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