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July 16, 2014

Michigan v. Bay Mills Indian Community: Get That Waiver!

The United States Supreme Court, in Michigan v. Bay Mills Indian Community, 34 S. Ct. 2024, (2014), recently affirmed the doctrine of tribal sovereignty immunity and highlighted the importance of negotiating for a waiver of sovereign immunity in agreements with Indian tribes. The State of Michigan ("Michigan") and the Bay Mills Indian Community (the "Tribe") were parties to a State-Tribal Gaming Compact ("Compact") that covered casino gaming on the Tribe's reservation. However, when the Tribe opened a casino on property located approximately 125 miles from its reservation, Michigan brought an action against the Tribe seeking an injunction prohibiting the operation of the casino. Michigan alleged that the casino violated both the federal statute governing Indian gaming (IGRA) and the Compact because the Tribe's casino was located outside "Indian lands." The Tribe took the position that because the land was purchased with income from a federally funded land claim trust fund, the parcel was "Indian Lands" and, therefore, eligible for gaming under IGRA.

The United States District Court granted Michigan's application for an injunction. The Tribe closed the casino. The United States Court of Appeals for the Sixth Circuit reversed the District Court, holding that Michigan's action against the Tribe was barred by the Tribe's sovereign immunity from suit. The Supreme Court accepted the case and ultimately agreed with the Sixth Circuit that the Tribe's sovereign immunity from suit barred Michigan's action.

The Supreme Court reviewed the doctrine of tribal sovereign immunity and concluded that the alteration or elimination of the doctrine could be achieved only by Congressional action. Further, any intent by Congress to limit or abrogate tribal sovereign immunity must be unequivocally expressed in a statute because the courts would not lightly assume an intent by Congress to undermine Indian self-government.

Michigan argued that IGRA did narrow the scope of tribal sovereign immunity when it authorized a State to bring an action against a tribe to "enjoin a class III gaming activity located on Indian lands and conducted in violation of any Tribal-State compact." However, according to the Supreme Court, Michigan's argument could not prevail because the gaming activity that the State was seeking to enjoin was not on "Indian land." According to a Department of Interior opinion issued on the very same day Michigan had filed its complaint, the Tribe's use of the trust fund earnings to purchase the off-reservation property did not convert the property to "Indian land." The Supreme Court held that the waiver of sovereign immunity in IGRA, therefore, did not apply to the property at issue and, therefore, the doctrine of sovereign immunity barred Michigan's action.

Michigan contended that Congress could not have intended such an anomalous result, that a State could sue to stop illegal gambling on Indian land, but could not bring a similar action when the illegal gambling occurred off Indian land on State-regulated land. The Supreme Court rejected any notion that it should rewrite the statute, given that the language of the IGRA provision at issue was clear and given the result was in fact consistent with the intention of IGRA, to regulate gaming on an Indian reservation. The Supreme Court pointed out that Michigan did have recourse – it could attempt to limit the Tribe's off-reservation gambling without relying on IGRA by using civil and criminal options focusing on either individual tribal officials who do not enjoy sovereign immunity from suit or customers of such an illegal casino.

Finally, the Supreme Court reminded Michigan that it had the power to control tribal off-reservation gambling by negotiating a waiver of tribal sovereign immunity as part of the Tribal-State Gaming Compact required under IGRA. Given the parties' ability to negotiate various provisions, including remedies for breach of the gaming compact, Michigan could have negotiated a waiver of the Tribe's sovereign immunity, but had failed to do so.

The Supreme Court also rejected Michigan's suggestion that the Court revisit previous rulings upholding the extension of tribal sovereign immunity to tribal commercial activities that occur outside the reservation borders. The Supreme Court held that it was Congress' job, not the Court's, to determine whether to limit tribal sovereign immunity. The Court noted that Congress had considered several bills to modify the doctrine of tribal sovereign immunity in a commercial context but had not enacted any legislation effecting such a change. The Supreme Court remains unwilling to usurp the function of Congress in defining the limits of tribal sovereign immunity.

The takeaway from the Michigan case, whether you are a municipality or a private entity, is that when entering into an agreement or contract with an Indian tribe, you must obtain a waiver of the tribe's sovereign immunity from the tribe governing body, e.g., from the tribal council. You must make the waiver explicit and applicable to the enforcement procedure (litigation or arbitration) to which the parties agree. If a tribe refuses to provide such a waiver, rethink whether it is advisable to enter into the agreement or contract. Without enforcement capabilities, you will be without recourse in the event of default or a breach of the agreement or contract. Get that waiver!

If you require further information regarding the information presented in this Legal Alert and its impact on your organization, please contact any of the members of the Practice Area.


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