Lustre Oil v. Anadarko ( 2023 )

04/06/2023
DA 22-0034
Case Number: DA 22-0034
IN THE SUPREME COURT OF THE STATE OF MONTANA
2023 MT 62LUSTRE OIL COMPANY LLC, and
EREHWON OIL & GAS, LLC,
Plaintiffs and Appellants,
v.
ANADARKO MINERALS, INC. and
A&S MINERAL DEVELOPMENT CO., LLC,
Defendants and Appellees.
APPEAL FROM: District Court of the Seventeenth Judicial District,
In and For the County of Valley, Cause No. DV-2021-04
Honorable Yvonne Laird, Presiding Judge
COUNSEL OF RECORD:
For Appellants:
James Parrot, William E. Sparks (argued), Beatty & Wozniak, P.C.,
Denver, Colorado
James A. Patten, Patten, Peterman, Bekkedahl & Green, PLLC,
Billings, Montana
For Appellees:
Ryan C. Rusche, Matthew L. Murdock (argued), Sonosky, Chambers,
Sachse, Endreson & Perry LLP, Washington, District of Columbia
Argued: October 26, 2022
Submitted: November 1, 2022
Decided: April 6, 2023
Filed:
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__________________________________________
Clerk
Justice Beth Baker delivered the Opinion of the Court.
¶1 Lustre Oil Company LLC and Erehwon Oil & Gas, LLC (collectively “Lustre Oil”)
appeal the Montana Seventeenth Judicial District Court’s dismissal of their complaint for
lack of subject-matter jurisdiction. After jurisdictional discovery, the District Court found
A&S Mineral Development Company, LLC to be an arm of the Assiniboine and Sioux
Tribes entitled to sovereign immunity. Lustre Oil argues in the alternative: (1) that the
District Court “failed to utilize well-established law from the Tenth Circuit” when it found
that A&S could be an arm of the Tribes despite its incorporation under Delaware law;
(2) that the District Court improperly applied the Ninth Circuit’s balancing test to
determine that A&S was an arm of the Tribes; and (3) that the District Court erred when it
found that the Tribes did not waive A&S’s sovereign immunity.
¶2 We decline to adopt a firm rule that would automatically bar an entity incorporated
under state law from claiming tribal sovereign immunity, but we agree with Lustre Oil that
the District Court did not properly weigh the relevant jurisdictional factors when it
concluded that A&S was an arm of the Assiniboine and Sioux Tribes. We accordingly
reverse.
FACTUAL AND PROCEDURAL BACKGROUND
¶3 Between the 1950s and 1980s, the Fort Peck Indian Reservation, home to the
Assiniboine and Sioux Tribes (collectively “the Tribes”), experienced an influx of private
drilling and development of oil and gas wells. At the time, the private companies
conducting these activities were largely unregulated, and their operations resulted in
2
disastrous environmental impacts to the Reservation and the compromised health of the
residing Tribal communities. This abuse of Tribal resources led the Tribes to take control
of any further oil and gas development within the Reservation.
¶4 On March 9, 2009, through their Tribal Executive Board, the Tribes authorized the
formation of the A&S Mineral Development Company, LLC (“A&S”), incorporating it
under the laws of Delaware. The Tribes formed A&S to develop oil and gas resources on
the Tribes’ behalf. One such endeavor by A&S was to act as a holding company for the
Tribes’ interest in the Fort Peck Energy Company, LLC. The Tribes partnered with Native
American Resource Partners, LLC and Quantum Tribal Energy Capital, LLC to form Fort
Peck Energy Company, LLC for the purpose of furthering the Reservation’s oil and gas
resources. After Fort Peck Energy Company, LLC dissolved in 2017, A&S remained
dormant for three years.
¶5 Anadarko Minerals, Inc., a private company, operated oil and gas well leases on
privately owned land within the exterior boundaries of the Reservation. In 2018, after
spilling approximately 600 barrels of oil and 90,000 barrels of produced water within the
Reservation, Anadarko assigned those oil and gas leases to the Tribes as part of a settlement
agreement with the Tribes and the United States Environmental Protection Agency. The
Tribal Executive Board revived A&S in 2020 to develop the leases the Tribes acquired
from this settlement agreement. Additionally, as part of its revival, A&S assumed
responsibility for restoration and environmental cleanup efforts at abandoned well sites
within the Reservation, duties previously assigned to the Tribes’ Mineral Department and
the Tribes’ Office of Environmental Protection.
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¶6 In February 2021, Lustre Oil filed an action against A&S and Anadarko in District
Court seeking to quiet title and to invalidate A&S’s interests in forty-one of the fifty-seven
oil and gas leases A&S operates within the Reservation. Lustre Oil alleged that it obtained
valid interests to those leases from a third-party lease broker after Anadarko let the leases
expire prior to transferring the lease interests to A&S.
¶7 A&S and Anadarko moved the District Court to dismiss Lustre Oil’s action for lack
of jurisdiction, failure to join necessary and indispensable parties, and failure to state a
claim on which relief could be granted. A&S and Anadarko based their motions on A&S’s
sovereign immunity as an arm of the Tribes. The District Court weighed the five factors
from White v. University of California, 765 F.3d 1010 (9th Cir. 2014), to reach its
conclusion that A&S is an arm of the Tribes, entitling it to immunity. Because it concluded
that it did not have jurisdiction over A&S, the District Court dismissed Lustre Oil’s suit
after determining that A&S was an indispensable party.
STANDARD OF REVIEW
¶8 “We review de novo a district court’s ruling on a motion to dismiss for lack of
subject matter jurisdiction.” Crawford v. Couture, 2016 MT 291, ¶ 5, 385 Mont. 350, 384
P.3d 1038 (citations omitted). When a district court considers a motion to dismiss for lack
of subject-matter jurisdiction based on a claim of sovereign immunity, it must engage in
“sufficient pretrial factual and legal determinations to satisfy itself of its authority to hear
the case before trial.” Bradley v. Crow Tribe of Indians, 2003 MT 82, ¶ 18, 315 Mont. 75,
67 P.3d 306 (internal quotations omitted). We review these conclusions for correctness.
Crawford, ¶ 5.
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DISCUSSION
¶9 As a threshold matter, Lustre Oil asks this Court to adopt a bright-line rule
preventing tribal entities from enjoying sovereign immunity when those entities are
incorporated under the laws of a state rather than under tribal law. Alternatively, Lustre
Oil argues that the District Court erred in its balancing of the White factors because none
of the factors favor A&S’s immunity. Finally, Lustre Oil argues that the District Court
erred because even if the White factors favor immunity, the Tribes waived this immunity
for A&S.
¶10 Issue One: Whether this Court should categorically bar entities that are
incorporated under state law from enjoying tribal sovereign immunity.
¶11 Lustre Oil urges this Court to follow the Tenth Circuit’s decision in Somerlott v.
Cherokee Nation Distributors Inc., 686 F.3d 1144 (10th Cir. 2012), and categorically bar
an entity from claiming tribal sovereign immunity if incorporated under state law.
¶12 In Somerlott, Tina Marie Somerlott appealed a federal district court decision
dismissing her employment discrimination claims for lack of subject matter jurisdiction.
686 F.3d at 1146. Somerlott’s employer was CND, LLC, a clinic within the Reynolds
Army Community Hospital in Fort Sill, Oklahoma. Somerlott, 686 F.3d at 1146. Though
CND was wholly owned by a corporation regulated by the Cherokee Nation, it was
incorporated under the laws of Oklahoma. Somerlott, 686 F.3d at 1146-47. CND was
incorporated under Oklahoma law because, at the time, the Nation “did not have laws
permitting the formation of limited liability companies.” Somerlott, 686 F.3d at 1147.
CND claimed tribal sovereign immunity and the district court determined that CND was a
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“subordinate economic entity” of the Nation, entitling it to enjoy the Nation’s immunity.
Somerlott, 686 F.3d at 1147. Somerlott appealed to the Tenth Circuit, arguing that CND’s
activities were not sufficiently connected to the Nation to warrant sovereign immunity.
Somerlott, 686 F.3d at 1147.
¶13 Just ten days before the Tenth Circuit received Somerlott’s opening brief, it decided
Breakthrough Management Group, Inc. v. Chukchansi Gold Casino & Resort,
629 F.3d 1173 (10th Cir. 2010). In Breakthrough, the Tenth Circuit outlined factors it
considered “helpful” to determining whether an entity could share in tribal sovereign
immunity. 629 F.3d at 1187 (citations omitted). It did not define “the precise boundaries
of the appropriate test to determine if a tribe’s economic entity qualifies as a subordinate
economic entity entitled to share in a tribe’s immunity.” Breakthrough, 629 F.3d at 1187(emphasis in original). It also declined to find the financial relationship between the Tribe
and the entity at issue dispositive to its conclusion on immunity. Breakthrough,
629 F.3d at 1187. CND relied almost entirely on the factors from Breakthrough to argue
that it was entitled to sovereign immunity. Somerlott, 686 F.3d at 1148.
¶14 The Tenth Circuit did not apply the factors it had recently outlined in Breakthrough
to Somerlott, concluding that “the subordinate economic entity test is inapplicable to
entities which are legally distinct from their members and which voluntarily subject
themselves to the authority of another sovereign which allows them to be sued.” Somerlott,
686 F.3d at 1149-50. We compare the ruling in Somerlott to the root principles of tribal
sovereign immunity to determine whether to adopt a similarly bright-line rule.
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¶15 Among the core aspects of sovereignty that tribes possess is the “common-law
immunity from suit traditionally enjoyed by sovereign powers.” Santa Clara Pueblo v.
Martinez, 436 U.S. 49, 58, 98 S. Ct. 1670, 1677 (1978). As a general rule, sovereign
immunity is not limited to suits that specifically name a sovereign as a party; “an arm or
instrumentality” of a sovereign “generally enjoys the same immunity as the sovereign
itself.” Lewis v. Clarke, 581 U.S. 155, 162, 137 S. Ct. 1285, 1291 (2017).
¶16 The Supreme Court has noted the weight and importance of tribal sovereign
immunity, declaring it to be a “necessary corollary to Indian sovereignty and
self-governance.” Three Affiliated Tribes of Ft. Berthold Reservation v. Wold Engineering,
P.C., 476 U.S. 877, 890, 106 S. Ct. 2305, 2313 (1986). In other contexts, the Court has
suggested that courts should examine the relationship between entities and their sovereign
parent when determining sovereign immunity. Regents of the Univ. of Cal. v. Doe, 519
U.S. 425, 429, 117 S. Ct. 900, 904 (1997).
¶17 Tribes often form, and rely on, entities to carry out key aspects of tribal
self-governance. In J.L. Ward Associates v. Great Plains Tribal Chairmen’s Health Board,
a federal district court in South Dakota held that a tribal entity incorporated under South
Dakota law was entitled to immunity. 842 F. Supp. 2d 1163, 1182 (D. S. D. 2012). The
entity was formed by sixteen different tribes to provide “adequate health care to their
constituents—a group that suffers disproportionately from certain diseases and has a lower
life expectancy than other Americans[.]” J.L. Ward Assocs., 842 F. Supp. 2d at 1177. The
district court found that by “engaging in these activities, [the entity] promotes the
preservation of tribal cultural autonomy and tribal self-determination, two of the federal
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policies behind tribal sovereign immunity.” J.L. Ward Assocs., 842 F. Supp. 2d at 1177.
If the district court had halted its analysis at whether the entity was incorporated under
tribal or state law, an entity formed to “represent the health care interests of [tribal]
members to the federal government and to participate in the establishment of health care
programs unique to the tribes’ needs” would be without immunity. J.L. Ward Assocs., 842
F. Supp. 2d at 1177. Similarly, in Manzano v. Southern Indian Health Council, Inc., a
health entity formed by seven tribes for the purpose of providing “health care to American
Indians” was entitled to immunity despite its incorporation “solely under state law.”
No. 20-cv-02130-BAS-BGS, 2021 U.S. Dist. LEXIS 126475 at **2, 18 (S.D. Cal. July 7,
2021). These cases demonstrate the importance of examining the circumstances of each
case rather than utilizing a single-inquiry test to analyze tribal sovereign immunity. The
courts examined the relationship between the Tribes and their sub-entities and how they
work together to promote tribal self-governance, determining the relationships reflected an
extension of sovereign immunity.
¶18 We would not be the first to reject this bright-line ruling from Somerlott. In Rassi
v. Federal Program Integrators, LLC, a federal district court declined to follow Somerlott
after noting that “the Tenth Circuit’s discussion of sovereign immunity in Somerlott was
dicta.” 69 F. Supp. 3d 288, 291 (D. Me. 2014). “More importantly,” it considered the line
of cases on which Somerlott relied to be unpersuasive in light of Lebron v. National R.R.
Passenger Corp., 513 U.S. 374, 115 S. Ct. 961 (1995). Rassi, 69 F. Supp. 3d at 292. The
Supreme Court in Lebron concluded that “where . . . the Government creates a corporation
by special law, for the furtherance of governmental objectives, and retains for itself
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permanent authority to appoint a majority of the directors of that corporation, the
corporation is part of the Government.” Rassi, 69 F. Supp. 3d at 292 (citing Lebron, 513
U.S. at 399, 115 S. Ct. at 974). The Rassi court concluded that because a federally created
entity could retain the government’s immunity under these circumstances, tribes should
enjoy similar leeway. Rassi, 69 F. Supp. 3d at 292.
¶19 We, too, agree that state incorporation alone does not abrogate an entity’s immunity.
Tribes enjoy immunity from suit “on matters integral to sovereignty and self-governance.”
Manzano, No. 20-cv-02130-BAS-BGS, 2021 U.S. Dist. LEXIS 126475 at **28-29. For
example, in EEOC v. Navajo Health Foundation, the court concluded that incorporating as
a nonprofit under Arizona law did not affect a hospital’s status as an Indian tribe.
No. CV-06-2125-PCT-DGC, 2007 U.S. Dist. LEXIS 66839, at *3 (D. Ariz. Sep. 6, 2007).
In Giedosh v. Little Wound School Board, Inc., a school board’s status as an Indian tribe
remained unaffected by its incorporation as a nonprofit under South Dakota law.
995 F. Supp. 1052, 1058 (D.S.D. 1997). Here, the Tribes formed A&S for both
governmental and business-related purposes. If A&S were to be sued over its
environmental clean-up work—a function integral to self-governance—it would have a
strong claim to immunity. This is not to say that “business activities” are barred from tribal
sovereign immunity. See Allen v. Gold Country Casino, 464 F.3d 1044, 1046 (9th Cir.
2006) (immunity can “extend[] to business activities of the tribe, not merely to
governmental activities.”). But the nature of the entity’s activity—not just whether the
entity is incorporated under state or tribal law—should remain an important consideration
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when determining whether to extend immunity.1 To best support tribal self-governance
and autonomy, a court considering a jurisdictional challenge should examine all the
circumstances to determine whether an entity is an arm of a tribe that shares its sovereign
immunity. The case law reveals considerable variability in outcomes because of the
fact-dependent nature of the courts’ analysis.
¶20 In sum, though we find no fault with the District Court’s conclusion that A&S’s
incorporation under Delaware law does not favor immunity, the court did not err when it
refused to deny A&S tribal sovereign immunity based on state incorporation alone.
¶21 Issue Two: Whether the White factors weigh in favor of finding tribal sovereign
immunity for A&S.
¶22 “Tribal sovereign immunity not only protects tribes themselves, but also extends to
arms of the tribe acting on behalf of the tribe.” White, 765 F.3d at 1025 (citing Michigan
v. Bay Mills Indian Cmty., 572 U.S. 782, 790, 134 S. Ct. 2024, 2031 (2014) (other citations
omitted). In White, the Ninth Circuit considered the following five factors derived from
Breakthrough to determine whether an entity acts “on behalf of the tribe”:
(1) the method of creation of the economic entities; (2) their purpose;
(3) their structure, ownership, and management, including the amount of
control the tribe has over the entities; (4) the tribe’s intent with respect to the
sharing of its sovereign immunity; and (5) the financial relationship between
the tribe and the entities.
White, 765 F.3d at 1025 (quoting Breakthrough., 629 F.3d at 1187). Like the Breakthrough
court, we decline to adopt a precise test for determining whether a tribe’s economic entity
1
At oral argument, Lustre Oil’s counsel acknowledged that immunity and waiver thereof may be
determined on a claim-specific basis.
10
is entitled to share the tribe’s sovereign immunity. But we agree that these factors provide
useful guidance in a reviewing court’s consideration. When assessing the factors, the
analysis should be guided by the “central policies” supporting tribal sovereign immunity,
including the “preservation of tribal cultural autonomy” and the “preservation of tribal
self-determination.” White, 765 F.3d at 1025. Here, the District Court assessed each White
factor individually and concluded that A&S was entitled to sovereign immunity.
¶23 First, the District Court considered the “method of creation” for A&S. Following
Williams v. Big Picture Loans, LLC, 929 F.3d 170 (4th Cir. 2019), it focused on the
incorporation of A&S under Delaware law. Though it did not consider this fact dispositive,
the District Court determined that A&S’s incorporation under Delaware law weighed
against a finding of tribal sovereign immunity. The court stated that “[m]ost courts that
have been confronted with this issue have held that organization under state law weighs
against a finding that the entity in question has sovereign immunity.”
¶24 Second, the District Court considered A&S’s purpose and found that this factor
weighed “heavily” in favor of sovereign immunity. It reasoned that purposes related to
“broader goals of tribal self-governance” should weigh in favor of finding immunity.
Williams, 929 F.3d at 178. The court considered documents related to the formation of
A&S and concluded that the entity was “formed to provide revenue for tribal government
programs by conducting oil and gas development on behalf of the Tribes’ [sic].” The
District Court found that “A&S’s environmental purposes significantly advance the policy
of tribal self-determination[;] because of this and the entity’s role in funding the Tribes in
lieu of a tax base this factor weighs heavily in favor of sovereign immunity.”
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¶25 The District Court also found that the third factor, management and control by the
Tribes, weighed in favor of sovereign immunity. It considered A&S’s formal governance
structure; its ownership by the Tribes; its day-to-day management; the Tribes’ authority to
appoint and remove managers and board members; and, proportionally, how many
employees were members of the Tribes. The District Court found that the Tribal Executive
Board “retains ultimate authority over A&S.” Additionally, the Tribal Executive Board
appoints the officers and the manager of A&S and retains the right to override decisions
and assume complete control over A&S at any time. The court found that three employees
out of four are Tribal members, and all five of A&S’s officers are Tribal members. The
District Court also found that the manager of A&S, though not a Tribal member, is “a long
serving and loyal tribal employee.” Based on these facts, the court concluded that the
Tribes exercised sufficient management and control to favor sovereign immunity.
¶26 The District Court found that the fourth factor, the Tribes’ intent to share its
immunity, did not weigh in favor of A&S based on the A&S Operating Agreement and the
Fort Peck Energy Company Operating Agreement. The court considered Section 10.9 of
the A&S Operating Agreement that reads as follows: “Any agreement, obligations, and
transactions entered into by [A&S], shall be solely for its account and only its assets shall
be subject to any claim related thereto.” Though the court did not consider this language
an “express waiver” of sovereign immunity, it did determine that this language, along with
language from the Fort Peck Energy Company Operating Agreement specifically stating
that A&S “shall not be construed as possessing sovereign immunity,” demonstrated that
the Tribes “intended A&S to be subject to suit in state court.”
12
¶27 Finally, the District Court assessed the Tribes’ financial relationship with A&S and
determined that this factor weighed in favor of sovereign immunity. The court found that
“all of A&S’s profits are distributed directly to the Tribes on a quarterly basis.” Because
the revenue from A&S goes “directly to the Tribes’ general fund to be used for tribal
government programs as provided by tribal law,” the court found that this factor weighed
in favor of tribal sovereign immunity.
¶28 The District Court then tallied the five factors, concluding that because “three out
of the five factors weigh in favor of immunity,” A&S should be considered an arm of the
Tribes protected by sovereign immunity. The court placed particular emphasis on the
purpose of A&S and the financial relationship between the Tribes and A&S as supportive
in its finding for immunity. On appeal, both parties take issue with the District Court’s
assessment of certain White factors.
¶29 A&S and Anadarko first contend that “the circumstances of A&S’s creation actually
support its immunity” because it was created by the Tribes’ elected legislature, the Tribal
Executive Board, as authorized by the Tribes’ Constitution. A&S and Anadarko submit
that “A&S’s formation is readily distinguishable from the chartering of a normal business
entity because the Tribes created A&S to fulfill important objectives of governmental
policy.” Lustre Oil argues that incorporating under state law “weighs heavily against a
finding of sovereign immunity.”
¶30 We conclude that incorporating under state rather than tribal law does not favor
immunity. See American Prop. Mgmt. Corp. v. Superior Court, 206 Cal. App. 4th 491,
502, 141 Cal. Rptr. 3d 802, 810 (2012) (citing cases from different jurisdictions that
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weighed incorporation under state law against a finding of sovereign immunity). Courts
and commentators have observed that a tribe effectively may communicate its intention to
waive sovereign immunity for a tribal enterprise by creating a business entity under state
law. See Wright v. Colville Tribal Enterprise Corp., 159 Wn. 2d 108, 113-115, 147 P.3d
1275, 1279-80 (Wa. 2006) (noting that “[w]hen a tribal corporation and government are
not completely distinct, the immunity of the latter extends to the business operations of the
former,” but suggesting that incorporation under state law has the opposite effect) (citing
Dao Lee Bernardi-Boyle, State Corporations for Indian Reservations, 26 Am. Indian
L. Rev. 41 (2001)). See also Airvator v. Turtle Mountain Mfg. Co., 329 N.W.2d 596,
602-03 (N.D. 1983) concluding that “state-chartered corporations should be treated as
non-Indians” because, in part, “a corporation is an entity distinct and separate from its
shareholders, directors, officers, and agents,” which may sue and be sued under state law).
¶31 Some of these courts appear to follow the Somerlott approach. See e.g., State v.
Cherokee Servs. Grp., LLC, 2021 ND 36, ¶ 15, 955 N.W.2d 67 (N.D. 2021) (recognizing
North Dakota’s rulings that “[w]hen a tribal entity subjects itself to a state by organizing
under the state’s laws, it waives sovereign immunity.”). But we decline to adopt Lustre
Oil’s position that incorporation under state law should hold such a heavy emphasis without
also considering the entire circumstances of an entity’s method and creation as related to
its parent tribe. In Manzano, the court looked beyond the entity’s incorporation solely
under state law to find that the entity’s method and creation did favor immunity because
the entity provided health services to tribal communities on tribal land and comprised
“federally recognized tribes, all of which passed resolutions authorizing it to assume
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authority from the government over its services.” No. 20-cv-02130-BAS-BGS,
2021 U.S. Dist. LEXIS 126475 at **16-18; see also McCoy v. Salish Kootenai College,
Inc., 334 F. Supp. 3d 1116, 1121 (D. Mont. 2018), aff’d, 785 Fed. Appx. 414 (9th Cir.
2019) (holding that “state incorporation or dual incorporation does not divest a tribal
corporation of its tribal status” and considering the White factors to conclude that tribal
college was an arm of the tribe entitled to share in its sovereign immunity).
¶32 Lustre Oil argues in turn that the purpose of A&S simply was to shield the Tribes
from legal and financial liability. Some courts have adopted the understanding that a tribal
entity’s “stated purpose is sufficiently related to tribal self-governance where the ‘entity
was created to develop the tribe’s economy, fund its governmental services, or promote
cultural autonomy.’” Applied Scis. Info. Sys. v. Ddc Constr. Servs., No. 2:19-cv-575,
2020 U.S. Dist. LEXIS 94435 at *7 (E.D. Va. Mar. 30, 2020) (citing People v. Miami
Nation Enterprises, 2 Cal. 5th 222, 246, 211 Cal. Rptr. 3d 837, 386 P.3d 357 (2016)). It is
clear from A&S’s formative documents that it was created to develop the Reservation’s oil
and gas resources as well as to assume responsibility for environmental cleanup efforts
related to oil and gas development. These are goals that fund the Tribes’ governmental
services by developing oil and gas resources and promote the cultural autonomy and
self-governance of the Tribes by protecting Tribal lands from environmental degradation.
See Breakthrough, 629 F.3d at 1188 (citations omitted).
¶33 Though Lustre Oil does not dispute that the Tribes own A&S or that the Tribal
Executive Board retains control over A&S, it argues that the management and control of
A&S weighs against a finding of immunity because the Tribes “delegated most of the
15
control of A&S to its General Manager, Ms. Debi Madison, who is not a member of the
Tribes.” In Miami Nation Enterprises, the California Supreme Court concluded that tribes
may “be enmeshed in the direction and control of the business without being involved in
the actual management.” 2 Cal. 5th at 247, 386 P.3d at 373 (quotation omitted). Based on
the Tribes’ oversight of A&S and the Tribal Executive Board’s right to assume control of
A&S at any time, together with the right to appoint officers and the manager, we conclude
that its appointment of Debi Madison, a non-Tribal member but long-time Tribal employee,
as manager is not enough to weigh A&S’s management against a finding of immunity.
¶34 Lustre Oil also contends that the financial relationship between A&S and the Tribes
does not support immunity because there is no proof of the proportionate share of A&S’s
financial contributions to the Tribes’ overall budget. Lustre Oil complains that the Tribes
were wrong to withhold information regarding their overall budget from the District Court
record. We agree with the Connecticut Supreme Court, however, that courts need not probe
so deeply into a tribe’s governmental affairs. The “opening and examination of a tribe’s
financial books and records . . . in the absence of any indication that . . . proceeds are
flowing to nontribal members or that the entities serve a purpose other than the one asserted
by the tribe, would infringe too greatly on tribal self-governance and self-determination.”
Great Plains Lending, LLC v. Dep’t of Banking, 339 Conn. 112, 135, 259 A.3d 1128,
1144-45 (citing Williams, 929 F.3d at 180). A&S returns one hundred percent of its profits
to the Tribes, which amounted to nearly $185,000 over a three- to four-month period the
District Court examined. We consider more important the percentage of profits returned
to the Tribes than the proportionate share A&S contributes to the Tribes’ overall budget.
16
Lustre Oil provided no indication that A&S falsified this information or that the Tribes did
not use this revenue to fund their government.
¶35 A&S and Anadarko argue that the District Court incorrectly concluded that the
Tribes did not intend to share their sovereign immunity with A&S. They argue that the
“close association and control over A&S” should demonstrate that the Tribes intended to
extend sovereign immunity. But the District Court’s conclusion on this point finds support
in the record. It reflects that whenever the Tribes had occasion to address the matter, they
documented their intent to treat A&S as a separate entity not immune from suit in state
courts.
¶36 First, the March 10, 2009 A&S Operating Agreement contains several provisions
separating the Tribes, as a member, from A&S, as a company, for liability purposes.
Section 1.6 of the Operating Agreement contains the following language:
Qualification in Other Jurisdictions. The Company may do business in
any jurisdiction only if such jurisdiction recognizes the limited liability of the
Member to substantially the same extent as would be recognized for a limited
liability company under the laws of the State of Delaware.
(Italics added.) Similarly, Section 6.2 limits the liability of the Tribes to third parties:
Liability to Third Parties. No Member shall be liable for the debts,
obligations, or liabilities of the Company, including under a judgment decree
or order of a court. No agreement or commitment entered into by the
Company shall bind or be enforceable against the Member or the Member’s
Assets. All such debts, obligations, liabilities, agreements, or commitments
shall be solely obligations of the Company, enforceable and collectable only
against and from the Company’s assets.
(Italics added.) In Section 10.2, the Agreement distinguishes between its governing law
and that governing the Tribes’ conduct:
17
Governing Law. This Agreement shall be construed in accordance with and
governed by the laws of the State of Delaware without regard to principles
of conflict of laws. . . . All matters pertaining to any action taken by the
Tribes, as the Member of the Company, and the Tribes’ Executive Board
shall be governed and construed with the laws of the Tribes.
In Section 10.9, the Tribes clearly retain their sovereign immunity and again separate A&S
from the Tribes for the purposes of liability. In the original agreement the following section
was drafted in bold and all-capitalized letters:
Sovereign Immunity of the Tribes. Any agreements, obligations, and
transactions entered into by the company shall be solely for its account and
only its assets shall be subject to any claim related thereto. In no event shall
the Tribes have any obligation or be subject to any claim with respect to any
agreement or transaction into which the company may enter or engage.
Nothing herein contained shall be construed as a waiver or limitation of the
sovereign immunity possessed and enjoyed by the Tribes as federal
recognized Indian Tribes or by their officers, the members of their executive
board, their employees and agents.
(Italics added.) This founding document shows the Tribes’ intent to establish a separate
corporate entity “subject to . . . claims” while preserving the Tribes’ sovereign immunity.
¶37 Next, the 2009 Fort Peck Energy Company Operating Agreement expressly
provided that A&S “shall not be construed as possessing sovereign immunity” and that
A&S “irrevocably waives any sovereign immunity that it may be construed to possess.”
The Agreement was followed by a separate Acknowledgment and Waiver of Sovereign
Immunity, in which the Tribes expressly acknowledged that A&S “does not and shall not
be construed to possess sovereign immunity.” The Acknowledgment and Waiver
expressed further that this waiver extended to “any sovereign immunity that [A&S] now
or in the future may possess or may be construed to possess.” The Tribes made clear in
the same document that they did not waive their own sovereign immunity.
18
¶38 A&S points out that the Fort Peck Energy Company Operating Agreement was
specific to the Fort Peck Energy Company and, by its terms, did “not creat[e] any rights or
benefits in or to third parties,”—i.e., Lustre Oil. The Acknowledgment and Waiver also
made clear that it was adopted in order to induce the private partners to enter into the Fort
Peck Energy Company venture. We agree with A&S that this document expressly waived
immunity only for purposes of Fort Peck Energy Company operations. Tribes are entitled
to waive immunity with limitation because waiving sovereign immunity is voluntary.
See Oglala Sioux Tribe v. C&W Enters., 542 F.3d 224, 231 (8th Cir. 2008). Due to the
strong presumption against a waiver of tribal sovereign immunity, “[a]ny waiver of
immunity . . . ‘cannot be implied but must be unequivocally expressed.’” Bradley, ¶ 17
(citations omitted). The Fort Peck Energy Company Operating Agreement clearly limits
the application of immunity waivers to the members of the Fort Peck Energy Company
Operating Agreement in Section 10.14. The Fort Peck documents nonetheless offer an
additional example of the Tribes treating A&S as a separate entity that they anticipated
could be sued in state courts.
¶39 More on point to this case, when reactivating A&S years later the Tribes passed a
Resolution for the purpose of administering the Anadarko leases. The October 12, 2020
Resolution provided:
WHEREAS, upon the recommendation of legal counsel, the Tribes intend
to accept the assignment of [Anadarko’s] Lustre Field assets and assume its
Lustre Field obligations and liabilities through a wholly-owned limited
liability company, A&S Mineral Development Company, LLC . . . in
existence and in good standing under the laws of Delaware, to insulate the
Tribes from any direct liability with respect to this transaction other than any
19
capital that the Tribes may contribute to A&S Mineral to complete this
acquisition and support its operations[.]
(Italics added.) The Tribes followed with another Resolution that provided, “the
Assiniboine and Sioux Tribes has agreed to separate all Tribal mineral development
operations from the Tribal government operations and transfer all such operations to the
A&S Mineral Development Co., LLC to operate mineral development activities separate
and distinct from the Tribes . . . .” (Emphasis added.) These Resolutions, pertaining
directly to the leases that are the subject of this litigation, demonstrate that the Tribes
intended A&S to exist “separate” from the Tribes and “distinct” from the Tribes’ immunity
from legal liabilities.
¶40 In sum, each time the Tribes had occasion to document the functions and purposes
of A&S—including the documents governing the company’s management of the Anadarko
leases—they expressed a clear separation between the Tribal government, which retained
sovereign immunity, and the separate business entity, which the documents anticipate may
be subject to claims against its assets. These documents are the clearest indication of the
Tribes’ intent and demonstrate why sovereign immunity is not determined by a simple tally
of factors.
¶41 Just as we do not accept a dispositive rule associated with any single fact, we decline
to adopt an analysis that otherwise fails to consider all the circumstances of an entity’s
relationship with its parent tribe and the nature of the claims at issue. An assessment of
sovereign immunity must consider whether, under the circumstances of the case and the
relationship between the entity and its parent tribe, some considerations should be given
20
more weight. In this case, the Tribes’ choice to incorporate A&S under Delaware law—
thereby subjecting it to state laws allowing limited liability companies to sue and be
sued2—coupled with the Tribes’ stated intent to keep A&S a separate and distinct entity
for liability purposes, including for the management of the leases at issue, convinces us on
de novo review that the District Court erred in its legal conclusions when it weighed and
balanced the factors and determined that A&S is immune from suit in this case as an arm
of the Tribe.
¶42 Finally, Lustre Oil argues that Section 10.9 of the A&S Operating Agreement and
Section 10.16 of the Fort Peck Energy Company Operating Agreement unambiguously
waive A&S’s sovereign immunity in this case. Tribes are presumptively immune from suit
unless Congress authorizes suit or the tribes waive sovereign immunity. Kiowa Tribes of
Oklahoma v. Mfg. Techs., Inc., 523 U.S. 751, 754, 118 S. Ct. 1700, 1703 (1998) (citations
omitted). A tribal entity does not enjoy the same presumptive immunity from suit unless
the entity is determined to be an arm of the tribe. Williams, 929 F.3d at 177. Our
conclusion that A&S is not an arm of the Tribes for purposes of Lustre Oil’s claims renders
an express waiver analysis unnecessary because the Tribes did not extend immunity in the
first place. See Williams, 929 F.3d at 177 (an entity must demonstrate that it is an arm of
the tribe entitled to immunity before the burden shifts to the party arguing against sovereign
immunity to demonstrate that immunity was abrogated by Congress or waived by the tribe).
2
See 6 Del. C. §§ 18-215(b)(1), 18-218(c)(1).
21
¶43 We conclude that consideration of all the circumstances encompassed within the
White factors weighs against the extension of sovereign immunity to A&S as an arm of the
Tribes for the purpose of Lustre Oil’s claims in this case.
CONCLUSION
¶44 A&S is not entitled to sovereign immunity from Lustre Oil’s claims in this case.
The District Court erred in concluding otherwise. We reverse and remand the case for
further proceedings.
/S/ BETH BAKER
We Concur:
/S/ MIKE McGRATH
/S/ JAMES JEREMIAH SHEA
/S/ JIM RICE
Justice Jim Rice, concurring.
¶45 I concur with the Court, but the opinion well illustrates the deficits in current law
regarding determination of tribal corporation immunity, and the need for clearer standards
or bright-line rules. “[C]ommercial activity of tribes has proliferated,” Michigan v. Bay
Mills Indian Cmty., 572 U.S. 782, 823, 134 S. Ct. 2024, 2051, 188 L. Ed. 2d 1071, 1105
(2014) (Thomas, Ginsburg, Scalia, Alito, JJ, dissenting), including the creation of tribal
corporations, but the law has not caught up. We are left with nebulous factors to
“consider,” Opinion, ¶ 22, when deciding if a tribal corporation is “sufficiently related to
tribal self-governance” to warrant extension of the tribe’s immunity to the corporation.
22
Opinion, ¶ 32 (citation omitted). In pursuit of this sufficient-relation determination, we
conclude here that incorporation of the tribal business entity under state law “does not
favor” immunity, but nonetheless also conclude this fact should not “hold such a heavy
emphasis without also considering the entire circumstances” of the entity’s method and
creation “as related to its parent tribe.” Opinion, ¶¶ 30, 31. However, when undertaking
consideration of these “entire circumstances . . . as related to [the] parent tribe,” we may
not “probe [too] deeply into a tribe’s governmental affairs,” because this inquiry itself may
“infringe too greatly on tribal self-governance and self-determination.” Opinion, ¶¶ 31, 34
(citation omitted). Thus, there are countervailing considerations for application of
individual factors, and differing weights to be assigned to each factor. Viewed in
combination with the elusive sixth factor, which mandates the overall analysis be guided
by “the policies underlying tribal sovereign immunity,” Breakthrough Mgmt. Group, Inc.
v. Chukchansi Gold Casino & Resort, 629 F.3d 1173, 1187 (10th Cir. 2010), courts are left
with a malleable muddle with little guidance on how to even assess the factors, let alone
apply them. Indeed, our determination in this case to reverse orbits around the tribal intent
factor, about which we conclude that, while the District Court correctly weighed the factor
against extension of tribal immunity, it nonetheless erred by not weighing this factor
enough against tribal immunity. Opinion, ¶ 41.
¶46 The White multi-factor balancing test, first utilized by the Ninth Circuit in 2014, is
already a demonstrably ineffective mechanism for dealing with this issue. The
determination of immunity for tribal corporations engaged in the streams of commerce,
highlighted by the recent phenomenal growth in tribal commercial activities, should not be
23
left to such shifting sands. “Tribal immunity significantly limits, and often extinguishes,
the States’ ability to protect their citizens and enforce the law against tribal businesses. . . .
The problem repeats itself every time a tribe fails to pay state taxes, harms a tort victim,
breaches a contract, or otherwise violates state laws, and tribal immunity bars the only
feasible legal remedy.” Bay Mills, 572 U.S. at 823-24 (Thomas, Ginsburg, Scalia, Alito,
JJ, dissenting). States and tribes must be able to operate with clarity when tribal agents
engage in off-reservation commercial enterprises. The Somerlott rule could be a start, but
it addresses a limited circumstance, and its current validity is unclear. The vagueness in
the law promotes lengthy litigation in every case, and leaves the law, and thus the courts,
with insufficient direction. A better test must be adopted, or Congress must act to provide
clear guidance.
/S/ JIM RICE
Justice Laurie McKinnon, specially concurring.
¶47 I would conclude, under the five factors in White v. University of California, 765
F.3d 1010 (9th Cir. 2014), and A&S’s clear connection to tribal economic development
and self-determination, that A&S is an enterprise of the Tribes but that the Tribes have
waived A&S’s immunity. Indeed, A&S is an archetypal tribal entity: it was created by the
Tribes’ government and rooted in its constitution; its purpose is solely to benefit the Tribes
through economic development of its natural resources; it is completely owned and
managed by the Tribes, and all revenues A&S earns are paid into the Tribes’ general fund
for the benefit of its people and tribal programs. Notwithstanding the Tribes’ creation of
24
A&S as a tribal enterprise, the Tribes expressly declined to extend their immunity to A&S,
likely “to ensure that A&S is able to conduct business on a regular basis.”1 Our wholesale
conclusion that A&S is not a tribal entity misconstrues the law. The first crucial question
is whether A&S functions as an enterprise of the Tribes. It clearly does. The second crucial
question is whether the Tribes have waived A&S’s sovereign immunity. It clearly has. I
would conclude that A&S is an enterprise of the Tribes but that the Tribes have expressly
waived A&S’s sovereign immunity. I therefore concur in the judgment reached by the
Court, but strongly disagree with the Court’s analysis.
¶48 Our de novo standard of review requires that we review for clearly erroneous facts
and incorrect conclusions of law. Here, the Court does not conclude the District Court
made erroneous factual determinations or that it failed to make required findings. Instead,
the Court concludes the District Court made incorrect conclusions of law when it did not
give sufficient weight to one of the five White factors. The Court makes the same
conclusions of law as the District Court. However, the Court holds the District Court erred
in the weight it gave to the intent factor in the balancing. Here, the District Court held that
the language contained in the A&S Operating Agreement weighed against immunity; but
the Court holds that same language completely defeats immunity, even when balanced with
the other factors. This is essentially a de facto conclusion, not a balancing and
consideration of all the White factors, and it is also a misapplied waiver analysis. By
“blending” two distinct analyses of waiver and “arm of the tribe,” the Court throws the
1
Tribes’ Resolution #2276-2009-10.
25
baby (creation of a tribal entity to further tribal interests) out with the bathwater (an express
waiver of A&S’s immunity). The Court also misconstrues the “method of creation” factor
by finding that the Tribes’ decision to incorporate under Delaware law weighed against
finding immunity. I will address this error as well.
¶49 To begin, Lustre Oil has asked this Court to apply Somerlott v. Cherokee Nation
Distributors Inc., 686 F.3d 1144 (10th Cir. 2012), to conclude that A&S does not have
immunity. Somerlott is the progeny of several cases out of the Tenth Circuit which are not
discussed by the Court. Therefore, before addressing the propriety of adopting Somerlott,
some jurisprudential background information is in order. I am also concerned the Court
has relied upon many cases in its analysis which are distinguishable from the circumstances
here and do not provide the support the Court claims they do. In White, for example, the
Ninth Circuit considered whether the Kumeyaay Cultural Repatriation Committee, a tribal
organization which was formed in 1997 by tribal resolutions from each of its twelve
Kumeyaay Nation member tribes, was an “arm of the tribe” entitling it to the tribe’s
sovereign immunity status in litigation under the Native American Graves Protection and
Repatriation Act (NAGPRA), 25 U.S.C. § 3001. Applying the Tenth Circuit’s factors from
Breakthrough Management Group, Inc. v. Chukchansi Gold Casino & Resort, 629 F.3d
1173 (10th Cir. 2010), the Ninth Circuit concluded that the Repatriation Committee was
an “arm of the tribe.” Importantly, and absent from the Court’s discussion here, the
Repatriation Committee in White was not created under state law but was created by the
tribes under tribal law. White, 765 F.3d at 1025. Its purpose was to organize tribal leaders
and members to address repatriation efforts under NAGPRA. The Ninth Circuit considered
26
whether NAGPRA’s enforcement clause conferring jurisdiction to the federal courts over
an action alleging a violation of NAGPRA abrogated tribal sovereign immunity. Noting
that when Congress intends to abrogate a tribe’s sovereign immunity it must do so
unequivocally, the court concluded that the Act did not contain an “unequivocal
expression” of abrogation. White, 765 F.3d at 1024; see Michigan v. Bay Mills Indian
Cmty., 572 U.S. 782, 788, 134 S. Ct. 2024, 2031 (quoting Santa Clara Pueblo v. Martinez,
436 U.S. 49, 58, 98 S. Ct. 1670, 1677 (1978)). Thus, White dealt with an Act of Congress
which clearly affected the tribes and their ancestry. No aspect of White involved a tribal
entity incorporated under state law for purposes of enhancing economic development. Nor
does White speak to a significant aspect in this case; and that is that the Tribes specifically
and expressly declined to extend its immunity to the tribal entity it created.
¶50 The Court fails to adequately discuss and distinguish Breakthrough. Breakthrough
similarly did not involve an entity created under state law. Breakthrough is the second of
three cases issuing from the Tenth Circuit over a four year period which involved a tribal
entity and whether it was an “arm of the tribe.” The first case, Native American
Distributing v. Seneca-Cayuga Tobacco Co., 546 F.3d 1288 (10th Cir. 2008), is
particularly relevant to the facts here because of the inclusion in the entity’s corporate
charter that it had the power “[t]o sue and be sued; to complain and defend in any court.”
Native Am. Distrib., 546 F.3d at 1290. Lustre Oil argues that Delaware statutes provide
that a Delaware created limited liability company “shall be a separate legal entity” subject
to suit. In Native American Distributing, the Seneca-Cayuga Tribe of Oklahoma, a
federally recognized Indian tribe, exercised its power under Section 3 of the Oklahoma
27
Indian Welfare Act of 1936, 25 U.S.C. § 503, to organize by creating a constitution and a
corporate charter, although only required to organize under one entity. Native Am. Distrib.,
546 F.3d at 1290. The tribe, under its constitution, created a “Business Committee” with
the power to transact business and otherwise speak on behalf of the tribe. In contrast to the
tribe’s constitution, the tribe’s corporate charter contained a clause granting the corporate
entity the power to sue and be sued in any court. The Business Committee, exercising its
authority under the tribal constitution, adopted a resolution creating a tribal enterprise for
the manufacture and sale of tobacco and declared “such Tribal enterprise and its activities
as essential government functions of the Seneca-Cayuga Tribe.” Native Am. Distrib., 546
F.3d at 1291. The question before the Tenth Circuit was whether the entity created by the
Business Committee, the Seneca-Cayuga Tobacco Company (SCTC), functioned as an
enterprise of the Tribe, which would extend sovereign immunity to SCTC, or whether it
functioned as an enterprise of the Tribal Corporation, which had expressly and
unequivocally waived its immunity through the “sue or be sued” clause contained within
its corporate charter.2 Native Am. Distrib., 546 F.3d at 1293.
¶51 First, the court rejected plaintiffs’ arguments that the scope of the tribal immunity
doctrine should be limited to exclude commercial activities. The court explained that
2
The court noted the defendants had conceded the “sue or be sued” clause constituted an
unequivocal waiver of immunity, but the court also observed that whether such a clause contained
in a corporate charter functions as an unequivocal waiver has been questioned. Native Am.
Distrib., 546 F.3d at 1293 n.2. “Most courts have reasoned that tribal adoption of a charter with
such a clause simply creates the power in the corporation to waive immunity, and that adoption of
the charter alone does not independently waive tribal immunity.” Felix S. Cohen’s Handbook of
Federal Indian Law § 7.05(1)(c) (2005 ed.).
28
“[w]hile the Supreme Court has expressed misgivings about recognizing tribal immunity
in the commercial context, the Court has also held that the doctrine is ‘settled law’ and that
it is not the judiciary’s place to restrict its application.” Native Am. Distrib., 546 F.3d at1294 (citing Kiowa Tribe of Okla. v. Mfg. Techs., Inc., 523 U.S. 751, 756-59, 118 S. Ct.
1700, 1703-06, (1998)). The court observed that the Supreme Court has indeed
acknowledged “tribes could use their immunity as a sword rather than a shield.” Kiowa
Tribe, 523 U.S. at 756. However, the court reasoned that “[d]espite these concerns with
the assertion of immunity, the [Supreme] Court has held fast to its position that such
concerns are not the province of the courts, but of Congress or of the tribe itself.” Native
Am. Distrib., 546 F.3d at 1294. See Ute Distrib. Corp. v. Ute Indian Tribe, 149 F.3d 1260,
1267 (10th Cir. 1998) (holding that there can be no “waiver of tribal immunity based on
policy concerns, perceived inequities arising from the assertion of immunity, or the unique
context of a case”); Pan Am. Co. v. Sycuan Band of Mission Indians, 884 F.2d 416, 419
(9th Cir. 1989) (“Indian sovereignty, like that of other sovereigns, is not a discretionary
principle subject to the vagaries of the commercial bargaining process or the equities of a
given situation.”).
¶52 Recognizing that limiting the scope of the doctrine to exclude commercial activities
should be left to Congress, the court in Native American Distributing declined to limit the
doctrine by excluding commercial activities and proceeded to address the facts, concluding
SCTC functioned as an “arm of the tribe.” The court acknowledged the well-recognized
principle that a tribe’s immunity from suit under the doctrine may be overcome in only one
of two ways: first, Congress has the power to abrogate the tribe’s immunity; and second,
29
the tribe can waive its own immunity. Native Am. Distrib., 546 F.3d at 1293. In either
event, “a waiver of sovereign immunity cannot be implied but must be unequivocally
expressed.” Ute Distrib., 149 F.3d at 1263 (quoting Santa Clara Pueblo, 436 U.S. at 58).
The court concluded that “[w]hile the Business Committee could have invoked its powers
under the Corporate Charter to justify creation of a tobacco company, it instead invoked its
constitutional powers to do so.” Native Am. Distrib., 546 F.3d at 1294. Moreover, the
court noted the resolution creating the tobacco company expressly declared that its
activities are “essential government functions of the Seneca-Cayuga Tribe” and, further,
that there was no reason for the Business Committee to have used this language unless it
intended “to make clear that the tobacco company was a division of the Tribe . . . .” Native
Am. Distrib., 546 F.3d at 1294. Finally, the court reasoned that the same resolution which
approved an agreement with another entity for management of the tobacco company
expressly provided that the Business Committee did waive immunity to the management
company, but only as to the management company. Thus, by including an express waiver
of immunity in the resolution, one limited to the management company, the court held the
Business Committee clearly expressed its belief that SCTC was a division of the tribe that
was entitled to immunity, and that for this immunity to be waived, it would need to
affirmatively express an intention to do so. Native Am. Distrib., 546 F.3d at 1294. The
court next explained that SCTC was not created under the tribe’s corporate charter and
therefore was not bound by the “sue or be sued” clause; rather SCTC was created under
the tribe’s constitution which had not waived the tribe’s sovereign immunity. Native Am.
Distrib., 546 F.3d at 1294.
30
¶53 Two years later, in Breakthrough, the Tenth Circuit again revisited the relationship
between an Indian tribe and the economic entity created by the tribe to assess how close
that relationship must be for those entities to share in the tribe’s sovereign immunity.
Breakthrough, 629 F.3d at 1176. Breakthrough provided management services for the
Chukchansi Tribe’s casino, which was owned and operated by the Chukchansi Economic
Development Authority. Both entities were unincorporated and created by the tribe for the
sole purpose of promoting tribal interests through the ownership and operation of an Indian
gaming facility. The court recognized that Congress had sought to promote tribal
sovereignty and self-sufficiency through economic development and, particularly relevant
to the Chukchansi Tribe, provided a statutory authorization for Indian gaming, 25 U.S.C.
§ 2702(1). See Cal. v. Cabazon Band of Mission Indians, 480 U.S. 202, 218-219, 107
S. Ct. 1083, 1093 (1987) (“The Cabazon and Morongo Reservations contain no natural
resources which can be exploited. The tribal games at present provide the sole source of
revenues for the operation of the tribal governments and the provision of tribal services.
They are also the major sources of employment on the reservations. Self-determination
and economic development are not within reach if the Tribes cannot raise revenues and
provide employment for their members”). Further, it was undisputed in Breakthrough that
tribal sovereign immunity may extend to subdivisions of a tribe, including those engaged
in economic activities, “provided that the relationship between the tribe and the entity is
sufficiently close to properly permit the entity to share in the tribe’s immunity.”
Breakthrough, 629 F.3d at 1183. Thus, the court framed the question: “Does the resulting
entity have a distinct, nongovernmental character and therefore is not immune, or is it
31
merely an administrative convenience, and therefore immune?” Breakthrough, 629 F.3d
at 1184.
¶54 The primary issue in Breakthrough was the trial court’s application of the Johnson3
test to measure the closeness of the relationship between the tribe and the Chukchansi
Economic Development Authority and casino. The Johnson test required application of
ten factors; however, the tenth factor was considered a threshold determination for the
remaining nine factors. The tenth factor considered the financial relationship between the
entity and the tribe and whether a judgment against the entity would affect tribal assets,
just as the Supreme Court of Alaska had done in Runyon v. Association of Village Council
Presidents, 84 P.3d 437 (Alaska 2004). The court, returning to its decision in Native
American Distributing, explained that the most important lesson learned from that decision
was that “[the court] did not examine the financial relationship between SCTC and the tribe
and whether a judgment against SCTC would reach the tribe’s monetary assets, much less
designate that factor as a threshold determination.” Breakthrough, 629 F.3d at 1187. The
court reaffirmed that its decision in Native American Distributing “depended upon whether
SCTC was a division of the tribal corporation, which had waived its immunity from suit,
or of the tribe, which had waived its immunity only as to actions of the tribal corporation.”
Breakthrough, 629 F.3d at 1186.
3
Johnson was an unpublished opinion from the United States District Court for the District of
Kansas. Johnson v. Harrah’s Kansas Corp., No. 04-4142-JAR, 2006 U.S. Dist. LEXIS 7299,
2006 WL 463138 (D. Kan. Feb. 23, 2006).
32
¶55 After rejecting the Johnson test, the court adopted a six factor test, which has been
set forth in the majority opinion. The court next applied the six factor test to the
Chukchansi tribal entities. The court explained, under the first factor, that the entities were
created under tribal law and described by resolution as an “instrumentality” and
“authorized agency” of the tribe. Breakthrough, 629 F.3d at 1192-93. The entities were
characterized in their founding documents as “a wholly owned . . . enterprise of the Tribe”
which, the court concluded, naturally suggested that they enjoyed a close relationship to
the tribe. Breakthrough, 629 F.3d at 1192. The purpose for creating the entities, the second
factor, was to “further the economic prosperity” of the tribe through allocation of casino
revenue for the tribe’s benefit. Breakthrough, 629 F.3d at 1192. The structure, ownership,
and management of the entities—the third factor—favored immunity because the entities
were primarily run by members of the tribe. Regarding the fourth factor of intent, the court
concluded the tribe clearly intended to extend tribal sovereign immunity to the entities
because the ordinances themselves “clothed” them with the same privileges and immunities
as the tribe and clearly expressed the tribe’s belief that the entities were a division of the
tribe entitled to immunity. Breakthrough, 629 F.3d at 1193-94. The financial relationship
between the tribe and the entities demonstrated the entities were close to the tribe because
the tribe depended heavily on the casino for revenue to fund its governmental operations,
support its tribal members, and search for other economic development opportunities. And,
finally, the sixth factor—the overall purpose of tribal sovereign immunity—was served by
extending immunity to the entities because Congress had expressed a strong policy in favor
of encouraging tribal economic development and extending immunity “directly protects
33
the sovereign Tribe’s treasury, which is one of the historic purposes of sovereign immunity
in general.” Breakthrough, 629 F.3d at 1183 (quoting Allen v. Gold Country Casino, 464
F.3d 1044, 1047 (9th Cir. 2006)). The court noted that, in comparison, “[c]ases which have
not extended immunity to tribal enterprises typically have involved enterprises formed
solely for business purposes and without any declared objective of promoting the [tribe’s]
general tribal and economic development.” Breakthrough, 629 F.3d at 1195 (internal
quotations omitted) (quoting Trudgeon v. Fantasy Springs Casino, 71 Cal. App. 4th 632,
640, 84 Cal. Rptr. 2d 65, 70 (1999)). The court concluded that the entities were so closely
related to the tribe that they should share in the tribe’s sovereign immunity. Breakthrough,
629 F.3d at 1195.
¶56 It is important to examine the court’s analysis and reasoning in Native American
Distributing and Breakthrough, as I have done, to place in context the Tenth Circuit’s third
decision—Somerlott—and the propriety of adopting its reasoning. Lustre Oil asks this
Court to adopt the Somerlott decision and hold that A&S, because the Tribes incorporated
the company in Delaware, is not entitled to the Tribes’ immunity. Native American
Distributing and Breakthrough provide the groundwork for addressing whether a tribal
entity is entitled to a tribe’s immunity. Although the Court rejects applying Somerlott, it
is upon reasoning I do not find persuasive.
¶57 In Somerlott, the Tenth Circuit held that an entity is legally distinct from its
members and tribe when it “voluntarily subject[s] themselves to the authority of another
sovereign which allows them to be sued.” Somerlott, 686 F.3d at 1149-50. Accordingly,
“a separate legal entity organized under the laws of another sovereign . . . cannot share in
34
the [tribe’s] immunity from suit, and it is not necessary to apply the six-factor
[Breakthrough] test.” Somerlott, 686 F.3d at 1150. The concurring opinion buttressed the
reasoning of the court:
[Tribal sovereign immunity] is not limited by the type of activity involved or
where it takes place. But no matter how broadly conceived, sovereign
immunity has never extended to a for-profit business owned by one sovereign
but formed under the laws of the incorporating second sovereign when the
laws of the incorporating second sovereign expressly allow the business to
be sued. And it doesn’t matter whether the sovereign owning the business is
the federal government, a foreign sovereign, state—or tribe.
Somerlott, 686 F.3d at 1156.
¶58 The concurrence reasoned that as a legally distinct entity being created, embodied,
and brought into existence by the law of a second sovereign, a corporation is defined by
and subject to the privileges and responsibilities provided by that sovereign’s laws.
Somerlott, 686 F.3d at 1156. A corporation is not a natural person, but “an artificial being
that may exercise only those privileges the law confers upon it, either expressly, or as
incidental to its very existence.” Somerlott, 686 F.3d at 1156 (internal quotations omitted).
Thus, the concurrence reasoned, the entity’s claim to immunity is inconsistent with this
foundational principle of corporate law and the state law under which it became
incorporated becomes part of its charter. When a tribe chooses to create an entity under
state law, it does so according to the terms another sovereign has prescribed and it has no
authority to “commandeer that State’s legislative processes and rewrite the statutory terms
and condition of its formation . . .,” any more than a state may rewrite the laws of a tribe.
Somerlott, 686 F.3d at 1156. To allow the entity “to revise Oklahoma’s statutory code to
suit its preferences, would, clearly viewed, represent an infringement on the rights of only
35
one sovereign—Oklahoma.” Somerlott, 686 F.3d at 1156. Finally, the Somerlott
concurrence reasoned that the Breakthrough six factor test “does not alter the analysis”
because the test only exists to determine whether a particular tribal entity is or is not “a
legal entity separate and distinct from the tribe; when incorporated under state law, the
laws of the second sovereign say that it is.” Somerlott, 686 F.3d at 1156.
¶59 It is well-established that a tribe’s immunity from suit may only be overcome in
one of two ways. First, Congress has the power to abrogate the tribe’s immunity. Santa
Clara Pueblo, 436 U.S. at 58. Second, the tribe can waive its own immunity. E.F.W. v.
St. Stephen’s Indian High Sch., 264 F.3d 1297, 1304 (10th Cir. 2001). In either event, “a
waiver of sovereign immunity cannot be implied but must be unequivocally expressed.”
Santa Clara Pueblo, 436 U.S. at 58. Accordingly, Somerlott’s conclusion that a tribal
entity waives sovereign immunity by incorporating under the laws of another sovereign
informs a waiver analysis and is thus distinguishable from an impermissible judicial
narrowing or expansion of the sovereign immunity doctrine itself.4 This is evident because
the Tenth Circuit had previously recognized the role of Congress in altering the scope of
the doctrine, and declared it was not the role of the judiciary. In my opinion, very simply,
Somerlott incorrectly holds that utilizing a second sovereign’s laws as a vehicle for
incorporation automatically and unequivocally constitutes a waiver. Somerlott’s reasoning
suggests that based on the place of an entity’s incorporation it can no longer avail itself of
4
Examples of when Congress acts to limit the scope of tribal immunity include the Indian Gaming
Regulatory Act, 25 U.S.C. § 2710(d)(7)(ii); the Clean Water Act, 33 U.S.C. § 1365; the Safe
Drinking Water Act, 42 U.S.C. § 300j-9(i)(1)(c); the Resources Conservation and Recovery Act,
42 U.S.C. § 6972; and the Hazardous Materials Transportation Act, 49 U.S.C. §§ 5101-5125.
36
certain laws. However, when a corporation agrees to “sue or be sued” under another
sovereign’s laws it does not forego the application of that jurisdiction’s substantive laws.
A tribal entity incorporated under state law may still claim the benefit of that state’s laws
and the federal law, which include principles of sovereign immunity. See Okla. Tax
Comm’n v. Citizen Band of Potawatomi Indian Tribe, 498 U.S. 505, 509-10, 111 S. Ct.
905, 909-10 (1991) (the fact that a tribe as a plaintiff was subjected to a compulsory
counterclaim under Federal Rule of Civil Procedure 13(a) was insufficient to waive
sovereign immunity).
¶60 The Tenth Circuit’s own precedent does not support a rule of automatic waiver when
a sovereign avails itself of another sovereign’s laws. In E.F.W., plaintiffs argued that tribal
defendants waived their immunity by entering into an agreement with the State of
Wyoming for social services, arguing that these defendants became state actors because
the agreement incorporates state law, provides for state training, and allows the state to
inspect and review the tribes’ case records. Plaintiffs also argued that when E.F.W. was
removed from her home, the only authority supporting such action was state law. Plaintiffs
did not argue that Congress had abrogated the tribes’ immunity, only that the agreement
and the requirement to follow state law constituted a waiver by the tribes.
¶61 The Tenth Circuit disagreed. It concluded the agreement contained no language that
could be construed as an unequivocal waiver by the tribes. E.F.W., 264 F.3d at 1304. The
court reasoned the State of Wyoming, Shoshone and Arapaho Tribal Social Services, and
the tribes themselves did “not waive sovereign immunity by entering [into] the
[agreement], and specifically retain[ed] immunity and all defenses available to them as
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sovereigns pursuant to Wyo. Stat. Sec. 1-39-104(a) and all other applicable Tribal, Federal
or State law.” E.F.W., 264 F.3d at 1304. The fact that the tribe “agreed to act in accordance
with state law to some degree and in essence to adopt state law [was] simply not an express
waiver of their tribal sovereignty with respect to actions taken under that law.” E.F.W.,
264 F.3d at 1304. The court noted the Supreme Court has held that “[t]o say substantive
laws apply to off-reservation conduct, however, is not to say that a tribe no longer enjoys
immunity from suit . . . . There is a difference between the right to demand compliance
with state laws and the means available to enforce them.” Kiowa Tribe, 523 U.S. at 751.
¶62 Consistent with these principles, courts throughout the country have repeatedly held
a tribe’s agreement to comply with a particular law does not amount to an unequivocal
waiver of a tribe’s immunity. See, e.g., Nanomantube v. Kickapoo Tribe in Kan., 631 F.3d
1150, 1153 (10th Cir. 2011) (holding a tribe’s agreement to comply with Title VII of the
Civil Rights Act of 1964 did not constitute “an unequivocal waiver of tribal sovereign
immunity”); Wis. v. Timber & Wood Products, 379 Wis. 2d 690 (Wis. 2017) (claim against
a tribe to recover taxes alleging that it waived its sovereign immunity by agreeing to
comply with the Forest Croplands Law was dismissed because, while the statute made it
liable for payment of severance tax, it did not state that the tribe consented to be sued in
order to enforce any lien or personal liability); Sanderlin v. Seminole Tribe of Fla., 243
F.3d 1282, 1289 (11th Cir. 2001) (a tribe’s contractual promise to comply with an
anti-discrimination provision of the Rehabilitation Act “merely convey[ed] a promise not
to discriminate” and “in no way constituted an express and unequivocal waiver of
sovereign immunity”); Cohen v. Little Six, Inc., 543 N.W.2d 376, 380 (Minn. Ct. App.
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1996) (a tribal corporation did not waive its sovereign immunity by registering as a foreign
corporation and thereby agreeing to be “subject to the laws of [Minnesota]”); Sheffer v.
Buffalo Run Casino, PTE, Inc., 2013 OK 77, ¶ 42, 315 P.3d 359, 371 (Okla. 2013) (holding
a tribe did not waive its sovereign immunity by applying for and accepting a liquor
license—which required the tribe to agree not to violate federal, state, or municipal law—
because by doing so the tribe merely promised to comply with those laws, not subject itself
to lawsuits).
¶63 Based on the foregoing, I would reject Somerlott’s reasoning and conclusion that a
tribal entity incorporating in another state automatically and unequivocally waives its
sovereign immunity. Whether an entity is a tribal entity depends on the context in which
the question is addressed. Dille v. Council of Energy Res. Tribes, 801 F.2d 373, 376
(10th Cir. 1986) (stating that “the definition of an Indian tribe changes depending upon the
purpose of the regulation or statutory provision under consideration”). In my opinion, the
Somerlott analysis presumes an unequivocal waiver in every instance and context, contrary
to well established precedent. I do not find persuasive, as the Court does, the logic of
Lebron v. Nat’l R.R. Passenger Corp., 513 U.S. 374, 115 S. Ct. 961 (1995), which did not
involve a tribe and addressed whether Amtrack was an instrumentality of the federal
government for First Amendment purposes, or the federal district court cases—Manzano
v. S. Indian Health Council, Inc., No. 20-cv-02130-BAS-BGS, 2021 U.S. Dist. LEXIS
126475 (S.D. Cal. July 7, 2021), J.L. Ward Assocs. v. Great Plains Tribal Chairmen’s
Health Bd., 842 F. Supp. 2d 1163 (D. S. D. 2012), and Giedosh v. Little Wound Sch. Bd.,
Inc., 995 F. Supp. 1052 (D. S. D. 1997). In J.L. Ward and Manzano, for example, the
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primary issue before the court was the formation of an entity which brought together
numerous tribes from different states, picking one state within which to incorporate.
Instead, any discussion of the propriety of adopting Somerlott must be informed by a
waiver analysis: whether there has been an express and unequivocal waiver by the tribe
itself. Tribes do not waive their immunity by agreeing to act in accordance with or adopting
state law. I thus disagree with the Court when it concludes that A&S’s incorporation under
Delaware law “weighs” against immunity on the first Breakthrough factor—method of
creation. The cases upon which the Court relies either stand for the Somerlott proposition
that there is an automatic unequivocal waiver upon state incorporation or do not otherwise
associate state incorporation under the “method of creation” factor. Opinion, ¶ 30. In my
opinion, the factor examining how an entity was created demands a more meaningful and
substantive examination than just an observation that the incorporation occurred under state
law.
¶64 Here, in contrast to the Court’s sole reliance on A&S’s incorporation under
Delaware law, I would consider circumstances normally addressed by courts and conclude
that A&S’s method of creation supports that it is a tribal entity. In 2009, the Tribes elected
a governing Executive Board, pursuant to its constitutional authority to “engage in any
business that will further the economic well-being of the members of the Tribes” and to
“undertake any programs and projects designed for the economic advancement of the
people . . .,” and enacted Resolution 1514-2009-03 which directed that A&S be created to
proceed with the development of the Tribes’ natural resources. The Resolution provided
it was the “Tribes’ top priority to secure business relationships with credible oil and gas
40
companies that are willing to enter into business relationships that would be in the best
interest of, and of benefit to members of the Tribes.” The Resolution provided that the
“Tribes will participate [in this development] via a limited liability corporation the Tribes
will form, to be called A&S Mineral Development Company, LLC.” Thus, A&S was
created as an instrumentality and agency of the Tribes and was wholly owned and managed
by the Tribes. I would conclude that although A&S was incorporated under state law, that
it nonetheless was created by the Tribes pursuant to its constitutional authority and by
resolution through its governing body. A&S’s creation clearly was a result of the Tribes’
exercise of self-governance for the benefit of tribal members. In my opinion, the Court is
wrong to conclude the vehicle of incorporation is a more important consideration than the
founding documents and authority for A&S’s creation; that is, the Tribes’ constitutional
authority and governing body’s resolutions. The method of creation favors a conclusion
that A&S is a tribal enterprise.
¶65 Although I would conclude that the Tribes expressly waived A&S’s immunity, it is
my opinion that the District Court properly weighed and considered the remaining White
factors. The purpose for creating A&S was to further economic prosperity of the Tribes
through development of its oil and gas resources. The A&S Operating Agreement also
provided that its purpose was for the Tribes to have control over oil and gas development
to avoid further environmental degradation. A&S was wholly owned by the Tribes and the
Tribal Executive Board retained authority over A&S through its appointment of all A&S
officers, A&S’s manager, and its ability to override any decision and assume complete
control over A&S’s operations at any time. Finally, all A&S’s profits are distributed
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directly to the Tribes on a quarterly basis and deposited into the Tribes’ general fund. The
record shows A&S’s revenue is substantial: over one quarter (between October 2020 and
January 2021) A&S provided $184,805 to the Tribes. This revenue significantly protects
the Tribes’ treasury and promotes self-determination and self-sufficiency of the Tribes.
A&S is the archetypal tribal entity created and managed by the Tribes for the benefit of the
Tribes’ members. It is distinctly governmental in character and functions as an
instrumentality of the Tribes. Based on the foregoing, I would conclude that A&S
functions as a tribal enterprise and, but for the express waiver, would be entitled to the
Tribes’ immunity.
¶66 Unlike the tribe itself, an entity is not given “a presumption of immunity until it has
demonstrated that it is in fact an extension of the tribe.” Williams v. Big Picture Loans,
LLC, 929 F.3d 170, 177 (4th Cir. 2019). Once a defendant has demonstrated they are a
tribal entity, “the burden to prove the immunity has been abrogated or waived would then
fall to the plaintiff.” Williams, 929 F.3d at 177. A&S, based on my foregoing analysis,
has demonstrated they function as a tribal enterprise. Accordingly, the burden shifts to
Lustre Oil to demonstrate A&S’s immunity has been waived. I would conclude that Lustre
Oil has met that burden.
¶67 In 2009, the Tribes established the A&S Operating Agreement (Agreement). Article
1.5 of the Agreement provides A&S “shall continue indefinitely or until earlier terminated
in accordance with Article 8 [Winding Up].” Thus, at the time these proceedings were
initiated and during the development of the facts underlying these proceedings, A&S was
a functional, viable—albeit inactive—corporation in good standing and governed by the
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2009 Agreement. The terms of the Agreement are thus indicative of whether the Tribes
intended to extend its immunity to A&S. It expressly declared that they did not.
¶68 Article 10.9 expressly waives A&S’s immunity. It is the only section within the
whole Agreement which is entirely capitalized. It provides:
SOVEREIGN IMMUNITY OF THE TRIBES. ANY AGREEMENTS,
OBLIGATIONS, AND TRANSACTIONS ENTERED INTO BY THE
COMPANY SHALL BE SOLELY FOR ITS ACCOUNT AND ONLY ITS
ASSETS SHALL BE SUBJECT TO ANY CLAIM RELATED THERETO.
IN NO EVENT SHALL THE TRIBES HAVE ANY OBLIGATION OR BE
SUBJECT TO ANY CLAIM WITH RESPECT TO ANY AGREEMENT
OR TRANSACTION INTO WHICH THE COMPANY MAY ENTER OR
ENGAGE. NOTHING HEREIN CONTAINED SHALL BE CONSTRUED
AS A WAIVER OR LIMITATION OF THE SOVEREIGN IMMUNITY
POSSESSED AND ENJOYED BY THE TRIBES AS FEDERALLY
RECOGNIZED INDIAN TRIBES, OR BY THEIR OFFICERS, THE
MEMBERS OF THEIR EXECUTIVE BOARD, THEIR EMPLOYEES
AND AGENTS.
¶69 This is an express and unequivocal waiver from the Tribes that A&S was not to
share in their sovereign immunity. As in Native American Distributing, sovereign
immunity here was exclusively limited to the Tribes. The Agreement further provided in
Article 6.2:
No Member shall be liable for the debts, obligations, or liabilities of the
Company, including under a judgment decree or order of a court. No
agreement or commitment entered into by the Company shall bind or be
enforceable against the Member or the Member’s Assets. All such debts,
obligations, liabilities, agreements, or commitments shall be solely
obligations of the Company, enforceable and collectable only against and
from the Company’s assets.
¶70 In addition to these provisions of the Agreement, which in my opinion constitute
express and unequivocal waivers from the Tribes that A&S would not enjoy their
immunity, the Tribes also issued two resolutions in 2020 regarding the leases at issue here.
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The first tribal resolution issued October 12, 2020, provided A&S was “in existence and in
good standing” and would “insulate the Tribes from any direct liability with respect to this
transaction other than any capital that the Tribes may contribute to A&S Mineral to
complete this acquisition and support its operation . . . .” In a second resolution issued
October 23, 2020, the Tribes provided: “Whereas, the Assiniboine and Sioux Tribes has
agreed to separate all Tribal mineral development operations from Tribal government
operations and transfer all such operations to the A&S Mineral Development Co. LLC to
operate mineral developments separate and distinct from the Tribes . . . .” While these
resolutions themselves do not mention sovereign immunity as the Agreement did, they
support that A&S was not to have the Tribes’ sovereign immunity.
¶71 Based on the foregoing analysis, I would conclude that the A&S Operating
Agreement the Tribes entered when forming A&S constituted an express and unequivocal
waiver of A&S’s immunity. I would not find a waiver of immunity based on the Tribes’
incorporation of A&S under Delaware law as there is well-established precedent that the
Tribes’ agreement to act in accordance with state law is not an express waiver of their
immunity. While I understand the distinction in Somerlott regarding creation of an entity
under state law versus agreeing to follow state law, it is not a distinction worthy of
establishing a rule of automatic waiver, particularly given the requirement in Kiowa Tribe,
and like precedent, that any waiver must be express and unequivocal. Finally, I disagree
that A&S is not a tribal entity. I think the Court’s conclusion to the contrary will
detrimentally impact a tribe’s ability to establish entities that promote development of tribal
44
resources which will enhance the tribe’s self-determination, self-sufficiency, and provide
benefits to its members.
¶72 It is pursuant to this analysis that I would resolve this case. I, therefore, specially
concur.
/S/ LAURIE McKINNON
Justices Ingrid Gustafson and Dirk Sandefur join in the special concurrence of Justice
Laurie McKinnon.
/S/ INGRID GUSTAFSON
/S/ DIRK M. SANDEFUR
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