Opinion
No. 2:97cv330-C.
June 23, 1998.
MEMORANDUM OF DECISION
THIS MATTER is before the court upon defendants' Motion to Dismiss and plaintiff's Motion for Summary Judgment. Plaintiff's motion was contained in its response to defendants' motion. After careful consideration of the motions of defendants and plaintiff and review of the pleadings, and having conducted a hearing, the court enters the following findings, conclusions, and decision.
FINDINGS AND CONCLUSIONS
I. Standard
A. Introduction
Inasmuch as no objection was interposed at the hearing, the court has considered the motions as being cross motions for summary judgment. Indeed, the parties agreed at the hearing that no issues of material fact remain, only an issue of law, to be resolved by judicial determination, as to whether the agreement for sale of gas heaters is governed by 25, United States Code, Section 81 and, specifically, whether defendants' sale of gas heaters to the tribe amounts to "services" and, therefore, is void for defendants' failure to comply with the strict written contract provisions of Section 81.
B. Summary Judgment Standard
On a motion for summary judgment, the moving party has the burden of production to show that there are no genuine issues for trial. Upon the moving party's meeting that burden, the nonmoving party has the burden of persuasion to establish that there is a genuine issue for trial.
When the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts. In the language of the Rule, the nonmoving party must come forward with "specific facts showing that there is a genuine issue for trial." Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving [sic] party, there is no "genuine issue for trial."Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986) (citations omitted; emphasis in the original) (quoting Fed.R.Civ.P. 56). There must be more than just a factual dispute; the fact in question must be material and readily identifiable by the substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986). By reviewing substantive law, the court may determine what matters constitute material facts. Id. "Only disputes over facts that might affect the outcome of the suit under governing law will properly preclude the entry of summary judgment." Id. at 248. A dispute about a material fact is "genuine" only if the evidence is such that "a reasonable jury could return a verdict for the non moving party." Id.
[T]he court is obliged to credit the factual asseverations contained in the material before it which favor the party resisting summary judgment and to draw inferences favorable to that party if the inferences are reasonable (however improbable they may seem).Cole v. Cole, 633 F.2d 1083, 1092 (4th Cir. 1980). Affidavits filed in support of a motion for summary judgment are to be used to determine whether issues of fact exist, not to decide the issues themselves. United States ex rel. Jones v. Rundle, 453 F.2d 147 (3d Cir. 1971). When resolution of issues of fact depends upon a determination of credibility, summary judgment is improper. Davis v. Zahradnick, 600 F.2d 458 (4th Cir. 1979).
C. Factual Setting
In this action, the Eastern Band of Cherokee Indians, which is on the list of tribes covered by Section 81, contends that defendants, through connections and influence with members of tribal government other the the Chief, obtained a contract for the sale and installation of gas heaters in housing units located on and within the boundaries of land belonging to the tribe. To date, defendants have installed approximately 50 gas heaters and submitted to the tribe invoices, which have been paid, totaling approximately $90,000. It is undisputed the in installing these units, defendants performed services, including delivery of the gas heaters to homes; installing the units; cutting holes in walls and foundations as needed; testing the units; filling, initially, propane tanks; and, presumably, performing any warranty work. While the invoices submitted by defendants differ as to almost each job, invoice 3041 is typical of the invoices now before the court. That invoice provides, in relevant part, as follows:
Boyd Chekelelee Residence
1 Gas Heating System ...................... 999.00 1 Start-Up Tank with Fuel ................. 75.00 1 250 Gallon Propane Gas Tank ............. 615.00 250 Gallons Propane Gas ................. 349.75 Set Tank, Purge, Pressure check ........... 80.00 1 High pressure regulator ................. 64.95 1 Secondary regulator ..................... 30.00 connections, fittings, valves, shut off ... 55.12 complete Installation Leak Test ......... 220.00 ________ Total .......... 2,484.82
Plaintiff's Exhibit A, invoice 3041 (emphasis added to charges for services). For a total invoice price of approximately $2,500, defendants billed $2,200 for goods and $300 for services, which is 12 percent for services and 88 percent for goods. The court finds the Chekelelee bill to be representative of all the invoices submitted. Plaintiff also takes issue with the quality of defendants' work, the alleged roundabout manner in which they secured the contract and had the invoices paid, and the actual price paid. Such issues, however, are not relevant to whether this contract is governed by Section 81 and have been raised in a civil fraud and breach-of-contract action in state court.
II. Discussion
A. Introduction: Statutory Protection for Indians
Unlike the general population, recognized tribes and Indians within such tribes are the recipients of extensive federal protection from unscrupulous, would-be service contractors. After the Civil War, but before the end of the nineteenth century, Congress enacted Section 81, which not only allows contracts for services with listed tribes and their members to be voided, but also provides for the return of all monies paid, unless a number of steps are strictly followed when the contracts are obtained. Section 81 provides, as follows:
Contracts with Indian tribes or Indians
No agreement shall be made by any person with any tribe of Indians, or individual Indians not citizens of the United States, for the payment or delivery of any money or other thing of value, in present or in prospective, or for the granting or procuring any privilege to him, or any other person in consideration of services for said Indians relative to their lands, or to any claims growing out of, or in reference to, annuities, installments, or other moneys, claims, demands, or thing, under laws or treaties with the United States, or official acts of any officers thereof, or in any way connected with or due from the United States, unless such contract or agreement be executed and approved as follows:
First. Such agreement shall be in writing, and a duplicate of it delivered to each party.
Second. It shall bear the approval of the Secretary of the Interior and the Commissioner of Indian Affairs indorsed upon it.
Third. It shall contain the names of all parties in interest, their residence and occupation; and if made with a tribe, by their tribal authorities, the scope of authority and the reason for exercising that authority, shall be given specifically.
Fourth. It shall state the time when and place where made, the particular purpose for which made, the special thing or things to be done under it, and, if for the collection of money, the basis of the claim, the source from which it is to be collected, the disposition to be made of it when collected, the amount or rate per centum of the fee in all cases; and if any contingent matter or condition constitutes a part of the contract or agreement, it shall be specifically set forth.
Fifth. It shall have a fixed limited time to run, which shall be distinctly stated.
All contracts or agreements made in violation of this section shall be null and void, and all money or other thing of value paid to any person by any Indian or tribe, or any one else, for or on his or their behalf, on account of such services, in excess of the amount approved by the Commissioner and Secretary for such services, may be recovered by suit in the name of the United States in any court of the United States, regardless of the amount in controversy; and one-half thereof shall be paid to the person suing for the same, and the other half shall be paid into the Treasury for the use of the Indian or tribe by or for whom it was so paid.25 U.S.C. § 81. The key to receiving such protection is the meaning of the word "services." In ascertaining whether the contract at issue here was for the sale of goods or services, the court will first determine whether the statute reaches the sale of goods, and, if not, will proceed to determine whether, in any event, a sale of goods, accompanied by the provision of services, would be covered by Section 81.
B. The Scope of Section 81
In United States ex rel. Harlan v. Bacon, 21 F.3d 209 (8th Cir. 1994), the Court of Appeals for the Eighth Circuit held, as follows:
We are reluctant to give the word "services" any meaning other than its commonly understood one.
* * *
[I]t is a cardinal and long-revered canon of statutory construction that Congress is not to be presumed to have done a vain thing, namely, using superfluous language.Id., at 211-12. Plaintiff, however, points to Green v. Menominee Tribe of Indians in Wisconsin, 233 U.S. 558 (1914), in which it was held that a contract for the sale of goods was covered by Section 81's protection for service contracts.
Green stands alone, despite the passage of more than a century since the enactment of Section 81. While this court is bound by precedent, the anomaly of Green is thoroughly addressed in United States ex rel. Hall, 825 F. Supp. 1422 (D. Minn 1993), aff'd sub nom, United States ex rel. Hall v. Creative Games Technology, Inc., 27 F.3d 572 (8th Cir. 1994) (per curium table case, full text at 1994 WL 320296; affirmed on standing, other reasons for dismissal not reached), cert. denied, 513 U.S. 1155 (1995). In Hall the district court held, as follows:
The language of section 81 establishes unambiguously that it applies to service contracts but not to sales contracts. The provision never mentions goods or merchandise but repeatedly refers to "services." Moreover, it describes the contracts it applies to as agreements for "services . . . relative to [Indian] lands," and for "services . . . relative to . . . any claims" for money due under federal law or from the United States. This delineation of section 81's scope suggests that Congress was concerned about contracts for the representation of Indians' interests, not ordinary sales contracts. See U.S. ex. rel. Shakopee Mdewakanton Sioux Community v. Pan American Mgmt. Co., 616 F. Supp. 1200, 1217 (D.Minn. 1985) (legislative history of section 81 shows that "contractual relations with attorneys and claims agents were foremost on Congress' mind"), appeal dismissed, 789 F.2d 632 (8th Cir. 1986). Other evidence bolsters the conclusion that section 81 does not govern sales contracts. For example, at the time Congress enacted section 81, the ITLA had been in existence for over thirty years. The ITLA requires non-Indians who trade with Indians to obtain a federal license. That this mechanism for regulating sales between Indians and non-Indians was in place when Congress enacted section 81 suggests that the later statute was not directed at sales contracts.
The legislative history of section 81 also supports the interpretation that it does not apply to contracts for the sale of goods. It appears from the legislative history that Congress was concerned specifically about contracts for services such as representation of Indian interests before Congress and the pressing of Indians' claims. For example, in urging passage of the measure, a proponent stated that non-Indians had contracted with Indians to represent them before Congress for exorbitant fees, including large portions of congressional appropriations to Indians. See Cong. Globe, 41st Cong., 3d Sess. 1484, 1486 (Feb. 22, 1871) (comments of Mr. Wilson). Another proponent stated that "The object of this section is to protect the Indians and the Government both against . . . claim agents." Id. at 1484 (comments of Mr. Corbett). Yet another supporter argued that, in addition to being unfair, representation agreements were unnecessary because the Indian Commissioner, federal Indian agents, and the Indian Committees in Congress adequately represented the Indians' interests. Id. at 1487 (comments of Mr. Casserly).
Despite the clear wording of section 81, the prior enactment of the ITLA, and the legislative history, the plaintiffs contend that Green v. Menominee Tribe, 233 U.S. 558, 34 S.Ct. 706, 58 L.Ed. 1093 (1914), precludes any distinction between sales and service contracts in applying section 81. The Green Court concluded that an agreement to supply Indians with logging equipment and supplies was "clearly within the text of" section 81, without explaining how the sale of goods constituted a service. Id. at 569, 34 S.Ct. at 710. As the transaction in Green seems to have been a sale, id., it appears that the Supreme Court once interpreted section 81 to apply to sales contracts. However, as the Seventh Circuit has stated, this "quite ancient" decision does not adequately explain why the statute should apply to such contracts. Wisconsin Winnebago Business Committee v. Koberstein, 762 F.2d 613, 617 (7th Cir. 1985) [FN9]. Moreover, citing Koberstein, the Seventh Circuit recently held that an agreement to manufacture products on tribal trust lands was not governed by section 81. Altheimer Gray v. Sioux Manufacturing Corp., 983 F.2d 803, 812 (7th Cir. 1993). This Court is persuaded by the Altheimer court's reasons for disregarding the plaintiffs' proffered reading of Green. Therefore, the Court concludes that Congress did not intend that section 81 govern sales contracts.
[FN9]. In addition, the parties, posture, and policy considerations in Green distinguish it from the case at bar. In Green, the plaintiff was a vendor who provided logging equipment and supplies and did not receive payment. The defendant was the Menominee Indian Tribe, which had made payment to an "Indian agent," who failed to forward the payment to the plaintiff. The concerns of the enacting Congress about parties taking unfair advantage of Indian tribes in representation before Congress and in some commercial transactions were clearly implicated in Green and the Indian tribe used the secretarial approval requirement as a shield against effectively being forced to pay twice for the same goods. In the present case, plaintiffs, who were not parties to the transactions, seek to use section 81 as a sword to skewer the defendant vendors. Further, as discussed earlier, if the plaintiffs were successful in wielding their section 81 sword, they would also wound non-party Indian tribes and their members, whom section 81 was designed to protect.United States ex rel. Hall, supra, at 1431-32. For the reasons discussed in Hall the court is compelled to react to Section 81 in a manner not inconsistent with the intent of Congress in passing that section and the clear language it used in delineating "services." If the district court were to construe the contract at issue as one for the sale of goods, the court would be compelled to find that summary judgment must be granted for defendant and this action dismissed, inasmuch as Section 81 does not reach such contracts.
C. "Goods" versus "Services"
In the commercial world, the battle between what constitutes a contract for goods as opposed to one for services is not new and has been long decided in the context of the Uniform Commercial Code ("UCC"). Inasmuch as the contract at issue was entered into in North Carolina and there is no federal common law governing contracts, the court finds that North Carolina principals of contract law apply in determining whether the contract here was one for goods or services.
In Chapter 25 of the North Carolina General Statutes, North Carolina has adopted the UCC, which governs transactions between commercial sellers and purchasers. Due to the fact that the UCC governs only the sale of goods, not services, a body of law has developed in making the distinction which is crucial in this case. The first question for the court is whether gas heaters are "goods." The UCC provides the court with a working definition of that term:
"[G]oods" means all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities (article 8) and things in action.
N.C. Gen. Stat. 25-2-105. It is clear that the sale of gas heating units is the sale of goods.
The next issue is whether the contract, which provided for the installation of the units, is more akin to one for services. It is undisputed that defendants charged an average of 12 percent for services rendered in setting up the heaters. The issue then becomes how does the UCC or, better yet, North Carolina determine the nature of a contract when it involves both the sale of goods and the provision of services rendered in connection with the goods. The North Carolina courts repeatedly have held, as follows:
Inherent in the legislation [the UCC] is the recognition that the essence of the transaction between the retail seller and the consumer relates to the article sold, and that the seller is in the business of supplying the product to the consumer. It is the product and that alone for which he is paid.Batiste v. American Home Products Corp., 32 N.C. App. 1, 6, disc. rev, denied, 292 N.C. 466 (1977). Another way of stating the "essence-of-the transaction" test is found in Texas, which also looks to the "essence," but more plainly states that it considers the "dominant factor in the formation of the contract" and asks whether such dominant factor was for "the provision of goods or services." Sally Beauty Co., Inc. v. Nexxus Products Co., Inc., 801 F.2d 1001, 1005 (7th Cir. 1986). In this case, it is beyond dispute that the sale of gas heaters was the essence or dominant factor of the contract, because the contract was for the provision of goods. This conclusion is buttressed by the fact that 88 percent of a typical invoice was for goods, not services, and all services were directly related to the very utility of the goods.
The court finds that the essence of the contract at issue here was for the sale of goods; the decision in Green is inapplicable; and the clear intent of Congress in enacting Section 81 in the late 1800s was to protect recognized tribes and enrolled members from overreaching contracts for illusory services offered by claims agents and attorneys. Plaintiff offers this court a slippery slope — if this contract for goods is governed by Section 81, then any sale of goods that is accompanied by the least bit of service will be entered into at the merchant's peril. The plaintiff tribe is, perhaps, the strongest economic force in the mountain region of North Carolina, and the paternalistic view it offers in this case has no place in today's society. That an agent of the tribe entered into and bound the tribe to a contract for the sale of goods that displeases the tribe is not an issue for this court, but a matter of internal governance. To the extent that defendants are purported to be in breach of that contract or to have employed unfair and deceptive trade practices in either securing or performing the contract, those issues are now before a state court for resolution.
DECISION
IT IS, THEREFORE, THE DETERMINATION OF THIS COURT that defendants' Motion to Dismiss, considered to be one for summary judgment, will beALLOWED; plaintiff's Motion for Summary Judgment will be DENIED; and this action will be DISMISSED with prejudice. Such decisions are reflected in a judgment which is filed simultaneously herewith.
This Memorandum of Decision is entered in response to defendants' Motion to Dismiss (#12) and plaintiff's Motion for Summary Judgment (#6).