Wapato Heritage LLC v. Sandra Evans , 430 F. App'x 557 ( 2011 )

FILED
NOT FOR PUBLICATION MAR 31 2011
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U.S . CO U RT OF AP PE A LS
FOR THE NINTH CIRCUIT
WAPATO HERITAGE LLC, a No. 10-35237
Washington limited liability company;
KENNETH EVANS, individual resident D.C. No. 2:07-cv-00314-EFS
of Washington State; JOHN WAYNE
JONES, individual resident of Washington
State; JAMIE JONES, individual resident MEMORANDUM *
of Washington State,
Plaintiffs - Appellees,
v.
SANDRA D. EVANS, an individual not a
resident of Washington State,
Defendant - Appellant.
WAPATO HERITAGE LLC, a No. 10-35288
Washington limited liability company;
KENNETH EVANS, individual resident D.C. No. 2:07-cv-00314-EFS
of Washington State; JOHN WAYNE
JONES, individual resident of Washington
State; JAMIE JONES, individual resident
of Washington State,
Plaintiffs - Appellants,
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
v.
SANDRA D. EVANS, an individual not a
resident of Washington State; DAN
GARGAN, a citizen of Arizona,
Defendants - Appellees.
WAPATO HERITAGE LLC, a No. 10-35348
Washington limited liability company;
KENNETH EVANS, individual resident D.C. No. 2:07-cv-00314-EFS
of Washington State; JOHN WAYNE
JONES, individual resident of Washington
State; JAMIE JONES, individual resident
of Washington State,
Plaintiffs - Appellees,
v.
SANDRA D. EVANS, an individual not a
resident of Washington State,
Defendant,
and
DAN GARGAN, a citizen of Arizona,
Defendant - Appellant.
Appeal from the United States District Court
for the Eastern District of Washington
Edward F. Shea, District Judge, Presiding
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Argued and Submitted March 10, 2011
Seattle, Washington
Before: FISHER, GOULD, and TALLMAN, Circuit Judges.
William Wapato Evans' heirs settled their dispute over his estate by
executing a Settlement and Release Agreement ('Settlement Agreement'), which
required, among other things, that his daughter Sandra Evans ('Sandra') maµe
payments from her Individual Indian Money ('IIM') account in the form of a loan
to a corporation owned by her nephews called Wapato Heritage, LLC. Sandra
expected that the payments would require oversight and approval by the Bureau of
Indian Affairs ('BIA'), and when the BIA said that she was free to authorize the
payments without its approval, Sandra refused to authorize the payments. Wapato
Heritage then sued her for breach of contract and sued her financial advisor, Dan
Gargan ('Gargan'), for tortious interference with contract. The district court
denied Sandra's motion to dismiss for lacµ of subject-matter jurisdiction, and
entered summary judgment in favor of Gargan on the tortious interference claim
and in favor of Wapato Heritage on the contract claim. Sandra appeals the denial
of her motion to dismiss and the entry of summary judgment in favor of Wapato
Heritage; Wapato Heritage appeals the entry of summary judgment in favor of
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Gargan; and Gargan appeals the denial of his motion for attorneys' fees. We have
jurisdiction pursuant to 28 U.S.C. y 1291, and we affirm.
Sandra challenges the district court's November 23, 2009 order denying her
motion to dismiss for lacµ of subject-matter jurisdiction. The district court
reasoned that it had federal question jurisdiction pursuant to 28 U.S.C. y 1331
because federal law sets conditions for the Settlement Agreement's validity and
effectiveness. See 25 U.S.C. y 373 (requiring federal approval of probate
distribution of Indian money and property); see also In re Estate of Covington, 450
F.3d 917, 924 (9th Cir. 2006) (stating that federal law controls Indian probate
matters); 43 C.F.R. y 30.150 (delineating requirements for federal approval of
settlement agreements resolving issues in such probate proceedings). We reject
Sandra's challenge to jurisdiction for the reasons stated by the district court.1
We also agree that the district court properly entered summary judgment in
favor of Wapato Heritage on the breach of contract claim. There was no genuine
issue of material fact because the evidence showed that Sandra had not made the
IIM loans required by the Settlement Agreement, and BIA approval was not a
condition precedent to that obligation. Assuming without deciding that the BIA
1
Although Sandra moved to dismiss for lacµ of subject-matter jurisdiction
belatedly, the district court correctly recognized that a jurisdictional challenge
cannot be waived. Billingsley v. C.I.R., 868 F.2d 1081, 1085 (9th Cir. 1989).
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erred by not subjecting the IIM loan payments to its review and approval, such
error would not excuse Sandra's performance of the contract.2
Further, the award of summary judgment to Gargan on the tortious
interference claim was correct because the evidence did not create a genuine issue
of material fact as to whether he induced Sandra's breach of the Settlement
Agreement. Wapato Heritage proffered only speculative evidence in support of its
claim, which is insufficient to defeat summary judgment. See Nolan v. Cleland,
686 F.2d 806, 812 (9th Cir. 1982). Despite Gargan's success on this claim, the
district court did not abuse its discretion by denying him attorneys' fees.
Washington courts normally do not award attorneys' fees to prevailing parties
absent a contract, statute, or recognized ground of equity, see Rorvig v. Douglas,
873 P.2d 492, 497 (Wash. 1994), and the district court acted within its discretion
by not applying an exception to this rule.
2
Sandra argues that the district court's summary judgment ruling was
predicated on its erroneous resolution of a prior in limine motion excluding the
testimony of damages expert Robert Duffy. We need not decide whether the in
limine motion was resolved correctly or whether it affected the summary judgment
ruling because Sandra waived the affirmative defense of offset, for which she
sought to admit Duffy's testimony, by not pleading in her answer the theory she
planned to argue at trial. See Locµe v. City of Seattle, 137 P.3d 52, 61 (Wash. Ct.
App. 2006) (stating that offset is an affirmative defense to be pled in the answer).
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Finally, the district court did not abuse its discretion when it determined that
Wapato Heritage did not properly preserve its argument that Sandra should be
disinherited because of the will's no-contest clause.
The parties shall bear their own costs on appeal.
AFFIRMED.
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FILED
Wapato Heritage, LLC v. Evans, No. 10-35237õ MAR 31 2011
MOLLY C. DWYER, CLERK
TALLMAN, Circuit Judge, dissenting in part: U.S . CO U RT OF AP PE A LS
While I substantially agree with my colleagues' analysis of the merits of
Wapato Heritage's breach-of-contract claim, I am nevertheless compelled to
dissent because I do not believe we have jurisdiction to undertaµe that analysis. To
enforce the Settlement Agreement, Wapato brings a garden-variety state law
contract claim that simply does not 'arise under' federal law for the purposes of
establishing federal question jurisdiction under 28 U.S.C. y 1331. Therefore, I
would reverse the district court's denial of Evans' motion to dismiss for lacµ of
federal question jurisdiction and remand for a determination as to whether Wapato
Heritage can nonetheless establish jurisdiction through diversity of citizenship
under 28 U.S.C. y 1332. I join my colleagues in affirming the district court's grant
of summary judgment in favor of Gargan on the tortious interference claim.
State law supplies the substantive rules of decision for Wapato Heritage's
breach-of-contract claim. See Erie R. Co. v. Tompµins, 304 U.S. 64, 78 (1938).
Federal question jurisdiction may nonetheless lie if this state law claim raises a
substantial and disputed issue of federal law. Grable & Sons Metal Prods., Inc. v.
Darue, 545 U.S. 308, 314 (2005). To be sure, there is a disputed issue of federal
law raised in this case: whether 25 U.S.C. y 410 means that yet another BIA
1
approval beyond that obtained to settle the underlying probate litigation is required
before Evans can assign payments from her IIM account to Wapato Heritage in
fulfillment of her obligations under the Settlement Agreement. However, this issue
was pleaded in defendant Evans' answer as an affirmative defense asserted to
excuse her refusal to perform the contract. It is axiomatic that federal question
jurisdiction is proper only when the disputed federal issue is necessarily raised by
the plaintiff's well-pleaded complaint. Grable, 545 U.S. at 314; Franchise Tax Bd.
of State of Cal. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 10 (1983). A
defense based on federal law, whether raised in the defendant's answer or
anticipated by the plaintiff's complaint, is not sufficient to establish federal
question jurisdiction. Franchise Tax Bd., 463 U.S. at 10; Wayne v. DHL
Worldwide Express, 294 F.3d 1179, 1183 (9th Cir. 2002).
The fact that Wapato's contract claim necessarily raised the issue of the
Settlement Agreement's validity, which depended on its approval by the BIA under
43 C.F.R. y 30.150, also does not establish federal question jurisdiction because
the parties have never disputed this issue. See Grable, 545 U.S. 314 (noting that a
federal issue raised in the plaintiff's complaint must be 'actually disputed' to
support federal question jurisdiction). Evans admitted in her answer that she and
Wapato Heritage are parties to a settlement agreement which was approved both by
2
the Chelan County, Washington, Superior Court and by a BIA probate judge. In
fact, rather than contesting the contract's validity, both parties' pleadings
specifically argued that the terms of the Agreement were operative. What is
disputed is not BIA's approval of the Settlement Agreement itself, but rather
whether and how BIA must approve of specific disbursements from Evans' IIM
account to Wapato Heritage under the Agreement. Because this issue arises only
as an affirmative defense to the state law breach-of-contract claim, it does not
establish federal question jurisdiction.
Despite the absence of any disputed issue of federal law raised by the
plaintiff's complaint as required by the well-pleaded complaint rule, the majority
concludes that we nonetheless have jurisdiction to enforce the settlement
agreement simply because federal law requires federal approval of Indian wills, 25
U.S.C. y 373, and gives BIA probate judges the authority to approve settlement
agreements resolving contested Indian probate proceedings, 43 C.F.R. y 30.150.
However, this conclusion cannot be squared with controlling precedent. The
Supreme Court has expressly declined to recognize any 'inherent power' on the
part of a federal court to enforce a settlement agreement simply because the
agreement resolved a federal proceeding. See Koµµonen v. Guardian Life Ins. Co.,
511 U.S. 375, 377-378 (1994). Rather, enforcement of such a settlement
3
agreement 'requires its own basis for jurisdiction.' Id. at 378; see also Peabody
Coal Co. v. Navajo Nation, 373 F.3d 945, 949 (9th Cir. 2004) (holding that the
'general federal regulatory scheme' governing Indian mineral leases did not
establish federal jurisdiction to enforce an arbitration agreement made under such a
lease when the plaintiff's claim sounded only in general contract law); id. at 951
('[W]here the validity of a federally-regulated contract is not at issue, courts have
not found a substantial federal question to be present.').
Koµµonen does suggest that a federal court may have jurisdiction to enforce
a settlement agreement arising from its own proceedings if the court
contemporaneously issues an order that specifically requires compliance with the
agreement's terms, 511 U.S. at 381, or expressly retains jurisdiction to enforce the
agreement, id. at 379. But that never happened in this case. The BIA probate
judge's Order approving the Settlement Agreement directed only the distribution
of the decedent's federal trust assets to Evans and Wapato Heritage--not the
transfer of future payments from Evans to Wapato Heritage. Furthermore, far from
expressly retaining jurisdiction to enforce the Agreement, the federal probate court
said that it lacµed jurisdiction to compel Evans to maµe the promised payments,
and that a final order approving the settlement agreement would terminate its
jurisdiction over the decedent's estate. The probate has long since been closed.
4
While In re Estate of Covington, cited by the majority, acµnowledges that
'federal law supplies the standards for determining valid execution and proper
interpretation of [Indian] wills' during probate proceedings, it nowhere suggests
that federal courts have automatic jurisdiction over a probate settlement agreement
after probate has closed even if no federal law issue is raised by the plaintiff's
complaint. 450 F.3d 917, 924 (9th Cir. 2006). Contrary to the majority's
unsupported assertion, the mere fact that a federal probate court has approved the
terms of a settlement agreement in no way implies that a federal district court has
jurisdiction to enforce that agreement--especially when the probate court itself
neither claimed nor retained that jurisdiction.
I am not eager to dismiss Wapato Heritage's breach-of-contract claim such
that the litigation must start from scratch in state court. The parties and the district
court have already labored over this claim for several years in the federal forum.
The plaintiffs appear to present a strong case for relief, whereas Evans appears to
have reserved her jurisdictional trump card until she faced defeat in federal court.
But even these circumstances do not justify federal court adjudication of a claim
that does not belong here. To the contrary, it is our duty not to proceed. See
Augustine v. U.S., 704 F.2d 1074, 1077 (9th Cir. 1983) ('The defense of lacµ of
subject matter jurisdiction cannot be waived, and the court is under a continuing
5
duty to dismiss an action whenever it appears that the court lacµs jurisdiction.').
Therefore, I respectfully dissent.
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