Opposition Brief — Montana v. Crow Tribe

5) Supreme Court, U.S. }

FILED

JUL 14 1997

No. 96-1829

CLERK

In The —

Supreme Court of the United States

October Term, 1996

+

STATE OF MONTANA, ET AL.,

Petitioners,

CROW TRIBE OF INDIANS,

and UNITED STATES OF AMERICA,

Respondents.

+

On Petition For A Writ Of Certiorari

To The United States Court Of Appeals

For The Ninth Circuit

S

BRIEF FOR THE CROW TRIBE IN OPPOSITION

¢

Mayet Russevy Rosert S. PetcyGer*

Crow Tribal Attorney FREDERICKS, PELCYGER, HESTER

Crow Tribal Legal & Wuire, LLC

Department 1881 9th Street, Suite 216

303 N. Broadway, Suite 616 Boulder, Colorado 80302

Billings, Montana 59101 Telephone: (303) 443-1683

Telephone: (406) 259-8611 Counsel for Respondent

Crow Tribe of Indians

July 1997 *Attorney of Record

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964

OR CALL COLLECT (402) 342-2831

i

QUESTION PRESENTED

Whether the State of Montana and Big Horn County

should be required to pay the Crow Tribe, or the United

States on its behalf, the 30% taxes they illegally imposed

and collected on coal produced from deposits beneficially

owned by the Tribe and paid to the State and County by

the Tribe’s lessee where the taxes were found to appropri-

ate the Tribe’s mineral wealth to deprive the Tribe of

revenues it otherwise would have received, to impose

substantial burdens on the Tribe, to violate the Indian

Mineral Leasing Act of 1938, 25 U.S.C. §§ 396a-396g, and

to interfere with the Tribe’s sovereignty.

ii

PARTIES

All of the parties are listed in the caption of the

petition.

iii

TABLE OF CONTENTS

Page

I ns coca ccccscccccsccccees i

EEE EPL TT TTT TTT TTT TTT Tee ii

CE iii

EEE occ ccccccscccccccccescce iv

GREGG cob Gvecccccccccccccccccce 1

ETERS GRGRUR GCSES cedecccccccsscceces 2

FEDERAL STATUTE INVOLVED................... 2

STATEMENT OF THE CASE....................... 3

A. Factual Background ...................000005 3

CCE eee eeewescccccesccetccceeees 10

ECU R GG ROSE GSC6cdcccccccecccccccccce: 11

D. Proceedings Below (in Crow IV) ............. 12

eee eset econ esceseeccessccecces 14

I. THIS CASE IS FACTUALLY UNIQUE AND

LEGALLY PEDESTRIAN .................... 14

Il. CALIFORNIA HAS NO BEARING ON THIS

iii Meee ies hd bn 6eecbCeccacceces ce 19

A. California Did Not Involve The Equitable

Powers Of Federal Courts To Remedy

Violations Of Federal Law.............. 19

B. The Fact That The Tribe Did Not Pay The

Illegal Taxes Does Not Foreclose The Dis-

gorgement Remedy .................065. 22

Ill. THERE IS NO CONFLICT WITH THE TENTH

CIRCUIT’S DECISION IN UTE INDIAN

TRIBE V. STATE TAX COMMISSION ........ 26

iv

TABLE OF AUTHORITIES

Page

Cases

Albemarle Paper Co. v. Moody, 422 U.S. 405

GIF nev eccccccccccecsddscseebecosacesseoosees 17, 18

Alsco-Harvard Fraud Litigation, 523 F.Supp. 790

GEA. GEGED. ccc cccvcccvcncdtiasadataseccvcvescssi 23

Arizona v. California, 60 U.S. 605 (1983) ............ 16

Bell v. Hood, 327 U.S. 678 (1946) ...............545. 17

Board of Commissioners of Jackson County v.

United States, 308 U.S. 343 (1939)................. 18

Board of 1: Comm'rs v. Bloomington, 97

DER, Bee Gee SOUND coccccccscccccssccccsesceces 12, 25

City of Norfolk v. Norfolk County, 91 S.E. 820 (Va.

Bie budoccccccccesensecccce cocsccequcedeweness 12, 24

Commonwealth Edison Co. v. Montana, 453 U.S.

GRP Gc ce vncvccecccccccscsudceusasecnegeseceson: 9

Cotton Petroleum Corp. v. New Mexico, 490 U.S.

SED Gk ec cto ccctsciécoscansdcatekainunsas passim

Crow Tribe v. Montana, 650 F.2d 1104 (9th Cir.

1981), amended, 665 F.2d 1390 (9th Cir. 1982),

cert. denied, 459 U.S. 916 (“Crow I”) ......... passim

Crow Tribe v. Montana, 819 F.2d 895 (9th Cir.

1987), summarily affirmed, 484 U.S. 997 (1988)

CCaaee Bp. « ccccccccscccvceccsccscceccscccces passim

Crow Tribe v. Montana, 969 F.2d 848 (9th Cir.

fee fog ey ose a passim

Crow Tribe v. Montana, 92 F.3d 826, amended, 98

F.3d 1194 (9th Cir. 1996) (“Crow IV”)......... passim

Franklin v. Gwinnett County Public Schools, 503

CE. GD GEG cccceccccucvsccvcccccescuamas 17, 21, 22

Vv

TABLE OF AUTHORITIES - Continued

Page

Hoopa Valley Tribe v. Nevins, 881 F.2d 657 (9th

Cir. 1989), cert. denied, 494 U.S. 1055 (1990)...... 26

Humboldt County v. Lander County, 56 P.228

ih «1. dali ene heen dheckacanencdsll 12, 24

Idaho v. Coeur d’Alene Tribe of Idaho, ___ U.S.

__ No. 94-1474 (decided June 23, 1997).......... 16

Kendall v. United States ex rel. Stokes, 37 U.S. (12

I a eee ne ie os wan an « 17

Marbury v. Madison, 5 U.S. (1 Cranch) 137 (1803) .... 17

McClanahan v. Arizona Tax Comm’‘n, 411 U.S. 164

iid aihis el ocean chet detednedenennacens 16

McKesson Corp. v. Division of Alcoholic Bever-

ages, and T YT €'°8§& were 26

Mescalero Apache Tribe v. Jones, 411 U.S. 145

tia tits ohh toured he eakannditcovesenes ¢ cee 16

Midwest Aviation, Inc. v. General Electric Credit

Corp., 907 F.2d 732 (7th Cir. 1990)................ 23

Mitchell v. De Mario Jewelry, 361 U.S. 288 (1960) .... 17

Moe v. Salish & Kootenai Tribes, 425 U.S. 463

> cudwuebimibeduunetith denen abeenatascen 16, 20, 27

Montana v. Blackfeet Tribe, 471 U.S. 759 (1985)...... 16

New Mexico v. Mescalero Apache Tribe, 462 U.S.

SR tincik nis Mien sheeted eh aenewyne 16

Ramah Navajo School Board v. Bureau of Reve-

i rn cndcetcecnereudsedewerse ot 16

Schaeffer v. Miller, 41 Mont. 417, 109 P. 970 (1910) .... 23

vi

TABLE OF AUTHORITIES - Continued

Page

Seminole Tribe of Florida v. Florida, __. U.S. __|

BOS GOR, SHES GS dvccdéccnwesdsevctiWeccesices 16

Snepp v. United States, 444 U.S. 507 (1980) (per

CTR « ccc cesncécéstncntccncéededeses 18, 23, 24, 25

Swann v. Charlotte-Mecklenburg Bd. of Educa-

Gem, 468 UG. 2 CIDE). oc ccdvccccsccecccccccece 17, 18

United States v. California, 507 U.S. 746 (1993).. passim

United States v. City of Spokane, 918 F.2d 84 (9th

Cir. 1990), cert. denied, 501 U.S. 1250 (1991)...... 26

United States v. Minnesota, 270 U.S. 181 (1926) ..... 20

United States v. Rickert, 188 U.S. 432 (1903)......... 20

Ute Indian Tribe v. State Tax Comm’n, 574 F.2d

1007 (10th Cir. 1978), cert. denied, 439 U.S. 965

GRIPE cece cccccccasccecccscesessecoessoeses 26, 27, 28

Valley County v. Thomas, 109 Mont. 345, 97 P.2d

SED CIBGED . c cccccccccecccccesescccsscseccececes 11, 24

Washington v. Fishing Vessel Ass’n, 443 U.S. 658

CRITE cccccccedccececescocesevessvescoeceosvececes 18

White Mountain Apache Tribe v. Bracker, 448 U.S.

BBS CR cc cccccdepsccsccccccscccetcescesccsocnce 16

Wyandotte Transportation v. United States, 389

CE, BES GIG o vc cc dcccccccvscvccteceseveseoss 18, 21

STATUTES AND RULES

25 U.S.C. §§ 396a et seq. (“Indian Mineral Leasing

BOP. cocnnbetsactvcsecsconcedbaeniadecdsendl 2, 3, 20

vii

TABLE OF AUTHORITIES - Continued

Page

Mont. Code Ann. § 15-23-701 to 704................. 3

Mont. Code Ann. § 15-35-101 to 111............... 3, 5

Montana Constitution, Article IX, § 5................ y

OrHER AUTHORITIES

Dan B. Dobbs, Dobbs Law of Remedies, § 2.4(7) at

i atcpesesuhbadasnnabucsdece ceases 17

OPINIONS BELOW

The opinion of the Ninth Circuit Court of Appeals

that is the subject of this appeal is reported at 92 F.3d 826

and 98 F.3d 1194 (1996) (“Crow IV”) and is reproduced in

the Appendix to the Petition (Pet. App.) commencing at 1.

Prior decisions in this matter by the Ninth Circuit are

reported at 650 F.2d 1104 (1981), amended, 665 F.2d 1390

(1982) (“Crow I”), cert denied, 459 U.S. 916 (1982), repro-

duced in the Pet. App. commencing at 167 and 169; at 819

F.2d 895 (1987) (“Crow II”), reproduced in the Pet. App.

commencing at 88; and at 969 F.2d 848 (1992) (“Crow III”),

reproduced in the Pet. App. commencing at 58. This

Court’s prior summary affirmance of the Court of

Appeals’ 1987 decision in Crow II is reported at 484 U.S.

997 (1988), reproduced in the Pet. App. at 87.

The opinion of the District Court in Crow IV is unre-

ported and is reproduced in the Pet. App. commencing at

17. The prior reported opinion of the District Court,

which was the subject of review by the Court of Appeals

in Crow I, appears at 469 F.Supp. 154 (D. Mont. 1979), and

is reproduced in the Pet. App. commencing at 197. The

District Court’s prior reported opinion reviewed in Crow

II appears at 657 F.Supp. 573 (D. Mont. 1985), and is

reproduced in the Pet. App. commencing at 110. An unre-

ported opinion of the District Court reviewed by the

Court of Appeals in Crow III is reproduced in the Pet.

App. commencing at 67.

JURISDICTION

The judgment of the Court of Appeals was entered

on August 6, 1996. The petition for rehearing of the State

of Montana and the other petitioners (Montana) was

denied on February 21, 1997. Pet. App. 228. The petition

for a writ of certiorari was docketed on May 16, 1997.

This Court has jurisdiction pursuant to 28 U.S.C.

§ 1254(1).

S

FEDERAL STATUTE INVOLVED

In Crow II, the Court of Appeals for the Ninth Circuit

held that Montana’s severance and gross proceeds taxes

on coal produced from the Tribe’s coal deposits imper-

missibly infringed on the Crow Tribe’s sovereignty and

interfered with the policy of promoting tribal self-govern-

ment and economic development underlying the Indian

Mineral Leasing Act of 1938, 25 U.S.C. §§ 396a-396g, were

not narrowly tailored to achieve Montana’s legitimate

interest, and therefore were preempted by federal law.

819 F.2d 895, Pet. App. 88. See Crow IV, 92 F.3d at 828, Pet.

App. 6 (summarizing the holding of Crow II). This Court

summarily affirmed without opinion. 484 U.S. 997 (1988), .

Pet. App. 87.1 The issue presented in the petition,

1 In Cotton Petroleum Corp. v. New Mexico, 490 U.S. 163, 186

& n.17 (1989), this Court distinguished Montana’s “unique” and

“extraordinarily high” coal taxes which imposed a “substantial

burden” on the Crow Tribe from the state oil and gas taxes there

at issue, upheld the validity of those state oil and gas taxes as

applied to tribal minerals, and declined to reexamine its

summary affirmance in Crow II.

whether Montana and Big Horn County should be

allowed to keep the taxes they illegally collected on the

Tribe’s coal from the Tribe’s lessee at the Tribe’s expense,

arises from that holding.

The provisions of the Indian Mineral Leasing Act of

1938, 25 U.S.C. §§ 396a-396g, are reproduced in the

Appendix to the Crow Tribe’s Conditional Cross-Petition.

¢

STATEMENT OF THE CASE

A. Factual Background

In 1972, the Crow Tribe (Tribe) and Westmoreland

Resources (Westmoreland) entered into a coal lease pur-

suant to the Indian Mineral Leasing Act of 1938, 25 U.S.

§§ 396a et seq. In 1974, the Tribe and Westmoreland suc-

cessfully renegotiated the terms of their lease. The lease

and the amended lease were approved by the Department

of the Interior. Production at the Westmoreland mine,

which is located in an area known as the “ceded strip”

located north of the exterior surface boundaries of the

Crow Reservation, commenced in 1974. Pet. App. 30.

In April 1975, Montana enacted statutes imposing

severance and gross proceeds taxes on coal produced

within the State. There were no exceptions for coal owned

by Indian tribes. Mont. Code Ann. §§ 15-35-101 to 111,

15-23-701 to 704. The severance tax rate charged on Crow

coal produced during the 1975-1982 period at issue in the

instant case was. 30% of the value of the contract sales

price of the coal. Pet. App. 25. The rate of the gross

proceeds tax is equivalent to the number of mills levied

for general property tax by the county in which the

production occurred. The amount of the gross proceeds

tax on Crow coal varied somewhat from year to year but

was generally in the range of approximately 5% of the

contract sales price. Pet. App. 25-26. The effective rate of

the combined severance and gross proceeds tax exceeded

32% of the coal’s contract sales price taking account of

allowable deductions and adjustments. Crow II, 819 F.2d

at 899 n.2, Pet. App. 98; Cotton Petroleum, 490 U.S. at 186

n.17.

Tribal representatives appeared before the Montana

legislature and strongly opposed the imposition of the

proposed severance and gross proceeds taxes on Crow

coal on the grounds that:

(1) they are so out of line with taxes imposed

by other neighboring states that Crow coal will

no longer be competitive and therefore our coal

development program will suffer, and (2) . . . the

taxes bear no relation to the responsibilities and

burdens which coal development has imposed

on the State of Montana .. . [and 3]. . . this level

of taxation is so high that [it] becomes an

unauthorized state interference with federally

secured Indian property.

ER 1.2 The Tribe proposed a compromise to the legislature

under which producers would receive a credit against

state taxes for coal taxes paid to Indian tribes. The Senate

Taxation Committee rejected the Tribe’s proposal, com-

menting that “there would have to be court decreed

2 “ER” refers to the Tribe’s excerpts of record filed with the

Court of Appeals for the Ninth Circuit in Crow IV.

settlements regarding Indian coal revenues.” ER 5. See

Crow IV, 92 F.3d at 829, Pet. App. 9; Pet. App. 23.

In enacting the coal taxes, the Montana legislature

found that strip-mined coal is in sufficient demand that:

[A]t least one-third of the price it commands at

the mine may go to the economic rents of roy-

alties and production taxes. . . .

Mont. Code Ann. § 15-35-101(1)(e). In Crow I, 650 F.2d at

1113, Pet. App. 185, the Court of Appeals quoted this

legislative finding and stated: “[b]y setting the severance

tax rate at 30 percent of value, Montana made plain its

intention to appropriate : ost of the economic rent.”3 See

also, Crow II, 819 F.2d at 902, Pet. App. 104-05; Crow IV, 92

F.3d at 829, Pet. App. 10 (“we had . . . found [in Crow I]

the coal taxes were intentionally and illegitimately levied

to appropriate most of the economic rent from Tribal

ee he

The Tribe enacted its own 25% severance tax in early

1976. The tribal tax was approved by the Interior Depart-

ment as applied to the coal within the exterior surface

boundaries of the Reservation but not as to the Tribe’s

coal within the ceded strip. Interior’s decision not to

approve the tribal tax as applied to tribal coal located in

the ceded strip was based on its belief at that time that

that coal could not be taxed under the Tribal Constitution

because it was not part of the Crow Reservation. Pet.

3“ ‘Economic rent’ is the amount of revenue that can be

extracted from an activity, here in the form of royalties and

taxes, without significantly discouraging production.” Crow I,

650 F.2d at 1113 n.12, Pet. App. 185.

App. 19, 31; Crow I, 650 F.2d at 1107-08 & 1115 n.19, Pet.

App. 172, 192; Crow II, 819 F.2d at 897, Pet. App. 93.

It was subsequently determined in Crow II that the

Tribe’s minerals within the ceded strip are part of the

Crow Reservation. 819 F.2d at 896-98, Pet. App. 91-95.

The United States has acknowledged, and the District

Court found, that the government was mistaken in not

approving the Tribe’s tax as applied to its ceded strip

coal. Ninth Circuit Brief for the United States at 19-21;

Ninth Circuit Reply Brief for the United States at 6; Pet.

App. 36, 69, 78. There is no claim or evidence that Mon-

tana or Big Horn County relied to their detriment on

either Interior’s disapproval of the Tribe’s 1976 tax as

applied to the tribal coal mined by Westmoreland or the

Tribe’s subsequent, unsuccessful efforts to amend its

Constitution.

Westmoreland began paying the gross proceeds tax

to Big Horn County in 1975 and the severance tax to

Montana in 1976. Westmoreland paid $46.8 million to the

State between 1975 and 1983 and $11.4 million to the

County between 1976 and 1986. Pet. App. 23-27. The taxes

were not paid under protest and Westmoreland did not

initiate any proceeding to recover refunds. Westmoreland

later entered into an agreement waiving any claim to a

refund. Pet. App. 22, 37. No taxes were paid to the Tribe

during these periods. Pet. App. 31, 35. Montana and Big

Horn County received almost four times more money in

severance and gross proceeds taxes from Westmoreland

than the Tribe received in royalties under its 1974

amended lease. Crow I, 650 F.2d at 1107, Pet. App. 172.

The Tribe initiated discussions with Westmoreland in

1976 seeking payments in addition to the royalties

required under the 1974 amended lease. Westmoreland’s

position was that “any additional payment to the Tribe

would have to be in lieu of, rather than in addition to, the

State tax.” ER 12. See Crow IV, 92 F.3d at 830, Pet. App. 12

(“Westmoreland was willing to pay coal taxes to the Tribe

as early as 1976... . ”). Westmoreland did not make any

additional payments to the Tribe until after the Court of

Appeals’ decision in Crow II. Pet. App. 35.

Montana and Big Horn County derived significant

revenues from the Westmoreland mine from sources other

than the illegal severance and gross proceeds taxes on

Crow coal including property, income and resource

indemnity taxes which have not been contested by the

Tribe or the United States. Uncontroverted evidence

showed that these sources generated far more income for

Montana and Big Horn County than those entities

expended for services related to the Westmoreland mine.

Crow IV, 92 F.3d at 829-30, Pet. App. 11.4

* The expert witness for the Tribe and the United States

testified that from 1976 to 1986 Montana and Big Horn County

received approximately $29 million in revenues from the

Westmoreland mine from sources other than their invalid

severance and gross proceeds taxes while the governmental

costs associated with the mine during the same period were no

more than $5 million. ER 121, 124, 130-33, 137, 228b-228e.

Montana’s description of the services provided by the State

and the County to Crow tribal members (Pet. 8-9) is inaccurate

and misleading. The petitioners neglect to point out that the

District Court found that those “services would have been

rendered even in the absence of Westmoreland’s . . . mine and

were not related to the mine.” Pet. App. 38. They also fail to

In 1982, following the decision in Crow I, the Tribe

and Westmoreland reached agreement on a tax amend-

ment to their 1974 lease which was approved by the

Interior Department. Westmoreland agreed to pay the

Tribe taxes equal to Montana’s severance and gross pro-

ceeds taxes and the Tribe agreed to give Westmoreland a

credit for severance and gross proceeds taxes paid to

Montana and Big Horn County. In January 1983, the

District Court issued a preliminary injunction against

collection of the state severance tax and granted a motion

allowing Westmoreland to deposit its severance tax pay-

ments into an escrow account managed by the Court. The

same relief was granted as to the gross proceeds tax in

November 1987, following the decision in Crow II. Pet.

App. 31-32, 35.

Approximately $24 million was deposited into the

Court’s escrow account between 1983 and 1987. In 1989,

after this Court’s summary affirmance in Crow II, the

District Court issued a final judgment distributing the

funds held in escrow, including accrued interest, to the

United States in trust for the Tribe. Crow IV, 92 F.3d at

828, Pet. App. 7; Pet. App. 35; ER 91a. There was no

appeal from that judgment. Since 1988, Westmoreland has

paid all severance and gross proceeds taxes on Crow coal

mention the substantial number of jobs in Montana and Big

Horn County and the significant tax and other revenues

attributable to the Tribe and to the Crow Indian Reservation. See

Plaintiffs’ Ex. 351 at 31-32; V Tr. 840-48 (1994). For these and

other reasons the District Court did not consider State and

County services provided to Crow tribal members in its

balancing of equitable factors bearing on whether the State and

County were unjustly enriched. Pet. App. 38, 44-54.

to the Tribe pursuant to the 1982 amendment to the 1974

lease. Pet. App. 36. The issue in the instant case concerns

the disposition of the severance taxes ($46.8 million) and

the gross proceeds taxes ($11.4 million) illegally imposed

on the Tribe’s coal and collected by the State and County

from Westmoreland.

Neither Montana nor Big Horn County placed the

contested tax payments in escrow until ordered by the

District Court. Crow IV, 92 F.3d at 829 n.3; Pet. App. 9.

Significant portions of all of the coal severance revenues

received by Montana were, however, deposited into the

Constitutional Trust Fund established under Article IX,

Section 5, of the Montana Constitution. 25% of coal sever-

ance tax revenues were allocated to the Fund between

1977 and 1979; since 1980 the Fund has received 50% of

those revenues. The principal of the Fund can be spent

only with the approval of */s of the Montana legislature.

Crow I, 650 F.2d at 1108, Pet. App. 173; Pet. App. 25. As of

June 30, 1993, the value of the Fund was $512 million. Pet.

App. 25.

Montana’s coal severance tax has generated “enor-

mous revenues,” principally paid by out-of-state utility

customers. Cotton Petroleum, 490 U.S. at 186 n.17 (citing

Commonwealth Edison Co. v. Montana, 453 U.S. 609, 641-42

(1981) (Blackmun, J. dissenting)). From 1975 through

1993, Montana received more than $1.1 billion in coal

severance taxes. As of the end of 1993, the value of those

revenues (with interest based on the rate of return earned

by Montana’s Constitutional Trust Fund) exceeded $3.8

billion of which $263 million, less than 7%, represented

the value (with interest based on the same rate of return)

10

of the severance taxes Montana collected on Crow coal.

ER 122-23, 125, 228m-228n.

B. Crow Il

The holding in Crow II, that Montana’s severance and

gross proceeds taxes as applied to Crow coal interfered

with the purposes underlying the Indian Mineral Leasing

Act and infringed on the Tribe’s sovereignty, was based

on the following findings, among others: (i) by enacting

its coal taxes in 1975 and applying those taxes to coal

beneficially owned by the Tribe, Montana intended to,

and did in fact, appropriate most of the economic rent

attributable to strip-mined coal and thereby appropriated

the Tribe’s mineral wealth to itself and deprived the Tribe

of royalties and taxes the Tribe otherwise would have

earned, Crow I, 650 F.2d at 1113-14, Pet. App. 185-87; Crow

II, 819 F.2d at 902, 902-03, Pet. App. 104-05, 107; Crow IV,

92 F.3d at 830, Pet. App. 11-12; (ii) Montana’s taxes

“forced the coal producers to charge higher prices, reduc-

ing the demand for their Montana coal and resulting in

fewer sales for the producers and fewer royalties for the

Tribe,” Crow II, 819 F.2d at 899, Pet. App. 97; (iii) Mon-

tana’s coal taxes reduced tribal revenues by impairing the

marketability of the Tribe’s coal, Crow II, 819 F.2d at 903,

Pet. App. 109; (iv) “[t]he tax revenue from coal produc-

tion could generate funds for tribal services and provide

employment for tribal members. . . . By taking revenue

that would otherwise go towards supporting the Tribe

and its programs .. . the state tax threatens Congress’

overriding objective of encouraging tribal self-govern-

ment and economic development,” Crow II, 819 F.2d at

11

902-03, Pet. App. 107 (citation omitted); and (v) “Mon-

tana’s coal taxes . . . interfere with tribal economic devel-

opment and autonomy,” Crow II, 819 F.2d at 903, Pet.

App. 108. See also, Crow III, 969 F.2d at 848-49, Pet. App.

59-60 (reiterating several of the Crow II findings); Cotton

Petroleum, 490 U.S. at 186 n.17 (distinguishing Montana’s

“unique,” “unusually large,” and “extraordinarily high”

coal taxes, which “imposed a substantial burden on the

Tribe” and “had a negative effect on the marketability of

coal produced in Montana,” from New Mexico's oil and

gas taxes there at issue).

Cc. Crow Ill

Crow III concerned the claim of the United States and

the Tribe to the severance and gross proceeds taxes ille-

gally imposed and collected by Montana and Big Horn

County from Westmoreland before the disputed money

was paid into the District Court’s escrow account.5 The

District Court denied the motion of Montana and Big

Horn County to dismiss those claims. Pet. App. 67-86.

Citing the Montana Supreme Court's decision in Valley

County v. Thomas, 97 P.2d 345 (1939), as well as cases from

5 This claim had not been asserted by the Tribe, and the

United States had not yet intervened, when Crow | was decided.

Consequently, the issue concerning the Tribe’s right to recovery

of these taxes was not presented to the Court of Appeals in Crow

I. Under these circumstances, the Ninth Circuit’s observation in

Crow I (650 F.2d at 1113 n.13, Pet. App. 186 (emphasis added))

that the Tribe “is apparently not entitled to any refund if the tax

statutes are declared invalid,” was rightly accorded no weight

in that Court’s subsequent decisions. See Pet. 6 n.3.

12

other jurisdictions,* the District Court held that “an

action for restitution may be maintained by one govern-

mental entity against another even though the plaintiff is

not the source of the funds.” Pet. App. 80.

The Ninth Circuit initially accepted an interlocutory

appeal to determine whether the United States and the

Tribe could state a claim to funds collected from the

Tribe’s lessee. Crow III, 969 F.2d at 848, Pet. App. 59.

Following full briefing and oral argument, the Ninth

Circuit dismissed the appeal as improvidently granted

because that issue had already been decided in favor of

the Tribe and the United States in Crow II. Ibid.

D. Proceedings Below (in Crow IV)

After the Ninth Circuit’s decision in Crow III and a

trial, the District Court issued its decision in November

1994. Its analysis was predicated on its conclusion that “it

is a question of fact . . . whether a remedy in restitution

arises at all in this case.” Pet. App. 46-47. It recognized

that Montana’s illegal coal taxes had significant adverse

impacts on the Tribe and had contravened Congress’

overriding objective of encouraging self-government and

economic development. Pet. App. 27-29, 45 and 50. In the

District Court’s view, however, these factors favoring the

Tribe were outweighed by others. Pet. App. 31-37, 45-54.

Finding that it would not be unjust for Montana and Big

Horn County to retain the taxes they illegally imposed

© Humboldt County v. Lander County, 56 P.228 (Nev. 1899);

City of Norfolk v. Norfolk County, 91 S.E. 820 (Va. 1917); and Board

of Highway Comm'rs v. Bloomington, 97 N.E. 280 (Ill. 1912).

13

and collected on Crow coal, the District Court ruled that

the Tribe and the United States were not entitled to any

recovery. Pet. App. 52, 54.

In its conclusions of law, the District Court reiterated

its previous Crow III ruling that the Tribe and the United

States were not automatically barred from recovering

taxes paid by the Tribe’s lessee. Nevertheless, the District

Court found that “the lack of privity” between the Tribe

and Montana “has its place in determining restitution

damages.” Pet. App. 48-50. It did not address Montana’s

argument that this Court’s subsequent decision in United

States v. California, 507 U.S. 746 (1993), undermined the

vitality of the Ninth Circuit’s decision in Crow III.

The Ninth Circuit reversed. It stated that the District

Court:

[F]ailed to give appropriate weight to the law of

this case as established in the three prior

appeals. In the process of weighing the equities

in favor of and against restitution, the district

court in effect reconsidered questions of law

already decided by this Court in the prior

appeals. Nearly every factor relied upon by the

district court to determine that the Tribe was not

entitled to relief is either contradicted or made

irrelevant by our earlier holdings.

Crow IV, 92 F.3d at 828, Pet. App. 8.

With regard to the privity issue, the Ninth Circuit

held that the District Court had erred and ignored the

law of the case by denying relief based in part on the fact

that the taxes were paid by the Tribe's lessee. Crow IV, 92

14

F.3d at 828-29, Pet. App. at 8-9. It found that Westmore-

land had agreed to pay the tribal tax in the 1982 amend-

ment to the coal lease and that Westmoreland “was

willing to pay coal taxes to the Tribe as early as 1976.”

Consequently, “there was no reason for the [district]

court to distinguish between the taxes collected before

and after 1982.” Crow IV, 92 F.3d at 830, Pet. App. 11-12.

The Ninth Circuit also rejected Montana’s reliance on

California because California “involved an entirely differ-

ent factual situation.” Crow IV, 92 F.3d at 828-29 n.2, Pet.

App. 8-9; 93 F.3d at 1194-95, Pet. App. 16.

The case was remanded to the District Court “for

entry of an order directing the State and County to dis-

gorge the improperly collected taxes.” The District Court

also was instructed to consider the request of the Tribe

and the United States for prejudgment interest. Crow IV,

92 F.3d at 830, Pet. App. 12.

S

ARGUMENT

I. THIS CASE IS FACTUALLY UNIQUE AND

LEGALLY PEDESTRIAN.

It is established that Montana and Big Horn County

violated the federal rights and interfered with the feder-

ally protected sovereignty of the Tribe and thwarted Con-

gress’ overriding objectives by illegally imposing and

collecting more than $58 million in taxes on the Tribe's

coal. The State and County are seeking to retain the

money they unlawfully obtained at the Tribe’s expense in

violation of federal law. They do not question the obvious

but fundamental point that the relief granted by the

15

Ninth Circuit in Crow IV, disgorgement of the illegally

collected taxes, would effectuate the purpose of the laws

that were broken and partially make good the wrong

done to the Tribe. Conversely, the denial of the restitu-

tionary relief sought by the Tribe and the United States

would leave the Tribe without a remedy for the wrongs

inflicted by Montana from 1976 through 1983 and by Big

Horn County from 1975 through 1986 and would allow

them to profit from their own wrongdoing.

After the decision in Crow I, the District Court

ordered that the challenged severance taxes be paid into a

court supervised escrow account. Those funds with the

interest they earned were awarded to the United States in

trust for the Tribe following this Court's summary affir-

mance in Crow II. See Crow IV, 92 F.3d at 828, Pet. App. 7;

Pet. App. 35. Montana neither contested nor appealed

that final judgment. Since then, Westmoreland has paid

all severance and gross proceeds taxes on Crow coal to

the United States in trust for the Tribe pursuant to the

1982 amendment to the 1974 Crow/Westmoreland lease.

As held in Crow III, there is no justification for treating

the funds now at issue differently.

The petition does not raise an issue of broad applica-

tion or importance. This case is fact specific and the legal

issue presented is not likely to recur. As this Court recog-

nized in Cotton Petroleum, 490 U.S. at 186 & n.17, the taxes

here at issue are “unique.” They were held invalid in part

because they are so “extraordinarily high.” Petitioners

have not pointed to taxes of any other jurisdiction which

impose comparable burdens on Indian tribes or tribal

property. Another unusual aspect of the instant case is

that Westmoreland did not seek refunis of the taxes it

16

paid to the State and County and later waived any claim

to that money.

Due to the extraordinary nature of the taxes at issue and

to their devastating impact on the mineral wealth held by the

United States in trust for the Tribe, the United States inter-

vened in support of the Tribe’s claims.? The government's

participation as a co-plaintiff precludes Montana from sai-

sing Eleventh Amendment defenses. Arizona v. California, 460

U.S. 605, 614 (1983). Cf. Seminole Tribe of Florida v. Florida, ___

U.S. __, 116 S.Ct. 1114 (1996); Idaho v. Coeur d'Alene Tribe

of Idaho, __ U.S. ___ (No. 94-1474, decided June 23, 1997),

in which suits by tribes against states and state officials

were held barred by the Eleventh Amendment. The

absence of any Eleventh Amendment issues due to the

presence of the United States underscores the uniqueness

of this case and further diminishes the likelihood that the

issue this Court is being asked to consider will arise in

future actions.®

7 The large amount of money at stake reflects the “enormous

revenues” generated by Montana’s “extraordinarily high” coal taxes

and the extent to which the collection of those taxes unjustly

enriched the State and County and deprived the Tribe of revenues it

otherwise would have received. See supra at 9-10.

® During the past 25 years, the United States has

participated as a party in few, if any, cases challenging the

validity of state taxes as applied to Indians, Indian tribes and

their property or activities. See, e.g., Cotton Petroleum Corp. v.

New Mexico, 490 U.S. 163 (1989); Montana v. Blackfeet Tribe, 471

U.S. 759 (1985); New Mexico v. Mescalero Apache Tribe, 462 U.S.

324 (1983); Ramah Navajo School Board v. Bureau of Revenue, 458

U.S. 832 (1982); White Mountain Apache Tribe v. Bracker, 448 U.S.

136 (1980); Moe v. Salish & Kootenai Tribes, 425 U.S. 463 (1976);

McClanahan v. Arizona Tax Comm'n, 411 U.S. 164 (1973); and

Mescalero Apache Tribe v. Jones, 411 U.S. 145 (1973).

17

From a legal standpoint, there is nothing unusual or

remarkable about the relief granted by the court below.

The Ninth Circuit simply did what federal courts have

been doing “[fjrom the earliest years of the Republic,”

exercising their inherent equitable powers to remedy the

invasion of federally secured rights. Franklin v. Gwinnett

County Public Schools, 503 U.S. 60, 66-67 (1992) (” ‘where

legal rights have been invaded, and a federal statute

provides for a general right to sue for such invasion,

federal courts may use any available remedy to make

good the wrong done’ ”), citing, inter alia, Marbury v.

Madison, 5 U.S. (1 Cranch) 137, 163 (1803); and Kendall v.

United States ex rel. Stokes, 37 U.S. (12 Pet.) 524, 624 (1838),

and quoting Bell v. Hood, 327 U.S. 678, 684 (1946). As

stated in Swann v. Charlotte-Mecklenburg Bd. of Education,

402 U.S. 1, 15 (1971), “[o]nce a right and violation have

been shown, the scope of a district court’s equitable

powers to remedy past wrongs is broad, for breadth and

flexibility are inherent in equitable remedies.”9 It is also

%In fashioning appropriate relief, the primary

consideration is carrying out the purposes of the statute that

was violated. Albemarle Paper Co. v. Moody, 422 U.S. 405, 417

(1975) (the determination of appropriate relief “must be

measured against the purposes which inform [the statute]”);

Mitchell v. De Mario Jewelry, 361 U.S. 288, 292 & 296 (1960) (the

“statutory purposes leave little room for the exercise of

discretion not to order reimbursement”). Equitable relief

required to remedy the invasion of federally secured rights and

to effectuate the statutory purpose may be denied only if based

on an estoppel or on the plaintiff’s closely related illegal

conduct. Albemarle, 422 U.S. at 417-25; Dan B. Dobbs, Dobbs Law

of Remedies, § 2.4(7) at 119 (2d.Ed. 1993). Contrary to the district

court’s decision below, federal courts do not have broad or

unfettered discretion to exercise their equitable powers in an ad

18

well established that “the federal courts [are not]

restricted to the remedies available in state courts in

enforcing . . . federal rights” and that the relief available

in federal court for the violation of federal rights may not

be “unduly circumscribed by state law.” Board of Commis-

sioners of Jackson County v. United States, 308 U.S. 343,

350-51 (1939). Accord, Washington v. Fishing Vessel Ass'n,

443 U.S. 658, 695 (1979).

The Ninth Circuit’s disgorgement remedy in the

instant case is just like the equitable relief granted to

correct violations of constitutional rights, as exemplified

in Swann, the equitable remedies fashioned to give effect

to Indian treaty fishing rights, as in Fishing Vessel Ass’n,

443 U.S. at 692-96, the constructive trust ordered to carry

out the national security policy of the United States

embodied in a federal employment contract, as in Snepp v.

United States, 444 U.S. 507, 514-16 (1980) (per curiam), and

the declaratory and monetary relief required to effectuate

the statutory purpose of preventing obstructions to com-

merce on navigable waterways, as in Wyandotte Transpor-

tation v. United States, 389 U.S. 191, 201-05 (1967). In these

cases and many others, federal courts have exercised

their inherent equitable powers to correct the wrongs

inflicted on plaintiffs due to invasions of their federally

secured rights. This case is no different.

hoc manner “which varies like the Chancellor’s foot.” Albemarle,

422 U.S. at 417.

19

II. CALIFORNIA HAS NO BEARING ON THIS CASE.

Montana’s principal argument is that the decision

below conflicts with the holding in United States v. Califor-

nia. As the Ninth Circuit said, “California involved an

entirely different factual situation.” Crow IV, 98 F.3d at

1195, Pet. App. 16.

California does not preclude the Tribe’s recovery for

each of the following reasons: (i) the instant case is gov-

erned by the principle that, when federally secured rights

are invaded, federal courts will grant appropriate relief to

effectuate the federal purposes and make good the wrong

done, whereas the government's claim in California was

predicated exclusively on state law; (ii) there is no

requirement that the relief awarded by federal courts to

remedy violations of federal law must fit precisely within

the confines of established common law causes of action;

(iii) all of the essential elements of the common law

assumpsit action for money had and received are satis-

fied; (iv) California does not hold that only taxpayers may

seek recovery of illegally collected taxes; and (v) none of

the factors which made it equitable for the state to be

allowed to keep the taxes it collected from the federal

government’s contractor is present here.

A. California Did Not Involve The Equitable

Powers Of Federal Courts To Remedy Viola-

tions Of Federal Law.

In California, the United States attempted to federal-

ize a cause of action predicated on state law in order to

circumvent state filing requirements which otherwise

20

barred the claim.’ This Court held that under these

circumstances the United States could not use “the exis-

tence of an obligation to indemnify [its contractor] to

create a federal cause of action for money had and

received to recover state taxes paid by [its contractor]... .”

507 U.S. at 754. The federal action was “inap-

propriate . . . because the Government is in no better

position than as a subrogee of its [private] contractor.”

507 U.S. at 752.1!

Here, in stark contrast, the underlying claims of the

Tribe and the United States are predicated on federal law,

the violation of the Tribe’s rights under the Indian Min-

eral Leasing Act, 25 U.S.C. §§ 396a-396g, and interference

with the Tribe’s sovereignty. Montana directly violated

the Tribe's rights under federal law whereas in California

the government stood in the shoes of its subrogee, the

taxpayer, whose claims were predicated exclusively on

10 The government’s claim was “posited upon the

interpretation of a state-created exemption from a state[-]

created sales tax.” The United States sued in its proprietary

capacity and stood in the shoes of its contractor; there was no

sovereign interest of the United States. There were no

allegations that the state taxes were preempted by federal law or

violated the Constitution. 507 U.S. at 748-51.

11 This Court also noted that different rules apply to the

United States depending on whether it is acting in its

proprietary capacity, as in California, or as a sovereign. 507 U.S.

at 757-58. Where, as here, the United States sues as trustee on

behalf of Indian beneficiaries, it is exercising its sovereign

authority. Moe v. Salish & Kootenai Tribes, 425 U.S. 463, 473-75 &

n.13 (1976); United States v. Minnesota, 270 U.S. 181, 194-95

(1926); United States v. Rickert, 188 U.S. 432, 444-45 (1903).

21

state law.'2 The remedy issue in this case therefore is

governed by the principle, recently reaffirmed in Franklin,

that where federally secured rights are invaded, federal

courts will grant relief necessary to effectuate the con-

gressional purpose and to make good the wrong done.!5

Moreover, Montana’s reliance on California is predi-

cated on a fundamentally flawed, albeit unspoken, major

premise. Its argument mistakenly assumes that when a

violation of federal law is established, the relief federal

courts may grant is limited to traditional common law

remedies. That is not the law. In Wyandotte, for example,

this Court upheld the right of the United States to impose

12 The United States and the Tribe are not claiming by,

through or under Westmoreland. The Tribe’s action and

standing are based on the violation of its federally secured

rights, not on a voluntary indemnification agreement. The Tribe,

not Westmoreland, is the intended beneficiary of the federal

laws promoting Indian mineral development and recognizing

and protecting tribal sovereignty.

13 Westmoreland makes no claim to the illegally collected

taxes, so there is no contest between the Tribe and

Westmoreland regarding the disposition of those funds. If such

a claim were presented, the guiding principle would be to

award the funds in the manner that best effectuated the purpose

of the federal laws Montana violated. See supra at 17 n.9.

Westmoreland’s position from the outset was that it was willing

to pay either a tribal or state tax but not both, Crow IV, 92 F.3d at

830, Pet. App. 11-12; Tribe’s ER 12-13, so it is difficult to

understand how a court of equity could justify granting

Westmoreland immunity from both state and tribal taxes. In any

event, whatever Westmoreland did or did not do, or would have

or would not have done, does not have any bearing on whether

Montana should be allowed to keep the money it obtained in

violation of the Tribe's federally secured rights and at the Tribe's

expense.

22

liability on shipowners under the Rivers and Harbors Act

of 1895 for the negligent sinking of their vessels because

that remedy was necessary to fulfill the statutory pur-

pose. This Court specifically declined to decide whether

the United States would have been entitled to that relief

in the absence of the statute. 389 U.S. at 196 n.5. See also

the discussion supra at 17-18. Montana has not cited a

single case, and the Tribe is not aware of any, in which

equitable relief for the violation of a federal law was

denied on the ground that not all the prerequisites for a

common law cause of action were satisfied.

The instant case involves a cognizable cause of action

brought pursuant to federal laws. Violations of these laws

have been established. Consequently, the issue of appro-

priate relief is controlled by Franklin and the long line of

decisions on which it relies, not California.

B. The Fact That The Tribe Did Not Pay The Ille-

gal Taxes Does Not Foreclose The Disgorge-

ment Remedy.

Assuming arguendo that the claim of the Tribe and

the United States is predicated on assumpsit and con-

structive trust causes of action (as opposed to equitable

relief to remedy violations of federal law), all of the

required elements of those actions are satisfied.

Assumpsit, an action for money had and received, like

the imposition of a constructive trust,'* requires proof of

4 Both assumpsit and constructive trust actions are

predicated on a claim of unjust enrichment. The difference is

that a successful assumpsit action results in a judgment

23

three elements: (i) a wrongful act; (ii) specific property

acquired by the wrongdoer which is traceable to the

wrongful behavior; and (iii) a reason why the party hold-

ing the property should not be allowed in good con-

science to keep it. Alsco-Harvard Fraud Litigation, 523

F.Supp. 790, 806-07 (D.D.C. 1981) (and cases therein

cited). See also, Schaeffer v. Miller, 41 Mont. 417, 423, 109 P.

970, 973 (1910); Pet. App. 43, 70-71. If these elements are

present, the law implies the existence of a contract to turn

over the wrongfully acquired property to its rightful

owner. See, Midwest Aviation, Inc. v. General Electric Credit

Corp., 907 F.2d 732, 736-37, 743-44 (7th Cir. 1990)

(“[q]uasi-contractual duties arise only in situations of

unjust enrichment, situations where ‘one person has

received money or its equivalent under such circum-

stances that in equity and good conscience he ought not

to retain it and which ex cequo et bono belongs to another’ ”).

This Court’s decision in Snepp illustrates the use of

the constructive trust remedy to correct a violation of

federal law. Snepp involved the publication of a book by a

former CIA agent contrary to the covenant in his employ-

ment agreement not to publish any material relating to

the CIA without the agency’s prior approval. The wrong-

ful act was the agent’s publication of a book about the

CIA without approval. The property acquired by the

agent traceable to his wrongful behavior was the money

derived from the sale of the book. The reasons the agent

was not allowed to keep that money were that the book

imposing personal liability whereas a constructive trust

operates against specific property. Pet. 13 & n.4; Pet. App. 43,

70-71.

24

was written in violation of the agent’s employment cove-

nant and that it was equitable to require him to disgorge

the benefits of his faithlessness. 444 U.S. at 515. In addi-

tion, this Court noted that the constructive trust remedy

conformed the relief to the dimensions of the wrong and

that that relief was the most equitable and effective

means of fulfilling the purpose of the covenant, protect-

ing intelligence that could affect the Nation's security

interests. 444 U.S. at 514-16.

The instant case is on all fours with Snepp. Here, the

wrongful acts are the imposition and collection of the

invalid state coal taxes in violation of federal law. The

wrongfully acquired property is the $58 million in illegally

collected coal tax revenues. The reasons why Montana

should not be allowed to keep that money and why it

should be paid over to the Tribe are that it was acquired in

violation of the Tribe’s rights under federal law and that

disgorgement would effectuate the purpose of those laws

and at least partially make good the wrongs done to the

Tribe.

Nothing more is required. In its December 1990 deci-

sion denying Montana’s motion for summary judgment,

the District Court carefully considered and squarely

rejected Montana’s argument that restitutionary relief is

precluded because the taxes were paid to Montana and Big

Horn County by Westmoreland, not by the Tribe. Relying

on case law from Montana’ as well as other jurisdic-

tions,’ the District Court correctly concluded that the

15 Valley County v. Thomas, 109 Mont. 345, 97 P.2d 345 (1939).

16 Humboldt Co. v. Lander Co., 56 P. 228 (Nev. 1899); City of

Norfolk v. Norfolk County, 91 S.E. 820, 822-24 (Va. 1917); and

25

claim of the Tribe and the United States to the illegally

collected taxes turns on the issue of unjust enrichment, not

the identity of the taxpayer. Pet. App. 79-81. Here, as in

Snepp, the relationship between the wrongdoers and their

victims that is necessary to obtain appropriate equitable

relief is founded on the violations of the victims’s federally

secured rights. That is precisely what the Ninth Circuit

held in Crow II.

California does not stand for the proposition that only

taxpayers may recover taxes illegally imposed and col-

lected by governmental entities. This Court pointed out

that the federal government's contractor had challenged

the state’s taxes, had its day in court, settled its claim and

gone home. 507 U.S. at 752. The federal government's

claim was derived from its contractor and both the gov-

ernment and its contractor had a full and fair opportunity

to challenge the validity of California’s taxes under state

law. 507 U.S. at 750, 756-57. The failure of the federal

government to comply with state filing requirements

barred its claim for a tax refund. 507 U.S. at 756-57. Since

an adequate remedy was available which the federal gov-

ernment had failed to utilize, it was not unjust for Cali-

fornia to keep the money it collected from the contractor,

just as it would be able to retain taxes received from any

other taxpayer who failed to follow procedures required

to obtain a refund. When the federal government “chal-

lenge[s] a state tax on state-law grounds,” it should not

be treated any differently than other taxpayers “simply

because it is the Government.” 507 U.S. at 759-60.

Board of Highway Comm'rs v. Bloomington, 97 N.E. 280, 283-85 (Ill.

1912).

26

This case is completely different. The Tribe’s claim is

predicated on the unlawful appropriation and conversion

of its mineral wealth and the violation of its federally

secured rights, not on state law or a voluntary indemni-

fication agreement. The Tribe is not claiming by, through

or under Westmoreland. See supra at 21 n.12. There is no

contention that the Tribe’s rights have lapsed or that its

claim is barred. Nor is there an attempt to circumvent a

stale state claim by substituting a federal cause of action.

Granting the relief sought by the Tribe and the United

States would not result in unfair treatment vis-a-vis other

taxpayers.'’” In short, none of the factors which made it

equitable for California to be allowed to keep the taxes it

collected from the federal government's contractor is pre-

sent here.

Ill. THERE IS NO CONFLICT WITH THE TENTH

CIRCUIT’S DECISION IN UTE INDIAN TRIBE V.

STATE TAX COMMISSION.

The decision below does not conflict with Ute Indian

Tribe v. State Tax Comm'n, 574 F.2d 1007 (10th Cir. 1978),

17 See, e.g., McKesson Corp. v. Division of Alcoholic Beverages,

and Tobacco, 496 U.S. 18, 48 (1990) (states have no legitimate

interest in being able to retain taxes imposed and collected in

violation of federal law); United States v. City of Spokane, 918 F.2d

84, 89 (9th Cir. 1990), cert. denied, 501 U.S. 1250 (1991)

(municipality required to disgorge the taxes it illegally collected

from the Red Cross because “the only logical relief, aside from

further taxation, is to order the improperly taken

monies refunded”); Hoopa Valley Tribe v. Nevins, 881 F.2d 657 (9th

Cir. 1989), cert. denied, 494 U.S. 1055 (1990) (Indian tribe entitled

to recover illegal taxes collected by California from private

timber companies in violation of federal Indian law).

27

cert. denied, 439 U.S. 965 (1978). Ute was an action by an

Indian tribe to invalidate Utah’s taxes on sales of per-

sonal property by a tribal enterprise located within a

reservation. Following this Court’s decision in Moe v.

Salish & Kootenai Tribes, 425 U.S. 463 (1976), the Tenth

Circuit held that the state tax was valid as applied to

sales to non-Indians but invalid as applied to sales to

Indians. The Tribe’s claim for return of the invalid taxes

paid by the buyers of the goods, collected by the tribal

enterprise and turned over to the state was summarily

rejected on the ground that only the buyers could seek

recovery or refund of the taxes. 574 F.2d at 1009. Ute has

not been followed or cited in any subsequent decision for

the proposition that non-taxpayers may not seek to

recover illegally collected taxes.

There are at least four critical distinctions between

the instant case and Ute. First, in the instant case, unlike

Ute, the state’s “extraordinarily high” taxes operated

against the Tribe’s own property and significantly dimin-

ished its value. See supra at 5 and 10-11. In Ute, by

contrast, no tribal property was involved and the state’s

taxes operated only against the individual buyers. Sec-

ond, in the instant case the Ninth Circuit expressly found,

based on substantial evidence, that Montana’s taxes took

revenue that would otherwise go to the Tribe. See supra at

5, 7, 10-11, and 13-14. There was no such claim or finding

in Ute. Third, the tribe in Ute did nothing more than

collect the state’s taxes whereas Montana’s taxes imposed

substantial burdens on the Tribe and had a negative effect

on the Tribe’s ability to market its coal. Cotton Petroleum,

490 U.S. at 186 n.17; Crow II, 819 F.2d at 899, Pet. App.

97-98. Fourth, here, unlike Ute, the rights of the Tribe

under a federal statute were violated and the remedy

fashioned by the Ninth Circuit is necessary to effectuate

the purpose of that statute during the periods the taxes

were collected illegally by Montana and Big Horn

County.

In short, the Ute Court held that the tribe was not the

injured party so far as the recovery of invalid sales taxes

on personal property was concerned. The taxes involved

here are totally different. The findings of Crow I, II, Ill

and IV clearly establish that the Tribe was the rightful

recipient of the taxes illegally imposed on the Tribe's

trust assets and collected from Westmoreland.

For all of these reasons, the outcomes in Ute and

Crow IV are compatible. The Tribe certainly is a proper

party to seek recovery of the coal taxes which unjustly

enriched Montana and Big Horn County.

S

CONCLUSION

With full awareness of the risks, Montana and Big

Horn County deliberately and wrongfully appropriated

the Tribe’s mineral wealth and obtained enormous bene-

fits for themselves in violation of federal law. The Ninth

Circuit fashioned an appropriate remedy to correct those

wrongs. Its decision does not conflict with the decision of

this or any other court. It is supported by and is consis-

tent with the long line of cases affirming the broad equi-

table power of federal courts to fashion appropriate

remedies to correct invasions of federally secured rights.

The facts of this case are unique and are not likely to

29

recur. There is no issue that warrants review by this

Court.

For the foregoing reasons, the petition for a writ of

certiorari should be denied.

Respectfully submitted,

Rosert S. PeccyGer

FREDERICKS, PELCYGER,

Hester & Wuire, L.L.C.

1881 9th St., Ste. 216

Boulder, CO 80302

(303) 443-1683

Attorney for Respondent

Crow Tribe of Indians

July 1997