The Precarious Immunity Of Tribal Corporations

The Case

American Property Management Corporation v. Superior Court, by the California Court of Appeals (court) May 24, 2012.

The Context

Tribal sovereign immunity is a well-established doctrine of federal Indian law but it is not popular with courts. Judges dismissing cases brought against tribes or tribal corporations often complain that sovereign immunity is "unfair" because it prevents non-Indian litigants from seeking redress for alleged contract breaches or torts committed by tribes. It is sometimes noted that the federal and state governments provide statutory waivers to permit suits but that tribes normally do not. Courts will, therefore, look for opportunities to limit the scope of sovereign immunity, especially where tribal business corporations are involved. American Property Management Corporation v. Superior Court provides an example.

The Facts

The Sycuan Band of the Kumeyaay Nation (Tribe) charted the Sycuan Tribal Development Corporation (STDC) under Sycuan's tribal laws. STDC formed American Property Investors LLC (API) under California law, as its sole member. API formed Sycuan Investors LLC, under California law, as its sole member. Sycuan Investors LLC formed U.S. Grant Hotel Ventures LLC (USG) under California law as its sole member. USG bought the U.S. Grant hotel in San Diego and entered into an agreement with APMC to manage the hotel.

In 2005, USG sued APMC for $1.35 million. APMC countered claimed for $5 million. USG prevailed at tribal court but the court reversed certain rulings and remanded for further proceedings on the counterclaims, at which point USG moved to dismiss on grounds of sovereign immunity. The motion was granted and APMC filed a petition for writ of mandate in the court, which granted the writ.

What the Court Decided

The court applied a multi-factor test drawn from the Tenth Circuit's decision in Breakthrough Mgmt. Group, Inc. v. Chukchansi Gold Casino & Resort (10th Cir.2010) 629 F.3d 1173, 1185 (10th Cir. 2010), focusing on:

the method of the corporation's creation; its purpose; its structure, ownership, and management, including the amount of control the tribe has over the entities; whether the tribe intended for the entity to have tribal sovereign immunity; the financial relationship between the tribe and the entity; and whether the purposes of tribal sovereign immunity are served by granting immunity to the entity. The court concluded that USG was not an "arm" of the tribe, citing in particular...