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The Yavapai-Apache Nation v. Iipay Nation of Santa Ysabel

November 29, 2011

THE YAVAPAI-APACHE NATION, PLAINTIFF AND APPELLANT,
v.
IIPAY NATION OF SANTA YSABEL, DEFENDANT AND RESPONDENT.



APPEAL from an order of the Superior Court of San Diego County, Randa Trapp, Judge. Reversed. (Super. Ct. No. 37-2010-00068711- CU-BC-EC)

The opinion of the court was delivered by: Huffman, J.

CERTIFIED FOR PUBLICATION

Plaintiff and appellant the Yavapai-Apache Nation (YAN) appeals from the trial court's order granting the motion to quash service of summons filed by defendant and respondent Iipay Nation of Santa Ysabel (previously known as the Santa Ysabel Band of Diegueno Indians; "Nation"). YAN's breach of contract action arose from alleged breaches by Nation of obligations contained in several related documents, a multimillion dollar loan agreement that has been amended and restated numerous times, and that is accompanied by YAN's written loan guaranty agreement of Nation's performance of the loan agreement, also amended and restated numerous times. YAN's complaint alleges that the documents amending the loan agreement, in particular the fourth amendment, signed by Nation's tribal chairman on its behalf under a legislative authorization by Nation to engage in such a transaction, included valid waivers of tribal sovereign immunity that allowed dispute resolution in the California courts.

In response to the service of this California complaint, Nation brought its motion to quash service of summons on the ground of tribal sovereign immunity. Nation argued that no effective waiver of sovereign immunity was created by the fourth amendment to the loan agreements, because the chairman was given no authority to enter into such an additional waiver on behalf of Nation. According to Nation, all previous dealings among the parties included the enactment by Nation of accompanying legislation creating specific express, limited waivers of immunity for each portion of the transactions. Nation argued to the trial court that the only legislation concerning the fourth amendment, giving authority to the tribal chairman to act on its behalf, was more limited in nature, such that the fourth amendment loan agreement document could not have effectively waived the tribal immunity of Nation.

The record also shows that around the same time that YAN sued Nation for breach of contract and common counts in this action, Nation sued YAN in the Arizona courts, alleging breach of contract, breach of fiduciary duties, and other theories arising out of the accompanying loan guaranty agreement and its related agreements. Nation further argued in the motion to quash that even if the fourth amendment contained a valid contractual immunity waiver, the waiver did not cover the controversies that were related to the loan guaranty, which were being tried elsewhere, in Arizona. The parties confirm in their briefs on appeal that sovereign immunity issues, like these, are currently being litigated in that Arizona action. Nation's motion was granted.

On appeal, YAN challenges the order quashing service, contending that with regard to the loan agreement disputes and the proper interpretation of the fourth amendment, the trial court failed to recognize that YAN carried its burden to prove, by a preponderance of the evidence, that California jurisdiction exists under the fourth amendment for the disputes about the loan agreement. (Lawrence v. Nation Valley Ranch Resort & Casino (2007) 153 Cal.App.4th 1364, 1369 (Lawrence).) Regarding the loan agreement disputes, YAN argues that Nation's motion to quash merely brought forward evidence to show that its "custom and practice" was to enact legislation to create immunity waivers to accompany its contractual transactions, as was done previously in these transactions, but that no such legislation was expressly required by any authority shown to exist by any admissible evidence (such as Nation's tribal constitution). YAN therefore contends that the contractual waiver signed by the chairman, in the course of his duties in entering into the fourth amendment to the loan agreement, was a fully authorized waiver of immunity.

Although YAN's complaint seeks relief in damages under both the loan agreement and the loan guaranty agreement, YAN now represents on appeal that it does not seek California litigation of issues arising from the loan guaranty agreement, but intends to invoke jurisdiction in YAN's tribal courts for all relief on issues arising from the loan guaranty.

Nation responds to YAN's appeal by citing to examples of legislation it enacted during prior phases of the parties' contractual arrangements, and arguing that the absence of a similar express authorization, related to the waiver in the fourth amendment loan agreement document, undermines any apparent authority of its chairman to waive Nation's sovereign immunity, when he signed the amendment. Nation points out that the fourth amendment text substitutes new language for the previous versions of the loan agreement's article for choice of law and dispute resolution methods and forums, and Nation argues that such a change was unauthorized by the immediately preceding tribal legislative action, and that the loan guaranty tribal court procedures apply to the loan agreement as well.

Based on the parties' course of dealing throughout the loan agreement transactions, in which Nation expressly and irrevocably waived tribal sovereign immunity and allowed court resolution of disputes in those courts having subject matter jurisdiction of any loan agreement problems, we conclude the trial court erred in granting the motion to quash. In any reading of the complaint, together with its exhibits and other submitted documents, Nation cannot properly invoke sovereign immunity to avoid the fourth amendment terms that allow California jurisdiction to be exercised. Nation already irrevocably waived such immunity in the earlier versions of the loan agreement, which the fourth amendment expressly ratified and affirmed, and Nation did not retract its actions. Regardless of any related loan guaranty litigation elsewhere, this record discloses that the amended loan agreement terms permit this action to proceed in California, and we reverse the order that quashed service of summons.

I

GENERAL INTRODUCTION TO RECORD

The issues on appeal primarily concern the existence of California jurisdiction over actions based on the loan agreement and its amendments, as opposed to the separate loan guaranty agreement. However, many of the related legislative authorizations relied on by the parties reference both the loan agreement and the guaranty, and thus the issues overlap to some extent. It is important to note that the trial court's ruling made a finding that the tribal legislation that authorized the waivers "consented to suit according to the terms of the tribal dispute resolution process in YAN's Tribal Court." In its opening brief, YAN contends that the trial court appears to have confused the two agreements (loan agreement and the loan guaranty agreement), but YAN agrees that the substance of the ruling was that the fourth amendment to the loan agreement did not contain an enforceable waiver of sovereign immunity and consent to jurisdiction in California state court.

To analyze the waiver issues properly before us, it is necessary for us to describe the two agreements separately, and to set forth the legislative authorization for them separately, even though Nation's legislative resolutions cover both agreements. It is interesting to note that in this case, Nation's legislative acts preceded the execution of each of the agreements that it authorized. This is not a case in which an executed document, with set terms, was later approved or confirmed by later legislation, but rather, a case of prospective legislative authorization of transactions to be carried out as directed by Nation. (See Smith v. Hopland Band of Pomo Indians (2002) 95 Cal.App.4th 1, 5-9 (Smith).)

Accordingly, we will take note of the respective dates of the enactment of the legislative resolutions, and the subsequent amendment of the loan documents, in analyzing the scope of Nation's legislative and contractual authorization for waivers of immunity. The parties dispute the adequacy of the proof presented, and the burden of proof on the motion, concerning the existence of Nation's "customs and traditions" for waiving immunity, as repeatedly referred to in the legislation. Specifically, evidence about the tribal constitution was excluded, and the parties have not cited to any tribal rules or regulation as to the amount of time that may elapse between a tribal legislative resolution, allowing a waiver of sovereign immunity, and the execution of the contractual agreements agreeing to waiver of immunity. Nation is contending that only a few weeks normally elapsed between the legislative authorization of a waiver of immunity, and the later execution of contractual agreements implementing such a limited waiver. On the other hand, YAN argues that it made no difference that a few months elapsed between the October 2008 legislative authorization for the fourth amendment to the loan documents, and the execution of the fourth amendment in January 2009.

Before analyzing the documents in detail to delineate the scope of any allowable waivers of sovereign immunity in the loan agreement and its amendments, and the interpretation of the tribal legislation that authorized any such waivers, we next describe this series of related transactions.

II

BACKGROUND: LEGISLATION AND TRANSACTIONS

A. YAN and Nation Enter Into Loan Agreements and First through Third Amendments

In YAN's complaint, it alleges that it is the successor in interest to one of the parties to a loan agreement entered into in April 2005, in which Nation borrowed money from nonparties JPMorgan Chase Bank and another bank (the Banks), to finance casino construction by Nation (the loan agreement). Exhibits to the pleading show that this loan agreement was amended and restated numerous times, and is secured by credit documents including promissory notes (sometimes collectively the credit documents). In December 2005, the first amendment was made. Subsequently, the parties entered into the second and third amendments to the loan agreement.

At the same times of those loan transactions, YAN and Nation entered into separate loan guaranty agreements, to guarantee the performance of Nation on the loan agreement and to loan it money (see part IID, post). Different types of dispute resolution provisions are set forth for each, giving rise to this dispute.

In its original version and in its first, second and third amendments (dated from 2005-2007), the loan agreement includes as a dispute resolution provision its article XV, setting forth provisions for an Arizona choice of law, and waiver of jury trial in favor of court trial. As the borrower, Nation waived its sovereign immunity from any suit or proceeding in any forum, including any confirmation of arbitration awards with respect to the agreement and the transactions. Nation consented to the jurisdiction of the courts of the state of Arizona, United States courts, "and the courts of any other state that may have jurisdiction over the subject matter, over any such action, and over Borrower." In the event that the lenders (Banks) require arbitration, or if the Arizona courts or the United States courts decline to hear the action, an arbitration clause set forth can then be invoked, and judgment may be entered on any arbitration award "in any court of competent jurisdiction," including Nation's courts.

B. Related Legislation is Enacted for Loan Agreements and First through Third Amendments

Before the loan agreement, the loan guaranty, and their first, second (and third amendment as to the loan agreement) were signed, Nation enacted legislative resolutions to authorize their enactment and amendment. These lengthy legislative resolutions each include separate portions addressing the loan agreement and the loan guaranty, and set forth different dispute resolution provisions for each. (See pt. IID, post.) It is now necessary to outline the format and coverage of those legislative resolutions, regarding their several limited waivers of sovereign immunity for the purpose of Nation's consent to suit, when it entered into both the loan agreement and the loan guaranty and their amendments.

For the original restated version (agreements dated April 22, 2005 & Dec. 1, 2005), Nation enacted General Council Resolutions Nos. 05-09 and 05-64 (dated Feb. 13, 2005 & Nov. 6, 2005). They referred to the loan agreement for the construction of the casino, and set forth an amended budget for a cost of up to $33.8 million (also stating that YAN agreed to increase its guaranty amount on certain conditions, including an amended and restated loan and guaranty obligation; see pt. IID, post). As to the loan agreement, the resolutions set forth the terms of the new budget, and state that Nation agrees to a limited, irrevocable waiver of its sovereign immunity from any action brought by YAN related solely to these transactions. This waiver allows for binding arbitration and judicial enforcement of any arbitration award by any court of competent jurisdiction, including the courts of the United States, the state of Arizona, and other courts of competent jurisdiction for the enforcement of any binding arbitration award.*fn1

For the approval of the first amendment to the loan agreement (dated Dec. 28, 2006), Nation enacted General Council Resolution, No. 06-44, also dated December 28, 2006. It confirms that the tribal council had been authorized to execute and deliver the previous casino construction and financing documents, and that the attached first amendment was required to complete the transactions. The resolution states that no waiver of sovereign immunity or consent to binding arbitration or consent to jurisdiction of any judicial forums "may be granted without the approval of the General Council," in accordance with Nation's custom and tradition, and it then approves the first amendment and directs the chairman to execute and deliver it, without any need for further approval by the tribe.*fn2

For the second amendment to the loan agreement (dated March 15, 2007), Nation enacted a 28-page document, General Council Resolution No. 07-03, dated February 11, 2007. It contains numerous subheadings, including separate portions for the loan guaranty and the loan agreement. In the portion referring to the loan agreement, it refers to the chairman's execution and delivery of casino contracts, including the second amendment to the loan agreement, architect agreements, construction agreements with Bayley Construction, and states that in the previous documents, Nation's general council confirmed and approved the tribe's limited waiver of sovereign immunity from suit, including jury trial waiver and agreement to binding arbitration and judicial enforcement of any arbitration award by any court of competent jurisdiction. This was a consent to the jurisdiction of the courts of the United States, the state of Arizona, and other courts of competent jurisdiction for the enforcement of any binding arbitration award. Arizona law is chosen.*fn3

In the portion of General Council Resolution No. 07-03 called "Additional Grant of Authority As May Be Necessary to Construct a Casino," authorization to the chairman is given to act on behalf of the tribe in all matters requiring the tribe's approval or authorization for the construction and equipping of the casino, "subject to the provisions of this Resolution." (Italics added.)

For the third amendment to the loan agreement (dated July 15, 2007), Nation enacted a 30-page document, General Council Resolution No. 07-31, dated July 1, 2007. It also contains numerous subheadings, including separate portions for the loan guaranty and the loan agreement. Regarding the loan agreement, it refers to modification of the bank loans and confirms and ratifies Nation's previous "irrevocable" limited waiver of sovereign immunity and consent to jurisdiction in the courts of the United States, Arizona, and other courts of competent jurisdiction for enforcement of any arbitration award. It states there is a need to modify existing financing for the casino construction, revises the budget and directs the chairman to make any changes to the budget required by construction and political delays, after approval and direction from the tribal council, under the customs and traditions of the tribe.*fn4

To accomplish the transaction amendment, Nation's General Council Resolution No. 07-31 dated July 1, 2007, also states that as provided in the original loan agreement, it shall not be necessary in litigation or arbitration arising from the loan agreement to defer to or exhaust remedies in tribal courts. The chairman and the tribal council are given an additional grant of authority to take all other actions "consistent with this Resolution" that are necessary to construct and equip the casino, "provided however, the Chairman may not waive the Tribe's sovereign immunity, consent to binding arbitration, and/or consent to the jurisdiction of any judicial forums without the approval of the General Council of the Tribe in accordance with the customs and tradition of the Tribe."

C. YAN and Nation Enter Into Fourth Amendment to the Loan Agreement, Pursuant to Earlier Legislative Authorization

Around 2007, Nation was having disputes with a contractor on its casino project, Bayley Construction. Nation reached a settlement with that contractor and another, Sodexho (sometimes the contractors).

On October 8, 2008, the First Legislature of Nation enacted Legislative Bill LB-07-08, stating: "The Legislature hereby authorizes Chairman of the Executive Branch to negotiate and execute amendments to the various casino loan documents in the best interests of the nation." This bill authorized the chairman to negotiate and execute amendments to the casino loan documents, by reason of the legal dispute between Nation and the contractors. In the authorization portion of the bill, Nation's constitution is cited as allowing the legislature the power to authorize the chairman to negotiate and execute contracts on behalf of Nation.

The fourth amendment to the loan agreement was negotiated and executed by Nation's Chairman Johnny M. Hernandez on January 30, 2009.*fn5 In its section 3, it replaced article XV, the dispute resolution and sovereign immunity provisions of the previous loan agreement versions. The fourth amendment retains the loan agreement's Arizona choice of law provision and the waiver of jury trial. It then states that if any legal proceedings are filed in California courts, claims may be determined by a general reference proceeding under California Code of Civil Procedure sections 638 through 641.2. As the borrower, Nation waived its sovereign immunity from actions in any forum, including arbitration, regarding the loan agreement transactions. Additionally, Nation/Borrower consented to the jurisdiction of the Arizona state courts, California state courts, the courts of the United States, and the courts of any other state that may have jurisdiction over the subject matter, the action, and borrower. In the event that the ...


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