In Re US Ex Rel. Hall
MAGNUSON, District Judge.
BACKGROUND
Following the 1988 passage of the federal Indian Gaming Regulatory Act (IGRA),
A number of these tribal gaming operations have prospered, providing much-needed revenue for the tribes and their members. The tribes, apparently satisfied with the contracts and arrangements for provision of goods and services related to their gaming operations, have not sought to revise or challenge those transactions. However, several persons not party to the agreements now seek to challenge them, contending those
The plaintiffs seek, inter alia, rescission of the contracts and transactions at issue in these suits and refund of all monies paid by Indian tribes to defendant merchants pursuant to such contracts. If plaintiffs were successful, one-half of the refunded monies would be returned to the Indian tribes while the other half would be paid directly to the plaintiffs, as a reward for their assistance in the enforcement of federal laws. See
These cases were consolidated for pre-trial consideration before this court. Plaintiffs now seek summary judgment in each of these cases. Several defendants also move for summary judgment, while others have filed motions to dismiss.
DISCUSSION
Motion to Dismiss Standard
For the purposes of the defendants’ motions to dismiss, the court takes all facts alleged in the plaintiffs’ complaints as true. Westcott v. City of Omaha, 901 F.2d 1486, 1488 (8th Cir.1990). Further, the court must construe the allegations in the complaints and reasonable inferences arising from the complaints favorably to the plaintiffs. Morton v. Becker, 793 F.2d 185, 187 (8th Cir. 1986). A motion to dismiss will be granted only if “it appears beyond doubt that the plaintiff can prove no set of facts which would entitle him to relief.” Id. at 187; see Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957). The court applies those standards and analysis in the following discussion.
I. STANDING
In order to maintain an action in federal court, all plaintiffs must show they meet the standing requirements of Article III of the United States Constitution. This is a threshold question in every federal case, which determines whether a federal court has the power to hear the suit. Warth v. Seldin, 422 U.S. 490, 498, 95 S.Ct. 2197, 2205, 45 L.Ed.2d 343 (1975). In order to establish standing, a plaintiff must make a three part showing: (1) plaintiff must have sustained an injury in fact, i.e. an invasion of a legally protected interest which is concrete and particularized and actual or imminent, not conjectural or hypothetical; (2) there must be a causal connection between that injury and the complained-of conduct; and (3) it must be likely — as opposed to merely speculative — that the injury can be redressed by a favorable decision. Lujan v. Defenders of Wildlife, ___ U.S. ___, ___, 112 S.Ct. 2130, 2136, 119 L.Ed.2d 351 (1992) (citations omitted).
A. 25 U.S.C. § 81
The parties agree that Congress enacted
All contracts or agreements made in violation of this section shall be null and void, and all money or other thing of value paid to any person by any Indian or tribe, or any one else, for or on his or their behalf, on account of such services, in excess of the amount approved by the Commissioner and Secretary for such services, may be recovered by suit in the name of the United States in any court of the United States, regardless of the amount in controversy; and one-half thereof shall be paid to the person suing for the same, and the other half shall be paid into the Treasury for the use of the Indian or tribe by or for whom it was so paid.
B. 25 U.S.C. §§ 201, 261-64
The preceding standing analysis applies with equal force to the plaintiffs’ claims under the Indian Trader Licensing Act (ITLA),
Congress enacted the “penalties” provision (currently codified at
All penalties which shall accrue under this title shall be sued for and recovered in an action in the nature of an action of debt, in the name of the United States, before any court having jurisdiction of the same, in any State or Territory in which the defendant shall be arrested or found, the one half to the use of the informer and the other half to the use of the United States, except when the prosecution shall be first instituted on behalf of the United States, in which case the whole shall be to their use.
Similar to section 81, this statute is silent regarding which persons other than the United States may bring suit. It simply states that an “informer” is entitled to one-half of the penalty resulting from a successful suit. For the reasons set forth above with respect to section 81, the court will not infer standing for any and all persons, regardless of injury. Because plaintiffs do not allege direct, “actual injury” to their own interests, they fail to satisfy the standing requirements of Article III of the Constitution. See Lujan, ___ U.S. at ___, 112 S.Ct. at 2136.
C. Limited Recovery
Even if plaintiffs could establish standing to sue under
D. Indian Gaming Regulatory Act
Plaintiffs also seek to recover civil penalties for alleged violations of the Indian Gaming Regulatory Act (IGRA),
The plaintiffs argue that
Because the plaintiffs have no standing to bring these actions, the court has no subject matter jurisdiction. It is well-established that federal courts are courts of limited jurisdiction. The Constitution prohibits this court from hearing suits outside its subject matter jurisdiction, regardless of the parties’ positions with respect to the question or the procedural posture of the suits. Therefore, the court must dismiss all of these suits. Those cases which the parties have not moved to dismiss for lack of subject matter jurisdiction, the court dismisses sua sponte.
II. INDISPENSABLE PARTIES
The court also finds that these cases must be dismissed for inability to join an indispensable party. Even if the plaintiffs could establish standing to bring these actions, the court would dismiss them because the Indian tribes who are parties to the agreements and transactions at issue are necessary and indispensable parties who cannot be joined involuntarily. See
One who is not a party to an action is “necessary” to the action under
However, the absent tribes cannot be involuntarily joined because they enjoy sovereign immunity from suit. Santa Clara Pueblo v. Martinez, 436 U.S. 49, 58, 98 S.Ct. 1670, 1677, 56 L.Ed.2d 106 (1978).6 If a person who is necessary under
The Rule sets out four factors a court should consider in deciding whether an absent person is indispensable. The first two of the four factors are particularly relevant here:
to what extent a judgment rendered in the person‘s absence might be prejudicial to the person or those already parties; [and] the extent to which, by protective provisions in the judgment, by the shaping of relief, or other measures, the prejudice can be lessened or avoided.
In a larger sense, the precedent set by rescission of transactions freely entered by the tribes would likely be extremely prejudicial to the tribes’ long term interest in Indian gaming and the revenue it provides. The plaintiffs essentially seek rescission of the contracts and disgorgement of money paid for goods and services rendered pursuant to those contracts. The message such a judgment would send to outside vendors would be that transactions with Indian gaming enterprises are subject to cancellation at any time and without regard to whether the contracts were freely and fairly negotiated, the extent to which the parties have performed their duties under the contracts or the settled expectations and reliance of the parties. Very few merchants would be willing to transact business with Indian casinos under such risky conditions. This might well signal the end of Indian gaming in the Upper Midwest. Regardless of whether such a judgment would otherwise constitute the correct application of the law, it would undeniably be prejudicial to the interests of the Indian tribes.
The court can discern no way it could craft relief to reduce the prejudice to the nonparty Indian tribes. The plaintiffs seek rescission of contracts and transactions. There is no middle ground — either the transactions violate statutory requirements and are void, requiring repayment of all value paid by the tribes, or they comply with the law and are valid. See
A judgment for the plaintiffs rendered in the absence of the tribes would also encroach on tribal sovereignty. It is well-established that, subject to limited exceptions, tribes have the right to self-governance, unimpeded by federal authorities. See Martinez, 436 U.S. 49, 98 S.Ct. 1670; Morton v. Mancari, 417 U.S. 535, 551, 94 S.Ct. 2474, 2483, 41 L.Ed.2d 290 (1974) (noting strong congressional policy of promoting Indian self-government). Plaintiffs seek, inter alia, to force the defendants to return monies already paid to them by various Indian tribes in return for goods and services. In a similar though not identical case, the
Potential prejudice to the interests of the non-party tribes and protection of tribal sovereignty are such strong considerations in the present case that they must outweigh the remaining factors enumerated in Rule 19(b). With respect to the fourth factor, it appears that the plaintiffs may have no other remedy if these cases are dismissed. However, as demonstrated in the preceding standing discussion, the interests of plaintiffs in this matter are tenuous and indirect. In contrast, the non-party Indian tribes’ interest in the transactions which are the subject of these suits is direct, clear and strong. As the Ninth Circuit has stated, “No procedural principle is more deeply imbedded in the common law than that, in an action to set aside a lease or a contract, all parties who may be affected by the determination of the action are indispensable.” Lomayaktewa v. Hathaway, 520 F.2d 1324, 1325 (9th Cir. 1975), cert. denied, 425 U.S. 903, 96 S.Ct. 1492, 47 L.Ed.2d 752 (1976). Moreover, where a necessary party is immune from suit, there may be “very little room for balancing of other factors” because immunity may be considered a compelling interest. Wichita & Affiliated Tribes of Oklahoma v. Hodel, 788 F.2d 765, 777 n. 13 (D.C.Cir.1986); see also Enterprise Mgmt., 883 F.2d at 894 (dismissing an action under section 81 because a tribe was an indispensable party). Therefore, these suits must be dismissed for failure to join indispensable parties.
III. CHANGE OF VENUE
The plaintiffs have moved to change the venue of several cases to the Federal District Court for the Western District of Wisconsin.7 Initially, because the plaintiff chooses where to bring an action, concerns about the fairness and convenience of venue generally focus on the defendant, not the plaintiff. See Leroy v. Great Western United Corp., 443 U.S. 173, 180-84, 99 S.Ct. 2710, 2714-17, 61 L.Ed.2d 464 (1979). More significantly, in all but one of these cases, the court need not address the question of change of venue because it does not have subject matter jurisdiction. Because plaintiffs have no standing to bring those actions, the court does not have power to hear them and thus the question of proper venue does not arise.
In the remaining action, the plaintiffs have a colorable standing argument due to their alleged membership in the Lac Courte Oreilles Band. See U.S.A. ex. rel. Glenn Hall v. Interstate Gaming Serv., Inc., Civil No. 4-92-1192 (D.Minn. Dec. 2, 1992). However, the court has previously determined that action should be dismissed for inability to join an indispensable party. See
IV. LEASES AND CONTRACTS FOR GOODS
The court found above that these suits must be dismissed for lack of standing and failure to join indispensable parties. Although each of those grounds is independently sufficient to dismiss these cases, the court believes it appropriate to discuss a third alternative ground for judgment in favor of the defendants in several cases brought under
Summary judgment is appropriate if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law.
Section 81 applies to two types of agreements; contracts for “services” to Indians “relative to their lands,” and contracts for services relative to claims for payments due under federal law or “in any way connected with or due from” the United States.
Some of the contracts the plaintiffs challenge in these cases are for the sale or lease of gambling equipment or for other services short of managing a casino. In some cases these other services consist of delivering, installing, and maintaining equipment and training personnel to use it. In other cases, the defendants contracted to advertise and market casinos. None of the challenged contracts are for services related to claims, the second class of contracts which section 81 governs. Therefore, if section 81 applies to any contract at issue in these actions, it is because the contract is “relative to [Indian] lands.” The defendants contend that section 81 does not govern the non-management contracts because they are neither service contracts nor “relative to [Indian] lands.” The plaintiffs respond that the contracts satisfy both requirements.
A. Scope of Section 81
The language of section 81 establishes unambiguously that it applies to service contracts but not to sales contracts. The provision never mentions goods or merchandise but repeatedly refers to “services.” Moreover, it describes the contracts it applies to as agreements for “services ... relative to [Indian] lands,” and for “services ... relative to ... any claims” for money due under federal law or from the United States. This delineation of section 81‘s scope suggests that Congress was concerned about contracts for the representation of Indians’ interests, not ordinary sales contracts. See U.S. ex. rel. Shakopee Mdewakanton Sioux Community v. Pan American Mgmt. Co., 616 F.Supp. 1200, 1217 (D.Minn.1985) (legislative history of section 81 shows that “contractual relations with attorneys and claims agents were foremost on Congress’ mind“), appeal dismissed, 789 F.2d 632 (8th Cir. 1986). Other evidence bolsters the conclusion that section 81 does not govern sales contracts. For example, at the time Congress enacted section 81, the ITLA had been in existence for over thirty years. The ITLA requires non-Indians who trade with Indians to obtain a federal license. That this mechanism for regulating sales between Indians and non-Indians was in place when Congress
The legislative history of section 81 also supports the interpretation that it does not apply to contracts for the sale of goods. It appears from the legislative history that Congress was concerned specifically about contracts for services such as representation of Indian interests before Congress and the pressing of Indians’ claims. For example, in urging passage of the measure, a proponent stated that non-Indians had contracted with Indians to represent them before Congress for exorbitant fees, including large portions of congressional appropriations to Indians. See Cong. Globe, 41st Cong., 3d Sess. 1484, 1486 (Feb. 22, 1871) (comments of Mr. Wilson). Another proponent stated that “The object of this section is to protect the Indians and the Government both against ... claim agents.” Id. at 1484 (comments of Mr. Corbett). Yet another supporter argued that, in addition to being unfair, representation agreements were unnecessary because the Indian Commissioner, federal Indian agents, and the Indian Committees in Congress adequately represented the Indians’ interests. Id. at 1487 (comments of Mr. Casserly).
Despite the clear wording of section 81, the prior enactment of the ITLA, and the legislative history, the plaintiffs contend that Green v. Menominee Tribe, 233 U.S. 558, 34 S.Ct. 706, 58 L.Ed. 1093 (1914), precludes any distinction between sales and service contracts in applying section 81. The Green Court concluded that an agreement to supply Indians with logging equipment and supplies was “clearly within the text of” section 81, without explaining how the sale of goods constituted a service. Id. at 569, 34 S.Ct. at 710. As the transaction in Green seems to have been a sale, id., it appears that the Supreme Court once interpreted section 81 to apply to sales contracts. However, as the Seventh Circuit has stated, this “quite ancient” decision does not adequately explain why the statute should apply to such contracts. Wisconsin Winnebago Business Committee v. Koberstein, 762 F.2d 613, 617 (7th Cir.1985)9. Moreover, citing Koberstein, the Seventh Circuit recently held that an agreement to manufacture products on tribal trust lands was not governed by section 81. Altheimer & Gray v. Sioux Manufacturing Corp., 983 F.2d 803, 812 (7th Cir. 1993). This Court is persuaded by the Altheimer court‘s reasons for disregarding the plaintiffs’ proffered reading of Green. Therefore, the Court concludes that Congress did not intend that section 81 govern sales contracts.10
B. “Relative to [Indian] Lands”
Because section 81 states that it applies to agreements for “services ... relative to [Indian] lands,” any contract within the scope of section 81 must be both a service contract and relative to Indian lands. The non-management contract defendants argue that their contracts are not “relative to [Indian] lands.” No Eighth Circuit decision has defined this phrase. In Altheimer, however, the Seventh Circuit considered Seventh, Eighth, and Ninth Circuit bingo management contract decisions that held such contracts
The Altheimer factors may not pertain directly to the defendants’ sales, lease, and non-management services contracts because these contracts are not management contracts. Nevertheless, application of the sound principles behind the Altheimer factors reveals that the defendants’ non-management contracts are not “relative to [Indian] lands.”
First, these contracts do not relate to the management of a facility on Indian lands. A mere sale or lease of equipment clearly is not management. Nor are delivering, installing, and servicing equipment. Training casino personnel to use equipment is somewhat more akin to a management activity, but it certainly does not constitute management of a facility. Finally, while marketing and advertising might be considered management activities, neither can be described as management of a facility on Indian land.
The Altheimer court‘s analysis under the first factor supports the conclusion that the defendants’ contracts in the cases at bar do not relate to the management of a facility on tribal land. There, the court found that a contract for technical and engineering assistance, marketing, training management personnel, and consulting services regarding the operation of a manufacturing plant on tribal lands did not implicate this factor because “the facility was already in existence, was part of the Tribe‘s ongoing business, and was wholly owned by the Tribe.” Altheimer, 983 F.2d at 806, 811.
Second, the defendants’ contracts give them no exclusive rights to or control over Indian lands. Although in some cases the defendants’ lease contracts give them the right to replace less profitable gambling machines in order to increase profits, this is not a grant of exclusive rights or control over Indian lands because the tribes and their management companies retained much greater control over the casino facilities. Similarly, in the cases in which the defendants provide marketing and advertising, their contracts do not give them control over any facilities. See Altheimer, 983 F.2d at 811 (finding that the second factor did not apply because the Indian management corporation “would be heavily involved in the venture,” even though it did not have unilateral power to set wages, salaries, or operational and administrative costs, and even though “it may be an understatement to characterize [the non-Indian corporation] as a consultant“).
Third, the plaintiffs do not allege, nor does any evidence in the record suggest, that the contracts forbid the Indian tribes from encumbering any property.
The fourth factor is the only one that appears to lend the plaintiffs any support. The operation of gambling facilities, and therefore, in a sense, the provision of gambling supplies and related services, does indeed depend on the Indian tribes’ status as separate sovereigns; absent this status state law would forbid the operation of the casinos. See Altheimer, 983 F.2d at 812 (“Unlike bingo,
CONCLUSION
Plaintiffs have failed to establish standing to bring these suits. Further, because the Indian tribes are indispensable parties that cannot be joined in these suits, these cases must be dismissed under
Several of the defendants move for sanctions against the plaintiffs and their counsel, pursuant to
Accordingly, IT IS HEREBY ORDERED THAT:
All of these cases are DISMISSED for lack of standing and inability to join an indispensable party;
Defendants’ motions for summary judgment in civil case file numbers 3-92-792, 3-92-793, 3-92-796, 3-92-798, 3-92-803, 4-92-1179, 4-92-1181, 4-92-1182, 4-92-1183, 4-92-1184, 4-92-1185, 4-92-1186, 4-92-1188, 4-92-1191, 4-92-1193, 4-92-1197, 4-92-1199, 4-92-1200, 4-92-1203, 4-92-1175, 4-92-1176, 4-92-1177, 4-92-1178, 3-92-795, 3-92-799, 3-92-802, 4-92-1189, 4-92-1190, 4-92-1198 and 4-92-1201 are GRANTED; and
Defendants’ motions for sanctions are DENIED.
LET JUDGMENT BE ENTERED ACCORDINGLY.