Petition for writ of mandate following an order of dismissal in the Superior Court of San Diego County, Randa Trapp, Judge. Super. Ct. No. GIC845130)
The opinion of the court was delivered by: Irion, J.
CERTIFIED FOR PUBLICATION
The petition for writ of mandate filed by American Property Management Corporation (APMC)*fn1 challenges the trial court's ruling that the cross-complaint against U.S. Grant Hotel Ventures, LLC (U.S. Grant, LLC) -- a limited liability company organized under California law -- is barred by tribal sovereign immunity because of U.S. Grant, LLC's relationship with the Sycuan Band of the Kumeyaay Nation (Sycuan), a federally recognized Indian tribe.
We conclude that APMC is entitled to writ relief. U.S. Grant, LLC is not an arm of the tribe protected by Sycuan's sovereign immunity. Accordingly we will direct a writ of mandate to issue requiring the superior court to vacate its order dismissing the cross-complaint against U.S. Grant, LLC.
I FACTUAL AND PROCEDURAL BACKGROUND
In 2003, Sycuan Tribal Development Corporation (STDC), a corporation chartered under Sycuan's tribal laws, invested in the purchase of the U.S. Grant Hotel in downtown San Diego (the hotel) but created several layers of California limited liability companies to stand between it and the entity that took ownership of the hotel.
Specifically, U.S. Grant, LLC -- a California limited liability company -- purchased the hotel in 2003. U.S. Grant, LLC is wholly owned by its sole member Sycuan Investors - U.S. Grant, LLC (Sycuan Investors, LLC), a California limited liability company. Sycuan Investors, LLC, in turn, is wholly owned by its sole member American Property Investors - U.S. Grant, LLC (American Property Investors, LLC), a California limited liability company. American Property Investors, LLC is wholly owned by its sole member STDC. All three limited liability companies were organized in late 2003 in connection with the transaction to purchase the hotel.
STDC is a corporation that was created under Sycuan's own tribal laws in 1990, rather than under the laws of any state. As stated in its articles of incorporation, STDC's overall purpose is "the enhancement of the welfare of [Sycuan] through the acquisition and development of real and personal property, investment of funds and all other lawful activities appropriate to such purpose." Eligible enrolled members of Sycuan are shareholders in STDC.
According to deposition testimony of Sycuan's controller, STDC invested $18 million toward the purchase of the hotel. Although the record does not specifically reflect the structure of the transaction by which STDC invested in the hotel, we infer that it was accomplished through the capitalization of American Property Investors, LLC, when STDC organized that entity in December 2003 for the purpose of acquiring the hotel.*fn2 STDC acted as one of the guarantors of the $31 million bank loan that U.S. Grant, LLC obtained to purchase and renovate the hotel,*fn3 but U.S. Grant, LLC took title to the hotel in its own name.
Shortly after U.S. Grant, LLC purchased the hotel, it entered into a hotel management agreement with APMC San Diego Hotel Management, LLC, under which that entity would manage and operate the hotel for a 10-year term, subject to certain rights of termination by either party (the Agreement). In February 2005, U.S. Grant, LLC notified APMC San Diego Hotel Management, LLC that it was terminating the Agreement effective immediately due to alleged "mismanagement, misappropriation of funds and breach of fiduciary duty."
In response, APMC*fn4 asserted (1) it was entitled to retain $1.35 million that had previously been transferred from the hotel's operating account to an unrelated hotel account; (2) U.S. Grant, LLC owed APMC approximately $400,000 in management, accounting, promotional, marketing and legal fees; and (3) APMC was entitled to $5 million in liquidated damages under the terms of the Agreement because U.S. Grant, LLC terminated the Agreement without cause and without the notice that was required pursuant to the express terms of the Agreement.
U.S. Grant, LLC filed suit against APMC, APMC San Diego Hotel Management, LLC and Gallegos on April 1, 2005, seeking to recover the $1.35 million that had been transferred out of the hotel's operating account and to obtain an injunction to prevent defendants from disposing of the disputed funds. The trial court granted U.S. Grant, LLC's request for injunctive relief with respect to $950,000, pending resolution of U.S. Grant, LLC's claims. Prior to trial, U.S. Grant, LLC amended its complaint to add, among other claims, causes of action for breach of contract and breach of fiduciary duty.
APMC San Diego Hotel Management, LLC and Gallegos filed a cross-complaint against U.S. Grant, LLC seeking $5 million in liquidated damages on the ground that U.S. Grant, LLC had terminated the Agreement without cause and without notice. U.S. Grant, LLC answered the cross-complaint on May 13, 2005. U.S. Grant, LLC's answer did not raise tribal sovereign immunity as an affirmative defense.
The case proceeded to trial on the complaint and cross-complaint in January 2006. The jury returned a verdict largely in favor of U.S. Grant, LLC on its causes of action for breach of contract, breach of fiduciary duty and conversion. The jury denied any relief on the cross-complaint. After posttrial motions, including a successful motion for attorney fees by U.S. Grant, LLC, a notice of appeal was filed by APMC, APMC San Diego Hotel Management, LLC and Gallegos.
We reversed the judgment in an October 2008 opinion, concluding that the trial court erred "in failing to consider the extrinsic evidence proffered by APMC" concerning how the termination provisions of the Agreement should be interpreted. (U.S. Grant Hotel Ventures, LLC v. American Property Management Corp. (Oct. 16, 2008, D048746) [nonpub. opn.].) We explained that if the trial court had not erroneously refused to consider extrinsic evidence, it might have determined that the APMC parties were entitled to notice and an opportunity to cure any defects in performance prior to termination of the Agreement. We remanded the case to the trial court for further proceedings on the complaint and cross-complaint.
In May 2011, U.S. Grant, LLC filed a motion to dismiss the cross-complaint on the ground of tribal sovereign immunity, contending that it was entitled to Sycuan's sovereign immunity as a subordinate economic entity of the tribe. The trial court issued a written tentative ruling on June 2, 2011, granting the motion to dismiss on the ground that U.S. Grant, LLC was protected by tribal sovereign immunity. The tentative ruling further rejected the contention that U.S. Grant, LLC waived its claim of sovereign immunity with respect to the cross-complaint by agreeing to choice of law and arbitration provisions in the Agreement and by filing this lawsuit.
The trial court confirmed its tentative ruling at a hearing on the motion to dismiss and then issued a minute order reflecting its final ruling. The record contains no indication that the trial court or U.S. Grant, LLC served APMC, APMC San Diego ...