Court Opinion

ID: 9946282
Source: CourtListenerOpinion
Date Created: 2024-02-29 17:00:45.383861+00
Date Added: 2024-06-11T14:25:38.550695
License: Public Domain

FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

LEXINGTON INSURANCE                 No. 22-35784
COMPANY; HOMELAND
INSURANCE COMPANY OF NEW               D.C. No.
YORK; HALLMARK SPECIALTY            3:21-cv-05930-
INSURANCE COMPANY; ASPEN                 DGE
SPECIALTY INSURANCE
COMPANY; ASPEN INSURANCE UK
LTD; CERTAIN UNDERWRITERS AT          OPINION
LLOYD'S, LONDON AND LONDON
MARKET COMPANIES
SUBSCRIBING TO POLICY NO.
PJ193647; CERTAIN
UNDERWRITERS AT LLOYD'S,
LONDON SUBSCRIBING TO POLICY
NO. PJ1900131; CERTAIN
UNDERWRITERS AT LLOYD'S,
LONDON AND LONDON MARKET
COMPANIES SUBSCRIBING TO
POLICY NO. PJ1933021; CERTAIN
UNDERWRITERS AT LLOYD'S,
LONDON SUBSCRIBING TO POLICY
NOS. PD-10364-05 AND PD-11091-00;
ENDURANCE WORLDWIDE
INSURANCE LIMITED T/AS SOMPO
INTERNATIONAL SUBSCRIBING
TO POLICY NO. PJ1900134-A,
          Plaintiffs-Appellants,
2                 LEXINGTON INS. CO. V. SMITH

    v.

CINDY SMITH, in her official
capacity as Chief Judge for the
Suquamish Tribal Court; ERIC
NIELSEN, in his official capacity as
Chief Judge of the Suquamish Tribal
Court of Appeals; BRUCE DIDESCH,
in his official capacity as Judge of the
Suquamish Tribal Court of Appeals;
STEVEN D. AYCOCK, in his official
capacity as Judge of the Suquamish
Tribal Court of Appeals,
             Defendants-Appellees,
  and

SUQUAMISH TRIBE,
      Intervenor-Defendant-
      Appellee.

         Appeal from the United States District Court
           for the Western District of Washington
         David G. Estudillo, District Judge, Presiding

            Argued and Submitted August 24, 2023
                     Seattle, Washington

                   Filed February 29, 2024
    Before: Michael Daly Hawkins, Susan P. Graber, and M.
             Margaret McKeown, Circuit Judges.

                 Opinion by Judge McKeown
                    LEXINGTON INS. CO. V. SMITH                    3

                          SUMMARY*

                      Tribal Jurisdiction

    The panel affirmed the district court’s summary
judgment in favor of Suquamish Tribe in an action, brought
by several insurance companies and underwriters, seeking a
declaratory judgment that the Suquamish Tribal Court
lacked subject-matter jurisdiction over the Tribe’s suit for
breach of contract concerning its insurance claims for lost
business and tax revenue and other expenses arising from the
suspension of business operations during the onset of the
COVID-19 pandemic.
    The panel held that the Tribal Court had subject-matter
jurisdiction over the Tribe’s claim against nonmember off-
reservation insurance companies that participated in an
insurance program tailored to and offered exclusively to
tribes. The panel concluded that the insurance companies’
conduct occurred not only on the Suquamish reservation, but
also on tribal lands. The panel further concluded that, under
the Tribe’s sovereign authority over “consensual
relationships,” as recognized under the first Montana
exception to the general rule restricting tribes’ inherent
sovereign authority over nonmembers on reservation lands,
the Tribal Court had jurisdiction over the Tribe’s suit.

*
 This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
4                 LEXINGTON INS. CO. V. SMITH

                         COUNSEL

Richard J. Doren (argued), Matthew A. Hoffman, Bradley J.
Hamburger, Daniel R. Adler, Patrick J. Fuster, and Kenneth
Oshita, Gibson Dunn & Crutcher LLP, Los Angeles,
California; Gabriel L. Baker, Jensen Morse Baker PLLC,
Seattle, Washington; Michael E. Ricketts, Gordon Thomas
Honeywell LLP, Seattle, Washington; Kasie Kashimoto,
Kevin J. Kay, Thomas Lether, and Eric J. Neal, Lether Law
Group, Seattle, Washington; Robert W. Novasky, Forsberg
& Umlauf PS, Tacoma, Washington; for Plaintiffs-
Appellants.
Andrew Brantingham (argued), Skip Durocher, and
Benjamin Greenberg, Dorsey & Whitney LLP, Seattle,
Washington; Timothy W. Woolsey, Office of Tribal
Attorney, Squamish, Washington; for Intervenor-
Defendant-Appellee.

                          OPINION

McKEOWN, Circuit Judge:

    Justice Thurgood Marshall once wrote, “It must always
be remembered that the various Indian tribes were once
independent and sovereign nations, and that their claim to
sovereignty long predates that of our own Government.”
McClanahan v. State Tax Comm’n of Ariz., 411 U.S. 164,
172 (1973). Yet, a complex history has made federal courts
the arbiters of tribal court jurisdiction. This history has also
led to the Supreme Court’s general rule that restricts tribes’
inherent sovereign authority over nonmembers on
                  LEXINGTON INS. CO. V. SMITH                 5

reservation lands. See Montana v. United States, 450 U.S.
544, 565 (1981). Nonetheless, in Montana, a “pathmarking
case concerning tribal civil authority over nonmembers,”
Strate v. A-1 Contractors, 520 U.S. 438, 445 (1997), the
Court crafted two important exceptions that bring conduct
within tribal jurisdiction: “the activities of nonmembers who
enter consensual relationships with the tribe or its members”
and the conduct of nonmembers that “threatens or has some
direct effect on the political integrity, the economic security,
or the health or welfare of the tribe,” 450 U.S. at 565–66.
    This appeal involves an insurance claim covering tribal
properties on tribal land brought by a tribe and its businesses.
We consider whether the tribal court has jurisdiction over
this claim against nonmember, off-reservation insurance
companies that participate in an insurance program tailored
to and offered exclusively to tribes.
    Here, several insurance companies and underwriters
(collectively, “Lexington”) challenge the Suquamish Tribal
Court’s (“Tribal Court”) jurisdiction over an insurance
contract suit brought by the Suquamish Tribe (“Tribe”) and
its businesses. Since 2015, Lexington has insured the
Tribe’s properties on tribal lands within the boundaries of
the Port Madison Reservation. After suspending business
operations during the onset of the COVID-19 pandemic, the
Tribe submitted insurance claims for lost business and tax
revenue and other expenses. Lexington responded with
reservation-of-rights letters. The Tribe then sued Lexington
in Tribal Court for breach of contract, and Lexington moved
to dismiss for lack of jurisdiction. The Tribal Court found
that it had jurisdiction, and the Suquamish Tribal Court of
Appeals affirmed.
6                 LEXINGTON INS. CO. V. SMITH

    Lexington commenced this action in federal court,
seeking a declaratory judgment that the Tribal Court is
without jurisdiction. On cross-motions for summary
judgment, the district court held that the Tribal Court had
subject-matter jurisdiction over this dispute. The court
granted the Tribe’s motion for summary judgment, denied
Lexington’s motion, and dismissed the case with prejudice
to allow proceedings to continue in Tribal Court.
    We affirm. The Tribal Court has subject-matter
jurisdiction over this matter under the Tribe’s sovereign
authority over “consensual relationships,” as recognized
under Montana’s first exception. 450 U.S. at 565. Because
our decision rests on Montana’s first exception, we need not
examine the second Montana exception or the right to
exclude, as discussed in Water Wheel Camp Recreational
Area, Inc. v. LaRance, 642 F.3d 802 (9th Cir. 2011) (per
curiam).
                       BACKGROUND
    The Suquamish Tribe is a federally recognized tribe
located in the Puget Sound in Washington State. Pursuant to
the Treaty of Point Elliott, the Tribe has sovereign authority
over the Port Madison Reservation (“Reservation”). 12 Stat.
927 (1855). The Tribe operates a host of businesses on the
Reservation, both directly and through Port Madison
Enterprises (“Port Madison”), a tribally chartered economic
development entity that is wholly owned by the Tribe and
headquartered on tribal trust lands. The businesses, which
include a museum, a seafood company, a casino, a hotel, and
several gas stations, are all located on tribal trust lands
within the boundaries of the Reservation.
   Beginning in 2015, the Tribe and Port Madison
purchased insurance policies from Lexington Insurance
                    LEXINGTON INS. CO. V. SMITH                       7

Company and several other off-reservation insurance
companies via an insurance broker. The policies were
offered under the Tribal Property Insurance Program
(“Tribal Program”), which is administered by Alliant
Specialty Services, Inc., under the moniker Tribal First.1
Tribal First provides insurance and risk management
services exclusively to tribal governments and enterprises.
Tribal First describes itself as “the largest provider of
insurance solutions to Native America and a leader in the
specialty areas of tribal business enterprises, including
gaming, alternative energy, construction, and housing
authorities.” Because of this focus on “Native America,”
Tribal First “structure[s] insurance programs tailored to
safeguard both [tribal] operations and [tribal] employees.”
    Specifically, Tribal First contracts with insurance
providers and underwriting services that are willing to
provide coverage to tribal entities, and then supplies insureds
with the property insurance policies issued by the contracted
providers.     Tribal First handles the “underwriting,
claims/risk management, and administrative services” for
the tribal insureds. Lexington is one of these contracted
providers. Lexington participated in the Tribal Program to
provide insurance to tribal entities, like the Tribe and Port
Madison, that signed up with Tribal First. Lexington entered

1
  In full, appellants are Lexington Insurance Company (“Lexington”);
Homeland Insurance Company of New York; Hallmark Specialty
Insurance Company; Aspen Specialty Insurance Company; Aspen
Insurance UK Limited; Syndicate 1414; Syndicate 510; XL Catlin
Insurance Company UK Limited; Syndicate 4444; Syndicate 2987;
Endurance Worldwide Insurance Limited (last six collectively referred to
as “Certain Underwriters as Lloyd’s, London and London Market
Companies Subscribing to Policy Nos. PJ193647, PJ1900131, PJ1933021,
PD-10364-05, PD-11091-00, and PJ1900134-A”).
8                 LEXINGTON INS. CO. V. SMITH

into a contract with Alliant and issued insurance policies—
based on underwriting guidelines specifically negotiated for
the Tribal Program—that were provided through Tribal First
to the tribal entities.
    The relevant insurance policies named Lexington as the
insurer and the Tribe, Port Madison, and various
subsidiaries—all located on tribal trust lands within the
Reservation—as the insureds. In addition to being listed on
the evidence-of-coverage letters and the policies’
declaration pages as the insurer, Lexington knew it was
insuring the Tribe and Port Madison. The “All Risk”
policies issued by Lexington provided broad coverage for
losses to the Tribe’s and Port Madison’s businesses and
properties. The policies covered “all risks of physical loss
or damage” to “property of every description both real and
personal” located on the trust lands, as well as interruptions
to business and tax revenues generated within the
Reservation. Overall, the policies covered almost $242
million worth of real property, $50 million worth of personal
property, and $98 million of business interruption value—all
centered on Tribal trust lands—for the Tribe and Port
Madison.
    In March 2020, in response to the outbreak of COVID-
19, the Suquamish Tribal Council passed several resolutions
that declared a public health emergency, restricted access to
certain public facilities operated by Port Madison, and
suspended operations at all tribal businesses on the
Reservation. Eventually the Tribal Council initiated a
phased reopening plan for these businesses. As a result of
these closures and the pandemic, the Tribe and Port Madison
allege various injuries, including damage to the buildings on
trust lands, loss of business income and tax revenue, and
costs associated with disinfecting and sanitizing the business
                   LEXINGTON INS. CO. V. SMITH                   9

premises. In an effort to recoup these losses, the Tribe and
Port Madison submitted claims for coverage under the
Lexington insurance policies. Lexington responded to these
claims by issuing reservation-of-rights letters, contending
that the policies may not cover COVID-19-related losses.
The merits of the coverage claims are not before us.
    The Tribe and Port Madison then sued Lexington in the
Tribal Court, claiming breach of contract and seeking a
declaratory judgment that the insurers were obligated to
compensate them for the full amount of their pandemic-
related losses. Lexington, in its motion to dismiss the
complaint, argued that the Tribal Court did not have personal
or subject-matter jurisdiction. In denying the motion, the
Tribal Court found that it had jurisdiction based on the
Tribe’s inherent right to exclude and the consensual-
relationship exception set forth in Montana, 450 U.S. at 565–
66. The Suquamish Tribal Court of Appeals affirmed the
Tribal Court’s denial of Lexington’s motion to dismiss on
the same grounds. The parties agreed to stay further
proceedings in the Tribal Court so Lexington could pursue
this action in federal court.
    In December 2021, Lexington initiated this suit in the
Western District of Washington, seeking a declaratory
judgment that the Tribal Court lacks jurisdiction over
Lexington. The complaint named the judges of the Tribal
Court and Tribal Court of Appeals as defendants, and in
March 2022, the Suquamish Tribe intervened as a
defendant.2

2
 The individual defendants-appellees are Cindy Smith, Chief Judge,
Suquamish Tribal Court; Eric Nielsen, Chief Judge, Suquamish Tribal
Court of Appeals; and Bruce Didesch and Steve Aycock, Judges,
Suquamish Tribal Court of Appeals.
10                LEXINGTON INS. CO. V. SMITH

    On cross-motions for summary judgment on the
jurisdictional issues, the district court granted the Tribe’s
motion for summary judgment and denied Lexington’s
motions. In rejecting Lexington’s argument that its conduct
did not take place on tribal land, the court held that the
provision of insurance to businesses owned by the Tribe and
to properties located on Tribal land qualified as conduct that
is subject to tribal adjudicative jurisdiction under the right to
exclude. The court also held that the first Montana
exception applied and that the Tribal Court had personal
jurisdiction over the insurers. The court then dismissed the
case with prejudice. On appeal, Lexington argues that the
Tribal Court lacks subject-matter jurisdiction over the
insurers.
                          ANALYSIS
  I. Federal Jurisdiction and Standard of Review
    We have jurisdiction under 28 U.S.C. § 1291. It is well
settled that the issue of “whether a tribal court has
adjudicative authority over nonmembers is a federal
question.” Plains Commerce Bank v. Long Family Land &
Cattle Co., 554 U.S. 316, 324 (2008); see also Nat’l Farmers
Union Ins. Co. v. Crow Tribe of Indians, 471 U.S. 845, 852–
53 (1985). We review de novo this question of law, and we
review for clear error the Tribal Court’s factual findings.
FMC Corp. v. Shoshone-Bannock Tribes, 942 F.3d 916, 930
(9th Cir. 2019).
    Our review, however, is not free-ranging. We must keep
in mind that “because tribal courts are competent law-
applying bodies, the tribal court’s determination of its own
jurisdiction is entitled to ‘some deference.’” Water Wheel,
642 F.3d at 808 (quoting FMC v. Shoshone-Bannock Tribes,
905 F.2d 1311, 1313 (9th Cir. 1990)). We also are mindful
                 LEXINGTON INS. CO. V. SMITH              11

of the longstanding “federal policy of deference to tribal
courts.” Id. (quoting Iowa Mut. Ins. Co. v. LaPlante, 480
U.S. 9, 17 (1987)). While undertaking our duty to determine
the scope of tribal jurisdiction over nonmembers, our review
proceeds with proper respect for both the Tribal Court’s
authority over reservation affairs and federal promotion of
tribal self-government. See Iowa Mutual, 480 U.S. at 16–
17.
 II. Sources of Tribal Authority
     Our analysis of a tribe’s civil jurisdiction over
nonmembers is rooted in several longstanding principles.
The most important of these principles is that “Indian tribes
have long been recognized as sovereign entities, ‘possessing
attributes of sovereignty over both their members and their
territory.’” Babbitt Ford, Inc. v. Navajo Indian Tribe, 710
F.2d 587, 591 (9th Cir. 1983) (quoting United States v.
Wheeler, 435 U.S. 313, 323 (1978)). As the Supreme Court
has reinforced, “Indian tribes still possess those aspects of
sovereignty not withdrawn by treaty or statute, or by
implication as a necessary result of their dependent status.”
Wheeler, 435 U.S. at 323. But even in the face of these broad
propositions, “tribes do not, as a general matter, possess
authority over [nonmembers] who come within their
borders.” Plains Commerce, 554 U.S. at 328. In determining
whether tribal court jurisdiction over nonmembers exists, we
look to the “outer boundaries” of tribal sovereignty.
Knighton v. Cedarville Rancheria of N. Paiute Indians, 922
F.3d 892, 899 (9th Cir. 2019).
    Several principles shape those outer boundaries. First,
tribal jurisdiction is “cabined by geography”: a tribe’s
jurisdiction cannot extend past the boundaries of the
reservation. Philip Morris USA, Inc. v. King Mountain
12                LEXINGTON INS. CO. V. SMITH

Tobacco Co., 569 F.3d 932, 938 (9th Cir. 2009). This is,
indeed, a prerequisite to tribal jurisdiction.          If the
nonmember’s conduct occurred not only within the
boundaries of the reservation, but on tribal land, then a
presumption of tribal jurisdiction applies. See Strate, 520
U.S. at 454 (“We can readily agree, in accord with Montana,
that tribes retain considerable control over nonmember
conduct on tribal land.” (cleaned up)); Plains Commerce,
554 U.S. at 328 (“Our cases have made clear that once tribal
land is converted into fee simple, the tribe loses plenary
jurisdiction over it.”) (citations omitted). Thus, the conduct
must have occurred within the boundaries of the reservation,
and if the conduct occurred on tribal land, then the scales tip
sharply toward tribal jurisdiction.
    Once we have determined that the nonmember’s conduct
has occurred within the boundaries of the reservation, we
must further examine the tribe’s exercise of power, keeping
in mind that a tribe’s adjudicative jurisdiction cannot exceed
its legislative jurisdiction. Strate, 520 U.S. at 453.
Accordingly, to determine whether a tribe has adjudicative,
or subject-matter, jurisdiction over nonmembers, we first
inquire whether a tribe has regulatory authority over the
activities of those nonmembers. See id. at 453 (“Where
tribes possess authority to regulate the activities of
nonmembers, ‘civil jurisdiction over disputes arising out of
such activities presumptively lies in the tribal courts.’”
(quoting Iowa Mutual, 480 U.S. at 18) (cleaned up)).
    We have recognized two independent sources of a tribe’s
regulatory power over nonmembers: inherent sovereign
authority and the power to exclude. The first source is a
tribe’s inherent sovereign authority to protect self-
government and control internal relations, an authority
encapsulated in the two Montana exceptions. See Montana,
                  LEXINGTON INS. CO. V. SMITH              13

450 U.S. at 565–66; Knighton, 922 F.3d at 895, 903–05. The
second source of regulatory power is a tribe’s inherent power
to exclude nonmembers from tribal land, deriving from the
tribe’s status as a sovereign and a landowner. See Water
Wheel, 642 F.3d at 814; see also Merrion v. Jicarilla Apache
Tribe, 455 U.S. 130, 144 (1982). Accordingly, we will
uphold a tribal court’s exercise of civil jurisdiction over
nonmembers if a tribe’s regulatory authority—and by
extension, its adjudicative authority—is supported by either
of the Montana exceptions or the power to exclude.
  III. Conduct on Tribal Lands
    The question whether conduct occurred on tribal land—
where the exercise of tribal jurisdiction is the strongest—and
therefore took place within the bounds of the reservation
underlies our jurisdictional analysis. We conclude that
Lexington’s conduct occurred not only on the reservation,
but on tribal lands.
    A tribe’s regulatory authority over a nonmember is
triggered when “the nonmember enters tribal lands or
conducts business with the tribe.” Merrion, 455 U.S. at 142.
Lexington clearly made itself subject to the Tribe’s authority
by “conduct[ing] business with the tribe.” See id. Lexington
held itself out as a potential business partner to tribes by
entering into a contract with Tribal First. Lexington then
cemented that business relationship with the Tribe and Port
Madison—a tribally owned entity—when it issued the
insurance policies, which had been developed by Lexington
specifically for tribes and which listed Lexington as the
insurer. This business relationship was ongoing: not only
did Lexington continue to renew the insurance policies
annually from 2015 onward as the Tribe and Port Madison
paid premiums, but the Tribe and Port Madison also
14                LEXINGTON INS. CO. V. SMITH

submitted their insurance claims to the company authorized
by Lexington to process the claims on its behalf.
    The facts of this case closely align with those in Merrion
v. Jicarilla Apache Tribe, the defining case for tribal
authority over tribal lands. In Merrion, the Court upheld the
Jicarilla Apache Tribe’s imposition of a severance tax on
nonmember companies that had contracted with the Apache
Tribe to extract oil and gas from tribal land. 455 U.S. at 135–
36, 144. Although the companies’ employees entered tribal
lands to extract the resources, the Court did not solely rely
on this fact; it specifically pointed to the Apache Tribe’s
sovereign power over commercial agreements as derivative
of a tribe’s power to exclude on tribal lands. Id. at 145–48
(distinguishing between “the sovereign nature of the tribal
authority to tax” and a private “landowner’s contractual
right”). Thus, the Court held that the nonmember companies
were subject to tribal jurisdiction when the commercial
relationship between the companies and the tribe centered on
tribally owned resources on tribal land. Id. at 135–36, 144.
Here, the commercial relationship at issue—an insurance
contract—is also between a nonmember company—
Lexington—and a tribe—the Suquamish Tribe—and
involves tribally owned buildings and businesses located on
tribal trust land. Lexington’s provision of insurance was
therefore the type of business conduct on tribal land that the
Court contemplated in Merrion.
    Importantly, we have held that tribal regulatory authority
is proper when a nonmember’s conduct relates to tribal
lands. We have explained that “[o]ur inquiry is not limited
to deciding when and where the claim arose,” but also
considers “whether the cause of action brought by the[ ]
parties bears some direct connection to tribal lands.” Smith
v. Salish Kootenai Coll., 434 F.3d 1127, 1135 (9th Cir. 2006)
                  LEXINGTON INS. CO. V. SMITH               15

(en banc) (emphasis added); Knighton, 922 F.3d at 901–02;
see also Grand Canyon Skywalk Dev., LLC v. ‘Sa’ Nyu Wa
Inc., 715 F.3d 1196, 1205 (9th Cir. 2013) (holding that tribal
jurisdiction is plausible when “the dispute centers on [tribal]
trust land” (emphasis added)).
    The unique facts of the Tribe’s suit against Lexington
satisfy, and even exceed, the requirement that the claims
bear “some direct connection to tribal lands.” Knighton, 922
F.3d at 902. To begin, Lexington’s business conduct with
the Tribe and Port Madison is directly connected to tribal
lands—the insurance policies cover the Tribe’s and Port
Madison’s businesses and properties on the Tribe’s trust
lands. Additionally, this breach-of-contract dispute centers
on whether these policies cover the losses and expenses
incurred by those businesses and properties on the trust
lands. Tribal land literally and figuratively underlies the
contract at issue here. What could be more quintessentially
tribal-land-based than an insurance policy covering
buildings and businesses on tribal land? We would be
ignoring Merrion and our own precedent to conclude that a
suit over a commercial agreement that solely involves tribal
property on trust land does not fulfill the territorial
component for finding that nonmember conduct occurred on
tribal land.
    Any suggestion that Lexington cannot be subject to tribal
jurisdiction because all relevant conduct occurred off the
Reservation—and neither Lexington nor its employees were
ever physically present there—misreads our caselaw. The
foundational rule in Merrion states that a tribe has regulatory
jurisdiction over a nonmember who “enters tribal lands or
conducts business with the tribe.” 455 U.S. at 142 (emphasis
added). Nowhere in Merrion or in subsequent cases has the
Court limited the definition of nonmember conduct on tribal
16               LEXINGTON INS. CO. V. SMITH

land to physical entry or presence. Rather, the Court has
explicitly recognized that a nonmember either entering tribal
lands or conducting business with a tribe can make that
person subject to a tribe’s regulatory authority. We take the
Court at its word.
    It is easy to understand why the Court makes this
distinction between physical entry and business conduct.
Nonmembers may enter tribal lands or travel on tribal roads
without conducting business with the tribe or tribal
members. And when these nonmembers commit torts or
trespass on tribal lands, the tribe may exercise its civil
jurisdiction over them. See McDonald v. Means, 309 F.3d
530, 537–40 (9th Cir. 2002) (holding that a tribal court had
jurisdiction over a suit between a tribal member and a
nonmember arising from an accident on a tribal road); see
also Elliott v. White Mountain Apache Tribal Court, 566
F.3d 842, 849–50 (9th Cir. 2009) (holding that tribal court
jurisdiction over a nonmember who trespassed on tribal
lands was plausible). On the other hand, a tribe may regulate
nonmembers’ contractual relationships with the tribe or
tribal members apart from any physical entry that takes place
under those contracts. Thus, for example, tribes can impose
taxes on the value of nonmembers’ leasehold interests on
tribal lands. See Kerr-McGee Corp. v. Navajo Tribe of
Indians, 731 F.2d 597, 599–600 (9th Cir. 1984) (upholding
tribe’s possessory interest tax imposed on nonmember
corporation’s mining leases on tribal lands), aff’d, 471 U.S.
195 (1985).
    The tribes’ ability to regulate such consensual
relationships makes sense in our contemporary world in
which nonmembers, through the phone or internet, regularly
conduct business on a reservation and significantly affect a
tribe and its members without ever physically stepping foot
                  LEXINGTON INS. CO. V. SMITH               17

on tribal land. In sum, a nonmember’s business with a tribe
may very well trigger tribal jurisdiction—even when the
business transaction does not require the nonmember to be
physically present on those lands.
    Although our previous cases upholding tribal
jurisdiction over nonmembers involved some form of
physical presence, we have never stated that physical
presence is necessary to conclude that nonmember conduct
occurred on tribal land. Rather, we have repeatedly stated
that “[o]ur inquiry is not limited to deciding when and where
the claim arose” but “whether the cause of action brought by
the[ ] parties bears some direct connection to tribal lands.”
Smith, 434 F.3d at 1135 (emphasis added).
    In Smith, we concluded that a tribal court had jurisdiction
over a nonmember’s claims arising from an accident that
occurred on a federal highway when the vehicle was
maintained and the accident investigated by a tribal college
situated on tribal lands. Id. In Knighton, yet another case
implicating the role of tribal land, we similarly held that a
tribe’s suit against a nonmember tribal employee who
worked off the reservation related to tribal lands. Knighton,
922 F.3d 901–02. There, we pointed to the employee’s
involvement in moving the tribe’s headquarters from tribal
land on the reservation to off-reservation fee land. Id. The
teaching from these cases is that, even if Lexington
employees never entered the Reservation, Lexington’s
insurance coverage of the Tribe’s and Port Madison’s
businesses on trust lands relates directly to tribal lands and
conforms with our precedent.
    Cases from other circuits strengthen our conclusion. In
Attorney’s Process & Investigation Services, Inc. v. Sac &
Fox Tribe, the Eighth Circuit remanded a claim to determine
18                LEXINGTON INS. CO. V. SMITH

whether “the conversion claim has a sufficient nexus to the
consensual relationship between [the parties]” and could be
subject to tribal jurisdiction. 609 F.3d 927, 941 (8th Cir.
2010). There, the tribe had failed to delineate the
relationship between the claim and the nonmember entity’s
services on tribal land. Id. In contrast, the Suquamish Tribe
has provided a clear nexus between its breach-of-contract
claim and Lexington’s coverage of tribal properties on tribal
land. See also, e.g., DISH Network Serv. LLC v. Laducer,
725 F.3d 877, 884 (8th Cir. 2013) (holding that tribal
jurisdiction over an abuse-of-process tort against a
nonmember company, even if it occurred off tribal lands,
would “not clearly be lacking” because “the tort claim arises
out of and is intimately related to [the contract] and that
contract relates to activities on tribal land”).
    Contrasting the core of this appeal—a contract centered
on insuring tribal properties on tribal land—to other circuits’
cases underscores the distinction between the nexus to
conduct on tribal land and conduct that could not even
plausibly be viewed as connected to tribal land. See Stifel,
Nicolaus & Co. v. Lac du Flambeau Band of Lake Superior
Chippewa Indians, 807 F.3d 184, 189, 207–08 (7th Cir.
2015) (holding no tribal jurisdiction over nonmembers who
issued bonds for a tribe’s off-reservation investment
project); Jackson v. Payday Fin., LLC, 764 F.3d 765, 768
(7th Cir. 2014) (holding no tribal jurisdiction over suit
brought by off-reservation nonmembers against on-
reservation tribal lenders when the loan transactions were
completed online); MacArthur v. San Juan County, 497 F.3d
1057, 1060–61 (10th Cir. 2007) (holding no tribal
jurisdiction over tribal member employees’ suit against
nonmember clinic operated on non-Indian fee land).
                  LEXINGTON INS. CO. V. SMITH              19

    We easily conclude that Lexington’s business
relationship with the Tribe satisfies the requirements for
conduct occurring on tribal land, thereby occurring within
the boundaries of the reservation and triggering the
presumption of jurisdiction. We turn next to the Tribe’s
inherent sovereign authority as a basis for jurisdiction.
  IV. Tribal Jurisdiction Under the First Montana
      Exception
    In Montana, the Supreme Court affirmed that “Indian
tribes retain inherent sovereign power to exercise some
forms of civil jurisdiction over non-Indians on their
reservations, even on non-Indian fee lands.” 450 U.S. at
565. More than twenty years later, the Court explained that
“the regulation must stem from the tribe’s inherent sovereign
authority to set conditions on entry, preserve tribal self-
government, or control internal relations.”            Plains
Commerce, 554 U.S. at 337. We have described this
inherent sovereign power as encapsulated in the two
“Montana exceptions,” which “are ‘rooted’ in the tribes’
inherent power to regulate nonmember behavior that
implicates these sovereign interests” in protecting self-
government and controlling internal relations. Knighton,
922 F.3d at 904 (quoting Attorney’s Process, 609 F.3d at
936); see also Montana, 450 U.S. at 565–66 (describing the
exceptions to “the general proposition that the inherent
sovereign powers of an Indian tribe do not extend to the
activities of nonmembers of the tribe”).
     Under the first Montana exception, a “tribe may
regulate . . . the activities of nonmembers who enter
consensual relationships with the tribe or its members.”
Montana, 450 U.S. at 565. And under the second exception,
a tribe may “exercise civil authority over the conduct of non-
20                LEXINGTON INS. CO. V. SMITH

Indians on fee lands within its reservation when that conduct
threatens or has some direct effect on the political integrity,
the economic security, or the health or welfare of the tribe.”
Id. at 566.
    Although we early on characterized the Montana
framework as applicable only to tribal jurisdictional issues
on non-tribal, or non-Indian fee, land, we clarified our view
in Knighton. In Knighton, we spelled out that Water Wheel
and “our subsequent cases involving tribal jurisdictional
issues on tribal land do not exclude Montana as a source of
regulatory authority over nonmember conduct on tribal
land.” 922 F.3d at 903; see Water Wheel, 642 F.3d at 810.
Rather, the Montana exceptions allow us to determine the
scope of a tribe’s “general jurisdictional authority” over
nonmember conduct, whether it be on tribal or non-tribal
land. Water Wheel, 642 F.3d at 810.
     A. Regulatory and Adjudicative Jurisdiction
    Under Montana’s first exception, a “tribe may regulate,
through taxation, licensing, or other means, the activities of
nonmembers who enter consensual relationships with the
tribe or its members, through commercial dealing, contracts,
leases, or other arrangements.” 450 U.S. at 565. For the
purposes of determining whether a consensual relationship
exists, “consent may be established ‘expressly or by [the
nonmember’s] actions.’” Water Wheel, 642 F.3d at 818
(quoting Plains Commerce, 554 U.S. at 337).
    Lexington’s insurance contract with the Tribe squarely
satisfies Montana’s consensual-relationship exception. The
insurance policy establishes a contract between Lexington as
the insurer and the Tribe, Port Madison, and subsidiary
entities as beneficiaries.     In exchange for coverage,
Lexington received premiums from the Tribe and Port
                      LEXINGTON INS. CO. V. SMITH                        21

Madison, and Lexington renewed the policies many times
over the course of several years. Thus, Lexington entered
into a “relationship[ ] with the tribe . . . through commercial
dealing [and] contracts.” See Montana, 450 U.S. at 565.
There is no dispute that the relationship was mutual and
consensual.
     We must also “consider the circumstances and whether
under those circumstances the non-Indian defendant should
have reasonably anticipated that his interactions might
‘trigger’ tribal authority.” Water Wheel, 642 F.3d at 818
(quoting Plains Commerce, 554 U.S. at 338). It should have
been no surprise to Lexington that its contract with the Tribe
would trigger tribal authority. The transaction had tribe and
tribal lands written all over it. Because of its participation in
the Tribal Program—an insurance program marketed
specifically to tribes—Lexington was objectively on notice
that it was taking advantage of a program targeted at
providing insurance to tribes. Additionally, Lexington knew
that it was contracting with the Tribe to provide insurance
coverage for businesses and properties on tribal trust land.3
See id. at 817 (holding that a consensual relationship was

3
  We agree with Lexington that, in its Montana analysis, the district court
improperly relied on the insurance policies’ service-of-suit clause, which
provided that the parties would submit to a court of competent
jurisdiction. That clause does not identify a specific court. Rather, this
clause would allow the suit to proceed in tribal court if the tribal court
has subject-matter jurisdiction. It is circular reasoning to conclude that
the clause itself gives a tribal court jurisdiction when the thrust of this
federal court case is whether the Tribal Court has jurisdiction in the first
place and therefore qualifies as a “court of competent jurisdiction.” See
Lightfoot v. Cendant Mortg. Corp., 580 U.S. 82, 92 (2017) (“[T]he
phrase ‘court of competent jurisdiction’ [refers] to a court with an
existing source of subject-matter jurisdiction.”).
22                LEXINGTON INS. CO. V. SMITH

established when the nonmember “corporation had full
knowledge the leased land was tribal property”).
    As a sophisticated commercial actor conducting business
with tribes, Lexington could not have ignored tribes’ status
as sovereigns that retain jurisdiction over nonmembers in
certain circumstances.        Nor could Lexington have
disregarded the fact that tribal courts have long adjudicated
suits involving nonmembers. See, e.g., Santa Clara Pueblo
v. Martinez, 436 U.S. 49, 65 (1978) (“Tribal courts have
repeatedly been recognized as appropriate forums for the
exclusive adjudication of disputes affecting important
personal and property interests of both Indians and non-
Indians.”). As we counseled in Smith, nonmembers are on
notice that should they “choose to affiliate with” tribes
through a consensual relationship, they “may anticipate
tribal jurisdiction when their contracts affect the tribe.” 434
F.3d at 1138. In entering into a contract with the sovereign
Tribe that bore a direct connection to and could affect the
Tribe’s properties on trust land, Lexington should have
reasonably anticipated that it could be subject to tribal
jurisdiction.
    Finally, we address the nexus requirement. “Montana’s
consensual-relationship exception requires that ‘the
regulation imposed by the Indian tribe have a nexus to the
consensual relationship itself.’” Knighton, 922 F.3d at 904
(quoting Atkinson Trading Co. v. Shirley, 532 U.S. 645, 656
(2001)). The nexus between Lexington’s consensual
relationship with the Tribe and the conduct that the Tribe
seeks to regulate is no mystery. The consensual relationship
is embodied in an insurance contract involving tribal lands,
and the Tribe seeks to regulate the scope of insurance
coverage that Lexington was bound to provide under that
contract. See Water Wheel, 642 F.3d at 818–19 (stating that
                  LEXINGTON INS. CO. V. SMITH                23

either Montana exception would provide jurisdiction over a
breach-of-contract claim when “the commercial dealings
between the tribe and [the nonmember] involved the use of
tribal land, one of the tribe’s most valuable assets”). We
conclude that the Tribe has regulatory jurisdiction over
Lexington under Montana’s first exception.
    The Supreme Court has counseled that should a
consensual relationship exist and “tribes possess authority to
regulate the activities of nonmembers, ‘civil jurisdiction
over disputes arising out of such activities presumptively lies
in the tribal courts.’” Strate, 520 U.S. at 453 (quoting Iowa
Mutual, 480 U.S. at 18) (cleaned up). When regulatory
jurisdiction exists, important sovereign interests are at stake,
and “long-standing Indian law principles recognizing tribal
sovereignty” are implicated, a tribe possesses adjudicative
jurisdiction. Water Wheel, 642 F.3d at 816.
    Because the Tribe has regulatory jurisdiction over
Lexington, and considering the nature of the Tribe’s cause
of action, the Tribal Court presumptively has adjudicative
jurisdiction over this dispute. Tribal Court jurisdiction over
the breach-of-contract suit would not exceed the Tribe’s
ability to regulate the contract. See Strate, 520 U.S. at 453
(stating that “a tribe’s adjudicative jurisdiction does not
exceed its legislative jurisdiction”); see also Knighton, 922
F.3d at 906 (holding that a tribal court had authority to
adjudicate claims arising from an employee’s breach of
Tribal employee standards of conduct, which the Tribe had
the power to regulate). Because the Tribe’s sovereign
interest in managing its businesses on tribal lands is at stake,
tribal sovereignty principles are implicated. See Plains
Commerce, 554 U.S. at 334 (identifying “managing tribal
lands” as one of tribes’ “sovereign interests”); Merrion, 455
U.S. at 137 (recognizing a “tribe’s general authority, as
24               LEXINGTON INS. CO. V. SMITH

sovereign, to control economic activity within its
jurisdiction”). Therefore, the Tribal Court has jurisdiction
under the first Montana exception in view of the Tribe’s
regulatory authority coupled with its adjudicative
jurisdiction over Lexington.
     B. Sovereignty Considerations under Montana
    Our holding of tribal jurisdiction conforms with
precedent counseling respect for tribal sovereignty—
including the competency of tribal governments—while
affirming the limited scope of tribal jurisdiction over
nonmembers under Montana. Lexington’s suggestion to the
contrary misreads our case law.
    Consideration of the political structure of tribal
governments, including their judicial systems, has no place
in our Montana analysis. There is no merit to Lexington’s
suggestion that the Tribal Court should not adjudicate this
suit because of the “hometown” advantage and control
exercised by the Suquamish Tribal Council over the Tribal
Court judges, the exclusion of nonmembers from Tribal
juries, and the threat to Lexington’s due-process rights posed
by Tribal Court judges and juries selected by the Tribe to
rule on its own claims. The Supreme Court, our circuit, and
our sister circuits have rejected such attacks on tribal
judiciaries time and time again in light of federal law
guaranteeing due-process rights in tribal courts, as well as
empirical studies and judicial experience showing that
“tribal courts do not treat nonmembers unfairly.” FMC, 942
F.3d at 943–44 (collecting cases from the Supreme Court
and other circuits).
    Nor does the current state of the insurance regulatory
regime—namely states’ near-exclusive regulation of
insurance and the Tribe’s lack of insurance regulations—
                  LEXINGTON INS. CO. V. SMITH                25

serve as a counterweight to an anticipation of tribal
jurisdiction. We have never held that a tribe must possess
positive law addressing certain conduct to exercise
jurisdiction over that conduct. Rather, we have embraced
the opposite: so long as federal law determines that a tribe
has authority to regulate and adjudicate certain conduct, it
makes no difference whether a tribe does so based on
positive law or another source of law, like tort law, or in this
case, contract law. See Knighton, 922 F.3d at 906–07.
    We also do not countenance Lexington’s argument that
Plains Commerce imposed an additional limitation on the
Montana exceptions, namely that the tribal regulation must
not only satisfy Montana but also “stem from the tribe’s
inherent sovereign authority to set conditions on entry,
preserve tribal self-government, or control internal
relations.” 554 U.S. at 337. This argument misreads Plains
Commerce. As we explained in Knighton, the Court was
only affirming the “varied sources of tribal regulatory power
over nonmember conduct on the reservation” with that
statement in Plains Commerce. 922 F.3d at 903 (citing
Plains Commerce, 554 U.S. at 337). The Court was not
imposing a supplemental requirement to the Montana
analysis. Rather, it was merely stating that even if a
nonmember consented to tribal law, the tribe could impose
that law on the nonmember only if the tribe had the authority
to do so under the power to exclude—the “authority to set
conditions on entry”—or the Montana exceptions—the
authority to “preserve tribal self-government[ ] or internal
relations.” Plains Commerce, 554 U.S. at 337 (citing
Montana, 405 U.S. at 564); see also Knighton, 922 F.3d at
904 (“The Montana exceptions are ‘rooted’ in the tribes’
inherent power to regulate nonmember behavior that
implicates these sovereign interests.” (quoting Attorney’s
26                    LEXINGTON INS. CO. V. SMITH

Process, 609 F.3d at 936)). If the conduct at issue satisfies
one of the Montana exceptions, it necessarily follows that
the conduct implicates the tribe’s authority in one of the
areas described in Plains Commerce.4 Because Lexington’s
conduct satisfies the consensual-relationship exception, it
implicates the Tribe’s authority over self-government and
internal relations.
    Finally, our holding does not construe Montana’s first
exception “in a manner that would swallow the rule or
severely shrink it.” Plains Commerce, 554 U.S. at 330
(internal quotation marks and citations omitted). The
circumstances in this case resulting in tribal jurisdiction are
narrow: the nonmember consensually joined an insurance
pool explicitly marketed to tribal entities; the nonmember
then entered into an insurance contract with a tribe; the
contract exclusively covered property located on tribal
lands; and the tribe’s cause of action against the nonmember
arose directly out of the contract. In Allstate Indemnity
Company v. Stump, we deemed tribal jurisdiction over an
off-reservation insurance company as “colorable,” even
when the insurance was purchased by a tribal member

4
  Our understanding of Plains Commerce aligns with that of the Fifth
Circuit. See Dolgencorp, Inc. v. Mississippi Band of Choctaw Indians,
746 F.3d 167, 174–75 (5th Cir. 2014) (“We do not interpret Plains
Commerce to require an additional showing that one specific
relationship, in itself, ‘intrude[s] on the internal relations of the tribe or
threaten[s] self-rule.’” (quoting Plains Commerce, 554 U.S. at 337)),
aff’d by an equally divided court, 579 U.S. 545 (2016); see also id. at
175 (stating that the limitations expressed in Plains Commerce are
“already built into the first Montana exception”). However, this
understanding departs from that of the Seventh Circuit. See Jackson, 764
F.3d at 783 (holding that, beyond nonmember consent, the tribal
members also had to make a showing that the dispute implicated an
aspect of the tribe’s sovereign authority as stated in Plains Commerce).
                  LEXINGTON INS. CO. V. SMITH              27

outside the reservation. 191 F.3d 1071, 1074–76 (9th Cir.
1999). The situation here rises from colorable to actual. We
conclude that under the circumstances, the Tribe decidedly
has jurisdiction over an off-reservation insurance company.
    Importantly, we do not suggest that an off-reservation
nonmember company may be subject to tribal jurisdiction
anytime it does business with a tribe or tribal member or
provides goods or services on tribal lands. Our analysis does
not deal with the mine run of contracts.               Such a
generalization would swallow the rule. Rather, the Montana
framework requires a factual inquiry into each component—
the existence of a consensual relationship, the nonmember’s
anticipation of tribal jurisdiction, and the nexus between the
relationship and the conduct being regulated.             The
circumstances here telescope the close nexus between tribal
land and the consensual transaction. We emphasize that
tribal jurisdiction is proper because the relevant insurance
policy covers the properties and operations of a tribal
government and businesses that extensively “involved the
use of tribal land” and the businesses “constituted a
significant economic interest for the tribe.” Water Wheel,
642 F.3d at 817. Any concern regarding the scope of
Montana is quelled by the reminder that sophisticated
commercial actors, such as insurers, can easily insert forum-
selection clauses into their agreements with tribes and tribal
members, thereby precluding the exercise of tribal court
jurisdiction in such circumstances. See, e.g., Plains
Commerce, 554 U.S. at 346 (Ginsburg, J., concurring in part)
(stating that a nonmember company can include “forum
selection, choice-of-law, or arbitration clauses in its
agreements” with tribal members to avoid tribal court and
the application of tribal law).
28                LEXINGTON INS. CO. V. SMITH

    Ultimately, the Montana exceptions ensure that a tribe’s
exercise of authority over nonmembers is limited to a tribe’s
“sovereign interests” in “managing tribal land, protecting
tribal self-government, and controlling internal relations.”
Id. at 334 (cleaned up). Because this case squarely fits into
the first Montana exception, the jurisdiction recognized here
flows from the Suquamish Tribe’s retained sovereignty. See
Montana, 405 U.S. at 565 (“Indian tribes retain inherent
sovereign power to exercise some forms of civil jurisdiction
over non-Indians on their reservations . . . .”).
                        CONCLUSION
    We agree with the Tribal Court, the Suquamish Tribal
Court of Appeals, and the district court that the Tribal Court
has subject-matter jurisdiction over this suit pursuant to the
Tribe’s inherent sovereign power under the first Montana
exception. Our inquiry is at an end, and the case can proceed
under the jurisdiction and laws of the Suquamish Tribe.
     AFFIRMED.