RIPPLE, Circuit Judge.
The current appeal is the most recent in a series of lawsuits that have arisen over the sale of bonds by the Lake of the Torches Economic Development Corporation ("the Corporation"), a corporation wholly owned by the Lac du Flambeau Band of Lake Superior Chippewa Indians ("the Tribe") (collectively "the Tribal Entities"). In a prior action in this court, Wells Fargo Bank ("Wells Fargo") had alleged that the Corporation had breached a bond indenture and, as trustee for the bondholders, had sought "the appointment of a receiver to manage the trust security on behalf of the bondholder." Wells Fargo Bank v. Lake of the Torches Econ. Dev. Corp., 658 F.3d 684, 686 (7th Cir.2011). We held that the bond indenture constituted an unapproved management contract under the Indian Gaming Regulatory Act ("the IGRA"), 25 U.S.C. §§ 2701-2721, and was therefore void. Following our decision, the validity of other bond-related documents continued to be litigated in other courts.
After more than three years of litigating in federal and state court, the Tribal Entities instituted a tribal court action in April 2013 seeking a declaration that the bonds are invalid under the IGRA as well as tribal law. The action currently before the court represents the efforts of the non-tribal parties to put an end to the tribal court action. Those non-tribal parties are: Stifel, Nicolaus & Company, Inc., the initial purchaser of the bonds; Stifel, Nicolaus & Company's parent corporation, Stifel Financial Corporation (collectively "Stifel"); LDF Acquisition, LLC ("LDF"), a special purpose vehicle created by the predecessor of Saybrook Fund Investors, LLC (collectively "Saybrook") for the purpose of purchasing the bonds; Wells Fargo;
Following the submission of evidence and a hearing, the district court preliminarily enjoined the Tribal Entities from proceeding against the Financial Entities, but allowed the tribal action to proceed against Godfrey. The Tribal Entities appealed the district court's grant of the injunction, and Godfrey cross-appealed the district court's denial of the same.
We now affirm in part, and reverse and remand in part. We agree with the district court that tribal court exhaustion was not required. We also concur that the Tribal Entities effectuated a valid waiver of their sovereign immunity, and, therefore, the action against them may proceed. Finally, we agree that the Financial Entities have established a substantial likelihood of succeeding in their challenge to the tribal court's jurisdiction; we conclude, therefore, that the district court did not abuse its discretion in enjoining the tribal court action against the Financial Entities.
With respect to Godfrey's cross-appeal, we conclude that the district court made several errors of law in assessing whether Godfrey had established a likelihood of success on the merits. With respect to
The Corporation is chartered under tribal law to own and operate the Lake of the Torches Resort Casino ("the Casino"). The Casino is a gaming facility located on tribal lands in northern Wisconsin and is operated pursuant to a tribal-state compact with the State of Wisconsin.
In 2007, "the Tribe decided to diversify its operations by investing in a project to build a riverboat casino, hotel and bed and breakfast in Natchez, Mississippi. In order to secure funding for that investment and to refinance $27.8 million of existing debt, [the Corporation] issued $50 million in taxable gaming revenue bonds" in January 2008. Wells Fargo Bank, 658 F.3d at 688-89. Godfrey, in its capacity as counsel to the Corporation and bond counsel for the transaction, issued two opinion letters as to the meaning of several bond-related documents and the legality of the bond transaction.
The bonds were sold to a brokerage firm, Stifel, and then resold to LDF. "The bonds, which were secured by the revenues and related assets of the Casino, were accompanied by a trust indenture (`the Indenture') naming Wells Fargo as trustee." Id. at 689 (footnote omitted). The Indenture included numerous provisions "that vested in Wells Fargo and the bondholder the power to ensure that [the Corporation] satisfied its repayment obligations." Id. This power included oversight of Casino revenues, which the Corporation was required to deposit in an account controlled by Wells Fargo.
Along with the Indenture, there were several other documents relevant to the transaction: the Specimen Bond,
The Natchez investment proved to be less lucrative than expected, and the Tribe had trouble meeting its bond obligations. In October 2009, the Tribe elected a new governing council that had campaigned on a pledge to repudiate the bonds. The Corporation eventually repudiated its obligations under the bonds and refused to repay the $46,615,000 remaining principal or the interest.
When the Corporation repudiated the bonds, Wells Fargo brought an initial action
The district court subsequently denied Wells Fargo's motion to amend its complaint to assert claims based on other documents in the bond transaction, such as the bond itself. According to the district court, the other documents on which Wells Fargo sought to rely were "collateral agreements within the meaning of Commission regulations and, in the view of the district court, [we]re therefore also void." Id. at 692 (internal quotation marks omitted).
On appeal, we affirmed the district court's judgment that the Indenture was void as an unapproved management contract. We determined, however, that the district court's conclusion—that the other documents related to the bond transaction also were void—was premature:
Id. at 701. We "conclude[d] that the district court should have permitted Wells Fargo leave to file an amended complaint to the extent that it presented claims for legal and equitable relief in connection with the bond transaction on its own behalf and on behalf of the bondholder." Id. at 702. We also were mindful, however, that there was a question whether Wells Fargo could seek that relief now that the Indenture was void. Thus, the district court would have to "address whether Wells Fargo's standing to seek such relief on behalf of the bondholder survives the voiding of the Indenture." Id. We instructed that, after determining the standing issue, the district court "should proceed to address whether the transactional documents, taken alone or together, evince an intent on the part of the Corporation to waive sovereign immunity with respect to claims by Wells Fargo on its own behalf and, if it has standing to do so, on behalf of the bondholder." Id.
On remand, Wells Fargo was unsuccessful in crafting a complaint that named all of the real parties in interest and also preserved diversity of citizenship. It therefore moved to dismiss its complaint voluntarily on April 9, 2012.
Prior to Wells Fargo's voluntary dismissal of the remanded action, Saybrook had filed a twenty-four-count complaint against the Corporation, Stifel, and Godfrey in Waukesha County Circuit Court, in which it asserted a breach of bond claim against the Corporation and various alternative claims against the other defendants. The language of the Bond Documents, however, allowed the parties to bring suit against the Tribal Entities in state court
On March 11, 2013, the District Court for the Western District of Wisconsin determined that Saybrook's claims were for breach of the bond and therefore did not raise a federal question. The court also believed that it was unlikely that there was diversity of citizenship, but it required proof of the plaintiffs' citizenship in order to completely rule out diversity of citizenship as a basis for subject matter jurisdiction. Id. Following the submission of supplemental affidavits establishing a lack of complete diversity, the district court dismissed the Saybrook federal action without prejudice on April 1, 2013.
Following the district court's March 11 ruling in the Saybrook federal action, the Tribe amended its tribal code to expand the jurisdiction of its own tribal court. Prior to the amendment, the tribal code provided that the tribal court had jurisdiction over "[a]ll matters which the Tribal Council of the Lac du Flambeau Band of Lake Superior Chippewa invests, by appropriate ordinance, the Court with jurisdiction; [and][a]ll actions brought under the provisions of this Code."
On April 25, 2013, the Tribal Entities filed suit in tribal court against Saybrook, Wells Fargo, Stifel, and Godfrey seeking a
Following the filing of their tribal court action, the Tribal Entities moved to stay the state action in Waukesha County Circuit Court and to hold an inter-jurisdictional conference with the tribal court under Teague v. Bad River Band of Lake Superior Tribe of the Chippewa Indians, 236 Wis.2d 384, 612 N.W.2d 709 (2000).
On the same day that the Financial Entities and Godfrey filed their motions to dismiss the tribal court action, they also instituted this action in the District Court for the Western District of Wisconsin. They sought a ruling that the tribal court did not have jurisdiction over them and moved for a preliminary injunction to prevent the tribal court action from proceeding.
Following extensive briefing and a hearing, the district court ruled on the Financial Entities' and Godfrey's motion. Before it turned to the four-factor analysis for preliminary injunctions, however, the court addressed two threshold issues raised by the Tribal Entities: sovereign immunity and tribal exhaustion.
With respect to the waivers of sovereign immunity in the Bond Documents, the district court agreed with the Tribal Entities that several of the Bond Documents were unapproved management contracts under the IGRA and, therefore, that both the documents and the waivers were void. The district court determined, however, that there were at least two Bond Documents—the Tribal Resolution and the Bond Resolution—that were not management contracts under the IGRA, and did contain clear waivers of the Tribe's sovereign immunity. It concluded, therefore, that the Tribal Entities had waived their sovereign immunity.
The court then turned to the second threshold question—exhaustion of tribal remedies. Guided by this court's decision in Altheimer & Gray v. Sioux Manufacturing Corp., 983 F.2d 803 (7th Cir.1993), the court stated that it must look to the circumstances of the case "`to determine whether the issue in dispute is truly a reservation affair entitled to the exhaustion doctrine.'"
The court therefore held that the Financial Entities and Godfrey did not have to exhaust tribal court remedies with respect to disputes regarding the Bond Documents and Transaction.
Proceeding to the merits, the court observed that the Financial Entities and Godfrey bore the burden of demonstrating that: (1) they have a reasonable likelihood of success on the merits; (2) they have no adequate remedy at law; and (3) they will suffer irreparable harm without injunctive relief. If they met this burden, then they also would have to establish that the harm they would suffer outweighed any harm the Tribal Entities would suffer and that the preliminary injunction would not harm the public interest.
With respect to the Financial Entities' motion for injunctive relief, the court believed that the merits inquiry was governed by the Supreme Court's decision in Montana v. United States, 450 U.S. 544, 101 S.Ct. 1245, 67 L.Ed.2d 493 (1981). The court explained that Montana established the general presumption against tribal court jurisdiction over nonmembers as well as two exceptions to the presumption. First, tribes "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."
Focusing on the second Montana exception, the district court noted that this exception is limited to non-Indians' conduct on reservation land. The tribal action at issue, however, did not seek to regulate the Financial Entities' conduct on reservation land. Moreover, this exception "was effectively intended `to protect tribal self-government or to control internal relations.'"
Having determined that the Financial Entities were likely to prevail on their claim that the tribal court lacked jurisdiction over them, the district court proceeded to the other preliminary-injunction factors. It found that the Financial Entities would suffer irreparable harm if they were "forced to litigate in two forums, expending significant effort and resources," were "deprived of the benefits of the forum for which they expressly contracted," and were "forced to litigate before . . . a court that likely lacks jurisdiction over them."
With regard to Godfrey, however, the district court reached a different conclusion. For purposes of the preliminary-injunction proceedings, Godfrey did not contest the tribal court's jurisdiction under Montana; rather, it based its challenge on the forum selection clauses found in the Bond Documents.
Following the district court's ruling, the Tribal Entities appealed the district court's order granting a preliminary injunction to the Financial Entities, and Godfrey filed a cross-appeal challenging the district court's denial of its motion for a preliminary injunction.
Before we turn to the propriety of injunctive relief, we, like the district court, must consider whether the parties' dispute is properly before us; that is, we must address the threshold issue of whether the district court should have deferred to the tribal court under the tribal exhaustion rule. Because we agree with the district court that tribal exhaustion was not warranted under the circumstances presented here, we proceed to the second threshold issue: whether the Tribal Entities waived their sovereign immunity. We conclude that there was a valid waiver of sovereign immunity. Lastly, therefore, we consider whether the district court abused its discretion in granting the Financial Entities injunctive relief and in denying the same to Godfrey.
The concept of federal court abstention in cases involving Indian tribes, known as the tribal exhaustion rule, "requires litigants, in some instances, to exhaust their remedies in tribal courts before seeking redress in federal courts." Altheimer & Gray, 983 F.2d at 812. It is not, however, "`a jurisdictional prerequisite,' but rather is `a matter of comity.'" Id. at 813 (quoting Iowa Mut. Ins. Co. v. LaPlante, 480 U.S. 9, 16 n. 8, 107 S.Ct. 971, 94 L.Ed.2d 10 (1987)). Relying on our decision in Altheimer & Gray, the district court determined that exhaustion of tribal remedies was not required here. We begin, therefore, with Altheimer & Gray.
In Altheimer & Gray, the Devils Lake Sioux Tribe had created the Sioux Manufacturing Corporation ("SMC") to manufacture and market certain clothing products. The Tribe then negotiated with Medical Supplies & Technology, Inc. ("MST") to manufacture and market latex medical products on the reservation. A letter of intent contemplated that (1) SMC would purchase MST's assets, (2) MST would provide consulting services to SMC, and (3) SMC would pay MST a percentage of its profits. The letter also provided that the Tribe waived all sovereign immunity with respect to contractual disputes, that all of the documents were executed and would be interpreted according to the laws of Illinois, and that all parties agreed to submit to the venue and jurisdiction of the federal and state courts located in the State of Illinois. After the letter of intent was signed, MST began business operations, but the closing of the transaction never took place. MST later ceased operations within the reservation and sued SMC in Illinois state court for breach of contract. MST's law firm, Altheimer & Gray, also filed suit seeking its fees for the negotiations. SMC removed the action to district court and moved for summary
Before us, SMC urged that we affirm the judgment because, among other reasons, Altheimer & Gray had failed to exhaust its tribal court remedies. We determined, however, that tribal exhaustion was not required. First, it was not clear that tribal exhaustion applied in the absence of a first-filed tribal action. See Altheimer & Gray, 983 F.2d at 814. Assuming applicability of that doctrine, however, the exhaustion inquiry was fact sensitive: exhaustion does not apply unless "the issue in dispute is truly a reservation affair." Id. Turning to the facts before us, we observed that, with respect to SMC and Altheimer & Gray,
Id. Although the choice of law provision did not "foreclose application of the tribal exhaustion rule," this fact did distinguish the case then before us from cases in which the Supreme Court had required exhaustion. Id.
"More important []," however, than the presence of a choice of law provision or a first-filed tribal action was the fact that "the application of the tribal exhaustion rule would not serve the policies" that the Supreme Court had articulated in Iowa Mutual Insurance Co., 480 U.S. 9, 107 S.Ct. 971, and National Farmers Union Insurance Cos. v. Crow Tribe of Indians, 471 U.S. 845, 105 S.Ct. 2447, 85 L.Ed.2d 818 (1985). Altheimer & Gray, 983 F.2d at 814-15 (emphasis added). In these cases, "the Supreme Court was concerned with implementing Congress's policy of tribal self-government. The Court feared that `unconditional access to the federal forum would place it in direct competition with the tribal courts, thereby impairing the latter's authority over reservation affairs.'" Id. at 815 (quoting Iowa Mutual Insurance Co., 480 U.S. at 16, 107 S.Ct. 971). This was not the case in Altheimer & Gray, where "the tribal entity wished to avoid characterization of the contract as a reservation affair by actively seeking the federal forum." Id. We noted that,
Id. (emphasis added).
The Tribal Entities maintain that Altheimer & Gray is distinguishable in
We cannot reconcile this argument with our approach in Altheimer & Gray. In that case, we noted that there was a split of authority as to whether exhaustion was required when there was no pending tribal case. Nevertheless, we assumed that the tribal exhaustion doctrine applied in both circumstances—when there was a tribal action pending and when there was not. Assuming the general applicability of the tribal exhaustion rule, therefore, we went on to consider whether tribal exhaustion was appropriate under the facts presented. In doing so, we drew on the Supreme Court's discussions of tribal exhaustion in both Iowa Mutual Insurance Co. and National Farmers Union Ins. Cos.—cases in which there were competing tribal actions. Consequently, our reasoning in Altheimer & Gray is not limited to situations in which there is no competing tribal proceeding.
The Tribal Entities also contend that, unlike in Altheimer & Gray, the present action "raises significant issues of tribal law."
Finally, the Tribal Entities maintain that the Bond Documents do not evince an explicit agreement to submit to the jurisdiction and venue of the Wisconsin courts. We do not believe this is a fair reading of the Bond Documents. Although the documents do not use identical language, the Tribal Agreement and the Specimen Bond both provide:
Alternatively, the Tribal Entities maintain that, assuming Altheimer & Gray governs the present dispute, it requires the Financial Entities to exhaust tribal remedies. According to the Tribal Entities, "the tribal-court action implicates . . . the validity of a fraudulently induced Bond Transaction executed in violation of both tribal and federal law, which, if enforced, will consume the tribal Casino's revenue and cripple the tribal government."
A number of the cases on which the Tribal Entities rely are readily distinguishable.
In sum, we conclude that, consistent with the approach we adopted in Altheimer & Gray, exhaustion of tribal remedies is not required.
The Tribal Entities also maintain that the district court erred in holding that they had waived their sovereign immunity. They assert first that they were fraudulently induced to enter the bond transaction, and, therefore, any waivers contained in the Bond Documents are unenforceable. Second, they maintain that the Bond Documents did not waive their sovereign immunity. Finally, they contend that the documents containing the waivers are unapproved management contracts under the IGRA and, therefore, are not enforceable.
The Tribal Entities first fault the district court for considering the validity of the waivers of sovereign immunity in the Bond Documents without first considering whether the entire bond transaction was the product of fraudulent inducement. Because our analysis of this issue rests on the manner in which the issue of fraud was raised in the district court, we first set forth the procedural history of the Tribal Entities' fraud allegations.
The Financial Entities filed their federal complaint on May 24, 2013, and filed their
The Tribal Entities filed an interlocutory appeal with respect to the denial of their motion to dismiss, which we dismissed for want of jurisdiction on January 13, 2014. On January 14, 2014, the Tribal Entities and Godfrey then requested that the district court "set a new date for the previously scheduled and fully-briefed hearing on plaintiffs' Motion for Preliminary Injunction, to occur as soon as possible after February 21, 2014."
On February 12, 2014, the Tribal Entities filed a counterclaim, answer, and affirmative defenses. Among the defenses raised were that "[t]he Bond Transaction was procured by fraud and the Tribal [Entities] were fraudulently induced to enter into it and therefore should be relieved of any obligation to perform thereunder."
On February 21, 2014, Saybrook moved the "Court in limine to exclude argument and evidence regarding alleged fraud as a defense to a preliminary injunction order."
The court held a status conference on February 28, 2014, to address issues related to the preliminary-injunction hearing and the parties' motions in limine.
Following the preliminary-injunction hearing, the parties filed evidence for the court to consider in making its ruling. The Tribal Entities designated portions of
With this background in mind, we turn to an assessment of the Tribal Entities' fraud-in-the-inducement argument. Specifically, they maintain that the district court erred "[b]y refusing to consider the effect of fraud on the purported waivers."
"District court judges, because of the very nature of the duties and responsibilities accompanying their position possess great authority to manage their caseload." Gonzalez v. Ingersoll Mill. Mach. Co., 133 F.3d 1025, 1030 (7th Cir.1998) (quoting United States v. Reed, 2 F.3d 1441, 1447 (7th Cir.1993)). The Tribal Entities do not maintain that the district court abused its discretion in setting a briefing schedule or requiring the parties to submit proposed findings of fact. Moreover, they do not claim either that the Financial Entities impeded their ability to obtain evidence needed to raise the defense during the course of preliminary-injunction briefing or that the district court did not provide them with adequate time to develop their arguments. We must conclude, therefore, that the district court did not abuse its discretion in refusing to allow the Tribal Entities to expand the factual and legal parameters of the preliminary-injunction hearing.
Because the district court did not abuse its discretion in limiting the presentation of evidence and argument concerning the preliminary injunction, the Tribal Entities are limited to arguing that DeYoung's deposition testimony establishes that the Tribal Entities were fraudulently induced into entering the bond transaction. The evidence, however, does not support such a conclusion.
We have recognized that,
Archdiocese of Milwaukee v. Doe, 743 F.3d 1101, 1105 (7th Cir.2014) (quoting Restatement (Second) of Contracts § 164(1) (1981)). A fraud plaintiff bears the burden of proving these elements by clear and convincing evidence. See Lundin v. Shimanski, 124 Wis.2d 175, 368 N.W.2d 676, 681 (1985).
The Tribal Entities also argue that the Bond Documents relied upon by the district court—the Tribal Resolution and Bond Resolution—do not contain valid waivers of sovereign immunity. Relying on State of Wisconsin v. Baker, 698 F.2d 1323 (7th Cir.1983), the Tribal Entities further maintain that the Tribal and Bond Resolutions only approve waivers in other documents; they do not purport to be independent waivers of sovereign immunity. Finally, even if they constitute valid waivers of sovereign immunity, they are not broad enough to encompass an action by the Financial Entities. We do not find any of these arguments persuasive.
As a preliminary matter, the Tribal Entities' suggestion that the district court believed that only two documents provided unequivocal waivers is incorrect. While noting that "[t]wo individual Bond Documents in particular stand out as providing an unequivocal, independent waiver of the Tribe's sovereign immunity,"
Moreover, Baker does not support the Tribal Entities' assertion that the resolutions are ineffective as waivers of sovereign immunity. In Baker, the defendants, "in their capacity as members of the Band's governing board[,] adopted a resolution authorizing their attorneys of record to waive the Band's sovereign immunity to this suit." Id. at 1331. We held that this "resolution purport[ed] only to delegate to defendants' appellate attorneys the power to waive the Tribe's immunity to this suit" and that, based on the record before us, it did not appear "that defendants' attorneys ever exercised the power delegated to them." Id. Here, in contrast, the Resolutions do not authorize a future action that never occurred. Instead, the Resolutions affirmatively approve and acknowledge actions that already have been taken, namely that the Tribe has "provide[d] a limited waiver of sovereign immunity from suit."
The Tribal Entities also maintain that, assuming the Resolutions can operate as waivers of sovereign immunity, the Resolutions do not waive sovereign immunity as to the Financial Entities. The Tribal Entities argue that when the Resolutions are strictly construed, see Orff v. United States, 545 U.S. 596, 601-02, 125 S.Ct. 2606, 162 L.Ed.2d 544 (2005), they constitute
The language of the Resolutions is not so limited. More than merely establishing a contract with the Trustee, the Bond Resolution acknowledged that the bonds were to be sold to Stifel, approved all of the legal provisions in the Bond Documents, and, provided "more specifically and expressly" that "the Corporation . . . waive[d] its immunity from suit . . . with respect to any dispute or controversy arising out of the Indenture, the Security Agreement, the Bond Placement Agreement, the Bonds, this Bond Resolution and including any amendment or supplement which may be made thereto, or to any transaction in connection therewith."
Finally, the Tribal Entities argue that the waivers of sovereign immunity are unenforceable because the documents in which they appear are unapproved management contracts, which are void under the IGRA. They first note that, under the implementing regulations, "[t]he NICG must approve `any' agreement that `provides for the management of all or part of a gaming operation.' 25 C.F.R. § 502.15."
This argument, however, is foreclosed by our decision in Wells Fargo, 658 F.3d at 701. In that case, after we concluded that the Indenture was void as an unapproved management contract, we turned to the district court's determination that, because the various transactional documents were collateral to the Indenture and because they incorporated by reference the Indenture's terms, "the entire transaction, including all collateral agreements, required the Chairman's approval, and the bonds themselves were also management contracts subject to the Act's approval requirement." Id. We disagreed:
Id. (footnote omitted). Thus, a document that is collateral to a management contract in the sense that is related does not require approval; it is only when that related agreement also provides for "the management of all or part of a gaming operation" that NIGC approval is required.
Alternatively, the Tribal Entities contend that agency practice dictates that we view the Bond Documents collectively. According to the Tribal Entities, had the
"Under the NIGC's analysis," therefore, "even if an agreement is not a management contract, it becomes one if it is intertwined with, and dependent upon, other agreements that do provide for management."
Again, however, we cannot reconcile this approach with our decision in Wells Fargo. In Wells Fargo, we observed that "a document collateral to a management contract is subject to agency approval . . . only if it provides for the management of all or part of a gaming operation." Id. (internal quotation marks omitted). The agency's contrary practice cannot take precedence over the unambiguous language of the regulation.
Finally, the Tribal Entities contend that, even if the court considers the individual documents in isolation, they nevertheless each meet the definition of a management contract. Because each of the Bond Documents is void, the waivers of sovereign immunity contained in those documents also are void. Specifically, the Tribal Entities argue that the Tribal Resolution constitutes an unapproved management contract because it contains a "covenant[] not to replace key management of the Casino Facility without obtaining the requisite consent of the holders of the Bonds,"
In Wells Fargo, a provision of the Indenture prohibited the Corporation from removing or replacing (or permitting the removal or replacement of) key management
Moreover, it was not the "remove and replace" provision in the Indenture, standing alone, that transformed it into a management contract under the IGRA. Rather, it was the numerous provisions for oversight
Apart from the provision not to replace key personnel, the Tribal Entities do not point to any problematic provisions in the Tribal Resolution. Moreover, the Tribal Entities do not point to any problematic provisions in the Bond Resolution that would transform that document into a management contract.
Because we conclude that tribal court exhaustion was not required and that the Tribal Entities waived their sovereign immunity, we can proceed to the substantive issue presented by the Tribal Entities' appeal: whether the district court properly enjoined the tribal court action because the tribal court lacked jurisdiction over the Financial Entities.
In Atkinson Trading Co. v. Shirley, 532 U.S. 645, 121 S.Ct. 1825, 149 L.Ed.2d 889 (2001), the Supreme Court observed that "[t]ribal jurisdiction is limited: For powers not expressly conferred upon them by federal statute or treaty, Indian tribes must rely upon their retained or inherent sovereignty." Id. at 649-50, 121 S.Ct. 1825 (emphasis added); see also Atty's Process & Investigation Servs. v. Sac & Fox Tribe of the Miss. in Iowa, 609 F.3d 927, 934 (8th Cir.2010) ("Where, as here, tribal jurisdiction is not specifically authorized by federal statute or treaty, a tribe's adjudicatory authority must stem from its `retained or inherent sovereignty.'" (emphasis added) (quoting Atkinson Trading Co., 532 U.S. at 649-50, 121 S.Ct. 1825)).
Jackson v. Payday Fin., LLC, 764 F.3d 765, 782 (7th Cir.2014) (parallel citation omitted).
As an initial matter, the Tribal Entities argue that Montana only applies to situations in which tribes attempt to regulate nonmember conduct on non-Indian fee land, as opposed to tribal trust land.
The Tribal Entities' view cannot be squared with the Supreme Court's more recent cases, Nevada v. Hicks, 533 U.S. 353, 121 S.Ct. 2304, 150 L.Ed.2d 398 (2001), and Plains Commerce Bank v. Long Family Land & Cattle Co., 554 U.S. 316, 128 S.Ct. 2709, 171 L.Ed.2d 457 (2008). In Hicks, the Supreme Court considered whether a tribal court had jurisdiction over a warden's allegedly tortious conduct while executing a search warrant on tribe-owned land within the reservation. The Supreme Court began its analysis with the general proposition that "Indian tribes' regulatory authority over nonmembers is governed by the principles set forth in Montana." Hicks, 533 U.S. at 358, 121 S.Ct. 2304. It noted first, that, although "the non-Indian status of the land was central to the analysis in . . . Montana," that was not because "Indian ownership suspends the `general proposition' . . . that `the inherent sovereign powers of an Indian tribe do not extend to the activities of nonmembers of the tribe.'" Id. at 359, 121 S.Ct. 2304. "The ownership status of land," the Court explained, "is only one factor to consider in determining whether regulation of the activities of nonmembers is `necessary to protect tribal self-government or to control internal relations.'" Id. at 360, 121 S.Ct. 2304 (emphasis added).
Moreover, more recently in Plains Commerce Bank, the Supreme Court reiterated that Montana's "general rule restricts tribal authority over nonmember activities taking place on the reservation, and is particularly strong when the nonmember's activity occurs on land owned in fee simple by non-Indians—what we have called `non-Indian fee land.'" 554 U.S. at 328, 128 S.Ct. 2709 (quoting Strate v. A-1 Contractors, 520 U.S. 438, 446, 117 S.Ct. 1404, 137 L.Ed.2d 661 (1997)). Plains Commerce Bank, therefore, leaves no doubt that Montana applies regardless of whether the actions take place on fee or non-fee land.
Looking to the first Montana exception, the Tribal Entities assert that the Financial Entities entered into a consensual relationship with the Tribe and engaged in on-reservation conduct that brings it within the jurisdiction of the tribal court. We made clear in Jackson, however, that Plains Commerce Bank "circumscribed" the already narrow Montana exceptions. Jackson, 764 F.3d at 782. We explained that a tribe's authority to regulate non-member conduct "centers on the land": "`Montana and its progeny permit tribal regulation of nonmember conduct inside the reservation that implicates the tribe's sovereign interests.'" Id. (quoting Plains Commerce Bank, 554 U.S. at 327, 128 S.Ct. 2709).
The Tribal Entities submit that, in evaluating whether the tribal court has jurisdiction over the Financial Entities under the first Montana exception, the court need not limit its consideration to the on-reservation actions of the Financial Entities. This view, however, is at odds with Plains Commerce Bank, in which the Court observed "that the sovereignty that the Indian tribes retain is of a unique and limited character. It centers on the land held by the tribe and on the tribal members within the reservation." 554 U.S. at 327, 128 S.Ct. 2709 (emphasis added) (citations omitted) (internal quotation marks omitted). The actions of nonmembers out-side of the reservation do not implicate the Tribe's sovereignty.
Turning to on-reservation conduct, the Tribal Entities point to "multiple meetings," during which Stifel allegedly "misrepresented material terms of the Bond Transaction."
Finally, the Tribal Entities argue that the tribal court has jurisdiction over the Financial Entities under the second Montana exception. According to the Tribal Entities, the bond transaction imperiled the Tribe's ability to provide services to its members. The Financial Entities' actions, therefore, "threaten[] or ha[ve] some direct effect on the political integrity, the economic security, or the health or welfare of the tribe" and provide a basis for tribal court jurisdiction. Montana, 450 U.S. at 566, 101 S.Ct. 1245.
The Supreme Court discussed the second Montana exception in Strate, 520 U.S. at 458, 117 S.Ct. 1404. The jurisdictional dispute in Strate arose from a vehicle collision between two individuals, Fredericks and Stockert, on a portion of a North Dakota state highway that ran through a reservation. Fredericks was not a member of the tribe, but was the widow of a deceased tribal member and had adult children who were tribal members. Stockert, also a nonmember, was driving a truck belonging to his employer, A-1 Contractors, a non-Indian-owned enterprise, which was under contract to perform landscaping within the reservation. Fredericks filed a personal injury action against Stockert and A-1, and Fredericks's children filed a loss-of-consortium claim in the same lawsuit. The tribal court ruled that it had jurisdiction, and Stockert and A-1 proceeded to federal court, where they sought a declaratory judgment that the tribal court lacked jurisdiction and also sought an injunction against further tribal court proceedings.
Before the Supreme Court, Fredericks asserted that the tribal court had jurisdiction pursuant to Montana's second exception. The Supreme Court disagreed and explained:
Id. at 457-59, 117 S.Ct. 1404 (citations omitted) (emphasis added); see also Plains Commerce Bank, 554 U.S. at 335, 128 S.Ct. 2709 (observing that the regulations that it had approved of under Montana "all flow directly from these limited sovereign interests," namely "tribal governance and internal relations").
Here, the Tribal Entities do not point to any actions by the Financial Entities that threatened the right of tribal members "to make their own laws and be ruled by them." Strate, 520 U.S. at 459, 117 S.Ct. 1404 (internal quotation marks omitted). Instead, they focus on the financial consequences of adhering to freely negotiated commercial transactions. The Tribal Entities essentially maintain that the second Montana exception applies whenever the economic effects of its commercial agreements affect a tribe's ability to provide services to its members. Like the arguments made by Fredericks in Strate, however, if the second exception were so broad, it would swallow the general rule. The only questions raised in the tribal court action are the enforceability of commercial agreements; it does not address any on-reservation actions by the Financial Entities, much less actions that threaten tribal self-rule.
In sum, the district court did not err in concluding that the Tribal Entities waived their sovereign immunity, that tribal exhaustion was not required, and that the Financial Entities had established a likelihood of success on the merits of their claim that the tribal court lacked jurisdiction over them. The district court, therefore, did not abuse its discretion in granting the Financial Entities a preliminary injunction as to the tribal court proceedings.
We turn now to Godfrey's cross appeal. Before the district court, Godfrey conceded, for purposes of the court's consideration of the preliminary injunction only, that it could not fit within either of Montana's exceptions. It argued nevertheless that the tribal court lacked jurisdiction over it based on the waiver provisions in the Bond Documents. Because Godfrey did not contend that "federal law ha[d] divested the tribal court of jurisdiction" over it,
Assuming that it lacked jurisdiction over Godfrey's claim, the district court turned to the question of supplemental jurisdiction under 28 U.S.C. § 1367(a). The district court observed that it was likely to dispose of the Financial Entities' federal claims before a complete trial on the merits. Consequently, the district court believed that "a presumption ar[ose] in favor of relinquishing jurisdiction" over Godfrey's supplemental claims.
Finally, the court noted that, even if it "ignore[d] its jurisdictional concerns,"
"We review questions of subject-matter jurisdiction de novo," see Johnson v. Cypress Hill, 641 F.3d 867, 873 (7th Cir.2011), and we begin our jurisdictional analysis with the Supreme Court's decision in National Farmers Union Insurance Cos., 471 U.S. 845, 105 S.Ct. 2447. In that case, the Court considered the issue of whether a district court had jurisdiction to consider a tribal court's exercise of jurisdiction over a non-Indian's challenge to the tribal court's exercise of jurisdiction. Specifically, a tribal court had entered a default judgment against a state school district after it failed to respond to a complaint brought by a Crow Indian who had been struck by a motorcycle on school property. The school district and its insurer subsequently sought an injunction in federal district court against the tribal court proceedings, and the federal district court granted the injunction. Without reaching the merits of the underlying claim, the Ninth Circuit Court of Appeals reversed on the ground that "the District Court's exercise of jurisdiction could not be supported on any constitutional, statutory, or common-law ground." Id. at 849, 105 S.Ct. 2447.
The Supreme Court reached a different conclusion. It explained that, while at one time Indian tribes had "exercised virtually unlimited power over their own members as well as those who were permitted to join their communities," now "the power of the Federal Government over the Indian tribes is plenary." Id. at 851, 105 S.Ct. 2447. Consequently, "[f]ederal law, implemented by statute, by treaty, by administrative regulations, and by judicial decisions, provides significant protection for the individual, territorial, and political rights of the Indian tribes." Id. The Court, therefore, concluded that "[t]he question whether an Indian tribe retains the power to compel a non-Indian property owner to submit to the civil jurisdiction of a tribal court is one that must be answered by reference to federal law and is a `federal question' under § 1331." Id. at 852, 105 S.Ct. 2447 (emphasis added). Consequently, because the school district and its insurer "contend[ed] that federal law ha[d] divested the Tribe of this aspect of sovereignty, it is federal law on which they rel[ied] as a basis for the asserted right of freedom from Tribal Court interference. They have . . . filed an action `arising under' federal law within the meaning of § 1331." Id. at 852-53, 105 S.Ct. 2447.
The district court believed that "Godfrey's claims do not fall neatly within th[is] language," because Godfrey contends that state contract law, not federal law, "foreclosed [the Tribal Entities] from invoking tribal court jurisdiction."
Following the lead of our sister circuits, therefore, we agree with Godfrey that the district court had subject matter jurisdiction to consider Godfrey's challenge to tribal court jurisdiction, even though that challenge is rooted in the language of the Bond Documents. The district court therefore had subject matter jurisdiction over Godfrey's claim that the tribal court did not have jurisdiction to consider the merits of the claim against it.
Although the district court did not identify a single, defining rule of law that precluded Godfrey from prevailing on the merits, it had an overall unease about granting preliminary injunctive relief: "Godfrey's case falters in too many ways for the court to conclude [that] it has demonstrated the requisite likelihood of success."
In Adams v. Raintree Vacation Exchange, LLC, 702 F.3d 436 (7th Cir.2012), we reiterated that the test for whether a nonparty to a contract can enforce—and be bound by—a forum selection clause "is whether the nonparty is `closely related' to the suit." Id. at 439. Acknowledging that this is a "vague standard," we noted that "it can be decomposed into two reasonably precise principles": "`affiliation' and `mutuality,'" either of which is sufficient to allow a nonparty to invoke a forum selection clause. Id.
The Tribal Entities do not maintain either that Godfrey lacks a close affiliation with them, the bond transaction, or the Bond Documents. Instead, they contend that "affiliation," as we employed that term in Adams, really means a "parent or subsidiary" relationship to the party of a contract, and Godfrey is not related either to the Tribal Entities or to the Financial Entities in this way.
Similarly, with respect to "mutuality," the Tribal Entities do not quarrel with the proposition that Godfrey would have been held to the forum selection clause had it been sued by another party. Instead, the Tribal Entities maintain that "mutuality" is limited to the idea that "secret principal[s]" and "co-conspirator[s]" may "enforce a forum-selection clause of its partner or puppet."
Here, where it is clear that Godfrey was intimately involved in the negotiations leading to, and the documents embodying, the bond transaction, and where the Tribal Entities do not take exception to the conclusion that Godfrey would be bound by the forum selection clauses in the Bond Documents, we believe that the concepts of affiliation and mutuality are met.
Moreover, we believe that this is a particularly appropriate case to allow a nonparty to invoke a forum selection clause. Godfrey was not simply counsel to the Tribal Entities, it was bond counsel to the transaction. As one commentator has observed, "[a]lthough bond counsel is usually retained by the issuer, bond opinions must be completely objective, since they will not serve the function of facilitating the sale of bonds unless they are accepted as reliable in the bond market." 2 James A. Coniglio & M. David Gelfland, State & Federal Government Debt Financing § 16.16 (2d ed.2015). Indeed, some courts have recognized that "an attorney who issues an opinion letter for the purpose of inducing a non-client to purchase municipal notes or bonds can be liable for negligent misrepresentation when the opinion letter contains material misstatements of fact." Mehaffy, Rider, Windholz & Wilson v. Central Bank of Denver, 892 P.2d 230, 233 (Col.1995);
Additionally, as the district court explained:
We do not perceive any jurisdictional or legal impediments to Godfrey's relying on the forum selection clauses in the Bond Documents.
Because the district court determined that Godfrey was not likely to succeed on the merits of its claim, the district court did not reach the other elements of the preliminary injunction analysis, namely whether Godfrey had an adequate remedy at law, whether Godfrey would suffer irreparable harm, whether the balance of harms weighed in favor of an injunction, and whether issuing a preliminary injunction was in the public interest. See, e.g., Ferrell v. U.S. Dep't of Hous. & Urban Dev., 186 F.3d 805, 811 (7th Cir.1999). We therefore remand this action to the district court so that it may complete this analysis and determine whether a preliminary injunction should issue in favor of Godfrey.
We conclude that there were no impediments to the district court's consideration of the Financial Entities' and Godfrey's challenges to tribal court jurisdiction. Our decision in Altheimer & Gray forecloses the Tribal Entities' argument that exhaustion of tribal court remedies was required. Similarly, we conclude that the Bond Documents contain valid and effective waivers of the Tribal Entities' sovereign immunity.
With respect to the merits of the Financial Entities' motion for a preliminary injunction, the district court correctly concluded that the Financial Entities were likely to succeed on the merits of their claim that the tribal court lacked jurisdiction over them. We therefore affirm the judgment of the district court with respect to the grant of preliminary injunctive relief to the Financial Entities.
We reverse, however, the district court's denial of preliminary injunctive relief to Godfrey. The district court erred in concluding that it lacked subject matter jurisdiction over Godfrey, and that error colored its view of Godfrey's likelihood of success on the merits. Godfrey, like the Financial Entities, may invoke the forum selection clauses in the Bond Documents and, consequently, is likely to succeed on its claim that the tribal court lacks jurisdiction over it in this bond-related action. We therefore remand to the district court for further proceedings to determine whether, given the other preliminary-injunction factors, an injunction should issue in favor of Godfrey.
AFFIRMED IN PART; REVERSED AND REMANDED IN PART.