DC Circuit voids New Mexico tribe's 1996 gas business deal

Tuesday, April 30, 2013  

A deal between Kewa Pueblo in New Mexico and a non-Indian company is void because it was never approved by the federal government, the D.C. Circuit Court of Appeals ruled today.

The 1996 agreement gave Quantum Entertainment Ltd. near exclusive rights to manage and operate the tribe's gas station, located right off a major interstate. It was due to run for 10 years until the tribe in 2003 concluded it was "far too lucrative" for the non-Indian party, according to the ruling.

The Bureau of Indian Affairs invalidated the agreement that year, citing the "high fees" imposed on the tribe. Quantum received 49 percent of the gas station's net income, plus a fee of $0.03 per gallon of gasoline sold, along with a $0.005 per gallon "performance bonus" for fuel sold in excess of 1 million gallons per month, according to the decision.

Quantum disputed the cancellation but the Interior Board of Indian Appeals sided with the BIA. That led the company to file a lawsuit in federal court, which also sided with the IBIA.

On appeal, the D.C. Circuit said IBIA's interpretation of the situation was properly evaluated under 25 U.S.C. Section 81. At the time of the 1996 agreement, Section 81 required federal approval of all agreements with tribes.

Congress amended Section 81 in 2000 to limit the situations in which federal approval is required. The goal was to eliminate a "paternalistic" attitude toward tribes, the D.C. Circuit noted.

"Old Section 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," the court observed.

However, the D.C. Circuit said Congress did not intend for the new Section 81 to apply retroactively to preexisting agreements. So the court said it was void because it was never approved under the old Section 81.

"Those who entered agreements with Indian tribes while old Section 81 was in force without seeking Secretarial approval were on notice that such agreements could at a later date be deemed void," the decision stated.

The court also rejected Quantum's claim that the agreement never required approval under the old Section 81.

Turtle Talk has posted documents from the case, Quantum Entertainment v DOI.

DC Circuit Decision:
Quantum Entertainment v DOI (April 30, 2013)