Breakthrough Mgmt. Group, Inc. v. Chukchansi Gold Casino and Resort

Decision Date27 December 2010
Docket NumberNos. 08-1298,Nos. 08-1305,Nos. 08-1317,s. 08-1298,s. 08-1305,s. 08-1317
Citation629 F.3d 1173
PartiesBREAKTHROUGH MANAGEMENT GROUP, INC., Plaintiff-Appellee-Cross-Appellant, v. CHUKCHANSI GOLD CASINO AND RESORT; Chukchansi Economic Development Authority, Defendants-Appellants-Cross-Appellees, and Ryan Stanley, Defendant-Appellant-Cross-Appellee.
CourtU.S. Court of Appeals — Tenth Circuit

Marc F. Pappalardo of Breakthrough Management Group, Inc., Longmont, CO, for Plaintiff-Appellee-Cross-Appellant.

Michael A. Robinson of Fredericks Peebles & Morgan LLP, Sacramento, CA, for Defendants-Appellants-Cross-Appellees Chukchansi Gold Casino and Resort and Chukchansi Economic Development Authority.

Lenden F. Webb of Law Offices of Lenden F. Webb, Fresno, CA, for Defendant-Appellant-Cross-Appellee Ryan Stanley.

Before MURPHY, HOLMES, Circuit Judges, and ARMIJO, District Judge. *

HOLMES, Circuit Judge.

This appeal asks us to explore the relationship between an Indian tribe and the economic entities created by the tribe, and to determine how close that relationship must be in order for those entities to share in the tribe's sovereign immunity. Plaintiff Breakthrough Management Group, Inc. ("BMG"), a provider of business management training and consulting services, filed suit in the United States District Court for the District of Colorado in August 2006. BMG alleged that the Chukchansi Gold Resort & Casino ("the Casino") had paid for a single-person license for one of BMG's online training programs and then recorded and used portions of that program without permission to train more than one employee. Because the Casino is operated for the benefit of a federally recognized Indian tribe, the PicayuneRancheria of the Chukchansi Indians ("the Tribe"), BMG brought federal and state-law claims against the Tribe, the Chukchansi Economic Development Authority ("the Authority"), which owns and operates the Casino, the Casino, and several individual defendants. The defendants filed various motions to dismiss, arguing that they were protected from BMG's suit by the doctrine of tribal sovereign immunity and that the district court should dismiss the complaint for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1).

The district court granted the Tribe's motion to dismiss, holding that the Tribe was entitled to sovereign immunity and had not clearly waived that immunity by entering into licensing agreements with BMG that contained forum-selection clauses. The court denied Defendant Ryan Stanley's motion to dismiss, concluding that sovereign immunity did not extend to him because he had been sued in an individual rather than an official capacity. After an evidentiary hearing, the court also denied the Authority and the Casino's motion to dismiss, concluding that they were not entitled to share in the Tribe's sovereign immunity because any judgment imposed against them would not imperil the Tribe's monetary assets.

This appeal followed. The Authority and the Casino have appealed the district court's denial of their motion to dismiss for lack of subject matter jurisdiction (Appeal No. 08-1298), and Mr. Stanley has done likewise (Appeal No. 08-1305). BMG has filed a cross-appeal that raises an alternative ground for affirmance of the district court's order— viz., that the Authority and the Casino, and by extension Mr. Stanley, have waived any immunity that they may otherwise enjoy by entering into BMG's licensing agreements (Appeal No. 08-1317). We have jurisdiction over Defendants' interlocutory appeals under 28 U.S.C. § 1291 and the collateral order doctrine,1 but we DISMISS BMG's cross-appeal for lack of jurisdiction. For the reasons discussed below, we REVERSE the district court's orders denying the Authority and the Casino's motion to dismiss and the motion to dismiss of Mr. Stanley and REMAND for further proceedings consistent with this opinion.

BACKGROUND

BMG is a Colorado Corporation that provides online business management training and consulting services. BMG alleges that employees at the Casino copied and distributed materials from one of BMG's training programs without authorization. The Casino, which operates for the financial benefit of the Tribe, had paid for a single-person license, but allegedly had recorded and used portions of the program without permission to train a large group of employees. Based on these allegations, BMG brought suit against the Tribe, 2 the Authority, the Casino, the former general manager of the Casino, Mr. Stanley, and two other Casino employees. BMG asserted claims for federal copyright infringement, trademark infringement, and violation of the Racketeer Influenced Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962, as well as state common law claims for conversion, misappropriation,breach of contract, breach of the implied covenant of good faith and fair dealing, fraud, unfair competition, and violation of the Colorado Consumer Protection Act, Colo.Rev.Stat. Ann. §§ 6-1-101 to - 115 (West 2010).

All of the defendants filed motions to dismiss, arguing in relevant part that dismissal was warranted under Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction under the doctrine of tribal sovereign immunity. BMG opposed the motions. BMG also moved to convert the motions into Rule 56 motions for summary judgment and, in the alternative, for leave to conduct limited discovery on the issue of tribal sovereign immunity.

In a September 12, 2007, Opinion and Order, the district court granted the Tribe's motion to dismiss. The court determined that the Tribe "indisputably enjoys sovereign immunity," Aplts. App. at 21, and rejected BMG's argument that the Tribe had waived its immunity by entering into two licensing agreements with BMG that contained forum-selection clauses.3 The court held that a contractual provision agreeing to arbitrate disputes could constitute a waiver of sovereign immunity when (1) there is an agreement to submit disputes to a body for adjudication, as well as (2) an agreement as to what particular body will hear such disputes. But the court found that those requirements were not satisfied in this case.

The court reasoned that the Tribe did not expressly agree to submit any dispute for adjudication, it merely agreed where such adjudication would take place if it were to occur.4 The court explained that

the parties' agreement here speaks only to where a suit may be brought, but it does not expressly or impliedly address whether a suit may be brought....
At first blush, it seems awkward to read a contract to specify where disputes may be resolved, but not to read it as providing whether disputes may be resolved. However, any awkwardness in this interpretation vanishes when one recognizes the peculiar circumstances of this case. Here, unlike the ordinary citizen that [BMG] typically enters into contracts with, the Tribe possesses a special cloak of immunity from suit. Thus, language in [BMG's] standard contract that would be sufficient to bind ordinary citizens to a particular dispute-resolution mechanism is not necessarily sufficient to bind the Tribe.

Id. at 20. The court concluded that, because BMG did not negotiate the terms of the contract with the Tribe, "it should not be surprising that the standard terms of [the licensing agreement] yield seemingly awkward results in this peculiar factual circumstance." Id. at 21.

The court did not rule on the Authority and the Casino's motion to dismiss in the September 12, 2007, Opinion and Order because it could not determine from the pleadings whether the Authority and the Casino "enjoy[ed] a connection to the Tribe close enough to enjoy the Tribe's own immunity." Id. at 23. The court therefore scheduled an evidentiary hearing on that motion and denied as moot BMG's motion to convert the motions to dismiss into Rule 56 motions for summary judgment. The court also denied BMG's request"to specifically authorize discovery in advance of this hearing," holding that, if the Authority and the Casino were entitled to immunity, such discovery would "chip away at the benefits of ... immunity." Id. at 23 n. 8. But "[t]o ensure that both sides have a full and fair opportunity to examine the relevant documents and prepare their case," the district court ordered them to exchange copies of all exhibits ten days before the evidentiary hearing and held that the parties could subpoena any other documents up to three days prior to the hearing.5Id.

In that same order, the district court denied Mr. Stanley's motion to dismiss, finding that, because BMG was asserting claims against Mr. Stanley in his individual rather than official capacity, he was not entitled to tribal sovereign immunity. The court also granted the motion to dismiss for lack of personal jurisdiction brought by two employees of the Casino, Jeff Livingston and Vernon D'Mello. They are not parties to this appeal.

The district court held an evidentiary hearing on the Authority and Casino's motion to dismiss on October 23, 2007. At the hearing, the parties stipulated to the admission of approximately seventy-one exhibits "for the sole purpose of whether the Johnson ... test is met and not for any other issues, such as whether there has been a waiver of immunity." Aplee. Supp.App. at 99-100 (Tr., Evidentiary Hr'g, dated Oct. 23, 2007). The court also heard testimony from Dustin Graham, the chairperson of the Tribal Council. After the hearing, the parties filed a stipulation detailing the agreed-upon facts.

In an August 5, 2008, Opinion & Order, the district court evaluated the relationship between the Tribe and the Authority and the Casino under a ten-factor test articulated in an unpublished district court opinion, Johnson v. Harrah's Kansas Casino Corp., No. 04-4142-JAR, 2006 WL 463138 (D.Kan. Feb.23, 2006). Under Johnson, there is a threshold financial-liability inquiry that must be satisfied before a court will consider other factors measuring the closeness of the...

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