Sue/Perior Concrete & Paving, Inc. v. Lewiston Glof Course Corporation

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This opinion is uncorrected and subject to revision before
publication in the New York Reports.
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No. 196
Sue/Perior Concrete & Paving,
Inc.,
Respondent,
v.
Lewiston Golf Course Corporation,
Appellant,
et al.,
Defendants.
Edmund C. Goodman, for appellant.
Gregory P. Photiadis, for respondent.
Seneca Nation of Indians, amicus curiae.
PIGOTT, J.:
Defendant Lewiston Golf Course Corporation (Lewiston
Golf) is an indirect, wholly owned subsidiary of the Seneca
Nation of Indians, a federally recognized Indian tribe. We are
asked to decide whether that corporation is protected from suit
by the Seneca Nation's sovereign immunity. Applying the factors
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set out in Matter of Ransom v St. Regis Mohawk Educ. & Community
Fund (86 NY2d 553 [1995]), we hold that it is not.
I.
In 2002, the Seneca Nation's legislative body, the
Tribal Council, granted a corporate charter to Seneca Gaming
Corporation (Seneca Gaming), under the laws of the Seneca Nation,
to develop, finance, operate and maintain gaming facilities.
Seneca Gaming is wholly owned by the Seneca Nation. In the same
year, again under the laws of the Seneca Nation, the Tribal
Council granted a corporate charter to Seneca Niagara Falls
Gaming Corporation (Seneca Niagara), created as a wholly owned
subsidiary of Seneca Gaming, to develop, finance, operate and
conduct the business of the Nation's gaming operations in Niagara
County specifically. Seneca Gaming and Seneca Niagara are two of
the most financially successful revenue-producing assets of the
Seneca Nation.
Lewiston Golf was incorporated in June 2007, under the
laws of the Seneca Nation, as a wholly owned subsidiary of Seneca
Niagara, to develop, finance, operate and conduct the business of
an 18-hole golf course in the Town of Lewiston. The following
month, it acquired real property from Seneca Niagara, on which to
construct the golf course. The property is not part of any
Indian reservation and is not sovereign land.
As Lewiston Golf's predecessor had explained in its
application to Niagara County Industrial Development Agency for
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tax abatements and deferrals,1 it was "looking to create a
championship level public/semi-private golf course offering the
millions of visitors [to] the Niagara Falls region and the
patrons of the Seneca Niagara Casino & Hotel a new tourist
destination project that will attract golf enthusiasts from
Canada and the United States[,] and to capitalize on the growing
tourist market, which will create new jobs and allow for
prolonged stays in the area."
In resolving to authorize the creation of Lewiston
Golf, the Tribal Council stated that
"the Lewiston Golf Course [would] be
developed and operated as an amenity to
[Seneca Niagara]'s casino operations,
together with the casino's lodging, dining,
retail and entertainment amenities, the
purpose of which amenities is to enhance the
overall success and profitability of the
casino's operations consistent with the
powers described in [Seneca Niagara]'s
charter and the purposes for which [Seneca
Niagara] was formed . . . [T]he use of a
separate corporation or legal entity to own
and operate the Lewiston Golf Course is
advisable due to various legal and accounting
considerations, including the status of the
Lewiston Golf Course as an off-territory
business venture of the Nation, subject to
legal, tax and other requirements that are
not applicable to the Nation's on-territory
business . . . [T]he Nation desires to
1
The application was approved, and eventually Lewiston Golf
and the Niagara County Industrial Development Agency entered into
a Payment-In-Lieu-Of-Tax (PILOT) Agreement, providing for
Lewiston Golf to make payments in lieu of taxes, as well a Lease
Agreement and Leaseback Agreement. In this manner, Lewiston Golf
was granted certain exemptions from real property and sales
taxes.
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establish [Lewiston Golf] as a separate legal
entity, governmental instrumentality of the
Nation, and wholly-owned subsidiary of
[Seneca Niagara], for the purpose of
developing and operating the Lewiston Golf
Course in the Town of Lewiston, New York, and
legally doing business in such
jurisdictions."
Lewiston Golf's charter describes in detail the nature
of the relation between it and the Seneca Nation. The charter
provides that:
• "[n]o activity of [Lewiston Golf] nor any
indebtedness incurred by it shall encumber,
implicate or in any way involve assets of the
Nation or another Nation Entity not assigned or
leased in writing to [Lewiston Golf]"
• "the Nation shall not be liable for the debts or
obligations of [Lewiston Golf], and [Lewiston
Golf] shall have no power to pledge or encumber
the assets of the Nation"
• "[t]he Obligations of [Lewiston Golf] shall not be
a debt of the Nation or of [Seneca Gaming] or any
other Nation-chartered Gaming corporation" and
• "[t]he Company shall not have[ ] any power . . .
to borrow or lend money on behalf of the Nation,
or to grant or permit or purport to grant or
permit any right, lien, encumbrance or interest in
or on any of the assets of the Nation."
On the other hand, the Boards of Directors of Lewiston
Golf, Seneca Gaming, and Seneca Niagara are identical, are
appointed by the Tribal Council, and during this dispute were
composed entirely of enrolled members of the Seneca Nation.
Lewiston Golf, like Seneca Gaming and Seneca Niagara, is required
by its charter to obtain approval from the Seneca Nation before
undertaking significant expenditures of resources or personal
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property; adopting, amending, or repealing corporate by-laws;
providing significant guarantees or incurring significant
liabilities; lending money to other Seneca Nation entities;
buying, selling, or encumbering real property; entering into
financing arrangements involving securities; or entering into,
performing, or canceling contracts with any government or
government agency. Lewiston Golf, like Seneca Gaming and Seneca
Niagara, must keep detailed corporate and financial records and
submit for the Seneca Nation's approval an annual statement of
its financial condition. And Lewiston Golf, once again like
Seneca Gaming and Seneca Niagara, is required to receive consent
from the Seneca Nation before taking such legal actions as
commencing a lawsuit, consenting to a court's jurisdiction, or
waiving a claim to sovereign immunity.
II.
In the summer of 2007, plaintiff Sue/Perior Concrete &
Paving, Inc. (Sue/Perior) entered into a contract with Lewiston
Golf, whereby Sue/Perior would build a golf course on the
property, for the sum of $12,700,000. However, the business
relationship between Sue/Perior and Lewiston Golf deteriorated in
2009. Sue/Perior demanded payment of certain bills; Lewiston
Golf insisted that Sue/Perior was seeking remuneration for work
not done or exaggerating its costs. Sue/Perior filed mechanic's
liens, the third of which is in the amount of $4,130,538, for
materials furnished and labor performed.
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Sue/Perior commenced this foreclosure action against
Lewiston Golf and other defendants in June 2010, with respect to
that mechanic's lien. Lewiston Golf counterclaimed for willfully
exaggerated lien, fraud, breach of contract, and unjust
enrichment. Sue/Perior subsequently amended its complaint to add
additional defendants – Seneca Niagara, Seneca Gaming, and 15
corporate officers and directors – and to assert additional
causes of action for breach of contract, breach of implied
covenant of good faith and fair dealing, quantum meruit,
promissory estoppel, and fraud.2
Seneca Niagara, Seneca Gaming, Lewiston Golf and the
individual defendants moved to dismiss Sue/Perior's complaint
pursuant to CPLR 3211, alleging protection from suit under the
sovereign immunity of the Seneca Nation. Supreme Court denied
the motion to dismiss, ruling, as pertinent here, that Lewiston
Golf did not qualify as an "arm" of the Seneca Nation. Lewiston
Golf appealed. For its part, Sue/Perior withdrew claims against
all defendants except Lewiston Golf.
The Appellate Division affirmed Supreme Court's order,
2
Sue/Perior also commenced a separate action against Seneca
Gaming, Seneca Niagara, and certain individual defendants – but
not Lewiston Golf – alleging tortious interference with contract,
tortious interference with prospective business advantage,
concerted action, and prima facie tort (punitive damages). The
Appellate Division dismissed Sue/Perior's complaint (Sue/Perior
Concrete & Paving, Inc. v Seneca Gaming Corp., 99 AD3d 1203 [4th
Dept 2012]). We take no position on whether that appeal was
properly decided.
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as modified in a manner not relevant here (109 AD3d 80 [4th Dept
2013]). In ruling that Lewiston Golf lacked sovereign immunity,
the Appellate Division relied on our decision in Matter of
Ransom. There, we set out factors for courts to consider when
deciding whether a tribal subagency or a corporate entity
affiliated with an Indian tribe is entitled to sovereign
immunity, as the tribe itself is. The Appellate Division found
that most of the Ransom factors, and in particular those that the
Ransom court "characterized as the '[m]ore important[]' financial
factors, weigh in favor of a determination that [Lewiston Golf]
does not share in the Nation's sovereign immunity" (109 AD3d at
88, quoting Ransom, 86 NY2d at 559 [square brackets in Appellate
Division opinion]). The Appellate Division noted, for example,
that "[Lewiston Golf]'s charter clearly provides that [Lewiston
Golf] has no power to bind or otherwise obligate the funds of the
Nation" and that "the record is devoid of evidence that a lawsuit
against [Lewiston Golf] would adversely impact the Nation's
treasury either directly or indirectly" (109 AD3d at 91).
With respect to the non-financial factor comparing
Lewiston Golf's purposes with those of the Nation, the Appellate
Division found that statements by the Tribal Council and the
documents Lewiston Golf submitted to the Industrial Development
Agency in support of its request for economic assistance "reflect
that the purpose of [Lewiston Golf] . . . is several steps
removed from the purposes of tribal government . . . [T]he
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central purpose of the golf course project was not to provide
funds for traditional governmental programs or services but,
rather, was to serve as a regional economic engine . . . Notably
absent is any reference to improving the quality of life on
reservation lands, creating jobs for Native Americans living on
the reservation, or generating funds to support educational,
social, or other government-related programs for tribal members"
(id. at 89-90 [internal quotation marks omitted]).
Finally, the Appellate Division observed "that
declining to extend sovereign immunity to [Lewiston Golf] under
the circumstances of this case will not diminish the policies
underlying tribal sovereign immunity. . . . Here, permitting
[Lewiston Golf] to retreat behind the Nation's cloak of sovereign
immunity after it held itself out as an independent,
market-participating entity subject to the jurisdiction of the
State of New York, including its courts, would discourage
non-Indians from entering into business relationships with the
Nation's corporations, which may well retard the Nation's
economic growth and undermine one of the purposes of its
sovereign immunity" (109 AD3d at 92 [internal quotation marks,
citations and square brackets omitted]).
The Appellate Division granted Lewiston Golf leave to
appeal to this Court, certifying the question whether its order
was properly made. We now affirm and answer the certified
question in the affirmative.
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III.
Indian tribes possess the common law immunity from suit
traditionally enjoyed by sovereign powers, unless waived. In
Matter of Ransom, we set out several factors3 for courts to use
to determine whether an entity, such as a corporation or agency,
that is affiliated with an Indian tribe has the right to claim
sovereign immunity against suit.
"Although no set formula is dispositive, in
determining whether a particular tribal
organization is an 'arm' of the tribe
entitled to share the tribe's immunity from
suit, courts generally consider such factors
as whether: [1] the entity is organized under
the tribe's laws or constitution rather than
Federal law; [2] the organization's purposes
are similar to or serve those of the tribal
government; [3] the organization's governing
body is comprised mainly of tribal officials;
[4] the tribe has legal title or ownership of
property used by the organization; [5] tribal
officials exercise control over the
administration or accounting activities of
the organization; and [6] the tribe's
governing body has power to dismiss members
of the organization's governing body. More
importantly, courts will consider whether [7]
the corporate entity generates its own
revenue, whether [8] a suit against the
corporation will impact the tribe's fiscal
resources, and whether [9] the subentity has
the power to bind or obligate the funds of
3
Some commentators justifiably refer to our "nine factors"
(see e.g. Gregory J. Wong, Note & Comment, Intent Matters:
Assessing Sovereign Immunity for Tribal Entities, 82 Wash L Rev
205, 220 [2007]), but the last two, or last three, factors have
often been treated as one by courts citing Ransom, generating an
eight-factor or seven-factor test (see e.g. Seneca Niagara Falls
Gaming Corp. v Klewin Bldg. Co., Inc., 2005 WL 3510348 [Superior
Ct of Connecticut, Jud Dist of New London 2005]). We too treat
the last three factors as closely interrelated.
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the tribe. The vulnerability of the tribe's
coffers in defending a suit against the
subentity indicates that the real party in
interest is the tribe." (Ransom, 86 NY2d at
559-560 [internal quotation marks, citations,
and square brackets omitted; numbering
added].)
Applying these factors, we held in Ransom that the St.
Regis Mohawk Education and Community Fund – a nonprofit
corporation, organized under the District of Columbia Nonprofit
Corporation Act, providing educational, health care, social and
historical services to residents of the St. Regis Mohawk
Reservation in Franklin County – was a tribal entity that enjoyed
sovereign immunity from suit. We explained that "[t]he Fund was
established to enhance the health, education and welfare of Tribe
members, a function traditionally shouldered by tribal
government. Additionally, the Fund received its resources from
the Tribe, and the Tribe was designated by the Fund as the
recipient of its funds and services. Critically, under its
by-laws, the Fund's governing body may only be comprised of
elected Chiefs of the Tribe. Thus, the Fund's provision of
social services on behalf of and under the direct fiscal and
administrative control of the Tribe renders it an entity so
closely allied with and dependent upon the Tribe that it is
entitled to the protection of tribal sovereign immunity" (id. at
560).
We begin our discussion of the present appeal with the
functions or purposes factor. The question is whether Lewiston
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Golf's purposes are similar to, or serve, those of the Seneca
Nation. The Appellate Division reasoned that Lewiston Golf's
purposes are significantly different from those of tribal
government, because Lewiston Golf has functioned to develop an
amenity outside the Seneca Nation's reservation land that would
serve as a regional economic engine, not to promote tribal
welfare on the reservation directly.
Lewiston Golf and the dissent rely on Kiowa Tribe of
Okla. v Manufacturing Technologies, Inc. (523 U.S. 751 [1998]), in
which the Supreme Court of the United States held that "[t]ribes
enjoy immunity from suits on contracts, whether those contracts
involve governmental or commercial activities and whether they
were made on or off a reservation" (523 US at 760). In Kiowa
Tribe, a private party sued an Indian tribe for defaulting on a
promissory note, and asked the courts to limit tribal immunity to
suits involving conduct on reservations or involving
noncommercial activities. The Supreme Court refused to create a
"reservation" or a "commercial activity" exception to the
doctrine of tribal sovereign immunity from suit. Recently, a
sharply fractured Supreme Court declined to revisit that decision
(see Michigan v Bay Mills Indian Community, 572 US —, —, 134 S. Ct.
2024 [2014]).
Lewiston Golf contends that it is inconsistent with
Kiowa Tribe to treat the fact that an Indian tribe's subsidiary
engages primarily in commercial activities not located on the
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tribe's reservation as evidence that the subsidiary is not an
"arm" of the tribe. We disagree. Kiowa and Bay Mills do not
apply in the present appeal, because they concerned lawsuits
against Indian tribes themselves, not against corporate
affiliates of tribes. They do not illuminate questions
concerning whether such an entity is an "arm" of the tribe. The
United States Supreme Court has never held that corporations
affiliated with an Indian tribe have sovereign immunity.
As the Appellate Division notes, the primary purpose of
creating the golf course in Lewiston was to act as a regional
economic engine and thereby serve the profit-making interests of
the Seneca Nation's casino operations in the area. While this
may result in more funds for government projects on the Seneca
Nation's reservations and elsewhere that benefit members of the
tribe, we agree with the Appellate Division that the purposes of
Lewiston Golf were sufficiently different from tribal goals that
they militate against Lewiston Golf's claim of sovereign
immunity. However, the purposes factor of Ransom is not
determinative, and we proceed to discuss the other criteria.
While some of the remaining Ransom factors favor the conclusion
that Lewiston Golf is protected by sovereign immunity, the most
important ones strongly support the opposite conclusion.
IV.
It is true that Lewiston Golf was organized under
tribal law, not federal law, and that Lewiston Golf's governing
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body is comprised of tribal officials. The Seneca Nation
controls Lewiston Golf's Board of Directors, which is made up
exclusively of enrolled members of the Nation appointed by the
Tribal Council. Moreover, it is clear from the record that
tribal officials exercise control over the administration or
accounting activities of Lewiston Golf, and that the tribe's
governing body has power to dismiss members of Lewiston Golf's
governing body. Indeed, the Tribal Council has exclusive
authority to remove members of Lewiston Golf's Board. These
considerations indicate that Lewiston Golf is dependent on the
Seneca Nation in a manner that might suggest it partakes in the
Nation's sovereign immunity.
However, all the remaining Ransom factors, and
particularly those that consider the financial relationship
between the subsidiary or agency and the Indian nation, support
the conclusion that Lewiston Golf lacks sovereign immunity.
First, the Seneca Nation does not have legal title or
ownership of the golf course being developed by Lewiston Golf.
Contrary to the Seneca Nation's contention, the question posed by
this factor is not whether Lewiston Golf is owned by the tribe.
Rather, the issue is whether the property used by Lewiston Golf
is owned by the tribe, and the record leaves no room for doubt
that the owner of the golf course is Lewiston Golf, not the
Seneca Nation.
Next, and most significantly, the record firmly
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indicates the intent to ensure that a suit against Lewiston Golf
will not impact the Seneca Nation's fiscal resources. The
founding charter provided that no indebtedness incurred by it
would "in any way involve assets of the Nation . . .", which
would "not be liable for the debts or obligations" incurred by
Lewiston Golf. The charter stated that Lewiston Golf would have
no power to allow "any right, lien, encumbrance or interest in or
on any of the assets of the Nation." All the evidence in the
record points to the conclusion that Lewiston Golf lacks the
power to bind or obligate the funds of the Seneca Nation.
In response, Lewiston Golf does not deny that the
statements in the charter have their ordinary meaning and that
the Seneca Nation intended to create a corporation for whose
debts it would not be liable. Lewiston Golf does not contend
that the Seneca Nation's independent coffers are vulnerable.
Rather, it argues that a lawsuit against Lewiston Golf would have
an economic impact on the Seneca Nation because revenues that
would otherwise be distributed to the Nation will not be
available. Lewiston Golf expressly concedes that it generates
its own revenue, rather than being dependent on the resources of
the Seneca Nation.
Whether Lewiston Golf's revenues will become part of
the Seneca Nation's resources, as Lewiston Golf emphasizes, is
beside the point. The test, with respect to the financial
relationship factors of Ransom, is not the indirect effects of
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any liability on the tribe's income, but rather whether the
immediate obligations are assumed by the tribe. Here, the
financial obligations were assumed by Lewiston Golf and any
liability insurer, not by the Seneca Nation.
These financial relationship considerations are the
most important of the Ransom factors, as we noted when we first
set out the criteria (see Ransom, 86 NY2d at 559). In
attributing such weight to them, we have taken into consideration
federal precedent on the Eleventh Amendment immunity of States.
While the sovereign immunity of an Indian tribe is not based on
the Federal Constitution, it has in common with Eleventh
Amendment immunity "a background of traditional ideas about the
power and privileges of the sovereign" (Runyon v Ass'n of Vill
Council Presidents, 84 P3d 437, 440 n 12 [Sup Ct of Alaska 2004];
see Thebo v Choctaw Tribe of Indians, 66 F 372, 376 [8th Cir
1895]). In considering whether an entity is an "arm" of an
Indian tribe, the most significant factor is the effect on tribal
treasuries, just as "the vulnerability of the State's purse" is
considered "the most salient factor" in determinations of a
State's Eleventh Amendment immunity (Hess v Port Authority
Trans-Hudson Corporation, 513 U.S. 30, 48 [1994]).
If a judgment against a corporation created by an
Indian tribe will not reach the tribe's assets, because the
corporation lacks "the power to bind or obligate the funds of the
tribe" (Ransom, 86 NY2d at 559), then the corporation is not an
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"arm" of the tribe. However, if a tribe is legally responsible
for a corporation's obligations, the tribe is "the real party in
interest" (id. at 560). As the Supreme Court of Alaska has
observed, in a thoughtful opinion, "a tribe might, for commercial
purposes, wish to form a corporation exposed to suit in order to
cultivate trust with business partners. . . . The tribes' use of
the corporate form protects their assets from being called upon
to answer the corporation's debt. But this protection means that
they are not the real party in interest" (Runyon, 84 P3d at 441;
accord e.g. American Property Management Corp. v Superior Court,
206 Cal App 4th 491, 506 [Ct of App of California, 4th App Dist,
Div One 2012]; Uniband, Inc. v Commissioner of Internal Revenue,
140 TC 230, 255 [US Tax Ct 2013]; Seaport Loan Prods., LLC v
Lower Brule Community Dev. Enter. LLC, 41 Misc. 3d 1218 [A] [Sup
Ct NY County 2013]).4 In short, protection of a tribal treasury
against liability in a corporate charter is strong evidence
against the retention of sovereign immunity by the corporation.
The dissent's principal objection to our ruling is that
lower courts have found that Seneca Gaming and Seneca Niagara
have sovereign immunity (see dissenting op at 7-12, citing
Sue/Perior Concrete & Paving, Inc., 99 AD3d 1203; Seneca Niagara
4
While the Alaska Supreme Court's opinion concerned a
nonprofit corporation shielding members from liability under
state law, not tribal law, its analysis is equally pertinent here
in that the Seneca Nation created a corporation with a charter
expressly protecting the Nation from liability.
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Falls Gaming Corp., 2005 WL 3510348; Warren v United States, 859
F Supp 2d 522 [WD NY 2012], affd 517 Fed Appx 54 [2d Cir 2013];
Myers v Seneca Niagara Casino, 488 F Supp 2d 166 [ND NY 2006]).
Neither this Court nor the United States Supreme Court has so
held, and our decision today may imply the opposite. As noted
above, the question whether a corporate affiliate of an Indian
tribe is protected by the tribe's sovereign immunity has not been
settled by the United States Supreme Court.5 Therefore, even
assuming that it is a pure question of federal law, we remain at
liberty to answer it in a manner that may conflict with the
determinations of courts in our federal circuit. Contrary to the
dissent, New York State courts are not bound by the decisions of
federal courts other than the United States Supreme Court, on
questions of federal constitutional law (see Arthur Karger,
Powers of the New York Court of Appeals § 1:8 at 18 [3d ed rev
2005]). It is well-established that "the interpretation of a
Federal constitutional question by the lower Federal courts may
serve as useful and persuasive authority for our Court while not
binding us. This Court in its long-standing tradition and
independent responsibility has exercised its correlative
adjudicative power on questions of Federal law" (People v Kin
5
Nor has it been addressed by the United States Court of
Appeals for the Second Circuit, which treated the question
cursorily in a summary order that lacks precedential force (517
Fed Appx 54; see 2nd Cir Local Rule 32.1.1 [providing that
decisions "by summary order do not have precedential effect"]).
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Kan, 78 NY2d 54, 60 [1991] [citations omitted] [emphasis added],
citing New York R.T. Corp. v City of New York, 275 NY 258, 265
[1937], affd 303 U.S. 573 [1938] [noting that a decision of the
Second Circuit, "while entitled to great weight, is not binding
on this court"]; see also e.g. People v Konstantinides, 14 NY3d
1, 13 [2009]; Matter of Mason, 100 NY2d 56, 58 [2003]). The same
principle applies here.
Alternatively, it could be argued that Seneca Gaming
and Seneca Niagara are distinguishable from Lewiston Golf in that
their purposes are more closely aligned with those of the Seneca
Nation. In any case, that question is not before us, and the
dissent simply begs the question, assuming – what has not been
held by this Court or the Supreme Court – that Lewiston Golf's
corporate parents have sovereign immunity.
In conclusion, we agree with the Appellate Division
that the most significant Ransom factors count against sovereign
immunity on the part of Lewiston Golf. Its ruling was proper.
It is unnecessary for us to address the parties' remaining
contentions.
Accordingly, the order of the Appellate Division should
be affirmed, with costs, and the certified question answered in
the affirmative.
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Sue/Perior Concrete & Paving, Inc. v Lewiston Golf Course Corp.
No. 196
RIVERA, J.(dissenting):
The question on this appeal is whether a corporate
subsidiary of a corporation owned and controlled by an Indian
Tribe, and which exists solely for the economic benefit of the
tribe and its members, is immune from private suit based on the
Tribe's sovereign immunity. I can find no rational legal basis
to distinguish between the corporate parent, which is a
recognized arm of the Tribe, and its subsidiary. Therefore, I
would find the subsidiary is immune from suit.
I.
The Seneca Nation of Indians ("the Nation") is a
sovereign Tribe, predating the creation of the United States,
with its own government, laws and cultural identity (see Indian
Entities Recognized and Eligible To Receive Services From the
United States Bureau of Indian Affairs, 79 Fed Reg 4748-02
[2014]; Seneca Nation of Indians v State of N.Y., 26 F Supp 2d
555, 560 [WD NY 1998], affd sub nom Seneca Nation of Indians v
New York, 178 F3d 95 [2d Cir 1999]). As a tribal sovereign it
provides its members with various health and education-related
services and programs, which are dependent on the Nation's
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financial stability and well-being. The Nation has identified
the gaming industry as "vitally important to the economy of the
Nation and the general welfare of its members" (Seneca Gaming
Corporate Charter Law Enactment, Council of the Seneca Nation of
Indians, August 1, 2002). As part of its economic development
activities it has created and chartered, under the Nation's
corporate charter, three interlocking corporate entities,
intended to further the Nation's gaming operations, all for the
benefit of its members.
The Nation created the Seneca Gaming Corporation
("Seneca Gaming") to "finance, develop, construct, operate, and
maintain Nation Gaming Facilities." The Nation then created the
Seneca Niagara Falls Gaming Corporation ("Seneca Niagara Falls
Gaming") as a subsidiary of Seneca Gaming, for purposes of
"developing, financing, operating and conducting the business of
the Nation Gaming Facility" on Nation territory located in
Niagara County, New York.1 Seneca Niagara Falls Gaming is
subject to the "control, operation and management" of Seneca
Gaming.
The Nation decided to capitalize on the subsequent
success of its gaming operations, and Seneca Niagara Falls Gaming
commenced development of a golf course in the Town of Lewiston,
New York in Niagara County. The Nation thereafter created the
1
The Nation Gaming Facility operates in accordance with the
Indian Gaming Regulatory Act ("IGRA") and the Compact between the
Nation and New York State.
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Lewiston Golf Course Corporation ("Lewiston Golf") "as a separate
legal entity, governmental instrumentality of the Nation, and
wholly-owned subsidiary of [Seneca Niagara Falls Gaming], for the
purpose of developing and operating the Lewiston Golf Course."
All three of the Nation's resolutions creating Seneca
Gaming, Seneca Niagara Falls Gaming, and Lewiston Golf, and their
respective corporate charters provide
"it is declared the policy of the Nation to
promote the welfare and prosperity of its
members and to actively promote, attract,
encourage and develop economically sound
commerce and industry through governmental
action for the purpose of preventing
unemployment and economic stagnation; and the
economic success of the Nation’s gaming
operations is vitally important to the
economy of the Nation and the general welfare
of its members."
Plaintiff Sue/Perior Concrete & Paving, Inc., a
contracting company who had previously done business with the
Nation, entered a contract with Lewiston Golf to construct the
golf course. After certain payment disputes, plaintiff filed a
mechanic's lien foreclosure action against Lewiston Golf in
Niagara County. Plaintiff also filed an action in Erie County
against several of the same defendants, with the exception of
Lewiston Golf, but Erie County Supreme Court dismissed that
action based on the sovereign immunity of Seneca Gaming and
Seneca Niagara Falls Gaming.
Lewiston Golf moved to dismiss the action, asserting
sovereign immunity against suit as an arm of the Nation. Supreme
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Court and the Appellate Division both rejected this contention,
and held that Lewiston Golf is not an arm of the Nation. The
majority now agrees, and based on Matter of Ransom v St. Regis
Mohawk Educ. and Community Fund, Inc. (86 NY2d 553 [1995])
concludes that because Lewiston Golf is without power to bind or
obligate the Nation's funds it lacks a sufficient financial
relationship with the Nation to entitle it to sovereign immunity.
I disagree with the majority that certain financial
factors identified by this Court in Ransom and as applied here,
should be treated as outcome determinative of the question of the
expanse of the Nation's sovereign immunity over its corporate
subsidiary Lewiston Golf. Instead, our focus should be the
purpose and corporate structure of Lewiston Golf. As a corporate
entity created and chartered by the Nation, established to
enhance the Nation's gaming operations for the purpose of
benefitting the Nation's members, I would hold Lewiston Golf is
clothed with the Nation's sovereign immunity.
II.
Tribes are " 'separate sovereigns preexisting the
[United States] Constitution' " (Michigan v Bay Mills Indian
Community, 134 S. Ct. 2024, 2030 [2014], quoting Santa Clara Pueblo
v Martinez, 436 U.S. 49, 56 [1978]), and possess " 'common-law
immunity from suit traditionally enjoyed by sovereign powers' "
(id., quoting Santa Clara Pueblo, 436 U.S. at 58). Indeed,
"sovereign immunity is an inherent part of the concept of
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sovereignty and what it means to be a sovereign" (Breakthrough
Mgt. Group, Inc. v Chukchansi Gold Casino and Resort, 629 F3d
1173, 1182 [10th Cir 2010]), and "is 'a necessary corollary to
Indian self-governance' " (Bay Mills Indian Community, 134 S. Ct.
at 2030, quoting Three Affiliated Tribes of Fort Berthold
Reservation v Wold Engineering, P.C., 476 U.S. 877, 890 [1986], and
citing The Federalist No. 81, p. 511 [B. Wright ed. 1961] [A.
Hamilton] [It is “inherent in the nature of sovereignty not to be
amenable” to suit without consent]). Sovereignty immunity serves
interests essential to tribal identity, and is fundamental to the
survival and growth of Tribes and their members. Moreover,
immunity is " 'necessary to promote the federal policies of
tribal self[-]determination, economic development and cultural
autonomy' " (Breakthrough Mgt. Group, Inc., 629 F3d at 1182
[modification in original], quoting Am. Indian Agric. Credit
Consortium, Inc. v Standing Rock Sioux Tribe, 780 F2d 1374, 1378
[8th Cir 1985]).
The United States Supreme Court has broadly applied
tribal sovereign immunity to extend to "suits on contracts,
whether those contracts involve governmental or commercial
activities and whether they were made on or off" Indian lands
(Kiowa Tribe of Oklahoma v Mfg. Tech., Inc., 523 U.S. 751, 760
[1998]; see also Bay Mills Indian Community, 134 S. Ct. at
2030-31). There are no exemptions for tribal commercial activity
(see Cayuga Indian Nation of New York v Seneca County, N.Y., 761
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F3d 218, 221 [2d Cir 2014]), and, thus, sovereign immunity
extends to tribal business ventures (Oklahoma Tax Com'n v Citizen
Band Potawatomi Indian Tribe of Oklahoma, 498 U.S. 505, 510
[1991]). Immunity may be limited only by Congress or express
waiver of a tribe (Kiowa, 523 U.S. at 754).
Unsurprisingly, "tribes across the country, as well as
entities and individuals doing business with them, have for many
years relied on [Supreme Court precedent], negotiating their
contracts and structuring their transactions against a backdrop
of tribal immunity" (Bay Mills Indian Community, 134 S. Ct. at
2036, referencing Kiowa, 523 U.S. 751). Over the years tribal
activities have grown, "tribal gaming revenues have increased
more than thirty fold," and "other tribal enterprises, ranging
from cigarette sales to ski resorts" have flourished (Bay Mills
Indian Community, 134 S. Ct. at 2037; see id. at 2050-2051 [Thomas,
J., dissenting]). "[T]ribal business operations are critical to
the goals of tribal self-sufficiency because such enterprises in
some cases 'may be the only means by which a tribe can raise
revenues.' This is due in large part to the insuperable (and
often state-imposed) barriers Tribes face in raising revenue
through more traditional means" (id. at 2043 [Sotomayor, J.,
concurring] [citations omitted]).
III.
As federal courts have held, the Seneca Nation of
Indians has immunity from suit based on its status as a sovereign
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Indian Nation (Seneca Nation of Indians, 178 F3d 95) and that
Seneca Niagara Falls Gaming and Seneca Gaming are arms of the
Nation (Warren v United States, 859 F Supp 2d 522, 540 [WD NY
2012], affd 517 Fed Appx 54 [2d Cir 2013]; Myers v Seneca Niagara
Casino, 488 F Supp 2d 166 [ND NY 2006]) fully clothed with the
Nation's sovereign immunity. The question of whether Lewiston
Golf, another subentity of the Nation, may assert sovereign
immunity then seems a rather straightforward one, and one which
should be decided in Lewiston Golf's favor.
Tribal sovereignty, including immunity from suit, "is
subject to the superior and plenary control of Congress [and]
without congressional authorization, the Indian Nations are
exempt from suit" (Santa Clara Pueblo, 436 U.S. at 58] [quotation
marks and citation omitted]). As such, tribal immunity is "a
matter of federal law and is not subject to diminution by the
States" (Kiowa, 523 U.S. at 756). The Nation is a sovereign with
its own government and rights to self-determination, and as such
empowered to determine how best to structure its business
ventures. Therefore, we are without authority absent
congressional limitation, to reject the Nations's adoption of a
corporate structure that furthers its economic development goals.
The majority relies on this Court's decision in Ransom
for the legal framework by which to decide Lewiston Golf's
sovereign immunity. However, Ransom was decided before the
United States Supreme Court announced its decisions in Kiowa and
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Bay Mills Indian Community recognizing sovereign immunity applied
broadly to Indian business ventures, even those outside Indian
lands. Therefore, the factors in Ransom cannot supercede federal
proscriptions, and we must be cautious not to rely on these
factors in a way that conflicts with federal law.
The record makes abundantly clear that the Nation
created Lewiston Golf as a commercial business venture to
increase the Nation's gaming revenues for the benefit of the
Tribe and its members. The Nation determined that the best way
to pursue this goal is through a corporate structure whereby
Lewiston Golf is controlled by the Nation's corporate entity. As
a sovereign, the Nation is certainly able to decide that this
corporate arrangement will enhance its economic independence and
sustain its tribal membership and self-sustaining tribal
government. The Nation, having made that choice, is no less
entitled to expect that the protections afforded by its sovereign
immunity will apply equally to the activities of Lewiston Golf as
it does to the activities of Seneca Gaming and Seneca Niagara
Falls Gaming.
The logic of treating uniformly the corporate entities
for sovereign immunity purposes is illustrated by comparing
Lewiston and Seneca Niagara Falls Gaming. As their respective
corporate charters reveal, Seneca Niagara Falls Gaming and
Lewiston Golf are strikingly similar, both are owned by an arm of
the Nation (Seneca Gaming in the case of Seneca Niagara Falls
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Gaming, and Seneca Niagara Falls Gaming in the case of Lewiston
Golf), and both are controlled and run by the Nation. Both seek
to increase the Nation's revenue, with the obvious difference
that Niagara Falls Gaming was created for the "purpose of
developing, constructing, owning, leasing, operating, managing,
maintaining, promoting and financing a Nation Gaming Facility on
Nation territory within the exterior boundaries of Niagara County
pursuant to the terms of the [gaming] Compact," and Lewiston
Golf's purpose is to "develop[], construct[], own[], leas[e],
operat[e], manag[e], maintain[], promot[e] and financ[e] the
Lewiston Golf Course on land" which at the time of Lewiston
Golf's creation was owned by Seneca Niagara Falls Gaming. Thus,
one exists to maintain a casino for the Nation's benefit, the
other exists to maintain a golf course to enhance casino revenues
for the Nation's benefit. Both improve the Nation's economic
position. Moreover, not only are they similar in purpose and
service to the Nation and its members, but Lewiston Golf is
intended as an amenity to the casino to "further the economic
success of the Nation's gaming operations." The point of both
business enterprises is to bring revenues to the Nation.2 If the
golf course was owned by Seneca Niagara Falls Gaming, a
2
There is certainly nothing unique in establishing a golf
course as an economic development venture. As Lewiston Golf
points out, New York has several public golf courses that are
public amenities that "create jobs and support economic
development."
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recognized arm of the Nation, there would be no question that
sovereign immunity would foreclose plaintiff's suit against
Lewiston Golf. Consequently, there is no logical basis to treat
Lewiston Golf differently simply because it is a subsidiary of
Seneca Niagara Falls Gaming.
Therefore, I can find no legally defensible ground for
rejecting sovereign immunity to Lewiston Golf, a corporate entity
that is established under the Nation's laws and constitution,
chartered by the Nation to develop, construct and operate a golf
course in furtherance of the Nation's existing gaming operations,
and, consistent with the Seneca Niagara Falls Gaming charter,
controlled by Nation officials who make all significant business
decisions. Like its parent Seneca Niagara Falls Gaming, Lewiston
Golf is an engine for tribal economic development and growth.
The majority claims that there is no legal support for
presuming Seneca Gaming and Seneca Niagara Falls Gaming's
sovereign immunity. However, in Warren the district court, as
affirmed by the Second Circuit, held that Seneca Gaming "is a
government instrumentality entitled to immunity" (859 F Supp 2d
at 541), finding specifically that Seneca Gaming
"is incorporated under Seneca tribal law; it
was created to generate income to provide for
the general welfare of [the Nation's]
members; a majority of the board of directors
are enrolled Senecas; [Seneca Gaming's]
principal place of business is on the
Cattaraugus reservation; all important
corporate acts require approval of the tribal
Council; the tribal Council may remove
[Seneca Gaming] board members for cause"
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(id.). In Myers, the district court stated that Seneca Niagara
Falls Gaming "enjoys all of the privileges and immunities of the
Nation" (Myers v Seneca Niagara Casino, 488 F Supp 2d at 168 n
2). Thus, it is undisputed that under federal law these entities
are entitled to the Nation's sovereign immunity.
Nevertheless, the majority casts these decisions to the
wind, and asserts that in the instant appeal it may ignore
federal precedent and place in question sovereign immunity as it
applies to the Seneca Gaming and Seneca Niagara Falls Gaming, and
a fortiori Lewiston Golf (majority op, at 17). According to the
majority, it is free to apply outdated decisions, propound
unfounded conclusions, and clear its own path on the question of
sovereign immunity until such time as the United States Supreme
Court speaks on the issue. Well the Supreme Court has spoken,
and we are bound to comply with its pronouncement that tribal
sovereign immunity is a federal matter "not subject to diminution
by the states" (Kiowa, 523 U.S. at 756). Thus, our Court is
without authority to render tribal commercial activities
meaningless by subjecting tribal entities to suit in
contravention of federally recognized immunity. Consequently,
with respect to Seneca Gaming and Seneca Niagara Falls Gaming the
law is currently settled in New York that they are arms of the
Nation and clothed with sovereign immunity.3
3
Realizing that it cannot avoid federal law, the majority
opines that perhaps Lewiston Golf is different from the other
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Implicit in the majority's argument for rejecting
Lewiston Golf's claim is the notion that the corporate form, and
the protections therein, categorically bars the extension of
sovereign immunity. This is simply an irrelevant consideration
because the sovereign immunity of a tribe extends to its
subordinate economic entities (see e.g. Native Am. Distrib. v
Seneca-Cayuga Tobacco Co., 546 F3d 1288 [10th Cir 2008] [tobacco
manufacturer]), including corporate entities (see e.g. Memphis
Biofuels, LLC v Chickasaw Nation Industries, Inc., 585 F3d 917,
921 [6th Cir 2009] [tribal conglomerate was an arm of the Tribe;
incorporating under 25 USC § 477, i.e. a Section 17 corporation,
did not automatically waive tribal sovereign immunity]; Koscielak
v Stockbridge-Munsee Community, 340 Wis 2d 409, 418 [2012] [golf
course and supper club], review granted, 342 Wis 2d 155]).
The majority rests its decision on Lewiston Golf's
apparent inability to bind or obligate the funds of the Seneca
Nation. As noted above, the financial and administrative duties
and obligations of Lewiston Golf vis-a-vis the Seneca Nation are
nearly identical to those of Seneca Niagara Falls Gaming.
Seneca corporate entities because the purposes of Seneca Gaming
and Seneca Niagara Falls Gaming are more aligned with those of
the Nation (majority op, at 18). The record belies any such
distinction. Indeed, the corporate charters are quite clear that
the purpose of these three entities is to benefit the Nation and
its members through "government action for the purpose of
preventing unemployment and economic stagnation," achieved
through the economic success of the Nation's gaming operations.
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According to their charters, neither can bind nor obligate the
funds of the Seneca Nation. Yet, Seneca Niagara Falls Gaming is
an arm of the tribe (see Sue/Perior Concrete & Paving, Inc. v
Seneca Gaming Corp., 99 AD3d 1203 [4th Dept 2012]; Seneca Niagara
Falls Gaming Corp. v Klewin Bldg. Co., Inc., 2005 WL 3510348, at
*5 [Conn Super Ct Nov. 30, 2005] [Niagara Falls Gaming, which is
a wholly owned subsidiary of Seneca Gaming is a governmental
instrumentality of the Seneca Nation]; Warren, 859 F Supp 2d at
540-41 [Seneca Gaming entitled to immunity; finding Seneca Gaming
charter provisions incorporated in all relevant respects into the
Seneca Niagara Falls Gaming charter], citing Klewin Bldg. Co.,
Inc., 2005 WL 3510348, at *5, affd 517 Fed Appx 54 [2d Cir 2013];
Myers, 488 F Supp 2d at 168 n 2).
In deciding the expanse of sovereign immunity, our
focus should be on the purpose and goals of the corporate entity.
We should look to whether the corporate entity furthers tribal
self-determination and self-governance, and as such, benefits the
tribe's members. Therefore, I would not rely primarily on
Ransom's financial interconnectedness factors. Indeed, federal
and state courts have criticized the multi-factor approach to
subordinate economic analysis as contravening Kiowa (see Kiowa,
523 U.S. at 754-55; Breakthrough Mgt. Group, Inc., 629 F3d at 1185-
89 [expressly overruling district court's holding that financial
interconnectedness is a threshold factor]; Cash Advance and
Preferred Cash Loans v State, 242 P3d 1099, 1110 n 12 [Colo 2010]
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[distinguishing Ransom as pre-Kiowa]). Moreover, Runyon, also a
pre-Kiowa case, was an expressly narrow ruling, which relied on
Ransom and Alaska corporate law (Runyon v Ass'n of Vill Council
Presidents, 84 P3d 437, 441 [Sup Ct of Alaska 2004], citing
Alaska Stat § 10.20.051 [b]).
IV.
Plaintiff argues that even if Lewiston Golf is entitled
to sovereign immunity, that immunity has been waived and thus it
is subject to suit. I can find no basis in law or the record to
support waiver. As the United States Supreme Court has made
clear, "an Indian tribe is subject to suit only where Congress
has authorized the suit or the tribe has waived its immunity"
(Kiowa, 523 U.S. at 754). Just this past term, in Michigan v Bay
Mills Indian Community, the Supreme Court reaffirmed, not only
that it is for Congress "to abrogate tribal immunity for
off-reservation commercial conduct," but that Congress has chosen
not to do so (134 S Ct at 2031).
As the court in Ransom recognized, "preserving tribal
resources and tribal autonomy are matters of vital importance"
and waiver of "sovereign immunity cannot be implied but must be
unequivocally expressed" (Ransom, 86 NY2d at 560-61, quoting
Santa Clara Pueblo, 436 U.S. at 58 [internal quotations marks
omitted]). "[W]aivers are strictly construed in favor of the
tribe" (Ransom, 86 NY2d at 561, quoting Rupp v Omaha Indian
Tribe, 45 F3d 1241, 1245 [8th Cir 1995] [internal quotations
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marks omitted]).
Plaintiff's contract with Lewiston Golf lacks any
express waiver of sovereign immunity. Plaintiff seeks to avoid
sovereign immunity arguing that Lewiston Golf is subject to suit
for the mechanics lien foreclosure. However, courts have failed
to recognize the distinction between in rem and in personum
jurisdiction asserted by the respondent (see Cayuga Indian Nation
of New York, 761 F3d 218, 220; Oneida Indian Nation of New York v
Madison County, Oneida County, N.Y., 605 F3d 149, 159 [2d Cir
2010]; vacated on other grounds and remanded sub nom. Madison
County, N.Y. v Oneida Indian Nation of New York, 562 U.S. 42
[2011]). Regardless, the suit ultimately seeks to enforce
Lewiston Golf's alleged debt to the plaintiff, and does not seek
title to the land, so even plaintiff's in rem theory must fail.
I would reverse the Appellate Division because Lewiston
Golf is entitled to sovereign immunity, therefore I dissent.
* * * * * * * * * * * * * * * * *
Order affirmed, with costs, and certified question answered in
the affirmative. Opinion by Judge Pigott. Judges Graffeo, Smith
and Abdus-Salaam concur. Judge Rivera dissents in an opinion in
which Chief Judge Lippman and Judge Read concur.
Decided November 25, 2014
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