Tribe Wins Lien Fight With California

SACRAMENTO (CN) - California cannot place liens on tribal assets to collect unpaid state unemployment reimbursements, a federal judge ruled.

U.S. District Judge John Mendez on Wednesday granted summary judgment to Blue Lake Rancheria, a federally recognized tribe in Humboldt County. Mendez ruled that any alleged misuse of the tribe's sovereign immunity was not relevant to whether California's Employment Development Department (EDD) can attach liens on the tribe's property.

The tribe established Mainstay Business Solutions in 2003 as a for-profit business to provide employee leasing and temporary staffing for businesses in California, Hawaii and Nevada.

Mainstay participated in a joint federal-state unemployment insurance program and became a "reimbursable employer," which meant that the state would pay former employees and Mainstay would reimburse the state for those costs.

A dispute arose in 2008 about how much Mainstay owed in reimbursement, leading EDD to attach liens to the tribe's property in several counties and issue subpoenas to Blue Lake's banks seeking information about the tribe's assets.

The tribe filed a lawsuit against officers of EDD to stop them from their collections and to cancel the liens. It also asked the court to declare that the state's actions violate Blue Lake's sovereign immunity.

Mendez rejected the state's argument that sovereign immunity does not apply to tax enforcement, saying the state failed "to recognize 'the difference between the right to demand compliance with state laws and the means available to enforce them.'"

"Here, the tribe does not contest that defendants had authority to demand compliance with state law: that is, to require the tribe to pay reimbursements consistent with the unemployment insurance program. The real issue is whether defendants could enforce compliance by initiating collection actions," Mendez wrote.

Courts have established that immunity bars methods of enforcement similar to this case, Mendez said, finding that the state is barred by sovereign immunity from placing a lien on Blue Lake's tribal property.

"The fact that some of that property may be located outside of the reservation does not avoid the sovereign immunity bar," Mendez ruled.

The state failed to show that the tribe waived its sovereign immunity, but merely argued that Blue Lake's evidence that it did not waive immunity was insufficient.

Blue Lake provided evidence that neither its general or business councils had passed a resolution waiving sovereign immunity in favor of the EDD or any of the other defendants in this action.

The law does not require Blue Lake to disprove every possible means of waiver, Mendez found. It is sufficient for the tribe to point out the absence of evidence to support the state's case.

"Because defendants have provided no facts supporting a theory of waiver, summary judgment is warranted," Mendez said.

Whether Blue Lake invoked sovereign immunity in order to delay or defraud EDD from collecting unemployment insurance from the tribe is not relevant in this case, which involves only the issue of whether the state violated the tribe's immunity through its collection actions.

"This court makes no decision about plaintiff's liability arising from Mainstay's role as a reimbursable employer," Mendez wrote, disregarding the state's attempt to raise disputes about how much the tribe owes.

The tribe has established that it will suffer irreparable harm without injunctive relief, which is the only relief available.

"(I)f the court does not enjoin the liens, plaintiff would be unable to obtain damages from defendants because of the state's own immunity. And this unavailability of alternate remedies makes the harm from the violation of sovereign immunity irreparable," Mendez wrote.

The parties did not immediately respond to requests for comment.

Blue Lake Rancheria has an interesting and complex history.

The 26-acre reservation was established in 1908 for homeless Indians. The federal government "terminated" the reservation in 1954 under a policy that was supposed to integrate Native Americans with Anglo society. The termination policy was widely viewed as disastrous, and in 1966 the federal government returned the 26 acres to the Native Americans - but without the rights accorded to other Native Americans and tribes.

Blue Lake then joined 16 other rancherias in a class action lawsuit, Tillie Hardwick et al. v. the United States, which the rancherias won. The United States granted them their native rights in 1989, and Blue Lake now operates under its own constitution.

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