Court Opinion

ID: 4183338
Source: CourtListenerOpinion
Date Created: 2017-07-04 07:08:56.590093+00
Date Added: 2024-06-11T14:25:16.761953
License: Public Domain

SECOND DIVISION
                               DOYLE, C. J.,
                         MILLER, P. J, and REESE, J.

                   NOTICE: Motions for reconsideration must be
                   physically received in our clerk’s office within ten
                   days of the date of decision to be deemed timely filed.
                               http://www.gaappeals.us/rules

                                                                     June 19, 2017

In the Court of Appeals of Georgia
 A17A0535. CHURCHILL FINANCIAL MANAGEMENT CORP. DO-022
     v. CLEARNEXUS, INC.

      DOYLE, Chief Judge.

      This appeal arises from the trial court’s confirmation of an arbitration award

to ClearNexus, Inc., (“ClearNexus”) in the amount of $255,021 against Churchill

Financial Management Corporation (“Churchill”) based on Churchill’s alleged

termination of a service contract with ClearNexus without proper notice. Churchill

appeals, arguing that the trial court erred by finding that (1) Churchill waived

sovereign immunity via the arbitration clause in the contract between the parties; (2)

Churchill waived sovereign immunity by failing to file with the arbitrator a motion

to vacate or modify the award; and (3) Churchill could not assert the sovereign

immunity of the Guidiville Band of the Pomo Indians under which Churchill is
incorporated. For the reasons that follow, we vacate the order confirming the

arbitration award and remand the case for further proceedings consistent with this

opinion.

      Our review of the issue of sovereign immunity, which is a question of law, is

de novo.1 And although the bar for granting relief from an award of arbitration is

high, the issue of whether the arbitrator lacked jurisdiction on the basis that the

arbitration is barred by the doctrine of tribal sovereign immunity is an issue for which

relief can be granted.2

      The record reveals that the Guidiville Rancheria of California is a federally

recognized tribal entity (“the Tribe”).3 In 2013, Churchill, which is a secured

consumer lending entity chartered by the tribe, entered into a service contract with

ClearNexus in which ClearNexus would provide call center services for Churchill’s

lending operation. Churchill’s corporate charter states that Churchill “is a legal entity

      1
       See Ga. Dept. of Natural Resources v. Center for a Sustainable Coast, Inc.,
294 Ga. 593, 596 (2) (755 SE2d 184) (2014).
      2
        See OCGA § 9-9-13 (b). Cf. Fulton County v. Lord, 323 Ga. App. 384, 388,
389 (1) (746 SE2d 188) (2013).
      3
       See Indian Entities Recognized & Eligible To Receive Services From the
United States Bureau of Indian Affairs, 81 FR 5019, 5021 (2016).

                                           2
wholly owned by the Tribe, but distinct and separate from the Tribe.” The articles of

incorporation also state that “[n]othing in this Charter of Incorporation shall be

deemed to waive, or to permit the Corporation to waive, the sovereign immunity of

the Tribe.” The articles further provide that

      Subject to applicable federal law, [Churchill] is authorized and
      empowered to engage in, carry on and conduct any lawful business,
      including, but without limiting the broad authorization of the foregoing,
      the following:

      A. To sue in its corporate name and to permit suit against itself in its
      corporate name in the Guidiville Tribal Court or in other courts of
      competent jurisdiction, notwithstanding the privileges and immunities
      the Corporation otherwise enjoys by virtue of its status; provided, that
      [Churchill] may only exercise this power to waive the defense of
      sovereign immunity from suit by written resolution of the Board of
      Directors and the Guidiville Tribal Council . . . .

      C. Nothing in this Charter and no action taken by [Churchill] pursuant
      to this Charter shall be construed as a waiver of the sovereign immunity
      conferred upon [Churchill] by the Tribe unless the Board of Directors
      by Board Resolution expressly waives said immunity on a case by case
      basis.

                                          3
The articles contained a limited waiver of sovereign immunity, which required Tribal

approval:

      A. Nothwithstanding any other provision of law, [Churchill] is
      authorized to waive sovereign immunity from suit of [Churchill], the
      Directors, officers, employees[,] or agents for any particular agreement
      matter or transaction, on a case by case basis, as may be entered into to
      further the purposes of [Churchill]. Such resolution shall require the
      approval of the Tribal Council before being valid.4

      B. Any waiver of immunity authorized by paragraph A of this Article
      shall be in the form of a resolution adopted by the Board of Directors.
      The resolution shall indentify the parties for whose benefit the waiver
      is granted, the transaction or transactions and the claims or classes of
      claims for which the waiver is granted, the property of [Churchill] which
      may be subject to execution to satisfy any judgment which may be
      entered regarding the claim or claims, and shall identify the court or
      courts in which suit against [Churchill], its Directors, officers,
      employees or agents may be brought.

      C. Any waiver of immunity shall be limited to the assets and/or income
      of [Churchill], and the acts or omissions of [Churchill], its Directors,
      officers, employees or agents shall not create any liability, obligation or
      indebtedness either of the Tribe or payable out of assets, revenues or
      income of the Tribe.

      4
          (Emphasis supplied.)

                                          4
      In the service agreement between ClearNexus and Churchill, the following

provision appeared:

            11. Arbitration. All claims, controversies[,] and disputes (other
      than a claim for equitable relief) between [ClearNexus] and Client
      arising out of or in connection with this Agreement or the transactions
      and business contemplated thereby, shall be submitted to final and
      binding arbitration, as the exclusive dispute resolution mechanism. All
      arbitration proceedings shall be held in Atlanta, Georgia, unless
      [ClearNexus] and Client agree in writing to another location. Issuance
      of an arbitration demand shall suspend any judicial or administrative
      proceedings instituted in connection therewith (except for equitable
      remedies), for the duration of the arbitration proceedings. Arbitration
      shall be governed by the commercial rules of the American Arbitration
      Association (the “AAA”). Arbitration shall be conducted by one
      arbitrator who shall be chosen by the AAA within five (5) days of
      receipt of the arbitration demand, unless the Parties sooner agree upon
      an arbitrator. The arbitrator may award attorney[] fees and costs to the
      prevailing party . . . [ClearNexus] and Client hereby consent to the
      enforcement of any arbitration award rendered pursuant to this Section
      in the courts of competent jurisdiction of each state of the United States
      of America or elsewhere where Client or [ClearNexus] have offices or
      significant assets. All arbitration hearings shall be conducted in English,
      and any monetary award of the arbitrator shall be granted in US Dollars.

                                          5
      After a business dispute arose between the parties, ClearNexus filed a claim

against Churchill with the American Arbitration Association, and Churchill filed a

motion to dismiss the claim based on its immunity from suit as a tribal sovereign. The

arbitrator denied Churchill’s motion to dismiss, finding that by signing the service

agreement with its arbitration clause, Churchill had waived the protections of tribal

sovereign immunity. The arbitrator entered an award to ClearNexus, but Churchill did

not file an application to vacate the arbitration award. Within a year of the arbitrator’s

decision, ClearNexus filed an application to confirm the award in the trial court.

Churchill objected to the confirmation, arguing that the arbitrator’s award was void

because Churchill was immune from suit on the basis of tribal sovereign immunity.

      The superior court confirmed the award, finding that Churchill failed to timely

challenge the arbitrator’s award within three months. The court further determined

that Churchill was authorized by the Tribe to enter into contracts, and by doing so in

this instance, waived sovereign immunity for the purposes of this contract. Thus, the

superior court confirmed the arbitration award.

      1. As an initial matter, Churchill argues that the superior court erred by finding

that it waived sovereign immunity by failing to file with the arbitrator a motion to

vacate or modify the award under OCGA §§ 9-9-13 or 9-9-14.

                                            6
      To the extent that the superior court’s order was decided partially on this basis,

the superior court erred. ClearNexus has pointed to no State authority supporting the

proposition that an entity is prohibited from raising the issue of tribal sovereign

immunity as a defense to a petition to confirm an arbitration award. A dearth of case

law exists on the issue of tribal sovereign immunity, but, for instance, when

addressing State sovereign immunity “the general rule is that in the absence of

express statutory or constitutional authorization, neither counsel for the [S]tate nor

any of its agencies may, by affirmative action or by failure to plead, waive the defense

of governmental immunity.”5 Moreover, as the U.S. Supreme Court has explained,

      the immunity possessed by Indian tribes is not coextensive with that of
      the States. [For instance,] state sovereign immunity [diverges] from
      tribal sovereign immunity, as tribes were not at the Constitutional
      Convention. They were thus not parties to the mutuality of concession
      that makes the States’ surrender of immunity from suit by sister States
      plausible. So tribal immunity is a matter of federal law and is not subject
      to diminution by the States.6

      5
       (Punctuation omitted). Kelleher v. State, 187 Ga. App. 64, 65 (1) (369 SE2d
341) (1998).
      6
         (Citations and punctuation omitted.) Kiowa Tribe v. Mfg. Technologies, Inc.,
523 U. S. 751, 755-756 (II) (118 SCt 1700, 140 LE2d 981) (1998). See also Amerind
Risk Mgmt. Corp. v. Malaterre, 633 F3d 680, 686 (II) (8th Cir. 2011) (“The plaintiffs
assert that Amerind waived its sovereign immunity by failing to raise the issue before

                                           7
Accordingly, we decline to hold that a party is required to first file an application to

vacate an arbitration award under OCGA §§ 9-9-13 or 9-9-14 in order to argue the

defense of tribal sovereign immunity to the confirmation of an arbitration award.7

      2. Next, Churchill argues that the trial court erred by finding that it could not

assert the tribal sovereign immunity of the Tribe under which Churchill is

incorporated, or alternatively, Churchill waived any tribal sovereign immunity by

signing the agreement with the included arbitration clause.8

      (a) Generally speaking, “[t]ribes enjoy immunity from suits on contracts,

whether those contracts involve governmental or commercial activities and whether

they were made on or off a reservation. [Thus, a]n Indian tribe is subject to suit only

the district court in Amerind II. However, our court has held that [tribal] sovereign
immunity is a threshold jurisdictional matter and a jurisdictional prerequisite.
Therefore, tribal sovereign immunity may be raised for the first time on appeal, or
raised sua sponte by the court.”) (citations and punctuation omitted; emphasis in
original).
      7
         Compare Ralston v. City of Dahlonega, 236 Ga. App. 386, 390-391 (6) (512
SE2d 300) (1999) (holding that the parties’ failure to argue governmental immunity
before the arbitrator and superior court at the confirmation hearing effectively waived
their claims of governmental immunity on appeal).
      8
        For clarity, we address the issues raised in two of Churchill’s enumerations
of error together.

                                           8
where Congress has authorized the suit or the tribe has waived its immunity.”9 In C

& L Enterprises, Inc.,10 the U.S. Supreme Court held that a tribe may waive immunity

from suit by agreeing to arbitrate disputes relating to a contract as long as the

agreement is “clear.”11 Thus, if the agreement in this case had been made between the

Tribe and ClearNexus, then the arbitration clause would have effectuated a clear

waiver of tribal sovereign immunity.12 Nevertheless, Churchill is not the Tribe, but

a corporate entity chartered under tribal law.

      (b) Most courts that have addressed this issue have determined that tribal

sovereign immunity extends to entities known as chartered tribal corporations when

they are “arms of the tribe.”13 Whether a corporation is an “arm of the tribe” protected

      9
       C & L Enterprises, Inc., v. Citizen Band Potawatomi Indian Tribe, 532 U. S.
411, 416 (I) (121 SCt 1589, 149 LE2d 623) (2001). See also Kiowa Tribe, 523 U. S.
at 751 (providing an historical overview of tribal sovereign immunity); Rosebud
Sioux Tribe v. Val-U Constr. Co., 50 F3d 560, 562-563 (8th Cir. 1995).
      10
           532 U. S. at 411.
      11
           Id. at 418-419 (II).
      12
           See id.
      13
         See, e.g., Alabama v. PCI Gaming Auth., 801 F3d 1278, 1287-1288 (IV) (A)
(11th Cir. 2015) (finding that a wholly owned gaming authority that operates tribal
casinos was an arm of the tribe protected by sovereign immunity); Amerind Risk
Mgmt. Corp., 633 F3d at 688 (II) (finding that a self-insurance risk pool for multiple
tribes was protected by tribal sovereign immunity); Breakthrough Mgmt. Group, Inc.

                                           9
by tribal sovereign immunity generally is determined based on a consideration of

tribal involvement in the creation and control of the entity, intent to clothe the entity

with immunity, and whether the entity serves tribal sovereign interests such as

economic development.14

v. Chukchansi Gold Casino & Resort, 629 F3d 1173, 1191-1195 (I) (B) (2) (b) (10th
Cir. 2010) (finding that a tribal casino and economic development authority were
protected by tribal sovereign immunity); Memphis Biofuels, LLC v. Chickasaw Nation
Indus., Inc., 585 F3d 917, 920-921 (II) (A) (1) (6th Cir. 2009) (finding that a tribal
corporation chartered under former 25 USC § 477 was an arm of the tribe); Allen v.
Gold Country Casino, 464 F3d 1044, 1046-1047 (9th Cir. 2006) (casino acted as arm
of the tribe); Taylor v. Ala. Intertribal Council Title IV J.T.P.A., 261 F3d 1032, 1037
(11th Cir. 2011) (finding that an inter-tribal council was protected by trial sovereign
immunity); Hagen v. Sisseton-Wahpeton Community College, 205 F3d 1040, 1043-
1044 (8th Cir. 2000) (finding that a tribal community college was an arm of the tribe
and thus protected by tribal sovereign immunity). See also Inyo County v.
Paiute-Shoshone Indians, 538 U. S. 701, 705 n.1 (123 SCt 1887, 155 LE2d 933)
(2003) (accepting United States’ undisputed assertion that tribal gaming corporation
was an arm of the tribe for sovereign immunity purposes). But see Somerlott v.
Cherokee Nation Distribs., Inc., 686 F3d 1144, 1149-1150 (10th Cir. 2012) (tribal
entity incorporated under state law is not immune from an employment discrimination
suit, but plaintiff failed to preserve this argument on appeal); Runyon v. Assn. of
Village Council Presidents, 84 P3d 437, 441 (Alaska 2004) (determining that
corporation created by tribal villages was not arm of the several participating tribes
such that tribal sovereign immunity applied).
      14
        See, e.g., State of Colorado v. Cash Advance, 205 P3d 389,403-406 (VIII)
(Col. App. 2008) (collecting cases and describing various tests to determine status of
corporation).

                                           10
      Although neither the arbitrator nor the superior court engaged in an analysis

based on any factors to determine whether Churchill is an arm of the Tribe,

ClearNexus has conceded that Churchill is an arm of the Tribe. Additionally,

Churchill’s articles of incorporation stated that “[t]he Corporation shall be wholly

owned by the Tribe for the benefit of the Tribe and its members” and is clothed with

the immunity of the Tribe. Therefore, we need not adopt a particular approach to

determine this issue at this time, and we need not remand in order for the superior

court to make this determination.15

      (c) ClearNexus argues, and both the arbitrator and the superior court found,

that regardless of whether Churchill was an arm of the Tribe and protected by tribal

sovereign immunity, it has waived that immunity by signing the service agreement

containing the arbitration clause, similar to the determination in C&L Enterprises.16

Churchill argues instead that it is required to follow a specific procedure in order to

waive tribal sovereign immunity under its charter, and the necessary procedure was

not followed. Based on persuasive authority of other jurisdictions, we agree. In

      15
           Compare id. at 397 (III).
      16
           532 U. S. at 416 (I).

                                          11
Memphis Biofuels,17 the U.S. Court of Appeals for the Sixth Circuit determined that

although a wholly owned tribal corporation could have waived tribal sovereign

immunity, a clear contract provision between the parties did not act as a waiver

because the required approval of the contract and incorporated waiver was not

approved as required under the corporate charter.18

      Finally, to the extent that the superior court’s decision was based on

Churchill’s implied waiver by participating in the arbitration proceeding, the record

shows that the participation was minimal, involving only the issue of tribal sovereign

immunity, and thus insufficient to result in waiver.19 Accordingly, the trial court erred

by confirming the arbitration award and by finding that the arbitrator had jurisdiction

over the proceeding on the basis that Churchill had waived tribal sovereign immunity.

Thus, we vacate the superior court order confirming the award and remand the case

      17
           585 F3d at 921-922 (II) (A) (2)
      18
          See id. See also Buchwald Capital Advisors v. Papas, 559 B.R. 842 (Case
No. 08-53104; E.D. Mich. 2016); Amerind Risk Mgmt. Corp., 633 F3d at 687-688
(II). Cf. Sanderlin v. Seminole Tribe of Fla., 243 F3d 1282, 1287-1289 (III) (A) (11th
Cir. 2001) (holding that an agent of a tribe cannot waive tribal sovereign immunity
regardless of the existence of a contract containing waiver on behalf of tribe if the
agent failed to receive approval as required by tribe in order to waive immunity).
      19
         Compare with Oglala Sioux Tribe v. C&W Enterprises, 542 F3d 224, 233 (II)
(B) (5) (8th Cir. 2008) (holding that the tribe fully participated in arbitration).

                                             12
for entry of an order vacating the arbitration award for lack of jurisdiction based on

tribal sovereign immunity.

      “This result may seem unfair, but that is the reality of [tribal] sovereign

immunity.”20

      Judgment vacated and case remanded. Miller, P. J., and Reese, J., concur.

      20
        Memphis Biofuels, 585 F3d at 922 (II) (A) (3), quoting Kiowa Tribe of Ok.,
523 U. S. at 758 (II).

                                         13