Stock West Corp. v. Taylor

• Decision Date: 20 August 1991
• Docket Number: No. 90-35201,90-35201
• Citation: 942 F.2d 655
• Parties: STOCK WEST CORPORATION, an Oregon corporation, Plaintiff-Appellant, v. Michael TAYLOR, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 655

942 F.2d 655

STOCK WEST CORPORATION, an Oregon corporation, Plaintiff-Appellant, v. Michael TAYLOR, Defendant-Appellee.

No. 90-35201.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Oct. 1, 1990.

Decided Aug. 20, 1991.

Barbee B. Lyon, Tonkon, Torp, Galen, Marmaduke & Booth, Portland, Or., for plaintiff-appellant.

Alan C. Stay, Office of the Reservation Atty., Nespelem, Wash., for defendant-appellee.

Appeal from the United States District Court for the District of Oregon.

Before KOZINSKI, O'SCANNLAIN and FERNANDEZ, Circuit Judges.

O'SCANNLAIN, Circuit Judge:

We consider the limits of mandatory federal court deference to Indian tribal courts.

I

The tortuous history of this and related litigation graces the pages of numerous case reporting systems, including the Indian Law Reporter, the collected cases of the Interior Board of Indian Appeals, the Federal Supplement, and our own Federal Reporter. What follows is a synopsis.

A

On July 24, 1984, appellant Stock West Corporation entered into contracts with two tribal governmental corporations of the Confederated Tribes of the Colville Reservation ("Colville Tribes" or simply "Tribes"). Pursuant to the contracts, Stock West agreed to design and to supervise construction of a sawmill on the reservation and to manage the mill's operations and market its products. Appellee Michael Taylor is the Reservation Attorney for the Colville Tribes.

Under 25 U.S.C. § 81, approval by the Bureau of Indian Affairs ("BIA") is required for certain tribal agreements. ¹ Taylor regarded the Stock West agreements as requiring such BIA approval. Nonetheless, the BIA determined on December 7, 1984, that the contracts did not require BIA review because the contracting tribal corporations were distinct legal entities, separate from the Tribes.

In order to finance the sawmill venture, it was necessary for the tribal corporations to obtain a bank loan. Pursuant to the terms of a loan agreement, Taylor (as counsel for the tribal corporations, who were the borrowers) prepared a letter for an Oregon banking corporation, dated July 10, 1985, in which he opined that:

[n]o consent, approval or authorization of or registration, declaration or filing with any governmental or public body or authority is required to construct the Project or operate the Mill, or if required, such consent, approval, order or authorization has been obtained.

Included among the documents which Taylor reviewed, according to the opinion letter, was the BIA's December 7, 1984, determination that approval of the Stock West agreements was not required.

Meanwhile, construction of the sawmill, which began in 1984, continued apace. Stock West was contractually obliged to manage and supervise the sawmill's construction, and then to manage the completed sawmill as well as market its products. The mill was substantially completed by February 1986.

As is generally the rule in matters which come to this court's attention, the once-promising business relationship between the contracting parties soured. Recriminations festered. According to the tribes, Stock West did not live up to its end of the bargain. Inevitably, the disputes spilled over into the courts.

B

In July 1986, the Colville Tribes fired the first salvo, filing suit against Stock West in the tribal court. About one year later, the tribal court ruled that it possessed subject matter jurisdiction over the dispute and personal jurisdiction over Stock West. Confederated Tribes of the Colville Reservation v. Stock West, Inc., 14 Indian L.Rep (Am. Indian Law. Training Program) 6025 (Colville Tribal Ct. Aug. 17, 1987). The following year, rebuffing Stock West's attempt to compel arbitration as provided for in the contracts, the tribal court ruled that the contracts were void for lack of BIA approval under section 81. Confederated Tribes of the Colville Reservation v. Stock West, Inc., 15 Indian L.Rep. (Am. Indian Law. Training Program) 6019 (Colville Tribal Ct. May 2, 1988). ² The matter was set for trial in the tribal court.

On April 7, 1987, before the tribal court ruled on its own jurisdiction in the Colville Tribes' suit against Stock West, Stock West filed an action against the Tribes in federal district court. Stock West sought to compel arbitration under the terms of the contracts and to enjoin the tribal court action. The district court dismissed the action, citing the principle of comity and recognizing the tribal court's concurrent jurisdiction. Stock West, Inc. v. Confederated Tribes of the Colville Reservation, 14 Indian L.Rep. (Am. Indian Law. Training Program) 3097 (E.D.Wash. Aug. 5, 1987) (order of dismissal).

That decision was affirmed in a published opinion issued by this court on April 20, 1989. Stock West, Inc. v. Confederated Tribes of the Colville Reservation, 873 F.2d 1221 (9th Cir.1989) ("Stock West I "). As had the district court, we concluded that federal courts had diversity jurisdiction over the matter, see 28 U.S.C. § 1332 (1988). Stock West I, 873 F.2d at 1226-27. We also agreed that it was appropriate for the district court to defer to the tribal court on the basis of comity. Id. at 1229-30.

C

Following the foregoing, somewhat bewildering array of litigation, Stock West filed the present lawsuit. On September 8, 1989, Stock West brought this action against Taylor for malpractice and misrepresentation arising out of the opinion letter which Taylor prepared for the bank. Stock West contends that the letter was a misrepresentation because it later turned out that BIA approval of the contracts was required, and because Taylor issued the letter while harboring the belief that BIA approval was in fact required. Although the letter was not directed to Stock West, Stock West contends that the purported misrepresentation is actionable by Stock West as an intended beneficiary of the letter.

The district court dismissed the action. Stock West Corp. v. Taylor, 737 F.Supp. 601 (D.Or.1990) ("Stock West II "). Taylor moved for dismissal pursuant to Federal Rule of Civil Procedure 12 for lack of complete diversity, for lack of personal jurisdiction over Taylor, or as a matter of comity with the tribal courts. Stock West II, 737 F.Supp. at 603. As to the malpractice claim, Taylor moved for Rule 12 dismissal on the ground that Stock West had not stated a claim because of lack of attorney-client privity, or for summary judgment because Stock West's interpretation of the opinion letter was unreasonable and the case law interpreting 25 U.S.C. § 81 was unsettled. Id. Taylor also moved for Rule 12 dismissal or summary judgment on the misrepresentation claim because Stock West could not prove the required elements. Id. Additionally, Taylor requested dismissal under Federal Rule of Civil Procedure 19 because the Colville Tribes and the tribal corporations were indispensable parties which could not be joined due to the Tribes' sovereign immunity. Id. In connection with this last point, Taylor argued that he enjoyed official immunity from suit himself as the chief legal officer of the Tribes. Id.

From this potpourri of challenges, the district court selected two on which to base the dismissal. Finding this matter as suitable for tribal court resolution as Stock West's earlier district court action against the Tribes themselves, see id. at 604, the district court concluded that "principles of comity require me to decline to exercise jurisdiction over the dispute until [Stock West] has exhausted its tribal court remedies." Id. at 605 (citations omitted). As an alternative basis for the decision, the court found that Taylor was an officer of the Colville Tribes under tribal law and that Taylor's drafting of the opinion letter was performed within the scope of Taylor's official authority, thus leading to the conclusion that Taylor was immune from suit under Colville tribal law. Id.

Stock West appeals the entry of judgment dismissing its action. We have jurisdiction over this timely appeal under 28 U.S.C. § 1291.

II

We turn to the first reason given by the district court for dismissing the action: comity. The district court, having concluded that this matter arose on the reservation and was a concern of the Tribes, essentially considered itself bound to defer to the tribal courts. See Stock West II, 737 F.Supp. at 605. We examine when deference is due, and then consider whether this case falls within those categories for which deference is required.

A

Indian tribes enjoy continued, if somewhat clipped, recognition of sovereignty stemming from their status as the aboriginal people of this continent. See Native Village of Venetie I.R.A. Council v. Alaska, 918 F.2d 797, 805 (9th Cir.1990). "Indian tribes consistently have been recognized ... as 'distinct, independent political communities' qualified to exercise powers of self-government, not by virtue of any delegation of powers, but rather by reason of their original tribal sovereignty." F. Cohen, Handbook of Federal Indian Law 232 (1982 ed.) (quoting Worcester v. Georgia, 31 U.S. (6 Pet.) 515, 559, 8 L.Ed. 483 (1832)); see, e.g., Hardin v. White Mountain Apache Tribe, 779 F.2d 476, 478 (9th Cir.1985) (power to exclude persons from the reservation is permissible for self-government and territorial management).

The tribal courts play a vital role in tribal self-government. Iowa Mut. Ins. Co. v. LaPlante, 480 U.S. 9, 14-15, 107 S.Ct. 971, 975-76, 94 L.Ed.2d 10 (1987). While tribal courts are not permitted to exert criminal jurisdiction over non-Indians, Oliphant v. Suquamish Indian Tribe, 435 U.S. 191, 98 S.Ct. 1011, 55 L.Ed.2d 209 (1978), or even non-member Indians, Duro v. Reina, --- U.S. ----, 110 S.Ct. 2053, 109 L.Ed.2d 693 (1990), they enjoy fairly broad powers in the civil context. See id. 110 S.Ct. at 2061. "Tribal authority over the activities of non-Indians on reservation lands is an important part of tribal sovereignty," and thus "[c]ivil jurisdiction over such...