Gaming World International, Ltd. v. White Earth Band Of Chippewa IndiansGaming World International, Ltd. v. White Earth Band Of Chippewa Indians
H. Morrison Keshner, argued, Fergus Falls, for appellee.
MURPHY, Circuit Judge.
This case grows out of a dispute between the White Earth Band of Chippewa Indians (the Band) and Gaming World International, Ltd. (Gaming World) related to the construction and management of a casino in Mahnomen, Minnesota. Approximately one month after the Band filed a declaratory judgment action against Gaming World in the White Earth Band of Chippewa Tribal Court, Gaming World filed this petition seeking declaratory relief and arbitration. The district court granted Gaming World‘s motion to compel arbitration, and the Band appeals. We affirm in part and reverse in part.
I.
Gaming World is a Delaware corporation that specializes in operating casinos, and the Band is a federally recognized Indian tribe. The Band is governed by the White Earth Tribal Council which has conducted business as the White Earth Reservation Business Committee. In 1991 the parties agreed that the Band would construct the Shooting Star Casino in Mahnomen, Minnesota and that Gaming World would help to finance and manage it. A written contract was drafted which provided for a term of seven years and a division of the net profits of the casino. Sixty percent of the net profits were to go to the Band and forty percent to Gaming World. Appellant‘s Appendix (App.) at A-363. The White Earth Reservation Business Committee signed on behalf of the Band.
The parties agreed that the Band would borrow funds to finance the construction of the casino and that the loans would be repaid out of the Band‘s share of net profits. Id. at A-32, 245. The Band obtained the necessary construction funds by drawing $11,800,000 from a trust fund established under the White Earth Land Settlement Act (WELSA),
IGRA specifies that the Chairman of NIGC has exclusive authority to approve any casino management contract,
IGRA contains provisions governing the maximum term for management agreements, division of profits under them, and limitations on repayment of construction costs. See
Because the Band and Gaming World drafted their initial agreement before NIGC was actually in operation, they submitted it to the Area Director of the BIA for approval. The Area Director decided that the contract could not be approved unless modified to decrease its term to five years, to reallocate profits seventy percent to the Band and thirty percent to Gaming World, and to repay all of the Band‘s borrowed construction funds from gross casino revenues rather than from the Band‘s share of net profits. The parties agreed to these conditions under protest, and the Area Director approved the contract as so modified on March 6, 1992. App. at A-119.
The contract approved by the Area Director in March 1992 contained several other clauses relevant to this appeal. It included an arbitration clause which stated:
Any dispute, controversy or question of interpretation arising under, out of, or in connection with this Agreement or any amendments hereof, or any breach or default hereunder, shall be submitted to and determined and settled by arbitration in the State of Minnesota, in accordance with the applicable rules of the American Arbitration Association then in effect.
The parties to this Agreement anticipate that said Agreement will be approved by the Secretary of the Interior or his delegate pursuant to the provisions of [IGRA] and recognize that such approval causes this Agreement to be binding upon the parties until such time in the future as the Agreement shall be amended. The parties to this Agreement also recognize that [IGRA] may require the Band to submit this agreement to the Chairman of the National Indian Gaming Commission for approval by the Chairman. If so required, the parties hereto agree to submit this Agreement.
Id. at A-31-32.
The Band appealed the Area Director‘s March 6, 1992 decision to IBIA, id. at A-242, which issued its decision in early March 1993, the month after NIGC had begun to function. IBIA affirmed that part of the Area Director‘s decision limiting the contract term to five years and setting the division of profits at seventy percent for the Band and thirty percent for Gaming World. It vacated that part of the decision requiring the Band‘s construction costs be repaid from gross revenues, however, and remanded the matter to the Area Director for “further consideration.” White Earth Band of Chippewa Indians, 23 I.B.I.A. 216, 227 (Mar. 3, 1993). No reference was made to the fact that NIGC had become operational or that IGRA and the relevant regulations required final approval or disapproval of a management contract by the Chairman of NIGC,
On April 23, 1993, the Area Director wrote a letter to Darrell “Chip” Wadena, chairman of the White Earth Tribal Council. App. at A-488. The Area Director advised in this letter that the funds obtained from the Band‘s WELSA trust fund for construction of the casino were actually disbursements and required no repayment:
Contrary to our original assumption in this matter, funds borrowed from a Bureau trust fund account, such as the White Earth Tribal Government and Economic Development fund ... do not have to be repaid in any form or manner. The funds should be considered a disbursement and not a loan.
Id. According to the Area Director, this meant that the $11,800,000 drawn from the Band‘s trust fund would not have to be repaid from casino revenues, neither from gross revenues (as provided in the March 6, 1992 contract approved by the Area Director but vacated by IBIA), nor from the Band‘s share of net profits (as originally contemplated by the parties).
The April 23 letter also indicated that the Area Director expected that the issue remanded from IBIA would not be resolved by him, but by the parties submitting a revised contract for final approval or disapproval by NIGC. Even if the funds withdrawn from the WELSA trust did not have to be reimbursed, the repayment of the Band‘s $5,500,000 commercial loan remained at issue. The Area Director‘s letter advised:
the gaming management agreement with Gaming World International, Inc., will also need to be revised to reflect the change in required repayment. We assume, however, that you will address those revisions directly with the National Indian Gaming Commission along with those issues remanded back to the Bureau in the Interior Board of Appeals decision of March 3, 1993.
While the appeal of the Area Director‘s March 6, 1992 decision was pending before IBIA, the parties had decided on November 5, 1992 to make a further amendment to their agreement. Id. at A-353. This amendment was to “be integrated in and made a part of the earlier agreement between the parties dated March 6, 1992” and to cancel “all provisions of prior agreements, which are inconsistent” with the amendment. Id. The November 1992 amendment contained new provisions for construction of certain improvements to the casino, lengthened the contract term to seven years, reallocated profits sixty five percent to the Band and thirty five percent to Gaming World, and reaffirmed the Band‘s limited waiver of sovereign immunity. Id. at 356-58. The amendment also stated its terms were “contingent upon ... the approval of the United States, Bureau of Indian Affairs or the Chairman of the National Indian Gaming Commission as required by law.” Id. at 358. Although the parties began to perform under the terms of this amended agreement in May 1993, they did not submit it to NIGC until August, 1994.1
NIGC Chairman Harold A. Monteau rejected the November 5, 1992 amendment in a letter dated November 19, 1996, id. at A-141, which also stated that the Commission was not going to “review the [underlying] contract and require changes” or “require the parties to go through the extensive process to bring it in compliance” with IGRA. Id. at A-143. Monteau‘s letter stated that the November 1992 modification had been constructively denied as of September 1994 because the Commission had taken no action on it within thirty days, see
Finally, as part of our review of the amendment, we also called in the underlying contract between the parties. We have decided that it is neither necessary nor appropriate at this time to review the contract and require changes. The contract is very close to expiring on its own terms, and its provisions were not such that we believed it essential to require the parties to go through the extensive processes to bring it in compliance with the Indian Gaming Regulatory Act. More importantly, we have been advised that the parties have terminated their relationship. Therefore, we intend to take no further action on the contract.
Id. at 143. Although the letter notified the parties of their right to appeal within thirty days, id. at 141, no appeal was filed. The November 5, 1992 amendment thus never received final approval, and neither party presently contends it is valid or seeks to enforce its terms. The record also does not indicate that either party protested or appealed the Chairman‘s announcement that NIGC had decided not to review the March 6, 1992 agreement “at this time.”
The Band terminated the casino management contract with Gaming World by a resolution dated August, 12, 1996, after a change in its leadership. Id. at A-289-92. Wadena, tribal chairman when the parties first reached agreement in 1991, and two other members of the tribal council had been convicted of federal crimes on June 25, 1996, including conspiracy to use tribal funds in the construction of the casino for personal gain, in violation of
The White Earth Band of Chippewa Tribal Court had meanwhile been established on November 3, 1997, id. at A-637, 651 and the Band filed an action in that court on November 30, 2000. The Band states that this filing was delayed by difficulties in obtaining necessary records from Wadena and his coconspirators. In its action the Band requested a declaration that the March 6, 1992 contract was void and also asserted a qui tam claim under
Approximately one month after the Band filed its action in tribal court, Gaming World filed this petition in federal court seeking a declaratory judgment that the March 6, 1992 agreement is valid as approved by IBIA, as well as an order compelling arbitration. The Band‘s responsive pleading asserted that the federal court lacked jurisdiction and that the March 6, 1992 contract was void in its entirety for lack of valid federal approval.
Gaming World filed a motion to compel arbitration, and the district court granted it from the bench. The court concluded that it had jurisdiction under
II.
Before turning to the substantive issues raised by the parties, we must first determine whether there is jurisdiction over this matter. See Steel Co. v. Citizens for a Better Env‘t, 523 U.S. 83, 94-95 (1998); Bender v. Williamsport Area Sch. Dist., 475 U.S. 534, 541 (1986). We review de novo the district court‘s conclusion that it had subject matter jurisdiction. See Gilbert v. Monsanto Co., 216 F.3d 695, 699 (8th Cir.2000).
Diversity jurisdiction is not available here under
In its petition Gaming World seeks both declaratory relief and an order to compel arbitration, but it must also invoke federal substantive law for there to be jurisdiction. Federal courts may entertain claims for declaratory relief under
In terms of jurisdiction there is a significant distinction between ordinary contract disputes involving Indian tribes, TTEA v. Ysleta Del Sur Pueblo, 181 F.3d 676, 681 (5th Cir.1999), and those raising issues in an area of extensive federal regulation. See Comstock v. Alabama and Coushatta Indian Tribes, 261 F.3d 567 (5th Cir.2001), cert. denied, 535 U.S. 971 (2002). Thus, the “extensive regulatory scheme” governing tribal oil and gas leases conferred federal jurisdiction over a contract dispute between a tribe and two oil companies in Comstock. Id. at 574-75. The regulatory scope of IGRA is similarly far reaching in its supervisory power over Indian gaming contracts. The Eleventh Circuit has concluded that IGRA and NIGC regulations so dominate the area of tribal gaming that they are incorporated into gaming contracts by operation of law, see Tamiami Partners, Ltd. v. Miccosukee Tribe of Indians, 63 F.3d 1030, 1047 (11th Cir.1995), and our court has recognized that IGRA completely preempts state law with respect to Indian gaming. See Gaming Corp. of America v. Dorsey & Whitney, 88 F.3d 536, 547 (8th Cir.1996).
Moreover, an action filed in order to avoid tribal court jurisdiction necessarily asserts federal law. National Farmers Union Ins. Co. v. Crow Tribe of Indians, 471 U.S. 845, 853 (1985). See also Iowa Mut. Ins. Co. v. LaPlante, 480 U.S. 9, 15 (1987); TTEA, 181 F.3d at 683; Kerr-McGee Corp. v. Farley, 115 F.3d 1498, 1501 (10th Cir.1997) (affirming stay of federal court proceedings to allow tribal court to determine its own jurisdiction). It is well established that the scope of tribal court jurisdiction is a matter of federal law. See National Farmers Union Ins. Co., 471 U.S. at 852; Iowa Mut. Ins. Co., 480 U.S. at 15.
The jurisdictional facts in this case are very similar to those in Bruce H. Lien Co., 93 F.3d at 1421-22, which also involved a casino dispute in which a management company went to federal court for an order to compel arbitration after a tribe had filed a declaratory action in tribal court. We concluded in that case that there was federal jurisdiction over the matter because the issue of the “existence of tribal court jurisdiction itself presents a federal question within the scope of 28 U.S.C. § 1331.” Id.; see also TTEA, 181 F.3d at 683 (finding jurisdiction to determine whether tribal court properly exercised jurisdiction over § 81 claim).3 Here, Gaming World‘s petition is an attempt to circumvent the Band‘s previously filed action in tribal court, and we have jurisdiction to determine the scope of tribal court jurisdiction and whether comity requires deference to that court in the first instance. See Bruce H. Lien Co., 93 F.3d. at 1421-22.
After examining the issues, we conclude that we have jurisdiction and affirm the ruling of the district court on this point.
III.
The Band argues that the district court erred by granting the motion to compel arbitration instead of “staying its hand” so that tribal court remedies could be exhausted. Gaming World contends that the tribal exhaustion doctrine should not be applied because the White Earth Band of Chippewa Tribal Court did not exist at the time it commenced arbitration proceedings, the arbitration clause is itself valid and enforceable, and the validity of the March 6, 1992 agreement should be decided by the arbitrators, citing Prima Paint Corp., 388 U.S. at 402-04 (arbitration clause in contract involving interstate commerce is severable and enforceable unless there are questions about the formation or validity of the clause itself). The Band responds that in this case there is a valid issue about the formation of the management agreement, including the arbitration clause, because the contract never received the necessary federal approval and is therefore void.
The tribal exhaustion doctrine is based on “a policy of supporting tribal self-government and self-determination,” Nat‘l Farmers Union Ins. Co., 471 U.S. at 856, and it is prudential, rather than jurisdictional. See Iowa Mut. Ins. Co., 480 U.S. at 20 n. 14. Exhaustion is mandatory, however, when a case fits within the policy, Duncan Energy Co. v. Three Affiliated Tribes, 27 F.3d 1294, 1300 (8th Cir.1994); Burlington N. R.R. Co. v. Crow Tribal Council, 940 F.2d 1239, 1245 (9th Cir.1991), and the legal scope of the doctrine is a matter of law to be reviewed de novo. See Bowen v. Doyle, 230 F.3d 525, 530 (2d Cir.2000); U.S. v. Tsosie, 92 F.3d 1037, 1041 (10th Cir.1996).
Federal courts have deferred to tribal courts in circumstances similar to those here. The facts in Bruce H. Lien Co. are very close to this case. There, a management company went to federal court for an order to compel arbitration after a tribe had filed a declaratory judgment action in tribal court questioning the validity of a gaming contract. Id. at 1415-16. We held that the tribal exhaustion doctrine applied and that the tribal court should be “given the first opportunity to address [its] jurisdiction and explain the basis (or lack thereof) to the parties.” Id. at 1421. Federal court restraint is “especially appropriate” where the issues between the parties grow out of “[t]ribal governmental activity involving a project located within the borders of the reservation.” Id. at 1420. Other circuit courts have also applied the tribal exhaustion doctrine in cases involving questions of arbitrability and validity of contracts. In Bank One, N.A. v. Shumake, 281 F.3d 507, 514 (5th Cir.2002), cert. denied, 123 S.Ct. 94 (2002), the Fifth Circuit affirmed the dismissal of a bank‘s complaint seeking an order for arbitration in order to permit a previously filed tribal court action to proceed. The Fifth Circuit concluded that since Congress had not provided for federal jurisdiction in the FAA, that statute‘s mechanism favoring arbitration should not override the federal policy of deferring to tribal courts. Id. The Ninth Circuit reached a similar conclusion in Stock West, Inc. v. Confederated Tribes, 873 F.2d 1221, 1227-29 (9th Cir.1989), in which it rejected the argument that the FAA‘s implicit policy of favoring arbitration “should overcome the policy of comity in favor of the tribal court,” particularly where “the validity of the arbitration clauses in the contracts are themselves in dispute.” Id. at 1228 n. 16. See also Basil Cook Enter., Inc., 117 F.3d at 63-69 (management company‘s federal petition seeking order to compel arbitration dismissed because of pending action in tribal court).
Our cases have often recognized that Congress is committed to a policy of supporting tribal self-government and self-determination. That policy favors a rule that will provide the forum whose jurisdiction is being challenged the first opportunity to evaluate the factual and legal bases for the challenge.
471 U.S. at 856. See also Iowa Mutual Ins. Co., 480 U.S. at 15 (“a federal court‘s exercise of jurisdiction over matters relating to reservation affairs can ... impair the authority of tribal courts“); Merrion v. Jicarilla Apache Tribe, 455 U.S. 130, 138 n. 5 (1982) (“Through various Acts governing Indian tribes, Congress has expressed the purpose of fostering ‘tribal self government.‘“); White Mountain Apache Tribe v. Bracker, 448 U.S. 136, 143-44 (1980) (noting “firm federal policy” supporting tribal self-sufficiency). This policy would be undermined if Gaming World were permitted to evade the jurisdiction of the White Earth Band of Chippewa Tribal Court over the previously filed declaratory judgment action there.
Gaming World argues that it should be excused from exhaustion for several reasons. It points out that the tribal court was not available when it originally filed for arbitration, but that court was instituted, operating, and available by the time Gaming World filed its federal petition on January 2, 2001. This case is therefore not like Krempel v. Prairie Island Indian Community, 125 F.3d 621, 623 (8th Cir. 1997), where the tribal court was not operational until after the federal claim had been filed. Cf. Iowa Mut. Ins. Co., 480 U.S. at 19 (tribal exhaustion requires exhaustion of “available tribal remedies before instituting suit“). Gaming World also argues that a federal court need not defer if the party seeking exhaustion has acted in bad faith or with the intent to harass, if the matter clearly exceeds tribal court jurisdiction, or if exhaustion would be futile for lack of adequate opportunity to challenge the tribal court‘s jurisdiction. National Farmers Union Ins. Co., 471 U.S. at 856 n. 21; Bruce H. Lien Co., 93 F.3d at 1420 n. 14. Gaming World accuses the Band of acting in bad faith because it asked for a stay of arbitration so it could file a declaratory judgment action in federal court, but later filed it in tribal court. The Band responds that its filing was necessarily delayed by the difficulty in obtaining records from Wadena and his coconspirators and that it only subsequently decided to file in tribal court. We conclude that the record does not indicate either bad faith or any basic jurisdictional problem. Compare Comstock, 261 F.3d at 572 (exhaustion inapplicable where the tribal court had not been authorized by law). There is also no indication that the arbitrators would have refused a stay if the Band had stated it would file in tribal court or that exhaustion would be futile because Gaming World would not have adequate opportunity to raise any and all issues in tribal court, including any challenges to its jurisdiction.
We conclude that the district court erred by not deferring for exhaustion of tribal court remedies and by proceeding to rule on the motion to compel arbitration.5 Our decision in Bruce H. Lien Co. and those in similar cases decided by the Fifth, Ninth, and Second Circuits teach that exhaustion should be required when a party tries to avoid tribal court jurisdiction by seeking an order to compel arbitration in federal court. This is especially true if the underlying dispute involves activities undertaken by tribal government within reservation lands. Failure to require exhaustion in these circumstances would undermine the important federal policy to foster tribal self government through the development of tribal courts as enunciated in Nat‘l Farmers Union Ins. Co. and Iowa Mut. Ins. Co..
IV.
Accordingly, we reverse the decision of the district court not to defer to the tribal court in the first instance and vacate its order granting the motion to compel arbitration. We remand to the district court with instructions to stay or dismiss this action without prejudice in order to permit the parties to exhaust their tribal court remedies. See Nat‘l Farmers Union Ins. Co., 471 U.S. at 857; Bruce H. Lien Co., 93 F.3d at 1422.
Notes
Section 81 was repealed by a statute enacted on February 29, 2000, which said nothing about whether Congress intended to bar parties from asserting preexisting § 81 claims. The Indian Tribal Economic Development and Contract Encouragement Act, Pub.L. 106-179.
In Prima Paint the Supreme Court explained that arbitration should be ordered once a court “is satisfied that ‘the making of the agreement for arbitration... is not in issue.‘” 388 U.S. at 404 (quoting