Supreme Court: Nooksack tribe can’t claim sovereignty in casino loan case


The Nooksack Indian Tribe cannot claim its sovereignty trumps the terms of a contract it signed to obtain a loan for its casino, the Washington Supreme Court ruled Thursday, Aug. 21.

In 2006 the tribe signed a loan agreement with BankFirst for about $15 million to renovate its Deming casino. As part of the contract, the tribe’s business corporation granted “an irrevocable limited waiver of its sovereign immunity from suit or legal process with respect to any Claim,” and consented to be sued in “any court of general jurisdiction in the State.”

When the tribe did not make loan payments, Outsource Services Management, a loan servicing company, stepped in. Outsource and Nooksack made three agreements for the tribe to pay back the loans, but the tribe didn’t pay. Outsource then sued for breach of contract in Whatcom County Superior Court.

While the tribe agreed it had waived its sovereign immunity, it claimed the superior court did not have jurisdiction over the case because it involved a contractual dispute with a tribal enterprise that was made on tribal land. The tribe moved for dismissal.

At the time, attorneys for Outsource argued that “if (the tribe’s) arguments were the law, any tribal entity would have virtually unfettered discretion as to whether it should have to repay its obligations on a casino loan,” according to one court document.

In response, the tribe’s attorneys at the time said the seeming unfairness of the situation was beside the point.

“Sovereign immunity is a doctrine whose application frequently leads to unfair results,” the tribe’s attorneys stated in a Whatcom County Superior Court document.

The Superior Court denied the dismissal.

The tribe appealed that and a subsequent Court of Appeals decision.

In a 7-2 ruling Thursday, justices upheld the lower courts’ refusal to dismiss the case.

According to the decision, “Given that the Nooksack made the decision to enter into that contract and consent to those provisions, we do not see how state court jurisdiction would infringe on the tribe’s right to self-rule.

“In fact, we believe the opposite is true: ignoring the tribe’s decision to waive sovereign immunity and consent to state court jurisdiction would infringe on the tribe’s right to make those decisions for itself.”

Now that the court has ruled against the tribe’s efforts to dismiss the case, the lender can go back to trial to collect on the loans it made that haven’t been repaid, said Rob McKenna, one of the lawyers representing Outsource.

“This ruling vindicates the sovereign immunity of tribes,” McKenna said. “The Supreme Court has recognized the right of tribes to waive sovereign immunity for business purposes.”

Had the ruling gone the other way, McKenna said, that would have signaled that tribes cannot voluntarily waive their sovereign immunity under contracts, which would have made it harder for them to obtain outside loans.

The Nooksack tribal chairman and lawyers representing the tribe did not immediately return phone calls seeking comment.

 

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