Marceau v. Blackfeet Housing Authority

Citation540 F.3d 916
Decision Date22 August 2008
Docket NumberNo. 04-35210.,04-35210.
PartiesMartin MARCEAU; Candice Lamott; Julie Rattler; Joseph Rattler, Jr.; John G. Edwards; Mary J. Grant; Gray Grant; Deana Mountain Chief, on behalf of themselves and others similarly situated, Plaintiffs-Appellants, v. BLACKFEET HOUSING AUTHORITY, and its board members; Sandra Calfbossribs; Neva Running Wolf; Kelly Edwards; Ursula Spotted Bear; Melvin Martinez, Secretary; Department of Housing and Urban Development, United States of America, Defendants-Appellees.
CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)
540 F.3d 916
Martin MARCEAU; Candice Lamott; Julie Rattler; Joseph Rattler, Jr.; John G. Edwards; Mary J. Grant; Gray Grant; Deana Mountain Chief, on behalf of themselves and others similarly situated, Plaintiffs-Appellants,
v.
BLACKFEET HOUSING AUTHORITY, and its board members; Sandra Calfbossribs; Neva Running Wolf; Kelly Edwards; Ursula Spotted Bear; Melvin Martinez, Secretary; Department of Housing and Urban Development, United States of America, Defendants-Appellees.
No. 04-35210.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted on Rehearing May 9, 2007.
Filed August 22, 2008.

[540 F.3d 918]

Thomas E. Towe, Towe, Ball, Enright, Mackey & Sommerfeld, PLLP, Jeffrey A. Simkovic, Simkovic Law Firm, Billings, MT; Mary Ann Sutton, Attorney at Law, Missoula, MT, for the plaintiffs-appellants.

Stephen A. Doherty and Patrick L. Smith, Smith, Doherty & Belcourt, P.C., Great Falls, MT; Timothy J. Cavan, Assistant U.S. Attorney, Billings, MT, for the defendants-appellees.

John T. Harrison, Confederated Salish and Kootenai Tribes, Tribal Legal Department, Pablo, MT; Patterson V. Joe, Patterson V. Joe, P.C., Flagstaff, AZ, for the amici.

Appeal from the United States District Court for the District of Montana; Sam E. Haddon, District Judge, Presiding. D.C. No. CV-02-00073-SEH.

Before: HARRY PREGERSON, SUSAN P. GRABER, and RONALD M. GOULD, Circuit Judges.

Opinion by Judge GRABER; Dissent by Judge PREGERSON.

ORDER AND AMENDED OPINION
ORDER

The opinion filed on July 21, 2006, slip op. 8071, and appearing at 455 F.3d 974 (9th Cir.2006), is replaced in part and adopted in part, and the amended opinion filed on March 19, 2008, slip op. 2545, and appearing at 519 F.3d 838, is replaced in its entirety by the amended opinion filed concurrently with this order.

With this amended opinion, Judges Graber and Gould have voted to deny the Petition of the Federal Appellees for Panel Rehearing and Blackfeet Housing's Petition

[540 F.3d 919]

for Rehearing En banc. Judge Pregerson has voted to grant the petitions.

The full court has been advised of the petition for rehearing en banc and no judge of the court has requested a vote on it.

The petition for panel rehearing and the petition for rehearing en banc are DENIED. No further petitions for panel rehearing or petitions for rehearing en banc may be filed.

OPINION

GRABER, Circuit Judge:


Plaintiffs are members of the Blackfeet Indian Tribe who bought or leased houses built under the auspices of the United States Department of Housing and Urban Development ("HUD"). The houses had wooden foundations. The wood had been pressure-treated with toxic chemicals. Plaintiffs allege that the use of wooden foundations caused their houses to deteriorate and that the chemicals in the wood have caused, and continue to cause, health problems for those who live in the houses. On behalf of a class of persons similarly situated, Plaintiffs sued HUD, the Secretary of HUD, the Blackfeet Tribal Housing Authority and its board members ("the Housing Authority") under several theories. The district court dismissed the entire complaint under Federal Rule of Civil Procedure 12(b)(6).

On rehearing, we hold: (1) Plaintiffs must exhaust their tribal court remedies before bringing their claim against the Housing Authority; (2) the government did not undertake a trust responsibility toward Plaintiffs to construct houses or maintain or repair houses; and (3) Plaintiffs alleged sufficient facts to state claims against HUD under the Administrative Procedure Act ("APA"). We readopt our earlier opinion1 with respect to Plaintiff's breach of contract claims. Accordingly, we affirm the district court's dismissal of the case except as to Plaintiffs' claims against the Housing Authority and its board members and Plaintiffs' claims under the APA. As to those claims, we reverse and remand for further proceedings.

FACTUAL AND PROCEDURAL BACKGROUND

Because the district court dismissed the complaint for failure to state a claim, we construe the facts from Plaintiffs' complaint, which we must deem to be true, in the light most favorable to them. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir.1996). But we "need not assume the truth of legal conclusions cast in the form of factual allegations." United States ex rel. Chunie v. Ringrose, 788 F.2d 638, 643 n. 2 (9th Cir.1986).

The Blackfeet Tribe is a federally recognized Indian tribe. In January 1977, the Tribe established a separate entity, the Blackfeet Housing Authority. See 24 C.F.R. § 805.109(c) (1977) (requiring, as a prerequisite to receiving a block grant from HUD, that a tribe form a HUD-approved tribal housing authority). The Blackfeet Tribe adopted HUD's model enabling ordinance. Blackfeet Tribal Ordinance No. 7, art. II, §§ 1-2 (Jan. 4, 1977), reprinted in 24 C.F.R. § 805, subpt. A, app. I (1977). Thereafter, HUD granted the Blackfeet Housing Authority authorization and funding to build 153 houses.

Construction of those houses, and some additional ones, began after the Housing Authority came into being in 1977. Construction was completed by 1980.2 The

540 F.3d 920

houses—at least in retrospect—were not well constructed. They had wooden foundations, and the wood products used in the foundations were pressure-treated with toxic chemicals. The crux of Plaintiffs' complaint is that HUD directed the use of pressure-treated wooden foundations, over the objection of tribal members, and that the Housing Authority acceded to that directive.

In the ensuing years, the foundations became vulnerable to the accumulation of moisture, including both groundwater and septic flooding, and to structural instability. Some of the houses have become uninhabitable due to contamination from toxic mold and dried sewage residues. The residents of the houses have experienced health problems, including frequent nosebleeds, hoarseness, headaches, malaise, asthma, kidney failure, and cancer.

Plaintiffs bought or leased the houses, either directly or indirectly, from the Housing Authority. After it became clear that the houses were unsafe or uninhabitable, Plaintiffs asked the Housing Authority and HUD to repair the existing houses, provide them with new houses, or pay them enough money to repair the houses or acquire substitute housing. When they received no help from either entity, Plaintiffs filed this class action against the Housing Authority, HUD, and the Secretary of HUD. Plaintiffs seek declaratory and injunctive relief and damages for alleged violations of statutory, contractual, and fiduciary duties.

HUD filed a motion to dismiss for lack of subject matter jurisdiction and a motion to dismiss for failure to state a claim upon which relief can be granted. The Housing Authority and its board members filed a motion to dismiss because of tribal immunity. The district court granted those motions.

In our original opinion, we affirmed the dismissal of HUD and its Secretary, but reversed with respect to the Housing Authority. Marceau v. Blackfeet Hous. Auth. (Marceau I), 455 F.3d 974 (9th Cir. 2006). We granted the Housing Authority's petition for rehearing and issued an amended opinion. Marceau v. Blackfeet Hous. Auth. (Marceau II), 519 F.3d 838 (9th Cir.2008). The Housing Authority and HUD filed separate petitions for review. We now issue this revised opinion.

STANDARD OF REVIEW

We review de novo each of the issues in this case. See Coyle v. P.T. Garuda Indon., 363 F.3d 979, 984 n. 7 (9th Cir.2004) (concerning federal subject matter jurisdiction); Atwood v. Fort Peck Tribal Court Assiniboine, 513 F.3d 943, 946 (9th Cir. 2008) (concerning exhaustion of tribal court remedies).

DISCUSSION

A. Claim against the Housing Authority

Plaintiffs allege that the Blackfeet Housing Authority breached the covenants of habitability, merchantability, and good faith and fair dealing by selling defective homes to Plaintiffs. We decline to reach the merits of this contract claim because Plaintiffs first must exhaust their tribal court remedies.

Principles of comity require federal courts to dismiss or to abstain from deciding claims over which tribal court jurisdiction is "colorable," provided that there is no evidence of bad faith or harassment. Atwood, 513 F.3d at 948. Exhaustion of tribal remedies is "mandatory." Burlington N. R.R. Co. v. Crow Tribal Council, 940 F.2d 1239, 1245 (9th Cir. 1991). The parties failed to raise this issue until after we issued our opinion. Nevertheless, "[a] district court has no discretion to relieve a litigant from the duty to exhaust tribal remedies prior to proceeding in federal court." Allstate Indem.

540 F.3d 921

Co. v. Stump, 191 F.3d 1071, 1073 (9th Cir.), amended, 197 F.3d 1031 (9th Cir.1999). Although Plaintiffs' contract claim has not yet been brought in tribal court, "[t]he absence of any ongoing litigation over the same matter in tribal courts does not defeat the tribal exhaustion requirement." Sharber v. Spirit Mountain Gaming Inc., 343 F.3d 974, 976 (9th Cir. 2003) (per curiam); see also United States v. Plainbull, 957 F.2d 724, 728 (9th Cir. 1992) (holding that exhaustion of tribal remedies is "required even in the absence of a pending tribal court action").

Tribal court jurisdiction over the contract disputes here is unquestionably colorable: Plaintiffs are tribal members, Defendant Blackfeet Housing Authority is a tribal entity, and at least some key events—construction of the homes, for instance—occurred on tribal lands. See Stock W. Corp. v. Taylor, 964 F.2d 912, 919 (9th Cir.1992) (en banc) (holding that tribal court jurisdiction was colorable where a non-tribe member sued a tribe in a contract and tort dispute and the key events may have taken place on tribal lands). Because there is no evidence of bad faith or harassment, we hold that Plaintiffs must exhaust their tribal court remedies. Accordingly, we remand the case. Because of the lengthy course of this litigation, the district court should...

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