Tribal Sovereign Immunity Upheld: Texas Federal Court Dismisses Tribal Business Contract Dispute

By Heidi McNeil Staudenmaier and Kelsey Haake

In a contract dispute between CHR Solutions Inc. and Gila River Telecommunications Inc., a business entity wholly owned and operated by the Gila River Indian Community (“GRIC”), the question of tribal sovereign immunity and subject matter jurisdiction took center stage in a Texas Federal Court.¹ The dispute involved $247,000 in unpaid invoices for billing software services, and highlighted the complexities found between tribal sovereignty, contractual obligations, coupled with federal jurisdiction. The Texas Federal Court concluded that Gila River Telecommunications, located on the GRIC reservation lands near Phoenix, Arizona, was entitled to tribal sovereign immunity, and that there was no valid waiver of sovereign immunity in the parties’ contract.

CHR Solutions Inc. initiated the lawsuit in May 2023, claiming Gila River Telecommunications had failed to make payments since November 2022, further accumulating significant unpaid invoices. U.S. District Magistrate Judge Christina A. Bryan's ruling on the matter illustrated the intricate legal landscape surrounding tribally-owned businesses and their immunity from certain legal claims if the proper steps are not taken to assure there is a valid waiver of such immunity.

The Court's decision was rooted in tribal sovereign immunity, a longstanding Federal legal principle that shields tribes and their business entities from lawsuits without their consent via a valid waiver. Judge Bryan's ruling determined that Gila River Telecommunications was tribally owned and operated by characterizing it as an extension of the GRIC, and therefore, entitled to sovereign immunity.

Despite assertions of a waiver of immunity in the contractual agreement between CHR Solutions and Gila River Telecommunications, Judge Bryan opined that, for a waiver of sovereign immunity to be valid in this particular circumstance, approval of the contract by the GRIC Tribal Council was required. Specifically, the Court stated, “a waiver of tribal sovereign immunity must be clear, unequivocally expressed.”
Because there was not a clear and express sovereign immunity waiver in the contract that had been approved by the GRIC Tribal Council, the Court determined there was no valid, binding waiver. The Court’s opinion also emphasized the importance of understanding tribal government structures and tribal codes or ordinances that may be applicable to a contractual relationship with tribes and tribal entities.

Another important aspect of the case, was the determination of the Gila River Telecommunication’s citizenship for jurisdictional purposes. While the argument was made that Gila River Telecommunications was essentially “stateless” due to its status as a tribal entity, Judge Bryan opted for a literal interpretation of the federal diversity jurisdiction statutes. Consequently, she designated the Gila River Telecommunications as a citizen of Arizona, where its principal place of business resides.

The Court's decision hinged on an analysis of six key factors to ascertain Gila River Telecommunications’ status as an “economic arm” of the tribe, thus eligible for tribal immunity. Specifically, the Court relied upon six factors identified in the 10th Circuit decision of Breakthrough Management Grp., Inc. v. Chukchansi.² The six factors being (1) the method of creation of the entity; (2) the entity’s purpose; (3) its structure, ownership and management, including the tribe’s control over the entity; (4) whether the tribe intended for the entity to be immune from suit; (5) the financial relationship between the entity and the tribe; and (6) whether the purposes of tribal sovereign immunity would be served by recognizing the entity as immune. 

Judge Bryan's ruling serves as a reminder of the complex legal landscape surrounding tribal sovereignty and jurisdictional issues in the United States. The decision further stresses the need for careful consideration and understanding of tribal laws and governance structures when entering into contractual agreements with tribal entities, especially requirements relevant to obtaining valid and binding waivers of sovereign immunity. Ultimately, the case highlights the importance of clarity and precision when navigating contract drafting and contractual obligations with tribes and their businesses.
 

Footnotes

1. CHR Solutions, Inc., Plaintiff, v. Gila River Telecommunications, Inc., Defendant., No. 4:23-CV-01901, 2024 WL 346526 (S.D. Tex. Jan. 30, 2024). [Back]

2. 629 F.3d 1173 (10th Cir. 2010). [Back]