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The Eighth Circuit Court of Appeals recently examined whether an Indian tribe had effectively waived its sovereign immunity by active participation in arbitration proceedings and whether the state court had jurisdiction to enforce the rendered award.
In Oglala Sioux Tribe v. C&W Enterprises, Inc., No. 07-3269, 2008 WL 4093007 (8th Cir. Sept. 5, 2008), the Tribe and C&W entered into four contracts for different road construction projects within the Oglala Sioux Pine Ridge Indian Reservation. The first three contracts contained identical clauses requiring that any disputes be brought before the Oglala Sioux Tribe Executive Committee for non-binding mediation, and thereafter to arbitration under the Construction Industry Arbitration Rules of the American Arbitration Association (AAA).
The fourth contract required disputes to first proceed to the Tribe Executive Committee; however, the next step was to initiate an action in the Oglala Sioux Tribal Court. The Tribe was displeased with C&W's work and disputes arose regarding performance and payment. The parties were unable to resolve their disputes through the Tribe Executive Committee mediation.
C&W filed a demand for arbitration with the AAA concerning all four contracts. While not required, the Tribe assented to arbitrate the fourth contract. The Tribe fully participated in five months of arbitration, attending hearings, filing responses, and serving discovery requests. Afterward, the Tribe moved to dismiss the fourth contract claims from the arbitration on the basis of sovereign immunity.
The arbitrator denied the motion, finding that the Tribe waived its immunity by participating in the arbitration proceedings. The arbitrator entered an award in favor of C&W. Subsequently, C&W moved to confirm the award in South Dakota state court, while the Tribe sought vacatur in the Oglala Tribal Court. The state court entered default judgment against the Tribe in C&W's favor; however, the Tribal Court vacated the arbitration award.
The Tribe filed an action with the federal district court in South Dakota seeking an injunction on the state court's holdings. The district court found that the state court lacked jurisdiction to confirm the arbitral award, permanently enjoined it from exercising jurisdiction over the matter, and vacated the state court's determinations. C&W appealed.
On appeal, the Court observed that Indian tribes generally enjoy sovereign immunity from contract suits in state court. However, a tribe may be subject to a state suit if the tribe has clearly waived its immunity. The Court noted that the United States Supreme Court has held that an arbitration clause may be sufficient evidence that a tribe expressly waived its sovereign immunity to a state court action depending on the rules and procedures incorporated.
In this agreement, the parties clearly assented to arbitration under the AAA rules and incorporated the AAA rules into their contracts. Thus, the arbitration agreement specifically authorized judicial enforcement of an arbitration resolution. Further, the AAA rules expressly provide for state and federal court jurisdiction to implement arbitration awards.
Accordingly, the Court concluded that the Oglala Sioux Tribe waived its sovereign immunity in light of its participation in the arbitration proceedings. Further, the Court determined that the South Dakota state court had the necessary jurisdiction to confirm the arbitral award. The Court vacated the injunction and remanded the case for further proceedings.
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