There are many legal issues to consider when bidding on and building projects in American Indian Country. Which labor and employment laws apply? Are there contracting or hiring preferences that apply? Do the Prompt Pay Act and other state laws apply? Can I bring a lawsuit to enforce the contract and, if so, where would I file suit? This article addresses the final question, which is often the most important question when contracting with a tribal entity.
Many of the construction projects in American Indian Country are with tribes or entities wholly owned or by a tribe, such as housing authorities, casinos, hospitals, schools or other economic enterprises. Like the state and federal government, tribes (and their tribally—owned enterprises) enjoy sovereign immunity from any lawsuit, meaning they cannot be sued unless the tribe expressly agrees to waive its sovereign immunity. Sovereign immunity poses a unique issue for contractors that does not typically arise in other projects, but it need not be a deterrent to doing business with tribes. It is usually in the best interest of both the contractor and tribe to negotiate an acceptable waiver of sovereign immunity. Absent such a waiver, the tribe or tribal entity cannot be sued and the resulting forfeiture of remedies can be devastating for the contractor.
To waive sovereign immunity, the tribe must make it clear in the contract that it can be sued in a specific jurisdiction. Oklahoma Tax Comm'n v. Citizen Band Potawatomi tribe of Okla., 498 U.S. 505, 509 (1991). It does not matter whether the tribe is operating on or off its lands—if there is no express contractual waiver of sovereign immunity, a contractor will have no recourse in the event of non-payment or other breach of contract. See Kiowa tribe of Okla. v. Manufacturing Technologies, Inc., 523 U.S. 751, 118 S.Ct. 1700, 140 L.Ed.2d 981 (1998).
In C & L Enters. v. Citizen Band Patawatomi Indian Tribe, 121 S. Ct. 1589 (2001), the U.S. Supreme Court considered whether a standard construction arbitration agreement – agreeing to arbitrate a dispute and enforcement of the arbitration by the state – waived the tribe’s sovereign immunity. In C & L Enters., a tribe hired a contractor to install a roof on the tribe-owned commercial structure. The tribe and contractor used the standard agreement from the American Institute of Architects (AIA). When a dispute arose, the contractor demanded arbitration, but the Tribe refused to participate, claiming sovereign immunity. When the contractor sought to confirm the arbitration award, the case went all the way to the U.S. Supreme Court, which held that the choice-of-law provision (choosing state law) and the arbitration agreement in the standard AIA agreement worked as a “clear” waiver of sovereign immunity.
Even though the U.S. Supreme Court stated that standard arbitration and choice of law clauses waive a tribe’s sovereign immunity, if possible, an even better practice would be for the parties to nevertheless address the issue head on and specifically include a clause in the contract that addresses and waives the tribe’s sovereign immunity. Furthermore, in the wake of C & L Enters., many tribes have become wary of agreeing to state-court choice of law provisions to enforce arbitration awards because tribes often feel that state law and state courts are antagonistic to tribal interests. Instead, some tribes try to insist upon only limited waivers of sovereign immunity (e.g. capping the damages amount) or enforcement of an arbitration award via tribal law and the tribal court system. To this end, several tribes have passed statutes akin to the Uniform Arbitration Act to affirmatively allow their tribal courts to enforce arbitration awards. See e.g., Gila River Indian Community Code, § 4.317; Navajo Nation Code 7 § 1104. Before a contractor agrees to the application of tribal laws and enforcement of an arbitration award in tribal court, an attorney familiar with the tribe’s codes and court system should be consulted to determine whether any issues might exist in enforcing a potential arbitration award against the tribe.
Furthermore, upon negotiating a mutually agreeable waiver of sovereign immunity, the parties should confirm that the proper tribal authority has signed or otherwise approved the contract and provision waiving sovereign immunity. Many tribes have passed statutes that set forth exactly who must sign an agreement to effectuate a waiver of sovereign immunity (usually the tribal council or tribal chairman) and stating that any waiver not appropriately approved is ineffective. Each tribe is different and has the authority to pass its own laws; therefore, attorneys familiar with the tribe’s laws should be consulted to ensure that the waiver of sovereign immunity is clear and valid.
In conclusion, when contracting with a tribal entity, it typically is prudent to ensure that the arbitration clause and choice of law provisions of the contract clearly waive the tribe’s sovereign immunity and afford the ability to enforce a potential arbitration award. Because the failure to have a sufficiently clear waiver may result in forfeiting all remedies, it may be worth the extra time and effort to negotiate an unambiguous waiver acceptable to all parties.
