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Understand Indian Law Before Entering Into Business Transactions with Native American Tribes

As recently appeared in The Public Record:

Doing Business with Native American Tribes

Since its creation, the federal government has contracted with and passed laws affecting the self-determination of Native Americans. State governments have also entered into agreements or “compacts” with tribes, typically involving gaming and taxes on products and services offered by tribal entities. These laws and agreements have created significant opportunities for private entities to do business with Native American tribes and on reservation land in many areas, including real estate, natural resources, retail and commercial enterprises, as well as tourism and entertainment.

Doing business in the Coachella Valley often means doing business, to one degree or another, with Native American tribes or tribal entities. This is article is intended as an introduction to the most common issues and challenges that often arise when private entities and individuals seek to contract with tribal entities, particularly in the Coachella Valley where a significant percentage of the land is either tribal or allotted land.

Tribal Governments and Entities

Each Native American tribe has its own system of governance, and most have their own constitutions, by-laws, and codes setting forth Tribal law. Native American tribal governments have the authority to establish their own laws and regulations governing economic activity on their lands, although the United States retains control over the scope of tribal law making, and certain tribal laws must be reviewed by the Secretary of the Interior through the Bureau of Indian Affair (BIA).

Most tribes also have wholly-owned tribal corporate entities that enjoy many of the same legal protections and advantages of the tribes themselves. Tribal governments and their corporations are not subject to most state laws. For example, tribes are generally exempt from local, county, and state zoning and land-use restrictions, and state permitting requirements. Indian tribes are also generally exempt from Federal and State income tax, but have the power to tax transactions occurring on Indian lands which significantly involve the tribe or its members.

Many tribes impose a business license requirement as a pre-condition of doing business on tribal lands. While usually not difficult or expensive to obtain, a party who fails to obtain a required license risks losing the ability to enforce obligations arising out of its business activities on tribal land. Tradesmen should also be aware that state mechanics lien statutes may not apply to works of improvement on Indian land.

Sovereign Immunity

For anyone considering doing business with a Native American tribe or tribal entity, a basic understanding of the principle of “sovereign immunity” is essential. Stated broadly, tribal sovereign immunity refers to the inherent authority of indigenous tribes to govern themselves within the borders of the United States. The federal government recognizes tribal nations as distinct independent political entities. It is a form of parallel sovereignty within the U.S. constitutional framework. The sovereignty extends to tribal enterprises, including tribal casinos or gaming commissions.

The most significant aspect of tribal sovereign immunity is the absolute immunity from suit it provides to the tribe or tribal entity. Federally recognized Indian tribes, and in most cases tribal entities, including tribal officials and employees acting within the official capacity and scope of their employment, cannot be sued in state or federal court unless there is a clear and unequivocal waiver of immunity by the tribe or an act of Congress. (United States v. Mitchell (1980) 445 U.S. 535.)

Problems may arise, however, as it is not always clear exactly what contractual language constitutes a clear waiver of tribal immunity. While a detailed analysis is beyond the scope of this article, it should be understood that waivers of immunity are “strictly construed” in favor of the sovereign tribe, and not enlarged beyond what the contractual language requires.

Absent an effective waiver of sovereign immunity, disputes between the parties often end up in Tribal Court. Tribal court jurisdiction over criminal matters is limited. However, in civil cases, they generally have wide-ranging authority over both Indians and non-Indians for matters arising on Indian land, including commercial activities and negligence claims. Tribal court money judgments are generally enforceable in state court.

Employment Law on Indian Land

Because Native American tribes are sovereign nations, they generally are not subject to federal and state employment laws. However, there are many exceptions. Some federal laws, such as the Americans with Disabilities Act and Title VII of the 1964 Civil Rights Act, expressly exempt Indian tribes. Other laws do not, which has resulted in a split of authority among the various federal circuits. For example, the Ninth Circuit, which includes California, has held that the Fair Labor Standards Act, which establishes employment requirements regarding minimum wage, overtime pay, and child labor, and the National Labor Relations Act, are generally applicable to Indian tribes and entities and to businesses located on Indian land. However, it is unclear whether California’s new law, effective January 1, 2018, which prohibits an employer from inquiring about a job applicant’s salary history will apply to Indian tribes and entities.

The applicability of other federal laws, such as the Family Medical Leave Act and the Occupational Safety and Health Act (OSHA) are more complicated and subject to varying court interpretations. Accordingly, anyone contemplating conducting a business on Indian land should consult with experienced employment law counsel before proceeding.

Leasing Indian Land

In general, any lease of tribal or allotted land must be reviewed and approved by the Bureau of Indian Affairs (BIA). A lease without BIA approval is void and unenforceable. (While Indian tribes were recently given a pathway to enacting their own codes to expedite approval of leases, only a handful have undertaken the process.)

A good start for anyone intending to lease Indian land is to alert the regional office of the BIA early on to what the parties intend and to walk through any possible issues. Coordinating with the regional BIA is particularly important with any deals that might have an urgent deadline as the review process can take anywhere from a few months to a year, depending upon the complexity of the project. Projects involving gaming are handled at the BIA’s headquarters and can take several years to review.

When leasing Indian land, the prospective tenant should also make sure the deal will be seen as fair in the eyes of the BIA. If it appears the tenant is trying to “lowball” the tribe or the tribal member, approval is unlikely.

It is also critical when leasing to confirm the type of land ownership – ranging from tribal land, to allotted land held in trust by the United States for individual tribal members, to fee-held land. This is particularly important where financing is involved, as lenders will be looking for clear leasehold interests to value. The prospective tenant will also need to determine whether they will need additional rights-of-way to create access to the site or to allow for specialized uses. These also may only be granted by the Secretary of the Interior.

Conclusion

This very broad overview does not provide a comprehensive discussion of Indian law generally, or as it may affect a particular transaction. Those contemplating entering into such transactions are advised to consult with experienced counsel. At a minimum, the non-Indian party, or preferably his or her attorney, should conduct due diligence with respect to the pertinent federal law, tribal organizational documents, and tribal laws that will govern the parties’ business relationship. To increase the chances of a successful relationship, counsel should ensure that the contractual documents contain clear and unambiguous provisions that address all rights, obligations, and remedies of the parties.

Despite the additional issues that must be addressed, for those who take the time to understand the laws that can affect doing business with Indian tribes and tribal entities, the prospects for securing lucrative business opportunities with tribes and tribal entities are numerous.

Charles Gallagher is Senior Counsel with the law firm of Slovak Baron Empey Murphy & Pinkney LLP in Palm Springs. He can be reached at gallagher@sbemp.com or by calling (760) 322-2275.

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