Review of Court Decisions

Dispute Resolution Journal, May-July 2011 | Go to article overview

Review of Court Decisions


INDIAN TRIBE

Tribal Sovereign Immunity and Arbitration Agreements

The California Court of Appeal held that the Soboba Band of Luiseno, an Indian tribe, did not waive its sovereign immunity by agreeing to arbitrate. Accordingly, the court affirmed the denial of the plaintiff's motion to compel arbitration.

California Parking Services contracted with the band to provide valet parking to the casino on the Soboba Reservation. The tribe terminated the contract after problems arose. CPS filed a motion to compel arbitration under the arbitration clause in the parties' agreement. That agreement provided for the governing law to be Cal ifornia law, and "where applicable Tribal law and federal law." It also provided for the American Arbi - tration Association's Commercial Arbi tration Rules to ap ply, except for Rule 48(c), which deems that by agreeing to arbitrate under AAA rules, the parties consent to have a judgment entered in any federal or state court of jurisdiction.

The tribe demurred to the complaint, alleging tribal immunity. The district court denied CPS's motion to compel arbitration on the ground that it was barred by the tribe's sovereign immunity because, by excluding AAA Rule 48(c), it refused to accept the jurisdiction of a state or federal court.

The California Court of Appeal affirmed on de novo review. The court reviewed the principles of law related to tribal sovereign immunity, noting that waivers of such immunity are construed strictly and that courts have a strong presumption against finding a waiver.

The appeals court found that this case differed from the decision in C&L Enterprises v. Potawatomi Indian Tribe (532 U.S. 411, 1998), in which the Supreme Court ruled that the parties waived their sovereign immunity based on the agreement to arbitrate under AAA rules. The difference was that the Potawatomi tribe did not exclude Rule 48(c). The Supreme Court focused heavily on the fact that the tribe consented to have the award confirmed by a state or federal court. The appeals court said that this difference was "fatal" to the claim that the band waived its sovereign immunity.

The court sympathized with the argument that it would be wrong to disregard an entire arbitration clause because of a brief exception. But its sympathy was constrained by the heavy presumption against waivers of immunity. Next, it held that the exception of AAA Rule 48(c) is not ambiguous and could not be construed any other way than a rejection of state or federal court jurisdiction. The court ruled that this rejection "necessarily implied its rejection of the court's jurisdiction to compel arbitration as well." (It declined to apply a theory of limited rejection.)

The court also ruled that the choice-of-law clause did not overcome the clear rejection of court jurisdiction. In addition, the court rejected the argument that California law applied to the issue of sovereign immunity, saying that federal law governs whether a federally recognized Indian tribe has waived its immunity by entering into an agreement to arbitrate.

California Parking Enterprises v. Soboba Band of Lui - seno Indians, No. E050306, 2011 WL 2853218 (Cal. Ct. App. 4th Dist. July 20, 2011).

INTERNATIONAL CONSTRUCTION

Arbitrability of Statute of Limitations

The 2nd Circuit held that the timeliness of construction claims was an arbitrable issue and that the district court erred in taking that issue away from the arbitrator.

In 2000, UEG Araucária Ltda., a Brazilian entity, entered into three contracts worth $210 million with the Bechtel companies to engineer and construct a power plant in Brazil. The contracts contained the identical arbitration provision. They also provided that the "validity, effect and interpretation" of the agreement to arbitrate shall be governed by New York law and that the "law governing the procedure and administration of any arbitration instituted pursuant to Clause 37 is the law of the State of New York. …

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