Bruce H. Lien Co. v. Three Affiliated Tribes , 93 F.3d 1412 ( 1996 )

No. 95-3916
BRUCE H. LIEN COMPANY *
*
Plaintiff - Appellant *
* Appeal from the United States
vs. * District Court for the
* District of North Dakota
THREE AFFILIATED TRIBES; *
RUSSELL D. MASON, SR., as *
member of the Three Affiliated *
Tribal Business Council; MARTY *
FOX; DAYLON SPOTTED BEAR, as *
member of the Three Affiliated *
Tribal Business Council; IVAN *
JOHNSON, as member of the Three *
Affiliated Tribal Business *
Council; AUSTIN GILLETTE, as *
member of the Three Affiliated *
Tribal Business Council; GEORGE *
FAST DOG, as member of the *
Three Affiliated Tribal Business*
Council; ED HALL, as member of *
the Three Affiliated Tribal *
Business Council; P. DIANE *
AVERY, District Judge of the *
Tribal Court of the Three *
Affiliated Tribes *
*
Defendants - Appellees *
No. 96-1013
BRUCE H. LIEN COMPANY, *
* Appeal from the United States
vs. * District Court for the
* District of North Dakota
Plaintiff - Appellee *
*
THREE AFFILIATED TRIBES; *
RUSSELL D. MASON, SR., as *
member of the Three Affiliated *
Tribal Business Council; MARTY *
FOX; DAYLON SPOTTED BEAR, as *
member of the Three Affiliated *
Tribal Business Council; IVAN *
JOHNSON, as member of the Three *
Affiliated Tribal Business *
Council; AUSTIN GILLETTE, as *
member of the Three Affiliated *
Tribal Business Council; GEORGE *
FAST DOG, as member of the *
Three Affiliated Tribal Business*
Council; ED HALL, as member of *
the Three Affiliated Tribal *
Business Council; *
*
Defendants - Appellants *
*
P. DIANE AVERY, District Judge *
of the Tribal Court of the Three *
Affiliated Tribes *
*
Defendant *
Submitted: June 13, 1996
Filed: August 28, 1996
Before BOWMAN and HEANEY, Circuit Judges, and BOGUE,* Senior
District Judge.
BOGUE, Senior District Judge.
The Bruce H. Lien Company (Lien or the Company) appeals the District
Court's refusal to compel arbitration in Lien's dispute with the Three
Affiliated Tribes (Tribes) over matters concerning a tribal gaming
operation. The Tribes appeal the District Court's
*
The HONORABLE ANDREW W. BOGUE, Senior United States
District Judge for the Western Division of the District of South
Dakota, sitting by designation.
2
denial of their motion to dismiss. For the reasons stated below, we affirm
in part and reverse in part.
I.
The parties to this dispute came together for the purpose of
constructing and operating a tribal casino on trust lands within the
boundaries of the Fort Berthold Indian Reservation in North Dakota. The
modern era of tribal gaming in this country was ushered in with the 1988
passage of the Indian Gaming Regulatory Act, 25 U.S.C. § 2701 et. seq.
(IGRA). The Tribes1 and Lien entered into a management contract pursuant
to IGRA, 25 U.S.C. § 2511, whereby Lien was to assist in the financing,
construction and management of the Tribes' casino at Four Bears Motor Lodge
in exchange for a share of the profits of the operation. The agreement was
executed by Wilbur Wilkinson and John Rabbithead on behalf of the Tribes,2
and Bruce Lien and Kent Mundon, for the Company.
The agreement was submitted to the Area Director of the Bureau of
Indian Affairs (BIA), said agency having interim authority under IGRA to
1
The Mandan, Hidatsa, and Arikara collectively comprise the
Three Affiliated Tribes and are federally recognized Indian
tribes which exercise their sovereignty under a federally
approved constitution adopted pursuant to the Indian
Reorganization Act of 1934, 25 U.S.C. §§ 461-479.
2
The Tribes' constitution places governing authority in a
Tribal Business Council (TBC). At the time the agreement was
executed Wilkinson and Rabbithead were the TBC's Chairman and
Secretary, respectively.
3
approve gaming management contracts. 25 U.S.C. §§ 81 and 2709.3 After
receiving reports and commentary from the Office of
3
As discussed in greater detail later, IGRA established the
National Indian Gaming Commission (NIGC), which was granted
overall regulatory authority for Indian gaming conducted pursuant
to IGRA. 25 U.S.C. § 2704. IGRA also created the position of
Chairman of the NIGC, and granted said person certain enumerated
powers. 25
U.S.C. § 2705. Prior to the time the NIGC was organized and its
regulations promulgated, the Secretary of Interior was granted
the interim authority for supervision of Indian gaming. 25
U.S.C. § 2709. IGRA provides that the NIGC was to ultimately
review each contract approved by the Secretary of the Interior.
25 U.S.C. §§ 2712(a) and (c)(1). The NIGC was organized on or
about February 22, 1993, with the publication of its regulations
found at 25 CFR 530 et. seq.
4
the Solicitor, Department of the Interior, the agreement was approved by
the BIA's Area Director on February 19, 1993. Construction began shortly
thereafter with the casino beginning operations on July 16, 1993. There
is evidence in the record to indicate the casino has been a financial
success.
The management contract at issue provides for a five-year term with
a two-year extension which Lien has exercised. Lien was required to invest
the funds necessary to remodel the Four Bears Motel and Lodge and build a
gaming casino, with the Tribes maintaining a proprietary interest in the
property and facilities. The contract provided for the repayment to the
company of the investment incurred in the construction of the facility,
amortized over the initial five-year term of the contract. The contract
further provided for the payment of the expenses of operation of the
facility and provided for the split of any remaining profits, sixty percent
to the Tribes and forty percent to Lien.
Regarding the issues of dispute resolution and sovereign immunity,
the agreement provides that all disputes arising out of the agreement shall
be subject to binding arbitration, that the arbitration process is deemed
sufficient to exhaust the parties' tribal court remedies, and that,
relative to the agreement's dispute resolution procedure, the Tribes waive
their sovereign immunity.4
4
Specifically, the agreement provides:
14. ARBITRATION, PROCEDURE, AND SOVEREIGN IMMUNITY
The parties recognize and acknowledge that the Three
Affiliated Tribes, as Owner, is the governmental
authority vested with the power to carry our
governmental functions within the jurisdictional
boundary of the Three Affiliated Tribes. The Owner,
having full governmental authority on tribal trust
land, hereby agrees as set forth herein below, to
relinquish and waive any and all rights, powers,
authorities, and defenses, that are vested in or
available to Owner because of Owner's governmental
immunity. Therefore, to the extent set forth herein,
Owner Agrees that:
5
The agreement also provides that, pending arbitration of a dispute arising
out of the agreement, either party may seek injunctive relief in the
District Court of North Dakota.
After the gaming enterprise was up and running, Mr. Wilkinson lost
his bid to be re-elected to the TBC. Many of the new faces on the TBC
sought to review the actions of the former administration, including the
management contract for the Four Bears Casino. Specifically, some question
arose regarding Wilkinson's authority to bind the Tribes to the agreement.
Although the casino appeared to operating to the financial benefit of both
sides, disagreements
14.1 Any disputes, controversy, or claims between [the
Tribes] or [Lien], arising out of or relating to this
Agreement, and any breach thereof, whether material or
otherwise, shall be submitted to final and binding
arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration
Association ... . The parties further agree that by
submitting this dispute to arbitration, this procedure
shall constitute a full and complete exhaustion of all
remedies available by and between the parties in Tribal
Court. The arbitration decision shall be a final
decision and shall be entered as Judgment in Tribal
Court. The Judgment, without modification and
unaltered, may be enforced through the Tribal Court
system.
* * *
[The Tribes] [are] consenting to and specifically
limiting [their] governmental immunity and powers, as
it relates to governmental functions, the extent that
all such legislative, administrative, ordinances,
rulings, or decisions of Owner, during the term of this
Agreement, which, in any way, shall impact the rights
of Manager under the terms of this Agreement, shall be
subject to arbitration as set forth herein.
6
arose between the parties. Lien believed it was entitled to recapture
$2.28 million in construction and start up costs over that provided in the
contract. The Tribes, through their Tribal Gaming Commission, dramatically
increased licensing fees charged to Lien.
On January 31, 1995, Lien filed a demand for binding arbitration
pursuant to the management agreement, seeking resolution of the
5
construction costs and license fees issues. Under the agreement,
arbitration was to take place in front of a three-member panel comprised
of two party-appointed arbitrators and a third neutral arbitrator agreed
upon by both parties. After some delay both sides had their party
arbitrators in place and a neutral arbitrator was selected.
On June 27, 1995, the NIGC "called in" the management contract,
notifying the parties that it would be conducting its mandatory review of
the contract and requested all documentation be submitted within sixty
days. See 25 C.F.R. Part 533.1 et. seq. The Tribes thereafter sought a
postponement of the arbitration proceedings pending NIGC review of the
contract. Lien objected to the postponement. The arbitration panel, by
two to one vote, denied the Tribes' request for postponement.
On October 2, 1995, the Tribes filed an action in the Three
Affiliated Tribes' District Court (Tribal Court). The Tribal Court
complaint sought a declaration that the management contract signed by
former Chairman Wilkinson is null and void under Tribal law due to lack of
proper authority and failure to garner approval by the
5
An amended demand for arbitration requested determination
of whether the Tribes had materially breached the management
contract, sufficient to justify termination of the same. Lien
sought damages in the amount of $25,500,943.00, as well as
exemplary damages.
7
TBC.6 The Tribes further sought a preliminary injunction enjoining the
arbitration process until such time that the Tribal Court had ruled on the
Tribes' complaint or the NIGC had completed its review of the management
contract. Lien, by special appearance in Tribal Court, moved to dismiss
the complaint for lack of jurisdiction and argued against the
appropriateness of the injunction. On October 6, 1995, Tribal Judge Diane
Avery, defendant below, found that the Tribal Court had jurisdiction to
hear the matter and enjoined Lien and the American Arbitration Association:
from arbitrating disputes which have arisen under a management
agreement between [Lien] and the Three Affiliated Tribes until
such time that the National Indian Gaming Commission has
completed its review of the Agreement and the parties have
completed any changes in the Agreement which the National
Indian Gaming Commission may require, or this Court has ruled
on the Tribe's Complaint relative to that Agreement, whichever
is sooner.7
Approximately one week later, Lien filed suit in the United States
District Court for the District of North Dakota. Lien requested a
preliminary injunction to enforce the arbitration proceedings pursuant to
the management contract, and to enjoin the Tribes, its officials and the
Tribal Court Judge from interfering in the arbitration process. Lien also
moved the District Court to compel arbitration pursuant to the Federal
Arbitration Act, 9 U.S.C. § 1 et. seq. The Tribes moved to dismiss based
on lack of subject matter jurisdiction claiming that tribal remedies had
not
6
The Tribes' complaint further prays the Tribal Court for
"[a]n order directing that an accounting of all monies paid to
Company under the terms of the alleged agreement and the full
repayment by the Company of any and all such monies paid
thereunder to the Tribe." Tribes' appendix at 88.
7
Appeals from the decisions of the Tribal Court are taken to
the Northern Plains Intertribal Court of Appeals, seated in
Aberdeen, South Dakota. No appeal was taken from the Tribal
Court's October 6, 1995, order.
8
been exhausted and that the Tribes had not waived their sovereign immunity.
The Tribes also argued against the merits of Lien's requested injunctive
relief. Tribal Judge Avery filed a separate motion to dismiss.
The district court recognized that while both sides would seem to
have common objectives, their respective actions belie that assumption.
The District Court believed that the NIGC had "exclusive jurisdiction for
a first determination of [the management contract's] compliance and
validity." Bruce H. Lien Co. v. Three Affiliated Tribes, No. A4-95-135,
mem. and order nunc pro tunc at 8 (D.N.D. Nov. 9, 1995). Based on this
belief, the District Court noted that "[c]ommon sense dictates that
everyone cool down until the NIGC has taken action on the contract approval
with or without requirements for modification." Id. at 6. Relevant to the
present appeal, the court ultimately found; i) that it had federal question
jurisdiction, ii) that the NIGC has exclusive initial jurisdiction to
determine the validity of the contract, iii) that the Tribal Court's
injunction, while possibly "in excess of the jurisdiction of the Tribal
District Court," was a permissible means of maintaining the status quo, iv)
that Lien's motion for preliminary injunction to compel arbitration would
be denied, and, v) that Tribal Judge Avery would be dismissed from the
action. In a supplemental order, the District Court ruled that the Tribes'
motion to dismiss the federal action based on sovereign immunity and/or
comity was denied.
Both sides filed notice of appeal. Lien argues the District Court
erred in failing to compel arbitration pursuant to the management contract
and in refusing to enjoin the Tribal defendants, including the Tribal
Judge, from assuming jurisdiction over any portion of the controversy. The
Tribes cross appealed contending the District Court erred in holding it
possessed federal question subject matter jurisdiction, and in failing to
dismiss the action on the grounds of sovereign immunity or comity.
9
II.
This is a troubling action in that it presents a "tale of two cases"
quandary. If the management contract is legally valid, our course is
simple. The Tribes have clearly and unequivocally waived their sovereign
immunity under the contract and the parties have chosen binding arbitration
as a dispute resolution procedure. The District Court of North Dakota was
the selected forum in which to bring an action for injunctive relief and
that forum would clearly have jurisdiction to enforce the provisions of the
contract. The problem is that the Tribes are challenging the legal
validity of the contract itself, specifically the actions of its former
Chairman leading to the execution of the contract. This challenge to the
document itself therefore calls into question all provisions contained
therein (including provisions relating to arbitration, sovereign immunity,
and federal district court jurisdiction).
Further compounding the problem is the matter of the NIGC's review
of the management contract and the District Court and parties' perceived
role of that agency relative to the issues before the court. Fundamental
in the District Court's, and to some extent the Tribal Court's, analysis
was the belief that the NIGC had the authority and would, in fact, resolve
the question of whether or not the management contract was legally valid,
i.e., whether former Chairman Wilkinson had the authority to enter into the
contract on behalf of the Tribes. This, we believe, is where the District
Court is in error. Our interpretation of IGRA and the regulations
promulgated thereunder lead to the conclusion that disposition regarding
the legal validity of the management contract is beyond the authority of
the NIGC. It further appears obvious that resolution of any or all
collateral issues would be pointless until a decision regarding the
validity of the contract is achieved. That being the case, the issue
becomes where the decision regarding the contract's validity is to be made.
In the end we are convinced that the question must first be promptly
10
addressed in the Tribal Court, subject to appropriate review by the
District Court.
To this end, we will examine management contracts under IGRA, their
approval and review in general and in this particular instance, with the
purpose of highlighting the considerations within and outside the authority
of the federal agencies.
A. Management contracts under IGRA
IGRA is a vast piece of legislation enacted in part as a means "to
provide a statutory basis for the operation of gaming by Indian tribes as
a means of promoting tribal economic development, self-sufficiency, and
strong tribal governments." 25 U.S.C. § 2702(1). This circuit has
recently held that IGRA completely preempts the field of Indian gaming vis
a vis state law. Gaming Corp. of America v. Dorsey & Whitney, 88 F.3d 536
(8th Cir. 1996) (specifically holding that "IGRA has the requisite
extraordinary preemptive force necessary to satisfy the complete preemption
exception to the well-pleaded complaint rule.").
The text of IGRA authorizes tribes to enter into management contracts
for the operation and management of tribal gaming ventures. 25 U.S.C. §
2711(a)(1).8 IGRA and its regulations further prescribe essential terms
which must be contained in a management contract before the same can be
"approved" by the NIGC's Chairman (or the Secretary of the Interior for
contracts, like the present, which were submitted prior to NIGC
organization). 25
8
As a precursor to any tribal gaming venture involving Class
II or Class III gaming, see Shakopee Mdewakanton Sioux Community
v. Hope, 16 F.3d 261, 263 (describing the distinction between the
various classes of gaming under IGRA), the governing body of the
tribe must adopt an ordinance or resolution concerning the gaming
activities. 25 U.S.C. §§ 2710(b)(1)(B), (d)(1)(A). These tribal
ordinances are subject to approval by the NIGC and must be in
place before a management contract can be approved.
11
U.S.C. § 2711(b)(1-6); 25 C.F.R. Part 531.1(a-n).9 Along with the presence
of an adequate tribal ordinance regarding gaming and satisfactory
background checks for individuals and entities representing management
parties, 25 U.S.C. § 2711(a), the presence of the various essential
contract terms is critical regarding federal approval of management
contracts.
B. NIGC review of existing management contracts
The management contract at issue in the present case was approved by
the BIA Area Director, on behalf of the Secretary of the Interior, on
February 19, 1993. IGRA and the rules and regulations of the NIGC require
that all management contracts approved prior to the organization of the
NIGC be reviewed and approved by that agency's Chairman. 25 U.S.C. §
10
2512. During
9
The text of IGRA lists six essential terms to be included
before a management contract may be approved, in addition to
requiring a term that indicates management fees shall not
constitute more than forty percent of a gaming enterprise's net
revenues. On March 5, 1992, the Assistant Secretary of Interior
sent a memorandum to all BIA Area Directors which provided fairly
exhaustive guidelines to govern federal review and approval of,
inter alia, management contracts. Lien's Appendix at 96-111. 25
C.F.R. §§ 531.1, 531.2, and 533 appear to synthesize the text of
IGRA and the Department of Interior memorandum and represents the
current guiding principles regarding essential terms and federal
approval of management contracts.
10
We note that the text of 25 U.S.C. § 2512 addresses review
by the NIGC's Chairman of management contracts entered into
"prior to the enactment of this Act [enacted Oct. 17, 1988], ...
." Strictly speaking there appears to be a gap in the NIGC's
review authority for contracts entered after the passage of IGRA,
but before the NIGC was completely organized (February 22, 1993).
The management contract at issue in the present case, approved
February 19, 1993, would fall within this gap period and
apparently Lien has questioned the authority of the NIGC's review
in this instance. The NIGC itself clearly believes it has review
and approval authority over any management contract approved by
the Secretary, regardless of when the approval took place.
Various correspondence by the agency to the parties bears this
conclusion out. Tribes' appendix at 457-58; Lien appendix at 86-
12
the review process, many of the same criteria required for the Secretary's
approval are examined by the Chairman of the NIGC. 25 U.S.C. § 2712(c)(1-
2) (directing the Chairman to "subject [the existing] contract to the
requirements and process of [25 U.S.C. § 2711]"). Again, a contract's
approval by the Chairman depends on, inter alia, satisfactory background
checks and compliance with the essential terms outlined in IGRA and the
regulations. 25 C.F.R. §§ 533.6 (approval procedure), 533.3 (materials and
documentation to be submitted when contract called in), 531.1(a-n)
11
(denoting required essential contract terms).
So while approval of a management contract, either by the Secretary
of the Interior or the Chairman of the NIGC, entails a fairly comprehensive
and exhaustive examination of the document and surrounding circumstances,
in the end compliance with IGRA and the regulations is the sole focus. Has
all of the proper documentation been submitted? Does the document contain
provisions addressing the required essential topics? Do the backgrounds
of "interested parties" check out? We essentially agree with Lien's
assessment that "[t]he review is not more than a paper review to test the
sufficiency of the documents submitted to the Secretary of the Interior in
the first instance and to review whether the management agreement meets the
required contents [specified under IGRA]." Appellant's Brief at 42.
Despite the breadth of the approval and review process, passing on the
legal validity of the document (as opposed to approval for a contract
seemingly in compliance with IGRA and the regulations) is not within the
scope of the administrative bodies.
87. We believe this issue is not before us, but note that a
permissible agency interpretation
on this issue would merit considerable deference. Arkansas AFL-
CIO v. FCC, 11 F.3d 1430, 1441 (8th Cir. 1993).
11
It should be noted that during the NIGC's review process
of contracts previously approved, all contracts approved by the
Secretary of the Interior remain effective until approved or
disapproved by the Chairman of the NIGC. 25 C.F.R. § 533.1(c).
13
C. NIGC action in the present case
The NIGC called in the management contract at issue by letter to the
parties on June 27, 1995. All requested materials and documentation,
including the contract itself, were submitted by the parties. It was
during the NIGC's review process that the Tribes sought to have the
arbitration initiated by Lien postponed. Failing that, the Tribes filed
an action in Tribal Court believing a course enjoining the arbitration was
required pending the completion of the NIGC's review. The Tribal Court for
the most part agreed and attempted to maintain the status quo until the
review was complete or a ruling on the merits of the Tribes' complaint was
achieved. The District Court below as well relied heavily on the NIGC
review in denying Lien's motion to compel arbitration.
After briefing was complete in the present appeal, the NIGC issued
a letter dated May 17, 1996, to both parties indicating that the initial
review of the management contract and the casino operation was completed.
This correspondence was made part of the present record pursuant to
Fed.R.App.P. 28(j). While the NIGC indicated that modifications to the
contract were necessary for it to be in full compliance with IGRA,12 the
much-anticipated pronouncement said nothing regarding former Chairman
Wilkinson's authority at the time the contract was executed, nor about
whether or not a decision was forthcoming regarding the contract's legal
validity.
12
Deficiencies noted included the lack of a tribal gaming
license for the Four Bears Casino, and the lack of background
checks and licensing for certain "key employees" in the casino
operation. It is apparent the NIGC considers the deficiencies
serious and threatened the parties with the full panoply of
regulatory sanctions, including a shut down of the casino, if the
deficiencies are not remedied.
14
To end all doubt as to its position on the issue, the NIGC sent a
second letter to the parties on July 10, 1996, which states "the NIGC will
not consider the authority of former Chairman Wilkinson to enter into the
contract on behalf of the Tribe at this time since that question is
properly before the tribal court ... ."
III.
So here we are. These parties, initially associated for the purposes
of mutual profit and well being, are now fighting it out on three fronts
(tribal court, federal court, and the NIGC) over a number of issues, with
perceptively little hope of a quick or inexpensive resolution.13 Two
courts have this dispute on active status; the NIGC continues its review
and continues in its attempt to bring the contract and gaming operation
into compliance with IGRA; arbitrators, once chosen, presumably await
notification that their activity is to resume. The vessel which is the
orderly administration of justice is leaking all over and making a big
mess.
13
We feel constrained to note the feelings of the District
Court relative to the need for the parties, even at this late
date, to resolve their differences. We concur whole heartedly
with the thoughtful observations of such Court. Even at this
advanced stage of the conflict, it is difficult to determine the
underlying reason for this lawsuit. Whether it is a matter of
greed, stupidity, a lack of understanding of the legal
responsibilities of the parties hereto, a combination of all
three, or none of the above, is something only history will
ultimately clarify. One thing is certain, however, the dispute
at present is only the tip of the iceberg. More, much more, will
come about by way of legal maneuvering unless there is more give
and take on the part of both sides to this conflict. Much is at
stake here, including employment for hundreds of people and the
financial rewards to both sides of a successful business. It is
not beyond the realm of possibility that the business presently
existing will be forced to close its doors. The NIGC has noted
such in its correspondence to the parties. Having said this, it
is our fervent hope that reason will prevail.
15
Our examination leads us to the conclusion that the underlying issues
regarding the contract's validity must be resolved before any other matter
can be productively addressed. We believe the District Court should have
stayed its proceedings pending a resolution in the first instance in the
Tribal Court of these matters.
In coming to this conclusion we start with the premise that civil
jurisdiction over the activities of non-Indians on reservations lands
presumptively lies in tribal courts, unless affirmatively limited by a
specific treaty provision or federal statute. Iowa Mutual Ins. Co. v.
LaPlante, 480 U.S. 9, 18, 107 S. Ct. 971, 977, 94 L. Ed. 2d 10 (1987); Duncan
Energy v. Three Affiliated Tribes, 27 F.3d 1294, 1299 (8th Cir. 1994). The
exercise of tribal jurisdiction over activities of non-Indians is an
important part of tribal sovereignty. Iowa Mutual, 480 U.S. at 18, 107
S.Ct. at 977. As noted in this court's decision in Duncan Energy:
The Supreme Court has repeatedly recognized the Federal
Government's long-standing policy of encouraging tribal self-
government. See, e.g. Iowa Mutual Ins. Co. v. LaPlante,
[supra, 480 U.S. at 14, 107 S.Ct. at 975-76], Merrion v.
Jicarilla Apache Tribe, 455 U.S. 130, 138 n.5, 102 S. Ct. 894,
902 n.5, 71 L. Ed. 2d 21 (1982). Tribal courts play a vital role
in tribal self-government, and the federal Government has
consistently encouraged their development. Iowa Mutual, 480
U.S. at 14-15, 107 S.Ct. at 975-76 .... The deference that
federal courts afford tribal courts concerning [tribal-related]
activities occurring on reservation land is deeply rooted in
Supreme Court precedent. Because a federal court's exercise of
jurisdiction over matters relating to reservation affairs can
impair the authority of tribal courts, the Supreme Court has
concluded that, as a matter of comity, the examination of
tribal sovereignty and jurisdiction should be conducted in the
first instance by the tribal court itself. National Farmers
Union Ins. Co. v. Crow Tribe of Indians, 471 U.S. 845, 856, 105
S. Ct. 2447, 2453-54, 85 L. Ed. 2d 818 (1985).
Duncan Energy, 27 F.3d at 1299.
16
Supreme Court precedent and this court's pronouncements based thereon
require exhaustion of tribal court remedies in matters related to
reservation affairs. Reservation Tel. Co-op. v. Affiliated Tribes, 76 F.3d
181, 184 (8th Cir. 1996) (citations omitted). Barring the presence of an
exception to the exhaustion requirement14, "a federal court should stay its
hand in order to give tribal forums the initial opportunity to determine
cases involving questions of tribal authority." Id., citing, Iowa Mutual,
480 U.S. at 15-16, 107 S.Ct. at 976-77. In this case many of the parties
are Tribal entities or members and the dispute arises from Tribal
governmental activity involving a project located within the borders of the
reservation. Under these facts, exhaustion of tribal court remedies is
especially appropriate. United States v. Turtle Mountain Housing Auth.,
816 F.2d 1273, 1276 (8th Cir. 1987); Duncan Energy, 27 F.3d at 1300 (the
court concluding it faced a "dispute arising on the Reservation that raises
questions of tribal law and jurisdiction that should first be presented to
the tribal court").
The Tribes below moved the District Court to dismiss Lien's federal
action on the grounds of comity, arguing the federal court
14
As enumerated in National Farmers Union, exhaustion of
tribal remedies is not necessary where: (1) an assertion of
tribal jurisdiction is motivated by a desire to harass or is
conducted in bad faith; (2) the action is patently violative of
express jurisdictional prohibitions; or (3) exhaustion would be
futile because of the lack of an adequate opportunity to
challenge the court's jurisdiction. National Farmers Union, 471
U.S. at 856 n.21, 105 S. Ct. at 2454 n.21; See also, Reservation
Tel., 76 F.3d at 184.
17
should defer to the Tribal Court pending exhaustion of tribal remedies of
the questions regarding the contract's validity. The District Court
apparently felt that exhaustion of tribal remedies was not required because
IGRA divested said court of its jurisdiction. The Court noted:
The management contract between the Tribes and the Lien Company
is one authorized by Federal statutes, not Tribal Ordinance,
and the Federal statutes prove that NIGC has exclusive
jurisdiction for a first determination of compliance and
validity. It appears that a finding by the Tribal Court that
the management contract is void would itself be a nullity, but
it is not necessary to reach that point at this time.
Lien v. Three Affiliated Tribes, No. A4-95-135, mem. and order nunc pro
tunc at 7 (D.N.D. Nov. 9, 1995).
As previously indicated, we agree with the District Court's
assessment that the NIGC has exclusive authority to determine a contract's
compliance with IGRA and its regulations, but we disagree (as do both
parties) that said agency has "exclusive jurisdiction" regarding a
contract's legal validity. These are distinct inquiries, and the NIGC
itself is on the record indicating that it will not resolve the issue of
the contract's validity as the matter "is properly before the tribal
court." Questions regarding whether IGRA or the NIGC divest the Tribal
Court of authority to rule on the issues regarding the contract's validity,
whether IGRA is applicable to the Tribal Court action, and whether the
validity of the management contract can be affected by an interpretation
of Tribal law, are issues relating to the Tribal Court's jurisdiction which
should be dealt with first by the Tribal Court itself. Duncan Energy, 27
F.3d at 1299.
Lien argues that exhaustion is not required because the management
contract requires that all disputes be resolved through arbitration and
therefore mandates a limited role for the Tribal
18
Court. Lien cites FGS Constructors v. Carlow, 64 F.3d 1230 (8th Cir.
1995), for the proposition that where a contract involving an Indian party
contains a "choice of forum" clause, exhaustion of tribal remedies is not
necessary. In Carlow, the contract at issue contained a dispute resolution
clause stating, "In the event there is any dispute between the parties
arising out of this agreement, it shall be determined in the Ogalala Sioux
Tribal Court or other court of competent jurisdiction." Id. at 1233. The
district court had dismissed a Miller Act action brought in federal court
on the ground of comity and failure to exhaust tribal court remedies. Id.
at 1232. This court reversed that ruling, stating:
We do not agree with the district court's determination that
FGS must first exhaust its remedies in the tribal court. The
contracting parties agreed that a plaintiff could sue either in
the federal district court of South Dakota (a court of
competent jurisdiction) or in the tribal court. By this forum
selection clause, the Tribe agreed that disputes need not be
litigated in tribal court. The district court, therefore, had
no significant comity reason to defer this Miller Act
litigation first to the tribal court.
Id. at 1233.
The distinction between this case and Carlow is that in the present
situation the Tribes are challenging the very validity of the agreement
containing language giving the Tribal Court limited jurisdiction. As
previously indicated, we believe this entire litigation requires a logical
focus which mandates the agreement's validity be addressed before all else.
Lien next argues that exhaustion is not required because IGRA has
preempted the field of Indian gaming and serves to divest the Tribal Court
of jurisdiction. See, Reservation Tel. Co-Op, 76 F.3d at 184 (exhaustion
not required where the tribal court action is "patently violative of
express jurisdictional prohibitions") (citations omitted). This argument
is similar to the concerns raised by the District Court and must be
similarly rejected for the
19
reasons articulated above. While this circuit in the Gaming Corp. of
America case has determined that IGRA is sufficiently comprehensive to
preempt state law, Gaming Corp. of America says nothing regarding divesting
tribal courts of jurisdiction regarding reservation affairs.
It is true that under certain circumstances, preemptive federal
statutes may serve to relieve a party from exhausting tribal court
remedies, N.S.P. v. Prairie Island, 991 F.2d 458, 463 (8th Cir. 1993), or
may serve to "curtail[] the tribe's power to assert jurisdiction." City
of Timber Lake v. Cheyenne River Sioux Tribe, 10 F.3d 554, 559 (8th Cir.
1993) (citations omitted). These notions notwithstanding, it bears
repeating that under the exhaustion doctrine, the tribal courts themselves
are given the first opportunity to address their jurisdiction and explain
the basis (or lack thereof) to the parties. National Farmers Union, 471
U.S. at 857, 105 S.Ct. at 2454. As a jurisdictional inquiry, appeal of
this issue may be had in the federal district court. Duncan Energy, 27
F.3d at 1300.
We reject the additional arguments raised by Lien against exhaustion,
including the argument that the "bad faith" exception to the exhaustion
requirement is implicated by the current set of facts.
Despite the foregoing, we agree with Lien and the District Court that
federal question jurisdiction exists in the District Court. While the
issue of the contract's validity does not raise a federal question per se,
certainly there are aspects of the dispute which do. Particularly where
the entire association between the parties (and their various disputes)
arise under IGRA, and where the management agreement at issue, once
approved, remains so until disapproved by the NIGC. Further, this case is
being directed to the Tribal Court and exhaustion within that system. The
existence of tribal court jurisdiction itself presents a
20
federal question within the scope of 28 U.S.C. § 1331. Iowa Mutual, 480
U.S. at 15, 107 S.Ct. at 976 (noting also that "[e]xhaustion is required
as a matter of comity, not as a jurisdictional prerequisite"). As noted
by the Supreme Court:
Because petitioners contend that federal law has divested the
Tribe of [civil jurisdiction], it is federal law on which they
rely as a basis for the asserted right of freedom from Tribal
Court interference. They have, therefore, filed an action
'arising under' federal law within the meaning of § 1331. The
District Court correctly concluded that a federal court may
determine under § 1331 whether a tribal court has exceeded the
lawful limits of its jurisdiction.
National Farmers Union, 471 U.S. at 852-53, 105 S.Ct. at 2452.
IV.
Therefore we agree with the District Court that it has federal
question jurisdiction and affirm as to that issue. That being said, it
appears that the orderly administration of justice requires the District
Court to stay its proceedings pending a determination by the Tribal Court
of that court's jurisdiction and discussion regarding the legal validity
of the management contract. We reverse the District Court's decision not
to defer to the Tribal Court. Although we leave to the District Court's
sound discretion decisions regarding further proceedings in that court, we
note that the rare circumstances of this case make time of the essence.
The exhaustion process should be given a reasonable time to proceed, but
the District Court may wish to consider lifting the stay if satisfied that
undue delays detrimental to either party are attending the tribal court
exhaustion process.15,16
15
The Tribes have also asserted the district court erred in
failing to dismiss Lien's federal action on the grounds of
sovereign immunity. Because we are reversing the district
court's decision on the grounds of comity and failure to exhaust
tribal court remedies, which is presently dispositive of the
case, we decline to reach the sovereign immunity issue.
16
Given our disposition of this matter, we believe that all
matters decided by the District Court, but not referenced in the
current opinion, are mooted by the same. Considering that the
21
We remand for proceedings consistent with this opinion.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
matter is going back to her court for consideration, we
specifically affirm the District Court's dismissal of Tribal
Judge Avery as party defendant.
22