Tribal economies are booming, thanks in large part to the growth of Indian gaming. This trend, in turn, means more opportunity for those who do business, or want to do business, with Native American tribes.
Those venturing into this area, however, need to be aware that dealing with a tribe is like dealing with any other governmental entity, with one notable exception: most tribes have very limited waivers of sovereign immunity incorporated into their tribal laws. Further, many tribes are reluctant to include more than a very limited waiver in their contractual agreements, often agreeing only that an action on a contract may be brought in the tribe’s own court system. This does not bode well for the unwary, who might find themselves virtually without recourse should a dispute arise.
The easy solution, if a contractor can get the tribe to agree, is to include a waiver of sovereign immunity within, for example, the construction or supply contract, which allows the contractor to bring an action against the tribe for disputes arising under the contract. One form of contractual waiver provision that has been recognized by the courts is an arbitration clause that compels the tribe to arbitrate contractual disputes, most often through the American Arbitration Association, and which also includes a provision allowing for enforcement of the resulting award in state or federal court.1
Tribal Sovereign Immunity
It is a basic principle that Native American tribes — as recognized by the federal government — enjoy sovereign immunity.2 Tribal sovereign immunity can be waived in one of two ways. First, Congress has plenary authority to limit, modify or eliminate the powers of local self-government that the tribes otherwise possess3 and, in so doing, it can waive tribal sovereign immunity. However, to abrogate tribal immunity, Congress must “unequivocally” express that purpose.4
Second, a tribe itself may waive its sovereign immunity. Such waiver often takes the form of limited constitutional, charter or effective statutory waivers set forth in tribal ordinances, though — as noted above — these usually are very restricted. A common example is a limited tort claims act, which allows the tribe to be sued in its own court system on certain tort actions. To relinquish its immunity, a tribe’s waiver must be “clear,”5 cannot be implied and — like congressional action — must be unequivocally expressed.6
Contractual Waiver
In Kiowa Tribe of Okla. v. Manufacturing Technologies, Inc.,7 the U.S. Supreme Court held that an Indian tribe is not subject to suit in a state court — even for breach of contract involving off-reservation commercial conduct — unless “Congress has authorized the suit or the tribe has waived its immunity.” In C&L Enterprises, the U.S. Supreme Court found that an arbitration agreement, contained in a construction contract to install a roof on an off-reservation, commercial building owned by the Citizen Potawatomi Nation, constituted an effective and “clear” waiver of the tribe’s sovereign immunity.
In C&L, the contractor sued the Potawatomi tribe to enforce an arbitration award in state court. The tribe, to its peril, had not participated in the arbitration, asserting sovereign immunity, and the contractor obtained an award.8 When C&L sought to confirm the award in state court, under the terms of the contractual arbitration clause, the tribe moved to dismiss the action on sovereign immunity grounds.9
The issue identified by the Supreme Court was “whether the Tribe waived its immunity from suit in state court when it expressly agreed to arbitrate disputes with C&L relating to the contract, to the governance of Oklahoma law, and to the enforcement of arbitral awards ‘in any court having jurisdiction thereof.’”10 The Court held “that, by the clear import of the arbitration clause, the Tribe is amenable to a state-court suit to enforce an arbitral award in favor of contractor C&L.”11
The arbitration clause at issue provided, in part:
All claims or disputes between the Contractor [C&L] and the Owner [the Tribe] arising out of or relating to the Contract, or the breach thereof, shall be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association currently in effect unless the parties mutually agree otherwise ... . The award rendered by the arbitrator or arbitrators shall be final, and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction thereof.12
The “clear import” of such clauses is that they also compel a tribe to arbitrate contractual disputes in the first place.
Other Case Law
In C&L, the Supreme Court accepted certiorari to resolve a conflict it perceived between Pan Am. Co. v. Sycuan Band of Mission Indians13 and three other cases: Native Village of Eyak v. GC Contractors, Val/Del, Inc. v. Superior Court, and Sokaogon Gaming Ent. Corp. v. Tushie-Montgomery Assocs., Inc.14 However, a closer review of the case law reveals no real conflict between the cases. The Ninth Circuit in Pan Am cited Eyak and Val/Del as cases in which the courts “interpreted contractual arbitration provisions as waiving tribal immunity,”15 and further held that the arbitration provision at issue included an effective waiver of sovereign immunity with respect to arbitration, albeit not as to a court suit.
In Eyak, the arbitration clause at issue stated: “All claims, disputes and other matters in question between the Contractor and the Owner, arising out of, or relating to, the Contract Documents or the breach thereof, ... shall be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association[.]”16 The court held:
[W]e believe it is clear that any dispute arising from a contract cannot be resolved by arbitration, as specified in the contract, if one of the parties intends to assert the defense of sovereign immunity. To the extent possible, all provisions in a contract should be found meaningful. The arbitration clause in Eyak’s contract with GC Contractors would be meaningless if it did not constitute a waiver of whatever immunity Eyak possessed.17
The court in Val/Del construed a similar arbitration clause, finding it to be an “express waiver of the tribe’s sovereign immunity.”18 The Seventh Circuit in Sokaogon found another such provision to be unambiguous: “No appellate decision, to our knowledge, has ever rejected a waiver of sovereign immunity that was as clear as this one.”19
Since C&L Enterprises
Surprisingly, there has been very little case law in the six years since C&L Enterprises was decided that discusses the effect of arbitration clauses in contracts with Indian tribes. There is one case of note, however: Smith v. Hopland Band of Pomo Indians.20
The arbitration provision at issue was contained in an American Institute of Architects Standard Form of Agreement.21 The court found it to be “indistinguishable from the contract in C&L Enterprises, and the only reasonable interpretation of its terms is that it clearly, and explicitly waives tribal sovereign immunity.”22
Additional Considerations
The case law does not require specific or “magic” language for a waiver to be effective. For example, in finding the arbitration clause in Sokaogon “essentially indistinguishable” from the one at issue in C&L Enterprises, the Supreme Court noted the Seventh Circuit’s observations that: “‘The [tribal immunity] waiver ... is implicit rather than explicit only if a waiver of sovereign immunity, to be deemed explicit, must use the words “sovereign immunity.” No case has ever held that.’ That cogent observation holds as well for the case we confront.”23
Smith also signals a trend in tribal governance: the adoption of ordinances requiring that a waiver of sovereign immunity can only be effected by tribal council resolution. The purpose for these ordinances ostensibly is to prevent tribal officers, management and other functionaries from waiving the tribe’s sovereign immunity in their various dealings. Thus, when dealing with a tribe, it is best to review the tribal code to determine whether such an ordinance is in place. If so, the safest bet to ensure that a contractual arbitration clause is enforceable is to have the tribal council approve the contract by resolution.
Finally, the courts’ enthusiasm for tribal sovereign immunity may be wavering. As Chief Judge Richard A. Posner said in Sokaogon:
In the … class of case, illustrated by contract cases such as the present one, the issue is whether the tribe itself has waived one of its rights. Here the only purpose that a requirement of a clear statement could serve would be the admittedly, perhaps archaically, paternalistic purpose of protecting the tribe against being tricked by a contractor into surrendering a valuable right for insufficient consideration. We do not find this or any other purpose articulated in the cases, and this leads us to doubt whether there really is a requirement that a tribe’s waiver of its sovereign immunity be explicit, especially since the harder it is for a tribe to waive its sovereign immunity the harder it is for it to make advantageous business transactions.24
In short, the theory is it not only is good business for those dealing with Indian tribes to insist upon waivers of sovereign immunity in their contracts, it’s good business for the tribes to agree to such provisions.
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Gene Barton is the editor of the Bar Bulletin. A litigation attorney with Karr Tuttle Campbell in Seattle, Barton has spent the past three years challenging a tribe’s assertion of sovereign immunity in multiple forums. He can be reached at gbarton@karrtuttle.com or 206-224-8030.
1 See C&L Enterprises, Inc. v. Citizen Band Potawatomi Indian Tribe of Okla., 532 U.S. 411, 121 S. Ct. 1589 (2001); Native Village of Eyak v. GC Contractors, 658 P.2d 756 (Alaska 1983); Val/Del, Inc. v. Superior Court, 703 P.2d 502 (Ariz.), cert. denied, 474 U.S. 920 (1985); and Sokaogon Gaming Ent. Corp. v. Tushie-Montgomery Assocs., Inc., 86 F.3d 656 (7th Cir. 1996).
2 Santa Clara Pueblo v. Martinez, 436 U.S. 49, 98 S. Ct. 1670 (1978); Puyallup Tribe v. Washington Dept. of Game, 433 U.S. 165, 172–73 (1977). Tribal officers, however, do not enjoy similar immunity. Puyallup Tribe, 433 U.S. at 171–72.
3 Santa Clara Pueblo, 436 U.S. at 57, 98 S. Ct. at 1676.
4 C&L Enterprises, 532 U.S. at 418, 121 S. Ct. at 1594; Santa Clara Pueblo, 436 U.S. at 58.
5 C&L Enterprises, 532 U.S. at 418, 121 S. Ct. at 1594; Oklahoma Tax Comm’n v. Citizen Band Potawatomi Tribe of Okla., 498 U.S. 505, 509, 111 S. Ct. 905 (1991).
6 C&L Enterprises, 532 U.S. at 418, 121 S. Ct. at 1594; Santa Clara Pueblo, 436 U.S. at 58; United States v. Testan, 424 U.S. 392, 399 (1976).
7523 U.S. 751, 140 L. Ed. 2d 981, 118 S. Ct. 1700 (1998).
8 532 U.S. at 416, 121 S. Ct. at 1593.
9 Id.
10 Id. at 414, 121 S. Ct. at 1592.
11 Id.
12 Id. at 415, 121 S. Ct. at 1592–93.
13 884 F.2d 416, 419–20 (9th Cir. 1989).
14 See note 1, supra; 532 U.S. at 417–18, 121 S. Ct. at 1594.
15 884 F.2d at 419.
16 658 P.2d at 759.
17 Id. at 760–61.
18 703 P.2d at 508–09.
19 86 F.3d at 659–60. See also Rosebud Sioux Tribe v. Val-U Constr. Co., 50 F.3d 560, 563 (8th Cir. 1995) (“The parties clearly manifested their intent to resolve disputes by arbitration, and the Tribe waived its immunity with respect to any disputes under the contract.”); Ninigret Dev. Corp. v. Narragansett Indian Wetuomuck Housing Auth., 207 F.3d 21, 30–31 (1st Cir. 2000) (finding a contractual arbitration clause to be “nose-on-the-face plain,” effecting a waiver that was “direct, clear and unavoidable”).
20 115 Cal. Rptr. 2d 455 (Cal. Ct. App. 2002).
21 Id. at 457.
22 115 Cal. Rptr. 2d at 459 (emphasis supplied by court).
23 532 U.S. at 421, 121 S. Ct. at 1596 (quoting Sokaogon, 86 F.3d at 659–60). See also Krystal Energy Co. v. Navajo Nation, 357 F.3d 1055, 1061 (9th Cir. 2004); Rosebud Sioux Tribe, 50 F.3d at 563; Smith, 115 Cal. Rptr. 2d at 462.
24 86 F.3d at 659–60 (citing Amelia A. Fogleman, Note, “Sovereign Immunity of Indian Tribes: A Proposal for Statutory Waiver for Tribal Businesses,” 79 Va. L. Rev. 1345, 1364-65 (1993)).
