Avoiding Tribal Court When Contracting With Tribes
Jany K. Jacob
(Reprinted from Seattle Daily Journal of Commerce)

        The United States Supreme Court recently decided a case that offers hope for contractors who want to avoid tribal court when litigating disputes over construction contracts or joint ventures with tribal entities. The Court ruled that if such contracts include arbitration clauses, then any potential legal dispute may be resolved in arbitration proceedings rather than in tribal court. The case is called C&L Enterprises, Inc. v. Citizen Band Potawatomi Indian Tribe of Oklahoma and the plaintiff, C& L Enterprises, was a roofing contractor who contracted to perform work on a tribe-owned commercial building. The construction contract was executed off-reservation and the project was also off-reservation. The commercial building was not property held by the federal government in trust for the tribe and the construction contract did not address tribal sovereign immunity issues.

        After proposing and signing the contract, the tribe decided it wanted different roofing materials and hired a different contractor to perform the work. C& L Enterprises brought a breach of contract claim against the tribe in arbitration proceedings. The arbitrator rendered an award in favor of C& L Enterprises and the contractor subsequently filed suit in Oklahoma state court to enter judgment on the award. The tribe appeared in state court to request that the lawsuit be dismissed because of tribal sovereign immunity. The tribe’s request was denied and the matter was eventually appealed to the Supreme Court.

        The construction contract included an arbitration provision that contemplated that all potential legal disputes would be resolved in arbitration. The arbitration clause further provided that judgment on any arbitral award may be entered in “any court having jurisdiction thereof.” There was also a choice of law provision that determined that the law governing the contract would be Oklahoma state law. Oklahoma state law provides that its state courts have jurisdiction to enter arbitral awards. The Supreme Court decided that these contractual provisions evidenced a waiver of tribal sovereign immunity.

        Unless waived by the tribe, contractors cannot not sue tribes directly in state or federal court or enforce an arbitration award of monetary damages in the courts because of the doctrine of sovereign immunity. This doctrine states that a federally-recognized tribe is a sovereign like the United States is a sovereign and, being a sovereign, a tribe cannot be hauled into another government’s courts. The Supreme Court’s ruling in the C& L Enterprises case now makes it clear that an arbitration clause will work as a waiver even if the construction contract does not expressly address sovereign immunity issues.

        Before the C& L Enterprises case, the strict rules for what constitutes a waiver of tribal sovereign immunity from lawsuits made it difficult for contractors entering into contracts with tribes to avoid litigating potential disputes in tribal court. Courts had ruled that such a waiver only exists if it is clear from the tribe’s conduct that that is what it intended to do. For example, a tribe waives its sovereign immunity when it instigates a lawsuit against the other party to the contract in state court, but not when it merely appears in state court to request that a lawsuit filed against the tribe be dismissed. Also, even if a tribe instigates the lawsuit in state court, it may still invoke sovereign immunity from the counterclaims of the defendant. This is so even when these counterclaims arise from the same transaction or occurrence as the original lawsuit. A tribe is also prohibited from contractually waiving its sovereign immunity in matters affecting trust property without the consent of the U.S. Department of Interior. The Court’s ruling in the C& L Enterprises case answers the question of whether a tribe may contractually waive its sovereign immunity to a lawsuit unrelated to trust property— it can.

        The Supreme Court’s ruling in this year’s C& L Enterprises case is more encouraging from the standpoint of contractors than its 1998 ruling in the Kiowa Tribe of Oklahoma v. Manufacturing Technologies, Inc. case. In that case, the Court determined that just because a tribe conducts commercial enterprises off-reservation does not mean that it has waived its sovereign immunity from a lawsuit arising out of those commercial transactions.

        Thus, based on the recent Supreme Court ruling in the C& L Enterprises case, contractors should include an alternative dispute resolution procedure in all written contracts with tribes to avoid adjudicating disputes in tribal court. Contractors who are unable to secure an arbitration provision in their construction contracts with tribes may still be able to sue a tribal officer individually if the officer acted beyond the scope of his or her authority just as officials of the federal or a state government may be sued when acting beyond the scope of their authority. Also, if the construction contract is with a tribally-chartered corporation not owned by the tribe and operating independently of a tribal government, then the tribal corporation is not entitled to sovereign immunity from lawsuits in the first place.