The Ninth Circuit Finds Tribal Nation Waived Sovereign Immunity Through Arbitration Provision

By Heidi McNeil Staudenmaier and Amanda Z. Weaver, Ph.D.

On June 10, 2024, the Ninth Circuit entered an opinion finding that the Choctaw Nation had expressly waived its sovereign immunity against arbitration, determining that the contractual provision between the Nation and Caremark, LLC to arbitrate in the District of Arizona was valid and enforceable. See Caremark, LLC v. Choctaw Nation, — F.4th —, No. 22-15543 (9th Cir. June 10, 2024).

The parties, over the course of several years, had entered into agreements regarding Caremark’s insurance reimbursements for pharmacy service costs the Nation incurred on behalf of its members. Id. at 4. The Nation originally filed suit in the Eastern District of Oklahoma, alleging that Caremark had denied pharmacy reimbursement claims in violation of federal law. Id. at 4-5. The matter was stayed in that forum, and Caremark petitioned to compel arbitration in the District of Arizona, which the district court in Arizona granted. Id. at 5.  

On appeal, the Ninth Circuit addressed whether the district court lacked subject-matter jurisdiction over Caremark’s petition to compel arbitration on the basis of tribal sovereign immunity.¹ Id. 

The two ways in which a tribe can lose its sovereign immunity from suit are by Congress’s abrogation, or by its own waiver. Id. at 14-15. Waiving tribal immunity “must be unequivocally expressed” by “a clear and unequivocally expressed waiver by a tribe or congressional abrogation.” Id. at 15 (quoting Bodi v. Shingle Springs Band of Miwok Indians, 832 F.3d 1011, 1016-17 (9th Cir. 2016)).

The Ninth Circuit first analyzed whether the contracts were validly formed between the parties. It concluded they were, relying on the fact that the Nation appeared to recognize it formed valid contracts, at least as to $90.5 million in reimbursement claims the Nation had received from Caremark between 2014 to 2021. Id. at 17.

The Court then addressed the Nation’s argument that its tribal representatives did not have authority to waive sovereign immunity because Choctaw law requires tribal council approval. Id. at 18. However, the Ninth Circuit determined that the Nation’s failure to identify any tribal laws that applied in this circumstance precluded any conflict between its laws and the parties’ contracts “that would render any contractual waiver of immunity unclear or unequivocal.” Id. at 19. The Court similarly rejected the declaration from the Nation’s Executive Director of Legal Operations, finding that as to the substance of the declaration, no tribal law was cited or referenced: the Court reasoned that relying on such an argument would mean that a party contracting with a “tribe would have no means of ensuring that a contract provision that waives sovereign immunity would be effective.” Id. at 20-23. Indeed, even if a party researched tribal law and found nothing governing waiving sovereign immunity, “the tribe could later simply invalidate the provision with a declaration from its counsel that cites no tribal law.” Id. at 23.  

Lastly, the Ninth Circuit addressed whether the Nation “clearly and unequivocally” waived sovereign immunity for arbitration. Id. at 24. While the arbitration provisions existed in the Provider Manuals that were incorporated by reference into the parties’ contracts, the Court found that the contracts (through incorporation) “memorialized the Nation’s commitment to the dispute resolution regime that the agreements required, and that . . . the Nation agreed that any arbitration would take place ‘in Scottsdale, Arizona and Provider agrees to such jurisdiction.’” Id. at 27.  

Accordingly, the Ninth Circuit concluded that the District of Arizona had jurisdiction over the petition to compel arbitration and affirmed the district court’s order compelling arbitration. Id. at 28. Finally, it took no position on the arbitration provisions’ enforceability, given the delegation to the arbitrator of that issue. Id. at 29.

This decision underscores the importance of the parties to an agreement carefully negotiating the dispute resolution and choice-of-law provisions, as well as conducting due diligence in advance to determine whether any specific legal requirements exist in assuring the agreement is valid and enforceable.

Footnotes

1. The Nation asserted other arguments on appeal that the Ninth Circuit determined were foreclosed by its earlier opinion on arbitration provisions in Caremark, LLC v. Chickasaw Nation, 43 F.4th 1021 (9th Cir. 2022). Choctaw Nation, 22-15543, at 5. [Back]