Many tribal entities that choose to incorporate do so through Section 17 of the Indian Reorganization Act of 1934 (IRA). Through a Section 17 incorporation, the tribe creates a separate legal entity to divide its governmental and business activities. The Section 17 corporation has a federal charter and articles of incorporation, as well as bylaws that identify its purpose, much like a state-chartered corporation. The main differences between these entities and state chartered corporations are that (1) the IRA places certain limitations on incorporated tribes, and the secretary of the interior issues the federal charter; (2) some corporate transactions, such as the sale or lease of tribal land or assignment of tribal income, require the approval of the secretary; and (3) the tribe retains sovereign immunity.
An Indian corporation may also be organized under tribal or state law. If the entity was formed under tribal law, formation likely occurred pursuant to its own corporate code – just as state entities incorporate via a state’s corporate code. Under federal common law, tribal corporations enjoy sovereign immunity from suit. However, it is unclear whether a tribal corporation’s sovereign immunity is waived through state incorporation. While courts are trending towards a rule that state incorporation waives sovereign immunity, there is no consensus at this point.
Generally, both federal and state taxes apply to tribes, tribal enterprises, and tribal members outside of a tribe’s reservation. Within Indian country, on the other hand, the initial and frequently dispositive question in Indian tax cases is who bears the legal incidence of the tax. When the legal incidence falls on tribes, tribal members, or tribally owned corporations, states are categorically barred from implementing the tax.
When the legal incidence falls on non-Indians, however, a more nuanced analysis applies. Because Congress does not often explicitly preempt state law, the Supreme Court and the lower federal courts engage in a balancing act to determine whether tribal self-governance rights, bolstered by federal laws, preempt state taxation of non-Indians in Indian country. This balancing act weighs a state’s interest in the non-Indian conduct to be taxed against combined federal and tribal interests in controlling affairs that arise on-reservation. And, as with all balancing tests, the result is a crapshoot.
Most tribes have their own court systems, which include extensive court rules and procedures. While tribal courts are similar in structure to other courts in the United States, tribal courts are also unique. For example, the qualifications of tribal court judges vary widely depending on the court. Some tribes require tribal judges to be members of the tribe and to possess law degrees, while others do not. Generally though, as a matter of federal law – particularly when it comes to the application of exhaustion principles – tribal courts are “competent law-applying bodies.”
As with other courts, tribal court judges usually adhere to a tribe’s judicial precedent. In some instances, tribal judges place great weight on the decisions from other tribal courts. Unfortunately, conducting research on prior tribal court decisions may be difficult. There is no official tribal court reporter that compiles all published decisions from the various tribal courts. While groups like the Tribal Court Clearinghouse and the National Tribal Justice Resource Center now publish decisions from participating tribal courts on their websites, many tribal courts have yet to maintain their opinions in any searchable format.
Where tribal law is silent on an issue, federal and state court opinions often serve as persuasive authority to a tribal court, particularly in commercial litigation matters. State courts either extend full faith and credit to tribal court orders or enforce judgments under a comity analysis. Similarly, federal courts generally grant comity to tribal court rulings.
Tribal Court Civil Jurisdiction
The metes and bounds of tribal court jurisdiction generally depend on three factors (1) tribal law, (2) the status of the defendant, and (3) the land upon which the subject matter of the suit arises.
First, just as the type of cases that state chancery courts and federal bankruptcy courts can hear are limited by state and federal law, respectively, the type of cases that tribal courts may hear is largely a matter of tribal law. While most tribal courts are courts of general jurisdiction, some Tribes have resolved to limit the types of cases that may be brought. Civil suits in the Muckleshoot Tribal Court, for instance, are statutorily limited to suits against the tribe – the tribal court does not possess jurisdiction to hear run-of-the-mill citizen v. citizen tort suits, for example. The Tulalip Tribal Court, on the other hand, is a court of general jurisdiction.
Assuming that the tribal court is a court of general jurisdiction, tribal courts possess both subject matter and personal jurisdiction over a civil suit by any party – Indian or non-Indian – against an Indian defendant for a claim arising on the reservation.
As to non-Indian defendants, however, it becomes a bit more complicated. Generally, tribal courts possess jurisdiction over all non-Indian activities on “Indian trust land” (called that because, due to antiquated federal policies, sovereign Indian land is actually held in trust for the tribe by the federal government). Thus, the first step is to determine the status of reservation land. Believe it or not, not all reservation land is trust land. Many reservations are checker-boarded, with parcels of non-Indian fee lands sprinkled throughout (also due to antiquated federal policies). The Puyallup Indian Reservation offers one extreme example: the reservation consists of 99 percent non-Indian-owned fee land, and includes the much of the City of Tacoma and one of the largest container ports in North America. The Port Gamble S’Klallam Reservation, on the other hand, is 100 percent Indian trust land.
Thus, while the Port Gamble S’Klallam Tribe possesses jurisdiction over all activities arising on its reservation, the Puyallup Indian Tribe must conduct a second level of analysis to determine whether it possess jurisdiction over an activity arising on non-Indian owned fee land within its reservation (at Port of Tacoma, for example). Here, the tribe must look to the “landmark” decision of Montana v. United States, where the Supreme Court held that a tribal court cannot assert jurisdiction in this circumstance unless one of two exceptions applies: (1) the non-Indian has entered into “consensual relations” with the tribe or its members, or (2) the subject matter threatens the “political integrity, the economic security, or the health or welfare of the tribe.” 450 U.S. 544, 565-66 (1981).
The Supreme Court has made clear that a private contract qualifies as a consensual relationship under the Montana rule, thus affirming that tribal courts have jurisdiction over non-Indian parties to tribal contracts. This is the case whether the contract involves on- or off-reservation conduct. Moreover, federal courts have also held that a party who files a civil complaint in tribal court has entered into a “consensual relationship” with the tribe.
Tribal Court Exhaustion
The question of whether a tribal court has jurisdiction over a nontribal party is one of federal law, giving rise to federal questions of subject matter jurisdiction. Thus, non-Indian parties can challenge the tribal court’s jurisdiction in federal court. Before this occurs, however, the opposing party must comply with the tribal court exhaustion rule. This rule is akin to the well-known rule of administrative law as announced in Smoke v. City of Seattle: “if an administrative proceeding can alleviate the issue, a litigant must first pursue that remedy before the courts will intervene.” 937 P.2d 186, 190 (1997). Applied to tribal courts, this means that the party opposing jurisdiction is generally required to make its case to the tribal court prior to challenging tribal jurisdiction in a federal district court. If tribal options are not exhausted prior to bringing a jurisdictional challenge in federal court, the court will be forced to dismiss or stay the case until tribal remedies are exhausted.
After the tribal court has ruled on the merits of the case and all appellate options have been exhausted, the appellant can file suit in federal court, where the question of tribal court jurisdiction is reviewed by a de novo standard. The federal court may look to the tribal court’s jurisdictional determination for guidance; however, that determination is not binding. If the federal court affirms the tribal court ruling, the nontribal party may not re-litigate issues already determined on the merits by the tribal court.
Economic growth and development in Indian country has spurred many businesses to engage in business dealings with tribes and tribal entities. Confusion often arises during these transactions because of the unique sovereign and jurisdictional characteristics attendant to business transactions in Indian country. Accordingly, counsel assisting in these transactions, or any subsequent litigation, should conduct certain due diligence with respect to the pertinent federal law, tribal organizational documents, and tribal laws that may collectively dictate and control the business relationship.
To maximize a client’s chances of a successful partnership with tribes and tribal entities, counsel should ensure that the transactional documents contain clear and unambiguous contractual provisions that address all rights, obligations, and remedies of the parties. Therefore, even if the deal fails, careful negotiation and drafting, and in turn thoughtful procedural and jurisdictional litigation practice, will allow the parties to more expeditiously litigate the merits of any dispute, without jurisdictional confusion. As business between tribes and nontribal parties continues to grow, it becomes more and more important that both sides of the transaction fully understand and respect the relationship and fully grasp the law that governs it.