“Sue or Be Sued" Clauses: Limitations on the Enforceability of Consents to Suit by Tribal Corporations

February 09, 2005

Summary
Tribal entities have utilized “sue or be sued” clauses in tribal corporate charters since at least the 1930’s, when Congress enacted the Indian Reorganization Act. In this article, we explore the meaning and import of those clauses in the context of a recent decision of the New Mexico Court of Appeals, Sanchez v. Santa Ana Golf Club, Inc., 2005-NMCA-003 (November 22, 2004), which was published January 31, 2005, following the New Mexico Supreme Court’s denial of certiorari. In summary, the New Mexico Court of Appeals held that a waiver of immunity from suit by a tribal corporation must be clear and unambiguous, and all conditions imposed on any waiver must be met before any waiver can be effective. The Court concluded that a condition had not been met, and therefore the tribal corporation could not be sued.

Tribal entities have utilized “sue or be sued” clauses in tribal corporate charters since at least the 1930’s, when Congress enacted the Indian Reorganization Act. In this article, we explore the meaning and import of those clauses in the context of a recent decision of the New Mexico Court of Appeals, Sanchez v. Santa Ana Golf Club, Inc., 2005-NMCA-003 (November 22, 2004), which was published January 31, 2005, following the New Mexico Supreme Court’s denial of certiorari. In summary, the New Mexico Court of Appeals held that a waiver of immunity from suit by a tribal corporation must be clear and unambiguous, and all conditions imposed on any waiver must be met before any waiver can be effective. The Court concluded that a condition had not been met, and therefore the tribal corporation could not be sued.

Section 17 of the Indian Reorganization Act of 1934 (“IRA”), 25 U.S.C. § 477, authorized Indian tribes and Pueblos to incorporate tribal enterprises under federal law. The incorporation process includes the development of a corporate charter. Under Section 17 of the IRA, tribal corporations enjoy immunity from suit in the same fashion as the tribes or Pueblos themselves. And, just as tribes and Pueblos, tribal corporations may waive that immunity. The United States Supreme Court has stated that waivers of sovereign immunity “cannot be implied but must be unequivocally expressed.” Santa Clara Pueblo v. Martinez, 436 U.S. 49, 58 (1978). The Court in Santa Clara Pueblo confirmed that “Indian tribes have long been recognized as possessing the common-law immunity from suit traditionally enjoyed by sovereign powers.” Id. In the absence of an unequivocal waiver, tribes and tribal entities may not be sued. See also Kiowa Tribe of Oklahoma v. Manufacturing Technologies, Inc., 523 U.S. 751, 757 (1998). “Indian tribes long have structured their many commercial dealings upon the justified expectations that absent an express waiver their sovereign immunity stood fast.” American Indian Agricultural Credit Consortium, Inc. v. Standing Rock Sioux Tribe, 780 F.2d 1374, 1378 (8th Cir. 1985).

The Court in Sanchez v. Santa Ana Golf Club considered these basic principles and applied them to a “sue or be sued” clause in the Golf Club’s corporate charter. After eight years of employment with the golf club, she was fired, and Ms. Sanchez sued the Club in state court for wrongful discharge and defamation. The Golf Club invoked immunity from suit as a defense and argued that the case should be dismissed for lack of subject matter jurisdiction. The district court dismissed. Ms. Sanchez appealed to the New Mexico Court of Appeals.

The Golf Club’s corporate charter included a “sue or be sued” clause. The Court of Appeals’ analysis focused on that clause. Specifically, the clause provided the Golf Club the authority to: “sue or be sued in its Corporate name to the extent provided in Article XVI of this Charter.” Ms. Sanchez argued that this clause provided a sufficient waiver of the Golf Club’s immunity from suit. The court rejected the contention, concluding that the requirements of Article XVI necessary to make the waiver effective had not been met. According to the court,

the sue or be sued clause was only activated if it met the requirements of Article XVI. Section D of Article XVI mandates that all waivers must be in the form of a resolution, which shall be duly adopted by Defendants’ board of directors.

Section D of Article XVI provides further:

The resolution [of the Board] shall identify the party or parties for whose benefit the waiver is granted, the transaction or transactions and the claims or classes of claim for which the waiver is granted, the property of the Corporation which may be subject to execution to satisfy any judgment which may be entered in the claim, and shall identify the court or courts in which suit against the Corporation may be brought. . . .

According to the court of appeals, Ms. Sanchez presented no evidence of the requisite Board resolution. As a consequence, the court concluded that there was no effective waiver of immunity from suit that would permit the suit to proceed.

The court distinguished other cases construing “sue or be sued” clauses, including for example, Parker Drilling Co. v. Metlakatla Indian Community, 451 F. Supp. 1127, 1136-37 (D. Alaska 1978). In Parker Drilling, the “sue or be sued” clause had no restrictions, limitations or conditions and, therefore, was a clear and unambiguous waiver of immunity. Id.

The court went on to reject other theories of implied and inadvertent waiver that Ms. Sanchez advanced. Those theories included that: (a) the Golf Club’s participation in New Mexico’s workers compensation program represented a waiver of immunity; (b) the employee’s handbook included an anti-discrimination provision; and (c) the Golf Club waived immunity in other circumstances, and should be held to have waived immunity in the Sanchez case. The court of appeals affirmed the dismissal.

The lessons of Sanchez v. Santa Ana Golf Club and its predecessor cases governing issues of consent to jurisdiction or waivers of immunity from suit are clear. Waivers of immunity should be clear, unequivocal and unambiguous. And one should pay close attention to any conditions, limitations, or qualifications to any purported waiver of immunity. “Sue or be sued” clauses may be only a starting point in any analysis whether a tribal entity has waived its immunity from suit.