Blue Lake Rancheria, et al v. Morgenstern, et al.,

Filing 98

ORDER signed by Judge John A. Mendez on 5/12/2015 DENYING Defendants' request to defer adjudication; GRANTING 83 Motion for Summary Judgment; ORDERING the plaintiffs to submit a proposed form of Judgment to the Court within ten days. CASE CLOSED. (Michel, G.)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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BLUE LAKE RANCHERIA, a
federally-recognized Indian
Tribe; BLUE LAKE RANCHERIA
ECONOMIC DEVELOPMENT
CORPORATION, a federallycharted tribal corporation;
and MAINSTAY BUSINESS
SOLUTIONS, a federallyauthorized division of Blue
Lake Rancheria Economic
Development Corporation,

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No.

2:11-cv-01124-JAM-JFM

ORDER GRANTING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT

Plaintiffs,
v.
DAVID LANIER, in his official
capacity as Secretary of the
California Labor and
Workforce Development Agency;
PATRICK W. HENNING, JR., in
his official capacity as
Director of the Employment
Development Department of the
State of California (“EDD”),
PAM HARRIS, individually and
in her official capacity as
Chief Deputy Director of the
EDD, JACK BUDMARK,
individually and in his
official capacity as Deputy
Director of the Tax Branch of
the EDD; TALBOTT SMITH,
individually and in his
capacity as a Deputy Director
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of the Unemployment Branch of
the EDD; KATHY DUNNE,
individually and in her
official capacity as a Senior
Tax Compliance Representative
of the EDD; SARAH REECE,
individually and in her
official capacity as an
Authorized Representative of
the EDD,

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Defendants.
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Blue Lake Rancheria (“Plaintiff” or “the Tribe”) alleges

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that the California Employment Development Department (“EDD”)

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violated its tribal sovereign immunity by attaching liens on

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tribal assets.

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Although discovery remains open for several more months,

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Defendants have not raised any discoverable facts that could

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alter the Court’s conclusion, described herein, that Plaintiff is

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entitled to summary judgment. 1

Plaintiff now moves for summary judgment.

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I.

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UNDISPUTED FACTS AND PROCEDURAL BACKGROUND

Plaintiff is a federally-recognized tribe.

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Mobbs’ Decl. ¶ 3

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Exh. 1.

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chartered corporation called Mainstay Business Solutions

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(“Mainstay”) 2 operated a “temporary staffing and employee leasing

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business.”

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Statement of Facts ¶¶ 8-10.

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participate in a joint federal-state unemployment insurance

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For several years, a division of the Tribe’s federally-

Ramos Decl. ¶ 3; Defendants’ Response to Plaintiff’s
In 2003, Mainstay elected to

This motion was determined to be suitable for decision without
oral argument. E.D. Cal. L.R. 230(g). The hearing was
scheduled for April 8, 2015.
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Mainstay and Blue Lake Rancheria Economic Development Corps are
also plaintiffs in this matter, but they have not joined this
motion for summary judgment.
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program.

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Mainstay became a “reimbursable employer.”

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such, the state would pay former employees and Mainstay would

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later reimburse the state for those costs.

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Code § 803.

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See 26 U.S.C. § 3301 et seq.; Ramos Decl. ¶ 4.
Ramos Decl. ¶ 4.

As

See Cal. Unempl. Ins.

In 2008, a dispute arose as to the amount Mainstay owed in

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reimbursement.

Ramos Decl. ¶ 7.

When the parties were unable to

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resolve their dispute, EDD attached liens to the Tribe’s property

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under California Government Code section 7171 in several

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counties.

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subpoenas to Plaintiff’s banks seeking information about the

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Tribe’s assets.

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Ramos Decl. ¶ 8; see id. Exh. A.

EDD also issued

Rubin Decl. ¶ 4; see id. Exh. C.

The Tribe filed suit against officers of EDD (collectively,

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“Defendants”) seeking to enjoin their collection actions and

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cancel the liens, and for a declaratory judgment that Defendants’

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actions violated Plaintiff’s sovereign immunity.

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(Doc. #1) ¶¶ 34-41.

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judgment to dispose of all its claims (Docs. #82, 83).

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Defendants oppose the motion (Doc. #92) and, in the alternative,

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request that the Court defer adjudication until later in

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discovery, which is set to close in November.

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trial Scheduling Order (Doc. #79) at 3.

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takes no position on this motion (Doc. #93).

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The Tribe now brings this motion for summary

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II.
A.

See Compl.

OPINION

Legal Standard
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See Amended Pre-

Intervenor United States

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“An injunction is a matter of equitable discretion; it does

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not follow from success on the merits as a matter of course.”

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Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 32 (2008).

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The party seeking a permanent injunction must show “(1) that it

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has suffered an irreparable injury; (2) that remedies available

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at law, such as monetary damages, are inadequate to compensate

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for that injury; (3) that, considering the balance of hardships

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between the plaintiff and defendant, a remedy in equity is

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warranted; and (4) that the public interest would not be

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disserved by a permanent injunction.”

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Abbey, 719 F.3d 1035, 1054 (9th Cir. 2013) (citations and

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quotation marks omitted).

W. Watersheds Project v.

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B.

Judicial Notice

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Defendants request judicial notice (Doc. #92-9) of several

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court filings and documents recorded or produced by the

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California Department of State.

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public record and Plaintiff does not dispute them, the Court

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takes judicial notice.

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Food Not Bombs v. City of Santa Monica, 450 F.3d 1022, 1025 n.2

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(9th Cir. 2006); Lee v. City of Los Angeles, 250 F.3d 662, 689

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(9th Cir. 2001).

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C.

Because each is a matter of

See Fed. R. Evid. 201; see Santa Monica

Analysis
1.

Success on the Merits
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a.

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Sovereign Immunity
i.

Defendants’ Request to Defer
Adjudication

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Defendants request that the Court “defer[]” its ruling on

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sovereign immunity “until discovery is complete and the factual

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issue of the Tribe’s wavier has been fully briefed.”

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12:5-6.

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requirements of Rule 56(d) to support this request.

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3.

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Opp. at

Plaintiff argues that Defendants have not met the
Reply at 1-

Rule 56(d) permits a court to defer consideration of a

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motion for summary judgment if a party “shows by affidavit or

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declaration that, for specified reasons, it cannot present facts

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essential to justify its opposition[.]”

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“The requesting party must show (1) it has set forth in affidavit

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form the specific facts it hopes to elicit from further

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discovery; (2) the facts sought exist; and (3) the sought-after

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facts are essential to oppose summary judgment.”

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Finance Center, Inc. v. Loan Mortg. Corp., 525 F.3d 822, 827 (9th

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Cir. 2008).

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in pursuing discovery.

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Sec. Litig., 252 F. Supp. 2d 1005, 1016 (C.D. Cal. 2003), aff’d

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sub nom. Mortensen v. Snavely, 145 F. App’x 218 (9th Cir. Aug.

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17, 2005).

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grounds for denial of the request, and the court may proceed to

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summary judgment.

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827; In re Imperial Credit Indus., Inc. Sec. Litig., 252 F. Supp.

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2d at 1016 (citations omitted).

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Fed. R. Civ. P. 56(d).

Family House &

The party must also demonstrate that it was diligent
See In re Imperial Credit Indus., Inc.

Failure to comply with any of these requirements is

Family House & Finance Center, 525 F.3d at

Defendants here have provided a declaration in support of
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their request, see Bowers Decl. ¶ 2, but it does not justify a

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deferred ruling.

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concerning sovereign immunity is paragraph 4.a., which puts forth

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the following “fact[]” that “likely exist[s]”: “[Plaintiff]

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consented to [EDD’s] collection through the Tribe’s voluntary

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election of reimbursable financing of its unemployment insurance

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costs under 26 U.S.C. § 3309(d) and California Unemployment

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Insurance Code § 801 et seq.”

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Defendants’ plan to “demand production of documents related to

The only paragraph of the declaration

The declaration further describes

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the Tribe’s election and [to] depose the following current and/or

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former Tribal officers, employees, and/or agents: [enumerating

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individuals].”

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Bowers’ Decl. ¶ 4.a.

The first problem with Defendants’ declaration is that this

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purported “fact” is actually a legal conclusion.

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Nation v. Hanson, 47 F.3d 1061, 1063 (10th Cir. 1995) (referring

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to “the legal question of when a party can assert sovereign

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immunity”); cf. Shapiro v. Republic of Bolivia, 930 F.2d 1013,

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1017 (2d Cir. 1991) (discussing “the essentially legal question

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of whether appellees’ actions, as alleged, have triggered an

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exception to the general rule of foreign sovereign immunity”);

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see Cook v. AVI Casino Enterprises, Inc., 548 F.3d 718, 722 (9th

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Cir. 2008).

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question, but none of their authorities support that proposition.

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See Opp. at 11.

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Sac & Fox

Defendants suggest that waiver is a factual

A second problem is that the Court has already foreclosed

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Defendants’ legal theory of waiver.

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determined as a matter of law that neither 26 U.S.C. § 3309 nor

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Plaintiff’s decision to participate affected the Tribe’s
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Indeed, the Court has twice

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sovereign immunity.

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Preliminary Injunction (Doc. #40) at 11-12; Order Denying

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Defendants’ Motion to Dismiss (Doc. #53) at 14.

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not described any “specific facts” that would change this

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determination.

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F.3d 1090, 1100 (9th Cir. 2006) (requiring party requesting Rule

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56(d) relief to “identify by affidavit the specific facts that

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further discovery would reveal, and explain why those facts would

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preclude summary judgment”).

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See Order Granting Plaintiffs’ Motion for a

Defendants have

See Tatum v. City & Cty. of San Francisco, 441

The Court therefore concludes that

Defendants’ “fact” is not relevant to this motion.

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A final problem is that Defendants have not shown diligence.

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They blame their failure to conduct adequate discovery related to

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sovereign immunity on “Plaintiffs[’] mo[tion] to amend their

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complaint on January 6, 2015, [which] rais[ed] a question of the

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operative complaint[.]”

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not well taken.

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sovereign immunity issue, which in fact has been the main issue

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in this case since its inception.

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Opp. at 13:2-3.

Defendants’ excuse is

The proposed amendment in no way affected the

Because Defendants have not identified any specific facts

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relevant to the Tribe’s sovereign immunity, the Court denies

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their request to defer adjudication.

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considers the merits of Plaintiff’s sovereign immunity

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allegations.

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ii.

The Court therefore

Off-reservation Assets

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Defendants argue that sovereign immunity does not apply to

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tax enforcement actions in general, and even if it did, it does

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not bar the state from taking such actions against “off-

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reservation assets.”

Opp. at 9.

Defendants identify these
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assets as “Mainstay’s off-reservation bank accounts and accounts

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receivable[.]”

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these actions, no matter where its assets are located.

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8-9; Reply at 4-5.

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Id.

Plaintiff maintains that immunity does bar

The Court agrees with Plaintiff.

Mot. at

Defendants’ first argument

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is flawed, because it fails to recognize the “difference between

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the right to demand compliance with state laws and the means

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available to enforce them.”

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Technologies, 533 U.S. 751, 755 (1998).

Kiowa Tribe of Oklahoma v. Mfg.
Here, the Tribe does not

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contest that Defendants had authority to demand compliance with

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state law: that is, to require the Tribe to pay reimbursements

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consistent with the unemployment insurance program.

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issue is whether Defendants could enforce compliance by

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initiating collection actions under California Government Code

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section 7171.

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The real

While no controlling case has considered the availability of

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a section 7171 collection action to place a lien on tribal

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property, the Court concludes that these actions are barred by

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sovereign immunity.

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bars similar methods of enforcement.

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Bois Forte Reservation Hous. Auth., 517 F.2d 508, 510 (8th Cir.

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1975) (noting tribe’s “general immunity from levy and execution”

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of payment obligations); Maryland Cas. Co. v. Citizens Nat’l Bank

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of W. Hollywood, 361 F.2d 517, 521 (5th Cir. 1966) (“The waiver

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of the immunity to being sued was expressly qualified, and

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excluded from the waiver was the levy of any judgment, lien or

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attachment upon the property of the [tribe].”); Chemehuevi Indian

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Tribe v. Cal. State Bd. of Equalization, 492 F. Supp. 55, 60

Indeed, the cases establish that immunity

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See Namekagon Dev. Co. v.

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(N.D. Cal. 1979) (holding that sovereign immunity barred

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enforcement of tax through counterclaim against tribe), 3 aff’d,

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757 F.2d 1047 (9th Cir. 1985).

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As to the “off-reservation assets” argument, the Court also

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agrees with Plaintiff that sovereign immunity barred Defendants’

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collection activities, no matter where the Tribe’s assets were

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located.

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Washington v. Confederated Tribes of Colville Indian Reservation,

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447 U.S. 134 (1980).

Defendants’ argument to the contrary relies entirely on

In Confederated Tribes, the state levied a

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tax on cigarettes, and seized cigarettes en route to the

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reservation when the tribe did not pay.

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argued that the seizures were improper because “no state tax

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[was] due while the cigarettes [were] in transit.”

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But the Court concluded that the state’s “interest in enforcing

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its valid tax [was] sufficient to justify” the seizures.

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The Court found it “significant that these seizures t[ook] place

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outside the reservation, in locations where state power over

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Indian affairs is considerably more expansive[.]”

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Id. at 140.

The tribe

Id. at 161.

Id.

Id. at 162.

Confederated Tribes does not control the facts of this case.

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Defendants here did not seize lawfully taxed goods; rather, they

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sought to enforce payment obligations by instituting a lien on

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all of the Tribe’s property.

The fact that some of that property

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The parties contest which aspects of this case survived the
Supreme Court’s reversal and the Ninth Circuit’s subsequent
decision on remand. See 106 S. Ct. 289 (1985) (per curiam); 800
F.2d 1446 (9th Cir. 1986). On appeal, the Ninth Circuit affirmed
the district court’s holding that sovereign immunity barred the
counterclaim. 757 F.2d at 1052. The Supreme Court then reversed
on other grounds and did not consider the counterclaim issue, so
it was not at issue on remand. 800 F.2d at 1447 n.1.
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may be located outside of the reservation does not avoid the

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sovereign immunity bar.

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134 S. Ct. 2024, 2031 (2014) (“Our precedents . . . have not

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previously drawn the distinctions [between on- and off-

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reservation conduct for purposes of sovereign immunity].

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established a broad principle, from which we thought it improper

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to start carving out exceptions.

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Congress about whether to abrogate tribal immunity for off-

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reservation commercial conduct.”) (citations, quotation marks,

See Michigan v. Bay Mills Indian Cmty.,

They []

Rather, we opted to ‘defer’ to

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and alterations omitted); Kiowa, 533 U.S. at 754 (“To date, our

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cases have sustained tribal immunity from suit without drawing a

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distinction based on where the tribal activities occurred.

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To say substantive state laws apply to off-reservation conduct

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. . . is not to say that a tribe no longer enjoys immunity from

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suit.”).

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next turns to whether Plaintiff’s immunity was abrogated or

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waived.

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. . .

Concluding that sovereign immunity applies, the Court

iii.

Abrogation or Waiver of Sovereign
Immunity

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This Court has twice determined that Congress did not

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abrogate tribal sovereign immunity through the Federal

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Unemployment Tax Act, 26 U.S.C. § 3301 et seq.

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Granting Plaintiffs’ Motion for a Preliminary Injunction at 11;

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Order Denying Defendants’ Motion to Dismiss at 14.

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urge the Court to reconsider these holdings, see Opp. at 13-15,

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but Defendants have provided no new argument or new basis for

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this Court to conclude that the language of 26 U.S.C. 3309

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“clear[ly]” and “unequivocally” abrogates the Tribe’s immunity.
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See Order

Defendants

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See Bay Mills, 134 S. Ct. at 2031.

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As to waiver, Plaintiff has put forth evidence that the

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Tribe did not waive sovereign immunity by the procedures outlined

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in the Tribe’s constitution and that “[n]either the General

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Council nor the Business Council of the Tribe has passed a

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resolution or taken any other action . . . waiving sovereign

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immunity of the Tribe in favor of the EDD or any of the

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defendants in this action.”

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4-5 (citing Mobbs’ Decl. ¶ 4, Exh. 2; Ramos’ Decl. ¶ 2).

Plaintiff’s Statement of Facts ¶¶ 2,

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Defendants provide no contrary evidence, and instead argue that

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Plaintiff’s evidence is insufficient.

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Opp. at 12.

Defendants essentially complain that Plaintiff has not done

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enough to prove a negative – that the Tribe did not waive

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immunity.

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Statement of Facts ¶ 4 (“Undisputed that the Tribal Constitution

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contains the quoted language, disputed to the extent it is a

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legal conclusion that the provision is the only way that the

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Tribe may waive sovereign immunity.”).

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require Plaintiff to disprove every possible means of waiver;

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rather, Plaintiff may meet its burden by “pointing out through

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argument [] the absence of evidence” to support other party’s

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case.

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Cir. 2000).

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affidavits or other sources of evidence that “set forth specific

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facts showing that there is a genuine issue for trial.”

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Devereaux v. Abbey, 263 F.3d 1070, 1076 (9th Cir. 2001) (quoting

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Fed. R. Civ. P. 56(e)).

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facts supporting a theory of waiver, summary judgment is

See Opp. at 12; Defendants’ Response to Plaintiff’s

But the law does not

Fairbank v. Wunderman Cato Johnson, 212 F.3d 528, 532 (9th
It is then incumbent upon Defendants to provide

Because Defendants have provided no

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warranted.

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(N.D. Cal. Jan. 6, 2014) (“Because Defendants have met their

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initial burden of informing the court of the basis of their

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contention that they are entitled to summary judgment as to

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Plaintiff's claim based on municipal liability, the burden shifts

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to Plaintiff to establish a genuine issue of material fact.

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. . . Plaintiff has provided the court with no citation to any

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evidence creating such a genuine issue, and instead argues that

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Defendants have failed to prove the negative.

Cf. Egan v. Cty. of Del Norte, 2014 WL 46609, at *5

Therefore, the

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court finds Defendants’ evidence to be undisputed.”).

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has thus established success on the merits.

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b.

Plaintiff

25 U.S.C. § 476(e)

Plaintiff brings this motion under the alternative basis

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that Defendants’ actions violated 25 U.S.C. section 476(e).

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Because the Court has determined that Plaintiff succeeds on the

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merits of the sovereign immunity argument, the Court does not

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reach this issue.

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2.

Equitable Defenses and Balance of Equities

Defendants make multiple arguments relating to the equities

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– all unavailing.

First, they urge the Court to deny relief

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pursuant to the doctrine of unclean hands.

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argument fails, because “[s]overeign immunity involves a right

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which courts have no choice, in the absence of a waiver, but to

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recognize.”

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Game v. Quechan Tribe of Indians, 595 F.2d 1153, 1155 (9th Cir.

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1979).

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Defendants’ collection actions, the Court must reject Defendants’

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unclean hands defense.

Opp. at 18-19.

This

People of State of Cal. ex rel. Cal. Dept. of Fish &

Recognizing that the Tribe’s sovereign immunity barred

See Pan Am. Co. v. Sycuan Band of Mission
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Indians, 884 F.2d 416, 419 (9th Cir. 1989) (“Indian sovereignty,

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like that of other sovereigns, is not a discretionary principle

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subject to the vagaries of the commercial bargaining process or

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the equities of a given situation.”).

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Defendants next raise a Rule 56(d) request to delay

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adjudication to explore whether Plaintiff had “intent to hinder,

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delay or defraud creditor EDD in its collection” and whether it

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“improperly exploited tribal status as a business advantage[.]”

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Bowers Decl. ¶¶ 4.e, 4.f.

The Court again finds this request

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unpersuasive, because Defendants have not raised any issue that

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would affect the outcome of this motion.

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Plaintiff’s reasons for invoking sovereign immunity do not affect

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this Court’s duty to recognize that immunity.

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of Indians, 595 F.2d at 1155; Pan Am., 884 F.2d at 419.

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In particular,

See Quechan Tribe

The Court also reminds Defendants that this case involves

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only the issue of whether Defendants violated Plaintiff’s

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sovereign immunity by their collection actions.

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no decision about Plaintiff’s liability arising from Mainstay’s

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role as a reimbursable employer.

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Defendants’ attempts to raise factual disputes about how much

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Plaintiff actually owes.

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Material Facts” ¶¶ 24-34, 44-46.

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3.

This Court makes

The Court therefore disregards

See Defendants’ “Counterstatement of

Irreparable Harm and Availability of Damages

Plaintiff here has established irreparable harm, because

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damages would not be available.

Indeed, injunctive relief is the

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only form of relief available to the Tribe; if the Court does not

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enjoin the liens, Plaintiff would be unable to obtain damages

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from Defendants because of the state’s own immunity.
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See Ex

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parte Young, 209 U.S. 123, 167-68 (1908); Agua Caliente Band of

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Cahuilla Indians v. Hardin, 223 F.3d 1041, 1048 & n.7 (9th Cir.

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2000).

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harm from the violation of sovereign immunity irreparable.

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Cal. Pharmacists Ass'n v. Maxwell-Jolly, 563 F.3d 847, 852 (9th

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Cir. 2009) (“[B]ecause [plaintiffs] will be unable to recover

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damages against the Department even if they are successful on the

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merits of their case, they will suffer irreparable harm if the

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requested injunction is not granted.”), vacated on other grounds

And this unavailability of alternate remedies makes the
See

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sub nom. Douglas v. Indep. Living Ctr. of S. California, Inc.,

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132 S. Ct. 1204 (2012).

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4.

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Public Interest

Although the parties offer little argument on this subject,

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the Court concludes that the public interest would not be

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disserved by a permanent injunction.

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Cty. v. State, 11 F.3d 1341, 1348-49 (6th Cir. 1993) (stating

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that upholding sovereign immunity “served the fundamental public

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interest goal of respecting tribal sovereign immunity”) (citing

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Wichita & Affiliated Tribes of Oklahoma v. Hodel, 788 F.2d 765,

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777 (D.C. Cir. 1986)).

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See Keweenaw Bay Indian

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III.

ORDER

For the reasons set forth above, the Court DENIES

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Defendants’ request to defer adjudication and GRANTS Plaintiff’s

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motion for summary judgment. Plaintiff shall submit a proposed

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form of Judgment to the Court within ten days of this Order.

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IT IS SO ORDERED.
Dated: May 12, 2015

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