Emp'rs Mut. Cas. Co. v. Branch

381 F.Supp.3d 1144

EMPLOYERS MUTUAL CASUALTY COMPANY, Plaintiff,

v.Ethel B. BRANCH, et al., Defendants.

No. CV-18-08110-PCT-DWL

United States District Court, D. Arizona.

Signed April 3, 2019

Filed April 4, 2019

Daniel William McCarthy, Raymond Greer & Sassaman PC, Phoenix, AZ, Michael John Raymond, Raymond Greer & McCarthy PC, Scottsdale, AZ, for Plaintiff.

Colin Wittman Bradley, Paul Wesley Spruhan, Navajo Nation Department of Justice, Window Rock, AZ, for Defendants.

ORDER

Dominic W. Lanza, United States District Judge

INTRODUCTION

This case involves an attempt by a tribal court to assert jurisdiction over a party that never set foot within the tribe's reservation, never contracted with any tribal members or organizations, and never expressly directed any activity within the reservation's confines.

Employers Mutual Casualty Company ("EMC") is an Iowa-based insurance company. In 2004, EMC sold commercial general liability policies to Service Station Equipment and Sales, Inc. ("SSES") and Milam Building Associates, Inc. ("Milam"). Neither company has any tribal affiliation.

While these insurance policies were in place, SSES and Milam were each hired to perform certain work on a gas station in Chinle, Arizona. This gas station was situated on tribally-owned land within the Navajo Nation reservation. In March 2005, an employee of a subcontractor that had been hired by Milam accidentally breached a fuel line. This breach, which went undetected for five months, caused over 15,000 gallons of gasoline to leak into the ground. In response, the Navajo Nation sued an array of parties, including SSES, Milam, and EMC, in Navajo tribal court. EMC, in turn, moved to dismiss on the ground that it wasn't subject to tribal jurisdiction. After the tribal courts rejected this argument, EMC filed this action in federal court seeking declaratory and injunctive relief.

As explained below, the Court agrees with EMC that it isn't subject to tribal jurisdiction. The Supreme Court has never held that a tribal court has jurisdiction over a non-member, and although the Ninth Circuit has issued several decisions recognizing (or noting the possibility of) such jurisdiction, those cases have almost exclusively involved instances where a non-member was physically present on tribal land and thereafter engaged in the conduct giving rise to liability. Moreover, to the extent the Ninth Circuit has suggested an insurance company may be sued in tribal court despite the absence of any physical presence on tribal land, its decisions have been limited to circumstances where the policyholder was a tribal member and the insurance company engaged in conduct specifically directed toward the reservation. No court has ever recognized tribal jurisdiction under the circumstances presented here, where an insurance company simply sold a policy to a non-tribal member. The Court thus concludes this case doesn't satisfy either of the jurisdictional tests recognized by the Ninth Circuit: (1) EMC isn't subject to jurisdiction under the "right to exclude" test because EMC has never done anything to enter tribal land (and thus can't be excluded), and (2) neither of the exceptions recognized in Montana v. United States , 450 U.S. 544, 101 S.Ct. 1245, 67 L.Ed.2d 493 (1981), is applicable.

BACKGROUND

A. Underlying Facts

The following facts are derived from the "Stipulated Facts re Subject Matter Jurisdiction As To Claims Against Employers Mutual and Zurich American" that the parties filed during the tribal court proceedings. (Doc. 1-2 at 93-97.)¹

This case concerns a parcel of land in Chinle, Arizona that is owned by the Navajo Nation and located within the Navajo Nation reservation. (Id. ¶¶ 1, 5.) In approximately 1955, the Navajo Nation leased the parcel to several tribal members, who thereafter began operating a gas station on the site. (Id. ¶ 6.) In 1997, these tribal members entered into a sublease with Pic-N-Run, a company based in Flagstaff, Arizona, to operate the gas station. (Id. ¶ 7.)

Until 2004, fuel was stored at the site in three underground storage tanks ("USTs"). (Id. ¶ 12.) At some point, Pic-N-Run decided to replace the USTs with above-ground petroleum storage tank systems ("ASTs"). (Id. ) Pic-N-Run hired SSES and/or another company to assist with the UST-to-AST conversion and separately hired Milam to perform some other renovation work. (Id. ¶¶ 11-12.)

At the time they performed this work, both SSES and Milam were covered by commercial general liability policies issued by EMC. (Id. ¶¶ 3, 10, 12.) Neither company has any tribal affiliation. SSES is "a non-Indian Arizona corporation whose officer is ... a non-Indian individual" and Milam is "a non-Indian Texas corporation whose officers are ... both non-Indians." (Id. ¶ 3.) Additionally, EMC is not "a member or member entity of the Navajo Nation," "does not have a contractual relationship with the Navajo Nation," and issued both of the relevant insurance policies from locations (Show Low, Arizona and Flagstaff, Arizona) that are not within the Navajo Nation reservation. (Id. ¶¶ 2, 3, 10, 12.)

In March 2005, an employee of a subcontractor that had been hired by Milam accidentally breached a fuel line. (Id. ¶¶ 12, 13.) This breach, which went undetected for five months, caused over 15,000 gallons of gasoline to leak into the ground. (Id. ¶ 13.) During a subsequent investigation, it was determined that multiple other gasoline leaks had occurred on the site "from the mid-1940s to the mid-1980s and between 1974 and 1978." (Id. ¶ 16.)

In August 2009, the United States Environmental Protection Agency issued an administrative order (the "EPA Order") under what's commonly known as the Resource Conservation Recovery Act ("RCRA"). (Id. ¶ 17.) The EPA Order was issued against various potentially responsible parties ("PRPs"), including Milam's officers, the tribal members who had subleased the land to Pic-N-Run, and Pic-N-Run. (Id. ) SSES was not subject to the EPA Order. (Id. ) Additionally, no insurance companies were subject to the EPA Order. (Id. )

B. Procedural History

In November 2013, the Navajo Nation brought an action in Navajo tribal court to recover monetary damages and "nályééh" arising from the gas leak. (Id. ¶ 1; see also Doc. 1-2 at 61-80 [tribal court complaint].)² The defendants named in the tribal action included, among others, Milam, SES, and EMC. (Id. )

In January 2014, EMC filed a motion to dismiss based on a lack of subject matter jurisdiction and standing. (Doc. 1-2 at 82-91.)

In February 2018—more than four years later—the tribal court issued an order denying the motion. (Id. at 103-118.)

On March 9, 2018, EMC filed a petition for a writ of prohibition with the Navajo Supreme Court. (Id. at 120-139.)

On March 25, 2018, the Navajo Supreme Court issued an order denying the petition. (Id. at 141-42.)

On May 25, 2018, EMC filed its complaint in this matter, which seeks declaratory and injunctive relief. (Doc. 1.) Afterward, the parties filed cross-motions for summary judgment. (Docs. 15, 22.)

DISCUSSION

I. Jurisdiction

This Court has jurisdiction under 28 U.S.C. § 1331 to determine whether the Navajo tribal courts properly asserted jurisdiction over EMC. Nat'l Farmers Union Ins. Cos. v. Crow Tribe of Indians , 471 U.S. 845, 853, 105 S.Ct. 2447, 85 L.Ed.2d 818 (1985) ("The District Court correctly concluded that a federal court may determine under § 1331 whether a tribal court has exceeded the lawful limits of its jurisdiction.").

Additionally, this case does not present any of the exhaustion/comity issues that are often present in cases addressing questions of tribal jurisdiction. The rule is that "[a] tribal adjudicative body generally must have the first opportunity to evaluate its jurisdiction over a matter pending before it" and that, as a matter of comity, federal courts therefore may entertain unexhausted jurisdiction claims only in certain narrow circumstances.

Window Rock Unified Sch. Dist. v. Reeves , 861 F.3d 894, 897-98 (9th Cir. 2017). Here, EMC satisfied the exhaustion requirement by unsuccessfully seeking a writ of prohibition from the Navajo Supreme Court after the Navajo trial court denied its motion to dismiss. Ford Motor Co. v. Todecheene , 488 F.3d 1215, 1217 (9th Cir. 2007) ("Ford will be deemed to have exhausted its tribal remedies once the Navajo Nation Supreme Court either resolves the jurisdictional issue or denies a petition for discretionary interlocutory review pursuant to Navajo Nation Code tit. 7, § 303....).

II. Standard of Review

"The standard of review for an Indian tribal court decision deciding jurisdictional issues is de novo on questions of federal law and clearly erroneous for factual questions. Questions about tribal jurisdiction over non-Indians is an issue of federal law reviewed de novo." Big Horn Cty. Elec. Co-op., Inc. v. Adams , 219 F.3d 944, 949 (9th Cir. 2000) (citation omitted). The Ninth Circuit has noted that "the district court's review is akin to appellate review of the tribal court record." Water Wheel Camp Recreational Area, Inc. v. LaRance , 642 F.3d 802, 817 n.9 (9th Cir. 2011). Thus, the district court cannot rely on evidence that "was not before the tribal court." Id.

III. Analysis

The Ninth Circuit "has long recognized two distinct frameworks for determining whether a tribe has jurisdiction over a case involving a non-tribal-member defendant: (1) the right to exclude, which generally applies to nonmember conduct on tribal land; and (2) the exceptions articulated in Montana v. United States , [450 U.S. 544, 101 S.Ct. 1245, 67 L.Ed.2d 493 (1981) ] ... which generally apply to nonmember conduct on non-tribal land." Window Rock, 861 F.3d at 898. Moreover, in Knighton v. Cedarville Rancheria of N. Paiute Indians , 918 F.3d 660 (9th Cir. 2019), the Ninth Circuit recently clarified that when, as here, a tribal court seeks to assert jurisdiction over a party based on events that allegedly occurred on tribally-owned land within the reservation, both frameworks are...