WAIVING SOVEREIGN IMMUNITY GROWS TRICKIER
| Jurisdiction | United States |
Managing Partner
Jennifer L. Chino
Associate Attorney
Stetson & Jordan, P.C.
1305 Rio Grande Blvd. NW
Albuquerque, NM 87104
Phone: 505-256-4911
Fax: 505-256-5177
e-mail: cbs@stetsonlaw.com
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Providing limited waivers of a tribe's immunity from suit has become a virtual necessity in today's legal and business environment. The creation of tribal corporations allows a tribe to enter into important economic ventures providing limited waivers of its immunity that are specific to that particular enterprise and often to a particular court, and can help to protect the assets of the tribal government. Waivers of immunity have never been taken lightly, and courts make a strong presumption against such waivers.1 It has long been the rule that, absent a Congressional waiver of a tribe's sovereign immunity, tribal entities cannot be sued without their clear and unequivocal consent.2 That is now changing, and to balance competing interests of the preservation of tribal sovereignty on one hand and the need for limited waivers in commercial transactions, a tribal corporation should expressly identify how and to what extent it intends to waive immunity. The tribal corporation should always be wary of "sue or be sued" provisions in its charter, as well as of dispute resolution (arbitration)
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clauses that may be interpreted as implicit waivers of immunity beyond the scope of the tribe's or corporation's intentions.
"Sue or be Sued" Clauses.
Following the passage of the IRA, the federal government developed model charters for § 17 corporations to use in organizing, without much thought into individual needs of such tribal corporations. Many tribes adopted such charters without significant revision. Included in the standard charters was the general corporate power to "sue or be sued." The inclusion of this phrase led to conflict in the courts as to whether tribes by those terms waived immunity, and indeed earlier courts found the clause to be a general waiver of sovereign immunity.3
In recent years, however, the trend has reversed, and most cases find the provision by itself provides no waiver.4 For example, recently in Sanchez v. Santa Ana Golf Club, Inc.,5 the plaintiff contended, in part, that the inclusion of a "sue or be sued" clause in the defendant's corporate charter waived its immunity. The court concluded that it was not an express waiver because the charter mandated that the waiver be by resolution duly adopted by its board of directors. Absent such resolution, no waiver existed.
Earlier contrary cases have not been overruled, however, although the Santa Ana court distinguished most by those cases' reference to an express waiver.6 Therefore, if a "sue or be sued" clause is included in a tribal
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ordinance or charter, it would be wise to clarify how and to what extent any waiver will occur. It is certainly possible to write a waiver provision that cannot be read as a general waiver of the corporation's immunity, and many tribes successfully do so, either by requiring the waiver to be in writing supported by a corporate resolution, by limiting the waiver to declaratory judgments or injunctions, or by limiting the waiver to a particular transaction, or to a sum specific (e.g., not to exceed the cost of the contract or not to exceed the amount of insurance).7 Tribes and tribal corporations should be aware that the nature and the scope of their sovereignty may be challenged based on the language--or absence of it--and should therefore insist that all of their contracts, their tribal corporate laws, and their tribal charters deal expressly with the "sue or be sued" issue.
Arbitration/Dispute Resolution Provisions.
Even with the "sue or be sued" issue resolved, tribes and tribal corporations must still face the waiver of tribal sovereign immunity. In 2000, the First Circuit, in a less-than-stellar opinion finding that federal question jurisdiction under 28 U.S.C. § 1331 allowed it to make decisions regarding the tribe's jurisdiction, held that the "sue and be sued" language in the ordinance creating the tribal housing authority did not in and of itself waive the housing authority's immunity; however, the arbitration provision was found to do so.8
Subsequently, in C&L Enters., Inc. v. Citizen Band Potawatomi Indian Tribe,9 in a more studied analysis, the United States Supreme Court was presented with the question of whether the tribe waived its immunity from suit in state court when it expressly agreed to arbitrate disputes with a contractor relating to the construction contract, to the governance of Oklahoma law, and to the enforcement of arbitral awards in any court
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having jurisdiction thereof. The result dramatically changed the law on sovereign immunity.
The tribe in that case had entered into a contract with C&L Enterprises for the installation of a roof on a building owned by the tribe but located off- reservation. The construction contract was a standard form American Institute of Architects agreement, proposed by the tribe. After execution of the contract, but before C&L Enterprises began work on the project, the tribe obtained new bids for different roofing materials and hired a different company to install the roof. C&L Enterprises sought arbitration for breach of contract, and the tribe claimed it was immune from suit and refused to participate in the arbitration. The arbitrator found for C&L Enterprises.
On appeal, the Supreme Court recited the rule in Kiowa10 that a tribe is not subject to suit in state court, even for breach of contract involving off-reservation commercial conduct, unless it has waived its immunity. It then held unanimously that the tribe had clearly waived its immunity from suit. Two provisions of the contract were key to this case. First, the contract contained an arbitration clause:
All claims or disputes between the Contractor and the Owner 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.
Second, the contract included a choice-of-law clause that read: "The contract shall be governed by the law of the place where the Project is located."
The Court rejected the tribe's argument that the arbitration clause was a waiver of the parties' right to a court trial, not a waiver of immunity. Instead, the Court held that the arbitration clause demonstrated the parties' commitment to comply with the dispute resolution procedures, noting that the arbitration clause would be meaningless if it did not constitute a waiver
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of whatever immunity the tribe possessed.11 Also rejected was the tribe's contention that a form contract designed for entities that were not sovereign and thus had no immunity to waive, could not be seen as a clear waiver. The court noted the common-law rule of contract interpretation, construing any ambiguous language against the drafter, but stated that rule was inapplicable in this case because the contract was not ambiguous.12 The Supreme Court provided no predictable...
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