Articles > Business law in California

Native American Tribes are Immune from Civil Lawsuits Says U.S. Supreme Court

by William L. Porter, Attorney at Law

Those contractors who from time to time contract with Indian tribes* might take notice of a case from the United States Supreme Court. In 1998 the U.S. Supreme Court issued a decision in Kiowa Tribe of Oklahoma v. Manufacturing Technologies, Inc. 523 U.S. 751 (1998). The facts are as follows: Manufacturing Technologies, Inc., entered into a stock purchase contract with the Kiowa Tribe. The transaction was secured by a promissory note. The tribe defaulted on the note and Manufacturing Technologies sued in Court for breach of contract.

The U.S. Supreme Court decided the case in favor of the tribe. The Court held that even where the tribe had defaulted on the note and breached the contract, a tribe cannot be sued for such breach of contract in either state or federal court. The court concluded:

 “Indian tribes enjoy sovereign immunity from civil suits on contracts, whether those contracts involve governmental or commercial activities and whether they were made on or off the reservation. As a matter of federal law, a tribe is subject to suit only where Congress has authorized the suit or the tribe has waived its immunity.”

In commenting on the wisdom of this blanket tribal civil immunity, the Supreme Court also stated: “Tribal immunity extends beyond what is needed to safeguard tribal self-governance.” In the modern economic context, “immunity can harm those who are unaware that they are dealing with a tribe, who do not know of tribal immunity, or who have no choice in the matter, as in the case of tort victims.” The Court concluded by strongly suggesting that tribal civil immunity be eliminated but properly deferred to Congress to perform this legislative task. Whether Congress will ultimately end tribal immunity is another question entirely.

The lessons from the case are clear. When contracting with an Indian tribe, be advised that you will be unable to bring a civil suit against the tribe for breach of contract or any other civil claim. Under such circumstances a letter of credit, cash on delivery, or use of an independent escrow might be well advised.

* The U.S. Supreme Court uses the term “Indian tribe” rather than “Native American”
Nation, Group, or Community.

William L. Porter is a principal in Porter Law Group, Inc. in Sacramento, California.
He can be reached at (916) 381-7868.