(Tribal Court Has Jurisdiction Over Insurers Who Issued Insurance Policies to Tribe)
(October 2024) - In Lexington Insurance Company v. Smith, 2024 U.S. App. LEXIS 23429 (September 16, 2024), the U.S. Court of Appeals for the Ninth Circuit denied the insurers' petition for rehearing on its decision affirming a lower court's order granting Suquamish Tribe and Port Madison Enterprises' (collectively, the "Tribe") motion for summary judgment.
Lexington Insurance Company and several other insurance companies (collectively, "Lexington") contracted with Tribal First (an entity set up to offer insurance for tribes) to offer insurance policies to tribal governments and enterprises. Lexington then issued insurance policies that were to be provided through Tribal First to tribes. After suspending business operations during the onset of the COVID-19 pandemic, the Tribe submitted insurance claims for lost business and tax revenue and other expenses. After receiving reservation of rights letters, the Tribe sued Lexington for breach of contract in the Tribe's court. Lexington moved to dismiss, arguing the tribal court lacked tribal jurisdiction and personal jurisdiction. The lower tribal court denied the motion and the tribal court of appeals affirmed.
After exhausting its appeals with the tribal courts, Lexington sued in federal court for a declaratory judgment that the tribal court lacked jurisdiction. On cross motions for summary judgment, the U.S. District Court for the Western District of Washington sided with the Tribe, granting the Tribe's motion for summary judgment, denying Lexington's motions, and confirming the tribal court's jurisdiction over Lexington. The district court then dismissed the case with prejudice and Lexington appealed. On appeal, the Ninth Circuit affirmed the district court's ruling and held that the tribal court had subject-matter jurisdiction over the matter under the Tribe's sovereign authority over "consensual relationships." Lexington then petitioned for rehearing en banc.
In denying the petition for rehearing, the Ninth Circuit held that tribal jurisdiction was appropriate under U.S. Supreme Court precedent. The Ninth Circuit noted that Lexington explicitly held itself out as a potential business partner to tribes, tailored its insurance policies specifically for tribes, and knowingly contracted with the Tribe over a number of years to provide coverage for properties and businesses on tribal lands. Confining itself to these facts, the Ninth Circuit "faithfully applied Supreme Court and circuit court precedent in holding that Lexington's actions qualified as conduct on tribal lands and made Lexington subject to tribal jurisdiction." Specifically, the Ninth Circuit concluded that Lexington's relationship with the Tribe and the breach of contract action bear a "direct connection to tribal lands", thereby fulfilling the Ninth Circuit's test in Knighton v. Cedarville Rancheria of N. Paiute Indians, 922 F.3d 892, 902 (9th Cir. 2019). That connection, coupled with Lexington conducting business with the Tribe, fulfills the Supreme Court's directives in Montana v. United States, 45 U.S. 544, 565-66 (1980) and Merrion v. Jicarilla Apache Tribe, 455 U.S. 130, 142 (1982).
The Ninth Circuit also clarified that no physical presence is required in order to constitute nonmember conduct on tribal land. The Ninth Circuit noted that in determining whether a tribe has jurisdiction over a nonmember, the court first determines whether the nonmember's conduct at issue occurred within the boundaries of the reservation. Relying on the holdings in Montana and Merrion, the Ninth Circuit further noted that "a nonmember conducting business with a tribe that is directly connected to tribal lands can be subject to tribal jurisdiction" and no part of that test "requires the physical presence of a nonmember on a reservation." Rather, in determining whether a nonmember's conduct has occurred on tribal land, the court considers "whether the cause of action brought by the...parties bears some direct connection to tribal lands." The Ninth Circuit concluded that Lexington's conduct took place on tribal land because "[t]ribal land literally and figuratively underlies the contract at issue here."
Finally, the Ninth Circuit disagreed that the United State Supreme Court's holding in Plains Commerce Bank v. Long Family Land & Cattle Co., 554 U.S. 316, 324 (2008) imposes an additional jurisdictional requirement. In Plains Commerce Bank, the Supreme Court stated:
Consequently, [tribal] laws and regulations may be fairly imposed on nonmembers only if the nonmember has consented, either expressly or by his actions. Even then, the regulation must stem from the tribe's inherent sovereign authority to set conditions on entry, preserve tribal self-government, or control internal relations.
Id. at 337.
The Ninth Circuit clarified that rather than imposing an additional requirement, the Supreme Court "was merely clarifying that a nonmember's consent to tribal law is not enough for tribal jurisdiction and cannot circumvent the limitations on tribal authority." Rather, tribal law can only be enforced against a nonmember if that person consented and the tribe had the authority to do so under the power to exclude (i.e., the authority to set conditions on entry), the Montana exceptions (i.e., the authority preserve tribal government), or internal relations. The Ninth Circuit further noted that tribal sovereignty over territory is implicated when nonmember behavior regarding that territory "sufficiently affects the tribe as to justify tribal oversight." The Ninth Circuit concluded that "[t]he Lexington scenario easily fits within this construct" since the subject insurance policy covered the properties and operations of a tribal government and businesses that involved the use of tribal land and the businesses constituted a significant economic interest for the tribe.
Accordingly, the Ninth Circuit concluded that its decision to deny rehearing en banc "was grounded in precedent and common sense."
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