C & L Enterprises, Inc. v. Citizen Band Potawatomi Indian Tribe of Oklahoma (04/30/2001)

By: Linda Pendleton, Medill News Service

Questions presented

(1) Is an arbitration agreement, contained in a contract executed by an Indian tribe for commercial construction outside of reservation or land boundaries, enforceable by the arbitration proceedings provided for in the agreement? (2) Where the arbitration agreement provides: ""The award rendered by the arbitrator shall be final, and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction thereof...,"" does execution of such an arbitration agreement constitute a waiver of sovereign immunity from a state court suit against the Indian tribe to enforce an arbitration award resulting from such arbitration proceedings?

Brief

After members of the Citizen Band Potawatomi signed a contract with C & L Enterprises, Inc. to construct a foam roof on an off-reservation bank that the Potawatomi were building, the tribe's architects decided on a different roof.

C & L, in turn, decided on recouping lost potential profits - $85,000 altogether - for the breach of contract, by taking the dispute to arbitration. This was despite the fact that C&L hadn't yet begun work on the First Oklahoma Bank in Shawnee, Okla.

That's because in March 1994, seven months after signing a contract with C & L, architects for the Potawatomi determined that the roof should be rubberguard instead of foam. They discovered that birds had eaten holes through the foam roof of another project.

Unable to build rubberguard roofs, C & L offered to hire a subcontractor, and to lower the price from $85,000 to $79,000.

Another contractor offered to build the rubberguard roof for $56,784. Breaking the contract with C & L, the Potawatomi hired the other contractor.

In June 1995, the arbitrator awarded C & L $25,400 in damages for lost profits, $2,264.67 in attorney fees and costs, and $750 in arbitration fees.

""We don't even now know how they arrived at those figures,"" says Michael Minnis, attorney for the Potawatomi.

C & L filed suit in August 1995 to enforce the award in an Oklahoma district court, claiming that in August 1993, the Potawatomi drafted and signed a contract containing a clause that states that disputes between the contractor and owner should be decided by arbitration. And the arbitrator's award shall be final and enforceable in any court having jurisdiction.

The Potawatomi moved to dismiss, claiming sovereign immunity as a tribal nation from lawsuits.

Citizen Band Potawatomi are recognized by the Federal Government as a sovereign nation that exercises governmental authority over its members and territory. Sovereign immunity protects a government from suit to avoid undue intrusion on governmental functions or depletion of the government's treasury without legislative consent. Like foreign sovereign immunity, tribal immunity is a matter of federal law, and state courts generally have no jurisdiction.

Only Congress or the governing body of an Indian tribe may waive a tribe's sovereign immunity from suit, the Potawatomi contended.

But C & L argued that the Potawatomi explicitly waived sovereign immunity in the contract they had drafted, and that sovereign immunity didn't apply because the bank was located on non-reservation land.

However, the site is owned by Potawatomi, making it restricted land, Minnis says. ""The federal government has to step in any time the Potawatomi buy or sell land outside the reservation.""

C & L attorney John David Mashburn asserts: ""The Potawatomi argue that a specific waiver must somehow recite the magic words of Ôwaiver, ÔIndian and Ôimmunity and that absent such an incantation, waiver can only be inferred.""

In October 1995, the state district court entered judgment against the Potawatomi for $28,414.67. And in March 1996, the court awarded C & L an additional $10,545 in attorney fees.

The Potawatomi appealed, but the Oklahoma Court of Civil Appeals affirmed, finding that the tribe had waived immunity. After initially denying review in January 1997, the Oklahoma Supreme Court heard the case in June 1998, vacated the appeals court judgment and sent it back.

Having remained silent on the question of expressed waivers of sovereign suit immunity until this point, the Oklahoma Court of Civil Appeals addressed it in February 2000, and reversed its earlier judgment for C & L. The court remanded the case back to the district court with instructions to sustain the Potawatomi's August 1995 motion to dismiss, saying: ""In this instance the contract does not expressly waive the Tribe's sovereign immunity...""

""C & L never performed any work for the Potawatomi, but has been pursuing the tribe for five years, forcing the tribe to expend resources on wasteful, now arguably frivolous litigation,"" Minnis says.

On Oct. 30, 2000, the U.S. Supreme Court granted certiorari in the case.

On April 30, 2001, a unanimous Court reversed, holding that the contract's arbitration clause expressed a clear intent that the Potawatomi was waiving its tribal immmunity.

In writing for the Court, Justice Ruth Bader Ginsburg underscored that the case was not one in which Congress played a role in abrogating the tribe's immunity.