Bruce H. Lien Co. v. Three Affiliated Tribes

• Decision Date: 28 August 1996
• Docket Number: Nos. 95-3916,96-1013,s. 95-3916
• Citation: 93 F.3d 1412
• Parties: BRUCE H. LIEN COMPANY, Plaintiff-Appellant, v. THREE AFFILIATED TRIBES; Russell D. Mason, Sr., as member of the Three Affiliated Tribal Business Council; Marty Fox; Daylon Spotted Bear, as member of the Three Affiliated Tribal Business Council; Ivan Johnson, as member of the Three Affiliated Tribal Business Council; Austin Gillette, as member of the Three Affiliated Tribal Business Council; George Fast Dog, as member of the Three Affiliated Tribal Business Council; Ed Hall, as member of the Three Affiliated Tribal Business Council; P. Diane Avery, District Judge of the Tribal Court of the Three Affiliated Tribes, Defendants-Appellees. BRUCE H. LIEN COMPANY, Plaintiff-Appellee, v. THREE AFFILIATED TRIBES; Russell D. Mason, Sr., as member of the Three Affiliated Tribal Business Council; Marty Fox; Daylon Spotted Bear, as member of the Three Affiliated Tribal Business Council; Ivan Johnson, as member of the Three Affiliated Tribal Business Council; Austin Gillette, as member of the Three Affiliated Tribal Business Council; George Fast Dog, as member of the Three Affiliated Tribal Business Council; Ed Hall, as member of the Three Affiliated Tribal Business Council, Defendants-Appellants, P. Diane Avery, District Judge of the Tribal Court of the Three Affiliated Tribes, Defendant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1412

93 F.3d 1412

BRUCE H. LIEN COMPANY, Plaintiff-Appellant, v. THREE AFFILIATED TRIBES; Russell D. Mason, Sr., as member

of the Three Affiliated Tribal Business Council; Marty Fox;

Daylon Spotted Bear, as member of the Three Affiliated

Tribal Business Council; Ivan Johnson, as member of the

Three Affiliated Tribal Business Council; Austin Gillette,

as member of the Three Affiliated Tribal Business Council;

George Fast Dog, as member of the Three Affiliated Tribal

Business Council; Ed Hall, as member of the Three

Affiliated Tribal Business Council; P. Diane Avery,

District Judge of the Tribal Court of the Three Affiliated

Tribes, Defendants-Appellees.

BRUCE H. LIEN COMPANY, Plaintiff-Appellee, v. THREE AFFILIATED TRIBES; Russell D. Mason, Sr., as member

of the Three Affiliated Tribal Business Council; Marty Fox;

Daylon Spotted Bear, as member of the Three Affiliated

Tribal Business Council; Ivan Johnson, as member of the

Three Affiliated Tribal Business Council; Austin Gillette,

as member of the Three Affiliated Tribal Business Council;

George Fast Dog, as member of the Three Affiliated Tribal

Business Council; Ed Hall, as member of the Three

Affiliated Tribal Business Council, Defendants-Appellants,

P. Diane Avery, District Judge of the Tribal Court of the

Three Affiliated Tribes, Defendant.

Nos. 95-3916, 96-1013.

United States Court of Appeals Eighth Circuit.

Submitted June 13, 1996.

Decided Aug. 28, 1996.

Roger A. Tellinghuisen, Spearfish, SD, argued (Thomas K. Schoppert, on the brief), for Bruce H. Lien Co.

James G. Abourezk, Souix Falls, SD, argued, for P. Diane Avery.

Henry M. Buffalo, Jr., Minneapolis, MN, argued, (Joseph F. Halloran, on the brief), for Three Affiliated Tribes and Tribal Business Council Officials.

Before BOWMAN and HEANEY, Circuit Judges, and BOGUE, ^* Senior District Judge.

BOGUE, Senior District Judge.

The Bruce H. Lien Company (Lien or the Company) appeals the District Court's refusal to compel arbitration in Lien's dispute with the Three Affiliated Tribes (Tribes) over matters concerning a tribal gaming operation. The Tribes appeal the District Court's denial of their motion to dismiss. For the reasons stated below, we affirm in part and reverse in part.

I.

The parties to this dispute came together for the purpose of constructing and operating a tribal casino on trust lands within the boundaries of the Fort Berthold Indian Reservation in North Dakota. The modern era of tribal gaming in this country was ushered in with the 1988 passage of the Indian Gaming Regulatory Act, 25 U.S.C. § 2701 et. seq. (IGRA). The Tribes ¹ and Lien entered into a management contract pursuant to IGRA, 25 U.S.C. § 2511, whereby Lien was to assist in the financing, construction and management of the Tribes' casino at Four Bears Motor Lodge in exchange for a share of the profits of the operation. The agreement was executed by Wilbur Wilkinson and John Rabbithead on behalf of the Tribes, ² and Bruce Lien and Kent Mundon, for the Company.

The agreement was submitted to the Area Director of the Bureau of Indian Affairs (BIA), said agency having interim authority under IGRA to approve gaming management contracts. 25 U.S.C. §§ 81 and 2709. ³ After receiving reports and commentary from the Office of the Solicitor, Department of the Interior, the agreement was approved by the BIA's Area Director on February 19, 1993. Construction began shortly thereafter with the casino beginning operations on July 16, 1993. There is evidence in the record to indicate the casino has been a financial success.

The management contract at issue provides for a five-year term with a two-year extension which Lien has exercised. Lien was required to invest the funds necessary to remodel the Four Bears Motel and Lodge and build a gaming casino, with the Tribes maintaining a proprietary interest in the property and facilities. The contract provided for the repayment to the company of the investment incurred in the construction of the facility, amortized over the initial five-year term of the contract. The contract further provided for the payment of the expenses of operation of the facility and provided for the split of any remaining profits, sixty percent to the Tribes and forty percent to Lien.

Regarding the issues of dispute resolution and sovereign immunity, the agreement provides that all disputes arising out of the agreement shall be subject to binding arbitration, that the arbitration process is deemed sufficient to exhaust the parties' tribal court remedies, and that, relative to the agreement's dispute resolution procedure, the Tribes waive their sovereign immunity. ⁴ The agreement also provides that, pending arbitration of a dispute arising out of the agreement, either party may seek injunctive relief in the District Court of North Dakota.

After the gaming enterprise was up and running, Mr. Wilkinson lost his bid to be re-elected to the TBC. Many of the new faces on the TBC sought to review the actions of the former administration, including the management contract for the Four Bears Casino. Specifically, some question arose regarding Wilkinson's authority to bind the Tribes to the agreement. Although the casino appeared to operating to the financial benefit of both sides, disagreements arose between the parties. Lien believed it was entitled to recapture $2.28 million in construction and start up costs over that provided in the contract. The Tribes, through their Tribal Gaming Commission, dramatically increased licensing fees charged to Lien.

On January 31, 1995, Lien filed a demand for binding arbitration pursuant to the management agreement, seeking resolution of the construction costs and license fees issues. ⁵ Under the agreement, arbitration was to take place in front of a three-member panel comprised of two party-appointed arbitrators and a third neutral arbitrator agreed upon by both parties. After some delay both sides had their party arbitrators in place and a neutral arbitrator was selected.

On June 27, 1995, the NIGC "called in" the management contract, notifying the parties that it would be conducting its mandatory review of the contract and requested all documentation be submitted within sixty days. See 25 C.F.R. Part 533.1 et. seq. The Tribes thereafter sought a postponement of the arbitration proceedings pending NIGC review of the contract. Lien objected to the postponement. The arbitration panel, by two to one vote, denied the Tribes' request for postponement.

On October 2, 1995, the Tribes filed an action in the Three Affiliated Tribes' District Court (Tribal Court). The Tribal Court complaint sought a declaration that the management contract signed by former Chairman Wilkinson is null and void under Tribal law due to lack of proper authority and failure to garner approval by the TBC. ⁶ The Tribes further sought a preliminary injunction enjoining the arbitration process until such time that the Tribal Court had ruled on the Tribes' complaint or the NIGC had completed its review of the management contract. Lien, by special appearance in Tribal Court, moved to dismiss the complaint for lack of jurisdiction and argued against the appropriateness of the injunction. On October 6, 1995, Tribal Judge Diane Avery, defendant below, found that the Tribal Court had jurisdiction to hear the matter and enjoined Lien and the American Arbitration Association:

from arbitrating disputes which have arisen under a management agreement between [Lien] and the Three Affiliated Tribes until such time that the National Indian Gaming Commission has completed its review of the Agreement and the parties have completed any changes in the Agreement which the National Indian Gaming Commission may require, or this Court has ruled on the Tribe's Complaint relative to that Agreement, whichever is sooner. ⁷

Approximately one week later, Lien filed suit in the United States District Court for the District of North Dakota. Lien requested a preliminary injunction to enforce the arbitration proceedings pursuant to the management contract, and to enjoin the Tribes, its officials and the Tribal Court Judge from interfering in the arbitration process. Lien also moved the District Court to compel arbitration pursuant to the Federal Arbitration Act, 9 U.S.C. § 1 et. seq. The Tribes moved to dismiss based on lack of subject matter jurisdiction claiming that tribal remedies had not been exhausted and that the Tribes had not waived their sovereign immunity. The Tribes also argued against the merits of Lien's requested injunctive relief. Tribal Judge Avery filed a separate motion to dismiss.

The district court recognized that while both sides would seem to have common objectives, their respective actions belie that assumption. The District Court believed that the NIGC had "exclusive jurisdiction for a first determination of [the management contract's] compliance and validity." Bruce H. Lien Co. v. Three Affiliated Tribes, No. A4-95-135, mem. and order nunc pro tunc at 8 (D.N.D. Nov. 9, 1995). Based on this belief, the District Court noted that "[c]ommon sense dictates that everyone cool down until the NIGC has taken action on the contract approval with or without requirements for modification." Id. at 6. Relevant to the present appeal, the court ultimately found; i) that it had federal question jurisdiction, ii) that the NIGC has exclusive initial jurisdiction to determine the validity of the contract, iii) that the Tribal Court's injunction, while possibly "in excess of the jurisdiction of the Tribal District Court," was a permissible means of maintaining the status quo, iv) that Lien's motion for preliminary injunction to compel arbitration would be denied, and, v) that Tribal Judge Avery would be dismissed from the action. In a supplemental order, the District Court ruled that the Tribes' motion to dismiss the federal action based on sovereign immunity and/or comity was denied.

Both sides filed notice of appeal. Lien argues ...