Opinion ID: 1445206
Heading Depth: 2
Heading Rank: 5

Heading: The Second Amendment's Arbitration Clause

Text: The Nation makes a final argument that, even if we were to hold, as we do, that the Panzer decision did not automatically revoke the Nation's sovereign immunity waiver, the scope of the Nation's waiver is still limited only to arbitration. This is not the case. First, it is not altogether clear whether all disputes arising under the Compact are subject to arbitration. The Dispute Resolution provision in Paragraph 11, Section XXIII of the Second Amendment does include an arbitration clause, which provides: If any, dispute arises between the Parties regarding the interpretation or enforcement of the Compact, Amendment, and this Second Amendment, except as otherwise provided in this Second Amendment, that dispute (Dispute) shall be resolved in accordance with the following procedure: . . . The section then goes on to provide that the parties will first meet and confer, but if that process does not lead to a mutually satisfactory result, either Party may serve a demand for arbitration on the other Party. If that occurs, the Parties shall resolve the Dispute by binding arbitration, with actions to compel arbitration, determine whether an issue is arbitrable, or confirm an award to be brought in the United States District Court for the Western District of Wisconsin. This arbitration clause, however, is arguably in some tension with the first clause of the Sovereign Immunity section, which states: Unless the Parties agree otherwise, if a dispute arises regarding compliance with or the proper interpretation of the requirements of the Compact, as amended, under Sections IV (Authorized Class III Gaming), XXIII (Dispute Resolution), XXIV (Sovereign Immunity), XXXIV (Payment to the State), and XXV (Reimbursement of State Costs), the dispute shall be resolved by the United States District Court for the Western District of Wisconsin. Second Amendment, Paragraph 11, Section XXIV.A. Similarly, contrary to the Nation's claim, the provision waiving the parties' sovereign immunity is not exclusively limited to the arbitration process set forth in the Dispute Resolution section: Nothing contained herein shall be construed to waive the immunity of the State or the Nation except for suits arising under Sections XXIII [Dispute Resolution] and XXIV [Sovereign Immunity, including Section XXIV.A] of this Compact, as amended. The Nation and the State expressly waive, to the extent the State or the Tribe may do so pursuant to law, any and all sovereign immunity with respect to any claim brought by the State or the Nation to enforce any provision of this Compact, as amended. This waiver includes suits to collect money due to either Party pursuant to the terms of the Compact, as amended; to obtain an order to specifically enforce the terms of any provisions of the Compact, as amended; or to obtain a declaratory judgment and/or to enjoin any, act or conduct in violation of this Compact, as amended, This waiver also includes a suit to enforce Section XXIII [Dispute Resolution] of this Compact as amended. . . . Second Amendment, Paragraph 11, Section XXIV.B. If the Nation's waiver of its immunity were truly limited solely to arbitration, only the last sentence of the provision excerpted above would have been necessary that the waiver includes a suit to enforce Section XXIII of the Compact as amended. Although the provisions discussed above make clear that the Nation's waiver of its sovereign immunity was not limited solely to arbitration proceedings, these same provisions reflect that the district court had the responsibility to determine which claims were arbitrable. The State sought relief under the Compact's arbitration process, with its seventh and eighth causes of action seeking that the court compel the parties to proceed with binding arbitration on all arbitrable issues. Once the district court found, as it did in its summary judgment ruling, that the FAA applied to the Compact, the district court was charged with determining the scope of this arbitration agreement. Hill's Pet Nutrition v. Fru-Con Constr. Corp., 101 F.3d 63, 65 (7th Cir.1996). In determining whether the Nation and State agreed to arbitrate the claims brought by the State in its amended complaint, the district court should have rel[ied] on state contract law governing the formation of contracts. James v. McDonald's Corp., 417 F.3d 672, 677 (7th Cir.2005). Importantly for this case, in deciding whether the parties have agreed to submit a particular grievance to arbitration, a court is not to rule on the potential merits of the underlying claims. Stevens Constr. Corp. v. Chi. Reg'l Council of Carpenters, 464 F.3d 682, 686 (7th Cfr. 2006) (quoting AT & T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 649-50, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986)). While this Court has recognized that where `[the] court's decision on arbitrability collapses into the same inquiry as [the] decision on the merits,' a court may need to touch on the merits of an issue that ordinarily would be decided in arbitration, this was not required of the district court in this case. Id. at 687 (quoting BCS Ins. Co. v. Wellmark, Inc., 410 F.3d 349, 352 (7th Cir. 2005) (quotation marks omitted)). If the Nation's waiver of its sovereign immunity was dependent upon the Panzer decision's effect on the Compact, then the district court may have been justified in addressing that issue on the merits. Having determined, however, that this finding on the district court's part had no bearing on the Nation's waiver of its sovereign immunity under the Compact, this was not a circumstance where the arbitrability of the issue collapse[d] into the same inquiry as [the] decision on the merits. See id. Therefore, the district court erred in not first determining the arbitrability of the State's claims under the Compact's Dispute Resolution provision, before proceeding to address the Nation's remaining claims for summary judgment. As a result, we vacate the district court's order regarding the. Nation's motion for summary judgment, with the exception of its determination that the Compact was subject to the FAA and that federal jurisdiction existed over the State's claim seeking a declaration that it negotiated in good faith. We remand back to the district court for it to determine the arbitrability of the State's causes of action against the Nation. [6]