United States: Supreme Court Decision Alert - May 27, 2014

On May 27, 2014, the Supreme Court issued one decision, described below, of interest to the business community.

Indian Gaming Regulatory Act—Tribal Sovereign Immunity

Michigan v. Bay Mills Indian Community, No. 12-515 (described in the June 24, 2013, Docket Report)

Today, in Michigan v. Bay Mills Indian Community, No. 12-515, the Supreme Court reaffirmed its prior holding that tribal sovereign immunity extends to suits arising out of Indian tribes' commercial activities. The Court concluded that, although the Indian Gaming Regulatory Act (IGRA) partially abrogates tribal sovereign immunity by allowing the states to sue Indian Tribes in federal court "to enjoin ... class III gaming activit[ies]," such as casino games, that are "located on Indian lands and conducted in violation of any Tribal-State compact" (25 U.S.C. § 2710(d)(7)(A)(ii)), IGRA does not authorize suits to enjoin gaming activities located outside Indian lands. Because the Court's decision clarifies the types of suits that may be brought against Tribes under IGRA, it is of significant interest both to tribal entities that are subject to IGRA and to businesses that enter into contracts with them.

Bay Mills concerned a casino opened by the Bay Mills Indian Community in Vanderbilt, Michigan, "about 125 miles from the Tribe's reservation." Slip op. 3. Michigan sued to enjoin the casino's operation, "alleging that the facility violated IGRA and" the governing Tribal-State compact because the casino "was located outside Indian lands." Id. The district court granted Michigan's request for a preliminary injunction, but the Sixth Circuit "vacated the injunction, holding ... that tribal sovereign immunity barred Michigan's suit ... unless Congress provided otherwise, and that [IGRA] did not authorize the action." Slip op. 3-4.

In a 5-4 opinion written by Justice Kagan, the Supreme Court affirmed. The Court relied on its 1998 decision in Kiowa Tribe of Oklahoma v. Manufacturing Technologies, Inc., 523 U.S. 751 (1998), which held that tribal sovereign immunity bars "suits arising from a tribe's commercial activities, even when they take place off Indian lands," except when Congress "unequivocally" abrogates that immunity. Slip op. 6-7 (internal quotation marks omitted). Applying Kiowa, the Court held that tribal immunity barred Michigan's suit because IGRA permits only those suits that concern "gaming activity located on Indian lands," whereas "the very premise of [Michigan's] suit" was "that the Vanderbilt casino is outside Indian lands." Slip op. 8.

The Court also declined Michigan's invitation to overrule Kiowa. The Court reasoned that it "does not overturn its precedents lightly," and that principles of stare decisis weighed especially heavily against overruling Kiowa because tribal immunity "is settled law" and because both the Court itself and "tribes across the country" have "relied on" Kiowa's extension of tribal immunity to the commercial context. Slip op. 15-16 (internal quotation marks omitted). The Court further concluded that "it is fundamentally Congress's job, not [the Court's], to determine whether or how to limit tribal immunity." Slip op. 15-17. And the Court noted that, "[f]ollowing Kiowa, Congress considered," but declined to adopt, "several bills to substantially modify tribal immunity in the commercial context." Slip op. 19. The Court thus reasoned that "[r]eversing Kiowa ... would scale the heights of presumption." Slip op. 20.

In a concurring opinion, Justice Sotomayor wrote that the application of tribal sovereign immunity to bar suits arising out of commercial activities is supported by both "[c]omity"—which is to say, the "proper respect" given to "a sovereign's functions"—and the federal government's goal of making "Tribes more self-sufficient[] and better positioned to fund their own sovereign functions." Slip op. 3, 7 (Sotomayor, J., concurring) (internal quotation marks omitted).

Justice Thomas dissented, joined by Justices Scalia, Ginsburg, and Alito. In the dissent's view, Kiowa's "expansion of tribal immunity" to suits concerning commercial activities should be overruled as "unsupported by any rationale for [the immunity] doctrine, inconsistent with the limits on tribal sovereignty, and an affront to state sovereignty." Slip op. 1 (Thomas, J., dissenting). The dissent further argued that stare decisis does not "require" the Court "to preserve" the rule in Kiowa, which the dissenters viewed as "even more untenable" in light of the "dramatic[]" expansion of tribes' "commercial activities" since Kiowa was decided. Slip op. 9-10 (Thomas, J., dissenting). More specifically, the dissent argued that because "[t]ribal immunity is a common-law doctrine adopted and shaped by [the] Court," it is the Court's responsibility, not Congress's, to overrule Kiowa. Slip op. 7 (Thomas, J., dissenting). Finally, the dissent criticized the majority's reliance on the fact that Congress has not overturned Kiowa as "effectively codif[ying] that decision based only on Congress' failure to address it." Slip op. 14 (Thomas, J., dissenting).

The dissent also pointed out a potential problem with the majority's resolution of the case: Although the Tribe agreed in its compact with the state not to operate a casino outside Indian lands, the state could not enforce the contract in federal court. See Slip op. 11 (Thomas, J., dissenting). The majority offered two possible solutions to this problem: Michigan could (i) "deny a [state] license to Bay Mills" and then "bring suit against tribal officials or employees (rather than the Tribe itself)" if the tribe persisted in operating the casino, or (ii) "bargain for a waiver of immunity" in Tribal-State compacts. Slip op. 12-13. But the dissent argued that the effects of tribal sovereign immunity are far-reaching and not so easily dismissed: "This case is but one example" of the ways in which "[t]ribal immunity significantly limits, and often extinguishes, the States' ability to protect their citizens and enforce the law against tribal businesses." Slip op. 11 (Thomas, J., dissenting).

In a separate dissent, Justice Scalia stated that, although he had "concurred in [the] decision" in Kiowa, he is "now convinced that Kiowa was wrongly decided" and should be overruled. Slip op. 1 (Scalia, J., dissenting). Justice Ginsburg also wrote a separate dissent expressing her view that, although Kiowa exemplifies an "absolute ... and exorbitant" view of tribal sovereign immunity, the Court's prior decisions also "carried beyond the pale the [sovereign] immunity possessed by States." Slip op. 1 (Ginsburg, J., dissenting).

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