Indian Tribes May Not Be Sued Unless They Waive Their Sovereign Immunity

  1. A.                Outsource Services Management, LLC v. Nooksack Business Corporation, (January 14, 2013) Decision of the Washington State Court of Appeals

In this case, a lender brought suit in the Whatcom County Superior Court against Nooksack Business Corporation (“NBC”), a tribal corporation of the Nooksack Indian Tribe, on a limited recourse loan obligation of NBC in the initial amount of $15,315,856, enforceable against certain security that NBC had pledged.  The loan agreement and three successive forbearance agreements contained an explicit waiver of sovereign immunity.  The waiver of sovereign immunity provided:

The Borrower hereby expressly grants to the Lender and all persons entitled to benefit from any Loan Document an irrevocable limited waiver of its sovereign immunity from suit or legal process with respect to any Claim.  In furtherance of this waiver, the Borrower hereby consents with respect to any Claim:…  (b) to be sued in (i) the United States District Court of Western District of Washington … (ii) any court of general jurisdiction in the State (including all courts of the State to which decisions of such courts maybe appealed), and (iii) only if none of the foregoing courts shall have jurisdiction, or only to permit the compelling of arbitration in accordance with Section 8.27, or the enforcement of any judgment, decree, or award of any foregoing court or any arbitration permitted by Section 8.27, all tribal courts and dispute resolution processes of the Tribe.  The Borrower hereby expressly and irrevocably waives any application of the exhaustion of tribal remedies or abstention doctrine in any other law, rule, regulation, or interpretation that night otherwise require, as a matter of law or comity, that resolution of a Claim be heard first in a tribal court or any other dispute resolution process of the Tribe.

The Superior Court held that the Tribe had waived its sovereign immunity, and that suit could proceed in Washington State Courts.  The Washington State Court of Appeals affirmed.

  1. B.                 C&L Enterprises, Inc. v. Citizen Band Potawatomi Indian Tribe of Oklahoma

In the opinion just discussed, the Court addressed the April 30, 2001, opinion of the United States Supreme Court in C&L Enterprises, Inc. v. Citizen Band Potawatomi Indian Tribe of Oklahoma.  This case is significant to contractors performing construction work for Indian tribes.

In this case, the Tribe entered into a contract with a contractor for the installation of a roof on a Tribe-owned commercial building in Oklahoma.  The property was not on the Tribe’s reservation and was not held by the Federal Government in trust for the Tribe.  The contract in question was an AIA Standard Form document proposed by the Tribe.  The contract contained a provision that:

[a]ll… disputes… arising out of… the Contract… shall be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association… The award rendered by the arbitrator… shall be final, and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction thereof.

The applicable American Arbitration Construction Industry Dispute Resolution Rule at the time, Rule 48(c), provided:

Parties to these rules shall be deemed to have consented that judgment upon the arbitration award may be entered in any federal or state court having jurisdiction thereof.

The identical rule is now Rule 51(c) of the AAA’s Construction Industry Arbitration Rules.

A dispute arose between the Tribe and its Contractor, and the Contractor instituted AAA arbitration proceedings.  The Tribe asserted sovereign immunity and declined to participate.  The arbitrator received evidence and rendered an award in favor of the Contractor.  The Contractor then filed suit to enforce the award in Oklahoma State Court.  The Tribe appeared for the limited purpose of moving to dismiss the action on the ground that, as a sovereign, it was immune from suit.  The Oklahoma State Court denied the Tribe’s motion, and entered a judgment confirming the arbitration award.  The United States Supreme Court affirmed.

The Supreme Court unanimously held that by the clear import of the arbitration clause, the Tribe was amenable to a state court suit to enforce an arbitration award in favor of the Contractor.  The arbitration provision contained in the contract and the applicable rule described above, led to the conclusion that the Tribe had waived its immunity with the requisite clarity.  The arbitration clause required resolution of all contract-related disputes by binding arbitration, and that arbitration awards could be reduced to judgment “in accordance with applicable law in any court having jurisdiction thereof.”  Under the applicable AAA Rule, an “arbitration award may be entered in any federal or state court having jurisdiction thereof.”  The contract’s choice-of-law clause made it plain that a “court having jurisdiction” to enforce the award in question was an Oklahoma State Court.

By the parties’ contract, they selected Oklahoma law, “the law of the place where the Project is located” to govern the contract.  As a result, they consented to confirmation of the award in accordance with the Oklahoma Uniform Arbitration Act, which specifies that when “an agreement … provid[es] for arbitration in” Oklahoma, jurisdiction to enforce the agreement vests in “any court of competent jurisdiction of this state.”

It is particularly noteworthy that the project in question lay outside of the Tribe’s reservation and was not held by the federal government in trust for the Tribe.  If the project was located on Indian land, the result likely would have been different.

Both cases discussed in this article make it clear that Contractors performing construction work for Tribes must always keep in mind the need for a Tribe to waive its sovereign immunity in a manner that allows for appropriate dispute resolution procedures and enforcement of the results of those procedures.

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