State high court OKs gas tax challenge

OLYMPIA — The state Supreme Court has sided with a McCleary-based trade group of gas station owners who argued that tribal owners are lowering gas prices on reservations to unfairly compete with the private market.

State officials had argued that federal law prevents them from collecting gas taxes on reservations. But the the state Supreme Court said Thursday in a split verdict that a challenge to gas tax treaties with American Indian tribes may go forward even though the tribes are not party to the case.

The Automotive United Trades Organization filed the suit last year in Grays Harbor Superior Court. Judge Gordon Godfrey said he wanted to hear the case but had no choice to dismiss it because of the state’s argument that AUTO could not sue without including the tribes as defendants, and since the station owners could not sue the tribes, which are sovereign nations, they could not sue anyone. Godfrey strongly recommended the group take the case all the way to the state Supreme Court.

Hamilton said such an argument meant there could never be a judicial review of compacts the governor makes with tribes.

“The largest obstacle we faced — whether or not a citizen could challenge — was cleared today,” said Tim Hamilton, the executive director of AUTO. “The facts of the case are fairly clear and we are confident this decision is only the first with more to come. … This is truly a major victory for all the citizens and the small businesses that live or operate in the state of Washington.”

In a 5-4 decision Thursday, the state high court overturned that ruling, saying that justice may not be served when a plaintiff can’t sue because an absent party is a sovereign entity. The case now goes back to Grays Harbor Superior Court.

“In such an instance, the quest for ‘complete justice’ ironically leads to none at all,” Justice Debra L. Stephens wrote for the majority. “Sovereign immunity is meant to be raised as a shield by the tribe, not wielded as a sword by the state.”

The conclusion does not minimize the importance of tribal sovereign immunity, the majority said, but rather recognizes that dismissal would immunize the state, not the tribes, from judicial review.

In the dissenting opinion, Justice Mary E. Fairhurst wrote that a judgment rendered in the tribes’ absence will prejudice their interest in the compacts. Such a judgment will weaken tribes’ ability to negotiate future deals and impede their sovereign right to govern their reservations, she said.

“This case cannot proceed ‘in equity and good conscience,’” Fairhurst wrote. “The tribes’ substantial interests far outweigh AUTO’s much weaker interest in litigating its claim.”

The decision hinged on whether the plaintiffs had any other remedy if the case is dismissed. The dissenting justices argued that the plaintiffs could attempt to change the law through the state Legislature, but the majority called the idea of redressing potentially unconstitutional government conduct through the Legislature “astonishing.”

For more than 100 years, courts have concluded that tribes can still be indispensable parties in a case even if they can’t be sued as sovereign nations, said Rene Tomisser, senior counsel for the attorney general’s office, who called the ruling “surprising.”

Washington has signed more than 20 fuel tax compacts with tribes and dozens more governing cigarette taxes and gambling revenue.

Tomisser said the ruling could make those deals vulnerable and that the court’s decision showed “disregard for the impact on tribal sovereignty.”

He said it was too soon to determine whether the state would appeal.

“Even though no exemption is found under state or federal law or treaty, the Governor granted the tribes an exemption for 75% of the state motor fuel tax and the state constitution reserves decisions on taxation and exemptions exclusively for the legislature,” Hamilton said. “Expenditures out of the state treasury must be appropriated by the Legislature and no appropriation has occurred for the approximately $100 million in payments sent so far to the tribes. The 18th amendment requires that all motor taxes be placed into the motor vehicle account and used on public roads and the state has no ability to confirm where all the money has gone. State tax policy may not be discriminatory in its application and the tribal station operators are receiving approximately 28 cents per gallon in payments that are denied all others.”

Phil Talmadge, the attorney for Automotive United Trades Organization, said Thursday that he was “very gratified” by the court’s decision.

“There’s no demonstration that the state knows,” said Talmadge, a former state Supreme Court justice, “and the compact makes it impossible for the public to know.”