Flandreau Santee Sioux Tribe v. Gerlach et al

Filing 176

MEMORANDUM OPINION AND ORDER granting 159 Motion to Alter Judgment. Signed by U.S. District Judge Lawrence L. Piersol on 2/5/18. (DJP)

UNITED STATES DISTRICT COURT

DISTRICT OF SOUTH DAKOTA
SOUTHERN DIVISION
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FLANDREAU SANTEE SIOUX TRIBE,

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a federally-recognized Indian Tribe,

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CIV 14-4171

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Plaintiff,

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vs.

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MEMORANDUM OPINION AND

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ANDY GERLACH,Secretary ofthe State of
South Dakota Department of Revenue; and

ORDER ON THE TRIBE'S MOTION

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TO ALTER OR AMEND THE
JUDGMENT

DENNIS DAUGAARD,Governor ofthe State *
of South Dakota,
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Defendants.

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BACKGROUND

Pending before the Court is the Tribe's Motion to Alter or Amend the Judgment pursuant

to Fed R. Civ. P. 59(e), Doc. 159, filed on November 15, 2017. The Tribe asks the Court to
amend its Judgment, Doe. 158, entered on October 20, 2017, in order to correct a factual error.

According to the Tribe, "[pjortions of the Judgment fail to recognize that, pursuant to the
Deposit Agreement, the escrow account does not contain any deposits originating from the First
American Mart (the Mart)." The escrow account is composed of disputed taxes deposited by the
Tribe from January 1994 through July 1998. The Tribe asserts that "[t]he Deposit Agreement

was eoncemed with sales and use taxes only at the Tribe's Royal River Casino (the Casino), and
the Mart was not conveyed to the Casino until 2005."

The Deposit Agreement was entered into in 1994 and required the Tribe to pay a disputed
tax amount into an escrow account pending the final resolution of a federal action pending in

South Dakota District Court at that time. Specifically, the Deposit Agreement required the Tribe,

on a monthly basis, to deposit into an escrow account the tax from the "sales to non-members of
food, beverages and other tangible personal property... at the Tribe's casino." Recital F of the
Deposit Agreement states that the Tribe was to deposit "the aggregate amount of any disputed
tax liability prior to a final resolution of[Sisseton-Wahpeton v. South Dakota]." That lawsuit was

dismissed by stipulation in 1998 and it was around that time that the Tribe stopped making
payments into the escrow accoimt.

The State does not dispute that from January 1994 to July 1998, the funds held in escrow
did not include taxes on transactions of non-members at the Mart because the Tribe did not treat

the Mart as part of the Tribe's casino and therefore did not view the Mart as encompassed by the
Deposit Agreement. Nevertheless, the State contends that, even if the Court misimderstood the

composition of the escrow account and perceived the account as including taxes from
transactions with non-members at the Mart,"such misperception does not affect the accuracy of
the Court's Judgment."

The Tribe moves this Court to amend the fourth and sixth paragraphs ofthe Judgment "to
remove any implication that the escrow fund contains, or should contain, taxes arising from

nonmember sales at the Mart, and to delete the reference to the State receiving any 'credit' for
the taxes attributable to nonmember sales at the Mart 'during the time from when the Tribe
stopped paying that amount into escrow to the present.'" The applicable paragraphs are as
follows, with the contested language emphasized:
4. ...[T]he escrow agent may now, subject to any stay granted pursuant to an
appeal:
a. Pay the funds held in escrow to the Tribe which represent the use tax
imposed on nonmembers' use of purchased goods and services as to the
Casino's slots, table games, food and beverage services, hotel, RV park,
live entertainment events, and gift shop; and
b. Pay the funds held in escrow to the State which represent the use tax
imposed on nonmembers'use ofgoods and services purchased at the First
American Mart.

6. Defendants shall recover nothing in their counterclaim, and judgment on the
merits on all claims for relief therein except that the State must receive credit
against the funds in the escrow accountfor the reasonably estimated amount of
the additional state tax that would have accrued at the First American Martfor
sales to non-members during the timefrom when the Tribe stopped paying that
amount into escrow to the present.
ANALYSIS

Fed. R. Civ. P. 59(e) clarifies that the district court has power to correct its own mistakes
in the time period immediately following entry ofjudgment. Innovative Home Health Care, Inc.
V. P.T.-O.T. Assoc. ofthe Black Hills, 141 F.3d 1284, 1286 (8th Cir. 1998). District Courts have
broad discretion in determining whether to grant a motion to alter or amend a judgment under

Rule 59(e) and will only be reversed on appeal for abuse of discretion. Chapman v. Hiland
Partners GP Holdings, LLC, 862 F.3d 1103, 1110 (8th Cir. 2017). "An abuse of discretion will
only be found if the district court's judgment was based on clearly erroneous findings or
erroneous legal conclusions." Innovative Home Health Care, 141 F.3d at 1286 (quoting Perkins
V. U.S. West Communications, 138 F.3d 336, 340(8th Cir. 1998)), see also Villegas v. Princeton
Farms, Inc., 893 F.2d 919 (7th Cir. 1990)(finding abuse of discretion in granting a motion to

alter or amend where the district judge "cited no errors or changes of heart regarding the merits
ofthe legal arguments").
Rule 59(e) motions serve a limited fimction and may only be used to correct "manifest

errors of law or fact or to present newly discovered evidence." Hagerman v. Yukon Energy
Corp., 839 F.2d 407, 413, cert denied, 488 U.S. 820, 109 S.Ct. 63, 102 (1988). "Such motions
cannot be used to introduce new evidence, tender new legal theories, or raise arguments which
could have been offered or raised prior to entry of judgment." Innovative Home Health Care,
141 F.3d at 1286 (citing Hagerman, 839 F.2d at 414). "[Rule 59(e)] motions are to be granted
sparingly because of the judicial interest in finality and the conservation of scare judicial
resources."

v. Minneapolis, Civil No. 12-57 ADM/SER,2012 WL4449850, at *1 (D. Minn.

Sept. 26, 2012). Indeed, "[t]he fact that the court made a mistake is not, by itself, enough to
warrant granting [a Rule 59(e)] motion. Norman v. Arkansas Dept. ofEduc., 79 F.3d 748, 750
(8th Cir. 1996). Instead, relief under Rule 59(e) "is generally available only when a manifest
error affects the correctness of the judgment." Id. (quoting Seshachalam v. Creighton Univ. Sch.
Of Medicine, 545 F.2d 1147, 1147 (8th Cir. 1976) (per euriimi), cert denied, 433 U.S. 909
(1977).

Upon examination ofthe record, the only reference to when the Mart was acquired as part
of the Casino can be found in paragraph 37 of the Amended Complaint, Doe. 32, which states
"[t]he Tribe transferred the mart's assets to the Casino Complex in 2005." The State has never

contested this fact' and its response to the Tribe's current motion accepts this fact as true.^
However, "[a] verified complaint is the equivalent of an affidavit for summary-judgment
'The State's Answer, Doc. 34, stated in response,"The State is without sufficient knowledge to admit or deny the
statements in paragraph 37."

^ The State's Brief in Opposition to Flandreau Santee Sioux Tribe's Motion to Alter or Amend the Judgment states
"The Tribe argues—and the State currently does not refute—that fi om January 1994 to July 1998, the fimds held in
'
escrow did not include the taxes on transactions involving non-members at the First American Mart. During that
time fi-ame, the Tribe did not treat the Mart as part of the Tribe's casino and therefore viewed the Mart as not
encompassed by the Deposit Agreement." Doc. 167, p. 3(internal citations omitted).

purposes" because all justifiable inferences are drawn in the plaintiffs favor. See Munz v.
Michael, 28 F.3d 795, 798 (8th Cir. 1994)(quoting Williams v. Adams, 935 F.2d 960, 961 (8th
Cir. 1991). Therefore, allegations in the verified complaint "are evidence to the same extent as
statements in a swom affidavit." See id. at 799.

Paragraph 4

Paragraph 4.b grants that the escrow agent may now pay to the State the fimds held in
escrow which "represent the use tax imposed on nonmembers' use of goods and services
purchased at the First American Mart." The Tribe asserts that no funds in the escrow account

represent use taxes imposed on nonmember purchases at the Mart because the fimds in the
escrow account are composed of taxes imposed on nonmember purchases at the Casino from
1994 to 1998, and the Mart was not part of the Casino until 2005. Therefore, the Tribe argues,
because there are no fimds in the escrow account which represent use taxes imposed on
nonmember purchases at the Mart, it is incorrect and confusing to include paragraph 4.b in the
judgment. The State does not argue that there are any funds in the escrow account that represent
use taxes imposed on nonmember purchases at the Mart. Instead, the State asserts that it is

unnecessary to amend the judgment because it can be complied with as is and the escrow agent
will simply not pay any fimds to the State.
Paragraph 6

Paragraph 6 grants the State a credit against the funds in the escrow account for the "reasonably
estimated amount of the additional state tax that would have accrued at the First American Mart

for sales to nonmembers during the time from when the Tribe stopped paying that amount into
escrow to the present." The Tribe's reasons for amending this paragraph can essentially be
broken down into three arguments: 1) the paragraph is counterfactual—the Tribe did not stop
paying into the account any amounts that represent purchases of nonmembers at the Mart
because they never started; 2) allowing the State to receive escrowed Casino taxes as payment

for taxes arising at the Mart is contrary to the Deposit Agreement and would therefore be
inequitable; and 3) sovereign immunity bars awarding the State a portion of the escrow account
as a credit against historical taxes due that were not within the scope of the Deposit Agreement.
The Deposit Agreement required the Tribe, on a monthly basis, to deposit into an escrow
account the tax from the "sales to non-members of food, beverages and other tangible personal

property ... at the Tribe's casino." Further, the deposit was to be of"any disputed tax liability

prior to a final resolution" of the Sisseton-Wahpeton v. South Dakota case, which was dismissed
by stipulation in 1998. It is indeed counterfactual to suggest the Tribe stopped paying into the
escrow account any disputed taxes on nonmember purchases at the Mart because the Tribe never
paid any disputed taxes on such purposes into the escrow account. The Tribe never did so
because the Mart was not encompassed by the Deposit Agreement as it was not acquired by "the

Tribe's casino" until 2005, well after the Tribe stopped paying into the escrow account in 1998.
It is also true, then, that because the Deposit Agreement did not encompass the Mart and because
the deposit into the escrow account was to be composed of any disputed tax liability prior to a

final resolution of the Sisseton-Wahpeton v. South Dakota case, it cannot be said that the Tribe
was ever required to pay into the escrow account any disputed taxes on nonmember purchases at
the Mart. The Tribe's liability for any unpaid use taxes on nonmember purchases at the Mart is
wholly distinct from anything encompassed by the Deposit Agreement. Therefore, the Court

must grant the Tribe's Motion to Alter or Amend the Judgment to correct this factual error for
the same reasons why it was compelled to dismiss the State's counterclaim.

In this case, the State added a counterclaim asking the Court to order the Tribe to

"deposit the required sum, pursuant to the Deposit Agreement, from the date the Tribe stopped
depositing such sum in the escrow account to the date the funds in the escrow account are
disbursed," and asked that the escrow agent be ordered to disburse the contents of the escrow
account to the State. Defendants' Answer to First Amended Complaint, Doc. 34, at 19. The
Court dismissed the State's counterclaim, however, as barred by the Tribe's sovereign immunity.

"It is well established that Indian tribes possess the common law immunity from suit traditionally
enjoyed by sovereign powers." Rosebud Sioux Tribe v. Val-U Const. Co., 50 F.3d 560, 562 (8th
Cir. 1995)(citing Santa Clara Pueblo v. Martinez, 436 U.S. 49, 58 (1978)). Tribal immunity
may be waived by an unequivocal expression of Congress to do so or by an equally clear waiver
by the Tribe. See C & L Enterprises, Inc. v. Citizen Band Potowatomi Indian Tribe, 532 U.S.
411,418(2001).

Merely filing an action as a plaintiff does not waive sovereign immunity as to "claims
which do not meet the same transaction or occurrence test nor to claims of a different form or

nature than that sought by it as plaintiff nor to claims exceeding in amount sought by it as
plaintiff." Jicarilla Apache Tribe v. Andrus, 687 F.2d 1324, 1344 (10th Cir. 1982) (quoting
Federick v. U.S., 386 F.2d 481, 488 (5th Cir. 1967)). Instead, as this Court explained in its

Memorandum Opinion and Order on Plaintiffs Motion for Judgment on the Pleadings, Doc. 60,
at 7, when a Tribe files an action, it is immune from the defendant's counterclaims "except for
[counterclaims grounded] in recoupment[.]" Val-U Const., 50 F.3d at 562 (citing Rosebud Sioux
Tribe v. A &PSteel,Inc., 874 F.2d 550, 552(8th Cir. 1989)).
"Recoupment is a defensive action that operates to diminish the plaintiffs recovery rather

than to assert affirmative relief." Val-U Const., 50 F.3d at 562 (citing Andrus,687 F.2d at 1344).
"Claims in recoupment arise out of the same transaction or occurrence, seek the same kind of

relief as the plaintiff, and do not seek an amount in excess of that sought by the plaintiff." Berrey
V. Asarco, Inc., 439 F.3d 636, 643 (10th Cir. 2006)(citing FDIC v. Husley, 22 F.3d 1472, 1487
(10th Cir. 1994)). Because the State's counterclaim sought monetary relief from the Tribe that in
no way was meant to offset a claim for relief contained in the Tribe's Complaint, the State's
counterclaim seeking further payments into the escrow account from the Tribe was not an action
in recoupment and was therefore barred by sovereign immunity. Doc. 60, at 8. Here, the Tribe
asserts that requiring the Tribe to relinquish money from the escrow account to the State in the
form of a credit is no different from granting "monetary relief in the form of further payments
into the escrow account" because the credit would compensate the State for an "utterly distinct
tax liability." Doc. 169, at 3-4. The Court agrees.
If the escrow account did contain disputed use taxes arising at the Mart or even was
supposed to contain such disputed taxes as required by the Deposit Agreement, the Court would
be within its power to declare that the State receive credit for such taxes, as the funds would
satisfy the same transaction or occurrence test required for actions in recoupment. As that
assumption is factually incorrect, and any money owed for impaid taxes on nonmember
purchases at the Mart is an entirely distinct liability from that contracted about in the Deposit
Agreement, the Tribe's sovereign immunity prevents the Court from making such a declaration.
Accordingly,
IT IS ORDERED:

(1) That the Tribe's Motion to Alter or Amend the Judgment, Doc. 159, is GRANTED.

(2) The Court will enter an amended judgment which alters paragraphs 4 and 6 of the
Judgment, Doc. 158, to read:
4. In accordance with the Parties' Deposit Agreement, the escrow agent may now,
subject to any stay granted pursuant to an appeal, disburse to the Tribe the fiinds held

in escrow which represent the use tax imposed on nonmemhers' use of purchased
goods and services as to the Casino's slots, table games, food and beverage services,
hotel, RV park, live entertainment events, and gift shop.

6. Defendants shall recover nothing on their counterclaim, and the Court grants
judgment on the merits on all claims for relief therein in favor ofthe Tribe.

s-

Dated this£:day ofFebruary,2018.
BY THE COURT:

(UOtUL
Q

wrence L. Piersol

United States District Judge

ATTEST:

MATTHEW W.THELEN,Clerk of Courts