxpayer not living in that area, you do not get the
relief If you are a taxpayer living within that area, yea get the
relief at the expense of other taxpayers.

State and federal governments subsidize townships, villages,
school districts, cities, counties, and, at times, the federal
government subsidises states. Ke have the power, the ability, and
the legal right to subsidize present day Indian reservations within
the normal framework of hov we treat other entities. Do we have
the will"

Respondent wants a limited immunity to lawsuits to protect
tribal assets We do that now without calling the protected entity
a reservati. zr. In this state, townships, municipalities, local
governments, •etc., tnjsy a limited form of immunity. We call it
official and or discretionary immunity. It has beer, around for
decades At times different states have considered and put
monetary caps or. the dollar amount that can be recovered from a
municipal ity in & tcrt lawsuit. This privilege can be afforded tc
wealthy municipalities, when individuals, even poor ones, have nc
such protect ion. There is nothing that Indian people are entitled
to as human beings that cannot be afforded them through the normal
process of accepting them as brother and sister citizens. We ought
to, they are
Self -Determination. IV.

Part of respondent's argument is that we need sovereignty tc
preserve economic self-determination and economic self -governance

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for tribes. I agree with that goal. But it car. be done completely
under the framework of present Minnesota law. For instance,
municipalities have for decades been able to own and operate
municipal liqucr stores. Municipalities, for approximately the
last 2C years, have been urged, encouraged, and pushed hard by
professional sport franchises to build, own, and operate stadiums
suitable fcr professional football, hockey, baseball, and
basketball . When municipalities and cities own professional
stadiums and ball parks, the taxpayers subsidize wealthy investors
(mostly white males in return fcr the promise of jobs and economic
activity, such as bars, restaurants, and convention centers, in the
hopes that tourists going through will spend two days rather than
two hours in town. I do not think there is anything intrinsically
evil about this. Whatever duly elected officials do, they do. I
merely point this out to prove that we have the power, the right,
and the precedent to allow Indian econor.ic enterprises such as
gambling casinos and other businesses to operate within the
framework of existing state and federal law. Do we have the will?
If the taxpayers are asked , in various cities in various
states, as they have been, to subsidize wealthy non- Indian
investors, it cannot be said that it would be inappropriate fcr
Indian casinos to continue to exist without the mirage that the
land they sit on is "sovereign." Casinos provide exactly the same
benefits that sports franchises claim they provide, i.e., jobs,
economic development, and tourists who go slow rather than fast
through the state .

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This country has the power, the ability, and the will, tc
subsidize the wealthy, the pocr, and the in-between Farr
subsidies are but one of many examples. It has been knowr. for rany
years that a majority of the farr- subsidies gc to a srall
percentage c: the larger, and thus, probably wealthier farmers in
the areas of wheat, corn, sugar, tobacco, cotton, and pear.jts
This opinion does not knock that concept and does not infer that
this practice should be abolished. That is a decision for the will
of Congress I simply point out that we already have, and have had
for decades, a legal framework tc help people who need help (and
some that don't) at the expense of the rest of us. There is
nothing keeping us from, again within the framework of how we treat
all citizens, calling Indian reservations economic enterprise,
business, or disaster zones ;I suggest "disaster zones" would be
poetic justice . We can extend tc reservations the same tax
subsidies, outright grants, low interest loans, or zero interest
loans, etc., that we new give to others. Our ability to subsidize
American citizens and entities, regardless cf color, does net stop
there. We give, through the Internal Revenue Code, hundreds cf
millions to billions of dollars of tax breaks tc national and
multi-national corporations, particularly for mineral exploration
(depletion allowance) and overseas investment and trade. Put
another way, why do we have tc go through the pretense of calling
Indians and Indian tribes wards of the government and "sovereign"
entities to help them exist?

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309

If the question arises, can we protect their unique way of
life if we bring thex under the same big tent that the rest of us
live under? The unqualified answer is yes. we already do. For
example, the lifestyle, culture, and religion spirituality of the
Old Order Atr.ish is as specific, as culturally unique, and as
different from mainstream America as any traditional Indian
community, whether Ojibwe, Sioux, Cherokee, Navajo, Zuni, or Hopi .
Old Order Amish in Minnesota, and in other states, live a lifestyle
circa 1840-ieEC. Horse-drawn equipment, no electricity, kerosene
lamps, lack of plumbing, a unique style of dress, and adherence to
precepts that the elders cf each community set are their way of
life. The Amish in Minnesota are normal, full Minnesota citizens.
They are normal, full U.S. citizens. They pay taxes on their land;
they are entitled tc go tc public schools ;they simply choose not
to use them, but instead, maintain their own grade schools) ,• they
are entitled tc vote in all elections,- and they are entitled to rur.
for public office (but choose not to) . It is clear that in all
ways they live a lifestyle as foreign tc the rest cf us, and as
culturally specific a way of life, as found or. reservations in this
country where tradition, ceremonies and beliefs go back hundreds of
years. Yet we are able to protect them.

Despite these vast cultural differences, this state, this
country bends ever backward to accommodate the Amish. Ke do net
call them wards of the government. We do not call them a dependent
nation. It would be laughable to suggest that they are sovereign
or quasi -sovereign. They are just as standard a citizen as those

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residing ir. Rochester. St. Cloud. Bemia^i. cr Hrbbing. Minnesota

But we dc accommodate their way of life. To protect their way cf

life, the United States Supreme Court exempted the Amish from the

normal requirement applicable to the rest cf us that we attend

public or private grade schools and high schools until an arbitrary

age, often sixteen. Wisconsin v. Yoder . 406 U.S. 205, 234, 92 S.

Ct . 152€, 1542 '1972). In creating this exemption, the Supreme

Court noted that

[t]he purpose and effect of euch an exemption [is] • • •
to allow the Amish their centuries-cld religious society,
here long before the advent of any compulsory education,
to survive free from the heavy impediment compliance with
the Wisconsin compulsory-education law would impose.

Id. at 234 n.22, 92 S. Ct . at 1542-43 n.22. Thus, the Amish are
allowed to attend entirely unregulated home schools from the first
through eighth grades . This is the United States Supreme Court
speaking.

The Minnesota Supreme Court in State v. Hershheroer
specifically exempted the Amish in Minnesota from the normal
requirement applicable to the rest of us that orange triangles
adcrr. the bar:-: of their hcrse-dravn buggies and farm, carts tc
signify a slov moving vehicle. £fi£ State v. Kershberaer. 462
N.W.2d 353. 3rr (Minn. 199C) (statue requiring display cf slow-
moving vehicle emblem, violated freedom cf conscience rights
protected by Minnesota Constitution when statute was applied tc
Amish defendants, who held sincere religious belief against use of
emblem, where state failed to demonstrate that both freedom of
conscience and public safety could not be achieved through

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alternative means cf Amish defendants' use of white reflective tape
and lighted red lantern) .

I state the above simply to point out that this state, this
country, has the power and the legal right to protect any and all
parts of Indian identity. culture. tribal assets, self-
determination, religion/spirituality that needs to be protected,
and yet do it all within the framework of treating American Indians
like we treat ourselves, as normal citizens of this state, of this
country. The real issue is, do we have the will?
Duality v. Acceptance. V.

The heart of the issue, to me, is that we have refused the
painful, begrudging acceptance that "we are Indians, Indians are
us," as we have had tc accept, with painful, begrudging acceptance,
the nct-tc-be-der.ied idea that we are African-Americans and Asian-
Americans, and African-Americans and Asian-Americans are ut;

From the moment the Mayflower dropped anchor, until this very
date, we have persisted in a dual America. One America for the
American Indian, the red race, and a separate America fcr the Indo-
European Caucasian, the Af re-American, the Asian- American, the
white, black and yellow race.

We should have learned by now that this duality in America is
so intrinsically evil, so intrinsically wrong, so intrinsically
doomed for failure, that we must grit our teeth and work through
it.

Examples of failure abound. For a brief time following the
outbreak of World War II, we had a dual America, one for the rest

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of us and one for the Japanese-Americans living on or near the west,
coast. All of the rest of us. and Japanese-Americans in the
central and eastern part of the United States, could move and live
at will. Japanese-Americans living in the west coast area could
move or live at will, as long as they moved or lived in Japanese
relocation camps. This was done with the full pomp and
circumstance and authority of the U.S. government, backed by the
full judicial authority of the U.S. Supreme Court. After a
mercifully few short years, this practice was discontinued. Fifty
years later, the U.S. government said that the practice was wrong
and Congress appropriated a sue of money to identifiable
descendants of those camps. Was this Asian American duality in the
U.S. wrong? : can only state that when our government, with its
propensity ts stonewall, with its tradition of announcing that
winners of a war car. te guilty of no wrong, just the loser,
announces that it did wrong, that it is sorry, and pays money,
well, America, we were wrong. At rest now, is acceptance of the
fact that a dual America for west ccast Japanese -Americans and the
rest of us was wrong .

In cur history, we had another, much longer dual America. For
approximately SO years we had one America for white citizens and a
second America for black citizens. Following the Civil War, the
Thirteenth, Fourteenth and Fifteenth Amendments to the United
States Constitution were quickly enacted. As a result, all white
citizens and all blacks now became "full" citizens. Yet for
approximately 9C years, this country officially aanctioned and

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officially practiced segregation. We had decades of black

apartheid. Even 3C years after the enactment cf those three

amendments, the United States Supreme Court in Plessy held that, at

least as to intrastate travel, separate but equal was still

constitutionally permissible, proper, and in all things legal.

Plessy . 163 U.S. at 551, 16 S. Ct at 1143. My previous reference

to Judge Harlan, the lone dissenter, calls for a further

examination of that case (supreme law of the land for the following

58 years). Harlan's dissent said in places:

But I deny that any legislative body or judicial tribunal
may have regard to the race cf citizens when the civil
rights of those citizens are involved. Indeed, such
legislation as that here in question is inconsistent not
only with that equality of rights of which pertains Co
citizenship, national and state, but with the personal
liberty enjoyed by every one within the United States.

It was said in argument that the statute of
Louisiana does not discriminate against either race, but
prescribes a rule applicable alike to white and colored
citizens. But this argument does not meet the
difficulty. Every one knows that the statute in question
had its origin in the purpose, not so much to exclude
white persons fror. railroad cars occupied by blacks, as ;
to exclude colored people from coaches occupied by or .
assigned t" white persons. Railroad corporations of ;
Louisiana did not make discrimination among whites in the
matter cf accommodation for travelers. The thing to
acccr.pl ish was, under the guise of giving equal ,
accommodation for whites and blacks, to compel the latter
to keep to themselves while travelling in railroad
passenger coaches. No one would be ao wanting in candor
as to assert th* contrary.

Id. at 554-5?, 16 S. Ct . at 1145 (emphasis added).

I can only hope that Justice Harlan's candor as to black/white

duality will be recognized for its inherent truth and applied to

our present duality where our white, African-American and Asian -

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American citizens on the one side enjoy the US., while cr. trie

other, and the bottom side, we have the American Indian.

Justice Harlan further said:

But in view of the constitution, in the eye of the law,
there is in this country no superior, dominant, ruling
class of citizens. There is no caste here. Our
constitution is color-blind, and neither knows nor
tolerates classes among citizens. In respect of civil
rights, all citizens are equal before the law.

Id. at 559, 16 S. Ct. at 1146.

Until we accept the truth, the truth being that we impose this

duality today on American Indians, The Pledge of Allegiance, which

is supposed tc read

I pledge allegiance to the flag of the United States of
America and to the republic for which it stands, one
nation under God, indivisible , with liberty and justice
for all; (Emphasis added.)

instead reads

I pledge allegiance to the flag cf the United States cf
America and to the republic for which it stands, one
nation under God, divisible into two classes of colors,
one class is black, white, yellow, and the second class
is red, with liberty and justice for all according to the
above duality.

Between Plessv v. Ferguson in IE 36. and Brown v. Bsars. cf

Eduoaticn in 195-;, the United States continued to have its own fcrr

of a dual America, with our own form of black apartheid. Jits Crov

laws were alive and well, openly in parts of this country (and

subliminally in parts of others) through the tens, the twenties,

the thirties, and the forties. It wasn't until approximately EC

years after the Thirteenth, Fourteenth, and Fifteenth Amendments

were enacted that President Harry Truman, by executive

proclamation, officially integrated the U.S. armed forces. The

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legally permissible principle of separate but equal, ar. undeniable
form of black apartheid, persisted until 1954 and Brcwr. v Board of
Education . At that time, the federal judiciary had a perfectly
readable and articulate precedent called Plessy v. Ferguson to
follow. It would have been easy to build on the underpinnings of
Plessy . Plessv indicated that as long as there was equal but
separate accommodations for white and colored, and as long as
nobody could be denied a berth in one or the other, states could
opt to do it .

Basically, Brown v. Board of Education was carved cut of whole
cloth. Despite precedent, the U.S. Supreme Court said in 1954
(inventing new law; , "We ;ust aren't going to do this any more. It
is wrong. It was wrong. We don't care' that we used to say it was
okay. It is not okay. Ke are going to change it."

There was an immediate hue and cry from many members of
Congress ar.d from many states decrying this as a violation of
"state's rights". Congressional action to overturn the case was
discussed by a few,- nar.y legislative asseTblies and state houses
said "never" and set about various schemes ar.d artifices to negate
the ruling. But whether the Oval Office liked it or net, the
executive branch of the government set in force the needed justice
department and r.ilitary machinery to implement the dictates of
Brown . The struggle was long, violent, and marked by bloodshed and
death for the next decade, and finally, in the 1960s, civil rights
and voting rights legislation put an end to the thought, held by a
few, that although government and courts might say no to duality

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between Americans cf a different color, devious ways could be
devised to perpetuate the practice we }ust do not allow chat any
more:

We have the power and the right to end the present system of
red apartheid in this country, of wardship and of dependency, all
cloaked in the myth of sovereignty. But, do we have the will?

Morror. v. Mancari attempts to sidestep the bitter truth that
Indian sovereignty is a race-based classification by stating that
it is not race based, but is rather a "politically based
difference. " : 417 U.S. 525, 553 n. 24, 94 S. Ct 2474, 2484 n. 24
(1974) (stating that preferences for American Indians are not racial
but political when the preferences apply to members of federally
recognized tribes) .

Today. I still conclude the result reached in Red Lake School
District was ;ust and equitable. The entire school district was
within the Red Lake Cjibve reservation and the entire student body
were residents of the reservation . But I no longer accept that
part cf the reasoning wherein Ksrton held that Indians are a
political class, net a race or an ethnic class. If that were the
case, these in Congress who were bitterly opposed to Brown v. Board
of Education would have thought of the simple expedient of calling
black Americans a political class, rather than a race-based class,

I have cited to Morton v. Mancari myself in Krueth v.
Independent Sch. No. 3e. Red Lake , when this court held that a
preference for Indian Teachers with junior seniority to non- Indian
teachers was appropriate under state law. See Krueth v
Independent Sch. No. 36. Red Lake. 496 N.W.2d 829 (Minn. App
1993 , review denied (Minn. Apr. 20, 1593).

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and merrily continued on their way with de facte segregation If

this country :s t: meaningful deal with the consuming problem of

race and race bias, we have tc be smarter than that, we have tc be

more honest than that .

The Econo mic Reality of VI .
Mystic Lake Casino

Respondent, a corporate defendant in this personal injury-
lawsuit, urges that allowing appellant to proceed in state district
court would interfere with its casino business, interfere with
reservation tribal business, and interfere with its "self-
determination. " When examined in the light of the economic
realities of respondent, this argument is a non-issue. Mystic Lake
Casino no more needs this preferential treatment than does a
Cargill, a Dayton -Hudson, or a 3tf.

Mystic Lake Casino is a full-fledged gambling casino grossing
hundreds of millions of dollars per year. It took a few years of
planning, and millions of dollars tc construct. Its marketing plan
from day one, and this must be conceded by respondent, or
respondent is without candor, was specifically and solely designed
to attract thousands cf non- Indian visitors per day, thousands of
non- Indian visitors per week, and hundreds of thousands of non-
Indian visitors per year. Mystic Lake .Casino has, to date, been
successful in attracting hundreds of thousands of visitors/gamblers
from off the Shakopee reservation; visitors from the metro area,
visitors from around the entire State of Minnesota, visitors from
out of state, and visitors from foreign countries.

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47-201 98-11

318

Respondent's reservatic:-. contains somewhat less than 20C
members Respondent argues it is entitled to limited sovereign
immunity because the casino is a "tribal enterprise." To call
Mystic Lake, the largest casino in Minnesota and one in size that
compares favorably with large casinos in Las Vegas and Atlantic
City a "tribal enterprise." is like calling the Mall of America in
Bloomington "a smallish Blcomington strip mall." The Mall of
America, although available to Bloomington residents, was
specifically designed and built with a marketing plan in place to
attract shoppers from the entire metro region, the entire State of
Minnesota, from all our neighboring states, from virtually the
entire country, and from overseas. So, too, was Mystic Lake.

If Xystic Lake were truly a "tribal enterprise, " if it had not
been designed, built, and specifically marketed to attract hundreds
of thousands of non- Indian visiters from around the state, from
around the country, it would, with its millions of dollars tied up
in a building, gambling machines and fixtures, go broke in four
hours, would be in Chapter 7 bankruptcy in six.

Mystic Lake's sire, its scope, and its marketing plan are net
accidental. They are intentional, and well done. It is a highly
successful business enterprise. But it is decidedly not tribal,
not local. Tc the contrary, it is a business designed not for the
use of reservation residents, but instead, designed and marketed
for non- Indian users without whose patronage it would fail
immediately.

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: conclude that the intentional design, size, and marketing
plan of respondent constitutes a clear, express waiver of any so-
called limited right not to be sued by its patrons in the
appropriate Minnesota district court.

Oddly enough, under Public Law 26C. if the defendant were an
individual resident of respondent, he or she could be sued by
appellant. Why does "sovereignty" not protect the individual
Indian, a person with dignity and a life, but instead only protects
a soulless corporate shell that does not need the protection?
Arguably, the individual Indian deserves more protection than
respondent corporation.

The cost of a basic Owner' s/ Landlord ' s liability insurance
policy might be fairly expensive, given the amount of foot traffic.
However, this cost is no more a burden than all other Minnesota
businesses, great or small, bear.

The sovereignty issue gets muddled worse in tort cases, as we
have here, than it does in contract cases, when you study the
difference between "sue and be sued" versus "sue and consent to be
sued" clauses. when one contracts with an Indian reservation,
there is an issue as to whether the tribal constitution and/or
bylaws contain a "sue or be sued" clause, which acts an express
waiver cf sovereign immunity, or whether it contains a "sue and
consent to be sued" clause, which does not act as an express
waiver. £££ Rosebud Sioux Tribe v. A & P Steel. Inc.. 874 P. 2d
550, 552 (8th Cir. 1969) '."sue and be sued" clause in tribal
corporate charter is an express waiver of sovereign immunity) .

D-5E

First of all. if there is no "sovereignty." the issue is msot .
If you sign a contract and don't perform, you can be sued, and then
given a chance to explain your actions. But even allowing for the
myth of sovereignty, a contract case car. be looked at differently.
If one contracts with a reservation and assumes its definition of
sovereignty, and signs a contract in writing that contains a "sue
and consent to be sued" clause in favor of the reservation, when
one suffers for that, you have only yourself and your law firm to
blame.

That is decidedly r.ot the case in the area of tort law. None

of the hundreds of thousands cf daily visitors, like appellant, are

sat down at the front door, before plugging in their three nickels

in search of the elusive "Wild Cherries," and given a written

contract with bold face print, not fine print, that spells out

clearly and unequivocally the following information:

You are on an Indian reservation. We claim this is a
sovereign enterprise on sovereign land. If you do not
understand that, please consult your attorney. By
remaining on these premises after you have read this
notice, which you will sign at the bottom, you agree to
accept cur following terms and definitions. Ke can sue
you if we think we have a case. You cannot sue us in
state district court if you think you have a case unless
we consent to be sued in state district court . we retain
the option of forcing you to start your case in our
tribal court, and we appoint the judges and make the
rules for our tribal court.

Also, be aware that this casino may or may not be subject
to the Americans with Disabilities Act, may or may not be
subject to OSHA regulations, may or may not be subject to
state and federal laws prohibiting discrimination and
harassment in the area of gender, race, color, and creed.
We state that we are sovereign and we state that we can
decide to abide by the above rules or we can decide not
to abide by the above rules, but no one will tell us what
to decide because we claim we are sovereign.

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The abcve is an accurate statement of the position taken by
Indian casinos around this state and around the country. Some
voluntarily ccnforr- to the above laws and regulations , some neglect
to conform, some conform only in part, but all insist that they,
and not an individual state or the federal government, will dictate
to which state and federal laws they feel bound. Obviously, Mystic
Lake Casino would not insist that every single person coming
through the door sit down, read the statement, and then sign it
before being allowed to gamble. This would have a tremendously
negative impact or. the number of people coming to gamble. So none
of the visitors, including appellant, have carefully contracted
away their right to sue. None have carefully read and accepted
respondent's viewpoint on sovereignty.

What is happening here is that appellant becomes the
sacrificial lamb for America's 220 years cf benign neglect, and
intentional neglect (including active warfare at times) , cf the
various Indian tribes that populate, or used to populate, this
country. Rather than deal with this duality, this red apartheid as
I call it, we pretend there is such a thing as sovereignty, and as
compensation for past wrongs, we state that appellant, a Minnesota
citizen, cannot sue a Minnesota corporation in a Minnesota state
court for an accident in Minnesota.

The one court that has gotten this issue right to date is the
Montana Supreme Court, in Lambert v. Ryozik . 886 P. 2d 378 (Mont.
1994) . In Lambert . an enrolled member of an Indian tribe brought
a personal injury action in Montana state district court against a

D-57

non- resident motorist for injuries arising out of a car accident
that occurred within the boundaries of appellant's tribal
reservation. The defendant motorist moved to dismiss the action
"for lack of subject matter jurisdiction." The district court
dismissed the lawsuit, believing it was guided by precedent that
stated the jurisdiction of the tribal court pre-empted the
jurisdiction of the state district court.

The Montana Supreme Court made short shift of the argument and
stated flatly that plaintiffs 'Montana Indians) , as full Montana
citizens, had an absolute right under the Montana Constitution to
sue non- Indians in Montana state court. The court said that the
failure to recognize this right to sue would deprive an Indian
plaintiff of due process and equal protection of the law under the
Montana Constitution. :d . at 36C.

Minnesota bestows a similar constitutional guarantee of the
right to have a jury trial in a Minnesota state court. See Minn.
Const, art I. § 4 istating "!t]he right of trial by jury shall
re- a m inviolate, and shall extend tc all cases at lav without
regard tc tl-.e a-sunt m controversy"'.

Appellant here, subject all day and all night to being sued in
state district court by an individual Indian from Shakopee, or by
respondent itself, is being denied that Minnesota constitutional
right .

The Lambar t court did. in its analysis, recognize a previous
case which found in favor of an Indian defendant who wanted tc
defend himself in tribal court instead of state court. Lambert .

£-58

323

886 P. 2d at 360. That part of the analysis was collateral and
unneeded for the its core holding. I suggest the Lambert court
simply needed that part cf its analysis that recognized the
inherent injustice of allowing "sovereignty" to stand in the way cf
a Montana citizen's right to sue in a Montana court. Applying the
Lambert analysis to appellant's rights in this case, the
inconsistencies of respondent's position abound. If appellant had
negligently hurt a blackjack dealer or a coin changer, that person
could sue appellant in state district court. Yet, we say appellant
cannct sue respondent in state district court when she was
negligently hurt.

Assume that in the parking lot cf respondent, appellant, with
passengers in her car, collided with a vehicle belonging to the
Mystic Lake Casino and being driver, by a tribal member. The driver
could sue appellant in state district court. The passengers in
appellant's vehicle could sue appellant in state district court.
Respondent could sue appellant fcr property damage in state
district ccurt. Are we to say that appellant, for her owr.
injuries, has to counterclaim against the driver, and cross-claim
against him fcr injuries her passengers received, in tribal court?:
Do we have parallel lawsuits? What if this lawsuit and/or appeal
from state district court finds negligence on the part of the
driver of the reservation car, but the judgment in tribal court
finds negligence on the part of appellant. Whose judgment is
higher? Whose judgment gets enforced?

Z-59

Cur case today is founded upon a claim of "sovereignty" which
does r.ot now exist, r.cr has ever existed, in ar>y true sense of the
word. Ever. Cherokee Nation acknowledged the lack of true
sovereignty cr. the part cf Indian tribes Somehow the word crept
into our vocabulary. I suspect it crept in as a pacifier for
unrighted wrongs against Indian people, against Indian tribes.

The tribal courts throughout this state, throughout this
country, are net a reliable and predictable forum for citizens to
sue each ether in. nor a place tc seek redress and due process. If
there ie a need tc preserve an Indian tribal ccurt system, I have
no quarrel. This state, this country, is moving toward an era of
alternative forums for dispute resolution. But to wipe out the
racial bias cur Minnesota Supreme Court declared found in our court
system, an Indian tribal court must be open to all, organized
pursuant tc the Minnesota statutes controlling conciliation courts,
district courts and appellate courts, and organized under the
auspices and rule of the Minnesota Supreme Court regarding the
training and discipline cf attorneys and judges.

Ar.-.-tr.i— less would he a cure race-based distinction — ar.cj P.;
Mmnesotar.. regardless cf color, not volunteerms to enter a court
system bass- cr. race and take their chances, should be forced to dc
so or less their right to sue. But this is precisely what
respondent urges en this court. I disagree strongly. It is
difficult to sanction a Tribal Court and declare it tc have
jurisdiction over Kmnesctans. both Indian and non- Indian, when the
Tribal Court is a pure race-based classification. The appointing

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325

authority f:: the :ud=es cf the Tribal Court is the Reservation
5usiness Council, which is, fcy definition, composed only of those
meeting a rare-based qualification. This Council may, if they
choose, appoint r.cr.- Indian judges to the Tribal Court, but they
reserve to themselves the right tc make appointment to the Tribal
Court a race-based classification. In addition, the Reservation
Business Council, if respondent's position is accepted, retains the
right to sue other races (non- Indian) in Minnesota district court,
but then has the power to declare that other races (non- Indian; do
not have the right to sue respondent in Minnesota district court,
unless respcr.cer.t first consents.

Kow dc we accept the incongruity, the injustice, that
residents cf respondent's reservation, and respondent itself, have
the opticr. cf exercising their Minnesota constitutional right to
sue initially in state district court, but that appellant does not?
She is, like they, a Minnesotan resident.

The truly important goals cf protecting Indian culture, Indian
spirituality, self -deterrr.inat icn, their freedom, and their way of
life car. be done within the same framework and the same system, by
which we treat all other Mmnesotans of all colors. This country
has failed miserably at maintaining dual Americas. At one time, we
maintained one America for white and one for certain Japanese-
Americans. At another longer time, we maintained one America for
white Americans and another America for black Americans.

For some reason, we continue to insist that American Indians
can be the last holdout, a race that is not entitled to be brought

D-61

into the fold, car. be left to shift for themselves as long as. from
time to time, we pat them cr. the head like little children and call
them sovereign "Sovereignty" is just one mere indignity, one more
outright lie. that we continue to foist on American citizens, the
American Indian.

Like Justice Harlan, the dissenter in Plessy . I am out of
excuses and simply can no longer defend the status quo.

The most attractive and compelling argument made by respondent
is that they need this sovereignty for Indian "self-determination"
and Indian "self -governance . " When we read and hear this phrase,
all of us, like myself, who push for the self -determination and
independence of all, particularly the poor and the formerly poor,
would think it to be a great argument and reason enough to continue
the myth cf sovereignty. That is. unless we look into the very
phrase itself and say, "Self-determination for whom? Don't all
residents cf this state already have it to the same degree as all
others? Are not members of respondent's tribe residents of this
state?"

All bona fide residents of Minnesota, cf all races and colors.
enjoy identical opportunities for self-determination and self-
governance. All of us enjoy the same access to public schools.
All of us cf voting age enjoy the same access to the polls. All cf
us of electable age and with no legal disability enjoy the same
opportunity to run for office. None of us can be denied an
opportunity to apply for a job, or be kicked off a job, if we have
one. purely because of race or color. Those same guarantees

D-62

327

already dc. and must, apply (whether you live or. a reservation or
not i to all American Indians in Minnesota. Minnesota Indians, like
the rest of us are Minnesota citizens.

Why is there this need to single out a class of people by race
and give them a "double dose" of self-determination, and self-
governance? Without this fiction of sovereignty, they still have
every right we possess, every right that the State of Minnesota can
give. Are American Indians entitled to "more self-determination"
than Minnesota gives to its other residents? I am not sure how
this could be Kow car. a state give more than it possesses?

If this is deemed a federal issue, how does the federal
government give mere than it possesses? Under the United States
Constitution, all citizens of this country of all races already
enjoy the same rights and the same access to the federal court
system to enforce those rights.

Why dees the federal government select one class of people by
race and feel it necessary to give them "double self-determination
and self-gcverr.ar.ee.' - Double ir. the sense that they have the
rights c: all U.S. citizens, but new there is supposed to be
another right because they are Indians? Does that make Indians
separate but equal? I suggest that Brown v. Board of Education
will tell us this is a bad idea, a vicious and humiliating idea.

Do we label Indians "separate but more equal?" That would not
personally bother me, as the American Indian is entitled to some
pay back for our treatment of them since this country was founded.
But, can we really single cut a class of Americans by race and deer.

D-€3

328

them separate but more equal, without running into the same vicious
firestcrr of hate and diviaiveness that prompted the Brown Supreme
Court to state that the Plessv Supreme Court was all wet. all
wrong, and cry cut, "we aren't going to do that any more."

Do we label Indians "separate but less equal?" I suggest that
one will net get off the ground if "separate but equal" cannot.

This case, this issue, is not about who can round up the most
dried out musty federal precedent 1 for one side or the other. This
case, this issue, is about the future of the United States, and the
future of the American Indian. This case is about whether we
accept the American Indian as a full U.S. citizen, a real American.
or whether we will continue to sanctify tiny enclaves within a
state a.-.i tell the individual Indian that if he or she stays there
and does net core cut and live with the rest of us, we will bless
the- with the gift of "sovereignty."

In all hcr.es ty, I am satisfies" that respsndent, respondent's
attorneys, and mergers cf respondent's reservation realize and
accept that they are full -blown Minnesota residents, full -blown
U.S. citizens, and are not really a true sovereign nation or
country m any real sense of the word. I know they know that, and
I know they accept that because they continuously demand and

It is revolting to have no better reason for a rule of law
than that so it was laid down in the time of Henry IV. it is still
more revolting if the grounds upon which it was laid down have
vanished long since, and the rule simply persists from blind
imitation of 'the past .

Oliver Wendell Hclmss. Path cf the Law . 10 Barv. L.R. 45". 4€S

(189?: .

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329

exercise all the rights and privileges of being Mmnesotans and
Americans. They vote, they run for public office. The Minnesota
Legislature's state senator from Senate District 4, is and has
beer., an enrolled member of the Leech Lake Cjibwe Reservation and
a resident thereof fcr years. He repeatedly has signed affidavits
of candidacy for the Minnesota Senate declaring himself to be of
age, to be a Minnesota resident, and to be a resident of the
senatorial district from which he files. That district includes
both the Leech Lake reservation and non-India- lands . The
Minnesota Legislature at all times holds out to all residents in
Senate District 4 that they are bona fide citi2ens of the State of
Minnesota. k: nc time does the Minnesota Legislature advise
Minnesotar.s living ir. Senate District 4 that part of that district
is foreign or sovereign country, nor does the Minnesota Legislature
advise residents of Senate District 4 that they may be governed by
a foreign national cf a sovereign nation.

The senator from the Leech Lake Reservation is a full
Minnesota.-., ar.o" is completely qualified and completely eligible to
run for his senate district and all other local and state offices.
All other Minnesota Indians in this state enjoy identical
qualifications and eligibility to run for public office, from local
right or. \iz through the president cf the United States.

In addition to being eligible to serve in the Minnesota Senate
and the Minnesota House of Representatives, Minnesota Indians are
fully eligible and, if qualified, to file for or be appointed to
any cf Minnesota's constitutional offices, including state and

D-65

appellate court judicial positions. Further, they are eligible to
run for or.e of Minnesota's eight seats in the United States House
of Representatives, or our two state-wide United States senatorial
positions. I can only note that membership in the Minnesota
legislature, the Minnesota judiciary, the Minnesota delegation in
Congress, the federal bench, the United States Supreme Court, and
the office of President of the United States, is not often extended
to foreign nationals of true sovereign nations.

Respondent, and its members, routinely exercise their rights
of access, as Minnesotans. to Minnesota district courts and
Minnesota federal district courts. They take advantage cf the
option cf sending their children tc the public schools of
Minnesota. They lobby the Minnesota legislature and raise money
'.legitimately; for FACS to promote their own self-interest, and in
all other things enjoy the sar.e rights and privileges open tc
Minnesota residents and N.ir.r.escta businesses, regardless of race or
eclor .

What respondent's attorneys are really after is a race-based
econcmio preference that other races in Minnesota do not have. Z
do not quarrel with their right tc be here en appeal . Ethical
attorneys are required to support their client's cause, and when
•tuck with the facts and stuck with the law, they have no choice
but tc put their client's best foot forward. Here, that means
cloaking their client's request for a race-based economic
preference in the historical myth of "Indian sovereignty."

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331

: hope I have beer, able to set out ir. this opinion that
history, r.ct myself, has marshaled the most compelling argument
possible that Ir.diar. sovereignty never existed and does not now
exist . If the only issue were an argument that perhaps out of all
the different races in Minnesota, if any one could justify being
singled out for preferential treatment, it would be the American
Indian. I would have written a whole different opinion. History-
would marshal the argument, "Hey, America, its pay back time." But
that is net the issue, as it cannot be, as pure race-based
distinctions are an area this country has done sc poorly in, we put
them aside for fear of divisive and hate-filled bias resurgence.
The issue is, instead, "can we do what needs to be done for Indian
tribes and fcr individual members, and can we do it legally?" The
answer is a simple unqualified "yes."

As I have set cut ir. this dissent, the machinery is in place
or. the state and federal levels, and has been so for decades, for
hundreds c: years, to treat all we citirens, all we Americans,
subject tc the reality of our limited resources, vith all the care,
respect, and ccmpassicr. that ve can give. Other than that, we
cannot So, as r.c state, no country can give what it does net
possess .

If ve folio*- respondent's reasoning, it, as a reservation, is
entitled tc he a private, sanctified enclave with the extraordinary
privilege cf not having to answer for its alleged acts of
negligence in a Minnesota district court. I am simply not
persuaded .

D-67

How ma.-.y private enclaves within this state, within this
country, do we want CS establish befcre we realize we are
Balkamzir.g America? At last count there were EC: to 600 federally
recognized tribes That begs the question of why should a white
government get to designate who can be a real Indian tribe and whc
cannot be. Anthropologists, linguists, and serious students of
Indian culture conclude there may be as many as 2000 different
distinct groups of Indian people, some small and some larger, with
a separate and identifiable culture, way of life, or language. The
lower nuster cf SOC to 600 is expanding with the push for economic
development, with or without gambling, as unrecognized bands or
tribes are petitioning the federal government for recognition as
yet another " sovereign nation."

Whether we have 5CC to 60C (and growing' federally recognized
tribes, cr 2CCC or more (and growing distinct tribes, we should
talk to Yugoslavia about Balkanization. Yugoslavia no longer
exists .

This i£ not a case cf finding roor. for the great waves of
European ir-igrants that this country experienced between roughly
180C and 1S2C. Everyone involved in this issue is already here:
The one race or tribe or ethnicity that does not immigrate tc
America, by definition, is the American Indian.

Ke simply need tc provide for these fellow citizens, who have
been with us always, and with us a lot longer than we have been
with ther, and treat and respect them with the laws already on the
books for the class of people we call "Minnesota Americans."

C-66

Respondent in this case, a defendant in a personal injury
case, is a multi-millicr. cellar casino with millions of dollars in
revenues and rr.illicr.s :i visiters over its short lifetime.
Respondent was designed specifically for, and marketed specifically
to non- Indian visiters frcr. outside the reservation. That has to
be the c learest economically based express waiver of any claim of
immunity that I could design, if asked to be the architect of such

a waiver,

I respectfully dissent for all of the above reasons, and would
remand this case to the appropriate Minnesota district court to
continue. It would be Mmnesctan against Xinnesotan, in a court
trained to handle such r.atters. No harm will be done.

2-€r

334

Michael Harris, Esq.
41 1 South Muskogee
Tahlequah, OK 74464

Seat of the Cherokee Nation

Testimony before the Senate Oversight Committee on Indian Affairs, March 1 1 , 1998

Observations on the premise, practice, and product of Tribal Immunity.

One of the first concepts impressed upon a student at law school is that a contract is an ag reement
which is legally enforceable. Legally enforceable. Immunity forecloses legal proceedings to
enforce agreements.

Sovereign immunity was articulated as an extension of a doctrine, and was a device employed to
legitimize the rule of the British monarchy - the Divine Hierarchy of Kings. The argument as
advanced held that since the monarch was divinely appointed, he or she was an instrument of
God's will and therefore could do no wrong. Any assertion of error on the part of the monarch
was, by definition, wrong-headed and, in practice, frivolous.

The Royal Family no longer enjoys this privilege anymore than the colonies recognize their Divine
Right of superintendence over our affairs. But our common law retained this doctrine if for
different reasons. To award a judgment against the government by the judiciary was considered a
violation of the separation of powers, an exercise of a legislative function in the disbursement of
public monies for the benefit of one rather than all.

Ultimately however, this Nation and all states abrogated immunity to some extent when it was
acknowledged, all rhetoric aside, that an injustice to one citizen is an injustice to all citizens when
practiced by that our government. This principle gain favor everywhere except Tribal
governments.

Some people are convinced what Indian Country means can be found in Section 1151 of Title 18.
But to know what Indian Country means is to know what sovereign immunity means. The
hysteria which surrounds any suggestion of abrogating tribal sovereign immunity always speaks
louder than the finest advocate in its favor.

This alarm is not only misplaced, it's actually subversive. It's important to appreciate the
distinction between "sovereignty" and "sovereign immunity".Onry then is it possible to
comprehend the injury sovereign immunity routinely inflicts on tribal members.

It's like watching a drowning man ask for a glass of water. As a federal policy, it is flawed at its
inception, unjust in its application and disastrous in operation. Immunity from suit is as important
to sovereignty as duct tape is to an good architect.

335

Tribal sovereign immunity from state jurisdiction began as creature of judicial construction in a
series of decisions which span approximately ISO years. Worchester v. Georgia. The Kansas
Indians. Williams v. Lee, and Arizona State Tax Commission . Absolute immunity from suit was
further extended by judicial fiat in the decision, Santa Clara Pueblo v. Martinez. (1978) .
and defended in Cal ifornia v. Cabazon Band of Mission Indians (1987). and subsequent decisions
which followed. All these opinions, however well-intentioned were based upon the same
questionable presumptions and specious reasoning.

Among the most damaging of these contentions is that sovereign immunity advances the goals of
tribal self-sufficiency, and economic development. This opinion reflects the attitude that economic
development is some sort of seismic event which issues forth like "Old Faithful" to be enjoyed by
the patient and watchful. Yet if all modern economists agree on nothing else, it is the fact that
economic development is a product of a proper business climate.

If sovereign immunity were significant to economic development in any meaningful sense, why,
historically, do Native Americans rank at the bottom of all economic and social indicators? Why,
according to Ada Deere, former Assistant Secretary of Indian Affairs, does unemployment among
tribal members continue to average 50%? Why, with the enormous competitive advantage of
exemptions from state taxes, federal taxes, and immunity from suit, don't Indian enterprises
dominate marketplace?

In truth, tribal immunity deters growth, prosperity, and economic independence.

Non-tribal sources of investment and capital are understandably reluctant to negotiate agreements
with Tribes who are immune from suit. Legal uncertainties, high transaction costs, and the
considerable threat that any agreement may be rendered unenforceable are an impediment to
commercial interaction between Tribes and non-Indians. These obstacles are not as easily
dispatched, as some would suggest, by simply including a few boilerplate clauses waiving
sovereignty and selecting law and forum.

No agreement can bind a Tribe if the tribal agent is without the authority
to contract. And often there is considerable disagreement within the Tribe as to the extent of any
individual's or branch of government's ability to contract for the Tribe. It is not at all uncommon
to have the judicial branch invalidate a contract signed by the Principal Chief, or Tribal
Chairperson, as an unlawful violation the separations of powers: the legislative branch having the
exclusive authority to determine the disbursement of tribal funds.

Nor can a contractor be certain that any subsequent enactment of law will not invalidate an
ag r eement. Tribal law may be applied retroactively as well as prospectively in the absence of any
law to the contrary. These problems will vary from tribe to tribe as tribal governments are as
different in structure as the cultures they represent.

336

No complement of competent lawyers can guarantee safe passage navigating tribal law quicksand.
The Washington D.C. firm. Swidler and Berlin has around 1 75 associates to its credit, and none
of these rescued the law firm from the litigation in which it is now involved in both federal and
tribal court with the Cherokee Nation. Another Oklahoma law firm is involved in state district
court litigation arising from its contract with the Cherokee Nation.

These results are not necessarily the product of bad faith. But they are the consequence of bad
policy. Not only does immunity insulate tribes -from liability from non-Indian litigants, it absolves
Tribes from accountability to their tribal members.

It grants a license for lawlessness, and is an open invitation for elected Tribal officials to oppress
their tribal members. Whatever benefit may be claimed to accrue to the Tribe, the injury sustained
by Indian peoples is far worse. In the struggle to preserve immunity. Tribes preclude any realistic
hope of overcoming the poverty and despair which afflicts most Indian peoples living in Indian
Country.

It is time to re-examine the argument that absolute immunity serves to benefit Indian Tribes, and
demand some empirical evidence of its truth. Whatever promise that once lay on that unlit path
has fled - if it were ever there. Perhaps it's time, finally, that there be "one law for the native and
stranger among us."

Were this true, a tribal member wronged could have access to the same constitutional protections
guaranteed to other Americans. He or she might proceed by original petition in a state of federal
court to enforce those rights rather by Writ of Habeas Corpus in federal court to address
violations of the handful of rights recognized in the Indian Civil Rights Act of 1968 without any
meaningful forum. Were this true, a tribal member may be as aware of being an American as he or
she is of being Native.

The American Indian Equal Justice Act embodies this principle. It addresses inequities which
cannot fail to foster resentment between Indian and non-Indian. It attempts to provide protection,
accountability, and opportunity for Indian peoples.

For this, it must be regarded as among the most important effort in the realm of Indian Rights
since the Congressional grant of self-determination to Tribes in 1975 .This does not threaten two
hundred years of Indian law. To the contrary it extends two hundred years basic constitutional
jurisprudence. What principled objection can possibly be raised to this legislative endeavor?

That h should have been done sooner?

337

It is not necessary to deny rights to non-Indians to protect Native Americans. Nor is it necessary
to shield Indian peoples from opportunities because although they might do well, they might fail.
But what cannot continue is to withhold fundamental constitutional protections from everyone
because Tribes don't want to buy insurance.

Stripped of the ornamentation of elevated language, this would be the actual extent of the burden
placed on Tribes were the Indian American Equal Justice Act made law . Since most Tribes
possess this coverage anyway, it cannot be this intrusion to which the Tribes object. This hearing
constitutes the best evidence that with sufficient financing, the most artful speakers can discuss
concerns and positions passionately without reference to what is at stake.

It is necessary to acknowledge this problem exists, and it is in the best interests of the federal,
state and tribal governments to forge a common solution for its common citizens. All sovereign
immunity encourages, if anything, is conduct which is actionable in any other segment of society.
What Native Americans really need is a little less immunity, and a little more America.

338

Michael D. Harris, Attorney at Law

41 1 S. Muskogee. Tahlequah 74464 Telephone: 918.458. 1 1 10

March 30. 1998

Sen. Ben Nighthorse Campbell
Committee on Indian A Hairs
Washington D.C. 20510-6450

Re: Response to Questions submitted in Correspondence of March 23. 1998.

O'siyo Sen. Campbell:

Thank you for your interest in this matter which is so significant to the welfare of Indian
peoples. The following are my efforts to address the supplemental questions presented in your
letter of March 23, 1998.

1 . Do you believe that contract terms are best left to the contracting parties?

Contract terms should be determined by the parties but contract provisions are never adopted
without reference to the current statement of law. This is sole immutable verity of contract.
Any discussion of "freedom to contract" which omits the operative reality that "law" is the
cornerstone of contract is meaningless.

When asked whether S. 1691 would prevent terms which include resort to tribal courts and
law, Mr. Jarboe replied, "No. But it would drastically change the bargaining positions." This
amounts to a confession that bargaining positions are drastically disparate, and that Tribes
must negotiate to arrive at a position that all other parties enjoy when they first sit down to a
table with one another.

The statement of federal law, as currently articulated, is that any performance "contracted"
from a Tribe is mere "promise" to perform, and any performance tendered to a Tribe is a
"gift", in the absence of a waiver of sovereign immunity. Nomenclature aside, this is the effect
of a policy which holds that the non-Indian entity is bound but the Indian Tribe is not. This is
precisely what occurs, and with such regularity that it has become a topic of frequent
discussion among jurists and legislators.

To inquire whether terms are best left to the contracting parties avoids a more troublesome
truth. Individuals who are free to contract are free not to contract as well and the latter
decision precludes consideration of the incidents of the former. Too often this essential fact is
overlooked but its importance cannot be overstated.

339

Page 2

Response to Supplemental Questions

March 30, 1998

2. How has tribal immunity played a part in the contracts you have negotiated

with Indian Tribes?

Tribal immunity has presented an impediment to contracts with non-Indian business entities. Mr.
Jarboe is correct in his testimony, it is an issue. But he was disingenuous when he stated, "it is
just an issue". It is an issue that is often dispositive of the inclination to do business with a Tribe.

Part of the difficulty is predicated on the understandable tendency to group all Indian peoples"
circumstances together. Hence, a non-Indian business entity desirous to conduct business with
and on an Indian reservation will have no choice but to address the issue of sovereign immunity.
However, in Oklahoma, where no reservations exist, venture capitalists who are given a choice
between financing low cost housing with Indian Tribes or opening up a number of tanning salon
franchises will make a decision based on the numbers, and as a rule, it is not to the benefit of
Indian peoples.

This decision in no small part is determined by the lack of certainty which characterizes
transactions with Indian Tribes. Immunity, applicable law, proper forum, while not
insurmountable obstacles, are obstacles nonetheless, and no rational business entity undertakes an
endeavor the transaction costs of which are substantially higher than the many available
alternatives.

3. Should the Federal Government review privately negotiated contracts for fairness?

This is already the practice for all Tribes who do not operate under a Grant of Self-Determination.
The Bureau of Indian Affairs, pursuant to 25 CFR 81 reviews and ratifies all contracts negotiated
with Tribes, and without the approval of the BI A. all moneys paid pursuant to a contract are
subject to a Qui Tarn action for recovery.

As for the Tribes granted self-determination, it is not necessary that the Federal Government
review contracts for fairness. Indian Tribes are capable of negotiating mutually beneficial
contracts. We have lawyers, too. However, the chief concern should be that opportunities to
contract not be foreclosed because of a misplaced, overly-protective and archaic concept of who
and what Indian people are and what they need.

It seems curiously inconsistent for the Federal Government on one hand to hold that Indian
people are capable of governing their own affairs and on the other, shielding them from all the
risks and benefits of so doing. If the Federal Government is actually interested in fairness, level
the playing field. To do otherwise betrays the fact that the Federal Government does not believe
Indian people can look after themselves, an opinion that has many adherents within the
Department of the Interior.

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Page 3

Response to Supplemental Questions

March 30. 1998

When the same law operates consistently and fairly for all contracting parties, there will be no
need to police individual contracts for fairness. When Indian peoples are sufficiently respected
that they are treated as equals rather than "wards", the opportunities that all other citizens take
for granted will be available to tribal members.

In closing, I hope I have succeeded in emphasizing that the true difficulties do not arise when a
Tribes sits down to contract with a non-Tribal entity. Rather the problem occurs that often Tribes
never reach this point because the law, as currently constituted, makes this a poor business
practice when other options for investment exist for non-tribal entities. Necessarily, a loss of
opportunity is always difficult to measure but it is simple to observe first-hand in Indian Country.

Of course it is fitting that federal agencies whose livelihood is predicated upon the continued
vulnerability, poverty, and dependence of Indian people would oppose any effort change this
condition. Yet h is only with the greatest restraint that one may listen to a bureaucrat in a blue
Christian Dior suit profess with a straight face." Social and economic conditions are so dire for
Indian people, and not much improvement has been documented in the past twenty-five years. To
change federal policy with regard to the Tribes could only lead to a catastrophe." Since virtually
all the Tribes with a grant of self-determination are fully covered with insurance, a reasonable
person is compelled to wonder, "a catastrophe for whom?"

Any discussion of the impact of 'sovereign immunity" is generally a dry discourse at best in the
hands of academics. But it has peculiar force when its effects are witnessed in the slack faces
which populate the multitude of withered Indian communities in this Nation. These towns, these
families, these persons have names but the people who champion their plight do not know them.

Your Committee is singularly situated to address a problem which is more immediate than many
suspect. Indian peoples are actually oppressed by well-intentioned federal protections. Further,
the non-Indian backlash which is building seems particularly ironic given the fact that most tribal
members suffer rather than succeed as a result of the "special status" these non-tribal members
resent.

No good can come from it. Small truths speak in simple words. Important truths are silent.

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TESTIMONY OF SCOTT KAYLA MORRISON

Choctaw Attorney, Wilburton, Oklahoma

March 11, 1998

How far does tribal sovereignty extend? That is the question of concern. You know
about situations where non-Indian patrons of tribal casinos were prevented from bringing suit
against a tribe because of tribal sovereign immunity. You may not know about a situation that is
more troubling to me, a situation where tribal sovereign immunity extends to suits on behalf of the
United States to enforce a contract. When tribes cannot be sued by anyone, even the federal
government that funnels billions of dollars into tribal coffers each year, the tail is wagging the dog.

Sovereign immunity against the United States has been used by tribal leaders and tribes in
both the criminal and civil areas. The Eighth Circuit is currently considering Darrell "Chip"
Wadena's argument that the federal government cannot criminally charge him with federal crimes
involving federal money because of sovereign immunity.

The Seventh Circuit ( V S ex rel Hall v. Tribal Development Corp . No 96-1772) issued a
ruling in 1996 that said that citizens cannot bring a False Claims Act suit on behalf of the United
States against a tribal corporation The court ruled that the tribe was an indispensable party and
could not be sued because of tribal sovereign immunity. If the federal government cannot sue
tribes to enforce contracts, we have a problem. Most of the billions in federal aid received by
tribes are through Public Law 93-638 contracts or Self-Governance Compacts. With no
administrative accountability process, as is currently the case, and no enforcement mechanism
through the courts. Congress has no control over federal dollars once it goes to tribes. There will
be no accountability to anyone unless sovereign immunity is limited in some fashion.

I would like to share my experience of sovereign immunity as it pertains to a federal
contract. The woman standing behind me. Rose Burlison, was arrested in 1995 at the Choctaw

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Labor Day Festival in Tuskahoma, Oklahoma, for videotaping the arrest of a 64-year old
grandmother. Juanita McConnell Mrs McConnell was arrested for passing out Choctaws for
Democracy pamphlets Thirty minutes later, Douglas Dry, an attorney. Marine Corps Reserve
major and a candidate for chief, was arrested for passing out literature and he "voluntarily"
slammed his face into a tribal police car while handcuffed

At the time the three were arrested, the tribal attorney said that they violated a law that
prohibiting passing out political literature on tribal or federal land. When it was discovered that
no such law existed, the three were charged with a variety of charges, including disturbing the
peace and disrupting a parade Mrs. Burlison faces almost five years in jail. Mrs. McConnell
faces over three years in jail. Major Dry faces almost five years in jail. Free speech can be
punished on Choctaw land because of the legal fiction that the US. Constitution does not apply to
Indian Country

How could our tribe arrest these Choctaw citizens when we never granted criminal
jurisdiction to our tribe under our tribal constitution? The Bureau of Indian Affairs has taken the
position that the Choctaw Nation contracted federal criminal jurisdiction through a Public Law
93-638 contract The mechanism that allowed this is uncertain, and I believe illegal. What is
certain is that 1) the U.S. Constitution does not apply to Choctaw land, even though federal
criminal jurisdiction is being exercised, and 2) tribal sovereign immunity applies when we sued the
tribal officers over the arrests in a civil rights lawsuit in federal court. The tribal officers are
represented by the U.S. Attorneys Office in their official capacity but are asserting tribal
sovereign immunity in their individual capacity They are playing both sides of the street.

The three Choctaw citizens arrested have been forced to defend themselves, out of their
own pockets, for over two years in a Court of Indian Offenses for the Choctaw Nation, a

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supposedly federally administered court. They were charged for violating laws passed by the
Choctaw Council, instead of under the Code of Federal Regulations. They have been unable to
obtain evidence necessary for an adequate defense from the Bureau of Indian Affairs and the U.S.
Attorney's Office due to the regulations of a CFR Court, even though this is a court exercising
federal criminal jurisdiction.

The tribal prosecutor is also the tribal attorney who represents the executive and
legislative branches of the Choctaw government. This violates the separation of powers doctrine
of the U. S. and Choctaw Constitutions. The chief appoints the judge for this court, even though
the federal regulations state that the BIA is supposed to appoint the judge. The chief can also fire
the judge at will under the Choctaw Constitution. The chief also can fire the tribal police for not
doing as he orders. The chief intentionally hires a tribal prosecutor he can control. Prior to hiring
the son and law partner of the tribal attorney, the former chief, Hollis Roberts, offered the tribal
prosecutor job to Micah Knight, a Choctaw attorney he thought he could control. She turned
down the job.

The chief and the council can manipulate the court to their advantage. Our former chief
Mollis Roberts was convicted of sexually abusing tribal employees who were tribal members in
federal court in June 1997. Prior to the indictment, a victim, whose attorney was Douglas Dry,
sued the chief in federal court but the case was dismissed due to sovereign immunity She was
told by the federal court to sue in Choctaw court. Ten days later, the council changed the statute
of limitations from three years to six months so the victim could not sue the chief The speaker of
the council said this was the specific reason for the change as shown in the council minutes.

Dry, Burtison and McCoimeU have filed a writ of habeas corpus I have here in federal
court in January 1998. It sets out 1 7 reasons why they should be released from these charges and

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documents the abuses of the Choctaw court Judge Frank Seay dismissed the writ February 2,
1998, in a one-line order because they were not "in custody " This order has been appealed to the
10* Circuit

This is a system ripe for abuse because of no accountability - from the federal government
or tribal citizens. Under the current state of the law, we cannot sue our tribal government
because of sovereign immunity and the holding of Santa Clara Pueblo Without federal court
jurisdiction, we are at the mercy of a tribal government that has proven itself capable and willing
to harass and intimidate tribal citizens. Sovereign immunity was intended to be a shield for tribes
to become responsible and financially solvent governments. However, it has become a sword
used against tribal citizens.

You will be told that more money to tribes will solve any problem discussed here today
Let's look at how money has created, not solved, problems in the Choctaw Nation. From 1991 to
199S, the tribe received over SI million dollars to prosecute only three people for free speech.
Since these arrests in 199S, the tribe has received a second SI million and it has prosecuted a total
of 15 people in 5 years, with a tribal population is 107,000, with 25,000 living within our
boundaries. Of those 1 5, six were Choctaws for Democracy members These six were charged
with 22 crimes while the nine non-CFD members were charged with only 10 crimes, mainly public
intoxication. It appears from the figures that the tribal leaders are targeting a certain group for
harassment and intimidation, using federal funds and federal criminal jurisdiction to accomplish
this

At the 1996 Labor Day Festival, there were more arrests for pf><«*««ing Choctaws for
Democracy pamphlets. The Choctaw Nation hired off-duty police officers from state law
enforcement agencies as security during the Festival. Non-Indian officers wearing City of Durant

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police uniforms and badges assaulted Douglas Dry for possessing literature. Durant is 100 miles
from the place of the arrests in Tuskahoma We sued the officers in federal court. The Choctaw
tribal attorney represents these officers and asserted tribal sovereign immunity on their behalf. His
argument is that since they are tribal officers, we can't sue in federal court; since they are non-
Indians we cant sue in Choctaw court; and since it happened on tribal land, we can't sue in state
court. According to his argument, non-Indians can be hired by the tribe to assault tribal citizens
without recourse. Without federal court review, we are at the mercy of a tribal gov e r nm e nt out
of control

We hear "vote the bums out" as a solution, instead of limiting sovereign immunity. We
cannot do this because the war chest to re-elect our chief and council comes from federal funds
This is how it works: The tribe is given federal funds under PL-93-638 to maintain the Choctaw
voter registration list. This list is only available to administration and candidates of its choice, not
to all candidates. The reason for such secrecy is the federal Privacy Act, according to the tribal
attorney The Office of the Solicitor and a federal court have both ruled that the Privacy Act does
not apply to the Choctaw voter registration list. But the tribal attorney continues to assert the
Privacy Act prevents release of the list. The tribal attorney is paid by federal funds for this advice
that is clearly against the law But when tribal candidates cant sue the tribe in federal court
because of sovereign immunity and cant win if they sue the tribe in tribal court, the tribal attorney
can give any advice the administration wants to hear.

In 1987, a candidate challenged withholding the voter registration list in federal court.
The district court ruled that the BIA must release the list. However, ten days after the filing of
the complaint and prior to en fo rcement of this ruling, the BIA amended the voter registration
contract with the tribe to only include names but no addresses With a tribal population of

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107,000 scattered across the country, candidates cannot inform the membership of their platform
without addresses The BIA continues to funnel federal funds into a tribe that diligently denies us
basic input into our own tribal affairs election of tribal leaders. This is not self-determination, this
is a dictatorship.

In addition to withholding the voter registration list, the Choctaw Nation does not allow
candidates a platform in the tribal newsletter, the Bishiruk, which is funded by federal funds, by
the way. According to the Bishinik, the only candidate is the incumbent, and there is no free
exchange of ideas in the paper Federal funds are used to violate candidates and tribal members
free speech and free association. This can be done because there is no mechanism to allow
accountability. We can't sue and you, the federal gover nm e n t, can't sue.

Another way the administration controls the election is mailing campaign literature of the
incumbent, using federal funds. The chief sends out campaign letters, birthday and Christmas
cards, using the tribal postage meter and the voter registration list, both funded by federal funds
But the abuse of federal funds in campaigning does not stop there. Federal funds are used to send
out campaign letters for the state governor, a U.S. Senator, state representatives, state judges,
county commissioners, and county sheriffs. Rep. Wes Watkins can provide first-hand experience
with use of federal funds in campaigns. With political favors owed the tribe, tribal members are
further at the mercy of tribal leadership in forums outside of tribal government. And federal funds
allow the consolidation of such political power.

The tribe controls the press in southeast Oklahoma, directly or indirectly. The former
chief Hollis Roberts and the tribal attorney own newspapers outright; the tribe owns shares in
newspapers, and the tribe has contracts with newspapers for tribal printing. Small newspapers
have a vested interest in not printing fair and accurate tribal news. Tribal citizens cannot

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participate in tribal affairs if they are uninformed, and the tribal administration can maintain
ignorance with federal funds at their fingertips.

Tribal members cannot "vote the bums out" in such a system. There is no mechanism to
bring justice and democracy into our tribal government as long as this allowed. We are asking for
relief from this tyranny. We want federal court jurisdiction or review. Without it, we will
continue to be treated as second class citizens, not federal citizens.

We are not whiners. We have actively sought redress in tribal court, in CFR courts, in
state courts, in federal court and now in the 10* Circuit. I have a list summarizing 9 cases we
have filed, in addition to administrative complaints within the BIA and letters to Congress. We
have nowhere else to go. We are smart, intelligent people who participate in tribal affairs to
return a government of the people, by the people, and for the people. This is not an unreasonable
request. Congress set up the system we currently live under. Congress can change it. We want
to get back to our lives instead of investing thousands of dollars in fighting a corrupt system
funded by federal funds.
(End of oral testimony)

The Choctaw Nation is a microcosm of what is going on across Indian Country. The lack
of accountability creates an atmosphere ripe for corruption and abuse. The Mississippi Choctaw
Tribal Court has problems similar to ours.

Chokwe Lumumba, an African American attorney in Mississippi, represents a Mississippi
Choctaw in an action in tribal court to stop the casino. Silver Star. During a court hearing, Mr.
Lumumba was fined $300 for contempt of court. His contempt was 1) folding fas arms; 2) saying
"uh-huh", and 3) for an undisclosed incident that happened in chambers. He has not paid this
unfair fine and has been told that he would be arrested if he came on the reservation again The

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problem is that a tribe does not have criminal jurisdiction over non-Indians and cannot arrest him
Regardless, due to this threat, the tribal member has been denied an attorney of choice to
represent him in tribal court.

Another tribal member, Harrison Ben, is a councilman on the Mississippi Choctaw tribal
council. He was arrested in January 1996 for violating a law outlawing possession of tribal
documents without permission of Chief Philip Martin. I was contacted by tribal members when
this law was passed and asked for a copy of it from another councilman. He said that he could
not get a copy of the ordinance because possessing it would be illegal. There is a serious problem
with notice to tribal members of what action will result in criminal prosecution by withholding this
ordinance from the tribal public

This ordinance is not available through the Bureau of Indian Affairs either Under 25 CFR
Part 1 1 100(e), the BIA must approve it before it becomes effective law. BIA employees are
concerned that release of this ordinance will result in their arrest There are several problems with
this. First, the tribal or CFR court does not have jurisdiction over federal employees. Second,
withholding this information violates due process of tribal citizens under the U.S. Constitution or
the Indian Civil Rights Act. Third, this determination violates the Freedom of Information Act
which would allow release of this ordinance. Fourth, even if the tribe had authority over federal
employees, the BIA headquarters is off-reservation and the tribe does not have extra-territorial
criminal jurisdiction. The tail is wagging the dog when this can happen

At the January 1996 council meeting, Harrison Ben was asked to approve the casino
budget without an opportunity to study it or talk to his constituents. He refused to vote on it and
left the council hall with the budget in his possession. He was arrested the next day. Mr. Ben's

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attorney, Harvey Freeion, is an associate of Mr. Lumumba since Mr. Lumumba cannot return to
tribal court. Mr. Freeion filed a motion to dismiss that was denied on April 25, 1996. The
decision was published in 23 Indian Law Reporter 6119 (July 1996). Mr. Ben filed an appeal
within 30 days of the decision and to date, this appeal is still pending. Mr. Ben is still facing a
criminal charge over a year later.

I worked on the Miss. Choctaw reservation as staff attorney for East Mississippi Legal
Services in 1990-9 1 . I had many problems litigating in tribal court. I had a bad feeling about
going to my regular civil docket on December 6, 1991 . When I did not show up, the court clerk
(a non-Indian) asked the county sheriff to go by my apartment off-reservation to bring me to
court. She sent the Choctaw police to pick up my friends and staff on the reservation to question
as to my whereabouts The Mississippi Narcotics Bureau was sent to find me at friends in
Jackson, Miss , and broadcast my tag and a description of my truck. All of this was done without
a warrant to bring me back to tribal court. I have documentation of this because the tribe filed a
bar complaint against me During the bar complaint hearing, I was provided documentation and
two days of testimony. It was pretty scary Now, they refused to even acknowledge my
application to practice in Miss. Choctaw tribal court.

47-201 98-12

ORIGINAL

TESTIMONY OF CHIEF PHILLIP MARTIN

CHIEF OF THE MISSISSIPPI BAND OF CHOCTAW INDIANS

BEFORE THE COMMITTEE ON INDIAN AFFAIRS

UNITED STATES SENATE

March 11, 1998

Mr. Chairman and Members of the Committee, my name is Phillip Martin. I am the Chief of the
Mississippi Band of Choctaw Indians ("Choctaws" or the "Tribe"), a tribe of 8,300 members
with a small reservation of 24,000 scattered acres in East Central Mississippi. The Choctaw are a
people who have maintained their culture and language, which is still spoken by the majority of
the Tribe, and the Choctaw reservation is governed by a democratically elected 16 member
Tribal Council, all of whom are elected for staggered four year terms. The Chief is also elected
at large for a 4 year term.

I thank you for your gracious invitation to address the important issue of tribal sovereign
immunity as it relates to economic development, commercial dealings and taxation, especially
against the backdrop of the recently introduced legislation that seeks to take away a tribe's right
to assert or limit its immunity from suit. Put simply, immunity from suit is a fundamental and
critically necessary element of sovereignty and has been essential to the Choctaw's efforts to
attain economic achievement and a level of tribal self-sufficiency.

The Choctaws realized decades ago that the key to improving the social and economic well being
of our people lay primarily in our own hands rather than in the hands of the State of Mississippi
or the Federal government. At the same time, the Tribe was painfully aware that we had no
industry or infrastructure and suffered from an unemployment rate of more than 75 percent.

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Moreover, the Tribe had essentially no natural resources that could be used to generate income or
wealth, and our tribal membership lacked education, had no practical work experience and
suffered from overwhelming health problems.

In the 1970's, the Tribe focused on equipping its tribal members with the skills and confidence
they needed to be productive members of the work force. Working towards this end, the Tribe
committed its limited tribal and federal resources to strengthen its local schools, run adult
education and vocational programs, provide assistance and encouragement to students to pursue
higher education and educate tribal members about how to live healthier life-styles.

In tandem with that effort, the Choctaws focused on building their own industrial and
commercial base to create entry level jobs for the Choctaw people and our non-Indian neighbors.
Critical to the development of our commercial enterprises was our ability to exercise our
sovereign immunity and to negotiate contracts with our business partners using appropriate
waivers of this immunity.

From the very beginning, with our first plant in 1 979, the Tribe recognized that to succeed in the
commercial world we had to operate within certain basic guidelines. We had to be able to
convince potential non-Indian partners and investors that if they did business with the Choctaws
they first, were likely to make money and second, had necessary assurances that the Tribe was
going to honor the contractual obligations of our commitments. The Tribe's adherence to sound
business principles and the establishment of a reputation in the business community as a partner
that could be trusted has resulted in substantial gains for the Choctaw reservation.

Over the last 20 years, the Tribe has undergone an extraordinary transformation. Once a
community stuck in dire poverty, the Choctaws are now the largest employer in Neshoba County
and are among the ten largest employers in the State of Mississippi. The Choctaws have
experienced this phenomenal growth through self-governance. The Tribe did not receive any
money from the state.

Today, the Tribe runs a construction firm, shopping center, printing plant, auto parts
manufacturing plant, hotel, casino and championship golf course. Revenues generated from
these enterprises are used to provide traditional government services to the Tribe which include
law enforcement and courts, fire protection, education, water and sewer utilities, housing, roads,
health care, social and related human resources, and economic development. The Tribe operates
its own courts, fire department, police force, reservation school system, housing authority, utility
commission, and a comprehensive, integrated health care system which includes an accredited
hospital, field clinics, a 1 20-bed nursing home and a kidney dialysis center. In addition,
unemployment among tribal members has fallen almost twenty fold to 4 percent and dependence
on transfer payments such as general welfare assistance from the federal government has dropped
dramatically. Overall, the Tribe's quality of life has sharply improved.

Despite the gains we have made, there is still a role for the federal government, under its trust
responsibilities to the tribes, to assist the Choctaws with the unmet needs on the reservation.
There remains a huge unmet need for improving health care, education, housing and
infrastructure in our community.

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The success the Tribe has achieved would have never been possible without tribal sovereign
immunity. Tribal immunity from suit has played an essential role in the preservation of our
autonomous political existence and has safeguarded our tribal assets. It has also allowed us to
develop institutions of self-government, realize self-sufficiency and participate in mainstream
society.

Just as important as our ability to assert immunity from suit has been our right to negotiate
waivers of immunity with lenders, contractors and other non-Indian business entities. Like all
sovereigns - ranging from the United States of America to the City of Philadelphia, MS - we
have had to necessarily waive our sovereign immunity to induce third parties to enter into
contracts with us. The Choctaws believe that this basic free enterprise or freedom of contract
approach to addressing the tribal immunity issue is both the most economically efficient and the
best way to protect our people. A private party negotiating a contract with a sovereign tribe is in
the best position to determine what terms of a deal are and are not acceptable, just as they are in
negotiating a contract with anyone else. In addition, this approach has provided us the leeway to
privatize almost all government services by contracting to provide such services directly
ourselves. From our experience and standpoint, this contract approach is the most effective way
for a tribe to negotiate with non-Indians and has worked very well for us.

We have followed this approach and have honored our contracts because it was and remains the
right thing to do and in our best interests to do so. The only way the Tribe was able to attract
capital to the reservation to build any significant commercial base and generate revenues needed

to support and improve our communities was to voluntarily waive our immunity. Parties
interested in conducting business with the Choctaws would not have entered into these
agreements had there been no legal ability to seek redress for grievances. It is also important to
recognize that our partners also voluntarily entered into contracts with us as well. No person or
business is obligated or forced to contract with an Indian tribe.

Once we established an excellent track record with our lenders and first business partners,
financing for other enterprises and manufacturing plants followed. Had we not lived up to our
end of the deals and hid behind sovereign immunity had our partners come to seek redress,
however, we would have destroyed our standing with the outside business community and could
have never obtained the financing we needed to build and develop our commercial enterprises.

It is the market that has and will continue to regulate business cases involving sovereign Indian
tribes and non-Indians. When we first embarked on our strategy to look for outside private
investment, we were aware that outsiders would not do business with tribes if it was not in their
own economic self-interest to do so. I am personally cognizant of the difficulties a tribe must go
through to get the attention of and convince non-Indian businesses to invest in tribal enterprises.
Outside contractors and investors already possess the economic resources and capital necessary
operate on an equal basis in business dealings with the tribes. A tribe that asserts tribal sovereign
immunity in a contractual setting will soon find itself without any business or contracting
partners and will be unable to attract capital from lenders and investors. It is for this reason that
Federal legislation to revoke sovereign immunity for the tribes is unnecessary and an
unwarranted attack on our sovereignty.

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i also want to emphasize that ultimately it is not questions of legal defenses or legal rights and
legal immunities and jurisdiction that determine whether or not a long term commercial
relationship can be established and maintained between a tribe and an outside investor. The most
important aspect of maintaining such a relationship is trust.

Under existing law, there is no ability for a Federal court or a Mississippi State court to decide
commercial disputes arising on our reservation - even if the parties wanted to use one of these
forums. On the Choctaw reservation, the only forum available to resolve such disputes has been
the Choctaw Tribal Courts. In recognition of that, the Choctaw tribe has a written code of laws
and civil procedures. Furthermore, we employ experienced, licensed attorneys to sit as judges
over civil and commercial disputes. Our experience indicates that our tribal court is scrupulously
fair to the interests of non-Indians and nonmembers, and the judges are equally even-handed in
their decision-making processes when compared to federal and state courts. I am certain our
business partners would agree that our system operates in such a fair and honest manner. In fact,
even though we have this system, the Tribe has never had a conflict with a business partner
requiring resolution by the tribal courts.

For the reasons stated above, the Choctaws believe that sovereign immunity for tribes should
remain and that legislation seeking a sweeping waiver of tribal sovereign immunity is
unnecessary and will undermine tribal self-government and self-sufficiency. Furthermore,
assertions that the federal, state and local governments have either abolished or severely

restricted the doctrine of sovereign immunity are grossly exaggerated. The tribes are utilizing
the doctrine as it was intended and in the same manner as federal, state and local governments.

You have also asked that I briefly comment upon the relationship of the Choctaws and the State
of Mississippi in regard to the issue of taxation in general and the question of taxation of on-
reservation activities in particular. To put my comments in context, it is important to realize that
the Choctaw reservation has different origins and legal characteristics from many of the Western
reservations. Unlike most of the tribes in the West, the Choctaw reservation does not have a
treaty based, executive based or statutorily based exterior boundary within which there exists
tribal lands or in which there exists tribal lands and non-Indian or Indian owned fee lands or trust
allotments. Our entire reservation consists of trust land parcels, the title boundaries of which in
effect make up our exterior reservation boundaries. Thus, our experience has not required us or
the state to wrestle with the jurisdictional situations addressed, for instance, by the U.S. Supreme
Court's decision in Montana v. United States , 450 U.S. 544 (1981), where the Court laid down
some basic rules addressing the scope of tribal jurisdiction over non-Indians for their activities on
fee lands within the reservation boundaries, and in later cases which recognized some greater
degree of state jurisdiction to regulate the activities of non-Indians on such fee lands.

The Tribe does not have any fee lands within its reservation boundaries, so all of the tax issues
regarding the reservation have involved questions of whether the state or the Tribe had the ability
to tax land, property or transactions which occur on trust land parcels. In this regard, we and the
State of Mississippi wasted too much time and energy fighting about jurisdiction and taxes in the
early 1970s. The hostility and legal battles largely ended when the U.S. Supreme Court entered

357

its decision in United States v. John , 437 U.S. 634 (1978), reaffirming the legal status of our tribe
as federally recognized and the legal status of our land as Indian reservation land outside the
state's jurisdiction.

Since then, the Tribe and the state have worked closely to address these tax issues. As part of the
Tribe's commitment to work cooperatively with the state and local governments, the Choctaws
have not pushed issues of tax immunity to the limits that are permitted under existing federal
law. At the same time, the State of Mississippi has also shown its commitment to work
cooperatively with the Choctaws on tax issues and has made some accommodations to the Tribe
in terms of tax breaks which the state is not required to make and not collecting certain taxes
which it could under federal law. The state also exempts all transactions on the reservation lands
from state sales or gross receipt taxes. While these arrangements do not involve very much
money, they are important concrete examples of how a state (as well as the local governments
surrounding a reservation area) and a tribe can work in concert to resolve jurisdictional tax
issues. The point here is that this is all a two way street.

We also have an excellent working relationship with the State Tax Commission. There always
has been and will continue to be an ongoing dialogue on many fronts involving contractor's taxes
and ad valorem taxes to name a few. We intend to keep working together cooperatively to
provide for effective collection mechanisms when taxes are due and to sit down at the table and
work out mutually agreeable solutions.

Our ability to operate on our reservation lands free of most state taxes and regulations has
allowed us to grow our businesses through an approach very similar to a free enterprise zone. By
working honestly and reasonably with the state and the surrounding communities, we have also
been able to establish a relationship that is mutually beneficial for all parties.

I would also like to point out that our tribe and the State of Mississippi have just recently
executed an accord which solidifies the positive working relationship we have jointly developed.
A copy of the accord, which is attached to my written testimony, in essence commits both the
state and the Tribe to a formal process for working out jurisdictional and tax type issues at a high
level. Both parties agree that this accord provides for a forum to negotiate our differences before
they get blown out of proportion or place the tribe and the state in a position of confrontation that
neither of us wants.

The approaches I have outlined today have been good for our Tribe, good for the State of
Mississippi and good for our business associates. We have gone from an impoverished
community to a positive economic and social force in Mississippi.

In closing I want to say that I realize that our history and our relations with the state in which we
are located is different from other tribes throughout this great country. In some ways, we have
experienced more historical tragedy than many of the other tribes have had to endure and in some
ways less. The Choctaws have chosen, however, to focus on the future - on what we as a people
can contribute in positive way to build effective and profitable commercial relationships and
government-to-govemment relationships with the State of Mississippi and its political

subdivisions. We are committed to this course. It has worked, and in regard to pending
legislation which has been offered to fundamentally change the state/tribal jurisdictional
allocations and the sovereign immunity doctrine, the Choctaws believe that the consequences of
this legislation would be far reaching and detrimental to the tribes and would severely damage a
tribal government's ability to manage its own affairs.

Mr. Chairman and Members of the Committee, I appreciate your long-standing support of Indian
tribal governments and your continued support of tribal self-determination and the protection of
our sovereignty.

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TRIBAL OFFICE BUILDING
P. O. BOX 6010
MISSISSIPPI BAND OF CHOCTAW INDIANS Jfd^t.l\> PHILADELPHIA, MISSISSIPPI 39350

TELEPHONE (601) 656-5251

May 1, 1998

Senator Ben Nighthorse Campbell

Chairman

Committee on Indian Affairs

United States Senate

Washington, D.C. 20510-8450

Re: Tribal Economic Development, Sovereign Immunity and
Jurisdictional Issues

Dear Chairman Campbell:

I appreciate the opportunity to appear before your Committee at the
hearings of March 11 and April 9 regarding tribal economic
development and the related issues of tribal sovereign immunity and
jurisdiction. In this regard, you have requested by letter of
March 23, 1998 that the Mississippi Band of Choctaw Indians provide
supplemental responses to four additional questions. I understand
that the Committee's questions and our Tribe's responses will be
included in the March 11 hearing record.

Taking those questions one at a time, our response is as follows:

Q. The "Kiowa case" was recently argued before the U.S. Supreme
Court. The contract in issue stated that the tribe's immunity
"shall not be lessened or impaired." Should the court give
effect to that provision?

A. This question assumes that the contract between the Kiowa
tribe and the third party with whom the Kiowas had entered the
transaction in dispute contained language which stated that
"the tribe's immunity 'shall not be lessened or impaired.'"
The exact language in the contract was as follows: "Nothing
in this note subjects (sic) or limits the sovereign rights of
the Kiowa Tribe of Oklahoma." See, ■Tnint Apppnriiv , page JA-
14, Kiowa Tribe of Oklahoma v. Manufacturing Tprhn olngiPB ,
Tnr , NO. 96-1037.

The Kiowa Tribe did, however, argue in the case that pursuant
to the quoted contract provision, "as part of the transaction,
Kiowa refused to give its consent to suit or to waive tribal

■CHOCTAW SELF-DETERMINATION"

862

Ben Nighthorse Campbell -2- April 28, 1998

sovereign immunity." Brief for P«t- it inner pages 6-7, Kiowa

Trih* nf nklahnnui v M*nuf arMiring Torhnnl ngi en Tnr No. 96-

1037. Thus, the Kiowa Tribe's interpretation of the quoted
contract language is consistent with the way that language has
been paraphrased in the Committee's question and we will
assume the correctness of that paraphrase in our response.

The question you have posed is whether the court should give
effect to this provision. Our answer is "of course." This is
a matter of enforcing a contract made between the parties.
The contract implicitly addressed, but clearly did not waive,
the tribe's sovereign immunity from unconsented civil
lawsuits. It is well settled that waivers of tribal sovereign
immunity cannot be implied, but must be "unequivocally
expressed." Santa Clara Puehln v. Martinez. 436 U.S. 49, 59-
61, 98 S.Ct. 1670 (1978). The deal the parties made left the
tribal immunity defense in force, thus the tribe's subsequent
decision to invoke that defense should not have come as a
surprise to the plaintiff when the deal went sour. In this
regard, we would also like to point out that the deal went
sour because of fundamental misrepresentations made by the
non- Indian parties to induce the tribe to invest in stock
which turned out to be worthless.

Under the basic law governing contracts, courts are expected
to enforce the plain terms of an agreement. In this case,
certainly the other parties would be arguing that the plain
terms of the agreement should be enforced if the agreement had
expressly provided for a waiver of immunity and the tribe had
nonetheless argued that its immunity barred a lawsuit to
enforce the contract . The tribe would and should lose such an
argument in such circumstances, just as the plaintiff should,
under current law, lose the argument that the contract
provision which did not waive immunity should be ignored or
disregarded. We in fact argued this point in an »mi nm brief
filed with the court in the Kinw» case.

One argument we responded to in our »■"'""■ brief was the
suggestion that if sovereign immunity were upheld, "the tribes
would have difficulty finding anyone willing to risk his funds
in unenforceable obligations. Such a rule would chill tribal
commercial and entrepreneurial business." 921 P. 2d at 362.

In response, we pointed out:

* Amicus curiae have experienced no such
chilling effect. In an analogous setting, the
Tenth Circuit has exposed this rationalization
. . . for what it is i

363

Ben Nighthorse Campbell -3- April 28, 1998

The Bank next argues that commercial
relations between Indian tribes and
non- Indian banks will be chilled if
the district court's dismissal (for
failure to exhaust tribal remedies)
is affirmed. This policy argument
precisely misses the point of
sovereign immunity, which is the
power of self-determination. We
decline the Bank's invitation to
second-guess the wisdom of the
nation's business decisions under
the guise of judicial review.

Rank nf Oklahoma v Muscogee (Creek) Nation.
972 F.2d 1166, 1169 (10th Cir. 1992); rpp alsn
Hanson . 47 F.3d at 1064. Oklahoma's policy
consideration is, at best, misguided
paternalism. See Presidential Comm'n on
Indian Reservation Economies, Report and
Recommendations to the President of the United
States, Part 2 at 31, 115, 121 (1984) (from a
'private sector business perspective'
sovereign immunity is considered a 'problem
which the teams discovered low on the list of
priorities. .. .As noted above, the teams found
the lack of good business plans, a shortage of
entrepreneurs, and insufficient attention to
cash flows to be of far more importance to
banks and other investors than questions of
collateral.'). Indeed, as this Court has
noted, 'the perceived inequity of permitting
the Tribe to recover from a non- Indian for
civil wrongs in instances where a non- Indian
allegedly may not recover against the Tribe
simply must be accepted in view of the
overriding federal and tribal interests in
these circumstances....' Thrpp Affiliated
Trihpa, 476 U.S. at 893. Tribes and persons
dealing with them have long been able to
effect a valid waiver of tribal sovereign
immunity when they so desire. Ssp , eg .

MrfMendon v Tlnifert StafP B] 885 F.2d 627, 631-
32 (9th Cir. 1989); American Indian Agri r
rre><\it rnngnrfiiim, Tnr , 780 F . 2d at 1378-79.

Brief of the Navajo Nation. . .and the Mississippi Band of
Choctaw Indians as amici niriap in support of the

petitioner, pages 17-18, Kiowa Trihp , Riipra

364

Ben Nighthorse Campbell -4- April 28, 1998

We stand by this position. Tribes and their business partners
should be left alone to negotiate what degree or extent of
sovereign immunity waivers (if any) they can mutually agree
upon. Such agreements may limit the extent of the waiver to
particular contracts, to particular income streams, to
particular assets, etc., and the courts should enforce
contracts so negotiated in accordance with their terms.
Honoring the doctrine of freedom of contract is a far better
way to build reservation economies and protect the political
integrity of Indian tribes than imposing a unilateral,
federally imposed, "one size fits all tribes and all
transactions" change in the law of sovereign immunity.

Q. What is the appropriate "exercise" of tribal immunity in
contracts?

A. The issue posed in this question really boils down to one of
the prudential exercise of tribal governmental authority in
its business relationships. The word "appropriate" thus
captures not only the issue of what is legally permitted, but
also what is prudent to do in a given circumstance. As I have
previously indicated several times in testimony before your
Committee, our tribe has historically followed a strategy of
not invoking sovereign immunity in the context of commercial
or business relationships where to do so would prevent an
effective remedy for the other party.

We can, however, envision raising this defense in some
circumstances where we have contracted with other parties,
e.g., as our agents, who could be sued and provide an
effective remedy for a plaintiff. We have to keep in mind
that tribes are both business partners and governmental
entities. As an operating government, we cannot afford to
have our tribal officials tied up in court in routine
commercial cases . When we are involved in such court
proceedings, we cannot do the other work of governing the
tribe or meeting our other business obligations. There are
only so many hours in a day. It would also be fundamentally
incompatible with basic notions of tribal sovereignty to have
tribal leaders routinely hauled into state courts!

This is not to say, however, that any tribe would or should
routinely invoke sovereign immunity to bar it from being sued.
Again, the issue for us is whether an effective remedy is
otherwise provided through a suit against other parties. The
ultimate question about what is the appropriate exercise of
tribal immunity in contracts is, however, something that will
have to be answered by each tribe depending on its
circumstances on a case-by-case basis. If a tribe is given a
choice of invoking immunity or in effect being bankrupted in

365

Ben Nighthorse Campbell -5- April 28, 1998

a lawsuit, its duty to its tribal members to maintain the
existence of the tribe as a viable governmental entity may
require invoking sovereign immunity as a bar to the lawsuit .
We have no doubt that the federal government and the states
would make this same choice if forced to do so.

On the other hand, tribes will soon learn that they cannot do
business on a regular basis, with lenders or vendors or
merchants or investors if they routinely invoke immunity to
avoid ordinary commercial obligations. This is all about
balance and business judgment and the prudent exercise of
governmental authority.

In this regard, I would point out that the federal government
often tries (and sometimes succeeds) in avoiding its contracts
through various machinations including the invocation of
Congressionally mandated appropriations restrictions and other
defenses that are to some extent analogous to, but are
different than, the defense of sovereign immunity. See . e . q . .
the federal government ' s attempts to use the governmental
defenses based on the "delegation" doctrine, the
"unmistakability" doctrine, the "reserved powers" doctrine,
the "sovereign acts" doctrine, and the "impossibility"
doctrine as discussed in flpltad Si-at-as v. Winst-ar rnrprn-afinn.
116 S.Ct. 2432 (1996) .

While those governmental defenses did not shield the United
States from contract liability in Winstar, they remain viable
government defenses routinely raised by the United States to
avoid contract obligations which prevent any effective remedy.
State governments often do the same. While there are some
Constitutional limitations on the ability of the state or
federal legislatures or their executive branches to avoid
contracts, circumstances do exist that permit that outcome as
a matter of law. It is not just tribal governments that may
from time to time find themselves in need to invoke sovereign
immunity or other special governmental contract defenses that
have nothing to do with the merits of the plaintiff's claim.

Q. Would the waiver of immunity in S. 1691 regarding contracts
help or hinder your tribe's ability to create jobs and wealth
in Mississippi?

A. Based on our experience, the answer to this question is clear.
Waiver of tribal sovereign immunity, coupled with the
conferring of jurisdiction on state courts to hear disputes
arising on our reservation as contemplated in S. 1691, thereby
reversing the jurisdictional rule of Willi ama v t^p . 350 U.S.
217 (1959), would definitely hinder our tribe's ability to

366

Ben Nighthorse Campbell -6- April 28, 1998

create jobs and wealth in Mississippi. Why is this? Our
tribe's ability to generate businesses and to grow those
businesses has dramatically benefitted by being able to
operate outside of ordinary state regulatory and judicial
jurisdiction. We have been able to deal more flexibly with
our business partners and investors, we have been able to
create our own regulatory schemes that are locally
administered and fit our local situation. Instead, we operate
under a fairly limited federal and tribal regulatory scheme.
Imposing State regulatory or judicial authority as an overlay
to this issue would be confusing, costly and
counterproductive .

Also, while the present condition of the government-to-
government relations of our tribe and the State of Mississippi
is good, there is a long history of hostility between the
tribe and the state that we have only recently overcome. As
political leadership in the state and the tribe change in the
future, no one can predict if we will be successful in
maintaining the present state of good relations and mutual
respect . The present leadership of both the state and the
tribe is committed to that course, but neither party has
control of the future. We need only look back at the
disastrous consequences for our tribe of a renewal of those
hostilities, but this time occurring in a context after
passage of S. 1691 or something like it to understand why we
oppose any move to subject events and transactions on our
reservation to ordinary state court jurisdiction. .See, iin-it-ori
Sf.ar.Bs v .Tnhn . 437 U.S. 634 (1978), where the court reversed
prior holdings in state initiated litigation in both the state
courts and the federal courts which had previously ruled that
neither our tribe nor our reservation legally existed.

It was only after many years of litigation that we were able
to secure the ruling in iinit-Pd states v. .Tnhn supra re-
recognizing the status of our tribe and our reservation and
upholding our tribal jurisdiction and our freedom to operate
within our territory free of state jurisdiction. Not
coincidental ly, it was only after the successful conclusion of

that litigation and the holding in iinir^rf st-at-»g v John ,

Biipra . that Choctaw's economic miracle was able to get off the
ground. We do not want to face circumstances where those
battles could be re-fought, but this time in an even more
unbalanced legal and jurisdictional context. We do not want
to spend a lot of time and money dealing with state regulatory
authorities or in state courts in front of judges who may know
little or nothing about our situation, and who routinely give
no weight to fundamental federal Indian law policies,
including the federal trust responsibility to Indian tribes or
who will seek to evade federal laws intended to enhance and

367

Ben Nighthorse Campbell -7- April 28, 1998

protect tribal Status, e.g, MJBfiififiippi Band of Choi-raw
TnHiana v Hoi yf i *>1 A , 490 U.S. 30, 109 S . Ct . 1597 (1989).

The package of immunities, and the jurisdictional background
that underlies our commercial relations are matters that are
subject to some negotiation. If the Congress were to pass S.
1691 in its present form, this whole issue would be taken out
of the negotiations and the other parties would be given a
total victory in regard to jurisdiction and immunity for
nothing. Thus, we would be severely hampered in our
negotiations and in our ability to strike good business deals
at Choctaw if the changes proposed in S. 1691 become law.

Q. What are the remedies available to your contractors if the
deal falls apart?

A. The answer to this question depends upon where the contract is
formed, where the contract is to be performed, and where the
cause of action arose in connection with which a remedy is
being sought and which remedies are legally available. Since
I have addressed the sovereign immunity defense in response to
the Committee's prior questions, I will assume in response to
this question that the tribe's sovereign immunity defense has
not been raised in the context of the hypothetical question
the Committee has posed.

If the contract in question arose off the reservation and was
to be performed off the reservation, the ordinary court
remedies would be available, e.g., a state court forum and in
some circumstances a federal court forum where diversity or
federal question jurisdiction was available to hear these
disputes . The tribal court forum would also be available for
that purpose where the tribe or a tribal authority was a party
defendant .

But the bulk of our commercial relations involve contracts
which are to be performed on the reservation and where
breaches a tribal enterprise would occur on the reservation.
Under current law, the only place where such suits can be
brought is the tribal court. See, Hi 1 1 jama v t.op anpra and
Three Affiliated Tribes of the Port Berthold RfiRsrvatinn v
Wold RnginppHnj, 467 U.S. 138, 104 S.Ct. 2267 (1984) (Wold I)
and 476 U.S. 877, 106 S.Ct. 2305 (1986) (Wold II) . There are
circumstances were diversity or federal question jurisdiction
might be invoked to hear these cases in federal court, but the
federal court would usually be required to send such cases
back to the tribal court under the exhaustion rules of

National PanwrB Union Tna Co v Prow Triho, 471 U.S. 845,
105 S.Ct. 2447 (1985); and, Iowa Mutual Insur ance To. v
■LaElaate, 480 U .S. 9, 107 S.Ct. 971 (1987). Thus, again, as

368

Ben Nighthorse Campbell -8- April 28, 1998

a practical matter, the primary remedy is the Choctaw Tribal
Court system.

In this regard, our courts have been fully functional since
the late 1970s. We have a very detailed written tribal code
with written rules of evidence, written rules of civil
procedure and a legally trained judge (a member of the
Mississippi bar) who sits on all commercial civil disputes.
The particular judge we have now happens to be a non- Indian,
although this may change in the future. He is a non- Indian
who also lives off the reservation and operates as a contract
judge for the tribe.

There is an appeals court in place. Non- Indian plaintiffs
have been using this court system for almost 20 years and
routinely come in and win cases against tribal defendants.
Except in circumstances where the parties have agreed to use
arbitration to resolve their disputes, the tribal court
provides the primary and sometimes the only judicial remedy
for the outside parties.

Keep in mind, however, that a contract is only a part of what
builds a commercial relationship. It is the piece of paper
setting out the parties' agreement. We have tried to deal
with people in an honest and direct manner outside the
confines of the piece of paper. We have had almost no
litigation involving our commercial business ventures over the
last 20 years because we try very hard to work things out. We
realize that in most cases litigation should be a last resort
and that contract relationships are about more than just the
piece of paper. So when you ask the question "what remedies
are available," our answer has to include the notion that
judicial remedies are and should be the last resort when you
are trying to forge lasting and mutually profitable business
or banking relationships. We settle a lot of things over a
cup of coffee and we expect to continue to do that. Most of
the time when you have to end up in court it means not only
that the deal has fallen apart, but that the relationship has
fallen apart. That is not a good recipe for making money.

Pinal ly, it should be pointed out that although states are
generally obliged to honor their contracts and be subjected to
suits for their enforcement and the Federal Government is
generally liable on its contracts and is subject to suit for
their enforcement (subject to the various defenses previously
alluded to) (a) it took a century or so for the existing state
and federal sovereign immunity waivers to occur and even now
not all contracts are enforceable against either states or the
United States, and (b) the states have not agreed to subject
themselves to (and no other law makes them subject to) suits

Ben Nighthorse Campbell -9- April 28, 1998

by private parties on their contracts in federal courts
(because of the 11th Amendment immunity) ; and, the Federal
Government is not subject to unconsented suits on its
contracts in state courts, because it has not waived immunity
for contract claims filed against the Federal Government in
state courts.

Thus, neither the states nor the Federal Government have
consented to suits on their contracts in the courts of a
different sovereign. At the present time tribal courts are
generally open for suits on contracts against the tribe itself
in the tribal court as to which immunity has typically (but
not always) been waived, but the tribes like the states and
the Federal Government, have not consented to suit on their
contracts in the courts of other jurisdictions and Congress
has not required and should not require them to do so.

Imposing so drastic a change on the existing an longstanding
allocation of jurisdiction between the state, federal, and
tribal courts and as regards the doctrine of sovereign
immunity would be a serious mistake, fundamentally at odds
with the very notion of tribal sovereignty and the ability of
Indian tribes to survive as separate peoples, with our
separate languages, customs, and traditions. Subjecting us to
state jurisdiction would severely threaten what is uniquely
Indian about our communities. We are not just business
owners, we are also tribal communities having a special
government-to-government relationship with the United States.
Far more is at stake in the jurisdictional and immunity
changes proposed in S. 1691 than enforcement of commercial
contracts .

For these reasons, we urge your Committee not to report S. 1691 out
to the Senate and to continue to resist similar proposals for
changes in the existing law regarding jurisdiction and sovereign
immunity as they arise.

Sincerely,

Tribal Chief *

370

Testimony of W. Ron Allen, President

National Congress of American Indians

Before the United States Senate Committee on Indian Affairs

Oversight Hearing on Tribal Government Sovereign Immunity

March 11, 1998

I. INTRODUCTION

Good morning Chairman Campbell, Vice-Chairman Inouye, and distinguished members
of the Committee. It is an honor to be invited to provide testimony before the Senate
Committee on Indian Affairs. I am W. Ron Allen, Chairman of the Jamestown S'Klallam
Tribe and President of the National Congress of American Indians (NCAI). As the oldest
and largest national Indian advocacy organization in the United States, the NCAI is
dedicated to advocating on behalf of our member tribal governments on a myriad of
issues, including the issue of tribal government sovereign immunity. The specific focus
of today's hearing is on tribal government immunity for contract claims and for state retail
sales taxes, but for purposes of the record, I would like to briefly review the context in
which today's hearing takes place.

Tribal governments and their supporters in Congress joined efforts in the first session of
the 105 lh Congress to defeat a series of budget riders intended to limit tribal government
sovereign rights. The most dangerous of these riders was a provision included by Senator
Slade Gorton, Chairman of the Senate Interior Appropriations Subcommittee, in his
chairman's mark of the fiscal year 1998 Interior appropriations bill (H.R. 2107). This
provision, Section 120, would have (1) required Indian tribal governments to waive all
sovereign immunity against suit as a condition of receiving federal funds and (2)
authorized actions against tribal governments to be heard in federal courts rather than
tribal courts. This proposal to force tribes into an unlimited waiver of their sovereign
immunity and remove tribal court jurisdiction would have put tribal self-governance at
extreme risk. Tribal government executives, legislators and judges would have been
subject to immense lawsuits, whether they acted or failed to act, and tribal courts would
have been rendered irrelevant. No government, include the federal and state
governments, could long operate under these conditions.

The efforts of tribal governments and their supporters to defeat this rider won the support
of the majority of the Senate and Senator Gorton agreed to an amendment to the Interior
Appropriations bill that would remove Section 1 20. However, as a part of the agreement
Chairman Campbell committed to hold hearings on tribal sovereign immunity. The
hearing that the Committee is holding today, along with the two upcoming field hearings,
will fulfill that commitment.

371

At the time this agreement was made, Senator Gorton also indicated that he would
introduce a bill addressing tribal sovereign immunity. On February 27, 1998, Senator
Gorton introduced S. 1691, the 'American Indian Equal Justice Act." Although more
detailed in its mechanisms, the bill is similar in scope to Section 120. S. 1691 contains
extremely broad waivers of tribal sovereign immunity and would subject tribal
governments to virtually any type of law suit in both federal and state courts. Indeed we
find it ironic that Senator Gorton is an advocate of capping damages claims, yet would
propose to expose tribal governments to unlimited damages claims. Like Section 1 20, S.
1691 would make it nearly impossible for tribal governments to carry out basic
governmental functions and would jeopardize the resources and future of tribal
governments.

In NCAI's view, the proponents of S. 120 and S. 1691 have engaged in a campaign of
misinformation against tribal self-determination. Relying on slanted anecdotes and broad
unsupported generalizations about the 'unfairness* of tribal sovereign immunity and
tribal courts, the sponsors have played upon the common misunderstandings about tribal
governments. There is inadequate understanding in the general public and in Congress
that an Indian tribe is a form of government recognized in the U.S. Constitution and
hundreds of treaties, court decisions and federal laws. There is inadequate understanding
that tribal governments provide the basic governmental functions such as law
enforcement, justice, and education on Indian lands throughout this country. There is
inadequate understanding that the vast majority of tribal governments are modern,
democratic, fair and as deserving of respect as any other form of government.

This general lack of understanding about tribal governments could also result in a failure
to recognize that Section 120 and S. 1691, while cloaked in words of fairness, are
designed to render Indian tribes impotent to protect their lands, resources, cultures and
future generations and extinguish hundreds of years of federal Indian policy that protects
tribal self-government. As Felix Cohen observed, 'confusion and ignorance in fields of
law are allies of despotism.*

As a result, NCAI would like to extend its sincere thanks to the Chairman and Vice-
Chairman and many other members of the Committee for this hearing and their efforts to
understand and convey the message of tribal self-governance. The information following
and other testimony will clearly show that tribal governments exercise a form of sovereign
immunity that is similar in scope to the immunity exercised by state, federal and local
governments. Parties who may be harmed by tribal government activities do have an
opportunity to be compensated and to have their case heard by a competent tribal judge.
Like other forms of government, tribal governments are not perfect, but any solutions
should be based on careful study of the true circumstances and guided by the principle
that it is the federal government's role to protect tribal self-government. NCAI is looking
forward to engaging in that process with the Committee.

372

II. General Background on Sovereign Immunity

Governmental immunity from suit is an inherent right of all governments, including the
federal, state and tribal governments, for reasons of sound public policy. The purpose
served by this policy is to provide special protection against loss of assets held in
common for many people for the performance of vital government functions. Since
1 946, the federal government, most states and many tribes have provided limited waivers
of sovereign immunity that allow these governments to be sued when the government
functions in the same manner as a private individual, such as when a government
employee gets in a car accident. However, the federal government, states and tribes
have retained sovereign immunity in broad areas in order to protect governmental
functions from lawsuits and limit the size of damages claims.

A. Sovereign Immunity of the Federal Government

In 1946, Congress passed the Federal Torts Claims Act (FTCA),' which exposes the
United States government to limited liability for certain tort claims in the same manner as
a private individual, but not liability for interest prior to judgment or for punitive
damages. In addition, any claim for money damages must first be presented to the
appropriate federal agency. In 1988 amendments to the FTCA, Congress clarified and
strengthened the federal government's right to any defense based upon judicial or
legislative immunity. Congress waived sovereign immunity for certain contract actions
in 1887 under the Tucker Act. 2

Under these statutes, the federal government has retained its rights to sovereign immunity
in broad areas, including those functions that are inherently "governmental." For
instance, a postal consumer may not collect damages from the U.S. Postal Service for
failure to deliver mail; 1 and a federal agency may not be sued for a procedural error in
promulgating regulations. 4 In addition, the judicial and legislative functions are
specifically protected from lawsuits. The prohibition on punitive damages also provides
a significant limitation on the size of awards.

B. Sovereign Immunity of State and Local Governments

The sovereign immunity of state governments from suit is specifically guaranteed under
the Eleventh Amendment to the Constitution. 5 This Eleventh Amendment sovereign

1 28 U.S.C. S5 2671-2680.

2 28U.S.C.S M91.

1 Pruitt v. United State* Pmul Service, 81 7 F. Supp. 807 (ED Mo 1993).

4 C.P. Chemical Co. v. United States, 810 F.2d. 34 (CA2 NY 1987).

5 'The judicial power of the United States shall not be construed to extend to any suit in law or
equity, commenced or prosecuted against one of the United States by citizens of another state, or by
citizens or subjects of any foreign state. '

373

immunity was reaffirmed in two recent Supreme Court cases to the detriment of Indian
tribes trying to establish their federally guaranteed rights.'

Many, but not all, state governments have passed statutes similar to the FTCA that
provide limited waivers of immunity, but provide limitations on damages and retain state
immunity for governmental functions. Along with the prohibition on punitive damages, a
growing trend is for state governments to impose a ceiling on the amount of recoverable
damages. Although the dollar amounts vary, many states have adopted a cap of
$100,000 for injuries arising from a single occurrence. 7 Some states set lower caps for
property damage claims." In at least two states, Massachusetts and Texas, there are no
general statutory waivers. Instead, the state legislature considers each application fa-
waiver on a case-by-case basis. Local and municipal governments also retain sovereign
immunity subject to state law. In general, most states have passed laws which retain the
governmental function immunity of local and municipal governments. 9

In Bogan v. Scott-Harris, on March 3, 1998, the United States Supreme Court upheld
absolute immunity from civil liability for local legislators engaged in legislative activities.
Bogan unanimously affirms that federal, state and local officials often have absolute
immunity from lawsuits. Bogan also illustrates the error of the proposed finding in S.
1691 's Section 1(b)(5) that only tribes maintain the full scope of immunity from lawsuits.
As the Court notes "officers of a municipal corporation [as well as other legislators] . . .
invested with legislative powers . . . are exempt from individual liability for the passage of
any ordinance within their authority, and their motives in reference thereto will not be
inquired into." Furthermore, the Court points out that States and the federal government
are "often protected by sovereign immunity" even for constitutional violations.

C. Sovereign Immunity of Tribal Governments

Like the federal and state governments, many tribes have voluntarily provided for limited
waivers of their immunity 10 and/or have insurance to cover their potential liability." This

* Idaho v. Coeur d'Alene Tribe of Idaho, 1 997 WL 338603 (U.S.); Seminole Tribe of Florida v.
Florida, 1 16 S.Ct. 1114 (1996).

7 See, e.g., Ala. Code 1 1-93-2 (1992); Fla. Stat. Ann. 768.28(5) (Harrison 1992); Okla. Stat. Ann.
Tit. 51, 154 (West 1993).

I See, e.g., Okla. Stat. Ann. Tit. 51, 154(A)(1) (West 1993) ($25,000); Tex. Civ. FYac. & Rem. Code
Ann. 102.003 (West 1986) ($10,000).

9 See, Antieau, 1A Local Corporation Law §1 1 A.00 et. seq.

10 See, Weeks Constr., Inc. v. Oglala Sioux Hous. Auth., 797 F.2d 668, 671 (8th Cir. 1986) (stating
that tribal ordinance bars use of sovereign immunity); Merrion v. Jicarilla Apache Tribe, 61 7 F.2d 537 (10th
Cir. 1980) (finding express waiver of immunity in severance tax ordinance).

II Joseph Calve, Pequots Won't Gamble on Lawsuits at New Casino, Conn. L. Trib., Mar. 2, 1992,
at 1 . NCAI's informal sampling indicates that a substantial proportion of tribal governments carry insurance.

374

is a growing trend evidenced by an increasing number of civil claims handled by tribal
courts. "

Tribes and tribal officials also are subject to suit under various exceptions to tribal
sovereign immunity recognized by the courts. For example, courts have applied the Ex
Parte Young doctrine to tribal officials.' J This doctrine creates an exception to the
general rule of sovereign immunity when an official acts outside of the government's
authority. Tribal sovereign immunity also has been limited by various courts where
allegations of personal restraint and deprivation of personal rights were raised. 14 In
addition, pursuant to federal law, Indian tribes, contractors and employees are deemed to
be agents of the federal government for the purposes of the FTCA when a tribal
government program operates with federal dollars.'*

Tribal governments dealing in commercial contexts routinely agree to include limited
immunity waivers in contracts, including bonding and insurance requirements.
Negotiation of these limited waivers is a widely-practiced prerequisite to contracting with
tribal governments. In addition, many tribes have specifically waived sovereign
immunity for tribal businesses incorporated pursuant to the Indian Reorganization Act.'*

D. Conclusion

Sovereign immunity is no anachronism, but is alive and well as a legal doctrine that
protects the functions of government from litigation and damages claims.
The discussion above illustrates that tribes are certainly not protected by an impermeable
shield of sovereign immunity, but like the federal government and states, assert limited
immunity. Senator Gorton's proposal to completely waive tribal sovereign immunity
would place the governmental authority of tribes at extreme risk.

12 See, The Honorable Sandra Day O'Connor, Lessons from the Third Sovereign: Indian Tribal
Conns, The Tribal Court Record, Spring/Summer 1996, at 12.

" See, Susan M. Williams, Esq., Testimony Before the Committee on Indian Affairs, U.S. Senate,
September 24, 1996.

14 Dry Creek Lodge v. Arapahoe and Shoshone Tribes, 515 F.2d 926 (10th Cir. 1975).

15 Indian Self-Deter mi nation and Education Assistance Aci and related acts. Pub. L. No. 101-152,
Title III, 104 Stat. 19S9 (codified at 25 U.S.C. $ 450).

14 Boe v. Ft. Belknap Indian Community, 455 F. Supp. 462, 463 (D. Mont. 1978); Parker Drilling
Co. v. Metlakatla Indian Community, 451 f. Supp 1 127, 11 35 (Alaska 1978); Merrion v. jicarilla Apache
Tribe, 617 F.2d 537 (10th Cir. 1980)

375

III. State Retail Sales Tax Collections

The treatment of state and local taxes on Indian lands has been effectively handled at the
tribal-state level for many years because the states currently have adequate legal remedies
to pursue in collecting taxes on sales to non-tribal members that occur on Indian lands.
According to a report issued by the Arizona Legislative Council,' 7 there are a number of
'alternative taxation methods" now employed by states and tribes that provide for the
collection of retail taxes on sales involving non-members. As the report makes clear,
more than 200 tribes in 1 8 states have created successful state-tribal compacts that are
now in force and are mutually satisfactory to both parties.

In Moe v. Confederated Salish and Kootenai Tribes, 425 U.S. 463 (1976), and
subsequent cases, the United States Supreme Court has held that tribes are required to
collect sales taxes on non-Indian purchases of imported goods in certain situations. The
Supreme Court has detailed the remedies available to a state in the event that it cannot
reach an agreement with a tribe for the collection of retail sales taxes. In Oklahoma Tax
Commission v. Citizen Band of Potawatomi, 498 U.S. 505 (1991), the Court identified a
number of ways that a state can collect a lawfully imposed tax:

There is no doubt that sovereign immunity bars the state from pursuing the most
efficient remedy, but we are not persuaded that it lacks any adequate alternatives.
We have never held that individual agents or officers of a tribe are not liable for
damages in actions by the state. And under today's decision, states may of course
collect the sales tax from cigarette wholesalers, either by seizing unstamped
cigarettes off the reservation, or by assessing wholesalers who supplied unstamped
cigarettes to tribal stores. States may also enter into agreements with the tribes to
adopt a mutually satisfactory regime for the collection of this sort of tax.

The Court's recent decision in Bogan also shows that an immunity waiver for collection
of state taxes, such as Section 3 of S. 1691, is unnecessary. In Bogan, the Supreme Court
reaffirmed Amy v. Supervisors, 1 1 Wall. 136 (1871), in which local legislators were held
liable for violating a court order to levy a tax sufficient to pay a judgment because the
court order had created a ministerial duty. The Court said there, "[t]he rule is well settled
that where the law requires absolutely a ministerial act to be done by a public officer,
and he neglects or refuses to do such act, he may be compelled to respond in damages to
the extent of the injury arising from his conduct." Id. at 1 38. After Bogan, it is clear that
tribal immunity need not be abolished simply to help states enforce the requirements that
tribal agents and officials create records and collect certain taxes lawfully imposed by the
states on non-members purchasing imported goods on Indian reservations. Section 3 of
S. 1691 would propose to solve a problem that has not existed since 1871 .

""STARTED: Stale-Tribal Approaches Regarding Taxation & Economic Development*, Arizona
Legislative Council, November, 1995 at 81. See generally, 81-105.

376

Much of the attention to this issue of tribal collection of state retail sales taxes has arisen
in the wake of the Supreme Court's decision in Oklahoma Tax Commission v. Chickasaw
Nation 1 1 5 S.Ct. 2214 (1995). The Court ruled that the legal incidence of the state tax
fell on the tribal retailer in Indian country and, as such, was invalid because it was not
authorized by the Congress. For a very brief time, tribal governments in Oklahoma could
avoid paying the state tax on motor fuels. However, the Court noted that the Oklahoma
state legislature could simply amend its law to declare that the legal incidence falls on the
retail consumer. The Oklahoma Legislature responded by amending the state tax laws in
1 996 to shift the legal incidence of the tax to the consumer.'" Oklahoma has also
entered into tax agreements with nine tribes. These agreements provide that the State
collects a motor fuels tax at the distributor level before any fuels enter Indian country.
The State then pays the tribes a certain percentage of all taxes collected that reflects the
consumption by tribal members.

Despite the resolution in Oklahoma and the settlement of this issue in nearly every other
state that contains Indian country, the brief period of tribal exemption in Oklahoma has
fueled a spiteful rumor mill among truck stop and convenience store owners that Indian
tribes have the ability to avoid state taxes and are threatening to take over these
businesses throughout the country. Tribal governments simply do not have these
powers, and federal policy should not be made on the basis of exaggerated accounts with
little basis in reality.

A fundamental principle of sound federal policy making is to avoid federal intrusion
whenever local parties are already reaching agreement. Each state has the necessary
authority to resolve its taxation issues with tribal governments. Federal intervention
under these circumstances would be inconsistent with the long-standing policy of tribal
self-determination. New federal legislation in this area could also cast doubt on the
validity of the many existing agreements and create new burdens and turmoil in many
states. Section 3 of S. 1 961 would take a heavy-handed national approach that would
cause far more problems than it would resolve. The federal government should allow
the current process to continue its successful course.

III. Sovereign Immunity In Contracting

The issue of tribal sovereign immunity for contract obligations has arisen only in very
recent years, as more tribal governments have begun to have the financial resources to
enter into commercial transactions. In NCAI's view, this area of tribal government law
and policy should be allowed to evolve, without Congress getting into the business of
micromanaging contracts between tribal governments and other willing parties.

" Oklahoma Statutes, Title 68, Section 500.63.

377

No Indian tribe, and no person or entity interested in doing business with a tribe, is ever
forced to enter into a contract against its, his or her will. It is axiomatic that the terms of
the contract must be acceptable to each party entering the contract. Each party has the
simple right to refuse to enter into the deal. This fundamental principle ensures that tribal
government sovereign immunity cannot be used to unfairly disadvantage any individual
or entity contracting with a tribal government.

In addition, the federal, state and local governments all have sovereign immunity for
contracts and each has created limitations on sovereign immunity in its own way, at its
own time, in order to foster contracting. Tribal governments have this same ability.
Every tribal government is at a different place in its contracting sophistication. A general
federal legislative solution might work well for some tribes, but might create limitations
for some or expose others to an undesirable degree of risk.

The provisions of S. 1 691 would reach deeply into what are essentially private
transactions, when clearly there is no need for the federal government to 'protect*
contracting parties from tribal immunity. Tribal governments have created many ways to
accommodate the interests of contracting partners. From direct waivers, to insurance and
bonding requirements, to choice of forum provisions, tribes have found solutions
acceptable to both parties in thousands of contracts.

just as the federal government and the states have had to resolve the issues of their
sovereign immunity in their own ways, the tribes have to deal with their sovereign
immunity in ways that respect their own traditions and circumstances. The tribes and the
business community have been effective in reaching agreement on solutions. There is no
need for the federal government to intervene and prevent the continued evolution in this
area among willing parties.

IV. Tribal Courts

Indian tribes' inherent authority for self-government includes the power to adjudicate
disputes. Although tribal court criminal jurisdiction over non-Indians has been sharply
limited by the federal government,' 9 tribes retain significant authority to adjudicate civil
disputes involving non-Indians that arise on Indian land or otherwise affect the interest of
the tribe or its members. 20 As Congress has found, tribal courts are "important forums for
ensuring public health and safety and the political integrity of tribal governments.* They
are "the appropriate forums for the adjudication of disputes affecting personal and
property rights," and they are "essential to the maintenance of the culture and identity of

19 See generally, F. Cohen, Handbook of Federal Indian Law (1982 ed.) at 335.

20 National Farmers Union Ins. Co. v. Crow Tribe, 471 U.S. 845 (1985); Iowa Mutual Insurance
Co. v. LaPlante, 480 U.S. 9 (1987).

378

tribes...."

Senator Gorton's proposed legislation to grant jurisdiction to the federal and state courts
to any action against an Indian tribe constitutes a great threat to the sovereignty of tribes
and the tradition of local tribal control over tribal matters. The essence o' tribal
sovereignty is the tribal right to govern persons and property located within Indian lands
under laws adopted by tribal governing bodies and enforced in tribal courts. Yet the
dominant purpose of the proposed legislation appears to be to circumvent tribal courts
and tribal laws in favor of civil litigation in federal and state courts. Since tribal courts are
the final authorities on tribal law, and federal and state courts generally do not interpret
and enforce tribal law, authorizing federal courts to resolve civil matters arising on Indian
lands would encourage the bypass of tribal laws, and thwart the self-determination of
tribal governments.

Senator Gorton's proposal to grant direct jurisdiction over tribal governments to state and
federal courts is based on an assertion that tribal courts are not 'neutral* forums. The
reality is that there are no 'neutral* forums to be found at any level of government. Each
court has its own legal and philosophical views. The evolution of the U.S. Supreme
Court over time is the most notable example of this condition. A tribal court is more
likely to be steeped in knowledge of tribal government law and to support the legitimacy
of the tribal government. This is not a bias, but a legal and philosophical viewpoint that
supports tribal self-governance.

As with any court, the issue with tribal courts is not neutrality, but integrity and
competence. Rather than flood federal and state courts with claims against tribes, tribal
courts need to be strengthened. Tribal courts have come a long way in recent years, but
many lack necessary resources. The federal government has a responsibility to help
tribes build their judicial systems so that they can meet the standards that are expected in
the United States. Congress recognized this obligation in 1993 by enacting the Indian
Tribal Justice Act. 22 This law is designed to give tribal governments the resources they
need to develop their court systems. The Act authorizes $57 million in spending on
tribal courts, yet to date not one penny of the Act has been funded. NCAI strongly
supports full funding for the Indian Tribal Justice Act as a proactive solution for improving
tribal courts while protecting tribal self-governance.

21 Indian Tribal Justice Act, 25 USC $3601.
n 25 U.S.C. §53601 «. seq.

379

V. Conclusion

NCAI would like to extend its sincere thanks to the Chairman and Vice-Chairman and the
many other members of the Committee for this hearing on matters that are so critical to
tribal self-governance and the cultures and futures of Indian people. As the Committee
searches for solutions to the issues that have been raised today, NCAI would encourage
the Committee to bear three points in mind. First, broad generalizations and one-size-fits-
all solutions have a tempting ease, but have proven to have disastrous effects when
applied among the diversity of Indian Nations in this country. A comprehensive review
of the variety of circumstances and specific issues is far more likely to lead to workable
solutions. NCAI is greatly encouraged that the Committee has already begun such a
review. Second, many of the issues that have been raised today involve matters of purely
local concern that can be resolved on the local level among the tribes, states and
individuals. The role of the federal government in these instances should be to
encourage local cooperation, rather than to create new legislation that could have broad,
unintended consequences. Third, and finally, any solutions should be guided by the
principle that it is the federal government's role to protect tribal self-government. NCAI is
looking forward to working on these challenges with the Committee.

380
DORSEY & WHITNEY LLP

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Minneapolis. Minnesota 55402 1498 hattii
Tilephone (612) 340-2600

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mo»« moMC Fax. (612) 340-2868

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MARK A. JARBOE

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Internet: jarboe.markOcloraeylaw.coin

TESTIMONY OF MARK A. JARBOE
PARTNER IN DORSEY & WHITNEY LLP

Before the United States Senate Committee on Indian Affairs

Oversight Hearing on Tribal Sovereign Immunity

March 11, 1998

INTRODUCTION

Mr. Chairman, my name is Mark Jarboe. I am a partner in the Minneapolis,
Minnesota office of the law firm of Dorsey & Whitney LLP, and am the Chairman of
the firm's Indian Law Practice Group. I have practiced law in Indian Country for 13
years, primarily in the areas of finance, tribal governmental regulation and
reservation economic development. I am honored to be invited to present this
testimony to the Committee on the issue of tribal sovereign immunity in the
contexts of contracting and the collection of state sales taxes.

Dorsey & Whitney is an international firm of over 450 lawyers and represents
36 Indian tribal governments in 15 states. We also represent people and businesses
doing business with tribes — including commercial banks, investment banks, leasing
companies, construction contractors, equipment suppliers and service providers. As
such, we have seen the issue of tribal sovereign immunity addressed in many
circumstances and from many points of view. While I will present some
information at the end of my remarks on the issue of the collection of state sales
taxes, my friend and co-panelist, Reid Chambers, will testify more directly on that
point. The principal observation that I would like to make this morning is that
tribal sovereign immunity is not an obstacle to contracting with Indian tribes. It is
an issup in contracting, yes — an issue that must be addressed and dealt with. But it
is no more of an obstacle than many other issues that will arise in any contract

March 11, 1996, testimony of Mark A. Jarboe, Dorsey & Whitney LLP Page 1

381

negotiation and that likewise must — and can — be dealt with to the satisfaction of
both contracting parties.

I. SOVEREIGN IMMUNITY IN CONTRACTING

A. The Expansion of Economic Development in Indian Country.

Until the recent improvements in the financial situation of some tribes,
fueled in many cases by gaming but also by recreation, tourism, natural resource
development and tribal business diversification efforts, economic activity in Indian
Country was minimal. Very few tribes had the financial wherewithal to enter into
contracts of any size for any purpose, and mainstream American business did not
pursue what opportunities did exist with the tribes. Business in Indian Country
was, with few exceptions, left to local, small-scale establishments to pursue. Those
local establishments entered into transactions often on a cash, not credit, basis, or
extended "credit" to a tribe only if the tribe's obligation was fully collateralized by
cash deposits or other marketable collateral. The tribes generally refused to waive
their sovereign immunity in those contracts, but in such a situation the sovereign
immunity of a tribe is not a significant issue. If a tribe has fully performed its side of
a bargain (for example, by paying cash up front) or has fully collateralized its
obligations with cash or other security, the fact that the other party may not have the
ability to sue the tribe under the contract is of little moment — that party will likely
have no occasion to have to sue.

The situation started to change dramatically in the present decade. Some
tribes began to have financial resources sufficient to enable them to enter into
commercial transactions of significant size. These tribes sought to open lines of
credit, to borrow money and to issue bonds. They sought to build new buildings on
the reservations, often starting with gaming facilities and then continuing on to
include tribal schools, clinics and administrative buildings. They sought to obtain
equipment, to contract for services and, in general, to enter the stream of American
commerce.

On the non-Indian side, American business began to recognize, albeit slowly,
new opportunities with the tribes. Banks and investment bankers considered
making loans or underwriting the issuance of tribal debt securities. Construction
companies bid to build tribal buildings. Equipment suppliers and service providers
recognized a new market for their offerings. However, when these new players
started to become active in Indian Country, they quickly encountered the principle
of tribal sovereign immunity and, at first, did not know how to respond to it.

March 1 1, 1998, testimony of Mark A. Jarboe, Dorsey & Whitney LLP Page 2

47-201 98-13

382

B. The Evolution of Sovereign Immunity.

Sovereign immunity is the right of a sovereign government not to be sued in
any court unless it first gives its consent to be sued. All governments in this
country enjoy sovereign immunity: the federal government, the state governments,
municipal governments and tribal governments. Just last week the Supreme Court
handed down a decision reaffirming the sovereign immunity enjoyed by municipal
governmental officials in carrying out their legislative duties. In the contractual
context, court decisions and legislative actions have qualified and modified the
sovereign immunity of the federal, state and municipal governments so that
people — if they know the rules — are able to contract with those governments and to
have an ability to enforce their contractual obligations. For the federal, state and
municipal governments, that process took decades; with respect to the sovereign
immunity of tribal governments, the process is now underway. However, it is a
process that, like the similar processes that took place with the other governments,
should be carried out by the tribes themselves and the people with whom they deal.

facts:

This last point deserves special attention. It is based on two very important

1. No one is forced to enter into a contract. Contracts are voluntary
transactions, entered into by willing parties.

2. Each government that has decided to modify its sovereign immunity
has done so in its own way, at its own pace, and in the manner it
judged most appropriate for its circumstances.

Please permit me to elaborate.

1. Freedom of Contract . No tribe, and no person or entity interested in
doing business with a tribe, is ever forced to enter into a contract against its, his or
her will. In order for any two parties to enter into a contract, the terms of that
contract must be satisfactory to both of them. Certainly, there will be provisions that
favor one side or the other, and almost always both sides would like to add
provisions that do not appear, or delete provisions that do appear, in order to make
the final agreement even more attractive to that side. But if both sides agree upon a
set of terms, then each side has determined that, when all of the advantages of the
bargain are toted up and set against all of its disadvantages, the advantages outweigh
the disadvantages.

In any contract with an Indian tribe, the issue of the tribe's sovereign
immunity is one issue that must be addressed. It can be addressed in any number of
ways, from a complete refusal on the part of the tribe to any suit against it in any
forum, to an ability of the nontribal party to sue the tribe in any court and without

March 11, 1998, testimony of Mark A Jarboe, Dorsey & Whitney LLP Page 3

383

any limitation on recourse, or by any of a number of intermediate positions (some
of which I shall describe below). How that issue is resolved is a matter for the
parties to decide; the point that I wish to emphasize is that the parties are able to
resolve it, and must resolve it to their satisfaction, or else no contract will result.

If a tribe seeks to borrow money from a bank, the bank will likely insist on
having a means to enforce the obligation of the tribe to repay the loan. Because the
tribe has sovereign immunity, unless the tribe makes some concession to the bank
so as to enable the bank to sue the tribe upon default, it is almost inconceivable that
the bank will make the loan. '/' The tribe and the bank may engage in a give-and-
take on the issue. They may consider arbitration, a limited waiver for suits in tribal
court, a waiver for suits in state court (in a Public Law 280 jurisdiction), or the use of
a separate tribal instrumentality or corporation to be the borrower. The tribe may
negotiate that, in exchange for a waiver of immunity more favorable to the bank,
the bank must concede on some other point or points in the contract in favor of the
tribe. However, the tribe and the bank will have to come to a mutually acceptable
resolution of this issue or else no loan will be made. How they decide to resolve it is
up to them in the context of their particular contract.

2. Any Modification of a Government's Sovereign Immunity is a
Decision for that Gove rnment Itself to Make. The federal, state and municipal
governments all enjoy sovereign immunity. Those governments have seen fit to
modify their immunity and to permit suits to be brought against them in certain
circumstances and subject to certain limitations. In each case, however, the
modifications that were made, and the resulting recourse that claimants have
against those governments, were made over time, by the courts and legislatures of
those governments themselves, and were not imposed on them from above.

Each state has dealt with limitations on its sovereign immunity differently.
While the National Conference of Commissioners on Uniform State Laws has
promulgated nearly 200 model statutes for states to adopt, ranging from the
Uniform Commercial Code to the Uniform Act to Secure Attendance of Witnesses
From Without a State in Criminal Proceedings, there is no "Uniform Waiver of
Sovereign Immunity Act." State immunity waivers may be limited to certain types
of claims and may be conditioned on actions being brought in specific forums, on

1/ An exception to this would be the types of loans that, unfortunately, we
still see in Indian Country — loans that are not made unless the tribe first deposits
with the bank as collateral cash or investment securities in an amount in excess of
the amount of the loan. Because the bank can exercise setoff rights against such
collateral, it can, upon any default by the tribe, make itself whole without the need
of commencing any enforcement action. However, a loan of this nature is
essentially the bank lending the tribe's own money back to it, and is not a true
extension of credit.

March 11, 1998, testimony of Mark A. Jarboe, Dorsey & Whitney LLP Page 4

384

notices of claims being given within short timelines, or on suits being filed within
strict limitations periods. 2/ Damage awards may be capped. Specific performance
may be unavailable. All of these issues and more are dealt with by each state in the
manner it deems most appropriate for its circumstances, and the decision of one
state on any of these points is likely to be different from the decision of its neighbor.

Until the recent increase in economic activity in Indian country, tribal
governments have not had any serious need to address the issue of how sovereign
immunity affects their ability to contract. Their improving economic status has
caused many tribes to reconsider their treatment of immunity. 3/ The result has
been an evolution of tribal positions on this issue, an evolution that roughly
parallels developments with federal, state and local immunity in the beginning of
this century. That evolution will continue, and if left to proceed will result in
solutions that both accord with tribal policies, culture and governmental structures
and meet the needs of non-Indian contracting parties.

C Examples of Tribal Solutions.

Tribes have explored many ways to accommodate the legitimate interests of
non-Indian contracting parties. A few are described below. In providing this
summary, I am referring to transactions in which I was personally involved; there
are undoubtedly many others, some similar to the following and some quite
different, where tribal governments developed innovative and effective solutions
to deal with the sovereign immunity issue.

2/ It is worthy of note that one of the groups most adversely affected by
the remaining immunity enjoyed by the states are the tribes themselves. After the
Supreme Court ruled in Seminole Tribe of Florida v. Florida that the Eleventh
Amendment to the Constitution prohibited the federal courts from taking
jurisdiction over a suit brought by a tribe against a state in order to enforce the state's
federal obligation to negotiate a gaming compact under the Indian Gaming
Regulatory Act, tribes explored bringing those suits in state courts but found that
without a waiver of the state's immunity, no such suit could be brought.

1/ In the early 1990's, a tribe refused to waive sovereign immunity in
connection with a proposed water system loan from the United States Farmers
Home Administration, even though, under case law, tribes do not enjoy sovereign
immunity in suits brought by the federal government. The Tribal Council took the
position then that the tribe should not waive its sovereign immunity in any
situation. That same tribe has recently borrowed over $50,000,000 from a
consortium of banks under an agreement wherein it consents to suit in any court of
competent jurisdiction to enforce its loan obligations.

March 11, 1998, testimony of Mark A. Jarboe. Dorsey & Whitney LLP Page 5

385

1. Las Vegas Paiute Tribe . The Las Vegas Paiute Tribe is developing the
Las Vegas Paiute Resort, a destination golf resort on 4,000 acres of trust land just
outside of Las Vegas, Nevada. The Tribe sought financing for that project for over
two years — financing a golf resort on Indian lands is not one of the easiest of tasks.
It eventually succeeded, with interim financing from two bond funds (Calvert
Funds in Maryland and Miller & Schroeder Financial, Inc. in Minneapolis) and
permanent financing of over $25,000,000 from Bank of America.

In preparation for obtaining this financing, the Tribal Council, in 1993, took
three specific actions:

a. It called for a tribal election, to be conducted by the Secretary of the
Interior, to adopt an amendment to the Tribe's Constitution adding a
"no impairment of contracts" provision similar to the provision of
Article I, Section 10, Clause 1 of the United States Constitution. */ The
election was held on April 9, 1994 and that provision was adopted. 5/

b. It established a tribal governmental instrumentality, the Snow
Mountain Recreational Facilities Authority, to act as the borrower of
the financing for the project, to lease the site of the project from the
Tribe, and to be able to grant to the lender a leasehold interest on the
project to secure the repayment of the financings.

c It established the Tribal Commercial Court as a division of the Las
Vegas Paiute Tribal Court. The Tribal Commercial Court, which has
jurisdiction over all civil matters involving the Tribe where the
amount in controversy exceeds $50,000, has the following attributes:

1/ The "contracts clause" of the United States Constitution, which
prohibits the states from taking any action under their governmental powers to
impair the obligation of contracts, does not apply to the federal or tribal
governments.

5/ The provision, Article X of the Las Vegas Paiute Constitution, reads:

ARTICLE X - IMPAIRMENT OF CONTRACTS

The Las Vegas Paiute Tribe shall not adopt any law, ordinance, measure or
resolution, whether under Articles VII [dealing with the powers of the Tribal
Council] and VIE [dealing with initiative and referendum] hereof or otherwise,
impairing the obligation of contracts of the Las Vegas Paiute Tribe or of any
instrumentality, agent, corporation or member of the Las Vegas Paiute Tribe.

March 11, 1998, testimony of Mark A. Jarboe, Dorsey & Whitney LLP Page 6

386

i. The judges of the division are lawyers licensed to practice in any
state within the Ninth or Tenth federal circuits;

ii. The Division applies the substantive contract law of the State of
Nevada in all cases before it; and

iii. The rules of the Nevada Uniform Commercial Code apply with
respect to the creation and perfection of security interests. *>l

On this last point, it is essential to note that the Las Vegas Paiute Tribal
Commercial Court, while looking and acting a lot like a state or federal civil court, is
a tribal court, is created under tribal law, and functions as an arm of iiib_ai
government. The federal government and many state governments have
specialized courts for specialized purposes: the federal government has, in addition
to the federal district courts, courts such as the Court of Federal Claims, bankruptcy
courts, tax courts, and military courts; states have civil courts, criminal courts,
juvenile courts, probate courts, family courts — whatever areas the government
determines need to be addressed by specific methods of dispute resolution. A tribal
government has the same power, and can decide that certain types of disputes
should be heard by specialized subdivisions of its tribal court system. This is what
the Las Vegas Paiute Tribe, and other tribes who have acted similarly, ?/ have done.

After the Tribe took these actions, it was able to focus the attentions of
prospective lenders on the economic and credit issues presented by the proposed
project — where the attention of a lender should be focused. The Tribe's experience
both with the bond funds and with Bank of America was that its actions in
anticipating the legitimate needs of its lenders, coupled with an agreement by the
Tribe and the Authority that they could be sued in the Tribal Commercial Court to
enforce the loans, satisfied the enforcement concerns of the lenders. The Tribe has
taken out four separate multi-million dollar loans from Bank of America as the
project has grown, all ultimately enforceable in the Tribal Commercial Court.

2. Cow Creek Band of Umpqua Tribe of Indians. Earlier this month, the
Cow Creek Band of Umpqua Tribe of Indians was negotiating a contract between its
Nesika Health Group (Nesika), a business enterprise wholly owned by the Tribe, and
a provider of specialized services needed for the Tribe's health program. The service

6/ A copy of Tide 1 of the Las Vegas Paiute Tribal Law and Order Code,
establishing the Tribal Court and the Tribal Commercial Court, is attached to this
testimony as Exhibit A.

Z/ Other examples include the Cow Creek Band of Umpqua Tribe of
Indians and the Mohegan Tribe of Connecticut.

March 11, 1998, testimony of Mark A. Jarboe. Dorsey k. Whitney LLP Page 7

387

provider had never before faced the issues presented in contracting with tribes and
initially took the position that any dispute under the contract should be resolved in
Oregon state court (a legal possibility, given that Oregon is a Public Law 280 state, but
of uncertain effect given that Oregon state courts have not ruled on whether the
abstention doctrine, set out by the United States Supreme Court in the National
Farmers Union and Iowa Mutual cases, applies to actions brought in state court). 8/
The Tribe was unwilling to consent to Oregon state court jurisdiction, but was
willing to permit Nesika to be sued by the service provider in the Cow Creek Tribal
Court should the Tribe default under the contract. That result was unacceptable to
the provider.

The solution that was reached was another example of tribal government
flexibility:

a. The Cow Creek Tribe had previously established a Tribal Commercial
Court similar to that established by the Las Vegas Paiute Tribe and
enacted a Tribal Arbitration Code. Under that Code, an agreement in a
contract which provides that disputes thereunder are to be referred to
arbitration is specifically enforceable as a matter of tribal law. Any
action brought in Tribal Commercial Court to compel arbitration shall
be enforced by the Tribal Judge. Questions as to whether a dispute is
arbitrable are for the arbitrators to decide, and any award resulting from
the arbitration shall be confirmed and enforced by the Tribal
Commercial Court as issued by the arbitrators, without modification by
the court. 9/

b. Nesika and the service provider agreed that any dispute between them
would be referred to arbitration under the Tribal Arbitration Code,
using the commercial arbitration rules of the American Arbitration
Association.

c. Nesika consented to be sued in courts of competent jurisdiction in
order to enforce its obligations under the contract, particularly the

a/ The abstention doctrine provides that if both a federal court and a tribal
court have jurisdiction over a matter and the case is brought in federal court, the
federal court must abstain and let the matter proceed in tribal court. The law has
not been resolved as to whether that same rule applies to cases in Public Law 280
states where state and tribal courts have concurrent jurisdiction. The Minnesota
state courts have ruled that it does. Matsch v. Prairie Island Indian C ommunity .

?7 A copy of the Cow Creek Tribal Arbitration Code is attached to this
testimony as Exhibit B.

March 11, 1998, testimony of Mark A. Jarboe, Dorsey & Whitney LLP Page 8

388

obligation to arbitrate any disputes. The consent specifically limited the
amount of any damages that could be awarded against Nesika and
provided that no recourse could be had against any assets of the Tribe
other than those vested in its Nesika enterprise.

As a result, the position of the parties in the event of a default by the Tribe's
Nesika enterprise under that contract is this: An action to enforce the contract will
be resolved by arbitration. If the Oregon state courts would take jurisdiction over an
action to compel arbitration, or to enforce an arbitration award, the provider can
bring such an action there. If, however, the Oregon courts would apply the
abstention rule, or if the provider wanted to initiate an enforcement action in the
tribal forum, that action can be brought in the Tribal Commercial Court. This was a
sufficiently satisfactory combination of remedies to the provider for the contract to
be signed. 10/

3. Confederated Tribes of the Grand Ronde Community of Oregon (Spirit
Mountain Development Corporation) . The Grand Ronde Confederated Tribes have
incorporated Spirit Mountain Development Corporation (SMDC) as a tribally-
chartered corporation, 11/ and have chartered Spirit Mountain Gaming, Inc. (SMGI)
as a wholly-owned subsidiary of SMDC. The Confederated Tribes are the sole owner
of SMDC; SMDC, in turn, is the sole owner of SMGI.

The purpose of the establishment of SMDC and SMGI was to carry out
business diversification activities on behalf of the Tribes. SMDC and SMGI both
enjoy sovereign immunity, but both can waive that immunity without affecting the
immunity enjoyed by the Tribes themselves.

lfl/ A similar structure was sufficiently satisfactory to a consortium of
banks, lead by Bank of America, for them to provide a $350,000,000 credit facility to
the Mashantucket Pequot Tribe, which has adopted a similar arbitration ordinance.

11/ As governments, tribes have the power to establish corporations.
Tribal corporations can be chartered under a tribal corporation code (e.g., Ho-Chunk,
Inc., chartered by the Winnebago Tribe of Nebraska; Colville Tribal Enterprise
Corporation, chartered by the Confederated Tribes of the Colville Reservation), or by
specific action of the tribal government (e.g., Little Six, Inc., chartered by the
Shakopee Mdewakanton Sioux (Dakota) Community; the Mille Lacs Corporate
Commission, chartered by the Mille Lacs Band of Ojibwe; Ketchikan Tribal Hatchery
Corporation, chartered by the Ketchikan Indian Corporation). In many cases, tribal
corporations are registered, with the Secretary of State of the state in which their
chartering tribe resides, to do business in the state as foreign corporations.

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389

When the Tribes sought financing for the development of their Spirit
Mountain Resort, the Tribes contacted numerous financial institutions. The one
that they selected was John Hancock Mutual Life Insurance Company, in Boston.
John Hancock was willing to lend the Tribes $18,900,000 to finance this project, but,
like the lenders described above, wanted to ensure its right to enforce the loan
obligations against its borrower should a default occur. The solution agreed upon
was this:

a. SMGI became the borrower of the loan.

b. The Tribe leased the resort site to SMGI, and SMGI became the
developer and operator of the resort.

c SMGI pledged all of the revenues derived from the operation of the
resort to the lender and agreed to deposit those revenues daily into
bank accounts pledged as security to the lender. Revenues would be
released to SMGI out of those accounts monthly after all obligations
under the loan were first provided for.

d. SMGI consented to be sued by the lender in the Oregon state courts
(Oregon is a Public Law 280 state) and the federal courts to enforce its
obligations under the loan documents, and waived any requirement
on the part of the lender to exhaust remedies in the Grand Ronde
Tribal Courts. Counsel to SMGI advised the lender that the waiver of
the requirement to exhaust tribal court remedies was of uncertain
enforceability. The Tribes themselves did not waive their sovereign
immunity.

Although the question of whether, upon a default, the lender would be
required to pursue its remedies in tribal, as opposed to state, court was not resolved
with certainty, this arrangement proved to be sufficiently satisfactory to the parties
that a second loan for an expansion of the original facility, in an amount in excess of
$7,500,000, was made to SMGI by John Hancock on the same terms.

4. Confederated Tribes of the Colville Reservation (Colville Tribal
Enterprise Corporation) . The Colville Tribal Enterprise Corporation (CTEC) is a
governmental corporation and instrumentality of the tribal government of the
Confederated Tribes of the Colville Reservation in Washington. CTEC operates the
business operations of the Colville Tribes, including the harvest and sale of tribal
timber; the operation of a sawmill, wood products facilities, gaming facilities, and a
marina; the rental of vacation houseboats on Lake Roosevelt; and the overseeing of
the tribal credit operation. As an instrumentality of tribal government, CTEC enjoys
sovereign immunity and it can waive that immunity without affecting the
immunity of the Tribes themselves.

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390

In 1996, CTEC sought to refinance a number of outstanding loans, primarily
relating to the Tribe's timber sales and fabrication operations, and to open up a
working capital line of credit. It negotiated with Key Bank of Washington for a
$10,000,000 revolving and term credit facility to be secured by a pledge of most of
CTEC's revenues, a security interest in certain personal property and a mortgage on
CTEC's leasehold interest in the tribal sawmill. In the negotiations, CTEC agreed to
waive its sovereign immunity in order to permit suits to enforce the loan and
security, but only in the Colville Tribal Courts. The immunity of the Tribes
themselves would not be waived. This was not even a significant issue in the
negotiations. The contract was drafted to give either side the option to trigger
arbitration if it desired, but then provided that any arbitration award would be
enforced in the Colville Tribal Court. The bank accepted the Tribal Court as the
forum for the enforcement of the contract and the loans were made.

D. Conclusion.

These are but a few examples; there are many more like them. They involve
large amounts of money and small amounts; long term obligations and short term.
In each case, the tribe involved and its contracting party have worked out how the
issue of tribal sovereign immunity — how the other party can hold the tribe to its
promise should the tribe default — will be dealt with in the contract. Common
themes that we have seen include:

• Consenting to suit in tribal court, perhaps in connection with the
establishment of a specialized commercial division of tribal court.

• Establishing a tribal arbitration code, providing that arbitration awards
are specifically enforceable in tribal court and consenting to the
jurisdiction of the tribal court in suits to compel arbitration or to
enforce an arbitration award.

• Consenting to suit in state court in a Public Law 280 state.

• Establishing a tribal corporation, a Section 17 IRA corporation, 12/ or a
tribal government instrumentality to serve as the contracting party,
vesting in that entity sufficient assets or resources to carry out its
obligations, and granting that entity the power to waive its sovereign
immunity without waiving the immunity of the tribe itself.

In most cases, one or more of these solutions have proven sufficient to
address the legitimate needs of the non-Indian party and to preserve the

12/ A federally chartered corporation under Section 17 of the Indian
Reorganization Act; 25 U.S.C. § 477.

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391

governmental interests of the tribes involved. Sometimes they are not sufficient;
occasionally the non-Indian party refuses to accept any result other than state court
enforcement, and in those cases the parties usually cannot come to agreement. But
there is no law that every proposed contract has to come into effect, and if the parties
cannot reach agreement, that contract won't. That is their decision.

These solutions work. They have worked for hundreds of millions, if not
billions, of dollars of contracts with tribes and tribal entities. But the solution that
works in one situation, with one tribe, will not necessarily be the solution that
works with another tribe, in another situation. Just as the federal government and
each of the 50 states has had to deal with, and solve the difficulties created by, their
sovereign immunity and to deal with them in their own ways, the tribes have to
deal with their sovereign immunity in ways that respect their own traditions,
structures and situations while accommodating the legitimate needs of others. That
process often gets worked out in the give and take of voluntary contract
negotiations. The tribes and the business community have been effective in
reaching agreement on solutions; I respectfully submit that there is no need for the
federal government to intervene and prevent the continued evolution in this area
among informed, consenting parties.

II. STATE SALES TAX COLLECTIONS

In the context of the collection of state sales taxes on retail sales made to non-
Indians in Indian Country, it is important to recognize that (A) many tribes and
states have entered into arms-length tribal-state agreements providing for the
imposition of state, tribal or joint taxes and the method of collection and
distribution of their proceeds, and (B) even if there is no tribal-state agreement in
place, states can collect taxes before the taxable items reach Indian Country. In
addition, sales and excise taxes vary from state to state in their nature and legal
format. As with the issue of sovereign immunity, the tribes and the non-Indian
parties — in this case the states — are working matters out in ways that best suit their
particular situations, needs and interests. There is no need for a federal imposition
of uniformity, stopping the process in its tracks.

A. Tribal-State Tax Agreements.

Many states and tribes have entered into agreements covering how they will
deal with retail sales and excise taxes. A few examples follow.

1. Minnesota . By the early WSCs, Minnesota had agreements with the 11
Chippewa and Dakota tribes in the state regarding cigarette, alcoholic beverage, and
sales taxes. In 1994, the Minnesota Legislature amended then existing state law to
authorize more comprehensive tax sharing agreements between the state and tribal
governments. Today, the Minnesota Department of Revenue and the tribes have

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392

each entered into tax agreements with respect to: (a) sales and use tax, including
motor vehicle excise tax, (b) cigarette and tobacco products excise tax, (c) liquor tax,
and (d) motor fuel tax.

Under the agreements, both tribal members and non-members must pay the
equivalent of the state sales tax for transactions occurring on the reservation and
state cigarette taxes for on-reservation cigarette purchases. Using a per capita
formula, the Minnesota Department of Revenue refunds to tribes an amount
attributable to taxes paid by enrolled members. The agreements authorize the State
Tax Commissioner to collect the state and tribal taxes that are the subject of the
agreements.

The agreements fix the estimated per capita amounts for each tax based on
changes in the Consumer Price Index for the Minneapolis/St. Paul metropolitan
area. To receive the per capita payments the tribal governing body must certify its
population to the State Tax Commissioner.

The tribes and the state also share a "base tax." The base tax is the difference
between the total tax from sales on the reservation and the tax attributable to
enrolled member consumption. The total on-reservation cigarette, tobacco products
and alcoholic beverage taxes are derived from quarterly sales by distributors to
retailers located on the reservation.

The payment formula can be expressed in mathematical terms:

a. Per Capita Tax X Certified Population = Tax on Member Consumption

b. Tax Included in On-Reservation Sales - Tax on Member Consumption
= Base Tax

c Tax on Tribal Consumption + (Base Tax X 50%) = Payment

All vendors located on the reservation must purchase their stock from
distributors licensed by the state and all cigarettes sold on the reservation must bear
an Indian reservation tax stamp.

2. South Dakota . In South Dakota, agreements have been in place with
four of the nine tribes in the state regarding sales and use taxes, and cigarette and
contractors' excise taxes. These agreements were entered into in late 1970's, were
amended numerous times and, although they expired last year, the tribes and the
state are continuing to operate under them.

Under these agreements, the state collects a tribal tax which is equivalent to
the state tax. Every transaction on the reservation of a compacting tribe is subject to

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393

applicable sales, use, contractors' excise, or cigarette excise taxes, whether the sale is
to an Indian or a non-Indian. The State collects the tribal tax, remits a percentage to
the tribe, and keeps the remaining percentage. While there is no state tax imposed,
the state does collect a 1% administrative fee.

3. Washing ton. Washington State has entered into agreements with
several of the 26 tribes located in the state on motor fuel taxes and liquor taxes. In
addition, Washington implemented a cigarette allocation system in 1980.

Pursuant to the motor fuel tax agreements, on-reservation Indian retailers are
required to pay the state tax for all sales and to keep records of exempt sales. The
state then refunds to the tribe the taxes paid on exempt sales. Alternatively, some
motor fuel tax agreements require the tribe to purchase a percentage of tax-free fuel
representing exempt sales to Indians.

Eighteen of the 26 tribes participate in the cigarette allocation program. A
quota of tax-free cigarettes, determined by a per capita consumption formula, is set
aside to be sold to tribal retailers. Wholesalers, who apply stamps to the cigarettes,
pre-pay the cigarette taxes and receive refunds from the state for tax-free sales to
tribes if they obtain approval from the State Department of Revenue prior to the
sale.

4. Nevada . The State of Nevada has provided by statute that the state
shall not collect state sales tax on the sale of tangible personal property on an Indian
reservation if the tribe levies and collects a sales tax on retail sales at rates at least as
high as Nevada's. Similarly, the Nevada Tax Commission has provided that the
state excise tax will not apply to the sale of cigarettes on an Indian reservation if the
tribe levies and collects an excise tax at rates at least as high as Nevada's. Nevada's
interest appears to be to ensure that there is an equal tax burden on retail and
cigarette sales, not to raise revenue from taxing transactions that arise in Indian
country.

Under this authority, the state, through the Department of Taxation, and a
number of tribes in Nevada have entered into intergovernmental agreements
under which (a) the tribes agree to impose sales and excise taxes on the sale of
tangible personal property and cigarettes, whether to Indians or non-Indians, at rates
at least as high as Nevada's, (b) the Nevada state taxes do not apply to those
transactions, and (c) the tribes retain the revenue generated by the tribal tax.

5. Oklahoma . Application of Oklahoma's motor fuels tax to sales in
Indian Country was invalidated by the Supreme Court in the Chickasaw Nation
case. The Court ruled that the legal incidence of the state tax fell on the tribal
retailer in Indian Country and, as such, was invalid because it was not authorized by
the Congress. The Court also recognized that Oklahoma could simply shift the legal

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394

incidence of the tax so that it fell upon the ultimate retail purchaser, whereupon it
could be legally imposed upon non-Indian consumers. The Oklahoma Legislature
responded by amending the state tax laws in 1996 to shift the legal incidence of the
tax to the consumer.

The State has also entered into tax agreements with nine tribes. These
agreements provide that the State of Oklahoma collects a motor fuels tax at the
distributor level before any fuels enter Indian Country. The State then pays the
tribes a certain percentage of all taxes collected, reflecting the estimated exempt tribal
consumption share.

6. Wisconsin . In Wisconsin, the state and the tribes have entered into
cigarette tax agreements which require the tribes to collect state sales taxes on the
sale or the purchase, consumption and use of cigarettes. Under this agreement,
every consumer, including a tribal member, pays the state tax. Similar to the
agreements in Minnesota, the State then remits to the tribe a percentage of the state
tax collected which is determined on a tribal member per capita basis.

7. New York . Although not an example of a tribal-state tax agreement, I
should call the Committee's attention to recent developments in the State of New
York.

The State of New York adopted a precollection scheme for the taxation of
gasoline, motor fuel and cigarettes which were destined for retailers in Indian
country. The procedure involved collecting the tax on those products at the
distribution level, from the first person who brought the taxable product into New
York. This approach was upheld by the United States Supreme Court in
Department of Taxation and Finance of New York v. Milhelm Att ea & Bros..
although the Court noted in a footnote that it was not addressing whether the
precollection procedure violated treaty rights of the Seneca Nation of Indians.

Prior to implementation of this procedure, the state sought to negotiate tax
agreements with the New York tribes under which the tribes would either impose
their own taxes on, or establish minimum resale prices for the sale of, gasoline and
cigarettes sold on their lands, and would agree to share information as to the sales
and distribution of those products with the New York taxing authorities. Some
tribes agreed in principle to such an arrangement; others did not. Accordingly, on
April 1, 1997, the state implemented its precollection procedure. It met with
widespread opposition, both from the tribes and from non-Indians living in or near
Indian lands in New York. The tribes asserted that they alone had the power to
regulate commerce on their territories, and that the state's precollection scheme was
an improper infringement of tribal governmental power. In May, Governor Pataki
agreed. He ordered that the precollection practice be stopped, directed that the
regulations implementing it be revoked, and proposed legislation amending the

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New York tax code so as to exempt from the New York sales and excise taxes all
retail sales of gasoline, motor fuels and tobacco products that take place in Indian
Country. That legislation is presently pending.

In the meantime, the New York Association of Convenience Stores, a
nonprofit organization representing convenience stores that sell cigarettes, motor
fuel and other products in the state of New York, has brought suit against the New
York Commissioner of Taxation and Revenue to enforce the collection of state
excise and sales taxes from on-reservation sales of cigarettes and motor fuel to non-
Indian customers. That case is currently before the New York Court of Appeals and
is to be argued later this month. The Seneca Nation has appeared in the case as
amicus curiae in order to support the decision of the state not to attempt to collect
the taxes at issue.

The situation in New York has a long history and feelings run deep on both
sides. However, the Governor has decided that it is in the best interest of the people
of New York, including but not limited to its Indian residents, that the tribes
regulate retail sales of these products on their own, as they deem best, and that the
state not attempt to tax those transactions.

B. State Collection Power in the Absence of an Agreement.

The existence of a tribal-state tax agreement is not a prerequisite to a state's
ability to collect a lawfully imposed state tax. The Supreme Court itself, in
Oklahoma T ax Commission v. Citizen Band of Potawatomi. identified a number of
ways that a state can collect a lawfully imposed tax:

There is no doubt that sovereign immunity bars the state from pursuing the
most efficient remedy, but we are not persuaded that it lacks any adequate
alternatives. We have never held that individual agents or officers of a tribe
are not liable for damages in actions by the state. And under today's decision,
states may of course collect the sales tax from cigarette wholesalers, either by
seizing unstamped cigarettes off the reservation, or by assessing wholesalers
who supplied unstamped cigarettes to tribal stores. States may also enter into
agreements with the tribes to adopt a mutually satisfactory regime for the
collection of this sort of tax."

In addition, only tribes themselves enjoy sovereign immunity, not
individual tribal retail operators. Therefore, if a state and a tribe cannot reach
agreement on the matter of sales and excise taxes, and the state still wants to collect
any tax that it can lawfully impose, then its course is rather clear:

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396

1. ensure that the legal incidence of the state tax falls on the ultimate
consumer (in order that it can be imposed on a non-Indian retail
purchaser making a purchase in Indian country), and

2. if retail operations are being conducted by the tribes themselves, as
opposed to individual Indian retailers, institute a procedure to collect
the tax at the importer /distributor level, under which the first person
bringing the product into the state, or the manufacturer of an in-state
product, collects that tax as part of the sales price to the retailer and
remits it to the state on behalf of the ultimate consumer.

This may require a change in state tax law or procedure, but it is legally
available, has been upheld by the Supreme Court, and does not require any federal
intervention.

C Conclusion.

The area of retail sales and excise taxes is more controversial than the area of
contract, in large measure because it involves the competing power of two
governments. Those two governments generally are not on the best of terms, and it
is often difficult for them to sit down and try to resolve their differences in a way
that meets their mutual needs and interests. However, I submit to the Committee
that it is best to let this process continue to work itself out. Tribes and states are
reaching workable, creative and effective solutions to this issue, solutions that meet
the needs of those tribes and those states. Imposing a uniform federal rule would
stop this process cold and prevent continued evolution in the tribal /state
relationship that, if continued by people with good will on both sides, could well
result in benefits for Indians and non-Indians alike.

III. SUMMARY

Mr. Chairman, in both of these areas — contracting and the collection of state
sales taxes — tribes and their contracting parties, in the first, and tribes and states, in
the second, are reaching solutions that serve their respective interests and meet
their needs in their respective situations. This is a process that evolves. It evolved
with the federal government, it evolved with the state and local governments, and
it is evolving with the tribes. The evolution proceeds smoothly at some times, at
others it moves in fits and stops, but the evolution continues. If it may seem to
some that this evolution is late in coming, please recall that until recently there was
little need for it to do so, because of the historically low level of economic activity in
Indian Country. It is the increase in that activity that provides the impetus for tribes
and non-Indians to address these issues cooperatively.

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397

In addition, I submit that, just as there is no uniform scheme or procedure for
dealing with sovereign immunity in all federal, state and local governmental
contracts and no uniformity in the nature and format of state sales taxes, there is no
uniform scheme or procedure that is appropriate for dealing with sovereign
immunity in all tribal contracts or in tribal /state tax relationships. These matters
are best dealt with by the parties directly involved, in ways that they deem best. It
may sometimes take a bit of effort for those parties to reach accord, but it is better for
all that they do so themselves. The result will be much more appropriate for their
needs than any "solution" imposed from above.

Thank you very much, Mr. Chairman. I would be happy to respond to any
questions that the Committee may have.

Attachments: Exhibit A - - Law and Order Code of the Las Vegas Tribe

of Paiute Indians, Title 1 - The Tribal Court

Exhibit B - - Cow Creek Band of Umpqua Tribe of Indians,
Tribal Legal Code, Title 70 - Arbitration Code

March 11, 1998, testimony of Mark A. Jarboe, Dorsey & Whitney LLP Page 18

398

LAW AND ORDER CODE OF
THE LAS VEGAS TRIBE OF PAIUTE INDIANS

Title 1 - The Tribal Court

1-10 AUTHORIZATION AND DEFINITIONS

1-10-010 Establishment of the Tribal Court - Pursuant to Article VII of the

Constitution and By-laws of the Las Vegas Tribe of Paiute Indians,
there is hereby established by the Las Vegas Paiute Tribal Council a
Tribal Court of general jurisdiction.

Sourer. Tribal Council Resolution No. 94-021, dated June 21, 1994.

Comment: This section entirely restates and supersedes its prior version as originally

adopted pursuant to Tribal Resolution No. 7/5/77 A and all amendments thereto.

1-10-015 Establishment of the Tribal Commercial Court - Pursuant to Article VII

of the Constitution and By-laws of the Las Vegas Tribe of Paiute
Indians, there is hereby established by the Las Vegas Paiute Tribal
Council, as an adjunct to the Tribal Court, a Tribal Commercial Court
of limited jurisdiction which may exercise the authority of the Tribal
Court only with respect to those cases referred to the jurisdiction of the
Tribal Commercial Court pursuant to l-20-060(b) of this Code.

Sourer Tribal Council Resolution No. 94-021, dated June 21, 1994.
Comment:

1-10-020

Definitions - The following words have the meaning given below
when used in this Law and Order Code:

(a)
(b)

(8)

"Clerk" means the Clerk of the Tribal Court;

"Code" means the Law and Order Code of the Las Vegas Tribe of

Paiute Indians;

"Colony" or "Reservation" means all lands of the Las Vegas

Tribe of Paiute Indians described or referenced in the

Constitution and By-laws of the Las Vegas Tribe of Paiute

Indians, including, but not limited to, all lands described in

United States Public Law 98-203.

"Juvenile Court" means the Tribal Court when exercising its

jurisdiction pursuant to 1-20-050 of this Code.

"Tribe" means and "Tribal" refers to the Las Vegas Tribe of

Paiute Indians.

"Tribal Council" means the duly elected Tribal Council of the

Las Vegas Paiute Tribe.

LAS VEGAS PAIUTE TRIBAL LAW AND ORDER CODE - TITLE 1

Pagel

(f) "Tribal Court" means the Tribal Court of the Las Vegas Paiute
Tribe and, except as otherwise clearly indicated, all adjuncts
thereto, including, but not limited to, the Tribal Commercial
Court.

Source: Tribal Council Resolution No. 94-021, dated June 21, 1994.

Comment: This section entirely restates and supersedes its prior version as originally

adopted pursuant to Tribal Resolution No. 7/5/77A and all amendments thereto.

1-10-030 Words and Terms: T ense. Number and Gender - In interpreting and
applying the words and terms of this Code, save when otherwise fairly
declared or clearly apparent for the context:

(a) Words and terms in the present tense shall include the future
tense;

(b) Words and terms in any gender shall refer to all genders; and

Sourer. Tribal Council Resolution No. 94-021, dated June 21, 1994.

Comment: This section entirely restates and supersedes its prior version as originally

adopted pursuant to Tribal Resolution No. 7/5/77 A and all amendments thereto.

1-20 JURISDICTION OF THE TRIBAL COURT

1-20-010 Territorial Jurisdiction of the Tribal Court - The jurisdiction of the
Tribal Court shall extend to all territory within the boundaries of the
Colony, including trust and non-trust land, and all roads, water and
bridges, and any lands which may be added to the Colony in the future
or which may otherwise become subject to the jurisdiction of the Tribe
by any lawful means.

Source: Tribal Council Resolution No. 94-021, dated June 21, 1994.

Comment: This section entirely restates and supersedes its prior version as originally

adopted pursuant to Tribal Resolution No. 7/5/77 A and all amendments thereto.

1-20-020 Civil Turisdiction -

(a) The Tribal Court shall have original jurisdiction over all civil
causes of action arising from any transaction or occurrence
occurring within the territorial jurisdiction of the Tribal Court,
including, but not limited to:

(1) The transaction of any business within the Reservation;

(2) The commission of a tortious act within the
Reservation;

(3) The ownership, use, or possession of any property
situated within the Reservation;

LAS VEGAS PAIUTE TRIBAL LAW AND ORDER CODE - TITLE 1

Page 2

400

(4) Contracting to insure any person, property or risk
residing or located within the Reservation; or

(5) The violation of any of the civil regulatory provisions
of this Code.

(b) Personal jurisdiction shall exist over all defendants, Indians or
non-Indians:

(1) Served within the Territorial Jurisdiction of the Tribal
Court;

(2) Consenting to such jurisdiction; or

(3) Personally served with a summons outside the
Reservation in the manner prescribed by applicable
rules of procedure for the Tribal Court.

(c) The act of entry upon territory within the territorial jurisdiction
of the Tribal Court, including, but not limited to, entry for the
purpose of delivering goods or providing services, regardless of
where any contract related to such goods or services may have
been executed, shall be considered consent to the jurisdiction of
the Tribal Court with respect to any action arising from or
related to such entry.

(d) The Tribal Court shall have no jurisdiction in any matter in
which the Tribe, any Tribal instrumentality, office, authority, or
any officer of the Tribe or any officer of a Tribal instrumentality,
office or authority properly asserts the defense of sovereign
immunity, unless such sovereign immunity has been explicitly
waived in the context of the particular case before the Tribal
Court.

Sourer. Tribal Council Resolution No. 94-021, dated June 21, 1994.

Comment: This section entirely restates and supersedes its prior version as originally

adopted pursuant to Tribal Resolution No. 7/5/77 A and all amendments thereto.

This section 1-20-020 is intended as an express reservation by the Tribal Council
of civil adjudicatory jurisdiction to the full extent allowable under Tribal and federal
law.

1-20-030 Criminal Jurisdiction - The Tribal Court shall have criminal
jurisdiction over all offenses enumerated in this Code, or in any code
or regulation adopted, utilized or enforced by the Tribe by virtue of
Tribal, federal and /or state intergovernmental agreement, statute,
ordinance, resolution or other enactment, when committed within the
territorial jurisdiction of the Tribal Court.

Sourer. Tribal Council Resolution No. 94-021, dated June 21, 1994.

Comment: This section entirely restates and supersedes its prior version as originally

adopted pursuant to Tribal Resolution No. 7/5/77A and all amendments thereto.

LAS VEGAS PAIUTE TRIBAL LAW AND ORDER CODE -TITLE 1 Page 3

401

1-20-040

This section 1-20-030 is intended as an express reservation by the Tribal Council
of criminal prohibitory jurisdiction to the full extent allowable under Tribal and
federal law and in recognition of the Nevada state criminal jurisdiction of Tribal law
enforcement officers pursuant to N.R.S. 171.1255 and any other applicable laws of the
state of Nevada.

Nothing in this section 1-20-030 shall be construed as an assumption by the
Tribe of criminal prohibitory jurisdiction over non-Indians greater than the maximum
possible assumption of such jurisdiction under applicable federal law.

Probate Jurisdiction - To the full extent permitted by federal law, the
Tribal Court shall have probate jurisdiction over all real and personal
property located within the territorial jurisdiction of the Tribal Court at
the time of the owner's death, and the personal property, wherever
located, of any person residing within the Reservation at the time of
their death.

Sourer. Tribal Council Resolution No. 94-021, dated June 21, 1994.

Comment: This section entirely restates and supersedes its prior version as originally

adopted pursuant to Tribal Resolution No. 7/5/77 'A and all amendments thereto.

This section 1-20-040 is intended as an express reservation by the Tribal Council
of probate jurisdiction to the full extent allowable under Tribal and federal law.

1-20-050 Juvenile lurisdiction - The Tribal Court shall have original and
exclusive jurisdiction in all proceedings and matters affecting children
under the age of eighteen, when such children are residing or
apprehended within the territorial jurisdiction of the Tribal Court.
When exercising such jurisdiction, the Tribal Court shall be known as
the Juvenile Court.

Sourer. Tribal Council Resolution No. 94-021, dated June 21, 1994.

Comment: This section entirely restates and supersedes its prior version as originally
adopted pursuant to Tribal Resolution No. 7/5/77 A and all amendments thereto.
This section 1-20-050 is intended as an express reservation by the Tribal Council of
juvenile jurisdiction to the full extent allowable under Tribal and federal law.

1-20-060 jurisdictio n Over Certain Commercial Proceeding s -

(a) Original jurisdiction in all civil proceedings of the type described
in l-20-020(a) of this Code, where the matter in controversy
exceeds the sum or value of $50,000, exclusive of interest and
costs, is hereby referred to the Tribal Commercial Court. The
Chief Judge of the Tribal Court may also refer jurisdiction over
other civil actions to the Tribal Commercial Court on a
discretionary basis or at the direction of the Tribal Council.

(b) The Tribal Court may withdraw jurisdiction referred to the
Tribal Commercial Tribal Court under l-20-060(a), in whole or in

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part, on its own motion or on timely motion of any party, for
cause shown.

Sourer. Tribal Council Resolution No. 94-021, dated June 21, 1994.

Comment: This section entirely restates and supersedes its prior version as originally

adopted pursuant to Tribal Resolution No. 7/5/77 A and all amendments thereto.

1-30 LAW TO BE APPLIED BY THE TRIBAL COURT

1-30-010 A pplicable Law -

(a) The Tribal Court shall apply the provisions of this Code and any
other procedural codes or rules, ordinances, resolutions or other
enactments adopted by the Tribe. When appropriate, the Tribal
Court shall rely on previous opinions issued by the Tribal Court,
the Tribal Commercial Court or the Tribal Court of Appeals
interpreting this Code or any other Tribal ordinance, resolution
or enactment.

(b) In civil proceedings before the Tribal Court, as distinct from
proceedings before the Tribal Commercial Court, the Tribal
Court shall first adhere to the requirements of l-30-010(a) and
may then apply the substantive statutory, regulatory and
common law of the United States and the state of Nevada,
including, but not limited to, the Nevada Uniform Commercial
Code and Nevada choice-of-law principles, but only to the extent
that such Nevada substantive statutory, regulatory and common
law does not conflict with this Code or any duly enacted
ordinances, resolutions or other enactments of the Tribe or
federal law.

(c) In proceedings before the Tribal Commercial Court, the Tribal
Commercial Court shall first adhere to the requirements of
l-30-010(a) and shall then, to the maximum extent enforceable
under federal law, apply the below listed provisions of the
Nevada Revised Statutes (and any successor provisions),
including all common law principles derived from such
provisions and may then apply substantive statutory, regulatory
and common law of the United States and the state of Nevada
not below listed, but only to the extent that such Nevada
substantive statutory, regulatory and common law, whether
listed below or not, does not conflict with this Code or any duly
enacted ordinances, resolutions or other enactments of the Tribe
or federal law:

(1) N.R.S Chapters 30, 31, 32, 33, 38, 40 and 42;

(2) N.R.S. Title 4 in its entirety;

(3) N.R.S. Title 7 in its entirety;

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403

(4) N.R.S. Title 8 in its entirety;

(5) N.R.S. Chapters 106, 107 and 108;

(6) N.R.S. Chapter 112;

(7) N.R.S. Chapter 120A;

(8) N.R.S. Title 13;

(9) N.R.S. Title 54;

(10) N.R.S. Title 55;

(11) N.R.S. Title 57; and

(12) N.R.S. Title 58.

(d) In criminal proceedings the Tribal Court shall first adhere to the
requirements of l-30-010(a) and shall then apply the substantive
statutory, regulatory and common law of the United States and
the state of Nevada.

(e) Upon the passage of this Code, neither Nevada law nor the
provisions of 25 Code of Federal Regulations (C.F.R.), part 11,
shall be applied by the Tribal Court unless such application is
specifically authorized by this Code.

Source: Tribal Council Resolution No. 94-021, dated June 21, 1994; with the exception of
the text of Section l-3O-010(c) which was replaced in its entirety pursuant to Tribal
Council Resolution No. 95-028, dated June 27, 1995.

Comment: This section entirely restates and supersedes its prior version as originally
adopted pursuant to Tribal Resolution No. 7/5/77 'A and all amendments thereto. The
text of Section l-30-010(c) adopted by Tribal Council Resolution No. 94-021, dated
June 21, 1994, was replaced in its entirety pursuant to Tribal Council Resolution No.
95-028, dated June 27, 1995.

1-30-020 Tribal Custom -

(a) The Tribal Court shall not apply traditional or customary law of
the Las Vegas Paiute Tribe, except that the customs of marriage
and of divorce shall be applied when the marriage or divorce
was consummated in accordance with Tribal custom prior to the
effective date of Tribal Resolution No. 7/5/77 A.

(b) The Tribal Court shall not consider whether Tribal customs
relating to marriage and of divorce apply in any given case
unless the issue of the application of Tribal customs to such case
is raised by one of the parties. It is the obligation of the party
wishing to benefit by the application of this section to bring to
the attention of the Tribal Court the appropriate Tribal custom
and to establish that their case meets the requirements for
application of the custom.

Sourer. Tribal Council Resolution No. 94-021, dated June 21, 1994.

Comment: This section entirely restates and supersedes its prior version as originally

adopted pursuant to Tribal Resolution No. 7/5/77 A and all amendments thereto.

LAS VEGAS PAIUTE TRIBAL LAW AND ORDER CODE - TITLE 1 Page 6

404

For purposes of section 1-30-020 only, the effective date of this Code shall be
deemed to be the effective date of Tribal Resolution No. 7/5/77A.

1-40
1-40-010

1-40-020

1-40-025

JUDGES OF THE TRIBAL COURT
Composition of the Tribal Court -

(a) The Tribal Court, as distinct from the Tribal Commercial Court,
shall consist of one Chief Judge and as many Associate Judges as
the Tribal Council shall deem necessary.

(b) The Tribal Commercial Court shall consist of one Judge.

Sourer. Tribal Council Resolution No. 94-021, dated June 21, 1994.

Comment: This section entirely restates and supersedes its prior version as originally

adopted pursuant to Tribal Resolution No. 7/5/77 A and all amendments thereto.

Qualifications for Triba l Court Judges - A Tribal Court judge, including
the Chief Judge, may be any person, Indian or non-Indian, whether a
resident or non-resident of the Reservation, provided that such person:

(a) Is twenty-five (25) years of age or older;

(b) Has never been convicted of a felony;

(d) Is mature, trustworthy, and of good moral character;

(e) Is capable of supervising a staff of Associate Judges, Clerks, and
others;

(f) Is willing to attend training sessions for Tribal judges; and

(g) Is able to determine in what cases he will be disqualified and is
willing to disqualify himself.

Preference for this position of Judge of the Tribal Court shall be given
to those who are educated or experienced in the law.
Preference shall also be given to enrolled members of federally
recognized Tribes, Bands or Communities of Native Americans.

Sourer. Tribal Council Resolution No. 94-021, dated June 21, 1994.

Comment: This section entirely restates and supersedes its prior version as originally

adopted pursuant to Tribal Resolution No. 7/5/77 A and all amendments thereto.

Additional Qualifications for Judge of the Tribal Commercial Court -
The judge of the Tribal Commercial Court may be any person, Indian
or non-Indian, whether a resident or non-resident of the Reservation,
provided that such person:

(a) meets the requirements of 1-40-020 of this Code; and,

(b) Is duly licensed to practice law in the courts of any State within
the ninth or tenth federal Judicial circuits at all times while
presiding as a Judge of the Tribal Commercial Court.

LAS VEGAS PAIUTE TRIBAL LAW AND ORDER CODE - TITLE 1

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405

Preference for the position of Judge of the Tribal Commercial Court
shall be given to persons having: (i) significant prior adjudicatory
experience; (ii) experience in the area of federal Indian law and /or
commercial law in the State of Nevada; and (iii) five (5) or more years
experience as a licensed attorney in the State of Nevada.

Preference shall also be given to enrolled members of federally
recognized Tribes, Bands or Communities of Native Americans.

Sourer. Tribal Council Resolution No. 94-021, dated June 21, 1994.
Comment:

1-40-030 Appointment of Judges -

(a) All judges of the Tribal Court shall be appointed by the Tribal
Council. All judges shall be chosen from a list of qualified
candidates recommended by the Law and Order Committee of
the Tribal Council.

(b) Nothing in this section 1-40-030 shall prohibit the Tribal Council
from contracting or agreeing with the Bureau of Indian Affairs
or any other agency or organization that such agency or
organization shall provide all or part of the compensation of a
Tribal Court judge, and shall in return have control over the
appointment of such judge. In such situations, the Tribal
Council shall by resolution recommend to such agency or
organization the appointment of a particular person as a Tribal
Court judge.

Source: Tribal Council Resolution No. 94-021, dated June 21, 1994.

Comment: This section entirely restates and supersedes its prior version as originally

adopted pursuant to Tribal Resolution No. 7/5/77 A and all amendments thereto.

1-40-040 Term of Office -

(a)

(b)
(c)

Unless removed for cause, the Chief Judge of the Tribal Court
shall serve for a term of three years and until his successor
assumes office, Associate Judges of the Tribal Court shall serve
for a term of one year and until their successors assume office
and the judge of the Tribal Commercial Court shall serve a term
of three years and until his successor assumes office.
All judges shall be eligible for reappointment.
All judges shall assume office following their appointment by
taking the following oath of office, administered by the Tribal
Council Chairperson or his designate, at a regularly scheduled
meeting of the Tribal Council: "I, ,

LAS VEGAS PAIUTE TRIBAL LAW AND ORDER CODE - TITLE 1

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406

do solemnly swear/affirm that I will uphold and protect the
Constitution and Bylaws of the Las Vegas Paiute Tribe, that I will
fairly administer justice and perform the duties of judge of the
Tribal Court/Tribal Commercial Court of the Las Vegas Tribe of
Paiute Indians to the best of my abilities."

Sourer Tribal Council Resolution No. 94-021, dated June 21, 1994.

Comment: This section entirely restates and supersedes its prior version as originally

adopted pursuant to Tribal Resolution No. 7/5/77 A and all amendments thereto.

1-40-050 Duties and Powers of Tribal Court fudges -

(a) Judges of the Tribal Court shall have the duty and power to
conduct all Tribal Court proceedings, and issue all orders and
papers incident thereto, in order to administer justice in all
matters within the jurisdiction of the Tribal Court. In so doing
they shall:

(1) Be responsible for establishing and maintaining Rules of
the Tribal Court regulating conduct in the Tribal Court
and the Tribal Commercial Court. Such Rules of the
Tribal Court must be approved by the Tribal Council;

(2) Hold Tribal Court regularly at a designated time and place
on the Colony;

(3) Hear and decide all cases;

(4) Enter all appropriate orders and judgments;

(5) Issue all appropriate warrants;

(6) Keep such records as are required by this Code, the Rules
of the Tribal Court, Tribal ordinance, resolution or other
enactment of the Tribe;

(7) Perform the duties of the Clerk in the Clerk's absence;

(8) Perform such other duties as are required by this Code, the
Rules of the Tribal Court, Tribal ordinance, resolution or
other enactment adopted by the Tribe; and

(9) Perform such other duties as are necessary and proper for
the administration of justice.

(b) Unless a coroner is appointed in accordance with the provisions
of this Code, the Chief Judge shall have the authority to perform
the duties of Coroner for the Tribe.

(c) The Chief Judge shall hear all cases except those: (i) which are
assigned by the Chief Judge to an Associate Judge; (ii) which
must be heard by an Associate Judge in order to assure the
prompt administration of justice; or (iii) for which jurisdiction
has been referred to the Tribal Commercial Court pursuant to
l-20-060(b) of this Code.

LAS VEGAS PAIUTE TRIBAL LAW AND ORDER CODE - TTTLE 1 Page 9

407

Source: Tribal Council Resolution No. 94-021, dated June 21, 1994.

Comment: This section entirely restates and supersedes its prior version as originally

adopted pursuant to Tribal Resolution No. 7/5/77 A and all amendments thereto.

1-40-055 Duties and Powers of T ribal Commercial Court Tudge -

(a) The judge of the Tribal Commercial Court shall have the duty
and full power of the Tribal Court to conduct all proceedings
which have been referred to its jurisdiction pursuant to 1-20-060
of this Code, and to issue all orders and papers incident thereto,
in order to administer justice in all matters within the
jurisdiction of the Tribal Commercial Court. In so doing he
shall:

(1) Hold Tribal Commercial Court on the Reservation at a
location designated by the Chief Judge of the Tribal Court
at such times as directed by the Chief Judge of the Tribal
Court;

(2) Hear and decide all cases referred to the Tribal
Commercial Court pursuant to 1-20-060 of this Code;

(3) Enter all appropriate orders and judgments in such cases;

(4) Keep such records as are required by this Code, the Rules
of the Tribal Court, Tribal ordinance, resolution or other
enactment adopted by the Tribe;

(5) Perform the duties of the Clerk in the Clerk's absence;

(6) Perform such other duties as are required by this Code, the
Rules of the Tribal Court, Tribal ordinance, resolution or
other enactment adopted by the Tribe; and

(7) Perform such other duties as are necessary and proper for
the administration of justice.

(b) In addition to all standards and requirements imposed by this
Code, the Rules of the Tribal Court, Tribal ordinance, resolution
or other enactment adopted by the Tribe, the judge of the Tribal
Commercial Court shall be bound by all judicial standards, codes
of judicial conduct, and canons of judicial ethics applicable to
judges presiding in Nevada courts of general jurisdiction.

Source: Tribal Council Resolution No. 94-021, dated June 21, 1994.
Comment:

1-40-060 Appointment of Temporary Judges -

(a) If, due to the disqualification or other unavailability of the Chief
or Associate Judges of the Tribal Court, an additional judge is
needed to adjudicate matters at trial or on appeal, the Tribal
Council shall have the power to appoint a temporary judge to

LAS VEGAS PAIUTE TRIBAL LAW AND ORDER CODE - TITLE 1 Page 1

hear the case, or to contract with any agency or organization for
such appointment.

(b) The Tribal Council must make such an appointment when it is
necessary to insure the prompt administration of justice.

(d) Temporary judges must meet the requirements of 1-40-020 of
this Code.

Source: Tribal Council Resolution No. 94-021, dated June 21, 1994.
Comment: This section entirely restates and supersedes its prior version as
originally adopted pursuant to Tribal Resolution No. 7/5/77 A and all
amendments thereto.

1-40-070 Compensation of ludges -

(a) The compensation of all judges of the Tribal Court shall be set by
resolution of the Tribal Council. No judge shall have his
compensation reduced during his term of office.

(b) Nothing in this section shall prohibit the Tribal Council from
contracting or agreeing with the Bureau of Indian Affairs or any
other agency or organization that such agency or organization
shall provide all or part of the compensation of a judge of the
Tribal Court, and shall in return have control over the
compensation of such judge. In such situations the Tribal
Council shall by resolution make a recommendation to such
agency or organization as to the compensation of judges of the
Tribal Court.

Sourer. Tribal Council Resolution No. 94-021, dated June 21, 1994.

Comment: This section entirely restates and supersedes its prior version as originally

adopted pursuant to Tribal Resolution No. 7/5/77 A and all amendments thereto.

1-40-080 Removal of Judges -

(a) Judges of the Tribal Court may be removed for good cause by a
two-thirds (2/3) vote of the full Tribal Council; provided,
however, that no judge of the Tribal Court may be removed
during the original pendency of any case.

(b) Procedures to be followed in removing a judge of the Tribal
Court:

(1) No action will be taken except on a written complaint to
the Tribal Council setting forth specific facts justifying
removal;

(2) The judge shall be immediately notified of the charges
against him;

LAS VEGAS PAIUTE TRIBAL LAW AND ORDER CODE - TITLE 1 Page 11

409

(3) Within 60 days of receiving a complaint against any judge,
the Tribal Council shall decide by majority vote of a
quorum whether the complaint is frivolous and should be
dismissed, or whether the complaint requires a hearing
before the Tribal Council to determine if the judge should
be removed. Notice of this decision must be sent by
certified mail to both the judge accused and the
complainant within five (5) days of the decision. No
judge shall be removed except following a hearing on the
complaint and a subsequent decision and resolution by the
Tribal Council that removal is appropriate.

(4) If the Tribal Council decides a removal hearing is
required, it shall set a date and provide notice of such
hearing to the complainant and the accused judge at least
thirty (30) days, but not more than sixty (60) days, in
advance. Once the date for a removal hearing is set by the
Tribal Council, the accused judge shall be hereby
automatically suspended from his duties as a judge of the
Tribal Court.

(5) At the removal hearing both the accused judge and the
complainant shall be given an opportunity to present
evidence, call witnesses, and make a statement to the
Tribal Council in support of their contentions.

(6) After a removal hearing is held, the Tribal Council shall vote on
whether or not the evidence presented establishes that good
cause exists for removing the accused judge. The parties shall be
notified of the Tribal Council's decision within 60 days of the
hearing. Any judge not removed is restored to his duties as of
the time of the decision of the Tribal Council against removal.

(c) Nothing in this section shall prohibit the Tribal Council from
contracting or agreeing with the Bureau of Indian Affairs or any
other agency or organization that such agency or organization
shall provide all or part of the compensation of a judge of the
Tribal Court, and shall in return have control over the removal
of such judge. When appropriate, the Tribal Council shall by
resolution recommend to the agency or organization the
removal of a Tribal Judge after compliance with the procedures
of this section.

Sourer. Tribal Council Resolution No. 94-021, dated June 21, 1994.

Comment: This section entirely restates and supersedes its prior version as originally

adopted pursuant to Tribal Resolution No. 7/5/77A and all amendments thereto.

LAS VEGAS PAPJTE TRIBAL LAW AND ORDER CODE - TITLE 1 Page 12

410

1-40-090 Disqualification of judges: Conflict of Interest - No judge shall hear or
determine any case when he has a direct interest, other than an interest
arising solely on the basis of a judge's enrollment in the Tribe, in the
outcome of such case or where he is related by blood or marriage to one
of the parties as: husband, wife, brother, sister, father, mother,
grandfather, grandmother, grandson, granddaughter, son, daughter,
uncle, aunt, nephew, niece or first cousin. Any party, or the relevant
judge, may raise the question of conflict of interest. Upon decision by
the judge involved that disqualification is appropriate, another judge
of the Tribal Court shall hear the matter. If the judge refuses to
disqualify himself, such refusal may be grounds for appeal of the final
decision in the case. If the Tribal Court of Appe?ls determines that the
judge should have disqualified himself, it shall order the retrial of the
matter in the Tribal Court before a different judge.

Sourer. Tribal Council Resolution No. 94-021, dated June 21, 1994.

Comment: This section entirely restates and supersedes its prior version as originally

adopted pursuant to Tribal Resolution No. 7/5/77 A and all amendments thereto.

1-40-100 Filling Vacancies - When a judge's position becomes vacant for any
reason before the end of his term, the Tribal Council shall fill the
vacancy by appointment. The judge appointed to fill a vacancy will
serve the remainder of the original term and be eligible for
reappointment. Any appointment under this Section shall be subject
to the requirements of 1-40-060 of this Code.

Sourer. Tribal Council Resolution No. 94-021, dated June 21, 1994.

Comment: This section entirely restates and supersedes its prior version as originally

adopted pursuant to Tribal Resolution No. 7/5/77 A and all amendments thereto.

1-50 CLERK OF TRIBAL COURT

1-50-010 Qualifications of Clerk - The Clerk shall:

(a) Be willing to attend training sessions for Tribal Court Clerks;

(b) Be qualified to perform the duties of the clerk as set forth in
1-50-030 of this Code; and

1-50-020

Sourer. Tribal Council Resolution No. 94-021, dated June 21, 1994.

Comment: This section entirely restates and supersedes its prior version as originally

adopted pursuant to Tribal Resolution No. 7/5/77 A and all amendments thereto.

A ppointment of Clerk -

(a) The Clerk shall be appointed by the Tribal Council upon the
recommendation of the Law and Order Committee.

LAS VEGAS PAILTTE TRIBAL LAW AND ORDER CODE- TITLE 1

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411

(b) Nothing in this Section shall prohibit the Tribal Council from
contracting or agreeing with the Bureau of Indian Affairs or any
other agency or organization that the agency shall provide all or
part of the Clerk's compensation, and shall in return have
control over the appointment of such Clerk.

Sourer. Tribal Council Resolution No. 94-021, dated June 21, 1994.

Comment: This section entirely restates and supersedes its prior version as originally

adopted pursuant to Tribal Resolution No. 7/5/77 A and all amendments thereto.

1-50-030 Duties of the Clerk -

(a) The Clerk shall keep the records of the Tribal Court and the
Tribal Commercial Court, including, but not limited to, a case
file with an identifying number containing all of the pleadings
and all papers filed in each case.

(b) The Clerk shall post all notices required by this Code and Tribal
law to be sent by the Tribal Court.

(c) The Clerk shall assist all persons or organizations with their
business before the Tribal Court so as to insure the efficient
operation of the Tribal Court and the Tribal Commercial Court.
Such assistance may include, but is not limited to, help with the
preparation of papers to be filed with the Tribal Court.

(d) The Clerk shall collect all fines paid, pay out all duly authorized
fees, and account for all moneys to the Tribal Council.

(e) The Clerk shall attend all sessions of the Tribal Court and the
Tribal Commercial Court to administer oaths and otherwise
assist the judge in the conduct of the Tribal Court.

(f) The Clerk shall be under the supervision of the Chief Judge and
shall perform such other duties with regard to the Tribal Court
or the Tribal Commercial Court as the Chief Judge may direct.

(g) Nothing in this Section shall be construed to prohibit the Clerk
from having other duties consistent with the office of Clerk,
such as matron, bookkeeper, etc.

Sourer. Tribal Council Resolution No. 94-021, dated June 21, 1994.

Comment: This section entirely restates and supersedes its prior version as originally

adopted pursuant to Tribal Resolution No. 7/5/77 A and all amendments thereto.

1-50-040 Jud ge May Assume Duties of the Clerk - When, for whatever reason,
the position of Clerk is vacant or the Clerk is unavailable, any Tribal
Court judge may assume and perform the duties of the Clerk.

Sourer. Tribal Council Resolution No. 94-021, dated June 21, 1994.

LAS VEGAS PAIUTE TRIBAL LAW AND ORDER CODE - TITLE 1

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412

Comment: This section entirely restates and supersedes its prior version as originally
adopted pursuant to Tribal Resolution No. 7/5/77 A and all amendments thereto.

1-50-050 Termination of a Clerk - The Clerk may be removed from office for
cause by the vote of a majority of a quorum of the Tribal Council.

Source: Tribal Council Resolution No. 94-021, dated June 21, 1994.

Comment: This section entirely restates and supersedes its prior version as originally

adopted pursuant to Tribal Resolution No. 7/5/77 A and all amendments thereto.

1-60 RECORDS OF THE TRIBAL COURT

1-60-010 Tribal Court Files -

(a) Tribal Court files are generally not open to the public. Only the
parties to proceedings before the Tribal Court or the Tribal
Commercial Court and their designated representative(s) and /or
agent(s), any judge of the Tribal Court, and the Tribal Council or
its designated representative(s) and /or agent(s) may inspect the
records of any proceeding before the Tribal Court or the Tribal
Commercial Court and obtain copies of any documents included
therein.

(b) To insure the integrity of Tribal Court records, authorized
persons may inspect Tribal Court or Tribal Commercial Court
files only during the ordinary working hours of the Clerk or
under the supervision of any Tribal Court judge. Under no
circumstances shall anyone except the judge hearing a particular
case take a file from the Clerk's office without a written order
from the judge.

(c) Authorized persons may obtain copies of documents contained
in a Tribal Court or Tribal Commercial Court file from the Clerk
for a reasonable charge to be set by the Chief Judge. The Clerk
shall certify that such copies are accurate copies of the document
on file with the Tribal Court.

Source: Tribal Council Resolution No. 94-021, dated June 21, 1994.

Comment: This section entirely restates and supersedes its prior version as originally

adopted pursuant to Tribal Resolution No. 7/5/77 A and all amendments thereto.

1-60-020 Recording Tribal Court Proceedings -

(a) When requested to do so by a party to a proceeding before the
Tribal Court or the Tribal Commercial Court, the Clerk shall
record the audio portion of such proceeding. Such recordings
shall be identified by case number and maintained by the Clerk
for one year from the date of the recording for use in appeals or

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413

collateral proceedings in which the events of the hearing or the
manner in which it was conducted are in issue.

(b) To preserve the integrity of such recordings, the Clerk shall store
them in a safe place and release them only upon the order of the
Chief Judge.

(c) Nothing in this section shall prohibit the Tribal Council from
authorizing the archiving of recordings older than one year in
the central files of the Tribe, the Bureau of Indian Affairs, or any
other agency or organization.

Sourer. Tribal Council Resolution No. 94-021, dated June 21, 1994.

Comment: This section entirely restates and supersedes its prior version as originally t

adopted pursuant to Tribal Resolution No. 7/5/77 A and all amendments thereto.

1-60-030 Forms of Decisions -

(a) Each decision of the Tribal Court, whether at trial or on appeal,
shall be recorded on a form approved by the Tribal Council for
such purpose. The decision form shall provide for recording the
date, the case number, the parties, the substance of the
complaint, a brief summary of the evidence presented and the
judgment of the Tribal Court.

(b) This decision form shall be placed in the case file as an official
document of the Tribal Court.

Sourer. Tribal Council Resolution No. 94-021, dated June 21, 1994.

Comment: This section entirely restates and supersedes its prior version as originally

adopted pursuant to Tribal Resolution No. 7/5/77 A and all amendments thereto.

1-70 RULES OF THE TRIBAL COURT

1-70-010 Preparation of Rules - The Chief Judge may prepare Rules of Court
concerning conduct in the Tribal Court. Such Rules may include, but
are not limited to, the time and place of Tribal Court and Tribal
Commercial Court sessions, decorum in court and other matters which
will make the Tribal Court function more efficiently. Such Rules shall
supplement, but may not conflict with, other court procedural rules
ordinances or other enactments of the Tribe.

1-70-020

Sourer. Tribal Council Resolution No. 94-021, dated June 21, 1994.

Comment: This section entirely restates and supersedes its prior version as originally

adopted pursuant to Tribal Resolution No. 7/5/77 A and all amendments thereto.

A pproval of Rules - The Rules of Tribal Court shall be reviewed by the
Tribal Council and become effective upon approval by the Tribal
Council.

LAS VEGAS PAIUTE TRIBAL LAW AND ORDER CODE - TITLE 1

Page 16

47-201 98-14

414

Sourer. Tribal Council Resolution No. 94-021. dated June 21, 1994.

Comment: This section entirely restates and supersedes its prior version as originally

adopted pursuant to Tribal Resolution No. 7/5/77A and all amendments thereto.

1-70-030 Amendment of Rules - The Rules of Tribal Court may be amended
upon the recommendation of the Chief Judge of the Tribal Court by a
resolution of the Tribal Council. Such a resolution should specify
which rules are superseded and include the text of the new rules.

Sourer. Tribal Council Resolution No. 94-021, dated June 21, 1994.

Comment: This section entirely restates and supersedes its prior version as originally

adopted pursuant to Tribal Resolution No. 7/5/77 A and all amendments thereto.

1-70-040 Sanctions -

(a) The Tribal Court may require observance of the Rules of Tribal
Court, this Code and /or any court procedural rules adopted by
the Tribe before taking any action in a case.

(b) Where any party to a case before the Tribal Court suffers actual
monetary damages, including fees to a representative, due to
delay in the proceedings or any other reason, because of the
failure of another party in such case to obey the Rules of Tribal
Court, this Code and/or any court procedural rules adopted by
the Tribe, the injured party may sue to recover their actual
damages.

Sourer. Tribal Council Resolution No. 94-021, dated June 21, 1994.

Comment: This section entirely restates and supersedes its prior version as originally

adopted pursuant to Tribal Resolution No. 7/5/77 A and all amendments thereto.

1-80 PRACTICE BEFORE THE TRIBAL COURT

1-80-010 Right to Represent Oneself or Have a Representative as Counsel -

(a) Parties to cases before the Tribal Court shall have the right to
represent themselves without the assistance of counsel, unless
the court in which their case is being heard determines that such
parties are not competent to proceed without a representative.

(b) Parties to any case before the Tribal Court may employ a
representative as counsel to help present their case.

1-80-020

Sourer. Tribal Council Resolution No. 94-021, dated June 21, 1994.

Comment: This section entirely restates and supersedes its prior version as originally

adopted pursuant to Tribal Resolution No. 7/5/77 A and all amendments thereto.

Who May Be a Representative -

(a) Any person may be the representative of a party to a case before
the Tribal Court or the Tribal Commercial Court and may appear

LAS VEGAS PAIUTE TRIBAL LAW AND ORDER CODE- TITLE 1

Page 17

415

on behalf of such party upon payment by each representative of a
$50.00 fee to the Clerk, before each case in which such
representative appears before the Tribal Court, and subscribing to

the following oath: "I, , do hereby (swear/affirm) that I

am familiar with the Constitution and Bylaws and the Law and
Order Code of the Las Vegas Paiute Tribe and that I will conduct
myself with honor and integrity towards those I represent and
with respect before the Tribal Court."

(b) A list of persons who have fulfilled the requirements of this
section shall be kept by the Clerk.

(c) A relative or close friend of a party to any case before the Tribal
Court who is not compensated for his efforts may represent such
party without payment of the fee required under l-80-020(a).

Sourer: Tribal Council Resolution No. 94-021, dated June 21, 1994.

Comment: This section entirely restates and supersedes its prior version as originally

adopted pursuant to Tribal Resolution No. 7/5/77 A and all amendments thereto.

1-80-030 Representative's Right to Appear -

(a) A representative may be denied the privilege of appearing before
the Tribal Court, permanently or for a stated period of time, on
any of the following grounds:

(1) Swearing in Tribal Court to facts known to him to be false;
or

(2) Conviction in any court of any offense within a year of the
representatives appearance before the Tribal Court.

(b) No representative may be denied the privilege of appearing
before the Tribal Court under l-80-030(a) of this Code without a
hearing before the Chief Judge of Tribal Court in which the
necessary charges must be proven by a preponderance of the
evidence.

Sourer. Tribal Council Resolution No. 94-021, dated June 21, 1994.

Comment: This section entirely restates and supersedes its prior version as originally

adopted pursuant to Tribal Resolution No. 7/5/77 A and all amendments thereto.

1-90 TRIBAL COURT APPEALS

1-90-010 Composition of the Tribal Court of Appeals -

(a) The Tribal Court of Appeals shall consist of a panel of all the
judges of Tribal Court except the judge from whose decision the
appeal is taken. Such panel shall be composed of at least three

(3) judges of the Tribal Court.

(b) When necessary, the Tribal Council shall appoint temporary
judges to sit on the Tribal Court of Appeals. Whenever possible

LAS VEGAS PAIUTE TRIBAL LAW AND ORDER CODE - TITLE 1 Page 18

416

such temporary judges shall have experience as Tribal Court
Judges,
(c) Nothing in this section shall prevent the Tribal Council from
entering into an agreement with other Tribes, reservations and
colonies of Nevada Indians whereby Tribal Court judges are
shared between the various Tribal Courts for the purpose of
hearing appeals. Any such agreement by Tribal Council shall
take precedence over the general provisions contained in
l-90-0T0(a) and l-90-010(b).

Sourer. Tribal Council Resolution No. 94-021, dated June 21, 1994.

Comment: This section entirely restates and supersedes its prior version as originally

adopted pursuant to Tribal Resolution No. 7/5/77 A and all amendments thereto.

1-90-020 Appeal Procedure -

(a) Any party dissatisfied with a decision of the Tribal Court, except
the prosecution in a criminal case, may appeal by filing a written
notice of appeal with the Clerk within thirty (30) days of the
judge's decision. Where a decision is not delivered at a hearing
with both parties present, the thirty (30) days does not begin to
run until the party who wishes to appeal receives formal notice
of the decision.

(b) Upon receiving the notice of appeal, the Clerk shall create an
appellate case file and transfer the entire record, including any
notation indicating the existence of a recording of the
proceedings, to the Tribal Court of Appeals.

(c) Whenever possible, appeals shall be decided on the record of the
case, including the decision form and any recording of the
proceedings, in order to eliminate unnecessary travel and delay.
The Tribal Court of Appeals may require a hearing or oral
argument if it considers that such would be necessary or helpful.

(d) After the decision by the Tribal Court of Appeals, one judge
thereof shall fill out a decision form stating the result and
reason for the result on appeal. A copy of the completed
decision form shall be sent to each party to the appeal by certified
mail. The original form of decision shall be filed in the
appellate case file and remain a part of the record of the case in
any further proceedings.

Sourer. Tribal Council Resolution No. 94-021, dated June 21, 1994.

Comment: This section entirely restates and supersedes its prior version as originally

adopted pursuant to Tribal Resolution No. 7/5/77 A and all amendments thereto.

LAS VEGAS PA1UTE TRIBAL LAW AND ORDER CODE - TITLE 1 Page 1 9

417

EXHIBIT B

March 11, 1998 Testimony of Mark A. Jarboe, Dorsey & Whitney LLP

COW CREEK BAND OF UMPQUA TRIBE OF
INDIANS

TRIBAL LEGAL CODE

TITLE 70
ARBITRATION CODE

70-10 Authorization and Repeal of Inconsistent Legislation.

The Cow Creek Band of Umpqua Tribe of Indians (the "Tribe") is organized under
the Indian Reorganization Act of June 18, 1934 (48 Stat. 984) and the provisions of
the Cow Creek Band of Umpqua Tribe of Indians Recognition Act of December 29,
1982 (P.L. 97-391), as amended by the Cow Creek Band of Umpqua Tribe of Indians
Distribution of Judgement Funds Act of October 26, 1987 (P.L. 100-139), and the Cow
Creek Tribal Constitution, duly adopted pursuant to a federally-supervised
constitutional ballot, on July 8, 1991 (the "Tribal Constitution").

Pursuant to Article III, Section 1 of the Tribal Constitution, the Cow Creek Tribal
Board of Directors (the "Board") is the governing body of the Tribe. Pursuant to
Article VII, Section 1(d) of the Tribal Constitution, the Board has the authority to
"administer the affairs and assets of the Tribe . . ." Pursuant to Article VII, Section
1(e) of the Tribal Constitution, the Board has the authority to "administer ... all
federal funds . . . and ... all funds from tribal business enterprises . . ." Pursuant to
Article VII, Section 1(g) of the Tribal Constitution, the Board has the authority to
"(t]o manage all economic affairs and enterprises of the Tribe . . ." Pursuant to
Article VII, Section I(i) of the Tribal Constitution, the Board has the power to "enact
ordinances and laws governing the conduct of all persons on tribally-owned land; to
maintain order and protect the safety, health, and welfare of all persons within the
jurisdiction of the Tribe; and to enact any ordinances or laws necessary to govern the
administration of justice, and the enforcement of all laws, ordinances or regulations
. . ." Pursuant to Article VII, Section I(i) of the Tribal Constitution, the Board has the
power to "enter into loan agreements, joint venture business partnerships, to assign
business or other income as collateral for loans, and to enter into other financial
arrangements as required for the development and management of business

COW CREEK TRIBAL LEGAL CODE - TITLE 70 Page 1

418

enterprises or land acquisition, including the enactment of such ordinances as are
necessary or appropriate." Pursuant to Article VII, Section I(t) of the Tribe's
Constitution, the Board has "such other powers and authority necessary to meet its
obligations, responsibilities, objectives, and purposes as the governing body of the
Tribe."

Pursuant to the foregoing and the Tribe's retention of the full spectrum of sovereign
powers, the Board has the authority to establish, and the Board desires to establish,
this Title 70 of the Cow Creek Tribal Legal Code, Arbitration Code (this "Arbitration
Code").

Any prior Tribal regulations, resolutions, orders, motions, legislation, codes or other
Tribal laws which are inconsistent with the purpose and procedures established by
this Arbitration Code are hereby repealed to the extent of any such inconsistency.

Source: Tribal Board of Directors Resolution No. 96-26, dated March 10, 1996.

70-20 Scope of Ordinance.

This Arbitration Code applies to any written contract, agreement or other
instrument entered into by the Tribe, or any other person or entity entering into a
transaction subject to the jurisdiction of the Tribe, in which the parties thereto
expressly agree to settle by arbitration any controversy arising out of such contract,
agreement or other instrument and in which this Arbitration Code is expressly and
specifically invoked and where the matter in controversy exceeds the sum or value
of $50,000, exclusive of interest and costs.

Source: Tribal Board of Directors Resolution No. 96-26, dated March 10, 1996.

70-30 Agreements to Arbitrate are Enforceable.

An express agreement in any written contract, agreement or other instrument
described in Section 70-20, above, to settle by arbitration any controversy thereafter
arising out of such contract, agreement or other instrument or any other transaction
contemplated thereunder, including the failure or refusal to perform the whole or
any part thereof, or a written agreement between two or more persons to submit to
arbitration any controversy existing between them at the time of the agreement,
shall be valid, irrevocable and enforceable.

Source: Tribal Board of Directors Resolution No. 96-26, dated March 10, 19%.

COW CREEK TRIBAL LEGAL CODE - TITLE 70 Page 2

419

70-40 Law to be Applied.

a. In any contract, agreement or instrument described in Section 70-20,
above, the parties may agree upon the jurisdiction whose substantive law shall
govern the interpretation and enforcement of the contract, agreement, instrument
or controversy. Such governing law shall be valid and enforceable, and not subject
to revocation by one party without the consent of the other party or parties hereto,
provided that the subject matter of the contract, agreement, instrument or
controversy, and at least one of the parties thereto, shall have some contact with the
jurisdiction so selected.

b. In any proceeding under this Arbitration Code, whenever the contract,
agreement or other instrument sets forth a governing law provision, the Tribal
Court shall apply the procedural rules of the Tribal Court and the substantive law of
the jurisdiction selected in such governing law provision; provided that no
procedural rule of the Tribal Court shall be effective to bar, delay or impair any
action, proceeding or remedy where such action, proceeding or remedy would not be
barred, delayed or impaired by the procedural rules of the courts of the jurisdiction
whose substantive law applies.

c. In any proceeding under this Arbitration Code, whenever the contract,
agreement or other instrument does not set forth a governing law provision, the
Tribal Court shall first apply Tribal law and applicable federal law and then apply
substantive statutory, regulatory and common law of the jurisdiction selected in
such governing law provision, but only to the extent that any such substantive
statutory, regulatory or common law does not conflict with this Arbitration Code or
other applicable Tribal law.

Source: Tribal Board of Directors Resolution No. 96-26, dated March 10, 1996.

70-50 Stay of Proceedings and Order to Proceed with Arbitration.

a. If any action for legal or equitable relief or other proceeding is brought
by any party to any contract, agreement or instrument described in Section 70-20,
above, the Tribal Court Judge presiding over the pending action or proceeding shall
not review the merits of the pending action or proceeding, but shall stay the action
or proceeding until an arbitration has been had in compliance with the agreement.

b. A party to any contract, agreement or instrument described in Section
70-20, above, claiming the neglect or refusal of another party thereto to proceed with
an arbitration thereunder may make application to the Tribal Court for an order
directing the parties to proceed with the arbitration in compliance with their

COW CREEK TRIBAL LEGAL CODE - TITLE 70 Page 3

420

agreement. In such event, the Tribal Court shall order the parties to submit to
arbitration in accordance with the provisions of the contract, agreement or
instrument and the question of whether an obligation to arbitrate the dispute at
issue exists shall be decided by the arbitrator(s).

Source: Tribal Board of Directors Resolution No. 96-26, dared March 10, 19%.

70-60 Advice of the Court.

At any time during an arbitration, upon request of all the parties to the
arbitration, the arbitrator(s) may make application to the Tribal Court for advice on
any question of Tribal or other applicable law arising in the course of the arbitration.
The advice of the Court upon such application shall be final as to the question
presented and it shall bind the arbitrator(s) in rendering any award.

Source: Tribal Board of Directors Resolution No. 96-26, dated March 10, 1996.

70-70 Time Within Which Award Shall be Rendered.

a. If the time within which an award is rendered has not been fixed in the
arbitration agreement, the arbitrator(s) shall render the award within thirty days
from the date the arbitration has been completed. The parties may expressly agree to
extend the time in which the award may be made by an extension or ratification
thereof in writing.

b. An arbitration award shall be in writing and signed by the arbitrator(s).
The arbitrator(s) shall provide written notice of the award to each party by certified
or registered mail, return receipt requested.

Source: Tribal Board of Directors Resolution No. 96-26, dated March 10, 1996.

70-80 Application for Order Confirming Award; Record to be Filed with

Clerk of Court; Effect and Enforcement of Judgment

a. At any time within one year after an arbitration award has been
rendered and the parties thereto notified thereof, any party to the arbitration may
make application to the Tribal Court for an order confirming the award.

b. Any party applying for an order confirming an arbitration award shall,
at the time the order is filed with the Clerk of the Tribal Court for entry of judgment
thereon, file the following papers with the Clerk: (1) the agreement to arbitrate; (2)

COW CREEK TRIBAL LEGAL CODE - TITLE 70 Page 4

421

the selection or appointment, if any, of the arbitrator(s); (3) any written agreement
requiring the reference of any question as provided in Section 70-50, above; (4) each
written extension of the time, if any, within which to make the award; (5) the award;
(6) each notice and other paper used upon an application to confirm; and (7) a copy
of each order of the Tribal Court upon such an application.

c. An arbitration award shall not be subject to review or modification by
the Tribal Court, but shall be confirmed strictly as provided by the arbitrator(s). The
judgment confirming an award shall be docketed as if it were rendered in a civil
action. The judgment so entered shall have the same force and effect in all respects
as, and be subject to all the provisions of law relating to, a judgment in a civil action,
and it may be enforced as if it has been rendered in a civil action in the Tribal Court.
When the award requires the performance of any other act than payment of money,
the Tribal Court may direct the enforcement thereon in the manner provided by
law.

Source: Tribal Board of Directors Resolution No. 96-26, dated March 10, 1996.

70-90 Arbitration Award Not Appealable.

Notwithstanding any other provision of the Tribal Legal Code, including
without limitation, the Tribal Court Code, no further appeal may be taken from an
order issued by the Tribal Court pursuant to this Arbitration Code enforcing an
agreement to arbitrate or an award issued by an arbitrator.

Source: Tribal Board of Directors Resolution No. 96-26, dated March 10, 19%.

70-100 Jurisdiction of the Tribal Court in Actions to which the Tribe is a Party.

a. The Tribal Commercial Court shall have exclusive Tribal Court
jurisdiction over any action to enforce an agreement to arbitrate, to compel
arbitration pursuant to such an agreement to arbitrate and to enforce an award made
by an arbitrator pursuant to such an agreement to arbitrate, contained in any
contract, agreement or other instrument described in Section 70-20, above, to which
the Tribe is a party; provided that the Tribal Board of Directors has explicitly waived
the defense of tribal sovereign immunity in the contract, agreement or other
instrument at issue.

b. The jurisdiction of the Tribal Commercial Court under this Arbitration
Code shall be concurrent with the jurisdiction of any court of competent jurisdiction
to the jurisdiction of which the Tribal Board of Directors may have explicitly

COW CREEK TRIBAL LEGAL CODE - TITLE 70 Page 5

422

consented in such contract, agreement or other instrument. Any consent to the
jurisdiction of any court of competent jurisdiction contained in a contract,
agreement or other instrument described in Section 70-20, above, to which the Tribe
is a party shall be valid and enforceable in accordance with its terms.

Source: Tribal Board of Directors Resolution No. 96-26, dated March 10, 19%.

70-110 Severability.

If any section, or any part thereof, of this Arbitration Code or the application thereof
to any party, person or entity in any circumstances shall be held invalid for any
reason whatsoever by a court of competent jurisdiction or by federal legislative
enactment, the remainder of the relevant section or part of this Arbitration Code
shall not be affected thereby and shall remain in full force and effect as though no
section or part thereof has been declared to be invalid.

Source: Tribal Board of Directors Resolution No. 96-26, dated March 10, 19%.

70-120 No Waiver of Sovereign Immunity.

Nothing in this Arbitration Code shall provide or be interpreted to provide a waiver
of the sovereign immunity of the Tribe or any of its governmental officers,
employees and /or agents acting within the scope of their authority.

Source: Tribal Board of Directors Resolution No. 96-26, dated March 10, 19%.

70-130 Amendment or Repeal of Arbitration Code.

After this Arbitration Code becomes effective pursuant to Section 100-140, below,
this Arbitration Code shall not be amended or repealed other than by passage of a
Resolution approved by unanimous vote of the entire Tribal Board of Directors.
This Arbitration Code shall not be amended to adversely impair the rights of any
party to any contract, agreement or other instrument described in Section 70-20,
above.

Source: Tribal Board of Directors Resolution No. %-26, dated March 10, 19%.

COW CREEK TRIBAL LEGAL CODE - TITLE 70 Page 6

423

70-140 Effective Date.

This Arbitration Code shall be effective upon adoption hereof by Resolution
approved by no less than eight (8) members of the Tribal Board of Directors by roll
call vote.

Source: Tribal Board of Directors Resolution No. 96-26, dated March 10, 19%.

COW CREEK TRIBAL LEGAL CODE - TITLE 70 p age 7

424
DORSEY & WHITNEY LLP

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Telephone (612) 340-2600

Fax: (612) 340-2868

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April 10, 1998

The Honorable Ben Nighthorse Campbell

Chairman

Committee on Indian Affairs

United States Senate

Washington, DC 20510-6450

Re: March 11, 1998 Oversight Hearing on Tribal Sovereign Immunity
Responses to Supplemental Questions

Dear Senator Campbell:

In your letter of March 23, 1998, you posed six supplemental questions to me
and asked for my responses. I have repeated the questions below, followed, in each
case, by my response.

1. How is tribal immunity "an issue" but not "an obstacle" in contracts with
tribes?

Tribal sovereign immunity is "an issue" in contracts with tribes in that it is
one of the matters that must be addressed in contract negotiations, in the same
manner as price, nature of the contractual obligations, time of performance,
remedies upon breach and other contractual concerns. It is no more of "an obstacle"
to a contract than any other contractual issue that must be addressed and agreed to
by the parties.

For example, if I propose to sell a fire truck to a tribe, there are a number of
issues that I should address in my contract. Some apply to my obligations and the
tribe's rights: What kind of fire truck must I deliver? What kind of performance

DOR.SEY & WHITNEY LLP

The Honorable Ben Nighthorse Campbell
April 10, 1998
Page 2

specifications must it meet? When and where do I have to deliver it? What kind of
equipment is to come with it? What color is it to be painted? What warranties do I
provide? Some apply to the tribe's obligations and my rights: How much does the
tribe have to pay for the truck? When do they have to pay for it? And some apply
mutually or even to the contract itself: What rights do the parties have to assign the
contract to others? What is the governing law of the contract? What is the forum
for resolving disputes?

The issue of the tribe's sovereign immunity is an issue that should be
addressed as part of the "tribe's obligations and my rights" discussion. Because the
tribe has sovereign immunity, if it does not pay for the truck after I deliver it I
would be unable to sue the tribe to collect the amount owed to me in the event of
nonpayment. Therefore, if I want to be able to sue the tribe, it would be important
for me to ensure that the contract addresses this point in a way that meets my
satisfaction. In much the same fashion, if the tribe wants the fire truck delivered
within the next month rather than at the end of the year, or wants a truck that will
pump 1,000 gallons of water per minute rather than 500, the tribe should ensure that
the contract addresses the time of delivery, or the pumping capacity of the truck, in a
way that meets its satisfaction. We do not consider time of delivery, or the level of
performance of a product, as an "obstacle" to entering into a successful contract for
its purchase and sale, yet these issues must be addressed to the satisfaction of both
parties or there will be no contract, just as the issue of the tribe's immunity must be
satisfactorily addressed.

2. What are the consequences to the tribe if it refuses to waive its immunity?

There is no single answer to this question. The possibilities include at least
the following:

a. There may be no contract. If the nature of the transaction is one where
(i) the non-tribal party performs first, (ii) the non-tribal party is unable
to sue the tribe if it fails to perform and (iii) the adverse effect of non-
performance by the tribe would be significant in comparison to the
anticipated gain by the non-tribal party under the contract, then the
non-tribal party may well decide not to participate. The best example of
this would be a bank loan. It is hard to conceive of a bank lending
money to a tribe without a means of enforcing the tribe's obligation to
repay in the event that the tribe refused to do so.

DORSEY & WHITNEY LLP

The Honorable Ben Nighthorse Campbell
April 10, 1998
Page 3

The contract may proceed with the tribe performing its side of the
bargain first. In that case, the non-tribal party is not at risk of it
performing first and the tribe defaulting later. Examples of such
contracts would be a contract where the tribe is selling goods, delivers
them to the buyer and the buyer pays upon or after delivery, or a
contract where the tribe pays or deposits the purchase or contract price
up front and the non-tribal party then performs. One tribe for whom
we work contracted for the construction of an $8,000,000 building by
paying the entire contract price to the construction contractor up front.
Because the contractor was fully paid, it had no risk of nonpayment
and would not need to sue the tribe to enforce payment. (In addition,
by prepaying the contract price the tribe was able to obtain a discount
from the contractor in an amount equal to the present value of the
early payment when compared to payments stretched out over the
construction period.)

The parties may proceed without any waiver of immunity and with no
early performance by the tribe. This would happen most often in
situations where the adverse effect on the non-tribal party of a failure
by the tribe to perform is small in comparison to the overall gain
anticipated to be made by the non-tribal party under the contract. For
example, one tribe for whom we work had contracted for weekly
deliveries of potato chips to its casino. After the deliveries had been
going on for almost a year, the lawyer for the potato chip vendor called
me to say that his client had realized that there was no waiver of
sovereign immunity in the potato chip sales contract and that the
vendor wanted to have the tribe grant such a waiver. I asked if his
client had ever had any trouble in collecting payment and he replied
"no." After consulting with the tribe, I called the attorney for the
vendor and said to him: "The tribe will not waive its sovereign
immunity in order to buy potato chips. There are lots of potato chip
companies out there. If your client wants to deliver potato chips, the
tribe will pay for potato chips and if it ever doesn't pay, your client can
stop delivery. If that's not satisfactory, let me know and the tribe will
buy its potato chips elsewhere." The vendor apparently decided that
the profitability from selling potato chips to the tribe more than
outweighed the potential loss it would suffer if the tribe didn't pay for a
shipment, as the deliveries never slowed down.

427

DORSEY & WHITNEY LLP

The Honorable Ben Nighthorse Campbell
April 10, 1998
Page 4

3. Is tribal immunity the last vestige" of governmental immunity in the
United States?

No. The federal government, the state governments, and most local
governments retain sovereign immunity and assert it regularly. There are limited
waivers that the federal and most state and local governments have granted (just as
tribal governments have granted limited waivers), but the scope of those waivers
vary between the federal and state governments and vary from state to state. Mr.
Reid Chambers, in his testimony before the Committee on March 11, 1998,
summarized many of those limitations on state waivers (pp. 4-8). And as recently as
last month, the Supreme Court has ruled that members of local legislative bodies
are immune from suit under the federal civil rights laws (42 U.S.C. § 1983) for their
actions taken in their legislative capacity (Bogan v. Scott-Harris. No. 96-1569; March
3, 1998). 1/

While contract, tort and civil rights claims are all different, the federal, state
and local governments continue to enjoy immunity on many levels and against
many types of claims. No government's immunity has been waived entirely, and
tribal sovereign immunity is clearly not an anomaly in our federal system.

4. If Congress were to allow contract and/or tort suits against Indian tribes,
should claimants be required to exhaust tribal administrative and/or judicial
remedies before bringing suit?

This question goes to the legitimacy of tribal courts in the federal system. It
also exposes the misunderstanding that many non-Indians have about tribal courts,
by setting up a false dichotomy: "exhaust tribal ... remedies" vs. "bringing suit."

Many, if not most, tribes have tribal courts which have jurisdiction over
contract and tort claims (subject, in the case of suits against the tribes themselves, to
tribal immunity). If tribal immunity were to be waived, then an action in tribal

1/ The Court stated: "Absolute immunity for local legislators under § 1983
finds support not only in history, but also in reason. ... The rationales for according
absolute immunity to federal, state, and regional legislators apply with equal force to
local legislators. Regardless of the level of government, the exercise of legislative
discretion should not be inhibited by judicial interference or distorted by the fear of
personal liability."

DORSEY & WHITNEY LLP

The Honorable Ben Nighthorse Campbell
April 10, 1998
Page 5

court on a contract or tort matter would be just as much "bringing suit" as an action
in a federal or state court.

Furthermore, under the "abstention" rule of the Supreme Court's National
Farmers Union and Iowa Mutual decisions, a federal court with jurisdiction over an
action must abstain in favor of the action proceeding in tribal court if a tribal court
has a colorable claim of jurisdiction. After the tribal process is "exhausted," the
plaintiff can come to the federal court to ask only one question: "Did the tribal court
properly assert jurisdiction over the matter?" If the answer to that question is "yes,"
then the action is over; the tribal court's resolution of the case is final. If the answer
is "no," then the action can proceed anew in federal court, for the tribal court did not
have jurisdiction to decide the matter. However, other than in a case of the absence
of jurisdiction in the tribal court, a plaintiff does not get a "second bite at the apple"
in federal court.

Given the foregoing, I submit that the question would more properly be asked
as follows: "If Congress were to allow contract and /or tort suits against Indian tribes,
should claimants be required to bring those suits in tribal court or be allowed to
bring them in federal or state court?" There appear to be three possibilities:

a. Claimants could bring such actions in federal 2/ or state courts. The
effect of this choice would be to eliminate any role for tribal law and
tribal courts in contract or tort actions, because non-Indian claimants
would invariably choose the non-tribal forum in which to bring their
claims. This would remove one of the essential attributes of
governmental power — the power to establish laws and tribunals for
the resolution of disputes — from the tribes.

b. Claimants must first bring suit in tribal courts, but after the action is
completed in tribal court the claimants could bring an action de novo
in federal or state courts. This would make the tribal action
meaningless, would be highly inefficient and would waste the time of
the parties and the tribal court. It would have the same effect on the

2/ There is a serious question whether federal courts would have subject
matter jurisdiction over tort or contract suits against Indian tribal governments
under Article III, Section 2, Clause 1 of the Constitution.

DORSEY &. WHITNEY LLP

The Honorable Ben Nighthorse Campbell
April 10, 1998
Page 6

role and responsibility of the tribal courts as the preceding choice, only
at a greater cost.

c. Claimants must bring suit in tribal court and could bring an action in
federal or state court only if the tribal court lacked jurisdiction. This
would correspond closely to the present rule governing suits under the
Indian Civil Rights Act and would codify the rule that applies in the
federal system generally under National Farmers Union and Iowa
Mutual . It would promote the use and development of tribal courts
and lead to a strengthening of the tribal court system in general. It
would also promote the efficient use of federal (and state) judicial
resources, as more than one federal court has noted when applying the
National Farmers Union and Iowa Mutual principles in the federal
context.

If Congress were to waive the sovereign immunity of tribes for contract or
tort matters (an action that I do not believe should be taken), then I would suggest
that the third option — suit must be brought in tribal court — be chosen.

5. Should contract damages against tribes be limited to liquidated damages on
the face of the contract? Should any waivers of immunity by a tribe be
interpreted as narrowly as possible, like waivers of Federal or state
immunity?

"Liquidated" damages are amounts agreed to by the parties, in a contract itself,
as the appropriate measure of damage for a breach in a situation where actual
damages would be difficult or impossible to measure. Many contracts do not
provide for liquidated damages. Where they do, the contractual agreement of the
parties should be enforced.

In a contract that did not provide for liquidated damages, I suggest that, unless
a contract explicitly provided otherwise, damages for breach should be limited to
compensatory damages (such amount as will make good the loss directly caused by
the breach), and not for consequential (loss not directly caused by the breach but only
from some consequences of the breach), punitive (damages to punish the defendant
for its evil behavior) or exemplary (damages to compensate the plaintiff for mental
anguish or other aggravations resulting from the breach) damages. A tribe is a
government and its money and property are held for the public purpose of serving
its members and others within its territory. Permitting claims on the tribal treasury

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DORSEY & WHITNEY LLP

The Honorable Ben Nighthorse Campbell
April 10, 1998
Page 7

in an amount in excess of the actual damages sustained by a successful claimant
would divert funds from public purposes for private benefit. That is why the federal
government and most state governments have limited any waivers of their
immunity to actual damages and have prohibited awards of punitive or similar
damages against them. Tribal governments should be treated similarly.

For the same reasons, any waiver of immunity by a tribe should be
interpreted as narrowly as possible.

6. Are you concerned that allowing equitable claims against tribal officials in
state courts could lead to problems in the enforcement of state court orders?
Should state officers be authorized to enforce civil court orders on Indian
reservations?

The answer to this question flows from the answer to Question 4. If a court,
whether federal, state or tribal, is to be granted subject matter jurisdiction to hear
and decide an action, then it must have the authority to enforce its judgments. If a
state court is to have jurisdiction over actions against tribes, then there are three
possibilities:

a. Permit state officers, acting under state court order, to enforce those
orders, to enter reservations and to execute against tribal assets. This
would effectively eliminate the sovereign status of the tribes and their
reservations vis-a-vis the states, by giving states authority to enter
upon and seize tribal property.

b. Provide that state court orders could be executed by federal officers
acting under a federal court order. A successful claimant would then
take a state court order to a federal court and request a federal court
order directing a federal marshal to enforce it.

c. Provide that state court orders shall be given full force and effect in
tribal courts. A state court order could then be enforced by tribal
enforcement officers acting under a tribal court order. This would be
similar to the situation where a successful plaintiff obtains a
judgement in one state and seeks to have it enforced in another. If I
prevail against a Wisconsin defendant in a Minnesota court, I cannot
have a Minnesota sheriff go into Wisconsin to seize the defendant's
property; I have to take my judgment to a Wisconsin court, have it

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DORSEY & WHITNEY LLP

The Honorable Ben Nighthorse Campbell
April 10, 1998
Page 8

entered there and have the Wisconsin court issue an order for a
Wisconsin sheriff to execute. The same could be done with the
enforcement of state court orders within reservations. (If this approach
were to be adopted, then it would make sense to provide that tribal
court orders are to be given full faith and credit in state and federal
courts. This would give equal treatment to both court systems.)

I would not recommend that state officials be given the power to enter onto
tribal lands and execute against tribal assets. The second approach would create a
significant burden on the federal judiciary, would waste judicial resources, and
would raise Constitutional concerns; I would not advise adopting it. If this question
is reached, I would recommend the third alternative.

In any case, under any of these alternatives issues specific to Indian country
would arise:

i. Most tribal land is held in trust by the United States. As such, it is

immune from lien or execution. I assume that that immunity would
continue.

ii. Much of the income, and assets, of many tribes consists of money

received as federal payments under specific federal programs: Indian
Health Service, BIA education programs, highway improvement
funds, 638 contracts, etc. These payments are dedicated to the federal
purpose for which they are made. Permitting execution against any of
those revenues or assets would divert federal funds to other uses and
frustrate federal purposes; I assume that result would not be permitted.

I hope that the foregoing is responsive to your request. Thank you very
much for the opportunity to share my views with you and the Committee on these
matters.

MAJ/stl

(outs very truly,
daj-kA. Janboe

432

TESTIMONY OF JOHN LATTAUZIO

PRESIDENT, J A J MINI MARKETS

ON BEHALF OF THE

NATIONAL ASSOCIATION OF CONVENIENCE STORES

AND THE

PETROLEUM MARKETERS ASSOCIATION OF AMERICA

BEFORE THE

SENATE INDIAN AFFAIRS COMMITTEE

HEARING ON NATIVE AMERICAN SOVEREIGN IMMUNITY

March 11, 1998

Introduction

Good morning, Mr. Chairman. My name is John Lattauzio. I am President of J & J Mini
Markets of Alamogordo, New Mexico. J & J operates six convenience stores with motor fuels
operations in southern New Mexico.

I am appearing today in my capacity as a member of the board of the National
Association of Convenience Stores ("NACS") and as a member of the Petroleum Marketers
Association of America ("PMAA"). NACS is a trade association of over 2,300 companies that
operate over 60,000 convenience stores nationwide with some 750,000 employees. Over 75
percent of NACS member companies are classified as small businesses. NACS member
companies collectively sell over 55 percent of all gasoline marketed in the United States every
year.

I also am privileged to serve on the board of the New Mexico Petroleum Marketers
Association ("NMPMA"). NMPMA is a state affiliate of PMAA. PMAA is a federation of state
and regional petroleum marketing associations, representing nearly 1 1 ,000 independent petroleum
marketers nationwide. The average member represented by PMAA sells less than 10 million
gallons of motor fuel per year. Collectively, those marketers sell approximately 50 percent of

433

the gasoline, 75 percent of the home heating oil, and 60 of the diesel fuel sold in this country
each year. Virtually all independent petroleum marketers are small, often family-owned
businesses.

As an initial matter, Mr. Chairman, I would like to thank you for calling this hearing
today. For years, NACS, PMAA, and other petroleum marketing organizations have called for
congressional attention to the issue of state tax evasion by Native American tribes and Native
American corporations. We welcome this hearing on this important issue, and thank the
Committee for allowing us the opportunity to express our concerns.

Primary Focus of Testimony

Second, I want to be crystal clear regarding the issue under discussion in my testimony.
NACS and PMAA do not advocate, and have not advocated, permitting states to tax Native
American tribes, tribal corporations, or tribal members. Instead, NACS and PMAA advocate that
states receive an express authorization from Congress to enforce U.S. Supreme Court decisions
that Native American tribes and tribal corporations must collect and remit state excise taxes
imposed on non-Native Americans when these non-Native Americans purchase commodities such
as motor fuels and tobacco products from Native American tribes or tribal corporations.

This issue is fairly easy to understand. When a non-Native American customer buys ten
gallons of gasoline from one of my stores in New Mexico, I am required by the state to add 17
cents per gallon to the cost to the customer in state gasoline excise taxes. If, on the other hand,
a tribal member buys that same ten gallons of gasoline from a tribe-owned convenience store, the
Supreme Court has stated that the state gasoline excise tax may not be imposed. See Moe v.
Confederated Salish & Kootenai Tribes of Flathead Reservation , 96 S.Ct. 1634 (1976) ("Moe");
New York Dept. of Taxation & Finance v. Mithelm Attea & Bros. . 114 S.Ct. 2028 (1994)
("Attea"); Oklahoma Tax Com'n v. Chickasaw Nation . 115 S.Ct. 2214 (1995)(" Chickasaw ").
These two fact patterns are not in dispute.

Under a third scenario, however, the Supreme Court has stated that if a non-Native
American buys ten gallons of gasoline from the tribe-owned convenience store, then the state
gasoline excise tax is to be imposed on the non-Native American and the tribe has an obligation
to assist the state by collecting and remitting the tax to the state. See Washington v.
Confederated Tribes of Colville Indian Reservation . 447 U.S. 134, 160-61, 100 S.Ct. 2069, 2084-
85 (1980)(" Colville "V. Oklahoma Tax Commission v. Citizen Band Potawatomi Indian Tribe of

434

Oklahoma. 1 1 1 S.Ct. 905 ( 1991 X Totawatomi "). ". . . Indian retailers on an Indian reservation
may be required to collect all state taxes applicable to sales to non-Indians." Potawatomi at 91 1 .
It is this third scenario that is at issue here today.

We are not talking about taxing Native Americans. We are talking about taxing non-
Native Americans and the responsibilities the Supreme Court has stated that tribes have to assist
the states in collecting these excise taxes from non-Native Americans.

The Court, in a series of decisions stretching back three decades, has examined the issue
of Native American state excise tax evasion closely and issued an invitation for Congress to
address this problem. First, the Court has settled the question as to whether Native American
tribes must collect and remit state excise taxes on motor fuels and tobacco products imposed on
non-Native Americans when it is a Native American tribe or tribal corporation that sells these
products to non-Native Americans. The Court has held that tribes have the obligation to assist
the states by collecting and remitting these taxes on non-Native Americans. Attea at 2035-36;
Moe 1638.

Second, due to the doctrine of tribal sovereign immunity, the Court has stated that states
generally cannot enforce this obligation on Native American tribes. Potawatomi at 905. In other
words, the states have a right to require the assistance of the tribe, but does not have a method
for enforcing this right.

Third, the Court has stated that only Congress has the authority under the Constitution to
correct this legal inconsistency. Potawatomi at 912. Thus, if Native American excise state tax
evasion is to be curbed, it is up to Congress to act.

Congress Must Act

This is the reason for my appearance before you today. NACS and PMAA respectfully
urge this Committee to consider and adopt legislation to give states the right to enforce the tribes'
obligation to collect and remit lawfully-imposed state excise taxes on sales to non-Native
Americans by Native American retailers. According to the Supreme Court, only Congress has
the authority to grant this relief.

My home state of New Mexico currently is grappling with this legal disconnect. Truck
stops, convenience stores, and smoke shops operated by Native American tribes will be evading

435

approximately S14 million in state excise taxes on motor fuels and tobacco by the end of this
year. These tribes are not paying to the state either the 17 cents per gallon state excise tax on
gasoline or the state's 32 cents per pack excise tax on cigarettes when they sell these products
to non-Native Americans.

As a direct result. New Mexico's tax base is diminished at a time of record demands on
the state government. In addition, motor fuels and tobacco retailers such as myself and other
New Mexico marketers find it impossible to compete against a group with such a cost advantage -
- a cost advantage achieved only through tax evasion.

New Mexico is not alone in facing this problem. To varying degrees, the following states
are grappling with motor fuels or tobacco excise tax evasion by Native American tribes: New
York, Michigan, Oklahoma, North Dakota, South Dakota, Arizona, California, and Washington.
Together, it has been estimated that states are losing over $500 million annually in tax revenues
from Native American excise tax evasion.

NACS and PMAA Support Section 3 of S. 1691

NACS and PMAA support the approach taken by Senator Gorton in Section 3 of S. 1691
to address this issue. Simply stated, this section of Senator Gorton's legislation would give a
state the express right to sue a tribe in federal court to collect lawfully-imposed state excise taxes
imposed on sales to non-Native Americans. My company, and other private parties, would not
be permitted a cause of action under Section 3. Only a state could bring such a suit against a
Native American tribe. Thus, any argument that this section would subject tribes to scores of
frivolous lawsuits simply is not supportable.

This section also would require a tribe to waive its tribal sovereign immunity only to the
extent necessary for a state to enforce the obligations imposed by this section. Section 3 would
not require a blanket waiver of sovereign immunity. Instead, it would simply stop a tribe from
hiding behind a legal "loophole" to escape the obligation the Supreme Court has sanctioned.

It is important to me and to NACS and PMAA that our support for Section 3 is not
mischaracterized. NACS and PMAA are not seeking to vilify all Native Americans or even those
Native American retailers that are evading these taxes. Given the opportunity, I am sure that I
and the other members of NACS and PMAA would take advantage of a "loophole" that would

436

allow us to avoid paying state or federal taxes. That would not make us bad people - that would
make us business people.

NACS and PMAA support the economic development and success of Native American
tribes and corporation and would welcome the opportunity to assist these tribes and corporations
in achieving this success. But even the Supreme Court has stated that the sale of a tribe's general
exemption from state taxation to persons not entitled to that exemption is not economic
development.

Analysis of Section 3 of S. 1691

Creation of an Affirmative Obligation Under Federal Law

The first paragraph of Section 3 imposes an affirmative obligation, under federal law, on
tribes, tribal corporations, and members of a tribe to collect and remit to a state lawfully-imposed,
nondiscriminatory state excise, use, and sales taxes on purchases by non-tribal members by a
tribe, a tribal corporation, or a tribal member. Paragraph (1) codifies the U.S. Supreme Court's
decision in Moe and Colville .

The Necessity of Creating Such An Affirmative Federal Obligation

To gain access to the federal court system to bring a suit to enforce the collection of state
taxes, a state must assert a "federal question" under 28 U.S.C. § 1331. A "federal question"
action is described by the Court as follows:

"[A] suit arises under the Constitution and laws of the United States only when the
plaintiffs statement of his own cause of action shows that it is based upon those
laws or that Constitution."

Louisville & Nashville Railroad v. Motley . 211 U.S. 149, 153 (1908).

To bring a suit against a tribe, tribal corporation, or tribal member for failure to collect
and remit state taxes, a state must invoke the protection of a particular federal statutory,
constitutional, or treaty provision either authorizing it to collect taxes or requiring the tribe, tribal
corporation, or tribal member to pay such taxes. Therefore, paragraph ( 1 ) of Section 3 provides
such a federal statutory provision.

437

Limiting the State Taxes Covered

Paragraph ( 1 ) of Section 3 only creates an obligation on Native Americans if the incidence
of the state tax is on the non-Native American consumer, as required by the Supreme Court. The
Court has stated that states may not impose taxes on Native American tribes selling to members
of their own tribes. Chickasaw at 2214. Therefore, only those taxes imposed by the state on
sales to non-Native Americans by Native American tribes, tribal corporations, or individual tribal
members are subject to the obligation of paragraph ( 1 ). A state tax whose incidence is on Native
American wholesalers or retailers may not be enforced under the provisions of paragraph ( 1 ) of
Section 3.

Affirmative Grant Of Jurisdiction To Federal Courts

Paragraph (2) of Section 3 affirmatively grants a state the authority to bring an action to
enforce paragraph (1) in a federal district court. While it can be argued that this authority is
inferred by paragraph ( 1 ) and 28 U.S.C. § 1 33 1 , the authority is stated expressly in this paragraph
to avoid any ambiguity.

Prohibition On Sovereign Immunity Defense

The Court has held consistently that if tribal sovereign immunity is to be limited by
Congress, the federal statute must do so expressly and unambiguously.

"Suits against Indian tribes are thus barred by sovereign immunity absent a clear
waiver by the tribe or congressional abrogation. . . Congress has always been at
liberty to dispense with such tribal immunity or to limit it."

Potawatomi at 909.

"Indian tribes have long been recognized as possessing the common-law immunity
from suit traditionally enjoyed by sovereign powers. This aspect of tribal
sovereignty, like all others, is subject to the superior and plenary control of
Congress. But without congressional authorization, the Indian Nations are exempt
from suit. . . It is settled that a waiver of sovereign immunity cannot be implied
but must be unequivocally expressed."

438

Santa Clara Pueblo v. Martinez . 436 U.S. 49. 58-59 (1 978 X internal quotations and
citations omitted).

Thus, paragraph (3) of the Section 3 of S. 1691 provides an express limited waiver of
tribal sovereign immunity only to the extent necessary to enforce the obligation imposed in
paragraph ( 1 ).

Lack Of Geographic Limitation To Language

The Native American state excise tax evasion issue addressed by Section 3 of S. 1691
generally occurs at one of two geographic locations: (1) on an Indian "reservation;" or. (2) on
Indian trust land under the superintendence of the federal government. Tribes, tribal corporations,
and tribal members generally do not attempt to evade state taxes on land other than reservation
or trust lands, because "(ajbsent express federal law to the contrary. Indians going beyond
reservation boundaries have generally been held subject to nondiscriminatory state law otherwise
applicable to all citizens of the State." Mescalero-Apache v. Jones . 411 U.S. 145. 148-149
(1973).

Section 3 does not restrict the authority of a state to bring an action against a tribe, tribal
corporation, or tribal member for tax evasion only to evasion occurring on a reservation or trust
land. Instead, it codifies the Jones decision, stating that evasion of lawfully-imposed,
nondiscriminatory state sales, use, or excise taxes by a tribe, tribal corporation, or tribal member
may be prosecuted by a state in federal court no matter where this evasion occurs geographically.

Conclusion

Mr. Chairman. I thank you for your interest in my testimony. I am prepared to answer
any questions you may have.

439

J&J INVESTMENTS LTD.

April 25, 1998

The Honorable Ben Nighthorse Campbell

Chairman

Committee on Indian Affairs

Unites States Senate

838 Hart Senate Office Building

Washington, DC. 20510

Dear Mr. Chairman:

Thank you for your letter of March 23, 1998 and your kind words about my testimony
before the Committee on Indian Affairs on March 1 1, 1998. Again, I, as well as the National
Association of Convenience Stores ("NACS")"and the Petroleum Marketers Association of
America ("PMAA")" appreciate the opportunity to testify before you on the important issue of
Native American state excise tax evasion. I appreciate the open mind you are keeping on this issue
and look forward to working with you and your colleagues to find a mutually acceptable solution to
this problem.

You asked in your letter that I respond to several additional questions for the March 1 1
hearing record. My responses to these questions, on behalf of N ACS and PMAA, are listed below.

1 . Your testimony states that the tribes in New Mexico are not paying the state 's $. 32 per pack
excise tax on cigarettes. Yet, New Mexico explicitly exempts such sales from this state tax,
allowing tribes to impose their taxes. Are you characterizing this as illegal tax evasion?

It was not my intent to characterize the failure by Native Americans to pay the New Mexico
state excise tax on cigarettes as unlawful tax evasion. If my testimony gave that impression,
let me clarify that testimony for the record.

You are correct that in 1992 New Mexico exempted sales by Native Americans on
reservation lands from paying the state cigarette excise tax It is important to understand
why this exemption came about. In the late 1980s and early 1990s, Native Americans were
importing tobacco products from Colorado and Idaho in order to evade New Mexico's
excise tax on cigarettes. New Mexico tobacco wholesalers complained to the state

1306 Indian Wells Road • Alamogordo, NM 88J10 • (5(15) -i.Vi-l 100

440

legislature about this decrease in their sales, and the legislature responded in 1992 by
exempting all tobacco sales on reservations from the state excise tax.

However, Native Americans in New Mexico have not confined their use of tax exemption to
reservation lands. I am aware of at least one Native American smokeshop in the
Albuquerque area that is situation on non-reservation land and yet still sells tobacco
products free of state excise taxes. This outlet, and perhaps others in New Mexico, indeed
are evading state excise taxes on tobacco.

The state affiliates of NACS and PMAA have attempted and will continue to attempt to
have the 1992 New Mexico exemption repealed. Until that time, non-Native American
tobacco retailers will continue to attempt to compete with Native American tobacco retailers
in the face of an almost insurmountable competitive disadvantage

Should states be required to pursue all of the options recognized by the Supreme Court,
including negotiations, before they are allowed to sue in Federal court?

No, but in fact states have pursued all of the options suggested by the Supreme Court -
generally to no avail In QUafr — v. Citizen tfr njr, PflHWgomi Indian Tribe of Oklahoma .
1 1 1 S.Ct. 90S ( 1991 ), Oklahoma contended that the Court's ruling in that case gave the state
"a right without any remedy" Id At 912. The Court responded by identifying several
alternative remedies through which a state could enforce its Court-recognized right to
require Native Americans to act as the state's agent when non-Native Americans purchase
motor fuels or tobacco products from Native American enterprises. Those suggested
remedies are as follows: (1) sue individual agents or officers of a tribe for evaded state
taxes, (2) collect the tax from wholesalers; (3) enter into agreements with tribes; or, (4) seek
appropriate legislation from Congress.

To varying degrees, each of these remedies, apart from the final one, have been attempted
and discarded by individual states. Tribal officers have asserted successfully the shield of
tribal sovereign immunity if they are sued concerning official activities undertaken on
behalf of their tribe. ?-» pa rte YP ""g 28 S Ct. 441 (1908)

In New York, that state's attempt to collect tobacco excise taxes from tobacco wholesalers
before the tobacco products arrived on Indian lands was met with violent protests by Native
Americans in which lives were lost and major interstate highways were blockaded. Not
surprisingly, New York has backed off this strategy in the face of these violent protests.

In theory, compacts or agreements between tribes and states should be feasible, but only if
both sides to the negotiations have relatively equal bargaining power. In many of the
agreements between tribes and states that have been reached to date, states have lacked the
bargaining power to require tribes to fulfill their duty as set down by the Supreme Court ft
is just this inequality of bargaining power that Section 3 of S. 1691 will remedy. When
Section 3 is enacted, tribes will be forced to bargain in good faith with the states because the
state will have the power to enforce its rights in federal court if the tribe does not

441

Currently, tribes have little to fear from litigation with the states over Native American state
excise tax evasion the states in essence have a right without a ready remedy.

As a result, the only practical remedy identified by the Court that is left is to seek legislation
from Congress, which is exactly the course N ACS and PMAA are pursuing. Given
Congress' constitutional power to regulate commerce with Native American nations, a
federal solution to the issue of Native American state excise tax evasion is the most
efficient, least costly, and most practical solution faced by many states across the nation.

Please provide the amount of the tax revenue you claim is "lost " to the State of New Mexico
due to retail sales on Indian lands each year, and the source and methodology used in
arriving at that figure.

In 1998, according to the New Mexico Taxation and Revenue Department ("TRD"), Native
American motor fuels state tax evasion will reach approximately $14 million. In addition,
the TRD estimates that Native American tribes will sell approximately 6 million packs of
cigarettes in New Mexico in 1998 without paying state excise tax on these products,
resulting in a loss of approximately $22 million in tobacco excise tax revenue to the state.

Again, thank you for the opportunity to appear before the Senate Indian Affairs Committee. If I,
NACS, or PMAA can provide you or your staff with additional information, please do not hesitage
to contact us.

President

442

TESTIMONY OF GREG LOVE

PRESIDENT. LOVE'S COUNTRY STORES. IMC.

ON BEHALF OF THE

SOCIETY OF INDEPENDENT GASOLINE MARKETERS OF AMERICA

AND

NATSO - - REPRESENTING THE TRAVEL PLAZA AND TRUCK STOP INDUSTRY

BEFORE THE

SENATE INDIAN AFFAIRS COMMITTEE

HEARING ON NATIVE AMERICAN SOVEREIGN IMMUNITY

March 11. 1998

Introduction

Good morning. Mr. Chairman. My name is Greg Love. I am President of
Love's Country Stores, a chain of 127 convenience stores and motor fuels outlets
operating in eight western states, including Oklahoma. New Mexico, and Arizona.
Love's is headquartered in Oklahoma City. Oklahoma.

I am appearing here today on behalf of the Society of Independent Gasoline
Marketers of America ("SIGMA") and NATSO. which represents the travel plaza and
truck stop industry. SIGMA is an association of over 260 independent gasoline
marketers operating in all 50 states. Last year. SIGMA members sold over 30
billion gallons of motor fuel, representing over 21 percent of all motor fuels
sold in the United States in 1997. SIGMA members supply over 28.000 retail
outlets across the nation and employ over 200.000 workers nationwide. NATSO.
Inc. (formerly the National Association of Truckstop Operators) is the
professional and legislative representative of America's $35 billion travel plaza
and truckstop industry. NATSO was founded in 1960 and currently represents
nearly 1.100 member locations offering a diverse array of facilities and services
to professional truck drivers and the traveling public."

I would like to thank the Committee for holding this hearing today. Petroleum
marketers in Oklahoma and other states have been facing the issue of Native
American state excise tax evasion for over 15 years. A public examination of
this issue is long overdue.

443

Native American Excise Tax Evasion in Oklahoma

I am here today for one very simple reason: to tell this Committee about
motor fuels excise tax evasion by Native American tribes in Oklahoma. You may
hear other testimony today that asserts that this tax evasion problem no longer
exists in Oklahoma. Nothing could be further from the truth.

We must all be clear in our understanding of the type of tax evasion at
issue here. This issue is not about Native Americans evading state excise taxes
imposed on the tribes. The U.S. Supreme Court has stated conclusively that the
states do not have the authority to impose state excise taxes on the tribes.
SIGMA and NATSO do not dispute the Court's position on this narrow issue.

The tax evasion that is at issue here is evasion of a tribe's obligation
to collect state excise taxes when a non- Native American purchases gasoline or
diesel fuel from a tribal truck stop or convenience store. The Supreme Court has
stated repeatedly that tribes have an obligation to act as an agent of the state
in collecting these state excise taxes from non -Native Americans, just as my
company has an obligation to assist the state in collecting the taxes for
purchases at our stores.

For many years in Oklahoma, Native American tribes refused to fulfill this
obligation. And this refusal placed my company and others at a severe
competitive disadvantage. Simply stated, the Native American state tax excise
evasion placed us in a position in which it was impossible for our company to
make a profit on our operations that competed directly with Native American
stations.

Let me give you an example of this competitive disadvantage. We prepared
an actual profit and loss statement for one of our stores that has been in direct
competition with a tribal travel plaza. In 1995, our company experienced a loss
from that store of just over $5,000 on sales of over $6.5 million. If a Native
American tribe owned that store, and evaded payment of state taxes, that store
would have made a profit of over $925,000 on the same level of sales. This
example illustrates just how profitable tax evasion can be.

In response to exactly this type of situation, we petitioned our state
government in Oklahoma for a solution. To its credit, our government responded.
Not once, but twice, Oklahoma was forced to take Oklahoma tribes all the way to
the U.S. Supreme Court in its attempts to enforce the state's motor fuels excise
tax laws.

444

Finally, in 19%. Oklahoma was able to reach an agreement with several of
the most active tribes in the motor fuels retailing business in Oklahoma. In
return for the fulfillment of the tribe's obligation to collect and remit motor
fuel excise taxes to the state, participating tribes are to receive a payment
from the state equal in FY 1999 to 4.5 percent of all state collections of motor
fuel excise taxes.

Shortcomings of the Oklahoma Agreement

On paper, this agreement should have solved our state's problem. It
didn't.

First, only nine of Oklahoma's 39 registered Native American tribes have
signed the agreement. That means that over 75 percent of Oklahoma's tribes are
not bound by this agreement and are not required to collect and remit state
excise taxes on the motor fuel purchased by non-Native Americans at their retail
outlets.

Second, the agreement is entirely voluntary on the tribe's part. Those
tribes that have signed the agreement may withdraw from the agreement at any time
and return to the practice of excise tax evasion.

Third, the agreement does not prevent Native American tribes from evading
state excise taxes either by manufacturing gasoline or diesel fuel themselves or
by importing these motor fuels from outside of the state (because state
enforcement of its taxes on interstate sales is problematic without federal
support. Attached to my testimony are letters and articles from representatives
of Oklahoma tribes that indicate that they are trying to import motor fuels from
Texas and New Mexico to evade the excise tax collection system set up by the
state.

Fourth, the agreement covers only excise taxes on motor fuels. It does not
cover sales or excise taxes on tobacco products. As the January 1998 photographs
attached to my testimony show, even the Oklahoma Choctaw tribe •- which has
signed a motor fuels excise tax agreement with the state -- publicly advertises
no sales taxes on chewing tobacco sold at one of their outlets.

In short, any testimony you may hear today that the problem Oklahoma has
experienced with Native American excise tax evasion has been solved is
inaccurate. Instead, the Oklahoma solution is no more than a stop-gap band- aid
solution which has not been effective in stopping all tax evasion and likely will
unravel further in the near future.

445

An Imbalance of Negotiating Power

Why did the state of Oklahoma enter into these seemingly one-sided
agreements with the tribes? The answer to that question is simple: lack of
bargaining power. Under Supreme Court decisions, the state has the right to
these state excise taxes, but does not have the ability to enforce that right
when Native Americans do not fulfill their obligation to collect and remit the
taxes. Without the ability to petition our judicial system for a remedy, the
state of Oklahoma has a right without a remedy.

This Committee in particular and Congress in general has the ability to
alter this balance of bargaining power. SIGMA and NATSO urge this Committee to
pass legislation that gives states the express authority to sue Native American
tribes in federal court for evading state excise taxes on motor fuel and tobacco
when these products are purchased by non-Native Americans at Native American
stores. The Supreme Court has stated that it is up to Congress to authorize such
lawsuits. SIGMA and NATSO urge Congress to pass such legislation without delay.

Oklahoma is Not Alone

The problem of Native American state excise tax evasion is not unique to
Oklahoma. Native American tribes currently are evading state excise and/or sales
taxes on motor fuels and tobacco products in the following states: New York.
Michigan. North Dakota. Washington, California. New Mexico. Kansas. Nevada.
Arizona. Iowa. and. South Dakota.

And the potential is present for this evasion to spread even farther.
There is "Indian Country" in at least 38 states nationwide on which Native
Americans could establish retail outlets and attempt to evade state excise taxes.
This problem will only continue to grow.

SIGMA and NATSO Support Section 3 of S. 1691

SIGMA and NATSO strongly support Section 3 of S. 1691. introduced three
weeks ago by Senator Slade Gorton, a member of this Committee. Section 3 of this
legislation will empower state governments by authorizing them to enforce their
tax laws in federal court. This legislation will increase the bargaining power
of states in their negotiations with their Native American tribes, and will force
the tribes to bargain in good faith.

47-201 98-15

446

Conclusion

Thank you very much for this opportunity to present SIGMA' s and NATSOs
views. I would be pleased to respond to any questions you may have about my
testimony.

447

***•*•

**-v

**«io»

(405)422-2655 FAX (405)422-2039 P.O. BOX 763 EL RENO OK 73036

Oklahoma Indian Tribes Working Together .

August 3. 1997

R.T. Kahn Associates
136 East 79* Street

New York City. NY 10021-0435

DwMr.Kiho:

Thank you for your previous Ml— I in obtaining gasoline for Oklahoma Indian tribes. As you know.

confirmed b> a U.S. Supretnc Court ruling. Indian tnbes «rc not required to pay i sulcus on gasoline jold on their
lands. However. Oklahoma taxes the psoltaa at the refinery and/or distributor effectively adding the tax to Indian
gtmlinr We have to continue looting for gasoline sources free of the Oklahoma Jtatc tax

ICE Corporation lit ' H u m the Oklahoma Indian tribes in their (as marketing efforts. W« currently arc
serving eight (S) stations, with another 14 waitmg for a stable source of gasoline. Presently wc arc capable of moving
rwo(2)millK>ngallomofga»oIiDcainooth, and anticipate a steady growth. There arc 39 Indian tribes in Oklahoma
v>ith each having or planning at least one (1) gasoline outlet. Tribal nations require regular unleaded, super unleaded
anddicsct

v ~- "'tf***"" n ~~-~- g-«^n~- — « Mna— j»~t ■■■i»< ntawaMa ,f an — n— i ■*>*

transportation and other cost factors. Hauling gasoline that distance would cost approximately .25 cents a gallon. This
.25 cane transportation cost and the federal tax of .114 cents would show a built-in cost of .434 cents per gallon. With
all the costs considered, ICE Corporation would like to have a gasoline price of approximately .SO cents per gallon.
The portion taxed by the state. .17 cents it taxed by tribal tax commissions for ope r ation of tribal governments

Thank you tor yow

SincereJy,

Tyler Todd

Cnairmaa/CfcO

ICE PAOC^rporation

448

Tribal Caucus Report:

Indian Citizen Empowerment Corp.
To Deal With Fuel Tax Problem

By Bob Perry
Pawnee Tribe

Oklahoma Tribal Representatives have met
for several months to develop a means of distrib-
uting motor fuels to tribal retailers while protect-
ing the sovereignty of tnbal nghrs guaranteed by
creates signed years ago between Oklahoma
Tribes and the U.S. Government.

This becomes confrontational to Oklahoma
due to taxation of motor fuels. Recently, a
corporation has been formed, by many of the 39
federally recognized tribes in our state, which
addresses issues concerning the sovereignty of
Indian Tribes compared to a state's power to tax
tribal enterprises.

The Indian Citizen Empowerment Corpora-
tion ( ICE CORP) is being formed to make
arrangements with out-of-state motor fuel
producers, which have no other commitments for
delivery within Oklahoma, to deliver motor fuel
products to tribal fuel stations. The issue arises
to whether tribes must pay state tax.

Some tribes, which have motor fuel dispens-

ing stations, have signed "compacts" with the
state of Oklahoma. Allegedly, some of these
tribes have become disenchanted with the
amount of "their" share of the proceeds provided
under provisions of their "compter" and are
becoming increasingly interested in pursuing the
ICE CORP approach.

Under provisions of P.L. 93-638, Indian
(Native American) Tribes must move toward
self -extermination and self-governance. Re-
cently, Ada Deer, the head of the Bureau of
Indian Affairs. U.S. Department of Interior at the
Sovereignty Symposium in Tulsa; sponsored, m
pan by the Oklahoma Supreme Court and the
Oklahoma Indian Affairs Commission, stated.
"Adoption of (U.S. HR 1554) some pending
legislation would be tantamount (related) to
governments taxing governments."

It seems that the only resolution will involve
education, cooperation, negotiation, and legal
decisions.

Home-based Businesses Hear Latest Information

By Trisha Gcdon
With the theme "Revving Up For The 21st
Century," Oklahoma Home-based and micro
businesses focused on new technology at the 8th
annual Home -based Business Association
annual meeting and conference.

Glenn Muske, OSU Extension home -based
specialist announced his web site is http://wwx.
oksuie.edu/hcs/fci/cohbe. "This provides infor-
mation on upcoming workshops, educational
events and fact sheets as well as links to other
home-based sites." he explained.

The Extension service is also initiating a
"Listserv." This is basically an e-mail discussion

group targeting home -based and micro-based
business owners, he said.Tndmduals who sub-
scribe to the list will be able to share and ex-
change ideas relating to operating their own
business. This list will provide business owners
with another way to network."

Muskie will serve as the list's moderator. To
subscribe, home-based operators should send an
e-mail to listserv@oksute.edu. In the body of the
message, type: subscribe okhbbl <firsuame>
<last name>.

Musie also announced OSU has a 4-hour basic
Internet seminar available to groups.

449

loeoi to»p««)W«

P.O. 60*26210
OkWnnwOy. OK 73126
(406)731-6000

-Th» HMttand of

Apnl21. 1998

The Honorable Ben Nighthorse Campbell

Chairman

Committee on Indian Affairs

United States Senate

838 Hart Senate Office Building

Washington. DC 20SI0

Dear Mr Chairman

Thank you for your letter of March 23, 1998 expressing your appreciation for my
testimony before the Committee on Indian Affairs on March 11, 1998. As I stated at that
time. I, and the organizations I represented at the hearing, appreciate your willingness to
solicit testimony on the issue of Native American state excise tax evasion This issue has
been a problem for my company and other marketers in Oklahoma for years and we are
pleased that you and the Committee are taking the time to examine this problem.

Below are detailed answers to the supplemental questions you posed in your
letter I am responding on behalf of my company as well as the Society of Independent
Gasoline Marketers of America ("SIGMA") and NATSO - Representing the Travel Plaza
and Truck Stop Industry.

I I))) you feel that Oklahoma's experience with this mailer is typical of other stales 7
Because as you may know, the Arizona legislature found that over 200 taxation
agreements are in existence between tribes and stales'

Oklahoma's experience in dealing with Native American state excise tax evasion is
typical in some ways and atypical in others. First, the problem Oklahoma has faced -
a complex legal relationship between tribes, the state, and the Federal Government -
is common to all states across the country. The U.S. Supreme Court has attempted,
with limited success, for over three decades to resolve conflicts between tribes and
states on the issue of state excise tax evasion

Second, the potential for state tax evasion by Native Americans when non-Native
Americans purchase motor fuels or tobacco products from a tribal enterprise exists

451

across the country. While it is true that a minority of states currently are experiencing
a problem with Native American excise tax evasion, the number of these states has
increased significantly over the past decade and likely will increase further in the
future if a solution is not found

Third, Oklahoma's experience has been typical of other states in the frustration state
officials have experienced in attempting to halt Native American excise tax evasion
Despite the fact that the Supreme Court has stated in plain language that the tribes
have a duty to collect and remit these excise taxes to the state, the tribes' legal
maneuvering has stymied state enforcement actions for years Ultimately, weary of
conflict and realizing the limited options open to the state. Oklahoma entered into a
motor fuels excise tax agreement with several tribes in the state However, as I noted
in my testimony, even this agreement is flawed in several ways ( I ) only nine of
Oklahoma's 39 tribes have signed the agreement, (2) the agreement is entirely
voluntary on the tribe's part. (3) the agreement does not prevent Native American
tribes from evading state excise taxes either by manufacturing gasoline or diesel fuel
themselves or by importing these motor fuels from outside of the stale; and, (4) the
agreement covers only excise taxes on motor fuels - it does not cover sales or excise
taxes on tobacco products.

As I stated in my testimony:

"Why did the state of Oklahoma enter into these seemingly one-sided
agreements with the tribes 9 The answer to that question is simple
lack of bargaining power Under Supreme Court decisions, the state
has the right to these state excise taxes, but does not have the ability
to enforce that right when Native Americans do not fulfill their
obligation to collect and remit the taxes Without the ability to
petition our judicial system for a remedy, the state of Oklahoma has
a right without a remedy."

The same is true in other states with respect to compacting with tribes for the
collection of state excise taxes. While I am not in a position to comment on the exact
number of agreements that have been reached between tribes and states across the
nation, one characteristic is common within most of these agreements potentially
faced with years of contentious litigation, many states have chosen to enter into one-
sided or lop-sided agreements with tribes.

This is the path Oklahoma, and I suspect, many other states have taken. While it may
be true that over 200 taxation agreements are in existence, it also likely is true thai
states would welcome federal legislation such as Section 3 of S 1691 Currently,
despite several Supreme Court decisions in their favor, states have little or no
bargaining power to require tribes to collect state excise taxes Due to this lack of
bargaining power, many states have entered into one-sided or lop-sided agreements
with tribes Section 3 will strengthen a state's bargaining position when negotiating

452

future agreements, leveling the negotiating table which currently is tipped
substantially in the tribes' favor

Oklahoma's experience is atypical in several ways First, several of the Native
American tribes in Oklahoma have been among the most aggressive practitioners of
slate excise lax evasion over the past two decades I hese tribes have built large truck
slops and smoke shops across the slate and have aggressively adveniscd their stale
excise tax evasion in newspapers, on billboards, and on signage at their outlets

Second. Oklahoma's stale government has been equally aggressive in attempting to
curb Native American state excise tax evasion The state has litigated the issue twice
to the level of the Supreme Court, and has passed several pieces of legislation
designed to hall this tax evasion In some ways. Oklahoma has been one of the
primary battlegrounds over the issue of Native American state excise tax evasion

Ihtln'l llic Supreme ( mirl rule in 1995 llun Oklalutmo illejiallv nwghi In impn\e ii\
lux an inhc*. even ilmiiyih "letful iim nlcm <• " «/ //;<■ lax w </\ ilirei ictl m the retailer '

The Supreme Court case you have referenced was Oklahoma Tax Commission v
Chickasaw Nation . 115 SCl 2214 (1905) In that case, the Court held that
Oklahoma could not enforce its existing motor fuels tax on motor fuels purchased by
non-Native Americans from Native American retailers because the Court concluded
the incidence of the motor fuels tax in Oklahoma fell on the Native American
retailer The Court held that "a Slate is without power to tax reservation lands and
reservation Indians'' /</ at 2220 However, this case does not conflict with other
Court decisions which have held that Native Americans must act as an agent of the
state to collect state excise taxes imposed on non-Native Americans when the motor
fuels are sold by a Native American enterprise See, New York Dept of Taxation &
Finance v Milhclm Altea & Bros . 114 SCl 2028 (1904). Moe v Confederated
Salish & Kootenai Tribes of Flathead Reservation . % SCl 1634 (1976). and.
Oklahoma Tax Com'n v Potawatomi Indian Tribe . MIS CT 90S ( 1991 )

In the Chickasaw case, the Court prohibited the state from enforcing the tax because
the incidence of the tax was on the Native American retailer, not because the state did
not have the right to require the tribe to act as its agent in collecting the lax from a
non-Native American consumer In fact, subsequent to the Chickasaw decision.
Oklahoma amended its motor fuels tax law to clarify that the incidence of the tax was
on the consumer This amendment conformed Oklahoma's laws to the Coun's
decisions and permuted the state to require the tribes to act as its agent

Section 3 of S 1601 would permit stales to bring an action against a Native American
tribe onlv if the incidence of the tax falls on (he non-Native American consumer
Thus, if the incidence of a state excise tax falls on the tribe or a tribal retailer, then
the state would not be authorized to bring an action under Section 3 As a result, the
Chickasaw case would not be impacted by Section 3.

453

3. Should ( ongress also lake action to discourage Male attempts to impose taxes that
are later found to he illegally imposed on a trihe or its memhers''

The Supreme Court has decided that the state should be permitted to enforce such
taxes against tribes or their members. If Congress decides that such a decision should
be codified into federal statute, SIGMA and NATSO would not oppose such
legislation

4. />» you feel thai any particular Irihe is seeking to compete directly against you and
your stores'

Currently, the following Oklahoma tribes operate truck stops, travel plazas, and
smoke shops thai compete directly with Love's stores in Oklahoma: Chickasaw;
Cherokee, Choctaws; and, Seminoles. Together, these tribes operate eight of these
outlets in Oklahoma

5. Please provide the amount of lax revenue you claim is "lost" to the State of
Oklahoma each year due lo retail sales on Indian land, as well as the source and
methodology used in arriving al that figure.

The Oklahoma Tax Commission ("OTC") estimates that in Oklahoma's FY 1997 that
the state lost approximately $13.3 million in motor fuels state excise taxes from
Native American tax evasion. Since 19%, Oklahoma has entered into motor fuels
excise tax agreements with nine Native American tribes, which has reduced this
evasion figure substantially However, the OTC has stated that it is impossible to
estimate the amount of Native American state motor fuels excise tax evasion that is
ongoing through the importation of motor fuels from other states or through the
vertical integration of the production process As I stated in my testimony, the OTC
is aware that several tribes are attempting to circumvent their agreements with the
state by importing from other states or building production facilities on Native
American lands

Again according to the OTC, under agreements with several Native American tribes,
Oklahoma did not collect approximately $20.6 million in state tobacco excise taxes
in FY 1997 The OTC has predicted that this number will rise considerably in FY
1999, but has been unable to predict a precise number

454

Again, thank you for the opportunity to appear before the Senate Indian Affairs
Committee If I. SIGMA, or NATSO can provide you or your staff with additional
information, please do not hesitate to contact us

Sincerely.

Greg Love
President

455

GREGORY E. PYLE

CHIEF

CHOCTAW NATION OF OKLAHOMA

Testimony before the Senate Committee on Indian Affairs

March 11, 1998

456

Mr Chairman and members of the Committee, I am Gregory E. Pyle, Chief of the
great and proud Choctaw Nation of Oklahoma. We are the third largest Indian tribe in the
country. On behalf of our 107,000 members, I want to express my sincere appreciation
for the opportunity to appear before you and address concerns about Senate Bill 1691
shared by me, the Choctaw Nation of Oklahoma, and Native Americans and their
respective tribes across the country.

First, let me make clear that I understand that the United States Supreme Court
has said on numerous occasions that the sovereign status of Indian tribes is subject to the
plenary power of the United States Congress. Notwithstanding those pronouncements,
many attacks and incursions on tribal sovereignty have occurred in the judicial branch over
past decades. However, the Congress, much to its well-deserved credit has demonstrated
great respect to the Indian nations in this country and has, except on rare occasions,
declined to diminish our sovereignty. Rather, it has reaffirmed our status in that regard on
numerous occasions. For that, we are very grateful.

Sovereign immunity is perhaps the most significant tribal related issue facing
Congress this year. It is also one of the most divisive. As you know, opinions on this
issue run very strong on both sides. The recently introduced Senate Bill 1691 is sadly
indicative of these decisions.

Tribal sovereignty is the life blood of the American Indian's ability to maintain our
culture, heritage, and right of self-determination. For many years our people were on the
bottom rung of the social and economic ladder in the country. After the passage of PL
93-638, Indian Self-Determination Act, the U.S. policy changed to one of tribal self
determination and economic development. American Indian tribes were encouraged to
become self-sufficient, free of federal financial dependency. Needless to say, Indian tribes
welcomed this new policy and embraced it with great enthusiasm. For each and every
dollar Indian tribes make and put back into assistance for our citizens, this is a
dollar less we are dependent on the Federal or State Government If tribes were not
considered sovereign entities and not recipients of federal funding, the burden of
responsibility of care for these citizens would fall back on the Federal or State
Government

We began to figure out ways to generate revenues to finance this goal of financial
independence. Unlike local, state, and federal governments, Indian tribes have little or no
tax base or other ways to raise revenues, as other conventional governments have. Most
of us recognized early on that Indian tribes had to become capitalists. We began to look
at commercial endeavors, such as hotels, resorts, truck stops, manufacturing, and real
estate rental properties, such as shopping centers.

457

Those opposed to our tribal sovereignty can exhaust themselves citing
isolated incidents and worst case scenarios. In fact, there have been a few instances in
which tribal immunity in commercial affairs has resulted in unfortunate inequities. This
has become overshadowed by the many successes of Tribal Sovereign Immunity. This
issue can be resolved by tribes and businesses setting up an agreement which can
result, at the concurrence of the tribe, with a limited waiver of sovereign immunity
pertaining to each specific business of enterprise upon approval of that respective
tribe. With this waiver, both parties ' interests can be protected

Sovereign immunity can be a positive force for all parties- Indian and non-
Indian alike- when utilized appropriately. The Choctaw Nation conducts business with
our non-Indian business partners and with the State of Oklahoma while preserving our
sovereign immunity. For many years we could not agree with our state government in
Oklahoma about taxation practices. It was a very difficult situation, both sides were
adamant. But in the end we were able to put aside these differences and arrive at
agreements which work to everyone's benefit. And we did it without sacrificing our
immunity. In fact, I submit without this sovereignty, we may have never been able to
reach compacts with the state in gasoline and tobacco taxation.

These compacts were not easy. There were endless disputes, roadblocks, and land
mines which could have blown up in our faces. Negotiations were tough and sometimes
downright contentious. But in the end our determination on both sides to come to an
agreement and put these issues behind us prevailed. Both of our governments could then
return to our most important duty of providing for the general welfare of our citizens.

This includes providing jobs, promoting education, and caring for those of our
citizens who cannot care for themselves. These and other serious tribal obligations
illustrate why Indian tribes engaging in commercial activities are not like private
corporations or other businesses. We engage in business activities to provide revenues to
operate our governments. Our profits are not used to make individuals wealthy or to
compensate shareholders. We use our profits for such basic things as educating our
children, improving our people's healthcare, providing safe and decent housing and
other causes- things which most Americans take for granted. These are the goals
and purposes of Choctaw tribal enterprises.

Because of our gaming revenues, economic development ventures and money
earned from our Fuel Tax Compact with the State of Oklahoma, the Choctaw Nation has
began tribally funded programs to provide eyeglasses, dentures, hearing aids and other
medical equipment needs to our tribal members. We have been able to supplement our
Low Income Energy Assistance Program with an additional $100,000 and $200,000 for
college scholarships this year alone. The Choctaw Nation also allocated $400,000 this
year for homes for destitute people. Just recently, fires have resulted in the loss of homes
of some of our citizens. We were able to respond immediately with assistance, providing

458

them with a place to live We are also able to provide $100,000 for Boys and Girls Clubs
in several counties and able to partner with local public schools in providing after school
recreation programs for youth in socially disadvantaged areas. This is of utmost
importance in a state with one of the highest teen pregnancy rates in the Nation. This will
be one of the greatest drug prevention programs available, simply by providing structures,
supervised activities for young people in the afternoons and on weekends. At the end of
this testimony I am including remarks by many of our non-Indian business partners
indicating their support for our efforts at home and in Washington, DC. These programs
are wonderful examples of how tribal sovereignty benefits both the American Indian
and non-Indian communities.

By sharing state, federal, private and tribal resources we are in the process of
constructing an American Indian Center at Eastern Oklahoma State College in Latimer
County, which will reduce the dropout rate by providing counseling and academic tutorial
assistance for our Indian students. The Choctaw Tribal Council and I have contributed
$1.2 million of tribal funds for this project.

The Choctaw Nation has created 1,500 new jobs. We are building a new hospital,
not by waiting for the federal government to build it for us but by utilizing existing health
dollars, fuel tax dollars, gaming dollars, and tribal economic development dollars. This is
going to provide immediate services to our Indian people and reduce the burden of
the U.S. Government. The projected cost of this hospital from the Federal Government
was approximately $39 million. The tribe will be able to build this facility for
approximately $22 million Stop and think how this is reducing the federal deficit, by not
being a $39 million burden on the federal government. We did not have to come to any
federal funding agency with a request for additional dollars for construction, and the tribe
is able to build the hospital at almost half the formerly projected cost. We as Choctaws
welcome these challenges and opportunities.

By the Choctaw Nation partnering with agencies such as Little Dixie Community
Action Agency and by utilizing the services of both, we were able to provide more job
opportunities for everyone in the community. Please understand, my priority is the
Choctaw people, but I want to stress that when we succeed in business, everyone
benefits. Our businesses provide jobs, additional income for the area, additional taxes for
the community and allow opportunities for retail sales. This couldn't be more prevalent in
today's society with federal legislation such as Welfare-to-Work that has changed
society and provides a new generation of hope. With the restructuring of the
Welfare Program the Choctaw Nation must have the opportunity to continue with
economic development and provide more jobs to more people who will be without
social assistance.

459

The Choctaw Nation exercises our Tribal Sovereignty by compacting with the state,
and this relationship is working well for both the state and our tribe. The tribes and states
and others will ultimately resolve our conflicts and jurisdictional difficulties. In addition to
the issues of tobacco and motor fuel taxes where several tribes and the State of
Oklahoma have entered into compacts which are mutually beneficial to both sides, the
Choctaws, Chickasaws, and Cherokees are currently engaged in meaningful discussions
that may likely resolve state-tribal conflicts on water rights.

Gaming and smoke shops have been successful ventures for the Choctaw Nation.
These ventures have provided a tremendous means to virtually support additional
businesses, social programs, education programs and health programs of the Choctaw
nation.

I would like to point out that last year alone, gaming revenues allowed 500
additional higher educational scholarships to be awarded to Choctaw youth. I anticipate
that this year with the help of gaming revenues we will be able to send approximately
1,000 Choctaw youth to college. This is self-determination working at its best

The ICDBG ( Indian Community Development Block Grant ) program has played
a very significant role in our success in the field of economic development. This program
not only allowed us to enter into competition for federal dollars, it has allowed us to
create 234 jobs. Most of our truck stops are ICDBG projects, and all of them are
profitable. I want to commend Congress for designating funds for this extremely
successful program and I cannot think of a way it could be better. I understand some
would like to transfer this under a new entity. I want to reiterate that this is one of the
most successful programs that is provided to the Choctaw Nation today as the program is
presently administered.

Congress is now considering subjecting to the full array of remedies the courts and
forcing us to submit to being taxed by state governments. This would not only severely
retard our progress on our journey to self-determination and financial independence, but it
would also lead to the destruction of many tribal governments. Adopting legislation to
further such a policy would run exactly counter to the policies and legislation adopted in
the 1970's, and even recently, which has encouraged tribal self-determination.

The United States Supreme Court has concurred with this school of thought on
numerous occasions. In 1986 in the case of Three Affiliated Tribes v. World Engineering,
the Supreme Court was considering the tribal challenge to a North Dakota statute which
required Indian tribes to waive tribal sovereign immunity from unconsented suit before a
tribe could access the state courts as to tribal claims. The court very carefully detailed the
federal policy of tribal sovereignty and self determination and struck down the North
Dakota law as being pre-empted by federal policy and unduly burdensome on tribal
sovereignty and federal interests in promoting tribal self-determination.

460

I respectfully ask that you reject any proposed legislation which would
subject Indian Tribes in America to involuntary taxation by the states, or
unconsented coercive jurisdiction of state and federal courts.

Let us get on with the noble pursuit you have previously encouraged us to
undertake. Let us work our way off the federal dole without fear of the destruction of
our tribal governments which are so important to our people and their futures. To do
otherwise would give the appearance that we are being punished for too much
success in our efforts to achieve what the United States has asked of us. I urge this
Committee and the Senate, on behalf of the citizens of the Choctaw Nation, to defeat
legislation which would strip us of our sovereignty and our ability to care for our children,
elders and disadvantaged citizens.

Again, I wish to express my sincere appreciation for the opportunity to be here and
share my thoughts with you. Thank you very much.

Gregory E. Pyle, Chief
Choctaw Nation of Oklahoma

Written testimony submitted to Congress
March 11, 1998

461

C & T CONSTRUCTION r INC.

RT.l, BOX 250 WILBURTOH, OK (918)465-3396

March 2, 1998

SENATOR BEN NIGHTHORSE CAMPBELL, CHAIRMAN
SENATE COMMITTEE ON INDIAN AFFAIRS
WASHINGTON, D.C. 20510-6450

RE: BUSINESS RELATIONSHIPS WITH NON- INDIAN BUSINESSES

DEAR SENATOR CAMPBELL:

C S I CONSTRUCTION, INC. HAS DONE BUSINESS WITH THE CHOCTAW
NATION OF OKLAHOMA FOR THE PAST 2 YEARS. WE HAVE AN EXCELLENT
BUSINESS RELATIONSHIP THE CHOCTAW TRIBE.

THE LOSS OF SOVEREIGN IMMUNITY WOULD CRIPPLE THE CHOCTAW TRIBE'S
ABILITY TO GOVERN ITSELF AND COULD JEOPARDIZE ITS BUSINESS
VENTURES AND RELATIONSHIPS WITH BUSINESSES OUTSIDE THE TRIBE.
THIS WOULD HAVE A DIRECT IMPACT ECONOMICALLY ON BUSINESSES SUCH
AS OURS THAT HAVE COMMERCIAL INTEREST WITH CHOCTAW NATION.

WE URGE YOU TO SUPPORT THE CHOCTAW NATION'S STAND ON SOVEREIGN
IMMUNITY, AS WE DO, SO WE CAN CONTINUE OUR BUSINESS RELATIONSHIP
WITH THEM.

SINCERELY,

CLAYTON BROWNE, JR.

462

Paul Howser Concrete

P.O. Box 308
Hugo, Oklahoma 74743

March 2, 1998

Senator Ben Nlghthorse Campbell

Chairman

Senate committee on Indian Affairs

Washington, D.C 20510-6450

Dear Senator Campbell:

Our company, Paul Hawser Concrete, has done business with the Choctaw
Nation of Oklahoma for the last 10 years, we have an excellent business
relationship with the tribe.

We do a large volume of business with Choctaw nation and have never had
any problems with late payments or unpaid In voices. The issue of sovereign
Immunity has never interrupted or Impeded our business relationship with
Choctaw Nation.

The loss of sovereign immunity would cripple the Choctaw tribe's ability to
govern itself and could jeopardise Its business ventures and relationships
with businesses outside the tribe. This would have a direct impact economically
on businesses such as ours that have commercial interests with Choctaw
Nation.

We urge you to support the Choctaw Nation 's stand on sovereign immunity,
as we do, so that we can continue our business relationship with them.

Sincerely,

■Paul Howser
Owner
Paul Howser Concrete

463

Miller Office Equipment

March 2, 1998

4CJ k. Main • P.O Box MO • Anll«. OK 7«23
Artmmuimlun MM WMB

Senator Ben Nighthorse Campbell

Chairman

Senate Committee on Indian Affairs

Washington, D.C. 20510-6450

Dear Senator Campbell:

Miller Office Equipment, Inc. has done business with the Choctaw Nation of
Oklahoma for the last 23 years. We have an excellent business relationship
with the tribe and value mem very much as a customer.

We do a large volume of business with Choctaw Nation and have never had
any problems with late payments or unpaid invoices. The issue of sovereign
immunity has never interrupted or impeded our business relationship with
Choctaw Nation.

The loss of sovereign immunity would cripple the Choctaw tribe's ability to
govern itself and could jeopardize its business ventures and relationships with
businesses outside the tribe. This would have a direct impact economically
on businesses such as ours that have commercial interests with Choctaw
Nation.

We urge you to support the Choctaw Nation's stand on sovereign immunity,
as we do, so that we can continue our business relationship with them.

Sincerely,

Brad Mill
President
Miller Office Equipment, Inc

464

405 S. Leotard S«wet
Liberty. Miao«ii 64068-2S99

(HI 6)781-6700

GUYS

February 27, 1998

Senator Ben Nighthorse Campbell

Chairman

Senate Committee on Indian Affairs

Washington, D.C. 205 10-6450

Dear Senator Campbell:

Our company, Guy's Foods has done business with the Choctaw Nation of Oklahoma for
the last two years. We have an excellent business relationship with the tribe.

We do a large volume of business with Choctaw Nation and have never had any problems
whit late payments or unpaid invoices. The issue of sovereign immunity has never
interrupted or impeded out business relationship with Choctaw Nation.

The loss of sovereign immunity would cripple the Choctaw tribe's ability to govern itself
and could jeopardize its business ventures and relationships with businesses outside the
tribe. This would have a direct impact economically on businesses such as ours tht have
commercial Interests with Choctaw Nation.

We urge you to support the Choctaw Nation's stand on sovereign immunity, as we do, so
that we can continue our business relationship with them.

Sincerely,

AdJLf

Ron Geseh wind
Region Sales Manager
Guy's Foods
729 Overhead Drive
Oklahoma City, Oklahoma

Regional Oflka »t217S. Wafcer •OtoaoBaCUy.OK 73139 « (405)631-5361 • FAX (405) 631-4388

465

March 3, 1998

B & I Sales, Co.

POBox 205

90S North Wood Street

Cancy, KS 67333

800-235-6478

Senator Ben Nighthorse Campbell

Chairman

Senate Committee on Indian Affairs

Washington, DC. 20510-6450

Dear Senator Campbell:

Our company, B & I Sales Company, has done business with the Choctaw Nation of
Oklahoma for the past eleven years. We have always maintained an excellent business
relationship with the tribe.

We have found them to be very friendly, efficient, and prompt with payments. They are
one of our most valued customers and we do a large volume of business with the
Choctaw Nation. The issue of sovereign immunity has never interrupted or impeded our
business relationship with the Choctaw Nation.

The loss of sovereign immunity would cripple the Choctaw tribe's ability to govern itself
and could jeopardize its business ventures and relationships with businesses outside die
tribe. This would have a direct impact economically on businesses such as ours that have
commercial interests with the Choctaw nation. Because they are such a valued customer,
we would certainly hate for this to happen.

Therefore, we would encourage you to support the Choctaw Nation's stand on sovereign
immunity, as we do, so that we can continue our long and valued business relationship
with them.

Sincerely,

Wil liantfA. Bartusek

President

B & I Sales Company

466

XV- WYNN ASSOCIATES

ARCHITECTS • PLANNERS

March 5. 1998

Senator Ben Nighthorse Campbell

Chairman

Senate Committee on Indian Affairs

Washington. D.C. 20510-6450

Dear Senator Campbell:

Our Company, Wynn Associates, has done business with the Choctaw Nation of Oklahoma for
the last three (3) years. We have an excellent business relationship with the tribe.

We have always enjoyed our relationship with the Choctaw Nation, and hare never had any
problems with late payments or unpaid invoices. The issue of sovereign immunity has never
interrupted or impeded our business relationship.

The loss of sovereign immunity would cripple the Choctaw tribe's ability to govern itself and
could jeopardize its business ventures and relationships with businesses outside of the tribe.
This would have a direct impact economically on many businesses, such as ours, that have
commercial interests with the Choctaw Nation.

We urge you to support the Choctaw Nation's stand on sovereign immunity, as we do. so that
we can continue with a positive business relationship.

Respectfully.

TimWy

Arc

Wynn Associates

TW/bb

FIRST NATIONAL CENTER. 9UTO 1 ■ • MeALESTER. OK 74601 • B18423-O0B3 (FAX) 018 428-8917

467

CENTRAL ELECTMO

ft INSULATION COMPANY INC.
225: WEST MAIN STREET
DUfUNT. OKLAHOMA 74701

(405)924-7262

ftarch 5. 139C

Senator Len Wichthorse Campbell
, Chairoan
Seuatd Cor.x.ittce on Indian Affairs
T .7cahitt£ton, D. C. 2051C-6450

Dear Senator Campbell:

Our company. Central Llectric and Insulation Co., Inc.
has tlout. business with the Choctaw Nation of Oklahoma
for cho last ten (10) years. V» have an excellent •
business relationship with the tribe.

V.& do a lar^e voluice of business irith Choctaw Nation and
nave never had any problems with late paynents or unpaid
invoices. The issue of sovsrelgN irexnity has never
interrupted or impeded our business relationship with
Choctaw Nation.

At this tine I believe chat the Choctaw ITation 'nae a
highly respectable Chief, a true leader and a Godly
person that will take the Choctaw Eation to its highest
standards it has ever reached and the loss of sovereign
imr.unity would cripple the Choctaw tribe's ability to
govern itself and could jeopardize its business ventures
and relationships with businesses outside the tribe.
This would have a direct irrpact economically on
businesses such as ours that have coirarerical interests
with Choctaw Nation.

t.'e urge you to support the Choctsv Nation's stand on
sovereign iuaaunlty, as we do, so that we can continue
our business relationship with thei.. .

Sincerely. ^ ' *

Larry 2. Quails, -

President

Central Llectric and Insulation Co., Inc.

225 T J. I'ain -

Durant, Oklahoma 74701

468

BUCKSKIN

C o nstruction Company, Inc.

418 Wact Main

Wliburlon, Oklahoma 74(71
(•It) <«» 5S1J

March 2, 1998

Senator Ben Nighthorse Campbell

Chairman

Senate Committee of Indian .Affairs

Washington, DC 20510-6450

Dear Senator Campbell:

Our company, Buckskin Construction Company, Inc., has done business with the Choctaw Nation
of Oklahoma for the last 1 7 years. We have an excellent business relationship with the tribe.

We do a large volume of business with the Choctaw Nation and have never had any problems
with late payments or unpaid invoices. The issue of sovereign immunity has never interrupted or
impeded our business relationship with the Choctaw Nation.

The loss of sovereign irnmunity would cripple the Choctaw tribe's ability to govern itself and
could jeopardize its business ventures and relationships with businesses outside the tribe. This
would have a direct impact economically on business such as ours that have commercial interests
with the Choctaw Nation.

We urge you to support the Choctaw Nation's stand on sovereign immunity, as we do, so that we
can continue our business relationship with them.

Sincerely,

Stanley^f McCasland

President

Buckskin Construction Company, Inc.

469

K\f SHERMAN [xSnci

I\J DFFICESUPPLYIWC. Qg

Mareh4, 1998

Senator Ben Nighthorse Campbell

Chairman

Senate Committee on Indian Affairs

Washington, D.C. 20510-6450

Dear Senator Campbell,

Sherman Office Supply has done business with Choctaw Nation of Oklahoma for a
couple of years. We have an excellent business relationship with the tribe.

We do a lot of business with Choctaw Nation. They always pay prompt The issue of
sovereign immunity has never interrupted or impeded our business relationship with
Choctaw Nation.

The loss of sovereign immunity would cripple the Choctaw tribe's ability to govern itself
and could jeopardize its business ventures and relationships with businesses outside the
tribe. This would have a direct impact economically on businesses such as ours that have
commercial interests with Choctaw Nation.

We urge you to support the Choctaw Nation's stand on sovereign immunity, as we do, so
that we can continue our business relationship with mem.

Sincerely,

LomeMinnick

Sales

Sherman Office Supply, Inc.

LM/jkc

812 North Travis • Sherman. TX 76060* Phone 903 803-5816 • Fax 003 803-551

470

AMUN PUMP SERVICE

MmM Amtn. Owae>
P O Bo« S52 • Bonham. Taiaa 7*41a

MWMH

Oaaoena Pumpa Preotaien Tank

liiliimeni MUMTala

Tana. Remove* March 4. 1998

Senator B«n Nighthorse Campbel

Committee on Indian Affaire
DC 20510-6450

Dear Senator Campbell-

Amlin Pump Service has done business with the Choctaw Nation of OWafioma for the pest two (2) years
We have an excellent business relationship with fhe tribe and hope to continue to do ao.

Over the past two year*, we have done a large volume of business wWi the Choctaw Nation by doing two
(2) new fueling insulations, and three (3) fueling faculty upgrades We have never had any problems
with late payments or unpaid invoices, and the Issue of sovereign Immunity has never been d et ilm ei' aa l
to our business relationship with the Choctaw Nation of Oklahoma.

The loss of sovereign Immunity would cripple the Choctaw tribe's ability to govern Itself and oouu jeopar-
dize Its business ventures and relationships with businesses outside the tribe This would have a direct
impact economically on businesses such as ours that have commercial Interests with the Choctaw
Nation.

We urge you to support the Choctaw Nation's stand on sovereign Immunity, as we do, so that we can
continue our business relationship with them.

StfTCorety,

AMLIN PUMP SERVICE

^A^UcC d*J&.

MsrefUaM AfiaHn, Omvw

471

Stevenson Wholesale Company, Inc. po - *■ *2JJJ5*J

GLC Marketing, Inc. (40 ^ 920-0123

i IWln Htti- WfcMll tf | Pax (405)920-1323

March 2, 1998

Senator Ben Nignthorse Campbell

Chairman

Senate Committe on Indian Affairs

Washington. D.C. 20510-6450

Dear Senator Campbell,

Our company has had a very good business relationship with the Choctaw Nation of Oklahoma for
several years. We do hundreds of thousands of dollars worth of business with them each week.
Our invoices are paid on time and we have never had a single reason to be concerned about the
professional way in which they do business.

We have learned that a bin has been introduced that would limit a tribes sovereign immunity If they
are successful in operating their business or If they receive federal funding for other projects that
benefit the tribal members. This is outrageous in my opinion.

For the first time, Sovereign Indian Tribes In our country have the ability to compete in our new
world economy and share In the wealth of the nation. Why, for goodness sake, take away the toots
that they have so desperately needed for so many years just as they are now reaping the rewards
of becoming sett sufficient?

The loss of sovereign immunity would be a terrible blow to the Choctaw tribes ability to govern
itself and successfully compete in the business world. This would have a serious Impact not only
on the Choctaw tribe but my business as well since they are such large customers of my company

I urge you to support the Choctaw Nation's stand on sovereign immunity, as we do, so that we can
continue our strong business relationship with them. The Choctaw people are the foundation of our
community and deserve everyone's support and I urge you to continue to give them the took for
success for their future and for the sake of our community.

Sincerely.

Ron Cross
President & CEO

472

1 102 Norm nur stxeet

DORAWT. OK. 74701

nammitC-n^tAM

March 02.1994

Scntator Ben NighthorM

Chairman

Stout Committee an Indian Attain

Washington, D.C. 205 1 0-6450

Dear Senator Campbell:

Our company, Mariow Construction Company, hat done buaineat with the Choctaw Nation of Oklahoma for the
last three years. We have an excellent business relationship with the tribe.

We do a large volume of business with Choctaw Nation and nave never had any problems with late payments or
unpaid invoicos. The issue of sovereign immunity has never interrupted or impeded our business relationship with
Choctaw Nation.

The loss of sovereign immunity would cripple the Choctaw tribe's abiHlty to govern itself and could Jeopardise its
business ventures and relationships with business outside the tribe. This would have a direct impact economically
on businesses such as ours that have oommerioal interests with Choctaw Nation.

We urge you to support the Choctaw Nation's stand on sovereign Immunity, as we do, so that we can CDXt— our
business relationship with them.

Sincerely,

Ctrl Mariow

Owner

Mariow Construction Co.

473

Chapman, Inc.

Distributor

Gasoline

Diesel

Lubricants

P.O. Box 1 298 • Sherman, Texas 76091 • (903) 893-81 06 • Fax (903) 893-6731
3/9/98

Senator Ben Nighthorse Campbell

Chairmen

Senate Committee on Indian Affairs

Washington, D.C. 20510-6450

Dear Senator Campbell:

I would first like to take this opportunity to thank you for a wonderful job you are
doing representing the great State of Oklahoma and the Indian tribes of the state. We are
faced with some serious issuses reguarding sovereign immunity and I would like to
express my concerns on *h<< issue.

Our Company, Chapman, Inc., has done business with the Choctaw Nation of
Oklahoma for the last 9 years. We have an excellent business relationship with the tribe.

We do a large volume of business with the Choctaw Nation and have never had any
problem with late payments or unpaid invoices. The issue of sovereign immunity has
never interrupted or impeded our business relationship with the Choctaw Nation.

The loss of soverign immunity would cripple the Choctaw tribe's ability to govern
itself and could jeopardize its business ventures and relationships with businesses outside
the tribe. This would have a direct impact economically on businesses such as ours that
have commercial interests with the Choctaw Nation.

Wc urge you to support the Choctaw Nation's stand on sovereign immunity, as we do,
so that we can continue our business relationship with them.

Sincerely,

/LJLrak&jl-

Andrew Olm stead.
Vice President

474

WEST ARK OIL COMPANY

Ptt Box 717 • 72taou»>M< • Fort Smth. A*«m« 71MB • (501 ) 7S2-S29'

US ?70 E«* 1 Ahara RhU • Hot Spnngk, Aikaruu 71901 • (S01) 262-379?

3/9/M

Senator Ben Nighthorsc Campbell

Chairmen

Senate Committee on Indian Affairs

Washington, D.C. 20510-6450

Dear Senator Campbell:

Our Company, West Ark Oil Company, has done business with the Choctaw Nation of
Oklahoma for the last 9 years. We have an excellent business relationship with the tribe.

The loss of sovcrign immunity would cripple the Choctaw tribe's ability to govern
itself and could jeopardize its business ventures and relation ships with businesses outside
the tribe. This would have a direct impact economically on businesses such as ours that
have commercial interests with the Choctaw Nation.

We urge you to support the Choctaw Nation's stand on sovereign immunity, as we do,
so that we can continue our business relationship with them.

Sincerely,

L+r.t/j'tJ?

Lee Olmstead,
President

475

?J's Tire
Hwy 70 East

Duraat, OK 74702
(580) 924-1625

March 5, 1998

Senator Ben Nighthorse Campbell

Chairman

Senate Committee on Indian Affairs

Washington, D.C. 20510-6450

Dear Senator Campbell:

Our company, BJ's Tire, has done business with the Choctaw
Nation of Oklahoma for the last ten years. We have an ex-
cellent business relationship with the tribe.

We do a large volume of business vith Choctaw Nation and
have never had any problems with late payments or unpaid
invoices. The issue of sovereign immunity has never inter-
rupted or impeded our business relationship with Choctaw
Nation.

The loss of sovereign immunity would cripple the Choctaw
tribe's ability to govern itself and could jeopardize
its business ventures and relationships with businesses
outside the tribe. This would have a direct impact
economically on businesses such as ours that have cora-
merical interests vith Choctaw Nation.

We urge you to support the Choctaw Nation's stand on
sovereign immunity, as ve do, so that ve can continue
our business relationship vith them.

Sincerely,

B.JTWu
Owner
BJ's Tire

476

1045 HUMBLE ST.

EL PASO, TEXAS 79915

(915) 779-5636

March 3, 1998

Senator Ben Nighthorsc Campbell

Chairman

Senate Committee on Indian Affairs

Washington, D.C 20510-6450

Dear Senator Campbell:

Our company, Chico Arts, has done business with the Choctaw Nation of Oklahoma
since 1996. We have an excellent business relationship with Choctaw Nation.

We do a large amount of business with Choctaw Nation and have never had any problems
with late payments or unpaid invoices. The issue of sovereign immunity has never
interrupted or impeded our business relationship with Choctaw Nation.

The loss of sovereign immunity would cripple the Choctaw tribe's ability to govern itself
and could jeopardize its business ventures and relationships with businesses outside the
tribe. This would have a direct impact economically on businesses like Chico Arts, that
have commercial interests with Choctaw Nation.

We urge you to support the Choctaw Nation's stand on sovereign immunity, as we do,
so that we can continue our business relationship with them.

Avila
Manager
Chico Arts, Inc.

477

PARIS FIRE EXTINGUISHER CO. «~«<.».cv U «ht.

FIREHOM
SAFITY CONTAINCTS

P.O. BO« 391 . Pwti. Tnat 7»«ei-03ei « (214) 7S4-O201 M°«E »«CLS

March 4, 1998

Senator Ben Nighthorsc Campbell

C mbbm

Senate Committee on Indian Affairs

Washington. D.C. 20510-6430

Dear Senator Campbell:

Our company, Paris Fire Extinguisher Co., Inc., has done business with the Choctaw
Nation of Oklahoma for the last eight years. We have an excellent business relationship
with the tribe.

We do a large volume of business with Choctaw Nation and have never had any problems
with late payments or unpaid invoices. The issue of sovereign immunity has never
interrupted or impeded our business relationship with Choctaw Nation.

The loss of sovereign immunity would cripple the Choctaw tribe's ability to govern itself
and could jeopardize its business ventures and relationships with businesses outside the
tribe. This would have direct impact economically on businesses such as ours that have
commercial interests with Choctaw Nation.

We urge you to support the Choctaw Nation's stand on sovereign immunity, as we do, so
that we can continue our business relationship with them.

Sincerely,

Gary Cook
President

CC: Gregory E. Pyk

47-201 98-16

478

Choctaw Nation of Oklahoma

Gn*K?E.rjrk

Office Of The Admuiitntivc Aituum >-

Drawer 12IO-l>uran<. OkUhom. 74702 12IO.(405)924-t2SO -

April 10. J 998

Senator Ben Nighthorse Campbell, Chairman
Senate Committee on Indian Affairs
Washington, DC. 20510-6450

Dear Senator Campbell:

In response to your letter of March 23, 1 am submitting the following answers to your supplemental
questions subsequent to my testimony before the Senate Hearing Committee:

1 . Is a general waiver of immunity necessary to solve the tax issues in Oklahoma?

No. those issues are capable of being resolved by agreement In fact, each time the
State of Oklahoma has shown any interest in agreements regarding tax issues, we have
come to the table and resolved them. In 1992, the Five Tribes, through our initiative,
met with representatives of then Governor David Walters and the Oklahoma
Legislature to discuss resolution of pending and potential disputes regarding
state/tribal tax issues. At the time, the most pressing issue for the State was tobacco
taxes. At the outset, we agreed that once we had resolved that issue through a
Compact, we would begin working through other issues. We successfully reached an
agreement regarding tobacco taxes. However, state officials did not show any interest
in further negotiations until 1995 when an agreement was worked out on motor fuel
taxes. The Tribes have not heard anything further from the State of Oklahoma
concerning any other tax issue, but we remain interested in dealing with these matters.

2. What has your tribe's experience been in arriving at a negotiated agreement with the State
of Oklahoma?

See the response to question 1 above.

3. Please provide more information regarding the ownership of retail outlets in Oklahoma as
an indicator of the gravity of the problem in your state.

There are 4,135 fuel retailers in Oklahoma. Only 18 of these are American Indian
owned.

479

Senator Campbell

Page 2

April 10, 1998

Again, thank you for the opportunity to testify before the Senate Hearing Committee. I appreciate
your concern and interest in these issues that affect all American Indians.

If you need additional information or if I can be of assistance in any way, please don't hesitate to
call.

fbry BfPyle, Chief
Choctaw Nation of Oklahoma

GEP/gg

480

.r^i

INTER TRIBAL COUNCIL

} TRIBES

ARIZONA

STATEMENT

March 11, 1998

Re: Senate Committee on Indian Affairs

Tribal Sovereignty, Contracts, Taxes and SB 1691

Mr. Chairman, Members of the Committee, Tribal Leaders and Staff Thank you
for inviting Inter-Tribal Council of Arizona to testify on this important issue

My name is David Kwail and I am President of Inter-Tribal Council of Arizona
and Chairman of the Yavapai- Apache Nation in the Verde River Valley in Arizona This
statement is made on behalf of the 19 Member Tribes of the Inter-Tribal Council of
Arizona

More than half of all Reservation lands (25,000,000 acres) and half of the
American Indian Reservation population in the United States are in Arizona Generally,
there are few non-Indian residents on Reservations in Arizona

This hearing is about whether the United States will honor its sacred word to the
Indian Nations: to respect and protect the sovereignty of our permanent Tribal
homelands

The United States has given its word on countless occasions in order to secure
treaties and agreements with us Somehow, because of the passage of time, or politics,
or economic convenience or outright racisms, we are repeatedly required to remind the
U.S. of its sacred word.

To the American Indian Tribes and Nations, our word, and that of the United
States, never gets too old to keep

L Origin of Sovereignty

The origin of the law of sovereignty is the same for all nations Under
international law and the Law of Nations, it is the vital principal upon which the United
States Constitution and the Treaties with American Indian Nations were built — the right
to govern our affairs within the boundaries of our respective nations The United States
and our Nation each have the power to govern our citizens through the adoption of our
governing documents

4206 North 7V) Avanu* • Suto 200 • Phoofw. Anion* 85013 • (002) 240-0071 > Fax (002) 240-0000

481

Only within the specific context of this history can this body of law be adequately understood and
interpieted

A. 1492 to 1778: Early Principles Development

The Constitution of the United States resulted from the composite experience of the original
Thirteen Colonies and the scholars of the day The language and structure of significant sections exist due
to the experience of the Colonies with foreign nations and Indian Tribes

"Foreign Nations" and "Indian Nations" or "Tribes" were commonly used interchangeably, with the
former term encompassing the latter term, but not the antithesis. During the drafting of the Constitution,
separate clauses were drafted to describe the nations by location. Those which did not originate on the
continent were "foreign," and those which did were Indian. Even after the distinction, the founders
occasionally used "foreign" as encompassing Indian Tribes

For nearly 500 years the Indian Tribes of this continent have transacted business as sovereigns with
foreign nations The nations of Europe and the United States dealt with the Indian Nations as sovereigns,
created alliances with them in times of war, and entered into treaties with them to resolve questions
concerning war, territory and jurisdiction.

These countries included Great Britain, Holland, Mexico, Russia, Spain, France and the United
States of America. "The first mention of a European nation developing a treaty . . with the Indian Tribes
to secure Indian consent to cessions of land or changes of political status was made in 1 532 by Franciscus
de Victoria." 1 "The idea that land should be acquired from Indians by treaty involved three assumptions:
(I) that both parties to the treaty are sovereign; (2) that the Indian Tribe has a transferable title, of some
sort, to the land in question; and (3) that the acquisition of Indian lands could not safely be left to individual
Colonists but must be controlled as a governmental monopoly " 2 J 4

B. The Union Under the Articles of Confederation

After the Declaration of Independence, the states feared that the foreign governments, such as
France, Britain or Spain, might attempt to form coalitions with the Indian Tribes or other states to defeat
the Colonies. Major concepts to deal with these problems were embodied in the language of the Articles
of Confederation, the Northwest Ordinance and the Delaware Treaty Those concepts eventually found
their way into the Constitution, the Trade and Intercourse Acts and the Treaties with foreign nations and
the Tribes. Included were, inter alia, the exclusive power in the federal government to wage war, make
treaties, deal with foreign policy (including Indians), and to regulate the property of the country. 5

Under the Confederation, the Northwest Ordinance reflected the first Congressional policy of the
United States toward Indian affairs

The utmost good faith shall always be observed towards the Indians; their lands and properties shall
never be taken from them without their consent, and, in their property, rights, and liberty, they shall never
be invaded or disturbed unless in just and lawful wars authorized by Congress; but laws founded in justice
and humanity shall, from time to time, be made for preventing wrongs being done to them and for
preserving peace and friendship with them 6

482

This was an assertion of " Congressional authonty in Indian relations in the face of the casual flouting
of that authority by states such as Georgia and North Carolina, which continued to make both formal
treaties and unauthorized encroachments on Indian lands within their boundaries By itself, the Ordinance
could not settle the conflict, but it did establish a statement of basic policy . of Indian right s and
Federal authority "'

The national government had legal but no practical enforcement powers A number of states
attempted to dominate or tax trade, adversely to other states,' and to seize territories in the West ' Others
had deliberately and repeatedly violated treaties made by the United States with foreign nations and Indian
Tribes '° Support grew for the adoption of a new Constitution which would enable the United States
government to enforce its authority over the states to levy taxes, make war, deal exclusively with the
foreign and Indian nations, to govern the entry into the Union of new states," and to prevent state alliances,
control of trade, and seizure of western lands

The relationship of the Indian Tribes to the Federal and state governments and to foreign nations
played a decisive and pervasive role in the framing of many provisions By the time the drafting of our
present Constitution was concluded, h had become an accepted principle that the Federal government, and
not the states, should be the only govern m en t permitted to engage in wars, to make treaties and to regulate
commerce Encompassed in all three of these principles was the exclusive authority of the United States
in all dealings with the Indian Tribes

The concept that federal power under the Constitution would be from the people and not the states
was adopted The Constitution originating in the people instead of the states was also developed and
assisted in the ultimate establishment of the Supremacy Clause With the exclusive power of the national
govern m e n t under the war and treaty powers of the President and the power of the Senate to ratify treaties,
the language which resulted, "regulate commerce with foreign nations, and among the several states and
with the Indian Tribes," was considered sufficient to exclusively vest in the Federal government all manner
of dealings with Indian Tribes

Certain delegates to the Convention proposed a Judiciary composed of a Federal Supreme Court
with mere appellate jurisdiction from state courts a It was urged that appellate jurisdiction was sufficient
in all cases of the first instance and that a Federal Judiciary was an unnecessary encroachment upon the
jurisdiction of the states. 11 This issue was resolved against the state jurisdiction, in favor of a Federal
Supreme Court with such other Federal Judiciary as was deemed advisable by Congress, with jurisdiction
over the Constitution, treaties and laws of the Nation.

C. After the Constitution, 1 7M- 1 888.

The Constitution was ratified on June 21, 1788. The Indian Tribes of the Western Hemisphere were
still recognized to be full sovereigns capable of making war, compacts and treaties with other countries and
the United States On the same day, the states of the United States were divested of all elements of
sovereignty dealing with the same subject matter

Congress began to legislate in the area of Indian affairs by the adoption of the Trade and Intercourse
Acts, which maintained at all times the exclusive nature of the federal authority over Indian affairs In 1 790,
at the request of President George Washington, Congress adopted an Intercourse Act which included the

483

restriction that title to Indian land could not be affected by any person or state without the authority of the
United States." In 1802, at the request of President Thomas Jefferson, Congress adopted an Intercourse
Act defining the jurisdiction and laws of the United States as to be exclusive within Indian territory. The
Act provided that laws of the states and territories operated against all persons outside Indian territory, and
repeated the rule that states could not deal in any manner with an Indian Tribe or affect the title to any
Indian property." The Intercourse Act of June 30, 1834 codified previous trade and intercourse acts " It
confirmed the concept of exclusive Federal jurisdiction over Indian Tribes and Indian property " In 1 878
Congress confirmed that the exclusive rule of Federal jurisdiction over Indian Tribes and their property
within Indian country was to be applied to all territories and adopted "The Law Common to All
Territories""

The right of Indian Tribes to govern the activities within their own territories has been recognized
for over 500 years. Spain made treaties with the Indian Nations of the west under the Law of Nations
Britain, France, Russia, the United States and Mexico followed in this tradition. In the Southwest,
Congress, as a condition precedent, described the specific conditions under which the States, including
Arizona and New Mexico, would be permitted to enter the Union. To remove any implication of a state
claim under the Constitutional Property Clause, Congress required in the Enabling Acts that the States of
Arizona and New Mexico specifically disclaim all right, title and interest in certain federal lands and lands
owned or held by an Indian or Indian Tribes."

In addition. Congress required a number of other provisions for the benefit of Indians. It specifically
precluded the States of New Mexico and Arizona from taxing Indians or Indian lands within Indian country.

Finally, for the benefit of the Indians and to specifically confirm the policy which has existed from
the time of the Articles of Confederation to this date, but which had been frequently frustrated by illegal
intrusions by other states. Congress specifically required the States of New Mexico and Arizona to refrain
from exercising any jurisdiction or control over Indian Tribes or their property until the title to that
properly was extinguished and required the states to acknowledge that the absolute jurisdiction, which
all parties understood to be exclusive, rested with Congress Thus, the Senate Report on Statehood for
New Mexico and Arizona provided;

A final difference in the bills which your committee wishes to
call attention refers to more careful safeguarding of the rights
of Indians ... It is believed that the words inserted by the
Senate Bill would more effectively provide against the
introduction of liquor in the territory owned by these Indians
and remove any uncertainty as to their lands being Indian
country under existing laws. 20

These changes have been inserted to safeguard the rights of
any Indians who may have acquired title to their lands from a
prior sovereignty, thus effectually preventing their taxation

Subject to these conditions, and as a result of the compliance with these conditions, Arizona and
New Mexico were granted entry into the Union specifically subject to the provisions of the Enabling Act

484

D. Federal, Tribal. Stale Jurisdictions: 1912 lo 19W

Congress has continued to legislate in the area of Indian affairs In 1934 it adopted the Indian
Reorganization Act," which, truer alia, acknowledged the power of Indian Tribes to veto the attempted
disposition, lease or other assignment of Indian lands by the United States without Tribal permission All
Arizona Tribes, with the exception of the Navajo Nation, have adopted constitutions approved by the
Secretary of Interior confirming that power •'•'

In 1953 Congress passed Public Law 280, ;l and in 1968 the Indian Civil Rihts Act " Both Acts
expressly retain exclusive Federal jurisdiction over Tribes

Y. The Proper Rule for Review and Construction of Statutes Affecting Indians

The settled principles governing resolution of this case are not new, for the "policy of leaving
Indians free from state jurisdiction and control is deeply rooted in the Nation's history ""

Federally recognized Indian Tribes exercise many of the characteristics of a totally immune
sovereign, including immunity from suit absent the Tribe's consent and the consent of Congress to waive
such Tribal immunity H Any consent by Congress to waive Tribal immunity from suit must be expressed
and is never to be implied ""

Although traditional notions of Tribal sovereignty, first enunciated in Worchester v. Georgia" have
been modified by this Court "where essential Tribal relations were not involved and where the rights of
Indians would not be jeopardized,"" "it would vastly oversimplify the problem to say that nothing remains
in the notion that Reservation Indians are a separate people to whom State jurisdiction may not
extend " w Thus, it is important to recognize that "Indian Tribes are unique aggregations possessing
attributes of sovereignty over both their members and their territory ""

It has been recognized, without exception since the era of the Marshall Court, that Indian treaties
and legislation are to be liberally construed in order to further Indian interests " Moreover, in this instance,
the Treaty expressly dictates a "liberal construction, at all times and in all places, to the end that the
Government of the United States shall so legislate and act as to secure the permanent prosperity and
happiness of said Indians.""

In Washington v. Yakima Indian Nation" the Court indicated that in the absence of a repeal.
Washington's constitutional disclaimers were "organic law disclaimers of [state] jurisdiction over Indian
country " Moreover, the Court went on to quote from a House Report discussing the effect of such
disclaimers

According to this report accompanying H R 1063 (the House
version of Pub. L 280) '[examination of the federal statutes
and state constitutions has revealed that enabling acts for eight
states, and in consequence the constitutions of those states,
contain express disclaimers of jurisdiction Included are
Arizona, Montana, New Mexico, North Dakota. Oklahoma,
South Dakota, Utah and Washington '"

485

That the disclaimers are in fact barriers to state jurisdiction over Tribes and Reservation property
was again made clear in McCUmahan

Congress has consistently acted upon the assumption that the
states lacked jurisdiction over Navajos living on the
Reservation Thus, when Arizona entered the Union, its entry
was expressly conditioned on the promise that the state would
'forever disclaim all right and title to [Indian lands] . . and that
until the title of such Indian or Indian tribes shall have been
extinguished the same shall be and remain under the absolute
jurisdiction and control of the Congress of the United States. '*

Although the United States is a newcomer to the west, it also has recognized the sovereign right
of Indian nations within Spanish and Mexican territories by multiple treaties In the Southwest, treaties
made between Mexico and the United States required the United States to recognize and honor earlier
commitments made to Tribes by Spain and Mexico.

The treaties of Guadalupe Hidalgo, the Gadsen Treaty and the Treaties with the Apache Nation and
Navajo Nation, the United States and Tribal Constitutions govern the relationship of the United States and
Tribes in Arizona Treaties are the supreme law of the land under the Constitution.

Over two centuries, fueled by greed and racism, our Tribes have suffered repeated attacks. Many
would subject us to suits in State and Federal Courts. For sure, the purpose is to exhaust and destroy us.

The United States Supreme Court has said that the power to regulate is the power to destroy " The
concept of a state vesting any tribunal with the power to adjudge, enforce or extinguish rights and duties
is buih upon the fundamental concept of power M

II. The Exercise of Tribal Sovereignty

The Tribes in Arizona have extensive administrative and judicial systems supported by codes,
ordinances and rules of procedures governing substantially all areas of civil concern These include: tribal
membership, marriage, probate, child custody, contract (including secured transactions), employment rights,
health care, environmental enforcement, wildlife and recreation, taxation, leasing, licensing and permitting,
gaming and tort claims

Anyone who is not a member of an Arizona Tribe, who wishes to enter a reservation for business
or personal reasons can inform and avail himself of the rights and remedies under Tribal law In addition,
the United States Code, and Code of Federal Regulations set forth additional requirements for contracts, 39
leases and permits, and trading within federal Indian Reservations. If additional regulation or legislation was
thought to be needed, the Tribes, the US Department of Interior or the US Department of Justice would
present proposed legislation to Congress

The concept of a waiver of a sovereign power must be based upon a knowing and voluntary decision
by each Tribe Tribes voluntarily make specific limited waivers of sovereign immunity where it is deemed
in their best interest to do so in contract negotiations

486

Under the Federal and Stale Enabling Acts and the Constitutions of many western States, including
Arizona, States are precluded from taxing Indians, Indian Tribes and Indian property

Tribes must preserve their right to levy and collect taxes, which legal right and power is recognized
in the Constitution of Tribes under the 1934 Indian Reorganization Act and the U S Supreme Court

The Supreme Court has set the parameters for Tribal-State agreeme n ts for this narrow field in which
States are permitted to tax non-Indian sales on Reservations Congress should not dictate measures which
would usurp the power of Tribes to deal with States on a govemment-to-govemment basis

The concept of a waiver of a sovereign power must be based upon a knowing and voluntary decision
by the Tribe

F. S 1691

That brings me to comment on S 1691 The Arizona Tribes unanimously oppose this legislation in
every form. It would violate the sacred word of the United States made to us over the last two centuries

It relegates the governments of Tribes to the rights of private individuals, corporations and exposes
our resources to exhaustion by involuntary litigation

S 1691 violates the equal protection guarantee of the Constitution by placing Tribes in a subordinate
class where actions arising under the laws of the United States could be brought in state court, but could
not be removed to Federal court. No other person, or government, including non-citizens, would be
similarly deprived.

A state could bring suit in state or federal court without waiving its rights under the Eleventh
Amendment of the Constitution Those few states who once claimed no immunity from suit, sought the
adoption of the Eleventh Amendment because of the abuse they experienced to multiple suits in federal
court Thus, the waiver of sovereign immunity has been narrow and specific for federal and state purposes

The United States assured Tribes that it would honor its trust responsibility through treaties,
agreements, statutes, regulations and conduct It promised to protect Tribes and their resources from
exhaustion and disenfranchisement. S 1691 breaches all elements of that trust responsibility.

As in the 19S0's termination era of Klamath, Paiute and Menominee, which resulted in disaster, the
relegation of Tribes to private persons or corporations and the waiver of sovereign immunity from suit in
S 1691 is yet another attack on the essence of sovereignty of American Indian Tribes and Nations

Surely, it can not be too late in the day to honor the Sacred Word of the United States

CITATIONS

1 F. Cohen, Federal Indian Law, 46 ( 1 942), hereafter "Cohen," citing Victoria, De Indis el
Dejure belli relectiones (trans by J.P Bate, 1917), 1557 sec. 2, title 6.7.

2 Cohen, supra, at 47

3. Delaware Indian Treaty, 7 Stat 13 (1778) with the United States under the Articles of
Confederation, W. Washburn, The American Indian and the 1/niteJ States, Vol III, 2263
This was the first treaty made by the United States under the Articles of Confederation.

4 Kappler. Indian Affairs, Laws & Treaties, Volumes I through VII (2d Ed.) See

specifically, Treaty with the Apaches, July 1, 1852. 10 Stat 979, 981, Articles I, III, VIII
and IX See also. Treaty with the Navajo Nation, June 1 , 1 868, 1 S Stat 667 (J. A 296-
306)

5. See Article 9, Articles of Confederation (1778)

6 Northwest Ordinance, Jury 13, 1787, 1 Stat 51, Article III.

7. The American Indian and the United States, supra, Volume 3, page 2 144.

8. J. Madison, Nates of Debates in the Federal Convention of 1 787, "Preface to Debates in
the Convention: A Sketch Never Finished Nor Applied," at 14 (hereinafter referred to as
"Madison Notes"

9 J Madison, Journal of the Federal Convention, edited by E. H. Scott ( 1 898), 33

(hereinafter referred to as Madison Journal.

1 0. Madison Notes, at 1 4.

11. Madison Journal, at 32, 51

12 Madison Journal, at 67, 68, 164.

13 Madison Notes, at 71 .

14. 1 Stat 137, 138(1790).

15. 2 Stat 139, 147(1802).

16 Act of June 30, 1834, 4 Stat 729 (1834)

17. Wat §25

18. Revised Statutes of 1 878, Title XXIII, Chapter 1 , Section 1 839, Kappler, Indian Affairs
and Treaties, Vol. 1, p. 3 (2d. ed.)

1 9. Hearings on Statehood for New Mexico and Arizona, Before the House of
Representatives, Committee on the Territories, 61 st Congress, 2nd Sess. at 5, 1 1
(January 12th and 13th, 1910). See also, letter from the Office of the Governor of the
State of Arizona, Richard E Sloan, dated December 22, 1909 to Honorable Edward L.
Hamilton, Chairman, Committee on Territories, House of Representatives, Washington,
DC

20 S Rep No 454. 61st Congress, 2nd Sess at 31. 32 (1910).

21 48SU1984. §16

22 T.A at B. E

23 Act of August IS, 19S3, Pub L No 83-280. 67 Stat 588

24 Act of April 1 1, 1968. Pub L No 90-284. 82 Stat 77

25 McClcmahanv. Arizona Slate TaxComm , n.,4\\ US 164, 168 (1973) (quoting Rice v
Olsen, 324 US 786, 789 (1945)

26 Puyalhip Tribe v. Washington Game Dept., 433 US 165, 167 (1977), Santa Clara
Pueblo v. Martnez, 436 US 49, 58 (1978)

27 Turner v. United Stales, 248 US 354, 358 (1919), United States v. United State Fidelity
A Guaranty Co., 309 US. 506, 512 (1940).

28 31 US (6 Pet) 515 (1832).

29 Williams v. Lee, 358 U.S. 217, 219 (1959)

30 McClananan v. State Tax Commission of Arizona, 41 1 US 146, 170 (1973)

31 UnitedStates v. Mazurie, 419 US 544, 557 (1975), see While Mountain Apache Tribe v.
Bracker, 448 US 136, 142 (1980)

32 See Bryan v. Itasca Conty, 426 US 373, 392 (1976), McClananan v. Arizona Slate Tax
Commission, 41 1 US at 174, Worcester v. Georgia, 31 US (6 Pet ) 515, 582 (1832)

33 Treaty with the Apaches, Article XI (emphasis added)

34. 439 US 463,474(1979).

35. Id, at 481, quoting H R Rep 848, 83rd Cong , 1st Sess 6 (1953) (emphasis added)

36 McClanahan, 41 1 U.S. at 1 75 (emphasis added)

37 SeeMcCulloch v. Maryland, 4 Wheat 316 (1810)

38 Pennoyer v. Neff, 95 US 714 (1877), see Osborn v. Bank of the UnitedStates v.
Planters Bank, 9 Wheat 904 (1824), Pacific Railroad Removal Cases, 115US 1 (1885),
Textile Workers Union v. Lincoln Mills, 335 U.S. 448 (1957)

39 25 US.C §81.

489
TESTIMONY OF RED) PEYTON CHAMBERS

Before the
Senate Committee on Indian Affairs

Tribal Sovereign Immunity

in tribal contracts and concerning

collection of state retail taxes

March 11, 1998

SUMMARY OF TESTIMONY

Reid Peyton Chambers

The doctrine of tribal sovereign immunity has been repeatedly recognized
by the Supreme Court.

It is not a feudal or anachronistic legal concept but a necessary protection
for tribal self-government.

Despite the progress of some tribes, Indians remain the most deprived and
isolated minority group in the United States.

Allowing claims for money damages against Indian Tribal Governments in
state and federal courts will destroy the ability of Tribal governments to
render necessary services to their people.

S. 1691 bill would impose significant new burdens on already
overburdened federal courts in states with large Indian populations.

S. 1691 would waive tribal sovereign immunity in state courts and apply
state law to tribes, contrary to two centuries of federal Indian policy.

States have not waived their own sovereign immunity to the extent
Congress would waive tribal immunity under S. 1691.

States only allow suits against themselves in
their own courts;

States limit the extent of their liability often
to $100,000 or to the amount of their
insurance.

Tribes contracting with individuals or corporations often waive sovereign
immunity but only within negotiated limits.

Many tribal courts allow suits against tribes or their officers, but only in
tribal courts, just as states allow such suits only in state courts.

Most states have negotiated compacts with tribes on the collection of
various state taxes. Many of these recognize the need for tribal economic
development and foster it. S. 1691 would undo these compacts creating
chaos and litigation.

S. 1691 should not be enacted.

491

Mr. Chairman and members of the Committee, I am Reid Peyton Chambers, a partner in the
law firm of Sonosky, Chambers, Sachse & Endreson, Suite 1000, 1250 Eye Street, N.W.,
Washington, DC 20005, (202) 682-0240 Our firm represents several dozen Indian tribes and tribal
organizations Before founding this law firm 22 years ago with the late Marvin J Sonosky and Harry
R Sachse, I served as a professor at UCLA Law School from 1970 to 1973, then as the Associate
Solicitor for Indian Affairs (the chief Indian legal officer at the Interior Department) during the
second Nixon and Ford Administrations from 1973 to 1976 I currently teach a seminar in Federal
Indian Law at Georgetown Law School and Yale Law School. I appear today not on behalf of any
client, but in response to the Committee's invitation to address the long-established doctrine of tribal
sovereign immunity with respect to ( 1 ) contracts with Indian tribes and (2) collection of state retail
taxes from Indian tribes

Before turning to those two subjects, let me first describe the Indian tribal sovereign immunity
doctrine. This is certainly no feudal or anachronistic legal concept Rather, it is solidly anchored in
federal law, forming an essential protection for tribes if they are to continue to devote their usually
limited financial resources to providing vital health, education, housing and other services to their
members.

Indian Sovereign Immunity

As a legal matter, the United States Supreme Court has repeatedly held that tribes are immune
from suit Oklahoma Ta x Comm'n v. Citizen Band of Potawatomi Indian Tribe. 498 U.S. 505, 509-
1 1 (1991); Santa Clara Pueblo v. Martinez. 436 U.S. 49, 58 (1978); United States v United States
Fidelity & Guaranty Co .. 309 U.S. 506, 512 (1940); Turner v. United States. 248 U.S. 354, 358
(1919) This immunity is not something granted to tribes by the federal or state government. Rather
it is an inherent right of tribes as sovereigns. S_££ sj^ Three Affiliated Tribes v. Wold Engineering.
476 U.S. 877, 880 (1986), Merrion v. Jicarilla Apache Tribe. 455 U.S. 130, 144 (1982), United
States v. Wheeler. 435 U.S. 313, 322-323 (1978). This has been so from the earliest days of the
Republic, when Chief Justice John Marshall determined in Worcester v. Georg ia. 31 U.S. (6 Pet.)
515, 559 (1832), tribes are "distinct, independent political communities, retaining their original natural
rights." See also Cherokee Nation v. Georgia. 30 U.S. (5 Pet.t 1, 17(1831). In addition to Supreme
Court precedent, tribal sovereign immunity has been uniformly recognized and applied throughout
lower federal' and state 2 courts for more than a century

1 See eg Makah Indian Tribe v. Verity. 910 F.2d 555, 557(9th Cir. 1990); Weeks Constr
Inc. v Oglala Sioux Housing Auth .. 797 F.2d 668, 670 (8th Cir. 1986); Wichita and Affiliated
Tribes of Oklahoma vHodel. 788 F.2d 765, 771 (DC. Cir. 1986); Jicarilla Apache Tribe v.
Aadms, 687 F.2d 1324, 1344-45 (10th Cir. 1982), Bottomly v. Passamaquoddv Tribes. 599 F.2d
1061, 1064-1067 (1st Cir. 1979^: Maryland Casualty Co v. Citizens National Bank of West
Hollywood. 361 F.2d 517, 520-21 (5th Cir. 1966), Haile v Saunooke. 246 F.2d 293, 297 (4th
Cir. 1957), Thebo v Choctaw Tribe. 66 F. 372, 374-76 (8th Cir. 1895).

2 See eg John v. Hoag. 500 N.Y.S.2d 950 (Sup. Ct. 1986); Atkinson v. Haldane. 569
P.2d 151 (Alaska 1977), Moryan v. Col orado River Indian Tribe 443 P.2d 421 (Ariz. 1968);
Gavle v Little Six 555 N.W.2d 284 (Minn. 1996), petition for cert filed. 65 U.S.L.W. 3639

492

Apart from the law, while tribes have made impressive progress toward economic self-
sufficiency in recent years, it remains as true today as it was in 1 970 when President Nixon issued his
landmark Message to Congress on Indian Affairs that "| t]he first Americans - the Indians - are the
most deprived and most isolated minority group in our nation On virtually every scale of
measurement — employment, income, education, health — the condition of the Indian people ranks
at the bottom."' Today, according to the Census Bureau, unemployment among Indians is nearly 15
percent, about triple the national average The National Center for Education reports that more than
one-third of Indian children are still high school dropouts. The suicide rate for Indians is nearly
double that for all Americans, and alcoholism is six times as prevalent among Indians as among other
Americans, according to the Indian Health Service.

The Report to the Legislature : Cigarette Tax Study prepared by the Washington State
Cigarette Tax and Revenue Loss Advisory Committee in 1995 (hereinafter "Washington Report") 4
illustrates these conditions in one state. It reported as follows:

The economic conditions of Indian tribes and their
members in Washington, despite some improvements
through the years, are still much worse than those of
non-Indian citizens in the state and the nation Tribal
unemployment rates are significantly higher than both
the national and Washington averages, per capita and
household income for tribal members are significantly
lower, and a much higher percentage of Indians are
below the poveity level.

The unemployment rate in Washington in 1993 was
approximately 7 5%, the national rate approximately
6. 8%. The Bureau of Indian Affairs (Department of
the Interior) reported an unemployment rate of 46%
for Indian populations located on and adjacent to
reservations in Washington for the same year.

The 1 990 census reported average per capita income
for the population as a whole at $14,420 for the
United States, and $14,923 for the State of

(U.S. Jan. 29, 1997) (No 96-1215)

1 Special Message to the Congress on Indian Affairs, July 8, 1970 (President Nixon)
4 We have lodged a copy of this Report with the Committee.

493

Washington. Average per capita income for Indians in
the State of Washington, in stark contrast, ranged
from a high of $9,8 1 5 to a low of $3,540. Household
income showed a similar disparity. Median household
income for Indians was just under $20,000; for the
general population it was just over $30,000.

According to the 1990 census, 3 1 .6% of Indian people
were below the federal poverty level, compared to
13.1% of the population in
general. . . ."

The Washington Report also found that:

Health conditions for Indian people lag far behind
those of the rest of the population. Life expectancy is
shorter for Indian people. The overall mortality rate
for the Indian population is significantly higher than
for the rest of the population in every age group from
birth through age 64 The rate for Indians is from one
and one-half to two times as high in most age groups.

Adequate housing is also a problem for the tribes of
Washington. Tribes need more units to provide
sufficient housing, and need to make many
improvements to upgrade substandard housing. The
Bureau of Indian Affairs keeps records of housing
units and new units needed. On at least 17
reservations the need is in hundreds of units. The total
unfilled need is over 5,000 housing units for a
population of under 70,000 people.

Id at F-4-5 (footnotes omitted).

Given the widespread poverty that remains on most reservations and the enormous needs for
health, education, law and order, housing and similar services, the sovereign immunity doctrine
remains necessary to protect tribal governments against lawsuits which would otherwise drain tribal
resources, and destroy tribes' ability to provide much needed services to their people. Modern tribes
are using all their powers and resources to build tribal economies, improve the quality of life on their

494

reservations, and protect reservations' resources and environments — matters of vital importance to
all who live on or visit a reservation Tribes could not do this absent the continuing commitment of
Congress to the goals of self-determination and economic self-sufficiency. These have been the major
and bipartisan goals of federal policy endorsed by every Congress and every President for the last
thirty years. 5 These policies have worked over the last three decades to build stronger tribal
governments and economies in recent decades But continuing and pervasive poverty on most
reservations attests that there is a long way still to go

Claims for money damages go the heart of the tribal sovereign immunity doctrine. See
Turner, supra. United States Fidelity, sueia, American Indian Agricultural Credit Consortium v
Standing Rock Sioux Tribe. 780 F.2d 1374 (8th Cir. 1985) In Martinez, for example, the Supreme
Court expressed specific concern that allowing suits against tribes "would also impose serious
financial burdens on already 'financially disadvantaged' tribes." 436 U.S. at 64 (citation omitted)
The protection against money judgments which drain tribal resources is especially critical to tribes
because the financial resources available to most tribes are very limited, leaving them far more
susceptible to disruption by private lawsuits than a state government, or, of course, the United States.
If tribal sovereign immunity were broadly waived by Congress against the will of the tribes, tribal
governments could be bankrupted, and tribes would be thwarted in their efforts to devote limited
tribal resources to meeting vital needs on reservations As President Reagan said in his message to
Congress on Indian Affairs:

This Administration intends to restore tribal governments to their
rightful place among the governments of this nation and to enable
tribal governments, along with state and local governments, to resume
control over their own affairs.

The waiver of tribal sovereign immunity, as proposed in the recently introduced bill S. 1691, would
produce the opposite of President Reagan's policy.

One of the purported justifications for S. 1691 is the notion that the federal government and
the several states have waived their sovereign immunity in their respective jurisdictions However,
upon closer inspection it will be quickly seen that most states have not abrogated their immunity to

5 See Presidential memorandum for the Heads of Executive Departments and Agencies,
April 29, 1994 (President Clinton), Statement by the President: Indian Policy, the White House,
January 24, 1 983 (President Reagan); and Special Message to the Congress on Indian Affairs,
[1970] Pub Papers 564 (Nixon). Included in the self-determination policy is the '"overriding
goal' of encouraging tribal self-sufficiency and economic development " California v. Cabazon
Band oflndians, 480 U.S. 202, 216 (1987)(quoting New Mexico v. Mescalero Apache Tribe. 462
U.S. 324, 334-35 (1983)). As the Supreme Court has noted, Congress has enacted numerous
statutes in furtherance of the self-determination policy. See, e.g.. Mescalero Apache Tribe. 462
U.S. at 334-335 and n 17: White Mountain Apache Tribe v. Bracker 448 US 136, 143-44 and
nlO, 149(1980).

495

anything like the extent that S. 1691 would abrogate tribal immunity. S. 1691 would not treat tribes
similarly to other governments. Instead, it would convert them into "private, voluntary
organizations," contrary to (then) Justice Rehnquist's opinion for a unanimous Supreme Court in
United States v. Mazurie. 419 U.S. 544, 557 (1975).

To begin with, states have only waived their immunity for suits brought in their own courts,
not in federal courts or tribal courts. In addition, although generalizations are difficult when speaking
of the law of the several states, there are characteristics common to most states that show the
continued strength of state sovereign immunity. These include: (1) state tort claim acts that explicitly
retain immunity, subject to limited exceptions, (2) limits on the kinds of damages that can be
recovered and limits on the amount of any damages recoverable, (3) limitations on liability only to
the extent of insurance coverage, and (4) establishment of special state courts, commissions or boards
as exclusive forums where claims against a state must be brought. The cumulative effect of these
provisions is that many state statutes that appear to "scale back" their respective sovereign immunity
are, in fact, more illusory than real.

For example, several states have retained immunity as a general rule, subject only to specified
exceptions.* In addition, most states have retained immunity for discretionary functions. 7 Many
states have also retained immunity for claims based on the intentional conduct of state officers or
employees.' These areas represent significant sources of potential liability that remain immune from

* SS£, £X, Ala. Code §§ 1 1-47-190; Colo. Rev. Stat. §§ 24-10-105 et seq.; Del. Code
Ann. tit. 10, §§ 4001 et seq.; 745 LLCS. § 5/1; Me. Rev. Stat. Ann. tit. 14, § 8103; Mich.
Comp. Laws §§ 691.1407; Miss. Code Ann. §§ 1 1-46-3,5; Mo. Rev. Stat. §§ 537.600 et seq.;
N J. Rev. Stat. §§ 59:2-1 et seq.; KM. Stat. Ann. §§ 41-4-1 et seq.; Ohio Rev. Code Ann. §§
2743 02; 42 Pa. Cons. Stat. §§ 8522; Tenn. Code Ann. § 29-20-201; Utah Code Ann. §§ 63-30-
3; W. Va. Code §§ 29-12A-1 et seq.; Wyo. Stat. §§ 1-39-101 et seq.

7 Alaska Stat. § 09.50.250(1); Ariz. Rev. Stat. Ann. § 12-820.01(B); Cal. Gov't Code §
820.2; Del. Code Ann. tit. 10, § 4001(1); Ga. Code Ann. § 36-33-2 (municipalities); Hawaii Rev.
Stat. § 662-15(1), Idaho Code § 6-904(1); 745 LLCS. § 10/2-201; Ind. Code § 34-4-16.5-3(6);
Iowa Code § 670.4(3); Kan. Stat. Ann. § 75.6104(e); Ky. Rev. Stat. Ann. § 65.2003(3)
(municipalities), La. Rev. Stat. Ann. § 9:2798. 1(B); Me. Rev. Stat. Ann. tit. 14, § 8104-B(3);
Mass. Gen. L. ch. 258, § 10(b); Minn. Stat. § 3.736(3)(b); Miss. Code Ann. § ll-46-9(c); Neb.
Rev Stat. § 81-8219(l)(a); Nev. Rev. Stat. § 41.032(2); N.J. Rev. Stat. § 59:2-3(a); N.D. Cent.
Code § 32-12 1-03(3) (political subdivisions); Ohio Rev Code Ann. § 2744.03(A)(3); Okla. Stat.
Ann tit. 51, § 155(5); 42 Pa. Cons. Stat. Ann. § 8546(3); S.C. Code Ann. § 15-78-60(5); Tenn.
Code Ann. § 29-20-205(1); Tex. Civ. Prac. & Rem. Code Ann § 101.056(2); Utah Code Ann. §
63-30-10(1); Vt. Stat. Ann. tit. 12, § 5601(e)(1).

* Alaska Stat. § 9.50.250(3); Ariz. Rev. Stat. Ann. § 12-820.02; Cal. Gov't Code §
815.3; Fla. Stat. § 768.28(9); Hawaii Rev. Stat. § 662-15(4); Idaho Code § 6-904(3); 745
LLCS. §10/2-107; Mass. Gen. L. ch. 258, § 10(c); Miss. Code Ann. § 11-46-5; Neb. Rev. Stat.

496

suit under state law

Moreover, a number of states have created special courts, commissions or compensation
boards to hear claims against the state. In some states, special "courts of claim" hear cases brought
against the state. 9 In most states, these courts have exclusive jurisdiction over claims against the
state. Several other jurisdictions have established special "Boards of Claim" or "Compensation
Commissions" to adjudicate such claims. 10 By reserving the right to determine the forum in which
states face potential liability, a powerful advantage in the adjudication of the claim can be maintained.

Third, most states limit the kinds of damages that can be recovered and also limit the amount
of any damages award. Several states have completely barred any recovery for punitive or exemplary
damages. ' ' A clear majority of states have also imposed statutory caps on the amount of basic
compensatory damages an individual can recover from a state. 12 In these states, the maximum award

§ 81-8219(l)(d); N.J. Rev. Stat § 59:2-10; 42 Pa. Cons Stat. Ann. § 8542(aX2); S.C. Code Ann.
§ 15-78-60(17); Tenn. Code Ann. § 29-20-205(2); Tex. Civ. Prac. & Rem. Code Ann. § 101 057;
Utah Code Ann. § 63-30-10(2); Vt Stat. Ann. tit. 12, § 5601(eX6); Wis. Stat. Ann § 893 80(4)

9 705 I.L.C S §§ 505/1 et seq.; Mich. Comp. Laws § 600.6419; NY. Ct. CI. Act §§ 1 et
seq.; Ohio Rev. Code Ann §§ 2743.01 et seq., W Va. Code §§ 14-2-1 et seq.

,0 Ala. Code §§ 41-9-60 et seq; Ark. Stat. Ann. §§ 19-10-201 et seq.; Conn. Gen. Stat. §§
4-141 et seq.; Ga. Code Ann. §§ 28-5-60 et seq.; Ky. Rev. Stat. Ann. § 44.070; Neb. Rev Stat. §
81-821 1, N.C. Gen. Stat. § 143-291; S.D. Codified Laws Ann. §§ 21-32-1 et seq.; Tenn. Code
Ann. §§9-8-301 et seq.

"Ariz Rev Stat Ann. § 12-820.04; Cal. Gov't Code § 818, Colo Rev. Stat. § 24-10-
1 14(4), Hawaii Rev Stat § 662-2; Idaho Code § 6-918, Mass. Gen. L ch. 258, § 2, Minn Stat. §
3.736; Mo. Rev. Stat. § 537.610(3), Nev. Rev. Stat. § 41.035(1); N.H. Rev. Stat. Ann. § 507-
B:4(H); N.M. Stat. Ann. § 4 1-4- 19(B); Okla. Stat. tit. 51, § 154(B); Or. Rev. Stat. § 30.270(2);
42 Pa Cons. Stat § 8528(c) (listing available damages); Tex. Civ. Prac. & Rem. Code Ann. §
101 024, Utah Code Ann. § 63-30-22; W. Va. Code § 29-12A-7(a); Wis. Stat. Ann. § 893.80(3);
Wyo. Stat. § 1-39-1 18(d).

l2 Ala. Code § 1 1-93-2 ($100,000 limit for governmental entities), Colo. Rev. Stat. § 24-
10-1 14(lXa) ($150,000 limit), Fla. Stat. Ann. § 768.28(5) ($100,000 limit per person; $200,000
limit for all claims arising out of the same occurrence), Idaho Code § 6-926 ($500,000 limit); 705
LLCS. § 505/8(d) ($100,000 limit), Ind. Code § 34-4-16.5-4 ($300,000 limit), Kan. Stat. Ann §
75-6 105(a) ($500,000 limit); Ky. Rev. Stat. Ann § 44.070(5) ($100,000 limit); La. Rev. Stat.
Ann § 13:5106B(1) ($500,000 limit), Me. Rev. Stat. tit. 14, § 8105(1) ($300,000 limit), Md.
Code Ann. State Govt. § 12- 104(a) ($100,000 limit); Mass Gen. L. ch. 258, § 2 ($100,000 limit),
Minn. Stat § 3.736(4Xa) ($300,000 limit for wrongful death); Miss. Code Ann. § 1 1-46-15(1)
($250,000 limit), Mo. Rev. Stat. § 537.610(2) ($100,000 limit); Mont. Code Ann. § 2-9-108(1)

497

ranges from as low as $50,000 to as high as $750,000. Nevertheless, the statutes as a whole average
a maximum recovery well under $300,000.

Fourth, most states have authorized the purchase of liability insurance. In several of these
states the effect of the statute is a waiver of sovereign immunity only to the extent of the insurance
coverage." This is another way states are able to control the extent of their liability.

Moreover, the Supreme Court has respected the right of states to determine where they may
be sued Thus, the Court has refused to infer that a state's waiver of its immunity operates as a
waiver to suit in federal court, as opposed to only the state's courts. See. Ford Motor Co. v. Indiana
Dep't of Treasury. 323 US. 459 (1945). S. 1691 — by permitting claims against tribes in state and
federal courts — would compel tribes to defend against claims in the courts of foreign sovereigns ~
contrary to the treatment accorded states, and wholly at odds with established federal law and policy
intended to foster tribal self-determination. £e& Santa Clara Pueblo v. Martinez. 436 U.S. 49 (1978);
Iowa Mutual Ins Co v. LaPlante. 480 U.S. 9 (1987).

In conclusion, a basic premise for S. 1691 — that states have "dramatically scaled back the
doctrine of sovereign immunity" — is simply not supported by the data. Most states retain significant
portions of the doctrine as well as severely limiting the dollar amount that can be recovered when
immunity is waived. In the limited circumstances where immunity is waived, states have done so on
their own terms and in their own courts, knowing they have the ability to spread the ultimate cost of
the waiver over a wide population base. The same is not even remotely true of Indian tribes; no tribe
has the tax base or financial resources of a state. Thus, S. 1691 is a bill that would impose a kind of
waiver of sovereign immunity incompatible with typical American jurisprudence on those sovereign
entities least financially equipped to handle it The bill, therefore, should not pass.

($750,000 limit per claim, $1,500,000 limit per occurrence); Neb. Rev. Stat. § 13-926(1)
($1,000,000 limit for political subdivisions); Nev. Rev. Stat. § 41.035(1) ($50,000 limit); N.H.
Rev. Stat. Ann. § 507-B:4(I) ($150,000 limit); N.C. Gen. Stat. § 143-291 ($150,000 limit); N.D
Cent Code § 32-12.1-03(2) ($250,000 limit per claim against political subdivisions); Okla. Stat,
tit. 51, § 154(AX2) ($100,000 limit); Or. Rev. Stat. § 30.270(1 )(b) ($100,000 limit per claim); 42
Pa. Cons. Stat. § 8528(b) ($250,000 limit); R.I. Gen. Laws § 9-31-2 ($100,000 limit); S.C. Code
Ann. § 15-78- 120(a)(1) ($250,000 limit); Tex. Civ. Prac. & Rem. Code Ann. § 101.023(a)
($250,000 limit); Utah Code Ann. § 63-30-34(1) ($250,000 limit); Vt. Stat. Ann., tit. 12, §
5601(b) ($250,000 limit); Va. Code Ann § 8.01-195.3 ($100,000 limit); Wis Stat. Ann. §
893.80(3) ($50,000 limit); Wyo. Stat. § 1-39-1 18(a)(i) ($250,000 limit).

"Sse, &j^ Ark. Code Ann. § 21-9-301; Ga. Code Ann. § 33-24-5 1(b) (political
subdivisions), Hawaii Rev. Stat. § 661-1 1, Idaho Code § 6-926, Me. Rev. Stat. Ann. tit. 14 §
81 16, Miss. Code Ann § 1 1-46-16; Mo. Rev. Stat. § 537.610; Neb. Rev. Stat. § 13-916 (political
subdivisions); N.C. Gen. Stat. § 160A-485 (municipalities); S D. Codified Laws Ann § 21-32-16;
Term. Code Ann. § 29-20-31 1, Vt. Stat. Ann. tit. 29, § 1403 (municipalities).

498

Contracts with tribes

a Contractual waivers of sovereign immunity.

Under existing law, the immunity doctrine leaves it up to tribes to determine when and to
what extent they will waive their immunity from suit when they enter into commercial and other
contracts. This is a major component of the federal policy of tribal self-determination. Congress
should not abridge that policy, and unilaterally waive tribal immunity in an across the board as
proposed in S. 1691.

The tribal sovereign immunity doctrine is hardly a secret. Businesses and individuals dealing
with tribes are well aware of tribal sovereign immunity. Some, like my law firm, simply deal with
tribes without seeking waivers of immunity. I might add our success in collecting fees seems to be
the envy of most of my friends in corporate law firms. The truth is that almost all tribes pay their
contractual obligations in a full and timely fashion.

Other businesses and individuals do seek specific waivers of immunity before they will do
business with tribes. In my experience, tribes are usually willing to negotiate a waiver where they
determine that the benefits of a commercial or other transaction for the tribe justify the waiver Tribes
generally recognize that non-Indian companies will not make multimillion dollar capital investments
on tribal lands without some adequate recourse to enforce the tribe's obligations. The most common
approach in my experience is for tribes to agree to binding arbitration, ensuring specific performance
of a contract, usually with relief limited to the assets of the particular project at hand. Tribes often
also establish enterprises separate from the tribal government, including housing authorities, that
waive immunity in their charters or otherwise.

b. Tribal waivers of sovereign immunity for suits in their own courts .

In addition, some tribes have authorized equitable and declaratory relief in tribal courts against
tribal officers acting contrary to their legal obligations Decisions of various tribal courts published
in the Indian Law Reporter are indicative of instances in which tribal courts have determined that a
tribe has waived immunity to permit suit to proceed in the tribe's own court system. 14 Several

14 Blaze Construction. Inc v. Crownpoint Institute of Technology, 24 Ind. L. Rep. 6254
(Nav. Sup. Ct. 1997) (holding that statute in force at time of contract did not validly cloak tribal
vocational school in Navajo Nation's immunity), Jones v. Chitimacha Tribe of Louisiana. 23 Ind.
L. Rep. 622S (Chitimacha Ct. App. 1996) (finding a limited waiver of sovereign immunity in
tribal/state compact); Pazienzji v Mashantucket Pequot Gaming Enterprise 24 Ind. L. Rep. 6219
(Mash. Peq. Tr. Ct. 1996) (holding Tribe's sovereign immunity statute waived immunity for
common law invasion of privacy action, but not for strict liability action); Wells v Fort Berthold
Community College. 24 Ind. L. Rep. 6157 (Ft. Berthold Tr. Ct. 1997) (stating that "sue and be
sued," clause in charter of tribal community college was a valid waiver of sovereign immunity).

499

decisions hold that immunity was waived in the tribal constitution or in the tribal statutes, 15 while
others have found a waiver in the Indian Civil Rights Act.' 6

Where Indian tribes have enacted ordinances expressly waiving sovereign immunity, tribal
courts have sought to give effect to both the purpose and policy of the ordinance. For example, in
Bauer v. Mashantucket Pequot Gaming Enterprise. ' 7 the tribal appellate court held that the tribal
ordinance waived the tribal gaming enterprise's immunity from personal injury suits, and that the
lower court had erred in dismissing plaintiffs claim on the ground that she had misnamed the tribal
gaming enterprise in her complaint. And in Raymond v. Navajo Agricultural Products Industry, the
Supreme Court of the Navajo Nation examined each of the four exemptions from sovereign immunity
provided by the Navajo Sovereign Immunity Act to determine whether they applied to the
employment-related claims brought by plaintiff against a tribal entity. While holding that none of the
exemptions applied, the Court explained that plaintiff should have pursued the administrative remedy
provided under the Navajo Preference in Employment Act, which authorized an appeal to the tribal
court.

These decisions also show that a number of the tribal courts have adopted as tribal law the
remedy that the Supreme Court has made available for claimed violations of federal law in Ex parte
Young. 209 U.S. 123 (1908). The Young doctrine authorizes actions for prospective injunctive relief
against government officials for claimed violations of federal law by declaring that actions of
government officials that are beyond the scope of their authority are not actions of the sovereign, and
that therefore such actions are not barred by sovereign immunity. The Young doctrine has been
applied by a number of tribal courts as a remedy for claimed violations of tribal law, thus avoiding
immunity in suits against officials in the same manner as do the federal courts." Applying the same

"Sfifi, £X, Blaze Construction. Inc. v. Crownpoint Institute of Technology. 24 Ind. L.
Rep. 6254 (Nav. Sup. Ct. 1997); Jones v Chitimacha Tribe of Louisiana. 23 Ind. L. Rep. 6225
(Chitimacha Ct. App. 1996); Pazienza v. Mashantucke t Pequot Gaming Enterprise. 24 Ind. L.
Rep. 6219 (Mash. Peq. Tr. Ct. 1996); Wells v. Fort B erthold Community College. 24 Ind. L. Rep.
6157 (Ft. Berthold Tr. Ct. 1997).

"Sfifi, fi^, Works v Fallon Paiute-Shoshone Tribe. 24 Ind. L. Rep. 6033 (Intertr. Ct.
App. Nev. 1997); Davis v. Keptin. 18 Indian L. Rep. 6148 (Turt. Mt. Tr. Ct. 1991); Oglala Sioux
Tribal Personn el Board v. Red Shirt. 16 Indian L. Rep. 6052 (Ogl. Sx. Tr. Ct. App. 1983).

17 22 Indian L. Rep. 6145 (Mash. Peq. Ct. App. 1994).

" Sfifi, fix, Combrink v Allen, 20 Indian L. Rep. 6029, 6030 (Ct. Ind. App., Tonkawa
1 993)(holding sovereign immunity does not bar petition for mandamus directing president to
comply with tribal law where president acted beyond the scope of her authority); Wells. Jr. v.
Blaine. Jr.. et al.. 19 Indian L. Rep. 6035-36 (N. Pins. Intertr. Ct. App. 1991)(holding that the
doctrine of sovereign immunity does not bar actions against tribal officials who have acted outside
the scope of their authority): accord Lovermi v. Miccosukee Tribe of Indians of Florida. 23 Indian

500

doctrine, tribal courts have dismissed claims against tribal officials in the absence of allegations that
the defendants acted beyond the scope of their authority, 1 * and have recognized tribal immunity when
an action brought against tribal officials is in reality an action against the sovereign :u In sum, the
tribal courts have, through the development of tribal common law, made new remedies available to
litigants whose claims would otherwise be barred by immunity The important thing is that these
limitations on tribal immunity, like contractual limitations, have been made by the tribes themselves,
tailored to tribal finances and particularly not imposed in a one-size fits all manner from above.

c. The effect of S 1691 would be devastating to Tribes' federal

Indian policy and the federal court systems

S. 1691 proposes to replace contractual provisions, negotiated waivers of tribal immunity,
arbitration, and tribal court consideration of these questions with a mandatory waiver of all tribes'
immunity to permit adjudications of all contract claims against them in federal court. This proposal,
however, ignores the fact that federal courts ordinarily do not have federal question jurisdiction to
adjudicate contract or lease disputes involving Indian tribes and commercial partners. E.g.. Gila River
Indian Community v Henningson 626 F 2d 708 (9th Cir 1980), cert denied. 451 US 91 1 (1981);
Moronyo Band v California State Board of Equalization 858 F 2d 1376, 1385-1386 (9th Cir 1988),
cert, denied. 488 US. 1006 (1989). In addition, even if a tribe enters into a contract with an out-of-
state company or individual, two federal courts of appeal have held that tribes are not "citizens" of
a state for purposes of federal diversity jurisdiction. E.g.. Gaines v Ski Apache. 8 F.3d 726 (10th
Cir. 1993); Standing Rock Sioux Tribe v Dorgan. 505 F.2d 1 135, 1 140 (8th Cir 1974) Thus, if
Congress does decide to burden the federal courts with the additional jurisdiction proposed in S.
1691, it may not be within their jurisdiction under Article III of the United States Constitution.

Apart from this constitutional defect, Congress should bear in mind the recent admonition
from the Honorable J. Clifford Wallace, Chief Judge of the U.S. Court of Appeals for the Ninth
Circuit that if the controversies now filed in tribal courts (or, presumably, decided by arbitration) were

L Rep 6090 (Mice Tr Ct. 1996); Committee for Better Tribal Government, et al v Southern
Ute Election Board, et al.. 17 Indian L Rep. 6095, 6097 (S. Ute Tr. Ct. 1990).

19 £££, fi^, Lovermi v Miccosukee Tribe of Indians of Florida. 23 Indian L Rep 6090
(Mice. Tr Ct. 1996), Committee for Better Tribal Government, et al v. Southern Ute Election
Board, et al.. 17 Indian L. Rep 6095, 6097 (S. Ute Tr. Ct. 1990); accord Sulcer v. Barrett. Jr.. 17
Indian L Rep 6138 (C.B Pot Sup. Ct.1990).

20 See GNS. Inc v Blackhawk. 24 Ind. L. Rep 6260 (Winn. Sup. Ct. 1997); QsmaiL^
LeCompte. 22 Ind. L. Rep. 61 1 1 (Chy. R. Sx. Ct App. 1994 V Sulcer v. Barrett. Jr . 17 Indian L
Rep 6138, 6139 (C.B. Pot. Sup Ct. 1990V accord Dav v Hopi Election Board. 16 Indian L.
Rep 6057, 6059 (Hopi Tr. Ct. 1988Xholding that defendants were not liable for money damages
because the doctrine of sovereign immunity bars any suit "that could potentially reach into the
public treasury").

501

filed in federal courts:

[the federal courts] could not absorb them with our
current resources Thus, we should respect and
appreciate the tribal courts for the tremendous amount
of work they do to resolve disputes As the legal
market scrambles for alternative forums in which to
pursue claims and resolve conflicts, due largely to the
limited capacity of the federal courts as currently
staffed, we should not take for granted, but rather
honor and appreciate, the tribal forums that shoulder
such a significant burden.

Wallace, A New Era of Federal-Tnbal Court Cooperation. 79 Judicature No. 3 (1995). It is apparent
from Chief Judge Wallace's statement that the federal courts are not ready and able to hear all of the
contract cases that will be filed if tribal sovereign immunity were waived for contract claims, even if
these claims were within the Article III jurisdiction of federal courts.

S. 1691 also would waive tribal sovereign immunity to permit tribes to be sued without their
consent in state courts and for state substantive law to apply to determine such adjudications. This
radical proposal would stand more than two centuries of federal Indian policy on its head, replacing
self-determination with a policy that would "result in the undermining or destruction of . . tribal
governments," Bryan v. Itasca County. 426 U.S. 373, 387-388 (1976), and give states
unprecedented power in an area — commerce with Indian Tribes — that the Constitution itself confers
exclusively upon the federal government. E.g.. County of Oneida v. Oneida Indian Nation. 470 U.S.
226,234(1985).

It has been clear since the earliest days of the Republic that under the United States
Constitution states and state courts do qoI have jurisdiction over Indians on reservations, much less
over tribal governments themselves This principle has been well established at least since Chief
Justice Marshall's opinion in Worcester v. Georgia. 31 U.S. (6 Pet.) 515 (1832), holding that the law
of the State of Georgia has no force within the boundaries of the Cherokee Nation. "The Cherokee
nation, then, is a distinct community, occupying its own territory, in which the laws of Georgia
can have no force, and which the citizens of Georgia have no right to enter but with the assent of the
Cherokees themselves or in conformity with treaties and with the acts of Congress." 3 1 U.S. (6. Pet.)
at 561. See also Kansas Indians 72 U.S. (5 Wall.) 737 (1867); The New York Indians. 72 U.S. (5
Wall.) 761 (1867), Cherokee Nation v. Georgia. 30 U.S. (5 Pet.) 1 (1831).

The underpinnings of this doctrine are in the Constitution itself in the treaty making power
granted the President with the advice and consent of the Senate in Article II § 2, cl.2, and the power
over commerce with Indian tribes granted to Congress in Article I § 8, cl 3 The absence of state
jurisdiction over tribes is also part of the recognition of the inherent sovereignty of Indian tribes,
Worcester v. Georgia, supia at 559, Cherokee Nation v. Georgia, sjipxa, at 16, and protection of the

502

tribes from governmental regulation by the states 21 so that the tribes can remain "a separate people
with the power of regulating their internal and social relations," United States v. Kagama. 1 18 US
375, 382 (1886), with the power to "make their own laws and be ruled by them " Williams v Lee
358 U.S. 217, 220 (1959). Protecting these rights are core purposes of the modern self-
determination policy. As the Court explained in Warren Trading Post v. Arizona Tax Comm .. 380
U.S. 685, 686-87 (1965), "from the very first days of our Government, the Federal Government had
been permitting the Indians largely to govern themselves, free from state interference." In sum, as
the Supreme Court concluded in Rice v Olson. 324 U.S. 786, 789 (1945), "[t]he policy of leaving
Indians free from state jurisdiction and control is rooted deeply in the Nation's history " (citations
omitted)

Even in the rare instances where Congress has authorized state jurisdiction over reservation
Indians, as with Public Law 280 enacted in 1953, 25 U.S.C. § 1322, it has determined not to confer
"state jurisdiction over the tribes themselves." Brvan v. Itasca County. 426 U.S. at 389, Three
Affiliated Tribes v Wold Engineering. 476 U.S. 877, 892 (1986). The proposal in S. 1691 to confer
jurisdiction on state courts over tribes without their consent would thus be an unprecedented and rank
overturning of more than two centuries of federal Indian policy.

Cigarette and other sales taxes

The Supreme Court has adopted a per se rule that, except where authorized by Congress,
tribes and tribal members on reservations are exempt from state sales and other taxes. California v
Cabazon Band. 480 U.S. 202, 215, n. 17 (1987)

The rule regarding state taxation of commercial transactions between Indian sellers and non-
Indian buyers is more complex. In these cases, the courts have engaged in "a particularized inquiry
into the nature of the state, federal and tribal interests at stake, ... to determine whether, in the
specific context, the exercise of state authority would violate federal law." White Mountain Apache
Tribe v. Bracker. 448 U.S. 136, 145 (1980). No talismanic or certain outcome follows from
application of this test. It is by its very nature dependent on the specific facts presented in the case
concerning the impacts of a state tax on federal and tribal interests and on the purposes of the
particular state tax

Employing principles of preemption and the balancing of tribal, state, and federal interests
enunciated in Bracker. the Supreme Court has held in a number of cases that states cannot tax or
regulate the on-reservation activities of non-Indians engaged in transactions with tribes or their
members. See. SJL> California v Cabazon Band. 480 U.S. 202 (1987) (non-Indians entering
Reservation to attend tribal gaming establishment not subject to state regulation); Raman Navaj o
School Bd v. Bureau of Revenue. 458 US 832, 846 (1982) (non-Indian contractors building school

21 "Because of the local ill feeling, the people of the States where they [Indians] are found
are often their deadliest enemies " United States v. Kagama 118 U.S. 375, 384 (1886) See also
Ramah Navaio School Boar d v Bureau of Revenue , 458 U.S. 832. 846 (1982).

503

on reservation not subject to state gross receipts tax); White Mountain Apache Tribe v. Bracker. 448
U.S. 136 (1980) (non-Indian logger harvesting Indian-owned timber not subject to state license and
fuel taxes); Warren Trading Post v Arizona Tax Commission. 380 U.S. 685, 686-87 (1965) (state
gross receipts tax not applicable to non-Indian business).

In sales of cigarettes, if the incidence of the tax falls on the non-Indian purchaser, the Supreme
Court has held that the state tax is lawful, even though the sale took place on an Indian Reservation
and that tribes may be required to make reasonable efforts to assist in collection of the tax. New

York Tax Dep't v. Milhelm Attea & Bros 512 U.S. , 129 L.Ed 2d 52 (1994); Confederated

Colville Tribes v Washington. 447 U.S. 134 (1980); Moe v. Confederated Salish & Kootenai Tribes.
425 U.S. 463 (1976). The Tribes have bitterly opposed this result, because it either eliminates their
much needed ability to tax the transactions themselves, or results in double taxation by both tribes
and states, which ends their ability to compete. Nevertheless, most states and tribes have resolved
their disputes about application of state sales and other taxes by entering into intergovernmental
agreements. This has been true for various sales and excise taxes, including those dealing with
cigarettes, motor fuels and liquor. I describe below the agreements that have been made, relying on
two studies ~ the first by the Arizona Legislative Council, State-Tribal Approaches Regarding
Taxation & Economic Development (1995) (hereafter "Arizona Report"), and second the
"Washington Report" discussed earlier in my testimony, especially a monograph prepared by my
partner, Harry R. Sachse, and Puyallup tribal attorney, John Howard Bell that is Appendix J to that
Report. 22

Most of these agreements actually follow the pattern of the major Supreme Court cigarette
tax cases by (1) exempting all on-reservation sales to Indians from state tax, but agreeing to
imposition and collection of taxes on sales to non-Indians, or (2) agreeing on the part of the tribe to
impose the same tax as that imposed by the state, and sharing this "single tax" between the tribe and
the state on a prearranged basis, reflecting the percentage of the sales to Indians as contrasted to non-
Indians. Two states have actually agreed that tribes may keep all the tax revenues from the "single
tax," whether the on-reservation sales are to Indians or non-Indians. Four states have exempted all
on-reservation sales from state taxation. We provide the details of these agreements below.

a. Agreements exempting all on-reservation sales

bv Indian selle rs from state taxes

Mississippi and New Mexico exempt all cigarette sales on Reservations in their state by Indian
sellers from state sales taxes, where the Tribe imposes its own tax whether the sale is to Indians or
non-Indians. Miss. Code Ann. § 27-65-215; N.M Stat. Ann. § 7-12-4. Florida allows the Seminole
Tribe and tribal retailers to sell stamped cigarettes free of any state tax, and the Tribe imposes and
collects its own 10 percent tax on these sales. Fla. Stat. 210.05(5); Arizona Report at 82-83. We

22 I have lodged a copy of each study with the Committee. While these studies are two
years old, my Office recently confirmed and updated the accuracy of these reports by telephone
calls to state and tribal officials.

504

understand that New York has recently declared it the policy of the Executive Branch not to collect
cigarette or gasoline taxes for sales on Indian reservations

These four states avoid double taxation of a transaction by both a tribe and a state, and
recognize such sales as an important source of income for tribes. If Congress does decide to enact
legislation in this area, I would commend this approach to you, because it both promotes Indian
economic development and acknowledges to the fullest extent possible the often desperate need of
generally impoverished tribes for revenue. A variant of this approach is agreements Oklahoma has
concluded with sixteen tribes under which tribes agree to make "in lieu" payments to the state equal
to 25 percent of the state taxes that would be collected on all reservation tax sales. Arizona Report
at 91 . The Oklahoma approach is less than a full exemption for on-reservation sales But, since it
allows some price differential in favor of on-reservation sales, it also provides salutary encouragement
to tribal economic development.

b. Agreements under which Indian retailers sell

tax free to Indians (or tribal members ! but collect and
remit taxes on sales to no n-Indians (or non-members^

Some states and tribes have entered into agreements simply exempting Indian purchasers on
reservations from cigarette, motor fuel or other sales taxes. Utah has an agreement with the Ute
Tribe exempting all cigarette sales to tribal members from state taxes. Arizona Report at 95
Wyoming has the same type of agreement with the only tribes in that State. Id. at 99. Wisconsin
exempts all motor fuel sales to Indians on reservations from taxation. Id. at 98.

Three other states — Michigan, 23 Montana and Washington — have accomplished the same
result by agreeing with tribes to an allocation of the product to be taxed — usually tax free cigarettes
- to on-reservation retailers, set by a per capita consumption formula reflecting the number of Indians
(or tribal members) residing on the Reservation. Id- at 84, 87-88, 96. 24 Under these agreements, tax
free cigarettes can be sold to Indians or tribal members, and state taxes must be collected on sales to
non-Indians.

23 Michigan has the same structure for motor fuels taxes Arizona Report at 84.

24 Michigan has agreements, according to the Arizona Report with four of the ten tribes in
its state, Washington with 18 of the 26 tribes in that state, and Montana with all but one tribe in
Montana, which, however, is covered by the allocation formula in practice.

505

Agreements providing for a single

tax equal to the state tax

i. where the revenue is split between the

tribe and state reflecting the percentage on Indian

as compared to non-Indian customers

Six states have entered into agreements with tribes under which the tribe adopts the same tax
as the state, and providing for a revenue split ~ with the tribe taking the tax revenues attributable to
on-reservation sales to Indians, the state taking the revenues attributable to sales to non-Indians. This
approach accomplishes the same general outcome as an allocation of tax free cigarettes to retailers
for sale to Indians. Under both approaches, double taxation by both the state and tribe is avoided.

Minnesota has agreements with all tribes in that state on sharing cigarette tax revenues, and
with a number of tribes on sharing revenues of liquor and motor fuel taxes. Arizona Report at 85-86.
Montana has such agreements with some tribes on sharing cigarette, liquor and motor fuels taxes
Id. at 88. North Dakota has such an agreement on cigarette taxes with the Standing Rock Sioux
Tribe, Id at 90, as do Oregon and Wisconsin with most or all tribes in those states. Id. at 92, 2S 98.
South Dakota has such agreements with four tribes sharing cigarette, contractors excise and sales and
use taxes. Id at 93.

ii. where the Tribe keeps all the tax revenues

Louisiana and Nevada have agreements with most tribes in those states under which the tribes
levy a tax equal to the state tax ~ on sales of cigarettes and motor fuels in Louisiana, for sales, use
and cigarette taxes in Nevada — but where the tribe keeps all the tax revenues. Id at 83, 89 This
system, of course, treats on and off-reservation sales to non-Indians equally, eliminating possible
double taxation by both state and tribes that would disadvantage economic activity on reservations.
Unlike the tax sharing approach, however, this type of agreement allows tribes to retain all tax
revenues from on-reservation sales, whether to Indians or non-Indians.

d. S. 1691 would underc ut resolution of tax issues already

accomplished bv good faith consultation between states and
Tribes.

S. 1691 would replace these voluntary intergovernmental agreements, which have generally
resolved the applicability of state sales taxes to on-reservation sales in a manner satisfactory to both

25 The Arizona Report mentions only two tribes, but we have learned from the Oregon
Department of Revenue that agreements have subsequently been concluded with additional tribes.

506

tribes and states, with a federal mandate undercutting tribal powers of taxation and leaving no room
for negotiated solutions satisfactory to states and tribes It would then open the federal courts to
litigation between every tribe and every state. This is undesirable for a number of reasons

First, the large majority of tribal-state tax agreements already result in the state receiving taxes
on all on-reservation sales to non-Indians. By these agreements, tribes and states have already
resolved - in a manner favorable to states - the principal "problem" S. 1691 purports to address.

Second, S. 1691 would substitute contested litigation for negotiated agreements Litigation
is both costly and uncertain as to outcome, particularly where as in this subject area the balancing test
of tribal, federal and state interests to determine whether preemption has occurred must be applied,
and where complicated questions about the legal incidence of the tax must be determined. E.g..

Oklahoma Tax Comm'n v Chick asaw Nation. 515 US , 132 L. Ed. 2d 400 (1995). While a

mandatory waiver of tribal immunity would not in and of itself eliminate all the consensual agreements
that have been developed, lifting tribal sovereign immunity by Congress would make it less likely
states would enter into voluntary agreements with tribes.

Third, Congress should carefully consider the effects of S. 1691 as a matter of economic
policy. If tribes are free to enter into commercial transactions with non-Indians free of state taxation,
as Florida, Mississippi, New Mexico and New York have voluntarily agreed to permit, economic
development of some of the poorest areas of a state is enhanced and the federal policy of Indian
economic self-sufficiency is furthered. It is%n anomaly for Congress to undermine an area of
economic enhancement for tribes already agreed to by a number of states. It is impossible to square
this with Congress' trust responsibility for the Tribes.

Concluding remarks

Tribal sovereign immunity is no sterile academic doctrine. It allows tribes to determine their
own course - deciding when to arbitrate private commercial disputes, deciding to what extent they
will waive immunity to suit in arbitration or in their own tribal courts, negotiating tax agreements with
states that are mutually agreeable. Having the tribes make these decisions themselves - rather than
having a one-size fits all rule dictated by Congress - is part of the policy of recognizing tribal self-
determination and supporting tribal governments so eloquently stated by President Reagan and
endorsed by each Administration since President Nixon's.

Tribal sovereign immunity is likewise an important component of the federal policy of
promoting Indian self-sufficiency, because it protects limited tribal resources for use in providing
desperately needed public services on reservations, rather than being drained in damage awards that
could bankrupt tribes.

The contrary approach of S. 1691 would thwart these goals of federal policy, Tribal self-
determination would be replaced by Congress unilaterally dictating to tribes, by Congress requiring
that federal or state forums would decide important legal disputes involving tribes, by Congress
providing that state law would govern these cases - all without the consent of any tribe. Congress

507

would impose on the tribes rules no states impose on themselves. Economic self-sufficiency would
be throttled — by an unvarying policy that tribes could not offer tax incentives to non-Indian
businesses locating on reservations, by dictating that limited tribal resources must be spent defending
costly litigation and paying damage awards in lieu of providing needed public services to
impoverished reservations

Basic to the questions involving tribal sovereign immunity is the issue of whether three
decades of the bipartisan federal Indian policy of supporting tribal self-determination and fostering
tribal economic self-sufficiency, a policy that has brought many tribes out of poverty and reduced the
financial burden of the federal government, should now be reversed. It should not. This bill should
not pass.

508

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The Honorable Ben Nightborse Campbell, Chairman
Senate Indian Affairs Committee
S3 8 Senate Hart Building
2nd & C Streets, N.E.
Washington, DC. 20510

Re: March 1 1 hearing on tribal sovereign immunity

Dear Chairman Campbell:

Thank you for your letter of March 23, posing four supplemental questions to me. I am
pleased to respond to them below, and also wish again to express my appreciation for the
Committee's invitation to testify before it on the critical subject of preserving tribes' sovereign
immunity from suit.

I set forth your questions and then my responses.

1. Regarding state taxes and collection from tribes, is it accurate to state that current

law leaves states with a right but no remedy?

No The United States Supreme Court specifically rejected that very proposition when it
was argued by the State of Oklahoma in Oklahoma Tax Commission v Citizen Band Potawatomi
Indian Trih» 498 US. SOS, 514 (1991). The Court in Potawatomi observed that adequate
remedies available to states to collect taxes legally owed them include: (1) suits against individual
agents or officers of tribes under the theory of Ex Parte Young 209 U.S. 123 (1908), (2)
collecting taxes from wholesalers, either by seizure of untaxed products or assessments directly on
the wholesaler, and (3) entering into mutually satisfactory agreements with tribes for collecting

The Honorable Ben Nightborse Campbell, Chairman
Senate Indian Affairs Committee
April 21, 1998
Page 2

the taxes. 498 U.S. at 514. An additional remedy would be suits against individual Indian
proprietors where the retail establishment is not owned and operated by a tribe itself.

2. Should specific problems in one or two states dictate Federal Indian policy

throughout all fifty states 9

No. Federal Indian policy, as set by Congress, must be "tied rationally to the fulfillment of
Congress' unique obligation toward the Indians," Morton v. Mancari. 417 U.S. 535, 555 (1974)
This obligation requires adherence to "the most exacting fiduciary standards," e.g.. Seminole
Nation v United States. 3 16 US. 286, 297 (1942). These standards are obviously not fulfilled by
sacrificing Indian governmental rights and protections because of "problems in one or two states."

I suggest that Federal Indian policy in the area of state taxation of non-Indians doing
business with Indians on reservations should be guided primarily by the '"overriding goal' of
encouraging tribal self-sufficiency and economic development ." California v. Cabazon Band of
Indians. 480 U.S. 202, 216 (1987) (quoting New Mexico v. Mescalero Apache Tribe. 462 U.S.
324, 334-35 (1983)) Decisions of the Supreme Court such as Washington v. Confederated
Tribes of the Colville Indian Reservation , 447 US. 134 (1980) and Cotton Petroleum Corp. v.
New Mexico. 490 US 163 (1989) — which permit states to tax some non-Indians doing
commerce on reservations with tribes and Indians — thwart tribal economic self-sufficiency in two
ways. First, they make it impossible for tribes to give non-Indians a tax incentive to do business
on a reservation instead of outside it This is so because whenever state taxes are collected from
non-Indian economic activities on a reservation, the tribe cannot encourage those businesses to
locate on the reservation by imposing a tax lower than that of the state. Second, if a tribe imposes
any tax at all on the same on-reservation commerce that the state also taxes, this actually creates a
disincentive for economic activity on Indian reservations Tribes are thus faced with a cruel
dilemma anytime states are permitted to tax an activity on the reservation — they must either
forego their sovereign right to tax the activity ox exercise their sovereign right at the cost of
discouraging the activity, possibly even driving it to locate outside the reservation Congress
should protect tribes from this dilemma.

Most Indian reservations remain economically deprived areas Federal Indian economic
policy should encourage commerce on reservations, not discourage this commerce by enforcing
collection of additional tax burdens a state places upon it, as Colville and Cotton Petroleum do.
These cases simply consider whether state taxes are preempted by federal law in the absence of
specific action by Congress If Congress acts in this area, it should act to bar or limit state taxes
(by requiring at the very least that states give a full credit for taxes paid to the tribe) so as to
encourage economic activity on the reservations.

47-201 98-17

510

The Honorable Ben Nighthorse Campbell, Chairman
Senate Indian Affairs Committee
April 21, 1998
Page 3

3. Are tribea generally prevented from suing states in federal court 1 '

Generally yes Three recent United States Supreme Court rulings consider and limit the
circumstances under which tribes may sue states or state officials in federal court: Blatchford v
Native Village of Noatak 501 US 775 M 99 1 V Seminole Tribe v Florid. 517 US _, 134
L.Ed. 2d 252 (1996), Idaho v Coeur d' Alene Tnbe of Idaho. 521 US _, 138 L.Ed. 2d 438
(1997).

a suits against states

Blatchford v Native Village of Noatak. 501 US 775 (1991), holds that the Eleventh
Amendment generally gives states immunity against suits by tribes in federal court The Court
held the Eleventh Amendment generally prevents the federal courts from hearing suits against
states unless either the state consents to be sued in federal court or the suit is brought by the
United States or — in certain circumstances - by other states Although it recognized that tribes
are also sovereign, the Court held they cannot sue states in federal court. In Seminole Tribe v
Florida. 517 U.S. __, 134 L.Ed. 2d 252 (1996), the Supreme Court held that even Congress
cannot waive a state's Eleventh Amendment immunity from suit by tribes in federal court unless
Congress is acting to enforce one of the Civil War Amendments such as the Fourteenth
Amendment

Thus, the Supreme Court has held that states cannot be sued by tribes in federal court, and
can only be sued in federal courts at all in very limited circumstances I believe these holdings
actually furnish support for continuing the congressional policy of not waiving tribal immunity to
suit in federal courts. A policy of continuing tribal immunity would treat tribes in a fashion similar
to states, which I understand is an avowed purpose of S. 1691 .

b. suits against state officials

Tribes (like anyone else) caa sometimes sue state officials in federal courts if those
officials violate federal law. The Supreme Court nearly a century ago created an important
exception to the Eleventh Amendment immunity to make sure that state officials do not violate
federally-protected rights Sfi£ Ex Parte Young 209 U.S. 123 (1908). Under this Ex Parte Young
exception, a suit can be brought against state officials in federal court to compel them to take
actions in accord with federal law Ex parte Young is an important doctrine necessary to provide
a federal court to protect federal rights from violations by state officers. However, the Supreme
Court has also limited the availability of this doctrine for tribal suits in its recent Seminole and
CiOCIIT tl'Almff decisions

511

The Honorable Ben Nighthorse Campbell, Chairman
Senate Indian Affairs Committee
April 21, 1998
Page 4

In a closely divided S-to-4 decision, the Court held in Seminole that states and state
officials are immune under the Eleventh Amendment from suits brought by Indian tribes to
enforce the compact negotiation requirement of the Indian Gaming Regulatory Act (IGRA)
Seminole Tribe v Florida. 134 L.Ed. 2d at 277-279. In Seminole, the tribe sued the governor (as
well as the State) to secure compliance with IGRA's statutory requirement that the state enter into
good faith negotiations with a tribe seeking to establish casino gaming on a reservation. The
majority in Seminole rejected the tribes' argument that a suit to enforce IGRA's compact
negotiation provisions could be brought against state officials under Ex Parte Young IsL The
majority opinion reasoned that since the language of IGRA specifically provides for very detailed
remedies directed against the "state," Ex Parte Young was not available as an additional remedy.
Id at 278. As a practical matter, this ruling means that Indian tribes have no judicial remedy under
IGRA against states which fail to negotiate in good faith regarding a compact for Class III
gaming, unless the state consents to being sued

Idaho v Coeur d'Alene. 521 U.S. __, 138 L Ed 2d 438 (1997), considered whether the
Ex parte Young doctrine applies to a federal court suit by a tribe against state officials to establish
the tribe's exclusive rights over a lakebed. Although the Court ruled that the Ex parte Young
doctrine did not apply to this particular claim, the Court did sustain the general availability of the
doctrine if invoked by tribes.

In Coeur d'Alene. the tribe filed suit in federal court against Idaho officials to establish the
Tribe's right to the bed and banks of a lake within the Coeur d'Alene Reservation. Idaho v Coeur
d'Alene. 138 L.Ed. 2d at 438. The state officials argued that the suit should be dismissed because
under the Eleventh Amendment they and the state were immune from suit in federal court. ld_ A
majority of seven Justices concluded that the Ex parte Young doctrine generally is available for
federal court suits to enjoin state officials from interfering with federally-protected rights. liL at
446-448 At the same time, a majority of five Justices held that the Ex parte Young doctrine was
not applicable on the special facts of the Coeur d'Alene case, because that suit involved a state's
asserted property interest over use and possession of navigable waters, and therefore the case was
in essence a quiet title action against the State and barred under the Eleventh Amendment. ]d_ at
455 Two members of the Court - Chief Justice Rehnquist and Justice Kennedy - took an
unprecedently narrow view of when the Ex parte Young doctrine might be available. Their
opinion suggested major new limitations in the Ex parte Young doctrine not previously advanced
in any of the Supreme Court's cases. Id. at 448-455.

As a practical matter, Coeur d' Alene means that tribes cannot bring suit in federal court
against states or state officials to establish the Tribe's title to a lakebed unless the state has
consented to suit in the federal courts, or the United States appears as a party on the side of the
tribe. However, a majority of seven Justices made it clear that they would not depart from the
established law which generally permits actions to be brought in federal court for equitable relief

512

The Honorable Ben Nighthorse Campbell, Chairman
Senate Indian Affairs Committee
April21, 1998
PageS

against state officials under Ex parte Young

4 Of the remedies noted bv the Supreme Court as available to states to ensure taxes

on sales made to non-Indians are remitted which have been utilized most?

Your question refers, I believe, to the remedies set forth by the Supreme Court in the
Potawatomi case; I set forth those remedies in response to Question 1

I believe the most common way this problem is addressed is for states and tribes to enter
into agreements concerning application and/or collection of state cigarette and other sales taxes
As more particularly set forth in my written testimony, fourteen states have entered into
agreements with 91 tribes concerning cigarette sales taxes:

State

Number of Tribes

Colorado

Louisiana

2 J

Michigan

4 J

Minnesota

10 4

Montana

6 5

Nevada

13*

' Arizona Legislative Council, State-Tribal Approaches Regarding Taxation and Economic
Development 1 19951 at 82 (hereafter "Arizona Report") I supplied the Committee with a copy
of this Report along with my testimony.

2 Id.at83.

' Id. at 84 and personal communication, Michigan Department of Revenue. We
understand that Michigan is currently negotiating agreements with Tribes in that state.

4 Id. at 85

5 Id. at 88

* Id. at 89 One tribe prepays the state tax and applies for a refund from the state
According to the Arizona Report, the cigarette and tobacco excise agreements are mainly for the
purpose of clarifying the respective obligations of the tribes and state By state statute, no sales
and use or cigarette and tobacco excise taxes are imposed on reservation transactions if the tribe
itself imposes a comparable tribal tax This statute covers all 24 tribes in the State.

513

The Honorable Ben Nighthorse Campbell, Chairman
Senate Indian Affairs Committee
April 21, 1998
Page 6

North Dakota

Oklahoma

17'

Oregon

South Dakota

4'°

Utah

Washington

18 ,:

Wisconsin

10 ,!

Wyoming

I 14

As I discussed in my written testimony, these intergovernmental agreements take various
forms. Most of these agreements actually follow the pattern of the major Supreme Court
cigarette tax cases by (1 ) exempting all on-reservation sales to Indians from state tax, but agreeing
to imposition and collection of taxes on sales to non-Indians either directly or through an
allocation system — Michigan, Minnesota (some tribes), Montana (some tribes), Utah,
Washington, Wisconsin (some tribes) and Wyoming, or (2) agreeing on the part of the tribe to
impose the same tax as that imposed by the state, and sharing this "single tax" between the tribe
and the state on a prearranged basis, reflecting the percentage of the sales to Indians as contrasted
to non-Indians - Minnesota (some tribes), Montana (some tribes), North Dakota, Oregon, South
Dakota and Wisconsin (some tribes). Two states — Louisiana and Nevada — have actually agreed
that tribes may keep all the tax revenues from the "single tax," whether the on-reservation sales
are to Indians or non-Indians provided this single tribal tax is equivalent to the state tax. In
Oklahoma, the tribes covered by agreements make in lieu payments to the state equal to 25% of
the state tax rate for all sales of cigarettes whether made to Indian or non-Indian purchasers

7 LLat90.

' LL at 9 1 and personal communication, Oklahoma Tax Commission.

■ Rat 92

10 LL at 93

"IjLat95

12 IiL at 96 Under Washington state regulations, these tribes participate in an allocation
system whereby the State allows each tribe an annual quota of tax free cigarettes.

u Personal communication, Wisconsin Department of Revenue

14 Arizona Report, p. 99

514

The Honorable Ben Nighthorse Campbell. Chairman
Senate Indian Affairs Committee
April21. 1998
Page7

Four states have no agreements with tribes but have enacted statutes or provide
administratively that no state taxes shall be collected on cigarette sales by tribal retailers on
reservations - Florida ( two tribes), Mississippi (one tribe, sale and gross receipts taxes). New
Mexico (23 tribes). New York (seven tribes) " Another state, Nebraska, collects all cigarette
taxes for on-reservation sales and tribal retailers on the six Nebraska reservations submit claims or
refund to wholesalers In turn, the wholesaler gets credits on stamped cartons of cigarettes '*

In summary, then, 1 9 states and tribes have worked out mutually acceptable resolutions of
the issue of state taxes on Indian cigarette sales on 130 tribal reservations

While I believe this demonstrates that intergovernmental agreements are the most common
way of addressing the problem, there are several reported suits that have been successfully
brought against tribal officials to enforce collection of state cigarette taxes on tribal sales to non-
Indians under the Ex Parte Young concept In United States v Finn 919 F Supp 1 305 (D Minn
1995), affirmed, 121 F 3d 1 157 (8th Cir 1997) the court held that tribal sovereign immunity was
not a defense available to tribal officials who allegedly submitted false sales tax returns to the
State since a Tribal-State compact required collection of taxes on all on-reservation transactions,
and thus if the allegations in the indictment were true, the tribal officials were acting outside the
scope of their employment Similarly, in State v Thlopthlocco Tribal Town of Okl.. 839 P 2d
180, 185 (Okl 1992), the Oklahoma Supreme Court held that tribal sovereign immunity does not
excuse the Tribe from assisting in the collection of taxes on sales to non-tribal members See also.
California Bd of Equalization v Chemehuevi Tribe 474 US 9, 12 (1985).

There are also a number of reported cases where courts have required individual Indian
retailers to collect cigarette taxes on sales to non-Indians E.g.. Kaul v Stephan 83 F 3d 1208,
1216 (10th Cir 1W6K Kansas had probable cause to search on-reservation business since no State
law exempted Indian retailers from collecting sales tax on sales to non-Indians), United States v
Gord. 77 F 3d 1 192, 1 194 (9th Cir 1996) (Possession of unstamped cigarettes by Indian retailers,
even if intended for on-reservation sale to Indians, violated Washington state law and formed the
basis for an action under the federal Contraband Cigarette Trafficking Act ), United States v
Baker. 63 F 3d 1478, 1489-1491 (9th Cir 1995) (Washington's tax scheme as it applies to Indian
retailers located on-reservation did not impermissibly burden tribal sovereignty, was not
preempted by federal law and did not violate the Equal Protection Clause of the Constitution),
State of Oklahoma v Bruner 8 1 5 P 2d 667, 669-670 (Okl 1991) (State can enforce sales taxes

pp 82, 86-89, "Legislators balk at Pataki plan," Buffalo News, May 29,
1 997 and "Governor Pataki Acts to Bring Fairness to Indian Nations" New York Executive
Chamber Press Release, May 22. 1997

'* Personal communication, Nebraska Department of Revenue

515

The Honorable Ben Nighthorse Campbell, Chairman
Senate Indian Affairs Committee
April 21, 1998
Page 8

collection requirements on sales to nonmembers, record keeping requirements, and registration
requirements on Indian conducting business on reservation, but cannot require retailers to obtain
state licenses and permits) See also. New York State Depart ment of Taxat ion and Finance v
Tvler Distribution Centers Inc 639 N.Y.S. 2d SIS (1996) and New York State Department of
Taxation and Finance v St Regis Group. 635 N.Y.S. 2d 980, 983 (1995) (State could impose its
registration requirements and forfeiture laws against liquor distributors transporting to an Indian
reservation located within New York); Snvder v. Wetzler. 603 N.Y.S. 2d 910, 914 (1993),
affirmed, 620 N.Y.S. 2d 813 (State has legal authority to require an Indian retailer to collect
excise and sales taxes on sales to non-Indians occurring on-reservation); State of Arizona v.
Dillon- 826 P. 2d 1 186(Ariz. 1991) (Arizona luxury privilege tax validly imposed on non-member
Indian retailer doing business on reservation), Gord v. State of Washington. 749 P 2d 678, 682
(Wash. 1987) (State can enforce sales tax for on-reservation sales made to non-Indians). These,
of course, are all reported cases There may well be a larger number that are not reported

Overall, then, I believe it is clear that most states have worked this problem out with well
over 100 tribes, and that adequate legal remedies are available to states where tribal or Indian
retailers have not agreed upon a resolution of the cigarette tax collection problem.

Sincerely,

%m£L

Reid Peyton Chambers
RPCskk

516

TESTIMONY OF THE

SHOSHONE BANNOCK TRIBES OF THE FORT HALL RESERVATION

ON SENATE BILL 1691. 105 ,M CONGRESS 2d SESSION

The Shoshone-Bannock Tribes of the Fort Hall Indian Reservation in southeastern
Idaho, present the following written testimony in opposition to Senate Bill 1691. Senate
Bill 1691 strikes at the heart of tribal sovereignty by seeking to eliminate an essential
attribute of such sovereignty - tribal sovereign immunity. This broad, far-reaching
legislation is in direct conflict with the established federal policy of tribal self-
determination, contravenes the well established principles of federal Indian law enunciated
by the United States Supreme Court and Congress supporting tribal courts, and treats tribal
governments in a discriminatory manner in violation of its trust responsibility. Senate Bill
1691, if enacted would have a devastating impact on the basic functioning of tribal
governments to pursue economic development through contracting; to provide a stable
revenue base for its membership without intrusions from state courts and tax agencies,
and private sector; to protect their governmental coffers from frivolous lawsuits; to
preserve their tribal judicial system from outside interference of foreign federal and state
court judges; and provide for the general health, welfare and safety of their tribal
community and reservation homelands. For the reasons above and presented more fully in
this testimony, the Shoshone-Bannock Tribes must strongly oppose Senate Bill 1691.

The status of Indian tribes as governments has been confirmed repeatedly by the
United States Supreme Court. It is thus well established that Indian tribes are sovereign
entities with inherent powers of self-government. These inherent powers of tribal
sovereigns are powers not delegated from Congress, but rather are powers that originate
from the original sovereignty of Indian tribes, sovereignty which predates the European
arrival to this continent and the formation of the United States.

517

Tribal sovereignty has several adjuncts, one of the most important of which is tribal
sovereign immunity. Indeed, over 75 years ago, the Supreme Court recognized the tribal
immunity doctrine. Turner v. United States . 248 U.S. 354, 359 (1919). This doctrine has
been consistently reaffirmed by the Supreme Court. Santa Clara Pueblo v. Martinez , 436
U.S. 49 (1978); Oklahoma Tax Comm'n. v. Potawatomi Indian Tribe , 498 U.S. 505
(1991). Moreover, the common law immunity of Indian tribes is coextensive with that of
the United States. Kennerlv v. United States , 721 F.2d 1252 (9 ,h Cir. 1983).

Tribal sovereign immunity is necessary to preserve the autonomous political
existence of tribes. Furthermore, one of the fundamental purposes of sovereign immunity
is to protect against unconsented lawsuits for retroactive relief in the form of money
damages payable from a public treasury. Such relief is prohibited because it would deplete
the public treasury as a means of compensating for past wrongs. Sovereign immunity also
prevents unwarranted frivolous suits being filed against governments which can cripple a
government's ability to govern if it must continually respond and defend such suits.

Senate Bill 1691 seeks to authorize the blanket waiver of the thoroughly embedded
doctrine of tribal sovereign immunity, and open the door for lawsuits against tribal
governments in several areas including general contracts actions, state taxation, and tort
claims. The proposed legislation also permits such lawsuits to proceed in federal and state
courts and totally disregard the established tribal court system and tribal laws enacted to
control business and civil matters and relationships on Indian reservations and involving
tribal governments. The Shoshone-Bannock Tribes adamantly oppose Senate Bill 1691
based on several reasons.

First, Senate Bill 1691 is a major retreat and is totally inconsistent with the well
established federal-tribal relationship. The three branches of the federal government have
formally acknowledged tribal sovereignty through two centuries of treaties, executive

518

orders, legislation and judicial opinions. In 1975, President Richard Nixon reversed the
decades of assimilationist and domineering federal policy towards Indian tribes by
announcing a new era of "Self-Determination* in which tribes would be supported in their
efforts to gain tribal self-sufficiency. Each succeeding administration has embraced this
Indian policy and the important government-to-government relationship, including President
Clinton who reaffirmed it on April 29, 1994 when he issued his directive in dealing with
Indian tribes. Accordingly, each administration has pledged its commitment to upholding
its treaty obligations to tribes, and its trust responsibility to protect and preserve tribal
institutions, resources and land, and communities from the intrusions of the majority
society

Similarly, an immense body of Indian law has developed in the judicial arena
interpreting federal and other laws to uphold tribal sovereignty and its adjunct - sovereign
immunity. The Supreme Court has most consistently recognized the inherent powers of
tribal governments and interpreted many laws, regulations, and policies to reaffirm the
essential powers of tribes to enter undertake commercial and business dealings, to control
and regulate their territories, and to raise revenue in the form of taxes. In general, the
Supreme Court has consistently upheld tribal self-determination, and preempted the
intrusions of states into tribal matters.

The Congress has played a major role in bolstering tribal sovereignty and promoting
the goal of tribal self-sufficiency. Congress has facilitated the self-determinations of tribes
by the passage of legislation in a broad spectrum of areas including, economic
development, financing, exemptions from certain state taxation, improvements for judicial
and law enforcement systems, contracting, cultural preservation, education, social
services, environmental regulation, and natural resources development. Significantly,
Congress provided an exclusive role for tribes in each of these acts rather than assuming

519

that the federal or state agencies would undertake such responsibility. Indeed, in the field
of environmental regulations Congress has treated tribes as states for purposes of primary
authority, in the area of natural resource development, tribes have been provided greater
flexibility in negotiating and entering into mineral agreements, and in the area of economic
development tribes Congress has enacted legislation to facilitate tribal control and increase
their governing capacity.

Overall, the major legislation enacted by Congress has vested important
decisionmaking in tribal governments, and tribes are meeting the challenges of greater
responsibility entrusted to them by the Congress and the courts. Tribal governments are
increasingly complex entities with major infrastructures implementing and administering
laws, controlling and regulating their territories and conducting business and development
with majority society. Senate Bill 1691 now seeks to shift and abruptly change the major
federal Indian policy of self-determination. Such a drastic change is unwarranted and
would not be rationally related to the federal government's treaty commitments to tribes,
and its trust relationship to tribes.

Second, Senate Bill 1691 threatens the political integrity of tribes in terms of their
sovereign right to determine the law of torts, contracts and civil rights occurring on the
reservation. The proposed legislation would permit state law to be applied in actions
involving torts and contracts and federal law in civil rights actions, even if the case arose
on in Indian territory and involved a tribal government. The Supreme Court has declared
that tribal courts play a vital role in tribal self-government. Iowa Mutual Ins. V. LaPlante .
480 U.S. 9, 14 (1987). A tribe's role is critical particularly with respect to torts, an area
of common law traditionally addressed through a judicial forum. The Tribes, no less than
the states, have an essential interest in providing a court to hear tort claims arising within
its territory and involving the tribal government. Moreover, allowing state law to be

520

applied to reservation based incidents is a direct intrusion into the affairs of tribal
governments and their ability to make and enforce their own laws.

Senate Bill 1691 also disregards the tribal |udicial systems established to hear civil
matters including contract disputes, tort claims and civil rights violations, and instead
permits such actions to be directly filed in federal and state courts. Elevating the power of
state and federal courts at the expense of tribal courts is a direct assault on the concept of
tribal sovereignty. Central among the powers of a sovereign and essential to tribal self-
government is the provision of a forum for disputes arising on an Indian reservation.
Indeed, the authority to provide a forum for such disputes is integral to the definition of
tribal sovereignty. See. Iowa Mutual . Moreover, the examination and interpretation of
tribal documents, constitutions and laws must in the first instance be undertaken by a
tribal judge not a state or federal court judge. The doctrine of exhaustion of tribal court
remedies provides state and federal courts with the benefit of a tribal judge's expertise.
National Farmers Union Ins. Co.. v. Crow Tribe . 471 U.S. 845 (1985). Additionally, in
considering the Indian Tribal Justice Act, the Senate emphasized that "tribal courts are
permanent institutions charged with resolving the rights and interests of both Indian and
non-Indian individuals." S.Rep.No. 103-88, 103 rd Cong., 1" Sess. 8 (1993). Similarly, the
House confirmed the same understanding. H.Rep. No. 103-205, 103" 1 Cong., 1" Sess. 9
(1993).

Furthermore, over 160 years ago, the Supreme Court first articulated the policy
against state interference in Indian affairs. Worcester v. Georgia . 31 U.S. (6 Pet.) 515
(1832). The concept that state law has no force in Indian country remains today and has
been reaffirmed in an unbroken line of authority. In 1945, Justice Black proclaimed, "The
policy of leaving Indian free from state jurisdiction and control is deeply rooted in this
Nation's history." Rice v. Olson . 324 U.S. 786, 789 (1945). These basic federal Indian

521

law principles reinforce tribal sovereignty and a tribe's political ability to make their own
laws and be ruled by them. Permitting the filing of lawsuits against tribal governments in
federal and state forums, off-reservation, especially for reservation based actions totally
ignores the well established case precedent. And, the bill permits the interference of state
law in reservation and tribal activities, a concept that is inherently detrimental to any tribal
political integrity and the authority of tribal courts. As emphasized in 1886 by the
Supreme Court for its justification in excluding state control over Indian affairs: "They
(Indians) owe no allegiance to the States, and receive from them no protection. Because
of the local ill feeling, the people of the States where they are found are often their
deadliest enemies." United States v. Kaqama , 1 18 U.S. 375 (1886). That justification is
equally viable today for rejecting Senate Bill 1691.

Third, Senate Bill 1691 broadly waives the sovereign immunity of tribes for tort and
contract claims while preserving the sovereign immunity of states. This unprecedented
proposal amounts to an unequal treatment of tribal governments as opposed to the
treatment of state governments in similar situations. This discriminatory unequal treatment
of Indian tribes is certainly not "tied rationally to the fulfillment of Congress' unique
obligation toward Indians." Delaware Tribal Business Committee v. Weeks . 430 U.S. 73
(1977). Significantly, Senate Bill 1691 is in direct conflict with the Congress' trust
responsibility to protect the right of tribes to govern themselves and their reservations
through and by the enactment of tribal self-determination legislation and policies.

Again, this proposed legislation is a direct assault upon the sovereignty of tribes.
The legislation provides for a general, unlimited waiver of tribal sovereign immunity for
contract and tort claims. Rather than recognizing that tribal governments have the
authority to negotiate and decide to waive their immunity, particularly in business and
commercial dealings, Senate Bill 1691 consents to lawsuits against tribal officials and

government. Senate Bill 1691 is based upon the misconception that every tribal
government refuses to waive its sovereign immunity in all situations. Additionally. Senate
Bill 1691 disregards the fact that many tribes doing business under their Section 1 7 Indian
Reorganization Act Corporations have a waiver of sovereign immunity in their charters.
Thus, there is an established means by which tribes do waiver their sovereign immunity,
but it does not waive the immunity of the tribal government as proposed wholesale by
Senate Bill 1691 . Tribes also waive sovereign immunity to the extent of the limits of
liability insurance that the tribal government has purchased, and provide for limited waivers
of sovereign if the proceeding is brought in the tribal court.

Congress has provided funding and legislation for tribal governments to pursue a
wide array of business and commercial dealings to bolster tribal economies and provide for
basic essentials on many reservations. Congress must also permit tribes the opportunity to
make business decisions and enter into contracts without direct interference as set forth in
Senate Bill 1691.

Finally. Senate Bill 1691 subordinates Indian tribes to individuals and corporations
for the purpose of permitting tort claims against tribal governments. In short, such action
would extinguish the entire sovereignty of tribes and turn back the hundreds of years of
case precedent, congressional acts and executives orders recognizing tribes as sovereign
governments. As made perfectly clear by the Supreme Court, "Indian tribes are unique
aggregations possessing attributes of sovereignty over both their members and territory."
And Indian tribes "are a good deal more than 'private voluntary organizations." United
States v. Mazune . 419 U.S. 544 (1975).

In conclusion, Senate Bill 1691 is attempting to eliminate tribal sovereignty. Senate
Bill 1691 is attempting to do so in the absence of any concrete facts or rational reasons to
lustify such devastating Congressional action. Clearly, this legislation must be reacted in

523

light of the overwhelming federal policy of supporting tribal self-government by all three
branches of the federal government; in light of the established case law recognizing and
upholding the authority of tribal |udicial systems to adjudicate civil contract, tort and civil
rights cases; and in lights of the Congress' trust obligations to Indian tribes.

hnaa

524

PETROLEUM
MARKETERS
ASSOCIATION OF
AMERICA

1901 N. Four Mvm Duv» • Si m 1200 • Ajuim;tos. Vi*;i\ia« 22209-1604 • 70J-S51-8OO0 • Fax 70S-S51-9160

TESTIMONY OF BURTON BLACK

ON BEHALF OF THE

PETROLEUM MARKETERS ASSOCIATION OF

AMERICA

BEFORE THE

COMMITTEE ON INDIAN AFFAIRS

UNITED STATES SENATE

WEDNESDAY MARCH 11™ 1998

525

On behalf of the Petroleum Marketers Association of America (PMAA), I would like to
provide testimony on the issue of sovereign immunity and how it affects small businesses and
the tax structures of the states. I am Burton Black and am President of Black Oil Company,
and I am also President of the Utah Petroleum Marketers Association. Black Oil serves the
needs of petroleum users in the four corners area of Arizona, Colorado and Utah, through four
company operated convenience stores, three commissioned agent locations, two bulk plants
and nine dealers. In 1997, Black Oil sold $ 1 5,500.000 worth of products, of which $10,000,

000 were petroleum products. If you have any doubts, I am the typical small business marketer
who is the core constituent of the Petroleum Marketers Association of America.

The Petroleum Marketers Association of America (PMAA) is the national representative of
petroleum marketers. PMAA represents marketers in nearby every state through its state and
regional associations. Together these marketers sell nearly 50 percent of the diesel and over 40
percent of the gasoline consumed in the United States. Nearly 90 percent of these members
are small businesses.

Over the last several years, there has been discussion throughout the industry of the growing
problem of tax evasion on fuels. With taxes of 24.4 cents a gallon federal and as much as 39
cents a gallon in state taxes, evading motor fuel taxes has been a passion for many. Over the
last decade, the industry has been victimized by the traditional Mafia and the Russian Mafia.
Additionally, there are people importing and exporting product to Canada and avoiding the
national taxes of both countries. As long as the rate of tax is this high, there will be a strong
incentive to find a way to avoid paying the tax either through legal loopholes or plain theft.

Unfortunately, the latest group who is willing to engage in the evasion of taxes are Native
Americans. We have seen the evasion occur in several states including New York,
Washington, Oklahoma, New Mexico, Utah and Arizona. Now, I use the term evasion, and I
recognize that the tribes do not see it as evasion. They are of the view that they are beyond the
reach of state governments who are trying to impose the taxes and are enjoying their sovereign
rights to sell fuel tax free.

1 am not here to discuss the historical relationships of the tribes and the United States or the
current status of the tribes and their peoples. I am here to describe tax evasion that results in
unfair competition.

Under the current law, most of which has been established by the United States Supreme
Court, the general rule is that the doctrine of tribal sovereign immunity prevents a state that has
not asserted jurisdiction over native American lands under P.L 280 from taxing the sale of
goods to members of a federally recognized Indian tribe when sales occur on land held in trust
by the U.S. government for the benefit of the Tribe. However a State may collect taxes on
sales to nonmembers of the Tribe. While the Tribe has an obligation to collect these taxes, the
state may not maintain an action in state or federal court to require the tribal government to
provide such assistance.

Thus, we are left without a remedy when a tribal fuel retailer sells fuel to someone who is not a
member of the tribe. They should collect the state tax which is nineteen cents per gallon and
they should send it to the state where the retailer is located. However, if the Tribe does not do
this, several things happen. First, the state gets no money for road construction or other public
works projects. Second, the tribal retailer will enjoy both a substantial price and profitability

526

advantage in the market. Third, the state can do nothing to correct the situation.

For my company, it is of course impossible to determine what is going on in a particular
market. I have no right to review tax forms of other retailers, I cannot review invoices,
and I cannot verify where the fuel is being bought. What I can verify is what is going on
in the market. I have traditionally supplied two facilities in northeast Arizona as their
wholesale supplier. I have been informed by the dealers at these locations that the Navajo
Oil and Gas Company has offered to seU them fuel at a price below my wholesale price
plus tax. Thus, the stations intend to terminate their business with my company.

I beard from my brother who operates in Kayenta, Arizona and he stated that a competing
service station on the Navajo Reservation was purchased by the Navajo Oil and Gas
Company. As a result, this station no longer charges the state tax on sales and he is no
longer competitive and is likely to go out of business.

In Roosevelt, Utah, I have a dealer who competes with the Ute Tribe. At this facility, the
tribal store is able to sell fuel to all customers. The Utes are able to sell gasoline at a price
2-3 cents less than my purchasing price which includes the fuel taxes. Of course, I cannot
compete since I have to pay for transportation, insurance, and income taxes. At this
station, the Utes charge the same price for both tribal and non-tribal members.

It is my understanding that this price that is charged is the same for both tribal and non-
tribal members. How this can occur is a little uncertain. The Tribes are allowed to
purchase fuel for government use without the tax but generally are not supposed to
purchase the fuel for resale to the motoring public without taxes. Fortunately for the
Treasury of Utah, these locations are fairly remote and low volume stations. However,
that is no consolation to me.

The Governor is currently examining issues of taxation in Utah. But it is my opinion that
he has no power to force the Tribes to fully comply with any law that would fully impose
the tax.

Why should this be a concern of Congress? The main reason is that the United States
Constitution specifically requires the Congress to regulate commerce between the states
and between the Indian Tribes. Thus, it is clear that the framers of the Constitution
intended the Congress to continuously examine these issues.

Additionally, when the U.S. Supreme Court has reviewed cases regarding these tax issues,
they have indicated that proper recourse lies with the Congress. We would concur. We
believe that states and Tribes should be working to collect the taxes that are owed.
Further, we believe that the states and the Tribes should be able to develop an effective
method of allocating the funds to the parties that are entitled to the tax receipts. In a
model world this would occur without federal intervention. However, we do not live in a
model world, and since Congress is responsible for these relationships, Congress must
intervene to remedy the problems.

While several states have attempted to curtail evasion, the results have been mixed. The
one thing that has been perfectly clear is that states are not able to control the issue. It is
also clear that without federal legislation, there cannot be a level playing field.

In conclusion, I and my national association are encouraging you to develop and pass such
legislation. Section three of the American Indian Equal Justice Act would empower the
states to collect these taxes and thus we are supportive of this legislation. However, we
would welcome the opportunity to work with the Committee to develop and implement
any solution which ensures a fair marketplace.

528

Black oil co.

Wholesale • Retail

March 19. 1998

Senator Slade Gorton
730 Hart Building
WASHINGTON DC 20510

Dear Senator Gorton;

My name is J. Burton Black, and I'm a third generation petroleum marketer (I'm also
privileged to be serving as the President of the Utah Petroleum Marketers Association). My Grandpa
started distributing petroleum back in the days when (and to) John Ford and John Wayne were
making movies in Monument Valley. I represent Black Oil Company, of Monticello, Utah. We
serve the needs of petroleum retailers and users in the four-comers areas of Arizona, Colorado, and
Utah. In 1997, Black Oil sold over 10 million gallons and 1S.S million dollars of product.

I testify to you of the growing problem of Native American Tribes and businesses evading
state excise taxes on motor fuels. This tax evading practice translates into an 1 8 to 25 cent per gallon
advantage for Native American Tribes and businesses in our market area.

Even though this is 'state excise tax evasion,' it is a federal problem because tribes fall under
sovereign nation status and are thereby not governed by state law.

In our area, we compete against Navajo Nation Oil and Gas, Inc. (hereafter referred to as
NNOG). Remarkably, NNOG recently told Dun & Bradstreet that they expect sales of over 30
million dollars this year! And, it s only their third year of operation] \\\ It has taken Black Oil over
60 years to gain 15.5 million dollars in annual sales!

Additionally, Dun & Bradstreet reports that NNOG is owned 100% by the Navajo Tribe
(suggesting that federal dollars are competing, either directly or indirectly, against us traditional
petroleum marketers).

At these staggering, federally-tolerated competitive advantages, it won't be long before
NNOG is the only marketer serving the Navajo Nation. When and if this happens, will gasoline
continue to be sold on the Navajo Reservation at the price that is today? If NNOG is the only
marketer serving the Navajo Nation, wouldn't that be considered as violating federal anti-trust laws?

Black Oil is losing the business of two Northern Arizona dealer locations to NNOG; even
though, the State of Arizona is trying (unsuccessfully) to crack down on those who do not collect and
remit state excise taxes on motor fuels. The financial loss to Black Oil in losing these two locations
will be over $30,000 in net profit annually.

NNOG has promised to loan or grant over $ 1 50,000 to the owner of these locations if he'll
buy fuel from them for both locations. The only way that NNOG can afford such subsidies is to
charge their dealers (including our soon-to-be-former dealer locations) 5 to 8 cents per gallon less

33 N. Main, P.O. Box 159, Monticello. UT 84636 • Phono (801) 587-2215 • Fax (801) 587-2863

529

Senator Slade Gorton
March 19, 1998
Page 2

than we do (which, by the way, is less than our delivered cost), keeping the non-remitted state excise
tax for themselves.

Some fellow traditional marketers are now adopting the "If-you-can't-beat-'em, join-'em"
stance, working through firms with native American ties to distribute state excise tax-free fuel As
this trend continues, less and less funds will flow into the coffers of the states Consequently, those
states will turn to the federal government for help.

Thence, more and more traditional marketers will find it harder and harder to remain in
business

Therefore, Senator, I urge you to close this loophole as soon as possible. Stop the tribes from
competing unfairly against us traditional marketers AND keep the states' highway funds solvent.

Thank you for listening. May the Lord bless you in your endeavors to legislate our great
country

Sincerely,

BLACK OIL CO., INC., and

UTAH PETROLEUM MARKETERS ASSOCIATION

//J. Burton Black
" President

cc: PMAA - John Huber

El CAPITAN SERVICE

Box 145

Kayenta, Arizona 86033

February 25. 1998

Mr J. Burton Black, President
Black Oil Co.
Monticello, Utah 84535

Dear Burton,

I am writing to you as my Texa<-o Pptro)P'«n Distributor an? as a Director
of the Utah Chapter of Petroleum Marketers Association to solicit your
assistance in helping me solve a major problem developing in my marketing area.

I am sure you are aware the Chevron Service Station neighboring my Texaco
Station in Kayenta, Arizona was purchased by the Navajo Oil and Gas Co. a
couple of years ago. For the past 14 months the Navajo Oil and Gas Co. has
been able topurchase and resale gasoline for their stations on the Navajo
Reservation exempt Arizona State Gasoline Tax. This gives them an 18* per
gallon advantage over the other stations on the Reservation which they
do not either own or distribute to.

I am not able to market my gasoline as cheaply as they do so I find my
sales volume decreasing every month. I have been in business at this location
for over 33 years. I feel I have served the public well and consequently
I havs developed a fairly large customer base. But gradually I find my
customers drifting away because I can not sell them gasoline as cheaply
as does the Chevron sation. At the rate it is going, I will not be able to
remain in business much longer.

I hope that you can help do something to level the playing field. Either cause
the Navajo Oil and Gas Co. to pay Arizona Gasoline Tax or allow the rest of
us to purchase gasoline State Tax exempt. This current injustice must be
corrected or all non Navajo Oil Co. stations will be forced out of business.

Your assistance is greatly appreciated.

Paul D. Black

531

MUSCOGEE (CPEEIM NATIONAL COUNCIL

Crack Capitol CanMex - Ffce fttcund - Now H at Una) M - DC Don IH
CfcmuMee. Cfc 74447 - JIS JM I4IC - fAX 918/74643813

Spmtktr Kmnth L Ch**n. Sr Stcond Sptkrr an S File

STATEMENT TO THE SENATE COMMITTEE

ON INDIAN AFFAIRS

ON SOVEREIGN IMMUNITY

March 11, 1998

Good moming Mr. Chairman and members of the Committee, I am Bill S. Fife, Second
Speaker of the National Council, the legislative body of the Muscogee (Creek) Nation.
With me today also is Kenneth L. Childers, Speaker of the National Council.

I appear before the Committee today to express the Muscogee Nation's extreme concern
over the legislation proposed by Gorton.

I want to provide perspective about the Muscogee (Creek) Nation and how we, as a
people, characterize our sovereignty and OUR Nation. Muscogee is the name we have for
ourselves. "Este Muscogee" which means Muscogee People. Originally, we lived in
Southeastern United States and treatied with the nations of England, Spain, and France
prior to entering into our first treaty with a young United States in 1790. White
encroachment upon our lands, encouraged by President Andrew Jackson, resulted in a
forced removal to Indian Territory in the 1830's.

Arriving in our new homeland, we re-established the tribal government, ratified a
constitution, established schools, court systems, law-enforcement officers and jails, and
a diversified mix of all thing necessary to run a Nation. Then came the American Civil War
and afterward, the Creek Nation, along with the United States, went through a
reconstruction period.

We ratified a new Constitution, built a new Council House in our Capitol City, Okmulgee,
and struggled with our economy. We were a strong sovereign Nation.

However, as the 20* 1 Century emerged, a new threat was forming. Statehood! and a desire
four our resources. We fought for the sovereignty of our government — our lands — and
the very existence of our people. Our natural resources were at stake: land, and, among
other things, oil — the two natural resources that could benefit our people. By 1901 the
Dawes Commission was enrolling our tribal members for allotments. Through the
Sequoyah Convention we, along with other tribes, fought statehood, but the Enabling Act
of 1906 ended that effort.

Etvtwcce Emcpcnay v

532

Thai same year, the Five Tribe* Act was enacted with the intent to strip the tribal
government of its powers: however, the task was never completed, and our government
continued-despite Federal intervention and suppression.

Years passed. Tribal leaders worked steadfastly to keep our government going. In the
70*s. despite strong Federal opposition, the word of the people succeeded in the ratification
of a new constitutional government. Still new battles lay ahead in the civil and criminal
jurisdiction arena-and again, despite Federal opposition, our Court and Law Enforcement
systems were restored.

We've maintained the new Muscogee (Creek) National government for around 160 years
since the removal to Indian Territory. Oklahoma has only been in existence for 86 years.
When compared to the Creek Nation, Oklahoma is stttl a fledgling government. We spent
the first 78 years of this century battling to unlock the chains of Federal suppression; and,
we spent the next 15 short years forgoing a new constitutional framework - the word of the
people!

The Federal government is challenging our sovereignty by entertaining legislation to
forcibly waive immunity of Indian tribes for claims arising in tort or contract thru S 1 691 .
The challenge is not over our land and oil resources this time- it is over the ability to
govern taxation, the ability to resourcefully manage economic resources, and the ability
to regulate and engage in commerce - again resources which benefit our people. For the
last 160 years, our Nation has used its powers to build its economies, improve its citizens'
quality of life, manage environment and natural resources and pursue goals through the
powers of self-government.

So, in the characterization of sovereignty for the Creek Government, we will always be
here; we are permanent; this is our homeland, and, we are tenacious.

Consequently, the Muscogee (Creek) Nation will stand tall and use every legal means
necessary to hold our ground. Sovereignty is meaningless if we must get approval from
the state or Federal Government to govern ourselves. When we are recognized as an
equal, then we will be able to come to the negotiating table and work out an agreement
consistent with our treaties, the U. S. Constitution, and Federal law. At that point, we will
have taken a significant step toward sovereign relations. On the other hand, when laws
are passed that violate our treaty and constitutional rights, there is no progress. This is
suppression!

As Indian people, we always are aware that sovereignty ensures our identify for future
generations. Decisions that I and other tribal leaders make affect future generations. We,
in good faith, cannot give away the rights of generations not yet bom.

533

Therefore, with such high stakes, we have to be very cautious when selecting a course of
action for Creek people. We realize the Creek government does not exist in a vacuum-
separate and alone--but the Federal Government must realize it cannot effectively govern
as if it were isolated from Indian people.

Many races live and work side by side. We believe that what we do in the Creek Nation
must benefit the whole region: Indian and non-Indian alike, as we have so aptly
demonstrated. As we strive to improve the quality of life for our tribal members, it is our
philosophy to positively impact the region economically, socially, and culturally. We are
contributing to the development and growth of the whole area for all people, and we will
continue to do so.

I truly believe by working together, we can achieve much more. Too often, different groups
have taken opposing positions rather than co-existing. Ultimately, I conclude that the time
is right to get rid of old attitudes and old stereotypes which stand in the way of progress.
We need each other for support in this troubling and sometimes bewildering environment.

Indeed, neither all governments nor all people will agree on every issue. We will still have
differences of opinion. Nevertheless, we must still come together for the good of human
kind.

Sovereignty is not about colonial dominance, dictatorial relationships, and suppresive acts
by a dominant society. In govemment-to-govemment relations, it is about mutual respect.
Sovereignty is workable!

The National Council of the Muscogee (Creek) Nation enacted a Tribal Resolution which
opposes any Federal Legislation which would interfere with Indian Tribe's sovereign
immunity, tribal self -governance, and place tribal assets and funds at risk. (Copy attached.)

I am also at this time presenting the Position Statement of the Muscogee (Creek) Nation.
(Copy attached.)

534

Owfctllllll tinnlli MMiMi Ht«rn«lM*M Hltn MS
. Cfc 144*1 ■ »!•/#*• I4IC fA* »!»/#>«-«* I i

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STATEMENT OF POSITION OF THE MUSCOGEE (CREEK) NATION

ON S. 1691, PROPOSED WAIVER OF SOVEREIGN IMMUNITY OF

FEDERALLY RECOGNIZED INDIAN TRIBES

The Muscogee (Creek) Nation, a Federally recognized Indian Nation with approximately
over 42,000 citizens, has a jurisdictional area covering all or part of 1 1 counties in eastern
Oklahoma. Like many other tribes in the United States, the Muscogee Nation provides a
broad range of social, health and education programs for its Indian citizens. Some of these
programs are funded in whole or in part with revenues raised through tribal taxation or from
tribal enterprises, and some programs are funded, in whole or in part, from grants and
contracts with agencies of the federal government.

Immunity from suit in state and federal courts is one attribute of the inherent sovereignty
of Indian tribes which has always been recognized, respected and protected by the United
States Government. Senate Bill 1691 would forcibly waive the sovereign immunity of all
Indian tribes for claims arising in tort and/or in contract and make tribes amenable to suit
in state courts for all such claims. As written, S. 1691 is entirely inconsistent with this long-
standing respect for tribal immunity, it is also especially inconsistent with almost 30 years
of Federal Indian policy, which has encouraged tribes to govern and provide for
themselves. The threat of litigation, the potential loss of tribal assets, and the cost of
defending litigation in state court would present a powerful deterrent against engaging in
tribal revenue-raising activities and enterprises. The tribes' ability to plan and to manage
risks, and to raise revenues to fund governmental functions and services to tribal members,
would be substantially impaired.

The "finding" in Section 1 . of S. 1691 that over the past century, state governments "have
dramatically scaled back the doctrine of sovereign immunity without impairing their dignity,
sovereignty, or ability to conduct valid government policies,' is greatly exaggerated in some
instances. For example, the State of Oklahoma imposes a statutory cap on non-medical
most such claims against the state at $25,000 per claim for property loss and $1 00,000 per
claim for personal injury, even though the actual damages may greatly exceed these
limitations. This is hardly a "dramatic scaling back' of the doctrine.

Most importantly, it has always been left up to the states themselves to decide when, if and
to what extent they should waive sovereign immunity. For the Congress to forcibly waive
the tribes' immunity from suit is contrary to the Federal Government's policy of fostering
tribal self-governance and its responsibility as a fiduciary to protect Indian tribal
governments and Indian people.

Ctvlwoce Emoponayv

535

TR 98-06

CODIFICATION #33 PROCLAMATIONS AND RESOLUTIONS

A RESOLUTION OF THE MUSCOGEE (CREEK) NATION OPPOSING FEDERAL
LEGISLATION WHICH WOULD INTERFERE WITH INDIAN TRIBES' SOVEREIGN
IMMUNITY, TRIBAL SELF-GOVERNANCE, AND PLACE TRIBAL ASSETS AND FUNDS
AT RISK

WHEREAS, The Senate Committee on Indian Affairs has tentatively scheduled the

first of three hearings on Indian tribes' sovereign immunity beginning*
March 11, 1998; and.

WHEREAS, Federal legislation has been drafted which would provide authority for

states to sue tribes and-or tribal members in federal court for
collection of sales, excise, and use taxes; and,

WHEREAS, This Federal legislation also deals with contracts, torts, civil rights,

and land use and would expose tribal land and assets to loss through
federal courts.

NOW THEREFORE BE IT RESOLVED THAT:

The Muscogee (Creek) Nation strongly opposes any legislation which
would interfere with any Indian tribes' sovereign immunity, tribal self-
governance, and place tribal assets and funds at risk.

ENACTED by the Muscogee (Creek) National Council on this 28th day of February 1998 .

IN WITNESS WHEREOF, the Speaker of the Muscogee (Creek) National Council has
hereto attached his signature.

Kenneth L. Childers, Speaker
National Council
Muscogee (Creek) Nation

CERTIFICATION

I. the undersigned, certify that the foregoing is a true extract from the minutes of the
Muscogee (Creek) National Council comprised of twenty-six members with Twenty -two
members attending this meeting on the 28th day of f«hwiy HM and that the above is
in conformity with the provisions therein adopted by a vote of 21 in favor, against, Q
abstentions, and that said Resolution has not been rescinded or amended in any way and
the above is the signature of the Speaker of the National Council.

tuthie A. Burgess. Recording Secretary
Muscogee (Creek) National Council

APPROVAL

I. tf*£rjnopai Chief of the Muscogee (Creek) Nation, hereby affix my signature this
ly day of 'y\[iA.cA/7 Wtt. to the above Resolution. TR tt-Ot. authorizing it to
become a Resolution under Artide VI . Section VI of the Constitution of the Muscogee
(Creek) Nation.

z_^m

+p &&~ —

R. Perry Beaver, Principal Chief
Muscogee (Creek) Nation

537

Oneida Indian Nation

ONEIDA NATION TERRITORY, VIA ONEIDA, NEW YORK

Statement of Keller George
President of the United South and Eastern Tribes
Assistant to the Nation Representative, Oneida Nation
March 25, 1998

This statement is submitted to the Senate Indian Affairs Committee for inclusion in the record for
the hearing held on March 1 1 , 1 998 regarding S. 1691.

My name is Keller George. I am President of the United South and Eastern Tribes, and I
am an enrolled member of the Oneida Indian Nation in New York where I serve as the Assistant
to the Nation Representative. I submit this statement in opposition to S. 1691, specifically
section three of that bill, which would allow states to take Indian nations to court for purposes of
compelling tribal governments to serve as tax collectors for state governments. This provision
would not only abrogate the sovereignty of Indian nations, it would set a dangerous president and
embolden those who seek the eventual extinction of tribal governments. Further, the proponents
of this measure have grossly overstated the magnitude of the problem and are attempting to
impose a federal solution on a problem that can — and has been — adequately addressed at the
state and local level.

The petroleum marketers and others who favor this legislation often cite the unresolved
cigarette and fuel tax dispute in New York as justification for federal intervention. In making their
case, they have distorted the nature of Native American motor fuel businesses and have
misrepresented the actions of many New York-based Indian nations.

In all of New York, there are approximately 30 service stations that are owned and
operated by either an Indian nation or a Native American entrepreneur. This represents less than
one-third of one percent of all gas stations located within the boundaries of the state. Further, the
majority of those businesses are situated on reservations in remote locations. More than half are
located on the Mohawk reservation near the United States-Canadian border. This is an extremely
rural part of the state that sees very little automobile traffic. As to the Oneida Nation, the
majority of the patrons of our gas stations are visitors to, and employees of, our casino. These
are individuals who, but for the Oneida Nation's casino and other enterprises, would not travel to

PO Box 1 • Vernon, NY 13476
(315) 829-3090 • Fax (315) 829-3141

538

our reservation. Thus, we are not taking existing customers from existing service stations; rather,
we are bringing new customers to the area. Given these facts, the alleged adverse impact of Indian
businesses on convenience store owners and petroleum marketers is somewhat hard to
understand, especially in light of the sustained growth in the membership of those organizations
over the past ten years.

In addition to exaggerating the magnitude of this issue, the petroleum marketers have
conveniently overlooked the efforts of the Oneida Nation and other tribal governments to resolve
this issue through negotiations with the State of New York. Eighteen states have concluded
approximately 200 compacts with Indian nations in this country. The Oneida Nation has been
striving to join the ranks of those governments that have successfully resolved this issue through
negotiation. In reality, however, the current administration in Albany is the principal reason why
several New York-based Indian nations have not been able to come to terms with the state on the
subject of fuel and cigarette excise taxes. A brief history of the Oneida Nation's dealings with the
State of New York on this matter will serve to illustrate this point.

The Oneida Nation began negotiations with the New York Department of Taxation and
Finance in 1992 for purposes of settling the cigarette and fuel excise tax issue. The Seneca Nation
of Indians also embarked upon bilateral discussions with the State for purposes of resolving this
matter. The Oneida Nation began its talks with the Department at a time when Indian nations
were winning most of the court battles in New York with respect to cigarette and fuel taxes.
Those court victories notwithstanding, it elected to negotiate an amicable settlement because it
believed that, irrespective of the judicial authority on this issue, a permanent and lasting solution
could be achieved only through a govemment-to-government agreement

By the fall of 1994, the Oneida Nation had exchanged several draft agreements with the
Department of Taxation and Finance and had reached an agreement in principle with respect to
most issues. In November of that year, however, the citizens of New York elected a new
governor, George Pataki. As a result, the Cuomo Administration declined to finalize the Nation's
agreement, leaving the matter for Mr. Pataki to resolve.

In May 1995, the Oneida Nation sent a letter to Governor Pataki and the Commissioner
of Taxation expressing its desire to return to the negotiating table for purposes of concluding a tax
agreement. Five months went by before the Nation received a response to its invitation.

In early 19%, we met for the first time with representatives of the Pataki Administration
to discuss cigarette and fuel excise taxes. Many of them were unaware of the Nation's prior
negotiations with the Department on this issue and had no knowledge that an agreement in
principle had been reached by the parties in the fall of 1994. They promised, however, to study
that agreement and provide us with a response.

-2-

539

One week after that meeting, the Department of Taxation and Finance issued an
ultimatum to all Indian nations: "Sign a tax agreement within 1 20 days or else face the prospect
of vigorous enforcement." This directive was not well received in Indian country. No Indian
nation was willing to negotiate with the State unless the ultimatum was withdrawn; thus, the next
four months were devoted to convincing the State to withdraw its threat and deal with the Indian
nations on a govemment-to-government basis. After the Governor finally relented, the parties
were able to commence serious discussions on the excise tax issue.

Towards the end of 1 996 the Oneida Nation reached an impasse with the State over the
issue of revenue sharing. In an effort to resolve that issue and get the negotiations back on track,
we contacted the New York Association of Convenience Stores ("NYACS") and the Independent
Petroleum Marketers of New York. We had several meetings with representatives of those
organizations for purposes of crafting a solution to this issue that we could jointly present to the
Governor. Those efforts proved successful and paved the way for the execution of an interim tax
agreement between the Oneida Nation and the State on March 31, 1997. Five other Indian nations
signed interim agreements with New York with a view towards finalizing a permanent agreement
within the next sixty days.

By the end of May, the Oneida Nation had resolved most outstanding issues with the
State and was preparing the final draft of a ten-year tax agreement which it was ready to sign at
the end of the month. Five other nations were also prepared to sign a permanent agreement with
New York. In addition, several of the remaining nations were involved in active discussions with
the State for purposes of finding a mutually acceptable solution to this problem. Towards the
end of May, however, the Governor abruptly walked away from the negotiations and refused to
sign a tax agreement with any Indian nation. Instead, he chose to send proposed legislation to the
Assembly and the Senate that would exempt all Indian cigarette and fuel sales from State taxes — a
proposal that did not find a single sponsor in the legislature. The most commonly accepted
explanation for the Governor's behavior is that he perceived the issue was hurting him in the
public opinion polls; therefore, he opted to shift the problem to the legislature.

The most recent action taken by the State on this issue occurred last month when the
Department of Taxation and Finance formally withdrew and rescinded the excise tax regulations it
previously promulgated with respect to sales of gasoline and cigarettes occurring on Indian
reservations. Thus, Indian gas stations and convenience stores in New York are not considered to
be operating illegally by the Department.

Most Indian nations in New York realize that the Governor's lack of leadership on the
tax issue does not mean that the problem has been resolved. For this reason, several New York
Indian nations participated in a conference in Ithaca, New York on June 27-28, 1997 for
purposes of finding a more permanent solution to this issue. The Indian nations invited

540

representatives of the legislature and NY ACS to participate in the conference in order to find
common ground for settling their differences on the issue of taxes. Since that conference, the
Oneida Nation has hosted other meetings between Indian leaders and representatives of NYACS
with the objective of crafting a solution that they can jointly present to the legislature this year.
Several leaders in the State Assembly and Senate have pledged their unqualified support for this
effort.

The record clearly reflects that several Indian nations in New York are prepared to resolve
the tax issue through government-to-government agreements with the State of New York. The
Oneida Nation is committed to working towards that goal, either with the Pataki Administration
or the State legislature. Senator Gorton's proposal, however, will only undermine our efforts and
will likely prolong a dispute that has already taken much too long to resolve. Moreover, section 3
of S. 1691 clearly represents only the first assault on tribal sovereignty that Mr. Gorton has in
store for Indian nations.

Thank you for considering my views on this subject. If you desire any additional
information regarding this subject, please feel free to contact me (3 1 5/829/3090) or the Oneida
Nation's Tax Counsel, Eric Facer (202/429-6504) at any time.

541

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HUALAPAI TRIBAL COUNCIL

TESTIMONY OF THE HUALAPAI NATION

ON SENATE BILL 1691

105th CONGRESS, SECOND SESSION

I. INTRODUCTION

The Hualapai Nation opposes Senate Bill 1691, the "American Indian
Equal Justice Act" ("S.1691"). S.1691 would abrogate the sovereign immunity of
Indian tribal governments for all tort claims and contract actions in derogation of
existing, well-established federal and tribal law, and without regard for the
authority of tribal courts. Contrary to existing law, S.1691 would subject tribal
governments to lawsuits in state courts under state law for torts and contracts, it
would abrogate tribal sovereign immunity for the collection of state taxes in
federal court, and it would create a private cause of action under the Indian Civil
Rights Act in federal court for unspecified damages and relief. This ill-conceived
bill is an unnecessary breach of numerous sacred treaties and agreements, and it
would result in a radical shift of federal law and policy that would make a
mockery of the federal trust responsibility to Indian tribes. S.1691 is unnecessary,
unwise and should not be passed.

II. BACKGROUND

The Hualapai Nation is a federally recognized Indian tribe organized
pursuant to a constitution adopted under the Indian Reorganization Act of 1934

47-201 98-18

542

(Tribe*). The Hualapai Tribal Council, which consists of 9 members, is the governing body of
the Tribe. The Chairman of the Tribal Council is in charge of the tribal administration. The
Tribe has a judicial department which consists of a tribal court and an appellate court. The tribal
land base consists of approximately 1 million acres of land in Mohave, Coconino and Yavapai
Counties in northwestern Arizona. The Tribe has about 2000 members, many of whom live on
the Hualapai Reservation. The tribal headquarters is located at Peach Springs, Arizona. The
Tribe owns a Grand Canyon tourist visitation center called Grand Canyon West, a Colorado River
rafting company and the Hualapai Lodge, all of which serve over 100,000 domestic and foreign
visitors annually. These businesses are operated by the tribal owned Hwal'bay Ba:j Enterprises.
The Tribe also has organized federally-chartered business corporations under the Indian
Reorganization Act.

III. EXISTING, APPLICABLE FEDERAL AND TRIBAL LAWS AND PRACTICES
The abrogation of tribal sovereign immunity in S.1691 for contract and tort actions in
state court under state law is in derogation of the long-standing principles that Indians tribes
retain "attributes of sovereignty over both their members and their territory," United States v.
Mazuric . 419 U.S. 544 (1975), and that "tribal sovereignty is dependent on, and subordinate to,
only the Federal Government, not the states ...". Washington v. Confederated Tribes of the
Colville Indian Reservation . 447 U.S. 134, 154 (1980). S. 1691 breaches these principles as
evidenced by the fact that the Tribe has established corporations that have the full authority to
make contracts and to provide for arbitration or other alternative dispute resolutions to cover any
contractual disputes that may arise. The Tribe has insurance for itself and its corporations for
tort actions brought against tribal officials or corporations.

543

In accordance with the Constitution of the Hualapai Indian Tribe, the Hualapai Tribal
Court is authorized and equipped to deal with tort and contract disputes that may arise on the
Reservation. With respect to the collection of state taxes, S. 1691 is overreaching given the fact
that the State of Arizona only recently changed its gasoline tax statute to reach the ultimate non-
member consumer on Indian lands. S. 1691 affords to states the opportunity to collect taxes that
may not be authorized under federal law. Finally, S.1691 creates a cause of action under the
Indian Civil Rights Act in a broad manner that fails to take into account the impacts on Indian
tribal governments.

In the contractual context, the Tribe has established tribal corporations that have the full
authority to make contracts the charters vest authority in the corporation to sue and be sued. The
corporation boards can waive any further vestings of tribal sovereign immunity on corporate
assets. Under these limited waivers of immunity, the tribal corporation is authorized to pledge
the assets of the corporation to satisfy any claims made against it. An injured party also may
make claims against the insurance carriers who insure the Tribe and its corporations.

The Tribe's main industry is tourism due to our location along the south rim of the Grand
Canyon. The Tribe transacts business with over 100,000 visitors, both domestic and foreign,
annually. The Tribe conducts business with major helicopter and airplane operations, as well as
bus companies from Las Vegas, Nevada and Phoenix, Arizona who bring visitors to the
Reservation. The contracts that the Tribe and its corporations have negotiated and entered into
include arbitration and other alternative dispute resolution mechanisms that have served all parties
well, based on the fact that there have been no major, unresolved problems or disputes.

544

With respect to tort claims made against the Tribe, the Tribe and its corporations carry
and maintain insurance coverage for governmental and business activities. Equally important,
the Tribe does not allow their insurance companies to raise the defense of tribal sovereign
immunity to avoid paying claims. This is very important to the Tribe because we seek to protect
tribal members as well as those non-members who may be injured in the course of dealing with
the Tribe or its corporation.

In addition, the Constitution of the Hualapai Indian Tribe vests the tribal court with
jurisdiction over all cases and controversies that arise within the jurisdiction of the Tribe.
Therefore, any contractual or tort disputes that cannot be resolved through arbitration or insurance
setdement can be heard in the Tribal Court. Cases that cannot be resolved in the trial court can
be appealed to the Southwest Intertribal Court of Appeals, based in Albuquerque, New Mexico.
Judicial review by an independent appellate court staffed by qualified judges and attorneys
ensures that disputes are resolved without any suggestion of bias or conflicts of interest. Based
on the current judicial system of the Hualapai Tribe, there is no need for congressional action
to abrogate tribal sovereign immunity for tort and contract actions that may be brought against
the Tribe or its businesses.
IV. STATE TAXATION

Similarly, there is no need for congressional abrogation of tribal sovereign immunity for
actions against Indian tribal governments for the collection of state taxes. Under long-standing
principles, Indian tribes and reservation Indians are subject to tribal and federal law, and
therefore, Indian tribes are generally exempt from state taxation and regulation in Indian country.

545

St-* Qklaho ma Tax Comm'n v. Chickasaw Nation . 515 U.S. 450 (1995); Montana v. Blackfeet

Tribe. 471 U.S. 759 (1985). The Supreme Court has stated that:

The Constitution vests the Federal Government with exclusive authority over
relations with Indian tribes. Art. I. § 8, cl. 3. ... As a corollary to this authority,
and in recognition of the sovereignty retained by Indian tribes even after the
formation of the United States, Indian tribes and individuals generally are exempt
from state taxation within their own territory.

Id. at 764. Furthermore, the Supreme Court has ruled that when Indian tribes and individual

Indians generate value through economic activities on their reservations, federal law may also

preempt state taxation of non-Indians engaged in Indian commerce. For example in New Mexico

v. Mescalero Apache Tribe. 462 U.S. 324 (1983), the Supreme Court held that non-Indian hunters

using a tribal hunting license on reservations lands were exempt from state hunting regulations

reasoning that:

The Tribe has engaged in a concerted and sustained undertaking to develop and manage
the reservation's wildlife and land resources specifically for the benefit of its members.
The project generates funds for essential tribal services and provides employment for
members who reside on the reservation. ... The Tribal enterprise ... clearly involves "value
generated on the reservations by activities involving the Tribe."

14 at 340.

By contrast, the Supreme Court has ruled that where Indian tribes or individual tribal

retailers sell prepackaged goods to non-Indians, without adding reservation value, the non-Indian

consumer may be liable to pay non-discriminatory state taxes whose legal incidence falls on the

transaction by the non-member. §ee Washington v. Colville . 447 U.S. 134 (1980) (prepackaged

cigarettes). Though a state's authority to tax in these circumstances does not diminish the Indian

tribe's inherent authority to tax the same transaction, it has given rise to the problem of "dual

taxation" in Indian country.

546

To address the dual taxation burdens on commerce and to facilitate tax collection, the
Supreme Court has recognized that states and Indian tribes may enter into "mutually satisfactory*
tax agreements. S_ee Oklahoma Tax Comm'n v. Citizens Band Potawatomi . 485 U.S. 505, 514
(1991). For example, in March of 1997 the Arizona legislature changed the legal incidence of
its motor vehicle use fuel tax to fall on the ultimate consumer, including all consumers on Indian
lands. Effective January 1998, Arizona's use fuel statute imposes a fuel tax on tribal members
of an Indian reservation, but sets forth a burdensome refund procedure for those tribal members
to obtain refunds of the taxes that the state is not legally entitled to receive. In lieu of this
burdensome technique, the statute sets forth a mechanism for the state and tribe to enter into
cooperative agreements for the collection of the tax in a manner that prevents dual taxation of
the same transaction. For example, the state may agree to forgo its taxes, and the Indian tribe
may retain all tribal taxes from sales to non-Indians, provided that the tribal taxes are at least
equal to the amount of state taxes that would otherwise be imposed.

S.1691 would interfere and destroy the cooperation of states and tribes to enter into
mutually satisfactory agreements, and in cases where the legal incidence of a particular state tax
law does not fall on the ultimate consumer, S.1691 permits a state to sue for taxes that it would
not otherwise be entitled to receive. Furthermore, the broad language contained in S. 1691 would
effectively destroy a tribe's ability to develop and generate value through on-reservation economic
activities free of state taxation. Indian tribes need a viable tax base in order to provide essential
governmental services and to become self-sufficient. For example, although the Hualapai Tribe
does not have mineral production, tribal taxation on transmission lines and the impending lodger's
tax are essential to support tribal governmental operations. Further imposition of state taxes on

547

the Tribe will erode the existing and potential tax base that is absolutely critical for the continued
existence of the Tribe. S.1691 sets a dangerous precedent to abrogate tribal sovereign immunity
in a manner that obstructs tribal-state cooperative agreements and impedes on-reservation
economic development and taxation.

V. INDIAN CIVIL RIGHTS ACT

Under prevailing law, the Indian Civil Rights Act does not provide a waiver of tribal
sovereign immunity, but it does make available to any person the right of a writ of habeas corpus
in federal court to test the legality of his detention by order of an Indian tribe. Santa Clara
Pueblo v. Martinez. 436 U.S. 49 (1978). Tribal courts have construed the Indian Civil Rights
Act in accordance with federal law. In amending the Indian Civil Rights Act, S.1691 would
abrogate tribal sovereign immunity in an extremely broad manner without consultation from the
Indian tribes. Any legislation amending the Indian Civil Rights Acts must be accomplished in
a manner that preserves tribal governmental solvency, authority and functions in accordance with
and respect for tribal laws, customs and institutions.

VI. CONCLUSION

The Hualapai Nation opposes S. 1691 because it would abrogate tribal sovereign immunity
for tort claims and contract actions in derogation of federal law and policies of promoting tribal
self-determination and self-sufficiency. S.1691 disregards existing, well-established federal and
tribal law, as well as tribal courts. S.1691 would set a dangerous precedent by exposing tribal
government treasuries to private actions in state court, and by subjecting tribal governments to
actions for the collection of state taxes that a state might otherwise be barred from collecting.
S. 1691 is reckless in its abrogation of tribal sovereign immunity for claims under the Indian Civil

548

Rights Act. Simple logic dictates that such a departure from well-established law requires more
thought and analyses on the effects this broad-sweeping abrogation of tribal sovereignty will have
on Indian Nations. In accordance with the federal policies of self-determination and self-
sufficiency, Congress should pass legislation that builds the necessary tribal infrastructure for
tribal courts, business activities, taxation and economic development. Because S.1691
jeopardized tribal governmental solvency, diminishes tribal authority, undercuts the inherent
authority of tribal courts, and disregards well-established federal and tribal laws and policies, the
Hualapai Nation urges that S.1691 note be passed. Be assured, however, that the Hualapai
Nation will work with congress for positive legislation that will better address the concerns raised
in S.1691.

549

THE JICARILLA APACHE TRIBE

EXECUTIVE OFFICES

P.O. Box 507, Dulce, New Mexico 87528-507

(505) 759-3242

Jicanlla Apache Reservation

Feb™*, ii. '""'"TESTIMONY OF THE JICARILLA APACHE TRIBE
ON TRIBAL SOVEREIGN IMMUNITY
BEFORE THE SENATE COMMITTEE ON INDIAN AFFAIRS
105th CONGRESS, SECOND SESSION

L INTRODUCTION

The Jicanlla Apache Tribe opposes Senate Bill 1691, the so-called "American Justice
Equal Justice Act" ("S.1691"). S.1691 would abrogate the sovereign immunity of Indian tribal
governments for all tort claims and contract actions in derogation of existing, well-established
federal and tribal law, and without regard for tribal courts. S.1691 would subject tribal
governments to lawsuits in state courts under state law for torts and contracts, it would abrogate
tribal sovereign immuni ty for the collection of state taxes in federal court, and it would create
a cause of action under the Indian Civil Rights Act in federal court for unspecified damages and
relief. S.1691 also would abrogate tribal sovereign immunity for actions for the collection of
state taxes in a manner that fails to take into account the various ways that Indian tribes
contribute to the respective state tax base and in a manner that effectively destroys potential
economic development in Indian country. This ill-conceived bill is an unnecessary breach of
numerous sacred treaties and agreements, a radical shift in federal law and policy that would
make a mockery of the federal trust responsibility to Indian tribes. S.1691 is unnecessary, unwise
and should not be passed.

II. BACKGROUND

The Jicarilla Apache Tribe (hereinafter the "Jicarilla Tribe" or "Tribe") is an Indian Nation
recognized by the United States government and organized under Section 16 of the Indian
Reorganization Act of 1934, 25 U.S.C. § 476 (1988). Merrion v. Jicarilla Apache Tribe. 455
U.S. 130 (1982). The Jicarilla Apache Reservation is located in the northwest quadrant of the
state of New Mexico, on the eastern edge of the San Juan Basin, which is the second largest gas
field in the lower 48 states. The exterior boundaries of the Reservation have been established
by a series of executive orders. 1

'.Exec. Order of February 11, 1887; Exec. Order of November 11, 1907; Exec. Order of
January 28, 1908; Proclamation of the Secretary of the Interior dated September 1, 1988, 53 Fed.

(continued...)

550

Testimony of the Jicarilla Apache Tribe
Senate Committee on Indian Affairs
March 11. 1998

The land area within the exterior boundaries of the Reservation totals approximately
980,000 acres, virtually all of which is held in trust by the United Slates for the Tribe. The
United States holds all minerals under 900,000 of the Reservation's 980,000 acres in trust for the
Tribe. The Tribe is the lessor and royalty owner in more than 200 oil and gas mining leases
issued under the Indian Mineral Leasing Act of 1938, 23 U.S.C. § 396a-g (1988), for the
production of oil and gas from Reservation trust lands. Those leases cover over 300,000 acres
(approximately one-third) of the Reservation. By federal law, the Secretary of the Interior
expressly is charged with the responsibility of accounting for and collecting royalties and other
payments due the Tribe from oil and gas production on our Reservation. Federal Oil and Gas
Royalty Management Act of 1982, 30 U.S.C. §§ 1701 et seq. (1988). The Tribe has entered into
an agreement with the Department of the Interior's Minerals Management Service for joint audits
of oil and gas leases on the Reservation.

There are approximately 3,100 enrolled members of the Jicarilla Apache Tribe who reside
both on and off the Reservation. The total reservation population is approximately 3,000 people.
The number of non-members living on the reservation is less than 5% of the entire reservation
population and consists of people who work for the local schools, the Bureau of Indian Affairs
and the tribal government.

The Jicarilla Apache Tribe is the single largest employer in the area of more than 1 ,000
square miles in northern New Mexico, and we provide scholarship opportunities, elderly
assistance, and innumerable other services to our members, as well as search and rescue, fire and
police protection, and tribal court review to all within our jurisdiction and neighboring
communities. The Tribe relies on revenue from oil and gas production to fund more than 90%
of essential governmental services on the Reservation, including the police department, the tribal
court, emergency ambulance services, community services, alcoholic rehabilitation, day care
services, elderly care, and tribal regulation of oil and gas operations.

The Tribe has entered into contractual arrangements that provide the parties adequate
relied and redress under tribal law. The Tribe has a competent and well-staffed tribal court
system that is equipped to deal with matters that may arise under tribal contracts or under tort
laws. The Tribal Council has carefully considered the issue of sovereign immunity and has
provided for limited waivers that protect the tribal treasury as well as tribal authority. Moreover,
the tribe contributes immensely to the local and state economies through its governmental and
economic activities in spite of the dual taxation issue which plagues Indian country. Rather than

'(...continued)
Reg. 37355 (1988); Proclamation of the Secretary of the Interior dated September 1, 1988, S3
Fed. Reg. 37356 (1988).

551

Testimony of the Jicarilla Apache Tribe
Senate Committee on Indian Affairs
March 11, 1998

perpetuating dual taxation on Indian lands. Congress should pass legislation that promotes tribal
economic development and prosperity pursuant to the federal policies of tribal self-government
and self-sufficiency.

III. JICARILLA APACHE TRIBAL JUDICIAL SYSTEM

Article V of the Revised Constitution of the Jicarilla Apache Tribe sets forth the
separation of powers among the legislative, the executive and the judicial departments of the
tribal government Under Article XXIII of the Revised Constitution, the judicial powers of the
Tribe are vested in the Jicarilla Apache Tribal Court to exercise jurisdiction over all criminal
matters, (except those matters within the exclusive jurisdiction of the federal and state courts)
which involve members of the Tribe or non-member Indians. The Jicarilla Apache Tribal Court
is vested with the civil jurisdiction in all matters.

Article XXIV of the Revised Constitution governs the composition of the Jicarilla Apache
Tribal Court, which includes a trial court and an appellate court. The Tribal Court consists of
two permanent judges, a Chief Judge and an Associate Judge, and six pro tempore, all of which
are appointed by the President and confirmed by the Tribal Council. The Chief Judge and
Associate Judge have juris doctorates and are state-licensed attorneys. The Chief Judge is a
member of the San Juan Pueblo and the Associate Judge is a member of the Rosebud Sioux
Tribe. Five of the pro tempore judges have law degrees and include a New Mexico state court
judge, a former tribal court judge, and experienced practitioners in the field of Indian law and
complex federal, tribal and state jurisdiction matters. The non-lawyer trained pro tempore judge
has an extensive background with tribal governments and in the area of criminal procedure as
a former federal investigator. According to the Article XXIV, Section 3, three members of the
Tribal Council designated by the President sit as an appellate court any time an appeal is made
from a decision of the trial court.

The Tribal Court staff consists of four divisions including: criminal, civil, domestic and
probation. There are two employees in each divisions in addition to the general Tribal Court
support staff which consists of a receptionist, an office aid and a court administrator. The Tribal
Court budget for FY 1997 was $430,000, which was entirely funded by the Tribe without federal
funds. Related court functions include the Tribal Public Defender and the Tribal Prosecutor, both
are funded by the Tribe separate from the Tribal Court budget. The services of the Public
Defender are available to anyone, both members and non-members, who are subject to the
criminal jurisdiction of the Tribal Court, including non-Indians who consent to Tribal Court
jurisdiction in lieu of state court prosecution.

The Tribal Court recently developed a bar examination for practice in the Tribal Court
which was adopted by the Tribal Council and is scheduled to be implemented in May of 1998.

552

Testimony of the Jicarilla Apache Tribe
Senate Committee on Indian Affairs
March 11. 1998

The Tribal Court is currently in the process of adopting comprehensive rules of evidence and
rules of civil procedure. The Tribal Court has a caseload of approximately 4,500 cases both
criminal and civil which involve a diverse range of issues including, among others, traffic
offenses, game & fish issues, juvenile issues, domestic matters, taxation issues, tort actions, and
contract claims.

Non-Indians who reside on the Reservation have filed actions in Tribal Court for legal
redress in the area of domestic affairs such as divorces and child welfare matters. In addition,
other non-Indians, including bonafide creditors, have filed actions in Tribal Court under the tribal
garnishment code for purposes of satisfying of debts and collecting child support and delinquent
housing payments. Moreover, non-Indian creditors have filed actions in Tribal Court to recover
goods from members who default on a contracts. It is not uncommon for non- Indians to seek
legal redress in the Tribal Court for the repossession of goods pursuant to Section 2610 of the
Jicarilla Apache Tribal Code.

With respect to tort actions, the Tribal Court has exercised jurisdiction over non-Indians
both as defendants and plaintiffs. In fact, the Tribal Court has exercised jurisdiction over a
personal injury cause of action between two non-Indians that arose on the Reservation, and the
court adjudicated the case to the satisfaction of both non-Indian parties. Similarly, the Tribal
Court routinely exercises jurisdiction over contract actions involving non-Indians. For example,
the Tribal Court has heard five tax protest cases filed by non-Indian lessees pursuant to the
Tribe's oil and gas statute. In each of those cases, the parties, including the non- Indian plaintiffs,
accepted the decision of the Tribal Court and did not seek federal or state judicial intervention.
One of those cases involved a multi-million dollar complex tax matter involving federal, state
and tribal issues. In this complex litigation, the Tribal Court employed a special master (a Utah
state district court judge). In another complex litigation matter, the Tribal Court appointed a
special master (another state district court judge) in a case relating to a worker's compensation
claim.

Both of the permanent Tribal Court judges are actively involved in the state bar judicial
activities and have contributed their expertise in the field of Indian law to other judges in the
state. For instance the Chief Judge is a member of the State Bar Judicial Tribal-State Forum
Committee which deals with jurisdiction issues as between federal, state and tribal judicial
forums. The Associate Judge is currently working on revisions on the state child custody code
to ensure that it conforms with the provisions of the Indian Child Welfare Act. In addition, the
Associate Judge is assisting state district court judges in area of juvenile proceedings involving
Indian children and has tailored remedies consistent with respective tribal customs and traditions.
Under the Indian Child Welfare Act, the Tribal Court accepts transfers of jurisdiction from state
courts involving juvenile adjudications as required by federal law.

553

Testimony of the Jicarilla Apache Tribe
Senate Committee on Indian Affairs
March 11, 1998

We believe that our Tribal Court consistently provides due process and legal remedies for
all within our jurisdiction, including members, non-member Indians and non-Indians. S. 1691 not
only eliminates the jurisdiction of tribal courts which is a core function of tribal self-government,
but also it ignores the fact that tribal courts are upholding and strengthening the rule of law by
providing due process to those who seek legal redress in our courts.

IV. JICARILLA APACHE TRIBAL COUNCIL ACTIONS REGARDING TRIBAL
SOVEREIGN IMMUNITY

Pursuant to Article XI of the Revised Constitution of the Jicarilla Apache Tribe, the
inherent powers of the Tribe are vested in the Jicarilla Apache Tribal Council which is authorized
to enact ordinances to promote the peace, safety, property, health and general welfare of all of
the people of the Reservation. The Jicarilla Apache Tribal Council exercises its constitutional
powers subject only to the applicable limitations imposed by the Constitution of the United
States, and applicable federal statutes and regulations of the Department of the Interior and
restrictions established under the Jicarilla Revised Constitution. As a federally-recognized Indian
Nation that possesses inherent powers of self-government over tribal members and tribal territory,
the Jicarilla Apache Tribe enjoys tribal sovereign immunity from suit as an aspect of our
governmental sovereignty. Under well-settled case law grounded in the Constitution of the
United States, only Congress or the Tribe may waive tribal sovereign immunity from suit. See
Oh lfllrTTT W T" Comm'n v. Citizen Band Potawatomi. 489 U.S. 505, 509 (1991); Santa Clara
Pueblo v. Martinez. 436 U.S. 49 (1978).

According to S.1691, Indian tribal sovereign immunity may frustrate the rights of due
process and legal redress of non-Indians, and therefore, may provoke social tension and social
turmoil. S.1691 assumes that Indian tribes assert sovereign immunity in all matters involving
non-Indians. The findings of S.1691 are unsubstantiated and are simply wrong with respect to
the Jicarilla Apache Tribe. _

Pursuant to its constitutional powers, the Jicarilla Tribal Council has the authority to
waive the Tribe's sovereign immunity, and in fact has done so in a manner that recognizes and
protects vested contractual interests, promotes economic development and provides legal redress
for parties involved in commercial transactions and tort actions against the Tribe, a tribal entity
and tribal employees. For example, the Tribe has established tribal corporations organized under
federal charters pursuant to the Indian Reorganization Act as well as state charters for the
development of the Tribe's oil and gas interests, the operation of the Tribe's real estate holdings,
and the acquisition of trust lands for economic development. The charters of these tribal
corporations contain limited waivers of tribal sovereign immunity which limit the Tribe's liability
to the assets of the tribal corporation for actions in federal court. This type of limited waiver
protects tribal governmental functions and financial solvency.

554

Testimony of the Jicarilla Apache Tribe
Senate Committee on Indian Affairs
March 11. 1998

Since the late 1 970"s the Tribe has negotiated various types of agreements with oil and
gas companies for the development of the oil and gas reserves on the Reservation, including
pipeline rights-of-way agreements. In these contractual arrangements, the Tribe has inserted and
bargained for dispute resolution and binding arbitration provisions that are enforceable in federal
court, and sometimes in Tribal Court. It has never been necessary for an arbitration hearing to
be held because the resolution of conflicts arising from those contractual agreements have been
satisfactorily resolved in accordance with the dispute resolution provisions. Furthermore, the
satisfaction of the non-Indian companies with these contractual provision is exemplified by the
fact that there has been no demand by the non- Indian contractual party for access to state court
for further legal redress. The Jicarilla Tribe has never agreed, nor will it ever agree to submit,
to state court jurisdiction for matters affecting tribal trust property that arise on the Reservation.

The Jicarilla Tribal Council also has enacted ordinances which waive tribal sovereign
immunity for purposes of debt collection, child support payments and delinquent housing
payments to be satisfied from tribal wages, per capita distributions and dividend distributions.
The tribal garnishment code provides for a limited waiver of tribal sovereign immunity for the
sole and limited purpose of authorizing the filing of garnishment proceedings in tribal court by
naming the Tribal Controller as defendant for the satisfaction of such debt pursuant to a
garnishment order of the tribal court after notice and hearing. The tribal garnishment code
demonstrates how the Tribe is undertaking governmental responsibility to enforce money
judgments, child support orders and defaults on housing obligations.

In the area of taxation, the Tribe's possessory interest tax ordinance provides a mechanism
for an aggrieved taxpayer to file with the tribal Tax Administration Division a protest and request
for refund relating to an assessment, a denial of a claim for exemption, a determination of value,
or any other matter relating to the tribal possessory interest tax. The tribal Mineral and Water
Resources Committee reviews all protests and may receive evidence and hold hearings in a
formal or informal manner to make a determination of the protest. The decision of the
Committee is subject to review on the record at a hearing before the Tribal Court with further
review available before the tribal appellate court. The tribal code provides that where a tax has
been found to be erroneous or illegally collected, the tribal Treasurer shall pay interest at the rate
of four percent (4%) per annum on the amount refunded. As discussed above, the tribal court
has conducted at least Ave protest appeals and has adjudicated those appeals in a manner
satisfactory to the non-Indian taxpayer. There has been no claim of a lack of due process or
legal redress in the Jicarilla Tribal Court, nor has there been an attempt to seek federal review
of the Jicarilla Tribal Court determinations.

With respect to tort actions against the Tribe or tribal officers, the Jicarilla Tribal Council
has established a Tribal Self-Insurance Program by enacting a Risk Management Ordinance in
recognition that the Tribe must cover insurable risks in a financially responsible manner. Under

555

Testimony of the Jicarilla Apache Tribe
Senate Committee on Indian Affairs
March 11, 1998

that ordinance the Tribal Council permanently established the Jicarilla Apache Tribal Insurance
Claims Fund for the settlement or satisfaction of judgments of civil claims against the Tribe, a
tribal entity or tribal employees. Pursuant to the Risk Management Ordinance, the tribal Risk
Management Authority has the authority to issue rules and regulations governing the procedures
for filing a claim against the Tribal Insurance Fund, and it has the authority to review and decide
such claims. The Tribal Court has exclusive jurisdiction over any unresolved claim brought
against the Tribal Insurance Claims Fund. The insurance mechanism established by the Jicarilla
Tribe insures the tort liability claims against the Tribe, tribal entities and tribal employees up to
the amounts of an approved claim or up to the amounts of a judgment rendered by the Tribal
Court.

The preceding discussion provides an broad overview of the many protections afforded
tribal members, non-member Indians as well as non-Indians under Jicarilla tribal law. Though
this discussion is not by any means exhaustive of the laws of the Jicarilla Apache Tribe which
protect and address claims made by non-Indians who may enter into contractual agreements with
the Tribe, who seek legal redress in the Jicarilla Apache Tribal Court system, and who may be
accidentally injured as a result of the actions of the Tribe, a tribal entity or tribal employee, the
Tribe believes it provides a strong factual basis to address the inaccurate findings set forth in
S.1691. Clearly, the Jicarilla Apache Tribe does not erect a "complete shield from legal claims"
made by non-Indians who interact with the Tribe on a daily basis, as declared by S.1691.

V. INDIAN CIVIL RIGHTS ACT

Under prevailing law, the Indian Civil Rights Act does not provide a waiver of tribal
sovereign immunity, but it does make available to any person the right of a writ of habeas corpus
in federal court to test the legality of his detention by order of an Indian tribe. Santa Clara
Pueblo v. Martinez . 436 U.S. 49 (1978). Tribal courts have construed the Indian Civil Rights
Act in accordance with federal law. In amending the Indian Civil Rights Act, S.1691 would
abrogate tribal sovereign immunity in an extremely broad manner without consultation from the
Indian tribes. Any legislation amending the Indian Civil Rights Acts must be accomplished in
a manner that preserves tribal governmental solvency, authority and functions in accordance with
and respect for tribal laws, customs and institutions.

VI. THE CONTRIBUTION OF THE JICARILLA APACHE TRIBE TO STATE

As the lessor and royalty owner in more than 200 federal Indian oil and gas mining
leases, the Jicarilla Apache Tribe provides governmental services such as search and rescue, fire
and police protection, and tribal court redress to all within our jurisdiction and neighboring
communities. The Jicarilla Apache Tribe is the single largest employer in the area of more than
1,000 square miles in northern New Mexico. In New Mexico, four percent (4%) of the natural

556

Testimony of the Jicanlla Apache Tribe
Senate Committee on Indian Affairs
March 11. 1998

gas tales comes from Indian lands and of that percentage approximately seventy-five percent
(75%) comes from the tribal oil and gas production on the Jicarilla Apache Reservation.

In addition, the stale imposes taxes on non-Indian producers of oil and gas for on
Reservation production, and it uses such taxes to fund the state's permanent severance tax fund,
which is used to underwrite the issuance of state governmental bonds. The state has assessed and
collected hundreds of millions of dollars from the taxation of the non-renewable tribal trust
resources, and by comparison, the Tribe receives a fraction of that amount in the delivery of state
services. Even though the Tribe's resources are subject to dual-taxation, during the period 1990
through 1994, oil and gas production on the Reservation accounted for over 80 percent of the
Tribe's governmental operating revenues. Over half of the Tribe's income from oil and gas
activity consists of production royalties. The Tribe relies on revenue from oil and gas production
to fund the provision of essential governmental services on the Reservation, including the police
department, the tribal court, emergency ambulance services, community services, alcoholic
rehabilitation, day care services, elderly care, and tribal regulation of oil and gas operations.

In addition to the existing burdens of dual taxation, S.1691 would abrogate tribal
sovereign immunity for purposes of actions for the collection of state excise, use and sales taxes.
S.1691 also jeopardizes a potential avenue for economic development that is currently being
developing in Indian country. Under United States Supreme Court decisions, when an Indian
tribe and individual Indians generate value through economic activities on Indian lands, federal
law preempts the imposition of state taxation of non-Indian engaged in such Indian commerce.
See New Mexico v. Mescalero Apache Tribe . 462 U.S. 324 (1983) (non-Indian hunters using a
tribal hunting enterprise on reservation lands are exempt from state hunting regulations); White
Mountain Apache Tribe v. Bracker. 448 U.S. 136 (1980) (non-Indian engaged in reservation
timber production with Indian tribe was exempt from state motor fuel taxation). The broad
waiver of tribal sovereign immunity in S. 1691 would frustrate the potential of an Indian tribe to
develop and pursue economic activities that generate "on-reservation value" free of state taxation.

Rather than continuing to allow Indian tribal governments to be subject to the unfair
burdens of dual taxation of the non-renewable tribal trust resources. Congress should put an cik.
to state taxation of tribal trust resources. The demise of dual taxation will strengthen and
empower tribal self-government within the framework of government-to-govemment relations
between the federal government and Indian tribal governments, and in a manner consistent with
the federal policy of self-determination and self-sufficiency.

VIL CONCLUSION

The Jicarilla Apache Tribe opposes S.1691 because it would abrogate tribal sovereign
immunity for all tort claims and contract actions in derogation of federal law and policies of

557

Testimony of the Jicarilla Apache Tribe
Senate Committee on Indian Affairs
March 11, 1998

promoting tribal self-determination and self-sufficiency. S.1691 disregards existing, well-
established federal and tribal law, as well as tribal courts. S.1691 would set a dangerous
precedent by exposing tribal governmental treasuries to private actions in state court, and by
subjecting tribal governments to actions for the collection of state taxes that a state might
otherwise be barred from collecting. Therefore, the Jicarilla Apache Tribe urges that S.1691 not
be passed is reckless in its abrogation of tribal sovereign immunity for claims under the Indian
Civil Rights Act. The Jicarilla Apache Tribe appreciates the opportunity to present our views
on the extremely important subject of tribal sovereign immunity.

568

WRITTEN TESTIMONY OF GILBERT JONES, SR.

PRESIDENT, FORT MCDOWELL MOHAVE-APACHE INDIAN COMMUNITY

ON BEHALF OF THE

THE FORT MCDOWELL MOHAVE-APACHE INDIAN COMMUNITY

BEFORE THE

SENATE INDIAN AFFAIRS COMMITTEE
HEARING ON NATIVE AMERICAN SOVEREIGN AUTHORITY AND IMMUNITY

March 20, 1998

I INTRODUCTION

On March 1 1, 1998 the Senate Indian Affairs Committee held an Oversight Hearing on
Tribal Sovereignty The Fort McDowell Mohave-Apache Indian Community ("Fort McDowell"
or "Tribe") hereby submits the following testimony regarding Tribal Sovereignty and taxation.

On February 27, 1998, Senator Slade Gorton introduced S. 1691 entitled the "American
Indian Equal Justice Act." This bill primarily affects Tribal sovereign immunity and State taxes
imposed on reservations. Although the Tribe understands that the Oversight Hearing on Tribal
Sovereignty was not a hearing on Senator Gorton's bill, an analysis of the Senator's bill will be
extremely useful when considering these issues. Moreover, although the stated topic of this
hearing is taxation and contracts. Fort McDowell believes that the taxation issues cannot be
considered separately from the tort issues Therefore, this testimony includes a discussion of the
tort issues as well.

Although Senator Gorton has labeled S 1691 the benevolent title of the "American Indian
Equal Justice Act," as will be explained, the contents of this bill would have serious negative
impacts on Tribes, possibly devastating impacts For this reason, the Tribe believes a more
accurate title for S 1691 would be the "TRIBAL GOVERNMENT ELIMINATION ACT."
Although this bill purports to simply protect individuals that have dealings with Indian Tribes, this
bill is degrading, the bill's impact will be extremely harmful to Tribes, and the bill has not been
narrowly tailored to solve the alleged problems As we will describe below, S 1 69 1 's treatment
of taxation and sovereignty issues delivers a serious one-two knockout punch to Tribal
governments

Page 1 of 14

II. BRIEF HISTORY OF THE ORIGINS SOVEREIGNTY

The testimony of Mr. David Kwail, President of the Inter-Tribal Council of Arizona and
Chairman of the Yavapai- Apache Nation gives a good, short history of the origins of sovereignty.
Fort McDowell encourages this Committee to carefully take note of that testimony.

As is described in detail in this testimony, Indian Nations have always been considered as
distinct, independent, political communities. 1 When discussing the sovereignty of Indian Nations,
Chief Justice Marshall stated "the settled doctrine of the law of Nations is that a weaker power
does not surrender its indepedence - its right to self-government, by associating with a stronger
and taking its protections." ' Treaties signed by the Unites States and individual tribes explicitly
recognized this fact. 3 Indian Nations did not and will not surrender their right to self-
government. In modern times it is far too easy, convenient, and sometimes profitable to forget
the fact that Indian Nations are, in fact, governments.

III. CONTRACT ISSUES

Fort McDowell views any efforts to eliminate sovereign immunity of the Tribes in
contractual relations as contrary to common sense, the law, and the history of this Nation.
Accordingly, the Tribe will not devote a significant amount of time to that issue in this testimony.

In contractual relationships, parties are free to negotiate terms and conditions satisfactory
to both parties If an agreement cannot be reached, the parties do not enter into the contract.
Therefore, a federally mandated waiver of the Tribes' sovereign immunity is not necessary in
contract cases.

As a general rule, Fort McDowell does not waive its sovereign immunity in contracts.
This is especially true with regard to smaller agreements. The Tribe has made a policy decision
that it is willing to pay a little more for the contract initially than to subject itself to a lawsuit,
especially for small agreements Often times, the legal fees could easily outweigh the face amount
of the contract. However, the Tribe does not, in fact, pay more for most contracts. This is true
because the Fort McDowell enjoys a good business reputation in the local community. The Tribe
realizes that a good reputation is important and it deals with vendors in a fair manner. Even when
a conflict arises out of an agreement in which the Tribe has not waived its immunity, the Tribe
rarely raises sovereign immunity as a defense. Instead, the Tribe prefers to negotiate the problem
on the merits. Why? Because it would not be good business practice and raising sovereign

1 Worcester v. Georgia, 31 U.S. (6Pet.) 515, 559 (1832).

7 Id

3 See Id. at 555 ("This treaty thus explicitly recognizes the national character of the
Cherokees, and their right of self-government )

Page 2 of 14

560

immunity would ultimately hurt the reputation of the Tribe and discourage companies from doing
business on the Reservation

IV TAX ISSUES

A S 1691 AND THE CURRENT STATE OF THE LAW

Section 3 of S 1691, the TRIBAL GOVERNMENT ELIMINATION ACT requires
that:

An Indian tribe, tribal corporation, or member of an Indian tribe, shall collect, and
remit to a State, any excise, use, or sales tax imposed by the state on nonmembers
of the Indian tribe as a consequence of the purchase of goods or services by the
nonmember from the Indian tribe, tribal corporation, or member

In the federal context, the Federal Torts Claim Act was enacted to reflect a strong public
policy to protect the citizenry from torts committed by public servants, to lift the risks that may be
ruinous if left to lie upon individual victims of particular accidents, and to achieve allocation and
apportionment of loss among the entire federal taxpaying public * The obvious problem with
applying this policy to the Tribes is that their ability to tax and raise funds has been seriously
undermined

There are, of course, a handful of Tribes that currently have the resources to shoulder the
burden that S 1691 would impose. However, the vast majority of Tribes are not as fortunate,
and those Tribes and would eventually be devastated by this bill.

Although current caselaw imposes certain limitations on the imposition of state taxes on
reservations, S 1691 would appear to eliminate any limitations Presently, if a tribal enterprise
produced goods on the reservation and then sold those tribally produced goods to nonmembers
on the reservation, it is doubtful that the State could impose a sales tax or similar tax on that sale
At the other end of the spectrum, if a Tribe or other retailer on the reservation purchases goods
from off the reservation, such as cigarettes, and resells those goods to nonmembers on the
reservation, it is likely under current caselaw that the State could impose its taxes S. 1691
appears to authorize State taxes for either case

Tribes have, of course, strongly opposed the imposition of any State sales tax and all other
State taxes on the reservations As the Committee knows. Tribes are governments that have a
duty and obligation to care for its members, just like any other government These duties include,
among other things, building and maintaining roads, providing health care, providing programs
for the elderly and youth, and providing police and fire services When States are allowed to

4 See Plaits v. United States, 288 F Supp 254 (DC Utah 1968) aff'd 409 F 2d 1009 (10*
Cir 1 960Xemphasis added)

Page 3 of 14

561

impose their taxes on reservations. Tribes are prevented from raising revenue by the means that
most other governments can raise revenue - by taxes.

Although States may feel like they have a right to tax activities on reservations, basic
fairness mandates that they should not An analogous situation arises when, for example, citizens
of one State (State #1) cross the state border into another State (State #2). State #1 cannot
impose its state sales tax for the sales occurring in State #2, nor could State #1 impose a property
tax or other possessory interest tax for property held in State #2 by citizens of State #1 . Some
States have attempted to get around the prohibition of taxing interstate commerce by imposing
"use" taxes on their citizens. However, these "use" taxes are generally poorly enforced by States.
Since Tribes are not subdivisions of the State, States should not be allowed to tax any sales or
property interests on reservations.

Tribes should also be able to impose their own income taxes in place of the State income
taxes. When a citizen of State #1 works across the border in State #2, State #2 would impose its
income tax on that employee and the treasury of State #2 would keep that money. In contrast,
when a citizen of a State works on a reservation, the State will impose its income tax on everyone
except member Indians working on their own reservation. The State treasury will unfairly receive
the revenue.

Fort McDowell employs approximately 1600 persons in its government and in economic
enterprises. Less than 300 of these employees are Native American and not all of those are Tribal
Members. Therefore, more than 1 300 employees on the reservation pay State income tax to the
State of Arizona. It is a popular misconception that substantial State tax dollars are used to
support reservation activities and Indian people. The reality, however, is that there is a giant
sucking sound, but that sound is the States taking tax dollars away from the Tribes

B. THE SUPREME COURT CASES AUTHORIZING THE IMPOSITION OF
STATE TAXES ON RESERVATIONS SHOULD BE REVERSED

Testimony of persons before this Committee have referred to Tribes as tax evaders.
Although these persons are correct in stating that the Supreme Court has upheld the authority of
States to impose taxes on reservation under certain circumstances, that does not make those court
decisions good public policy Two hundred years of federal and state hostility, neglect,
termination and paternalism have devastated Indian Tribes. As such, Tribes need tax revenue and
revenue from other sources such as economic development to provide basic needs for their
members Moreover, in these times of shrinking federal funds, the Tribes cannot rely on the
federal government to fill these needs Tribes must be given opportunities to raise funds to pay
for these needs through the imposition of taxes

It seems peculiar that the most obvious source of revenue for governments - taxation - has
been taken away from Tribes. Tribes should be allowed to tax, or not tax (i.e. give a tax break to
a company) in order to raise revenue to provide for the general welfare of their people. The

Page 4 of 14

562

Federal government should not attempt to place restrictions on this ability because of the varying
situations of the five hundred plus Tribes

It is apparent that the anti-Tribal testimony before this Committee boiled down to the fact
that certain companies and industries fed that they are at a competitive disadvantage with the
Tribes. The real disadvantage is the current tax scheme that courts have handed down to Tribes
This Committee can find other solutions to this perceived problem without subjecting Tribes to
unfair lawsuits in federal court.

Although the Tribe does not advocate the following approach, a relatively recent cigarette
tax initiative passed in Arizona attempted to balance these competing interests. The Arizona
Tobacco Tax and Health Care Act imposed, among other things, a two cent per cigarette tax on
cigarettes. This Act provided that if a Tribe enacted a tax equal to or greater than the State tax,
the Tribe would keep the revenue from sales on the Reservations. This particular Act was
objectionable to Tribes because it permitted too much interference by the State in Tribal affairs
and imposes the States laws on the Tribes However, since an equal or greater tax is imposed by
the Tribe under the Arizona Cigarette Act, the concerns regarding unfair competition would be
eliminated.

Again, the Tribe is not advocating this particular solution. Some Tribes are in extremely
remote locations and an "equal" tax would certainly put them at a competitive disadvantage.
However, this example illustrates that there are alternative solutions to alleviating the concerns of
competitors of the Tribes' economic enterprises other than authorizing an intrusive suit against
the Tribes in federal court.

V. THE DIMINISHMENT OF THE SOVEREIGN RIGHTS AND ABILITIES OF
TRIBAL GOVERNMENTS

A EACH SOVEREIGN ADOPTS A DIFFERENT VERSION OF A TORTS

CLAIM ACT TO MEET THEIR PARTICULAR NEEDS, A ONE SIZE FITS
ALL APPROACH WILL NOT WORK

The final knockout punch of S. 1691, the TRIBAL GOVERNMENT ELIMINATION

ACT is the provisions that broadly waives the Tribes' sovereign immunity. The waiver of
immunity contained in S. 1691 may be the most broad waiver of governmental immunity in this
Country.

The Federal Torts Claim Act ("FTC A") appears to be a broad waiver of immunity.
Some States have adopted broad waivers of immunity and others have narrowly tailored their
waivers of immunity. Senator Gorton's home state of Washington has adopted one of the
broadest waivers of sovereign immunity in the Country.' Other states have adopted much more

5 See Savage v. State, 899 P 2d 1270 (Wash 1995).
Page 5 of 14

563

limited waivers and have required a Plaintiff to strictly adhere to certain procedures and time-
lines, or lose their claim

The Torts Claim Act of the State of Arizona, for example, contains numerous exceptions
to its waiver of immunity Under Arizona law, a public entity is absolutely immune and not liable
for judicial or legislative functions and the determination of fundamental government policy. A
determination of a fundamental governmental policy includes, but is not limited to, the purchase
of equipment, the construction or maintenance of facilities, the hiring of personnel, the provision
of governmental services, a determination of whether and how to spend existing resources, and
licensing and regulation of any profession or occupation 6 Arizona law also provides qualified
immunity Unless a public employee acting within the scope of his employment intended to cause
injury or was grossly negligent, neither the public entity nor the public employee is liable under
nine specific circumstances 7 All common law immunities are also reserved under the Arizona
Torts Claim Act *

Besides the immunities mentioned in the above paragraph, Arizona imposes other
restrictions, limitations and requirements on claimants against the State. The Statute of
Limitations is lowered from two years to one year for any claim against the State. 9 Also, a
claimant must file a claim with the State within One-Hundred Eighty (180) days after the cause of
action accrues Any claim which is not filed within One-Hundred Eighty days is barred and no
action may be maintained. 10 Finally, punitive and exemplary damages are not allowed."

Another example of a State that has narrowly tailored its waiver of immunity is the State
of Oklahoma The Oklahoma statute states:

[t]he State of Oklahoma does hereby adopt the doctrine of sovereign ^immunity.
The State, its political subdivisions, and all their employees acting within the scope
of their employment, whether performing governmental or proprietary functions,
shall be immune from liability for torts. The State, only to the extent and in the
manner provided in this act, waives its immunity and that of its political
subdivisions In so waiving immunity, it is not the intent of the State to waive any

6 See ARIZ REV STAT § 12-820 .01.

7 See ARIZ REV STAT. § 12-820 02
1 See ARIZ REV STAT. §12-820.05.

9 See ARIZ REV STAT. § 12-821.

10 See ARIZ REV STAT. § 12-821 01
" See ARIZ REV. STAT. § 12-820 04.

Page 6 of 14

rights under the 11* Amendment to the United States Constitution" a

The Oklahoma Statute effective July 1 , 1998 will list thirty two (32) exemptions to its waiver of
immunity " Oklahoma law also limits recovery for each act, accident or occurrence to: 1)
$25,000 for loss of property, 2) $100,000 for any other loss, and 3) $1,000,000 for any number of
claims arising out of a single occurrence or accident M Punitive and exemplary damages are not
permitted Claims must be presented within one (1) year that the date of the loss occurs "

The fact that each sovereign has balanced the interests of compensating victims with the
interest of protecting the government, its dignity, and its treasury and each sovereign has adopted
varying degrees of waivers highlights the point that a one size fits all waiver does not work. Each
sovereign or government has their own needs and capabilities. The State of Washington has
adopted a broad waiver, the State of Arizona's waiver might be characterized as middle of the
road, and the State of Oklahoma appears to have adopted a very limited waiver

Likewise, each Tribe should be allowed to consider their own needs and capabilities Fort
McDowell, for example, has purchased general liability insurance for its government activities and
its economic enterprises. The insurance policies contain riders that prohibit the insurance
company from raising the defense of governmental immunity. The Tribal Council is also
considering adopting a Tribal Torts Claim Act, which would, among other things, codify the
requirement that the insurance companies cannot raise the defense of governmental immunity.
The proposed Tribal Torts Claim Act incorporates many or the provisions of the Arizona Torts
Claim Act. Like the State of Oklahoma Torts Claim Act, the proposed Act also places
limitations on the dollar amount of recovery, although the maximum recoveries will likely be
higher than those set forth in the Oklahoma statute.

B EACH SOVEREIGN REQUIRES THAT AN ACTION BE BROUGHT ONLY

IN THE COURTS OF THAT PARTICULAR JURISDICTION AND IN THE
VENUE THAT IS CONVENIENT TO THE SOVEREIGN.

The TRIBAL GOVERNMENT ELIMINATION ACT delivers another blow to the
Tribes regarding the choice of forum and venue issues. Each of the four Torts Claims Acts that
the Tribe analyzed for this testimony contained provisions that all claims could only be brought in
the court of that sovereign. For example, the Attorney General of the United States is authorized

,2 Okla. Stat. Ann. tit. 51 §152.1.
,J Okla Stat Ann. tit. 51 § 156
14 Okla Stat Ann tit 51 § 154
"Okla Stat Ann tit 51 §156

Page 7 of 14

565

to remove any claim brought in state court to the Federal District Court.' 6 Moreover, each
sovereign also controls the venue of the claim For example, the Attorney General of the State of
Arizona may remove any action filed in another part of the State to Maricopa County." In
contrast, S. 1691 allows claims to be brought against Tribes in either State or Federal Court.
Claims do not have to be filed in Tribal Court and there is no consideration regarding the venue of
the lawsuit. This smacks in the face of current caselaw and the federal policy of Indian
sovereignty and self-determination.

The "findings" of S. 1691 state that "for more than a century, the Government of the
United States and the States have dramatically scaled by the doctrine of sovereign immunity
without impairing their dignity, sovereignty, or ability to conduct valid government policies "
Although it is true that the U.S. Government and the States in varying degrees have scaled back
their use of sovereign immunity, this scaling back is authorized only within their own respective
court systems

As this Committee is well aware, the States possess sovereign immunity protection under
the Eleventh Amendment of the Constitution." The Eleventh Amendment presupposes that each
state is a sovereign entity in the federal system and that it is inherent in the nature of sovereignty
not to be amenable to suit without a State's consent." The Eleventh Amendment largely shields
states from suit in federal court without their consent, leaving parties with claims against state to
present them, if the state permits, in state's own tribunals. 20 The impetus for Eleventh
Amendment is the prevention of federal court judgments that must be paid out of state's
treasury. 21 The Eleventh Amendment also protects States from the burden of discovery. 22
However, the Eleventh Amendment does not exist solely in order to prevent federal court
judgments that must be paid out of state's treasury; it also serves to avoid the indignity of

16 See2SU.SC. §2679.

17 SeeARS. §12-822.

11 See Seminole Tribe of Florida v. Florida, 1 16 S.Ct. 1114 (1996).

19 Id. at 1122

20 Hess v. Port Authority Trans-Hudson Corp., 115 S.Ct. 394, 400, 513 U.S. 30 (1994).

21 Id; See Hutsell v. Sayre, 5 F.3d 996, 999 (6* Cir. 1993) cert, denied, 1 14 S.Ct 1071(A
suit in federal court by private party seeking to impose liability which must be paid from public
funds in state treasury is barred by the Eleventh Amendment, this bar against suit also extends to
state officials acting in their official capacities.).

22 See University of Texas at Austin v. Uralil,96¥3d 1337, 1340 (10* Cir. 1996).

Page 8 of 14

566

subjecting the state to the coercive process of judicial tribunals at the instance of private parties. 2 '

Courts have long recognized that Tribes are sovereign nations. Chief Justice Marshall, in
Worcester v. Georgia M stated:

The Indian nations had always been considered as distinct, independent, political
communities, retaining their original natural rights, as undisputed possessors of the
soil, from time immemorial . . .

The Cherokee nation, then, is a distinct community, occupying its own territory,
with boundaries accurately described, in which the laws of Georgia can have no
force . . .

The treaties and laws of the United States contemplate the Indian territories as
completely separate from that of the states.

Undoubtably it is unfair to subject a state's treasury and its dignity to a foreign court, including
the federal court Treating the Tribes differently from the States in this regard would be unfair,
unjust, and would be a callous disregard of the Tribes' dignity. If Congress thinks that a waiver
of the Tribes' immunity is necessary, that waiver must only be effective in the Tribal Courts.
Judicial review of Tribal Court decisions is neither proper nor necessary.

A waiver of the Tribes' sovereign immunity in State Court is completely unacceptable.
Often times. Tribes' and States' interests are adverse. These adverse interests often preclude the
Tribes from receiving a fair forum in State Courts. Moreover, State judges are more likely to be
biased in favor of the non-Indian party than their federal counterparts. The Honorable William C
Canby in his Nutshell on American Indian Law discussed the inherent strained relationship
between Tribes and States and the origins of Tribal sovereignty:

During the colonization of America, the British Crown dealt with the Indian tribes
formally as a foreign sovereign nations. Britain and several of its colonies entered
treaties with various tribes As the colonies grew in strength and population, it
became apparent that individual colonists were encroaching upon Indian lands and
were otherwise treating the Indians unfairly or worse In order to avoid prolonged
and expensive Indian wars, and perhaps also to enforce a measure of justice, the
Crown increasingly assumed the position of protector of the tribes from the
excesses of the colonists It is accordingly not surprising that when the colonies

23 Seminole v. Florida, 116 S Ct at 1 124; See also Sherwinski v. Peterson, 98 F 3d 849,
851 (5* Cir 1996XThe object and purpose of the Eleventh Amendment is to prevent the indignity
of subjecting a state to coercive process of judicial tribunals at the instance of private parties.).

24 31 US. (6Pet ) 515, 557, 559, 561 (1832).

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567

revolted from Britain, nearly all of the tribes allied themselves with the Crown.

Upon independence, the new nation found itself with the same problems of non-
Indian aggression and threatened Indian retaliation that had faced the Crown. If
Indian affairs were left to the individual states, non-Indian land hunger would
almost certainly result in new Indian wars that the exhausted United States was in
no position to fight. If stability were to be achieved, it had to be by placing Indian
affairs in the hands of the central government. After a period of uncertainty under
the Articles of Confederation, the Constitution did just that "

This natural tension is spelled out by Chief Justice Marshall in 1832 in Worcester v. Georgia. 26
Over fifty years later, in United Slates v. Kagama, the Supreme Court again recognized this
tension and stated:

[Indian nations] owe no allegiance to the States, and receive from them no
protection Because of the local ill feeling, the people of the States where they are
found are often their deadliest enemies. From their weakness and helplessness, so
largely due to the course of dealing of the federal government with them, and the
treaties in which it has been promised, there arises the duty to protection, and with
it the power. 27

If anyone seriously believes the States have become more objective and benevolent toward Indian
Nations, Fort McDowell has some swamp land here in the desert for sale to that person.
Although non-Indians may not be hungering for the Tribes' land at this time, testimony before this
Committee certainly indicates companies are hungry for profits and States are hungry for tax
dollars all at the expense of Tribal governments

/
If Congress allows any review of Tribal Court decisions at all, that review must only be in
the federal courts and the federal courts must give deference to the Tribal Courts. In its current
form, it is sad to note S. 1691 would relegate Tribal Courts to something less that
administrative bodies of federal and state governments. Under the Federal Administrative
Procedures Act, a reviewing court may set aside an agency's findings of fact which are arbitrary,
capricious, an abuse of discretion, or otherwise not in accordance with the law. State courts
normally review state administrative bodies' decisions with deference as well. 2 *

25 William C Canby, Jr., American Indian Law in a nutshell, 10 (1981)

26 See generally Worcersterv. Georgia, 31 US (6Pet.) at 557.

27 6 S.Ct. 1109, 1113-1114(1886)

n See e.g. Schillerstrom v. Slate, 885 P.2d 156 (Ariz. App. Div. 1 1994)(Trial Court must
find that there was no substantial evidence to support the agency decision, or that the agency

Page 10 of 14

568

S. 1691 would give no deference to tribal courts In fact. Under S. 1691 claimants would
not be required to file in Tribal Court at all S. 1691 would take away a significant portion of the
Tribal Courts jurisdiction It is hard to put into words the indignity that this bill places on the
Tribe Unless Tribal Courts are utilized, they will never achieve the respect that they deserve and
require. This action would, in no way, further the stated federal goal of furthering Tribal self-
sufficiency and strong tribal governments. 19

The provisions of S. 1691 allowing claims in state and federal court also appears to
eliminate the rule of Tribal exhaustion of remedies set forth by the United States Supreme Court,
one of the those few favorable court decisions that exist today M Under current caselaw, persons
with claims against the tribe must exhaust their tribal court remedies by bringing the action in
tribal court in the first instance. 11

C. THE "FINDING" OF S 1691 THAT "THE ONLY REMAINING

GOVERNMENTS IN THE UNITED STATES THAT MAINTAIN AND
ASSERT THE FULL SCOPE OF IMMUNITY FROM LAWSUITS ARE
INDIAN GOVERNMENTS" IS FALSE AND MISLEADING

First, numerous Tribes throughout the Country have adopted limitations to their use of the
defense of sovereign immunity As stated above. Fort McDowell's general liability insurance
policies contain riders that the insurance carriers cannot raise governmental immunity Moreover,
the Tribal Tort Claim Act that the Fort McDowell is considering at this time has been modeled
after an existing Torts Claim Act of the White Mountain Apache Tribe of Arizona.

Next, States continue to use the defense of sovereign immunity in contexts that many
people would find objectionable Most of the examples cited herein involve the States being sued
in Courts other than their own State Courts. However, this only highlights that fact that it is
wrong to subject a sovereign to suits in foreign Courts.

The most obvious example is the recent case of Seminole Tribe of Florida v. Florida* 1
The State of Florida raised its 11* Amendment sovereign immunity defense and prevailed against

acted arbitrary, capriciously, or abused its discretion).

79 See 25 U.S.C. § 2702( 1 XCongressional declaration of policy under the Indian Gaming
Regulatory Act).

30 See National Farmers Union Ins. Companies v. Crow Tribe of Indians, 471 U.S. 845
(1985).

11 See Id. at 856

"&?e!16SCt. 1114(1996).

Page 11 of 14

the Tribe Unless Secretarial procedures are adopted and allowed, or the Justice Department
brings a lawsuit on behalf of Tribes, this decision appears to have left the Tribe with no remedy to
enforce their rights under the federal statute Other examples of States successfully using their
sovereign immunity to bar claims include:

1) An action against the State of Illinois by elderly persons who suffered from
Alzheimer, dementia, or organic brain dysfunctions to obtain home health care
benefits provided by Illinois Department of Aging 33

2) An action against the State of Maine by AFDC recipients who should have
received child support collected by State through interception of tax refunds. 34

3) An action against the State of Minnesota under title VI and title IX alleging race
and sex discrimination .-"

4) An action brought against the State of Alaska in federal court by the owners of
Native allotment to quiet title to a right-of-way asserted by the State over the
allotment and for money damages against the State for trespass Action dismissed
notwithstanding owner's claim that dismissal of action based on sovereign
immunity would deny them any forum for a takings claim. 36

5) An action brought against the State of Connecticut for reimbursement of Medicaid
hospital charges under the Borden Amendment. 37

6) An action against the State of Hawaii alleging breach of trust and violation of
Hawaiian homeland lessees' rights by approving third-party agreements permitting
agricultural use of homelands by non-native Hawaiians. 3 *

7) An action against the State of Montana alleging violations of the Montana

33 See Frances J. v. Wright, 19 F.3d 337 (7* Cir. 1994) rehearing and suggestion for
rehearing denied, cert denied, 115 S.Ct. 204 (1994).

34 See Doucelle v. Ives, 947 F. 2d 21 (1" Cir. 1991)

35 See Egerdahl v. Hibbing Community College, 72 F.3d 615 (8* Cir. 1995).

36 See Harrison v. Hickel, 6 F 3d 134 (9* Cir 1993)

37 See Connecticut Hosp. Ass'n v. Weicher, 46 F.3d 21 1 (2 nd Cir. 1995).
3 * See Han v. United States Dept. 0/ Justice, 45 F 3d 333 (9* Cir 1995)

Page 12 of 14

570

Environmental Policy Act. "

8) An action against the State of New Mexico alleging sex discrimination. *°

9) An action against the State of New York alleging nonpayment of workers
compensation award. 4I

10) An action brought against the State of Arizona by inmates to recover minimum
wages under Arizona law. 42

1 1) An action against the State of Pennsylvania alleging age discrimination against the
state while acting in its capacity as an employment agency under the Age
Discrimination Employment Act."

12) An action against the State of Washington by a seaman and his wife for negligence
and loss of consortium under the Jones Act. 44

The Tribe cites to these examples not to argue that the Tribe wants to mistreat claimants or deny
claimants a fair forum. Rather, the Tribe cites to these examples to illustrate that when read in
isolation and without all the facts, many reported cases will appear to be unjust. Moreover, these
cases also illustrate that States aggressively use their sovereign immunity in courts of other
jurisdictions, even when its use may deny a claimant any other remedy or forum. This use is
allowed, and even cheered, by advocates of States' rights because of the indignity of subjecting a
State to the jurisdiction of another sovereign and the risk to the State's treasury The Tribes must
be afforded the same dignity and their limited treasuries must be protected.

59 See Fund for Animals, Inc. v. Lujan, 962 F.2d 1391 (9* Cir. 1992).

40 See Whitney v. State of New Mexico, 1 13 F.3d 1 1 70 (lO* Cir. 1997).

41 See Lipofsky v. Sleingiil, 86 F 3d 15 (2 - Cir 1996), cert denied, 117 S Ct 401 (1996);
See also Santiago v. N. Y. State Dept. Of Corrections Services, 945 F 2d 25 (2* 1 Cir. 1991), cert
denied, 112 S.Ct 1 168 (Public employees claim for emotional distress barred by 1 1*
Amendment).

42 See Gilbreath v. Cutter Biological Inc., 931 F.2d 1320 (9* Cir 1991).
41 See BlatKiak v. Allegheny indium Corp., 77 F.3d 690 (3* Cir. 19%).
44 See Micomonaco v. Slate of Washington, 45 F 3d 3 16 (9* Cir. 1995).

Page 13 of 14

571

IV. CONCLUSION

S. 1691 would expand damaging court decisions regarding the taxing authority of States
for sales on the reservations while at the same time significantly increasing the Tribes' exposure to
liability. If Congress does not reverse and remedy the incorrect court decisions regarding
taxation. Tribes cannot spread the burden among taxpayers If left with no tax base, only a small
fraction of Tribes could shoulder the burden of this bill. 45

If Congress considers imposing the enormous burden that a broad the waiver of immunity
would impose. Congress must give Tribes full autonomy and full taxing authority. For all
activities and ownership within the boundaries of the reservation. States should have no authority
to tax If a State's authority to tax on reservations is prohibited, which makes good policy sense.
Tribes could not be labeled the derogatory term of "tax evaders." This prohibition should include,
but not be limited to, any and all sales on the reservations, income earned on the reservations, and
any property interests owned on the reservations. Tribes taxing authority must apply regardless
of the nature of the buyer, the seller, the owner, or the employee (eg Tribal member, other native
American or non-Indian). When this happens, when Tribes are treated as sovereigns as was
intended when this Country was formed, then Congress can impose obligations expected of other
sovereigns of this Nation.

The United States Supreme Court and lower federal courts are generally not friendly
forums for Tribes, especially in the last thirty or forty years. These courts have steadily eroded
the Tribes' sovereignty. However, the Supreme Court has consistently recognized the basic
principle of Tribes as sovereign governments. Although States have been successful in the Courts
in taking away the Tribes' sovereignty in a number of areas, including taxation, S. 1691 seeks to
reverse the small minority of Supreme Court decisions favorable to Tribes.

The constant onslaught of unfavorable court decisions and efforts by Congress to reverse
the few favorable court decisions is discouraging and disheartening to Tribes. Although the
concept of a "trust relationship" is often used to describe the relationship between the federal
government and the Tribes, that concept is hollow in practice. This is true especially in the last
few years as members of Congress constantly assault the Tribes and any progress of the Tribes.

The Fort McDowell Mohave-Apache Indian Community, therefore, respectfully requests
that this Committee reject the TRIBAL GOVERNMENT ELIMINATION ACT or any other
like efforts to eliminate the Tribes' sovereignty under the laws of the United States and any efforts
to expand the taxing authority of states over Tribes.

45 Even assuming that Congress were to adopt a bill granting full taxing authority to
Tribes, many Tribes would still be unable to generate any significant revenue because of their
remote locations.

Page 14 of 14

572

TESTIMONY

STATEMENT OF CHARLES W. MURPHY, CHAIRMAN
STANDING ROCK SIOUX TRIBE
FORT YATES, NORTH DAKOTA

BEFORE THE U.S. SENATE COMMITTEE ON INDIAN AFFAIRS

■

MARCH 23, 1998

573

Chairman Nighthorse Campbell and Committee members, my name is Charles
Murphy, and I serve as Chairman of the Standing Rock Sioux Tribe. Standing Rock is a
signatory of the Treaty of Fort Laramie of April 29. 1868 Our existing Reservation is
comprised of 2.3 million acres in the northern great plains Over seven thousand of our
Tribal members remain on our Reservation where we exercise self government and work
to develop economically, while retaining our cultural and traditional ways in a modern and
rapidly changing world

I appreciate the opportunity to present testimony in opposition to S. 1691, a bill that
is wrongly entitled the "American Indian Equal Justice Act " This bill re-writes history and
would mark a serious shift in federal policy toward Indians My remarks shall focus on
these two, related points.

The Standing Rock Sioux Tribe is committed to retaining our culture and history,
and our treaty rights. In fact, our Reservation is home to some of the most dramatic events
in United States history. Our band of the Lakota Nation is the Hunkpapa, and the most
prominent of our chiefs was Sitting Bull In 1871 gold was discovered in the Black Hills
of present-day South Dakota, but this land was reserved by the Sioux Nation in the 1868
Treaty. Nevertheless. General Custer violated the treaty and led an expedition into the
Black Hills in 1874. Sitting Bull drove him out and resoundingly defeated Custer at Little
Big Horn on June 25, 1876

U.S. Commissioner George Manypenny convinced many of the Sioux bands to
return to the Indian Agencies to receive subsistence rations But Sitting Bull's band of
Hunkpapa remained in the traditional buffalo hunting grounds, in an area of present-day

47-201 98-19

574

Wyoming and eastern Montana reserved by the Sioux in the 1868 treaty as unceded
territory The Army chased the Hunkpapas north and for several years we remained in
Canada The buffalo had been killed off by the movement westward by the whites,
intensified by the construction of the transcontinental railroad, completed in 1 869 The
buffalo gone, chased by US Cavalry raids, and starving. Sitting Bull returned to the US
and agreed to reside on the Reservation Soon after on December 15. 1890. Sitting Bull,
the last Indian leader in North America to submit to government authority, was shot at his
home along the Grand River on the Standing Rock Reservation

The point, Mr Chairman, is that there is a long and important history involving the
Standing Rock Sioux Tribe and the United States This history includes the signing of a
peace treaty at Fort Laramie. Wyoming in 1868 The treaty recognizes our right to self
determination, and contains a solemn promise by the United States to assist our Nation
to survive in a changing era

Yet the federal policy has taken dramatic swings in the past 130 years After the
treaty period of the 1850's and 1860's the federal government undertook to assimilate
Indians Our Tribal lands were allotted and confiscated our children were forcibly taken
away from the Reservation and sent to Christian boarding schools, and we were prohibited
from speaking our language

This policy was universally discredited upon the publication of the Merriam Report
in 1928. The Congress shifted policy against allotment and assimilation, with enactment
of the Indian Reorganization Act of 1934 This act accepted in part by Standing Rock,
provided for Tribal self governance in the modern era

575

But 20 years later, Congress shifted again In 1953 the House of Representatives
passed House Concurrent Resolution 108 expressing the sense" "of the House" that all
federal obligations to Indians be "terminated as rapidly as possible."

Let me emphasize to this Committee that the Termination Era in Indian Affairs has
been universally discredited as a federal policy This is important, because of the dramatic
resemblance of S 1691 to the Congressional language in HCR 108. the House of
Representatives Termination Resolution of 1 953

Because of the failure of the termination policy Congress shifted Indian policy
again, and in 1973 the Congress formally entered the self determination era which we are
now in, with enactment of the Indian Self Determination and Education Assistance Act
(PL 93-638). Let there be no question Mr Chairman that it is under this policy of the
last 25 years that we have made the most remarkable economic and social progress in the
history of the Standing Rock Nation

We have developed or contacted dozens of federal programs for the economic,
educational and social enhancement of our Tribal members We have chartered the
Sitting Bull College, in Fort Yates North Dakota We have developed a Tribal Farm
Enterprise and two Class III Gaming establishments which generate revenues with which
we have built eight community centers in rural low income communities on our
Reservation. We have developed a modern technically adept Tribal Environmental
Protection Program, to protect our Reservation environment We have closed down all
Reservation dump sites, and now ensure that solid waste is disposed of at a regional, off-
reservation sanitary landfill We developed the first Tribally-chartered Historic

576

Preservation Act of 1966. as amended in 1992 We nave established a Tribal FM radio
station, which advances our language and culture, and further opens our Tribal
government affairs to our members

The Standing Rock Sioux Tribe is proof that the self determination era is working
There is no reason for Congress to turn back the clock and effect another dramatic
shift in federal Indian policy. There is nothing in the record before Congress to justify
this In fact, to the contrary, everything in the record suggests that we should hold the line,
while increasing federal financial assistance to enable the Tribe to address our lingering
economic development and social services needs

Let there be no mistake, S 1691 constitutes a return to Termination-era federal
policies Notwithstanding any statements by its sponsors that they support tribal
government, this bill is designed to destroy Tribal government.

With one stroke of the pen S 1691 would take away our fundamental sovereign
right to determine the circumstances in which our immunity from suit would be waived The
broad language in this bill would subject my Tribe to a broad array of personal injury, tax,
contract and other liabilities over which we now have some measure of control.

The bill's sponsors would lead one to believe that the fact that Tribal governments
currently have some control over the boundaries of liabilities that we potentially face,
inevitably leads to arbitrary and unfair consequences Nothing is further from the truth.
Our Tribal government carries general liability insurance for personal injury matters We
have waived our immunity in contractual relationships Mr Chairman there is no issue
here There is no reason for Congress to take any action m this regard

577

As sovereign governments, we have our own court systems. Section 1(a)(1)
purports that "a universal principle of simple justice and accountable government requires
that all persons be afforded legal remedies for violations of their legal rights." This
amorphous and seemingly benign language sounds much like the Termmationist language
that destroyed Tribal governments in the 1 950's and transferred jurisdiction over Indians
to the states.

Nevertheless, it makes more sense to delineate the responsibility of jurisdiction over
non-Indians and deeded lands within Reservations to Tribal Courts If the Congress seeks
"Indian legal reform," to provided non-Indians legal remedy it must be acknowledged that
the court system of our sovereign nation does provide such a remedy Congress would
better effect the objective of supplying legal remedies to non-Indians in Indian Country by
fully funding the Tribal Court Impovement Act of 1994 This would undoubtedly improve
the "legal remedy" sought for non-Indians, and do so within existing law.

As I stated above, the language contained in S 1£91 eerily resembles the language
contained in the termination-era legislation S 1691 is entitled the American Indian Equal
Justice Act." HCR 108 of the 83'" Congress purported to free" the Tribes from "all
disabilities and limitations specially applicable to Indians The results are the same -
state court jurisdiction over Indians and Tribal governments with dramatically decreased
powers

Moreover, as stated above the Standing Rock Sioux Tribe is a treaty tribe. The
1868 Fort Laramie Treaty provides that if bad men among the whites shall commit any
wrong upon the person or property of the Indians the offender is to be arrested and

578

punished according to the laws of the United States Federal and Tribal jurisdiction

remains a federal treaty obligation to our Tribe

Article II of the United States Constitution clearly recognized the federal role - a role

which is inalterably undermined by S 1691 - in relations with Indian Tribes " The US

Supreme Court has interpreted Article II

our existing constitution confers on congress the powers of war
and peace, of making treaties and of regulating commerce foreign
nations, and among the several states and with the Indian tnbes
These powers comprehend all that is required for the regulation of
our intercourse with the Indians

Worcester v. Georgia . 31 US (6 Pet ) 515 (emphasis original)

By terminating the federal legal remedy afforded to Indian Tribes S 1691 may be

unconstitutional

Moreover,

The Indian nations had always been considered as distinct,
independent political communities retaining their original natural
rights, as the undisputed possessors of the soil, from time
immemorial The very term nation so generally applied to them
means "a people distinct from all others The constitution, by
declaring treaties already made as well as those to be made, to be
the supreme law of the land has adopted and sanctioned the
previous treaties with the Indian nations and consequently admits
their rank among those powers who are capable of making treaties
The word "treaty" ana nation are words of our own language . .
having each a definite and well understood meaning We have
applied them to Indians as we have applied them to the other nations
of the earth They are applied to all m the same sense

Additionally. Article 12 of the Fort Laramie Treaty of 1868 specifically states:

No treaty for the census of any portion or part of the reservation
herein described which may be held m common shall be of any
validity or force as against the said Indians unless executed and

579

signed by at least three-fourths of all the adult male Indians,
occupying or interested in the same; and no cession by the tribe shall
be understood or construed in such manner as to deprive, without his
consent, any individual member of the tribe of his rights

IsL

The sponsor of S 1691 lacks an understanding of our history, and attempts to re-
write it. He seeks to reverse federal Indian policy and bring it back to its darkest period.
He's minimizing the unique government to government relationship agreed upon by treaty,
as one sovereign nation with another As Indian Nations our inherent rights of sovereign
immunity must be upheld The Senate should reject his efforts Great nations, like great
men, should keep their word ." F PC. v Tuscarora Indian Nation . 362 U.S. 99, 142 (1957),
Black, J , dissenting

580

NOCO

ENERGY CORP.

TESTIMONY OF JAMES D. NEWMAN

EXECUTIVE VICE PRESIDENT

NOCO ENERGY CORP.

TO THE

SENATE INDIAN AFFAIRS COMMITTEE

WEDNESDAY, MARCH II, 1998

WASHINGTON, D.C.

GOOD MORNING. I WOULD I.IKE TO THANK CHAIRMAN
CAMPBELL AND THE MEMBERS OF THE SENATE INDIAN AFFAIRS

N OCO

:OMMIT OR ALLOWING ME fUNITY T( 1FY TODAY.

MY NAME IS JAMES D. NEWMAN AND I AM EXECUTIVE VICE
PRESIDENT OF NOCO ENERGY CORP. BASED IN TONA WANDA. NEW YORK.

NOCO IS A 65-YEAR OLD. THIRD-GENERATION. FAMILY-OWNED
BUSINESS THAT EMPLOYES APPROXIMATELY 700 PEOPLE THROUGHOUT
BUFFALO AND NEW YORK STATE. ALMOST HALF OF OUR EMPLOYEES
WORK IN OUR NOCO EXPRESS GASOLINE CONVENIENCE STORE CHAIN.

I ALSO APPEAR BEFORE YOU AS PRESIDENT OF THE INDEPENDENT
PETROLEUM MARKETERS ASSOCIATION OF NEW YORK STATE. OR IPNY.
AND AS A MEMBER OF THE SOCIETY OF INDEPENDENT GASOLINE
MARKETERS OF AMERICA. OR SIGMA.

I AM HERE TODAY TO ASK THIS PRESTIGIOUS BODY TO IMPOSE
WHAT THE STATES AND THE SUPREME COURT HAVE ALREADY
DETERMINED TO BE A LEGAL RIGHT - THE RIGHT FOR THE STATES TO
COLLECT SALES TAX ON NATIVE-AMERICAN RESERVATIONS FROM GOODS
PURCHASED BY NON-NATIVE-AMERICANS.

I WANT TO BE PERFECTLY CLEAR THAT WE DO NOT IN ANY WAY
SUPPORT ANY LEGISLATIVE EFFORT THAT WOULD REQUIRE NATIVE-
AMERICAN BUSINESSES TO IMPOSE SALES. EXCISE OR USE TAXES ON
NATIVE-AMERICANS.

BEFORE NEW YORK STATE RECENTLY REVISED ITS POSITION.
PREVIOUS STATE REGULATIONS WERE VERY CLEAR THAT NATIVE-
AMERICAN BUSINESSES HAD TO COLLECT TAXES ON GOODS SUCH AS
GASOLINE THAT WERE PURCHSED ON RESERVATIONS BY NON-NATIVE
AMERICANS.

THE REGULATIONS INSTRUCTED NATIVE-AMERICAN BUSINESSES TO
COLLECT THE TAXES AND FORWARD THE COLLECTIONS TO THE STATE.
NEW YORK WENT SO FAR AS TO NEGOTIATE DIRECTLY WITH THE TRIBES
TO CREATE INDIVIDUAL TAX COMPACTS WHICH WOULD OUTLINE HOW

581

THIS PROCESS WOULD WORK AS EACH TRIBE HAS DIFFERENT RULES FOR
SELF-GOVERNANCE.

WE STRONGLY BELIEVE THAT NEW YORK'S DECISION TO REPEAL
THESE REGULATIONS AND THE SUBSEQUENT COMPACTS WAS
EXTREMELY UNFAIR. WE HAVE ALWAYS VIEWED THIS ISSUE AS A
MATTER OF FAIRNESS AND WE TURN TO YOU TO HELP US FIND A FAIR
SOLUTION BY LENDING OUR STRONG SUPPORT TO SECTION 3 OF THE
AMERICAN INDIAN EQUAL JUSTICE ACT.

ALLOWING THE STATES TO BRING ACTION IN FEDERAL DISTRICT
COURT TO ENFORCE THE OBLIGATION NATIVE- AMERICAN TRIBES HAVE
TO COLLECT AND REMIT STATE, EXCISE, USE AND SALES TAXES OWED
FROM SALES MADE BY NATIVE-AMERICANS TO NON-NATIVE AMERICANS
THROUGH SECTION 3 WOULD BE A FAIR AND EQUITABLE SOLUTION.

WE BELIEVE THAT THE PREMISE OF SECTION 3 WOULD INDEED
OFFER THE MEMBERS OF ORGANIZATIONS SUCH AS IPNY AND SIGMA A
LEVEL PLAYING FIELD WITH THE NATIVE-AMERICAN COMPETITORS.

LIKE NOCO, MANY OF THE IPNY AND SIGMA MEMBERS ARE FAMILY-
OWNED AND OPERATED BUSINESSES. AND. FOR MANY OF US. WE REMAIN
AT A SERIOUS COMPETITIVE DISADVANTAGE WITH NATIVE-AMERICANS
BECAUSE OF THIS INEQUITY.

IN NEW YORK STATE. OUR NATIVE-AMERICAN COMPETITORS ARE
SELLING GASOLINE AT TWENTY TO THIRTY CENTS BELOW THE PRICE OF A
GALLON OF GASOLINE SOLD BY OFF-RESERVATION MARKETERS.

MR. CHAIRMAN. THIS WOULD BE ANALOGOUS TO THE NATIONAL
FOOTBALL LEAGUE SAYING TO YOUR SUPER BOWL CHAMPION DENVER
BRONCOS THAT THE TEAM MUST NOW GO THE FULL 100 YARDS TO SCORE,
BUT YOUR OPPONENT ONLY HAS TO GO 70 OR 80 YARDS. THAT
CERTAINLY IS UNFAIR.

BEFORE I MOVE ON, I BELIEVE THAT IT IS IMPORTANT TO CLEARLY
STATE THAT NOCO ENERGY CORP., IPNY AND SIGMA ACKNOWLEDGE AND
RESPECT THE SOVEREIGNTY STATUS OF NATIVE-AMERICAN NATIONS. ALL
UNITED STATES CITIZENS SHOULD HONOR AND RESPECT OUR NATIVE-
AMERICAN TREATIES.

IN THE NAME OF FAIRNESS THOUGH, WE HAD HOPED THAT OUR
NATIVE-AMERICAN COMPETITORS WOULD RESPECT THE NEW YORK
STATE REGULATIONS REQUIRING THE COLLECTION OF SALES TAX FROM
NON-NATIVE AMERICANS.

582

MOST TRIBES IN NEW YORK STATE DO RESPECT NEW YORK'S
PREVIOUS REGULATIONS AND WE RESPECT THEM FOR THEIR EARNEST
AND SINCERE EFFORTS IN THE NEGOTIATIONS TO RESOLVE THIS
DILEMMA THROUGH THE TAX COMPACTS.

UNFORTUNATELY. A FEW UNSCRUPULOUS NATIVE-AMERICAN
BUSINESSMEN DISREGARDED AND RIDICULED THESE COMPACTS.

THE COMPACT REMEDY WAS EVENTUALLY MET WITH OUTRIGHT
VIOLENCE AND ACTS OF SABOTAGE. NATIVE-AMERICANS AND NATIVE-
AMERICAN SYMPATHIZERS BURNED TIRES. ULTIMATELY FORCING THE
NEW YORK STATE THRUWAY TO CLOSE DUE TO POOR VISIBILITY THAT
THREATENED THE GENERAL PUBLIC AND HALTED INTERSTATE
COMMERCE. MEMBERS FROM THE NEW YORK STATE POLICE WERE
PHYSICALLY ASSAULTED. THESE ACTS ALSO INJURED INNOCENT NATIVE-
AMERICANS. ONE MOTORIST WAS EVENTUALLY KILLED.

OUR FEAR IS THAT A FEDERAL REMEDY WOULD STILL RESULT IN
THESE KINDS OF PLANNED AND ORCHESTRATED ACTS OF VIOLENCE. THE
LAST THING WE WANT IS A SITUATION IN WHICH LIVES ARE JEOPARDIZED.

WE BELIEVE THAT HOW TO ENFORCE A FAIR REMEDY IS JUST AS
IMPORTANT AS DEFINING A FAIR REMEDY.

WE ARE ENCOURAGED BY SECTION 3 OF THE AMERICAN INDIAN
EQUAL JUSTICE ACT AND WILL HELP TO SEEK ITS PASSAGE. WE HAD
HOPED THAT TRIBES BASED IN NEW YORK AND THE STATE COULD HAVE
REACHED CONSENSUS THROUGH INDIVIDUAL TAX COMPACTS. BUT THIS
DOES NOT SEEM TO BE POSSIBLE.

WE BELIEVE THAT SECTION 3 WOULD HELP LEVEL THE PLAYING
FIELD FOR BUSINESSES THAT COMPETE WITH NATIVE-AMERICAN
BUSINESS ENTITIES. WHO CURRENTLY ENJOY UNFAIR COMPETITIVE
ADVANTAGES IN THE MARKETPLACE.

WE URGENTLY TURN TO THIS RESPECTED BODY FOR YOUR HELP IN
BRINGING A FAIR RESOLUTION TO THIS LONG STANDING DILEMMA.

MR. CHAIRMAN, THANK YOU FOR THE OPPORTUNITY TO APPEAR
BEFORE THIS PRESTIGIOUS BODY. I WILL ANSWER ANY QUESTIONS YOU
MAY HAVE.

583

J^ KENALIUO, NIW MEXICO «-7»<M \

WW— (M)M7-U*1
FAX. (f.|) »7 11M

TESTIMONY OF THE SANTA ANA PUEBLO

ON SENATE BILL 1691

105th CONGRESS, SECOND SESSION

L INTRODUCTION

The Santa Ana Pueblo ('Pueblo") opposes Senate Bill 1691, the "American Indian Equal
Justice Act" ("S.1691"). S.1691 would abrogate the sovereign immunity of Indian tribal
governments for all tort claims and contract actions in derogation of existing, well-established
federal and tribal law, and without regard for the authority of tribal courts. Contrary to existing
law, S.1691 would subject tribal governments to lawsuits in state courts under state law for torts
and contracts, it would abrogate tribal sovereign immunity for the collection of state taxes in
federal court, and it would create a private cause of action under the Indian Civil Rights Act in
federal court for unspecified damages and relief. This bill is an egregious breach of numerous
sacred treaties and agreements, and would result in a marked abandonment of federal law and
policy, and would make a mockery of the federal trust responsibility to Indian tribes. S.1691 is
unnecessary, unwise and should not be passed.
D. BACKGROUND

The Santa Ana Pueblo is a federally recognized Indian tribe exercising a traditional form
of government infused with some contemporary governmental elements. The present government
combines the traditional tribal theocracy, the secular government decreed by Spain in 1620, and
a modem administrative structure for maintenance of day-to-day operations. The Tribal Council

584

nukes governmental policy decisions through actions embodied in resolutions and ordinances;
the Governor and Li. Governor handle external affairs; the administrative staff handles day-to-day
operations; and the traditional religious councils and Icivas handle internal affairs. The Tribal
Council is comprised of all male heads of household, who serve for life, while officers are
appointed to one-year terms. The Pueblo has an established traditional tribal court system, with
the governor serving as chief judge as well as a contemporary court system with a law-trained
judge.

The Pueblo land base consists of approximately 63,000 acres of land in Sandoval County,
located in north-central New Mexico near the town of Bernalillo, about 18 miles north of
Albuquerque. The Pueblo has about 660 members, many of whom live on the Santa Ana
Reservation. The Pueblo owns a 27-hole championship golf course, a four-star restaurant, a
garden center and a gaming facility which serve both domestic and foreign visitors. The Pueblo
also has organized several tribal corporations and enterprises including Southern Sandoval
Investments, Ltd., Santa Ana Golf Corporation, Santa Ana Hospitality Corporation and Santa Ana
Non-Profit Enterprise.
m. EXISTING, APPLICABLE FEDERAL AND TRIBAL LAWS AND PRACTICES

The abrogation of tribal sovereign immunity contemplated by S. 1691 for contract and tort
actions in state court under state law is in derogation of the long-standing principles that Indians
tribes retain "attributes of sovereignty over both their members and their territory," United States
v. Mazurie . 419 U.S. 544, 557 (1975), and that "tribal sovereignty is dependent on, and
subordinate to, only the Federal Government, not the states ... ." Washingt on v. Confederated
Tribes of the Colville Indian Reservation . 447 U.S. 134, 154 (1980). S. 1691 severely breaches

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these principles of federal law. The Pueblo is amply equipped to deal with tort and contract
disputes that may arise on the Reservation.

In the contractual context, the Tribe has established tribal corporations that have the full
authority to make contracts, provide for arbitration or other dispute resolution, and to waive
immuni ty Under limited waivers of immunity, the tribal corporation is authorized to pledge the
assets of the corporation to satisfy any claims made against it. For example, the Pueblo has
agreed to arbitration to resolve any disagreement arising under the Tribal-State gaming compact
and agreed to waive sovereign immunity under a gaming equipment contract.

The Santa Ana Star Casino ("Star") maintains liability insurance insuring the Pueblo, its
agents, and employees against claims for injury or damage from visitors. Any claim can be
brought either in tribal court or state court, given that the Pueblo agreed to extend concurrent
jurisdiction to the state for a visitor's claim of liability for bodily injury or property damage.
Visitors, guests, and vendors to the Santa Ana Star are afforded ample protection in pursuing
claims through tribal or state court and seeking recovery under the Star's outside insurance policy
coverage.

The Pueblo's main industry is tourism, due to our proximity to Santa Fe and our location
north of Albuquerque. The Pueblo transacts substantial business with visitors, both domestic and
foreign. The Santa Ana Golf Course is the home of the PGA/NIKE New Mexico Charity Classic
Tournament and was rated as one of American's best golf courses in 1995 by Golf Week
magazine. It hosts many annual tournaments, including the PGA Challenge Cup and U.S. Open
Qualifier. The contracts that the Tribe and its corporations have negotiated and entered into

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include arbitration and other dispute resolution mechanisms that have served all parties well,
based on the fact that there have been no major, unresolved problems or disputes.

With respect to tort claims made against the Pueblo, the Pueblo and its corporations carry
and maintain insurance coverage for governmental and business activities. Equally important,
the Tribe does not allow their insurance companies to raise the defense of tribal sovereign
immunity to avoid paying claims. This is very important to the Pueblo because we seek to
protect both tribal members and non-members who may be injured in the course of dealing with
the Pueblo or its corporation.

In addition, the Pueblo maintains a tribal court system with jurisdiction over all cases and
controversies that arise within the jurisdiction of the Tribe. Therefore, any contractual or tort
disputes that cannot be resolved through arbitration or insurance settlement can be heard in the
Tribal Court. Given the protection afforded tribal members, non-members, and visitors, there is
no need for congressional intervention to abrogate tribal sovereign immunity for actions that may
be brought against the Pueblo or its businesses.
IV. STATE TAXATION

Similarly . there is no need for congressional abrogation of tribal sovereign immunity for

actions against Indian tribal governments for the collection of state taxes. Under long-standing

principles, Indian tribes and reservation Indians are subject to tribal and federal law, and

therefore, Indian tribes are generally exempt from state taxation and regulation in Indian country.

S«- OH«h«n. Tax Comm'n v. Chickasaw Nation . SIS U.S. 450 (1993); Montana v. Blackfeet

Tribe . 471 U.S. 759 (1985). The Supreme Court has stated that:

The Constitution vests the Federal Government with exclusive authority over
relations with Indian tribes. Art. I. § 8, cl. 3. ... As a corollary to this authority.

587

and in recognition of the sovereignty retained by Indian tribes even after the
formation of the United States, Indian tribes and individuals generally are exempt
from state taxation within their own territory.

Id. at 764. Furthermore, the Supreme Court has ruled that when Indian tribes and individual

Indians generate value through economic activities on their reservations, federal law may also

preempt state taxation of non-Indians engaged in Indian commerce. For example in New Mexico

v. Mescalero Apache Tribe. 462 U.S. 324 (1983), the Supreme Court held that non-Indian hunters

using a tribal hunting license on reservations lands were exempt from state hunting regulations

reasoning that:

The Tribe has engaged in a concerted and sustained undertaking to develop and manage
the reservation's wildlife and land resources specifically for the benefit of its members.
The project generates funds for essential tribal services and provides employment for
members who reside on the reservation. ... The Tribal enterprise ... clearly involves "value
generated on the reservations by activities involving the Tribe."

Iiat340.

By contrast, the Supreme Court has ruled that where Indian tribes or individual tribal
retailers sell prepackaged goods to non-Indians, without adding reservation value, the non-Indian
consumer may be liable to pay non-discriminatory state taxes whose legal incidence falls on the
transaction by the non-member. §ee Washington v. Colville . 447 U.S. 134 (1980) (prepackaged
cigarettes). Though a state's authority to tax in these circumstances does not diminish the Indian
tribe's inherent authority to tax the same transaction, it has given rise to the problem of "dual
taxation" in Indian country.

588

(1991). S.1691 would interfere and destroy the cooperation of states and tribes to enter into
mutually satisfactory agreements, and in cases where the legal incidence of a particular state tax
law does not fall on the ultimate consumer, as in New Mexico, S.1691 permits a state to sue for
taxes that it would not otherwise be entitled to receive. Furthermore, the broad language
contained in S.1691 would effectively destroy a tribe's ability to develop and generate value
through on-reservation economic activities free of state taxation. S.1691 sets a dangerous
precedent to abrogate tribal sovereign immunity in a manner that obstructs tribal-state cooperative
agreements and impedes on-reservation economic development and taxation.

V. INDIAN CIVIL RIGHTS ACT

Under prevailing law, the Indian Civil Rights Act does not provide a waiver of tribal
sovereign immunity, but it makes available to any person the right of a writ of habeas corpus in
federal court to test the legality of his detention by order of an Indian tribe. Santa Clara Pueblo
v. Martinez. 436 U.S. 49 (1978). Tribal courts have construed the Indian Civil Rights Act in
accordance with federal law. In amending the Indian Civil Rights Act, S.1691 would abrogate
tribal sovereign immunity in an extremely broad manner without consultation from the Indian
tribes. Any legislation amending the Indian Civil Rights Acts must be accomplished in a manner
that preserves tribal governmental solvency, authority and functions in accordance with and
respect for tribal laws, customs and institutions.

VI. CONCLUSION

The Santa Ana Pueblo opposes S.1691 because it would abrogate tribal sovereign
immunity for tort claims and contract actions in derogation of federal law and policies of
promoting tribal self-determination and self-sufficiency. S.1691 disregards existing, well-

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established federal and tribal law, as well as tribal courts. S.1691 would set a dangerous
precedent by exposing tribal government treasuries to private actions in state court, and by
subjecting tribal governments to actions for the collection of state taxes that a state might
otherwise be barred from collecting. S.1691 is reckless in its abrogation of tribal sovereign
immunity for claims under the Indian Civil Rights Act. Simple logic dictates that such a
departure from well-established law requires more thought and analysis on the effects this broad-
sweeping abrogation of tribal sovereignty will have on Indian Nations. In accordance with the
federal policies of self-determination and self-sufficiency, Congress should pass legislation that
builds the necessary tribal infrastructure for tribal courts, business activities, taxation and
economic development. Because S.1691 jeopardizes tribal governmental solvency, diminishes
tribal authority, undercuts the inherent authority of tribal courts, and disregards well-established
federal and tribal laws and policies, the Santa Ana Pueblo urges that S.1691 not be passed. Be
assured, however, that the Pueblo will work with congress for positive legislation that will better
address the concerns raised in S.1691.

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STATEMENT OF THE HOPI TRIBE PROVIDED BY THE HOPI TRIBAL COUNCIL AND
CHAIRMAN, WAYNE TAYLOR. JR.. REQARDINQ S.1691

TRIBAL GOVERNMENT AND SOVEREIGN IMMUNITY

The Hopi Tribe welcomes this opportunity to express its views concerning
Senate Bill 1 691 .

Indian tribal governments, like the United States and the State governments,
possess Sovereign Immunity from unconsented lawsuits.

The idea of such an immunity is as fundamental as the idea of government
itself. In helping to lay down the foundations of Constitutional government in this
Country, Alexander Hamilton in 1788 in his Federalist Paper No. 81 reassured the
several States of their continued immunity from unconsented lawsuits in the following
words:

"It is inherent in the nature of sovereignty not to be amenable to the suit of an

individual without its consent . . . This is one of the attributes of Sovereignty

Hamilton's argument was aimed at putting to rest the fears of the several
states who worried that their treasuries would be laid open to ruin by the lawsuits of
individuals or other states. Protection against this fear was provided by the concept
of Sovereign Immunity and later by the 1 1th Amendment to the Constitution.

This early fear of the states, underscores the primary rationale behind the
existence of Sovereign Immunity, ie., the protection of the public treasury from
lawsuit, except as consented to by the sovereign who must act for the benefit of the

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entire nation, state or tribe, and not exclusively for the individual litigant. The
obligation of the government to its citizens cannot be fulfilled if the public treasury
is depleted by lawsuits.

Just as important, the immunity allows the processes of government to
proceed without fear that every governmental action will result in a lawsuit designed
to test its efficacy or merely intimidate the lawmakers and administrators in carrying
out their work. Government resources should not be expended defending against
frivolous or otherwise ill-intended lawsuits.

An important part of Sovereign Immunity is the notion of consent, ie. that no
lawsuit may be maintained against the government, in other words the people and
their treasury, without the consent of the government acting in the best interest of
the people.

The expression of consent is at the heart of the American system of
government. This nation was formed by the united consent of the American people
as they acted to adopt the Constitution. Consent is the connection between
Sovereignty and Immunity. The idea of consent means that it is the right of every
government; federal, state, and tribal to choose the circumstances which will give rise
to governmental liability and the scope of that liability before the courts.

The legislation proposed by Senator Gorton would take away that right of
consent from the Indian nations of this great country. To do so would be to act
contrary to the expressed policy of the United States to promote and preserve tribal
self-government, the very heart and soul of Federal Indian Policy. Indeed, the policy

592

of self-government or self-determination is at the heart of American democracy both
at home and abroad. At home, self-determination is the principle upon which this
nation was founded and built and to which the nations of the world now look to for
hope. We too as Indian nations have long embraced these principles. Moreover,
America has always sought to promote these same principles abroad and around the
world. The Indian people of this country were with you in every fight to do so,
standing shoulder-to-shoulder from the American Revolution to Desert Storm and
every shore in between. Are we now to be judged by the Senate to be less
deserving of the protections of these principles of freedom and self-determination that
we have throughout history loyally and without reserve supported you in the fight to
protect? No, we are not!

We have earned these protections and blessings as members of humankind and
through our sacrifices and our losses. Indian people will never forget that it was our
land that made it possible for this Nation of America to take root and grow to
greatness. When we agreed, or in most cases were forced to give up a part of our
lands, we did so based on an understanding that our agreement would not result in
our destruction nor our loss of freedom. Like the English Philosopher, Edmund Burke,
we too believed that freedom is ". . . the only advantage worth living for." 1 All that
we asked for ourselves in return was a small place in this Great Nation where we
could determine our destiny, where we could, guided by our hearts, be what we

1 Edmund Burke, speech to the British House of Commons, April, 1775.
3

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choose to be--lndian people who have never and will never give up our identity and
our shared love, with you, of freedom.

This Congress cannot and must not destroy this right of self-determination--this
right that we have always possessed and which we have repeatedly won throughout
the history of this nation with our lives, our land and our sacrifice.

Waiving the Immunity of Indian tribal governments opens the door to unfettered
legal warfare on the tribes. Such warfare will lead first to the destruction of tribal
property and ultimately to the destruction of tribal government itself. Such a result
would be counter to longstanding Federal Indian Policy and destructive to the
principles of freedom and self-determination which are the foundation of that policy
and of America itself.

In the past Senator Gorton has sought to make tribal receipt of federal priority
funding allocations contingent on waivers of tribal immunity. In asking the Indian
Nations to waive our Sovereign Immunity in order to receive the same federal financial
assistance that state and local governments receive without such waivers, you in
effect are asking us to choose between the health and well-being of our children and
our freedom. Is this the price of our place in America? If this unholy choice must be
made, then we will choose freedom and place our health and well-being into the
hands of God. For their can be no true well-being among any people without
freedom. This is the lesson taught to us by our forefathers, both yours and mine.
This is the lesson that we will teach our children. There is no life without freedom.
To choose Senator Gorton's way is to choose death for American Indian Nations.

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In addition to matters of principle and policy, there are very practical reasons
which also support this conclusion. In the matter of commercial contracting, an
undertaking where both parties to an arms length transaction are presumed to act in
their respective best interest and with the advice of counsel as necessary, the tribes
have come to expect that it is in the tribe's best interest to contract for appropriate
dispute resolution provisions. Almost always this requires a limited waiver of tribal
immunity. Typically, the waiver may include the ability to obtain specific performance
of the contractual obligation or damages up to the value of the contract. The Hopi
Tribe has come to expect that such limited waivers of the Tribe's immunity will be
included in commercial contracts as a matter of business as usual. We understand
that contracts are agreements of mutual accommodation and that if the Tribe wishes
to undertake commercial transactions in advancing tribal interest, then it must do so
with an eye toward accommodating the interest of the other party to the transaction
by agreeing to limited waivers of immunity. This result is brought about by the reality
of the market place and by the conscious choosing of the Tribe to be a part of that
market place.

In cases involving personal injury to individuals resulting from the actions of the
Tribe, insurance is the typical means of providing relief to the interested party. The
Hopi Tribe, as a part of its Risk Management Policy requires liability and property
damage insurance covering the activities of the Tribe and its officials and employees.
These insurance policies require a minimum of $1 Million Dollars of liability coverage
for each injury and for each person so injured. Property damage is covered up to

$500,000. Tribal departments and programs which receive federal funds are also
covered by the Federal Tort Claims Act for injuries occurring to third parties in the
course of tribal activities. The Tribe has maintained these insurance policies for many
years and I am not aware of one instance where the Tribe has raised the defense of
Sovereign Immunity as to personal injuries. In fact, I am aware of several instances
where individuals have filed claims arising out of personal injuries and have been
compensated from the Tribe's policies. We believe it to be in the best interest of the
Tribe to maintain these insurance policies. We choose to act responsibly in pursuing
our governmental activities.

In the area of tribal legislation, the Hopi Tribe continually enacts provisions
providing for limited waivers of the Tribe's immunity and providing for judicial review
of tribal decision-making which affects the property or other interest of both tribal
members and non-Indians. We believe such a practice is in the best interest of the
Tribe.

In each of these instances the Tribe is in the best position to determine when
and to what extent a waiver of immunity will be made. This is the responsibility of
tribal government, a responsibility which we have never turned from.

On the matter of waiving Tribal Immunity to allow State lawsuits against Tribes
for the collection of taxes, let me suggest that we first undertake a dialogue
concerning the fundamental unfairness of state taxation of transactions occurring
within Indian Country. The Hopi Tribe has experienced this unfairness firsthand.

Most of the revenues of the Hopi Tribe are derived from the operation of two

596

coal mines within the reservation which are owned jointly by the Hopi and Navajo
Nations. The coal is mined by Peabody Western Coal Company under lease
agreements with the Hopi and Navajo. The State of Arizona taxes Peabody's
operations and receives in excess of 915 million dollars per year in tax revenues.
These tax revenues far exceed the amount of royalty income received by the Hopi
Tribe from those same operations by Peabody Coal Company. Is there any fairness
in such a situation where the State receives more from Indian owned natural
resources than do the Indian owners of the resources themselves? Not only is this
fundamentally unfair, it also lessens the value of the Tribe's coal by increasing the
ultimate sales price and it weakens the tribal economy by taking much needed dollars
from the reservation economic base, dollars which could be paid to the Tribe in the
form of increased royalties or other benefits.

We are not aware of any overtures from the State rushing to resolve this
inequity. We do not support measures which would give the States an even greater
opportunity to tap into tribal economies and weaken those economies at the expense
of tribal members.

Sovereign Immunity is not about denying plaintiffs access to the Tribal, Federal
or State courts. Sovereign Immunity is about the right of Indian Tribes, just like the
Federal and State governments, to decide when and under what circumstances and
to what extent that immunity will be waived and litigants allowed to proceed to prove
their claims for money damages or other appropriate relief. Tribal governments, like
the state and federal governments, are in the best position to protect the interest of

597

their citizens in the tribal treasury and in the effective administration of government.
Moreover, Tribal governments, like the State and Federal governments, are in the best
position to balance those interest against the competing interest of litigants who
allege some grievance against the Tribe. This is not unfair advantage, this does not
intrude on notions of due process, this is simply a necessary protection for
economically disadvantaged Tribal governments struggling to provide basic yet
essential governmental services to their people.

Much has been made of the fact that the States and the Federal government
have in many instances enacted laws limiting the assertion of Federal and State
Sovereign Immunity. This is certainly true. However, as I have already pointed out,
the Hopi Tribe has repeatedly acted, and I am sure many other Tribes have taken
similar measures to provide for relief against the Tribe, in the areas of personal injury
claims and contracts as well as general tribal legislation. What is overlooked by those
who hold up Federal and State waivers of immunity in contrast to tribal waivers of
immunity is the fact that the Federal and State governments with their huge tax bases
are in a much better position to grant broad waivers of immunity than are the Tribes
which have historically been hamstrung by the lack of a tribal tax base, partly as a
result of the dual taxation problem engendered by state taxation of transactions
within Indian country, and partly as a result of struggling tribal economies which are
only now beginning to see the light of day. Waiving tribal sovereign immunity will
only weaken these emerging economies. The resources that would normally be spent
on governmental services and expanding economies would under the proposed

598

legislation be required to be diverted to the hiring of lawyers and the defense of
lawsuits.

The Hopi Tribe joins with the other Indian Nations of this country in imploring
the Senate to stand firm in support of the principles of freedom and self-determination
for all American people including the Indian Nations of this Country. We beseech you
to not turn away from your commitments to America's Indian People, commitments
which span the distance between the birth of this nation and the present. No good
thing can come from this proposed legislation. We urge its sound defeat.

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AGREEMENT BETWEEN THE STATE OF MINNESOTA AND
THE MILLE LACS BAND OF OJIBWE INDIANS

This Agreement is between the State of Minnesota ("State") and the Mille Lacs Band of Ojibwe

Indians ("Band"), a federally recognized Indian tribe with jurisdiction over its members and its

territory. The State Commissioner of Revenue ("State Commissioner"), exercising authority

granted pursuant to Minnesota Statutes section 270.60, and the Band Commissioner of Finance

("Band Commissioner"), exercising authority pursuant to 4 Mille Lacs Band Statutes Annotated

section 3(b) and Band Assembly Resolution No. 07-04-123-97, a copy of which is appended

hereto, hereby agree to the following:

Section 1. Statement of Intent.

A. The Band and the State each assert sovereign authority to tax certain activities on lands

within the jurisdiction of the Band. The parties recognize that, absent clear authority

from Congress, the State does not have the authority to impose the taxes covered by this

Agreement on the activities of the Band, Band agencies and instrumentalities, and Band

members on such lands. However, there are many unsettled questions regarding Band

and State taxation of the activities of non-Band entities and persons on such lands. The

parties recognize that they each may have authority to tax such activities, and that the full

assertion of such authority could result in tax rates on such activities that exceed the tax

rates on similar activities occurring within the State but outside the jurisdiction of the

Band. Similarly, the parties recognize that State sales taxes imposed on purchases by

Band members on lands outside the jurisdiction of the Band and Band use taxes imposed

on such purchases could also result in tax rates that exceed those on similar purchases by

600

others.

B. The purpose of this Agreement is to provide for the mutual recognition of and respect for
the sovereignty of the State and the Band, to avoid disputes over taxation of activities on
lands within the jurisdiction of the Band, and to ensure that the rate of taxation, for those
taxes covered by this Agreement, does not exceed the rate on similar activities occurring
on lands within the State but outside the jurisdiction of the Band. To achieve these
objectives, the Band and the State shall, as hereinafter set forth:

1 . establish a mechanism to allow the Band and Band-owned entities to exercise
their exemption from those taxes specified in Section 7 of this Agreement, or
provide for a refund of such taxes to the Band;

2. establish a mechanism for refunding to the Band tax payments made to the State
by resident Indians who are not