In Re Richard D. Greene and Donna J. Greene, Husband and Wife, Debtors, Ross Richardson, Chapter 7, Trustee-Appellee v. Mt. Adams Furniture

RYMER, Circuit Judge,

concurring:

I agree with my colleagues that the tribe’s sovereign immunity bars this action under either theory argued by the parties — that the bankruptcy court’s exclusive jurisdiction abrogates tribal sovereign immunity and that 11 U.S.C. § 106 (c) effects *599 a waiver of that immunity. In framing the issues this way, however, both parties assume that the scope of tribal immunity was locked in at the time the treaty with the Yakima Nation was ratified and can only be changed by Congressional action; the immunity enjoyed by other sovereigns, however, is subject to evolution through the common law. As it has evolved, the immunity of a foreign state is limited to its public acts and does not extend to suits based on its commercial or private acts. I write separately to note that we have never squarely addressed the question whether the law on sovereign immunity of an Indian nation is similarly developed. It is not an easy question to resolve, and I am not so persuaded as the majority appears to be that “the scope of tribal immunity has to be measured at the common law as it existed at some earlier time.” Since this point was not directly briefed in this case, I do not believe we can answer it authoritatively. I therefore understand the majority’s opinion to reach no further than the issues actually raised.

As the Supreme Court pointed out in Nevada v. Hall, 440 U.S. 410 , 99 S.Ct. 1182 , 59 L.Ed.2d 416 (1979), the immunity of a sovereign in the courts of another sovereign is controlled by the law of the forum state. Id. at 416-17 , 99 S.Ct. at 1186 . The old rule of sovereign immunity under United States law was one of absolute immunity. In The Schooner Exchange v. M’Faddon, 11 U.S. (7 Cranch) 116 , 3 L.Ed. 287 (1812), Chief Justice Marshall stated that the

perfect equality and absolute independence of sovereigns ... have given rise to a class of cases in which every sovereign is understood to waive a part of that complete territorial jurisdiction, which has been stated to be the attribute of every nation.

Id. 11 U.S. at 137 . This rule of absolute immunity was followed by the Supreme Court into the twentieth century. See Berizzi Bros. Co. v. S.S. Pesaro, 271 U.S. 562, 568 , 46 S.Ct. 611 , 70 L.Ed. 1088 (1926) (“A real sovereign, a state, a nation, is always sovereign. In none of its activities is it ever subject to a higher human will, individual or collective.”).

Sovereign immunity, like other legal concepts, is capable of evolution. See Nevada v. Hall, 440 U.S. at 417-19 , 99 S.Ct. at 1186-87 . Even before the Supreme Court’s decision in Berizzi Brothers, the State Department had favored the restrictive view, which limits immunity to the noncommercial activities of a foreign sovereign. See David A. Brittenham, Note, Foreign Sovereign Immunity and Commercial Activity: A Conflicts Approach, 83 Colum.L.Rev. 1440, 1452 (1983). The Supreme Court implicitly adopted the restrictive view in the early 1940’s by agreeing to adhere to the policy opinions of the State Department. In Mexico v. Hoffman, 324 U.S. 30 , 65 S.Ct. 530 , 89 L.Ed. 729 (1945), the Court stated:

It is ... not for the courts to deny an immunity which our government has seen fit to allow, or to allow an immunity on new grounds which the government has not seen fit to recognize.

Id. at 35 , 65 S.Ct. at 533 . See also Ex parte Peru, 318 U.S. 578, 586-87 , 63 S.Ct. 793, 799 , 87 L.Ed. 1014 (1943); Victory Transport Inc. v. Comisaria General de Abastecimientos y Transportes, 336 F.2d 354, 360 (2d Cir.1964), cert. denied, 381 U.S. 934 , 85 S.Ct. 1763 , 14 L.Ed.2d 698 (1965). In 1952, the State Department officially announced in the Tate Letter (letter from Jack B. Tate, Acting Legal Adviser of the U.S. Dep’t of State, to Acting Attorney General Philip B. Perlman (May 19, 1952), reprinted in 26 Dep’t St.Bull. 984 (1952)) that it would be “the Department’s policy to follow the restrictive theory of sovereign immunity.” Id.

By enacting the Foreign Sovereign Immunities Act of 1976 (FSIA), Pub.L. 94-583, 90 Stat. 2891 (1976), Congress adopted the restrictive view of sovereign immunity. The House of Representatives report on the FSIA stated that

the bill would codify the so-called “restrictive” principle of sovereign immunity, as presently recognized in international law. Under this principle, the immunity of a foreign state is “restricted” to suits involving a foreign state’s *600 public acts (jure imperii) and does not extend to suits based on its commercial or private acts (jure gestionis).

House Report (Judiciary Committee) No. 94-1487 (Sept. 9, 1976), reprinted in 1976 U.S.C.C.A.N. 6604, 6605 (emphasis added). Since the enactment of the FSIA, the scope of the commercial exception that it codifies has been extensively litigated in the federal courts. See, e.g., Republic of Argentina v. Weltover, Inc., — U.S. -, 112 S.Ct. 2160 , 119 L.Ed.2d 394 (1992) (breach of contract action involving bonds issued by Argentine national bank); Compania Mexicana de Aviacion, S.A. v. United States Dist. Court, 859 F.2d 1354 (9th Cir.1988) (tort action against Mexican state airline).

The common law sovereign immunity among the states has also evolved. In Nevada v. Hall, a California resident had sued the State of Nevada in California court to recover damages arising from an automobile accident with an employee of the University of Nevada. 440 U.S. at 419 , 99 S.Ct. at 1187 . The Supreme Court upheld the California court’s rejection of Nevada’s sovereign immunity defense, even though it noted that “when The Schooner Exchange was decided, or earlier when the Constitution was being framed, the defense would have been sustained by the California courts.” Hall, 440 U.S. at 417 , 99 S.Ct. at 1186 .

Tribal sovereign immunity, such as that asserted by the Yakimas in this case, is not precisely the same as either international law sovereign immunity or sovereign immunity among the states:

The sovereignty that the Indian tribes retain is of a unique and limited character. It exists only at the sufferance of Congress and is subject to complete de-feasance. But until Congress acts, the tribes retain their existing sovereign powers. In sum, Indian tribes still possess those aspects of sovereignty not withdrawn by treaty or statute, or by implication as a necessary result of their dependent status.

United States v. Wheeler, 435 U.S. 313, 323 , 98 S.Ct. 1079, 1086 , 55 L.Ed.2d 303 (1978). Indian sovereignty is further distinguished because of the importance, as the Supreme Court has emphasized, of “Congress’ desire to promote the ‘goal of Indian self-government, including its “overriding goal” of encouraging tribal self-sufficiency and economic development.’ ” Oklahoma Tax Comm’n v. Citizen Band Potawatomi Tribe, 498 U.S. 505 , 111 S.Ct. 905, 910 , 112 L.Ed.2d 1112 (1991).

Yet the common law sovereignty of Indian tribes is not absolute. The Wheeler Court identified several areas in which tribal sovereignty has been circumscribed: Indians can no longer freely alienate the land they occupy to non-Indians, they cannot enter into direct relations with foreign nations, and they cannot try nonmembers in tribal courts. See 435 U.S. at 326 , 98 S.Ct. at 1087 . At the same time, “Indian tribes have long been recognized as possessing the common law immunity from suit traditionally enjoyed by sovereign powers.” Santa Clara Pueblo v. Martinez, 436 U.S. 49, 58 , 98 S.Ct. 1670, 1677 , 56 L.Ed.2d 106 (1978). Because that common law sovereign immunity has evolved to be inapplicable to commercial activity by a sovereign and because such an exception is based on the important principle that it is disfavored for a commercial actor to escape the legal consequences of its actions, whether tribal sovereign immunity now extends to commercial activities is an important, complex, and unresolved question. 1

. No other court has directly confronted this question, either. Two recent opinions in other circuits have touched on the commercial exception recognized in the FSIA and commercial transactions of an Indian tribe. Neither, however, explicitly considers whether tribal sovereign immunity extends to commercial activities or is restricted by virtue of a tribe's dependent status or by virtue of evolution of the common law. In Bank of Oklahoma v. Muscogee (Creek) Nation, 972 F.2d 1166 (10th Cir.1992), the Tenth Circuit found unpersuasive an analogy to the *601 commercial exception in the FSIA in deciding that an interpleader action filed against an Indian tribe in connection with a dispute over a tribal bingo hall was barred by sovereign immunity. The Eighth Circuit held in American Indian Agricultural Credit Consortium v. Standing Rock Sioux Tribe, 780 F.2d 1374 (8th Cir.1985), that the commercial nature of a loan between a credit union and an Indian tribe did not effect an implied waiver of tribal sovereign immunity. Id. at 1378.

As Judge Nelson notes, state supreme courts have addressed the commercial exception, but with ambiguous results. See, e.g., Dixon v. Picopa Constr. Co., 160 Ariz. 251 , 772 P.2d 1104, 1109 (1989) (tribal sovereign immunity covers "tribal business” but not “non-tribal business,” without definition); Padilla v. Pueblo of Acoma, 107 N.M. 174 , 754 P.2d 845, 850 (1988) (tribal sovereign immunity does not cover economic activities by the tribe off the reservation), cert. denied, 490 U.S. 1029, 1030 , 109 S.Ct. 1767, 1768 , 104 L.Ed.2d 202 (1989). See also Duluth Lumber and Plywood Co. v. Delta Development, Inc., 281 N.W.2d 377, 382 (Minn.1979) ("Generally, state courts may assume jurisdiction over disputes arising from commercial transactions between Indians and non-Indians if the transaction is not confined to the Indian Reservation.”); Atkinson v. Haldane, 569 P.2d 151, 169-70 (Alaska 1977) (courts do not recognize "proprietary act/governmental function” test regarding tribal sovereign immunity); North Sea Products, Ltd. v. Clipper Seafoods Co., 92 Wash.2d 236 , 595 P.2d 938, 939, 942-43 (no commercial exception under existing law, but concurring justice suggests this rule is "unjust, unwise and unreasonable”) (1979).

Although the United States Supreme Court has held that "without Congressional authorization the Indian nations are exempt from suit,” United States v. United States Fidelity & Guaranty Co., 309 U.S. 506 , 60 S.Ct. 653 , 84 L.Ed. 894 (1940); see Santa Clara Pueblo v. Martinez, 436 U.S. at 58 , 98 S.Ct. at 1677 (quoting United States Fidelity & Guaranty, 309 U.S. 506, 512 , 60 S.Ct. 653, 656 , 84 L.Ed. 894 (1940)), it has never directly considered the reach of tribal immunity in business ventures. Indeed, Justice White dissented from the denial of certiorari in Padilla, 490 U.S. at 1030 , 109 S.Ct. at 1768 , urging that the Court should have heard the case "to resolve the conflict among the state courts"; and Justice Stevens, concurring in Potawatomi Tribe, remarked that he was “not sure that the rule of tribal sovereign immunity extends to cases arising from a tribe’s conduct of commercial activities off the reservation.” Id., 498 U.S. at- 111 S.Ct. at 912 (citing the Foreign Sovereign Immunities Act).