Wes Colombe v. Rosebud Sioux Tribe , 747 F.3d 1020 ( 2014 )

United States Court of Appeals
For the Eighth Circuit
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No. 13-1382
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Wes Colombe, Personal Representative of Charles Colombe, Individually and as
an Officer of BBC Entertainment, Inc., a dissolved Minnesota corporation
lllllllllllllllllllll Plaintiff - Appellant
v.
Rosebud Sioux Tribe; Rosebud Sioux Tribal Court; Judge Sherman Marshall, in
his Official and Individual Capacities
lllllllllllllllllllll Defendants - Appellees
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No. 13-1512
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Wes Colombe, Personal Representative of Charles Colombe, Individually and as
an Officer of BBC Entertainment, Inc., a dissolved Minnesota corporation
lllllllllllllllllllll Plaintiff - Appellee
v.
Rosebud Sioux Tribe; Rosebud Sioux Tribal Court; Judge Sherman Marshall, in
his Official and Individual Capacities
lllllllllllllllllllll Defendants - Appellants
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Appeal from United States District Court
for the District of South Dakota - Pierre
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Submitted: October 23, 2013
Filed: April 4, 2014
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Before GRUENDER, BEAM, and SHEPHERD, Circuit Judges.
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SHEPHERD, Circuit Judge.
Charles Colombe1 was a member of the Rosebud Sioux Tribe (“the Tribe”), and
he was a shareholder, director, and officer of BBC Entertainment, Inc. (“BBC”),
which managed a casino on tribal lands. After receiving an adverse ruling from the
Rosebud tribal courts regarding a casino management contract, Colombe filed an
action in federal court seeking to vacate the tribal court ruling and to enjoin the Tribe
from continuing a second action in the Rosebud tribal courts. In the proceeding
before the district court, the Tribe moved to dismiss the complaint for failure to
exhaust tribal court remedies. The district court granted the motion to dismiss in part
and denied the motion in part. The district court later entered summary judgment in
favor of the Tribe and its officials on the remainder of the case. Colombe appeals the
dismissal in part and the grant of summary judgment. The Tribe cross-appeals,
arguing the district court should have dismissed the entire complaint for failure to
exhaust tribal court remedies. We agree with the Tribe, and thus we reverse the
district court’s denial in part of the motion to dismiss. We affirm the district court in
all other respects.
1
On August 8, 2013, the Court granted, pursuant to Federal Rule of Civil
Procedure 43, Wes Colombe’s motion to substitute himself in his capacity as Personal
Representative of the Estate of Charles Colombe. Charles Colombe died on June 9,
2013. All references in this opinion to “Colombe” pertain to Charles Colombe.
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I.
The Tribe owns and operates a casino on tribal trust land in South Dakota. In
1994, the Tribe entered into a five-year casino management contract with BBC.
Article 6.4(c)(5) of the contract required BBC to fund an initial Operation Expense
Reserve (“OER”) account. BBC, however, never made the initial contribution to the
OER account. Instead, BBC and the Tribe orally agreed that BBC would contribute
7.5% of the casino’s net profits to the account each month. At the conclusion of the
contract, BBC withdrew $415,857 from the OER account based on its belief that it
was entitled to 35% of the remaining OER account balance, a division consistent with
the contract’s division of net profits. The Tribe brought a breach-of-contract suit in
tribal court, arguing that the oral modification was not in compliance with the Indian
Gaming Regulatory Act of 1988 (“IGRA”) and IGRA’s various implementing
regulations.
IGRA created the statutory basis for the regulation and operation of gaming by
Indian tribes. IGRA established the National Indian Gaming Commission (“NIGC”)
to oversee Indian gaming. Indian tribes may enter into casino management contracts
only after the NIGC Chairman has approved those contracts. Any modifications of
the contracts are also subject to the NIGC Chairman’s approval. The NIGC Chairman
approved the casino management contract entered into by the Tribe and BBC, but the
oral modification regarding the funding of the OER account was never presented to
the NICG Chairman.
The Tribe argued to the tribal court that, because the oral modification was not
presented to the NIGC Chairman, the modification was void, and because BBC failed
to fund the OER account as required by the contract, BBC was not entitled to any of
the money in the OER account. The tribal court judge disagreed with the Tribe and
found in favor of BBC. The Tribe appealed to the Rosebud Sioux Tribe Supreme
Court (“Rosebud Supreme Court”). BBC did not file a cross-appeal or assign any
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errors to tribal court’s exercise of jurisdiction. BBC stated, however, in their appellate
brief that the Tribe could have complained to the NIGC and sought relief from that
agency. BBC asserted that 25 U.S.C. § 2713(3) “provides the procedure applicable
to violations which replaces the jurisdiction of courts.”
The Rosebud Supreme Court reversed the decision of the tribal court, holding
that the oral agreement was void because it had not been approved by the NIGC
Chairman. The Rosebud Supreme Court remanded the case to the tribal court to
determine damages. The Tribe sought rehearing en banc of the Rosebud Supreme
Court’s decision to remand. The Tribe argued that remand was unnecessary because
its measure of damages was the full amount BBC withdrew from the OER account.
BBC argued the Rosebud Supreme Court had no jurisdiction to determine the legal
validity of an oral modification because IGRA had given the NIGC exclusive
jurisdiction to make such determinations. The Rosebud Supreme Court granted the
rehearing en banc, but limited that rehearing to the “sole issue” of the appropriate
remedy for BBC’s breach of the management contract. The Rosebud Supreme Court
did not address the issue of tribal jurisdiction in its order re-affirming its prior
decision.
The tribal court conducted a hearing on damages, awarding final judgment
against BBC in the amount of $399,353.61, plus interest accrued from August 15,
1999 in the amount of $127,793.15. BBC did not appeal the judgment to the Rosebud
Supreme Court.
Due to insolvency, BBC did not pay the judgment. The Tribe then filed suit in
tribal court seeking to pierce BBC’s corporate veil and recover the judgment from
BBC’s owners—Wayne Boyd2 and Charles Colombe. Colombe moved to dismiss the
suit, claiming that the judgment was void because the tribal court had violated IGRA.
2
Wayne Boyd was later dismissed from the suit.
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He also argued that under an amendment to the Rosebud Sioux Tribe Constitution at
the time judgment was entered against BBC, the tribal court had ceased to exist. The
tribal court denied the motion to dismiss, and Colombe sought an interlocutory appeal
to the Rosebud Supreme Court. The tribal court denied the request for an
interlocutory appeal.
While the Tribe’s suit seeking to pierce the corporate veil was proceeding,
Colombe filed suit in federal court. Count 1 of the complaint sought de novo review
of “any controversy litigated in the tribal court” and “an order from [the federal court]
vacating the tribal court judgment . . . on the grounds that the tribal court had no
jurisdiction to rule that there had been an illegal modification of the Management
Agreement.” Count 2 sought a permanent injunction against the Tribe, the tribal
court, and the Tribal Court Judge Sherman Marshall from proceeding with the action
to pierce the corporate veil.
The Tribe moved to dismiss the complaint, arguing, as relevant to this appeal,
that Colombe and BBC had failed to exhaust tribal court remedies. The district court
held that BBC had exhausted tribal court remedies as to the issue of the tribal court’s
jurisdiction to find an illegal modification of the management contract. The court held
further, however, that BBC had not exhausted any other issues pertaining to the tribal
court’s order after remand from the Rosebud Supreme Court because BBC failed to
appeal that order.
After the district court granted the motion to dismiss in part, Colombe filed
motions for reconsideration of the partial grant of the motion to dismiss and for a trial
on his request for a permanent injunction. In these motions, he argued for the first
time in federal court that the Rosebud tribal courts had failed to comply with certain
provisions in the Tribe’s amended constitution, and thus the Rosebud Supreme Court
lacked authority to hear an appeal from the tribal court. The district court noted that
this issue had not been exhausted because it had not yet been considered by the
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Rosebud Supreme Court. Accordingly, the district court denied the motions to
reconsider and for trial on Colombe’s request for a permanent injunction.
Colombe and the Tribe filed competing motions for summary judgment on the
“sole remaining issue” following the district court’s partial grant of the motion to
dismiss: “Whether the Tribal Court had jurisdiction to hold that the oral modification
to the NIGC-approved management contract was void.” (Doc. 66 at 6.) The district
court granted summary judgment to the Tribe, holding that the NIGC chairman’s
exclusive authority to determine a contract’s compliance with IGRA does not
encompass the authority to determine the legal validity of a contract.
Colombe appeals, raising three arguments. First, he argues that the district
court erred in granting summary judgment to the Tribe because according to IGRA,
the Rosebud tribal courts lacked jurisdiction to consider the validity of the oral
modification to the management contract. Second, Colombe argues that BBC
properly exhausted its tribal court remedies regarding whether the Rosebud Supreme
Court was deprived of its constitutional power to act. Finally, Colombe argues that,
to the extent the district court found that he had not exhausted tribal court remedies
as to some of his claims, exhaustion was impossible because of BBC’s financial
insolvency and futile because the Rosebud Supreme Court made clear that it was not
going to consider his argument that the Rosebud tribal courts lacked jurisdiction.
The Tribe cross-appeals, contending the district court should have dismissed the
entire complaint because of failure to exhaust. Specifically, BBC failed to exhaust its
claim that the tribal courts lacked jurisdiction under IGRA to consider the validity of
the oral modification to the management contract.
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II.
As a threshold issue, we must consider, as presented in the Tribe’s cross-appeal,
whether the district court erred in denying the Tribe’s motion to dismiss on exhaustion
grounds. In their motion to dismiss, the Tribe argued, inter alia, that BBC had failed
to exhaust available tribal court remedies to challenge tribal court jurisdiction to
adjudicate the breach-of-contract claims. The Tribe acknowledged BBC made a
statutory argument that IGRA did not provide for a private cause of action, however
the Tribe contended BBC never made an explicit or implicit challenge to the tribal
court’s exercise of jurisdiction over the breach-of-contract claim.
The district court rejected the Tribe’s argument for dismissal on this basis. It
found that, “When the Tribe appealed [Tribal] Judge Jones’s first decision to the
Rosebud Supreme Court, BBC argued that IGRA did not create a private cause of
action and, reading the brief generously to BBC, that jurisdiction to determine the
legality of the Contract modification rests with the NIGC rather than [the Rosebud]
tribal courts.” (Doc. 33 at 16-17.) Thus, the district court held the Rosebud Supreme
Court could have determined, based on BBC’s contention in its reply brief, it did not
have jurisdiction to decide whether the oral modification was void. Instead, the
Rosebud Supreme Court decided the oral modification was void for failure to obtain
the NIGC Chairman’s approval and, according to the district court, “implicit[ly]”
rejected BBC’s jurisdictional argument.
“[A]s a matter of comity, the examination of tribal sovereignty and jurisdiction
should be conducted in the first instance by the tribal court itself.” Duncan Energy
Co. v. Three Affiliated Tribes of Fort Berthold Reservation, 27 F.3d 1294, 1299 (8th
Cir. 1994). Thus, “a federal court should stay its hand in order to give tribal forums
the initial opportunity to determine cases involving questions of tribal authority.”
Reservation Tel. Coop. v. Three Affiliated Tribes of Fort Berthold Reservation, 76
F.3d 181, 184 (8th Cir. 1996) (citing Iowa Mut. Ins. Co. v. LaPlante, 480 U.S. 9, 15-
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16 (1987)). “Allowing tribal courts to make an initial evaluation of jurisdictional
questions serves several important functions, such as assisting in the orderly
administration of justice, providing federal courts with the benefit of tribal expertise,
and clarifying the factual and legal issues that are under dispute and relevant for any
jurisdictional evaluation.” DISH Network Serv. L.L.C. v. Laducer, 725 F.3d 877, 882
(8th Cir. 2013) (citing Nat’l Farmers Union Ins. Cos. v. Crow Tribe of Indians, 471
U.S. 845, 856-57 (1985)). “Exhaustion includes both an initial decision by the tribal
trial court and the completion of appellate review.” Id. at 882-83 (citing Iowa Mut.
Ins. Co. v. LaPlante, 480 U.S. 9, 17 (1987) (“Until appellate review is complete, the
. . . Tribal Courts have not had a full opportunity to evaluate the claim and federal
courts should not intervene.”)).
We disagree with the district court’s “generous[]” reading of BBC’s briefs to
the Rosebud Supreme Court that BBC adequately raised the jurisdictional question to
the Rosebud tribal courts. First, the BBC never raised the jurisdictional challenge in
the tribal court in the initial suit brought by the Tribe. Second, after the tribal court
ruled in favor of BBC, the Tribe appealed that decision to the Rosebud Supreme
Court. BBC did not file an appeal or a cross-appeal challenging whether the tribal
court had jurisdiction to consider the contract modification claim. Instead, in its
appellee’s brief to the Rosebud Supreme Court, BBC stated, “BBC has not filed a
cross appeal, and assigns no error.” Colombe maintains that BBC necessarily raised
the Rosebud tribal courts’ lack of jurisdiction through BBC’s arguments related to the
IGRA, such as its claim that IGRA does not create a private right of action. We reject
this argument, however, because the question of the Rosebud tribal courts’ jurisdiction
was, at best, tangentially mentioned and certainly did not “fairly put [the Rosebud
Supreme Court] on notice as to the substance of the [jurisdictional] issue.” See
Nelson v. Adams USA, Inc., 529 U.S. 460, 469 (2000). Third, while BBC did present
a more clear argument as to jurisdiction in its responsive Optional Brief on Rehearing
to the Rosebud Supreme Court, the motion for rehearing was brought by the Tribe and
was granted by the Rosebud Supreme Court to address the narrow issue of the proper
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remedy for BBC’s breach of the management contract. BBC failed to file its own
motion for rehearing and rehearing en banc raising the jurisdictional question. Thus,
we do not have the benefit of the Rosebud tribal courts’ expertise and clarification in
consideration of the jurisdictional questions. See DISH Network Serv., 725 F.3d at
882. Accordingly, we hold that BBC has failed to exhaust tribal remedies, and the
federal complaint should have been dismissed on that basis.
The district court dismissed, on exhaustion grounds, Colombe’s argument that
the Rosebud tribal courts have failed to comply with the Rosebud Sioux Tribe
Constitution. We affirm this dismissal. This argument was first raised by Colombe
in response to the Tribe’s action in tribal court to pierce the corporate veil. Colombe
sought an interlocutory appeal which the tribal court, in its discretion, denied.
Therefore, the Rosebud Supreme Court had not addressed this issue when Colombe
raised it in federal court, meaning tribal court remedies had not been exhausted.
Accordingly, the district court properly dismissed this claim.
Colombe argues that he should be excused from the exhaustion requirements
on two grounds. First, he claims that due to his and BBC’s insolvency, it was
economically impossible to exhaust tribal remedies. Second, he argues that it became
obvious that the Rosebud Supreme Court was not going to consider his jurisdictional
claims, and therefore it would be futile to require exhaustion of those claims.
Colombe has failed to point us to any cases that excuse the exhaustion requirement on
the basis of financial insolvency, and we decline to adopt such an exception now.
Further, while the Supreme Court has recognized that futility may justify an exception
to the exhaustion requirement “because of the lack of an adequate opportunity to
challenge the [tribal] court’s jurisdiction,” see Nat’l Farmers Union Ins. Co. v. Crow
Tribe of Indians, 471 U.S. 845, 856 n.21 (1985), Colombe and BBC had several
opportunities—in the tribal court, on direct appeal to the Rosebud Supreme Court, or
in a motion for rehearing and rehearing en banc—to challenge the Rosebud tribal
courts’ jurisdiction, and they failed to do so. “[S]peculative futility is not enough to
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justify federal jurisdiction.” White v. Pueblo of San Juan, 728 F.2d 1307, 1313 (10th
Cir. 1984); see Duncan Energy, 27 F.3d at 1300-01 (rejecting argument of futility
based on “mere[] alleg[ation] that tribal courts will be incompetent or biased”).
Colombe may not be excused from his obligation to exhaust tribal court remedies on
the basis of futility.
III.
Accordingly, we reverse the district court’s denial of the Tribe’s motion to
dismiss the complaint for failure to exhaust tribal court remedies pertaining to BBC’s
challenge of the tribal courts’ jurisdiction. We remand this part of the claim to the
district court with instructions to enter an order dismissing Colombe’s complaint. We
affirm the district court’s orders in all other respects.
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