Outsource Services Management, Llc. v. Nooksack Business Corporation
74764-9
| Wash. Ct. App. | Apr 3, 2017Background
- Nooksack Business Corporation (NBC), owned by the Nooksack Tribe, borrowed >$15M via limited-recourse loans to build and improve the Nooksack River Casino; Outsource Services Management (OSM) is successor lender.
- Loan documents pledged "Pledged Revenues": all receipts, revenues, and rents from operation of any portion of the "Facilities," including future revenues and non-gaming incidental operations; "Facilities" included equipment and improvements (buildings).
- Agreements expressly stated they did not encumber tribal land and gave lender no management or operational control; loans were limited recourse and enforceable until secured obligations were paid.
- OSM sued NBC after default; trial court entered judgment for outstanding debt, permitted OSM to execute on pledged revenues (including future revenues), stayed execution pending asset identification, and barred transfers of pledged assets.
- NBC appealed, arguing (1) the agreements encumber tribal land under 25 U.S.C. § 81 and required DOI preapproval, (2) pledged revenues should not include future receipts or revenues from third-party operation, (3) the loan rights merged into the judgment and were extinguished, and (4) state court lacked subject matter jurisdiction to enforce the judgment.
Issues
| Issue | Plaintiff's Argument (NBC) | Defendant's Argument (OSM) | Held |
|---|---|---|---|
| Whether loan agreements "encumber" tribal land under 25 U.S.C. § 81 so as to require Secretary preapproval | The pledge of revenues and restraints on alienation effectively encumber tribal land and thus need DOI approval | The agreements grant only a right to revenues, not proprietary or near-exclusive control of the land; thus no encumbrance under § 81 | The agreements do not encumber tribal land for § 81 purposes because lender has no legal interest in or control over land; no preapproval required |
| Whether "Pledged Revenues" includes future receipts and revenues from any activities at the Facilities (including after casino closure or by others) | Pledge should be limited to revenues NBC originally contemplated (e.g., gaming) and not future third-party receipts | The pledge language is broad and unambiguous: it covers receipts "whether now existing or hereafter arising" from operation of any portion of Facilities | The pledge validly covers past, present, and future revenues from operations of the Facilities as written |
| Whether the loan rights merged into the money judgment and were extinguished | Merger into judgment extinguished original contractual security and recourse rights | Merger does not eliminate a judgment creditor's special rights to enforce security for the underlying debt | Merger did not prevent court from defining and permitting enforcement against pledged assets; secured remedies survive judgment enforcement |
| Whether state court has subject matter jurisdiction to construe and enforce the loan agreements | Waiver of sovereign immunity is limited; state court cannot fully adjudicate enforcement against tribal interests | Parties (tribe and NBC) contractually waived immunity and consented to suit in Washington courts for contract-related claims; prior Supreme Court decision affirmed jurisdiction on remand | State court had subject matter jurisdiction to construe and enforce the agreements and rights to execute on pledged revenues |
Key Cases Cited
- Outsource Servs. Mngt., LLC v. Nooksack Bus. Corp., 181 Wn.2d 272 (Wash. 2014) (state supreme court held waiver of sovereign immunity and consent to be sued supported state-court jurisdiction for contract claims)
- GasPlus, L.L.C. v. United States Dep't of Interior, 510 F. Supp. 2d 18 (D.D.C. 2007) (distinguishes management/control rights from mere revenue rights for § 81 encumbrance analysis)
- Chemehuevi Indian Tribe v. Jewell, 767 F.3d 900 (9th Cir. 2014) (discusses history and purpose of § 81 and limits on its reach)
- Boeing Emps.' Credit Union v. Burns, 167 Wn. App. 265 (Wash. Ct. App. 2012) (merger into judgment does not extinguish enforcement rights in underlying security)