Team Sys. Int'l, LLC v. Haozous, Case No. CIV-14-1018-D

Decision Date07 May 2015
Docket NumberCase No. CIV-14-1018-D
CourtUnited States District Courts. 10th Circuit. Western District of Oklahoma

Before the Court is Defendants' Motion to Dismiss [Doc. No. 19], filed pursuant to Fed. R. Civ. P. 12(b)(1) and (b)(6) and Fed. R. Civ. P. 17(b). Plaintiff has timely opposed the Motion, which is fully briefed.

Factual and Procedural Background

Plaintiff Team Systems International, LLC commenced this breach of contract action against Jeff Haozous, also known as Jeff Houser, individually and in various representative capacities; Fort Sill Apache Business Committee; Fort Sill Apache Industries ("FSAI") and its board of directors; and the Fort Sill Apache Casino, now known as Apache Casino Hotel. Upon initial examination of the Complaint, the Court found insufficient factual allegations to establish diversity jurisdiction under 28 U.S.C. § 1332(a), which was asserted as the basisof federal subject matter jurisdiction. See Compl. ¶ 3. Plaintiff was ordered to file an amended complaint within 14 days. See Order of Sept. 23, 2014 [Doc. No. 7]. Plaintiff subsequently filed a First Amended Complaint and a Second Amended Complaint attempting to cure the deficiencies identified by the Court, including that a suit against a tribal official and tribal entities was an action against the Fort Sill Apache Tribe and "'Indian tribes are not citizens of any state for purposes of diversity jurisdiction.'" See id., p.2 (quoting Gaines v. Ski Apache, 8 F.3d 726, 729 (10th Cir. 1993)). In permitting the filing of the Second Amended Complaint, the Court made no determination of whether diversity jurisdiction exists or whether the factual allegations of Plaintiff's amended pleading are sufficient to establish complete diversity of citizenship.

Currently, the named defendants are Jeff Haozous individually and in his official capacity as president and chief executive officer of FSAI, the board of directors of FSAI, and FSAI. Plaintiff alleges that FSAI is "a business entity organized under the tribal laws of Fort Sill Apache Tribe of Oklahoma with principal offices and place of business" in Oklahoma. See Second Am. Compl. [Doc. No. 12], ¶ 2. Plaintiff states that FSAI is "sometimes called a 'corporation' and it was formed as a business entity by internal actions of the Fort Sill Apache Tribe and its Tribal Council. As such, FSAI is considered to be a citizen of Oklahoma for diversity purposes." Id. (citing the holding of Gaines, 8 F.3d at 729, that a corporation chartered by a tribe "will be considered a citizen of a state for purposes of diversity jurisdiction"). Plaintiff claims that complete diversity exists because all defendants are citizens of Oklahoma and Plaintiff is considered to be a citizen of Florida, Virginia,Maryland, and Texas. See id. ¶ 3. (citations omitted). Attachments to the Second Amended Complaint include copies of FSAI's articles of incorporation, which show it is a wholly owned corporation of the Fort Sill Apache Tribe of Oklahoma (hereafter, the "Tribe"), and the Tribe's current constitution and bylaws. Id., Exs. B-C [Doc. Nos. 12-2 & 12-3].

Defendants move to dismiss the action, in part, for lack of subject matter jurisdiction. They do not challenge Plaintiff's position that FSAI is a citizen of Oklahoma but, instead, contend it is entitled to sovereign tribal immunity and all other defendants (who are alleged to be alter egos of FSAI) enjoy the same immunity. Plaintiff alleges, and argues in opposition to the Motion, that "Defendants have waived any rights to sovereign immunity they may otherwise have had" by an express provision of the written contract between Plaintiff and FSAI. See Second Am. Compl. [Doc. No. 12], ¶ 14.

As to the board of directors of FSAI, Defendants contend that the board is not an entity subject to suit in its own name, apart from FSAI, and that this putative defendant should be dismissed for lack of capacity to be sued. Plaintiff makes no response to this argument, and thus, the Court deems the issue confessed. Further, Plaintiff presents no legal authority that would permit a suit against a corporation's board of directors as a separate, suable entity under Oklahoma law, which governs this issue. See Fed. R. Civ. P. 17(b)(3). Defendants admit a lack of controlling precedent in Oklahoma but have presented legal authority from other jurisdictions to support their position. See Defs.' Mot. Dism. [Doc. No. 19], pp.13-14. The Court's research reveals persuasive authority in the arguably analogous situation of a board of education. In Oklahoma, a board of education is thegoverning body of a school district (which is "a body corporate" with "the usual powers of a corporation," see Okla. Stat. tit. 70, § 5-105), but the board may not sue or be sued. See Primeaux v. Ind. Sch. Dist. No. 5, 954 F. Supp. 2d 1292, 1294-95 (N.D. Okla. 2012). Thus, the Court finds that Plaintiff's claim asserted against FSAI's board of directors should be dismissed.

As to Plaintiff's action against Chairman Haozous in his official capacity as president or chief executive officer of FSAI, the law is well settled that an official-capacity suit is treated as a suit against the entity that the official represents. See Kentucky v. Graham, 473 U.S. 159, 165 (1985); Johnson v. Board of County Comm'rs, 85 F.3d 489, 493 (10th Cir. 1996). Thus, any claim asserted against Chairman Haozous in his capacity as an officer or manager of FSAI simply duplicates Plaintiff's claim against FSAI. Accordingly, the Court views Plaintiff's Second Amended Complaint as asserting claims against Chairman Haozous individually and FSAI.

I. Motion to Dismiss for Lack of Jurisdiction
A. Standard of Decision

"Motions to dismiss for lack of subject matter jurisdiction 'generally take one of two forms: (1) a facial attack on the sufficiency of the complaint's allegations as to subject matter jurisdiction; or (2) a challenge to the actual facts upon which subject matter jurisdiction is based.'" City of Albuquerque v. United States Dep't of Interior, 379 F. 3d 901, 906 (10th Cir. 2004) (citing Ruiz v. McDonnell, 299 F. 3d 1173, 1180 (10th Cir. 2002)). Where "the movant goes beyond the allegations in the complaint and challenges the facts upon whichsubject matter jurisdiction depends . . . , the court must look beyond the complaint and has wide discretion to allow documentary and even testimonial evidence." Paper, Allied-Indus., Chem. & Energy Workers Int'l Union v. Continental Carbon Co., 428 F.3d 1285, 1292 (10th Cir. 2005); see Holt v. United States, 46 F. 3d 1000, 1002-03 (10th Cir. 1995). A court may consider such evidence without converting the motion to one for summary judgment under Rule 56, unless "the jurisdictional question is intertwined with the merits of the case." Holt, 46 F. 3d at 1003; see Sizova v. Nat'l Inst. Standards & Tech, 282 F.3d 1320, 1324 (10th Cir. 2002); Pringle v. United States, 208 F.3d 1220, 1222 (10th Cir. 2000). The issues are considered to be intertwined for this purpose where "resolution of the jurisdictional question requires resolution of an aspect of the substantive claim." Pringle, 208 F.3d at 1223; see Sizova, 282 F.3d at 1324.

In this case, Defendants challenge the actual facts on which subject matter jurisdiction depends, but they do not rely on additional evidence outside the Second Amended Complaint. Further, the jurisdictional issues of sovereign immunity and waiver are not intertwined with the merits of Plaintiff's claims. Therefore, the Court need not convert the Motion to one under Rule 56.

B. Discussion
1. FSAI's Entitlement to Tribal Immunity

The Tenth Circuit has held that a corporation or business entity created under tribal law may be entitled to share in the tribe's sovereign immunity under appropriate circumstances. See Somerlott v. Cherokee Nation Distrib., Inc., 686 F.3d 1144, 1149 (10thCir. 2012). To determine if a tribal business qualifies as a "subordinate economic entity" that enjoys sovereign immunity, the court has considered the following factors: "(1) the method of creation of the economic entities; (2) their purpose; (3) their structure, ownership, and management, including the amount of control the tribe has over the entities; (4) the tribe's intent with respect to the sharing of its sovereign immunity; and (5) the financial relationship between the tribe and the entities." Breakthrough Mgmt. Group, Inc. v. Chukchansi Gold Casino & Resort, 629 F.3d 1173, 1187 (10th Cir. 2010). The parties do not address these factors but, instead, assume FSAI would be entitled to assert sovereign immunity.

Based on FSAI's articles of incorporation, this assumption is well-founded. FSAI was created by the Tribe's governing body, its general council, as a wholly owned corporation of the Tribe to fulfill a "duty to provide for the health, safety, morals and welfare of all persons within the jurisdiction of the Tribe." See Second Am. Compl., Ex. 2 [Doc No. 12-2], § 1-020(A). The creation of FSAI was deemed necessary to serve "an essential governmental function . . . to address serious economic, social and health problems associated with the serious unemployment and underemployment within the [Tribe], the general lack of available tribal funds . . . to address these problems, and the attendant impact upon the public health, safety, and welfare of the Tribe created by this situation." Id. § 1-030(A)-(B). The stated purposes of FSAI's organization and operation are to remedy a disproportionate unemployment rate, provide revenue for the Tribe's governmental purposes, attract private industry to the Tribe's jurisdiction, and coordinate activities with tribal leaders toward the Tribe's goal of repatriation to sacred homelands in New Mexico and Arizona. Id. § 1-040.


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