Allstate Indemnity Co. v. Stump

• Decision Date: 13 September 1999
• Docket Number: DEFENDANT-APPELLEE,No. 97-35822,PLAINTIFF-APPELLANT,97-35822
• Citation: 191 F.3d 1071
• Parties: (9th Cir. 1999) ALLSTATE INDEMNITY COMPANY, AN ILLINOIS CORPORATION,, v. VINA STUMP, AS PERSONAL REPRESENTATIVE OF THE ESTATE OF HAROLD STUMP; VERNON THE BOY AS PERSONAL REPRESENTATIVE OF THE ESTATE OF VICTOR THE BOY; AND ARTHUR WINDY BOY, ASSOCIATE JUDGE, CHIPPEWA CREE TRIBAL COURT, IN HIS OFFICIAL CAPACITY ONLY,
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1071

191 F.3d 1071 (9th Cir. 1999)

ALLSTATE INDEMNITY COMPANY, AN ILLINOIS CORPORATION, PLAINTIFF-APPELLANT, v. VINA STUMP, AS PERSONAL REPRESENTATIVE OF THE ESTATE OF HAROLD STUMP; VERNON THE BOY AS PERSONAL REPRESENTATIVE OF THE ESTATE OF VICTOR THE BOY; AND ARTHUR WINDY BOY, ASSOCIATE JUDGE, CHIPPEWA CREE TRIBAL COURT, IN HIS OFFICIAL CAPACITY ONLY, DEFENDANT-APPELLEE.

No. 97-35822

U.S. Court of Appeals, Ninth Circuit

Argued September 16, 1998

Submission deferred September 28, 1998

Resubmitted January 8, 1999

August 19, 1999

As amended Sept. 13, 1999.

Mikel L. Moore, Christensen, Moore, Cockrell & Cummings, Kalispell, Montana, for the plaintiff-appellant.

Gary Zadick, Ugrin, Alexander, Zadick, & Higgins, Great Falls, Montana; Daniel Belcourt, Tribal Attorney, Chippewa Cree Tribe, Box Elder, Montana, and Patrick J. Flaherty, Great Falls, Montana, for the defendants-appellees.

Maylinn Smith, Indian Law Clinic, The University of Montana, Missoula, Montana, for the amicus curiae.

Appeal from the United States District Court for the District of Montana; Donald W. Molloy, District Judge, Presiding D.C. No. CV-97-00082-DWM

Before: Mary M. Schroeder, Charles Wiggins, and M. Margaret McKeown, Circuit Judges.

Schroeder, Circuit Judge

This is a dispute between the estates of deceased members of an Indian tribe and an off-reservation insurer over the insurer's allegedly bad faith denial of insurance coverage for a fatal automobile accident. The accident occurred on a road maintained by the tribe and located on tribal land. The insurer, Allstate, filed this declaratory judgment action in district court to challenge tribal court jurisdiction over the estates' suit against Allstate for failure to settle. The district court held that the tribal court had jurisdiction and entered judgment for the defendant estates.

We hold that there is a genuine dispute over whether the estates' claim arose on the reservation, where the accident occurred and the insureds resided, or off the reservation, where the insurer was located. Because it is not plain that the tribal court lacks jurisdiction, we conclude that the insurer is required to exhaust its remedies in tribal court before challenging tribal jurisdiction in federal court, and we order the district court to stay this declaratory judgment action. See Strate v. A-1 Contractors, 520 U.S. 438 (1997); Iowa Mut. Ins. Co. v. LaPlante, 480 U.S. 9 (1987).

I. Facts

This dispute stems from a 1995 car accident on a tribal road in the Rocky Boy Reservation in Montana. The accident occurred when Dennis Sangray, a member of the Chippewa Cree Tribe, lost control of his vehicle, killing his two passengers, Harold Stump and Vernon The Boy, who were also enrolled members of the Tribe. Sangray held an Allstate liability policy that he had purchased from the independent Erickson-Baldwin Insurance Agency in Havre, Montana, which is outside the Rocky Boy Reservation. Sangray habitually paid the insurance premiums in cash at the EricksonBaldwin office. The policy itself bore Sangray's reservation address, and Allstate mailed the policy and premium statements to that address.

The representatives of the victims' estates filed claims with Allstate for recovery under Sangray's liability policy. Allstate denied coverage, taking the position that the accident occurred on the early morning hours of April 1 and that Sangray's policy had expired on midnight on March 31. Various off-reservation communications took place between Allstate and counsel for the estates of the deceased. Relatives of the deceased made inquiries from the reservation by telephone.

The estates sued Allstate in tribal court for a declaration that Sangray was covered under the Allstate policy and for damages under Montana's unfair claims settlement practices statute, Mont. Code Ann. S 33-18-101 et seq. The parties settled the issue of coverage but the unfair settlement action remains pending before the tribal court. Allstate brought this federal action to challenge the tribal court's jurisdiction to entertain the bad faith settlement action. The district court held that the tribal court had jurisdiction under the "consensual relationship" exception to the rule of Montana v. United States, 450 U.S. 544 (1981), agreeing with the estates that the dispute arose out of the consensual relationship between Allstate and its insured, Dennis Sangray. Allstate appealed the dismissal of the case. We deferred deciding the appeal pending the decision of the en banc court in County of Lewis v. Allen, 141 F.3d 1385 (9th Cir.), withdrawn and revised en banc, 163 F.3d 509 (1998).

II. Analysis

We begin with the general rule that a party may not sue in federal court to challenge tribal court jurisdiction until it has first exhausted its remedies in tribal court. See Iowa Mut. Ins. Co. v. LaPlante, 480 U.S. 9, 16 (1987). Exhaustion of tribal remedies includes tribal appellate review on the question of jurisdiction; thus, federal courts should not intervene until tribal appellate review is complete. See id. at 17. Although Allstate contends that the Supreme Court's latest pronouncement on tribal jurisdiction, Strate v. A-1 Contractors, 520 U.S. 438 (1997), has done away with the exhaustion requirement, the Supreme Court there affirmed that the exhaustion requirement applies unless "it is plain" that the tribal court lacks jurisdiction over the dispute. See id. at 459 n.14. Because Allstate has not exhausted its tribal remedies, it is entitled to a declaratory judgment only if the Strate futility exception applies.

Allstate argues that appellees have waived or effectively conceded the exhaustion issue by not raising it in the district court, which did not even address exhaustion in its order. Exhaustion, however, cannot be waived. A district court has no discretion to relieve a litigant from the duty to exhaust tribal remedies prior to proceeding in federal court. See Burlington Northern R.R. Co. v. Crow Tribal Council, 940 F.2d 1239, 1245 (9th Cir. 1991). Despite appellees' failure to argue exhaustion, it is appropriate to examine the issue sua sponte because of the important comity considerations involved. See United States v. Tsosie, 92 F.3d 1037, 1041 (10th Cir 1996) (raising issue of exhaustion sua sponte and remanding to district court); see also Stone v. San Francisco, 968 F.2d 850, 855-56 (9th Cir. 1992) (court may consider sua sponte issue touching on comity).

El Paso Natural Gas Co. v. Neztsosie, 119 S. Ct. 1430 (1999), does not prevent us from considering the exhaustion issue. There, the Supreme Court vacated our decision to consider sua sponte a partial injunction against tribal court jurisdiction that the plaintiffs had failed to appeal. See id. at 1434. The Court reasoned that the comity considerations surrounding the exhaustion doctrine did not justify an exception to the rule requiring cross-appeals. See id. at 1435. By contrast, in this case there was no reason for the plaintiff estates to cross-appeal the exhaustion issue, for the district court had not ruled on exhaustion, but had granted the estates a greater remedy by definitively ruling that the tribal court had jurisdiction. Neztsosie therefore does not apply.

Analysis of Indian jurisdiction over cases involving non-Indians generally turns on whether the tribe controls the land on which the dispute arose. The leading case on Indian jurisdiction is Montana v. United States, 450 U.S. 544 (1981), in which the Supreme Court held that an Indian tribe could not regulate hunting by non-Indians on non-Indian-owned fee land within the reservation. Although tribes may regulate hunting on land owned by the tribe or held in trust by the United States for the tribe, tribes lack jurisdiction over the activities of non-Indians on non-Indian fee land except when (1) the nonmembers have entered into "consensual relationships with the tribe or its members, through commercial dealing, contracts, leases, or other arrangements," or (2) the non Indians' conduct "threatens or has some direct effect on the political integrity, the economic security, or the health or welfare of a tribe." Id. at 565-66.

The Supreme Court recently expanded the Montana rule in Strate. There, the Court considered whether a tribe could exercise jurisdiction over an accident injury claim where the accident involved non-Indians and occurred on a state highway that ran through a reservation. The United States had granted North Dakota a right-of-way across the reservation for maintenance of a highway. The right-of-way was open to the public and the traffic on it subject to state control. The tribe had forfeited the right to control the highway and to exclude others from the land. Thus, the Court held that the highway right-of-way was "equivalent, for nonmember governance purposes, to alienated, non-Indian land." Strate, 520 U.S. at 454.

As the Supreme Court stated in Strate, "tribes retain considerable control over nonmember conduct on tribal land." Id. Although the Court in Montana endorsed "the general proposition that the inherent sovereign powers of an Indian tribe do not extend to the activities of nonmembers of the tribe," the Court also stated that "Indian tribes retain inherent sovereign power to exercise some forms of civil jurisdiction over non Indians on their reservations." Montana, 450 U.S. at 565. Generally speaking, the Montana rule governs only disputes arising on non-Indian fee land, not disputes on tribal land; otherwise, the Strate Court's analysis of why a state highway on tribal land was equivalent to non-tribal land would have been unnecessary.

In this case, the parties disagree as to whether the lawsuit arose on the tribal road, where the auto accident occurred, or at Allstate's off-reservation offices, where it allegedly committed insurance bad faith. Allstate's position, that the court must look to the off-reservation settlement activities, is foreclosed by the Supreme Court's...