Washington Supreme Court Upholds Tribal Corporation's Waiver of Sovereign Immunity and Consent to State Court Jurisdiction

As many readers of this blog may be aware, special care must be taken when contracting with tribal nations and their corporations.  First and foremost, the tribe must specifically “waive sovereign immunity.”  This means the tribe expressly consents and agrees it may be sued for claims arising under the contract.  Without such a waiver, the tribe or its corporations cannot be sued in any court or arbitration proceeding, no matter how valid the claim.  Second, many businesses also insist that the tribe consent to the jurisdiction of the U.S. federal or state courts.  Absent such consent, any claim arising out of the contract would have to be brought in tribal court. 

Recently, the Washington Supreme Court examined these two core trial contracting tenets.  In Outsource Services Management, LLC v. Nooksack Business Corporation, Outsource Services Management, LLC entered into a loan agreement with Nooksack Business Corporation, a tribal enterprise of the Nooksack Indian Tribe to finance the renovation and expansion of the tribal casino.  2014 WL 4108073, __ Wn.2d __ (August 21, 2014).  Nooksack failed to make payments due under the loan agreement and subsequent workout agreements, and Outsource sued the tribal corporation in Whatcom County Superior Court. 

Nooksack argued that the Whatcom County Court lacked jurisdiction to hear the case because it involved a contractual dispute with a tribal enterprise that occurred on tribal land.  There was no dispute that Nooksack waived sovereign immunity in the loan agreement.  The sole issue was whether the claim should be heard in state court or tribal court.  The loan agreement provided that the “Borrower” consented to be sued in “any court of general jurisdiction in the State.”  The lower courts both held that Nooksack had agreed in its contract to the jurisdiction of the Washington State Courts, and Nooksack appealed to the Washington Supreme Court. 

The Washington Supreme Court noted that state courts have jurisdiction over civil disputes in Indian country unless asserting jurisdiction would “infringe on the rights of the tribe to make its own laws and be ruled by them.”  For instance, if two parties on a reservation had a dispute in an area of law regulated by the tribe, but agreed or chose to file in state court, the state court might nonetheless decline to take the case because deciding it would infringe on the tribe’s right to govern itself.

In this case, however, the Court held that the tribe itself, acting through the tribal corporation, agreed to jurisdiction in state court for claims arising out of the contract.  The Court held that to disregard the tribe’s own decision to allow it to be sued in state court would undermine the tribe’s right to make those decisions for it.  The Court also noted that if Nooksack’s position were adopted, other tribes and tribal entities in this state could be negatively impacted in their business dealings, as non-tribal businesses could no longer be assured that a tribe’s contractual consent to state court jurisdiction would be enforced.

While the this case does not represent a departure from previous cases involving tribal contracts, it does add a degree of certainty to an area of law which is often uncertain and unfamiliar to many businesses not accustomed to doing business with tribal nations or entities.

Comment:  Any contractor, subcontractor, or vendor contemplating getting involved with a construction project involving a tribal owner or which occurs on tribal land should seek legal counsel to become informed as to the unique risks associated with performing work on tribal projects and how to best protect its interests during contract negotiations.

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