Ninth Circuit Upholds Tribal Jurisdiction Over Nonmember Businesses: No Physical Presence Required

By Heidi McNeil Staudenmaier and Kelsey Haake

The Ninth Circuit’s landmark decision in Lexington Insurance Co. v. Smith¹ is a pivotal moment for tribal sovereignty, particularly in delineating the extent of tribal jurisdiction over nonmembers. At the heart of this case was the question of whether Lexington Insurance Co., a non-tribal entity, representing a group of insurance companies, could be subject to the Suquamish Tribe’s jurisdiction for actions related to an insurance contract tailored for tribal properties on trust lands.

Lexington Insurance Co. (Lexington) formed a unique partnership with Tribal First to provide insurance policies specifically for tribal governments and enterprises. These contracts, tailored specifically to the needs of the Suquamish Tribe, covered properties and businesses on their lands and totaled nearly $242 million in insured property. Like many businesses, the Suquamish Tribe (the Tribe) experienced losses on their lands related to the COVID-19 pandemic. The Tribe made claims under their insurance policies, which were denied by Lexington. Thereafter, the Tribe filed suit against Lexington in the Suquamish Tribal Court (the Tribal Court).

The central legal question was whether the Tribal Court could assert jurisdiction over Lexington, a nonmember entity, where Lexington had no physical presence on the reservation. Lexington argued that the Tribal Court lacked such jurisdiction, where Judge Bumatay, in dissent, supported this view. He criticized the majority for “gutting any geographic limits” on tribal jurisdiction and suggested that tribal jurisdiction over nonmembers should be constrained by physical presence. This dissenting opinion joined by four additional judges provides an alternative viewpoint on the issue, emphasizing the complexity of the legal debate.

However, the panel majority of 16 judges relied upon prior case precedent from the Supreme Court and other Circuit cases and disagreed. The majority concluded that physical presence is not required for tribal jurisdiction to apply. Instead, the Ninth Circuit emphasized that the business relationships and contracts between Lexington and the Tribe, directly involving Tribal trust lands, established a sufficient nexus. The panel pointed to two critical Supreme Court cases — Montana v. United States² and Merrion v. Jicarilla Apache Tribe³ — which authorize tribal jurisdiction over nonmembers when their conduct is tied to tribal land and the tribe’s economic interests.

The Ninth Circuit majority emphasized that “[n]o part of this [Montana] test requires the physical presence of a nonmember on reservation” rather, the nonmember that is conducting business with the tribe or tribal entity must only be directly connected to the tribal lands. The Ninth Circuit also relied heavily on Smith v. Salish Kootenai College⁴ concluding that “Lexington’s conduct took place on tribal land because ‘[t]ribal land literally and figuratively underlies the contract at issue here.’” The Ninth Circuit concluded that they could not reduce the physical presence test to “whether a nonmember has physically tiptoed onto a parcel of land within the boundaries of a reservation.”

To continue, when looking at other Circuit case decisions, the Ninth Circuit firmly rejected Judge Bumatay’s interpretation of the Supreme Court’s Plains Commerce Bank⁵ decision, which requires an additional inquiry into whether tribal law can regulate nonmembers’ actions. The majority aligned with the Fifth and Ninth Circuits, which have read Plains Commerce as reinforcing, not adding to, existing tribal jurisdiction standards. Only the Seventh Circuit has adopted a more restrictive reading that requires a separate inquiry into tribal authority over nonmembers.

Ultimately, the Ninth Circuit denied Lexington’s en banc petition and concluded that Lexington’s long-term contractual engagements with the Tribe constituted conduct on Tribal lands, subjecting the company to tribal jurisdiction. As Tribes and the businesses in which they engage grow increasingly complex, decisions like Lexington v. Smith may pave the way for further recognition of tribal courts’ authority in civil matters involving nonmembers.