Conducting Business with Tribes in the Aftermath of the Dollar General Supreme Court Split: What You and Your Clients Need to Know

About the Authors:

Heidi McNeil Staudenmaier is a partner in the Phoenix office of the law firm of Snell & Wilmer, where she manages the Native American Affairs practice group and also provides legal representation on gaming and business litigation issues. She is chair of the Business Law Section’s Business & Corporate Litigation Committee, past member of the Section Council, and past editor-in-chief of Business Law Today, as well as a member of the first class of Business Section Fellows.

Hannah K. Speirs is an associate in the Phoenix office of the law firm of Snell & Wilmer, where she practices general litigation with a focus on real estate and other commercial matters. She is a 2016 graduate of the Sandra Day O’Connor College of Law at Arizona State University.

Introduction

With the U.S. Supreme Court’s 4–4 split in Dollar Gen. Corp. v. Mississippi Band of Choctaw Indians, 136 S. Ct. 2159 (2016), tribal members and nonmember individuals and businesses are left to wonder who really wins in this tie. The split decision provided no written opinion and operates as an affirmation of the Fifth Circuit’s decision upholding the jurisdiction of the Mississippi Band of Choctaw tribal court over tort claims brought by a member of the Choctaw tribe against a corporation doing business on reservation land. This decision serves as a significant reminder that anyone doing business on tribal lands must be cognizant that tribal court jurisdiction likely may apply over any disputes that arise.

Overview of Tribal Jurisdiction

Over 30 years ago, the U.S. Supreme Court created two exceptions to the general rule that Indian tribes cannot exercise civil jurisdiction over nonmembers in Montana v. United States, 450 U.S. 544, 565–66 (1981). The first of the two Montana exceptions, also known as the “consensual relationship” exception, establishes that a tribe may regulate the activities of nonmembers entering consensual relationships with the tribe or members thereof through “commercial dealing, contracts, leases, or other arrangements.” Methods of such regulation include “taxation, licensing, or other means.”

Despite this evident pronouncement that tribal courts may, under certain circumstances, exercise jurisdiction over nonmembers, approximately 20 years after the Montana decision, the Supreme Court itself recognized that tribal courts had yet to exercise jurisdiction over a nonmember defendant in any context whatsoever, leaving many to question for two decades whether, and under what circumstances, nonmembers may be subject to tribal court jurisdiction. See generally Nevada v. Hicks, 533 U.S. 353 (2001) (finding Montana’s proscriptions to fall short of dispositive in the case “when weighed against the State’s interest in pursuing off-reservation violations of its laws.”).

Dollar General’s Procedural Posture

The factual background of Dollar General sounds in tort. Dolgencorp operates a Dollar General store on the Choctaw reservation in Mississippi, located on land held by the United States in trust on behalf of the Mississippi Band of Choctaw Indians (the Tribe). The Dollar General store is operated pursuant to a lease agreement with the Tribe and a business license issued by the Tribe to Dolgencorp. Dolgencorp, Inc. v. Mississippi Band of Choctaw Indians, 746 F.3d 167, 169 (5th Cir. 2014). The Tribe conducts the Youth Opportunity Program (YOP), a project which places young members of the Tribe in short-term, unpaid positions—similar to internships—for educational and training purposes. The manager of the Dollar General store, Dale Townsend (Townsend), agreed to participate in this program. Townsend was not a member of the Tribe. Thereafter, the YOP program placed a 13-year-old tribal member (Doe) at the store. Doe later accused Townsend of sexual molestation.

In January 2005, Doe filed suit against Townsend and Dolgencorp in the Choctaw tribal court, alleging that Dolgencorp was vicariously liable for Townsend’s actions and asserting the store negligently hired, trained, or supervised Townsend. Doe further claimed the assault caused severe mental trauma, seeking “actual and punitive damages in a sum not less than 2.5 million dollars.”

Townsend and Dolgencorp filed motions in tribal court seeking to dismiss Doe’s claims for lack of subject matter jurisdiction—both of which were denied. The parties appealed to the Choctaw Supreme Court, which upheld the denials based on a Montana-based analysis and found subject matter jurisdiction applicable over both defendants. Dolgencorp and Townsend then filed a new action in the U.S. District Court for the Southern District of Mississippi against the tribal defendants, alleging that the tribal court lacked jurisdiction over them and seeking to enjoin the prosecution of Doe’s tribal court suit.

The crux of the Dollar General case revolves around interpreting the meaning and implications of the Supreme Court’s decision in Plains Commerce Bank v. Long Family Land & Cattle Co., 554 U.S. 316 (2008). Unfortunately, for clarity’s sake, the Supreme Court resolved that case on other grounds, though it originally granted certiorari to decide whether Montana’s undefined “other means” language included adjudicating civil tort claims in tribal court.

In Plains Commerce, a bank that sold land to tribal members sought to avoid tribal court jurisdiction in the wake of the transaction. The court decided via a fractured 5-4 vote in favor of finding the bank not subject to the lawsuit filed in tribal court, despite having entered into a consensual agreement with tribal members. The court found that tribes lack inherent authority to regulate the sale of non-Indian land, regardless of the form of regulation, thus failing to apply and analyze in any meaningful manner Montana’s first exception.

In Dollar General, Dolgencorp claimed that the Plains Commerce decision narrowed the first Montana exception. Specifically, for tribal jurisdiction to apply, the party seeking to establish jurisdiction must show that: (1) the nontribal entity or individual agreed to a consensual relationship; and (2) the relationship impacts to some degree tribal self-government or internal relations.

Dolgencorp asserted that, because the consensual relationship between Dolgencorp, Townsend, and the tribal parties does not implicate tribal self-governance or internal relations, tribal jurisdiction could not be asserted. Dolgencorp further argued that “tribal sovereignty is subordinate to Congressional authority as a practical matter, and inconsistent with federal concepts of sovereignty.”

The tribal defendants countered that Plains Commerce did not alter the Montana exceptions in any manner, and that a plain showing of a consensual relationship between the tribe and nontribal parties supports a finding of consent to tribal jurisdiction. The Tribe also relied on a contract with Dollar General that “explicitly bound” the corporation to tribal court, arguing further that a sexual assault case addressed tribal health and welfare and thus was clearly subject to tribal jurisdiction.

The Mississippi District Court in Dollar General agreed with the tribal defendants’ arguments in favor of jurisdiction and granted summary judgment in their favor. Dolgencorp Inc. v. Mississippi Band of Choctaw Indians, 846 F. Supp. 2d 646, 653–654 (S.D. Miss. 2011) (“In the court’s opinion, defendants have the better of this argument. Montana identified nonmembers’ consensual relationships with tribes and their members, which involve conduct on the reservation (and particularly on Indian trust land), as a circumstance that warrants tribal civil jurisdiction over matters arising from those relationships.”). The court refused to read any narrowing of Montana’s exception through the Plains Commerce decision and subsequent jurisprudence.

Dolgencorp challenged the district court’s determination that Montana’s consensual relationship exception had been met. However, the Fifth Circuit Court of Appeals affirmed the district court’s decision. In doing so, the court held that Doe was essentially an unpaid intern, unquestionably creating a consensual relationship of commercial nature. Dolgencorp, Inc. v. Mississippi Band of Choctaw Indians, 746 F.3d 167, 173 (5th Cir. 2014) (“In essence, a tribe that has agreed to place a minor tribe member as an unpaid intern in a business located on tribal land on a reservation is attempting to regulate the safety of the child’s workplace. Simply put, the tribe is protecting its own children on its own land. It is surely within the tribe’s regulatory authority to insist that a child working for a local business not be sexually assaulted by the employees of the business.”).

It is important to note that the Fifth Circuit did not establish a commercial relationship as a prerequisite to the assertion of tribal jurisdiction. By rejecting Dolgencorp’s assertion that Plains Commerce narrowed the Montana exception, the appellate court established a higher-level, more general focus when determining an activity’s impact on the Tribe’s interest in regulating the activity.

Fifth Circuit Judge Smith wrote a biting dissent, emphasizing that: (i) Montana’s narrow exception applies only when the conduct questioned is encompassed under a tribe’s authority to “protect tribal self-government or to control internal relations”; and (ii) even if this initial barrier had been met, the nexus between Dolgencorp’s participation in the YOP and the full body of Indian tort law was too weak to permit tribal jurisdiction over Dolgencorp. Judge Smith opined that Dolgencorp could not have anticipated that its consensual relationship with Doe via the YOP program would subject it to any and all tort claims actionable under tribal law; thus, an insufficient nexus existed to satisfy Montana’s first exception. He postured that this first exception “envisages discrete regulations consented to ex ante; the majority, to the contrary, upholds an unprecedented after-the-fact imposition of an entire body of tort law based on Dolgencorp’s participation in a brief, unpaid internship program.”

The Supreme Court’s Dollar General Split

The Supreme Court granted a petition for a writ of certiorari to Dollar General and its parent company, Dolgencorp (together, Dolgencorp), to evaluate whether Dolgencorp could be brought under tribal jurisdiction to adjudicate civil tort claims against nonmembers under the first exception enumerated in Montana. See generally Dollar General, 136 U.S. at 2159. The tribal court approached the Supreme Court’s review with unlikely odds, having won only two Supreme Court cases involving tribal interests, compared to nine losses, since 2005. In addition to its wide recognition as a pro-business bench, the Supreme Court itself acknowledged in 2001 that it had never found a tribal court to have jurisdiction against nonmembers under the first Montana exception.

The Tribe, however, did have some support. For example, although the Supreme Court had never held as such, the Fifth Circuit pointed out that, in its view, every circuit court to address whether tribal courts may exercise jurisdiction over tort claims against nonmembers under Montana’s first exception have held or assumed that they may validly do so. Dolgencorp, Inc., 746 F.3d at 173 n.3. Additionally, the Department of Justice (DOJ) filed an amicus brief in support of the Tribe’s positions and supported the Fifth Circuit’s decision that the Tribe had jurisdiction over Doe’s tort claims because it has the ability to regulate conduct occurring on tribal land, irrespective of Montana’s rule or exceptions. Brief for the United States as Amicus Curiae, Dollar General Corp. v. Mississippi Band of Choctaw Indians, 2015 WL 2228553, at 9–10 (U.S.).

On June 23, 2016, the Supreme Court issued its Dollar General ruling, with a 4–4 split decision, affirming the decision of the Fifth Circuit and upholding tribal court jurisdiction over Doe’s tort claims against Dolgencorp. Because of the tie, no written opinion was issued by the court; thus, the decision does not operate as direct precedent outside of the Fifth Circuit (which includes Mississippi, Louisiana, and Texas). Nevertheless, this does provide persuasive precedent for other jurisdictions and “affirms the longstanding legal principle that tribal courts have civil jurisdiction over non-Indian conduct arising from consensual relations on Indian reservations.” Indeed, with the Dollar General decision, the Supreme Court voted three out of three times in favor of upholding tribal sovereignty in major Indian law cases in 2016, including Nebraska v. Parker, 136 S. Ct. 1072 (2016) and U.S. v. Bryant, 136 S. Ct. 1954 (2016). Both Bryant and Dollar General dealt with tribal courts’ ability to protect tribal members from domestic violence and sexual assault.

Notwithstanding the Supreme Court decision, much uncertainty remains as to the scope of tribal jurisdiction over nonmember individuals and organizations conducting business on tribal land. This uncertainty carries the ability to adversely impact both tribes and their business partners. One result of this jurisdictional uncertainty is the potential withdrawal of businesses from operating and transacting on tribal land. For tribal communities “in which unemployment is already high and access to commercial services (like low-cost merchandise stores) is low,” this may be a very real negative consequence of continuing jurisdictional uncertainty. Petition for Writ of Certiorari, Dollar General Corp. v. The Mississippi Band of Choctaw Indians, 2014 WL 2704006, at 17 (U.S.).

Conclusion

The Supreme Court’s decision is quite impactful on business relationships between tribes and companies and individuals seeking to do business with tribes. Dolgencorp’s petition for a writ of certiorari even anticipated the serious implications of the Supreme Court’s future decision, noting that it affects “tens of thousands of nonmember corporations and individuals who do business on tribal reservations.” Dollar General serves to solidify tribal courts’ jurisdiction and ability to protect members from intentional torts committed within the context of an employer/employee relationship when the business is located within tribal land. Because Indian tribes “generally [do not] have criminal jurisdiction over non-Indians,” this affirmation of a tribe’s ability to seek a civil remedy serves as “the only deterrent to unlawful actions committed by non-Indians who are working or doing business on the reservation.” The suit will now continue in tribal court for a hearing on its merits.

As a result of Dollar General, businesses simply must be aware that any disputes arising on tribal lands may be subject to tribal court jurisdiction, and they should familiarize themselves with the court’s rules and procedures.

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