Quantum Entertainment Limited v. United States Department of the Interior Bureau of Indian Affairs ( 2012 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
QUANTUM ENTERTAINMENT, LTD., :
:
Plaintiff, : Civil Action No.: 11-47 (RMU)
:
v. : Re Document No.: 13, 14
:
UNITED STATES DEPARTMENT OF :
INTERIOR, BUREAU OF INDIAN :
AFFAIRS, :
:
Defendant. :
MEMORANDUM OPINION
GRANTING THE DEFENDANT’S MOTION FOR SUMMARY JUDGMENT; DENYING THE
PLAINTIFF’S CROSS-MOTION FOR SUMMARY JUDGMENT
I. INTRODUCTION
This case comes before the court on the parties’ cross-motions for summary
judgment. The plaintiff, Quantum Entertainment Limited (“QEL”), commenced this
action against the Bureau of Indian Affairs (“BIA”), a department within the United
States Department of the Interior (“DOI”). According to the plaintiff, the DOI’s Interior
Board of Indian Appeals (“the Board”) issued an administrative decision that violated the
Administrative Procedure Act (“APA”), 5 U.S.C. §§ 701, et seq. Upon review of that
decision, this court previously held that the Board had failed to articulate a reasoned basis
for certain findings central to its holding and remanded the case to the Board for further
explanation. The Board thereafter issued a revised opinion in 2010, and the parties have
now filed cross-motions for summary judgment. Because the Board’s 2010 opinion was
not arbitrary, capricious or contrary to law, the court grants the defendant’s motion for
summary judgment and denies the plaintiff’s motion.
II. BACKGROUND
A. Statutory Framework
In 1872, Congress passed legislation that governed agreements related to Native
American lands, codified at 25 U.S.C. § 81. From 1871 until 2000, this legislation,
referred to herein as “Old Section 81,” remained substantially unchanged and read as
follows:
No agreement shall be made by any person with any tribe of [Native
Americans] . . . for the payment or delivery of any money or other thing of
value . . . in consideration of services for said [Native Americans] relative
to their lands . . . unless such contract or agreement be executed and
approved [by the Secretary of the DOI (“Secretary”)] . . . . All contracts
or agreements made in violation of this section shall be null and void, and
all money or other thing of value paid to any person by any [Native
American], tribe, or any one else, for or on his or their behalf, on account
of such services, in excess of the amount approved by the . . . Secretary for
such services, may be recovered by suit in the name of the United States.
25 U.S.C. § 81 (1994). Congress passed Old Section 81 out of concern that “claims
agents and attorneys working on contingency fees routinely swindl[ed Native Americans]
out of their land, accepting it as payment for prosecuting dubious claims against the
federal government.” United States v. Turn Key Gaming, Inc., 260 F.3d 971, 976-77 (8th
Cir. 2001) (citing Cong. Globe, 41st Cong., 3d Sess. 1483, 1483-87 (daily ed. Feb. 22,
1871)); see also id. at 976 n.6, 977 n.7.
In 2000, Congress amended Old Section 81 as part of the Native American Tribal
Economic Development and Contracts Encouragement Act of 2000. 25 U.S.C. §§ 71, 81,
476. This “amendment” was intended to replace Old Section 81, as the changes to the
text were quite substantial. S. REP. NO. 106-150, at 1, 1999 WL 965424 (1999). The
relevant text of 25 U.S.C. § 81, as amended (“New Section 81”), states that “[n]o
agreement or contract with [a Native American] tribe that encumbers [Native American]
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lands for a period of 7 or more years shall be valid unless that agreement or contract
bears the approval of the Secretary of the Interior or a designee of the Secretary [‘DOI
approval’].” 25 U.S.C. § 81(b) (2000). In other words, whereas Old Section 81 required
DOI approval of any agreement between Native Americans and others regarding Native
American land, New Section 81 only requires DOI approval if an agreement with a
Native American tribe would hinder the use of its land for a period of 7 years or more.
See id.The legislative history surrounding the enactment of New Section 81 illustrates
that Congress was concerned that “many provisions of [Old Section 81 had] come to be
antiquated and unnecessary,” H.R. REP. NO. 106-501, at 2 (2000), as reprinted in 2000
U.S.C.C.A.N. 69, and that their interpretation was unpredictable, see S. REP. NO. 106-
150, at 5, 1999 WL 965424 (1999). Congress acknowledged that “[Native American]
tribes, their corporate partners, courts, and the [BIA] have struggled for decades with how
to apply [Old] Section 81 in an era that emphasizes tribal self-determination, autonomy,
and reservation economic development.” Id. at 2. To address these concerns, Congress
passed New Section 81 and thereby narrowed the scope of contracts that require DOI
approval. Id. at 9.
Congress did not comment on whether New Section 81 applied to contracts
formed before its enactment, however. See generally id. When Congress does not
expressly prescribe a statute’s retroactive reach, courts must consider whether such
retroactive application would have an impermissible retroactive effect. Landgraf v. USI
Film Prods., 511 U.S. 244, 278 (1994). A new statute has an impermissible retroactive
effect if, compared to the old statute, its retroactive application would impair a party’s
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rights or increase his liabilities for past conduct, or if it would impose new duties on a
party. Id. In the event that such an impermissible retroactive effect is present, it is
presumed that the new statute does not apply retroactively. Id.B. Factual and Procedural Background
Santo Domingo Pueblo (“Pueblo”) is a Native American pueblo, or tribal
community, located in New Mexico. Compl. ¶ 2. Kewa Gas Limited (“Kewa”) is a
Registered Indian Tribal Distributor (“RITD”) that operates the Pueblo’s retail gas
station, its gas distribution business and related businesses. Id. ¶ 20. In August 1996, the
plaintiff, QEL, entered into a management agreement (“agreement”) with the Pueblo and
Kewa. Id. ¶ 16. The agreement authorized the plaintiff to manage Kewa’s gas
distribution business and to be compensated at a rate of 49% of income, plus bonuses. Id.
The agreement was to last for ten years, but the plaintiff had the option at the end of the
first decade to renew it for an additional ten years, and for a subsequent ten-year period
thereafter. Id. In other words, the plaintiff could elect to bind the defendant to the
agreement for thirty years. Id.
The parties operated under the agreement for six years. Id. ¶¶ 22, 36. In March
2003, however, the Governor of the Pueblo requested that the BIA review the agreement,
believing that it was “far too lucrative for” QEL, and adversely “impacted the tribe. . .
financially.” Id. ¶ 37.
In October 2003, the BIA determined that the agreement was subject to review
under Old Section 81 because the parties entered into the agreement before New Section
81 was enacted. Id. ¶ 38. The BIA further reasoned that because the agreement had
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never been approved by the Secretary of the DOI, Old Section 81 dictated that the
agreement had “never been legally valid and any monies received by [the plaintiff]
pursuant to [the agreement] were [therefore] unauthorized.” Id.
The plaintiff appealed the BIA’s decision to the Board, which upheld the BIA’s
findings in March 2007. Id. ¶ 43. The Board determined that New Section 81 did not
retroactively apply to the agreement and that, therefore, Old Section 81 applied. Compl.,
Ex. B (“Bd. 2007 Decision”), at 3. The Board further concluded that under Old Section
81, the agreement should have received approval from the Secretary of the DOI before
going into effect. Id. at 2.
The plaintiff then commenced this action seeking review of the Board’s decision.
Compl. ¶ 44. In February 2009, the court determined that the Board’s decision was
arbitrary and capricious because it had failed to address two considerations central to its
holding. Mem. Op. (Feb. 19, 2009 ) at 11. First, this court held that in determining
whether Old Section 81 or New Section 81 applied to the agreement, the Board had not
fully addressed whether applying New Section 81 would result in an impermissible
retroactive effect. Id. Second, in determining whether the agreement required DOI
approval under Old Section 81, the Board had neglected to consider whether the
agreement was “relative to” Native American lands. Id. at 9-10. For these reasons, the
case was remanded to the Board with instructions to explain the basis of its decision. Id.
at 14.
In December 2010, the Board issued a more developed opinion that reaffirmed its
previous decision. See generally Compl., Ex. C (“Bd. 2010 Decision”). In its 2010
opinion, the Board determined that Old Section 81 should apply to the agreement because
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applying New Section 81 would have an impermissible retroactive effect. Id. at 317.
Specifically, the Board concluded, applying New Section 81 would create contractual
rights and duties for the parties that had not existed before. Id. The Board also held that
under Old Section 81, the agreement required DOI approval because it was related to
Native American lands. Id. The defendant has now filed a motion for summary
judgment, arguing that the Board’s revised opinion satisfied the APA. See generally
Def.’s Mot. In response, the plaintiff has filed a cross-motion for summary judgment,
contending that the Board erred in making its determinations. See generally Pl.’s Mot.
The court now turns to the parties’ arguments and the applicable legal standards.
III. ANALYSIS
A. Legal Standard for Summary Judgment
Summary judgment is appropriate when the pleadings and evidence show “that
there is no genuine dispute as to any material fact and the movant is entitled to judgment
as a matter of law.” FED. R. CIV. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S.
317, 322 (1986); Diamond v. Atwood, 43 F.3d 1538, 1540 (D.C. Cir. 1995). To
determine which facts are “material,” a court must look to the substantive law on which
each claim rests. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A “genuine
dispute” is one whose resolution could establish an element of a claim or defense and,
therefore, affect the outcome of the action. Celotex, 477 U.S. at 322; Anderson, 477 U.S.
at 248.
In ruling on a motion for summary judgment, the court must draw all justifiable
inferences in the nonmoving party’s favor and accept the nonmoving party’s evidence as
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true. Anderson, 477 U.S. at 255. A nonmoving party, however, must establish more than
“the mere existence of a scintilla of evidence” in support of its position. Id. at 252. To
prevail on a motion for summary judgment, the moving party must show that the
nonmoving party “fail[ed] to make a showing sufficient to establish the existence of an
element essential to that party’s case, and on which that party will bear the burden of
proof at trial.” Celotex, 477 U.S. at 322. By pointing to the absence of evidence
proffered by the nonmoving party, a moving party may succeed on summary judgment.
Id.The nonmoving party may defeat summary judgment through factual
representations made in a sworn affidavit if he “support[s] his allegations . . . with facts
in the record,” Greene v. Dalton, 164 F.3d 671, 675 (D.C. Cir. 1999) (quoting Harding v.
Gray, 9 F.3d 150, 154 (D.C. Cir. 1993)), or provides “direct testimonial evidence,”
Arrington v. United States, 473 F.3d 329, 338 (D.C. Cir. 2006). Indeed, for the court to
accept anything less “would defeat the central purpose of the summary judgment device,
which is to weed out those cases insufficiently meritorious to warrant the expense of a
jury trial.” Greene, 164 F.3d at 675.
B. Legal Standard for Judicial Review of Agency Actions
The APA entitles “a person suffering legal wrong because of agency action, or
adversely affected or aggrieved by agency action . . . to judicial review thereof.” 5
U.S.C. § 702. Under the APA, a reviewing court must set aside an agency action that is
“arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.”
Id. § 706; Tourus Records, Inc. v. Drug Enforcement Admin., 259 F.3d 731, 736 (D.C.
7
Cir. 2001). In making this inquiry, the reviewing court “must consider whether the
[agency’s] decision was based on a consideration of the relevant factors and whether
there has been a clear error of judgment.” Marsh v. Or. Natural Res. Council, 490 U.S.
360, 378 (1989) (internal quotations omitted). At a minimum, the agency must have
considered relevant data and articulated an explanation establishing a “rational
connection between the facts found and the choice made.” Bowen v. Am. Hosp. Ass’n,
476 U.S. 610, 626 (1986); Tourus Records, 259 F.3d at 736. An agency action is usually
arbitrary or capricious if
the agency has relied on factors which Congress has not intended it to
consider, entirely failed to consider an important aspect of the problem,
offered an explanation for its decision that runs counter to evidence before
the agency, or is so implausible that it could not be ascribed to a difference
in view or the product of agency expertise.
Motor Veh. Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983); see
also County of L.A. v. Shalala, 192 F.3d 1005, 1021 (D.C. Cir. 1999) (holding that
“[w]here the agency has failed to provide a reasoned explanation, or where the record
belies the agency’s conclusion, [the court] must undo its action”).
As the Supreme Court has explained, however, “the scope of review under the
‘arbitrary and capricious’ standard is narrow and a court is not to substitute its judgment
for that of the agency.” Motor Veh. Mfrs. Ass’n, 463 U.S. at 43. Rather, the agency
action under review is “entitled to a presumption of regularity.” Citizens to Pres.
Overton Park, Inc. v. Volpe, 401 U.S. 402, 415 (1971), abrogated on other grounds by
Califano v. Sanders, 430 U.S. 99 (1977). Nothing more than a “brief statement” is
necessary, as long as the agency explains “why it chose to do what it did.” Tourus
Records, 259 F.3d at 737. If the court can “reasonably discern[]” the agency’s path, it
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will uphold the agency’s decision. Pub. Citizen, 988 F.2d at 197 (citing Bowman
Transp., Inc. v. Arkansas-Best Freight Sys., Inc., 419 U.S. 281, 286 (1974)).
C. The Court Grants the Defendant’s Motion for Summary Judgment and Denies
the Plaintiff’s Cross-Motion for Summary Judgment
As mentioned previously, the court must determine whether the Board was correct
in deciding two separate questions. One issue is whether Old Section 81 or New Section
81 applies to the agreement. In addition, the court must also determine whether the
agreement required DOI approval in order to be valid, pursuant to Old Section 81.
For reasons explained below, the analysis of whether Old Section 81 or New
Section 81 applies is influenced by whether DOI approval of the agreement was required
if Old Section 81 applies. Therefore, the court will assume in the proceeding section that
Old Section 81 applies, in order to reach the issue of determining whether DOI approval
was necessary.
1. Assuming, Arguendo, That Old Section 81 Applied, the Agreement
Required DOI Approval1
The defendant asserts that the Board correctly concluded that under Old Section
81, the agreement was “relative to” Native American lands and therefore required DOI
approval in order to be valid. Def.’s Mot. at 2. The plaintiff does not address the
1
Again, as will become clear in the next section, resolving whether or not the agreement
required DOI approval is the critical preliminary question to determining whether Old
Section 81 or New Section 81 applied to the agreement. See infra Part III.C.2.
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defendant’s arguments.2 See generally Pl.’s Mot.
Under Old Section 81, a contract made with a Native American tribe for the
payment of money in exchange for services must receive DOI approval if that contract
relates to Native American lands. 25 U.S.C. § 81. Here, the Board’s 2010 opinion held
that Old Section 81 required DOI approval of the agreement because, inter alia, it was an
agreement related to Native American lands. Bd. 2010 Decision at 292. In turn, the
agreement was related to Native American lands because, according to the Board,
Kewa’s business was “located on Native American lands.” Id. at 307. Further, the Board
stated, the parties to the agreement were able to enjoy the state tax exemption for Native
American gasoline distributors operating on tribal reservation lands only because Kewa’s
business was located on Pueblo land. Id. at 307. The Board therefore reasoned that the
benefit derived from the tax exemption was “inextricably tied to the Pueblo’s land, its
status as reservation land, and the sovereign rights of the Pueblo over its land.” Id.(internal quotation marks and citations omitted). Thus, because the agreement was
related to the Pueblo’s lands within the plain meaning of Old Section 81, the Board
concluded that DOI approval of the agreement was necessary in order for it to be valid.
Id.2
Instead, the plaintiff focuses its response on why applying Old Section 81 is inappropriate
here, arguing that instead of implementing Chevron principles, the court must adhere to
the “long-standing canon that statutes are to be construed liberally in favor of [Native
Americans].” Pl.’s Mot. at 4. The court, however, applies Chevron deference only when
there is dispute as to an ambiguous term in a statute. United States v. Able Time, Inc.,
545 F.3d 824, 836 (9th Cir. 2008) (determining that Chevron deference does not apply to
statutes that are not ambiguous); Doe v. Attorney Gen. of U.S., 659 F.3d 266, 274 (3d Cir.
2011) (holding that Chevron deference does not apply when there is no ambiguous term
and the statute is clear). Here, the parties do not argue over whether the phrase “relative
to [Native American] lands” is ambiguous under Old Section 81, nor has the Board
considered competing notions of the phrase. Id. Because there is no dispute over an
ambiguous statutory term, neither Chevron deference nor the “long-standing canon”
advanced by the plaintiff apply.
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An agreement concerning a business located on tribal land that provides services
to Native Americans is “relative” to Native American lands within the meaning of Old
Section 81. A.K. Mgmt. Co. v. San Manuel Band of Mission Indians, 789 F.2d 785, 787
(9th Cir. 1986) (affirming a district court’s decision that an agreement to construct a
bingo facility was “relative to” Native American lands because the business was located
on tribal land); Wis. Winnebago Bus. Comm. v. Koberstein, 762 F.2d 613, 619 (7th Cir.
1985) (same). Therefore, assuming that Old Section 81 applies to the agreement, the
parties were required to obtain DOI approval before entering into it. Pueblo of Santa Ana
v. Hodel, 663 F.Supp. 1300, 1304-05 (D.D.C. 1987) (concluding that because the
business that the parties had formed under contract was related to Native American lands
within the meaning of Old Section 81, DOI approval of the contract was required for it to
be valid). Accordingly, the court concludes that the Board’s 2010 determination that the
agreement required DOI approval was not arbitrary, capricious or contrary to law. Id. at
1309 (determining that the BIA’s decision was not arbitrary or capricious when it held
that an agreement related to Native American lands pursuant to Old Section 81 required
DOI approval); Rosales v. United States, 477 F. Supp. 2d 119, 128 (D.D.C. 2007)
(holding that the Board’s reasoning in upholding a tribal constitutional amendment was
not “arbitrary, capricious, [or] contrary to law or an abuse of discretion” because the
court could reasonably discern how the Board reached its holding).
2. The Board Did Not Err in Determining That New Section 81 Would Have an
Impermissible Retroactive Effect
The parties disagree as to whether Old Section 81 or New Section 81 applies to
the agreement. See generally Def.’s Mot.; Pl.’s Mot. The crux of this disagreement lies
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in whether New Section 81 would have an impermissible retroactive effect and should
therefore not be applied to the agreement. Landgraf, 511 U.S. at 269-70, 280. The
plaintiff maintains that such an impermissible retroactive effect exists, Pl.’s Opp’n at 6,
whereas the defendant responds that it does not, Def.’s Mot. at 19.
A statute has an impermissible retroactive effect when its retroactive application
“would impair the rights a party possessed when he acted, increase a party’s liability for
past conduct, or impose new duties with respect to transactions already completed.”
Landgraf, 511 U.S. at 280. If a statute is deemed to have an impermissible retroactive
effect, the court presumes that the new statute “does not govern.” Id.As mentioned previously, the Board’s 2010 opinion determined that if Old
Section 81 applied, the agreement would be deemed invalid due to the parties’ failure to
obtain DOI approval. Bd. 2010 Decision at 317. Thus, the Board stated, because the
agreement would not be enforceable pursuant to Old Section 81, the parties would have
no contractual rights and liabilities. Id. On the other hand, the Board noted, applying
New Section 81 would not require DOI approval of the agreement and the agreement
would be enforceable. Id. Applying New Section 81 to the agreement would therefore
give rise to contractual obligations for the parties, the Board reasoned. Id. Thus, the
Board concluded, applying New Section 81 would create contractual rights and duties for
the contracting parties, whereas no such rights and duties existed under Old Section 81.
Id. These rights and obligations would be triggered as of March 2000, when New
Section 81 was enacted. Id.Essentially, the Board observed, applying New Section 81 would require Kewa
and the Pueblo to become locked into what they deemed to be an undesirable business
12
arrangement with the plaintiff for a potential thirty years.3 Id. at 318. By contrast, the
Board reasoned, applying Old Section 81 would invalidate the agreement and allow
Kewa and the Pueblo to walk away from it without consequence. Id. According to the
Board, applying New Section 81 would therefore have an impermissible retroactive effect
because it would bind the Pueblo to financially detrimental legal obligations it would
otherwise not have and “change the legal consequences of the parties’ pre-enactment
conduct.” Id.The court agrees that, as discussed above, DOI approval was required under Old
Section 81. See supra Part III.C.1. Because the parties never obtained such approval,
they had no contractual rights or obligations under Old Section 81. Pueblo of Santa Ana,
663 F.Supp. at 1315 (determining that an agreement that was related to Native American
lands under Old Section 81 was unenforceable because the parties had failed to obtain
DOI approval). The court further agrees that under New Section 81, the agreement
would have been enforceable because DOI approval was not required. See 25 U.S.C.
§ 81(b) (2000) (stating that DOI approval is not required for agreements in effect for
seven years or less). As the Board correctly noted, the parties would thus be bound by
the contractual rights and duties flowing from the agreement. See Bd. 2010 Decision at
318. Applying New Section 81 would therefore impose new contractual duties on the
parties with respect to “transactions already completed,” as compared to applying Old
Section 81. Landgraf, 511 U.S. at 269-70, 280. Stated otherwise, applying New Section
81 would have an impermissible retroactive effect. Id. (determining that if retroactive
3
The Board determined that requiring Kewa and the Pueblo to become locked into
the agreement would involve waiving sovereign immunity, paying out 49% of profits
plus bonuses to the plaintiff and being prevented from hiring any other, more attractive,
business managers for the entirety of that period. Id.13
application of a statute imposes new contractual obligations on a party, it constitutes an
impermissible retroactive effect).
The court thus considers the Board’s 2010 analysis to be well-reasoned and
legally sound in determining that applying New Section 81 to the agreement would have
an impermissible retroactive effect. Associated Fisheries of Me., Inc. v. Daley, 127 F.3d
104, 113 (1st Cir. 1997) (holding that an agency’s decision was well-reasoned when it
held that applying the new rule would result in an impermissible retroactive effect
because it would impose new duties with respect to transactions already completed).
Accordingly, the court concludes that the Board’s 2010 decision was not arbitrary,
capricious or contrary to law, and therefore did not violate the APA. Conax Fla. Corp. v.
United States, 824 F.2d 1124, 1130 (D.C. Cir. 1987) (determining that an administrative
agency’s decision that a contract was valid was not arbitrary, capricious or contrary to
law because it was well-reasoned).
IV. CONCLUSION
For the foregoing reasons, the court grants the defendant’s motion for summary
judgment and denies the plaintiff’s cross-motion for summary judgment. An Order
consistent with this Memorandum Opinion is separately and contemporaneously issued
this 26th day of March 2012.
RICARDO M. URBINA
United States District Judge
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