Good morning Chairman Campbell, Vice-Chairman Inouye, and distinguished members of the Committee. It is an honor to be invited to provide testimony before the Senate Committee on Indian Affairs. I am W. Ron Allen, Chairman of the Jamestown S'Klallam Tribe and President of the National Congress of American Indians (NCAI). As the oldest and largest national Indian advocacy organization in the United States, the NCAI is dedicated to advocating on behalf of our member tribal governments on a myriad of issues, including the issue of tribal government sovereign immunity. The specific focus of today's hearing is on tribal government immunity for contract claims and for state retail sales taxes, but for purposes of the record, I would like to briefly review the context in which today's hearing takes place.

Tribal governments and their supporters in Congress joined efforts in the first session of the 105^th Congress to defeat a series of budget riders intended to limit tribal government sovereign rights. The most dangerous of these riders was a provision included by Senator Slade Gorton, Chairman of the Senate Interior Appropriations Subcommittee, in his chairman's mark of the fiscal year 1998 Interior appropriations bill (H.R. 2107). This provision, Section 120, would have (1) required Indian tribal governments to waive all sovereign immunity against suit as a condition of receiving federal funds and (2) authorized actions against tribal governments to be heard in federal courts rather than tribal courts. This proposal to force tribes into an unlimited waiver of their sovereign immunity and remove tribal court jurisdiction would have put tribal self-governance at extreme risk. Tribal government executives, legislators and judges would have been subject to immense lawsuits, whether they acted or failed to act, and tribal courts would have been rendered irrelevant. No government, include the federal and state governments, could long operate under these conditions.

The efforts of tribal governments and their supporters to defeat this rider won the support of the majority of the Senate and Senator Gorton agreed to an amendment to the Interior Appropriations bill that would remove Section 120. However, as a part of the agreement Chairman Campbell committed to hold hearings on tribal sovereign immunity. The hearing that the Committee is holding today, along with the two upcoming field hearings, will fulfill that commitment.

At the time this agreement was made, Senator Gorton also indicated that he would introduce a bill addressing tribal sovereign immunity. On February 27, 1998, Senator Gorton introduced S. 1691, the "American Indian Equal Justice Act." Although more detailed in its mechanisms, the bill is similar in scope to Section 120. S. 1691 contains extremely broad waivers of tribal sovereign immunity and would subject tribal governments to virtually any type of law suit in both federal and state courts. Indeed we find it ironic that Senator Gorton is an advocate of capping damages claims, yet would propose to expose tribal governments to unlimited damages claims. Like Section 120, S. 1691 would make it nearly impossible for tribal governments to carry out basic governmental functions and would jeopardize the resources and future of tribal governments.

In NCAI's view, the proponents of S. 120 and S. 1691 have engaged in a campaign of misinformation against tribal self-determination. Relying on slanted anecdotes and broad unsupported generalizations about the "unfairness" of tribal sovereign immunity and tribal courts, the sponsors have played upon the common misunderstandings about tribal governments. There is inadequate understanding in the general public and in Congress that an Indian tribe is a form of government recognized in the U.S. Constitution and hundreds of treaties, court decisions and federal laws. There is inadequate understanding that tribal governments provide the basic governmental functions such as law enforcement, justice, and education on Indian lands throughout this country. There is inadequate understanding that the vast majority of tribal governments are modern, democratic, fair and as deserving of respect as any other form of government.

This general lack of understanding about tribal governments could also result in a failure to recognize that Section 120 and S. 1691, while cloaked in words of fairness, are designed to render Indian tribes impotent to protect their lands, resources, cultures and future generations and extinguish hundreds of years of federal Indian policy that protects tribal self-government. As Felix Cohen observed, "confusion and ignorance in fields of law are allies of despotism."

As a result, NCAI would like to extend its sincere thanks to the Chairman and Vice-Chairman and many other members of the Committee for this hearing and their efforts to understand and convey the message of tribal self-governance. The information following and other testimony will clearly show that tribal governments exercise a form of sovereign immunity that is similar in scope to the immunity exercised by state, federal and local governments. Parties who may be harmed by tribal government activities do have an opportunity to be compensated and to have their case heard by a competent tribal judge. Like other forms of government, tribal governments are not perfect, but any solutions should be based on careful study of the true circumstances and guided by the principle that it is the federal government's role to protect tribal self-government. NCAI is looking forward to engaging in that process with the Committee.
 

Governmental immunity from suit is an inherent right of all governments, including the federal, state and tribal governments, for reasons of sound public policy. The purpose served by this policy is to provide special protection against loss of assets held in common for many people for the performance of vital government functions. Since 1946, the federal government, most states and many tribes have provided limited waivers of sovereign immunity that allow these governments to be sued when the government functions in the same manner as a private individual, such as when a government employee gets in a car accident. However, the federal government, states and tribes have retained sovereign immunity in broad areas in order to protect governmental functions from lawsuits and limit the size of damages claims.

• Sovereign Immunity of the Federal Government

Under these statutes, the federal government has retained its rights to sovereign immunity in broad areas, including those functions that are inherently "governmental." For instance, a postal consumer may not collect damages from the U.S. Postal Service for failure to deliver mail;⁽³⁾ and a federal agency may not be sued for a procedural error in promulgating regulations.⁽⁴⁾ In addition, the judicial and legislative functions are specifically protected from lawsuits. The prohibition on punitive damages also provides a significant limitation on the size of awards.

• Sovereign Immunity of State and Local Governments

Many, but not all, state governments have passed statutes similar to the FTCA that provide limited waivers of immunity, but provide limitations on damages and retain state immunity for governmental functions. Along with the prohibition on punitive damages, a growing trend is for state governments to impose a ceiling on the amount of recoverable damages. Although the dollar amounts vary, many states have adopted a cap of $100,000 for injuries arising from a single occurrence.⁽⁷⁾ Some states set lower caps for property damage claims.⁽⁸⁾ In at least two states, Massachusetts and Texas, there are no general statutory waivers. Instead, the state legislature considers each application for waiver on a case-by-case basis. Local and municipal governments also retain sovereign immunity subject to state law. In general, most states have passed laws which retain the governmental function immunity of local and municipal governments.⁽⁹⁾

In Bogan v. Scott-Harris, on March 3, 1998, the United States Supreme Court upheld absolute immunity from civil liability for local legislators engaged in legislative activities. Bogan unanimously affirms that federal, state and local officials often have absolute immunity from lawsuits. Bogan also illustrates the error of the proposed finding in S. 1691's Section 1(b)(5) that only tribes maintain the full scope of immunity from lawsuits. As the Court notes "officers of a municipal corporation [as well as other legislators] . . . invested with legislative powers . . . are exempt from individual liability for the passage of any ordinance within their authority, and their motives in reference thereto will not be inquired into." Furthermore, the Court points out that States and the federal government are "often protected by sovereign immunity" even for constitutional violations.

• Sovereign Immunity of Tribal Governments

Tribes and tribal officials also are subject to suit under various exceptions to tribal sovereign immunity recognized by the courts. For example, courts have applied the Ex Parte Young doctrine to tribal officials.⁽¹³⁾ This doctrine creates an exception to the general rule of sovereign immunity when an official acts outside of the government's authority. Tribal sovereign immunity also has been limited by various courts where allegations of personal restraint and deprivation of personal rights were raised.⁽¹⁴⁾ In addition, pursuant to federal law, Indian tribes, contractors and employees are deemed to be agents of the federal government for the purposes of the FTCA when a tribal government program operates with federal dollars.⁽¹⁵⁾

Tribal governments dealing in commercial contexts routinely agree to include limited immunity waivers in contracts, including bonding and insurance requirements. Negotiation of these limited waivers is a widely-practiced prerequisite to contracting with tribal governments. In addition, many tribes have specifically waived sovereign immunity for tribal businesses incorporated pursuant to the Indian Reorganization Act.⁽¹⁶⁾

• Conclusion

The discussion above illustrates that tribes are certainly not protected by an impermeable shield of sovereign immunity, but like the federal government and states, assert limited immunity. Senator Gorton's proposal to completely waive tribal sovereign immunity would place the governmental authority of tribes at extreme risk.
 

The treatment of state and local taxes on Indian lands has been effectively handled at the tribal-state level for many years because the states currently have adequate legal remedies to pursue in collecting taxes on sales to non-tribal members that occur on Indian lands. According to a report issued by the Arizona Legislative Council,⁽¹⁷⁾ there are a number of "alternative taxation methods" now employed by states and tribes that provide for the collection of retail taxes on sales involving non-members. As the report makes clear, more than 200 tribes in 18 states have created successful state-tribal compacts that are now in force and are mutually satisfactory to both parties.

In Moe v. Confederated Salish and Kootenai Tribes, 425 U.S. 463 (1976), and subsequent cases, the United States Supreme Court has held that tribes are required to collect sales taxes on non-Indian purchases of imported goods in certain situations. The Supreme Court has detailed the remedies available to a state in the event that it cannot reach an agreement with a tribe for the collection of retail sales taxes. In Oklahoma Tax Commission v. Citizen Band of Potawatomi, 498 U.S. 505 (1991), the Court identified a number of ways that a state can collect a lawfully imposed tax:

There is no doubt that sovereign immunity bars the state from pursuing the most efficient remedy, but we are not persuaded that it lacks any adequate alternatives. We have never held that individual agents or officers of a tribe are not liable for damages in actions by the state. And under today's decision, states may of course collect the sales tax from cigarette wholesalers, either by seizing unstamped cigarettes off the reservation, or by assessing wholesalers who supplied unstamped cigarettes to tribal stores. States may also enter into agreements with the tribes to adopt a mutually satisfactory regime for the collection of this sort of tax.

The Court's recent decision in Bogan also shows that an immunity waiver for collection of state taxes, such as Section 3 of S. 1691, is unnecessary. In Bogan, the Supreme Court reaffirmed Amy v. Supervisors, 11 Wall. 136 (1871), in which local legislators were held liable for violating a court order to levy a tax sufficient to pay a judgment because the court order had created a ministerial duty. The Court said there, "[t]he rule is well settled that where the law requires absolutely a ministerial act to be done by a public officer, and he neglects or refuses to do such act, he may be compelled to respond in damages to the extent of the injury arising from his conduct." Id. at 138. After Bogan, it is clear that tribal immunity need not be abolished simply to help states enforce the requirements that tribal agents and officials create records and collect certain taxes lawfully imposed by the states on non-members purchasing imported goods on Indian reservations. Section 3 of S. 1691 would propose to solve a problem that has not existed since 1871.

Much of the attention to this issue of tribal collection of state retail sales taxes has arisen in the wake of the Supreme Court's decision in Oklahoma Tax Commission v. Chickasaw Nation 115 S.Ct. 2214 (1995). The Court ruled that the legal incidence of the state tax fell on the tribal retailer in Indian country and, as such, was invalid because it was not authorized by the Congress. For a very brief time, tribal governments in Oklahoma could avoid paying the state tax on motor fuels. However, the Court noted that the Oklahoma state legislature could simply amend its law to declare that the legal incidence falls on the retail consumer. The Oklahoma Legislature responded by amending the state tax laws in 1996 to shift the legal incidence of the tax to the consumer.⁽¹⁸⁾ Oklahoma has also entered into tax agreements with nine tribes. These agreements provide that the State collects a motor fuels tax at the distributor level before any fuels enter Indian country. The State then pays the tribes a certain percentage of all taxes collected that reflects the consumption by tribal members.

Despite the resolution in Oklahoma and the settlement of this issue in nearly every other state that contains Indian country, the brief period of tribal exemption in Oklahoma has fueled a spiteful rumor mill among truck stop and convenience store owners that Indian tribes have the ability to avoid state taxes and are threatening to take over these businesses throughout the country. Tribal governments simply do not have these powers, and federal policy should not be made on the basis of exaggerated accounts with little basis in reality.

A fundamental principle of sound federal policy making is to avoid federal intrusion whenever local parties are already reaching agreement. Each state has the necessary authority to resolve its taxation issues with tribal governments. Federal intervention under these circumstances would be inconsistent with the long-standing policy of tribal self-determination. New federal legislation in this area could also cast doubt on the validity of the many existing agreements and create new burdens and turmoil in many states. Section 3 of S. 1961 would take a heavy-handed national approach that would cause far more problems than it would resolve. The federal government should allow the current process to continue its successful course.
 

The issue of tribal sovereign immunity for contract obligations has arisen only in very recent years, as more tribal governments have begun to have the financial resources to enter into commercial transactions. In NCAI's view, this area of tribal government law and policy should be allowed to evolve, without Congress getting into the business of micromanaging contracts between tribal governments and other willing parties.

No Indian tribe, and no person or entity interested in doing business with a tribe, is ever forced to enter into a contract against its, his or her will. It is axiomatic that the terms of the contract must be acceptable to each party entering the contract. Each party has the simple right to refuse to enter into the deal. This fundamental principle ensures that tribal government sovereign immunity cannot be used to unfairly disadvantage any individual or entity contracting with a tribal government.

In addition, the federal, state and local governments all have sovereign immunity for contracts and each has created limitations on sovereign immunity in its own way, at its own time, in order to foster contracting. Tribal governments have this same ability. Every tribal government is at a different place in its contracting sophistication. A general federal legislative solution might work well for some tribes, but might create limitations for some or expose others to an undesirable degree of risk.

The provisions of S. 1691 would reach deeply into what are essentially private transactions, when clearly there is no need for the federal government to "protect" contracting parties from tribal immunity. Tribal governments have created many ways to accommodate the interests of contracting partners. From direct waivers, to insurance and bonding requirements, to choice of forum provisions, tribes have found solutions acceptable to both parties in thousands of contracts.

Just as the federal government and the states have had to resolve the issues of their sovereign immunity in their own ways, the tribes have to deal with their sovereign immunity in ways that respect their own traditions and circumstances. The tribes and the business community have been effective in reaching agreement on solutions. There is no need for the federal government to intervene and prevent the continued evolution in this area among willing parties.
 

Indian tribes' inherent authority for self-government includes the power to adjudicate disputes. Although tribal court criminal jurisdiction over non-Indians has been sharply limited by the federal government,⁽¹⁹⁾ tribes retain significant authority to adjudicate civil disputes involving non-Indians that arise on Indian land or otherwise affect the interest of the tribe or its members.⁽²⁰⁾ As Congress has found, tribal courts are "important forums for ensuring public health and safety and the political integrity of tribal governments." They are "the appropriate forums for the adjudication of disputes affecting personal and property rights," and they are "essential to the maintenance of the culture and identity of tribes...."⁽²¹⁾

Senator Gorton's proposed legislation to grant jurisdiction to the federal and state courts to any action against an Indian tribe constitutes a great threat to the sovereignty of tribes and the tradition of local tribal control over tribal matters. The essence of tribal sovereignty is the tribal right to govern persons and property located within Indian lands under laws adopted by tribal governing bodies and enforced in tribal courts. Yet the dominant purpose of the proposed legislation appears to be to circumvent tribal courts and tribal laws in favor of civil litigation in federal and state courts. Since tribal courts are the final authorities on tribal law, and federal and state courts generally do not interpret and enforce tribal law, authorizing federal courts to resolve civil matters arising on Indian lands would encourage the bypass of tribal laws, and thwart the self-determination of tribal governments.

Senator Gorton's proposal to grant direct jurisdiction over tribal governments to state and federal courts is based on an assertion that tribal courts are not "neutral" forums. The reality is that there are no "neutral" forums to be found at any level of government. Each court has its own legal and philosophical views. The evolution of the U.S. Supreme Court over time is the most notable example of this condition. A tribal court is more likely to be steeped in knowledge of tribal government law and to support the legitimacy of the tribal government. This is not a bias, but a legal and philosophical viewpoint that supports tribal self-governance.

As with any court, the issue with tribal courts is not neutrality, but integrity and competence. Rather than flood federal and state courts with claims against tribes, tribal courts need to be strengthened. Tribal courts have come a long way in recent years, but many lack necessary resources. The federal government has a responsibility to help tribes build their judicial systems so that they can meet the standards that are expected in the United States. Congress recognized this obligation in 1993 by enacting the Indian Tribal Justice Act.⁽²²⁾ This law is designed to give tribal governments the resources they need to develop their court systems. The Act authorizes $57 million in spending on tribal courts, yet to date not one penny of the Act has been funded. NCAI strongly supports full funding for the Indian Tribal Justice Act as a proactive solution for improving tribal courts while protecting tribal self-governance.
 

NCAI would like to extend its sincere thanks to the Chairman and Vice-Chairman and the many other members of the Committee for this hearing on matters that are so critical to tribal self-governance and the cultures and futures of Indian people. As the Committee searches for solutions to the issues that have been raised today, NCAI would encourage the Committee to bear three points in mind. First, broad generalizations and one-size-fits-all solutions have a tempting ease, but have proven to have disastrous effects when applied among the diversity of Indian Nations in this country. A comprehensive review of the variety of circumstances and specific issues is far more likely to lead to workable solutions. NCAI is greatly encouraged that the Committee has already begun such a review. Second, many of the issues that have been raised today involve matters of purely local concern that can be resolved on the local level among the tribes, states and individuals. The role of the federal government in these instances should be to encourage local cooperation, rather than to create new legislation that could have broad, unintended consequences. Third, and finally, any solutions should be guided by the principle that it is the federal government's role to protect tribal self-government. NCAI is looking forward to working on these challenges with the Committee.
 

1. 28 U.S.C. §§ 2671-2680.

2. 28 U.S.C. § 1491.

3. Pruitt v. United States Postal Service, 817 F. Supp. 807 (ED Mo 1993).

4. C.P. Chemical Co. v. United States, 810 F.2d. 34 (CA2 NY 1987).

5. "The judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by citizens of another state, or by citizens or subjects of any foreign state."

6. Idaho v. Coeur d'Alene Tribe of Idaho, 1997 WL 338603 (U.S.); Seminole Tribe of Florida v. Florida, 116 S.Ct. 1114 (1996).

7. See, e.g., Ala. Code 11-93-2 (1992); Fla. Stat. Ann. 768.28(5) (Harrison 1992); Okla. Stat. Ann. Tit. 51, 154 (West 1993).

8. See, e.g., Okla. Stat. Ann. Tit. 51, 154(A)(1) (West 1993) ($25,000); Tex. Civ. Prac. & Rem. Code Ann. 102.003 (West 1986) ($10,000).

9. See, Antieau, 1A Local Corporation Law §11A.00 et. seq.

10. See, Weeks Constr., Inc. v. Oglala Sioux Hous. Auth., 797 F.2d 668, 671 (8th Cir. 1986) (stating that tribal ordinance bars use of sovereign immunity); Merrion v. Jicarilla Apache Tribe, 617 F.2d 537 (10th Cir. 1980) (finding express waiver of immunity in severance tax ordinance).

11. Joseph Calve, Pequots Won't Gamble on Lawsuits at New Casino, Conn. L. Trib., Mar. 2, 1992, at 1. NCAI's informal sampling indicates that a substantial proportion of tribal governments carry insurance.

12. See, The Honorable Sandra Day O'Connor, Lessons from the Third Sovereign: Indian Tribal Courts, The Tribal Court Record, Spring/Summer 1996, at 12.

13. See, Susan M. Williams, Esq., Testimony Before the Committee on Indian Affairs, U.S. Senate, September 24, 1996.

14. Dry Creek Lodge v. Arapahoe and Shoshone Tribes, 515 F.2d 926 (10th Cir. 1975).

15. Indian Self-Determination and Education Assistance Act and related acts. Pub. L. No. 101-152, Title III, 104 Stat. 1959 (codified at 25 U.S.C. § 450).

16. Boe v. Ft. Belknap Indian Community, 455 F. Supp. 462, 463 (D. Mont. 1978); Parker Drilling Co. v. Metlakatla Indian Community, 451 F. Supp. 1127, 1135 (Alaska 1978); Merrion v. Jicarilla Apache Tribe, 617 F.2d 537 (10th Cir. 1980)

17. "STARTED: State-Tribal Approaches Regarding Taxation & Economic Development", Arizona Legislative Council, November, 1995 at 81. See generally, 81-105.

18. Oklahoma Statutes, Title 68, Section 500.63.

19. See generally, F. Cohen, Handbook of Federal Indian Law (1982 ed.) at 335.

20. National Farmers Union Ins. Co. v. Crow Tribe, 471 U.S. 845 (1985); Iowa Mutual Insurance Co. v. LaPlante, 480 U.S. 9 (1987).

21. Indian Tribal Justice Act, 25 USC §3601.

22. 25 U.S.C. §§3601 et. seq.