No. 95-3916

 

BRUCE H. LIEN COMPANY *

*

Plaintiff - Appellant *

* Appeal from the United States

vs. * District Court for the 

* District of North Dakota

THREE AFFILIATED TRIBES; *

RUSSELL D. MASON, SR., as *

member of the Three Affiliated *

Tribal Business Council; MARTY *

FOX; DAYLON SPOTTED BEAR, as *

member of the Three Affiliated *

Tribal Business Council; IVAN *

JOHNSON, as member of the Three *

Affiliated Tribal Business *

Council; AUSTIN GILLETTE, as *

member of the Three Affiliated *

Tribal Business Council; GEORGE *

FAST DOG, as member of the *

Three Affiliated Tribal Business*

Council; ED HALL, as member of *

the Three Affiliated Tribal *

Business Council; P. DIANE *

AVERY, District Judge of the *

Tribal Court of the Three *

Affiliated Tribes *

*

Defendants - Appellees *

 

No. 96-1013

 

BRUCE H. LIEN COMPANY, *

* Appeal from the United States

vs. * District Court for the 

* District of North Dakota

Plaintiff - Appellee *

*
 The HONORABLE ANDREW W. BOGUE, Senior United States *

District Judge for the Western Division of the District of South

Dakota, sitting by designation.

2

THREE AFFILIATED TRIBES; *

RUSSELL D. MASON, SR., as *

member of the Three Affiliated *

Tribal Business Council; MARTY *

FOX; DAYLON SPOTTED BEAR, as *

member of the Three Affiliated *

Tribal Business Council; IVAN *

JOHNSON, as member of the Three *

Affiliated Tribal Business *

Council; AUSTIN GILLETTE, as *

member of the Three Affiliated *

Tribal Business Council; GEORGE *

FAST DOG, as member of the *

Three Affiliated Tribal Business*

Council; ED HALL, as member of *

the Three Affiliated Tribal *

Business Council; *

*

Defendants - Appellants *

*

P. DIANE AVERY, District Judge *

of the Tribal Court of the Three *

Affiliated Tribes *

*

 Defendant *

 

Submitted: June 13, 1996

 Filed: August 28, 1996

 

Before BOWMAN and HEANEY, Circuit Judges, and BOGUE, Senior *

District Judge.

 

BOGUE, Senior District Judge.

The Bruce H. Lien Company (Lien or the Company) appeals the District

Court's refusal to compel arbitration in Lien's dispute with the Three

Affiliated Tribes (Tribes) over matters concerning a tribal gaming

operation. The Tribes appeal the District Court's
 The Mandan, Hidatsa, and Arikara collectively comprise the 1

Three Affiliated Tribes and are federally recognized Indian

tribes which exercise their sovereignty under a federally

approved constitution adopted pursuant to the Indian

Reorganization Act of 1934, 25 U.S.C. §§ 461-479.

 The Tribes' constitution places governing authority in a 2

Tribal Business Council (TBC). At the time the agreement was

executed Wilkinson and Rabbithead were the TBC's Chairman and

Secretary, respectively. 

3

denial of their motion to dismiss. For the reasons stated below, we affirm

in part and reverse in part.

I. 

The parties to this dispute came together for the purpose of

constructing and operating a tribal casino on trust lands within the

boundaries of the Fort Berthold Indian Reservation in North Dakota. The

modern era of tribal gaming in this country was ushered in with the 1988

passage of the Indian Gaming Regulatory Act, 25 U.S.C. § 2701 et. seq.

(IGRA). The Tribes and Lien entered into a management contract pursuant 1

to IGRA, 25 U.S.C. § 2511, whereby Lien was to assist in the financing,

construction and management of the Tribes' casino at Four Bears Motor Lodge

in exchange for a share of the profits of the operation. The agreement was

executed by Wilbur Wilkinson and John Rabbithead on behalf of the Tribes,2

and Bruce Lien and Kent Mundon, for the Company. 

The agreement was submitted to the Area Director of the Bureau of

Indian Affairs (BIA), said agency having interim authority under IGRA to
 As discussed in greater detail later, IGRA established the 3

National Indian Gaming Commission (NIGC), which was granted

overall regulatory authority for Indian gaming conducted pursuant

to IGRA. 25 U.S.C. § 2704. IGRA also created the position of

Chairman of the NIGC, and granted said person certain enumerated

powers. 25

U.S.C. § 2705. Prior to the time the NIGC was organized and its

regulations promulgated, the Secretary of Interior was granted

the interim authority for supervision of Indian gaming. 25

U.S.C. § 2709. IGRA provides that the NIGC was to ultimately

review each contract approved by the Secretary of the Interior. 

25 U.S.C. §§ 2712(a) and (c)(1). The NIGC was organized on or

about February 22, 1993, with the publication of its regulations

found at 25 CFR 530 et. seq. 

4

approve gaming management contracts. 25 U.S.C. §§ 81 and 2709. After

3

receiving reports and commentary from the Office of
 Specifically, the agreement provides: 4

14. ARBITRATION, PROCEDURE, AND SOVEREIGN IMMUNITY

The parties recognize and acknowledge that the Three

Affiliated Tribes, as Owner, is the governmental

authority vested with the power to carry our

governmental functions within the jurisdictional

boundary of the Three Affiliated Tribes. The Owner,

having full governmental authority on tribal trust

land, hereby agrees as set forth herein below, to

relinquish and waive any and all rights, powers,

authorities, and defenses, that are vested in or

available to Owner because of Owner's governmental

immunity. Therefore, to the extent set forth herein,

Owner Agrees that:

5

the Solicitor, Department of the Interior, the agreement was approved by

the BIA's Area Director on February 19, 1993. Construction began shortly

thereafter with the casino beginning operations on July 16, 1993. There

is evidence in the record to indicate the casino has been a financial

success. 

The management contract at issue provides for a five-year term with

a two-year extension which Lien has exercised. Lien was required to invest

the funds necessary to remodel the Four Bears Motel and Lodge and build a

gaming casino, with the Tribes maintaining a proprietary interest in the

property and facilities. The contract provided for the repayment to the

company of the investment incurred in the construction of the facility,

amortized over the initial five-year term of the contract. The contract

further provided for the payment of the expenses of operation of the

facility and provided for the split of any remaining profits, sixty percent

to the Tribes and forty percent to Lien.

Regarding the issues of dispute resolution and sovereign immunity,

the agreement provides that all disputes arising out of the agreement shall

be subject to binding arbitration, that the arbitration process is deemed

sufficient to exhaust the parties' tribal court remedies, and that,

relative to the agreement's dispute resolution procedure, the Tribes waive

their sovereign immunity.4
14.1 Any disputes, controversy, or claims between [the

Tribes] or [Lien], arising out of or relating to this

Agreement, and any breach thereof, whether material or

otherwise, shall be submitted to final and binding

arbitration in accordance with the Commercial

Arbitration Rules of the American Arbitration

Association ... . The parties further agree that by

submitting this dispute to arbitration, this procedure

shall constitute a full and complete exhaustion of all

remedies available by and between the parties in Tribal

Court. The arbitration decision shall be a final

decision and shall be entered as Judgment in Tribal

Court. The Judgment, without modification and

unaltered, may be enforced through the Tribal Court

system. 

* * *

[The Tribes] [are] consenting to and specifically

limiting [their] governmental immunity and powers, as

it relates to governmental functions, the extent that

all such legislative, administrative, ordinances,

rulings, or decisions of Owner, during the term of this

Agreement, which, in any way, shall impact the rights

of Manager under the terms of this Agreement, shall be

subject to arbitration as set forth herein.

6

The agreement also provides that, pending arbitration of a dispute arising

out of the agreement, either party may seek injunctive relief in the

District Court of North Dakota.

After the gaming enterprise was up and running, Mr. Wilkinson lost

his bid to be re-elected to the TBC. Many of the new faces on the TBC

sought to review the actions of the former administration, including the

management contract for the Four Bears Casino. Specifically, some question

arose regarding Wilkinson's authority to bind the Tribes to the agreement.

Although the casino appeared to operating to the financial benefit of both

sides, disagreements
 An amended demand for arbitration requested determination 5

of whether the Tribes had materially breached the management

contract, sufficient to justify termination of the same. Lien

sought damages in the amount of $25,500,943.00, as well as

exemplary damages.

7

arose between the parties. Lien believed it was entitled to recapture

$2.28 million in construction and start up costs over that provided in the

contract. The Tribes, through their Tribal Gaming Commission, dramatically

increased licensing fees charged to Lien. 

On January 31, 1995, Lien filed a demand for binding arbitration

pursuant to the management agreement, seeking resolution of the

construction costs and license fees issues. Under the agreement,

5

arbitration was to take place in front of a three-member panel comprised

of two party-appointed arbitrators and a third neutral arbitrator agreed

upon by both parties. After some delay both sides had their party

arbitrators in place and a neutral arbitrator was selected. 

On June 27, 1995, the NIGC "called in" the management contract,

notifying the parties that it would be conducting its mandatory review of

the contract and requested all documentation be submitted within sixty

days. See 25 C.F.R. Part 533.1 et. seq. The Tribes thereafter sought a

postponement of the arbitration proceedings pending NIGC review of the

contract. Lien objected to the postponement. The arbitration panel, by

two to one vote, denied the Tribes' request for postponement. 

On October 2, 1995, the Tribes filed an action in the Three

Affiliated Tribes' District Court (Tribal Court). The Tribal Court

complaint sought a declaration that the management contract signed by

former Chairman Wilkinson is null and void under Tribal law due to lack of

proper authority and failure to garner approval by the
 The Tribes' complaint further prays the Tribal Court for 6

"[a]n order directing that an accounting of all monies paid to

Company under the terms of the alleged agreement and the full

repayment by the Company of any and all such monies paid

thereunder to the Tribe." Tribes' appendix at 88.

 Appeals from the decisions of the Tribal Court are taken to 7

the Northern Plains Intertribal Court of Appeals, seated in

Aberdeen, South Dakota. No appeal was taken from the Tribal

Court's October 6, 1995, order.

8

TBC. The Tribes further sought a preliminary injunction enjoining the

6

arbitration process until such time that the Tribal Court had ruled on the

Tribes' complaint or the NIGC had completed its review of the management

contract. Lien, by special appearance in Tribal Court, moved to dismiss

the complaint for lack of jurisdiction and argued against the

appropriateness of the injunction. On October 6, 1995, Tribal Judge Diane

Avery, defendant below, found that the Tribal Court had jurisdiction to

hear the matter and enjoined Lien and the American Arbitration Association:

from arbitrating disputes which have arisen under a management

agreement between [Lien] and the Three Affiliated Tribes until

such time that the National Indian Gaming Commission has

completed its review of the Agreement and the parties have

completed any changes in the Agreement which the National

Indian Gaming Commission may require, or this Court has ruled

on the Tribe's Complaint relative to that Agreement, whichever

is sooner.7

Approximately one week later, Lien filed suit in the United States

District Court for the District of North Dakota. Lien requested a

preliminary injunction to enforce the arbitration proceedings pursuant to

the management contract, and to enjoin the Tribes, its officials and the

Tribal Court Judge from interfering in the arbitration process. Lien also

moved the District Court to compel arbitration pursuant to the Federal

Arbitration Act, 9 U.S.C. § 1 et. seq. The Tribes moved to dismiss based

on lack of subject matter jurisdiction claiming that tribal remedies had

not
9

been exhausted and that the Tribes had not waived their sovereign immunity.

The Tribes also argued against the merits of Lien's requested injunctive

relief. Tribal Judge Avery filed a separate motion to dismiss. 

The district court recognized that while both sides would seem to

have common objectives, their respective actions belie that assumption.

The District Court believed that the NIGC had "exclusive jurisdiction for

a first determination of [the management contract's] compliance and

validity." Bruce H. Lien Co. v. Three Affiliated Tribes, No. A4-95-135,

mem. and order nunc pro tunc at 8 (D.N.D. Nov. 9, 1995). Based on this

belief, the District Court noted that "[c]ommon sense dictates that

everyone cool down until the NIGC has taken action on the contract approval

with or without requirements for modification." Id. at 6. Relevant to the

present appeal, the court ultimately found; i) that it had federal question

jurisdiction, ii) that the NIGC has exclusive initial jurisdiction to

determine the validity of the contract, iii) that the Tribal Court's

injunction, while possibly "in excess of the jurisdiction of the Tribal

District Court," was a permissible means of maintaining the status quo, iv)

that Lien's motion for preliminary injunction to compel arbitration would

be denied, and, v) that Tribal Judge Avery would be dismissed from the

action. In a supplemental order, the District Court ruled that the Tribes'

motion to dismiss the federal action based on sovereign immunity and/or

comity was denied.

Both sides filed notice of appeal. Lien argues the District Court

erred in failing to compel arbitration pursuant to the management contract

and in refusing to enjoin the Tribal defendants, including the Tribal

Judge, from assuming jurisdiction over any portion of the controversy. The

Tribes cross appealed contending the District Court erred in holding it

possessed federal question subject matter jurisdiction, and in failing to

dismiss the action on the grounds of sovereign immunity or comity.
10

II. 

This is a troubling action in that it presents a "tale of two cases"

quandary. If the management contract is legally valid, our course is

simple. The Tribes have clearly and unequivocally waived their sovereign

immunity under the contract and the parties have chosen binding arbitration

as a dispute resolution procedure. The District Court of North Dakota was

the selected forum in which to bring an action for injunctive relief and

that forum would clearly have jurisdiction to enforce the provisions of the

contract. The problem is that the Tribes are challenging the legal

validity of the contract itself, specifically the actions of its former

Chairman leading to the execution of the contract. This challenge to the

document itself therefore calls into question all provisions contained

therein (including provisions relating to arbitration, sovereign immunity,

and federal district court jurisdiction).

Further compounding the problem is the matter of the NIGC's review

of the management contract and the District Court and parties' perceived

role of that agency relative to the issues before the court. Fundamental

in the District Court's, and to some extent the Tribal Court's, analysis

was the belief that the NIGC had the authority and would, in fact, resolve

the question of whether or not the management contract was legally valid,

i.e., whether former Chairman Wilkinson had the authority to enter into the

contract on behalf of the Tribes. This, we believe, is where the District

Court is in error. Our interpretation of IGRA and the regulations

promulgated thereunder lead to the conclusion that disposition regarding

the legal validity of the management contract is beyond the authority of

the NIGC. It further appears obvious that resolution of any or all

collateral issues would be pointless until a decision regarding the

validity of the contract is achieved. That being the case, the issue

becomes where the decision regarding the contract's validity is to be made.

In the end we are convinced that the question must first be promptly
 As a precursor to any tribal gaming venture involving Class 8

II or Class III gaming, see Shakopee Mdewakanton Sioux Community

v. Hope, 16 F.3d 261, 263 (describing the distinction between the

various classes of gaming under IGRA), the governing body of the

tribe must adopt an ordinance or resolution concerning the gaming

activities. 25 U.S.C. §§ 2710(b)(1)(B), (d)(1)(A). These tribal

ordinances are subject to approval by the NIGC and must be in

place before a management contract can be approved. 

11

addressed in the Tribal Court, subject to appropriate review by the

District Court. 

To this end, we will examine management contracts under IGRA, their

approval and review in general and in this particular instance, with the

purpose of highlighting the considerations within and outside the authority

of the federal agencies. 

A. Management contracts under IGRA

IGRA is a vast piece of legislation enacted in part as a means "to

provide a statutory basis for the operation of gaming by Indian tribes as

a means of promoting tribal economic development, self-sufficiency, and

strong tribal governments." 25 U.S.C. § 2702(1). This circuit has

recently held that IGRA completely preempts the field of Indian gaming vis

a vis state law. Gaming Corp. of America v. Dorsey & Whitney, 88 F.3d 536

(8th Cir. 1996) (specifically holding that "IGRA has the requisite

extraordinary preemptive force necessary to satisfy the complete preemption

exception to the well-pleaded complaint rule."). 

The text of IGRA authorizes tribes to enter into management contracts

for the operation and management of tribal gaming ventures. 25 U.S.C. §

2711(a)(1). IGRA and its regulations further prescribe essential terms

8

which must be contained in a management contract before the same can be

"approved" by the NIGC's Chairman (or the Secretary of the Interior for

contracts, like the present, which were submitted prior to NIGC

organization). 25
 The text of IGRA lists six essential terms to be included 9

before a management contract may be approved, in addition to

requiring a term that indicates management fees shall not

constitute more than forty percent of a gaming enterprise's net

revenues. On March 5, 1992, the Assistant Secretary of Interior

sent a memorandum to all BIA Area Directors which provided fairly

exhaustive guidelines to govern federal review and approval of,

inter alia, management contracts. Lien's Appendix at 96-111. 25

C.F.R. §§ 531.1, 531.2, and 533 appear to synthesize the text of

IGRA and the Department of Interior memorandum and represents the

current guiding principles regarding essential terms and federal

approval of management contracts. 

 We note that the text of 25 U.S.C. § 2512 addresses review 10

by the NIGC's Chairman of management contracts entered into

"prior to the enactment of this Act [enacted Oct. 17, 1988], ...

." Strictly speaking there appears to be a gap in the NIGC's

review authority for contracts entered after the passage of IGRA,

but before the NIGC was completely organized (February 22, 1993). 

The management contract at issue in the present case, approved

February 19, 1993, would fall within this gap period and

apparently Lien has questioned the authority of the NIGC's review

in this instance. The NIGC itself clearly believes it has review

and approval authority over any management contract approved by

the Secretary, regardless of when the approval took place. 

Various correspondence by the agency to the parties bears this

conclusion out. Tribes' appendix at 457-58; Lien appendix at 86-

12

U.S.C. § 2711(b)(1-6); 25 C.F.R. Part 531.1(a-n). Along with the presence 9

of an adequate tribal ordinance regarding gaming and satisfactory

background checks for individuals and entities representing management

parties, 25 U.S.C. § 2711(a), the presence of the various essential

contract terms is critical regarding federal approval of management

contracts. 

B. NIGC review of existing management contracts

The management contract at issue in the present case was approved by

the BIA Area Director, on behalf of the Secretary of the Interior, on

February 19, 1993. IGRA and the rules and regulations of the NIGC require

that all management contracts approved prior to the organization of the

NIGC be reviewed and approved by that agency's Chairman. 25 U.S.C. §

2512. During 10
87. We believe this issue is not before us, but note that a

permissible agency interpretation

on this issue would merit considerable deference. Arkansas AFLCIO v. FCC, 11 F.3d 1430, 1441 (8th Cir. 1993). 

 It should be noted that during the NIGC's review process 11

of contracts previously approved, all contracts approved by the

Secretary of the Interior remain effective until approved or

disapproved by the Chairman of the NIGC. 25 C.F.R. § 533.1(c).

13

the review process, many of the same criteria required for the Secretary's

approval are examined by the Chairman of the NIGC. 25 U.S.C. § 2712(c)(1-

2) (directing the Chairman to "subject [the existing] contract to the

requirements and process of [25 U.S.C. § 2711]"). Again, a contract's

approval by the Chairman depends on, inter alia, satisfactory background

checks and compliance with the essential terms outlined in IGRA and the

regulations. 25 C.F.R. §§ 533.6 (approval procedure), 533.3 (materials and

documentation to be submitted when contract called in), 531.1(a-n)

(denoting required essential contract terms). 

11

So while approval of a management contract, either by the Secretary

of the Interior or the Chairman of the NIGC, entails a fairly comprehensive

and exhaustive examination of the document and surrounding circumstances,

in the end compliance with IGRA and the regulations is the sole focus. Has

all of the proper documentation been submitted? Does the document contain

provisions addressing the required essential topics? Do the backgrounds

of "interested parties" check out? We essentially agree with Lien's

assessment that "[t]he review is not more than a paper review to test the

sufficiency of the documents submitted to the Secretary of the Interior in

the first instance and to review whether the management agreement meets the

required contents [specified under IGRA]." Appellant's Brief at 42.

Despite the breadth of the approval and review process, passing on the

legal validity of the document (as opposed to approval for a contract

seemingly in compliance with IGRA and the regulations) is not within the

scope of the administrative bodies. 
 Deficiencies noted included the lack of a tribal gaming 12

license for the Four Bears Casino, and the lack of background

checks and licensing for certain "key employees" in the casino

operation. It is apparent the NIGC considers the deficiencies

serious and threatened the parties with the full panoply of

regulatory sanctions, including a shut down of the casino, if the

deficiencies are not remedied.

14

C. NIGC action in the present case 

The NIGC called in the management contract at issue by letter to the

parties on June 27, 1995. All requested materials and documentation,

including the contract itself, were submitted by the parties. It was

during the NIGC's review process that the Tribes sought to have the

arbitration initiated by Lien postponed. Failing that, the Tribes filed

an action in Tribal Court believing a course enjoining the arbitration was

required pending the completion of the NIGC's review. The Tribal Court for

the most part agreed and attempted to maintain the status quo until the

review was complete or a ruling on the merits of the Tribes' complaint was

achieved. The District Court below as well relied heavily on the NIGC

review in denying Lien's motion to compel arbitration. 

After briefing was complete in the present appeal, the NIGC issued

a letter dated May 17, 1996, to both parties indicating that the initial

review of the management contract and the casino operation was completed.

This correspondence was made part of the present record pursuant to

Fed.R.App.P. 28(j). While the NIGC indicated that modifications to the

contract were necessary for it to be in full compliance with IGRA, the

12

much-anticipated pronouncement said nothing regarding former Chairman

Wilkinson's authority at the time the contract was executed, nor about

whether or not a decision was forthcoming regarding the contract's legal

validity. 
 We feel constrained to note the feelings of the District 13

Court relative to the need for the parties, even at this late

date, to resolve their differences. We concur whole heartedly

with the thoughtful observations of such Court. Even at this

advanced stage of the conflict, it is difficult to determine the

underlying reason for this lawsuit. Whether it is a matter of

greed, stupidity, a lack of understanding of the legal

responsibilities of the parties hereto, a combination of all

three, or none of the above, is something only history will

ultimately clarify. One thing is certain, however, the dispute

at present is only the tip of the iceberg. More, much more, will

come about by way of legal maneuvering unless there is more give

and take on the part of both sides to this conflict. Much is at

stake here, including employment for hundreds of people and the

financial rewards to both sides of a successful business. It is

not beyond the realm of possibility that the business presently

existing will be forced to close its doors. The NIGC has noted

such in its correspondence to the parties. Having said this, it

is our fervent hope that reason will prevail. 

15

To end all doubt as to its position on the issue, the NIGC sent a

second letter to the parties on July 10, 1996, which states "the NIGC will

not consider the authority of former Chairman Wilkinson to enter into the

contract on behalf of the Tribe at this time since that question is

properly before the tribal court ... ." 

III.

So here we are. These parties, initially associated for the purposes

of mutual profit and well being, are now fighting it out on three fronts

(tribal court, federal court, and the NIGC) over a number of issues, with

perceptively little hope of a quick or inexpensive resolution. Two

13

courts have this dispute on active status; the NIGC continues its review

and continues in its attempt to bring the contract and gaming operation

into compliance with IGRA; arbitrators, once chosen, presumably await

notification that their activity is to resume. The vessel which is the

orderly administration of justice is leaking all over and making a big

mess. 
16

Our examination leads us to the conclusion that the underlying issues

regarding the contract's validity must be resolved before any other matter

can be productively addressed. We believe the District Court should have

stayed its proceedings pending a resolution in the first instance in the

Tribal Court of these matters.

In coming to this conclusion we start with the premise that civil

jurisdiction over the activities of non-Indians on reservations lands

presumptively lies in tribal courts, unless affirmatively limited by a

specific treaty provision or federal statute. Iowa Mutual Ins. Co. v.

LaPlante, 480 U.S. 9, 18, 107 S.Ct. 971, 977, 94 L.Ed.2d 10 (1987); Duncan

Energy v. Three Affiliated Tribes, 27 F.3d 1294, 1299 (8th Cir. 1994). The

exercise of tribal jurisdiction over activities of non-Indians is an

important part of tribal sovereignty. Iowa Mutual, 480 U.S. at 18, 107

S.Ct. at 977. As noted in this court's decision in Duncan Energy:

The Supreme Court has repeatedly recognized the Federal

Government's long-standing policy of encouraging tribal selfgovernment. See, e.g. Iowa Mutual Ins. Co. v. LaPlante,

[supra, 480 U.S. at 14, 107 S.Ct. at 975-76], Merrion v.

Jicarilla Apache Tribe, 455 U.S. 130, 138 n.5, 102 S.Ct. 894,

902 n.5, 71 L.Ed.2d 21 (1982). Tribal courts play a vital role

in tribal self-government, and the federal Government has

consistently encouraged their development. Iowa Mutual, 480

U.S. at 14-15, 107 S.Ct. at 975-76 .... The deference that

federal courts afford tribal courts concerning [tribal-related]

activities occurring on reservation land is deeply rooted in

Supreme Court precedent. Because a federal court's exercise of

jurisdiction over matters relating to reservation affairs can

impair the authority of tribal courts, the Supreme Court has

concluded that, as a matter of comity, the examination of

tribal sovereignty and jurisdiction should be conducted in the

first instance by the tribal court itself. National Farmers

Union Ins. Co. v. Crow Tribe of Indians, 471 U.S. 845, 856, 105

S.Ct. 2447, 2453-54, 85 L.Ed.2d 818 (1985).

Duncan Energy, 27 F.3d at 1299. 
 As enumerated in National Farmers Union, exhaustion of 14

tribal remedies is not necessary where: (1) an assertion of

tribal jurisdiction is motivated by a desire to harass or is

conducted in bad faith; (2) the action is patently violative of

express jurisdictional prohibitions; or (3) exhaustion would be

futile because of the lack of an adequate opportunity to

challenge the court's jurisdiction. National Farmers Union, 471

U.S. at 856 n.21, 105 S.Ct. at 2454 n.21; See also, Reservation

Tel., 76 F.3d at 184.

17

Supreme Court precedent and this court's pronouncements based thereon

require exhaustion of tribal court remedies in matters related to

reservation affairs. Reservation Tel. Co-op. v. Affiliated Tribes, 76 F.3d

181, 184 (8th Cir. 1996) (citations omitted). Barring the presence of an

exception to the exhaustion requirement , "a federal court should stay its 14

hand in order to give tribal forums the initial opportunity to determine

cases involving questions of tribal authority." Id., citing, Iowa Mutual,

480 U.S. at 15-16, 107 S.Ct. at 976-77. In this case many of the parties

are Tribal entities or members and the dispute arises from Tribal

governmental activity involving a project located within the borders of the

reservation. Under these facts, exhaustion of tribal court remedies is

especially appropriate. United States v. Turtle Mountain Housing Auth.,

816 F.2d 1273, 1276 (8th Cir. 1987); Duncan Energy, 27 F.3d at 1300 (the

court concluding it faced a "dispute arising on the Reservation that raises

questions of tribal law and jurisdiction that should first be presented to

the tribal court"). 

The Tribes below moved the District Court to dismiss Lien's federal

action on the grounds of comity, arguing the federal court
18

should defer to the Tribal Court pending exhaustion of tribal remedies of

the questions regarding the contract's validity. The District Court

apparently felt that exhaustion of tribal remedies was not required because

IGRA divested said court of its jurisdiction. The Court noted:

The management contract between the Tribes and the Lien Company

is one authorized by Federal statutes, not Tribal Ordinance,

and the Federal statutes prove that NIGC has exclusive

jurisdiction for a first determination of compliance and

validity. It appears that a finding by the Tribal Court that

the management contract is void would itself be a nullity, but

it is not necessary to reach that point at this time.

Lien v. Three Affiliated Tribes, No. A4-95-135, mem. and order nunc pro

tunc at 7 (D.N.D. Nov. 9, 1995).

As previously indicated, we agree with the District Court's

assessment that the NIGC has exclusive authority to determine a contract's

compliance with IGRA and its regulations, but we disagree (as do both

parties) that said agency has "exclusive jurisdiction" regarding a

contract's legal validity. These are distinct inquiries, and the NIGC

itself is on the record indicating that it will not resolve the issue of

the contract's validity as the matter "is properly before the tribal

court." Questions regarding whether IGRA or the NIGC divest the Tribal

Court of authority to rule on the issues regarding the contract's validity,

whether IGRA is applicable to the Tribal Court action, and whether the

validity of the management contract can be affected by an interpretation

of Tribal law, are issues relating to the Tribal Court's jurisdiction which

should be dealt with first by the Tribal Court itself. Duncan Energy, 27

F.3d at 1299. 

Lien argues that exhaustion is not required because the management

contract requires that all disputes be resolved through arbitration and

therefore mandates a limited role for the Tribal
19

Court. Lien cites FGS Constructors v. Carlow, 64 F.3d 1230 (8th Cir.

1995), for the proposition that where a contract involving an Indian party

contains a "choice of forum" clause, exhaustion of tribal remedies is not

necessary. In Carlow, the contract at issue contained a dispute resolution

clause stating, "In the event there is any dispute between the parties

arising out of this agreement, it shall be determined in the Ogalala Sioux

Tribal Court or other court of competent jurisdiction." Id. at 1233. The

district court had dismissed a Miller Act action brought in federal court

on the ground of comity and failure to exhaust tribal court remedies. Id.

at 1232. This court reversed that ruling, stating:

We do not agree with the district court's determination that

FGS must first exhaust its remedies in the tribal court. The

contracting parties agreed that a plaintiff could sue either in

the federal district court of South Dakota (a court of

competent jurisdiction) or in the tribal court. By this forum

selection clause, the Tribe agreed that disputes need not be

litigated in tribal court. The district court, therefore, had

no significant comity reason to defer this Miller Act

litigation first to the tribal court.

Id. at 1233. 

The distinction between this case and Carlow is that in the present

situation the Tribes are challenging the very validity of the agreement

containing language giving the Tribal Court limited jurisdiction. As

previously indicated, we believe this entire litigation requires a logical

focus which mandates the agreement's validity be addressed before all else.

Lien next argues that exhaustion is not required because IGRA has

preempted the field of Indian gaming and serves to divest the Tribal Court

of jurisdiction. See, Reservation Tel. Co-Op, 76 F.3d at 184 (exhaustion

not required where the tribal court action is "patently violative of

express jurisdictional prohibitions") (citations omitted). This argument

is similar to the concerns raised by the District Court and must be

similarly rejected for the
20

reasons articulated above. While this circuit in the Gaming Corp. of

America case has determined that IGRA is sufficiently comprehensive to

preempt state law, Gaming Corp. of America says nothing regarding divesting

tribal courts of jurisdiction regarding reservation affairs. 

It is true that under certain circumstances, preemptive federal

statutes may serve to relieve a party from exhausting tribal court

remedies, N.S.P. v. Prairie Island, 991 F.2d 458, 463 (8th Cir. 1993), or

may serve to "curtail[] the tribe's power to assert jurisdiction." City

of Timber Lake v. Cheyenne River Sioux Tribe, 10 F.3d 554, 559 (8th Cir.

1993) (citations omitted). These notions notwithstanding, it bears

repeating that under the exhaustion doctrine, the tribal courts themselves

are given the first opportunity to address their jurisdiction and explain

the basis (or lack thereof) to the parties. National Farmers Union, 471

U.S. at 857, 105 S.Ct. at 2454. As a jurisdictional inquiry, appeal of

this issue may be had in the federal district court. Duncan Energy, 27

F.3d at 1300.

We reject the additional arguments raised by Lien against exhaustion,

including the argument that the "bad faith" exception to the exhaustion

requirement is implicated by the current set of facts. 

Despite the foregoing, we agree with Lien and the District Court that

federal question jurisdiction exists in the District Court. While the

issue of the contract's validity does not raise a federal question per se,

certainly there are aspects of the dispute which do. Particularly where

the entire association between the parties (and their various disputes)

arise under IGRA, and where the management agreement at issue, once

approved, remains so until disapproved by the NIGC. Further, this case is

being directed to the Tribal Court and exhaustion within that system. The

existence of tribal court jurisdiction itself presents a
 The Tribes have also asserted the district court erred in 15

failing to dismiss Lien's federal action on the grounds of

sovereign immunity. Because we are reversing the district

court's decision on the grounds of comity and failure to exhaust

tribal court remedies, which is presently dispositive of the

case, we decline to reach the sovereign immunity issue.

 Given our disposition of this matter, we believe that all 16

matters decided by the District Court, but not referenced in the

current opinion, are mooted by the same. Considering that the

21

federal question within the scope of 28 U.S.C. § 1331. Iowa Mutual, 480

U.S. at 15, 107 S.Ct. at 976 (noting also that "[e]xhaustion is required

as a matter of comity, not as a jurisdictional prerequisite"). As noted

by the Supreme Court:

Because petitioners contend that federal law has divested the

Tribe of [civil jurisdiction], it is federal law on which they

rely as a basis for the asserted right of freedom from Tribal

Court interference. They have, therefore, filed an action

'arising under' federal law within the meaning of § 1331. The

District Court correctly concluded that a federal court may

determine under § 1331 whether a tribal court has exceeded the

lawful limits of its jurisdiction. 

National Farmers Union, 471 U.S. at 852-53, 105 S.Ct. at 2452.

IV.

Therefore we agree with the District Court that it has federal

question jurisdiction and affirm as to that issue. That being said, it

appears that the orderly administration of justice requires the District

Court to stay its proceedings pending a determination by the Tribal Court

of that court's jurisdiction and discussion regarding the legal validity

of the management contract. We reverse the District Court's decision not

to defer to the Tribal Court. Although we leave to the District Court's

sound discretion decisions regarding further proceedings in that court, we

note that the rare circumstances of this case make time of the essence.

The exhaustion process should be given a reasonable time to proceed, but

the District Court may wish to consider lifting the stay if satisfied that

undue delays detrimental to either party are attending the tribal court

exhaustion process. 

15,16
matter is going back to her court for consideration, we

specifically affirm the District Court's dismissal of Tribal

Judge Avery as party defendant. 

22

We remand for proceedings consistent with this opinion. 

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.