The past decade has witnessed a number of cases in which federal courts have limited tribal sovereign immunity and jurisdiction. Two recent decisions – one from the Ninth Circuit and the other from the Tenth Circuit U.S. Court of Appeals – make clear, however, that when a tribe has immunity from suit, that immunity most probably extends to tribal businesses and that waivers of sovereign immunity are critical when contracting with tribal businesses.

In Cook v. Avi Casino Enterprise et al. (November 14, 2008), the plaintiffs sued the Fort Mohave Indian Tribe's Avi Casino under Arizona's dram shop laws, which make businesses that serve alcohol to intoxicated persons liable for the damages that the persons cause. In this case, an employee of the Avi Casino was given free drinks during a party at the casino. The casino provided transportation to the intoxicated employee to the parking lot and allowed her to get into her car to drive. After leaving the parking lot, she swerved over the centerline and hit the plaintiff's motorcycle. The plaintiff suffered catastrophic injuries, including the loss of his leg.

While clearly torn by its decision, the Court held that the tribal casino could not be sued for its negligence because it is an "arm" of the Fort Mohave Indian Tribe and has the same immunity as the tribe. The court held that the U.S. Supreme Court has made it clear that tribes can be sued only if suit is authorized by Congress or the tribe has waived its immunity. The Supreme Court has not made exception for commercial, for-profit businesses of tribes; and, the Court said, left it no choice but to dismiss plaintiff's complaint against Avi and its employees.

In Native American Distributing v. Seneca-Cayuga Tobacco Company (November 17, 2008), the Court held that the Seneca-Cayuga's cigarette business cannot be sued in federal court because the business, like its tribal owner, is immune from suit. The suit by Native American Distributing alleged that the tribe's tobacco company and its officials engaged in illegal competitive practices and repeatedly broke agreements with Native American. The plaintiff argued that the tobacco company can be sued because the tribe adopted a corporate charter for its business activities, which allows the tribe's business committee to sue and be sued in any court. Relying primarily on the tribe's business committee resolution that created the tobacco company, and in spite of testimony that the tobacco company represented to the plaintiff that it could be sued, the court concluded that Seneca-Cayuga Tobacco Company is a division of the tribe – not a division of the tribe's corporate business entity – and, therefore, is immune from suit.

Lessons Learned For Doing Business With Tribal Enterprises

The lessons of the Cook and Native American Distributing cases are clear.

  • There is a presumption in favor of sovereign immunity.
  • When doing business with a tribal business, assume that the business is immune from suit and that you will have no recourse unless the tribal business waives its immunity.
  • Expressly provide a waiver of immunity in all agreements with tribal businesses.
  • If they are not determinative, the business's organizational documents are likely to be probative of whether the business is a tribal enterprise or a division of a tribal corporation that may have waived its immunity from suit.
  • Do not rely on "sue and be sued" clauses. They often do not ensure recourse against a tribal business.
  • Do your due diligence and get sound legal advice. Don't wait until you have a dispute to learn that you have no recourse.

Its unique blend of Indian law, commercial, real estate, contract and energy law expertise makes the Bracewell & Giuliani Indian Law Practice Group uniquely suited to advise and counsel businesses and individuals who do, or wish to do, business with tribes and tribal enterprises. We will be pleased to assist you in identifying the advantages and challenges of doing business with tribal businesses and to help you negotiate contracts that will achieve your goals.

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