This case grows out of a dispute between the White Earth Band of Chippewa Indians (the Band) and Gaming World International, Ltd. (Gaming World) related to the construction and management of a casino in Mahnomen, Minnesota. Approximately one month after the Band filed a declaratory judgment action against Gaming World in the White Earth Band of Chippewa Tribal Court, Gaming World filed this petition seeking declaratory relief and arbitration. The district court granted Gaming World's motion to compel arbitration, and the Band appeals. We affirm in part and reverse in part.
Gaming World is a Delaware corporation that specializes in operating casinos, and the Band is a federally recognized Indian tribe. The Band is governed by the White Earth Tribal Council which has conducted business as the White Earth Reservation Business Committee. In 1991 the parties agreed that the Band would construct the Shooting Star Casino in Mahnomen, Minnesota and that Gaming World would help to finance and manage it. A written contract was drafted which provided for a term of seven years and a division of the net profits of the casino. Sixty percent of the net profits were to go to the Band and forty percent to Gaming World. Appellant's Appendix (App.) at A-363. The White Earth Reservation Business Committee signed on behalf of the Band.
The parties agreed that the Band would borrow funds to finance the construction of the casino and that the loans would be repaid out of the Band's share of net profits. Id. at A-32, 245. The Band obtained the necessary construction funds by drawing $11,800,000 from a trust fund established under the White Earth Land Settlement Act (WELSA), 25 U.S.C. § 331, and by arranging a $5,500,000 commercial loan. App. at A-43, 245. The casino was furnished through a $5,000,000 contribution by Gaming World, apparently to be reimbursed from casino gross revenues. Id. at A-44, 249.
Casino management contracts involving Indian tribes are regulated under the Indian Gaming Regulatory Act of 1988 (IGRA). 25 U.S.C. §§ 2701 et seq. IGRA created the National Indian Gaming Commission (NIGC), 25 U.S.C. § 2704, and assigned responsibility for reviewing all management contracts to the Chairman of NIGC. 25 U.S.C. §§ 2710(d)(9) & 2711. Although IGRA was passed in 1988, it was only in February 1993 that NIGC began to function. Before that time the Secretary of the Interior had interim authority to review and approve management contracts. See 25 U.S.C. § 2709. The Secretary delegated his own approval power under IGRA to the Area Directors of the Bureau of Indian Affairs (BIA), whose decisions could be appealed to the Interior Board of Indian Appeals (IBIA). 25 C.F.R. § 2.4(e). An Area Director's decision automatically became effective after thirty days, unless an adversely affected party had filed both a notice of appeal and a petition for a stay. 43 C.F.R. § 4.21(a)(2). During the interim before NIGC became operational, only IBIA could grant final approval of management agreements on behalf of the Secretary. 43 C.F.R. §§ 4.1(b)(2), 4.312. An unreviewed decision by an Area Director was not a final agency decision for purposes of exhaustion and judicial review. 43 C.F.R. §§ 4.21(c), 4.314(a).
IGRA specifies that the Chairman of NIGC has exclusive authority to approve any casino management contract, 25 U.S.C. § 2705(a)(4); 25 C.F.R. § 533.1(b), and every management contract must contain a provision acknowledging this fact. 25 C.F.R. § 531.1(n). Contracts approved
IGRA contains provisions governing the maximum term for management agreements, division of profits under them, and limitations on repayment of construction costs. See 25 U.S.C. § 2711(b)-(c). Although the statute limits management contract terms to five years, it authorizes approval of terms up to seven years if necessary because of the amount of capital investment, income projections, and type of gaming involved. 25 U.S.C. § 2711(b)(5). Similarly, management fees are not to exceed thirty percent of net revenues, but they may go as high as forty percent if approved and if circumstances require. 25 U.S.C. § 2711(c). Every management contract is also required to provide "a minimum guaranteed payment to the Indian tribe that has preference over the retirement of development and construction costs," 25 U.S.C. § 2711(b)(3), and "for an agreed ceiling for the repayment of development and construction costs." 25 U.S.C. § 2711(b)(4).
Because the Band and Gaming World drafted their initial agreement before NIGC was actually in operation, they submitted it to the Area Director of the BIA for approval. The Area Director decided that the contract could not be approved unless modified to decrease its term to five years, to reallocate profits seventy percent to the Band and thirty percent to Gaming World, and to repay all of the Band's borrowed construction funds from gross casino revenues rather than from the Band's share of net profits. The parties agreed to these conditions under protest, and the Area Director approved the contract as so modified on March 6, 1992. App. at A-119.
The contract approved by the Area Director in March 1992 contained several other clauses relevant to this appeal. It included an arbitration clause which stated:
Id. at A-49-50. It also included a limited waiver of the Band's sovereign immunity so that Gaming World could seek to enforce the contract, id. at A-50, and several seemingly contradictory clauses related to the date when the contract would become effective. One of these clauses said the contract would commence "on the date it is approved by the Bureau of Indian Affairs," id. at A-31, another stated that "As of this date, this Agreement is in full force and effect," id. at A-58, and a third indicated that the agreement would be binding when approved by the Secretary or his delegate unless IGRA were to require its submission to the NIGC Chair for approval:
Id. at A-31-32.
The Band appealed the Area Director's March 6, 1992 decision to IBIA, id. at A-242, which issued its decision in early March 1993, the month after NIGC had begun to function. IBIA affirmed that part of the Area Director's decision limiting the contract term to five years and setting the division of profits at seventy percent for the Band and thirty percent for Gaming World. It vacated that part of the decision requiring the Band's construction costs be repaid from gross revenues, however, and remanded the matter to the Area Director for "further consideration." White Earth Band of Chippewa Indians, 23 I.B.I.A. 216, 227 (Mar. 3, 1993). No reference was made to the fact that NIGC had become operational or that IGRA and the relevant regulations required final approval or disapproval of a management contract by the Chairman of NIGC, 25 U.S.C. § 2705(a)(4); 25 C.F.R. § 533.1(a)(b).
On April 23, 1993, the Area Director wrote a letter to Darrell "Chip" Wadena, chairman of the White Earth Tribal Council. App. at A-488. The Area Director advised in this letter that the funds obtained from the Band's WELSA trust fund for construction of the casino were actually disbursements and required no repayment:
Id. According to the Area Director, this meant that the $11,800,000 drawn from the Band's trust fund would not have to be repaid from casino revenues, neither from gross revenues (as provided in the March 6, 1992 contract approved by the Area Director but vacated by IBIA), nor from the Band's share of net profits (as originally contemplated by the parties).
The April 23 letter also indicated that the Area Director expected that the issue remanded from IBIA would not be resolved by him, but by the parties submitting a revised contract for final approval or disapproval by NIGC. Even if the funds withdrawn from the WELSA trust did not have to be reimbursed, the repayment of the Band's $5,500,000 commercial loan remained at issue. The Area Director's letter advised:
Id. at 489. It does not appear from the record that the parties ever followed this suggested procedure, presumably because they had begun to operate under a new amendment they had agreed to in the meantime.
While the appeal of the Area Director's March 6, 1992 decision was pending before IBIA, the parties had decided on November 5, 1992 to make a further amendment to their agreement. Id. at A-353. This amendment was to "be integrated in and made a part of the earlier agreement between
NIGC Chairman Harold A. Monteau rejected the November 5, 1992 amendment in a letter dated November 19, 1996, id. at A-141, which also stated that the Commission was not going to "review the [underlying] contract and require changes" or "require the parties to go through the extensive process to bring it in compliance" with IGRA. Id. at A-143. Monteau's letter stated that the November 1992 modification had been constructively denied as of September 1994 because the Commission had taken no action on it within thirty days, see 25 C.F.R. § 535.1(d), but that the amendment would also have been rejected upon complete review. App. at 141-43. The letter concluded by saying:
Id. at 143. Although the letter notified the parties of their right to appeal within thirty days, id. at 141, no appeal was filed. The November 5, 1992 amendment thus never received final approval, and neither party presently contends it is valid or seeks to enforce its terms. The record also does not indicate that either party protested or appealed the Chairman's announcement that NIGC had decided not to review the March 6, 1992 agreement "at this time."
The Band terminated the casino management contract with Gaming World by a resolution dated August, 12, 1996, after a change in its leadership. Id. at A-289-92. Wadena, tribal chairman when the parties first reached agreement in 1991, and two other members of the tribal council had been convicted of federal crimes on June 25, 1996, including conspiracy to use tribal funds in the construction of the casino for personal gain, in violation of 18 U.S.C. §§ 371, 666, and 1163. See, e.g., United States v. Wadena, 152 F.3d 831, 837-39 (8th Cir.1998). After the reconstituted tribal council conducted an investigation, it concluded that the contract lacked proper federal approval because neither the Area Director nor the Chairman of NIGC had ever addressed the issue remanded by IBIA.
The White Earth Band of Chippewa Tribal Court had meanwhile been established on November 3, 1997, id. at A-637, 651 and the Band filed an action in that court on November 30, 2000. The Band states that this filing was delayed by difficulties in obtaining necessary records from Wadena and his coconspirators. In its action the Band requested a declaration that the March 6, 1992 contract was void and also asserted a qui tam claim under 25 U.S.C. § 81. The qui tam claim sought to recover on behalf of the United States approximately $12,000,000 in casino proceeds wrongfully received by Gaming World, payments which it says were made under a void contract and were thus recoverable under § 81 as excess payments.
Approximately one month after the Band filed its action in tribal court, Gaming World filed this petition in federal court seeking a declaratory judgment that the March 6, 1992 agreement is valid as approved by IBIA, as well as an order compelling arbitration. The Band's responsive pleading asserted that the federal court lacked jurisdiction and that the March 6, 1992 contract was void in its entirety for lack of valid federal approval.
Gaming World filed a motion to compel arbitration, and the district court granted it from the bench. The court concluded that it had jurisdiction under 28 U.S.C. § 1331 because the question of the validity of the March 6, 1992 contract raised issues of federal law under IGRA, that the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq., applied because the contract affected interstate commerce, and that the arbitration clause was severable and binding, regardless of whether the contract as a whole were void. It cited Prima Paint
The Band argues on appeal that the arbitration clause cannot be separately enforced in the circumstances of this case, that the validity of the management contract as a whole must be considered, as well as the effect of its limited waiver of sovereign immunity. It asserts that the policy favoring exhaustion of tribal remedies requires that the validity of the contract be litigated first in tribal court and that the contract is void for lack of proper federal approval. Gaming World responds that a federal court should not defer to a tribal court which did not exist when it first sought arbitration, that the arbitration clause is severable and enforceable, that the arbitration clause implies a limited waiver of sovereign immunity for purposes of enforcing it, and that the validity of the contract is an issue for the arbitrators.
Before turning to the substantive issues raised by the parties, we must first determine whether there is jurisdiction over this matter. See Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 94-95, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998); Bender v. Williamsport Area Sch. Dist., 475 U.S. 534, 541, 106 S.Ct. 1326, 89 L.Ed.2d 501 (1986). We review de novo the district court's conclusion that it had subject matter jurisdiction. See Gilbert v. Monsanto Co., 216 F.3d 695, 699 (8th Cir.2000).
Diversity jurisdiction is not available here under 28 U.S.C. § 1332 because Indian tribes are neither foreign states, Cherokee Nation v. Georgia, 5 Pet. (30 U.S.) 1, 16-18, 8 L.Ed. 25 (1831), nor citizens of any state, Standing Rock Sioux Indian Tribe v. Dorgan, 505 F.2d 1135, 1140 (8th Cir.1974). Federal question jurisdiction can exist under 28 U.S.C. § 1331 if Gaming World's petition states a claim arising under federal law, but jurisdiction cannot be founded on anticipated defenses or responsive pleadings. See Iowa Mgmt. & Consultants, Inc. v. Sac & Fox Tribe of the Mississippi in Iowa, 207 F.3d 488, 489 (8th Cir.2000).
In its petition Gaming World seeks both declaratory relief and an order to compel arbitration, but it must also invoke federal substantive law for there to be jurisdiction. Federal courts may entertain claims for declaratory relief under 28 U.S.C. § 2201, so long as they raise a federal question. Victor Foods, Inc. v. Crossroads Econ. Dev. of St. Charles County, Inc., 977 F.2d 1224, 1227 (8th Cir.1992). The FAA also does not alone confer federal jurisdiction. See 9 U.S.C. § 4; Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 26 n. 32, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). If a declaratory judgment action requires resolution of an issue of federal law or precludes the assertion of a federal right by a responding party, there is jurisdiction over it. See Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 19, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983); 10B Charles Alan Wright et al., Federal Practice and Procedure: Civil 3d § 2767 (1998). Gaming World's petition seeks a declaratory judgment that the March 6, 1992 contract received valid federal approval and is therefore enforceable. The district court concluded that this claim for relief requires interpretation of federal statutes, and we agree.
In terms of jurisdiction there is a significant distinction between ordinary contract disputes involving Indian tribes, TTEA v. Ysleta Del Sur Pueblo, 181 F.3d 676, 681 (5th Cir.1999), and those raising issues in an area of extensive federal regulation. See Comstock v. Alabama and Coushatta Indian Tribes, 261 F.3d 567 (5th Cir.2001),
Since this case raises issues under the extensive regulatory framework of IGRA, it is not a routine contract dispute. Our decisions illustrate the distinction. If a management company alleges only a "routine contract action" against a tribe, such as a claim that the tribe has violated a consulting agreement not subject to regulation under IGRA, the complaint does not invoke federal jurisdiction. See Iowa Mgmt. & Consultants, Inc., 207 F.3d at 488-89. Similarly, an issue of individual authority to sign on behalf of a tribe is "not ... a federal question per se." See Bruce H. Lien Co. v. Three Affiliated Tribes, 93 F.3d 1412, 1421 (8th Cir.1996). By contrast, the petition in this case raises the issue of whether the March 6, 1992 contract received valid federal approval under the IGRA regulatory scheme. It thus invokes federal jurisdiction.
Moreover, an action filed in order to avoid tribal court jurisdiction necessarily asserts federal law. National Farmers Union Ins. Co. v. Crow Tribe of Indians, 471 U.S. 845, 853, 105 S.Ct. 2447, 85 L.Ed.2d 818 (1985). See also Iowa Mut. Ins. Co. v. LaPlante, 480 U.S. 9, 15, 107 S.Ct. 971, 94 L.Ed.2d 10 (1987); TTEA, 181 F.3d at 683; Kerr-McGee Corp. v. Farley, 115 F.3d 1498, 1501 (10th Cir.1997) (affirming stay of federal court proceedings to allow tribal court to determine its own jurisdiction). It is well established that the scope of tribal court jurisdiction is a matter of federal law. See National Farmers Union Ins. Co., 471 U.S. at 852, 105 S.Ct. 2447; Iowa Mut. Ins. Co., 480 U.S. at 15, 107 S.Ct. 971.
The jurisdictional facts in this case are very similar to those in Bruce H. Lien Co., 93 F.3d at 1421-22, which also involved a casino dispute in which a management company went to federal court for an order to compel arbitration after a tribe had filed a declaratory action in tribal court. We concluded in that case that there was federal jurisdiction over the matter because the issue of the "existence of tribal court jurisdiction itself presents a federal question within the scope of 28 U.S.C. § 1331." Id.; see also TTEA, 181 F.3d at 683 (finding jurisdiction to determine whether tribal court properly exercised jurisdiction over § 81 claim).
After examining the issues, we conclude that we have jurisdiction and affirm the ruling of the district court on this point.
The Band argues that the district court erred by granting the motion to compel arbitration instead of "staying its hand" so that tribal court remedies could be exhausted. Gaming World contends that the tribal exhaustion doctrine should not be applied because the White Earth Band of Chippewa Tribal Court did not exist at the time it commenced arbitration proceedings, the arbitration clause is itself valid and enforceable, and the validity of the March 6, 1992 agreement should be decided by the arbitrators, citing Prima Paint Corp., 388 U.S. at 402-04, 87 S.Ct. 1801 (arbitration clause in contract involving interstate commerce is severable and enforceable unless there are questions about the formation or validity of the clause itself). The Band responds that in this case there is a valid issue about the formation of the management agreement, including the arbitration clause, because the contract never received the necessary federal approval and is therefore void.
The issue of tribal exhaustion is a threshold one because it determines the appropriate forum. The tribal exhaustion doctrine, first enunciated by the Supreme Court in Nat'l Farmers Union Ins. Co., 471 U.S. at 853-57, 105 S.Ct. 2447, and further developed in Iowa Mut. Ins. Co., 480 U.S. at 15-18, 107 S.Ct. 971, favors exhaustion of available remedies in tribal court before a collateral or parallel federal court action may proceed. See Basil Cook Enter., Inc. v. St. Regis Mohawk Tribe, 117 F.3d 61, 65 (2d Cir.1997). A federal court should "stay  its hand until after the Tribal Court has had a full opportunity to determine its own jurisdiction." National Farmers Union Ins. Co., 471 U.S. at 857, 105 S.Ct. 2447. Tribal courts presumptively exercise civil jurisdiction over the activities of non Indians on reservation lands "unless affirmatively limited by a specific treaty provision or federal statute," Iowa Mut. Ins. Co., 480 U.S. at 18, 107 S.Ct. 971, and no treaties or statutes limiting tribal court jurisdiction in the circumstances here have been cited.
The tribal exhaustion doctrine is based on "a policy of supporting tribal self-government and self-determination," Nat'l Farmers Union Ins. Co., 471 U.S. at 856, 105 S.Ct. 2447, and it is prudential, rather than jurisdictional. See Iowa Mut. Ins. Co., 480 U.S. at 20 n. 14, 107 S.Ct. 971. Exhaustion is mandatory, however, when a case fits within the policy, Duncan Energy Co. v. Three Affiliated Tribes, 27 F.3d 1294, 1300 (8th Cir.1994); Burlington N. R.R. Co. v. Crow Tribal Council, 940 F.2d 1239, 1245 (9th Cir.1991), and the legal scope of the doctrine is a matter of law to be reviewed de novo. See Bowen v. Doyle, 230 F.3d 525, 530 (2d Cir.2000); U.S. v. Tsosie, 92 F.3d 1037, 1041 (10th Cir.1996).
Federal courts have deferred to tribal courts in circumstances similar to those here. The facts in Bruce H. Lien Co. are
We agree with the reasoning of these cases which is consistent with the longstanding federal policy supporting the development of tribal courts. As the Supreme Court explained in Nat'l Farmers Union Ins. Co.:
471 U.S. at 856, 105 S.Ct. 2447. See also Iowa Mutual Ins. Co., 480 U.S. at 15, 107 S.Ct. 971 ("a federal court's exercise of jurisdiction over matters relating to reservation affairs can ... impair the authority of tribal courts"); Merrion v. Jicarilla Apache Tribe, 455 U.S. 130, 138 n. 5, 102 S.Ct. 894, 71 L.Ed.2d 21 (1982) ("Through various Acts governing Indian tribes, Congress has expressed the purpose of fostering `tribal self government.'"); White Mountain Apache Tribe v. Bracker, 448 U.S. 136, 143-44, 100 S.Ct. 2578, 65 L.Ed.2d 665 (1980) (noting "firm federal policy" supporting tribal self-sufficiency). This policy would be undermined if Gaming World were permitted to evade the jurisdiction of the White Earth Band of Chippewa Tribal Court over the previously filed declaratory judgment action there.
Gaming World argues that it should be excused from exhaustion for several reasons. It points out that the tribal court was not available when it originally filed for arbitration, but that court was instituted, operating, and available by the time Gaming World filed its federal petition on January 2, 2001. This case is therefore not like Krempel v. Prairie Island Indian Community, 125 F.3d 621, 623 (8th Cir.
We conclude that the district court erred by not deferring for exhaustion of tribal court remedies and by proceeding to rule on the motion to compel arbitration.
Deferral to the tribal court will give the parties the opportunity to raise their various arguments in that forum in the first instance. The first filed declaratory action encompasses all of the issues between the parties, including the Band's asserted § 81 qui tam claim. Gaming World's subsequent petition for declaratory relief and arbitration was a clear attempt to evade tribal court jurisdiction, and "all issues relating to the Tribal Court's jurisdiction ... should be dealt with first by the Tribal Court itself." Bruce H. Lien Co., 93 F.3d at 1420-21.
Accordingly, we reverse the decision of the district court not to defer to the tribal court in the first instance and vacate its order granting the motion to compel arbitration. We remand to the district court with instructions to stay or dismiss this action without prejudice in order to permit the parties to exhaust their tribal court remedies. See Nat'l Farmers Union Ins. Co., 471 U.S. at 857, 105 S.Ct. 2447; Bruce H. Lien Co., 93 F.3d at 1422.
Section 81 was repealed by a statute enacted on February 29, 2000, which said nothing about whether Congress intended to bar parties from asserting preexisting § 81 claims. The Indian Tribal Economic Development and Contract Encouragement Act, Pub.L. 106-179.
In Prima Paint the Supreme Court explained that arbitration should be ordered once a court "is satisfied that `the making of the agreement for arbitration... is not in issue.'" 388 U.S. at 404, 87 S.Ct. 1801 (quoting 9 U.S.C. § 4). Nevertheless, the question of arbitrability itself is an issue for the court unless the parties have unmistakably agreed otherwise, AT & T Technologies, Inc. v. Communications Workers of Am., 475 U.S. 643, 649, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986), and the Supreme Court has recently elucidated the difference between a question of arbitrability for the court and a gateway question which is for the arbitrator to decide. Howsam v. Dean Witter Reynolds, Inc., ___ U.S. ___, ___, 123 S.Ct. 588, 592, 154 L.Ed.2d 491 (2002). "[A] gateway dispute about whether the parties are bound by a given arbitration clause raises a `question of arbitrability' for a court to decide." Id. Whether a nonsigning party or a successor corporation is bound by an arbitration agreement or whether a "particular type of controversy" is covered by an "arbitration clause in a concededly binding contract" are examples of issues to be decided by the court. See id. Conversely, whether grievance procedures have been followed or time limits satisfied are examples of issues to be decided by the arbitrator. See id. The key is whether the question is one the parties would likely have expected to be decided by the court or the arbitrator. See id. The parties in this case of course differ on the potential impact of the complicated regulatory background on the arbitrability issue.