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Tribal Sovereign Immunity

Some weeks back I mentioned one of the “stack the deck” provisions that is often included in business contracts. This time I want to focus on a critical “unstack” the deck provision that is mandatory in certain types of transactions. What I’m referring to is a waiver of sovereign immunity when doing business with any tribe or tribal entity.
48_black_panBy “tribe” I don’t mean a group of people with similar interests, such as the coterie of fine gentlemen who own classic Harley-Davidson motorcycles with Panhead engines. No, I’m talking about Native American tribes. Or more specifically, Native Alaskan tribes. The federal gummint has explicitly recognized literally hundreds of different tribes and tribal entities in Alaska, any one of which might enter into a business transaction for one reason or another.

Alaskans sometimes overlook the importance of tribes in the Last Frontier. The tribes play a critical role in Alaska life. The Native Alaskan tribes often deliver services that no one else can provide or is willing to provide — like, for example, health care in the Bush.

But Native Alaskan tribes have another attribute that figures into commercial transactions. They are recognized under the law as being their own sovereign nations. They enjoy immunity from suit in much the same way the State of Alaska or the U.S. of A. does. Even in Alaska where there is no Indian Country north of Metlakatla (at least the federal courts have not yet been able to find any), the tribes enjoy sovereign immunity. The tribes, and some tribal entities they establish, cannot be sued in either state or federal court without the tribe’s own permission.

So the lawyers handling commercial transactions in Alaska have to be alert to who exactly is involved in the deal. Any contract with a tribe or a tribal entity simply must include an express waiver of sovereign immunity. And the waiver has to be precise in order to be effective. If there is no effective waiver of immunity, then the options for enforcing the contract are going to be either very limited (tribal court, perhaps) or entirely nonexistent. (For more on tribal sovereign immunity in business transactions, I recommend reading this article in the most recent edition of Business Law Today.)

A November 14 decision of the Ninth Circuit illustrates the strength of tribal sovereign immunity. In Cook v. Avi Casino Enterprises, Inc., the employees of a tribal corporation operating a casino in Nevada got together in the casino after work to celebrate a birthday. The manager on-duty announced that drinks were “on the house” for the employees. One of the employees became obviously drunk. The drunk got on the casino’s shuttle bus and the driver delivered her to the employee parking lot, where she promptly got into her car to drive home. Just a few miles down the road, she swerved into on-coming traffic and collided with Mr. Cook on his motorcycle. (I doubt the bike was a Harley Panhead, but the court’s opinion does not give the make or model.) Mr. Cook suffered catastrophic injuries, including the loss of a leg. The drunk employee, who had a blood/alcohol level of over three times the legal limit, pled guilty to aggravated assault and DUI. She was packed off for a four-year stretch in the Stripey Hole.

When Mr. Cook sue the tribal entity running the casino for serving alcohol to an intoxicated person and letting her get into a car to drive, both the trial court and the Ninth Circuit said: “No dice.” The tribal entity was protected by sovereign immunity and could not be sued. Every argument Mr. Cook’s lawyer made for finding an implied waiver of immunity came up snake eyes. The courts even extended immunity to the fellow employees of the casino who had served up the liquor.

The Cook case, of course, was a tort lawsuit, not one involving a business deal. But if the courts aren’t going to help out poor Mr. Cook in overcoming sovereign immunity — when all he did was ride his motorcycle down the road — how much help are they are going to be to a businessperson who willingly enters into a deal with an immune tribal entity? Not much, I’m afraid, which is why an explicit waiver of sovereign immunity is required in these transactions.

By the way, did you know that the Harley Panhead engine was preceded by the Knucklehead engine of the 1930s and 1940s? The name came from the protruding “knuckles” on the sides of the valve covers that accommodated Harley’s first overhead valve design for the V-twin engine. The Knucklehead bikes are prized collectors’ items today. I suppose the Harley enthusiasts who have motorcycles with these old engines are, in one sense, members of the Knucklehead tribe. Perhaps they would accept an honorary member?