Michael Taylor: The Practical Issues of Business Development - Some Things to Consider: When to Waive Sovereign Immunity (or Not)
Taylor, Michael. "The Practical Issues of Business Development - Some Things to Consider: When to Waive Sovereign Immunity (or Not)." Building and Sustaining Tribal Enterprises seminar. Native Nations Institute for Leadership, Management, and Policy, Udall Center for Studies in Public Policy, University of Arizona. Tucson, Arizona. March 29, 2007. Presentation.
"I want to say my main experience all these years has been using tribal corporations like CTEC [Colville Tribal Enterprise Corporation], which is a special kind of tribal corporation. I call it a tribal governmental corporation. What's a governmental corporation? The post office is a governmental corporation, Amtrak, the Corporation for Public Broadcasting; those are governmental corporations and that's what CTEC is. And that's what Wright vs. CTEC is about, this tribal governmental corporation. But every tribe that I work with has a modern Section 17 corporation. Why? Why is this? Because, for example, over at Colville, they have this corporation. Occasionally I get calls from the rez attorney's office over there and they say, "˜Now, Mike why do we have this Section 17 corporation? We don't remember.' So I have to tell them, "˜Why do we have it?' When I went to Tulalip, they had a Section 17 corporation, it was an old one, 1930s vintage, the language was terrible. So we got another one. The original one had only one asset. It was a Superfund site, a polluted, a highly polluted Superfund site. So you don't want to put other stuff into that corporation. You need a new one because that corporation had enough stuff in it; that was the problem. Why do you need a new one? And I went to Ada Deer, I think [she] was the Assistant Secretary of Indian Affairs at the time, and I said, "˜I want another Section 17 corporation.' And she said, "˜You can't have one, you can only have one.' And I said, "˜Where's it say that?' So we got another one and it doesn't have anything in it either. Okay, why taxes? These forms of corporations are, it's, at this juncture, unclear as to whether the IRS considers the income of these tribal corporations as taxable. They made some moves on this some time ago and they decided that state corporations owned by tribes, whether they were wholly owned or not, the income is taxable. Corporate income tax is due on the earnings of these corporations. But they stopped and so we don't know what this, what the income of this entity is in terms of the views of the IRS. So the Section 17 Corporation sits out here as kind of a tax lifeboat. If our entity starts to sink in the troubled waters of the IRS, we move the assets to the Section 17. So don't start doing business and think you're okay without this Section 17. And if you have an old one, I think you should get a new one. It's easier to get a new one than to try to amend the old ones. That's my comment.
Sovereign immunity: when to waive it, when not to waive it. Well, how many people in here think that if you waive sovereign immunity it weakens your sovereignty? How many people think that? I would say, sometimes, at the risk of being charged with showing off, I sometimes do a push-up at this juncture right in front of the crowd. And the reason is to make the point that sovereignty is a power, sovereign immunity is a part of that power and whether you're waiving it or asserting it or writing it into an ordinance or a contract or whatever it is, you're exercising it, and indeed waiver strengthens it. It strengthens it, by actually showing that you have it and putting it out there in whatever form. So the waiver of sovereign immunity -- this is an issue with a lot of tribal people and a lot of tribal councils, they're very worried that waivers, however they're written, whether they're written sloppily, which they sometimes are, or whether they're written carefully, will somehow erode tribal sovereignty, and that's not true at all. It's an exercise of a power. Waiver is the same thing in technical legal terms as asserting it in a lawsuit or some other way. So it doesn't weaken tribal sovereign immunity...or tribal sovereignty to execute a waiver. Got it? Do I have to do the push-up? I can do it. When I go down, that's a metaphor for waiver. It strengthens me in the same fashion as when I come up. So that's my take on it. Is that right? I don't know. I made that up.
When do you waive it? When you're asked. If you're not asked don't do it. The Tulalip Tribes is a party to literally hundreds of contracts all the time. Uniform cleaners, rug cleaners, towing cars, building hotels, and when the other side comes in and says, "˜Well, here's the contract,' or asks us to write the contract, we write the contract. If the other side knows that they've got to get a waiver in order for the contract to be enforceable, then we start working on it. But if they don't, if they don't ask or they don't care, sometimes they just don't care, then we don't go up to them and say, "˜Hey, we're sovereign, you can't... if something happens under this contract to say that you have a claim against us, unless there's a waiver in here, you can't do anything about it unless we agree to it.' You have to be asked; B of A [Bank of America] always asks. They all say, "˜Oh, yeah.' I've never met a B of A guy that didn't ask. Right away, it's the first thing they ask."
"It's a starting point. If you can't get beyond that, then we're not going anywhere. It's got to be there."
"If it's part of the deal, then you work on it and you craft it carefully. You pay attention to what the issues are and you work on it. So the most common waivers that we have at Tulalip I'd say are major lending contracts, contracts for construction, the construction firms have now gotten savvy to this, and so they're immediately asking for a waiver. There are lots of other ways, other places where you should waive your immunity. Tribal civil rights act: you should have a tribal civil rights act. People can sue the tribe if the tribe damages them in some way and it should have a waiver in there. Tribal tort claims act: we have a tort claims act. All our cases go through tribal court. Tribal tort claims act: if you follow the process and you've been injured by the tribe, you're going to get paid something to make you whole. And as a hospitality entity, we've got to do that. If people fall off the curb at the casino parking lot and it's our fault and they injure themselves, it's quickly going to be known around the region that you shouldn't go to the Tulalip Casino because you can fall off the curb and hurt yourself, the tribe's going to raise sovereign immunity and you can't collect anything. So people are not going to come. We're in the hospitality business; we've got restaurants, we've got an amphitheater, we've got all this stuff. We need to make sure that tribal sovereign immunity is not an impediment to people getting reasonable compensation if they're injured by the tribe. Another piece of that is you've got make sure that you're insurer recognizes tribal sovereign immunity and sovereignty and writes into the contract that they can't raise it. When Joe [Kalt] comes to see the casino and falls off the curb and hurts his knee and so he makes a claim and we take the claim and give it to the, he follows the tribal tort claims act and we take the claim and give it to the insurer, we don't want the insurer saying, "˜Sorry, Joe, sovereign immunity, you don't get anything,' because then we'd be paying for insurance that's worthless. We pay a whole lot money for insurance to cover Joe when he falls off the curb, and if we don't get our insurer to say that they won't raise immunity, we've just paid for nothing because they stand in our shoes when Joe is injured and they can raise all the defenses that we have.
Tribal grievance procedures, tribal employee grievance procedures: set up this code to deal with tribal employee grievances. And now I work with a tribal chairman who's 80 years old. He can remember when the tribe didn't have any employees at all. Now we've got 3,000 or 4,000 or something like that. So they're always grumpy, aren't they? They're always after you for something and we've got a raft of codes and procedures to deal with grumpiness because that's part of life. And when they come into the tribal court where most of our grievance procedures end up, if you don't like what the administrators do and that sort of thing, and the tribe waltzes in and says, "˜Hey, wait a minute judge. Sovereign immunity -- can't do anything with regards to this,' you're not doing the right thing. All the stuff that you've done in personnel and HR [human resources] is worthless because the person can't get their grievance heard. Housing appeal, same kind of thing. Tribal self-insurance programs; we have several self-insurance programs. They're much cheaper than buying insurance, but they require us to waive our immunity so that the people who are relying on these insurance programs, if they don't agree with what they got, worker's comp [compensation] is a very common one, that they can go to tribal court and that requires a waiver of immunity. In my mind, there's a lot of reasons why you want to set up these numerous waivers. You get, I get, my office gets sometimes, we haven't had a lot of them, but you get claims of waiver of immunity where there was none. So you want to be able to show that the tribal council knows how to waive immunity and has done it numerous times so you can go into court, federal, state or tribal, and say, "˜Look, your honor, there isn't any waiver here and I can show you why because there are plenty of tribal waivers that have happened and here they all are.' They're resolutions and in ordinances and sections of contracts and that sort of thing. The tribal council knows that as the only entity that has the power to do that is the tribal council, in some cases delegated power to someone else but the tribal council and here's how they did it and there's no other way to do it and here's all the list of the waivers that have happened. So this claim that the tribe somehow inadvertently waived sovereign immunity isn't valid. So in corporate enabling acts, tribal court jurisdictional statutes, enrollment ordinances, you want to create a pattern. If you're a serious tribal governmental entity, you want to create a pattern and this is the way you do it.
We're building a hotel now. It's, I don't know, $160 million or $260 million or whatever it is. My mother advised me not to sign the loan documents. She said, "˜That's way too much money.' We sent out a request for proposals for contractors and the lowest bidder was this company, it's a big company, Canadian company, but they've got an American division. It's called PCL Construction; maybe you've run into them. They wanted a waiver of immunity and we said, "˜Fine.' And we worked and worked and worked on this waiver of immunity but at the end of this, not at the end, in the middle of this, they said, "˜We want state court.' We did an arbitration provision, which allowed disputes to be arbitrated by an appropriate arbitrator, but arbitration awards have to be enforced by a court. There has to be a court out there that will enforce the ruling of the arbitrator. The arbitrator doesn't have judicial authority. Arbitrators can, under the contract, act like a judge, make an award to one side or the other, but if one side or the other won't follow the directions of the arbitrator, the ruling of the arbitrator, you have to have a court at the end, federal, state or tribal. Federal court doesn't work in this circumstance. I won't tell you why because I've only got 50 seconds. PCL said to us, "˜We won't accept your tribal court.' You have to waive immunity in state court. So, we got another contractor. We just finally said, "˜We're not doing it. We put a lot of work into this tribal court.' Joe gave us an award recently. Our tribal court's good. We've got good judges, we've got a good court of appeals, we've got good ordinances, we even took the extraordinary step of having the chief trial judges in tribal court go over and sit down with the president of PCL and tell him, "˜Look, the tribe -- here's the ordinance -- the tribe has given me authority to enforce arbitration awards. I've got 40 years of experience both as a lawyer and as a court commissioner in King County, Seattle.' He's an Indian, he's a Colville Indian, but he said, "˜Look, now I'm not going to decide on your case when there isn't a case, but if there's an arbitration award I'll enforce it.'
We have built an institution, our tribal court as part of our sovereignty, and if they don't accept it, let's get somebody else. And they did. So that's when you don't waive. That's when you say, "˜It's affecting our sovereignty and we're not going to do it.'"