Quantum Entertainment Ltd. v. United States Department of the Interior , 714 F.3d 1338 ( 2013 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued February 15, 2013 Decided April 30, 2013
No. 12-5133
QUANTUM ENTERTAINMENT LIMITED,
A NEW MEXICO LIMITED LIABILITY COMPANY,
APPELLANT
v.
UNITED STATES DEPARTMENT OF THE INTERIOR,
BUREAU OF INDIAN AFFAIRS,
APPELLEE
Appeal from the United States District Court
for the District of Columbia
(No. 1:11-cv-00047)
Charles K. Purcell argued the cause for appellant. With
him on the brief was Nancy J. Appleby.
Matthew Littleton, Attorney, U.S. Department of Justice,
argued the cause for appellee. With him on the brief were
William J. Lazarus, and John L. Smeltzer, Attorneys. Tamara
N. Rountree, Attorney, entered an appearance.
Before: GARLAND, Chief Judge, ROGERS and TATEL,
Circuit Judges.
Opinion for the Court by Circuit Judge ROGERS.
2
ROGERS, Circuit Judge: This appeal involves questions of
statutory retroactivity, which the court analyzes under the two-
part test in Landgraf v. USI Film Products, 511 U.S. 244, 280
(1994). Agreeing with the Interior Board of Indian Appeals, the
district court ruled that Quantum Entertainment Limited’s 1996
Management Agreement with the Santo Domingo Pueblo, a
federally recognized Indian tribe, and its tribal corporation,
Kewa Gas Limited, was null and void for lack of approval by the
Secretary of the Interior as required by 25 U.S.C. § 81 (1994),
and that it was incapable of being validated by the 2000
amendment to § 81, the application of which would be
impermissibly retroactive. Quantum challenges the Board’s
determinations that application of the 2000 amendment would
be impermissibly retroactive and that § 81 applies to the 1996
Agreement.
Application of Landgraf’s retroactivity test does not work
in Quantum’s favor. First, Congress made no clear statement
that it intended the 2000 amendment to apply retroactively, see
511 U.S. at 280. Second, because the 1996 Agreement required
Secretarial approval that was never obtained and the parties
agree the Agreement would be valid without Secretarial
approval under § 81 as amended, the application of the new law
would give life to a null and void agreement, thereby attaching
“new legal consequences” to it, id. at 269–70, 280. Although
the Pueblo may have voluntarily undertaken the stated duties
and liabilities under the Agreement, such an agreement was null
and void without Secretarial approval before 2000. Since the
Secretary never approved the Agreement, any legislative
validation of the “duties” or “liabilit[ies]” attached to it was
impermissibly retroactive. Id. at 280. Quantum’s challenges to
the scope of § 81 itself are unavailing. Accordingly, we affirm
the grant of summary judgment, venturing no opinion on
whether Quantum could recover in quantum meruit, an issue not
briefed by the parties.
3
I.
On August 14, 1996, Quantum entered into an agreement
with the Pueblo, acting through its Tribal Council, and Kewa
Gas to manage, supervise, and operate Kewa Gas’s gasoline
distribution business on the Pueblo’s reservation in New
Mexico. Quantum is a limited liability company incorporated
in the state of New Mexico, “engaged in, among other things,
the business of managing gas distribution businesses.” 1996
Agreement Recitals, C. Kewa Gas was chartered in 1996 by the
Tribal Council of the Pueblo for the purpose of “carry[ing] on
certain economic development activities on behalf of the Pueblo,
including . . . operation of a gasoline distribution business,”
Tribal Council Res. No. S.D. 08-96-18 (Aug. 14, 1996); at the
time of the Agreement it was registered as a distributor with the
New Mexico Tax and Revenue Department, 1996 Agreement
Recitals, A, B.
Under the terms of the Agreement, Quantum exercised
nearly exclusive control over Kewa Gas’s distribution business.
It supervised “the general operations . . . including the purchase,
marketing, sale and delivery of branded and unbranded gasoline
and special fuels,” and was to “[s]elect and train personnel,”
“[n]egotiate prices and coordinate deliveries,” “[m]aintain
proper and suitable records and books of account for” Kewa
Gas, and “provide for normal repairs, replacements, and
maintenance of equipment.” Agreement, § 1.2(a)–(c), (e), (g).
At a more general level, Quantum also “[d]evelop[ed] policies
for the purpose of maximizing net income from the operations.”
Id. § 1.2(d). The Agreement included a provision for capital
advances by Quantum for construction of physical assets
although for “any construction to expand the Gas Distribution
Business or . . . any capital expenditures costing in excess of
$10,000,” Kewa Gas’s approval was required. Id. § 1.3. In
return for the “day-to-day operation” of the business, Quantum
received an annual management fee of 49% of Kewa Gas’s “Net
4
Income,” payable monthly, a fee of $0.03 per gallon of gasoline
or diesel fuel sold to the Pueblo gas station, and a “performance
bonus” of $0.005 per gallon for every gallon of fuel sold in
excess of 1 million gallons per month. Id. §§ 2.1–2.3.
In addition to provisions for indemnification and settlement
of disputes through binding arbitration, the Agreement included
a non-compete clause. The Pueblo and Kewa Gas covenanted
not to have any interest in any other gas distribution business
within the State of New Mexico, except with respect to the retail
operation of the tribe’s Santo Domingo gas station (located
adjacent to I-25 at the N.M. State Highway 22 exit). Quantum
also agreed to a non-compete covenant, except for areas of the
State that Quantum and Kewa Gas determined could not be
economically serviced by Kewa Gas’s gas distribution business.
The initial term of the Agreement was for 10 years, with
Quantum having the option to renew it for two additional 10-
year terms, subject to a management fee of 44% in the first ten-
year extension and 39% in the second.
By means of the Agreement the parties were able to benefit
from a state tax exemption available to Indian Tribes. Kewa
Gas, which was 100% owned by the Pueblo, was not subject to
New Mexico’s gasoline and special fuel tax. Although Kewa
Gas was the distributor, and the incidence of the tax fell on the
distributor not the purchaser, the State had concluded that the
tax was preempted by federal law, exempting Kewa Gas from
the payment of taxes on the receipt and sale of gasoline and
special fuels to retail outlets in the State. See New Mexico
Taxation and Revenue Dep’t, Ruling No. 640-96-01 (Apr. 4,
1996) (citing Oklahoma Tax Comm’n v. Chickasaw Nation, 515
U.S. 450 (1995)). In 1999, the State replaced the exemption
with a tax deduction for Indian tribal distributors like Kewa Gas
for fuel sold from “a nonmobile storage container located within
. . . [the] reservation . . . for resale outside . . . [the] reservation”
5
not in excess of 2,500,000 gallons per month. N.M. Stat. Ann.
§ 7-13-4(f) (1999).
Restrictions on contracting with Indian Tribes have existed
since 1872. See S. REP. (COMM. INDIAN AFFAIRS) NO. 106-150
1, 7–8 (1999). At the time of the 1996 Agreement, section 81
provided in part:
No agreement shall be made by any person with any
tribe of Indians, . . . in consideration of services for
said Indians relative to their lands, . . . unless such
contract or agreement be executed and approved as
follows:
...
Second. It shall bear the approval of the Secretary of
the Interior and the Commissioner of Indian Affairs
indorsed upon it.
25 U.S.C. § 81 (1994) (emphases added). Congress amended
this provision in 2000 to provide, in relevant part:
No agreement or contract with an Indian tribe that
encumbers Indian 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.
25 U.S.C. § 81(b) (2000) (emphasis added). (For ease of
reference we henceforth refer to the former as “old § 81” and the
latter as “new § 81.”) The parties to this appeal stipulated that
the 1996 Agreement would not require Secretarial approval
under new § 81.
In 2003, after the Agreement had been operational for
several years, a new Governor of the Pueblo Tribal Council
advised the Bureau of Indian Affairs by letter that the 1996
6
Agreement had never been approved by the Secretary and that
the Agreement was “far too lucrative” for Quantum. The Acting
Regional Director determined that the Agreement was subject to
the Secretary’s approval under old § 81 and was not in the best
interests of the Pueblo due to the high fees Quantum received
under its terms; the Director declared the Agreement to have
“never been legally valid” under old § 81, the law in effect at the
time the parties entered the Agreement. Act’g. Reg’l Dir.
Decision at 5 (Oct. 23, 2003). Upon Quantum’s appeal, the
Board of Indian Appeals agreed that the Agreement was not
valid and that old § 81 applied, although it reached that
conclusion for different reasons. The Board concluded that
because the Agreement would have required Secretarial
approval under old § 81 to be valid but would be valid without
Secretarial approval under new § 81, applying new § 81 to the
1996 Agreement would have an impermissible retroactive effect
of “rendering valid an otherwise invalid contract” and so would
“alter the legal consequences of acts completed before New
Section 81 was enacted.” Quantum Entertainment Ltd. v. Acting
Sw. Reg’l Dir., Bureau of Indian Affairs, 44 IBIA 178, 192–93
(2007) (citing Landgraf, 511 U.S. at 269–70 & n.23).
Quantum challenged the Board’s decision in the district
court. The district court granted Quantum’s motion for
summary judgment in part and remanded the case to the Board
to explain the basis for its conclusion the Agreement was
invalid. Quantum Entertainment Ltd. v. U.S. Dep’t of Interior,
597 F. Supp. 2d 148, 156 (D.D.C. 2009). On remand the Board
reaffirmed its conclusion and expanded its reasoning. Quantum
Entertainment Ltd. v. Acting Sw. Reg’l Dir., Bureau of Indian
Affairs, 52 IBIA 289 (2010). Upon Quantum’s further
challenge, the district court granted summary judgment to the
Bureau of Indian Affairs. Quantum Entertainment Ltd. v. U.S.
Dep’t of Interior, 848 F. Supp. 2d 30, 32–33 (D.D.C. 2012).
7
II.
Questions of statutory retroactivity are resolved under the
two-part test established by the Supreme Court in Landgraf, 511
U.S. at 280. This test evolved from the Court’s clarification of
two lines of its precedent concerning the effect of intervening
changes in the law when a statute does not specify its temporal
reach. See id. at 264. “The first is the rule that ‘a court is to
apply the law in effect at the time it renders the decision.’” Id.(quoting Bradley v. School Bd. of Richmond, 416 U.S. 696, 711
(1974)). “The second is the axiom that ‘[r]etroactivity is not
favored in the law,’ and its interpretative corollary that
‘congressional enactments and administrative rules will not be
construed to have retroactive effect unless their language
requires this result.’” Id. (quoting Bowen v. Georgetown Univ.
Hosp., 488 U.S. 204, 208 (1988)). Before examining these
precedents, the Court in Landgraf observed that “retroactivity is
a matter on which judges tend to have ‘sound . . . instinct[s]’ and
familiar considerations of fair notice, reasonable reliance, and
settled expectations offer sound guidance.” Id. at 270 (internal
citation omitted). Ultimately, however, the Court settled on a
two-part test, instructing that:
When a case implicates a federal statute enacted
after the events in suit, the court’s first task is to
determine [1] whether Congress has expressly
prescribed the statute’s proper reach. If Congress has
done so, of course, there is no need to resort to judicial
default rules. When, however, the statute contains no
such express command, the court must determine [2]
whether the new statute would have retroactive effect,
i.e., whether it would impair 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. If the statute would
operate retroactively, our traditional presumption
8
teaches that it does not govern absent clear
congressional intent favoring such a result.
Id. at 280. In applying this test, the court owes no deference to
the Board’s retroactivity analysis under Chevron, U.S.A., Inc. v.
Natural Resources Defense Council, Inc., 467 U.S. 837 (1984).
See I.N.S. v. St. Cyr, 533 U.S. 289, 320 n.45 (2001); Arevalo v.
Ashcroft, 344 F.3d 1, 9–10 (1st Cir. 2003). Our review of the
grant of summary judgment is de novo, and “in a case like the
instant one, in which the district court reviewed an agency
action under the [Administrative Procedure Act],” this court
“review[s] the administrative action directly, according no
particular deference to the judgment of the district court.” Ass’n
of Private Sector Colls. & Univs. v. Duncan, 681 F.3d 426,
440–41 (D.C. Cir. 2012) (capitalization changed).
Under the first part of the Landgraf test, the court must
determine whether Congress has “express[ly] command[ed]”
that new § 81 apply retroactively. 511 U.S. at 280. Quantum
acknowledges that “[t]he text of New Section 81 . . . does not
explicitly extend the statute’s reach to contracts antedating the
statute’s enactment.” Appellant’s Br. at 24. Instead it urges the
court to focus on new § 81’s legislative history, which indicates
concern about the uncertainty that old § 81 created with regard
to existing contracts as well as the view that there was no longer
a need for Secretarial oversight. See id. at 24-25 (citing S. REP.
NO. 106-150 at *7–*8). Those contracts were vulnerable to qui
tam actions challenging their validity absent Secretarial approval
even after the parties had determined such approval was not
necessary. See id. (citing S. REP. NO. 106-150 at *7).
The legislative histories of new § 81 and old § 81 reveal
that they had different purposes. The 1999 Report of the Senate
Committee on Indian Affairs included the statement that the
paternalistic foundations on which old § 81 rested were no
longer justified as a basis for federal policy. See S. REP. NO.
9
106-150 at 7–8. In its opinion on remand the Board also
examined the legislative history of old § 81 and the resulting
case law, acknowledging that “paternalism, [the] guardian-ward
relationship between the United States and tribal Indians, and
the view that tribes and non-citizen Indians were incompetent to
independently handle their business affairs” provided the
historical context for Congress’s enactment of old § 81.
Quantum, 52 IBIA at 309. The enactment of new § 81 marked
a move away from the concerns underlying old § 81.
Neither Quantum’s nor the Board’s review of the legislative
history, however, reveals that Congress intended new § 81 to
apply retroactively to preexisting agreements. At best, Quantum
has identified statements in the Senate Report that are more
probative of a concern with the need to repeal old § 81 than with
the temporal reach of its amendment. Even assuming a
committee report would be sufficient evidence of an “express
command” by Congress, none appears in the Senate Report here.
Quantum’s cited judicial authority is also of no assistance to it;
the cases track objections to “the paternalistic concern of a
bygone era” while acknowledging that until Congress acts the
courts are bound to apply old § 81. See, e.g., U.S. ex rel. Crow
Creek Sioux Tribe v. Hattum Family Farms, 102 F. Supp. 2d
1154, 1163 (D.S.D. 2000) (quoting U.S. ex rel. Hall v. Tribal
Dev. Corp., 49 F.3d 1208, 1218 (7th Cir. 1995) (Flaum, J.,
concurring). Absent an express prescription by Congress that
new § 81 applies to existing agreements, we turn to the second
part of the Landgraf test.
Under part two of Landgraf’s test, a court must hold that the
application of a new statute is impermissibly retroactive only if
it would “impair rights a party possessed when [it] 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. To establish a baseline against
which to evaluate any shifts in rights, liabilities, or duties that
10
might arise under new § 81, the Board looked to whether old
§ 81 imposed obligations on the parties when they entered the
1996 Agreement and how those obligations affected the validity
of the Agreement. The Board concluded, as we do, that the
Agreement required Secretarial approval when the parties
entered into it and consequently new § 81 would attach new
legal consequences to the Agreement between Quantum, the
Pueblo, and Kewa Gas, by removing the impediment to its
validity — i.e., the need for Secretarial approval. The Board
explained:
Under Old Section 81, there were no legal
consequences whatsoever that attached to an Indian
tribe through its execution of an agreement that fell
within the scope of the statute, unless and until it was
approved by the Secretary. To declare that New
Section 81 retroactively renders valid and enforceable
agreements that otherwise would remain null and void
under Old Section 81 for lack of Secretarial approval
would have the effect of imposing contractual
obligations and liability on tribes (in this case on the
Pueblo and Kewa) where no such obligations or
liability had previous legal existence.
Quantum, 52 IBIA at 293. In the Board’s view, applying new
§ 81 to validate an agreement that would have been null and
void under old § 81 would have an impermissible retroactive
effect.
For a different conclusion, Quantum relies on McNair v.
Knott, 302 U.S. 369 (1937), and Ewell v. Daggs, 108 U.S. 143(1883), as the “[c]ontrolling law,” Appellant’s Br. 26.1 In
1
The court requested post-argument briefing on the effect of
1 U.S.C. § 109, see Landgraf, 511 U.S. at 271, as a result of a question
11
McNair, 302 U.S. at 372–74, the Supreme Court held that a
federal statute had validated an ultra vires pledge agreement by
a Florida bank to secure public deposits despite the agreement
having been made prior to enactment of the statute. And in
Ewell, 108 U.S. at 148–149, 151, the Court held that a provision
of the Texas Constitution repealing an anti-usury law had
revived the obligations arising under a promissory note, which
had been void because of its usurious interest rate. In Ewell, the
Court drew a distinction between contracts that were “absolutely
a nullity” and those that were “voidable merely,” concluding
that the usurious contract was only voidable because it was not
malum in se and therefore could be resurrected by a subsequent
statute. Id. at 149–150. To Quantum these cases establish an
exception to the presumption against retroactivity because the
enforcement of contracts like those in McNair and Ewell and the
1996 Agreement “creates no new legal obligations” — i.e., “it
imposes nothing more than the liability inherent in the
contract[s] [themselves], which the complainant[s] fully
intended to incur.” Appellant’s Br. at 29 (internal quotation
marks, citation, and alterations omitted).
Reliance on these cases is misplaced. First, old § 81 was
enacted in a particular historical context oriented towards
different concerns than those at issue in McNair and Ewell. Old
§ 81 was focused on ensuring the legal incapacity of the Indian
tribes to contract on matters relative to their lands, a limitation
informed by the belief that they were unable to resist the
schemes of unscrupulous non-Indians seeking to swindle them
out of their patrimony. See S. REP. NO. 106-150 at 7–8; see also
raised by the court during oral argument. Neither the Interior
Department nor the United States relied on this provision in the course
of the administrative and judicial proceedings. See U.S. Dep’t of
Justice letter to the Clerk, Feb. 20, 2013 at 4. We consider the issue
waived. See Coburn v. McHugh, 679 F.3d 924, 930 (D.C. Cir. 2012);
Potter v. District of Columbia, 558 F.3d 542, 547 (D.C. Cir. 2009).
12
FELIX S. COHEN, HANDBOOK OF FEDERAL INDIAN LAW 77
(1942). This notion of contracting incapacity emerged from a
history of shameful misdeeds on the part of those dealing with
Indian tribes that the limitations at issue in McNair and Ewell do
not share. For this reason, the Ewell Court might have viewed
an agreement entered into in violation of old § 81 “absolutely a
nullity, in the sense that no right or claim can be derived from”
it, rather than “voidable merely,” and thus capable of being
resurrected by a later statute. Ewell, 108 U.S. at 149.
Second, and more significantly, McNair and Ewell pre-date
Landgraf and applied a different test for determining statutory
retroactivity. In Landgraf, 511 U.S. 244, the Supreme Court’s
comprehensive examination of its prior cases did not result in a
test that recognized an exception to the presumption against
retroactivity where a new statute would, if applied to preexisting
agreements, create new legal duties and obligations. But
McNair and Ewell accepted just that: legally unenforceable
agreements were transformed into valid ones that imposed
previously non-existent obligations on the contracting parties.
The Court’s distinction in Ewell between contracts that are
“absolutely a nullity” and those that are “voidable merely,” as
well as its endorsement of a presumption of retroactive
application of the repeal of anti-usury laws, Ewell, 108 U.S. at
149, conflicts with the two-part test established in Landgraf.
Under the Ewell framework, new legal consequences generated
by a retrospective law repealing penal statutes of the kind in that
case are not problematic. Id. at 150. Similarly, under McNair,
302 U.S. at 372, “validat[ing] transactions that were previously
illegal” is also unproblematic. Under Landgraf this is not so,
and Landgraf, not McNair nor Ewell, provides the controlling
retroactivity test.
Under Landgraf, the application of new § 81 to the 1996
Agreement is impermissible because it would “increase [the
Pueblo’s] liability for past conduct” and “impose new duties
13
with respect to transactions already completed.” Landgraf, 511
U.S. at 280. That is, application of new § 81 would create “legal
consequences” different from those that would result from
application of old § 81. Under old § 81, the Agreement would
be “void ab initio as a matter of law in the absence of Secretarial
approval,” Quantum, 55 IBIA at 316, and because applying new
§ 81 would transform the Agreement from void to valid, the
presumption against retroactive legislation precluded the Board
from applying new § 81 to the Agreement, id. at 293, 317.
To the extent considerations of fair notice, reasonable
reliance, and settled expectations remain relevant to the
retroactivity analysis, see Martin v. Hadix, 527 U.S. 343,
357–58 (1999), the plain text of old § 81 is addressed to “any
person” and gives fair warning of the risk for “any person,”
such as Quantum, who fails to obtain Secretarial approval. See
A.K. Mgmt. Co. v. San Manuel Band of Mission Indians, 789
F.2d 785, 788 (9th Cir. 1986). Those who entered agreements
with Indian tribes while old § 81 was in force without seeking
Secretarial approval were on notice that such agreements could
at a later date be deemed void ab initio. Most emphatically old
§ 81 warned that “[a]ll 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 Indian or
tribe . . . may be recovered by suit in the name of the United
States . . . .” 25 U.S.C. § 81 (1994). United States ex rel. Hall
v. Tribal Development Corp., 49 F.3d 1208 (7th Cir. 1995), is
illustrative of such qui tam litigation.
Concerns about unfairness that may arise from a retroactive
determination that the 1996 Agreement was void ab initio are
ameliorated by the possibility that Quantum may recover in
quantum meruit, a question the Board did not resolve, see
Quantum, 44 IBIA at 179. The Board concluded that the issue
was not ripe and noted that none of the parties had addressed
whether the Secretary’s quantum meruit authority survived the
14
amendment of old § 81 in 2000. Id. at 207 & n.24. The Board
observed, however, that if Quantum were to request the
Regional Director to exercise the Secretary’s quantum meruit
authority under old § 81, then the Director would “have an
opportunity to consider the exercise of such authority and to
consider [Quantum’s] views concerning the appropriateness of
quantum meruit relief.” Id.; see also Quantum, 52 IBIA at 290
n.2. The parties have not briefed this question and we venture
no opinion on it.
III.
Our retroactivity analysis assumed that old § 81 requires
that the 1996 Agreement receive Secretarial approval. Quantum
contends, however, that Secretarial approval was not required
under old § 81 because the Agreement was neither “with a[]
tribe of Indians” nor “relative to their lands.” The Board’s
interpretation of ambiguity in old § 81 is entitled to deference
under Chevron, 467 U.S. at 843. This interpretation is also
consistent with the Indian law canon of construction, cf. Cobell
v. Salazar, 573 F.3d 808, 812 (D.C. Cir. 2009), because it
dovetails with the Indian-protective goals of old § 81. The
Board’s assessment of the connection between the “facts found
and the choice made” is reviewed under the “very deferential”
arbitrary and capricious review standard. Rural Cellular Ass’n
v. F.C.C., 588 F.3d 1095, 1105 (D.C. Cir. 2009).
A.
The Board concluded that the Pueblo was a party to the
1996 Agreement and thus that the Agreement was “with a ‘tribe
of Indians’” within the meaning of old § 81. Quantum, 44 IBIA
at 198; see Quantum, 52 IBIA at 292. The preamble to the
Agreement identifies the parties as Quantum “on the one hand”
and the Pueblo and Kewa Gas “on the other hand.” Section 9.9
of the Agreement provides that it “may not be modified or
amended except in writing signed by both parties.” (emphasis
15
added). The Board interpreted these provisions to mean that the
Agreement was between two parties, treating “the Pueblo and
Kewa as a single contracting unit.” Quantum, 44 IBIA at 197.
The Board also concluded that the Pueblo’s 100% ownership of
Kewa Gas’s stock “denoting its complete and exclusive control
over and interest in Kewa at the time the Agreement was
signed” bolstered the conclusion that, “despite [the Pueblo’s and
Kewa Gas’s] distinct roles and obligations . . . , the evidence on
the face of the Agreement indicates that . . . [they] are treated
collectively as a single ‘party.’” Id.
Quantum views the distinct roles of the Pueblo and Kewa
Gas as determinative, and it contends that the Board’s failure to
disaggregate them so the obligations that run between Quantum
and Kewa Gas survive even if those between Quantum and the
Pueblo are null and void is arbitrary and capricious. To
emphasize the distinct legal personalities of the Pueblo and
Kewa Gas, Quantum cites a New Mexico Supreme Court
decision noting that corporate status is a legal identity separate
and distinct from that of a corporation’s shareholders.
Appellant’s Br. at 52 (citing Scott v. AZL Res., Inc., 753 P.2d
897, 900 (N.M. 1988)). Quantum suggests that the
Agreement’s references to “both parties” and other similar
language is equally consistent with the conclusion that Kewa
Gas was the principal contracting party in a three-party
agreement in which the Pueblo’s inclusion was incidental,
pointing to phrases such as “[Kewa Gas] hereby engages
[Quantum] to manage, supervise, and operate [Kewa’s] Gas
Distribution Business” and to the separate signatures of the
Pueblo and Kewa Gas on the Agreement as denoting their
separate legal identities. Id. at 52–53. In Quantum’s view, the
Pueblo is simply a “nominal party” to the Agreement, having
“undert[aken] almost no obligations of its own” insofar as the
single promise it made, not to compete, “was an easy promise
to keep, given that the Pueblo was Kewa [Gas]’s sole
shareholder . . . .” Id. at 53–54. Viewing the Pueblo’s inclusion
16
in the Agreement a “mere afterthought,” id. at 52, Quantum
maintains that the analysis in Inecon Agricorporation v. Tribal
Farms, Inc., 656 F.2d 498, 501 (9th Cir. 1981), should apply so
that the portions of the Agreement that run between Quantum
and Kewa Gas survive even if those between Quantum and the
Pueblo do not.
The Board’s conclusion that the Agreement was with the
Pueblo is neither contrary to the plain meaning of old § 81 nor
arbitrary and capricious. In context, the Agreement is
reasonably interpreted as grouping the Pueblo and Kewa Gas
together as a single party, given that the text of the Agreement
is itself so structured. See Quantum, 44 IBIA at 196–97.
Notably as well, the Agreement subjected the Pueblo to a non-
compete covenant that imposed a real and specific duty on the
Pueblo as a signatory. In Inecon, 656 F.2d at 501, the Ninth
Circuit recognized the contractual obligations between a tribal
corporation and a non-Indian third party despite the “contractual
incapacity of the Tribe,” which was also a signatory to the
Agreement. But the contract in Inecon imposed only a vague
duty of non-interference, giving the Tribe a “limited role.” id.By contrast, the Pueblo’s duty under the non-compete covenant
in the 1996 Agreement was neither vague nor insubstantial.
Quantum’s assertion that the covenant requires no more of the
Pueblo than that it protect its own interests by abstaining from
involvement in other gas distribution businesses is speculative.
The record hardly negates the possibility that, absent the
covenant, the Pueblo could involve itself in the gas distribution
business in New Mexico markets beyond those in which Kewa
Gas operates; neither does it foreclose other possible
collaborations that might be damaging to Quantum’s economic
interests while benefitting the Pueblo.
Cf. Quantum, 52 IBIA at 309.
17
B.
The Board, upon reviewing the legislative history of old
§ 81 and the case law interpreting it, concluded that the phrase
“relative to [Indian] lands” was indefinite and broad but not
ambiguous, bringing any agreement “relating to, necessarily
connected with, or dependent upon the tribes’ lands” within the
scope of old § 81. Quantum, 52 IBIA at 308. Alternatively,
assuming “relative to” was ambiguous, the Board concluded
that the phrase should be given broad effect in light of “the
historical context of paternalism” underlying old § 81’s
enactment and its legislative history, which did not suggest that
the enacting Congress had any “intent to limit the relative-to-
their-lands language only to agreements that conferred upon the
non-Indian party the incidents of ownership of land.” Id. at 309.
The Board applied “the cardinal rule,” id. at 307, that “until
Congress repeals or amends a statute intended to protect
Indians, we must give it a sweep as broad as its language and
interpret it in light of the Congress that enacted it.” Id. (quoting
Cent. Mach. Co. v. Ariz. State Tax Comm’n, 448 U.S. 160, 166
(1980) (internal quotation marks and alterations omitted)).
The Board offered two rationales for concluding that the
1996 Agreement was “relative to [Indian] lands.” First, it
found that the “value of the Agreement, and the consideration
to Quantum for its services” was derived from the tax benefits
conferred by the business’s location on Pueblo land, and that
because the non-compete clause “limited the right of the Pueblo
and Kewa [Gas] to derive that same value on other Pueblo lands
without Quantum’s consent,” the Agreement was relative to
their lands. Id. at 310. Second, applying a slightly modified
version of the four-factor analysis in Altheimer & Gray v. Sioux
Mfg. Corp., 983 F.2d 803, 811 (7th Cir. 1993),2 the Board
2
In Altheimer, 983 F.2d at 811, the Seventh Circuit identified
four criteria it found in the case law for interpreting the phrase
18
found: (1) the Agreement related to the management of a
facility on the Pueblo’s land; (2) Quantum exercised nearly
exclusive control over the gas distribution business; (3) the non-
compete clause restricted the Pueblo’s use of its lands for
purposes of competing in the gas distribution business in the
State (somewhat like a negative easement); and (4) the tax
benefit derived from the Pueblo’s sovereign status was essential
to the business’s existence because absent the Tribe’s legal
sovereignty the tax benefit would not have accrued to it and
returns for Quantum on the distribution business would have
been significantly less. Quantum, 52 IBIA at 311–314 & n.19.
Quantum protests that the Board’s loose application of the
Altheimer factors, including its recognition of the adequacy of
nearly exclusive, as opposed to exclusive, control under the
modified test and its analogy between the non-compete
provision and a negative easement, so twisted the Seventh
Circuit’s opinion as to make the Board’s decision contrary to
law. The Board is not bound to follow the Seventh Circuit’s
test and concluded that approach did not “encompass[] the outer
limits of what the 41st Congress meant by the phrase ‘relative
to’ Indian lands.” Id. at 310. Its interpretation of the
ambiguous phrase “relative to” is entitled to Chevron deference.
“relative to [Indian] lands” as it relates to contracts between a tribe of
Indians and non-Indian third parties:
(1) Does the contract relate to the management of a facility to
be located on Indian lands? (2) If so, does the non-Indian
party have the exclusive right to operate that facility? (3) Are
the Indians forbidden from encumbering the property? (4)
Does the operation of the facility depend on the legal status of
an Indian tribe being a separate sovereign?
Id. The court cautioned that “none of the above factors are the ‘sine
qua non’ of a contract which relates to Indian lands.” Id.
19
The Board’s factual findings are virtually undisputed. To the
extent that Quantum contests the significance of the non-
compete provision and the relation between the Pueblo’s tribal
sovereignty and the tax benefits accorded to Kewa Gas, its
arguments are unpersuasive. Furthermore, Green v. Menominee
Tribe of Indians in Wisconsin, 233 U.S. 558, 569 (1914), lends
support to the Board’s interpretation, for in that case the
Supreme Court held that a contract regarding the provision of
logging equipment to an Indian tribe for use on their lands was
sufficient to trigger the involvement of the Secretary under an
earlier version of old § 81. Given the tenuous connection of
that transaction to Indian lands and the fact that large fuel
storage containers used in the gasoline distribution business
under the 1996 Agreement were physically on the Pueblo’s
lands, the Board’s conclusion that old § 81 applied was at least
within the outer limits of a permissible interpretation of the
ambiguous phrase, “relative to [Indian] lands.”
Accordingly, we affirm the grant of summary judgment.