ORDER DENYING PLAINTIFFS' MOTION FOR LEAVE TO AMEND

JOHN A. MENDEZ, District Judge.

This matter is before the Court on Plaintiffs Blue Lake Rancheria ("the Tribe"), Blue Lake Rancheria Economic Development Corporation ("EdCo"), and Mainstay Business Solutions' ("Mainstay") (collectively "Plaintiffs") Motion to Amend (Doc. #66) the Complaint (Doc. #1).1 Defendants Marty Morgenstern, Pam Harris, Jack Budmark, Talbott Smith, Kathy Dunne and Sarah Reece (collectively "Defendants") filed an opposition (Doc. #69). Plaintiffs replied (Doc. #70). For the reasons set forth below, the motion to amend is DENIED.

I. FACTUAL ALLEGATIONS AND SUMMARY OF ARGUMENTS

The Tribe is a federally-recognized Indian tribe. EdCo is a federally-chartered corporation wholly-owned by the Tribe. Mainstay, a division of EdCo, is an employee staffing organization.

On April 26, 2011, Plaintiffs filed this action seeking declaratory and injunctive relief related to the Defendants' enforcement of state taxes in violation of Plaintiffs' tribal sovereignty. Plaintiffs allege that Defendants were engaged in ongoing collection efforts which violated Plaintiffs' federal tribal sovereign immunity, and by those actions, Defendants had unlawfully encumbered tribal lands and other tribal assets.

Plaintiffs' suit concerns the collection of unemployment insurance contribution payments, pursuant to the Federal Unemployment Tax Act, 26 U.S.C. § 3301 et seq. ("FUTA"). FUTA is a joint federal-state program for unemployment insurance. FUTA was amended in 2001 to require states to allow Indian tribes to elect to be a reimbursing employer. This affords any Indian tribe in California the flexibility to finance its liability for unemployment contributions in alternative ways. Cal. Unempl. Ins. Code § 802(a). If a tribe wishes to be a reimbursing employer, it is allowed to reimburse the State for all benefits paid to former employees rather than pay the contributions required of other employers. Id. §§ 802(a), 803(b). Mainstay elected to be a reimbursing employer under FUTA, and held this designation from 2003 to 2010. Mainstay ceased making full contribution payments as required, prompting Defendants to eventually begin the collection activities at issue in this suit.

On June 1, 2011, Plaintiffs filed a Motion for Preliminary Injunction (Doc. #20). On June 15, 2011, Defendants filed a Motion to Dismiss (Doc. #26). On August 11, 2011, the Court granted Plaintiffs' Motion for Preliminary Injunction (Doc. #40) and ordered that Defendants refrain from undertaking any further efforts to collect from Plaintiffs any unemployment contributions. On December 6, 2011, this Court issued an order (Doc. #53) denying Defendants' Motion to Dismiss.

II. OPINION

A. Legal Standard

"Whether leave to amend should be granted is generally determined by considering the following factors: (1) undue delay; (2) bad faith; (3) futility of amendment; and (4) prejudice to the opposing party." N. Slope Borough v. Rogstad (In re Rogstad), 126 F.3d 1224, 1228 (9th Cir. 1997). In the absence of any of the preceding factors, leave to amend should be freely granted. See Gabrielson v. Montgomery Ward & Co., 785 F.2d 762, 765 (9th Cir. 1986).

Defendants' arguments in opposition concern the futility of Plaintiffs' proposed amendment. Futility alone can justify the denial of a motion to amend. Johnson v. Buckley, 356 F.3d 1067, 1077 (9th Cir. 2004); Davis v. Powell, 901 F.Supp.2d 1196, 1211 (S.D. Cal. 2012).

B. Discussion

Plaintiffs seek leave pursuant to Federal Rule of Civil Procedure 15(a)(2) to amend the Complaint by adding a claim under 42 U.S.C. § 1983 ("§ 1983") for injunctive relief for violations of the Tribe and EdCo's due process rights. MTA at p. 2. Defendants do not oppose amendment based on bad faith, undue delay or prejudice. However, they argue the Court should deny the motion because the proposed amendment is futile. Opp. at pp. 3-4. Defendants' contend that the Tribe does not qualify as a "person" under § 1983 for the purposes of this claim.

The Supreme Court expressly addressed whether a Native American tribe qualifies as a "person" for the purpose of bringing suit pursuant to § 1983 in Inyo County, California v. Paiute-Shoshone Indians of the Bishop Community of the Bishop Colony, 538 U.S. 701, 712 (2003) ("Inyo County"). In Inyo County, the Court found a tribe may not sue under § 1983 to vindicate its sovereign rights. Id. It reasoned that § 1983 was "designed to secure private rights against government encroachment . . . not to advance a sovereign's prerogative. . . ." Id.

Id. at 711. The Supreme Court reasoned that the plaintiff's claim for relief was based on rights it possessed only as a result of its status as a sovereign and concluded that it therefore could not bring the § 1983 claim. Id. at 711-12.

The Ninth Circuit addressed the issue in Skokomish Indian Tribe v. United States, 410 F.3d 506, 514 (9th Cir. 2005) ("Skokomish"). In Skokomish, the Court found that the plaintiff tribe was not suing in any capacity resembling a private person. Id. Rather, it sought to enforce rights granted to it as a function of its status as a sovereign, specifically fishing rights obtained through a treaty entered into with the United States. Id. at 514-15. The Court also found that the individual tribe members did not have cognizable § 1983 claims because they sought to vindicate communal as opposed to individual rights. Id. at 515-16.

Here, Plaintiffs were specially granted the right to become a reimbursable employer as a function of their status as a federally-recognized tribe pursuant to FUTA and the California Unemployment Insurance Code. See 26 U.S.C. §§ 3306(c)(7) & (u), 3309 (a)(2) & (d); Cal. Unemp. Ins. Code §§ 802, 803. It was as a result of this status that they incurred the tax debt underlying the present matter. Although Plaintiffs rightly argue that a sovereign may assert claims under § 1983 in a capacity which resembles a private person, the proposed cause of action arises only as a function of rights granted to Plaintiffs as a sovereign entity. Similar to the fishing rights afforded to the plaintiffs in Skokomish through a federal treaty with the United States, Plaintiffs were only given the right to become a reimbursable employer and establish this financial relationship with the State of California as a result of specific provisions in a federal statute, FUTA, which affords Indian tribes special rights regarding the financing of their unemployment liability.

Plaintiffs are not seeking to protect individual rights from government encroachment, but to protect the communal interests of the Tribe in a financial relationship with the State of California. This special relationship is the direct result of Plaintiffs exercising their "prerogative" to become a reimbursable employer, a choice afforded to them as a federally-recognized Indian tribe. See Inyo County, 538 U.S. at 712. Accordingly, the Court DENIES Plaintiffs' Motion to Amend the Complaint.

III. ORDER

For the reasons set forth above, Plaintiffs' motion to amend is DENIED.

IT IS SO ORDERED.