Stock West, Inc. v. Confederated Tribes of the Colville Reservation, s. 87-4123

• Decision Date: 20 April 1989
• Docket Number: Nos. 87-4123,87-4119,s. 87-4123
• Citation: 873 F.2d 1221
• Parties: STOCK WEST, INC., an Oregon corporation, Plaintiff/Appellee/Cross-Appellant, v. CONFEDERATED TRIBES OF THE COLVILLE RESERVATION; Colville Reservation; Colville Business Council; Colville Tribal Enterprise Corporation, and; Colville Indian Precision Pine Corporation, Defendants/Appellants/Cross-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1221

873 F.2d 1221

STOCK WEST, INC., an Oregon corporation, Plaintiff/Appellee/Cross-Appellant, v. CONFEDERATED TRIBES OF THE COLVILLE RESERVATION; Colville

Reservation; Colville Business Council; Colville Tribal

Enterprise Corporation, and; Colville Indian Precision Pine

Corporation, Defendants/Appellants/Cross-Appellees.

Nos. 87-4123, 87-4119.

United States Court of Appeals,

Ninth Circuit.

Argued and Submitted Jan. 12, 1989.

Decided April 20, 1989.

Michael Taylor, Nespelem, Wash., for defendants-appellants-cross-appellees.

Barbee B. Lyon and John H. Boone, San Francisco, Cal., for plaintiff-appellee-cross-appellant.

Appeal from the United States District Court for the Eastern District of Washington.

Before WRIGHT, TANG and WIGGINS, Circuit Judges.

TANG, Circuit Judge:

Stock West, Inc. contracted with two Colville tribal entities to construct and later manage a sawmill on the Colville reservation. The tribe claimed that Stock West failed to perform its contractual duties and brought an action in tribal court. Stock West filed a demand for arbitration in tribal court pursuant to terms of the contracts. The tribal court ruled that it had jurisdiction and ruled also that since the validity of the arbitration clauses was in doubt, the court would decide the underlying contract dispute rather than have the matter submitted to arbitration. A February 1989 trial date has been set.

Stock West then filed an action in district court to compel arbitration and to enjoin the tribal court proceedings. The district court ruled that it had diversity jurisdiction to compel arbitration, but that it would not exercise its jurisdiction and instead would dismiss the case on the grounds of comity. On appeal, Stock West challenges the dismissal and the refusal to compel arbitration, and the tribe cross-appeals challenging the ruling that the district court had jurisdiction.

I. Factual Background

A. Background to Contracts

In November and December 1983, members of the Stock family met with representatives of the Confederated Tribes of the Colville Reservation to discuss the possibility of building a sawmill on the reservation. The meetings took place both at the Stocks' office in Oregon and on the reservation in Washington. A Professional Services Agreement ("PSA") signed by James Stock and a tribal representative on January 20, 1984, provided that "Stockwest" ¹ was to provide business and marketing plans concerning the proposed sawmill to the tribe. According to paragraph 11 of the PSA:

[a]ll disputes over the subject matter of this agreement or performance thereof will proceed to final resolution in Colville Tribal Courts and be controlled and bound by the laws of the Colville Confederated Tribes.

Supp. ER Tab 7. ²

B. The Contracts: The CMA and the MMA

The two major contracts at issue in this case are the Construction Management Agreement ("CMA") and the Management and Marketing Agreement ("MMA"). These contracts were signed on July 23, 1984 by James Stock on behalf of Stock West, and a tribal representative on behalf of Colville Tribal Enterprise Corporation ("CTEC") and Colville Indian Precision Pine Company ("CIPP"). ³ These contracts were signed on the reservation.

Under the CMA, Stock West was to manage and supervise all facets of the construction of the sawmill. Stock West maintained an office at CIPP headquarters on the reservation. The construction itself was not to be performed by Stock West, but rather by tribal employees or contractors. Actual construction of the sawmill started in approximately August 1984 and was substantially completed by February 1986.

Under the MMA, Stock West was to provide management and marketing services once the sawmill was in operation. To perform these contractual obligations, James Stock was made a director and president of CIPP. Stock West also opened a sales office in Portland, Oregon and served as a selling agent of CIPP.

For the purposes of the present controversy, the most relevant provisions of the contracts are the sections dealing with arbitration, ⁴ ] choice of law, ⁵ and waiver of sovereign immunity. ⁶ But unlike the PSA, neither the CMA nor the MMA include a provision vesting jurisdiction in tribal court.

II. Procedural Background

A. Tribal Court Proceedings

According to the tribe, Stock West failed to perform its contractual duties. Around July 15, 1986, the tribal parties served on Stock West a Notice of Default. ⁷ Stock West filed a response on July 28, 1986 in which it did not answer the tribe's claims of default but instead filed a demand for arbitration and selected an arbitrator as per the terms of the contracts. The tribe refused to agree to arbitration and refused to pay Stock West sums that Stock West says was owed.

On July 30, 1986, the tribe filed for (a) declaratory and injunctive relief, (b) recoupment of money paid and damages, and (c) a temporary restraining order (TRO). The tribal court issued the TRO. An amended complaint was filed on March 4, 1987.

On August 7, 1986, Stock West filed a Special Appearance in tribal court and entered into a Stipulated Joint Motion for Continuance on the hearing for the preliminary injunction. On August 22, 1986, the tribal court entered a preliminary injunction restraining Stock West from interfering with operations at the mill and requiring the tribe to post a bond.

On August 17, 1987, after full briefing and oral argument, the tribal court ruled in a published decision that it had jurisdiction over the defendants. Confederated Tribes of the Colville Reservation v. Stock West, 14 Ind.L.Rep. 6025 (Colville Tribal Ct.1987).

Stock West then filed motions to dismiss the tribe's action and to compel arbitration under the terms of the contracts and the federal Arbitration Act. 9 U.S.C. Secs. 1-4. Again after full briefing and oral argument, the tribal court denied these motions on May 2, 1988, ruling that the CMA and MMA were void for lack of Bureau of Indian Affairs (BIA) approval ⁸ and that the tribe's claims are thus a matter for the court, not an arbitrator, to resolve. Confederated Tribes of the Colville Reservation v. Stock West, 15 Ind.L.Rep. 6019 (Colville Tribal Ct.1988).

On July 25, 1988, the tribal court entered a pretrial order setting discovery deadlines. A trial date was set for February 13, 1989.

B. District Court Proceedings

On April 7, 1987, Stock West filed an action in federal district court to compel arbitration under the terms of the CMA and the MMA and to enjoin the tribal parties from pursuing the matter in tribal court. After a hearing, the district court granted the tribe's motion to dismiss. ⁹ Although the district court found that it had diversity jurisdiction under 28 U.S.C. Sec. 1332, it dismissed Stock West's action, ruling that

out of a sense of comity this Court should abstain in favor of Tribal Court jurisdiction, which [Stock West] concedes is concurrent.

ER TabE.

Stock West now brings this appeal, challenging the district court's dismissal of its action and refusal to compel arbitration. The tribe cross-appeals, challenging the district court's determination that it had jurisdiction to compel arbitration.

III. Does Federal Subject Matter Jurisdiction Exist?

In considering the jurisdiction questions, it should be remembered that "[i]t is a fundamental principle that federal courts are courts of limited jurisdiction." Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 374, 98 S.Ct. 2396, 2403, 57 L.Ed.2d 274 (1978). A federal court is presumed to lack jurisdiction in a particular case unless the contrary affirmatively appears. California ex rel. Younger v. Andrus, 608 F.2d 1247, 1249 (9th Cir.1979).

Although a district court's determination of federal subject matter jurisdiction is reviewed de novo, Mobil Oil Corp. v. City of Long Beach, 772 F.2d 534, 538 (9th Cir.1985), the district court's factual findings on jurisdictional issues must be accepted unless clearly erroneous. Bruce v. United States, 759 F.2d 755, 758 (9th Cir.1985).

A. Federal Question Jurisdiction Under 28 U.S.C. Sec. 1331

It is clear that with respect to the underlying substantive dispute, the tribe is correct in declaring that no federal question jurisdiction exists in this case. ¹⁰ According to 28 U.S.C. Sec. 1331:

The district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States.

Stock West cites in its complaint the Declaratory Judgment Act, 28 U.S.C. Sec. 2201, as a basis for jurisdiction. But this Act only creates a remedy and is not an independent basis for jurisdiction. California Dump Truck Owners Assoc. v. Associated Gen. Contractors, 562 F.2d 607 (9th Cir.1977). To obtain declaratory relief in federal court, there must be an independent basis for jurisdiction. Miller-Wohl Co. v. Commissioner of Labor & Indus., 685 F.2d 1088 (9th Cir.1982). Similarly, Stock West's reliance on the Arbitration Act, 9 U.S.C. Secs. 1-4, is insufficient to confer federal question jurisdiction. General Atomic Co. v. United Nuclear Corp, 655 F.2d 968 (9th Cir.1981), cert. denied, 455 U.S. 948, 102 S.Ct. 1449, 71 L.Ed.2d 662 (1982).

In addition, federal question jurisdiction does not exist merely because an Indian tribe is a party or the case involves a contract with an Indian tribe. ¹¹ "Otherwise the federal courts might become a small claims court for all such disputes." Gila River Indian Community v. Henningson, Durham & Richardson, 626 F.2d 708, 715 (9th Cir.1980), cert. denied, 451 U.S. 911, 101 S.Ct. 1983, 68 L.Ed.2d 301 (1981). ¹²

B. Diversity Jurisdiction Under 28 U.S.C. Sec. 1332

In considering whether federal diversity jurisdiction exists, aside from issues of exhaustion and comity, the wording of 28 U.S.C. Sec. 1332 must be considered, which provides in relevant part that

[t]he district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $10,000,...