Penobscot Indian Nation v. Key Bank of Maine

• Decision Date: 03 December 1996
• Docket Number: Nos. 96-1670,s. 96-1670
• Parties: PENOBSCOT INDIAN NATION, Plaintiff, Appellee, v. KEY BANK OF MAINE, et al., Defendants, Appellees, John Palmer, Palmer Management Corporation, and Palmer Development Corporation, Appellants. PENOBSCOT INDIAN NATION, Plaintiff, Appellant, v. KEY BANK OF MAINE, et al., Defendants, Appellees. PENOBSCOT INDIAN NATION, Plaintiff, Appellee, v. KEY BANK OF MAINE, et al., Defendants, Appellees. John Schiavi, Appellant. PENOBSCOT INDIAN NATION, Plaintiff, Appellee, v. KEY BANK OF MAINE, Defendant, Appellant. to 96-1672, 96-1736. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 538

112 F.3d 538

65 USLW 2752

PENOBSCOT INDIAN NATION, Plaintiff, Appellee, v. KEY BANK OF MAINE, et al., Defendants, Appellees, John Palmer, Palmer Management Corporation, and Palmer

Development Corporation, Appellants.

PENOBSCOT INDIAN NATION, Plaintiff, Appellant, v. KEY BANK OF MAINE, et al., Defendants, Appellees.

PENOBSCOT INDIAN NATION, Plaintiff, Appellee, v. KEY BANK OF MAINE, et al., Defendants, Appellees.

John Schiavi, Appellant.

PENOBSCOT INDIAN NATION, Plaintiff, Appellee, v. KEY BANK OF MAINE, Defendant, Appellant.

Nos. 96-1670 to 96-1672, 96-1736.

United States Court of Appeals First Circuit.

Heard Dec. 3, 1996.

Decided May 5, 1997.

Peter J. Haley, with whom Stephen F. Gordon, Gordon & Wise, Boston, MA, Ronald C. Caron, and Caron & Sullivan, Biddeford ME, were on brief for appellant Penobscot Indian Nation and third-party defendants-appellees, Gerald Pardilla and Reuben Phillips.

Catherine R. Connors, with whom Debra Brown and Pierce Atwood, Portland, ME, were on brief for appellee and cross-appellant Key Bank of Maine.

Justin W. Leary, with whom Leonard I. Sharon and Sharon, Leary & Detroy, Auburn, ME, were on brief for appellee Michael Marcello.

Stephen B. Wade with whom Skelton, Taintor & Abbott, Auburn, ME, was on brief for defendants-appellees and cross-appellants, John Palmer, Palmer Management Corp., and Palmer Development Corp.

Jeffrey A. Thaler with whom Berman & Simmons, P.A., Lewiston, ME, was on brief for defendant-appellee and cross-appellant, John Schiavi.

Melissa A. Hewey with whom Drummond Woodsum & MacMahon, Portland, ME, was on brief for appellees Consumers Water Company, Burlington Homes of New England, Inc., and SHC Corporation.

Before SELYA and STAHL, Circuit Judges, and WOODLOCK, ^* District Judge.

STAHL, Circuit Judge.

Appellant, a federally-recognized Indian tribe, appeals the district court's denial of its motion for declaratory judgment, pursuant to 25 U.S.C. § 81, seeking to invalidate several agreements concerning the purchase and operation of a mobile home business. Appellees cross appeal the district court's summary judgment ruling in favor of Appellant on several defamation counterclaims as well as a breach of contract and emotional distress counterclaim stemming from litigation involving the failure of this same mobile home business.

Background

Although the district court provided a cogent summary of the facts and procedural history in its memorandum opinion below, see Penobscot Indian Nation v. Key Bank, 906 F.Supp. 13, 16-17 (D.Me.1995), the complexity of this case compels us to sketch the necessary background information.

In 1983, Consumers Water Company ("CWC") acquired Schiavi Homes Corporation ("SHC"), a profitable Maine mobile home sales business, from John Schiavi ("Schiavi"). Under CWC's ownership, SHC continued to operate successfully. In 1985, John Palmer ("Palmer") became SHC's new president. In August 1985, Palmer and his wife, Mary Anna, also founded Palmer Development Corporation ("Palmer Development"). Like SHC, Palmer Development engaged in the sale of mobile homes throughout Maine.

In 1985, the Penobscot Indian Nation ("PIN") hired Tribal Assets Management ("TAM") to locate, evaluate, and recommend potential investment opportunities. Late in 1986, TAM identified SHC as a potential PIN investment and conducted a detailed analysis of SHC's viability as a successful business venture. TAM alerted PIN that SHC constituted a good investment possibility, but cautioned PIN that the success of the venture would depend largely on PIN's willingness to invest in new mobile home sites on which the mobile homes it sold to retail customers could be located. PIN expressed its willingness to use its lands and invest its resources for such purposes.

On December 31, 1986, PIN and Palmer Management Corporation ("Palmer Management"), a corporation formed for the purpose of purchasing SHC, executed a Partnership Agreement creating Schiavi Homes ("Schiavi Homes" or "the Partnership"), a Maine limited partnership. Pursuant to the Partnership Agreement, PIN became the sole limited partner and Palmer Management the sole general partner. ¹ PIN acquired a ninety percent interest in Schiavi Homes. Palmer Management received only a ten percent share but secured full control over all management decisions.

Also on December 31, 1986, the Partnership executed a Purchase and Sale Agreement with SHC, which provided for the Partnership's purchase of SHC's assets and business for approximately $5 million. Key Bank of Maine ("Key Bank") financed the purchase on the condition that Palmer retain full management control over Schiavi Homes. Key Bank also insisted that PIN post a $1 million letter of credit to secure its loan and agree to restrictions on the withdrawal of funds from Schiavi Homes.

As part of its purchase of SHC, the Partnership secured three non-competition agreements. CWC entered into a non-competition agreement with Schiavi Homes and assigned to the Partnership its interest in an existing non-competition agreement with Schiavi, which it obtained at the time it originally acquired the business. Palmer signed a similar agreement with the Partnership.

Schiavi Homes fared poorly from its inception. Although sales of mobile homes in Maine reached an all time high during this time, by the end of 1987 Schiavi Homes' market share had declined from eighteen to eight percent. Over the course of its three year existence, PIN made several investments in Schiavi Homes in an attempt to buoy its business fortunes. Most significantly, in October 1987, PIN signed a Lease-Option Agreement with Schiavi Homes leasing for the nominal fee of $1 per year a twenty-four acre tract of real property (the "Holden Lot") that PIN purchased during this same month. The Lease-Option Agreement afforded the Partnership the option to purchase the Holden Lot for $100,000. PIN subsequently invested approximately $135,000 to develop the Holden Lot for purposes of the Schiavi Homes business. In December 1988, with Schiavi Homes unable to make its regular monthly loan payment of principal and interest to Key Bank, the Partnership pledged the Lease-Option Agreement to Key Bank.

In April 1989, acting on the advice of its counsel, Bernstein, Shur, Sawyer & Nelson ("Bernstein"), PIN decided to liquidate Schiavi Homes. As part of the liquidation plan, PIN and Palmer then assigned Schiavi Homes' assets to Key Bank. In May 1989, Key Bank notified PIN that it intended to exercise the purchase option contained in the Lease-Option Agreement. ² At this time, Key Bank also initiated three foreclosure actions with respect to real property that the Partnership owned and encumbered with mortgage deeds given to Key Bank in conjunction with the initial financing of SHC's purchase.

On September 29, 1989, PIN entered into two comprehensive Settlement Agreements with Schiavi, SHC, Schiavi Homes, Palmer, Palmer Management, Key Bank, Burlington Homes of New England ³ ("Burlington Homes"), and CWC (collectively "Appellees"). PIN, Schiavi Homes, Schiavi, Palmer, Palmer Management, and Key Bank executed the first Settlement Agreement ("first Settlement Agreement"); PIN, Schiavi Homes, SHC, Palmer, Palmer Management, Key Bank, CWC, and Burlington Homes executed the second Settlement Agreement ("second Settlement Agreement"). The two agreements contained identical language that served broadly to "release, remise and forever discharge" all claims involving the signatories. Subsequent to the signing of the two Settlement Agreements, legal proceedings deriving from the operation of Schiavi Homes ceased.

The ensuing period of calm ended on September 14, 1994, when PIN filed the lawsuit underlying this appeal. PIN's suit stemmed from an investigation of Key Bank's activities relating to Schiavi Homes that Penobscot County Deputy Sheriff Carl Andrews conducted between approximately 1993 and 1994. ⁴ PIN alleges that Andrews' investigation revealed substantial improprieties on the part of PIN's business associates in the Schiavi Homes venture. Also on September 14, 1994, PIN held two press conferences, one in Bangor, Maine, and one in Portland, Maine, to announce the filing of its lawsuit in federal district court. Michael Marcello, PIN's media relations consultant, prepared the statements that PIN Governor Reuben Phillips and PIN Lieutenant Governor Gerald Pardilla read at the two press conferences. Marcello also distributed the text of the statements to members of the media.

PIN's complaint contained nine counts and named nine defendants. Most importantly for our purposes, the complaint alleged that the two Settlement Agreements signed by PIN and the Appellees were void because they did not receive the Secretary of the Interior's approval pursuant to 25 U.S.C. § 81. ⁵ SHC filed a motion to dismiss PIN's claims. Key Bank, Schiavi, Palmer, Palmer Development, Palmer Management, CWC, and Burlington Homes moved for summary judgment.

Palmer, Palmer Development, Palmer Management (the "Palmer Defendants"), Key Bank, and Schiavi filed counterclaims against PIN for defamation and punitive damages based on the alleged defamation stemming from the September 14, 1994 press conferences. Key Bank filed counterclaims for defamation against Marcello, Phillips, and Pardilla. Also deriving from these press conferences, Palmer asserted counterclaims against PIN for intentional and negligent infliction of emotional distress. Both Palmer and Palmer Management filed counterclaims against PIN for breach of contract, alleging that PIN's suit violated the release contained in the Settlement Agreements. Only Marcello responded with a motion for summary judgment.

The district court (Brody, J.) concluded that 25 U.S.C. § 81 did not apply to the Settlement Agreements. Determining that the Settlement Agreements constituted valid releases, the district court granted summary judgment for the defendants with respect to all of PIN's...