2015 WL 2330293

United States Court of Appeals,
Eighth Circuit.
BELCOURT PUBLIC SCHOOL DISTRICT; Angel Poitra, Plaintiffs–Appellants
Ella DAVIS, Defendant–Appellee
Turtle Mountain Tribal Court, Defendant
Belcourt Public School District, Plaintiff–Appellant
Erica Malaterre, Defendant–Appellee
Turtle Mountain Tribal Court, Defendant
Belcourt Public School District; Chris Parisien, Plaintiffs–Appellants
Mike Nelson; Judy Nelson on behalf of their Minor Child S.N., Defendants–Appellees
Turtle Mountain Tribal Court, Defendant
Belcourt Public School District; Roman Marcellais; School Board Members for the Belcourt Public School District, Plaintiffs–Appellants
Bruce Allard; Martin Desjarlais; Jeff Laducer; Chad Marcellais; Robert St. Germaine, Defendants–Appellees
Turtle Mountain Tribal Court, Defendant
Belcourt Public School District; Roman Marcellais; School Board Members for the Belcourt Public School District, Plaintiffs–Appellants
Steve Herman, Defendant–Appellee
Turtle Mountain Tribal Court, Defendant.
Nos. 14–1541, 14–1542, 14–1543, 14–1545, 14–1548. | Submitted: Dec. 10, 2014. | Filed: May 15, 2015.

Affirmed in part and reversed in part.

Appeals from United States District Court for the District of North Dakota—Bismarck.
Attorneys and Law Firms
Rachel Bruner–Kaufman, argued, Bismarck, ND, (Jonathan P. Sanstead, Bismarck, ND, on the brief), for Plaintiffs–Appellants.
Reed Soderstrom, argued and on the brief, Minot, ND, for Defendant–Appellee Erica Malaterre.
Donald George Bruce, argued and on the brief, Belcourt, ND, for Defendant–Appellee Ella Davis, Mike and Judy Nelson, Bruce Allard, Martin Desjarlais, Jeff Laducer, Chad Marcellais, Robert St. Germaine, and Steve Herman.
Before BYE, SMITH, and KELLY, Circuit Judges.
SMITH, Circuit Judge.

*1 Plaintiff–Appellants, Belcourt Public School District ("School District") and certain of its employees, brought an action against Defendant–Appellees, members of the Turtle Mountain Band of Chippewa Indians ("Tribe") and the Turtle Mountain Tribal Court ("Tribal Court"), seeking (1) a declaration that the Tribal Court lacks jurisdiction over claims that the Tribe members filed against Plaintiff–Appellants in Tribal Court, and (2) injunctions prohibiting the prosecution of the claims before the Tribal Court. Plaintiff–Appellants also moved for default judgment against one of the Tribe members. The district court denied the motion for default judgment and found that the Tribal Court had jurisdiction. For the reasons stated herein, we affirm in part and reverse in part.

I. Background
The School District is a political subdivision of the State of North Dakota, Bismarck Pub. Sch. Dist. # 1 v. State By and Through N.D. Legislative Assembly, 511 N.W.2d 247, 251 (N.D.1994), that operates within the exterior boundaries of the Turtle Mountain Indian Reservation ("Reservation"). The Constitution of North Dakota requires that the School District provide education to all children in North Dakota, including children who are Indians or reside on Indian reservations. N.D. Const. art. VIII, § 1 ("[P]ublic schools [ ] shall be open to all children of the state of North Dakota....").

The Tribe and School District have agreed to mutually share the responsibility for educating students, both Indian and non-Indian, residing on the Reservation. Accordingly, the Tribe and School District entered into agreements ("Plans of Operations") in both 2006 and 2009 that provided the School District with exclusive authority to administer the "day-to-day operations" of the Turtle Mountain Community High School ("Grant High School"), subject to applicable laws. This arrangement vested the School District with exclusive administrative authority over, among other things, the supervision and employment of staff at Grant High School.1

Several Tribe members filed suit against the School District and its employees in Tribal Court, alleging defamation, excessive use of force, and multiple employment-related claims. The Tribal Court ultimately dismissed the claims pursuant to the United States Supreme Court's decision in Nevada v. Hicks, 533 U.S. 353, 121 S.Ct. 2304, 150 L.Ed.2d 398 (2001), on the grounds that the Tribal Court lacked jurisdiction over the School District and its employees for claims related to the employees' performance of their official duties. On appeal, however, the Turtle Mountain Tribal Court of Appeals ("Tribal Court of Appeals") reversed the Tribal Court's decision, finding that Hicks was not dispositive in part because the School District signed the Plans of Operations, thereby subjecting itself to Tribal jurisdiction.2 The School District and its employees thereafter filed actions in federal court, seeking (1) a declaration that the Tribal Court lacks jurisdiction over the claims, and (2) injunctions prohibiting the Tribal members from pursuing the claims and likewise prohibiting the Tribal Court from adjudicating them.

*2 The School District and its employees later moved for default judgment in one of the actions ("Nelson " action) based on the defendants' alleged failure to defend against the claims. The district court exercised its discretion to deny the motion, however, holding that, at least in that case, "default judgment is not the appropriate avenue" to issue declaratory relief.

The School District and its employees then moved for summary judgment in all of the actions. The district court ultimately denied the motions and concluded that the Tribal Court, in fact, had jurisdiction over the claims. In so holding, the district court found inapplicable the United States Supreme Court's decision in Montana v. United States, 450 U.S. 544, 101 S.Ct. 1245, 67 L.Ed.2d 493 (1981). It further found that, even if Montana were applicable, the Tribal Court would nevertheless have jurisdiction because the School District entered into the Plans of Operations with the Tribe.

II. Discussion
A. Tribal Court Jurisdiction
[1] [2] The School District and its employees argue on appeal that the Tribal Court lacked jurisdiction over them and, consequently, that the district court erred in denying their motions for summary judgment. We review de novo a district court's denial of summary judgment. Solomon v. Petray, 699 F.3d 1034, 1038 (8th Cir.2012) (citation omitted). "The extent of tribal court subject matter jurisdiction over claims against nonmembers of the Tribe is a question of federal law which we review de novo." Attorney's Process & Investigation Servs., Inc. v. Sac & Fox Tribe of Miss. in Iowa, 609 F.3d 927, 934 (8th Cir.2010) (citation omitted).

[3] No federal statute or a treaty specifically provides the Tribal Court with jurisdiction over the claims at issue in this case; therefore, the Tribal Court's jurisdiction must arise from its "retained or inherent sovereignty." Atkinson Trading Co., Inc. v. Shirley, 532 U.S. 645, 649–50, 121 S.Ct. 1825, 149 L.Ed.2d 889 (2001). We analyze the contours of a tribal court's inherent jurisdiction over nonmembers of the tribe within the framework and principles set forth in Montana, which remains the " 'pathmarking case" ' on the subject. Hicks, 533 U.S. at 358 (quoting Strate, 520 U.S. at 445). In Montana, the Supreme Court addressed whether a tribe could prohibit hunting and fishing activities by non-Indians on reservation land owned in fee simple by non-Indians. As a general matter, the Court held, "the inherent sovereign powers of an Indian tribe do not extend to the activities of non members of the tribe." 450 U.S. at 565 (emphases added). The Court then noted, however, two relatively narrow exceptions to this general rule:
To be sure, Indian tribes retain inherent sovereign power to exercise some forms of civil jurisdiction over non-Indians on their reservations, even on non-Indian fee lands. A tribe may regulate, through taxation, licensing, or other means, the activities of nonmembers who enter consensual relationships with the tribe or its members, through commercial dealing, contracts, leases, or other arrangements. A tribe may also retain inherent power to exercise civil authority over the conduct of non-Indians on fee lands within its reservation when that conduct threatens or has some direct effect on the political integrity, the economic security, or the health or welfare of the tribe.
*3 Id. at 565–66 (emphases added) (internal citations omitted).3 These two categories of nonmember conduct that Indian tribes may regulate are commonly referred to as the "Montana exceptions." The Court in Montana ultimately found that neither exception provided the tribe with jurisdiction over non-Indians' hunting and fishing on non-Indian land. Id. at 566.

[4] [5] Given the general rule set forth and applied in Montana—that a tribe's inherent sovereign powers do not vest it with jurisdiction over the activities of nonmembers—the Tribal Court presumably does not have jurisdiction over the claims asserted in this case. "The burden rests on the tribe" to establish that one of the Montana exceptions applies. Plains Commerce Bank v. Long Family Land & Cattle Co., 554 U.S. 316, 330, 128 S.Ct. 2709, 171 L.Ed.2d 457 (2008).

1. First Montana Exception
[6] The School District agreed to provide educational services to students residing on the Reservation, as memorialized, at least in part, in the Plans of Operations. But these agreements between the School District and the Tribe do not alone confer jurisdiction on the Tribal Court under the first Montana exception. Notably, North Dakota law specifies that a school district cannot "[a]uthorize an agreement that enlarges or diminishes the jurisdiction over civil or criminal matters that may be exercised by ... tribal governments located in North Dakota." N.D. Cent.Code § 54–40.2–08. The agreements do not state that the School District intended to, or represented that it could, deviate from North Dakota law.

Moreover, even assuming arguendo that the School District could agree to an expansion of Tribal Court jurisdiction under North Dakota law, the first Montana exception still would not provide the Tribal Court with jurisdiction. Indeed, in Hicks, the Supreme Court elaborated on the first Montana exception and specified that, "[r]ead in context, an 'other arrangement' is clearly another private consensual relationship...." 533 U.S. at 359 n. 3 (holding that a tribal court lacked jurisdiction over claims asserted against state officials who executed a search warrant on tribal land to search for evidence of an off-reservation crime). To resolve lingering ambiguities as to what constitutes an "other arrangement" under the first Montana exception, the Court further stated that:
The [Montana ] Court (this is an opinion, bear in mind, not a statute) obviously did not have in mind States or state officers acting in their governmental capacity; it was referring to private individuals who voluntarily submitted themselves to tribal regulatory jurisdiction by the arrangements that they (or their employers) entered into. This is confirmed by the fact that all four of the cases in the immediately following citation involved private commercial actors. See [Washington v. Confederated Tribes of Colville Indian Reservation, 447 U.S. 134, 152, 100 S.Ct. 2069, 65 L.Ed.2d 10 (1980) ] (nonmember purchasers of cigarettes from tribal outlet); [Williams v. Lee, 358 U.S. 217, 79 S.Ct. 269, 3 L.Ed.2d 251 (1959) ] (general store on the Navajo reservation); [Morris v. Hitchcock, 194 U.S. 384, 24 S.Ct. 712, 48 L.Ed. 1030 (1904) ] (ranchers grazing livestock and horses on Indian lands "under contracts with individual members of said tribes"); Buster v. Wright, 135 F. 947, 950 (8th Cir.1905) (challenge to the "permit tax" charged by a tribe to nonmembers for "the privilege ... of trading within the borders").
*4 Id. at 372 (emphasis added).

The Tribe members nevertheless contend that the requisite "consensual relationship" existed under the first Montana exception because the School District entered into contracts (that is, the Plans of Operations) with the Tribe. But they are mistaken. The Ninth and Tenth Circuits have held that contractual agreements between tribes and government entities do not constitute "consensual relationships" within the meaning of the first Montana exception. In County of Lewis v. Allen, for instance, the Ninth Circuit, en banc, held that a tribal court lacked jurisdiction over a tribal member's civil claims against a political subdivision of a state stemming from his arrest on reservation land—even though the arrest was made pursuant to a specific law enforcement contract between the state and the tribe. 163 F.3d 509, 514–16 (9th Cir.1998) (en banc). In so holding, the court noted that "Montana 's exception for suits arising out of consensual relationships has never been extended to contractual agreements between two government entities.... [T]he Agreement between the tribe and the state is not a " 'consensual relationship' of the qualifying kind." Id. at 515 (quotation marks omitted) (quoting Strate, 520 U.S. at 457). Likewise, in MacArthur v. San Juan County, the Tenth Circuit held that employment relationships that were "contractual in nature" between a state's political subdivision and two tribe members "were not 'private consensual relationships' ... and [therefore] do not fall within the first Montana exception." 497 F.3d 1057, 1071, 1074 (10th Cir.2007).

More recently, in Red Mesa Unified School District v. Yellowhair, a district court reached the same conclusion in a case remarkably similar to this case. There, two school districts operating on Indian reservations filed for declaratory and injunctive relief in federal court to prohibit a tribal administrative tribunal from deciding employment-related claims filed against the school districts. No. CV–09–8071–PCT–PGR, 2010 WL 3855183, at *2 (D.Ariz. Sept.28, 2010). The court granted the relief and specifically found that the first Montana exception did not apply—notwithstanding a lease agreement between the school districts and the tribe—because the school districts "made the employment decisions at issue while operating in their governmental capacities pursuant to their state constitutionally-imposed mandate to operate a public school system within the reservation boundaries." Id. at *3.

We agree with these well-reasoned decisions. The School District in this case was clearly acting in its official capacity and, specifically, in furtherance of its obligations under the Constitution of North Dakota to make public education "open to all children of the state of North Dakota," see N.D. Const. art. VIII, § 1, when it entered into the agreements relevant to this case. The agreements therefore do not fall within the ambit of the first Montana exception.4

2. Second Montana Exception
*5 [7] Because there is no private consensual relationship between the School District and the Tribe, the Tribal Court will have jurisdiction only if the claims at issue involve "conduct [that] threatens or has some direct effect on the political integrity, the economic security, or the health or welfare of the tribe." Montana, 450 U.S. at 566. In conducting this analysis, we note at the outset that not every event that impacts a tribe's political integrity, economic security, health, or welfare will necessarily give rise to tribal court jurisdiction; indeed, a lax application or overly broad reading of the second Montana exception would render meaningless Montana 's general rule that "the inherent sovereign powers of an Indian tribe do not extend to the activities of nonmembers of the tribe." Id. at 565. The Court in Hicks emphasized the necessarily narrow scope of the second Montana exception when it confirmed that, "[w]here nonmembers are concerned, the 'exercise of tribal power beyond what is necessary to protect tribal self-government or to control internal relations is inconsistent with the dependent status of the tribes, and so cannot survive without express congressional delegation.' " 533 U.S. at 359 (quoting Montana, 450 U.S. at 564); see also Plains Commerce Bank, 554 U.S. at 330 (noting that the Montana exceptions "are limited ones, and cannot be construed in a manner that would swallow the rule, or severely shrink it") (quotations omitted).

In Plains Commerce Bank, the Court further elucidated the circumstances necessary for the second Montana exception to apply. There, the Court held that the second Montana exception did not apply to a non-Indian bank's sale of land on a tribal reservation to another non-Indian because:
The conduct must do more than injure the tribe, it must "imperil the subsistence " of the tribal community. [Montana, 450 U.S. at 566]. One commentator has noted that "th[e] elevated threshold for application of the second Montana exception suggests that tribal power must be necessary to avert catastrophic consequences." Cohen § 4.02[3][c], at 232, n. 220.
Id. at 341 (emphases added).5

The claims and alleged conduct at issue in this case clearly do not "imperil the subsistence" of the Tribe, and Tribal Court jurisdiction is not "necessary to avert catastrophic consequences." Other courts have found the second Montana exception inapplicable to conduct that was either comparable or more detrimental to a tribe's subsistence and well-being than the conduct alleged in this case.6

In sum, the Tribe members have failed to carry their burden of establishing that either of the Montana exceptions apply. We therefore hold that the Tribal Court lacked jurisdiction over the Tribe members' claims.

B. Default Judgment
[8] The School District and its employees also contend that the district court erred in not granting their motion for default judgment in the Nelson action. We review the district court's decision for an abuse of discretion. Taylor v. City of Ballwin, Mo. ., 859 F.2d 1330, 1332 (8th Cir.1988) (citation omitted).

*6 [9] "The Federal Rules of Civil Procedure commit the entry of a default judgment against a party to the sound discretion of the trial court." F.T.C. v. Packers Brand Meats, Inc., 562 F.2d 9, 10 (8th Cir.1977) (per curiam) (citations omitted); see also Fed.R.Civ.P. 55(b)(2). This court has recognized that default judgments are "not favored by the law and should be a rare judicial act." In re Jones Truck Lines, Inc., 63 F.3d 685, 688 (8th Cir.1995) (citations and quotation marks omitted). Put simply, there is a "judicial preference for adjudication on the merits." Johnson v. Dayton Elec. Mfg. Co., 140 F.3d 781, 784 (8th Cir.1998) (citations and quotation marks omitted).

[10] [11] There are various factors courts may consider when determining whether to enter a default judgment, including:
[T]he amount of money potentially involved; whether material issues of fact or issues of substantial public importance are at issue; whether the default is largely technical; whether plaintiff has been substantially prejudiced by the delay involved; and whether the grounds for default are clearly established or are in doubt. Furthermore, the court may consider how harsh an effect a default judgment might have; or whether the default was caused by a good-faith mistake or by excusable or inexcusable neglect on the part of the defendant.
Briarpatch Ltd., L.P. v. Geisler Roberdeau, Inc., 513 F.Supp.2d 1, 3 (S.D.N.Y.2007) (alteration in original) (citation omitted).

[12] In light of these considerations and the judicial preference for adjudication on the merits, we conclude that the district court did not abuse its discretion in denying the motion for default judgment. In particular, we note that the scope of Tribal Court jurisdiction was a central issue in each of the actions brought by the School District and its employees—including the Nelson action—and that the district court issued its opinion with respect to Tribal Court jurisdiction shortly after denying the motion for default judgment. It was well within the district court's discretion to choose to resolve all of the actions in the same order.

III. Conclusion
For the foregoing reasons, and after thoroughly considering all of the parties' contentions on appeal, we reverse the district court's decision with respect to Tribal Court jurisdiction and remand for further proceedings. We affirm the district court's denial of default judgment in the Nelson action.