J Enters., Inc. v. Jantzen

248 Ariz. 98

458 P.3d 102

HWAL’BAY BA: J ENTERPRISES, INC., Petitioner,

v. Honorable Lee F. JANTZEN, Judge of the Superior Court of the State of Arizona, IN AND FOR the COUNTY OF MOHAVE, Respondent Judge,andSara and William Fox, Real Parties in Interest.

No. CV-19-0123-PR

Supreme Court of Arizona.

Filed February 25, 2020

D. Samuel Coffman (argued), Mitesh V. Patel, Vail C. Cloar, Dickinson Wright PLLC, Phoenix; Verrin T. Kewenvoyouma, Kewenvoyouma Law, PLLC, Tempe, Attorneys for Hwal’Bay Ba: J Enterprises, Inc.

David L. Abney (argued), Ahwatukee Legal Office, P.C., Phoenix; John P. Torgenson, Jon T. Drago, Torgenson Law, Phoenix, Attorneys for Sara and William Fox

William A. Nebeker, John M. Sticht, Koeller, Nebeker, Carlson & Haluck LLP, Phoenix, Attorneys for Amicus Curiae Grand Canyon Custom Tours, Inc.

Doreen N. McPaul, Attorney General, Navajo Nation Department of Justice, Window Rock; Susan B. Montgomery, Jay Tomkus, Montgomery & Interpreter, PLC, Phoenix; Sam Hirsch, Jenner & Block LLP, Washington, DC, Attorneys for Amici Curiae The National Congress of American Indians Fund, The Inter Tribal Association of Arizona, Inc., and The Navajo Nation

VICE CHIEF JUSTICE TIMMER authored the Opinion of the Court, in which CHIEF JUSTICE BRUTINEL and JUSTICES BOLICK, GOULD, LOPEZ, BEENE and MONTGOMERY joined. JUSTICE BOLICK filed a concurring opinion.

VICE CHIEF JUSTICE TIMMER, Opinion of the Court:

¶1 An Indian tribe’s "subordinate economic organization" serves as an "arm of the tribe" and therefore shares its sovereign immunity. This tort case affords us an opportunity to identify factors courts should examine to decide whether a tribal entity serves in that capacity. After doing so, we conclude the tribal entity here did not prove it is a subordinate economic organization entitled to share the tribe’s immunity, and the superior court therefore did not err by denying the entity’s motion to dismiss.

BACKGROUND

¶2 In April 2016, Sara Fox was seriously injured while white-water rafting on the Colorado River through the Grand Canyon. Arizona holds title to the lands beneath the river, and Fox therefore suffered her injuries on state land. See Morgan v. Colo. River Indian Tribe , 103 Ariz. 425, 427, 443 P.2d 421, 423 (1968). The rafting boat was operated by employees of Hwal’Bay Ba: J Enterprises, Inc., which does business under the trade name Grand Canyon Resort Corporation ("GCRC"). GCRC is a tribal corporation whose sole shareholder is the Hualapai Indian Tribe (the "Tribe"), a federally recognized Indian tribe. The Hualapai Reservation is contiguous to parts of the Colorado River.

¶3 Fox and her husband filed suit against GCRC, the Tribe, and unidentified "John Does" seeking compensatory and punitive damages. The Foxes also sued Grand Canyon Custom Tours, Inc. ("GCCT"), an Arizona corporation, which sold them the rafting trip in an online transaction. GCCT is not affiliated with the Tribe but served as GCRC’s booking agent. Foxes’ claims against GCCT are not before us.

¶4 The Tribe and GCRC moved to dismiss the complaint pursuant to Rules 12(b)(2) and (5), Arizona Rules of Civil Procedure, arguing they possessed sovereign immunity from suit, which precluded the court from exercising personal jurisdiction, and they were not properly served. After briefing and argument, the court found that the Foxes had properly served both defendants. It dismissed the complaint against the Tribe on sovereign immunity grounds but declined to dismiss the complaint against GCRC, finding it not protected by sovereign immunity. The court denied GCRC’s request to reconsider that decision.

¶5 GCRC unsuccessfully petitioned the court of appeals for special action relief from the superior court’s partial denial of the motion to dismiss. We granted review to decide the circumstances under which a tribal entity enjoys sovereign immunity as a "subordinate economic organization" of the tribe, a recurring issue of statewide importance.

DISCUSSION

I. General principles

A. Sovereign immunity

¶6 Indian tribes, as "domestic dependent nations," are immune from lawsuits in state and federal court, unless that immunity is waived by the tribe or abrogated by Congress. Kiowa Tribe v. Mfg. Techs., Inc. , 523 U.S. 751, 754, 118 S.Ct. 1700, 140 L.Ed.2d 981 (1998) ; Okla. Tax Comm’n v. Citizen Band Potawatomi Indian Tribe , 498 U.S. 505, 509, 111 S.Ct. 905, 112 L.Ed.2d 1112 (1991). Sovereign immunity applies to a tribe’s commercial and government activities, conducted both on and off the reservation. See Kiowa , 523 U.S. at 760, 118 S.Ct. 1700. Sovereign immunity does not shield individual tribal employees sued in their personal capacities, even if the tribe is obligated to indemnify them. See Lewis v. Clarke , ––– U.S. ––––, 137 S. Ct. 1285, 1288, 197 L.Ed.2d 631 (2017).

B. Subordinate economic organizations

¶7 Sovereign immunity also applies to a subordinate economic organization, which is considered an arm of the tribe. White Mountain Apache Indian Tribe v. Shelley , 107 Ariz. 4, 7, 480 P.2d 654, 657 (1971) ; see also Inyo Cty. v. Paiute-Shoshone Indians of the Bishop Cmty. of the Bishop Colony , 538 U.S. 701, 705 n.1, 123 S.Ct. 1887, 155 L.Ed.2d 933 (2003) ("The United States maintains, and the County does not dispute, that the Corporation is an ‘arm’ of the Tribe for sovereign immunity purposes."). Recognizing immunity for subordinate economic organizations permits tribes to conduct commercial activities through subordinate governmental agencies without unintentionally waiving sovereign immunity. See Dixon v. Picopa Constr. Co. , 160 Ariz. 251, 256, 772 P.2d 1104, 1109 (1989) ; see also Shelley , 107 Ariz. at 7, 480 P.2d at 657 (concluding "it would defeat the purpose of Congress in granting immunity to Indian Tribes" if subordinate economic organizations of a tribe were not cloaked with sovereign immunity).

¶8 The issue before us is whether GCRC is immune from suit as a subordinate economic organization of the Tribe, or, as the superior court ruled, has no immunity because it is an entity separate and distinct from the Tribe. GCRC bears the burden of demonstrating its immunity by a preponderance of the evidence. See Williams v. Big Picture Loans, LLC , 929 F.3d 170, 176 (4th Cir. 2019) ; People v. Miami Nation Enters. , 211 Cal.Rptr.3d 837, 386 P.3d 357, 365 (2016). We review the superior court’s denial of GCRC’s motion to dismiss for an abuse of discretion, although we decide the legal issues underlying that ruling de novo. See Leach v. Reagan , 245 Ariz. 430, 441 ¶ 53, 430 P.3d 1241, 1252 (2018) ; Nataros v. Superior Court , 113 Ariz. 498, 499-500, 557 P.2d 1055, 1056-1057 (1976).

¶9 We have not established a test to identify subordinate economic organizations, and no nationwide consensus exists on the appropriate inquiry. See Miami Nation Enters. , 211 Cal.Rptr.3d 837, 386 P.3d at 366 ("In the absence of guidance from the high court, state and federal courts have articulated a variety of arm-of-the-tribe tests."). Generally, courts outside Arizona have relied on one or more factors, such as examining an entity’s creation, purpose, ownership, governance, and financial relationship with the tribe and the tribe’s intent concerning the applicability of sovereign immunity. See id. , 211 Cal.Rptr.3d 837, 386 P.3d at 366–67 (summarizing approaches taken by state and federal courts). In adopting the appropriate framework for deciding whether an entity is a subordinate economic organization and thus an arm of the tribe, we are guided by prior Arizona cases, authorities outside our state, and the purposes underlying sovereign immunity for Indian tribes.

¶10 This Court first addressed subordinate economic entities in Shelley , which concerned a breach-of-contract suit filed in superior court against the Fort Apache Timber Company ("FATCO"). The White Mountain Apache Indian Tribe created FATCO as an unincorporated entity. Shelley , 107 Ariz. at 7, 480 P.2d at 657. Nevertheless, the superior court ruled FATCO was either a corporation by estoppel or a de facto corporation, making it a separate legal entity not entitled to share the tribe’s immunity. Id. at 5, 480 P.2d at 655.

¶11 This Court reversed. Id. at 7–8, 480 P.2d at 657–658. We examined FATCO’s relationship with the tribe to determine whether FATCO shared the tribe’s sovereign immunity. Id. at 5–6, 480 P.2d at 655–656. The Court initially noted that the tribal constitution authorized the tribe to create FATCO for economic purposes. Id. It also relied on FATCO’s plan of operation, which provided that FATCO was created to serve the economic and employment interests of the tribe and its members, including business training, and authorized the tribe to establish qualifications for board members, appoint and suspend members, and set member salaries. Id. at 6, 480 P.2d at 656. The plan also stated that the White Mountain Apache owned FATCO, all FATCO property was titled in the tribe’s name, and all purchases had to be made through the tribal purchasing agent and in compliance with tribal policies. Id. FATCO’s board of directors was authorized to act "for and on behalf of" the tribe in all phases of the business. Id. Based on these facts, the Court concluded FATCO was "part of the tribe" and thus entitled to share its sovereign immunity. Id. at 7–8, 480 P.2d at 657–658.

¶12 In S. Unique, Ltd. v. Gila River Pima-Maricopa Indian Community , 138 Ariz. 378, 674 P.2d 1376 (App. 1983), the court of appeals addressed whether sovereign immunity barred a breach-of-contract claim against Gila River Farms ("GRF"), an unincorporated entity. Resolution of the dispute depended on whether GRF was created and controlled by the Gila River Indian Community (the "Community"), which was organized for governmental purposes under section 16 of the Indian Reorganization (Wheeler-Howard) Act, 25 U.S.C. § 5123, or by the Gila River Pima-Maricopa Indian Community (the "Indian Corporation"), which was incorporated for business or commercial...