Colombe v. Rosebud Sioux Tribal

• Decision Date: 02 February 2012
• Docket Number: No. CIV 11–3002–RAL.,CIV 11–3002–RAL.
• Citation: 835 F.Supp.2d 736
• Parties: Charles COLOMBE, Individually and as an Officer of BBC Entertainment, Inc., a dissolved Minnesota corporation, Plaintiff, v. ROSEBUD SIOUX TRIBE, Rosebud Sioux Tribal Court, and Judge Sherman Marshall, in his Official and Individual Capacities, Defendants.
• Court: U.S. District Court — District of South Dakota

835 F.Supp.2d 736

Charles COLOMBE, Individually and as an Officer of BBC Entertainment, Inc., a dissolved Minnesota corporation, Plaintiff,

v.ROSEBUD SIOUX TRIBE, Rosebud Sioux Tribal Court, and Judge Sherman Marshall, in his Official and Individual Capacities, Defendants.

No. CIV 11–3002–RAL.

United States District Court,

D. South Dakota,

Central Division.

Sept. 23, 2011.

Order Denying Reconsideration Feb. 2, 2012.

Clint L. Sargent, Meierhenry Sargent, LLP, Sioux Falls, SD, for Plaintiff.

Dana Hanna, Rapid City, SD, for Defendants.

OPINION AND ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS

ROBERTO A. LANGE, District Judge.

I. INTRODUCTION

Plaintiff Charles Colombe, a shareholder, director, and officer of BBC Entertainment, Inc. (“BBC”) filed a Complaint (Doc. 1) against Defendants Rosebud Sioux Tribe, Rosebud Sioux Tribal Court, and Judge Sherman Marshall (collectively “Defendants”). Plaintiff seeks de novo review of a tribal court decision regarding a casino management contract dispute and an injunction prohibiting Defendants from continuing a tribal court action to pierce the corporate veil of BBC. Defendants seek, and Plaintiff opposes, dismissal of the Complaint under Federal Rule of Civil Procedure 12(b)(1) for lack of subject-matterjurisdiction. (Doc. 5, 8, 13). On August 17, 2011, 2011 WL 3654412, this Court issued an Opinion and Order Regarding Motion to Dismiss ¹ (Doc. 21) resolving part of the issues and requiring submission of a tribal resolution missing from the record that affected the Court's analysis of waiver of tribal sovereign immunity. Since that time, both parties filed additional material relating to the issues in this case. ( See Doc. 27, 28, 32). This Court now denies in part the motion to dismiss.

II. FACTS

The Rosebud Sioux Tribe (“Tribe”) is a federally recognized Indian tribe that owns and operates a casino on tribal trust land within the exterior boundaries of the Rosebud Sioux Reservation. BBC is a now-dissolved Minnesota corporation that was owned in part by tribal member Charles Colombe. In June of 1994, the Tribe and BBC entered into a five-year casino management contract ² (“Contract”) pursuant to the Indian Gaming Regulatory Act of 1988, 25 U.S.C. §§ 2701 et seq. (“IGRA”). Article 6.4(c)(5) of the Contract required that BBC fund an initial Operation Expense Reserve (“OER”) account. (Doc. 9–1 at 37–38; Doc. 9–7 at 20). Although BBC never made an initial contribution to the OER account, the Tribe and BBC reached a subsequent oral agreement to contribute 7.5% of the casino's net profits to the account each month. (Doc. 9–4 at 4; Doc. 9–7 at 24–25). At conclusion of the contract, BBC withdrew $415,857 from the OER account based on BBC's belief that it was entitled to 35% of the OER account balance, consistent with the Contract's division of net profits with 65% going to the Tribe and 35% to BBC. (Doc. 9–4 at 4).

The Tribe disputed BBC's withdrawal of the $415,857 and brought suit against BBC in tribal court. Before Special Tribal Court Judge B.J. Jones, the Tribe argued that the oral modification concerning how to fund the OER account did not comport with IGRA and its implementing regulations. ( Id. at 4–5). IGRA established a statutory basis for the regulation and operation of gaming by Indian tribes and created the National Indian Gaming Commission (“NIGC”) to oversee Indian gaming. 25 U.S.C. § 2702. Subject to the approval of the Chairman of the NIGC, Indian tribes may enter into management contracts for the operation and management of a tribe's gaming facilities. 25 U.S.C. § 2711. Once the NIGC Chairman has approved a casino management contract, any attempt by the parties to modify the contract is void without further Chairman approval. 25 C.F.R. § 535.1. The NIGC Chairman approved the Contract in June of 1994, but no one sought approval of the later oral modification concerning funding the OER account. (Doc. 9–1 at 6). The Tribe thus contended that the modification was void and that because BBC did not make an initial contribution to the OER account, BBC was not entitled to any of the money in the account. Judge Jones disagreed with the Tribe, instead finding that “nothing in the agreement prohibited the parties from using their respective net earnings to fund an account such as the OER account ...” (Doc. 9–2 at 11).

The Tribe appealed Judge Jones's decision to the Supreme Court of the Rosebud Sioux Tribe. (Doc. 9–4). In its appellate brief, BBC argued that IGRA does not create a private right of action and suggested that jurisdiction to determine the legality of the Contract modification rested with the NIGC rather than the tribal court.³ (Doc. 9–3). The Rosebud Supreme Court found that the oral agreement to fund the OER account through mutual monthly contributions was void for failure to obtain the approval of the NIGC and remanded the case to Judge Jones for an accounting. (Doc. 9–4). The Court did not directly address BBC's jurisdictional argument. Id.

The Tribe subsequently sought a rehearing en banc, contending that the Rosebud Supreme Court's order remanding the case to Judge Jones contained certain mistakes of law and fact. (Doc. 9–6). The Rosebud Supreme Court granted the motion for a rehearing en banc, but limited the rehearing “to the sole issue of the appropriate remedy for BBC Entertainment, Inc.'s ... breach of the management contract in regard to the funding of the [OER] account.” Id. at 2. In its optional brief on rehearing, BBC asserted that the Rosebud Supreme Court had failed to discuss BBC's jurisdictional argument in its initial remand order and argued that only the NIGC had jurisdiction to determine whether there had been an illegal modification of the Contract. (Doc. 9–5). Following the rehearing en banc, the Rosebud Supreme Court issued a Summary Order that affirmed the Court's earlier remand to Judge Jones without discussing BBC's jurisdictional argument. (Doc. 9–6),

On October 16, 2007, Judge Jones granted the Tribe a judgment against BBC in the amount of $399,353.61, plus interest accrued from August 15, 1999, in the amount of $127,793.15. (Doc. 9–7). BBC filed a motion for a new trial (Doc. 9–9), which was denied for failure to adhere to the Rosebud Rules of Civil Procedure. (Doc. 9–10). BBC did not appeal the judgment.

On February 17, 2009, the Tribe filed a tribal court complaint against BBC and two of its owners, Wayne Boyd and Charles Colombe. (Doc. 5–1). The complaint sought to pierce BBC's corporate veil and to hold Boyd and Colombe personally liable for the earlier judgment against BBC. (Doc. 5–1). On March 24, 2009, Colombe responded with a motion to dismiss arguing, among other things, that the underlying judgment against BBC was void because the tribal court violated IGRA and illegally amended an NIGC approvedmanagement contract. (Doc. 5–6). Tribal Judge Sherman Marshall denied Colombe's motion to dismiss (Doc. 5–25) and later ordered Colombe to respond to written discovery by January 22, 2011. (Doc. 5–46). Colombe then filed the present complaint in federal district court.

Colombe now asks this Court to vacate the October 16, 2007 judgment against BBC on the grounds that the tribal court had no jurisdiction to find that there had been an illegal modification of the Contract and that the IGRA created no private right of action for the Tribe to bring against BBC. Colombe also seeks a judgment on the merits finding that BBC did not violate the Contract. Finally, Colombe seeks an injunction against Defendants from continuing any litigation against Colombe that relates to the October 16, 2007 judgment. Defendants have filed a Motion to Dismiss, arguing that this Court does not have subject matter jurisdiction over the case, that Defendants have not waived their sovereign immunity, and that Colombe has failed to exhaust his tribal court remedies.

III. DISCUSSIONA. Colombe's Right to Pursue Claims in the Name of BBC

As a preliminary matter, this Court must determine whether Colombe has standing to assert claims in the name of BBC, a dissolved Minnesota corporation. Minnesota Statute § 302A.783 provides that “[a]fter a corporation has been dissolved, any of its former officers, directors, or shareholders may assert or defend, in the name of the corporation, any claim by or against the corporation.” Minn.Stat. § 302A.783; see also Firstcom, Inc. v. Qwest Corp., No. Civ. 04–995 ADM/AJB, 2004 WL 1402564, at *2 (D.Minn. June 21, 2004) (“The text of [section 302A.783] is clear and unambiguous: former shareholders may assert any claim in the name of the corporation.”). Because BBC was dissolved and Colombe was a shareholder, director, and officer of BBC, he has standing to maintain the present action.

B. Subject Matter Jurisdiction

“Federal courts are courts of limited jurisdiction.” Myers v. Richland Cnty., 429 F.3d 740, 745 (8th Cir.2005) (citation omitted). Here, no diversity of citizenship exists under 28 U.S.C. § 1332 because Indian tribes are neither foreign states nor citizens of any state, See Gaming World Int'l v. White Earth Band of Chippewa Indians, 317 F.3d 840, 847 (8th Cir.2003). Federal subject matter jurisdiction under 28 U.S.C. § 1331 requires the presence of a federal question. 28 U.S.C. § 1331; Oglala Sioux Tribe v. C & W Enter., Inc., 487 F.3d 1129, 1130 (8th Cir.2007) (citing Arbaugh v. Y & H Corp., 546 U.S. 500, 513, 126 S.Ct. 1235, 163 L.Ed.2d 1097 (2006)). Section 1331 provides that “[t]he district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331, Courts generally consider a claim to have arisen under federal law “if a federal cause of action appears on the face [of] a well-pleaded complaint.” Oglala Sioux Tribe, 487 F.3d at 1131 (citing Oklahoma Tax Comm'n v. Graham, 489 U.S. 838, 840–841, 109 S.Ct. 1519, 103 L.Ed.2d 924 (1989)).

Colombe, relying principally on Nat'l Farmers Union Ins. Co. v....