Auto-Owners Ins. v. Tribal Court of Spirit Lake

• Decision Date: 01 August 2007
• Docket Number: No. 06-3562.,06-3562.
• Citation: 495 F.3d 1017
• Parties: AUTO-OWNERS INSURANCE COMPANY, Plaintiff/Appellee, v. The TRIBAL COURT OF the SPIRIT LAKE INDIAN RESERVATION; Devils Lake Sioux Tribal Education Board, doing business as Four Winds Elementary School; Fort Totten Public School District, Defendants, Tate Topa Tribal Education Board, also known as Spirit Lake Sioux Tribal Education Board, Defendant/Appellant, Four Winds High School, Defendant, Tate Topa Tribal School, also known as Four Winds Elementary School, Defendant/Appellant, Vivian Lohnes, as Court-Appointed Custodian and Guardian of her Minor Granddaughter, Mary DeLorme, Defendant.
• Court: U.S. Court of Appeals — Eighth Circuit

495 F.3d 1017

AUTO-OWNERS INSURANCE COMPANY, Plaintiff/Appellee, v. The TRIBAL COURT OF the SPIRIT LAKE INDIAN RESERVATION; Devils Lake Sioux Tribal Education Board, doing business as Four Winds Elementary School; Fort Totten Public School District, Defendants, Tate Topa Tribal Education Board, also known as Spirit Lake Sioux Tribal Education Board, Defendant/Appellant, Four Winds High School, Defendant, Tate Topa Tribal School, also known as Four Winds Elementary School, Defendant/Appellant,

Vivian Lohnes, as Court-Appointed Custodian and Guardian of her Minor Granddaughter, Mary DeLorme, Defendant.

No. 06-3562.

United States Court of Appeals, Eighth Circuit.

Submitted: May 17, 2007.

Filed: August 1, 2007.

Counsel who presented argument on behalf of the appellant was Todd M. Roen, Minneapolis, MN. Also appearing on the brief for appellant was Andrew M. Small Minneapolis, MN.

Counsel who presented argument on behalf of the appellee was Joel M. Fremstad, Fargo, ND. Also appearing on the brief for appellee was William P. Harrie, Fargo, ND.

Before BYE, BEAM, and SMITH, Circuit Judges.

SMITH, Circuit Judge.

Auto-Owners Insurance Company ("Auto Owners") filed a declaratory judgment action against its insureds, the Tate Topa Tribal Education Board and the Tate Topa Tribal School (collectively "Tate Topa"), in light of potential coverage claims. Tate Topa moved to dismiss the suit, contending that the action was barred by sovereign immunity, which it enjoyed as an entity of the Spirit Lake Sioux Tribe. Tate Topa now appeals the district court's order denying its renewed motion to dismiss. We reverse the decision of the district court.

I. Background

In April 2001, a Tate Topa Elementary School student was sexually assaulted by a student at the Fort Totten Public High School. In August 2004, Vivian Lohnes, the guardian of the elementary school student, brought a negligence suit in Spirit Lake Tribal Court against Tate Topa ("Lohnes action"). At the time of the incident, Auto Owners insured Tate Topa through a Commercial General Liability Policy and a Commercial Umbrella Policy.

Auto Owners brought this declaratory judgment action in federal district court, seeking a determination of whether the insurance policies provided coverage for the alleged sexual assault of the elementary school student. In response, Tate Topa filed a motion to dismiss the federal action, asserting that Tate Topa was immune from suit absent an express and unequivocal waiver of sovereign immunity. Tate Topa also argued that the district court lacked subject matter jurisdiction. Lohnes also filed a motion to dismiss, arguing that the tribal exhaustion doctrine applied.

In response to the motions to dismiss, Auto Owners moved the district court for permission to amend its initial complaint. Auto Owners's revised complaint alleged federal question jurisdiction and sought a declaration that the tribal court was without jurisdiction to hear the Lohnes action. Tate Topa opposed the motion to amend, arguing that the tribal exhaustion doctrine gave the tribal court the first opportunity to address whether it had jurisdiction over the Lohnes action. In the interim, Tate Topa moved the tribal court for dismissal of the Lohnes action based on lack of subject matter jurisdiction, as federal courts have exclusive jurisdiction over claims implicating the Federal Tort Claims Act (FTCA).

On September 22, 2005, the district court granted Auto Owners's motion to amend the complaint, finding that tribal court jurisdiction issues invoked federal question jurisdiction. The district court also found that the tribal exhaustion doctrine was inapplicable because, by statute, the underlying Lohnes action implicated the FTCA. The district court thus denied Tate Topa's and Lohnes's motions to dismiss. Thereafter, Tate Topa renewed its motion to dismiss based on sovereign immunity. Four months later, Auto Owners filed a motion for summary judgment as to its obligation to defend and indemnify Tate Topa.

On September 7, 2006, the district court denied Tate Topa's renewed motion to dismiss, holding that "sovereign immunity is not applicable here as the tribal court has exceeded its jurisdictional authority." The district court gave Tate Topa 30 days to respond to the outstanding motion for summary judgment. Tate Topa timely filed a notice of appeal from the district court's September 7, 2006 order but did not appeal the September 22, 2005 order. On January 17, 2007, the district court granted Auto Owners's motion for summary judgment.

II. Discussion

On appeal, Tate Topa argues that the district court erroneously concluded that: (1) it had jurisdiction over the declaratory judgment action when it denied Tate Topa's motion to dismiss and (2) Tate Topa cannot raise a sovereign immunity defense because the tribal court exceeded its jurisdictional authority in the Lohnes action.

In response, Auto Owners notes that the district court's ruling that the tribal court lacks jurisdiction over the underlying Lohnes action is unchallenged. Thus, the crucial issue is whether the district court may also exercise jurisdiction over the declaratory judgment action. According to Auto Owners, Tate Topa's sovereign immunity is not a bar to the continuing exercise of jurisdiction because the remaining claim is only for declaratory relief. Specifically, Auto Owners seeks a declaration that it has no duty to defend or indemnify Tate Topa. Moreover, Auto Owners asserts that the district court must address the pending summary judgment motion for declaratory relief because the tribal court has ignored the district court's finding that the tribal court lacks jurisdiction.

As a threshold matter, we must necessarily determine whether subject matter jurisdiction exists over Auto Owners's declaratory judgment action. This court may raise the issue of subject matter jurisdiction sua sponte. Lundeen v. Canadian Pac. Ry. Co., 447 F.3d 606, 611 (8th Cir.2006).

Even if an Indian tribe waives its sovereign immunity, such a waiver does not automatically confer jurisdiction on federal courts. Weeks Constr., Inc. v. Oglala Sioux Hous. Auth., 797 F.2d 668, 671-72 (8th Cir.1986) ("The [Tribal] Housing Authority's waiver only nullifies the Housing Authority's use of sovereign immunity as a possible defense to Weeks' breach of contract action. That waiver of immunity does not determine in what forum a suit against the Housing Authority may properly be brought."). A federal court must make a separate determination as to whether it has subject matter jurisdiction over the suit. Id. at 672. Upon review, we find neither diversity of citizenship nor federal question jurisdiction applicable and conclude that subject matter jurisdiction is lacking.

A. Diversity

"A federal court has original jurisdiction over a civil action if the parties are of diverse state citizenship and the courts of the state in which the federal court sits can entertain the suit." Id.; see also 28 U.S.C. § 1332(a)(1). "[A]n Indian tribe is not a citizen of any state and cannot sue or be sued in federal court under diversity jurisdiction." Standing Rock Sioux Indian Tribe v. Dorgan, 505 F.2d 1135, 1140 (8th Cir.1974); see also Gaming World Int'l v. White Earth Band of Chippewa Indians, 317 F.3d 840, 847 (8th Cir.2003) ("Diversity jurisdiction is not available here under 28 U.S.C. § 1332 because Indian tribes are neither foreign states nor citizens of any state.") (internal citations omitted).

In the present case, no diversity jurisdiction exists as a basis for subject matter jurisdiction because Tate Topa—a sub-entity of the Spirit Lake Sioux Tribe— is considered a part of the Indian tribe. See, e.g., Hagen v. Sisseton-Wahpeton Cmty. Coll., 205 F.3d 1040, 1043 (8th Cir. 2000) ("It is [] undisputed that a tribe's sovereign immunity may extend to tribal agencies.... [H]ere the [Community] College serves as an arm of the tribe and not as a mere business and is thus entitled to tribal sovereign immunity."); Weeks, 797 F.2d at 670 ("It has been held that a housing authority, established by a tribal council pursuant to its powers of self-government, is a tribal agency."); Dillon v. Yankton Sioux Tribe Hous. Auth., 144 F.3d 581, 583 (8th Cir.1998) ("Therefore, we must treat the Authority as a tribal agency rather than a separate corporate entity created by the tribe."). As recognized in Dorgan, an Indian tribe is not a citizen of a state for diversity purposes.

B. Federal Question

In addition to diversity subject matter jurisdiction, a federal court has "`original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States.'" Weeks, 797 F.2d at 672 (quoting 28 U.S.C. § 1331). While a "non-frivolous claim of a right or remedy under a federal statute is sufficient to invoke federal question jurisdiction," "the fact that [a tribal entity] is created by and operates on behalf of an Indian tribe is not alone sufficient to find the existence of a federal question." Id. (holding that corporation that contracted with the Oglala Housing Authority to build housing units on the reservation could not bring breach of contract suit against the Housing Authority because the district court lacked federal question jurisdiction over the action, as "the rights which [the corporation] s[ought] to enforce [were] based on its construction contract with the Housing Authority, interpretation of which is governed by local, not federal, law"); see also Gaming World, 317 F.3d at 847 ("In terms of jurisdiction there is a significant difference between ordinary contract disputes involving Indian tribes and those raising issues in an area of extensive federal regulation.") (internal citations omitted).

But even where a federal question exists, due to considerations of comity, federal court jurisdiction does not properly arise until available remedies in the tribal court system have been exhausted. In National Farmers Union...