Regulatory Updates

Washington Court Gets it “Wright” – Upholds Immunity for Tribal Corporations

Gabriel S. Galanda
Gabriel S. Galanda

by Gabriel S. Galanda, Attorney at Law

On December 7, 2006, the Washington State Supreme Court handed down its most important decision on tribal rights in decades. The state's highest court ruled in Wright v. Colville Tribal Enter. Corp., that Indian corporations owned by tribal governments and created under tribal law stand immune from suit, absent express waiver of that immunity by the tribe or U.S. Congress. See No. 7758-3, Slip Op. (Dec. 7, 2006).

But as discussed below, Wright did not come without warning: tribal governments must avoid forming businesses under state law. Rather, tribes should develop their own corporate codes and charter corporations pursuant to such tribal law. Tribes should consider passing employment laws that allow employees the opportunity to file a grievance or even seek limited redress in tribal court. And, in this day and age of Indian economic development, tribes must think twice before asserting their sovereign immunity in tort litigation. While Wright did not concern Indian gaming activities, these warnings are very relevant to tribal casinos.

Background
In July 2002, Colville Tribal Services Corporation (CTSC), a subsidiary of Colville Tribal Enterprise Corporation (CTEC), hired Christopher Wright, a non-Indian, as a pipe-layer and equipment operator. Both CTEC and CTSC are wholly owned by the Confederated Tribes of the Colville Reservation (“Tribe”) and, importantly, chartered under the Tribe's corporate code. Mr. Wright worked on a project to construct a waterline for a U.S. Navy housing development in Oak Harbor, Washington.

Mr. Wright alleged racial harassment and resigned in February 2003. He could have filed a grievance and sought relief with the Colville Tribal Employment Rights Office, or filed suit in tribal court pursuant to the Colville Civil Rights Act, but apparently he did not.

In November 2003, Mr. Wright sued CTEC, CTSC and his former supervisor in Island County Superior Court, alleging race discrimination, racial harassment, hostile work environment, negligent supervision, and negligent infliction of emotional distress. CTEC and CTSC successfully moved the Superior Court to dismiss his lawsuit with prejudice for lack of subject matter jurisdiction. The court record (naturally) does not indicate whether the tribe's insurance defense counsel considered alternatives to dismissal motion practice that would not place tribal sovereignty squarely before the state judiciary; alternatives such as reaching an early, nominal settlement with Mr. Wright, or allowing him to prove his case on the merits through limited consent to suit.

The Washington Court of Appeals Division One reversed the trial court, finding in pertinent part that tribal sovereign immunity did not protect CTEC or CTSC. See Wright v. Colville Tribal Enter. Corp., 127 Wn. App. 644, 111 P.3d 1244 (2005). CTEC and CTSC petitioned for review (against the advice of some tribal lawyers), which the Supreme Court granted. See 156 Wn.2d 1020 (2006). The tribe appeared as amicus curiae, or “friend of the court.” The court heard oral argument on May 16, 2006.

Ruling
The Washington Supreme Court's four-justice majority decision in Wright began with a recitation of well-established U.S. Supreme Court case law on Indian sovereign immunity: Tribal sovereign immunity protects a tribal corporation owned by a tribe and created under its own laws, absent express waiver of immunity by the tribe or Congressional abrogation. Under federal law, tribal sovereign immunity comprehensively protects recognized American Indian tribes from suit absent explicit and 'unequivocal' waiver or abrogation. Tribal sovereign immunity protects tribes from suits involving both 'governmental and commercial activities,' whether conducted 'on or off a reservation.'

See Slip Op., at 4-6 (citations omitted). Though not the subject of the Wright case, tribal sovereign immunity also protects a tribal government as the real party in interest vis-à-vis its casino, as well as casino officer and employees acting within the scope of their employment.

The court then concluded that “tribal sovereign immunity protects tribal governmental corporations owned and controlled by a tribe and created under its own laws, unless the tribe waives or Congress abrogates immunity.” Id. at 7-8. And, since the immunity of CTEC and CTSC was “neither waived nor abrogated,” the State Supreme Court over-ruled the appellate court's decision and thereby reinstated the trial court's dismissal of Mr. Wright's lawsuit with prejudice.

According to the Spokesman-Review, Mr. Wright is considering whether to appeal the Washington Supreme Court's decision to the United States Supreme Court.

Lessons
Wright is certainly a big win for Indian country, particularly tribes who engage in “commercial activities” - on or off the reservation. But the decision was not rendered without warning to tribes. The Washington Supreme Court did suggest that the tribal act of incorporating an enterprise under state law, rather than tribal law, “may” waive that business' immunity and thus subject the enterprise to suit. It was inconsistent for the court to assert on the one hand that a tribe that merely files corporate formation papers with the Secretary of State may waive the company's immunity; yet on the other, to acknowledge that an immunity waiver “will not be implied but must be unequivocally expressed” by the tribe. Id. at 8-9.

Notwithstanding, Wright should be taken as a warning to tribal governments to create corporate codes and charter tribally-owned businesses under those tribal codes, or risk having Indian businesses be sued - very possibly in state court. In addition to affording Indian businesses immunity protection, chartering such businesses under tribal law would mitigate against state adjudicatory jurisdiction over claims against such companies (assuming the tribe or Congress clearly waives the business' immunity protection). Thus, any tribally owned gaming business that need be incorporated should be chartered under tribal law.

Moreover, reading between the lines of the two-justice concurrence in Wright, tribes should consider promulgating and following employment laws that confer employees' grievance rights and perhaps even allow them to seek limited redress (e.g., equitable relief such as reinstatement) in tribal court. See Id. (Madsen, concurrence), at 16. Why? Because tribal, state and federal judges increasingly “doubt the wisdom of perpetuating the [immunity] doctrine,” suggesting to Congress “a need to abrogate tribal immunity.” Kiowa Tribe of Oklahoma v. Manufacturing Technologies, 523 U.S. 751, 758 (U.S. 1998). Courts believe it unfair for reservation-goers to be deprived of rights to grieve or have their case aired before a trier of fact, particularly in situations that involve “unknowing” non-Indian casino customers or employees and/or arise out of Indian “commercial” enterprises such as casinos.

Tribes must also realize that once a dismissal motion is filed, the tribe relinquishes control over the outcome of a lawsuit to the judicial system. In Wright, the fate of tribal immunity in Washington (and beyond) was left to the state's appellate courts.

For these reasons, tribes can no longer automatically assert their sovereign immunity in tort litigation, particularly cases arising out of tribal casinos. Tribes must carefully consider all of their legal options before moving to dismiss - e.g., reinstating or reassigning an aggrieved employee; reaching a nominal monetary settlement with an injured person, perhaps with insurance proceeds; or allowing a plaintiff to prove his/her case on the merits by consenting to suit through a limited immunity waiver.

Thankfully for Washington tribes and tribal businesses, and all of Indian country, the Colville Tribes fought the tough appellate fight - and the Wright court got it right.

Gabriel “Gabe” S. Galanda practices Indian and gaming law in Seattle, WA with Williams, Kastner & Gibbs, PLLC. He is a descendant of the Nomlaki and Concow Tribes and enrolled with the Round Valley Indian Tribes. He can be reached by calling (206) 628-2780 or email ggalanda@wkg.com