Opinion
Civil No. 02-4741 (DSD/SRN)
August 4, 2003
Steven E. Wolter, Esq., for Plaintiffs, Steven F. Olson, Esq., for Defendants
REPORT AND RECOMMENDATION
The above entitled matter came before the undersigned United States Magistrate Judge on Defendant's Motion to Dismiss (Doc. No. 2). This matter has been referred to the undersigned pursuant to 28 U.S.C. § 636 and Local Rule 72.1.
This case presents multiple issues of first impression. Plaintiffs seek review of a Tribal Court decision that held that the Tribal Court had subject matter jurisdiction to consider Plaintiffs' claims to funds in a trust and certain purported benefit plans because the plans were not formally adopted pursuant to tribal corporate law, and, therefore, not ERISA plans. Specifically, the issues presented in this case are as follows: (1) whether the Employee Retirement Income Security Act (ERISA) applies to Little Six, Inc., an Indian Community corporation, in this case; (2) whether this Court has subject matter jurisdiction to review the Tribal Court's decision that the plans are not ERISA plans; (3) whether this Court has subject matter jurisdiction over this case because the Indian Community waived Little Six, Inc.'s sovereign immunity or because sovereign immunity otherwise does not apply; and (4) whether application of ERISA to the Indian Tribes is unconstitutional.
I. BACKGROUND
The Shakopee Mdewakanton Sioux (Dakota) Community (the Community) is a federally recognized Indian Tribe. (Compl. ¶ 10). Little Six, Inc. (LSI) is a corporation formed under the laws of the Community and is wholly owned by the Community. Id. LSI is engaged in the business of legal Indian gaming conducted pursuant to the Indian Gaming Regulatory Act, 25 U.S.C. § 2701-2721. LSI operates the Mystic Lake, Little Six, and Dakota Country Casinos located near Prior Lake, Minnesota. Id.
Plaintiffs are former employees of LSI. (Compl. ¶ 6). Leonard Prescott is an enrolled member of the Community and served as LSI's chief executive officer, chairman of the board of directors, and served on LSI's executive committee from its inception in or about February of 1992 through his separation with LSI on or about September 29, 1994. Id. at ¶ 7. The remaining Plaintiffs are not members of the Community. F. William Johnson served as LSI's chief operating officer and member of the executive committee until his separation on June 8, 1994. Id, at ¶ 8. Peter Riverso served as LSI's senior vice president of casino operations until his separation on January 10, 1995. Id. at ¶ 9.
Sometime in 1992, Plaintiffs allege that LSI began to explore options to attract and retain top-level employees. Id. at ¶ 17. Plaintiffs allege that since LSI was wholly owned by the Community, it could not legally offer traditional retirement plans (such as a 401k plan) or stock options. Id. at ¶ 18. Thus, LSI considered and allegedly adopted the alternative plans named as Defendants herein-Executive 457 Plan; Supplemental Retirement Plan; Life Insurance Plan; Separation Pay Plan, and Retention Plan. Id. at ¶ 19. Plaintiffs allege, among other things, that the plans were discussed at multiple LSI board meetings,id. at ¶ 72(c), individuals were retained to develop the plans, id at ¶ 70, outside counsel developed employee handbooks, id. at ¶ 72(e), LSI distributed written copies and summary descriptions of the plans, id at ¶ 2(c), 12-16, Ex. 1-5, LSI transferred money to a trust pursuant to the plans, id. at ¶ 72(f), 20-29, and Plaintiffs participated in, contributed to and/or received administrative account balances of their plan benefits, id, at ¶ 25-26, 33-35, 43-45, 52-54. In late 1994, the entire LSI board of directors was replaced, apparently after some discord within the Community, and Plaintiffs thereafter separated from LSI. Id. at ¶ 61. The new board, while acknowledging some of its obligations under the plans, passed a resolution stating that it did not have obligations pursuant to other plans because they had not been adopted. Id. at ¶ 62-63. In their complaint, Plaintiffs claim they have been wrongly denied benefits and information under the plans and that the plans are subject to ERISA. Plaintiffs seek an award of rightful benefits, 29 U.S.C. § 1132(a)(1)(B), 1132(a)(3), plan documents they requested and a statutory penalty, 29 U.S.C. § 1024(b)(4), 1025(a) 1132(c), a declaration that the plans existed and the Plaintiffs were participants, 29 U.S.C. § 1132(a)(3), a declaration that purported amendments and termination of certain plans are void, 29 U.S.C. § 1132(a)(3), a judgment concerning illegal conversion of life insurance policies, and other necessary equitable relief.
A. Procedural History
On October 21, 1994, the Community and LSI filed suit in tribal court against Leonard Prescott and F. William Johnson alleging wrongful conversion and breach of fiduciary duties. This suit was resolved in the defendants' favor some time in 1998 or 1999. On April 6, 1995, the Trustees of the LSI plan's trust (a rabbi trust) commenced an action in the tribal court, which was stayed when Plaintiffs herein brought their first suit in this federal district court. On or about May 12, 1995, Plaintiffs herein brought suit against Defendants herein in this Court.See Prescott v. Little Six. Inc., 897 F. Supp. 1217 (D. Minn. 1995) (Prescott I). In Prescott, I Plaintiffs argued that they did not need to exhaust their tribal court remedies prior to bringing a claim in federal court because federal courts have exclusive jurisdiction to provide the remedies they seek (ERISA relief) and the tribal court's enabling ordinance did not provide it with jurisdiction to decide ERISA claims or determine the existence of a plan. Id. at 1222. Prescott I held that `"ERISA nowhere makes federal courts the exclusive forum for deciding the ERISA status vel non of a plan.'" Id. (quoting Int'l Assoc. of Entrepreneurs of Am. v. Angoff, 58 F.3d 1266, 1269 (8th Cir. 1995)). As to Plaintiffs' second argument, Prescott I held that tribal court jurisdiction is to be decided in the first instance by the tribal court.Id. at 1222. Prescott I further held that exhaustion of tribal remedies is not futile because federal courts are not the sole arbiters of the existence of a plan, and, furthermore, exhaustion would allow "`a full record to be developed in the Tribal Court before either the merits or any question concerning appropriate relief is addressed [in the federal district court].'" Id. at 1223 (alteration in original). Finally, the Court held that "[a]fter tribal remedies are exhausted, the tribal court's determinations of federal law are reviewed de novo." Id. at 1224 n. 6.
On arrival in the tribal court, the Shakopee Mdewakanton Sioux (Dakota) Community Trial Court directed the Trustees to recast their claim as an interpleader action, and the Trustees did so by filing a complaint in interpleader. In re Trust Under Little Six. Inc. Retirement Plans, No. 055-95, at 2-3 (SMS(D)C Tr. Ct. 2000). In doing so, Plaintiffs were forced to assert their claims to the funds and benefits of the trust and plan in this action. Id. at 3. LSI filed an answer claiming the trust and plans were not properly created and never existed. Id. The claimants (Plaintiffs herein) also filed an answer claiming the plans and trust were created, did exist, and the tribal court was without jurisdiction to consider the matter further. Id. The tribal trial court held a three day evidentiary hearing. Id. After the evidentiary hearing, the tribal trial court concluded:
Actually, it appears the Trustees filed a complaint in Intervention but the Tribal Court treated it as one for Interpleader.
[T]he Trust and all five of the Plans were, in fact, validly created and approved as a matter of law by the LSI Board of Directors. Their procedural and documentary history may be muddled, but from the testimony and the documents which I review in detail below, it is clear to me that the Trust and the Plans had an actual reality for LSI and its employees, and this fact was understood and accepted by the LSI Board. So, although there may exist no sheet of paper memorializing their approval by the Board of Directors, nonetheless the legal reality is that they were approved by the Board. It is the actual reality of the Trust and the Plans, not any mere paper formality, that controls here.
I also have concluded, as I discuss below, that the Trust and the Plans are governed by ERISA. The comprehensive sweep of that legislation seems to me to permit no other conclusion. And under ERISA, this Court lacks subject matter jurisdiction over all aspects of the Trust and the Plans.Id. at 5-6.
The tribal trial court seemed to base its decision on the adoption and existence of the trust and plans under Community law and federal law.Id. at 15.
The Shakopee Mdewakanton Sioux (Dakota) Community Court of Appeals reversed. In re Trust Under Little Six, Inc. Retirement Plans, No. 024-00, at 2, 5 (SMS(D)C Ct. App. 2001). The Tribal Court of Appeals held that "[b]ecause we conclude that the trust and plans at issue here were never properly adopted by LSI under Community law, an ERISA plan was never created, and this Court may entertain this dispute." Id. at 2, 6 ("[A]t the end of the day, we simply cannot impute to LSI liability on these plans without some evidence that LSI formally intended to adopt or approve the trust or plan documents in accordance with its Articles of Incorporation. To do so would be to ignore the carefully crafted body of corporate law laid out in this Community's Corporation Ordinance and in LSI's Articles of Incorporation."). With that, the tribal court of appeals held the trust was revocable, directed the Trustees to return the trust funds to LSI, and dismissed the claimants' claims. Id. at 2.
On December 5, 2002, Plaintiffs filed the instant complaint. Therefore, this case comes to this Court after Plaintiffs have exhausted their tribal court remedies. Plaintiffs seek review of the tribal court's determination of its subject matter jurisdiction over Plaintiffs claims seeking benefits under the alleged plans and enforcement of their ERISA rights.
II. MOTION TO DISMISS
The Court emphasizes at the outset that the motion before it is one to dismiss for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1). Thus, in analyzing the issues noted supra, the Court simply addresses the narrow issue of subject matter jurisdiction but goes no farther. A. ERISA Applies to LSI
Defendants also vaguely rely on Federal Rule of Civil Procedure 12(b)(6) in arguing that because the tribal court of appeals held there was no plan Plaintiffs fail to state a claim upon which relief may be granted. (Defs.' Reply Mem. in Supp. of Mot. to Dismiss, at 2). Elsewhere, however, Defendants frame this issue as a lack of subject matter jurisdiction. (Defs.' Mem. in Supp. of Mot. to Dismiss, at 12-15). Moreover, at the outset of its brief, Defendant only states that "this Court lacks subject matter jurisdiction to hear Plaintiffs' complaint and this Court must therefore dismiss this suit." Id. at 2.
In any event, on a motion to dismiss for failure to state a claim, this Court must accept as true the allegations of the complaint. E.g., Coleman v. Watt, 40 F.3d 255, 258 (8th Cir. 1994). Defendants' argument that Plaintiffs' allegations of an ERISA plan in the complaint are contradicted and trumped by the attached tribal court of appeals decision is unavailing. Among other reasons, attached to the complaint also are the actual written plans that contradict the tribal court of appeals decision. Moreover, this case does not sit in the typical procedural posture because it ultimately asks for a review of the tribal court of appeals decision. See Prescott v. Little Six, Inc., 897 F. Supp. 1217, 1224 n. 6 (D. Minn. 1995).
To the extent Defendant also relies on Rule 12(b)(6) for its constitutional argument, the Court disposes of that issue infra Part II(D).
In general, Indian tribes possess `"inherent powers of a limited sovereignty which has never been extinguished.'" United States v. Wheeler, 435 U.S. 313, 322 (1978) (emphasis omitted) (quoting F. COHEN, HANDBOOK OF FEDERAL INDIAN LAW 122 (1945)). "Their incorporation within the territory of the United States, and their acceptance of its protection, necessarily divested them of some aspects of the sovereignty which they had previously exercised." Id. at 323. Despite not possessing all attributes of sovereignty, the Indian tribes "remain a `separate people, with the power of regulating their internal and social relations.'" Santa Clara Pueblo v. Martinez, 436 U.S. 49, 55 (1978). Thus, "[t]he sovereignty that the Indian tribes retain is of a unique and limited character. It exists only at the sufferance of Congress and is subject to complete defeasance." Wheeler, 435 U.S. at 323. Accordingly, "Indian tribes still possess those aspects of sovereignty not withdrawn by treaty or statute, or by implication as a necessary result of their dependent status." Id. Martinez, 436 U.S. at 56; United States v. Kagama, 118 U.S. 375, 379-80, 6 S.Ct. 1109, 1111-12 (1886).
This Court's starting point in analyzing whether a federal statute applies to LSI is Fed. Power Comm'n v. Tuscarora Indian Nation, 362 U.S. 99, 120 (1960), wherein the Supreme Court stated that "general Acts of Congress apply to Indians as well as to all others in the absence of a clear expression to the contrary." The Circuit Courts of Appeal have, however, outlined three exceptions to this general rule that are summarized as follows:
A federal statute of general applicability that is silent on the issue of applicability to Indian tribes will not apply to them if: (1) the law touches "exclusive rights of self-governance in . . . intramural matters"; (2) the application of the law to the tribe would "abrogate rights guaranteed by Indian treaties"; or (3) there is proof "by legislative history or some other means that Congress intended [the law] not to apply to Indians on their reservations. . . ." In any of these three situations, Congress must expressly apply a statute to Indians before we will hold that it reaches them.Donovan v. Coeur d'Alene Tribal Farm, 751 F.2d 1113, 1116 (9th Cir. 1985) (first alteration ours) (quoting United States v. Farris, 624 F.2d 890, 893-94 (9th Cir. 1980)); accord EEOC v. Fond du Lac Heavy Equipment and Const. Co., Inc., 986 F.2d 246, 248 (8th Cir. 1993) ("As this court has previously stated, `areas traditionally left to tribal self-government, those most often the subject of treaties, have enjoyed an exception from the general rule that congressional enactments, in terms applying to all persons, includes Indians and their property interests.'"); Florida Paraplegic Ass'n, Inc. v. Miccosukee Tribe of Indians, 166 F.3d 1126, 1129 (11th Cir. 1999); Reich v. Mashantucket Sand Gravel, 95 F.3d 174, 177, 182 (2d Cir. 1996); Smart v. State Farm Ins. Co., 868 F.2d 929, 932-33 (7th Cir. 1989); United States v. White, 508 F.2d 453, 456 (8th Cir. 1974) (noting that abrogation of specific treaty rights must be expressly stated).
In Fond du Lac, the Eighth Circuit decided whether the Age Discrimination in Employment Act (ADEA), applied to an Indian tribe through its wholly owned and operated construction company. 986 F.2d at 248. The Eighth Circuit explained the above exceptions to the Tuscarora rule as follows: "As this court has previously stated, `areas traditionally left to tribal self-government, those most often the subject of treaties, have enjoyed an exception from the general rule that congressional enactments, in terms applying to all persons, includes Indians and their property interests."1 Id. Thus, the Eighth Circuit plainly agrees with the three exceptions. The Eighth Circuit, however, did signal that it may not have as restrictive an interpretation of the "self-governance in intramural matters" exception when it included a "but see" citation to the Ninth Circuit's Coeur d'Alene decision. Fond du Lac, 986 F.2d at 249 n. 3. The Eighth Circuit cited, with apparent disapproval, the Ninth Circuit's explanation that the "self-governance" exception only applies to "purely" intramural matters such as conditions of tribal membership, inheritance rules, and domestic relations. Id.; see also Coeur d'Alene, 751 F.2d at 1116 (citing Farris, 624 F.2d at 893 (collecting Supreme Court cases for this proposition)). Whatever weight this Court can glean from a citation signal in a footnote, it has no bearing on this Court's decision because this Court holds that application of ERISA in this case would not infringe on the tribe's self-governance in intramural matters under the Eighth Circuit's reasoning. See also EEOC v. Karuk Tribe Hous. Auth., 260 F.3d 1071, 1078-81 (9th Cir. 2001) (holding, as did the Eighth Circuit, that the ADEA did not apply to the particular Indian Tribe).
In holding that the ADEA did not apply to the tribe under the particular facts, the Eighth Circuit emphasized that the dispute was strictly intramural and the tribe should be able to make employment decisions concerning age in light of its culture. The Eighth Circuit reasoned as follows:
The facts in this case reveal that this dispute involves a strictly internal matter. The dispute is between an Indian applicant and an Indian tribal employer. The Indian applicant is a member of the tribe, and the business is located on the reservation. . . . The consideration of a tribe member's age by a tribal employer should be allowed to be restricted (or not restricted) by the tribe in accordance with its culture and traditions. Likewise, disputes regarding this issue should be allowed to be resolved internally within the tribe. Federal regulation of the tribal employer's consideration of age in determining whether to hire the member of the tribe to work at the business located on the reservation interferes with an intramural matter that has traditionally been left to the tribe's self-government.Id. at 249 (emphasis added).
In conclusion, the Eighth Circuit emphasized the limit of its holding: "[W]e find that the ADEA does not apply to the narrow facts of this case which involve a member of the tribe, the tribe as an employer, and on the reservation employment." Id. at 251.
The Circuit Courts of Appeal have considered whether other generally applicable statutes apply to an Indian tribe under particular circumstances. See N.L.R.B. v. Chapa De Indian Health Program, Inc., 316 F.3d 995, 998 (9th Cir. 2003) (collecting its cases), Karuk, 260 F.3d at 1078-81 (ADEA did not apply to tribe); Miccosukee, 166 F.3d at 1129 (portion of ADA did apply to tribe); Reich, 95 F.3d at 177 (OSHA did apply to the tribe); Coeur d'Alene, 751 F.2d at 1116 (OSHA did apply to the tribe); EEOC v. Cherokee Nation, 871 F.2d 937, 938 (10th Cir. 1989) (ADEA did not apply to the tribe); Donovan v. Navajo Forest Prod. Indus., 692 F.2d 709, 712 (10th Cir. 1982) (OSHA did not apply to the tribe).
The Tenth Circuit's cases were at least in part decided on the basis of a treaty. Compare Donovan, 692 F.2d at 712, with, Coeur d'Alene, 751 F.2d at 1117 n. 3, and Reich, 95 F.3d at 179-81.
The Ninth and Seventh Circuits have held that ERISA applies to an Indian tribe or a tribal owned corporation. Lumber Indus. Pension Fund v. Warm Springs Forest Prod. Indus., 939 F.2d 683 (9th Cir. 1991); Smart v. State Farm Ins. Co., 868 F.2d 929, 932-33 (7th Cir. 1989); see also Prescott I, 897 F. Supp. at 1224 n. 6 (noting that "persuasive federal authority on this issue indicates ERISA's requirements apply to LSI's plans and the Rabbi Trust" and citing the Seventh and Ninth Circuit cases) (Kyle, J.). In Lumber Industry, Warm Springs Forest Products was a tribally owned and operated sawmill located on the reservation. 939 F.2d at 684. The sawmill was a signatory to a collective bargaining agreement that required the sawmill to contribute to the pension fund of its employees. Id. The sawmill stopped making contributions to the Lumber fund and began making contributions to a tribal fund. Id. The Lumber fund sued arguing ERISA applied. The sawmill argued that a tribal ordinance required it to transfer all tribal member employees to the tribal plan. The Ninth Circuit held that application of ERISA would not interfere with the tribe's right to self-government because it would not "usurp the tribe's decision-making power." Id. at 685. The tribe was free to pass the ordinance and transfer tribal employees to such plan, "[b]ut, by transferring its employees to the tribal plan before the bargaining agreement expired, the mill exposed itself to possible liability for unpaid contributions to the Fund." Id.
In Smart, plaintiff Alton Smart was an enrolled member of the Bad River Band of the Chippewa Tribe and an employee of the Chippewa Health Center. 868 F.2d at 930. The Chippewa Health Center was owned and operated by the Lac Du Flambeau Band of the Tribe within the boundaries of its reservation. Id. State Farm Insurance issued to Chippewa Health Center a group health policy, which was available to eligible employees and dependents. Id. Smart enrolled in the policy and submitted an application for his son. Id At the time of submission, Smart did not know his son had had treatment for alcohol and drugs, and he omitted this from the application. Id. Smart's son was hospitalized, and State Farm denied coverage. Id. at 930-31. A federal district court granted State Farm summary judgment on an ERISA arbitrary and capricious denial claim. Id. at 931. On appeal, Smart argued "that ERISA does not govern an employee benefits plan established and operated by an Indian Tribe for Tribe employees." Id. at 930. The Seventh Circuit held that no specific treaty rights would be affected if ERISA applied and that application of ERISA would "in no way" limit how tribes govern themselves. Id. at 934-36. With respect to governing intramural affairs, the Seventh Circuit reasoned as follows:
The application of ERISA to this case would not impermissibly upset the Tribe's self-governance in intramural matters. ERISA does not broadly and completely define the employment relationship-even less so than the federal withholding tax. It is only applied to an employment relationship if the employer decides to offer an employee benefit plan. Even then, ERISA merely requires reporting and accounting standards for the protection of the employees. Moreover, the activity underlying this challenge to ERISA is the Tribe's subscription of services and pooling of risks with State Farm, an outside, non-Indian agent. ERISA is instructive on how a covered health insurance plan operates vis-a-vis the beneficiaries and the trustee, not between the Chippewa Health Center and Smart. In sum, plaintiff has failed to demonstrate how ERISA will intrude upon Tribal self-governance; ERISA merely imposes beneficiary protection while in no way limiting the way in which the Tribe governs intramural matters.Id. at 935-36.
This Court holds that ERISA applies to LSI. LSI argued in its supplemental brief that ERISA is not a statute of general applicability because it exempts certain entities. This argument is without merit. "The issue is whether the statute is generally applicable, not whether it is universally applicable." N.L.R.B. v. Chapa De Indian Health Program. Inc., 316 F.3d 995, 998 (9th Cir. 2003) (emphasis added). ERISA is a "comprehensive and reticulated statute," Nachman Corp. v. Pension Benefit Guar. Corp., 466 U.S. 359, 361 (1980), that applies to any employee benefit plan established or maintained "by any employer engaged in commerce or in any industry or activity affecting commerce." 29 U.S.C. § 1003(a)(1). As the Seventh Circuit explained, "ERISA is clearly a statute of general application, one that envisions inclusion within its ambit as the norm. The exemptions from coverage are explicitly and specifically defined, as well as few in number." Smart, 868 F.2d at 933; accord Lumber Indus., 939 F.2d 685.
Thus, ERISA applies unless one of the exceptions to the Tuscarora rule applies. LSI has not argued that ERISA would abrogate a specific treaty right. LSI has not argued that the legislative history of ERISA demonstrates that Congress intended that the statute not apply to Indian Tribes. Therefore, the only issue is whether application of ERISA would impinge on the Community's self-governance in intramural affairs.
LSI's argument that application of ERISA would impinge on the Community's self-governance in intramural affairs proceeds as follows. LSI is wholly owned and operated by the Community. LSI is the entity by which the Community conducts gaming activities. Therefore, because LSI is a tribal entity and conducts gaming activities for the Community, application of ERISA to LSI (and therefore the Community) would interfere with tribal self-governance of intramural affairs. This argument wholly fails to explain how ERISA would in any way affect the Community's self-governance of intramural affairs. The above quoted reasoning from the Seventh Circuit is directly applicable. If LSI makes the choice to create a benefits plan, ERISA only requires reporting and accounting standards. What aspect of intramural self-governance this would impinge upon has not been identified. As the Seventh Circuit stated, "[a] statute of general application will not be applied to an Indian Tribe when the statute threatens the Tribe's ability to govern its intramural affairs, but not simply whenever it merely affects self-governance as broadly conceived." Id. at 935; see also Reich, 95 F.3d at 178-79, 181 ("The question is not whether the statute affects tribal self-governance in general. . . ."). Application of ERISA to the Community would not prevent LSI from continuing its gaming operations, and it would only apply if LSI chooses to create a benefits plan. Also, the alleged plans at issue here appear to have involved similar pooling of risks and investment in outside entities-purchase of Life Insurance policy by Plaintiff Johnson (Compl. ¶ 33, 35) and the ability to direct personal investment choices of funds contributed to annuities,e.g., id. at ¶ 22, 26, 42-44.
In addition, the commercial nature of LSI's operations, its employment of non-Indians, and its non-Indian client base, "when viewed as a whole, result in a mosaic that is distinctly inconsistent with the portrait of an Indian tribe exercising exclusive rights of self-governance in purely intramural matters." Reich, 95 F.3d at 178-79. LSI operates at least three casinos-Mystic Lake, Dakota Country, and Little Six. The casinos are plainly a for-profit commercial enterprise, and the product is inherently profitable as long as, in general, certain costs are managed and LSI can seize upon the open market by attracting customers.Miccosukee Tribe, 166 F.3d at 1129-30 (holding that since the tribe's "restaurant and gaming facility is a commercial enterprise open to non-Indians from which the Tribe intends to profit," and "the business does not relate to the governmental functions of the Tribe," application of a portion of the ADA would not interfere with self governance of intramural affairs); Reich, 95 F.3d at 181 ("Indeed, `a bingo hall and casino [even one on tribal grounds] designed to attract tourists from surrounding states undeniably affects interstate commerce. . . .'") (alteration in original); United States v. Farris, 624 F.2d 890, 893 (9th Cir. 1980) ("[T]he large-scale professional gambling involved here . . . is neither profoundly intramural (the casinos' clientele was largely non-Indian) nor essential to self-government."). According to the Shakopee Mdewakanton Sioux (Dakota) Community Trial Court, there has been "remarkable success for LSI's businesses, astonishing growth in the corporation's gross revenues and profitability." In re Trust Under Little Six, Inc. Retirement Plans, No. 055-95, at 7 (SMS(D)C Tr. Ct. 2000). Thus, LSI and the casinos have been remarkably successful in entering the open market and participating in interstate commerce. E.g., Karuk, 260 F.3d at 1080; Reich, 95 F.3d at 181 ("When a tribal operation affects open markets, it is unlikely that the operation is purely intramural."). The casinos and LSI employ non-Indians. LSI's "employment of non-Indians weighs heavily against its claim that its activities affect rights of self-governance in purely intramural matters." Id. at 181. Indeed, two of the three Plaintiffs herein are not members of the Community. Moreover, LSFs casinos are, suffice it to say, open to the public. See Miccosukee Tribe, 166 F.3d at 1129; United States Dep't of Labor v. Occupational Safety Health Review Comm'n, 935 F.2d 182, 184 (9th Cir. 1991) (holding that tribal employer was subject to OSHA because it "employs a significant number of non-Native Americans and sells virtually all of its finished product to non-Native Americans through channels of interstate commerce"). "That an entity is owned by a tribe, operates as an arm of a tribe, or takes direction from a tribal council, does not ipso facto elevate it to the status of a tribal government." Reich, 95 F.3d at 180. When viewed together, LSFs activities are entirely extramural.
Another important aspect of this statement is that the Tribal Trial Court labels LSI's operations as a "business" as opposed to a sovereign arm of the Community engaging in wholly governmental activities.
The Court notes that in Reich the construction company was tribally owned and created, worked "as an arm of the tribe," and received its orders from the tribal counsel. 95 F.3d at 175. In holding that application of the OSHA to the construction company would not interfere with self-governance, the Second Circuit drew upon the tribe's casino's commercial/non governmental character to support the fact that the construction company's work on the casino affected interstate commerce. Id. at 181. This case, therefore, is even more compelling on this issue.
This conclusion is further championed by the Supreme Court's discussion in Kiowa Tribe v. Mfg. Technologies, Inc., 523 U.S. 751, 757-58 (1998). In Kiowa, the Supreme Court discussed the shaky rationale for maintaining a comprehensive tribal sovereign immunity doctrine:
The rationale, it must be said, can be challenged as inapposite to modern, wide-ranging tribal enterprises extending well beyond traditional tribal customs and activities. Justice STEVENS, in a separate opinion, criticized tribal immunity as "founded upon an anachronistic fiction" and suggested it might not extend to off-reservation commercial activity.
There are reasons to doubt the wisdom of perpetuating the doctrine. At one time, the doctrine of tribal immunity from suit might have been thought necessary to protect nascent tribal governments from encroachments by States. In our interdependent and mobile society, however, tribal immunity extends beyond what is needed to safeguard tribal self-governance. This is evident when tribes take part in the Nation's commerce. Tribal enterprises now include ski resorts, gambling , and sales of cigarettes to non-Indians.
523 at 757-58 (emphasis added) (citations omitted).
Furthermore, this case is entirely distinguishable from the Eighth Circuit's narrow decision in Fond du Lac. Unlike Fond du Lac, two of the three Plaintiffs in this case are non-Indians, and other participants in the alleged plans are not members of the Community. In rejecting the application of the ADEA, the Eighth Circuit relied on the fact that the tribe's culture and traditions should be allowed to guide its decisions concerning age and employment. Id. at 249. No such cultural interest that would be infringed by the application of ERISA has been advanced here. The purpose of ERISA is "to protect interstate commerce and the interests of participants in employee benefit plans and their beneficiaries." 29 U.S.C. § 1001(b). ERISA simply provides that if LSI creates a plan, it manages the plan fairly and accurately.
Finally, the Court notes that the Shakopee Mdewakanton Sioux (Dakota) Community Trial Court specifically held that ERISA does apply to Indian tribal governments and corporations created by such governments. In re Trust Under Little Six, Inc. Retirement Plans, No. 055-95, at 3, n. 2, 15 (SMS(D)C Tr. Ct. 2000). The Tribal Court of Appeals was not required to address that issue but did note "our research to date, and the argument of each party, has not identified one case in any jurisdiction that exempts Indian tribes from ERISA's broad reach." In re Trust Under Little Six, Inc. Retirement Plans, No. 024-00, at 5 (SMS(D)C Ct. App. 2001).
Given all the foregoing, the Court holds that ERISA applies to LSI. B. This Court Has Subject Matter Jurisdiction to Review the Tribal Court of Appeals Decision
To the extent the Pension Benefit Guaranty Corporation opinions are relevant to this issue, the Court finds that its holding is consistent with opinion 89-9 as the activities here are not characteristically governmental and entirely for-profit.
At this point, the Court reemphasizes its limited holding that it has jurisdiction to review the tribal court decisions, but it does not make any review in this report and recommendation; such a holding is all that is required by LSI's motion.
Plaintiffs come to this Court after having exhausted their tribal court remedies. In Prescott I, this Court directed that the tribal court should consider two jurisdictional questions in the first instance: whether its enabling ordinance gave it jurisdiction to consider whether an ERISA plan existed and, if so, whether a plan existed. See Prescott I, 897 F. Supp. at 1222 (holding, in response to the argument that the tribal court's enabling ordinance does not grant jurisdiction over ERISA issues, that "tribal court jurisdiction is to be decided in the first instance by the tribal court"), id. at 1224 ("The Court will accordingly require the Defendants to contest the validity of the plans in that forum.").Prescott I definitively held, consistent with the very foundation of the tribal exhaustion doctrine, that "tribal court jurisdiction is to be decided in the first instance by the tribal court, not the federal court." Prescott I, 897 F. Supp. at 1222.
The tribal court exhaustion doctrine clearly allows a federal court to review a tribal court's jurisdiction. This much is plainly evident from the two cases that created the exhaustion doctrine, Nat'l Farmers Union Ins, v. Crow Tribe of Indians, 471 U.S. 845 (1985) and Iowa Mutual Ins. Co. v. LaPlante, 480 U.S. 9 (1987). In Nat'l Farmers, a Crow Indian minor was hit by a motorcycle in a school parking lot. 471 U.S. at 847. The school was located on land owned by the State within the boundaries of the Crow Indian Reservation. Id. The Crow Indian minor obtained a default judgment against the School District in Crow Tribal Court. Id Thereafter, the School District and its insurer, National Farmers, sought a restraining order in federal district court from execution of the tribal court default judgment arguing that the Crow Tribal Court did not have jurisdiction over a civil action against a non-Indian. Id. at 848. The federal district court granted the restraining order and later a permanent injunction because the tribal court lacked subject matter jurisdiction over the tort. Id. at 848-49. The Ninth Circuit reversed holding that the district court did not have jurisdiction to consider a challenge to the tribal court's jurisdiction.Id. at 849, 849 n. 3. The Supreme Court reversed and explained the basis of the district court's jurisdiction as follows:
In this case the petitioners contend that the Tribal Court has no power to enter a judgment against them. Assuming that the power to resolve disputes arising within the territory governed by the Tribe was once an attribute of inherent tribal sovereignty, the petitioners, in essence, contend that the Tribe has to some extent been divested of this aspect of sovereignty. More particularly, when they invoke the jurisdiction of a federal court under § 1331, they must contend that federal law has curtailed the powers of the Tribe, and thus afforded them the basis for the relief they seek in a federal forum.
The question whether an Indian tribe retains the power to compel a non-Indian property owner to submit to the civil jurisdiction of a tribal court is one that must be answered by reference to federal law and is a "federal question" under § 1331. Because petitioners contend that federal law has divested the Tribe of this aspect of sovereignty, it is federal law on which they rely as a basis for the asserted right of freedom from Tribal Court interference. They have, therefore, filed an action "arising under" federal law within the meaning of § 1331.Id. at 852-53 (footnote omitted).
The Supreme Court then announced the tribal court exhaustion rule and held that the existence of a tribal court's jurisdiction "should be conducted in the first instance in the Tribal Court itself through a "careful examination of tribal sovereignty, the extent to which that sovereignty has been altered, divested, or diminished, as well as a detailed study of relevant statutes, Executive Branch policy as embodied in treaties and elsewhere, and administrative and judicial decisions."Id. at 855-56. Such exhaustion will encourage tribal self-government as well as permitting:
[T]he orderly administration of justice in the federal court [to] be served by allowing a full record to be developed in the Tribal Court before either the merits or any question concerning appropriate relief is addressed. . . . Exhaustion of tribal court remedies, moreover, will encourage tribal courts to explain to the parties the precise basis for accepting jurisdiction, and will also provide other courts with the benefit of their expertise in such matters in the event of further judicial review.Id. at 856-57.
The question in Iowa Mutual was "whether a federal court may exercise diversity jurisdiction before the tribal court system has an opportunity to determine its own jurisdiction." 480 U.S. at 11. Iowa Mutual held that the exhaustion rule applies in cases arising in federal court under diversity jurisdiction. Id. at 16, 19. In doing so, the Supreme Court explained:
Although petitioner must exhaust available tribal remedies before instituting suit in federal court, the Blackfeet Tribal Courts' determination of tribal jurisdiction is ultimately subject to review. If the Tribal Appeals Court upholds the lower court's determination that the tribal courts have jurisdiction, petitioner may challenge that ruling in the District Court. See National Farmers Union, supra, at 853, 105 S.Ct., at 2452. Unless a federal court determines that the Tribal Court lacked jurisdiction, however, proper deference to the tribal court system precludes relitigation of issues raised by the [plaintiffs] bad-faith claim and resolved in the Tribal Courts.Id. at 19 (emphasis added).
As is clear from Nat'l Farmers and Iowa Mutual, this Court has subject matter jurisdiction under 28 U.S.C. § 1331 to consider whether the Shakopee Mdewakanton Sioux (Dakota) Community Tribal Courts had jurisdiction to enter a judgment on Plaintiffs' underlying claims. See Prescott I, 897 F. Supp. at 1224 n. 6 ("The examination of tribal sovereignty, jurisdiction and federal laws not exclusively reserved for the federal courts should be conducted in the first instance by the tribal court itself. After tribal remedies are exhausted, the tribal court's determinations of federal law are reviewed de novo."); Duncan Energy Co. v. Three Affiliated Tribes of the Fort Berthold Reservation, 27 F.3d 1294, 1300 (8th Cir. 1994) ("Once tribal remedies have been exhausted, the Tribal Court's determination of tribal jurisdiction may be reviewed in the federal district court."); Arizona Pub. Serv. Co. v. Aspaas, 77 F.3d 1128, 1132 (9th Cir. 1996) ("In National Farmers, the Supreme Court held that a federal court is empowered to determine under 28 U.S.C. § 1331 whether a tribal court has exceeded the lawful limits of its jurisdiction;'): see also Fort Halifax Packing Co. Inc. v. Coyne, 482 U.S. 1, 6-19 (1987) (reviewing state court rulings on the existence of or establishment of an ERISA plan).
Acknowledging that no other court has required tribal court exhaustion in these circumstances and, accordingly, no other court has considered post-exhaustion review under these circumstances, this Court further explains below why it has subject matter jurisdiction to consider the Tribal Court's jurisdiction. When Plaintiffs filed suit in Prescott I, they sought, among other things, equitable relief under ERISA, 29 U.S.C. § 1132(a)(3) [or hereinafter equitable claims].Prescott I, 897 F. Supp. at 1221, 1222. 29 U.S.C. § 1132(e)(1) provides that "[e]xcept for actions under subsection (a)(1)(B) of this section, the district courts of the United States shall have exclusive jurisdiction of civil actions under this subchapter." In Prescott I, this Court recognized the exclusive federal forum for § 1132(a)(3) claims. 897 F. Supp at 1222 ("[F]ederal courts have exclusive jurisdiction to award equitable relief under 29 U.S.C. § 1132(a) (3). . . ."). Prescott I nevertheless recognized that the existence of an ERISA plan is a prerequisite to an exclusive federal forum for § 1132(a)(3) claims, and that the Eighth Circuit had held that federal and state courts have concurrent jurisdiction to determine the existence vel non of an ERISA plan. Id. (quoting Angoff, 58 F.3d at 1269). Accordingly, pursuant to the tribal court exhaustion doctrine, Prescott I held that the tribal court, assuming its enabling ordinance provided it with the power to do so, should consider the existence of an ERISA plan in the first instance. Id. at 1224. In doing so, Prescott I explained that exhaustion was favored because, quotingNat'l Farmers, it would allow "a full record to be developed in the Tribal Court before either the merits or any question concerning appropriate relief is addressed [in the federal district court]." Id. at 1223.
§ 1132(a)(3) provides:
A civil action may be brought — . . . by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan. . . .
It is not clear whether Plaintiffs brought a claim, as here, under § 1132(c) in Prescott I.
The Tribal Court's inquiry into the existence of an ERISA plan was a question of subject matter jurisdiction to further consider Plaintiffs' equitable claims. This is so because "ERISA's express grant of exclusive jurisdiction to the federal courts divests state courts [and here tribal courts] of jurisdiction to hear claims brought under ERISA" or brought under §§ 1132(a)(3). Thiokol Corp. v. Dep't of Treasury, 987 F.2d 376, 379 (6th Cir. 1993): accord Pension Trust Fund v. Triple A. Mach. Shop, Inc., 942 F.2d 1457, 1461 (9th Cir. 1991): see also Iowa Mutual 480 U.S. at 977 ("Civil jurisdiction over such activities [activities of non-Indians on reservation lands] presumptively lies in the tribal courts unless affirmatively limited by a specific treaty provision or federal statute.") (emphasis added); Int'l Ass'n of Entrepreneurs of America v. Angoff, 58 F.3d 1266, 1270 (8th Cir. 1995) (explaining that there is "an exclusive federal jurisdiction to grant certain types of declaratory and injunctive relief once ERISA status has been established by either a state or federal court"); Telecomm. Research and Action Ctr. v. F.C.C., 750 F.2d 70, 77 (D.C. Cir. 1984) ("It is well settled that . . . a statute which vests jurisdiction in a particular court cuts off original jurisdiction in other courts in all cases covered by that statute."). The divestiture of the Tribal Court's jurisdiction, however, does not operate "unless a plaintiff can first establish that rights in connection with an employee benefit plan subject to ERISA are involved/' JAMES JORDENETAL., HANDBOOK ON ERISA LITIGATION § 1.01,1-3 (2d. ed. 2003);see also Harris v. Arkansas Book Co., 794 F.2d 358, 360 (8th Cir. 1986) ("The existence of a plan is a prerequisite to jurisdiction under ERISA."); accord Kulinski v. Medtronic Bio-Medicus, Inc., 21 F.3d 254, 256 (8th Cir. 1994); Tinoco v. Marine Chartering Co., Inc., 311 F.3d 617, 623 (5th Cir. 2002); UIU Severance Pay Trust Fund v. Local Union No. 18-U, 998 F.2d 509, 510 n. 2 (7th Cir. 1993) ("[T]he existence of an "ERISA-governed plan" is an essential precursor to federal jurisdiction."). Accordingly, the lack of an ERISA plan in this circumstance was a prerequisite to the Tribal Court's jurisdiction. In other words, since the Tribal Court's subject matter jurisdiction to consider the merits of Plaintiffs' underlying equitable claims depended on whether such claims arose in connection with an ERISA plan, the question of the existence of an ERISA plan is a question of the Tribal Court's subject matter jurisdiction to resolve Plaintiffs' equitable claim.
In Pension Trust Fund v. Triple A. Mach. Shop, Inc. 942 F.2d 1457 (9th Cir. 1991), Triple A was required to make contributions to the Trust Fund on behalf of its employees. Id. at 1459. The Trust Fund brought suit in state court against Triple A for liquidated damages as a result of deficiencies in fringe benefit contributions. Id. The Trust Fund and Triple A eventually settled this lawsuit, and the action was dismissed with prejudice. Id. Three years later, the Trust Fund again sued Triple A, this time in federal court, seeking a final audit of Triple A's contributions and claiming Triple A failed to make fringe benefit contributions. Id. Triple A argued, and the district court agreed, that the Trust Fund's federal lawsuit was barred by res judicata because it involved litigation of the same rights as the state court case. Id. at 1459-60. The Ninth Circuit reversed, holding: "Section 502(e) [§ 1132(e)], by its terms, vests exclusive jurisdiction in the federal courts for the suit brought by Trust Fund under sections 502(a)(3) and (g)(2) [§ 1132(a)(3) and (g)(2)] of ERISA. Consequently, the California state court that heard Trust Fund's previous proceeding could not have had jurisdiction to hear these claims." Id. at 1461. Thus, the Ninth Circuit held that res judicata did not apply because the state court waswithout jurisdiction to consider the Trust Fund's claims. Id. This case highlights the exclusivity of ERISA's jurisdictional provision, 29 U.S.C. § 1132(e), and the fact that the Tribal court's subject matter jurisdiction to resolve Plaintiffs' claims depended on the jurisdictional inquiry into the existence of an ERISA plan. See also Provident Life and Ace. Ins. Co. v. Linthicum, 743 F. Supp. 662, 667-68 (W.D. Ark. 1990) (explaining in another ERISA context that "it would appear that this court's jurisdiction is exclusive, and if it is, then it matters not what the state court held or did not hold, as such would be void for lack of subject matter jurisdiction").
Both the Tribal Trial Court and Court of Appeals acknowledged that the question of the existence of an ERISA plan was a question of subject matter jurisdiction. The Tribal Trial Court explained that "the issue of this Court's jurisdiction and the issue of the validity of the Trust and the Plans appear [to] be identical. That is, if the Trust and the Plans were validly created, then they would likely be subject to ERISA and to the exclusive jurisdiction of the Federal courts." In re Trust Under Little Six, Inc. Retirement Plans, No. 055-95, at 3 (SMS(D)C Tr. Ct. 2000). Similarly, the Tribal Court of Appeals explained that "we must decide if the Court has subject matter jurisdiction over a dispute involving a trust funded to support employee benefit programs at Little Six, Inc." In re Trust Under Little Six. Inc. Retirement Plans. No. 055-95, at 1 (SMS(D)C Ct. App. 2001).
Therefore, the Tribal Court's determination of the existence of an ERISA plan is a jurisdictional determination that this Court has subject matter jurisdiction to review under 28 U.S.C. § 1331 for two reasons: (1) a Tribal Court's jurisdiction to entertain a claim that Congress has divested from the jurisdiction of state and tribal courts under certain jurisdictional facts is a federal question and (2) it is a federal question arising under ERISA. As explained supra, Part II(A), Indian tribe sovereignty "exists only at the sufferance of Congress and is subject to complete defeasance." Wheeler, 435 U.S. at 323. Accordingly, Indian tribes only "possess those aspects of sovereignty not withdrawn by treaty or statute, or by implication as a necessary result of their dependent status." Here, if the ERISA plans existed, the Tribal Court could not, because Congress has spoken, consider Plaintiffs' underlying equitable claims.
LSI argues that there is nothing to review regarding the existence of an ERISA plan because the Tribal Courts based their decision on tribal law, and this Court must completely defer to tribal law. However, review of the Tribal Court's decision is one of fact and law. A "district court should review the Tribal Court's findings of fact under a deferential, clearly erroneous standard. The Tribal Court's determinations of federal law should be reviewed de novo while determinations of Tribal law should be accorded more deference." Duncan Energy, 27 F.3d at 1300 (emphasis added) (citations omitted). Moreover, "the Tribal Court's determination of its own jurisdiction . . . is a question of federal law that must be reviewed de novo." Id See also Fort Halifax Packing Co., Inc. v. Coyne. 482 U.S. 1 (1987) (announcing controlling principles for when an ERISA plan is established or exists); Belanger v. Wyman-Gordon Co., 71 F.3d 451, 455 (1st Cir. 1995) ("All that can be stated with assurance is that Fort Halifax controls."); Kulinski, 21 F.3d at 256-57 (explaining that Fort Halifax is the "touchstone" and review of the existence of an ERISA plan is de novo); 29 U.S.C. § 1144(a).
In addition, the Court notes that Supreme Court precedent hardly makes it clear that a federal court is limited solely to reviewing a tribal court's jurisdiction. Nat'l Farmers specifically contemplated a subsequent review on the merits when it stated:
[T]he orderly administration of justice in the federal court will be served by allowing a full record to be developed in the Tribal Court before either the merits or any question concerning appropriate relief is addressed. . . . Exhaustion of tribal court remedies, moreover, will encourage tribal courts to explain to the parties the precise basis for accepting jurisdiction, and will also provide other courts with the benefit of their expertise in such matters in the event of further judicial review.471 U.S. at 856 (emphasis added).
Iowa Mutual then made a seemingly contradictory statement that: "Unless a federal court determines that the Tribal Court lacked jurisdiction, however, proper deference to the tribal court system precludes relitigation of issues raised by the [plaintiffs'] bad-faith claim and resolved in the Tribal Courts." 480 U.S. at 19. Iowa Mutual's statement might be consistent with Nat'l Farmers given that federal court jurisdiction in Iowa Mutual was based on diversity, and, therefore, the merits of the dispute would likely be based on tribal law. Commentators have argued that "[a]s a matter of practice . . . the federal courts on post-exhaustion review will redetermine de novo any federal questions raised by the merits of the lawsuit, as well as the federal question of the tribal courts' jurisdiction." Judith V. Royster, Stature and Scrutiny: Post Exhaustion Review of Tribal Court Decisions, 46 U. KAN. L. REV. 241,277 (1998). See, e.g., Arizona Pub. Serv. Co. v. Aspaas, 77 F.3d 1128 (9th Cir. 1995).
This would not be the first time that a federal court has reviewed another sovereign's ERISA decisions. In Fort Halifax Packing Co. Inc. v. Coyne, 482 U.S. 1 (1987), the Maine Director of Labor Standards brought suit in state court seeking to enforce a state statute that required employers to provide a one-time severance payment to employees in the event of a plant closing. Id. at 4-5. The employer argued that ERISA preempted the state statute because it regulates employee benefit plans.Id. at 7. The Maine Supreme Court rejected the employer's argument and held that the statute was not preempted because ERISA only preempts laws relating to benefit plans created by employers. Id. at 6. The United States Supreme Court affirmed but for different reasons. Id. The Court held that the Maine statute "neither establishes, nor requires an employer to maintain, an employee welfare benefit `plan'" under ERISA.Id. In doing so, the Court announced the controlling principles for when an employer establishes an ERISA plan or when an ERISA plan exists. Id. at 12 (explaining that, in general, an ERISA plan is established where there is "an ongoing administrative program for processing claims and paying benefits"). See Belanger v. Wyman-Gordon Co. 71 F.3d 451. 454 fist Cir. 1995) ("Fort Halifax is the beacon by which we must steer.");Kulinski, 21 F.3d at 257; Kenney v. Roland Parson Contracting Corp., 28 F.3d 1254, 1257-58 (D.C. Cir. 1994). C.f. Maez v. Mountain States Tel, and Tel. Inc., 54 F.3d 1488, 1495 (10th Cir. 1995) (holding that federal court has jurisdiction to review state court's ERISA preemption decisions that led to removal). C. Sovereign Immunity
Plaintiffs argue that tribal sovereign immunity does not bar their ERISA claims against LSI for three reasons. First, Plaintiffs argue that their claims under ERISA are equitable in nature, and tribal sovereign immunity does not extend to equitable claims. Second, Plaintiff Prescott, an enrolled member of the Community, argues that LSFs articles of incorporation specifically waive LSFs sovereign immunity. Finally, Plaintiffs argue that the Tribe expressly waived its sovereign immunity in the alleged ERISA plans.
"As a matter of federal law, an Indian tribe is subject to suit only where Congress has authorized the suit or the tribe has waived its immunity." Kiowa Tribe of Oklahoma v. Mfg. Technologies. Inc., 523 U.S. 751, 754 (1998); accord e.g., Santa Clara Pueblo v. Martinez, 436 U.S. 49, 58 (1978). Plaintiffs seize, as some courts have, on Justice Stevens' concurrence in, Oklahoma Tax Comm'n v. Citizen Band Potawatomi Indian Tribe, 498 U.S. 505, 515-16 (1991), for the proposition that Indian tribes do not have sovereign immunity against suits for equitable relief, and, therefore, LSI does not have sovereign immunity from their equitable ERISA claims. This Court cannot accept Plaintiffs first argument.
A review of the relevant case law is in order. In Santa Clara Pueblo, the plaintiff sued the tribe and its Governor for declaratory and injunctive relief against enforcement of a tribal ordinance because it violated the Indian Civil Rights Act (ICRA). 436 U.S. at 51. The Supreme Court held that the plaintiffs equitable claims against the tribe were barred by sovereign immunity because nothing in the ICRA constituted an express waiver. Id. at 59. As for the Governor, however, the Supreme Court specifically stated an individual officer of the tribe is not protected from the equitable relief sought. Id, In holding that the Governor was "not protected by the tribe's immunity," the Supreme Court cited Puyallup Tribe, Inc. v. Washington Dept. of Game, 433 U.S. 165, 171-72 (1977). Id. Puyallup Tribe explained that "whether or not the Tribe itself may be sued in a state court without its consent or that of Congress, a suit to enjoin violations of state law by individual tribal members is permissible." 433 U.S. 171. Thus, the Supreme Court, in no uncertain terms, reaffirmed the rule that an Indian tribe's sovereign immunity extends to equitable relief but a tribal official's immunity does not.
In Potawatomi, the issue was whether Oklahoma could tax sales of cigarettes to non-members on the reservation. 498 U.S. at 512-13. The Supreme Court held that Oklahoma could do so. Id. at 512. However, the Supreme Court held that the tribe was immune from suit by the state to collect the tax. Id. at 514. In response to Oklahoma's argument that it would have a right with no remedy, the Supreme Court explained that "[t]here is no doubt that sovereign immunity bars the State from pursuing the most efficient remedy, but we are not persuaded that it lacks any adequate alternatives." Id. The Supreme Court went on to explain Oklahoma's alternatives to suing the tribe such as suing tribal officials, collecting taxes from wholesalers, "enter[ing] into agreements with the tribes to adopt a mutually satisfactory regime for the collection," or seeking relief from Congress. Id. Justice Stevens, joined by no member of the Court, concurred and stated:
My purpose in writing separately is to emphasize that the Court's holding in effect rejects the argument that this governmental entity-the Tribe-is completely immune from legal process. By addressing the substance of the tax commission's claim for prospective injunctive relief against the Tribe, the Court today recognizes that a tribe's sovereign immunity from actions seeking money damages does not necessarily extend to actions seeking equitable relief.Id. at 515-16.
Justice Stevens' suggestion, however, "was implicitly [if not explicitly] rejected in the majority opinion's discussion of alternative remedies." Citizen Band Potawatomi Indian Tribe v. Oklahoma Tax Comm'n, 969 F.2d 943, 948 n. 5 (10th Cir. 1992) (on appeal from remand). The Supreme Court explicitly stated that "[t]here is no doubt that sovereign immunity bars the State from pursuing the most efficient remedy" and then went on to explain alternative remedies other than suing the tribe.Potawatomi, 498 U.S. at 514. Moreover, having "unequivocally upheld a tribe's immunity from a suit that sought only declaratory and prospective injunctive relief in Santa Clara Pueblo, Florida v. Seminole Tribe, 181 F.3d 1237, 1244 (11th Cir. 1999), the Supreme Court explicitly rejected a challenge to modify the doctrine of tribal sovereign immunity in Potawatomi when it stated that "we are not disposed to modify the long-established principle of tribal sovereign immunity." Potawatomi, 498 U.S. at 510; see also Kiowa Tribe, 523 U.S. 755 ("There is a difference between the right to demand compliance with state laws and the means available to enforce them."). The Supreme Court again refused to modify tribal immunity, despite questioning its very foundation, in Kiowa Tribe, 523 U.S. at 756-60. Given the Supreme Court's prior cases barring equitable claims against tribes and its continual deference to Congress as the avenue to modify tribal sovereign immunity, this Court cannot accept Justice Stevens' suggestion in a lone concurrence as modifying the law because until a majority of the Supreme Court speaks "it is not the law." Seminole Tribe, 181 F.3d at 1244.
The Court notes that some courts have seized upon Justice Stevens' suggestion, including, in what appears to be dicta, a Judge from this district in Maxam v. Lower Sioux Indian Community, 829 F. Supp. 277, 282-83 (D. Minn. 1993) ("Even apart from the Community's waiver, this court likely has jurisdiction to hear the present request for equitable relief") (emphasis added). See TTEA v. Ysleta del Sur Pueblo, 181 F.3d 676, 680 (5th Cir. 1999); Ross v. Flandreau Santee Sioux Tribe, 809 F. Supp. 738, 744-45 (D.S.D. 1992). This Court, however, agrees, for the reasons stated above, with the courts that have rejected Justice Stevens' suggestion as the law. Florida v. Seminole Tribe, 181 F.3d 1237, 1244-45 (11th Cir. 1999) ("We conclude that Justice Stevens1 comment provides no solace to the State, however, because it is not the law.");Citizen Band Potawatomi Indian Tribe v. Oklahoma Tax Common, 969 F.2d 943, 948 n. 5 (10th Cir. 1992) (rejecting Justice Steven's view as the current law) (on appeal from remand); Davids v. Coyhis, 869 F. Supp. 1401, 1406-07 (E.D. Wis. 1994); Tamiami Partners, Ltd v. Miccosukee Tribe of Indians, 803 F. Supp. 401, 408-09 (S.D. Fla. 1992), reversed on other grounds by, 999 F.2d 503 (11th Cir. 1993); see also Imperial Granite Co. v. Pala Band of Mission Indians, 940 F.2d 1269, 1271 (9th Cir. 1991) ("The immunity extends to suits for declaratory and injunctive relief.") (citing Santa Clara Pueblo v. Martinez, 436 U.S. 49, 59 (1978)). Like the Supreme Court, this Court questions "the wisdom of perpetuating the doctrine" as it "can be challenged as inapposite to modern, wide-ranging tribal enterprises extending well beyond traditional tribal customs and activities," especially the commercial gambling, which the Supreme Court noted as one of the tribal enterprises extending beyond traditional customs, being conducted by LSI. Kiowa Tribe, 523 U.S. at 758. Nevertheless, that is currently the law, and this Court must follow it. "Sovereign immunity can be waived, and the federal and state courts await to resolve disputes if tribes' contractual partners [or employees] insist on such protection." TTEA, 181 F.3d at 685.
The Fifth Circuit appears to rely on Puyallup Tribe, Inc. v. Washington Dept. of Game, 433 U.S. 165 (1977) as support for its holding that Indian tribes do not have immunity from equitable claims. Puyallup Tribe, however, explicitly and repeatedly held that Indian Tribes, as opposed to tribal members/officials, could not be sued for equitable relief. 433 U.S. at 167-68 ("We hold that insofar as the claim of sovereign immunity is advanced on behalf of the Tribe, rather than the individual defendants, it is well founded, but we reject petitioner Tribe's other contentions."); id. at 171 ("[W]hether or not the Tribe itself may be sued in a state court without its consent or that of Congress, a suit to enjoin violations of state law by individual tribal members is permissible."); id. at 173 ("Only the portions of the state-court order that involve relief against the Tribe itself must be vacated in order to honor the Tribe's valid claim of immunity."); id. at 178 ("[Although it properly resists the authority of the state court to order it to provide information with respect to the status of enrolled members of the Tribe and the size of their catch, it may find that its members' interests are best served by voluntarily providing such information to respondent. . . .").
As explained infra, this protection may be available to Plaintiffs.
Next, Plaintiff argues that LSI's articles of incorporation waive its sovereign immunity from suit by Plaintiff Prescott, a Community member. LSI argues that this wavier is solely a waiver to suit in tribal court. Article 3.1 of LSI's restated articles of incorporation provides:
Sovereign Immunity of Corporation, As provided in Section 4.1 of the Corporation Ordinance, the Community confers on the Corporation all of the Community's rights, privileges and immunities concerning federal, state, and local taxes, regulation, and jurisdiction, and sovereign immunity from suit, to the same extent that the Community would have such rights, privileges, and immunities, if it engaged in the activities undertaken by the Corporation. Such immunity shall not extend to actions against the Corporation by the Community or any voting member of the Community (each a "Member," and collectively "Members" of the Corporation).
(Olson Aff, Ex. B).
As noted, "[i]t is settled that a waiver of sovereign immunity `cannot be implied but must be unequivocally expressed.'" Santa Clara Pueblo, 436 U.S. at 58. A careful reading of Article 3.1 reveals that it is subject to no interpretation other than that it constitutes an express waiver of any sovereign immunity LSI may have with respect to Plaintiff Prescott's claims. There is no dispute that Plaintiff Prescott is a member of the community. Article 3.1 explains that the Community confers all of the Community's "rights, privileges and immunities concerning federal, state, and local taxes, regulation, and jurisdiction, and sovereign immunity from suit" on LSI. Thus, LSI has all those rights, privileges, and immunities, including sovereign immunity from suit, held by the Community as a quasi-sovereign. The Community, however, in creating LSI and bestowing on LSI the Community's immunities, explicitly withheld and/or waived all "such immunities" in actions by a voting member of the Community against LSI. Pointedly, the Community states: "Such immunity [that conferred in the preceding sentence] shall not extend to actions against the Corporation by the Community or any voting member of the Community." Accordingly, the Community expressly did not confer upon LSI any of the Community's immunities, including "sovereign immunity from suit," for actions against LSI by a voting Community member. Therefore, in the context of actions by a voting member of the Community against LSI, LSI does not have any sovereign immunity. In other words, LSI cannot assert sovereign immunity as a defense in such a suit because it has none.
LSI has not argued that Plaintiff Prescott is not a voting member, and the Court would expect LSI to do so if such was the case. Thus, the Court considers this settled.
LSFs argument that Article 3.1 is solely a waiver of sovereign immunity to suit in tribal court is illogical. Notably, LSI cites no authority for its argument. The argument begs the question: from what source does LSI garner its sovereign immunity from an action in federal or any other court when being sued by a voting member of the community? The source cannot be the Community's immunities because the Community expressly stated that "[s]uch immunity — all of the Community's rights, privileges and immunities concerning federal, state, and local taxes, regulation, and jurisdiction, and sovereign immunity from suit"-shall not extend to LSI in suits by a voting Community member. Thus, "there is little logic to [LSI's] proposition and there is no language in the [Article] limiting consent to suits in tribal court," Namekagon Dev. Co. Inc. v. Bois Forte Reservation Hous. Auth., 395 F. Supp. 23 (D. Minn. 1974); indeed, there is no language limiting consent to any court because, in the context of Plaintiff Prescott's claim, there simply is no sovereign immunity.
The result would be the same if LSI had some inherent sovereign immunity because the Community, from which that inherent sovereign immunity could only be derived, has specifically removed all those rights, privileges, and immunities for suits by voting Community members leaving nothing for LSI on which to base its defense of immunity.
Moreover, other than the plain language, the Court finds some support for its conclusion in Namekagon Dev. Co. Inc. v. Bois Forte Reservation Hous. Auth., 395 F. Supp. 23 (D. Minn. 1974) (Heaney, Circuit Judge, sitting by designation), affd. 517 F.2d 508 (8th Cir. 1975). InNamekagon, the court held that a tribal Housing Authority Corporation did not have sovereign immunity "because it [the court] believes that sovereign immunity of corporations created by Indian Nations should be confined in the same manner as corporations created by the United States." Id. at 26. The rule for corporations created by the United States is that "government-created corporations are not immune from suit unless expressly so created." Foster v. Day Zimmerman. Inc., 502 F.2d 867, 874 n. 6 (8th Cir. 1974); accord Keifer Keifer v. Reconstr. Refinance Corp., 306 U.S. 381, 388-89 (1939). In explaining the rule, the Supreme Court stated:
As to the states, legal irresponsibility was written into the Eleventh Amendment,
Const. U.S.C.A.; as to the United States, it is derived by implication. . . . But because the doctrine gives the government a privileged position, it has been appropriately confined. Therefore, the government does not become the conduit of its immunity in suits against its agents or instrumentalities merely because they do its work. For more than a hundred years corporations have been used as agencies for doing work of the government. Congress may create them `as appropriate means of executing the powers of government, as, for instance, * * * a railroad corporation for the purpose of promoting commerce among the states.' But this would not confer on such corporations legal immunity even if the conventional to-sue-and-be-sued clause were omitted. In the context of modern thought and practice regarding the use of corporate facilities, such a clause is not a ritualistic formula which alone can engender liability like unto indispensable words of early common law, such as `warrantizo' or `to A and his heirs', for which there were no substitutes and without which desired legal consequences could not be wrought.Keifer, 306 U.S. at 388-89.
Likewise, the creation of the sovereign immunity doctrine for Indian tribes "developed almost by accident." Kiowa Tribe, 523 U.S. at 756 (explaining that courts developed the doctrine from Turner v. United States, 248 U.S. 354 (1919) which "simply does not stand for that proposition"). Thus, given the rule for federal corporations, conferring automatic sovereign immunity on Tribal corporations would seem to be at odds with the dependent position Indian Tribes hold in our system of government.
In any event, although waiver of tribal sovereign immunity does not require "the invocation of `magic words' stating that the tribe hereby waives its sovereign immunity," Rosebud Sioux Tribe v. Val-U Const. Co., Inc., 50 F.3d 560, 563 (8th Cir. 1995), the Court finds that with respect to Plaintiff Prescott's claim the Community actually used the magic waiver words ("Such immunity [all of the Community's rights, privileges and immunities concerning federal, state, and local taxes, regulation, and jurisdiction, and sovereign immunity from suit] shall not extend to actions against the Corporation by the Community or any voting member of the Community."). The waiver, however, is limited only to Plaintiff Prescott's claims and only to LSI. LSI may not assert sovereign immunity as a defense against Plaintiff Prescott's claims.
Finally, Plaintiffs argue that LSI waived its sovereign immunity in the alleged plans themselves. Plaintiffs point out striking language from some of the plans that were apparently distributed to Plaintiffs and others. For instance, under the section entitled "ERISA Rights," among other things, it states:
Under ERISA, there are steps you can take to enforce the above rights. For instance if you request materials from the Plan and do not receive them within 30 days, you may file suit in federal court. In such a case, the court may require your employer [LSI] to provide the materials and pay you up to $100 a day until you receive the materials, unless the materials were not sent because of reasons beyond the control of your employer. If you have a claim for benefits which is denied or ignored, in whole or in part, you may file a suit in a state or federal court. If you are discriminated against . . . you may seek assistance from the U.S. Department of Labor, or you may file suit in a federal court.E.g., (Wolter Aff Ex. 1024).
Of course, LSI argues that the plans were never in existence, and, therefore, LSI could not have waived any sovereign immunity. This was the finding of the Shakopee Mdewakanton Sioux (Dakota) Community Court of Appeals. A finding, however, that this Court is entitled to review at a later date when the full record before the Community Court of Appeals is before this Court.
LSI states that, solely as to sovereign immunity, it is making a factual attack on the subject matter jurisdiction of this Court. (LSI's Mem. in Supp. of Mot. to Dismiss, at 6, n. 2). The facts LSI relies on are not entirely clear. LSI appears to assert that given the Community Court of Appeals' ruling that the plans did not exist or were not adopted by LSI, LSI could not have waived its sovereign immunity. This argument, however, is premature because the present motion does not require this Court to actually conduct the review of the Community Court's decision. The thrust of LSFs motion is that this Court lacks jurisdiction to review the Community Court's decision and that ERISA does not apply to Indian Tribes. This Court holds that ERISA does apply to LSI and it does have subject matter jurisdiction to review the Community Court's decision, and the Court need go no further to dispose of LSFs motion. In fact, a review of the Community Court's decision at this stage would be erroneous because the parties have not adequately marshaled the "full record . . . developed in the Tribal Court" necessary "before either the merits or any question concerning appropriate relief is addressed" or the Community Court's jurisdiction is addressed in this Court. Nat'l Farmers, 471 U.S. at 856.
Ordinarily, "because jurisdiction is a threshold question, judicial economy demands that the issue be decided at the outset rather than deferring it until trial." Osborn v. United States, 918 F.2d 724, 729 (8th Cir. 1990). In a factual 12(b)(1) motion "the trial court is free to weigh the evidence and satisfy itself as to the existence of its power to hear the case," and "once the evidence is submitted, the district Court must decide the jurisdictional issue, not simply rule that there is or is not enough evidence to have a trial on the issue." Id. at 730. "The only exception is in instances when the jurisdictional issue is `so bound up with the merits that a full trial on the merits may be necessary to resolve the issue." Id.
In this situation, as explained, the Court is not satisfied that the full Community Court record is before this Court, especially considering the posture of LSFs motion. Importantly, whether the plans themselves waive LSFs sovereign immunity is inextricably bound up with this Court's eventual review of the Community Court's jurisdictional decision-i.e., whether ERISA plans existed. On review of the Community Court's decision, this Court could find that the Community Court was correct, the plans did not exist, and that it, therefore, had jurisdiction to decide Plaintiffs' rights. On the other hand, a review of the full record may reveal that LSI authorized the plans, the plans did exist under ERISA, LSI thereby waived its sovereign immunity, and the Community Court did not have subject matter jurisdiction to decide Plaintiffs' claims. There, of course, may be some other determination. In any event, this Court can only speculate what the record developed before the Community Court will demonstrate, and it would be merely advisory for this Court to say "if1 on review the record demonstrates "X," then the Court would hold LSI waived or did not waive. Thus, this Court cannot make a determination regarding whether the language in the alleged plans constitutes a waiver. Such a determination will be made when this Court reviews the Community Court's decision regarding its subject matter jurisdiction.
D. Constitutionality of Applying ERISA to Indian Tribes
LSI argues that application of ERISA to Indian Tribes would violate the Constitution because Congress can regulate the Indian Tribes only through the Indian Commerce Clause, U.S. CONST. Art. 1, § 8, cl. 3, and Congress did not even mention Indian Tribes, let alone the Indian Commerce Clause, in enacting ERISA. (LSI's Supp'l Mem. in Supp. of Mot. to Dismis, at 1-4) (citing among others M'Culloch v. Maryland, 17 U.S. (4 Wheat,) 316, 405 (1819), Martin v. Hunter's Lessee, 14 U.S. (1 Wheat.) 304, 326 (1816)). Second, LSI argues that application of ERISA to Indian Tribes would abrogate their sovereign immunity, and ERISA does not unequivocally express its intention to do so. Id. at 5-6 (citing among others Santa Clara Pueblo v. Martinez, 436 U.S. 49 (1978)).
As for LSI's first argument, this Court need only explain that it is bound by the direction in Fed. Power Comm'n v. Tuscarora Indian Nation, 362 U.S. 99, 120 (1960) ("[G]eneral Acts of Congress apply to Indians as well as to all others in the absence of a clear expression to the contrary. . . ."), and the entrenched, virtually universal following, with exceptions duly applied, it has received by the Circuit Courts of Appeal, including the Eighth Circuit. See EEOC v. Fond du Lac Heavy Equipment and Const. Co. Inc., 986 F.2d 246, 248 (8th Cir. 1993); United States v. White, 508 F.2d 453, 461 n. 4 (8th Cir. 1974);Florida Paraplegic Ass'n, Inc. v. Miccosukee Tribe of Indians, 166 F.3d 1126, 1129 (11th Cir. 1999); Reich v. Mashantucket Sand Gravel 95 F.3d 174, 177, 182 (2d Cir. 1996); Cook v. United States, 86 F.3d 1095, 1097 (Fed. Cir. 1996); Lazore v. C.I.R., 11 F.3d 1180, 1183 (3d Cir. 1993); Lumber Indus. Pension Fund v. Warm Springs Forest Prod. Indus., 939 F.2d 683 (9th Cir. 1991); Smart v. State Farm Ins. Co., 868 F.2d 929, 932-33 (7th Cir. 1989); Navajo Tribe v. N.L.R.B., 288 F.2d 162, 165 n. 4 (B.C. Cir. 1961); see also United States v. Stone, 112 F.3d 971, 974 (8th Cir. 1997): Cook v. United States, 32 Fed. Cl. 170, 172 (Fed.Cl. 1994).
Pointedly, the D.C. Circuit also explained:
The Tribe says that Congress in the National Labor Relations Act did not rely on, or purport to exercise, its power to regulate commerce `with the Indian Tribes,' Constitution, Article I, Section 8, Clause 3, and that hence such commerce remains unregulated by the Act. But it is doubtful that commerce with an Indian tribe is involved in this case at all. The Board regulates labor disputes affecting interstate commerce, and the Act authorizes it to do so without stating any exception which would preclude its acting with respect to a plant located within an Indian reservation, or one employing Indians. Congress need not cite or purport to rely on all its powers, when reliance on a single power is ample to sustain its mandate. Nor is its failure to mention its power over commerce with the Indian tribes any indication that it intended to narrow its action with respect to interstate commerce in the manner suggested by appellants.288 F.2d at 165.
As for LSI's second argument, this Court does not hold, and the argument has not even been presented by Plaintiffs, that ERISA itself operates as a waiver of an Indian Tribe's sovereign immunity from suit.See, e.g., Kiowa Tribe, 523 U.S. at 755 ("There is a difference between the right to demand compliance with state laws and the means available to enforce them."); Potawatomi, 498 U.S. at 514 ("There is no doubt that sovereign immunity bars the State from pursuing the most efficient remedy, but we are not persuaded that it lacks any adequate alternatives."); Bassett v. Mashantucket Pequot Tribe, F 204 F.3d 343, 357 (2d Cir. 2000) ("[T]he fact that a statute applies to Indian tribes does not mean that Congress abrogated tribal immunity in adopting it.");Florida Paraplegic Ass'n, Inc. v. Miccosukee Tribe of Indians, 166 F.3d 1126, 1129, 1130, 1135(11th Cir. 1999) (holding that Title III of the ADA applies to Indian Tribes, but recognizing that "whether an Indian tribe is subject to a statute and whether the tribe may be sued for violating the statute are two entirely different questions" and then holding that the ADA did not abrogate the tribe's sovereign immunity from suit.). Based upon the foregoing and all the files, records, and proceedings herein,
IT IS HEREBY RECOMMENDED that:
1. Defendant's Motion to Dismiss (Doc. No. 2) be DENIED.
Under D. Minn. LR 72.1(c)(2) any party may object to this Report and Recommendation by filing with the Clerk of Court, and serving all parties by August 12, 2003, a writing which specifically identifies those portions of this Report to which objections are made and the basis of those objections. Any party wising to oppose such objections must file and serve all parties with its response. Failure to comply with this procedure may operate as a forfeiture of the objecting party's right to seek review in the Court of Appeals.