Tohono O'Odham Nation v. Schwartz

• Decision Date: 16 September 1993
• Docket Number: No. CIV 92-2422-PHX-SMM.,CIV 92-2422-PHX-SMM.
• Citation: 837 F. Supp. 1024
• Parties: TOHONO O'ODHAM NATION, and Tohono O'odham Housing Authority, Plaintiffs, v. The Honorable Jonathan H. SCHWARTZ, Maricopa County Superior Court, Division 61, and Canyon Contracting Company, Defendants.
• Court: U.S. District Court — District of Arizona

837 F. Supp. 1024

TOHONO O'ODHAM NATION, and Tohono O'odham Housing Authority, Plaintiffs, v. The Honorable Jonathan H. SCHWARTZ, Maricopa County Superior Court, Division 61, and Canyon Contracting Company, Defendants.

No. CIV 92-2422-PHX-SMM.

United States District Court, D. Arizona.

September 16, 1993.

David P. Frank, Office of the Atty. Gen. of Tohono O'odham Nation, Sells, AZ, for plaintiff Tohono O'odham Nation.

Daniel W. Hester and Thomas L. LeClaire, Fredericks & Pelcyger, Boulder, CO, for plaintiff Tohono O'odham Housing Authority.

Mary Jane Gregory, Ariz. Atty. General's Office, Phoenix, AZ, for defendant Schwartz.

Guy William Bluff, Virginia Lee Varner, Guy Bluff, P.C., Phoenix, AZ, for defendant Canyon Contracting Co.

MEMORANDUM OF DECISION AND ORDER

McNAMEE, District Judge.

Canyon Contracting Company ("Canyon"), a non-Indian contractor, filed suit against the Tohono O'odham Housing Authority ("TOHA") in state court for an alleged breach of contract involving an Indian housing project on the Tohono O'odham Reservation. Canyon, as a party of the state court action, sought a writ of execution against an off-reservation bank account to satisfy an award of attorney's fees from a denial of TOHA's petition for a Writ of Special Action in the Arizona Court of Appeals. The Tohono O'odham Nation ("the Nation") and TOHA obtained a temporary restraining order from this Court restraining the writ of execution and further proceedings in state court. After a hearing on the motion for preliminary injunction, TOHA and the Nation requested that the injunction be made permanent.

I. BACKGROUND

The Tohono O'odham Nation is a federally recognized Indian tribe, organized pursuant to Section 16 of the Indian Reorganization Act of 1934, 25 U.S.C. § 476 et seq. (1982), and occupies a reservation in south central Arizona known as the Tohono O'odham Reservation. The sovereign powers, authority, and jurisdiction of the Nation extend to all lands within the Reservation and to all persons and activities carried on within the Reservation. Constitution of the Tohono O'odham Nation Art. I §§ 1, 2. The legislative power of the Nation is vested in the Tohono O'odham Legislative Council. See Id. at Art. V, § 1. The judicial power of the Nation is vested in the Tohono O'odham Tribal Courts. See Id. at Art. VIII, I §§ 1, 2.

The Tohono O'odham Housing Authority is a governmental agency of the Nation, created in 1962 by the Legislative Council of the Tohono O'odham Nation, and organized pursuant to tribal ordinance to address and administer the housing needs of tribal members on the Reservation. See Tohono O'odham Ordinance No. 56, Art. I and II. In accordance with the United States Housing Act of 1937, 42 U.S.C. § 1437, et seq., the TOHA has the power to contract with and to borrow money from HUD for the purpose of constructing housing for tribal members on the Reservation. As an arm of the tribal government, all of TOHA's property is considered public property of the Nation.

TOHA undertook to develop a federally funded housing project ("Project") on the Reservation consisting of 144 homes on scattered sites throughout the Reservation in 1982. The homes were to be occupied by tribal members and paid for by the TOHA. In February 1982, TOHA (then known as the Papago Housing Authority) contracted with Canyon's predecessor-in-interest, Miles-Canyon Joint Venture, for the construction of the 144 homes on the Reservation. In 1983, disputes under the contract arose as the Project neared completion which resulted in litigation between Canyon and TOHA.

II. PROCEDURAL HISTORY

In 1984, Canyon filed a breach of contract suit in Maricopa County Superior Court against TOHA and the architect/engineer for the Project seeking monies retained by TOHA in the amount of $341,641.33 and damages in the amount of $179,659.41. Very early on, this case (Civil Action No. C506736) was dismissed without prejudice.

In May 1988, Canyon filed a subsequent suit against TOHA in Maricopa County Superior Court (Civil Action No. 88-13562). The complaint asserts that $31,913.00 is being wrongfully retained by TOHA under the contract to construct 144 housing units on the Reservation and that alleged delays in construction by TOHA caused $179,659.41 in damages to Canyon. TOHA filed a motion to dismiss Canyon's complaint for lack of subject matter jurisdiction in December 1988. The Honorable Daniel E. Nastro denied TOHA's motion to dismiss in February 1989. Subsequently, Canyon was granted partial summary judgment on the issue of subject matter jurisdiction. However, the court denied Canyon's motion for partial summary judgment on the issues of liability and damages for the $31,913.00 claim on retained funds.

TOHA filed a Petition for a Writ of Special Action in the Arizona Court of Appeals requesting an order dismissing the state court action for lack of subject matter jurisdiction in March 1989. The Nation filed a brief as amicus curiae in the Special Action objecting to the Superior Court's assumption of subject matter jurisdiction. The Arizona Court of Appeals subsequently declined to accept jurisdiction over the Special Action, thereby expressing no opinion on the issue of the Superior Court's assumption of subject matter jurisdiction. Canyon was awarded attorney's fees which serve as the underlying basis for Canyon's writ of execution.

TOHA and Canyon then initiated settlement negotiations. Shortly thereafter, in June 1989, the parties reached what was believed by TOHA to be a final and complete settlement of the entire litigation. After a disagreement developed over the settlement, TOHA filed a motion in Superior Court to compel the enforcement of the settlement agreement. The Honorable Paul A. Katz of the Superior Court entered an order finding a valid and binding settlement of the entire litigation in May 1990. Canyon's motion for reconsideration of Judge Katz's order was denied in July 1990. The Superior Court entered judgment affirming the settlement agreement and ordered the case dismissed with prejudice in September 1990.

Canyon appealed the Superior Court's order of settlement and dismissal. In July 1992, the Arizona Court of Appeals filed its opinion concluding the settlement agreement was not valid because Canyon had not executed the agreement nor assented to its terms. The Court of Appeals remanded the matter to the Superior Court for a determination of Canyon's original claims for retained monies and delay damages. On remand, the case was assigned to the Honorable Jonathan H. Schwartz. The Superior Court trial set for May 10, 1993 has been temporarily enjoined pending the outcome of this action in federal court. Canyon contends that this Court is without jurisdiction to enjoin the state court proceedings.

III. APPLICABILITY OF THE AUTOMATIC STAY TO THIS ACTION

After this Court entered the temporary restraining order and while the Court was considering whether to enter a permanent injunction, Canyon filed a petition with the United States Bankruptcy Court of the District of Arizona. Accordingly, the first issue this Court must decide is whether this proceeding must be stayed pending the outcome of Canyon's action in the Bankruptcy Court.

Clearly, under Section 362(a) of the Bankruptcy Code, the filing of a Chapter 11 bankruptcy petition automatically stays all actions or proceedings which have been brought "against the debtor." 11 U.S.C. § 362(a). Notably, however, the statute does not specify whether actions which have been brought by the debtor are stayed as well. Further, the circuit courts which have addressed this question have held that the automatic stay applies only to actions brought against the bankrupt, not to those brought by the bankrupt. See e.g., Martin-Trigona v. Champion Federal Savings and Loan Ass'n, 892 F.2d 575, 577 (7th Cir.1989); In re Berry Estates, Inc., 812 F.2d 67, 71 (2d Cir.1987). Accordingly, the Court finds that this action need not be stayed because of Canyon's bankruptcy.

IV. DISCUSSION

A. JURISDICTION OF THIS COURT

The next issue the Court must address is whether it has jurisdiction over this action.

1. GENERALLY

The jurisdiction of this Court is invoked by the Nation and the TOHA pursuant to 28 U.S.C. § 1331 (federal question), 28 U.S.C. § 1362 (Indian tribes), and 28 U.S.C. §§ 2201-2202 (declaratory judgment).

Despite Canyon's assertion to the contrary, federal courts do have jurisdiction and authority to enjoin state court proceedings when it is necessary to preserve the integrity of Indian sovereignty. White Mountain Apache Tribe v. Smith Plumbing Co., 856 F.2d 1301, 1304-1306 (9th Cir.1988). 28 U.S.C. § 1362 provides that "the district courts shall have original jurisdiction of all civil actions, brought by any Indian tribe or band with a governing body duly recognized by the Secretary of the Interior, wherein the matter in controversy arises under the Constitution, laws or treaties of the U.S." 28 U.S.C. § 1362.

Canyon contends that the Ninth Circuit's ruling in Navajo Tribal Utility Authority v. Arizona Dept. of Revenue, 608 F.2d 1228 (9th Cir.1979), precludes this Court from asserting jurisdiction in this case. In Navajo Tribal Utility Authority, the Ninth Circuit held that a "subordinate, economic enterprise," in that case an Indian entity, constituted an Indian tribe or band within the meaning of 28 U.S.C. § 1362, and, thus, there was no jurisdiction in the district court. Id. at 1229-1233. The Circuit Court went on to opine, however, that the result would have been different if the Tribe would have been a co-plaintiff in the action. Id. at 1234. In the present case, the Nation is a co-plaintiff with TOHA. Canyon's broad, preclusive jurisdictional interpretation is neither supported by Navajo Tribal Utility Authority nor by 28 U.S.C. § 1362. Because the Tribe brought this action in conjunction with TOHA, this Court has jurisdiction over this action.

2. ANTI-INJUNCTION ACT

Canyon's...