Penobscot Indian Nation v. Key Bank of Maine, Civ. No. 94-0212-B.
| Decision Date | 25 October 1995 |
| Docket Number | Civ. No. 94-0212-B. |
| Citation | 906 F. Supp. 13 |
| Parties | PENOBSCOT INDIAN NATION, Plaintiff, v. KEY BANK OF MAINE, et al., Defendants. |
| Court | U.S. District Court — District of Maine |
COPYRIGHT MATERIAL OMITTED
Stephen F. Gordon, Gordon & Wise, Boston, MA, Ronald C. Caron, Caron & Sullivan, Biddeford, Maine, for Plaintiff.
Peter W. Culley, Pierce, Atwood, Scribner, Allen Smith & Lancaster, Portland, Maine, for Defendant Key Bank.
Bernard J. Kubetz, Eaton, Peabody, Bradford & Veague, Bangor, Maine, for Defendant Bernstein Shur.
Stephen B. Wade, Skelton, Taintor & Abbott, Auburn, Maine, for Palmer Defendants.
Melissa A. Hewey, Drummond Woodsum, Plimpton & MacMahon, Portland, Maine, for Defendants SHC Corp. & Burlington.
Jeffrey A. Thaler, Berman & Simmons, P.A., Lewiston, Maine, for Defendant John Schiavi.
Leonard I. Sharon, Laskoff & Sharon, Lewiston, Maine, for Defendant Michael Marcello.
Plaintiff, the Penobscot Indian Nation ("PIN"), filed a ten count complaint against nine Defendants, for claims arising out of a failed business venture.1 PIN seeks declaratory judgement under 25 U.S.C. § 81, damages under state tort and contract theories, and civil RICO claims. Defendants Key Bank, CWC, Burlington, John Schiavi, John Palmer, Palmer Management, and Palmer Development move for Summary Judgement. Defendant SCH filed a Motion to Dismiss which, under the Court's Order of June 7, 1995, will be treated as a Motion for Summary Judgement. Only Defendant Bernstein has not filed a motion for summary judgement.2
Defendants Key Bank, John Schiavi and the Palmer Defendants (John Palmer, Palmer Management and Palmer Development) filed counterclaims against PIN for defamation and punitive damages. John Palmer also claims both negligent and intentional infliction of emotional distress and breach of contract (by Palmer and Palmer Management). Key Bank also files counterclaims against Michael Marcello, PIN's media consultant, and individual PIN members Reuben Phillips and Jerry Pardilla. Only Counterclaim Defendant Michael Marcello responded with a motion for summary judgement.
The Court now addresses: (1) Defendants' Motions for Summary Judgement on the original claims, (2) Defendant SCH's Motion for Summary Judgement, and (3) Counterclaim Defendant Marcello's Motion for Summary Judgement.
The Court construes the facts in the light most favorable to the nonmoving party. In 1986 PIN, a federally recognized sovereign Indian tribe, formed a limited partnership with Palmer Management for the purpose of buying the Schiavi Homes Corp. ("Schiavi Homes") from CWC. CWC previously acquired Schiavi Homes, a Maine corporation which marketed and sold mobile homes, from John Schiavi in 1983.
PIN invested in Schiavi Homes on the advice of Tribal Assets Management ("TAM"), an investment banking firm which advises both PIN and the Passamaquoddy Indian Tribe. TAM aided in the negotiations of both the Partnership Agreement with Palmer Management, as well as the final Asset Purchase Agreement with CWC. Under the Partnership Agreement, PIN, the limited partner, acquired a 90% interest in Schiavi Homes. Palmer Management, the sole general partner, received only a 10% stake, but gained full control over all management decisions. Key Bank financed the purchase on the condition that John Palmer retain full management control over Schiavi Homes. Palmer, an associate of John Schiavi, managed the company under CWC's ownership. As a prerequisite to financing the deal, Key Bank also required PIN to: (1) post a $1 million letter of credit to secure its loan, and (2) agree to restrictions on the withdrawal of funds. The Secretary of the Interior determined that the Partnership Agreement did not fall within 25 U.S.C. § 81, and therefore did not require approval. PIN now alleges that this agreement was a sham.
The Partnership attained two noncompetition agreements in connection with its purchase of Schiavi Homes. First, CWC assigned to the Partnership its interest in a noncompetitive agreement with John Schiavi. Additionally, John Palmer signed a noncompetitive agreement with the Partnership.
Schiavi Homes, prosperous under John Schiavi and CWC, experienced financial difficulties almost immediately after the sale to the Partnership. Consequently PIN was forced to make several additional investments in the Partnership. Over the course of three years PIN invested both land and money in Schiavi Homes. In October of 1987 PIN signed a Lease Agreement with the Partnership renting the "Holden Lot," PIN property, to the Partnership for the nominal consideration of $1 per year. The Lease Agreement also gave the Partnership the option to purchase the land for $100,000. Later the Partnership pledged the Lease Agreement to Key Bank, who ultimately sought to exercise the option to purchase.3
Although PIN continued to finance Schiavi Homes, the business never rebounded. Ultimately in April of 1989, with Schiavi Homes suffering severe financial difficulties, PIN decided, with the advice of its counsel, Bernstein, to liquidate Schiavi Homes. PIN and Palmer signed over the company's assets to Key Bank.
In addition to its financial problems, Schiavi Homes, under the Partnership, also experienced various legal difficulties. In an effort to resolve these matters PIN signed two Settlement Agreements in September of 1989. One agreement sought to resolve, among other issues: (1) Key Bank's action against PIN for the Holden property, (2) Schiavi Homes' suit against Burlington and Consumers for breach of their covenants not-to-compete, and (3) the foreclosure by Key Bank on the real property of Schiavi Homes.4 The second agreement was more expansive in nature.5 Both agreements, however, contain sweeping language and both explicitly sought to "release, remise and forever discharge all claims" among the signing parties. The validity of these Settlement Agreements lies at the heart of the present suit; PIN contests them both.
PIN's present suit arises from an investigation by the Penobscot County Sheriff Carl Andrews into alleged wrongdoings by Key Bank. Based on the improprieties allegedly revealed, PIN now attributes the failure of Schiavi Homes to continued mismanagement and self-dealing on the part of John Palmer, acting in collusion with John Schiavi, Key Bank and others. After reaching these conclusions, PIN held a press conference in September, 1994, to announce the filing of this lawsuit. The statements made at this press conference, stemming from PIN's complaint in this action, form the basis of defendants' counterclaims.
Summary judgment is appropriate in the absence of a genuine issue of any material fact, when the nonmoving party is entitled to a judgement as a matter of law. Fed.R.Civ.P. 56(c). An issue is genuine, for summary judgement purposes, if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). A material fact is one which has "the potential to affect the outcome of the suit under applicable law." Nereida-Gonzalez v. Tirado-Delgado, 990 F.2d 701, 703 (1st Cir. 1993). Facts may be drawn from "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits." Fed.R.Civ.P. 56(c). On summary judgement, the moving party bears the initial burden of demonstrating the absence of a disputed issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1977). However, the Court views the record in the light most favorable to the nonmoving party. FDIC v. Anchor Properties, 13 F.3d 27, 30 (1st Cir.1994).
Defendants' Motion for Summary Judgement, as well as Plaintiff's objection, revolves chiefly around 25 U.S.C. § 81, the federal statute governing contracts with Indian tribes. PIN's tort and contract claims will survive only to the extent that this Court construes § 81 to invalidate the contracts at issue, specifically the Settlement Agreements.
The Court holds that the documents at issue fall outside the scope of the statute's language. Consequently, PIN's tort and contract claims fail given the binding force of the Settlement Agreements. The Court therefore grants Defendants' Motion for Summary Judgement as to Count I (declaratory judgement), Count II (breach of duty of good faith and fair dealing), Count III (breach of contract-misrepresentation), Counts VI and VII (breach of fiduciary duty), and Count VIII (breach of contract) as to all defendants. Count IX, PIN's RICO claim, is barred by the statute of limitations.
In Count I, Plaintiff seeks declaratory judgement that 25 U.S.C. § 81 applies to all the contracts at issue. The Court's analysis, however, deals primarily with the Settlement Agreements because, if valid, the relevancy of the remaining documents is immaterial and the remaining claims would be precluded by the binding force of the Settlement Agreements. Plaintiff argues, in short, that the Settlement Agreements, and indeed all of the agreements involved with PIN's purchase and control of Schiavi Homes: (a) fall within § 81, and (b) are therefore invalid because they were never properly approved by the Secretary of the Interior as required by the statute. Defendants, however, contend that the contracts at issue do not fall within the plain language of § 81, and even if they do, the Settlement Agreements are nonetheless valid because the Federal Maine Indian Claims Settlement Act, 25 U.S.C. §§ 1721-1735, preempts § 81.
Congress passed § 81 in 1872 "to protect Indians from improvident and unconscionable contracts." Altheimer & Gray v. Sioux Mfg. Corp., 983 F.2d 803, 805 (7th Cir.) (quoting In re Sanborn, 148 U.S. 222, 227, 13 S.Ct....
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