Stifel, Nicholaus & Co. v. Lac Du Flambeau Band of Lake Superior Chippewa Indians ( 2015 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
Nos. 14-2150 & 14-2287
STIFEL, NICHOLAUS & COMPANY, INC.,
et al.,
Plaintiffs-Appellees,
and
GODFREY & KAHN,
Plaintiff-Appellee/Cross-Appellant,
v.
LAC DU FLAMBEAU BAND OF LAKE
SUPERIOR CHIPPEWA INDIANS and LAKE
OF THE TORCHES ECONOMIC DEVELOPMENT
CORPORATION,
Defendants-Appellants/Cross-Appellees.
____________________
Appeal from the United States District Court for the
Western District of Wisconsin.
No. 3:13-cv-00372-wmc — William M. Conley, Chief Judge.
____________________
ARGUED APRIL 9, 2015 — DECIDED NOVEMBER 24, 2015
____________________
Before FLAUM, RIPPLE, and WILLIAMS, Circuit Judges.
2 Nos. 14-2150 & 14-2287
RIPPLE, Circuit Judge. The current appeal is the most re-
cent in a series of lawsuits that have arisen over the sale of
bonds by the Lake of the Torches Economic Development
Corporation (“the Corporation”), a corporation wholly
owned by the Lac du Flambeau Band of Lake Superior
Chippewa Indians (“the Tribe”) (collectively “the Tribal En-
tities”). In a prior action in this court, Wells Fargo Bank
(“Wells Fargo”) had alleged that the Corporation had
breached a bond indenture and, as trustee for the bondhold-
ers, had sought “the appointment of a receiver to manage
the trust security on behalf of the bondholder.” Wells Fargo
Bank v. Lake of the Torches Econ. Dev. Corp., 658 F.3d 684, 686
(7th Cir. 2011). We held that the bond indenture constituted
an unapproved management contract under the Indian
Gaming Regulatory Act (“the IGRA”), 25 U.S.C. §§ 2701–
2721, and was therefore void. Following our decision, the
validity of other bond-related documents continued to be
litigated in other courts.
After more than three years of litigating in federal and
state court, the Tribal Entities instituted a tribal court action
in April 2013 seeking a declaration that the bonds are invalid
under the IGRA as well as tribal law. The action currently
before the court represents the efforts of the non-tribal par-
ties to put an end to the tribal court action. Those non-tribal
parties are: Stifel, Nicolaus & Company, Inc., the initial pur-
chaser of the bonds; Stifel, Nicolaus & Company’s parent
corporation, Stifel Financial Corporation (collectively
“Stifel”); LDF Acquisition, LLC (“LDF”), a special purpose
vehicle created by the predecessor of Saybrook Fund Inves-
tors, LLC (collectively “Saybrook”) for the purpose of pur-
Nos. 14-2150 & 14-2287 3
chasing the bonds; Wells Fargo;1 and Godfrey & Kahn S.C.
(“Godfrey”), counsel to the Corporation and bond counsel to
the transaction. Specifically, the Financial Entities and God-
frey sought an injunction in the Western District of Wiscon-
sin to preclude the Tribal Entities from pursuing their tribal
court action.
Following the submission of evidence and a hearing, the
district court preliminarily enjoined the Tribal Entities from
proceeding against the Financial Entities, but allowed the
tribal action to proceed against Godfrey. The Tribal Entities
appealed the district court’s grant of the injunction, and
Godfrey cross-appealed the district court’s denial of the
same.
We now affirm in part, and reverse and remand in part.
We agree with the district court that tribal court exhaustion
was not required. We also concur that the Tribal Entities ef-
fectuated a valid waiver of their sovereign immunity, and,
therefore, the action against them may proceed. Finally, we
agree that the Financial Entities have established a substan-
tial likelihood of succeeding in their challenge to the tribal
court’s jurisdiction; we conclude, therefore, that the district
court did not abuse its discretion in enjoining the tribal court
action against the Financial Entities.
With respect to Godfrey’s cross-appeal, we conclude that
the district court made several errors of law in assessing
whether Godfrey had established a likelihood of success on
the merits. With respect to Godfrey’s cross-appeal, therefore,
1 Stifel, LDF, Saybrook, and Wells Fargo are referred to collectively as
“the Financial Entities.”
4 Nos. 14-2150 & 14-2287
we reverse the judgment of the district court and remand for
further proceedings.
I
BACKGROUND
A. Facts
1.
The Corporation is chartered under tribal law to own and
operate the Lake of the Torches Resort Casino (“the Casi-
no”). The Casino is a gaming facility located on tribal lands
in northern Wisconsin and is operated pursuant to a tribal-
state compact with the State of Wisconsin.
In 2007, “the Tribe decided to diversify its operations by
investing in a project to build a riverboat casino, hotel and
bed and breakfast in Natchez, Mississippi. In order to secure
funding for that investment and to refinance $27.8 million of
existing debt, [the Corporation] issued $50 million in taxable
gaming revenue bonds” in January 2008. Wells Fargo Bank,
658 F.3d at 688–89. Godfrey, in its capacity as counsel to the
Corporation and bond counsel for the transaction, issued
two opinion letters as to the meaning of several bond-related
documents and the legality of the bond transaction.
The bonds were sold to a brokerage firm, Stifel, and then
resold to LDF. “The bonds, which were secured by the reve-
nues and related assets of the Casino, were accompanied by
a trust indenture (‘the Indenture’) naming Wells Fargo as
trustee.” Id. at 689 (footnote omitted). The Indenture includ-
ed numerous provisions “that vested in Wells Fargo and the
bondholder the power to ensure that [the Corporation] satis-
fied its repayment obligations.” Id. This power included
Nos. 14-2150 & 14-2287 5
oversight of Casino revenues, which the Corporation was
required to deposit in an account controlled by Wells Fargo.
Along with the Indenture, there were several other doc-
uments relevant to the transaction: the Specimen Bond,2 a
Bond Purchase Agreement,3 a resolution related to the issu-
ance of the bonds (“the Bond Resolution”),4 a Tribal Resolu-
tion,5 and opinion letters by Godfrey6 (collectively “the Bond
Documents”). Several of these documents contain (1) waiv-
ers of sovereign immunity on behalf of the Tribal Entities; (2)
forum selection clauses designating the United States Dis-
trict Court for the Western District of Wisconsin (or, alterna-
tively, the courts of Wisconsin) as the exclusive forum for
disputes concerning the bond transaction; and (3) choice-of-
law clauses designating the law of Wisconsin as the law ac-
cording to which the documents were to be construed and
disputes were to be resolved.
The Natchez investment proved to be less lucrative than
expected, and the Tribe had trouble meeting its bond obliga-
tions. In October 2009, the Tribe elected a new governing
council that had campaigned on a pledge to repudiate the
bonds. The Corporation eventually repudiated its obliga-
tions under the bonds and refused to repay the $46,615,000
remaining principal or the interest.
2 R.1-1.
3 R.1-3.
4 R.1-5.
5 R.1-10.
6 R.99-9, 99-10.
6 Nos. 14-2150 & 14-2287
2.
When the Corporation repudiated the bonds, Wells Far-
go brought an initial action in federal district court to en-
force the Indenture. The district court, however, dismissed
the action for lack of subject matter jurisdiction. It believed
that several provisions of the Indenture “provide[d] Wells
Fargo and Saybrook with significant authority to set up
working policy for the Casino’s operations.” Id. at 690. As
such, the Indenture constituted a management contract un-
der the IGRA and was void because it had not been submit-
ted to the Indian Gaming Regulatory Commission (“Com-
mission”) for approval. See id. at 691. Moreover, “[b]ecause
unapproved management contracts are void, the waiver of
sovereign immunity contained in the Indenture also was
void and the district court was without jurisdiction. Conse-
quently, it dismissed the case.” Id.
The district court subsequently denied Wells Fargo’s mo-
tion to amend its complaint to assert claims based on other
documents in the bond transaction, such as the bond itself.
According to the district court, the other documents on
which Wells Fargo sought to rely were “collateral agree-
ments within the meaning of Commission regulations and,
in the view of the district court, [we]re therefore also void.”
Id. at 692 (internal quotation marks omitted).
On appeal, we affirmed the district court’s judgment that
the Indenture was void as an unapproved management con-
tract. We determined, however, that the district court’s con-
clusion—that the other documents related to the bond trans-
action also were void—was premature:
Nos. 14-2150 & 14-2287 7
It is not immediately apparent that the waivers
contained in the documents attached to the
proffered amended complaint, when read sep-
arately or together, ought to be construed as
dependent on the validity of the waiver in the
Indenture and that they do not make clear the
Corporation’s intent to render itself amenable
to suit for legal and equitable claims in connec-
tion with the bond transaction.
Id. at 701. We “conclude[d] that the district court should
have permitted Wells Fargo leave to file an amended com-
plaint to the extent that it presented claims for legal and eq-
uitable relief in connection with the bond transaction on its
own behalf and on behalf of the bondholder.” Id. at 702. We
also were mindful, however, that there was a question
whether Wells Fargo could seek that relief now that the In-
denture was void. Thus, the district court would have to
“address whether Wells Fargo’s standing to seek such relief
on behalf of the bondholder survives the voiding of the In-
denture.” Id. We instructed that, after determining the stand-
ing issue, the district court “should proceed to address
whether the transactional documents, taken alone or togeth-
er, evince an intent on the part of the Corporation to waive
sovereign immunity with respect to claims by Wells Fargo
on its own behalf and, if it has standing to do so, on behalf of
the bondholder.” Id.
On remand, Wells Fargo was unsuccessful in crafting a
complaint that named all of the real parties in interest and
also preserved diversity of citizenship. It therefore moved to
dismiss its complaint voluntarily on April 9, 2012.
8 Nos. 14-2150 & 14-2287
3.
Prior to Wells Fargo’s voluntary dismissal of the re-
manded action, Saybrook had filed a twenty-four-count
complaint against the Corporation, Stifel, and Godfrey in
Waukesha County Circuit Court, in which it asserted a
breach of bond claim against the Corporation and various
alternative claims against the other defendants. The lan-
guage of the Bond Documents, however, allowed the parties
to bring suit against the Tribal Entities in state court only in
the event that the District Court for the Western District of
Wisconsin failed to exercise jurisdiction.7 Consequently, on
the same day that Wells Fargo voluntarily dismissed the re-
manded federal action, Saybrook filed a complaint in federal
district court (“Saybrook federal action”) for the purpose of
obtaining the court’s ruling on its subject matter jurisdiction.
See Saybrook Tax Exempt Investors v. Lake of the Torches Econ.
Dev. Corp., 929 F. Supp. 2d 859, 860 (W.D. Wis. 2013). The
state action was stayed pending the federal court’s determi-
nation of its jurisdiction, and the state court entered an order
(agreed upon by the parties) extending the defendants’
deadlines for answering or responding to the state court
complaint until forty-five days after the district court made a
7 Specifically, the Specimen Bond provided that “[t]he Corporation ex-
pressly submits to and consents to the jurisdiction of the United States
District Court for the Western District of Wisconsin (including all federal
courts to which decisions of the Federal District Court for the Western
District of Wisconsin may be appealed), and, in the event (but only in the
event) the said federal court fails to exercise jurisdiction, the courts of the
State of Wisconsin… .” R.1-1 at 6 (emphasis added).
Nos. 14-2150 & 14-2287 9
determination as to its jurisdiction in the Saybrook federal
action.
On March 11, 2013, the District Court for the Western
District of Wisconsin determined that Saybrook’s claims
were for breach of the bond and therefore did not raise a
federal question. The court also believed that it was unlikely
that there was diversity of citizenship, but it required proof
of the plaintiffs’ citizenship in order to completely rule out
diversity of citizenship as a basis for subject matter jurisdic-
tion. Id. Following the submission of supplemental affidavits
establishing a lack of complete diversity, the district court
dismissed the Saybrook federal action without prejudice on
April 1, 2013.
4.
Following the district court’s March 11 ruling in the
Saybrook federal action, the Tribe amended its tribal code to
expand the jurisdiction of its own tribal court. Prior to the
amendment, the tribal code provided that the tribal court
had jurisdiction over “[a]ll matters which the Tribal Council
of the Lac du Flambeau Band of Lake Superior Chippewa
invests, by appropriate ordinance, the Court with jurisdic-
tion; [and] [a]ll actions brought under the provisions of this
Code.”8 After the amendment, the tribal court’s jurisdiction
extended to “all cases and controversies, both criminal and
civil, in law or in equity, arising under the Constitution,
laws, customs, and traditions of the Lac du Flambeau Band
of Lake Superior Ojibwe, including…cases in which the
8 R.1-12 at 7.
10 Nos. 14-2150 & 14-2287
Tribe, or its officials and employees shall be a party… .”9 The
code was further amended to provide for the selection of a
“Judge Pro Tempore” under certain circumstances.10 Most
pertinent to the present action, the amendment allowed
“[t]he Lac du Flambeau Tribal Council [to] appoint Judges
Pro Tempore by majority vote…[t]o fill the role of a standing
Trial Judge in any case to which the Tribe or any agency or
enterprise of the Tribe is a party and an opposing party is a
non-member of the Tribe.”11
5.
On April 25, 2013, the Tribal Entities filed suit in tribal
court against Saybrook, Wells Fargo, Stifel, and Godfrey
seeking a declaration that all bond-related documents were
void under the IGRA and under tribal law. The Tribe ap-
pointed as Judge Pro Tempore Professor Matthew L.M.
Fletcher, a professor of Indian law from Michigan State Uni-
versity College of Law. The Financial Entities and Godfrey
responded to the action on May 24, 2013, by filing motions to
dismiss, which contested the jurisdiction of the tribal court.
These motions were denied by the tribal court in an opinion
issued on August 27, 2013.
Following the filing of their tribal court action, the Tribal
Entities moved to stay the state action in Waukesha County
Circuit Court and to hold an inter-jurisdictional conference
with the tribal court under Teague v. Bad River Band of Lake
9 R.1-13 at 7.
10 See id. at 8.
11 Id.
Nos. 14-2150 & 14-2287 11
Superior Tribe of the Chippewa Indians, 612 N.W.2d 709 (Wis.
2000).12 The state court denied that motion, and the state ap-
pellate court denied the Tribal Entities an interlocutory ap-
peal.
B. District Court Proceedings
On the same day that the Financial Entities and Godfrey
filed their motions to dismiss the tribal court action, they al-
so instituted this action in the District Court for the Western
District of Wisconsin. They sought a ruling that the tribal
court did not have jurisdiction over them and moved for a
preliminary injunction to prevent the tribal court action from
proceeding.
Following extensive briefing and a hearing, the district
court ruled on the Financial Entities’ and Godfrey’s motion.
Before it turned to the four-factor analysis for preliminary
injunctions, however, the court addressed two threshold is-
sues raised by the Tribal Entities: sovereign immunity and
tribal exhaustion.
1.
With respect to the waivers of sovereign immunity in the
Bond Documents, the district court agreed with the Tribal
Entities that several of the Bond Documents were unap-
12 In Teague v. Bad River Band of Lake Superior Tribe of the Chippewa Indians,
612 N.W.2d 709, 719 (Wis. 2000), the Supreme Court of Wisconsin con-
cluded that, when there are concurrent state and tribal actions, as a mat-
ter of comity, the two courts should confer for purposes of allocating ju-
risdiction between the two sovereigns.
12 Nos. 14-2150 & 14-2287
proved management contracts under the IGRA and, there-
fore, that both the documents and the waivers were void.
The district court determined, however, that there were at
least two Bond Documents—the Tribal Resolution and the
Bond Resolution—that were not management contracts un-
der the IGRA, and did contain clear waivers of the Tribe’s
sovereign immunity. It concluded, therefore, that the Tribal
Entities had waived their sovereign immunity.
The court then turned to the second threshold question—
exhaustion of tribal remedies. Guided by this court’s deci-
sion in Altheimer & Gray v. Sioux Manufacturing Corp., 983
F.2d 803 (7th Cir. 1993), the court stated that it must look to
the circumstances of the case “‘to determine whether the is-
sue in dispute is truly a reservation affair entitled to the ex-
haustion doctrine.’”13 The court explained that,
[a]s in Altheimer, the Tribe and the Corporation
alike agreed to litigate disputes involving the
Bond Documents or the Bond Transaction, like
this one over enforcement of the provisions of
the Bonds themselves, in Wisconsin’s federal
or state courts, and they agreed that the law of
Wisconsin should apply to such litigation. In
the words of the Altheimer court, by doing so,
the defendants apparently “wished to avoid
characterization of the contract as a reservation
affair by actively seeking the federal forum.”[14]
13R.175 at 19 (quoting Altheimer & Gray v. Sioux Mfg. Corp., 983 F.2d 803,
815 (7th Cir. 1993)).
14 Id. at 19–20 (quoting Altheimer & Gray, 983 F.2d at 815).
Nos. 14-2150 & 14-2287 13
The court therefore held that the Financial Entities and God-
frey did not have to exhaust tribal court remedies with re-
spect to disputes regarding the Bond Documents and Trans-
action.
2.
Proceeding to the merits, the court observed that the Fi-
nancial Entities and Godfrey bore the burden of demonstrat-
ing that: (1) they have a reasonable likelihood of success on
the merits; (2) they have no adequate remedy at law; and (3)
they will suffer irreparable harm without injunctive relief. If
they met this burden, then they also would have to establish
that the harm they would suffer outweighed any harm the
Tribal Entities would suffer and that the preliminary injunc-
tion would not harm the public interest.
With respect to the Financial Entities’ motion for injunc-
tive relief, the court believed that the merits inquiry was
governed by the Supreme Court’s decision in Montana v.
United States, 450 U.S. 544 (1981). The court explained that
Montana established the general presumption against tribal
court jurisdiction over nonmembers as well as two excep-
tions to the presumption. First, tribes “may regulate,
through taxation, licensing, or other means, the activities of
nonmembers who enter consensual relationships with the
tribe or its members, through commercial dealing, contracts,
leases, or other arrangements.”15 According to the court, the
Supreme Court had made clear that the focus of the first
Montana exception was on nonmember conduct on Indian
15 Id. at 26 (quoting Montana v. United States, 450 U.S. 544, 565 (1981)).
14 Nos. 14-2150 & 14-2287
land and that “the touchstone” of the Montana exceptions
was “the tribe’s interests in protecting internal relations and
self-governance.”16 The district court observed that the Fi-
nancial Entities’ on-reservation conduct had been “minimal,
particularly with respect to Saybrook.”17 Although, with re-
spect to Stifel, “the question [wa]s arguably closer,” never-
theless, there was “no evidence presented that any negotia-
tions with respect to the Bond Transaction or Documents
took place on tribal land.”18 “In the end,” the court noted,
the Tribal Entities only had pointed to “the mere fact of a
commercial relationship” that did not implicate the Tribe’s
sovereign interests.19 The district court concluded “that this
relationship alone, without more, [wa]s likely not enough”
to support tribal court jurisdiction.20
Focusing on the second Montana exception, the district
court noted that this exception is limited to non-Indians’
conduct on reservation land. The tribal action at issue, how-
ever, did not seek to regulate the Financial Entities’ conduct
on reservation land. Moreover, this exception “was effective-
ly intended ‘to protect tribal self-government or to control
internal relations.’”21 Because paying the bonds would not
jeopardize “the [T]ribe’s right to self-governance,”22 the tribal
16 Id. at 28.
17 Id. at 29.
18 Id.
19 Id. at 30.
20 Id.
21 Id. at 32 (quoting Strate v. A-1 Contractors, 520 U.S. 438, 459 (1997)).
22 Id. at 33.
Nos. 14-2150 & 14-2287 15
court action did not fall within the second Montana excep-
tion.
Having determined that the Financial Entities were likely
to prevail on their claim that the tribal court lacked jurisdic-
tion over them, the district court proceeded to the other pre-
liminary-injunction factors. It found that the Financial Enti-
ties would suffer irreparable harm if they were “forced to
litigate in two forums, expending significant effort and re-
sources,” were “deprived of the benefits of the forum for
which they expressly contracted,” and were “forced to liti-
gate before…a court that likely lacks jurisdiction over
them.”23 The district court similarly found that the balance of
the harms and the public interest weighed in favor of issuing
the injunction. The court rejected the notion that “entry of an
injunction w[ould] undercut the autonomy both of the Tribe,
as a sovereign nation, and of the state court.”24 The court ex-
plained that “[t]o enforce the various waivers…is not to un-
dercut the autonomy of a sovereign nation; it is to hold the
Tribe and the Corporation to the terms to which they agreed
when entering into the Bond Transaction.”25 The district
court, therefore, granted the Financial Entities’ motion for a
preliminary injunction.
23 Id. at 49.
24 Id. at 50.
25 Id.
16 Nos. 14-2150 & 14-2287
3.
With regard to Godfrey, however, the district court
reached a different conclusion. For purposes of the prelimi-
nary-injunction proceedings, Godfrey did not contest the
tribal court’s jurisdiction under Montana; rather, it based its
challenge on the forum selection clauses found in the Bond
Documents.26 Because Godfrey’s forum-selection-clause ar-
gument was based in state contract law, the district court de-
termined that it did not have subject matter jurisdiction over
Godfrey’s action. Moreover, although the court could have
exercised supplemental jurisdiction over Godfrey’s claim
pursuant to 28 U.S.C. § 1367(a), the court was disinclined to
do so because, it determined, it likely would resolve the Fi-
nancial Entities’ federal claims without a full trial on the
merits. Finally, the district court continued, even if it were to
ignore the jurisdictional concerns, Godfrey had not estab-
lished a substantial likelihood of success on the merits. Most
troubling to the district court was that the Bond Document
on which Godfrey relied most heavily—the Tribal Agree-
ment—contained provisions that rendered it a “management
contract” under the IGRA. Although other documents, such
as the Specimen Bond, did not raise those concerns, the
Specimen Bond’s forum selection clause applied only to the
26 In particular, Godfrey stipulated that it would “not contend in connec-
tion with the motion for a preliminary injunction in this action that the
Tribal Court does not have jurisdiction over it under Montana v. United
States, 450 U.S. 544 (1981).” R.131 at 2. This stipulation was solely “for the
purposes of the motion for preliminary injunction in this action only.” Id.
at 1. The stipulation, Godfrey made clear, did not prevent it from chal-
lenging the Tribal Court’s jurisdiction over it “in light of the forum selec-
tion provisions contained in” the various Bond Documents involved in
the parties’ transaction. Id. at 2.
Nos. 14-2150 & 14-2287 17
Corporation and not the Tribe. Therefore, the district court
concluded that Godfrey was likely to enjoy “partial success
[on the merits] at best.”27 Accordingly, it denied Godfrey’s
motion for a preliminary injunction.
Following the district court’s ruling, the Tribal Entities
appealed the district court’s order granting a preliminary
injunction to the Financial Entities, and Godfrey filed a
cross-appeal challenging the district court’s denial of its mo-
tion for a preliminary injunction.28
II
DISCUSSION
Before we turn to the propriety of injunctive relief, we,
like the district court, must consider whether the parties’
dispute is properly before us; that is, we must address the
threshold issue of whether the district court should have de-
ferred to the tribal court under the tribal exhaustion rule. Be-
cause we agree with the district court that tribal exhaustion
was not warranted under the circumstances presented here,
we proceed to the second threshold issue: whether the Tribal
Entities waived their sovereign immunity. We conclude that
there was a valid waiver of sovereign immunity. Lastly,
therefore, we consider whether the district court abused its
discretion in granting the Financial Entities injunctive relief
and in denying the same to Godfrey.
27 R.175 at 47–48.
28 The district court’s jurisdiction was premised on 28 U.S.C. § 1331. Our
jurisdiction is premised on 28 U.S.C. §§ 1291 and 1292(a)(1).
18 Nos. 14-2150 & 14-2287
A. Exhaustion
The concept of federal court abstention in cases involving
Indian tribes, known as the tribal exhaustion rule, “requires
litigants, in some instances, to exhaust their remedies in trib-
al courts before seeking redress in federal courts.” Altheimer
& Gray, 983 F.2d at 812. It is not, however, “‘a jurisdictional
prerequisite,’ but rather is ‘a matter of comity.’” Id. at 813
(quoting Iowa Mut. Ins. Co. v. LaPlante, 480 U.S. 9, 16 n.8
(1987)). Relying on our decision in Altheimer & Gray, the dis-
trict court determined that exhaustion of tribal remedies was
not required here. We begin, therefore, with Altheimer &
Gray.29
1.
In Altheimer & Gray, the Devils Lake Sioux Tribe had cre-
ated the Sioux Manufacturing Corporation (“SMC”) to man-
ufacture and market certain clothing products. The Tribe
then negotiated with Medical Supplies & Technology, Inc.
(“MST”) to manufacture and market latex medical products
on the reservation. A letter of intent contemplated that (1)
SMC would purchase MST’s assets, (2) MST would provide
consulting services to SMC, and (3) SMC would pay MST a
percentage of its profits. The letter also provided that the
Tribe waived all sovereign immunity with respect to con-
tractual disputes, that all of the documents were executed
and would be interpreted according to the laws of Illinois,
29We review the district court’s exhaustion ruling de novo. See Garcia v.
Akwesasne Hous. Auth., 268 F.3d 76, 79 (2d Cir. 2001).
Nos. 14-2150 & 14-2287 19
and that all parties agreed to submit to the venue and juris-
diction of the federal and state courts located in the State of
Illinois. After the letter of intent was signed, MST began
business operations, but the closing of the transaction never
took place. MST later ceased operations within the reserva-
tion and sued SMC in Illinois state court for breach of con-
tract. MST’s law firm, Altheimer & Gray, also filed suit seek-
ing its fees for the negotiations. SMC removed the action to
district court and moved for summary judgment on the
ground that the contract was null and void under 25 U.S.C.
§ 81, a statute that required contracts concerning Indian
lands to be approved by the Secretary of the Interior. The
district court entered judgment for SMC, and Altheimer &
Gray appealed.
Before us, SMC urged that we affirm the judgment be-
cause, among other reasons, Altheimer & Gray had failed to
exhaust its tribal court remedies. We determined, however,
that tribal exhaustion was not required. First, it was not clear
that tribal exhaustion applied in the absence of a first-filed
tribal action. See Altheimer & Gray, 983 F.2d at 814. Assuming
applicability of that doctrine, however, the exhaustion in-
quiry was fact sensitive: exhaustion does not apply unless
“the issue in dispute is truly a reservation affair.” Id. Turning
to the facts before us, we observed that, with respect to SMC
and Altheimer & Gray,
the principal dispute…concerns the application
of a federal statute, 25 U.S.C. § 81, to the Letter
of Intent. The other issues in this litigation con-
cern a contract that both parties agreed would
be interpreted under Illinois law. To apply the
tribal exhaustion rule would place before the
20 Nos. 14-2150 & 14-2287
tribal court a dispute that must be resolved by
laws of distant jurisdictions.
Id. Although the choice of law provision did not “foreclose
application of the tribal exhaustion rule,” this fact did dis-
tinguish the case then before us from cases in which the Su-
preme Court had required exhaustion. Id.
“More important[],” however, than the presence of a
choice of law provision or a first-filed tribal action was the
fact that “the application of the tribal exhaustion rule would
not serve the policies” that the Supreme Court had articulat-
ed in Iowa Mutual Insurance Co., 480 U.S. 9, and National
Farmers Union Insurance Cos. v. Crow Tribe of Indians, 471 U.S.
845 (1985). Altheimer & Gray, 983 F.2d at 814–15 (emphasis
added). In these cases, “the Supreme Court was concerned
with implementing Congress’s policy of tribal self-
government. The Court feared that ‘unconditional access to
the federal forum would place it in direct competition with
the tribal courts, thereby impairing the latter’s authority
over reservation affairs.’” Id. at 815 (quoting Iowa Mutual In-
surance Co., 480 U.S. at 16). This was not the case in Altheimer
& Gray, where “the tribal entity wished to avoid characteri-
zation of the contract as a reservation affair by actively seek-
ing the federal forum.” Id. We noted that,
[i]n the Letter of Intent, Sioux Manufacturing
Corporation explicitly agreed to submit to the
venue and jurisdiction of federal and state
courts located in Illinois. To refuse enforcement of
this routine contract provision would be to under-
cut the Tribe’s self-government and self-
determination. The Tribe created SMC to en-
hance employment opportunities on the reser-
Nos. 14-2150 & 14-2287 21
vation. As the Ninth Circuit recognized, eco-
nomic independence is the foundation of a
tribe’s self-determination. If contracting parties
cannot trust the validity of choice of law and
venue provisions, SMC may well find itself
unable to compete and the Tribe’s efforts to
improve the reservation’s economy may come
to naught. We therefore affirm the district
court’s denial of SMC’s motion for a stay of
proceedings based on the tribal exhaustion
rule.
Id. (emphasis added).
2.
The Tribal Entities maintain that Altheimer & Gray is dis-
tinguishable in several respects. According to the Tribal Enti-
ties, the rule articulated in Altheimer & Gray—that the ex-
haustion rule does not apply when a non-tribal forum has
been designated by contract—is applicable only to situations
where no tribal action is pending.
We cannot reconcile this argument with our approach in
Altheimer & Gray. In that case, we noted that there was a split
of authority as to whether exhaustion was required when
there was no pending tribal case. Nevertheless, we assumed
that the tribal exhaustion doctrine applied in both circum-
stances—when there was a tribal action pending and when
there was not. Assuming the general applicability of the
tribal exhaustion rule, therefore, we went on to consider
whether tribal exhaustion was appropriate under the facts
presented. In doing so, we drew on the Supreme Court’s
22 Nos. 14-2150 & 14-2287
discussions of tribal exhaustion in both Iowa Mutual Insurance
Co. and National Farmers Union Ins. Cos.—cases in which
there were competing tribal actions. Consequently, our rea-
soning in Altheimer & Gray is not limited to situations in
which there is no competing tribal proceeding.
The Tribal Entities also contend that, unlike in Altheimer
& Gray, the present action “raises significant issues of tribal
law.”30 In the tribal action, the Tribal Entities seek to void the
Bond Documents under tribal law, the IGRA, and the tribal
constitution.31 The central issue, however, is whether the
Bond Documents constitute management contracts under
the IGRA. If they are not management contracts, then the fo-
rum selection and choice-of-law clauses require that any
disputes related to the bonds be resolved in Wisconsin
courts and be governed by Wisconsin law. If they are man-
agement contracts, then, following this court’s decision in
Wells Fargo, they are void, and the court need not reach the
question of their validity under tribal law. Thus, as in Al-
theimer & Gray, “the principal dispute between the parties
concerns the application of a federal statute.” 983 F.2d at 814.
Finally, the Tribal Entities maintain that the Bond Docu-
ments do not evince an explicit agreement to submit to the
jurisdiction and venue of the Wisconsin courts. We do not
believe this is a fair reading of the Bond Documents. Alt-
hough the documents do not use identical language, the
Tribal Agreement and the Specimen Bond both provide:
30 Appellants’ Br. 23.
31 See R.1-14 at 28–32.
Nos. 14-2150 & 14-2287 23
The Corporation expressly submits to and con-
sents to the jurisdiction of the United States
District Court for the Western District of Wis-
consin (including all federal courts to which
decisions of the Federal District Court for the
Western District of Wisconsin may be ap-
pealed), and, in the event (but only in the
event) the said federal court fails to exercise ju-
risdiction, the courts of the State of Wisconsin
wherein jurisdiction and venue are otherwise
proper, for the adjudication of any dispute or
controversy arising out of this Bond, the Inden-
ture, or the Bond Resolution and including any
amendment or supplement which may be
made thereto, or to any transaction in connec-
tion therewith, to the exclusion of the jurisdiction
of any court of the Corporation.[32]
Given that the Tribal Entities have consented to the jurisdic-
tion of the Wisconsin courts (federal or state) to the exclusion
32 R.1-1 at 6 (Specimen Bond) (emphasis added); R.1-9 at 6 (Tribal
Agreement) (stating that “[t]he Tribe expressly submits to and consents
to the jurisdiction of the United States District Court for the Western Dis-
trict of Wisconsin…to the exclusion of the jurisdiction of any court of the
Tribe”). Moreover, the Tribal Resolution “resolve[s] that all Legal Provi-
sions in the Tribal Agreement are hereby approved; more specifically and ex-
pressly, those by which the Tribe…consents to the jurisdiction: of the
United States District Court for the Western District of Wisconsin…and
the courts of the State of Wisconsin wherein jurisdiction and venue are
otherwise proper.” R.1-10 at 3 (emphasis added); see also R.1-5 at 4 (Bond
Resolution) (stating that “more specifically and expressly the Corpora-
tion…consents to the jurisdiction of the United States District Court for
the Western District of Wisconsin”).
24 Nos. 14-2150 & 14-2287
of any tribal courts, and given that the Tribal Entities do not
suggest that any other courts have jurisdiction over bond-
related disputes, these disputes must be resolved in the fed-
eral or state courts of Wisconsin.
3.
Alternatively, the Tribal Entities maintain that, assuming
Altheimer & Gray governs the present dispute, it requires the
Financial Entities to exhaust tribal remedies. According to
the Tribal Entities, “the tribal-court action implicates…the
validity of a fraudulently induced Bond Transaction execut-
ed in violation of both tribal and federal law, which, if en-
forced, will consume the tribal Casino’s revenue and cripple
the tribal government.”33 They point to several cases from
other circuits in which, they maintain, the courts have re-
quired exhaustion under similar circumstances.
A number of the cases on which the Tribal Entities rely
are readily distinguishable.34 Others, arguably, are more fac-
33 Appellants’ Br. 25.
34 For instance, National Farmers Union Insurance Cos. v. Crow Tribe of In-
dians, 471 U.S. 845 (1985), involved an insurance company’s jurisdictional
challenge to a tort suit brought by a tribal member in tribal court where
the tribal court already had entered a default judgment. Unlike the pre-
sent case, there was no contractual waiver of exhaustion or agreement to
litigate in a non-tribal forum. Under those circumstances, the Court de-
termined that, in light of congressional policies “supporting tribal self-
government and self-determination,” the insurance companies defend-
ing the action should have to exhaust tribal remedies. Id. at 856; see also,
e.g., Davis v. Mille Lacs Band of Chippewa Indians, 193 F.3d 990, 991–92 (8th
Cir. 1999) (requiring tribal court exhaustion with respect to employment
dispute between a member of the tribe and the tribe itself); Basil Cook
Nos. 14-2150 & 14-2287 25
tually analogous to the circumstances at hand.35 In any
event, with the advent of Altheimer & Gray, the presence of a
forum selection clause is dispositive of the exhaustion issue:
“To refuse enforcement of this routine contract provision
would be to undercut the Tribe’s self-government and self-
determination.” 983 F.2d at 815; see also Ninigret Dev. Corp. v.
Narragansett Indian Wetuomuck Hous. Auth., 207 F.3d 21, 33
(1st Cir. 2000) (noting that, in Altheimer & Gray, the court
Enters., Inc. v. St. Regis Mohawk Tribe, 117 F.3d 61, 66 (2d Cir. 1997) (re-
quiring exhaustion in an action brought by two members of the tribe
against the tribe and tribal leaders with “virtually all the events giving
rise to the litigation occur[ing] on reservation lands”); United States ex rel.
Kishell v. Turtle Mountain Hous. Auth., 816 F.2d 1273, 1276 (8th Cir. 1987)
(requiring exhaustion in an action brought on behalf of the estate of an
enrolled member of the tribe against a tribal entity concerning land situ-
ated within the reservation).
35 The Tribal Entities, for example, rely on Bruce H. Lien Co. v. Three Affil-
iated Tribes, 93 F.3d 1412 (8th Cir. 1996). In that case, the Tribes had con-
tracted with a nonmember company for the management of an on-
reservation casino. The agreement between the parties included an “un-
equivocal[] waive[r of] their sovereign immunity” as well as a binding
arbitration provision, and “[t]he District Court of North Dakota was the
selected forum in which to bring an action for injunctive relief.” Id. at
1417. When a disagreement arose between the parties, the management
company filed a demand for binding arbitration, followed by the Tribes
filing an action in tribal court in which they challenged the validity of the
contract under tribal law. The Eighth Circuit concluded that the dispute
concerned a matter related to reservation affairs requiring exhaustion of
tribal remedies: “In this case many of the parties are Tribal entities or
members and the dispute arises from Tribal governmental activity in-
volving a project located within the borders of the reservation.” Id. at
1420. The presence of the forum selection clause in the contract did not
alter the analysis because “in the present situation the Tribes are chal-
lenging the very validity of the agreement containing language giving
the Tribal Court limited jurisdiction.” Id. at 1421.
26 Nos. 14-2150 & 14-2287
held that “the tribal exhaustion doctrine did not apply to a
forum-selection clause in a contract between a non-Indian
corporation and an Indian manufacturing company”). Fur-
thermore, the fact that a contract may have been procured by
fraud does not negate the validity of a forum selection
clause; instead, we look to whether “a forum selection
clause…itself was procured by fraud.” Muzumdar v. Wellness
Int’l Network, Ltd., 438 F.3d 759, 762 (7th Cir. 2006) (emphasis
added);36 see also Rucker v. Oasis Legal Fin., L.L.C., 632 F.3d
1231, 1238 (11th Cir. 2011) (observing that “[a] forum selec-
tion clause is viewed as a separate contract that is severable
from the agreement in which it is contained,” and, therefore,
an allegation that the clause was a part of an agreement that
was “void as [an] illegal gambling contract[] under Alabama
law” did not affect the validity of the forum selection
clause).37
36 In their reply brief, the Tribal Entities acknowledge the holding in
Muzumdar v. Wellness International Network, Ltd., 438 F.3d 759 (7th Cir.
2006), but maintain that “reliance on Muzumdar…and cases concerning
fraudulently induced contracts is misplaced” because those cases “con-
cerned voidable contracts,” whereas contracts that violate the IGRA are
void ab initio. Appellants’ Reply Br. 10 n.7. Even if there were merit to the
Tribal Entities’ void/voidable distinction, there are Bond Documents that
contain valid waivers of sovereign immunity and designations of venue
but do not constitute unapproved management contracts under the
IGRA.
37 Saybrook also maintains that exhaustion is not required because the
tribal court’s exercise of jurisdiction is in bad faith. See Saybrook’s Br. 13.
Because we conclude, on a different basis, that exhaustion is not re-
quired, we have no occasion to consider this argument.
Nos. 14-2150 & 14-2287 27
In sum, we conclude that, consistent with the approach
we adopted in Altheimer & Gray, exhaustion of tribal reme-
dies is not required.
B. Waiver of Sovereign Immunity
The Tribal Entities also maintain that the district court
erred in holding that they had waived their sovereign im-
munity. They assert first that they were fraudulently in-
duced to enter the bond transaction, and, therefore, any
waivers contained in the Bond Documents are unenforcea-
ble. Second, they maintain that the Bond Documents did not
waive their sovereign immunity. Finally, they contend that
the documents containing the waivers are unapproved man-
agement contracts under the IGRA and, therefore, are not
enforceable.
1. Fraudulent inducement
The Tribal Entities first fault the district court for consid-
ering the validity of the waivers of sovereign immunity in
the Bond Documents without first considering whether the
entire bond transaction was the product of fraudulent in-
ducement. Because our analysis of this issue rests on the
manner in which the issue of fraud was raised in the district
court, we first set forth the procedural history of the Tribal
Entities’ fraud allegations.
a.
The Financial Entities filed their federal complaint on
May 24, 2013, and filed their motion for injunctive relief on
28 Nos. 14-2150 & 14-2287
the same day. In response, the Tribal Entities filed a motion
to dismiss, in which they argued that the Bond Documents
did not waive their sovereign immunity, and, even if they
did, they nevertheless were unenforceable as unapproved
management contracts under the IGRA. Notably, the Tribal
Entities did not argue that the Bond Documents were unen-
forceable because they were the product of fraud. Similarly,
the Tribal Entities’ briefs in opposition to the motions for
preliminary injunction and their reply brief in support of
their motion to dismiss also made no argument with respect
to fraud. On October 29, 2013, the district court denied the
Tribal Entities’ motion to dismiss. In the same order, the
court set a hearing on the preliminary injunction for No-
vember 26, 2013.
The Tribal Entities filed an interlocutory appeal with re-
spect to the denial of their motion to dismiss, which we dis-
missed for want of jurisdiction on January 13, 2014. On Jan-
uary 14, 2014, the Tribal Entities and Godfrey then requested
that the district court “set a new date for the previously sched-
uled and fully-briefed hearing on plaintiffs’ Motion for Prelim-
inary Injunction, to occur as soon as possible after February
21, 2014.”38 The preliminary-injunction hearing was re-set
for February 24, 2014. By request of the Tribal Entities, the
date was then moved to March 14, 2014.
On February 12, 2014, the Tribal Entities filed a counter-
claim, answer, and affirmative defenses. Among the defens-
es raised were that “[t]he Bond Transaction was procured by
fraud and the Tribal [Entities] were fraudulently induced to
enter into it and therefore should be relieved of any obliga-
38 R.92 (emphasis added).
Nos. 14-2150 & 14-2287 29
tion to perform thereunder.”39 Attached to the counterclaim
was a transcript of a tribal meeting in which Kevin Shibilski,
a representative of Stifel, allegedly made misrepresentations
concerning the bond transaction.
On February 21, 2014, Saybrook moved the “Court in
limine to exclude argument and evidence regarding alleged
fraud as a defense to a preliminary injunction order.”40
Saybrook noted that the Tribal [Entities] had attached 377
pages of exhibits to their counterclaim, only fifteen of which
had been mentioned in the preliminary-injunction briefing.
According to Saybrook, “it [wa]s far too late…for the Tribal
[Entities] to raise a highly fact-intensive affirmative defense
of fraud rooted in allegations entirely unrelated to those that
have been briefed to date.”41
The court held a status conference on February 28, 2014,
to address issues related to the preliminary-injunction hear-
ing and the parties’ motions in limine.42 The court granted in
part and denied in part Saybrook’s motion in limine, allow-
ing the “defendants…[to] raise fraud at the hearing, but only
to the extent they have proposed facts in response to plaintiffs’ pro-
posed findings of fact that support this claim.”43 The ruling,
however, was limited to the court’s consideration of the mo-
tion for a preliminary injunction and did not preclude the
Tribal Entities from raising fraud as a defense in the case.
39 R.99 at 14.
40 R.109 at 1.
41 Id. at 4.
42 See R.127 at 1.
43 Id. at 2 (emphasis added).
30 Nos. 14-2150 & 14-2287
Following the preliminary-injunction hearing, the parties
filed evidence for the court to consider in making its ruling.
The Tribal Entities designated portions of the deposition of
David DeYoung, Stifel’s designee under Federal Rule of Civ-
il Procedure 30(b)(6), in which he had been asked to com-
ment on allegedly fraudulent statements made by Shibilski
during the tribal meeting.
b.
With this background in mind, we turn to an assessment
of the Tribal Entities’ fraud-in-the-inducement argument.
Specifically, they maintain that the district court erred “[b]y
refusing to consider the effect of fraud on the purported
waivers.”44 There is no question that fraud in the induce-
ment bears on the enforceability of the contractual provi-
sions. See First Nat’l Bank & Trust Co. of Racine v. Notte, 293
N.W.2d 530, 538 (Wis. 1980) (noting that fraud in the in-
ducement renders a contract voidable). The court readily
acknowledged this consideration and allowed the Tribal En-
tities to “plead[] fraud in the inducement as a defense in the
case.”45 It did circumscribe, however, the Tribal Entities’
presentation of evidence of fraud with respect to the prelimi-
nary injunction; for purposes of the preliminary injunction,
the district court refused to expand the hearing beyond
those issues which the Tribal Entities previously had raised
and briefed.
44 Appellants’ Br. 43.
45 R.127 at 2.
Nos. 14-2150 & 14-2287 31
“District court judges, because of the very nature of the
duties and responsibilities accompanying their position pos-
sess great authority to manage their caseload.” Gonzalez v.
Ingersoll Mill. Mach. Co., 133 F.3d 1025, 1030 (7th Cir. 1998)
(quoting United States v. Reed, 2 F.3d 1441, 1447 (7th Cir.
1993)). The Tribal Entities do not maintain that the district
court abused its discretion in setting a briefing schedule or
requiring the parties to submit proposed findings of fact.
Moreover, they do not claim either that the Financial Entities
impeded their ability to obtain evidence needed to raise the
defense during the course of preliminary-injunction briefing
or that the district court did not provide them with adequate
time to develop their arguments. We must conclude, there-
fore, that the district court did not abuse its discretion in re-
fusing to allow the Tribal Entities to expand the factual and
legal parameters of the preliminary-injunction hearing.
c.
Because the district court did not abuse its discretion in
limiting the presentation of evidence and argument concern-
ing the preliminary injunction, the Tribal Entities are limited
to arguing that DeYoung’s deposition testimony establishes
that the Tribal Entities were fraudulently induced into enter-
ing the bond transaction. The evidence, however, does not
support such a conclusion.
We have recognized that,
[f]or claims of rescission based on fraud in the
inducement, the Wisconsin Supreme Court fol-
lows the rule set forth in the Restatement (Sec-
ond) of Contracts: “If a party’s manifestation of
32 Nos. 14-2150 & 14-2287
assent is induced by either a fraudulent or a
material misrepresentation by the other party
upon which the recipient is justified in relying,
the contract is voidable by the recipient.”
Archdiocese of Milwaukee v. Doe, 743 F.3d 1101, 1105 (7th Cir.
2014) (quoting Restatement (Second) of Contracts § 164(1)
(1981)). A fraud plaintiff bears the burden of proving these
elements by clear and convincing evidence. See Lundin v.
Shimanski, 368 N.W.2d 676, 681 (Wis. 1985).
DeYoung’s deposition testimony, standing alone, does
not satisfy the Tribal Entities’ burden. First, DeYoung’s tes-
timony does not establish that Shibilski’s statements were
“fraudulent or [] material misrepresentation[s].” Archdiocese
of Milwaukee, 743 F.3d at 1105. Although in his deposition,
DeYoung seems to want to distance himself from Shibilski’s
statements, in most instances, he stops short of stating that
Shibilski’s statements were false. Second, the Tribal Entities
point to no evidence in the record that they relied on these
specific misstatements in approving the bond transaction,
much less evidence that would establish their reliance by
clear and convincing evidence.
2. Waiver language in the Bond Documents
The Tribal Entities also argue that the Bond Documents
relied upon by the district court—the Tribal Resolution and
Bond Resolution—do not contain valid waivers of sovereign
immunity. Relying on State of Wisconsin v. Baker, 698 F.2d
1323 (7th Cir. 1983), the Tribal Entities further maintain that
the Tribal and Bond Resolutions only approve waivers in
other documents; they do not purport to be independent
Nos. 14-2150 & 14-2287 33
waivers of sovereign immunity. Finally, even if they consti-
tute valid waivers of sovereign immunity, they are not broad
enough to encompass an action by the Financial Entities. We
do not find any of these arguments persuasive.
As a preliminary matter, the Tribal Entities’ suggestion
that the district court believed that only two documents pro-
vided unequivocal waivers is incorrect. While noting that
“[t]wo individual Bond Documents in particular stand out as
providing an unequivocal, independent waiver of the Tribe’s
sovereign immunity,”46 the district court mentioned several
documents that “unambiguously state[] not only that de-
fendants have waived sovereign immunity but also that they
consent to jurisdiction in this court,”47 including the Speci-
men Bond, the Bond Purchase Agreement, the Bond Resolu-
tion, and the Tribal Resolution.
Moreover, Baker does not support the Tribal Entities’ as-
sertion that the resolutions are ineffective as waivers of sov-
ereign immunity. In Baker, the defendants, “in their capacity
as members of the Band’s governing board[,] adopted a reso-
lution authorizing their attorneys of record to waive the
Band’s sovereign immunity to this suit.” Id. at 1331. We held
that this “resolution purport[ed] only to delegate to defend-
ants’ appellate attorneys the power to waive the Tribe’s im-
munity to this suit” and that, based on the record before us,
it did not appear “that defendants’ attorneys ever exercised
the power delegated to them.” Id. Here, in contrast, the Reso-
lutions do not authorize a future action that never occurred.
Instead, the Resolutions affirmatively approve and
46 R.175 at 14 (emphasis added).
47 Id. at 9.
34 Nos. 14-2150 & 14-2287
acknowledge actions that already have been taken, namely
that the Tribe has “provide[d] a limited waiver of sovereign
immunity from suit.”48 The distinction drawn in Baker, there-
fore, simply has no applicability here.
The Tribal Entities also maintain that, assuming the Reso-
lutions can operate as waivers of sovereign immunity, the
Resolutions do not waive sovereign immunity as to the Fi-
nancial Entities. The Tribal Entities argue that when the Res-
olutions are strictly construed, see Orff v. United States, 545
U.S. 596, 601–02 (2005), they constitute a contract only with
the Trustee, and only the Trustee can enforce its provisions.
The language of the Resolutions is not so limited. More
than merely establishing a contract with the Trustee, the
Bond Resolution acknowledged that the bonds were to be
sold to Stifel, approved all of the legal provisions in the
Bond Documents, and, provided “more specifically and ex-
pressly” that “the Corporation…waive[d] its immunity from
suit…with respect to any dispute or controversy arising out
of the Indenture, the Security Agreement, the Bond Place-
ment Agreement, the Bonds, this Bond Resolution and in-
cluding any amendment or supplement which may be made
thereto, or to any transaction in connection therewith.”49 The
waiver is written in the broadest terms and does not suggest
any limitation as to litigating party.
48 R.1-10 at 3.
49 R.1-5 at 4.
Nos. 14-2150 & 14-2287 35
3. Validity under the IGRA
Finally, the Tribal Entities argue that the waivers of sov-
ereign immunity are unenforceable because the documents
in which they appear are unapproved management con-
tracts, which are void under the IGRA. They first note that,
under the implementing regulations, “[t]he NICG must ap-
prove ‘any’ agreement that ‘provides for the management of
all or part of a gaming operation.’ 25 C.F.R. § 502.15.”50 They
maintain that all the Bond Documents are part of the same
transaction, and, therefore, they constitute a single manage-
ment contract that rises or falls as one.51 Because the Inden-
ture is at the heart of the transaction, and because we have
held that the Indenture is void under the IGRA, see Wells
Fargo Bank, 658 F.3d at 702, the remainder of the Bond Doc-
uments also are void.
This argument, however, is foreclosed by our decision in
Wells Fargo, 658 F.3d at 701. In that case, after we concluded
that the Indenture was void as an unapproved management
contract, we turned to the district court’s determination that,
because the various transactional documents were collateral
to the Indenture and because they incorporated by reference
the Indenture’s terms, “the entire transaction, including all
collateral agreements, required the Chairman’s approval,
and the bonds themselves were also management contracts
subject to the Act’s approval requirement.” Id. We disagreed:
We do not believe that this analysis can sup-
port the district court’s decision. As our col-
50 Appellants’ Br. 48 (footnote omitted).
51 See also Br. of Amicus Curiae Nat’l Indian Gaming Ass’n 5–6.
36 Nos. 14-2150 & 14-2287
leagues in the Second Circuit have held, a doc-
ument collateral to a management contract “is
subject to agency approval…only if it ‘provides
for the management of all or part of a gaming
operation.’” Catskill Dev. [L.L.C. v. Park Place
Entertainment Corp.], 547 F.3d [115, 130 (2d Cir.
2008)] (quoting 25 C.F.R. § 502.15). In our view,
the mere reference to a related management
contract does not render a collateral document
subject to the Act’s approval requirement.
Id. (footnote omitted). Thus, a document that is collateral to a
management contract in the sense that is related does not
require approval; it is only when that related agreement also
provides for “the management of all or part of a gaming op-
eration” that NIGC approval is required.
Alternatively, the Tribal Entities contend that agency
practice dictates that we view the Bond Documents collec-
tively. According to the Tribal Entities, had the Bond Docu-
ments been submitted for agency approval, the NIGC
would have reviewed the entire set of Bond
Documents together and considered them as a
group to ensure that none conveyed manage-
ment authority… .
After reviewing the Bond Documents to-
gether, the NIGC would have issued a ‘declina-
tion letter’ that applied to all of the Documents,
or would refuse to issue a declination letter
concerning any of the documents.[52]
52 Appellants’ Br. 51–52.
Nos. 14-2150 & 14-2287 37
“Under the NIGC’s analysis,” therefore, “even if an agree-
ment is not a management contract, it becomes one if it is
intertwined with, and dependent upon, other agreements
that do provide for management.”53
Again, however, we cannot reconcile this approach with
our decision in Wells Fargo. In Wells Fargo, we observed that
“a document collateral to a management contract is subject
to agency approval…only if it provides for the management
of all or part of a gaming operation.” Id. (internal quotation
marks omitted). The agency’s contrary practice cannot take
precedence over the unambiguous language of the regula-
tion.54
53 Id. at 52.
54 Bernard v. Casino Magic Corp., 293 F.3d 419 (8th Cir. 2002), does not
suggest a different result. In that case, the parties (the tribe and Casino
Magic) had submitted a consulting agreement to the NIGC for approval.
The NIGC, however, had determined that the consulting agreement was
not a management contract and therefore did not require approval from
the NIGC: “While Casino Magic will be advising and consulting on
many aspects of the gaming enterprise, pursuant to the Consulting
Agreement the Tribe will retain ultimate control and direction of the ca-
sino operation.” Id. at 421. Later, the Tribe and BNC National Bank en-
tered into a Construction and Term Loan Agreement. Under the terms of
the Agreement, BNC agreed to make advances to the Tribe conditioned
upon Casino Magic’s commitment to contribute to the loan; the Agree-
ment also required that the Tribe “accept and comply with all of the rec-
ommendations made by the Consultant under the Consulting Agree-
ment.” Id. at 422 (internal quotation marks omitted). When litigation lat-
er arose, the tribe argued that the Construction and Term Loan Agree-
ments, together with the Consulting Agreement, constituted an unap-
proved management contract that was void under the IGRA. The Eighth
Circuit agreed; it stated: “The Tribe’s ultimate authority…was effectively
revoked by the terms of section 5.1(p) of the Construction and Term
38 Nos. 14-2150 & 14-2287
Finally, the Tribal Entities contend that, even if the court
considers the individual documents in isolation, they never-
theless each meet the definition of a management contract.
Because each of the Bond Documents is void, the waivers of
sovereign immunity contained in those documents also are
void. Specifically, the Tribal Entities argue that the Tribal
Resolution constitutes an unapproved management contract
because it contains a “covenant[] not to replace key man-
agement of the Casino Facility without obtaining the requi-
site consent of the holders of the Bonds,”55 similar to the one
we found problematic in Wells Fargo. According to the Tribal
Entities, this one provision is sufficient to transform the
Tribal Resolution into a management contract for purposes
of the IGRA. We disagree.
In Wells Fargo, a provision of the Indenture prohibited the
Corporation from removing or replacing (or permitting the
removal or replacement of) key management personnel at
the Casino “without the consent of 51% of bondholders.” 658
F.3d at 698. We noted that “[t]his requirement applie[d] to
removal for any reason, thus potentially tying the hands of
the Tribe to replace key officers even when sound manage-
ment or even regulatory compliance concerns require their
removal.” Id. The language in the Tribal Resolution, howev-
er, is not as broad: The Tribal Resolution does not require
bondholder approval to remove key management employees;
it only requires bondholder approval for the choice of re-
Loan Agreement, which mandated the Tribe’s compliance with Casino
Magic’s recommendations.” Id. at 425. Here, the documents merely ref-
erence one another; the Tribal Entities do not point to any terms in one
document that fundamentally alter language in another.
55 R.1-10 at 3.
Nos. 14-2150 & 14-2287 39
placements. Consequently, the Tribal Agreement does not
“t[ie] the hands of the Tribe” in the same manner as the In-
denture did.
Moreover, it was not the “remove and replace” provision
in the Indenture, standing alone, that transformed it into a
management contract under the IGRA. Rather, it was the
numerous provisions for oversight56 “taken together” that
rendered the Indenture a management contract. Id. at 698–
99.
Apart from the provision not to replace key personnel,
the Tribal Entities do not point to any problematic provi-
sions in the Tribal Resolution. Moreover, the Tribal Entities
do not point to any problematic provisions in the Bond
Resolution that would transform that document into a man-
agement contract.57 Because the Tribal and Bond Resolutions
are not void as unapproved management contracts and also
contain waivers of sovereign immunity, the district court did
not err in concluding that the Tribal Entities had waived
their sovereign immunity.58
56 These include: the direct deposit of the Casino’s daily gross revenues
into a trust account managed by Wells Fargo, a requirement that capital
expenditures above a certain amount be approved by the bondholders,
and the appointment of an independent consultant (approved by the
bondholder representative) in the event that the debt-service-coverage
ratio fell below a stated level. See Wells Fargo, 658 F.3d at 698–99.
57 Although the parties focus on the Tribal and Bond Resolutions, this
also is true of the Specimen Bond.
58 Because we conclude that the Tribal and Bond Resolutions were not
void as unapproved management contracts, we need not address
Saybrook’s alternative contention that the voiding regulation, 25 C.F.R.
§ 533.7, is defective. See Saybrook’s Br. 35–37.
40 Nos. 14-2150 & 14-2287
C. Tribal Court Jurisdiction
Because we conclude that tribal court exhaustion was not
required and that the Tribal Entities waived their sovereign
immunity, we can proceed to the substantive issue presented
by the Tribal Entities’ appeal: whether the district court
properly enjoined the tribal court action because the tribal
court lacked jurisdiction over the Financial Entities.
In Atkinson Trading Co. v. Shirley, 532 U.S. 645 (2001), the
Supreme Court observed that “[t]ribal jurisdiction is limited:
For powers not expressly conferred upon them by federal statute or
treaty, Indian tribes must rely upon their retained or inherent
sovereignty.” Id. at 649–50 (emphasis added); see also Atty’s
Process & Investigation Servs. v. Sac & Fox Tribe of the Miss. in
Iowa, 609 F.3d 927, 934 (8th Cir. 2010) (“Where, as here, tribal
jurisdiction is not specifically authorized by federal statute or
treaty, a tribe’s adjudicatory authority must stem from its ‘re-
tained or inherent sovereignty.’” (emphasis added) (quoting
Atkinson Trading Co., 532 U.S. at 649–50)).59
59 The Tribal Entities do assert that the tribal court has jurisdiction over
the Financial Entities based on treaty rights. However, the Tribal Entities
do not point to any treaty language that grants the Tribe authority over
nonmembers, much less authority “expressly conferred,” Atkinson Trad-
ing Co. v. Shirley, 532 U.S. 645, 649 (2001), or “specifically authorized,”
Atty’s Process & Investigation Servs. v. Sac & Fox Tribe of the Miss. in Iowa,
609 F.3d 927, 934 (8th Cir. 2010). The sole record support for their claim
that tribal court jurisdiction is rooted in treaty rights is a citation to an
affidavit filed by John P. Bowes, Associate Professor of History at East-
ern Kentucky University, who opines that “[e]vidence indicates
that…the government also intended the Indians to have the right to ex-
clude individuals from the reservation if they so desired.” R.50 at 4 ¶11.
In setting forth his opinion, Professor Bowes does not rely on treaty lan-
guage, but on the statements of Commissioner Henry Gilbert made a
Nos. 14-2150 & 14-2287 41
The scope of a tribe’s “retained or inherent authority”
was first articulated in Montana v. United States, 450 U.S. 544,
565 (1981): “Indian tribes retain inherent sovereign power to
exercise some forms of civil jurisdiction over non-Indians on
their reservations, even on non-Indian fee lands.” Specifical-
ly, the Court in Montana set forth
two narrow situations in which a tribe may ex-
ercise jurisdiction over nonmembers: (1) “[a]
tribe may regulate, through taxation, licensing,
or other means, the activities of nonmembers
who enter consensual relationships with the
tribe or its members, through commercial deal-
ing, contracts, leases, or other arrangements”;
and (2) “[a] tribe may also retain inherent
power to exercise civil authority over the con-
duct of non-Indians on fee lands within its res-
ervation when that conduct threatens or has
some direct effect on the political integrity, the
economic security, or the health or welfare of
the tribe.” Id. at 565, 566.
Jackson v. Payday Fin., LLC, 764 F.3d 765, 782 (7th Cir. 2014)
(parallel citation omitted).
1.
As an initial matter, the Tribal Entities argue that Mon-
tana only applies to situations in which tribes attempt to
year after a treaty was ratified. This is not sufficient for us to conclude
that the “tribe’s adjudicatory authority” was “specifically authorized by
federal…treaty.” Atty’s Process & Investigation Servs., 609 F.3d at 934.
42 Nos. 14-2150 & 14-2287
regulate nonmember conduct on non-Indian fee land, as op-
posed to tribal trust land.
The Tribal Entities’ view cannot be squared with the Su-
preme Court’s more recent cases, Nevada v. Hicks, 533 U.S.
353 (2001), and Plains Commerce Bank v. Long Family Land &
Cattle Co., 554 U.S. 316 (2008). In Hicks, the Supreme Court
considered whether a tribal court had jurisdiction over a
warden’s allegedly tortious conduct while executing a search
warrant on tribe-owned land within the reservation. The
Supreme Court began its analysis with the general proposi-
tion that “Indian tribes’ regulatory authority over nonmem-
bers is governed by the principles set forth in Montana.”
Hicks, 533 U.S. at 358. It noted first, that, although “the non-
Indian status of the land was central to the analysis
in…Montana,” that was not because “Indian ownership sus-
pends the ‘general proposition’…that ‘the inherent sover-
eign powers of an Indian tribe do not extend to the activities
of nonmembers of the tribe.’” Id. at 359. “The ownership sta-
tus of land,” the Court explained, “is only one factor to consid-
er in determining whether regulation of the activities of
nonmembers is ‘necessary to protect tribal self-government
or to control internal relations.’” Id. at 360 (emphasis added).
“[T]he existence of tribal ownership,” however, “is not alone
enough to support regulatory jurisdiction over nonmem-
bers.” Id.
Moreover, more recently in Plains Commerce Bank, the
Supreme Court reiterated that Montana’s “general rule re-
stricts tribal authority over nonmember activities taking
place on the reservation, and is particularly strong when the
nonmember’s activity occurs on land owned in fee simple by
non-Indians—what we have called ‘non-Indian fee land.’”
Nos. 14-2150 & 14-2287 43
554 U.S. at 328 (quoting Strate v. A-1 Contractors, 520 U.S.
438, 446 (1997)). Plains Commerce Bank, therefore, leaves no
doubt that Montana applies regardless of whether the actions
take place on fee or non-fee land.60 We therefore turn to the
Montana exceptions.
2.
Looking to the first Montana exception, the Tribal Entities
assert that the Financial Entities entered into a consensual
relationship with the Tribe and engaged in on-reservation
conduct that brings it within the jurisdiction of the tribal
court. We made clear in Jackson, however, that Plains Com-
merce Bank “circumscribed” the already narrow Montana ex-
ceptions. Jackson, 764 F.3d at 782. We explained that a tribe’s
authority to regulate nonmember conduct “centers on the
land”: “‘Montana and its progeny permit tribal regulation of
nonmember conduct inside the reservation that implicates the
tribe’s sovereign interests.’” Id. (quoting Plains Commerce
Bank, 554 U.S. at 327).
60 The Tribal Entities point to the Ninth Circuit’s decision in Water Wheel
Camp Recreational Area v. LaRance, 642 F.3d 802 (9th Cir. 2011). In that
case, the Ninth Circuit stated that “Montana limited the tribe’s ability to
exercise its power to exclude only as applied to regulation of non-
Indians on non-Indian land, not on tribal land.” Id. at 810. The court in
Water Wheel acknowledged the Court’s decisions in Nevada v. Hicks, 533
U.S. 353 (2001), and Plains Commerce Bank v. Long Family Land & Cattle
Co., 554 U.S. 316 (2008), but determined that Hicks’s holding was of “lim-
ited applicability,” Water Wheel Camp Recreational Area, 642 F.3d at 813,
and that Plains Commerce Bank does not speak to situations involving In-
dian land, id. at 811 n.6. We do not believe that these conclusions can be
reconciled with the language that the Court employed in Hicks and Plains
Commerce Bank.
44 Nos. 14-2150 & 14-2287
The Tribal Entities submit that, in evaluating whether the
tribal court has jurisdiction over the Financial Entities under
the first Montana exception, the court need not limit its con-
sideration to the on-reservation actions of the Financial Enti-
ties. This view, however, is at odds with Plains Commerce
Bank, in which the Court observed “that the sovereignty that
the Indian tribes retain is of a unique and limited character.
It centers on the land held by the tribe and on the tribal members
within the reservation.” 554 U.S. at 327 (emphasis added) (cita-
tions omitted) (internal quotation marks omitted). The ac-
tions of nonmembers outside of the reservation do not im-
plicate the Tribe’s sovereignty.
Turning to on-reservation conduct, the Tribal Entities
point to “multiple meetings,” during which Stifel allegedly
“misrepresented material terms of the Bond Transaction.”61
The first Montana exception, however, requires that a tribe’s
regulation of the nonmember, here the tribal court action,
“have a nexus to the consensual relationship itself.” Atkinson
Trading Co., 532 U.S. at 656. The tribal court action, however,
does not seek to regulate any of Stifel’s activities on the res-
ervation. Rather, the tribal court action seeks to void each of
the bond documents because they are unapproved manage-
ment contracts under the IGRA; it also seeks to void the
Tribal Agreement and Tribal Resolution “because [they]
w[ere] not approved by a referendum vote of the members
of the Tribe or the Secretary of the Interior as required by the
61Appellants’ Br. 34. Saybrook’s conduct has an even more tenuous con-
nection to the reservation. Saybrook’s representative came onto the res-
ervation only once for less than one day to gather information about the
Casino.
Nos. 14-2150 & 14-2287 45
Tribal Constitution.”62 Because the tribal court action does
not seek redress for any of Stifel’s consensual activities on
tribal land, it does not fall within Montana’s first exception.
3.
Finally, the Tribal Entities argue that the tribal court has
jurisdiction over the Financial Entities under the second
Montana exception. According to the Tribal Entities, the
bond transaction imperiled the Tribe’s ability to provide ser-
vices to its members. The Financial Entities’ actions, there-
fore, “threaten[] or ha[ve] some direct effect on the political
integrity, the economic security, or the health or welfare of
the tribe” and provide a basis for tribal court jurisdiction.
Montana, 450 U.S. at 566.
The Supreme Court discussed the second Montana excep-
tion in Strate, 520 U.S. at 458. The jurisdictional dispute in
Strate arose from a vehicle collision between two individu-
als, Fredericks and Stockert, on a portion of a North Dakota
state highway that ran through a reservation. Fredericks was
not a member of the tribe, but was the widow of a deceased
tribal member and had adult children who were tribal mem-
bers. Stockert, also a nonmember, was driving a truck be-
longing to his employer, A-1 Contractors, a non-Indian-
owned enterprise, which was under contract to perform
landscaping within the reservation. Fredericks filed a per-
sonal injury action against Stockert and A-1, and Freder-
icks’s children filed a loss-of-consortium claim in the same
lawsuit. The tribal court ruled that it had jurisdiction, and
62 R.1-14 (Tribal Court Statement of Claim) at 34.
46 Nos. 14-2150 & 14-2287
Stockert and A-1 proceeded to federal court, where they
sought a declaratory judgment that the tribal court lacked
jurisdiction and also sought an injunction against further
tribal court proceedings.
Before the Supreme Court, Fredericks asserted that the
tribal court had jurisdiction pursuant to Montana’s second
exception. The Supreme Court disagreed and explained:
Undoubtedly, those who drive carelessly on a
public highway running through a reservation
endanger all in the vicinity, and surely jeop-
ardize the safety of tribal members. But if Mon-
tana’s second exception requires no more, the excep-
tion would severely shrink the rule. Again, cases
cited in Montana indicate the character of the
tribal interest the Court envisioned.
…
Read in isolation, the Montana rule’s second
exception can be misperceived. Key to its proper
application, however, is the Court’s preface: “Indi-
an tribes retain their inherent power [to punish
tribal offenders,] to determine tribal membership, to
regulate domestic relations among members, and to
prescribe rules of inheritance for members… . But
[a tribe’s inherent power does not reach] beyond
what is necessary to protect tribal self-government
or to control internal relations.” Neither regulato-
ry nor adjudicatory authority over the state
highway accident at issue is needed to pre-
serve “the right of reservation Indians to make
their own laws and be ruled by them.” The
Nos. 14-2150 & 14-2287 47
Montana rule, therefore, and not its exceptions,
applies to this case.
Id. at 457–59 (citations omitted) (emphasis added); see also
Plains Commerce Bank, 554 U.S. at 335 (observing that the
regulations that it had approved of under Montana “all flow
directly from these limited sovereign interests,” namely
“tribal governance and internal relations”).
Here, the Tribal Entities do not point to any actions by
the Financial Entities that threatened the right of tribal
members “to make their own laws and be ruled by them.”
Strate, 520 U.S. at 459 (internal quotation marks omitted). In-
stead, they focus on the financial consequences of adhering
to freely negotiated commercial transactions. The Tribal En-
tities essentially maintain that the second Montana exception
applies whenever the economic effects of its commercial
agreements affect a tribe’s ability to provide services to its
members. Like the arguments made by Fredericks in Strate,
however, if the second exception were so broad, it would
swallow the general rule. The only questions raised in the
tribal court action are the enforceability of commercial
agreements; it does not address any on-reservation actions
by the Financial Entities, much less actions that threaten
tribal self-rule.
In sum, the district court did not err in concluding that
the Tribal Entities waived their sovereign immunity, that
tribal exhaustion was not required, and that the Financial
Entities had established a likelihood of success on the merits
of their claim that the tribal court lacked jurisdiction over
them. The district court, therefore, did not abuse its discre-
tion in granting the Financial Entities a preliminary injunc-
tion as to the tribal court proceedings.
48 Nos. 14-2150 & 14-2287
III
We turn now to Godfrey’s cross appeal. Before the dis-
trict court, Godfrey conceded, for purposes of the court’s
consideration of the preliminary injunction only, that it
could not fit within either of Montana’s exceptions. It argued
nevertheless that the tribal court lacked jurisdiction over it
based on the waiver provisions in the Bond Documents. Be-
cause Godfrey did not contend that “federal law ha[d] divest-
ed the tribal court of jurisdiction” over it,63 the district court
was not convinced that the general rule articulated in Na-
tional Farmers Union Insurance Cos. v. Crow Tribe of Indians,
471 U.S. 845, 852 (1985)—that “[t]he question whether an In-
dian tribe retains the power to compel a non-Indian property
owner to submit to the civil jurisdiction of a tribal court is
one that must be answered by reference to federal law and is
a ‘federal question’ under § 1331”—applied to Godfrey’s
claim.
Assuming that it lacked jurisdiction over Godfrey’s
claim, the district court turned to the question of supple-
mental jurisdiction under 28 U.S.C. § 1367(a). The district
court observed that it was likely to dispose of the Financial
Entities’ federal claims before a complete trial on the merits.
Consequently, the district court believed that “a presump-
tion ar[ose] in favor of relinquishing jurisdiction” over God-
frey’s supplemental claims.64
Finally, the court noted that, even if it “ignore[d] its ju-
risdictional concerns,” Godfrey had not “yet established a
63 R.175 at 34.
64 Id. at 38.
Nos. 14-2150 & 14-2287 49
substantial likelihood of success on the merits.”65 The court
believed that, “Godfrey’s case falter[ed] in too many ways
for the court to conclude” that it had met this burden.66 “In
any event,” the district court continued, “it ma[de] little
sense to exercise supplemental jurisdiction over Godfrey’s
claims given that there is a reasonable likelihood that this
court will not ultimately reach the merits of its claims.”67
A.
“We review questions of subject-matter jurisdiction de
novo,” see Johnson v. Cypress Hill, 641 F.3d 867, 873 (7th Cir.
2011), and we begin our jurisdictional analysis with the Su-
preme Court’s decision in National Farmers Union Insurance
Cos., 471 U.S. 845. In that case, the Court considered the issue
of whether a district court had jurisdiction to consider a trib-
al court’s exercise of jurisdiction over a non-Indian’s chal-
lenge to the tribal court’s exercise of jurisdiction. Specifically,
a tribal court had entered a default judgment against a state
school district after it failed to respond to a complaint
brought by a Crow Indian who had been struck by a motor-
cycle on school property. The school district and its insurer
subsequently sought an injunction in federal district court
against the tribal court proceedings, and the federal district
court granted the injunction. Without reaching the merits of
the underlying claim, the Ninth Circuit Court of Appeals re-
versed on the ground that “the District Court’s exercise of
65 Id. at 39.
66 Id. at 48.
67 Id.
50 Nos. 14-2150 & 14-2287
jurisdiction could not be supported on any constitutional,
statutory, or common-law ground.” Id. at 849.
The Supreme Court reached a different conclusion. It ex-
plained that, while at one time Indian tribes had “exercised
virtually unlimited power over their own members as well
as those who were permitted to join their communities,”
now “the power of the Federal Government over the Indian
tribes is plenary.” Id. at 851. Consequently, “[f]ederal law,
implemented by statute, by treaty, by administrative regula-
tions, and by judicial decisions, provides significant protec-
tion for the individual, territorial, and political rights of the
Indian tribes.” Id. The Court, therefore, concluded that “[t]he
question whether an Indian tribe retains the power to compel a
non-Indian property owner to submit to the civil jurisdiction of a
tribal court is one that must be answered by reference to fed-
eral law and is a ‘federal question’ under § 1331.” Id. at 852
(emphasis added). Consequently, because the school district
and its insurer “contend[ed] that federal law ha[d] divested
the Tribe of this aspect of sovereignty, it is federal law on
which they rel[ied] as a basis for the asserted right of free-
dom from Tribal Court interference. They have…filed an ac-
tion ‘arising under’ federal law within the meaning of
§ 1331.” Id. at 852–53.
The district court believed that “Godfrey’s claims do not
fall neatly within th[is] language,” because Godfrey con-
tends that state contract law, not federal law, “foreclosed
[the Tribal Entities] from invoking tribal court jurisdic-
tion.”68 We have been unable to locate, however, any author-
ities that support the distinction drawn by the district court.
68 Id. at 34.
Nos. 14-2150 & 14-2287 51
It is well recognized that “[f]ederal question jurisdic-
tion…extends to…claims that the exercise of tribal authority
impermissibly exceeds the federal common-law limits im-
posed by the Supreme Court.” Cohen’s Handbook of Federal
Indian Law § 7.04(1)(a), p.613 & n.11 (Nell Jessup Newton ed.,
2012) (citing National Farmers Union Ins. Cos., 471 U.S. at 852–
53). Indeed, in every case cited by the parties, the court de-
termined that the scope of tribal court authority, even where
allegedly circumscribed by contract, raised a federal question
under § 1331. See Gaming World Int’l, Ltd. v. White Earth Band
of Chippewa Indians, 317 F.3d 840, 848 (8th Cir. 2003) (“[A]n
action filed in order to avoid tribal court jurisdiction necessarily
asserts federal law. It is well established that the scope of tribal
court jurisdiction is a matter of federal law.”(emphasis add-
ed) (citation omitted)); Ninigret Dev. Corp. v. Narraganset In-
dian Wetuomuck Hous. Auth., 207 F.3d 21, 28 (1st Cir. 2000)
(holding, in the context of dispute in which tribe’s adjudica-
tive authority allegedly was limited by contract, that “‘fed-
eral courts have authority to determine, as a matter “arising
under” federal law,’ the limits of a tribal court’s jurisdiction”
and “[t]he fact that a plaintiff’s claims are not premised on
federal law does not alter this result” (quoting El Paso Natu-
ral Gas Co. v. Neztsosie, 526 U.S. 473, 483 (1999))); Bruce H.
Lien Co. v. Three Affiliated Tribes, 93 F.3d 1412, 1421–22 (8th
Cir. 1996) (noting that among the “aspects of the dispute”
that raised a federal question was the fact that “this case is
being directed to the Tribal Court and exhaustion within
that system” and further observing that “[t]he existence of
tribal court jurisdiction itself presents a federal question
within the scope of 28 U.S.C. § 1331”); cf. Arizona Publ. Serv.
Co. v. Aspaas, 77 F.3d 1128, 1132 (9th Cir. 1996) (holding that,
in context of a challenge to a tribe’s legislative authority over
52 Nos. 14-2150 & 14-2287
a non-Indian that was allegedly limited by contract, “a non-
Indian challenging an exercise of tribal adjudicatory or legis-
lative power states a claim that arises under federal law”).69
Following the lead of our sister circuits, therefore, we
agree with Godfrey that the district court had subject matter
jurisdiction to consider Godfrey’s challenge to tribal court
jurisdiction, even though that challenge is rooted in the lan-
guage of the Bond Documents. The district court therefore
had subject matter jurisdiction over Godfrey’s claim that the
tribal court did not have jurisdiction to consider the merits
of the claim against it.70
69 In the present action, the district court discounted Bruce H. Lien v.
Three Affiliated Tribes, 93 F.3d 1412 (8th Cir. 1996), and Gaming World In-
ternational, Ltd. v. White Earth Band of Chippewa Indians, 317 F.3d 840 (8th
Cir. 2003), because, “to the extent that the [Federal Arbitration Act]’s pol-
icy in favor of arbitration supported divestment of tribal jurisdiction, the
defendants in both cases ‘relied’ on federal law ‘as a basis for the assert-
ed right of freedom from Tribal Court interference.’” R.175 at 36 (quoting
Nat’l Farmers Union Ins. Cos., 471 U.S. at 853). Two considerations, how-
ever, prevent us from embracing this distinction. First, neither Bruce H.
Lien nor Gaming World International rests its analysis on the federal policy
in favor of arbitration embodied in the Federal Arbitration Act. Second,
the Federal Arbitration Act does not create federal jurisdiction: “As for
jurisdiction over controversies touching arbitration, the [Federal Arbitra-
tion] Act does nothing, being something of an anomaly in the field of
federal-court jurisdiction in bestowing no federal jurisdiction but rather
requiring an independent jurisdictional basis.” Hall Street Assocs., L.L.C.
v. Mattel, Inc., 552 U.S. 576, 581–82 (2008) (internal quotation marks omit-
ted).
70 Because the district court reached a contrary conclusion, it proceeded
to consider whether it should exercise supplemental jurisdiction over
Godfrey’s claims under 28 U.S.C. § 1367(a). As noted previously, it was
reluctant to do so given that the Financial Entities’ claims likely would be
resolved prior to trial. We need not address that conclusion.
Nos. 14-2150 & 14-2287 53
B.
Although the district court did not identify a single, de-
fining rule of law that precluded Godfrey from prevailing on
the merits, it had an overall unease about granting prelimi-
nary injunctive relief: “Godfrey’s case falters in too many
ways for the court to conclude [that] it has demonstrated the
requisite likelihood of success.”71 Yet, our own study of the
district court’s explanation of Godfrey’s claims reveals as
well a disquietude with the Tribal Entities’ arguments.72 Now
that we have rejected, definitively, the Tribal Entities’ gen-
eral contentions with respect to the tribal court’s exercise of
jurisdiction over all of the parties, including Godfrey, we
turn to the one argument, unique to Godfrey, which we have
not addressed: that Godfrey cannot invoke the forum selec-
tion clauses in the Bond Documents because it is not a party
to the bond transaction.73
71 R.175 at 48.
72 See id. at 41 (identifying “a number of flaws in [the Tribal Entities’]
argument”); id. at 44 (noting that it “would be disinclined” to accept a
position of the Tribal Entities); and id. at 46 (observing that the Tribal
Entities’ arguments for “void[ing] the Specimen Bond are somewhat less
persuasive”).
73 Specifically, the Tribal Entities assert that “Godfrey’s repeated reliance
on [the forum selection] clauses is misplaced because it lacks standing to
enforce them. Godfrey did not bargain for forum-selection rights in the
Bond Documents or in the general-counsel contract that governed its re-
lationship with the Tribal [Entities]. SA-1061-62.” Appellants’ Reply Br.
53. The Tribal Entities do not make any further argument or provide any
additional explanation as to the effect or limitations of the general-
counsel agreement on the Bond Documents. “We repeatedly have made
clear that perfunctory and undeveloped arguments…are waived… .”
United States v. Berkowitz, 927 F.2d 1376, 1384 (7th Cir. 1991). Moreover,
54 Nos. 14-2150 & 14-2287
In Adams v. Raintree Vacation Exchange, LLC, 702 F.3d 436
(7th Cir. 2012), we reiterated that the test for whether a non-
party to a contract can enforce—and be bound by—a forum
selection clause “is whether the nonparty is ‘closely related’
to the suit.” Id. at 439. Acknowledging that this is a “vague
standard,” we noted that “it can be decomposed into two
reasonably precise principles”: “‘affiliation’ and ‘mutuali-
ty,’” either of which is sufficient to allow a nonparty to in-
voke a forum selection clause. Id.
The Tribal Entities do not maintain either that Godfrey
lacks a close affiliation with them, the bond transaction, or
the Bond Documents. Instead, they contend that “affilia-
tion,” as we employed that term in Adams, really means a
“parent or subsidiary” relationship to the party of a contract,
and Godfrey is not related either to the Tribal Entities or to
the Financial Entities in this way.74 The Tribal Entities, how-
ever, do not point to any case in which we have limited “af-
filiation” to entities that are only related through corporate
structure.
the tribal court action does not seek to hold Godfrey liable for its advice
or actions as general counsel, but only its actions as bond counsel. See
R.1-14 at 10 (“Godfrey would retain $125,000 of Bond proceeds as its fee
for serving as Bond Counsel”); id. at 14 (“Stifel and Godfrey Press the
Tribe to Approve the Bond Transaction”); id. at 23 (“Godfrey incorrectly
opined that the Bond Documents did not require NIGC approval.”); id. at
29–34 (requesting relief in the form of a declaration that the Bond Docu-
ments and the bond transaction are void under Tribal law and under the
IGRA). As explained above, the forum selection clauses in the Bond
Documents are written in the broadest terms so as to encompass any dis-
pute or controversy arising out of the bond transaction, including claims
against Godfrey as bond counsel. See supra 34.
74 Appellants’ Reply Br. 54.
Nos. 14-2150 & 14-2287 55
Similarly, with respect to “mutuality,” the Tribal Entities
do not quarrel with the proposition that Godfrey would
have been held to the forum selection clause had it been
sued by another party. Instead, the Tribal Entities maintain
that “mutuality” is limited to the idea that “secret princi-
pal[s]” and “co-conspirator[s]” may “enforce a forum-
selection clause of its partner or puppet.”75 Again, there is
nothing in our case law that suggests that “mutuality” is
limited to these situations. Rather, these situations simply
represent the factual scenarios in which we have been called
upon to apply the general principal of mutuality. See Adams,
702 F.3d at 442–43; Frietsch v. Refco, Inc., 56 F.3d 825, 827 (7th
Cir. 1995).
Here, where it is clear that Godfrey was intimately in-
volved in the negotiations leading to, and the documents
embodying, the bond transaction, and where the Tribal Enti-
ties do not take exception to the conclusion that Godfrey
would be bound by the forum selection clauses in the Bond
Documents, we believe that the concepts of affiliation and
mutuality are met.
Moreover, we believe that this is a particularly appropri-
ate case to allow a nonparty to invoke a forum selection
clause. Godfrey was not simply counsel to the Tribal Enti-
ties, it was bond counsel to the transaction. As one commen-
tator has observed, “[a]lthough bond counsel is usually re-
tained by the issuer, bond opinions must be completely ob-
jective, since they will not serve the function of facilitating
the sale of bonds unless they are accepted as reliable in the
bond market.” 2 James A. Coniglio & M. David Gelfland,
75 Id. (internal quotation marks omitted).
56 Nos. 14-2150 & 14-2287
State & Federal Government Debt Financing § 16.16 (2d ed.
2015). Indeed, some courts have recognized that “an attor-
ney who issues an opinion letter for the purpose of inducing
a non-client to purchase municipal notes or bonds can be li-
able for negligent misrepresentation when the opinion letter
contains material misstatements of fact.” Mohaffy, Rider,
Windholz & Wilson v. Central Bank of Denver, 892 P.2d 230, 233
(Col. 1995);76 cf. Restatement (Third) of the Law Governing
Lawyers § 51(2)(a) (2000) (stating that a lawyer owes a duty
of care to a nonclient when the lawyer or his client “invites
the nonclient to rely on the lawyer’s opinion…and the non-
client so relies”).
Additionally, as the district court explained:
[W]hile [the Tribal Entities] have sued Godfrey
in [tribal] court, they assert no claims against
Godfrey. Rather, Godfrey is a defendant in that
suit for the sole purpose of binding them to
any determination regarding the validity of the
Bond Documents, even though defendants
contend in this court that Godfrey is a
“stranger” to those documents. Essentially, de-
76 The general rule in Wisconsin is that “an attorney c[an] not be held
liable to third parties for any acts committed within the scope of an at-
torney-client agency relationship.” Green Spring Farms v. Kersten, 401
N.W.2d 816, 823 (Wis. 1987). However, the Wisconsin courts have devi-
ated from the general rule, and the following factors have guided that
determination: “(1) the extent to which the transaction was intended to
affect the plaintiff; (2) the foreseeability of harm to the plaintiff; (3) the
degree of certainty that the plaintiff suffered harm; (4) the nexus between
the defendant’s conduct and the plaintiff’s harm; and (5) the policy of
preventing future harm.” Id.
Nos. 14-2150 & 14-2287 57
fendants have obliged Godfrey to defend the
Bond Documents’ validity in tribal court while
maintaining in this court that those documents
give Godfrey no enforceable rights. Those posi-
tions are inconsistent, and the court would be
disinclined to foreclose Godfrey from the bene-
fit of the documents’ forum selection clause
given the nature of the tribal court action.[77]
We do not perceive any jurisdictional or legal impedi-
ments to Godfrey’s relying on the forum selection clauses in
the Bond Documents.78 We therefore reverse the judgment of
the district court denying Godfrey a preliminary injunction.
Because the district court determined that Godfrey was
not likely to succeed on the merits of its claim, the district
court did not reach the other elements of the preliminary in-
junction analysis, namely whether Godfrey had an adequate
remedy at law, whether Godfrey would suffer irreparable
harm, whether the balance of harms weighed in favor of an
injunction, and whether issuing a preliminary injunction
was in the public interest. See, e.g., Ferrell v. U.S. Dep’t of
Hous. & Urban Dev., 186 F.3d 805, 811 (7th Cir. 1999). We
therefore remand this action to the district court so that it
may complete this analysis and determine whether a prelim-
inary injunction should issue in favor of Godfrey.
77 R.175 at 44 (internal citation omitted).
78We do note that this aspect of the case would have been much simpler
had there been a specific forum selection clause in the Bond Documents
governing disputes involving bond counsel.
58 Nos. 14-2150 & 14-2287
Conclusion
We conclude that there were no impediments to the dis-
trict court’s consideration of the Financial Entities’ and God-
frey’s challenges to tribal court jurisdiction. Our decision in
Altheimer & Gray forecloses the Tribal Entities’ argument that
exhaustion of tribal court remedies was required. Similarly,
we conclude that the Bond Documents contain valid and ef-
fective waivers of the Tribal Entities’ sovereign immunity.
With respect to the merits of the Financial Entities’ mo-
tion for a preliminary injunction, the district court correctly
concluded that the Financial Entities were likely to succeed
on the merits of their claim that the tribal court lacked juris-
diction over them. We therefore affirm the judgment of the
district court with respect to the grant of preliminary injunc-
tive relief to the Financial Entities.
We reverse, however, the district court’s denial of prelim-
inary injunctive relief to Godfrey. The district court erred in
concluding that it lacked subject matter jurisdiction over
Godfrey, and that error colored its view of Godfrey’s likeli-
hood of success on the merits. Godfrey, like the Financial En-
tities, may invoke the forum selection clauses in the Bond
Documents and, consequently, is likely to succeed on its
claim that the tribal court lacks jurisdiction over it in this
bond-related action. We therefore remand to the district
court for further proceedings to determine whether, given
the other preliminary-injunction factors, an injunction
should issue in favor of Godfrey.
AFFIRMED IN PART;
REVERSED AND REMANDED IN PART