by Bill Lawrence and Clara NiiSka

On May 29, 2001, the U.S. Supreme Court ruled that the Navajo’s imposition of a hotel occupancy tax upon nonmembers on non-Indian fee land within its reservation is invalid.  The decision in Atkinson Trading Co. v. Joe Shirley, Jr., et al., is the Supreme Court’s second unanimous decision limiting tribal sovereignty within a month—on April 30 they ruled in C&L Enterprises v. Citizen Potawatomi Nation to limit tribal sovereign immunity in a case arising from an off-reservation construction project.

This week’s case, Atkinson v. Shirley, arose from the taxation, under the 1995 Navajo tribal code §§ 101-142, of hotel guests at the Cameron Trading Post, a white-owned hotel, restaurant, and tourist complex on fee-patent land near the intersection of Arizona Highway 64 (which leads west to the Grand Canyon) and U.S. Highway 89.  Many of the hotel’s guests are tourists enroute to the Grand Canyon; the non-Navajo guests paid approximately $84,000 in Navajo hotel taxes annually.  The complex is located within the exterior boundaries of the Navajo reservation.

In an opinion written by Chief Justice William Rehnquist, and supported by a brief concurrence by Justices David Souter, Anthony M. Kennedy and Clarence Thomas, the Supreme Court addressed the Navajo’s taxation of non-members on fee-patent land largely in terms of the legal structure created by that court’s 1981 decision in Montana v. United States.  In Montana, the court found that Indian tribes’ “power over nonmembers on non-Indian fee land is sharply circumscribed.”  Tribal jurisdiction over nonmembers on fee-patent land was constrained to the two exceptions delineated in Montana: (1) “consensual relationships” with the tribe or its members stemming from commercial dealing, contracts or leases; and (2) civil authority over non-Indians on fee lands within the reservation when those non-members’ “conduct threatens or has some direct effect on the tribe’s political integrity, economic security, or health or welfare.”  In Atkinson, the Supreme Court held that “neither of Montana’s exceptions” warranted the Navajo’s imposition of a hotel occupancy tax on non-member guests at the Cameron Trading Post, and that Montana “grants tribes nothing beyond what is necessary to protect tribal self-government or control internal relations.”

The United States initially asserted jurisdiction over the Navajo “by virtue of a treaty” signed on February 2, 1848 between the United States and Mexico, generally known as the Treaty of Guadalupe Hidalgo.  The next year, the first of two treaties was signed between the Navajo and the U.S.; article VII of the 1849 “Treaty with the Navajo” provided for the “free and safe passage” of the ‘people of the U.S.’ through Navajo territory.  That 1849 treaty also affirmed U.S. assertion of jurisdiction over the Navajo.  The second treaty with the Navajo, signed in 1868, set boundaries for the Navajo reservation, provided for allotment of the reservation, and included several articles in which the U.S. asserted aspects of both civil and criminal jurisdiction over the Navajo and their reservation.

The Cameron Trading Post was built in 1916 by white trader Hubert Richardson on land he purchased “directly from the United States.”  That land, “just south of the Little Colorado River near Cameron, Arizona,” was not within the boundaries of the Navajo reservation as established under the 1868 treaty.  The Navajo reservation was extended southward in 1934 under the provisions of the Indian Reorganization Act.  The boundaries of the Navajo reservation as expanded by the 1934 I.R.A. boundaries embraced the Cameron Trading Post.

The Supreme Court wrote in Montana that it “defied common sense to suppose that Congress would intend that non-Indians purchasing allotted lands would become subject to tribal jurisdiction”; the court reasserted this philosophy in Atkinson v. Shirley, detailed the legal history of its position that “Indian tribes have lost many of the attributes of sovereignty,” and wrote that “the civil authority of Indian tribes and their courts with respect to non-Indian fee lands generally ‘does not extend to the activities of nonmembers of the tribe’.”

Several Amici Curiae (“Friends of the Court”) briefs were filed in Atkinson v. Shirley.  One such Amici brief was filed by: the Assiniboine and Sioux Tribes of the Fort Peck Indian Reservation, Confederated Tribes of the Colville Reservation, Lac du Flambeau Band of the Lake Superior Chippewa, and St. Croix Chippewa Indians of Wisconsin, in support of the Navajo.  A second was filed by: Confederated Tribes of the Umatilla Indian Reservation, Three Affiliated Tribes of the Fort Berthold Reservation, Menominee Tribe of Wisconsin, Pueblo of Pojoaque, Salt River Pima Maricopa Indian Community, Manzanita Band of Mission Indians, and Seminole Tribe of Florida, also in support of the Navajo. A third was filed by: the Shakopee Mdewakanton Sioux (Dakota) Community, the Spirit Lake Tribe, the Sisseton-Wahpeton Sioux Tribe, the Grand Portage Band of Chippewa, and the Sac & Fox Tribe of the Mississippi in Iowa, in support of the Navajo.  A fourth Amici brief was filed by Acting Solictor Barbara Underwood, Acting Assistant Attorney General John Cruden, Deputy Solicitor Edwin Kneedler, Assistant to the Solicitor General Edward Dumont, and the U.S. Department of Justice—in support of the Navajo.

The Amici briefs generally stressed the position that “the power to tax is essential to self-government.”  As the Justice Department put it, restricting tribal powers of taxation “relegates tribes to little more than private, voluntary organizations.”  The Justice Department also wrote, citing Duro v. Reina, that “denial of the right to participate in the political process has never been construed to wholly divest the exercise of sovereignty over the excluded class.”  In their Amici brief, the Umatilla, et al., addressed the question of U.S. Constitutional protections of due process underlying the question of taxation in Atkinson v. Shirley by claiming that the Supreme Court “has already found applicable a broad tribal right to tax … regardless of taxpayer representation in tribal government,” and noted that, “many tribal governments allow non-members to appear at hearings and other governmental proceedings …”

The Amici generally stressed the “advantages of civilized society that are assured by the existence of tribal government” (quoting the Merion v. Jicarilla Apache Tribe, 1982), and the potential availability of tribal government services to tourists staying at the Cameron Trading Post, and argued that the hotel tax was “consensual” because the hotel’s patrons voluntarily entered the Navajo reservation.

Counsel for the Atkinson Trading Company responded with their own interpretation of Montana, stressing the “general proposition that the inherent powers of an Indian tribe do not extend to activities of nonmembers of the tribe.”  Atkinson’s attorneys noted that, “federal and state governments are constrained by a constitutional framework that mandates equal voting rights and equal protection of the laws.”  Their objections to the Navajo’s exercise of tribal sovereignty over non-members—“most generally … tribes do not permit the kind of full and democratic participation of all citizens on an equal basis that is the predicate for the recognition of full sovereignty within our constitutional framework”—was bolstered by a quotation from Duro: “it is significant that the Bill of Rights does not apply to Indian tribal governments.”

Atkinson’s attorneys countered the Navajo and their Amici’s contention that the hotel tax supported “civilized society … assured by the existence of tribal government” with the observation that “more than $174,000,000 (or nearly 62%) of the Navajo Nation’s funding came from federal and state/private funding … it is thus hard to conclude that nonmembers do not pay their fair share of tribal expenses.”

The Supreme Court found that—despite the “advantages of a civilized society that are assured by the existence of tribal government” (quoting from Exxon Corp. v. Department of Revenue of Wisconsin)—the Navajos could not tax the hotel guests at the Cameron Trading Post in order to provide them with the advantages of civilization.  As the Court put it, “an Indian tribe’s sovereign power to tax—whatever its derivation—reaches no further than tribal land.”  In Atkinson, the court has again ‘pierced the veil of tribal sovereignty,’ finding—as they did in Duro eleven years ago—that “only full territorial sovereigns enjoy the ‘power to enforce laws against all who come within the sovereign’s territory, whether citizens or aliens’ and Indian tribes ‘can no longer be described as sovereigns in this sense’.”

The full text of the Supreme Court’s decision in Atkinson v. Shirley is available on the Supreme Court’s website: http://www.supremecourtus.gov.