Snowbird Const. Co., Inc. v. US

• Decision Date: 10 July 1987
• Docket Number: Civ. No. 85-1423.
• Citation: 666 F. Supp. 1437
• Parties: SNOWBIRD CONSTRUCTION COMPANY, INC., and Superstructure Development, Ltd., d/b/a Snowbird/Superstructure, Plaintiffs, v. The UNITED STATES of America, Department of Housing and Urban Development, Duck Valley Housing Authority, David R. Brown and Associates, A.I.A., David R. Brown, Al Schulz, Frank Schierenbeck, John P. Callahan, Gary Hanes, All Jointly and Severally, Defendants.
• Court: U.S. District Court — District of Idaho

666 F. Supp. 1437

SNOWBIRD CONSTRUCTION COMPANY, INC., and Superstructure Development, Ltd., d/b/a Snowbird/Superstructure, Plaintiffs, v. The UNITED STATES of America, Department of Housing and Urban Development, Duck Valley Housing Authority, David R. Brown and Associates, A.I.A., David R. Brown, Al Schulz, Frank Schierenbeck, John P. Callahan, Gary Hanes, All Jointly and Severally, Defendants.

Civ. No. 85-1423.

United States District Court, D. Idaho.

July 10, 1987.

COPYRIGHT MATERIAL OMITTED

M. Michael Sasser, Hamlin & Sasser, P.A., Boise, Idaho, Richard L. Lambe, Ulin, Dann, Elston & Lambe, Seattle, Wash., for plaintiffs.

Maurice O. Ellsworth, U.S. Atty., Dist. of Idaho, Jeffery W. Ring, Asst. U.S. Atty., Boise, Idaho, for defendants U.S., Schierenbeck, Hanes.

Howard A. Belodoff, Idaho Legal Aid Services, Inc., Boise, Idaho, for defendants Duck Valley Housing Authority, Callahan.

Michael Day, Brady & McDaniel, Chartered, Boise, Idaho, for defendants Brown & Associates, Brown, Schulz.

MEMORANDUM OPINION AND ORDER

RYAN, District Judge.

I. INTRODUCTION

On August 9, 1983, Plaintiffs Snowbird Construction Company, Inc., and Superstructure Development, Ltd., d/b/a Snowbird/Superstructure, a joint venture (hereinafter referred to as "Snowbird"), submitted a bid to Defendant Duck Valley Housing Authority (hereinafter referred to as the "Housing Authority") for Contract No. NV99-B006-010, which provided for the construction of twenty-four, single-family homes located within the boundaries of the Duck Valley Indian Reservation. The Housing Authority was established pursuant to a special ordinance enacted by the Shoshone-Pauite Indian Tribe on July 31, 1963. The federal reservation is located in the States of Nevada and Idaho.

Pursuant to the United States Housing Act of 1937, 42 U.S.C. § 1437, et seq., and 24 C.F.R. § 905, et seq., the United States Department of Housing and Urban Development (HUD) was obligated to provide financial and technical assistance to the Housing Authority for construction of the project. The Housing Authority accepted Snowbird's bid, and the two parties entered into a formal construction contract on November 16, 1983. Serious contractual disputes arose shortly after construction of the project began, and the Housing Authority ultimately withheld final approval and acceptance of Snowbird's construction work.

On May 23, 1986, Snowbird filed a Second Amended Complaint in this court against the Housing Authority; John P. Callahan, Chairman of the Housing Authority; David R. Brown and Associates, A.I.A.; David R. Brown and Al Schulz as agents of the Housing Authority; the United States; HUD; and Gary Hanes and Frank Schierenbeck as agents of HUD.

The Second Amended Complaint sets forth nine separate claims for relief. Count one contains a claim for breach of contract against the Housing Authority. Plaintiffs allege that the Housing Authority refused to grant time extensions to them as previously agreed to, rejected work that had previously been inspected and approved, and failed to timely process change orders in accordance with the terms of the contract. Count two of the complaint sets forth a claim for tortious interference with contractual relations. Specifically, it is alleged that each of the defendants interfered with the contractual relationship between plaintiffs and plaintiffs' subcontractors. Count three sets forth a claim against the Housing Authority, David R. Brown and Associates, and David R. Brown, individually, for providing defective plans and design specifications to Snowbird. In count four plaintiffs allege that Al Schulz, acting as the agent of the Housing Authority, performed improper inspections on plaintiffs' construction work. Count five sets forth a claim for defamation against each of the defendants.

In count six Snowbird alleges that Defendant HUD negligently administered the housing contract between Snowbird and the Housing Authority in violation of the federal regulations set forth in 24 C.F.R. § 905 et seq. Count seven involves a claim against the defendants under the Idaho Consumer Protection Act. In count eight of the complaint, plaintiffs set forth a claim for misrepresentation against the Housing Authority and HUD. Specifically, it is alleged that these defendants failed to disclose to Snowbird the fact of suspected labor violations of the Davis-Bacon Act. Finally, in count nine plaintiff set forth a claim under 18 U.S.C. §§ 1961-68, the Racketeer Influenced and Corrupt Organizations (RICO) Act. Specifically, it is alleged that the defendants carried out an enterprise designed to cause economic harm to the plaintiffs and that the enterprise was conducted in part through the fraudulent use of the United States mails and telephone wires. All of the named defendants have filed motions to dismiss the Second Amended Complaint.

II. ANALYSIS

A. Federal Jurisdiction Over the Housing Authority

1. Waiver of sovereign immunity.

Plaintiffs contend that federal jurisdiction over this action exists because the "sue and be sued" clause contained in the Shoshone-Pauite tribal ordinance creating the Housing Authority represents a waiver of sovereign immunity. The Housing Authority asserts that no such waiver has been made.

It is well established that Indian tribes enjoy the common law immunity from suit traditionally possessed by sovereign powers. Santa Clara Pueblo v. Martinez, 436 U.S. 49, 98 S.Ct. 1670, 56 L.Ed.2d 106 (1978); A.K. Management Co. v. San Manuel Band, 789 F.2d 785 (9th Cir.1986). The attributes of tribal sovereignty generally extend to a housing authority, established by a tribal council pursuant to its powers of self-government. Weeks Construction, Inc. v. Oglala Sioux Housing Authority, 797 F.2d 668 (8th Cir.1986). Any waiver of a tribal agency's sovereign immunity cannot be implied, but must be unequivocally expressed. A.K. Management Co. v. San Manuel Band, 789 F.2d at 789.

The tribal ordinance establishing the Duck Valley Housing Authority provides in part:

2. The Council hereby gives its irrevocable consent to allowing the Authority to sue and be sued in its corporate name, upon any contract, claim or obligation arising out of its activities under this ordinance and hereby authorizes the Authority to agree by contract to waive any immunity from suit which it might otherwise have ...

Appendix to Memorandum in Support of Motion to Dismiss, filed March 18, 1986, Appendix 3.

The "sue and be sued" language such as set forth in the Shoshone-Pauite tribal ordinance has been recognized as constituting an "unequivocally expressed" waiver of sovereign immunity. Weeks Construction, Inc. v. Oglala Sioux Housing Authority, 797 F.2d at 671. This court finds, based upon the "sue and be sued" language in the tribal ordinance, that the Housing Authority has unequivocally expressed a waiver of its sovereign immunity.

This finding does not end the court's inquiry. The waiver of sovereign immunity and consent to suit in federal court does not automatically confer jurisdiction on this court. Id. Before this court can retain jurisdiction over this action involving the tribal authority, it must be determined whether federal question or diversity jurisdiction exists.

2. Federal question jurisdiction.

Pursuant to 28 U.S.C. § 1331, a federal district court has "original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States." Snowbird's action against the Housing Authority is based primarily upon the alleged breach of the construction contract entered into on November 16, 1983; however, the parties expressly agreed that interpretation of the contract would be governed by state law. Therefore, the only possible basis for federal question jurisdiction over the claims between plaintiffs and the Housing Authority would have to be founded on the RICO claims set forth in count nine of the complaint.

In count nine of the Second Amended Complaint, plaintiffs state that "defendants, and each of them, in their improper, negligent, arbitrary and capricious administration of the Contract, violated the Title 18 of the United States Code, § 1961 et seq." Second Amended Complaint, filed May 23, 1986, at 10. An essential element of a RICO claim is a violation of 18 U.S.C. § 1962. A violation of Section 1962 requires (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity. Sedima, S.P.R.L. v. Imrex Company, Inc., 473 U.S. 479, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985). Each of these elements must be sufficiently alleged to state a claim under the RICO Act. Id.

In the instant case, plaintiffs assert that the named defendants carried out an enterprise designed to cause economic harm to plaintiffs. They allege that this enterprise was conducted, in part, through the fraudulent use of the United States Mails and telephone wires. "Racketeering activity" includes any act "indictable" under certain enumerated federal criminal statutes, including 18 U.S.C. § 1341, which makes mail fraud a criminal offense, and 18 U.S.C. § 1343, which makes wire fraud a crime.

In order to allege a violation of the mail fraud statute, a party must show (1) that the defendants formed a scheme or artifice to defraud; (2) that defendants used the United States mails or caused the use of the United States mails in furtherance of the scheme; and (3) the defendants did so with the specific intent to deceive or defraud. Schreiber Distributing Co. v. Serv-Well Furniture Co., 806 F.2d 1393 (9th Cir.1986). In order to prove a wire fraud violation, a party must show (1) the formation of a scheme or artifice to defraud, (2) use of the United States wires or causing use of the United States wires in furtherance of the scheme; and (3) specific intent to deceive or defraud. Id.

In addition to the requirements set forth above, a plaintiff must also satisfy the standard set forth in Rule 9(b) of the Federal Rules of Civil Procedure...