State v. Cherokee Servs. Grp., LLC

• Citation: 955 N.W.2d 67
• Decision Date: 18 February 2021
• Docket Number: No. 20200166,20200166
• Parties: STATE of North Dakota, BY AND THROUGH WORKFORCE SAFETY AND INSURANCE, Appellee v. CHEROKEE SERVICES GROUP, LLC, Cherokee Nation Government Solutions, LLC, Cherokee Medical Services, LLC, Cherokee Nation Technologies, LLC, Steve Bilby and Hudson Insurance Company, Appellants
• Court: United States State Supreme Court of North Dakota

955 N.W.2d 67

STATE of North Dakota, BY AND THROUGH WORKFORCE SAFETY AND INSURANCE, Appellee

v.CHEROKEE SERVICES GROUP, LLC, Cherokee Nation Government Solutions, LLC, Cherokee Medical Services, LLC, Cherokee Nation Technologies, LLC, Steve Bilby and Hudson Insurance Company, Appellants

No. 20200166

Supreme Court of North Dakota.

FILED FEBRUARY 18, 2021

Lawrence E. King, Bismarck, ND, for appellants.

Jacqueline S. Anderson, Special Assistant Attorney General, Fargo, ND, for appellees.

VandeWalle, Justice.

[¶1] Cherokee Services Group, LLC; Cherokee Nation Government Solutions, LLC; Cherokee Medical Services, LLC; Cherokee Nation Technologies, LLC (collectively referred to as the "Cherokee Entities"); Steven Bilby; and Hudson Insurance Company ("Hudson Insurance") appealed from district court orders and a judgment reversing an administrative law judge's ("ALJ") order. The ALJ's order concluded the Cherokee Entities and Bilby are protected by tribal sovereign immunity and Workforce Safety and Insurance ("WSI") had no authority to issue a cease and desist order to Hudson Insurance. The district court reversed the ALJ's determination. We reverse the district court judgment. We affirm and reinstate the ALJ's order related to the cease and desist power of WSI, but we remand to the ALJ for further proceedings on the issue of sovereign immunity.

I

[¶2] The Cherokee Entities are wholly owned by the Cherokee Nation, a federally recognized tribe. Bilby served as executive general manager of the Cherokee Entities. Hudson Insurance provides worldwide workers’ compensation coverage to Cherokee Nation, and the Cherokee Entities are named insureds on the policy. WSI initiated an administrative proceeding against the Cherokee Entities, Bilby, and Hudson Insurance. WSI determined the Cherokee Entities were employers subject to North Dakota's workers’ compensation laws and were liable for unpaid workers’ compensation premiums. WSI also ruled that Bilby, as executive general manager, was personally liable for unpaid premiums. WSI ordered the Cherokee Entities to pay the unpaid premiums. WSI also ordered Hudson Insurance to cease and desist from writing workers’ compensation coverage in North Dakota. The Cherokee Nation has no sovereign land in North Dakota, and the Cherokee Entities were operating within the state but not on any tribal lands.

[¶3] After WSI issued its order, the Cherokee Entities, Bilby, and Hudson Insurance requested an administrative hearing. At the hearing, WSI's collections supervisor, Sarah Feist, did not dispute that the Cherokee Entities acted as an "arm of the tribe." The ALJ reversed WSI's decision. The ALJ found the Cherokee Entities had sovereign immunity in the area of workers’ compensation, and Bilby was not foreclosed from asserting sovereign immunity as he was sued in his official capacity. Additionally, the ALJ held WSI had no authority to issue cease and desist orders to insurance companies.

[¶4] WSI appealed the ALJ's order to the district court. The Cherokee Entities, Bilby, and Hudson Insurance removed the case to federal court, but the federal court remanded the case back to the state district court. The state district court held the Cherokee Entities and Bilby were not entitled to sovereign immunity. The court also held WSI has authority to issue a cease and desist order to Hudson Insurance.

II

[¶5] "Courts exercise only a limited review in appeals from administrative agency decisions under the Administrative Agencies Practice Act, N.D.C.C. ch. 28-32." Bergum v. N.D. Workforce Safety & Ins. , 2009 ND 52, ¶ 8, 764 N.W.2d 178. Under N.D.C.C. §§ 28-32-46 and 28-32-49, a district court and this Court must affirm an administrative decision unless:

1. The order is not in accordance with the law.

2. The order is in violation of the constitutional rights of the appellant.

3. The provisions of [N.D.C.C. ch. 28-32] have not been complied with in the proceedings before the agency.

4. The rules or procedure of the agency have not afforded the appellant a fair hearing.

5. The findings of fact made by the agency are not supported by a preponderance of the evidence.

6. The conclusions of law and order of the agency are not supported by its findings of fact.

7. The findings of fact made by the agency do not sufficiently address the evidence presented to the agency by the appellant.

8. The conclusions of law and order of the agency do not sufficiently explain the agency's rationale for not adopting any contrary recommendations by a hearing officer or an administrative law judge.

Bergum , at ¶ 8.

[¶6] This Court reviews "the administrative agency's decision in the same manner as the district court, giving due respect to the district court's analysis and review." Bergum , 2009 ND 52, ¶ 8, 764 N.W.2d 178. "We do not give deference to the ALJ's legal conclusions, and questions of law are fully reviewable on appeal." Johnson v. N.D. Workforce Safety & Ins. , 2012 ND 27, ¶ 9, 812 N.W.2d 467. "Regarding review of an agency's factual findings, we have explained we do not make independent findings or substitute our judgment for that of the agency, but determine only whether a reasoning mind reasonably could have determined the findings were proven by the weight of the evidence in the record." N.D. Sec. Comm'r v. Juran & Moody, Inc. , 2000 ND 136, ¶ 23, 613 N.W.2d 503.

III

[¶7] The Cherokee Entities argue Cherokee Nation is entitled to tribal sovereign immunity and the sovereign immunity extends to the Cherokee Entities as "arms of the tribe." The Cherokee Entities claim tribal sovereign immunity precludes WSI from enforcing workers’ compensation laws against them. "[T]ribal sovereign immunity is a threshold jurisdictional question." Amerind Risk Mgmt. Corp. v. Malaterre , 633 F.3d 680, 684-85 (8th Cir. 2011). However, "the jurisdictional nature of tribal immunity has never been definitively settled." People v. Miami Nation Enters., 2 Cal.5th 222, 211 Cal.Rptr.3d 837, 386 P.3d 357, 370 (2016) (concluding some courts treat tribal sovereign immunity as a subject matter jurisdiction issue while others treat it as a personal jurisdiction issue); see also In re Prairie Island Dakota Sioux , 21 F.3d 302, 304 (8th Cir. 1994) (holding tribal sovereign immunity is separate from subject matter jurisdiction as it can be waived while subject matter jurisdiction cannot). Regardless of the jurisdictional nature, tribal sovereign immunity bars an action against a tribe when it is invoked. See Miami Nation Enters. , 211 Cal.Rptr.3d 837, 386 P.3d at 370 (stating trial courts do not have a sua sponte duty to raise tribal immunity).

A

[¶8] Cherokee Nation must possess tribal sovereign immunity as a prerequisite for it to extend to the Cherokee Entities. "Indian tribes have long been recognized as possessing the common-law immunity from suit traditionally enjoyed by sovereign powers." Santa Clara Pueblo v. Martinez , 436 U.S. 49, 58, 98 S.Ct. 1670, 56 L.Ed.2d 106 (1978). "This aspect of tribal sovereignty, like all others, is subject to the superior and plenary control of Congress. But ‘without congressional authorization,’ the ‘Indian Nations are exempt from suit.’ " Id. (quoting United States v. U.S. Fid. & Guar. Co. , 309 U.S. 506, 512, 60 S.Ct. 653, 84 L.Ed. 894 (1940) ). Congress can use its plenary power to waive tribal sovereign immunity; however, this waiver "cannot be implied but must be unequivocally expressed." Id. (quoting United States v. Testan , 424 U.S. 392, 399, 96 S.Ct. 948, 47 L.Ed.2d 114 (1976) ). Additionally, a tribe can waive its sovereign immunity on its own accord. Kiowa Tribe of Okla. v. Mfg. Techs., Inc. , 523 U.S. 751, 754, 118 S.Ct. 1700, 140 L.Ed.2d 981 (1998).

[¶9] Tribal sovereign immunity "applies no less to suits brought by States (including in their own courts) than to those by individuals." Michigan v. Bay Mills Indian Cmty. , 572 U.S. 782, 789, 134 S.Ct. 2024, 188 L.Ed.2d 1071 (2014). The United States Supreme Court has made clear on more than one occasion that tribes are entitled to sovereign immunity even when they engage in off-reservation commercial activity.

Id. at 790, 803, 134 S.Ct. 2024 ; see also Kiowa , 523 U.S. at 760, 118 S.Ct. 1700 (analyzing a contract dispute). The Court deferred to Congress on whether such exceptions for off-reservation commercial activity should be made. Bay Mills , at 790, 800-01, 134 S.Ct. 2024.

[¶10] A state may apply its substantive law to tribal activities occurring within the state. Kiowa , 523 U.S. at 755, 118 S.Ct. 1700. However, the state has no remedy to enforce the law against a tribe without a waiver of tribal sovereign immunity. Id. The United States Supreme Court has said:

To say substantive state laws apply to off-reservation conduct, however, is not to say that a tribe no longer enjoys immunity from suit. In Potawatomi , for example, we reaffirmed that while Oklahoma may tax cigarette sales by a Tribe's store to nonmembers, the Tribe enjoys immunity from a suit to collect unpaid state taxes. There is a difference between the right to demand compliance with state laws and the means available to enforce them.

Id. (citations omitted) (citing Okla. Tax Comm'n v. Citizen Band Potawatomi Indian Tribe of Okla. , 498 U.S. 505, 510, 514, 111 S.Ct. 905, 112 L.Ed.2d 1112 (1991) ).

[¶11] WSI and the district court conflate the defense of sovereign immunity with a tribe's sovereignty to adjudicate certain disputes occurring on tribal lands, but these two concepts are different. For purposes of sovereign immunity, it is immaterial where the conduct by the tribe took place, unless an act of Congress or waiver says otherwise. Kiowa , 523 U.S. at 754-55, 118 S.Ct. 1700. A tribe is entitled to invoke sovereign immunity as a defense in a lawsuit. Id. Here, Cherokee Nation is entitled to invoke its tribal sovereign immunity against a lawsuit—even one brought by the State.

[¶12] WSI points to no act of Congress waiving Cherokee Nation's sovereign immunity. Additionally, WSI does not...