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Findleton v. Coyote Valley Band of Pomo Indians

California Court of Appeals, First District, Second Division

July 29, 2016

ROBERT FINDLETON, Plaintiff and Appellant,
v.
COYOTE VALLEY BAND OF POMO INDIANS, Defendant and Respondent.

         Mendocino County Superior Court No. SCUKCVG1259929, Trial Judge: Hon. Jeanine Nadel

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[Copyrighted Material Omitted]

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         COUNSEL

         Timothy W. Pemberton, for Plaintiff and Appellant.

         Rapport and Marston and Lester J. Marston, for Defendant and Respondent.

         OPINION

         STEWART, J.

         This appeal requires us to determine whether a Native American tribe known as the Coyote Valley Band of Pomo Indians (the Tribe) validly waived its sovereign immunity for purposes of the enforcement by construction contractor Robert Findleton (Findleton) of arbitration provisions in contracts between them. Findleton claims the Tribe waived its sovereign

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immunity when its Tribal Council entered into, and then amended, contracts with Findleton containing arbitration clauses and also adopted a resolution expressly waiving sovereign immunity to allow arbitration of disputes under the contracts. The Tribe disagrees, arguing the Tribal Council lacked authority to waive the Tribe’s immunity and therefore any such waivers were invalid, because the power to waive the Tribe’s immunity had not been properly delegated to the Tribal Council in accordance with the procedures specified by the Tribe’s constitution. The superior court agreed with the Tribe and held that it lacked jurisdiction over Findleton’s claims because there had been no valid waiver of the Tribe’s sovereign immunity. Findleton appealed.

         The issue is one of law, which we review de novo. We disagree with the trial court and conclude that the Tribal Council was authorized to, and did, waive the Tribe’s sovereign immunity for purposes of arbitrating disputes arising under the Tribe’s contracts with Findleton. We therefore reverse.

         I.

         FACTUAL BACKGROUND[1]

         The Tribe’s governance is carried out by two bodies: the General Council, which its constitution establishes as “[t]he governing body of the Band” and consists of all tribal members 18 years of age or older, and the Tribal Council, an elective body consisting of seven members of the General Council whose powers are more narrowly circumscribed than those of the General Council. The Tribe’s constitution does not permit the Tribal Council to waive the Tribe’s sovereign immunity without the General Council’s “consent” and “prior approval.” This appeal requires us to decide whether the General Council validly delegated its authority to waive the Tribe’s immunity to the Tribal Council.

         A. Resolution 07-01

         The first of the delegations of authority in question was adopted on June 2, 2007, at a special meeting of the General Council of the Tribe, when the Council adopted a resolution entitled, “General Council Delegation of Authority to the Tribal Council to Waive on a Limited Basis the Sovereign Immunity of the Tribe.” The resolution, known as resolution 07-01 (Resolution 07-01, had been placed on the agenda and raised to the floor for a vote by the tribal chief (Tribal Chief). It contained a series of prefatory recitals,

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which identified the Tribe’s constitution and stated that the constitution provided that the General Council was the Tribe’s governing body, and conferred on the Tribal Council various powers, including the power to negotiate contracts and conclude agreements on behalf of the Tribe, to borrow money and secure debt with Tribal assets, to engage in business activities and projects to promote the economic well being of the Tribe and its members, and to take actions necessary to carry out those powers. The resolution further acknowledged that the constitution reserved to the General Council the power to waive the tribe’s sovereign immunity from suit but that it also authorized the General Council to delegate that power to the Tribal Council.

         With regard to the specific circumstances, the resolution recited that the Tribal Council had authorized development of a new gaming and resort facility and related infrastructure to support the gaming facility and the Tribal community (the Project), that the Project consisted of a casino and hotel complex within the Tribe’s reservation, that the Project would require financing and hiring of architects, consultants and contractors to construct the Project, and that “[c]ontractual transactions favorable to the Tribe generally require that the Tribe waive on a limited basis its sovereign immunity in order to attract other individuals and entities to do business with the Tribe.” Because it was “impractical for the General Council to meet and approve individual waivers of the sovereign immunity of the Tribe as each contract related to financing and development of the Project is entered into, ” the General Council had “determined... that it is necessary and in the best interests of the Tribe for the General Council to delegate to the Tribal Council its authority to waive the sovereign immunity of the Tribe in connection with contracts related to the financing and development of the Project.”

         As relevant here, the General Council therefore resolved in Resolution 07-01 that it “hereby delegates to the Tribal Council authority to waive on a limited basis the sovereign immunity of the Tribe in contracts of the Tribe approved by the Tribal Council... as determined necessary by the Tribal Council for the financing and development of the Project.”[2]

         B. The Construction and On-Site Rental Agreements

         In October 2007, the Tribe entered into an agreement with Terre Construction, a doing business as name of Findleton, to construct improvements on the Tribe’s reservation in Mendocino County, California, in preparation for construction of a new gaming facility (the Construction Agreement). The

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Construction Agreement, which was prepared by the Tribe, was a form agreement for construction projects issued by the American Institute of Architects (AIA) with various modifications. It was signed by Findleton as Contractor and by the Tribe’s Chairman, John Feliz, Jr., on behalf of the Tribe.

         The Construction Agreement contained provisions regarding “Claims and Disputes, ” which provided among other things that “[a]rbitration shall be held in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association currently in effect unless the parties mutually agree otherwise.” It provided that “[t]he foregoing agreement to arbitrate... shall be specifically enforceable in accordance with applicable law in any court having jurisdiction thereof, ” and that “[t]he award rendered by the arbitrator or arbitrators shall be final, and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction thereof.” Immediately following the arbitration provisions was a section stating: “No term or provision in this Agreement shall be construed as a waiver of the sovereign immunity of the Coyote Valley Band of Pomo Indians. The Parties specifically agree that the sovereign immunity of Coyote Valley Band of Pomo Indians shall not be waived for disputes or other matters related to this Agreement.” Under the heading “Miscellaneous Provisions, ” the Construction Agreement contained a choice-of-law provision stating that it “shall be governed by the law of the Coyote Valley Band of Pomo Indians, ” that “[i]f a particular issue is not covered by such law, federal law shall govern” and that “[t]he Contractor agrees to the jurisdiction of the Coyote Valley Band of Pomo Indians.”

         In view of the choice-of-law provision, before entering the agreement Findleton requested that the Tribe “produce any documents, any laws or regulations that might be in place.”[3] The members of the Tribe with whom he negotiated told him that “if there were any laws and codes, that they would be produced.” The Tribe members did not provide him any tribal codes or laws despite his asking “several times, ” which led him to understand that there were none “in effect at that time and, therefore, the federal or other contractual agreements, arbitration and so forth, would apply.” Initially, when he asked, they told him they were “ ‘checking on that, ’ ” but later he “was specifically told that they... had gotten rid of most of their laws and ordinances and that there wasn’t something in place at that time.”

         In November 2007, the Tribe and Findleton, under the doing business as name of "On-Site Equipment, ” entered into a second agreement entitled “On-Site Equipment Master Rental Contract, ” which was “an abstraction of

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our standard master rental contract” that was prepared by “the Tribe and the Tribe’s attorney” (the Rental Contract). The Tribe had proposed this agreement so that it could require all contractors doing work on the project to rent their equipment from Findleton on the reservation because by doing so those contractors would avoid state sales taxes.

         The Rental Contract, like the Construction Agreement, contained an arbitration clause stating that “[c]laims, disputes or other matters in question between the parties to this Agreement arising out of or relating to this Agreement or breach thereof shall be subject to and decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association currently in effect unless the parties mutually agree otherwise.” The Rental Contract similarly provided for specific enforcement of the agreement to arbitrate “in accordance with applicable law in any court having jurisdiction thereof, ” and stated the arbitrator’s award would be final and similarly enforceable in court. And it stated that “[t]he Parties specifically agree that the sovereign immunity of Coyote Valley Band of Pomo Indians shall not be waived for disputes or other matters related to this Agreement.”

         The scope of work under the original Construction Agreement was approximately $1.6 million, but the parties twice agreed to increase the scope of work, first in November 2007 (to $3.6 million) and then in January 2008 (to $4.8 million).

         C. Resolution 08-01

         Thereafter, a second delegation of authority to waive sovereign immunity was adopted, on March 1, 2008, when the General Council held a special meeting and adopted resolution 08-01 (Resolution 08-01), entitled “General Council Delegation of Authority to the Tribal Council to Waive on a Limited Basis the Sovereign Immunity of the Tribe.”

         Resolution 08-01 contained the same recitals and resolutions as Resolution 07-01. In addition, it contained a recital stating: “It has been determined by the General Council that it is necessary and in the best interests of the Tribe to ratify the Tribe’s waiver of sovereign immunity in connection with its existing contracts and to reconfirm the Tribal Council’s, and otherwise delegate to the Tribal Council, authority to waive the Tribe’s sovereign immunity in connection with contracts negotiated and concluded by the Tribal Council in furtherance of the Project.” It resolved among other things that “the General Council hereby ratifies, confirms, approves and adopts all existing contracts of the Tribe related to the development, financing, and operation of the Project, and specifically ratifies, confirms, approves and adopts all waivers of sovereign immunity of the Tribe in such contracts, ”

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and that “the General Council, for clarification purposes, hereby reconfirms the authority of, and otherwise delegates authority to, the Tribal Council, to be exercised by the majority vote of all members of the Tribal Council as evidenced by an appropriate Tribal Council resolution, to waive the Tribe’s sovereign immunity in contracts of the Tribe approved by the Tribal Council, as determined necessary in the discretion of the Tribal Council, upon advice of counsel, and in furtherance of the best interests of the Tribe.”[4]

         D. Suspension of Construction, Amendment of Agreements and Adoption of Tribal Council Resolution.

         In August 2008, ten months after the Tribe and Findleton entered into the Construction Agreement, the Tribe gave Findleton notice it was suspending construction of the Project because the financial meltdown had adversely affected its ability to secure financing. The notices assured Findleton and other contractors that “[u]pon securing sufficient Project financing, the Tribe intends to pay all contractors, subcontractors, design professionals, and other services providers involved in the Project all outstanding fees and expenses” and that the Tribe would endeavor to obtain additional financing sufficient to complete the casino project. The notice letter requested Findleton’s and other contractors’ “patience in this matter.”

         Shortly after the Tribe’s suspension of construction, Findleton met with four Tribe members, including the Tribal Treasurer, Tribal Administrator and Acting Construction Manager. After the meeting, he sent a letter to the Tribal Chairman summarizing the meeting and a proposal he had made to the Tribe under which he would continue to provide services for the next three months (from August through October 2008). Per that proposal, Terre Construction would perform additional work in the amount of approximately $527, 000, the Tribe would execute a Third Amendment to the Agreement to include that work, Findleton would defer payment for that work until 2009, the Tribe would make payments in 2009 with interest at 6.5 percent, and the Tribe would issue a resolution accepting these terms and also including a limited waiver of sovereign immunity.[5] Findleton included a document entitled “Third Amendment to Agreement” with the proposal. It recited the terms of

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the existing Construction Agreement and prior amendments, and described the additional work and its costs.

         Findleton was told by tribe members that the proposal (with the Third Amendment) was presented to and approved by the Tribal Council. Findleton was also told that the proposal would be (and later that it had been) presented to the General Council. ...


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