(Cite as: 2005 WL 3510348 (Conn.Super.)
UNPUBLISHED OPINION. CHECK COURT RULES BEFORE CITING.
Superior Court of Connecticut,Judicial District of New London.
SENECA NIAGARA FALLS GAMING CORP.
KLEWIN BUILDING CO., INC. et al.
Nov. 30, 2005.
Murtha Cullina LLP, Hartford, for Seneca Niagara Falls.
Zeisler & Zeisler, Bridgeport, Robert Wright, Attorney at Law, Wethersfield, for Klewin Bldg. Co. Inc.
Updike Kelly & Spellacy, Hartford, for TD Banknorth.
SEYMOUR L. HENDEL, J.T.R.
*1 This is an application brought by the plaintiff for a limited order pursuant to Connecticut General Statutes § 52-422 FN1 to aid it in a pending arbitration, which application seeks temporary and permanent injunctions and the imposition of a constructive trust against a sum of $14,551,977.49 deposited by the plaintiff in an account maintained by defendant Klewin Building Company, Inc. (Klewin Building) with defendant TD Banknorth, N.A. (Banknorth) pursuant to agreements by the parties under a construction contract entered into by the plaintiff and Klewin Building. The plaintiff seeks an injunction compelling the defendants to place the sum in a certain ?positive pay? account maintained by Klewin Building with Banknorth and precluding the defendants from using the sum other than for payment of Klewin Building's subcontractors and architect for amounts due them under the construction project which is the subject of the construction contract. Defendant C.R. Klewin Gaming and Hospitality, Inc. was joined as a party defendant by agreement. Klewin Building and defendant C.R. Klewin Gaming and Hospitality, Inc. are hereinafter referred to as the ?Klewin defendants.?
FN1. Section 52-422 provides:
At any time before an award is rendered pursuant to an arbitration under this chapter, the superior court for the judicial district in which one of the parties resides or, in a controversy concerning land, for the judicial district in which the land is situated or, when said court is not in session, any judge thereof, upon application of any party to the arbitration, may make forthwith such order or decree, issue such process and direct such proceedings as may be necessary to protect the rights of the parties pending the rendering of the award and to secure the satisfaction thereof when rendered and confirmed.
The Klewin defendants filed an answer, special defense and counterclaim. The amended counterclaim asserts four causes of action: a violation of the Connecticut Unfair Trade Practices Act, unlawful interference with business relations, conversion and civil theft. The Klewin defendants also filed an application for immediate temporary injunction and application for temporary injunction seeking to enjoin the plaintiff from hiring any persons presently or formerly employed by Klewin Building and from using any drawings and other documents created and/or furnished by Klewin Building pursuant to the construction contract.
The plaintiff has filed this motion to dismiss counterclaims and application for immediate temporary injunction on the basis that the claims asserted by the Klewin defendants are barred by the doctrine of sovereign immunity and on the basis that the Klewin defendants failed to establish jurisdiction for their claims as an application pursuant to Connecticut General Statutes § 52-422 because none of their claims are being arbitrated.
The plaintiff's primary basis for its motion to dismiss is that the Klewin defendants' counterclaims are barred by the doctrine of sovereign immunity. It is well established that, absent a clear and unequivocal waiver by an Indian tribe or a congressional abrogation, the doctrine of sovereign immunity bars suit against a tribe. Romanella v. Hayward, 933 F.Sup. 163, 167 (D.Conn.) (1996), aff'd 114 F.3d 15 (2ndCir.1997). Any waiver of immunity is to be interpreted liberally in favor of the tribe and restrictively against the claimant. S. Unique, Ltd. v. Gila River Pima-Maricopa Indian Community, 138 Ariz. 378, 674 P.2d 1376, 1381 (Ariz.App.1983). Entities created by an Indian tribe to further governmental purposes cannot be sued absent a waiver of immunity. Weeks Constr., Inc. v. Ogala Sioux Housing Auth., 797 F.2d 668, 671 (8th Cir.1986). A tribe's sovereign immunity is not limited to governmental activities, but extends to commercial activities as well. Kiowa Tribe of Oklahoma v. Manufacturing Technologies, Inc., 523 U.S. 751, 118 S.Ct. 1700, 1705, 140 L.Ed.2d 981 (1998). The United States Supreme Court has acknowledged the significance of gaming in furthering the self-determination and economic development of Indian tribes. California v. Cabazon Board of Mission Indians, 480 U.S. 202, 107 S.Ct. 1083, 1092-93, 94 L.Ed.2d 244 (1987). Because of the doctrine of tribal immunity, ?businesses that deal with Indian tribes do so at great financial risk.? S. Unique. Ltd. v. Gila River Pima-Maricopa Indian Community, supra, at 1384-85.
*2 In the present case, the Klewin defendants contend that the plaintiff is not a tribal agency sufficiently connected to and controlled by a sovereign Indian tribe so as to enjoy sovereign immunity.
The court has reviewed extensive documentation concerning the status of the plaintiff, including: the Constitution of the Seneca Nation of Indians (Nation), the Council Resolution Granting the Charter of the plaintiff, the Charter and By-Laws of the plaintiff, a lease by the Nation to the plaintiff of real estate located in Niagara Falls, New York, and a Council resolution regarding dividends.
The documentation establishes the following. The Nation is a federally recognized Indian tribe which is the duly-authorized governing body of the Seneca tribe. The Nation's legislative power is vested in the Council, which is composed of sixteen elected members of the Tribe. Under federal law and a compact with the State of New York, the Nation is permitted to conduct casino operations on tribal land, including land in Niagara Falls, New York. The Council adopted a resolution granting a corporate charter to the Seneca Gaming Corporation (Gaming Corporation) as a governmental instrumentality and subordinate arm of the Nation to develop and operate the Nation's gaming facilities, which were recognized as of vital importance to the economy of the Nation and the general welfare of its members. The plaintiff was granted a corporate charter by a resolution of the Council as a wholly-owned subsidiary of the Gaming Corporation to develop and operate the Nation's casino in Niagara Falls, New York. The plaintiff was created to improve the well-being of the Nation and its members as a governmental instrumentality of the Nation having autonomous existence separate and apart from the Nation and was deemed to be a subordinate arm of the Nation entitled to all of the privileges and immunities of the Nation.
The documentation further establishes the following. The Council appoints the plaintiff's board of directors, a majority of whom must be enrolled Senecas. The Council fills vacancies on the board and may remove any board member for cause. In addition, Council authorization is required for significant corporate acts, including transactions involving any management contract, financing, substantial expenditures of money, giving significant guarantees, incurring significant liabilities, loans to tribal entities, purchase or sale of real estate, significant expenditures for personal property, transactions involving bonds, obligations, shares or securities of others, participation with others in any transaction which the plaintiff would have power to do by itself, significant expenditures of resources for the Niagara Falls Gaming Facility and waiver of the Nation's sovereignty. The plaintiff pays $1,000,000 per month from the profits of the Seneca Niagara Casino to the Nation as rent under its lease with the Nation and makes other substantial cash payments and real estate distributions to the Nation and the Gaming Corporation. The plaintiff must submit quarterly and annual reports of the casino's financial condition, activities, significant problems and accomplishments and future plans to the Gaming Corporation, which submits similar reports to the Nation.
*3 In their briefs and arguments on the issue of whether the plaintiff is an entity to which the Nation's immunity extends, the parties have extensively briefed and argued the case of Ransom v. St. Regis Mohawk Educ. & Comm. Fund, Inc., 86 N.Y.2d 553, 658 N.E.2d 989 (1995). In Ransom, the plaintiffs were Mohawk Indians who were former employees of the defendant, a non-profit District of Columbia corporation which provided education, health care, social and historical services to residents of the St. Regis Mohawk Reservation. The plaintiffs brought suit for wrongful termination against the directors of the Fund. The Fund claimed sovereign immunity.
The New York Court of Appeals set forth, at page 559, the following seven-part test for determining whether a tribal entity is an arm of the tribe entitled to share the tribe's immunity from suit:
(1) whether the entity is organized under the tribe's laws or constitution rather than federal law;
(2) whether the organization's purposes are similar to or serve those of the tribal government;
(3) whether the organization's governing body is comprised mainly of tribal officials;
(4) whether the tribe has legal title or ownership of property used by the organization;
(5) whether tribal officials exercise control over the administration or accounting activities of the organization;
(6) whether the tribe's governing body has power to dismiss members of the organization's governing body; and,
(7) more importantly, whether the corporate entity generates its own revenue, whether a suit against the corporation will impact the tribe's fiscal resources, and whether the sub-entity has the power to bind or obligate the funds of the tribe.
In upholding the claim of tribal immunity, the court stated at page 560:The conclusion that respondent Fund is a tribal entity which enjoys sovereign immunity from suit is fully supported by the record. The Fund was established to enhance the health, education and welfare of Tribe members, a function traditionally shouldered by tribal government. Additionally, the Fund received its resources from the Tribe, and the Tribe was designated by the Fund as the recipient of its funds and services. Critically, under its by-laws, the Fund's governing body may only be comprised of elected Chiefs of the Tribe. Thus, the Fund's provision of social services on behalf of and under the direct fiscal and administrative control of the Tribe renders it an entity so closely allied with and dependent upon the Tribe that it is entitled to the protection of tribal sovereign immunity.
In Gavle v. Little Six, Inc., 555 N.W.2d 284 (1996), the Minnesota Supreme Court quoted the first six Ransom factors, but omitted the seventh factor of the test. After reviewing Ransom and other cases, the court, at page 294, set forth three principal factors to be considered in determining whether tribal sovereign immunity extends to a tribal business entity:*4 (1) whether the business entity is organized for a purpose that is governmental in nature, rather than commercial;
2) whether the tribe and the business entity are closely linked in governing structure and other characteristics; and
(3) whether federal policies intended to promote Indian tribal autonomy are furthered by the extension of immunity to the business entity.
Based on this three-factor test, the court held that the defendant, a casino owned by a tribal corporation, was immune from suit by a former employee for tortious acts that occurred both within and without Indian country. The court found that the corporation had been created for the specific purpose of improving the financial and general welfare of the tribe; the corporation was wholly owned by the tribe as a governmental unit, rather than being organized under state law; the board of directors of the corporation had to include at least three members of the tribal Council; a majority of the directors had to be tribal members and directors could be removed by a tribal court proceeding commenced by tribal members; and federal policies supported Indian gaming as a means of promoting tribal welfare.
The California Court of Appeals adopted the Gavle three-factor test in Trudgeon v. Fantasy Springs Casino, 71 Cal.App.4th 632 (1999). The plaintiff, who was injured in a fight at the defendant tribal corporation's casino, brought suit against the casino claiming negligence. The court held that the corporation was formed for the benefit of the tribal members, the corporation was closely related to the tribe and federal policies furthered immunity in the case and, therefore, the corporation was entitled to tribal immunity.
The plaintiff satisfies the three-part Gavle test for tribal immunity because it was created to improve the well-being of the Nation and its members, it is very closely related in its structure and business operations to the Nation and federal policies support gaming as a source of income for Indian tribes.
The plaintiff also meets the seven-factor Ransom test for tribal entity immunity, as follows:
(1) The plaintiff is incorporated under Seneca tribal law and not federal or state law. The present case appears to be a case of first impression in Connecticut involving an incorporated entity of the tribe. Incorporated tribal entities have been accorded tribal immunity in the Ransom, Gavle and Trudgeon decisions. In Ransom, the incorporation was under District of Columbia law and in Gavle and Trudgeon the incorporations were under tribal law, as in the present case.
(2) The plaintiff was created to improve the well-being of the Nation and its members which is the same as the purpose of the Nation. It is responsible for developing and operating the Nation's gaming facility, which is the main source of income to provide for the general welfare of the Nation's members, the principal purpose of both the Nation and the plaintiff.
*5 (3) A majority of the members of the plaintiff's board of directors must be enrolled Senecas. Two of the present directors are the president and treasurer of the Nation.
(4) Although the plaintiff owns the Niagara Falls casino and the personal property used in the casino, the Nation owns the real estate upon which the casino is situated. By its ownership of the real estate, the Nation ultimately will acquire title to the casino.
(5) The Tribe maintains oversight and control over the administration and accounting activities of the plaintiff. All important corporate acts require the approval of the Council. Reports of the casino's financial condition, activities, significant problems and accomplishments and future plans must be submitted to the Gaming Corporation quarterly and annually.
(6) The Council may remove any member of the plaintiff board of directors for cause.
(7) The plaintiff generates its own income from the profits of its casino. Because the plaintiff is a corporation, suit against it will not directly impact the Nation's fiscal revenues. However, if a large judgment is entered against the plaintiff as a result of a suit, payment of such judgment could result in the plaintiff being unable to make the $1,000,000 monthly rental payments to the Nation, thereby substantially impacting the Nation. Similarly, as a corporation, the plaintiff does not have the power to bind or obligate the funds of the Nation, but its failure to make monthly rental payments would have a significant effect on such funds. The funds which the plaintiff administers, in practical effect, are the funds of the Nation and the manner in which the plaintiff handles such funds redownds to the benefit or detriment of the Nation.
It should be noted with respect to the seventh factor that the Ransom court found the tribal entity involved in the case, a District of Columbia corporation, was entitled to tribal immunity, even though its corporate status would prevent a suit against it from directly impacting the tribe's revenues and the entity would not have power to bind or obligate the funds of the tribe. Furthermore, in both Gavle and Trudgeon the entities were tribal corporations, as is the plaintiff in this case with similar corporate limitations, and both corporations were held to have tribal immunity.
New London County, because it is the site of the two largest Indian casinos in the United States, has been the source of many cases involving the immunity of the tribal entities. A review of the following cases arising in New London County reveals that tribal immunity was found to exist as to an entity of the tribe in each case. Kizis v. Morse Diesel International, Inc., 260 Conn. 46 (2002) (gaming authority); Worrall v. Mashantucket Pequot Gaming Enterprises, 131 F.Sup.2d 328 (D.Conn.2001) (gaming enterprise); Chayoon v. Sherlock, 2004 Conn.Super. LEXIS 1059 (2004) (gaming enterprise); Mohegan Tribal Gaming Authority v. Fox, 2003 Ct.Sup. 14444 (2003) (gaming authority); Paszkowski v. Chapman, 2001 Conn.Super LEXIS 2551 (2001) (gaming authority); Greenridge v. Volvo Car Finance, Inc., 2000 Conn.Super. LEXIS 2240 (2000) (gaming commission); Burnham v. Pequot Pharmaceutical Network, 1998 Conn.Super. LEXIS 1734 (1998) (for-profit commercial health care organization); Mashantucket Pequot Gaming Enterprises v. CCI, Inc., 1994 Conn.Super. LEXIS 1775 (1994) (gaming enterprise).
*6 In all of the above cases, except Burnham, the tribal entities were the casino operating arms of the Indian tribes involved in the cases. The casino entities were similar in their operations and purposes to the operations and purposes of the plaintiff in this case. In Burnham, The tribal entity was a for-profit health care organization conducting business off the tribal reservation, which is clearly less closely connected to the tribe than the operations of the plaintiff in this case.
The Klewin defendants, both in their briefs and oral argument, failed to cite any case in which a tribal entity owning and operating an Indian casino has been denied inmunity from suit in a state court nor could the court find any such case.
Accordingly, for the reasons stated above, the court finds that the plaintiff is a tribal entity entitled to tribal immunity.
The Klewin defendants claim that, even if the plaintiff is a tribal entity entitled to tribal immunity, the plaintiff has waived its sovereign immunity by instituting this action in the state court.
The simple answer to the Klewin defendants' claim is our Supreme Court's statement in Schaghticoke Indians of Kent, Connecticut, Inc. v. Potter, 217 Conn. 612, 622, fn. 9 (1991), that, while the plaintiff Indian tribe therein ?sought out a state forum in this action, unilateral action of this sort is insufficient to constitute consent or otherwise give the state jurisdiction.? The Klewin defendants rely on the legal principle of equitable recoupment as an exception to sovereign immunity. Equitable recoupment recognizes that, by bringing a claim, a tribe necessarily waives immunity for matters arising out of the same transaction or occurrence which is the subject matter of the tribe's suit to the extent of defeating the tribe's claims, but not to the extent of a judgment which is affirmative in the sense of involving relief different in kind or nature or exceeding the relief sought by the tribe. Jicarilla Apache Tribe v. Andrus, 687 F.2d 1324, 1344 (10th Cir., 1982). In Jicarilla, the Tenth Circuit held that counterclaims raised by lessees against the tribe for breach of leases were not permissible in the action brought by the tribe against the Secretary of the Interior and oil and gas lessees claiming the Secretary had failed to comply with his regulations when advertising oil and gas leases on the reservation.
The Klewin defendants rely on Rupp v. Omaha Indian Tribe, 45 F.3d 1241 (8th Cir., 1995), and Wyandotte Nation v. City of Kansas, Kansas, 200 F.Sup.2d 1279 (D.C.Kan.2002). In each of these cases, the plaintiff Indian tribe sought to quiet title against the defendants. The courts allowed counterclaims by the defendants to quiet title because the very same issues were involved in the defendants' claims to quiet title as in the plaintiffs' claims to quiet title. The Wyandotte court, however, did not allow the defendants' claim for reimbursement of improvements they had made to the land in question because, although ?the reimbursement action arises out of the same transaction or occurrence which is the subject matter of the suit, it clearly is different in kind and nature from the quiet title and trespass claims brought by the tribe and exceeds the amount of relief sought by the tribe.? Id., at 1286. (Internal quotation marks omitted.) In the present case, the defendants' counterclaims similarly are clearly different in kind and nature from the plaintiff's request for temporary injunction and exceed the relief sought by the plaintiff.
*7 The Klewin defendants also cite a case which arose in this jurisdiction, Mohegan Tribal Gaming Authority v. Kohn Pedersen Fox, 2003 Ct.Sup. 14444 (2003), in which the plaintiff tribe sought damages for negligent performance of an architectural and engineering contract and the defendants asserted counterclaims arising out of an owner-controlled project professional liability insurance policy. Because the primary agreement contained a sovereign immunity waiver provision permitting state court jurisdiction and the contract was part of the agreement, the court denied the tribe's motion to dismiss. In the present case, no such waiver exists. Moreover, the doctrine of equitable recoupment did not enter into the court's decision.
In a case in this jurisdiction strikingly similar to the facts in the present case, Mashantucket Pequot Gaming Enterprise v. CCI, Inc., supra, the plaintiff, an Indian gaming entity operating a bingo hall and casino, filed an action seeking temporary and permanent injunctive relief against the defendant, a supplier of computer-related services, to prohibit disclosure of personal information under an invasion of privacy theory. The defendant filed a counterclaim alleging violation of several Connecticut statutes and breach of contract. The court found that the plaintiff was an economic subdivision of the tribe and could invoke sovereign immunity and granted the plaintiff's motion to dismiss the counterclaims.
Accordingly, the court finds that by instituting this action the plaintiff has not waived its sovereign immunity as to the Klewin defendants' counterclaims and the counterclaims must be dismissed.
The plaintiff further claims as a basis for its motion to dismiss the Klewin defendants' counterclaims that the Klewin defendants failed to establish jurisdiction for their claims pursuant to Connecticut General Statutes § 52-422 because none of their claims are being arbitrated. Inasmuch as the court has found that the counterclaims are barred by the doctrine of sovereign immunity, it is not necessary for the court to address this issue.
For the reasons stated above, the court grants the plaintiff's motion to dismiss the Klewin defendants' counterclaims and application for immediate temporary injunction.