The Denver-based 10th Circuit Court of Appeals said the tribal court cannot enforce its rulings on the health-care clinic, which is on state-owned land within the Navajo reservation.
Jesse Trentadue, a Salt Lake City lawyer who represents the county, said the opinion recognizes the power of the state and county to govern its own entities without interference. If tribal courts had been given the power to assert their authority, "they could literally do away with county government," he said.
"This will have major implications in relations between tribes and state and local governments, especially in the West," where there are millions of acres of reservation land, Trentadue added.
The lawyer for former clinic workers who brought the appeal could not be reached Thursday for comment.
The appeals court decision, released Wednesday, caps a long-running dispute that began when former employees claimed they had been wrongfully fired and that Navajo patients were being denied service at the clinic.
The 15 plaintiffs first went to a Navajo tribal court, where a judge in 1999 ordered the clinic to rehire the workers and correct the alleged discrimination. He later tried to impose a fine of $10,000 for each day his orders were not carried out.
The next year, the employees sued state and county officials in U.S. District Court in Salt Lake City and asked Judge Dale Kimball to enforce the tribal order. Kimball, though, ruled that a tribe lacked authority over an arm of the state.
The workers appealed to the 10th Circuit, which sent the case back to Utah for a review of whether the tribal judge had authority to rule on the claims of three of the plaintiffs, who were enrolled members of the tribe. The three employees claimed violations of their constitutional rights and sought $18 million in damages for themselves and $6 million for the clinic.
Judge Bruce Jenkins reaffirmed the lack of tribal authority over the state and all of its political subdivisions and dismissed the case in 2005.
The dismissal led to a second appeal and Wednesday's ruling, which said the clinic's activities do not affect the Navajo Nation's right to self-government.
"Despite plaintiffs' attempt to make more of it, this case essentially boils down to an employment dispute," the 10th Circuit said.