Are Hopes for the HEARTH Act Too High?

With much tribal and media fanfare, on Monday the President signed into law the Helping Expedite and Advance Responsible Tribal Homeownership (HEARTH) Act, Pub. L. No. 112-151 (2012).  It was signed less than two weeks after the Senate passed the Act by unanimous consent.  According to the House Report on the bill:

Private investment within Indian reservations . . . is about as scarce as it is in any nation where ownership of property is highly restricted by national governments. Investors cannot afford to wait the months or years it may take for BIA approval of a simple lease executed with a tribe. . . . Fortunately, there are exceptions. In reservations where tribes have wisely contracted with the BIA to manage their own lands, productivity and health of the property dramatically improve.

As it stands, under 25 U.S.C. § 415 each and every lease of a tribe’s lands must still undergo federal review and approval by the Secretary of the Interior under a sprawling, burdensome set of regulations.  Approval is also subject to the National Environmental Policy Act, 42 U.S.C. § 4321, et seq., along with the usual delays and court controversies that protract the process.  It is not unheard of for several years to pass before Indian land can be leased, if at all.  Thus, a tribe who wants to govern its trust lands under free market principles cannot, in practice, do so.

Needless to say, the HEARTH Act has great expectations. The Act seeks to change the current scheme of Indian land leasing by – commonsensically – allowing tribes to lease their own land. (The “Homeownership” moniker to the Act is actually misleading; the HEARTH Act potentially applies to all non-mineral tribal land leases, not just those pertaining to Indian homesteads). The Act will give tribal governments the discretion to lease restricted lands for business, agricultural, public, religious, educational, recreational, or residential purposes without the approval of the Secretary of the Interior. Tribes are able to do so with a primary term of 25 years, and up to two renewal terms of 25 years each (or a primary term of up 75 years if the lease is for residential, recreational, religious or educational purposes).

The Act has been lauded as something that will “open the door to badly needed housing development on reservations, as well as wind and solar energy projects that tribes have been eager to launch.”  Senator John Barrasso (R-WY) says that it will once and for all “remove bureaucratic red tape and clear the way for Indian tribes to pursue homeownership and economic development opportunities”; Interior Secretary Ken Salazar says the Act “will have a real impact for individuals and families who want to own a home or build a business – generating investment, new jobs and revenues”; National Congress of American Indians President Jefferson Keel echoes the applaud, stating that the Act “will streamline business development and housing development and create jobs on reservations across the country.”

Although a good first step – a very good first step, with much potential – I am not as sold that the HEARTH Act will have such immediate effects, if it will have any effect at all.  First, before any tribal government can approve a lease, the Secretary must approve the tribal regulations under which those leases are executed (and mining leases will still require the Secretary's approval).  Second, before the Secretary can approve those tribal regulations, the tribe must have implemented an environmental review process – a “tribal,” or “mini” NEPA –that identifies and evaluates any significant effects a proposed lease may have on the environment and allows public comment on those effects.

One need only look to the energy arena to determine the future of the HEARTH Act. In 2005, Congress enacted 25 U.S.C. § 3504, which included provisions for implementation of a Tribal Energy Resource Agreement (“TERA”).  Essentially, the law operates much like the HEARTH Act.  It (1) allows tribes to enter into a master agreement (the TERA) with the Secretary of the Interior, which then (2) grants the tribe the ability to enter into leases and to grant rights of way across tribal lands without Secretarial approval.

To date, however, not one tribe has entered into a TERA.  For many tribes, the cost simply outweighs the benefits – TERAs allow tribes the leeway to skip Secretarial approval, “but only on terms dictated by the federal government rather than on the tribes’ own terms.”  Like the HEARTH Act, the TERA requires that tribes create a NEPA-like environmental review process and comply “with all applicable environmental laws.”  And tribes simply do not have the resources necessary to fulfill the host of NEPA requirements, which impose an extremely heavy burden on tribal governments to demonstrate that they have the requisite expertise, experience, laws, and administrative structures in place to assume the responsibility of a TERA.  According to Indian law scholar Judith V. Royster, “[f]ew tribes at present have the in-house geologists, engineers, hydrologists, and other experts, or the financial wherewithal to hire or train them,” in order to provide the tribe with the capacity necessary to obtain Secretarial approval under the TERA regulations.

Of course, the HEARTH Act authorizes the Secretary to provide a tribe, upon the tribe’s request, technical assistance in developing a regulatory environmental review process. But this takes time and money.  And the Secretary, given all of the BIA’s other demands, is perennially short on time when it comes to launching new initiatives such as this one. Further, Congress has shown time and time again that it is willing to pass these laws, but not to fund them; Congress should not be expected to authorize one red cent to support the HEARTH Act’s implementation.

Time will tell whether the HEARTH Act proves to be any success at all.  Until then, the “Expedite” part of the HEARTH Act’s title seems a bit too optimistic.

Ryan Dreveskracht is an Associate at Galanda Broadman PLLC, of Seattle, an American Indian majority-owned law firm. His practice focuses on representing businesses and tribal governments in public affairs, energy, gaming, taxation, and general economic development. He can be reached at 206.909.3842 or ryan@galandabroadman.com.

Judicial Warning to Tribes to Avoid State Incorporation

Before any tribal government forms an enterprise under state law or seeks to do business beyond Indian Country, it should consider this week's indictment of tribal sovereign immunity by a Tenth Circuit Court of Appeals Judge in Somerlott v. Cherokee Nation Distributors.

CND, LLC wants sovereign immunity. But CND, LLC is in the business of manipulating spines for profit. It serves mostly non-Indians and operates off reservation. It was formed under Oklahoma’s limited liability statutes. . . .

[S]overeign immunity has never extended to a for-profit business owned by one sovereign but formed under the laws of a second sovereign when the laws of the incorporating second sovereign expressly allow the business to be sued. And it doesn’t matter whether the sovereign owning the business is the federal government, a foreign sovereign, state — or tribe. . . .

Neither can we doubt that the Nation lacked for choices when it came to organizing CND — or that good reasons exist for the choice it made. The Nation could have chosen to operate the chiropractic clinic itself and enjoy immunity for its operations. . . .

The moral of this story: Tribes should avoid state incorporation of their enterprises whenever possible. Instead, tribes should charter their businesses under tribal law, or perhaps Section 17 of the IRA (yet heeding caution about sue-and-be-sued-clause immunity waiver as to the latter). I recognize that certain tribal economic development efforts require an entity formed under state law but that should be the exception to the rule.

Gabriel "Gabe" Galanda is a partner at Galanda Broadman PLLC, of Seattle, an American Indian owned law firm.  He is an enrolled member of the Round Valley Indian Tribes of Covelo, California.  Gabe assists tribal governments and businesses in all matters of tribal economic development and diversification, including entity formation and related tax strategy. Gabe can be reached at 206.691.3631 or gabe@galandabroadman.com.

TOGA, TOGA! SCIA Kicks Off The Tribal Online Gaming Party

Earlier this summer it looked like a federal online gaming solution was unlikely in the face of recent piecemeal moves by states to legalize Internet play. But today’s Senate Committee on Indian Affairs Oversight hearing on Regulation of Tribal Gaming: From Brick & Mortar to the Internet suggests that reports of the demise of the federal regulatory solution were grossly exaggerated. In fact, the Committee has published a discussion draft of the “Tribal Online Gaming Act of 2012” or “TOGA.”

Expect this draft to be discussed in depth today at 2:15 p.m. eastern by a panel of experts and insiders. Testimony will be available via webcast.

If TOGA has legs, expect it to be debated heavily. Some of TOGA’s critical points:

• Any federalization of online gaming must provide positive economic benefits for Indian tribes since such a program would create thousands of jobs within the United States. • “Tribal online gaming” means only online poker. • The Secretary of Commerce shall oversee and regulate tribal online gaming – not the NIGC. • Tribes, consortiums of tribes, and “a consortium of tribe(s) and non-tribal entities” could be operators. • No Indian lands requirement appears to exist. • TOGA is not intended to affect compacts or cause them to be renegotiated. • A most-favored-games clause would allow tribes to offer games as they become legal – ostensibly beyond poker. • No state taxation of tribal online gaming revenue.

So, the TOGA party has started. Will it get busted (by the Congress)? If not, which tribal governmental operators will be let into the TOGA party? And which will be left out? The tribal online gaming fun has now officially begun.

Anthony Broadman is a partner at Galanda Broadman PLLC and focuses his practice on issues critical to Indian Country. He can be reached at 206.321.2672 and anthony@galandabroadman.com.

Trending: Gross and Willful Tribal Vendor Requests for Indemnity

For years, lenders have insisted that tribes indemnify them in loan documents for the bank's own negligence and misconduct concerning the deal. Tribes have too frequently accepted the bank-demanded indemnity language, simply in order to get the cash they need to run tribal governments and businesses. More specifically, some commercial lenders, and an increasing number of vendors and service providers to tribes, are insisting that tribes indemnify them from the banks/vendor/providers' own negligence, carving out from the indemnity clauses only those non-Indian businesses' "gross negligence" and "willful misconduct." And the the banks/vendor/providers treat the issue as non-negotiable; as "take it or leave it"/"our way or the highway."

Tribes should simply not be indemnifying non-Indian businesses from basic negligence. Period. The banks/vendor/providers' simple negligence should be carved out of any indemnity language that the tribe agrees to in favor of those non-Indian businesses.

The banks/vendor/providers' position, i.e., assume liability for our silly behavior or we won't loan you cash or provide you services, is preposterous -- in fact gross (disgusting) and willfully disrespectful to tribal governments and enterprises. Hopefully tribes who see over-reaching indemnity language in proposed loan documents and other commercial agreements, will reject any such language out of hand. If enough tribes do, that language will eventually disappear from commercial agreements in Indian Country.

Gabriel "Gabe" Galanda is a partner at Galanda Broadman PLLC, of Seattle, an American Indian owned law firm.  He is an enrolled member of the Round Valley Indian Tribes of Covelo, California.  Gabe helps with all varieties of tribal economic development and diversification initiatives. Gabe can be reached at 206.691.3631 or gabe@galandabroadman.com.

Galanda and Dreveskracht Both Published in Gaming Law Review on Cutting Edge Indian Gaming Issues

Gabe Galanda and Ryan Dreveskracht were each published in the June 2012 edition of Gaming Law Review and Economics, the leading peer-reviewed journal addressing important regulatory and economic issues facing today’s gaming industry. Gabe was featured in a published set of roundtable comments on issues of "Native American Off-Reservation Gaming." Among Gabe's quotes:

“[O]ff-reservation gaming” is simply a politically loaded term, by the design of non-tribal political interests...[W]hat we are more likely than not talking about it is reacquired Indian lands -- lands to be held in trust for tribal governments by their trustee, the United States, for purposes of Indian governmental gaming enterprise."

"Everyone is awaiting the Interior Secretary’s determination on the Spokane Tribe's application for a two-part determination...[for a] proposed a gaming site just a few miles down the road from the Kalispel Casino and Resort, also in Airway Heights. As the crow flies, it’s about thirty miles from the Spokane Reservation. So the very recent acquisitions in California...perhaps bode well for the Spokane Tribe..."

"[A] Carcieri fix, as it has been called, is needed by Congress, both for purposes of trust acquisition relative to gaming and, more importantly, so that tribes can restore their land base and conduct themselves as governments, while diversifying their economies away from gaming....Any Carcieri fix and the issue of so-called off-reservation trust acquisition for gaming purposes are apples and oranges. But Congress has been persuaded to think that those two issues are inextricably intertwined with one another. And it is safe to say, I believe, that, so long as Congress believes that a Carcieri fix will allow so-called "off-reservation gaming," it is very likely that there will never be a Carcieri fix."

"[W]e are seeing a rise of cases like Patchak, where non-Indian citizens or officials are suing the United States or appealing administrative decisions and the tribe is not a party to the administrative litigation or to the federal court lawsuit -- until, perhaps, it is forced to intervene. And, generally speaking, tribes are immune from such administrative or federal court litigation between a non-Indian party and the federal government. But then they are faced with the Hobson's choice of essentially standing behind the shield of that immunity and not involving themselves in the litigation and, therefore, allowing the United States to represent its interests; or to actually consent to the litigation and effectively waive their immunity, because the tribe believes that it is the only party that can adequately represent its interests and because it believes -- perhaps more crucially –- that the federal government cannot adequately represent its interests."

"The tribes, whether by Congress or the Obama Administration, must be given a seat at the internet gaming table and they must be specifically mentioned in any federal law or regulation which allows internet gaming. If the United States flouts its obligations to Indian Country in regards to the legalization of internet gaming, then it may be time for tribal governments to start internet gaming irrespective of the fed. And that, of course, is precisely how modern Indian gaming began in the 1970s; that is what resulted in the Cabazon decision and, ultimately, the Indian Gaming Regulatory Act and, ultimately, it is that civil disobedience, if you will, that resulted in us having this discussion about a $26 billion Indian gaming industry."

Ryan published his article, "Keeping It Clean for the Future of Indian Gaming." A passage:

At minimum, the cautionary tale to lawyers exemplified by Lake of Torches must be told: Saybrook and Wells Fargo filed a $50 million suit against their former attorneys, alleging that Saybrook would not have purchased the bonds and Wells Fargo would not have secured them had it not been for their attorneys’ negligent advice regarding NIGC approval. It is highly unlikely that the attorneys’ malpractice insurance will cover any $50 million judgment. Further, although Lake of Torches was a legal victory for the Lac du Flambeau Tribe, it was Pyrrhic for both the Tribe and Indian Country. While Lac du Flambeau will find it difficult, if not impossible to ever assume another commercial loan, the Lake of Torches imbroglio helped freeze the capital markets for all of Indian Country for much of the last couple of years.

Indian gaming enterprises have an obligation to appreciate and help nullify the danger that non-Indian businesses and their attorneys inadvertently pose to tribal sovereignty. Indeed, the days of tribal lawyers playing ‘‘hide the ball’’ in contract negotiations may need to be a thing of the past. Instead, taking preemptive steps to caution non-Indian businesses to at least hire competent counsel is not only good business, it is very likely necessary to deter the ero- sion of those fundamental principles of law that have allowed Indian gaming to flourish into the present day.

Gabriel "Gabe" Galanda is a partner, and Ryan Dreveskracht an associate, at Galanda Broadman PLLC, of Seattle, an American Indian owned law firm.  Gabe is an enrolled member of the Round Valley Indian Tribes of Covelo, California.  He represents tribal governments and businesses and Indians citizens in all matters of controversy and transaction. He can be reached at 206.691.3631 or gabe@galandabroadman.com. Ryan's practice focuses on representing businesses and tribal governments in public affairs, energy, gaming, taxation, and general economic development. He can be reached at 206.909.3842 or ryan@galandabroadman.com.

Getting Green in Indian Country: Two Sides of the Buffalo Nickel

A recent study conducted by Small Business America, reveals that  “[a]cross all industries and at both ends of the political spectrum, entrepreneurs overwhelmingly support government investing in renewable energy and creating clean energy policies that will help guide them into a new economic sector where they can do business.”   The study found that “71 percent believe government investments in clean energy play an important role in creating jobs now.”

The federal government is trying its best to make this happen.  President Obama’s goal of generating 80 percent of the nation’s electricity from clean energy sources by 2035 has led to numerous projects on millions of acres of public lands, most in Western states.  The administration has put some of the most promising, shovel-ready projects on a “fast track” for Bureau of Land Management (“BLM”) permitting.  In issuing these permits, federal officials say “they have consulted with multiple tribes and have either made sure the massive solar projects will not harm any historic works or have determined that certain sites are not worthy of protecting.”

But, apparently, the Fed’s idea of what it means to “consult” in making this determination is something other than required by its own clearly defined laws and regulations.  In 2010, for instance, the BLM allowed a solar project to move forward without adequately consulting the tribe whose areas of cultural significance would be directly affected by the project.   Luckily, the tribe was able to obtain an injunction in federal court that put an end to the project before those areas could be harmed.   See Quechan Tribe v. U.S. Dep’t of Interior, 755 F.Supp.2d 1104 (S.D. Cal. 2010) (“[I]f the tribe hasn't been adequately consulted and the project goes ahead anyway, this legally-protected procedural interest would effectively be lost.”).

The Colorado River Indian Tribes were not as fortunate.   Late last month, a solar project named “Genesis” uncovered a human tooth and a handful of burned bone fragments the size of quarters on a sand dune in the shadow of new solar power transmission towers.  As reported by the LA Times:

As a federally recognized tribal group with sovereignty over a 264,000-acre reservation, the Colorado tribes were offended that the BLM approved Genesis without holding “nation-to-nation” consultations with them.  Before construction began, archaeologists had warned that the site near Ford Dry Lake was rich with Native American history.  [D]uring construction last November, workers uncovered a pair of grinding stones and what appeared to be a layer of charcoal. The Colorado tribes say they are evidence of a sacred cremation site.  Genesis claims they are insignificant artifacts. . . . NextEra warns that yielding to the tribes’ demands could result in costly delays that jeopardize completion of the 250-megawatt plant, which is being built on BLM land with the help of an $825-million loan guaranteed by federal taxpayers. . . . Native Americans insist they are not against renewable energy.  The problem is that some solar projects were approved for lands that are an essential part of Indian religion, culture and history — without consultation with affected tribes.

 To be clear (federal agencies take note): “Meaningful consultation means tribal consultation in advance with the decision maker or with intermediaries with clear authority to present tribal views” to the agency decision maker.  This usually comprises of a meeting, during which the federal agency notifies the tribe of the proposed action and justifies its reasoning.  The tribe may then issue a motion of support for the decision, or reject the decision, pursuant to tribal law or procedure.  Lower Brule Sioux Tribe v. Deer, 911 F. Supp. 395, 401 (D.S.D. 1995).

The other side of the coin is that, contrary to being “against renewable energy,” tribal governments are in the best position to utilize their land to develop these projects in a manner that is consistent with their culture and tradition, and are actively seeking to do so.  By the numbers, these developments should be paying off: An estimated $1 trillion in revenue is possible were Indian country to fully develop its energy resources.  With tribes already feeling the brunt of global warming, the environmental benefits of using alternative energies to support the next generation are increasingly being explored. Where unemployment levels are disproportionately high in Indian country, perhaps equally important is that alternative energies are job-creating hothouses.

But as I noted last summer, the federal government has failed to allow tribes to enter the alternative energy market at all.  In short, were a Tribe to chose to develop its own lands in a similar manner – save for the disturbance of its areas of cultural and spiritual significance – the project would have been a dead end.  Pursuant to 25 U.S.C. § 415, transactions involving the transfer of an interest in Indian trust land must be approved by the Bureau of Indian Affairs (“BIA”).  And even where the tribe structures the project without leasing its land, 25 U.S.C. § requires that the BIA approve contracts that could “encumber” Indian lands for a period of seven or more years.  In these instances the BIA approval process constitutes a “federal action,” which triggers a slew of federal laws that the BIA must comply with – laws that can take over 12 years to comply with and can generate millions of dollars in additional cost.

In August of 2010, Senator Byron Dorgan (D-ND) introduced S. 3752, “[a] bill to amend the Energy Policy Act of 1992 to streamline Indian energy development, to enhance programs to support Indian energy development and efficiency, to make technical corrections.”  In short, the bill attempted to reduce the Federal burdens through mandated interagency coordination of planning and decision-making; regulatory waiver provisions; relief from land transaction appraisal requirements; and the elimination of fees assessed by Bureau of Land Management for applications for permits to develop Indian lands.  But the bill died before it was introduced to the full Senate.

More recently, in October of last year, Senator John Barrasso (R-WY) introduced S. 1684, “[a] bill to amend the Indian Tribal Energy Development and Self-Determination Act of 2005.”  Although not as robust as S. 3752, S. 1684 is significant in that it makes the Tribal Energy Resource Agreement (“TERA”) provision of the Indian Tribal Energy Development and Self-Determination Act of 2005 somewhat workable.  Section 103 of the bill extends an approval exemption to leases, business agreements, and rights-of-way granted by a tribe to a tribal energy development organization in which the tribe maintains a controlling interest, thereby expanding the opportunity for access to capital for direct tribal development without federal approval where the tribe continues to control the activity.  This Section also provides for a favorable tribal capacity determination based on a tribe’s performance of 93-638 contracts or self-governance compacts over a three year period without material audit exceptions; allows for TERA funding transfers to be negotiated between the BIA and the tribe based on cost savings occasioned by the Interior Department as a result of a TERA; and confirms that TERA provisions do not waive tribal sovereign immunity.

Last week, the Senate Committee on Indian Affairs held a hearing on S. 1684, where numerous tribal officials indicated their support for the bill.  Although many officials submitted that “biggest problem is what is not in the bill” – as “S. 1684 barely scratches the surface of outdated laws and regulations, bureaucratic regulatory and permitting processes, and insufficient federal staffing or expertise to implement those processes” – the overall sentiment was that S. 1684 is a much needed step in the right direction.  As noted by Tex G. Hall, Chairman of the Mandan, Hidatsa, and Arikara Nation of the Fort Berthold Reservation: “If Indian tribes are going to unlock the potential of their energy resources and provided needed domestic energy supplies, we need real changes in the law.  Changes that affirm tribal authority, provide tribes access to funding and financing opportunities, and allow tribes to participate in federal energy programs that have over looked tribes for decades.”

The next step will be for the Senate Committee on Indian Affairs to consider mark-ups to the bill.  A fine line will need to be towed.  Hopefully, considering the testimony of tribal leaders submitted last week, mark-ups can make the bill as hearty as the previously introduced S. 3752.  However, a step in the right direction is better than no steps at all, and any changes that will furnish the bill a similar fate should be avoided.

Hopefully both sides of the coin – cultural property protection in the face of any callous non-Indian energy development, and streamlined tribal energy development for sake of tribal self-determination – can be realized by the revised S. 1684.  The protection of Indian Country, both in the long and short term, quite literally depends on it.

Ryan Dreveskracht is an Associate at Galanda Broadman PLLC, of Seattle, an American Indian majority-owned law firm. His practice focuses on representing businesses and tribal governments in public affairs, energy, gaming, taxation, and general economic development. He can be reached at 206.909.3842 or ryan@galandabroadman.com.

Tribal Regulation Immunizes Certain Tobacco Sales from Federal-State Interference

Cigarettes sold by a tribally licensed retailer and pursuant to a state-tribe cigarette agreement are not contraband for purposes of the federal Contraband Cigarette Trafficking Act (CCTA) – even if they are contraband under state law. United States v. Wilbur, 10-30185, 2012 WL 1139078 (9th Cir. Apr. 6, 2012). The Ninth Circuit ruled last week in Wilbur that even if cigarettes are transported in violation of state law, the CCTA only makes cigarettes “contraband” in this context if they “bear no evidence of the payment of applicable State or local cigarette taxes in the State or locality where such cigarettes are found.” 18 U.S.C. § 2341(2). The cigarettes at issue during one period of the Wilbur case were unstamped. But the defendants qualified as an Indian retailer under Washington state law, came partially within the constraints of a tribal tobacco tax compact, and therefore were not subject to state taxes – even though they were allegedly illegal under state cigarette transportation laws and were out of compliance with some tribal regulations.

At its core, for the period in which convictions were overturned, the decision implicitly recognized the legitimacy of tribal tobacco regulation. This could, by analogy or otherwise, undercut the interpretation of the PACT Act by federal agencies that suggests tribal tobacco entities must be licensed by the state to be considered “lawfully operating” under that federal law.

The Wilbur defendants’ convictions were upheld for other periods of the alleged conspiracy. And of more concern is the appearance of state officers acting in federal clothing. As the opinion observed, “a Lieutenant with the Washington State Liquor Control Board who was deputized as a Special Deputy U.S. Marshall, led the search” of the defendants’ retail facility. Although tribal law enforcement also participated in the raids, it is nonetheless noteworthy that reliance by federal statute on state law predicates is problematic in the face of “the right of reservation Indians to make their own laws and be ruled by them.” Williams v. Lee, 358 U.S. 217, 220 (1959).

The apparent ability for state officers to don federal clothing and enforce the state-federal hybrid criminal frameworks on reservations is an even more profound threat to that right. As explicitly contemplated by the Tribal Law and Order Act, if federally deputized non-federal officers are enforcing laws on the Reservation, it should be federally deputized tribal officers doing so. This concern is of course nothing new, as Indian Country braces for and resists the STOP Act, which would essentially import state and big-tobacco interests into Reservation economies under color of federal law. Wolves in sheep’s clothing; Trojan horse; pick your cliché.

Besides the clarity provided by Wilbur, and its limitation on the reach of the CCTA, in the end, a state was still able to enforce its laws on the Reservation, against Reservation Indians.

Anthony Broadman is a partner at Galanda Broadman PLLC. He can be reached at 206.321.2672, anthony@galandabroadman.com, or via www.galandabroadman.com.

Connecticut District Court Resucsitates Bracker Balancing and Tax-Free Native-to-Native Commerce

On March 27, 2012, the U.S. District Court for the District of Connecticut ruled that a local government could not assess personal property taxes against Class III slot machines. The decision in Mashantucket Pequot Tribe v. Town of Leydard is here and related news coverage quoting Gabe Galanda is here. Beyond the court's specific holding, which represents a scarce tax win for Indian Country of late, the decision stands to rebuff an increasingly common arguments by states in justification of state taxation of Native-to-Native or Reservation-to-Reservation commerce. Due to Congress' preemption of the Indian gaming field and clear prohibition on state taxation of Indian gaming, per IGRA, the decision affirmed what was widely believed to be the law: that is, that states and local governments cannot assess personal property taxes against Class II or III gaming devices. Of broader significance, the Connecticut District Court's decision in Leydard stands to defeat arguments increasingly advanced by state tax assessors that to the extent Indians traverse state-funded highways in trading goods or engaging in commerce from Reservation to Reservation, states can tax those activities.

Last year, the Tenth Circuit Court of Appeals ruled that state roads traversed by non-Indian extraction companies while taking oil and gas to market represented a “substantial” state interest. That interest ultimately tipped the Bracker balancing away from tax preemption, in favor of the state, and gave more state tax collectors even more reason to argue that state roads represent a so-called state burden that justifies state taxation of Reservation-to-Reservation commerce.

But in Leydard, the District Court rejected such an argument on the part of the township:

The maintenance of the roads to the Reservation has some connection to the taxed activity because the leased gaming equipment was brought onto the Reservation by way of the roads and the individuals who use the gaming equipment also use the roads to the Reservation. However, even if the Tribe did not lease the gaming equipment, the Town would need to maintain roads to provide access to the Reservation for individuals living on and off the Reservation. Thus, the State and Town’s interest in taxing the leased equipment fails to justify the economic burden on the Tribe that compromises substantial federal and Tribal interests in tribal self-determination and self-government pursuant to comprehensive federal regulation. The tax is preempted pursuant to Bracker balancing.

In all, the Leydard decision helps tip the Bracker scale back in favor of Indian Country, especially as to tax-free Native-to-Native or Reservation-to-Reservation commerce.

Gabriel "Gabe" Galanda is a partner at Galanda Broadman PLLC, of Seattle, an American Indian owned law firm.  He is an enrolled member of the Round Valley Indian Tribes of Covelo, California.  Gabe helps tribes and Indian small businesses with economic diversification efforts, with an emphasis on minimizing state interference or taxation. Gabe can be reached at 206.691.3631 or gabe@galandabroadman.com.

Seattle Tribal Lawyer Anthony Broadman Publishes Local Taxation in Indian Country Article

Anthony Broadman has published a paper, "Know Your Enemy: Local Taxation and Tax Agreements in Indian Country," has been published in the inaugural edition of Seattle University's American Indian Law Journal.

Intergovernmental disputes between tribes and their neighbors have educated states about tribal sovereignty. What many state governments have learned, through litigation, political battle, and intergovernmental dispute, is that even when states have “won” tax disputes, they have lost. This dependably pyrrhic result has driven rational state actors—state taxing authorities acting consistently with their own best fiscal interests—to pursue negotiated agreements. Today, state-tribal tax compacts, while often controversial, are commonplace.

Counties and cities, on the other hand, with some admirable exceptions, have yet to learn, or heed, lessons from inter-local tax disputes. As it stands, tribes must be prepared for future battles over local taxation in Indian Country, particularly in regard to real or personal property owned by tribes. But as counties and municipal governments slowly learn the lessons already learned by the states, tribes should also be ready to negotiate intergovernmental solutions to inter-local tax disputes.

Anthony Broadman is a partner at Galanda Broadman PLLC, of Seattle, an American Indian majority-owned law firm.  His practice focuses on company-critical business litigation and representing tribal governments, especially in federal, state and local tax controversy. He can be reached at 206.691.3631 or anthony@galandabroadman.com, or or via galandabroadman.com.

Seattle Tribal Lawyers Galanda & Dreveskracht Publish "Tribal Court Litigation" Deskbook Chapter

This month, a chapter on "Tribal Court Litigation" co-authored by Gabe Galanda and Ryan Dreveskracht for an authoritative commercial litigation handbook, was published by the American Bar Association Business Law Section. The chapter appears in the 2012 edition of Annual Review of Developments in Business and Corporate Litigation. The breadth of the very complex Indian law issues covered by the chapter is suggested by its Table of Contents:

§ 27.1 Introduction to Transacting in Indian Country § 27.2 The Third Sovereign § 27.2.1 The Modern Erosion of Tribal Sovereignty § 27.2.2 State Regulation and Taxation, and Federal Indian Preemption § 27.3 Tribal Sovereign Immunity § 27.3.2.1 Scope of Tribal Immunity § 27.3.2.2 Waiver of Tribal Immunity § 27.4 Tribal Structures § 27.4.1 Tribal Corporations § 27.4.2 Tribal Courts § 27.5 Tribal Assets and Federal Approval § 27.4.1 Fee-to-Trust and Carcieri § 27.4.2 Federal Approvals § 27.6 Tribal Labor and Employment § 27.7 Federal Laws of General Applicability § 27.8 Federal Court Jurisdiction § 27.9 Tribal Court Jurisdiction § 27.9.1 Tribal Authority Vis-à-vis State Authority § 27.9.2 Tribal Exhaustion Doctrine § 27.9.2.1 National Farmers Union § 27.9.2.2 Exceptions to the Exhaustion Doctrine § 27.10 Conclusion

Consider the conclusion to the chapter:

Economic growth and development throughout Indian country have spurred many businesses to engage in business dealings with tribes and tribal entities. Confusion may arise during these transactions because of the unique sovereign and jurisdictional characteristics attendant to business transactions in Indian Country. As a result, these transactions have prompted increased litigation in tribal and nontribal forums. Accordingly, counsel assisting in these transactions, or any subsequent litigation, should conduct certain due diligence with respect to the pertinent tribal organizational documents and governing laws that may collectively dictate and control the business relationship.

To maximize the client’s chances of a successful partnership with tribes and tribal entities, counsel should ensure that the transactional documents contain clear and unambiguous contractual provisions that address all rights, obligations, and remedies of the parties. Therefore, even if the deal fails, careful negotiation and drafting, and in turn thoughtful procedural and jurisdictional litigation practice, will allow the parties to more expeditiously litigate the merits of any dispute in the event that the deal fails, without jurisdictional confusion. As business between tribes and nontribal parties continues to grow, ensuring that both sides of the transaction fully understand and respect the deal will lead to a long-lasting and beneficial business relationship for all.

Gabe served as the Editor-in-Chief of Annual Review for the 2007 through 2010 editions, and has co-authored the Tribal Court Litigation chapter each year since 2006. This is Ryan's first year co-authoring the chapter.

Gabriel "Gabe" Galanda is a partner at Galanda Broadman PLLC, of Seattle, an American Indian owned law firm.  He is an enrolled member of the Round Valley Indian Tribes of Covelo, California.  Ryan Dreveskracht is an associate with Galanda Broadman. Gabe and Ryan litigate various critical matters on behalf of tribal governments and businesses and individual Indians, in tribal, state and federal court.