04/30/2013 10:06 am ET Updated Jun 30, 2013

Commercial Disputes May Be Subject to Tribal Courts

An April 26, 2013, decision of the federal Court of Appeals for the Ninth Circuit, Grand Canyon Skywalk Development, Inc. v. 'Sa' Nyu Wa Inc., begins with the statement: "We must once again address the subject of tribal court jurisdiction over disputes when non-Indians choose to do business in Indian country." The decision is part of a broader dispute concerning the Grand Canyon glass skywalk. This comment considers the tribal court jurisdictional implications of two recent court decisions.

The underlying contract was between a Nevada corporation and a tribally chartered corporation. As the dispute unfolded the tribe exercised eminent domain to take the Nevada corporation's intangible property rights. "Intangible property" would include rights granted by a contract.

This Ninth Circuit decision requires the Nevada corporation to pursue remedies in the tribal court before litigating in a U.S. court since there was no evidence of bad faith on the part of the tribal court. There was insufficient evidence that the tribal court lacked independence and was controlled by the tribal council. Furthermore, "... a tribe's inherent authority over tribal land may provide for regulatory authority over non-Indians on that land..." The skywalk is operated on tribal land.

The Ninth Circuit's decision has potential application to many commercial activities originating on or otherwise connected to tribal lands. For example, the Federal Trade Commission has been attempting to exercise jurisdiction over payday lending originating from tribal authority.

A March 28, 2013, federal District Court decision in South Dakota, FTC v. Payday Financial, LLC, addressed what the court described as a question of first impression:

"When a company conducting business from an Indian reservation enters into a commercial contract with a non-Indian, is it an unfair and deceptive practice for the company to include forum selection and consent to tribal jurisdiction provisions in the contract and then expect to litigate any alleged breach of contract claim against the non-Indian in tribal court?"

The District Court carefully phrased an answer that these contractual provisions are not unfair and deceptive when the non-Indian's relationship with tribal members has a sufficient connection to on-reservation activities. In this case there are remaining questions concerning tribal membership and ambiguity in the particular contract in question.

Both the Ninth Circuit and District Court decisions referenced the U.S. Supreme Court's 1981 decision in Montana v. U.S. The Supreme Court wrote:

"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. A tribe may also retain inherent power to exercise civil authority over the conduct of non-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."

The implications of this language are applied in numerous subsequent decisions.

When a tribally chartered corporation is involved and the activity in question is physically conduced on tribal land, the tribal court's jurisdiction is especially strong. Just how far tribal court jurisdiction may be extended to contracts between a tribe and a state chartered corporation or to economic activity that is not physically conducted on tribal land is a debatable question. A significant related issue, beyond the scope of this comment, is when tribal law exclusively applies to the event in question. Until the Supreme Court clarifies these issues, one must consider the implications of tribal court jurisdiction in all business transaction with a tribal connection.