Memphis Biofuels v. Chickasaw Nation Industries

• Decision Date: 04 November 2009
• Docket Number: No. 08-6145.,08-6145.
• Citation: 585 F.3d 917
• Parties: MEMPHIS BIOFUELS, LLC, Plaintiff-Appellant, v. CHICKASAW NATION INDUSTRIES, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

585 F.3d 917

MEMPHIS BIOFUELS, LLC, Plaintiff-Appellant, v. CHICKASAW NATION INDUSTRIES, INC., Defendant-Appellee.

No. 08-6145.

United States Court of Appeals, Sixth Circuit.

Submitted: October 6, 2009.

Decided and Filed: November 4, 2009.

ON BRIEF: John R. Branson, BAKER, Donelson, Bearman, Caldwell & Berkowitz, P.C., Memphis, Tennessee, for Appellant. Donna Brown Jacobs, Butler, Snow, O'Mara, Stevens & Cannada, PLLC, Jackson, Mississippi, Randall Dean Noel, Daniel Warren Van Horn, Butler, Snow, O'Mara, Stevens & Cannada, PLLC, Memphis, Tennessee, for Appellee.

Before: MARTIN, COLE, and KETHLEDGE, Circuit Judges.

OPINION

COLE, Circuit Judge.

Plaintiff-Appellant Memphis Biofuels, LLC appeals the dismissal of its suit against Defendant-Appellee Chickasaw Nation Industries, Inc. for lack of subject-matter jurisdiction. Because we agree with the district court that Chickasaw Nation Industries, Inc. enjoys tribal-sovereign immunity, we AFFIRM.

I. BACKGROUND

Memphis Biofuels, LLC ("MBF") is a biodiesel refining company incorporated in Delaware with its principal place of business in Memphis, Tennessee. Chickasaw Nation Industries, Inc. ("CNI") is a federally chartered tribal corporation with its principal place of business in Oklahoma and is incorporated under the Oklahoma Indian Welfare Act ("OIWA"), 25 U.S.C. § 503, et seq. The OIWA expanded the Indian Reorganization Act ("IRA"), 25 U.S.C. § 461, et seq., to include Indian tribes in Oklahoma. Section 17 of the IRA, 25 U.S.C. § 477, allows for a tribe to incorporate; thus, tribes incorporated under the IRA or OIWA are called Section 17 corporations. As a Section 17 corporation, CNI is wholly owned by the Chickasaw Nation tribe but is an entity separate and distinct from the Chickasaw Nation.

In 2006, CNI and MBF negotiated a deal whereby CNI would deliver diesel fuel and soybean oil to MBF's Memphis facility for refinement and later resale as biodiesel. MBF recognized that, should a dispute arise, CNI might try to claim sovereign immunity. Thus, MBF insisted on a contractual provision expressly waiving any sovereign immunity and a "representation and warranty" that CNI's waiver was valid, enforceable, and effective. Throughout the negotiations, the parties exchanged draft versions of the agreement. On October 5, 2006, CNI forwarded MBF a draft of the agreement that CNI's in-house lawyers had reviewed and electronically edited. The edits included five separate comments; two of the comments addressed the sovereign-immunity waiver provision and said that CNI board approval was necessary to waive tribal-sovereign immunity. Ultimately, however, both parties signed the agreement, and the board did not waive immunity.

CNI repudiated the agreement, and MBF began mediation procedures through the American Arbitration Association ("AAA"), as required by the agreement. Initially, CNI participated in the mediation. CNI sent its president and CEO, a second corporate officer, two corporate counsels, and outside counsel to attend a day-long mediation session with MBF. After the session, the parties negotiated directly. Unable to resolve the dispute, MBF filed a demand for arbitration on March 10, 2008, but CNI refused to arbitrate. Instead, on April 15, 2008, CNI filed suit against MBF and the AAA in Chickasaw Nation District Court in Oklahoma. The lawsuit seeks a declaratory judgment that the waiver of CNI's sovereign immunity is invalid for want of board approval and seeks injunctive relief to prevent the arbitration between MBF and CNI.

MBF responded by filing suit in the United States District Court for the Western District of Tennessee. MBF sought a declaratory judgment under 28 U.S.C. § 2201 that CNI's waiver of sovereign immunity is effective; an order compelling arbitration under the contract's arbitration clause; and a temporary restraining order ("TRO") prohibiting CNI from proceeding with its case against MBF in the Chickasaw Nation District Court. CNI moved to dismiss MBF's suit for lack of subject-matter jurisdiction under Federal Civil Procedure Rule 12(b)(1) or, in the alternative, to stay the suit based on MBF's failure to exhaust tribal remedies.

The district court held a TRO hearing on June 10, 2008. Both parties emphasized the threshold issue of whether MBF's action survives CNI's motion to dismiss, and, in particular, whether the federal court has jurisdiction. The district court concluded that it did not have jurisdiction for two reasons. First, the court decided that it did not have diversity jurisdiction because CNI has sovereign immunity, and, therefore, CNI is not a diverse party under 28 U.S.C. § 1332. Second, according to the district court, the case raises no federal question, because, in its complaint, MBF did not properly plead the issue of the Chickasaw Nation District Court's jurisdiction over MBF as a basis for federal-question jurisdiction. Because the court decided it did not have jurisdiction, the court granted CNI's motion to dismiss. MBF timely appealed.

II. ANALYSIS

We "`review de novo the district court's decision to dismiss for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1).'" Lovely v. United States, 570 F.3d 778, 781 (6th Cir.2009) (quoting Howard v. Whitbeck, 382 F.3d 633, 636 (6th Cir.2004)). Also, "[w]here the district court does not merely analyze the complaint on its face, but instead inquires into the factual predicates for jurisdiction, the decision on the 12(b)(1) motion resolves a `factual' challenge rather than a `facial' challenge, and we review the district court's finding for clear error." Id. at 781-82. (quotation marks omitted). But, of course, "review of the court's application of the law to the facts is de novo." Id. at 782 (quotation marks omitted). Here, the relevant facts are undisputed; therefore, we review de novo the district court's decision to grant CNI's motion to dismiss.

A. Tribal Sovereign Immunity

As a threshold matter, we must determine if CNI enjoys tribal-sovereign immunity. If so, a dismissal for lack of jurisdiction was proper. See Lovely, 570 F.3d at 782 n. 2 (6th Cir.2009) ("[S]overeign immunity is a jurisdictional doctrine ....") (internal quotation marks omitted); cf. Nair v. Oakland County Cmty. Health Auth., 443 F.3d 469, 474 (6th Cir.2006) ("[T]he Eleventh Amendment is jurisdictional in the sense that it is a limitation on the federal court's judicial power.") (internal quotation marks omitted). Moreover, if CNI enjoys tribal-sovereign immunity, we need not address the issues of diversity jurisdiction and federal-question jurisdiction. See Miner Elec., Inc. v. Muscogee (Creek) Nation, 505 F.3d 1007, 1011 (10th Cir.2007) (holding that if an entity enjoys tribal-sovereign immunity, federal jurisdiction is otherwise irrelevant and dismissal of the suit is proper). MBF argues that CNI waived its tribal-sovereign immunity either explicitly or implicitly. Thus, to determine if CNI enjoys tribal-sovereign immunity, we must address three issues: (1) Whether incorporating under Section 17 automatically waives tribal-sovereign immunity; (2) whether CNI expressly waived tribal-sovereign immunity; and (3) whether equitable doctrines apply to waive CNI's tribal-sovereign immunity.

1. Automatic Waiver

MBF argues that the act of incorporation under Section 17 divests entities of their tribal-sovereign immunity. This is an issue of first impression for our Court, and other courts are in dispute over this issue. See generally Ann K. Wooster, Validity and Construction of Indian Reorganization Act, 28 A.L.R. Fed.2d 563, §§ 25, 26 (2009). For example, in GNS, Inc., v. Winnebago Tribe of Nebraska, the United States District Court for the Northern District of Iowa held that "a Section 17 corporation waives sovereign immunity." 866 F.Supp. 1185, 1188-89. (N.D.Iowa 1994). In contrast, the Ninth Circuit held in American Vantage Companies v. Table Mountain Rancheria that a "tribe that elects to incorporate does not automatically waive its tribal-sovereign immunity by doing so." 292 F.3d 1091, 1099 (9th Cir. 2002). After reviewing the two lines of cases, the district court concluded that incorporating under Section 17 does not automatically divest an entity of its tribal-sovereign immunity.

We agree. As discussed above, CNI is chartered under the OIWA, 25 U.S.C. § 503, et seq. The OIWA is an extension of the IRA, 25 U.S.C. § 461, et seq., which Congress passed to encourage non-Indian businesses to engage in commerce with Indian tribes. See Parker Drilling Co. v. Metlakatla Indian Cmty., 451 F.Supp. 1127, 1137 (D.Alaska 1978). Section 16 of the IRA, 25 U.S.C. § 476, permits Indian tribes to adopt constitutions, and Section 17 allows the incorporation of a tribal business. Section 17 provides:

The Secretary of the Interior may, upon petition by any tribe, issue a charter of incorporation to such tribe.... Such charter may convey to the incorporated tribe the power to purchase, take by gift, or bequest, or otherwise, own, hold, manage, operate, and dispose of property of every description, real and personal, including the power to purchase restricted Indian lands and to issue in exchange therefor interests in corporate property, and such further powers as may be incidental to the conduct of business, not inconsistent with law....

25 U.S.C. § 477. Thus, the statute is silent as to whether Section 17 incorporated tribes have sovereign immunity.

We conclude that it is more appropriate to interpret this silence as not abrogating sovereign immunity for two reasons. First, in Kiowa Tribe of Oklahoma v. Manufacturing Technologies Inc., the Supreme Court held that "[a]s 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." 523 U.S. 751, 754, 118 S.Ct. 1700, 140 L.Ed.2d 981 (1998). The Court came to this conclusion, in part, because sovereign immunity is part of the common law. See ...