Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_18-cv-00834/USCOURTS-casd-3_18-cv-00834-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1330 Breach of Contract

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UNITED STATES DISTRICT COURT 

SOUTHERN DISTRICT OF CALIFORNIA

OUTLIERS COLLECTIVE, a Nonprofit Mutual Benefit Corporation,

Plaintiff,

vs.

THE SANTA YSABEL TRIBAL 

DEVELOPMENT CORPORATION, a 

Tribally chartered corporation; 

GARDENPHARMA, LLC, a limited 

liability company; DAVID CHELETTE, 

an individual; and DOES 1 through 50, 

Inclusive,

Defendants.

Case No. 3:18-cv-00834-JAH-KSC

ORDER GRANTING DEFENDANTS 

THE SANTA YSABEL TRIBAL 

DEVELOPMENT CORPORATION 

AND DAVID CHELETTE’S 

MOTION TO DISMISS

INTRODUCTION

Pending before the Court is Defendants The Santa Ysabel Tribal Development 

Corporation (“SYTDC”) and David Chelette’s (“Chelette”) (collectively referred to 

as “Tribal Defendants”) motions to dismiss plaintiff Outliers Collective’s (“Outco” or 

“Plaintiff”) Complaint pursuant to Federal Rules of Civil Procedure (“Fed. R. Civ. 

P.”) 12(b)(1) and 12(b)(7). Doc. Nos. 8, 11. For the reasons set forth below, 

Defendants’ motions to dismiss are GRANTED and the action is DISMISSED in its 

entirety as to all Defendants with prejudice. 

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BACKGROUND 

This action arises out of a Land Use Agreement (“Agreement”) entered into 

by a tribally chartered corporation, wholly owned by the Iipay Nation of Santa Ysabel, 

a federally recognized Indian Tribe, and a Nonprofit Mutual Benefit Corporation, 

organized under the laws of the State of California. Doc. No. 8-1 at 8-34. In pertinent 

part, the Agreement set forth the terms by which Plaintiff would lease from SYTDC 

interior and exterior space on tribal lands for the cultivation, harvesting, and 

processing of medical cannabis pursuant to the Santa Ysabel Tribal Medicinal 

Cannabis Enterprise Act. Id. at 9. 

In early 2017, a dispute arose regarding Plaintiff’s obligation to pay the Tribe’s 

Medical Cannabis Tax. Doc. No. 7 at 11. Negotiations were unsuccessful and the 

Agreement was eventually terminated. Id. at 12. The Tribal Cannabis Regulatory

Agency revoked Plaintiff’s license and prohibited Plaintiff and its affiliates from 

accessing the facility, although some of Plaintiff’s property remained. Id.

On April 30, 2018, Plaintiff filed a complaint against Tribal Defendants for: (1) 

Breach of Contract; (2) Breach of Covenant of Quiet Enjoyment; (3) Conversion; (4) 

Unjust Enrichment; and (5) Declaratory Relief. Doc. No. 1. Tribal Defendants each 

timely filed motions to dismiss pursuant to Federal Rules of Civil Procedure (“Fed. 

R. Civ. P.”) 12(b)(1) and 12(b)(7). See Doc. Nos. 6, 8, 11. The motions have been 

fully briefed and are now before the Court. 

DISCUSSION

I. LEGAL STANDARD 

The federal court is one of limited jurisdiction. Gould v. Mutual Life Ins. Co. v. 

New York, 790 F.2d 769, 774 (9th Cir. 1986). As such, it cannot reach the merits of 

any dispute until it confirms its own subject-matter jurisdiction. Steel Co. v. Citizens 

for a Better Environ., 523 U.S. 83, 93-94 (1998). The burden of establishing

jurisdiction rests upon the party asserting it. Kokkonen v. Guardian Life Ins. Co. of 

Am., 511 U.S. 375, 377 (1994).

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“‘[F]ederal jurisdiction exists only when a federal question is presented on the 

face of the plaintiff’s properly pleaded complaint. ’ [Citation].” Rivet v. Regions Bank 

of Louisiana 522 U.S. 470, 475 (1998). Plaintiff must plead a colorable claim “arising 

under” the Constitution or laws of the United States to invoke federal-question 

jurisdiction pursuant to 28 U.S.C. §1331. Arbaugh v. Y&H Corp., 546 U.S. 500, 513, 

(2006). To properly invoke federal question jurisdiction, a federal law or regulation 

must be “an element, and an essential one, of the plaintiff’s cause of action.” Gully 

v. First Nat. Bank 299 U.S. 109, 112 (1936). If “a federal court concludes that it lacks 

subject-matter jurisdiction, the court must dismiss the complaint in its entirety.” 

Arbaugh, 546 U.S. at 514. 

II. ANALYSIS

The Complaint alleges jurisdiction under 28 U.S.C § 1331. Plaintiff cites to 

Williams v. Lee, 358 U.S. 217 (1959) to support jurisdiction over a matter brought by 

a non-tribal plaintiff against a tribal defendant when the cause of action arises on 

Indian territory. Doc. No. 1 at 2, ¶6. The Complaint further alleges that SYTDC agreed 

to waive its sovereign immunity from suit in favor of Plaintiff. Id. In response to 

Defendants’ motions to dismiss1

, Plaintiff contends that the subject matter of the 

agreement is sufficient to invoke federal-question jurisdiction. Doc. No. 16 at 5. 

First, Plaintiff’s reliance on Willams is misplaced. The Williams Court reversed 

the Arizona Supreme Court’s decision affirming judgment for plaintiff, a non-tribal 

member, in an action against a tribal member. The Court held that state courts did not 

have authority to exercise jurisdiction over civil suits against tribal members where 

the cause of action arose on an Indian reservation. 358 U.S. at 223. The Court 

reasoned that the exercise of jurisdiction by the state would “undermine the authority 

 1 Defendants move to dismiss on three grounds: (1) as a court of limited jurisdiction, this Court 

lacks subject-matter jurisdiction, (2) the limited waiver of sovereign immunity allowed only for 

dispute resolution by arbitration and has since expired, and (3) indispensable parties have not been 

joined by Plaintiff and therefore Plaintiff’s claims must be dismissed. Because the Court finds it 

lacks subject-matter jurisdiction, it declines to address the remaining contentions.

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of the tribal courts over Reservation affairs and hence would infringe on the right of 

the Indians to govern themselves.” Id. The lack of authority by state courts to exercise 

jurisdiction, however, cannot be interpreted to mean jurisdiction automatically vests

in District Courts. To be certain, the Supreme Court notes in Williams that Congress 

has acknowledged the authority of Indian governments over their reservations and the 

Court has consistently protected it. Id. at 223.

Second, SYTCD’s limited waiver of sovereign immunity has no bearing on

whether this Court has subject-matter jurisdiction. Subject-matter jurisdiction cannot 

be forfeited or waived. Arbaugh, 546 U.S. at 514 (quoting United States v. Cotton, 

535 U.S. 625, 630, (2002)); See also Weeks Const., Inc. v. Oglala Sioux Hous. Auth., 

797 F.2d 668, 671 (8th Cir. 1986) (waiver of sovereign immunity by tribal housing 

authority did not by fiat confer jurisdiction on the federal courts). Even if the parties 

agreed, as Plaintiff contends, that a dispute arising out of the Agreement may be 

submitted to any federal court of competent jurisdiction within this District, this Court 

has an “independent obligation to determine whether subject-matter jurisdiction 

exists.” Arbaugh, 546 U.S. at 514 (citing Ruhrgas AG v. Marathon Oil Co., 526 U.S. 

574, 583 (1999).

Third, the allegations Plaintiff pleads in the Complaint and raises in its

responsive pleading are insufficient to bring the action within the limited jurisdiction 

of this Court. Plaintiff references no federal law or regulation essential to the 

adjudication of its claims.

2 “Federal question jurisdiction does not exist merely 

because an Indian tribe is a party or the case involves a contract with an Indian tribe,” 

Stock W., Inc. v. Confederated Tribes of the Colville Reservation, 873 F.2d 1221, 1225 

(9th Cir. 1989), nor “does it exist if ‘the real substance of the controversy centers 

 

2 Plaintiff mentions the Wilkinson Memorandum referred to in the Land Use Agreement, 

which provides “guidance on the enforcement of the Controlled Substances Act ... on tribal 

lands by the United States Attorneys’ offices.” Policy Statement Regarding Marijuana 

Issues in Indian Country, Monty Wilkinson, Director of the Executive Office for the United 

States Attorneys, pp 1-2. October 28, 2014 (“Wilkinson Memorandum”). The Controlled 

Substance Act constitutes federal law. However, the memo itself does not.

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upon’ something other than the construction of federal law.” Longie v. Spirit Lake 

Tribe, 400 F.3d 586, 590 (8th Cir. 2005) (quotations omitted) (quoting Littell v. Nakai, 

344 F.2d 486, 488 (9th Cir.1965)). District Courts “will exercise section 1331 

jurisdiction in cases involving reservation affairs only in those cases in which federal 

law is determinative of the issues involved.” Id. at 589 (citing Smith v. McCullough, 

270 U.S. 456, 459 (1926)). 

Plaintiff frames its controversy as:

...relating to [the] respective rights and duties under ... the Land Use 

Agreement, and their respective rights to possession, control and ownership 

over the medical cannabis then growing at the premise, the greenhouses, 

supplies and equipment for use in growing that medical cannabis, and the right 

to the profits arising therefrom. Doc. No. 1 at 11, ¶48.

The controversy is based solely on the terms of the Agreement, without regard to the 

“validity, construction or effect” of a federal law. See Shulthis v. McDougal, 225 U.S. 

561, 569-70 (1912). “If an interpretation of tribal or local law is necessary to establish 

or clarify a right sought to be enforced based on a contract, then jurisdiction under 

section 1331 does not exist, even if the subject of the contract is [federally regulated].” 

Longie, 400 F.3d at 590 (no jurisdiction despite a contractual dispute relating to Indian 

trust property); see also Begay v. Kerr-McGee Corp., 682 F.2d 1311, 1315, (9th 

Cir.1982) (no jurisdiction where the cause of action arose under state law, despite 

anticipation of a defense based on federal law). Plaintiff does not challenge the effect 

or construction of the Controlled Substance Act (“CSA”), but mentions, in opposition 

to the motion, that a federal question has been asserted “in light of the subject matter 

of the agreement and the federal regulation of that subject matter.” Doc. No. 16 at 5. 

Even assuming Plaintiff included the federal regulation of controlled substances as a

basis for jurisdiction in its Complaint, as opposed to its response to Defendants’ 

motions to dismiss, the result would be same. 

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Provision 17.1 of the Agreement provides: 

This Agreement shall be governed by and interpreted in accordance with the 

laws of the Tribe. This Agreement shall be deemed made and entered into 

within the Tribe's reservation.

As in Weeks Const. Inc. v. Oglala Sioux Hous. Auth., the rights Plaintiff seeks 

to enforce are based on an agreement, interpretation of which is governed by local 

(tribal) law, not federal law; leaving this Court devoid of subject-matter jurisdiction. 

797 F.2d 668, 672 (8th Cir. 1986).

CONCLUSION

Based on the foregoing, the Court finds that Plaintiff has not met its burden in 

establishing subject-matter jurisdiction. Therefore, Defendants’ motions to dismiss 

(doc. nos. 8, 11) are GRANTED, and Plaintiff’s Complaint is DISMISSED in its 

entirety with prejudice as to all Defendants. 

IT IS SO ORDERED.

DATED: March 12, 2019 

_____________________________

HON.JOHN A. HOUSTON

UNITED STATES DISTRICT JUDGE

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