Court Opinion

ID: 3030508
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:44:28.885137+00
Date Added: 2024-06-11T11:48:06.986020
License: Public Domain

United States Court of Appeals
                           FOR THE EIGHTH CIRCUIT
                                    ___________

                                    No. 01-3040
                                    ___________

Gaming World International, Ltd.,        *
a Delaware Corporation,                  *
                                         *
             Petitioner - Appellee,      * Appeal from the United States
                                         * District Court for the
      v.                                 * District of Minnesota.
                                         *
White Earth Band of Chippewa             *
Indians; White Earth Reservation         *
Business Committee, also known as        *
White Earth Tribal Council, doing        *
business as Shooting Star Casino,        *
                                         *
             Respondent - Appellant. *
                                    ___________

                            Submitted: May 16, 2002
                               Filed: January 24, 2003
                                ___________

Before LOKEN, HEANEY, and MURPHY, Circuit Judges.
                           ___________

MURPHY, Circuit Judge.

      This case grows out of a dispute between the White Earth Band of Chippewa
Indians (the Band) and Gaming World International, Ltd. (Gaming World) related to
the construction and management of a casino in Mahnomen, Minnesota.
Approximately one month after the Band filed a declaratory judgment action against
Gaming World in the White Earth Band of Chippewa Tribal Court, Gaming World
filed this petition seeking declaratory relief and arbitration. The district court granted
Gaming World’s motion to compel arbitration, and the Band appeals. We affirm in
part and reverse in part.

                                            I.

        Gaming World is a Delaware corporation that specializes in operating casinos,
and the Band is a federally recognized Indian tribe. The Band is governed by the
White Earth Tribal Council which has conducted business as the White Earth
Reservation Business Committee. In 1991 the parties agreed that the Band would
construct the Shooting Star Casino in Mahnomen, Minnesota and that Gaming World
would help to finance and manage it. A written contract was drafted which provided
for a term of seven years and a division of the net profits of the casino. Sixty percent
of the net profits were to go to the Band and forty percent to Gaming World.
Appellant’s Appendix (App.) at A-363. The White Earth Reservation Business
Committee signed on behalf of the Band.

       The parties agreed that the Band would borrow funds to finance the
construction of the casino and that the loans would be repaid out of the Band’s share
of net profits. Id. at A-32, 245. The Band obtained the necessary construction funds
by drawing $11,800,000 from a trust fund established under the White Earth Land
Settlement Act (WELSA), 25 U.S.C. § 331, and by arranging a $5,500,000
commercial loan. App. at A-43, 245. The casino was furnished through a
$5,000,000 contribution by Gaming World, apparently to be reimbursed from casino
gross revenues. Id. at A-44, 249.

      Casino management contracts involving Indian tribes are regulated under the
Indian Gaming Regulatory Act of 1988 (IGRA). 25 U.S.C. §§ 2701 et seq. IGRA
created the National Indian Gaming Commission (NIGC), 25 U.S.C. § 2704, and
assigned responsibility for reviewing all management contracts to the Chairman of

                                           -2-
NIGC. 25 U.S.C. §§ 2710(d)(9) & 2711. Although IGRA was passed in 1988, it was
only in February 1993 that NIGC began to function. Before that time the Secretary
of the Interior had interim authority to review and approve management contracts.
See 25 U.S.C. § 2709. The Secretary delegated his own approval power under IGRA
to the Area Directors of the Bureau of Indian Affairs (BIA), whose decisions could
be appealed to the Interior Board of Indian Appeals (IBIA). 25 C.F.R. § 2.4(e). An
Area Director’s decision automatically became effective after thirty days, unless an
adversely affected party had filed both a notice of appeal and a petition for a stay. 43
C.F.R. § 4.21(a)(2). During the interim before NIGC became operational, only IBIA
could grant final approval of management agreements on behalf of the Secretary. 43
C.F.R.§§ 4.1(b)(2), 4.312. An unreviewed decision by an Area Director was not a
final agency decision for purposes of exhaustion and judicial review. 43 C.F.R. §§
4.21(c), 4.314(a).

      IGRA specifies that the Chairman of NIGC has exclusive authority to approve
any casino management contract, 25 U.S.C. § 2705(a)(4); 25 C.F.R. § 533.1(b), and
every management contract must contain a provision acknowledging this fact. 25
C.F.R. § 531.1(n). Contracts approved under the Secretary’s interim authority were
to be effective only “until approved or disapproved by the Chairman.” 25 C.F.R.
§ 533.1(c). Management contracts “that have not been approved by the Secretary of
the Interior or the Chairman...are void.” 25 C.F.R. § 533.7; see also 25 U.S.C.
§ 2711(a)(1) (management contracts subject to approval of chairman). After NIGC
became operational in February 1993, only its chairman could grant final approval to
a management contract under the regulatory scheme created under IGRA. 25 U.S.C.
§ 2705(a)(4); 25 C.F.R. § 533.1(a)-(b).

      IGRA contains provisions governing the maximum term for management
agreements, division of profits under them, and limitations on repayment of
construction costs. See 25 U.S.C. § 2711(b)-(c). Although the statute limits
management contract terms to five years, it authorizes approval of terms up to seven

                                          -3-
years if necessary because of the amount of capital investment, income projections,
and type of gaming involved. 25 U.S.C. § 2711(b)(5). Similarly, management fees
are not to exceed thirty percent of net revenues, but they may go as high as forty
percent if approved and if circumstances require. 25 U.S.C. § 2711(c). Every
management contract is also required to provide “a minimum guaranteed payment to
the Indian tribe that has preference over the retirement of development and
construction costs,” 25 U.S.C. § 2711(b)(3), and “for an agreed ceiling for the
repayment of development and construction costs.” 25 U.S.C. § 2711(b)(4).

      Because the Band and Gaming World drafted their initial agreement before
NIGC was actually in operation, they submitted it to the Area Director of the BIA for
approval. The Area Director decided that the contract could not be approved unless
modified to decrease its term to five years, to reallocate profits seventy percent to the
Band and thirty percent to Gaming World, and to repay all of the Band’s borrowed
construction funds from gross casino revenues rather than from the Band’s share of
net profits. The parties agreed to these conditions under protest, and the Area
Director approved the contract as so modified on March 6, 1992. App. at A-119.

       The contract approved by the Area Director in March 1992 contained several
other clauses relevant to this appeal. It included an arbitration clause which stated:

      Any dispute, controversy or question of interpretation arising under, out
      of, or in connection with this Agreement or any amendments hereof, or
      any breach or default hereunder, shall be submitted to and determined
      and settled by arbitration in the State of Minnesota, in accordance with
      the applicable rules of the American Arbitration Association then in
      effect.

Id. at A-49-50. It also included a limited waiver of the Band's sovereign immunity
so that Gaming World could seek to enforce the contract, id. at A-50, and several
seemingly contradictory clauses related to the date when the contract would become

                                          -4-
effective. One of these clauses said the contract would commence “on the date it is
approved by the Bureau of Indian Affairs,” id. at A-31, another stated that "As of this
date, this Agreement is in full force and effect," id. at A-58, and a third indicated that
the agreement would be binding when approved by the Secretary or his delegate
unless IGRA were to require its submission to the NIGC Chair for approval:

      The parties to this Agreement anticipate that said Agreement will be
      approved by the Secretary of the Interior or his delegate pursuant to the
      provisions of [IGRA] and recognize that such approval causes this
      Agreement to be binding upon the parties until such time in the future
      as the Agreement shall be amended. The parties to this Agreement also
      recognize that [IGRA] may require the Band to submit this agreement
      to the Chairman of the National Indian Gaming Commission for
      approval by the Chairman. If so required, the parties hereto agree to
      submit this Agreement.

Id. at A-31-32.

       The Band appealed the Area Director's March 6, 1992 decision to IBIA, id. at
A-242, which issued its decision in early March 1993, the month after NIGC had
begun to function. IBIA affirmed that part of the Area Director’s decision limiting
the contract term to five years and setting the division of profits at seventy percent
for the Band and thirty percent for Gaming World. It vacated that part of the
decision requiring the Band’s construction costs be repaid from gross revenues,
however, and remanded the matter to the Area Director for "further consideration."
White Earth Band of Chippewa Indians, 23 I.B.I.A. 216, 227 (Mar. 3, 1993). No
reference was made to the fact that NIGC had become operational or that IGRA and
the relevant regulations required final approval or disapproval of a management
contract by the Chairman of NIGC, 25 U.S.C. § 2705(a)(4); 25 C.F.R. § 533.1(a)-(b).

      On April 23, 1993, the Area Director wrote a letter to Darrell “Chip” Wadena,
chairman of the White Earth Tribal Council. App. at A-488. The Area Director

                                           -5-
advised in this letter that the funds obtained from the Band’s WELSA trust fund for
construction of the casino were actually disbursements and required no repayment:

      Contrary to our original assumption in this matter, funds borrowed from
      a Bureau trust fund account, such as the White Earth Tribal
      Government and Economic Development fund...do not have to be
      repaid in any form or manner. The funds should be considered a
      disbursement and not a loan.

Id. According to the Area Director, this meant that the $11,800,000 drawn from the
Band's trust fund would not have to be repaid from casino revenues, neither from
gross revenues (as provided in the March 6, 1992 contract approved by the Area
Director but vacated by IBIA), nor from the Band’s share of net profits (as originally
contemplated by the parties).

      The April 23 letter also indicated that the Area Director expected that the issue
remanded from IBIA would not be resolved by him, but by the parties submitting a
revised contract for final approval or disapproval by NIGC. Even if the funds
withdrawn from the WELSA trust did not have to be reimbursed, the repayment of
the Band's $5,500,000 commercial loan remained at issue. The Area Director’s letter
advised:

      the gaming management agreement with Gaming World International,
      Inc., will also need to be revised to reflect the change in required
      repayment. We assume, however, that you will address those revisions
      directly with the National Indian Gaming Commission along with those
      issues remanded back to the Bureau in the Interior Board of Appeals
      decision of March 3, 1993.

Id. at 489. It does not appear from the record that the parties ever followed this
suggested procedure, presumably because they had begun to operate under a new
amendment they had agreed to in the meantime.

                                          -6-
       While the appeal of the Area Director's March 6, 1992 decision was pending
before IBIA, the parties had decided on November 5, 1992 to make a further
amendment to their agreement. Id. at A-353. This amendment was to “be integrated
in and made a part of the earlier agreement between the parties dated March 6, 1992"
and to cancel “all provisions of prior agreements, which are inconsistent” with the
amendment. Id. The November 1992 amendment contained new provisions for
construction of certain improvements to the casino, lengthened the contract term to
seven years, reallocated profits sixty five percent to the Band and thirty five percent
to Gaming World, and reaffirmed the Band’s limited waiver of sovereign immunity.
Id. at 356-58. The amendment also stated its terms were “contingent upon...the
approval of the United States, Bureau of Indian Affairs or the Chairman of the
National Indian Gaming Commission as required by law.” Id. at 358. Although the
parties began to perform under the terms of this amended agreement in May 1993,
they did not submit it to NIGC until August, 1994.1

       NIGC Chairman Harold A. Monteau rejected the November 5, 1992
amendment in a letter dated November 19, 1996, id. at A-141, which also stated that
the Commission was not going to "review the [underlying] contract and require
changes" or "require the parties to go through the extensive process to bring it in
compliance" with IGRA. Id. at A-143. Monteau's letter stated that the November
1992 modification had been constructively denied as of September 1994 because the
Commission had taken no action on it within thirty days, see 25 C.F.R. § 535.1(d),
but that the amendment would also have been rejected upon complete review. App.
at 141-43. The letter concluded by saying:

      Finally, as part of our review of the amendment, we also called in the
      underlying contract between the parties. We have decided that it is

      1
       We have found nothing in the record to explain why the parties did not begin
performing under their November 5, 1992 amendment until May 1993, or why they
did not submit the amendment to NIGC until August 1994.

                                         -7-
      neither necessary nor appropriate at this time to review the contract and
      require changes. The contract is very close to expiring on its own terms,
      and its provisions were not such that we believed it essential to require
      the parties to go through the extensive processes to bring it in
      compliance with the Indian Gaming Regulatory Act. More importantly,
      we have been advised that the parties have terminated their relationship.
      Therefore, we intend to take no further action on the contract.

Id. at 143. Although the letter notified the parties of their right to appeal within thirty
days, id. at 141, no appeal was filed. The November 5, 1992 amendment thus never
received final approval, and neither party presently contends it is valid or seeks to
enforce its terms. The record also does not indicate that either party protested or
appealed the Chairman's announcement that NIGC had decided not to review the
March 6, 1992 agreement "at this time."

       The Band terminated the casino management contract with Gaming World by
a resolution dated August, 12 1996, after a change in its leadership. Id. at A-289-92.
Wadena, tribal chairman when the parties first reached agreement in 1991, and two
other members of the tribal council had been convicted of federal crimes on June 25,
1996, including conspiracy to use tribal funds in the construction of the casino for
personal gain, in violation of 18 U.S.C. §§ 371, 666, and 1163. See, e.g., United
States v. Wadena, 152 F.3d 831, 837-39 (8th Cir. 1998). After the reconstituted tribal
council conducted an investigation, it concluded that the contract lacked proper
federal approval because neither the Area Director nor the Chairman of NIGC had
ever addressed the issue remanded by IBIA.

      Shortly after the tribal council acted to terminate the management contract,
Gaming World initiated an arbitration proceeding against the Band. App. at A-60,
62. Gaming World claimed that the Band had breached the March 6, 1992 contract
“as amended” and sought to recover $3,200,000 in casino profits (including
undistributed profits it alleged were owing, for the period August 12, 1996 to

                                           -8-
March 6, 1997, and underpayments from March 6, 1992 to August 12, 1996). Id. at
A-63. The Band counterclaimed for damages of approximately $22,000,000,
claiming there had been excess distribution of profits to Gaming World. Id. at A-580-
81. Arbitrators were appointed in the summer of 1997, and a final arbitration hearing
was scheduled for May 3, 1999. Approximately ten days before the scheduled
arbitration hearing, the Band moved for a continuance so that it could file an action
in federal court seeking a declaration that the management contract had never
received proper federal approval. Id. at A-613. The motion for continuance was
granted.

        The White Earth Band of Chippewa Tribal Court had meanwhile been
established on November 3, 1997, id. at A-637, 651 and the Band filed an action in
that court on November 30, 2000. The Band states that this filing was delayed by
difficulties in obtaining necessary records from Wadena and his coconspirators. In
its action the Band requested a declaration that the March 6, 1992 contract was void
and also asserted a qui tam claim under 25 U.S.C. § 81. The qui tam claim sought to
recover on behalf of the United States approximately $12,000,000 in casino proceeds
wrongfully received by Gaming World, payments which it says were made under a
void contract and were thus recoverable under § 81 as excess payments.2 Id. at A-
314. Gaming World filed a responsive pleading on December 12, 2000, in which it

      2
       Section 81 permitted a private party to assert a claim in the name of the United
States to recover payments in excess of contractual amounts approved by the
Secretary of the Interior or the Commissioner of Indian Affairs, including payments
made by an Indian tribe to a third party for services related to Indian lands. See 25
U.S.C. § 81. A successful qui tam relator could receive half of any recovery, with the
remainder “paid into the Treasury for the use of the Indian or tribe.” Id.

       Section 81 was repealed by a statute enacted on February 29, 2000, which said
nothing about whether Congress intended to bar parties from asserting preexisting §
81 claims. The Indian Tribal Economic Development and Contract Encouragement
Act, Pub. L. 106-179.

                                         -9-
challenged the tribal court’s jurisdiction, denied the Band’s material allegations, and
counterclaimed for lost profits under the March 6, 1992 contract. Id. at A-630-34.

       Approximately one month after the Band filed its action in tribal court, Gaming
World filed this petition in federal court seeking a declaratory judgment that the
March 6, 1992 agreement is valid as approved by IBIA, as well as an order
compelling arbitration. The Band’s responsive pleading asserted that the federal
court lacked jurisdiction and that the March 6, 1992 contract was void in its entirety
for lack of valid federal approval.

       Gaming World filed a motion to compel arbitration, and the district court
granted it from the bench. The court concluded that it had jurisdiction under 28
U.S.C. § 1331 because the question of the validity of the March 6, 1992 contract
raised issues of federal law under IGRA, that the Federal Arbitration Act (FAA), 9
U.S.C. § 1 et seq., applied because the contract affected interstate commerce, and that
the arbitration clause was severable and binding, regardless of whether the contract
as a whole were void. It cited Prima Paint Corp. v. Flood and Conklin Mfg. Co., 388
U.S. 395, 402-04 (1967), as authority to grant the motion to compel, and the Band
appealed.

       The Band argues on appeal that the arbitration clause cannot be separately
enforced in the circumstances of this case, that the validity of the management
contract as a whole must be considered, as well as the effect of its limited waiver of
sovereign immunity. It asserts that the policy favoring exhaustion of tribal remedies
requires that the validity of the contract be litigated first in tribal court and that the
contract is void for lack of proper federal approval. Gaming World responds that a
federal court should not defer to a tribal court which did not exist when it first sought
arbitration, that the arbitration clause is severable and enforceable, that the arbitration
clause implies a limited waiver of sovereign immunity for purposes of enforcing it,
and that the validity of the contract is an issue for the arbitrators.

                                           -10-
                                          II.

       Before turning to the substantive issues raised by the parties, we must first
determine whether there is jurisdiction over this matter. See Steel Co. v. Citizens for
a Better Env't, 523 U.S. 83, 94-95 (1998); Bender v. Williamsport Area Sch. Dist.,
475 U.S. 534, 541 (1986). We review de novo the district court's conclusion that it
had subject matter jurisdiction. See Gilbert v. Monsanto Co., 216 F.3d 695, 699 (8th
Cir. 2000).

      Diversity jurisdiction is not available here under 28 U.S.C. § 1332 because
Indian tribes are neither foreign states, Cherokee Nation v. Georgia, 5 Pet. (30 U.S.)
1, 16-18 (1831), nor citizens of any state, Standing Rock Sioux Indian Tribe v.
Dorgan, 505 F.2d 1135, 1140 (8th Cir. 1974). Federal question jurisdiction can exist
under 28 U.S.C. § 1331 if Gaming World’s petition states a claim arising under
federal law, but jurisdiction cannot be founded on anticipated defenses or responsive
pleadings. See Iowa Mgmt. & Consultants, Inc. v. Sac & Fox Tribe of the
Mississippi in Iowa, 207 F.3d 488, 489 (8th Cir. 2000).

       In its petition Gaming World seeks both declaratory relief and an order to
compel arbitration, but it must also invoke federal substantive law for there to be
jurisdiction. Federal courts may entertain claims for declaratory relief under 28
U.S.C. § 2201, so long as they raise a federal question. Victor Foods, Inc. v.
Crossroads Econ. Dev. of St. Charles County, Inc., 977 F.2d 1224, 1227 (8th Cir.
1992). The FAA also does not alone confer federal jurisdiction. See 9 U.S.C. § 4;
Moses H. Cohn Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 26 n.32 (1983).
If a declaratory judgment action requires resolution of an issue of federal law or
precludes the assertion of a federal right by a responding party, there is jurisdiction
over it. See Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 19
(1983); 10B Charles Alan Wright et al., Federal Practice and Procedure: Civil 3d §
2767 (1998). Gaming World's petition seeks a declaratory judgment that the March 6,

                                         -11-
1992 contract received valid federal approval and is therefore enforceable. The
district court concluded that this claim for relief requires interpretation of federal
statutes, and we agree.

       In terms of jurisdiction there is a significant distinction between ordinary
contract disputes involving Indian tribes, TTEA v. Ysleta Del Sur Pueblo, 181 F.3d
676, 681 (5th Cir. 1999), and those raising issues in an area of extensive federal
regulation. See Comstock v. Alabama and Coushatta Indian Tribes, 261 F.3d 567
(5th Cir. 2001), cert. denied, 122 S.Ct. 1438 (2002). Thus, the “extensive regulatory
scheme” governing tribal oil and gas leases conferred federal jurisdiction over a
contract dispute between a tribe and two oil companies in Comstock. Id. at 574-75.
The regulatory scope of IGRA is similarly far reaching in its supervisory power over
Indian gaming contracts. The Eleventh Circuit has concluded that IGRA and NIGC
regulations so dominate the area of tribal gaming that they are incorporated into
gaming contracts by operation of law, see Tamiami Partners, Ltd. v. Miccosukee
Tribe of Indians, 63 F.3d 1030, 1047 (11th Cir. 1995), and our court has recognized
that IGRA completely preempts state law with respect to Indian gaming. See Gaming
Corp. of America v. Dorsey & Whitney, 88 F.3d 536, 547 (8th Cir. 1996).

       Since this case raises issues under the extensive regulatory framework of
IGRA, it is not a routine contract dispute. Our decisions illustrate the distinction. If
a management company alleges only a “routine contract action” against a tribe, such
as a claim that the tribe has violated a consulting agreement not subject to regulation
under IGRA, the complaint does not invoke federal jurisdiction. See Iowa Mgmt. &
Consultants, Inc., 207 F.3d at 488-89. Similarly, an issue of individual authority to
sign on behalf of a tribe is “not...a federal question per se." See Bruce H. Lien Co.
v. Three Affiliated Tribes, 93 F.3d 1412, 1421 (8th Cir. 1996). By contrast, the
petition in this case raises the issue of whether the March 6, 1992 contract received
valid federal approval under the IGRA regulatory scheme. It thus invokes federal
jurisdiction.

                                         -12-
       Moreover, an action filed in order to avoid tribal court jurisdiction necessarily
asserts federal law. National Farmers Union Ins. Co. v. Crow Tribe of Indians, 471
U.S. 845, 853 (1985). See also Iowa Mut. Ins. Co. v. LaPlante, 480 U.S. 9, 15
(1987); TTEA, 181 F.3d at 683; Kerr-McGee Corp. v. Farley, 115 F.3d 1498, 1501
(10th Cir. 1997) (affirming stay of federal court proceedings to allow tribal court to
determine its own jurisdiction). It is well established that the scope of tribal court
jurisdiction is a matter of federal law. See National Farmers Union Ins. Co., 471 U.S.
at 852; Iowa Mut. Ins. Co., 480 U.S. at 15.

       The jurisdictional facts in this case are very similar to those in Bruce H. Lien
Co., 93 F.3d at 1421-22, which also involved a casino dispute in which a management
company went to federal court for an order to compel arbitration after a tribe had filed
a declaratory action in tribal court. We concluded in that case that there was federal
jurisdiction over the matter because the issue of the “existence of tribal court
jurisdiction itself presents a federal question within the scope of 28 U.S.C. § 1331.”
Id.; see also TTEA, 181 F.3d at 683 (finding jurisdiction to determine whether tribal
court properly exercised jurisdiction over § 81 claim).3 Here, Gaming World's
petition is an attempt to circumvent the Band's previously filed action in tribal court,
and we have jurisdiction to determine the scope of tribal court jurisdiction and
whether comity requires deference to that court in the first instance. See Bruce H.
Lien Co., 93 F.3d. at 1421-22.

      3
       The qui tam claim filed in tribal court might also provide another basis for
federal jurisdiction if Gaming World's petition would preclude assertion of a federal
right by the Band. See Franchise Tax Bd., 463 U.S. at 19. Because there are other
grounds for jurisdiction, we need not decide whether the Band's § 81claim is a viable
federal right. We note, however, that the Band would be entitled to half of any
recovery as relator and to the other half as the beneficiary. But see TTEA, 181 F.3d
at 682-83 (claim brought in name of United States not a federal right of the relator).

                                         -13-
       After examining the issues, we conclude that we have jurisdiction and affirm
the ruling of the district court on this point.

                                          III.

       The Band argues that the district court erred by granting the motion to compel
arbitration instead of "staying its hand" so that tribal court remedies could be
exhausted. Gaming World contends that the tribal exhaustion doctrine should not be
applied because the White Earth Band of Chippewa Tribal Court did not exist at the
time it commenced arbitration proceedings, the arbitration clause is itself valid and
enforceable, and the validity of the March 6, 1992 agreement should be decided by
the arbitrators, citing Prima Paint Corp., 388 U.S. at 402-4 (arbitration clause in
contract involving interstate commerce is severable and enforceable unless there are
questions about the formation or validity of the clause itself). The Band responds that
in this case there is a valid issue about the formation of the management agreement,
including the arbitration clause, because the contract never received the necessary
federal approval and is therefore void.

        The issue of tribal exhaustion is a threshold one because it determines the
appropriate forum. The tribal exhaustion doctrine, first enunciated by the Supreme
Court in Nat'l Farmers Union Ins. Co., 471 U.S. at 853-57, and further developed in
Iowa Mut. Ins. Co., 480 U.S. at 15-18, favors exhaustion of available remedies in
tribal court before a collateral or parallel federal court action may proceed. See Basil
Cook Enter., Inc. v. St. Regis Mohawk Tribe, 117 F.3d 61, 65 (2d Cir. 1997). A
federal court should “stay [] its hand until after the Tribal Court has had a full
opportunity to determine its own jurisdiction." National Farmers Union Ins. Co., 471
U.S. at 857. Tribal courts presumptively exercise civil jurisdiction over the activities
of non Indians on reservation lands “unless affirmatively limited by a specific treaty

                                         -14-
provision or federal statute,” Iowa Mut. Ins. Co., 480 U.S. at 18, and no treaties or
statutes limiting tribal court jurisdiction in the circumstances here have been cited.4

        The tribal exhaustion doctrine is based on “a policy of supporting tribal self-
government and self-determination,” Nat'l Farmers Union Ins. Co., 471 U.S. at 856,
and it is prudential, rather than jurisdictional. See Iowa Mut. Ins. Co., 480 U.S. at 20
n.14. Exhaustion is mandatory, however, when a case fits within the policy, Duncan
Energy Co. v. Three Affiliated Tribes, 27 F.3d 1294, 1300 (8th Cir. 1994); Burlington
N. R.R. Co. v. Crow Tribal Council, 940 F.2d 1239, 1245 (9th Cir. 1991), and the
legal scope of the doctrine is a matter of law to be reviewed de novo. See Bowen v.
Doyle, 230 F.3d 525, 530 (2d Cir. 2000); U.S. v. Tsosie, 92 F.3d 1037, 1041 (10th
Cir. 1996).

        Federal courts have deferred to tribal courts in circumstances similar to those
here. The facts in Bruce H. Lien Co. are very close to this case. There, a
management company went to federal court for an order to compel arbitration after
a tribe had filed a declaratory judgment action in tribal court questioning the validity
of a gaming contract. 93 F.3d at 1415-16. We held that the tribal exhaustion doctrine
applied and that the tribal court should be “given the first opportunity to address [its]
jurisdiction and explain the basis (or lack thereof) to the parties.” Id. at 1421.
Federal court restraint is “especially appropriate” where the issues between the parties
grow out of “[t]ribal governmental activity involving a project located within the
borders of the reservation.” Id. at 1420. Other circuit courts have also applied the
tribal exhaustion doctrine in cases involving questions of arbitrability and validity of

      4
        The White Earth Band of Chippewa Tribal Court is authorized to exercise
jurisdiction “over all persons [including corporations] whose actions involve or affect
the White Earth Band of Chippewa or its members, and over persons who enter into
consensual relationships with the Band or its members through commercial dealings,
contracts, leases, or other arrangements.” White Earth Band of Chippewa Judicial
Code, Ch. 2, § 1(c).

                                          -15-
contracts. In Bank One, N.A. v. Shumake, 281 F.3d 507, 514 (5th Cir. 2002), cert.
denied, 123 S.Ct. 94 (2002), the Fifth Circuit affirmed the dismissal of a bank's
complaint seeking an order for arbitration in order to permit a previously filed tribal
court action to proceed. The Fifth Circuit concluded that since Congress had not
provided for federal jurisdiction in the FAA, that statute's mechanism favoring
arbitration should not override the federal policy of deferring to tribal courts. Id.
(diversity jurisdiction "not a sufficient basis to override the federal policy of
deference to tribal courts"). The Ninth Circuit reached a similar conclusion in Stock
West, Inc. v. Confederated Tribes, 873 F.2d 1221, 1227-29 (9th Cir. 1989), in which
it rejected the argument that the FAA's implicit policy of favoring arbitration "should
overcome the policy of comity in favor of the tribal court," particularly where "the
validity of the arbitration clauses in the contracts are themselves in dispute." Id. at
1228 n.16. See also Basil Cook Enter., Inc. v. St. Regis Mohawk Tribe, 117 F.3d 61,
63-69 (2d Cir. 1997) (management company's federal petition seeking order to
compel arbitration dismissed because of pending action in tribal court).

      We agree with the reasoning of these cases which is consistent with the
longstanding federal policy supporting the development of tribal courts. As the
Supreme Court explained in Nat'l Farmers Union Ins. Co.:

      Our cases have often recognized that Congress is committed to a policy
      of supporting tribal self-government and self-determination. That policy
      favors a rule that will provide the forum whose jurisdiction is being
      challenged the first opportunity to evaluate the factual and legal bases
      for the challenge.

471 U.S. at 856. See also Iowa Mutual Ins. Co., 408 U.S. at 15 ("a federal court's
exercise of jurisdiction over matters relating to reservation affairs can...impair the
authority of tribal courts"); Merrion v. Jicarilla Apache Tribe, 455 U.S. 130, 138 n.5
(1982) ("Through various Acts governing Indian tribes, Congress has expressed the
purpose of fostering 'tribal self government.'"); White Mountain Apache Tribe v.

                                         -16-
Bracker, 448 U.S. 136, 143-44 (1980) (noting "firm federal policy" supporting tribal
self-sufficiency). This policy would be undermined if Gaming World were permitted
to evade the jurisdiction of the White Earth Band of Chippewa Tribal Court over the
previously filed declaratory judgment action there.

       Gaming World argues that it should be excused from exhaustion for several
reasons. It points out that the tribal court was not available when it originally filed
for arbitration, but that court was instituted, operating, and available by the time
Gaming World filed its federal petition on January 2, 2001. This case is therefore not
like Krempel v. Prairie Island Indian Community, 125 F.3d 621, 623 (8th Cir. 1997),
where the tribal court was not operational until after the federal claim had been filed.
Cf. Iowa Mut. Ins. Co., 480 U.S. at 19 (tribal exhaustion requires exhaustion of
"available tribal remedies before instituting suit"). Gaming World also argues that
a federal court need not defer if the party seeking exhaustion has acted in bad faith
or with the intent to harass, if the matter clearly exceeds tribal court jurisdiction, or
if exhaustion would be futile for lack of adequate opportunity to challenge the tribal
court’s jurisdiction. National Farmers Union Ins. Co., 471 U.S. at 856 n.21; Bruce
H. Lien Co., 93 F.3d at 1420 n.14. Gaming World accuses the Band of acting in bad
faith because it asked for a stay of arbitration so it could file a declaratory judgment
action in federal court, but later filed it in tribal court. The Band responds that its
filing was necessarily delayed by the difficulty in obtaining records from Wadena and
his coconspirators and that it only subsequently decided to file in tribal court. We
conclude that the record does not indicate either bad faith or any basic jurisdictional
problem. Compare Comstock, 261 F.3d at 572 (exhaustion inapplicable where the
tribal court had not been authorized by law). There is also no indication that the
arbitrators would have refused a stay if the Band had stated it would file in tribal
court or that exhaustion would be futile because Gaming World would not have
adequate opportunity to raise any and all issues in tribal court, including any
challenges to its jurisdiction.

                                          -17-
        We conclude that the district court erred by not deferring for exhaustion of
tribal court remedies and by proceeding to rule on the motion to compel arbitration.5
Our decision in Bruce H. Lien Co. and those in similar cases decided by the Fifth,
Ninth, and Second Circuits teach that exhaustion should be required when a party
tries to avoid tribal court jurisdiction by seeking an order to compel arbitration in
federal court. This is especially true if the underlying dispute involves activities
undertaken by tribal government within reservation lands. Failure to require

      5
        In its oral ruling that the validity of the management agreement was for the
arbitrators, the district court made no reference to the record but simply stated that the
arbitration clause was "a separate contract, severable from the larger contract" that it
needed no federal approval, and that it evidenced no "irregularity or any fraud" in its
creation. Hearing Tr. 7/6/2001 at 23-24. The court named only Prima Paint as
support for its conclusion.

       In Prima Paint the Supreme Court explained that arbitration should be ordered
once a court "is satisfied that 'the making of the agreement for arbitration...is not in
issue.'" 388 U.S. at 404 (quoting 9 U.S.C. § 4). Nevertheless, the question of
arbitrability itself is an issue for the court unless the parties have unmistakably agreed
otherwise, AT & T Technologies, Inc. v. Communications Workers of Am., 475 U.S.
643, 649 (1986), and the Supreme Court has recently elucidated the difference
between a question of arbitrability for the court and a gateway question which is for
the arbitrator to decide. Howsam v. Dean Witter Reynolds, Inc., 123 S.Ct. 588, 592
(2002). "[A] gateway dispute about whether the parties are bound by a given
arbitration clause raises a 'question of arbitrability' for a court to decide." Id.
Whether a nonsigning party or a successor corporation is bound by an arbitration
agreement or whether a "particular type of controversy" is covered by an "arbitration
clause in a concededly binding contract" are examples of issues to be decided by the
court. See id. Conversely, whether grievance procedures have been followed or time
limits satisfied are examples of issues to be decided by the arbitrator. See id. The
key is whether the question is one the parties would likely have expected to be
decided by the court or the arbitrator. See id. The parties in this case of course differ
on the potential impact of the complicated regulatory background on the arbitrability
issue.

                                          -18-
exhaustion in these circumstances would undermine the important federal policy to
foster tribal self government through the development of tribal courts as enunciated
in Nat'l Farmers Union Ins. Co. and Iowa Mut. Ins. Co..

       Deferral to the tribal court will give the parties the opportunity to raise their
various arguments in that forum in the first instance. The first filed declaratory action
encompasses all of the issues between the parties, including the Band's asserted § 81
qui tam claim. Gaming World's subsequent petition for declaratory relief and
arbitration was a clear attempt to evade tribal court jurisdiction, and "all issues
relating to the Tribal Court’s jurisdiction...should be dealt with first by the Tribal
Court itself." Bruce H. Lien Co., 93 F.3d at 1420-21.

                                          IV.

       Accordingly, we reverse the decision of the district court not to defer to the
tribal court in the first instance and vacate its order granting the motion to compel
arbitration. We remand to the district court with instructions to stay or dismiss this
action without prejudice in order to permit the parties to exhaust their tribal court
remedies. See Nat'l Farmers Union Ins. Co.,471 U.S. at 857; Bruce H. Lien Co., 93
F.3d at 1422.

      A true copy.

             Attest:

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

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