Petition for Writ of Certiorari — Notti v. Cook Inlet Region, Inc.

>upreme Court, U.S.

FILED

O12 392 ave 19 2002

No. ORR OTE OLaRiC

IN THE

Supreme Court of the United States

EMIL NOTTI, ET AL.,

Petitioners,

V.

COOK INLET REGION, INC.,

Respondent.

On Petition for a Writ of Certiorari to the

United States Court of Appeals for the Ninth Circuit

PETITION FOR WRIT OF CERTIORARI

FRED W. TRIEM

° Counsel of Record

Box 129

Petersburg, Alaska

99833-0129

(907) 772-3911

Warmer nese tem

a J

QUESTIONS PRESENTED

Petitioning shareholders in an Alaska business cor-

poration for profit sued their corporation in state court be-

cause the respondent corporation was paying discrimina-

tory dividends in violation of a state law requiring equal

treatment of all shares of the same class of stock.

Respondent corporation removed to federal court on

the ground that state corporate law has incorporated a

federal law that purportedly allows these discriminatory

_ payments. The district court denied remand and dismissed

on the merits; the Ninth Circuit affirmed.

The ultimate issue is whether the incorporation of a

federal law by state law allows the removal under 28

U.S.C. § 1441 to federal court of a state corporate law

claim for breach of the corporate contract, and the subse-

quent finding of federal question jurisdiction under § 1331.

Should this Court resolve the issues it left open in

Merrell Dow:

1. Can the adoption of federal law by a state statute give

rise to § 1331 federal question jurisdiction when the

federal law does not occupy the field, does not entirely

displace state law, does not create a federal cause of

action, and does not contain a federal remedy?

2. Should this Court adopt a bright line rule requiring the

existence of a private cause of action and remedy under

federal law before it will allow § 1331 jurisdiction?

3. Should this Court adopt a bright line rule that a federal

law that provides no private remedy cannot supply a

“jurisdiction-triggering federal question”+ and thus

cannot give rise to § 1331 jurisdiction?

t Merrell Dow Pharmaceuticals v. Thompson, 478 U.S.

804, 817 & n.15 (1986).

incall

LIST OF PARTIES

Petitioners, Shareholder Plaintiffs-Appellants:

EMIL NOTTI

JAMES GROTHA

GLEN KERR

SAM PEDRO

ELLA RING

All are shareholders of CIRI and are residents

of Alaska.

Respondent, Corporate Defendant-Appellee:

COOK INLET REGION, INC. [CIRI]]

An Alaska business corporation for profit with

its headquarters in Anchorage, Alaska.

aS

+ Pursuant to Supreme Court Rule 29.6, petitioners state

that Cook Inlet Region, Inc. [CIRI] has no parent company.

Because initial ownership of CIRI’s stock was

restricted to Alaska Natives and because the stock is subject

to alienability restrictions, there is no “publicly held company

owning 10% or more of the corporation’s stock.”

The alienability restrictions are found in the Alaska

Native Claims Settlement Act, ANCSA § 7(h)(1)(B) and

(C) [43 U.S.C. § 1606(h)(1)(B) and (C)].

—1li—

TABLE OF CONTENTS

SPUPHeD RORIEUEE WORENIRIIN BHEID 5. scaseccssososcnsssonseovosansessesnvevscsssosesses i

Se III science cieneosaiesbsensadinstnnienessainesasoeiceotevascosesen il

BR OMEE AE FART BERTIE EELS pe csnesecscsosnsesssesssnsnsecscesosssecsecesosees iv

III (aisles si nnsiensbcsuirseisenssisianéaniesesensenceneesinsse 2

eT I eda ees shinai udsiatekanbebdoe akan béasenesionennersnis 2

a I ashi cscsnsnsssnusindindeeeviiinsohonsdisecsicsonens 3

aU WMOOtMT ET GOR? PPAR CASE cc sccessesecesesesssssvesscosssssoscvesensace 6

REASONS FOR GRANTING THE WRIT uu... .eceeeeeees 1]

I. There is a conflict among the circuits —

They are split on federal question

jurisdiction over state law ClaimS............c:cscssesee. 1]

II. The questions left unanswered in Merrell Dow

should now be answered by this Court...............0.. 13

Ill. The friction between Smith and Moore

should be cured and put to rest ........ceccccceeceeesceeee 15

IV. This case presents a recurring jurisdictional

problem that is of broad interest and importance .... 17

V. Federal courts lack subject matter jurisdiction

when the defense of preemption is raised to

FEMOVE a Case frOM State COUTT ...........sccsesessessssesseees 18

CONCLUSION ...0.0....0-. i STC SO eee 19

TE censtace infra

— ||

TABLE OF AUTHORITIES

CASES

Alaska v. Arctic Maid, 366 U.S. 199 (1961)................c00e 18

Alaska v. Native Village of Venetie Tribal

Government, 522 U.S. 520 (1998).............ccccssssssssssseees 18

American Well Works Co. v. Layne & Bowler Co.,

8 Wee BE LOSE D iccciinsinainnnnapancainicicitinlinstanaass 12,17

Caterpillar Tractor v. Williamson,

ERE SEs Fe a EE Diiticsitcediictntihsnienusniisiinsindabecndahidiieuiaiaaieinin 19

Cort v. ASM, S22 VB GOL FO CEG Ta ciecerstcinennnnentecsnntenies 14

Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938)......... 15

Merrell Dow Pharmaceuticals v. Thompson,

SFB USS. FG (ER vesncicieescccenrsvattiincaveeninds 12, 13, 15, 16

Moore v. Chesapeake & Ohio Ry. Co.,

BOE Thay BD CP carnitnianinsevscsheencinicciastea atheonsiie 12

Smith v. Kansas City Title & Trust Co.;

OD Wee BAe GFE ii vcisicsicisinnnignipeidatentainenignananentene 11, 15

Swift v. Tyson, 16 Pet.1, 10 L.Ed. 865 (1842) .................. 15

Territory of Alaska v. American Can Company,

SOE AEs GIP e ST eineitnibitniniuapteaanitabtatibiimenataeaeiebes 18

Zobel v. Williams, 457 U.S. 55 (1982)...........cccccecseseeeeeeees 18

STATUTES

FURL. 6 Maik diccicindidcatieie ns 10

GSU. § NOI acon nstescceesccctsietsescecd 3

SUTRA s conkintcakeca ne 3

Fh i. : eC RE AEB ERNE Yeo en 10

IS EI icc cients aes dame aa 19

AMCBA 6 ARUBA sivoicneianiteca as 3, 19

WETS, TO i seiecictccsisvininiasccaniiitec ere 3, 10, 18

PREIS Di cswiissiscthssrecncisnoustledecaosidant il acme 19

DOUTE GE siiisidisihciinitlosteiostigia tie ee oe eee 17

All MOGI issirincccecccaisiuiiene ss 3, 4,6

BAG VOIR iiireicectcsceninntitaniacta ee 3, 4,6

SE OID acienitsiis bikie Msi ttl NC a 6

WS OM IOID iiss 4,8

RULES

UNE SE TN DE as iiiciceritnctinannieiitinieseatsiach 18

——

TREATISES AND OTHER AUTHORITIES

18B AMJUR2D, Corporations, §1220 (1985)............cceeeee 7

BRANSON, CORPORATE GOVERNANCE, V (1993) .........000 14

CHEMERINSKY, FEDERAL JURISDICTION (3rd ed. 1999)......9

CLARK, CORPORATE LAW, §1.2, 13 (1986).................0000 7

CURRIE, FEDERAL JURISDICTION IN A NUTSHELL

CRU OE, asi cccticeitintncinadicenniitnnlatnitaibiaiaaittidiadiinaiiaianlees 16

FLETCHER, CYCLOPEDIA OF THE LAW OF PRIVATE

CORPORATIONS, (1995 rev'd. VOI.)............cccccsceescscceeeees 7

HENN AND ALEXANDER, LAWS OF CORPORATIONS,

Bae (56 C6, FO titeitionceiutdiea eee ns 7

LAW REVIEW ARTICLES

Brudney, Equal Treatment of Shareholders in Corporate

Distributions and Reorganizations, 71 CALIF.L.REV.

BUFT & ( ED saretsaincasavevansieciachigntinbndennlanemnsvenihaaaiaueipans aa

Buxbaum, Preferred Stock — Law and Draftsmanship,

42, CALIP ESREY, BOS CODED iinsivissssnesunscsanniabvadiaiaeliniadiiets 7

Hellman, Mr. Smith Goes to Federal Court: Federal

Question Jurisdiction over State Law Claims Post-

Merrell Dow, 115 HARV.L.REV. 2272 (2002)....... 12, 13

Miller, Artful Pleading: A Doctrine in Search of

Drefathon:; 76S CREAR «EPO scicsccsssstssciovcetasbctociaviocn 16

Note, The Internal Affairs Doctrine: Theoretical

Justifications and Tentative Explanations for Its

Continued Primacy, 115 HARV.L.REV. 1480 (2002)....14

Warren, New Light on the History of the Federal

Judiciary Act of 1789, 37 HARV.L.REV. 49 (1923)...... 14

IN THE

Supreme Court of the United States

EMIL NOTTI, ET AL.,

Petitioners,

Vv.

COOK INLET REGION, INC.,

Respondent,

On Petition for a Writ of Certiorari to the

United States Court of Appeals for the Ninth Circuit

PETITION FOR WRIT OF CERTIORARI

The petitioners, Emil Notti and four of his fellow

shareholders, who are the five named plaintiffs in this

suit against their Alaska business corporation, request

that a writ of certiorari issue to review the judgment and

opinion of the United States Court of Appeals for the

Ninth Circuit that was entered in this case on 22 March

2002.

a oe

OPINIONS BELOW

The memoranda opinions and orders of the United

States District Court for the District of Alaska (John

Sedwick, J.) have not been reported. There are three such

memoranda, the first two (issued on 8 November 2000 and

on 5 December 2000) denying the plaintiff-shareholders’

motion to remand and the third (issued on 1 May 2001)

granting the respondent-corporation’s motion for summary

judgment. All three memoranda are reprinted in the

appendix, below, at pages la, 16a, and 21a.

The opinion of the Court of Appeals for the Ninth

Circuit, which was entered on 22 March 2002, is reprinted

at 31 Fed.Appx. 586 (9th Cir. 2002). The opinion is set out

in the appendix, below, at 27a.

The order denying the petition for rehearing was

entered on 19 April 2002, and also is included in the

appendix at 30a. The mandate issued on 29 April 2002.

JURISDICTION

This lawsuit was filed in a state court and later

removed to federal court. It was filed in the Superior

Court of the State of Alaska at Petersburg on 22 June 2000,

and was removed to the District Court for the District of

Alaska by a notice of removal that was filed on 11 August

2000.

The plaintiff shareholders, Notti et al., who are the

petitioners here in this Court, protested the jurisdiction of

the federal court and they moved to remand to state court.

The district court denied remand in a pair of orders issued

in late 2000, denied the shareholders’ request for leave to

file an interlocutory appeal on the remand issue, then

granted CIRI’s motion for summary judgment, and

dismissed the case by order signed on | May 2001. The

—, re

district court entered its final judgment of dismissal with

prejudice on 2 May 2001, and denied reconsideration on

11 May 2001. The shareholders noted their appeal to the

Court of Appeals for the Ninth Circuit on 31 May 2001.

The appeal was decided by a panel of three judges:

Circuit Judge Alarcon from Los Angeles, Circuit Judge

Silverman from Phoenix, and District Judge Brewster from

San Diego.

After oral argument in Seattle on 5 March 2002, the

Court of Appeals affirmed the district court’s decision in an

opinion issued on 22 March 2000. Rehearing was denied

on 19 April 2002.

Petitioners submitted a timely application to extend

the time for filing this petition for writ of certiorari, and the

application was granted by order of Circuit Justice

O’Connor on 8 July 2002. That action extended the dead-

line for filing this petition to and including 19 August

2002, the date upon which it is being filed.

The jurisdiction of the Supreme Court to review the

judgment of the Ninth Circuit is invoked under

28 U.S.C. § 1254(1).

STATUTES INVOLVED

The statutes principally involved in this case are

parts of the Alaska Corporations Code, AS 10.06 [ACC],

primarily AS 10.06.305(b) and AS 10.06.408: and the

Alaska Native Claims Settlement Act [ANCSA]: ANCSA

§ 7(h)(1)(A), which is codified at 43 U.S.C.

§ 1606(h)(1)(A); and ANCSA §7(r) [43 U.S.C.

§ 1606(r)]. These and other relevant provisions of state

and federal law are included below in the Appendix.

a on

The shareholders relied upon the state law

prohibition against setting a retroactive record date, found

in AS 10.06.408, and the requirement of equal treatment of

shares found in AS 10.06.305(b) and -.313 (‘shares of the

same class shall be identical’’):

AS 10.06.305. Creation, classes, and issuance of shares.

(b) All shares of a class shall have the same

voting, conversion, and redemption rights and other

rights, preferences, privileges, and restrictions, unless

the class is divided into series. If a class is divided into

series, all the shares of a series shall have the same

: voting, conversion, and redemption rights and other

rights, preferences, privileges, and restrictions. (§ 1 ch

166 SLA 1988).

The district court relied in part upon an Alaska

statute, AS 10.06.960(f), for the proposition that Alaska

law incorporates a federal law (ANCSA):

AS 10.06.960. Corporations organized under ANCSA.

(f) Notwithstanding the other provisions of

this chapter, a corporation organized under the act is

governed by the act to the extent the act is

inconsistent with this chapter, and the corporation

may take any action, including amendment of its

articles, authorized by the act, and the action is

considered to be approved and adopted if approved

under the act.

The federal law that was held by the lower courts to

be incorporated into the plaintiffs’ cause of action is

ANCSA §7(r) [43 U.S.C. § 1606(r)], which CIRI

argued has preempted the Alaska Corporations Code

and which allows CIRI to pay a discriminatory to

a, am

dividend only to its original shareholders who are over

the age of 65 years:

ANCSA § 7(r) [43 U.S.C. § 1606(r)]

(r) BENEFITS FOR SHAREHOLDERS OR

IMMEDIATE FAMILIES.

The authority of a Native Corporation to provide

benefits to its shareholders who are Natives or

descendants of Natives or to its shareholders’

immediate family members who are Natives or

descendants of Natives to promote the health,

education, or welfare of such shareholders or family

members is expressly authorized and confirmed.

Eligibility for such benefits need not be based on

share ownership in the Native Corporation and such

benefits may be provided on a basis other than pro

rata based on share ownership.

The petitioning shareholders rely upon ANCSA

§ 7(h)(1)(A), which says that Alaska Native corporations

are chartered and governed according to Alaska law unless

state law is expressly preempted by a specific provision of

federal law:

ANCSA § 7(h)(1)(A) [43 U.S.C. § 1606(h)(1)(A)]

RIGHTS AND RESTRICTIONS.—

(A) Except as otherwise expressly provided in

this Act, Settlement Common Stock of a Regional

Corporation shall—

(i) carry a right to vote in elections

for the board of directors and on such other

questions as properly may be presented to

shareholders;

wniadliitis

(ii) permit the holder to receive

dividends or other distributions from _ the

corporation; and

(iii) | vest in the holder all rights of a

shareholder in a business corporation organized

under the laws of the State.

(emphasis added). Statements that these corporations are

defined, created, and governed by state law are found else-

where in ANCSA, such as in §§ 3(g), 3(t), and 39.

The complete text of these statutes is set out in the

appendix, below at pgs. 31a - 39a.

STATEMENT OF THE CASE

This is a state-law contract dispute between Alaska

shareholders and their corporation; it is about corporate

discrimination in the payment of dividends: Cook Inlet

Region, Inc. [CIRI] pays extra dividends to some shares

but not to others of the same class of stock. Only original

shareholders over the age of 65 years are paid the extra

dividend of $450.00 per quarter.

The first discrimination (paid only to original

shareholders) violates AS 10.06.408 because it sets a

retroactive record date and employs “snapshot eligibility,”

the forbidden practice of using an old picture of the

shareholders to determine present eligibility.

The second discrimination (paid only to older

shareholders) violates AS 10.06.305(b), -.313, and -.542

because discriminates among holders of the same class.

No court has ever approved a discriminatory

dividend. Centuries of corporate law require that a

pe,

corporation pay its dividends in a uniform and pro rata

manner to all shares of the same class of stock.’ But the

lower courts have approved a discriminatory dividend —

and opened the door to a tidal wave of corporate

discrimination—doing so on the most slender reed: an

implied preemption of a monolithic rule of state law by a

weak, amorphous federal statute.

A third flaw in CIRI’s discriminatory dividend is

that all of its directors are original shareholders, so they

voted themselves a special financial benefit that was not

; When a corporation makes distributions and pays divi-

dends to shareholders, it must do so on a pro rata basis and

without discrimination. Victor Brudney, Equal Treatment of

Shareholders in Corporate Distributions and Reorganizations,

71 CALIF.L.REV. 1072, 1076-78 (1983) (“Dividends among

shareholders of the same class generally must be distributed on

a pro rata basis without discrimination or preference.”). See also,

Richard M. Buxbaum, Preferred Stock — Law and

Draftsmanship, 42 CALIF.L.REV. 243, 247 (1954) (“Dividend

rights of shareholders are contractual.” “Equal shares receive

equal dividends.”); FLETCHER, 11 CYCLOPEDIA OF THE LAW OF

PRIVATE CORPORATIONS, § 5352 (1995 rev’d. vol.)

(“Dividends among shareholders of the same class generally

must be distributed on a pro rata basis without discrimination or

preference. In other words, the board of directors cannot pay

dividends only to certain shareholders to the exclusion of others of

the same class”). See generally, CLARK, CORPORATE LAw,

$1.2, 13 (1986) (shares of common stock possess rights,

including “the right to share pro rata (that is, the same amount

for each share) in dividend payments”); HENN AND AL-

EXANDER, LAWS OF CORPORATIONS, §324 (3d ed. 1983) (“The

basic dividend rule is that all shareholders participate ratably in

dividends”); 18B AMJUR2D, Corporations, §1220 (1985)

(“Directors have no authority to declare a dividend on any other

principle”).

iil its

approved by disinterested directors and that was not

approved by the general rank-and-file shareholder

population, as required by AS 10.06.478(a)(1) and (2).

The special dividend was poisoned by the directors’

conflict of interest.

‘The plaintiffs’ complaint meticulously stated only

state corporate law causes of action. On its face it

contained no federal law claims, only the statutory and

parallel common law claims under the state corporations

code.

CIRI was successful in persuading the district court

that a purely state law claim is really a federal law claim

because AS 10.06.960(f) incorporates ANCSA by refer-

ence. Here is the central passage in the district court’s de-

cision, which explains the heart and soul of this jurisdic-

tional battle:

Here, for reasons already discussed, ANCSA is an

integral part of the state provisions in question. The

substantive scope of state law is defined by reference to

federal law. The federal question does not arise as a

defense; instead, it defines the nature of state law.

Under these circumstances — admittedly somewhat

unique — federal law is a “necessary element” of the

state claim. It seems probable to this court that federal

question jurisdiction exists.

Notti raises another argument which is less

easily dismissed. Citing Third and Fifth Circuit

precedent, Notti contends that a federal claim subsumed

within a state cause of action creates a federal question

only when the federal law creates a cause of action.

There is some support for this argument. Indeed,

perhaps the leading contemporary scholar, Professor

Erwin Chemerinsky, writes:

The decisions interpreting § 1331 can be best

summarized by the following principle: A case

an EF

arises under federal law if it is apparent from the

face of the plaintiff's complaint either that the

plaintiffs cause of action was created by federal!

law; or, if the plaintiffs cause of action is based

on state law, a federal law that creates a cause of

action is an essential component of the plaintiff’s

claim. [Erwin CHEMERINSKY, FEDERAL JURIS-

DICTION, § 5.2.3 at 274 (3rd ed. 1999)*]

However, the Ninth Circuit has not adopted this test.

Furthermore, the test adopted by the Ninth Circuit

(discussed above) appears to apply a different standard.

Moreover, even Professor Chemerinsky concedes that

United States Supreme Court precedent is

“inconsistent” and that “the Court has never formulated

a clear test for deciding when a case ‘arises under’

federal law for purposes of § 1331. In analyzing

whether a federal claim subsumed within a state cause

of action may create a federal question, Professor

Chemerinsky emphasizes that “[u]nfortunately, the

Supreme Court has not formulated a clear test to

determine when the presence of a federal law in a state

law action constitutes a federal question.” Professor

Chemerinsky additionally observes that, under the

United States Supreme Court’s decision in Franchise

Tax Board v. Construction Laborers Vacation Trust,

federal question jurisdiction exists if the “federal law

creates the cause of action or . . . [if] the plaintiffs right

to relief necessarily depends on resolution of a

substantial question of federal law.” This alternate

?

-

The district court should have turned the page and read

Professor Chemerinsky’s following subsection, entitled Federal

statute must itself create a cause of action in order to

understand why ANCSA does not give rise to § 1331 juris-

diction. See id., § 5.2.3 at pgs. 284-85. See also, id. at 280 -83,

discussing Smith jurisdiction and the Merrell Dow case.

es

formulation suggests that the federal law need not

create a cause of action to support federal question

jurisdiction.

Consequently, although one might read authority

from other circuits to support Notti’s position that the

federal law subsumed within a state claim must create a

cause of action before a federal question will exist, this

principle does not appear to be as clear as Notti

contends.

District court’s PRELIMINARY ORDER, 8 November 2000.

Complete text in Appendix, infra, at 6a - 7a.

The district court veered off the road because it

failed to observe the quintessential features of CIRI’s

statute, ANCSA § 7(r), which:

Does not create a cause of action — because it is a

purely permissive statute; it is passive, does not

command or prohibit any conduct. Therefore it cannot

be violated. Neither a corporation or a shareholder

could sue to enforce this law because there is nothing to

enforce.

Does not contain a remedy — no _ enforcement

provision or mechanism and nothing to enforce.

Does not displace state law — because it is merely

passive and permissive.

Does not contain a jurisdictional grant — on the

contrary, Congress said ANCSA does not confer

jurisdiction. ANCSA § 2(f) [43 U.S.C. § 1601(f)] (“no

provision of this Act shall be construed to constitute a

jurisdictional act, to confer jurisdiction to sue, nor .. .”).

waa iles:

REASONS FOR GRANTING THE WRIT

I. THERE IS A CONFLICT AMONG THE

CIRCUITS — THEY ARE SPLIT ON FEDERAL |

QUESTION JURISDICTION OVER

STATE LAW CLAIMS

Either by serendipity or by petitioners’ unalloyed

good fortune, the most recent issue of the HARVARD

LAW REVIEW bears an article that explains it all.’

The central question is when, and under what

circumstances, does a federal court have jurisdiction to

decide claims that arose under state law? When one

body of law incorporates the other? (Usually it is state

law that incorporates federal law, but sometimes the

converse situation is presented.)

The origin of the debate and_ continued

uncertainty about this topic can be traced at least as far

back as this Court’s decision in Smith v. Kansas City

Title & Trust Co., 255 U.S. 180 (1921). In Smith, Justice

Holmes dissented and adhered to his rule (known as the

: Matthew S. Hellman, Mr. Smith Goes to Federal Court:

Federal Question Jurisdiction over State Law Claims Post-

Merrell Dow, 115 HARV.L.REV. 2272, 2279-82 & especially nn.

49-52 (2002) (“the circuits have split nearly evenly, and

sometimes within themselves, on the status and scope of

Merrell Dow’s private right of action requirement”)

[hereinafter: Mr. Smith Goes to Federal Court}.

ee | ee

“Holmes Test’) that “‘a suit arises under the law that

creates the cause of action.””

After Justice Holmes retired, this issue resurfaced

in the Moore case’, which has become the antipode of

Smith.

The Smith and Moore cases have taken opposite

views about when a case arises under federal law where

the initial claim or cause of action is a state law claim.

This issue arose again in Merrell Dow Pharmaceuticals

v. Thompson, 478 U.S. 804 (1986), which might seem to

approve of Smith while expressing a narrower — though

vague in critical respects — view of permissible federal

interests.

As Mr. Hellman explains in his current article,

there is not merely confusion and uncertainty in this area

of law, but there is outright conflict between the

circuits”:

In light of this conflicting language and the

Court’s subsequent silence, the circuits have split

nearly evenly, and sometimes within themselves,

on the status and scope of Merrell Dow’s private

American Well Works Co. v. Layne & Bowler Co., 241 US.

257, 260 (1916) (Holmes, J.).

> Moore v. Chesapeake & Ohio Ry. Co., 291 U.S. 205 (1934).

6

There is also intra-circuit conflict within the Ninth Circuit.

Mr. Smith Goes to Federal Court, 115 HARV. L.REV. at 2281 &

n. 50 (2002). This petition focuses on the inter-circuit conflict,

which poses an issue of nation-wide importance. The Ninth

Circuit’s woes also can be resolved if this Court will grant

review and fashion a workable rule.

an, |, en

on the status and scope of Merrell Dow’s private

right of action requirement. The crux of the

disagreement is whether the presence of a private

right of action is the only road to Smith jurisdiction

after Merrell Dow or whether Smith jurisdiction

remains open for state law claims that present

federal issues that a federal court should decide.

As a result of the nearly even split among the

appellate courts, litigants will find it difficult to

predict whether a court will take jurisdiction over

their Smith claims in the absence of a federal cause

of action.

Mr. Smith Goes to Federal Court, at 2281-82 (footnotes

omitted).

Conclusion: This court should resolve the conflict

among the circuits by adopting a bright line rule that

allows § 1331 jurisdiction only when the federal law at

issue both creates a private cause of action under federal

law and also provides a remedy under federal law.

Il. THE QUESTIONS LEFT UNANSWERED IN

MERRELL DOW SHOULD NOW BE

ANSWERED BY THIS COURT

This Court’s decision in Merrell Dow has left a

trail of uncertainty because that decision embraces

conflicting rules about federal jurisdiction.

om | ee

The uncertainty is the need, vel non, for a private

right of action? And for a private remedy? ’

Merrell Dow does say that “the mere presence of

a federal issue in a state cause of action does not auto-

matically confer federal-question jurisdiction,” id., 478

U.S. 813. However, the opinion confuses judges and

practicing lawyers by failing to address the importance

of an independent federal cause of action in the jurisdic-

_ tional formula. Is it desirable but not necessary? Or is it

a sine qua non for § 1331 jurisdiction? See, id., 478 U.S.

at 814 & n.12 (focusing on nature of the claim and

interest balancing—not the stuff from which practical

rules can be fashioned).

Again, Mr. Hellman’s article informs the

discussion. Part II of the article “argues that discretion is

undesirable, as a policy matter, to the extent that it leads

: The importance of both a private cause of action and a

private remedy can be traced to the four-factor test of Cort v.

Ash, 422 U.S. 66, 78 (1975), where Justice Brennan collected

the four elements that must be considered when deciding

whether there is a remedy to be found in a federal statute that

does not expressly provide one.

Cort v. Ash is the first of several adoptions by this Court

of the Internal Affairs Doctrine, which says that “state law will

govern the internal affairs of the corporation.” /d., 422 U.S. at

84. See also, DOUGLAS M. BRANSON, CORPORATE GOVERNANCE,

v (1993) (“state law is the heart and soul of United States

corporation law’). See generally, Note, The Internal Affairs

Doctrine: Theoretical Justifications and-Tentative Explanations

for Its Continued Primacy, 115 HARV.L.REv. 1480 (2002).

—_—) we

to a lack of clarity about jurisdictional rules.” Mr. Smith

Goes to Federal Court, at 2273, 2277-84.

To clarify the law in the wake of Merrell Dow,

this court should explain:

e Is a private cause of action under federal law a sine

qua non for the existence of § 1331 jurisdiction?

e Can Smith jurisdiction exist in the absence of a

private right of action? .

Conclusion: This court should decide whether the

doctrine of Smith v. Kansas City Title & Trust Co., and

its younger cousin, Merrell Dow, allow a federal court to

find federal question jurisdiction in a suit presenting a

state law claim, where the federal law incorporated by

the state claim does not create a federal cause of action

and does not provide a federal remedy.

. Reliance upon a law review article to explain the need

for a change in the law of federal jurisdiction has historic prece-

dent in this Court. The famous example from legal history is

the celebrated article by Charles Warren, New Light on the

History of the Federal Judiciary Act of 1789, 37 HARV.L.REV.

49, 84-88 (1923), which revealed the historical error in Swift v.

Tyson, 16 Pet.1, 10 L.Ed. 865 (1842), and which lead to Swift’s

overruling in Erie Railroad Co. v. Tompkins, 304 U.S. 64

(1938).

a.

Ill. THE FRICTION BETWEEN SMITH AND

MOORE SHOULD BE CURED AND PUT TO REST

Long enough. This problem has been with us

since 1934. Even Mr. Justice Brennan thought the two

cases were causing trouble:

My own view is in accord with those

commentators who view the results in Smith and

Moore as irreconcilable.

Merrell Dow, 478 U.S. at 821-22, n. 1 (Brennan, J.

dissenting).

The academic community agrees. Professor

Currie devotes six pages of his little treatise to the Smith

- Moore debate, concluding:

It is not easy to reconcile these decisions. In

Moore as well as Smith the result turned upon

construction of federal law; in neither case did

federal law provide a remedy.

DAVID P. CURRIE, FEDERAL JURISDICTION IN A

NUTSHELL, 70 - 75 (4th ed. 1999). Professor Miller

seems to agree. See, e.g., Arthur Miller, Artful Pleading:

A Doctrine in Search of Definition, 76 TEX.L.REV. 1781,

1786-93 (collecting cases that illustrate the confusion in

the law on this topic).

Conclusion: This Court should resolve the apparent

conflict between Smith and Moore by adopting a bright line

rule that allows § 1331 jurisdiction only when the federal

law at issue both creates a cause of action under federal law

and also provides a remedy under federal law.

a

Or, the Court should disapprove or overrule Smith

and either fashion a workable new rule or return to the

Holmes Test °(a “suit arises under the law that creates the

cause of action”).

IV. THIS CASE PRESENTS A RECURRING

JURISDICTIONAL PROBLEM THAT IS OF

BROAD INTEREST AND IMPORTANCE

The dispute about Smith jurisdiction and the need to

resolve issues left open in Merrell Dow are issues of

nation-wide importance. But this case is also important to

Alaska because of the large number of Alaska Native

corporations that are chartered and governed by state

corporate law — but that law might give rise only to

federal cases? If so, then the internal affairs of Alaska’s

corporations will no longer be decided by Alaska courts;

the Supreme Court of Alaska will no longer be the law

giver on matters of corporate law in this State.

This case is also of great importance to the State

of Alaska, to its economy and to its Native peoples.

More than 200 Alaska Native corporations will be

affected by this case. A significant part of Alaska’s

residents are shareholders in Alaska corporations. CIRI

alone has more than 7,000 shareholders. These

corporations have received almost one billion dollars of

federal money and title to an area the size of Missouri

American Well Works Co. v. Layne & Bowler Co., 241 U.S.

257, 260 (1916) (Holmes, J.).

|

and Kentucky combined. ANCSA §§ 6, 9, 11-16 [43

U.S.C. §§ 1605, 1608, 1610 - 1615].

This Court has a grand tradition of granting

review in cases that are of special importance to Alaska.

Alaska v. Arctic Maid, 366 U.S. 199, 201-02, 6 L.Ed.2d

227, 81 S.Ct. 929 (1961)(“The case is here on a petition

for certiorari which we granted because of the

importance of the ruling to the new State of Alaska.”).

Other cases of the genre include: Territory of Alaska v.

American Can Company, 358 U.S. 224 (1959)(certiorari

“granted in view of the fiscal importance of the question

to Alaska”), Zobel v. Williams, 457 U.S. 55 (1982)

(striking down state-wide dividend distributions that

were based upon length of residency in Alaska), and

Alaska v. Native Village of Venetie Tribal Government,

522 U.S. 520, 534 (1998) (“it is worth noting that

Congress conveyed ANCSA lands to state-chartered and

state-regulated private business corporations, hardly a

choice that comports with a desire to retain federal

superintendence over the land”) (italics in original).

V. FEDERAL COURTS LACK SUBJECT

MATTER JURISDICTION WHEN THE

DEFENSE OF PREEMPTION IS RAISED TO

REMOVE A CASE FROM STATE COURT

This case is a good candidate for summary

reversal under Supreme Court Rule 16.1 (“The order

may be a summary disposition on the merits.’’).

This case started in an Alaska State court as a

purely Alaska case. The complaint alleged CIRI had

breached its shareholder contract by paying dividends in

—

violation of Alaska corporations statutes and in violation

of the Alaska common law of corporations.

CIRI removed the case on the reasoning that its

federal statute, ANCSA § 7(r), has preempted the

corporations law of Alaska. Indeed, the Ninth Circuit

opinion found a preemption of Alaska law. Notti v.

CIRI, 31 Fed.Appx. 586, 587 (“ANCSA expressly

preempts Aiaska law’’).

Implicit or explicit, neither form of preemption

asserted by CIRI is sufficient to support removal from a

state court.

[I]t is now settled law that a case may not be

removed to federal court on the basis of a federal

defense, including the defense of pre-emption, even

if the defense is anticipated in the plaintiff’s

complaint and even if both parties concede that the

federal defense is the only question truly at issue.

Caterpillar Tractor v. Williamson, 482 U.S. 386, 393, 96

L.Ed.2d 318, 327, 107 S.Ct. 2425 (1987) (italics in the

original).

This is not a case where there is complete pre-

emption. Contrary: ANCSA §§ 2(f), 3(g), 3(t),

§ 7(h)(1)(A), and 39 expressly adopt state law to define,

create and govern these corporations and their programs.

CONCLUSION

We need a new rule. A bright line rule, not a

fuzzy unworkable rule.

A final decision about the permissible dividends

that can be paid by an Alaska corporation was made by

three appellate judges whose chambers are in Phoenix,

Los Angeles, and San Diego — thousands of miles from

Va

a ee

CIRI’s shareholders in Anchorage, Alaska. This is the

harm done by the Ninth Circuit’s far-reaching grab of

subject matter jurisdiction.

The Petition for Certiorari should be granted or

the Ninth Circuit’s decision should be vacated with

instructions to remand to State court.

In the alternative, this Court should summarily

reverse the decision of the Court of Appeals. Supreme

Court Rule 16.1.

Respectfully submitted this 19th day of August in

2002 at Petersburg, Alaska.

Fred W. Triem

Triem Law Office

Box 129

Petersburg, Alaska

99833-0129

triemlaw@alaska.net

(907) 772-3917

Attorney for Petitioners

Seaman ieee

PETITIONERS’ APPENDIX

TABLE OF CONTENTS

Lower Court Decisions:

Appendix A — District Court’s Ist order..........cccccceeeeeeees la

Appendix B — District Court’s 2nd OTUET...sssessesersesrssessssees 16a

Appendix C — District Court’s 3rd order ...........cccccceceeeeee 21a

Appendix D — Ninth Circuit Opinion ...............ccccceeeeeeees 27a

Appendix E — Ninth Circuit Denial of Rehearing.............. 30a

Constitutional and Statutory Provisions Involved:

Alaska Statutes — Alaska Corporations Code ...............000.. 3la

a Ne occ cccesevvccecsevcccesecccecsesceesse 36a

Federal Statutes — Jurisdiction & Removal (28 USC)....... 36a

Federal Statutes — ANCSA (43 USC)............ccccccccccssssesseee 37a

APPENDIX A

UNITED STATES DISTRICT COURT

DISTRICT OF ALASKA

Case No. JOO-20 CV (JWS)

EMIL NOTTI; JAMES GROTHA; GLEN KERR; SAM

PEDRO; ELLA RING, et a/., PLAINTIFFS

V.

COOK INLET REGION, INC. [CIRI], DEFENDANT

Filed November 8, 2000

PRELIMINARY ORDER

[Re: Motion to Remand - Docket 11]

I. NATURE OF ORDER

At docket 11, plaintiffs Emil Notti, et a/, move to

remand this case to state court. Defendant Cook Inlet Region,

Inc. (“CIRI’’) opposes the motion. Oral argument is scheduled

for November 30, 2000, at 8:30 a.m., in Anchorage, Alaska.

This preliminary order reflects the court’s tentative views

concerning the motion at docket 11. It is intended to assist

the parties prepare for and conduct oral argument. This

preliminary order does not reflect the court’s final order. The

la

|

2a

court may or may not adopt this preliminary order as its final

order after oral argument is conducted. This preliminary order

does not authorize the filing of any supplemental briefing.

Il. BACKGROUND

CIRI is a corporation organized pursuant to the

Alaska Native Claims Settlement Act, 43 U.S.C. §§ 1601 et

seq. (“ANCSA”). CIRI instituted an Elders Benefit Program

which distributed dividends to shareholders age 65 or older.

Notti contends that the Elders Benefit Program violates

Alaska state law which prohibits discriminatory dividend

distribution among shareholders.’ CIRI removed to federal

court asserting federal question jurisdiction existed because

an ANCSA provision, 43 U.S.C. § 1606(r), authorizes the

preferential dividend that CIRI granted. Notti seeks remand.

Other facts are noted below.

Ill. STANDARD OF REVIEW

Subject matter jurisdiction may be challenged at any

time by either party or the court sua sponte.” Removal

statutes are strictly construed against removal, and any doubts

regarding removal must be resolved against removal and in

favor of remand.° If at anytime after removal it appears that

' See AS 10.06.305(b).

72 James Moore, Moore’s Federal Practice, § 12.30{1], at 12-33

(3d ed. 1998) Moore note:

[E]ven if the litigants do not identify a potential problem

in that respect, it is the duty of the court—at any level of

the proceedings—to address the issue sua sponte

whenever it is perceived.

Id.

3 Gaus v. Miles, Inc. 980 F.2d 564, 566 (9th Cir. 1992)

3a

the district court lacks subject matter jurisdiction, the case

shall be remanded.” The removing party bears the burden of

proof and persuasion.” Doubtful or close cases should be

remanded.°

IV. DISCUSSION

Notti argues that federal question jurisdiction does

not exist and that CIRI’s removal was procedurally defective.

Both arguments are analyzed below.

A. Whether Federal Question Jurisdiction Exists

To evaluate whether federal question jurisdiction

exists, the court looks to the face of the complaint.’ Either the

complaint must allege a federal cause of action or plaintiff’s

claim must depend “on . . . resolution of a substantial

question of federal law.”* The court usually confines its

assessment to the face of the complaint under the well-

pleaded complaint rule. However, federal question

jurisdiction exists in cases of complete preemption or if

“vindication of a right under state law necessarily turn[s] on

some construction of federal law.”” The Ninth Circuit has

distilled the relevant principles into the following test:

*28 U.S.C. § 1447(c).

° 14C Charles Alan Wright, Arthur R. Miller, and Edward H.

Cooper, Federal Practice and Procedure, § 3739, at 424, 470 (3d

ed. 1998) (“Wrighi).

° Wright, § 3739, at 446.

” See Easton v. Crossland Mortgage Corp., 114 F.3d 979, 982 (9th

Cir. 1997).

* Id. (quoting Franchise Tax Bd. v. Construction Laborers

Vacation Trust, 463 U.S. 1, 27-28, 103 S. Ct. 2841, 2856 (1983)).

” See Berg v. Leason, 32 F.3d 422, 423 (9th Cir. 1994) (quoting

Franchise Tax, supra, 463 U.S. 1, 9, 103 S. Ct. 2841, 2846

(1983)). ;

4a

A state-created cause of action can be deemed to

arise under federal law (1) where federal law

~ completely preempts state law [citations omitted];

(2) where the claim is necessarily federal in

character [citation omitted]; or (3) where the right to

relief depends on the resolution of a substantial,

disputed federal question. '°

Here, Notti’s claims allege violation of the Alaska

State Corporation Code, AS 10.06 et seg. for discriminatory

dividend distribution. However, Title 10 expressly

incorporates ANCSA with respect to its application. In

relevant part, Title 10 provides:

Notwithstanding the other provisions of this chapter,

a corporation organized under [ANCSA] is governed

by [ANCSA] to the extent [ANCSA] is inconsistent

with this chapter, and the corporation may take any

action, including amendment of its articles,

authorized by [ANCSA]..."

Consequently, application of Alaska state law “tums on”

construction of ANCSA, which is undeniably a federal law.

CIRI therefore contends that federal question -jurisdiction

exists.

Notti argues that incorporation of federal law into a

state-created cause of action does not create a federal question

for purposes of Section 1331. However, this sweeping

proposition is too broad, and the authorities relied upon by

Notti are unavailing. It is true, as Notti contends, that a state

claim will not be converted into a claim arising under federal

'° See ARCO Environmental Remediation L. L. C. v. Department

of Health and Environmental Quality, 213 F.3d 1108, 1114 (9th

Cir. 1998).

'! See AS 10.06.960(f).

Sa

law simply because it references, relates, or depends upon

federal law to some degree. For example, in Merrell Dow

Pharmaceuticals v. Thompson, the United States Supreme

Court held that a state negligence claim based, in part, on an

alleged violation of federal law did not create a federal

question where Congress had expressly precluded private

causes of action to enforce the federal law at issue.'* In Rains

v. Criterion Systems, Inc.,’* the Ninth Circuit held that if a

claim “can be supported by alternative and independent

theories—one of which is a state law theory and one of which

is a federal law theory—federal question jurisdiction does not

attach because federal law is not a necessary element of the

claim.”'* In Berg v. Leason,'* the Ninth Circuit held that a

state law malicious prosecution claim did not arise under

federal law just because one of the elements required analysis

of the underlying federal claim to determine whether it was

legally untenable. .

But these authorities are inapposite to the

circumstances facing the court in this case. Here, Congress

has not precluded private causes of action regarding the

ANCSA provision in question. The court is not faced with

alternative and independent theories. Instead, there is one

state claim which expressly incorporates federal law and

which hinges upon interpretation and application of that law.

In analogous situations, the Ninth Circuit has held that federal

question jurisdiction existed. By way of illustration, in Sparta

Surgical Corp. v. National Assoc. of Securities Dealers,

'? See Merrell Dow, 478 U.S. at 817, 106 S.Ct. at 3237.

'? F.3d 339 (9th Cir. 1996).

'* Id. at 346.

'S 32 F.3d 422 (9th Cir. 1994).

'° Id. at 424-26.

6a

Inc.,'” the court held that federal question jurisdiction existed

because ‘although Sparta’s theories are posited as state law

claims, they are founded on the defendants’ conduct in

suspending trading and de-listing the offering, the propriety

of which must be exclusively determined by federal law.”'*

Here, for reasons already discussed, ANCSA is an integral

part of the state provisions in question. The substantive scope

of state law is defined by reference to federal law. The federal

question does not arise as a defense; instead, it defines the

nature of state law. Under these circumstances--admittedly

somewhat unique—federal law is a “necessary element” of

the state claim. It seems probable to this court that federal

question jurisdiction exists.

Notti raises another argument which is less easily

dismissed. Citing Third and Fifth Circuit precedent, Notti

contends that a federal claim subsumed within a state cause of

action creates a federal question only when the federal law

creates a cause of action. There is some support for this

argument. Indeed, perhaps the leading contemporary scholar,

Professor Erwin Chemerinsky, writes:

The decisions interpreting § 1331 can be best

summarized by the following principle: A case arises

under federal law if it is apparent from the face of

the plaintiff's complaint either that the plaintiffs

cause of action was created by federal law; or, if the

plaintiffs cause of action is based on state law, a

federal law that creates a cause of action is an

essential component of the plaintiff’s claim.'”

'7 159 F.3d 1209 (9th Cir. 1998).

'8 Td. at 1212.

'? See Erwin Chemerinsky, Federal Jurisdiction at 274 (3d. ed.

1999) (“Chemerinsky” ).

7a

However, the Ninth Circuit has not adopted this test.

Furthermore, the test adopted by the Ninth Circuit (discussed

above) appears to apply a different standard. Moreover, even

Professor Chemerinsky concedes that United States Supreme

Court precedent is “inconsistent” and that “the Court has

never formulated a clear test for deciding when a case ‘arises

under’ federal law for purposes of § 1331.*° In analyzing

whether a federal claim subsumed within a state cause of

action may create a federal question, Professor Chemerinsky

emphasizes that “[u]nfortunately, the Supreme Court has not

formulated a clear test to determine when the presence of a

federal law in a state law action constitutes a federal

question.””! Professor Chemerinsky additionally observes

that, under the United States Supreme Court’s decision in

Franchise Tax Board v. Construction Laborers Vacation

Trust,’ federal question jurisdiction exists if the “federal law

creates the cause of action or . . . [if] the plaintiffs right to

relief necessarily depends on resolution of a substantial

question of federal law.” This alternate formulation

suggests that the federal law need not create a cause of action

to support federal question jurisdiction.

Consequently, although one might read authority

from other circuits to support Notti’s position that the federal

law subsumed within a state claim must create a cause of

action before a federal question will exist, this principle does

” Id.

*! See Chemerinsky, supra at 281.

* 463 U.S. 1, 103 S. Ct. 2841(1983).

*> See Chemerinsky, supra, at 281 (quoting Franchise Tax Board

[citation omitted]) (emphasis added).

8a

not appear to be as clear as Notti contends. Commenting on

the unsettled state of law, Professor Chemerinsky states:

The important, underlying issue, of course, is when

does the presence of a federal issue in a state law

claim present a federal question? Unfortunately, no

formula or criteria exist; the Court never has done

better than Justice Cardozo’s explanation [that the

federal question must be an essential and important

element of a plaintiffs cause of action]. A majority

of the Court has now endorsed the position advanced

by commentators that the existence of a federal

question depends on “an evaluation of the nature of

the federal interest at stake.” But the Court has not

elaborated on the content or structure of that

evaluation. Moreover, such an approach to defining

federal question jurisdiction § inherently is

unpredictable, vesting great discretion in the district

court to determine the nature of the federal interest

and to decide whether that interest merits federal

jurisdiction for the state law claim.”*

This “interest-based” analysis militates in favor of CIRI. The

federal interest in Native American affairs generally and

ANCSA-related matters in particular is undeniably

paramount. This, coupled with the fact that the state law in

question hinges upon interpretation and application of

ANCSA, ultimately persuades this court that federal question

jurisdiction probably exists. This is a preliminary order, and

the court will afford Notti an opportunity to persuade the

court that the tentative views expressed in this order are

incorrect. However, based on this court’s understanding of

the relevant legal principles, it seems probable that federal

question jurisdiction exists.

*4 See Chemerinsky, supra, at 283-84.

9a

B. Whether CIRI’s Removal was Untimely and

Procedurally Defective

Notti argues that CIRI’s removal was untimely and

procedurally defective. With respect to the timeliness of

CIRI’s removal, the record establishes that Notti mailed a

courtesy copy of the complaint to CIRI on or about June 22,

2000, and effected service on or about July 25, 2000. CIRI

removed on August 11, 2000. Prior to 1999, these facts would

have required the court to construe and apply the “receipt

rule’—a rule which fostered confusion and resulted in many

conflicting decisions. > However, in 1999 the United States

Supreme Court handed down its opinion in Murphy Brothers,

Inc v. Michetti Pipe Stringing, Inc., 76 which held that, for

purposes of the 30-day period governing removal, time runs

from actual service and not from receipt of a courtesy copy of

the complaint.” Murphy Brothers establishes that CIRI’s

removal was timely. Notti did not effect proper service until

on or about July 25, 2000. CIRI removed on August 11, 2000.

This was well within the 30-day period governing removal. “

Notti also contends that the removal procedures were

defective because (allegedly) CIRI did not file a copy of the

removal notice with the state court. Notti contends that

removal is not effective until such a time as the notice is

*> See, e.g., 14C Charles Alan Wright, Arthur R. Miller, and

Edward H. Cooper, Federal Practice and Procedure, § 3732 at

281-93, 300 (3d ed. 1998) (citing and _ discussing

authorities)( “Wright” ). For a brief but helpful discussion of the

“receipt rule,” see Chart Development Corporation v. West Slope

Water Dist., 22 F. Supp. 2d 1169, 1170 (D. Ore. 1998).

6 526 U.S. 344, 119 5. Ct. 1322 (1999).

?” See Murphy Brothers, 526 U.S. at 347-48, 356,1195. Ct. at 1325,

1329-30.

28 Soe 28 U.S.C. § 1446(b).

10a

filed.”’ The statute governing removal procedures provides, in

relevant part:

Promptly after the filing of such notice of removal of

a civil action the defendant or defendants shall give

written notice thereof to all

adverse parties and shall file a copy of the notice

with the clerk of such State court, which shall effect

the removal and the State court shall proceed no

further unless and until the case is remanded.”

Professor Wright states that “removal is effected by . . . three

procedural steps: filing a notice of removal in the federal

court, filing a copy of this notice in the state court, and giving

prompt written notice to all adverse parties.”’' Some courts

have held that removal is effective once the notice is filed in

federal court “and that later completion of the other steps

operates to vest subject matter jurisdiction in the federal court

as of the earlier date.”’* But, according to Professor Wright,

“the sounder rule, and the one most consistent with the

language of Section 1446(d) of Title 28, is that removal is not

effective until all the steps required by the federal statute have

been taken by the defendant.’’’ However, Professor Wright

qualifies this observation by noting that “[t]he filing of a copy

of the notice of removal in the state court is a procedural and

ministerial act and a number of federal courts have held that a

failure to do so will not defeat the district court’s subject

” See 28 U.S.C. § 1446(d).

” See 28 U.S.C. § 1446(d).

* See Wright, supra, § 3737 at 381.

2 Td. (citing cases).

*® Td. at 382 (citing cases).

lla

matter jurisdiction.”** Professor Wright instructs that [if] the

plaintiff does object [to a defendant’s failure to file the notice

with state court], the defendant must correct its defective

removal by filing a notice of removal with the state court

clerk or by explaining its failure to do so to that court.””° The

parties have not cited any Ninth Circuit authority, and the

court’s preliminary research has not discovered any offering

guidance.

Here, it is not precisely clear if or when CIRI filed its

notice with the state court, but a fair reading of the entire

record implies that the notice was filed on or about

September 11, 2000. CIRI previously submitted two

affidavits at docket 12. These affidavits are from Lani Gerkin,

secretary to Mark Rinder, Esq., representing CIRI in this

matter, and James Edward Eastman, owner of a courier

service. According to Ms. Gerkin and Mr. Eastman, CIRI

attempted to mail a copy of the removal notice to state court

on August 11, 2000, but for some unexplained reason the

courier service employee who picked up the notice failed to

mail it as directed. The notice filed by CIRI at docket 12

concludes by advising that “[a] copy of the Notice of

Removal, which was to be filed with the Superior Court in

Petersburg, has been again sent by Express Mail on

September 11, 2000, to the court in Petersburg for filing.””°

Assuming that the notice has, in fact, been filed in

state court, these facts present the court with an issue of

apparent first impression in the Ninth Circuit; specifically,

whether filing a notice with state court after the 30-day period

has run operates to cure an otherwise procedurally defective

4 See Wright, supra, § 3736 at 379.

*§ Td. at 380.

*© See Notice, docket 12, at p. 2.

12a

removal. CIRI relies on a Fifth Circuit case, Dukes v. South

Carolina Ins. Co.,*’ which held that “[fJailure to file a copy

of the removal petition with the state court clerk is a

procedural defect, and does not defeat the federal court’s

jurisdiction.”** This rule has been adopted by at least one

district court in the Ninth Circuit.’ This court is not

necessarily convinced that the Dukes rule would be or should

be adopted to govern all cases for all purposes. However,

under the precise circumstances of this case, the court is

persuaded that the Dukes rule represents good law and policy

for five interrelated reasons. First, CIRI’s removal notice was

timely filed in this court, and notice to Notti was also timely

given. Second, this is not a case where a defendant played fast

and loose with two courts waiting to see if pending motions

or proceedings in state court would be resolved in its favor.”

Third, the failure to have the initial notice filed in state court

appears to have resulted from circumstances outside

counsel’s control or at least not as a result of action taken by

counsel. Fourth, CIRI has apparently now taken steps to

ensure that the notice is filed in state court (although as noted

this remains unconfirmed). Fifth and finally, Section 1446(d)

does not expressly specify that the notice must be filed in

state court in thirty days. Instead, it commands that the notice

be “promptly” filed in state court. In short, the court is

persuaded by CIRI’s arguments that its failure to file its

7 770 F.2d 545 (5th Cir. 1985).

*8 Td. at 547.

*° See Shanks v. Northern California Cement Masons, et al., 1993

WL 150273 at *2-*3 (N.D. Cal. 1993).

See Wright, supra, § 3736 at 379 (“The federal court should

never permit the defendant to use a delay as a ‘hedge’ to see if

there is likely to be a favorable result in the state court.”).

13a

removal notice in state court was—at most—a_ procedural

defect which under the somewhat unique circumstances of

this case it has cured by subsequent filing in state court.

However, the court remains open to reaching an opposite

conclusion if Notti can point to any more timely or persuasive

authority in support of his arguments or if it is established

that no notice has ever been filed with the state court.

xa Potential Dispositive Motion Practice

A few final comments are in order in light of this

order’s preliminary scope and the scheduled oral argument.

ANCSA provides:

The authority of a Native Corporation to provide

benefits to its shareholders who are Natives or

descendants of Natives or to its shareholders’

immediate family members who are natives or

descendants of Natives to promote the health,

education, or welfare of such shareholders or family

members is expressly authorized and confirmed.

Eligibility for such benefits need not be based on

share ownership in the Native Corporation and such

benefits may be provided on . basis other than pro

rata based on share ownership.”'

As previously noted, state law permits ANCSA corporations

to “take any action ... authorized by (ANCSA] ....”

Applying the ANCSA provision quoted above in conjunction

with state law would seem to lead one to the inevitable

conclusion that it is entirely permissible for an ANCSA

*! See 43 U.S.C. § 1606(r). This provision was added by

amendment in 1998. See Pub.L. 105-333, § 12, 112 Stat. 3135

(October 31, 1998) (codified at 43 U.S.C. § 1606(r)).

* See AS 10.06.960(f).

l4a

corporation to allot shareholder dividends on a preferential

basis. This being the case, it is difficult to understand how

CIRI would not be entitled to some form of dispositive relief

upon motion. The court notes this not to suggest how it will

rule on any such motion, but simply to point out what appears

to be an obvious conclusion. Where possible, this court

attempts to identify potentially dispositive issues not

otherwise discussed by the parties in order “to secure the just,

speedy, and inexpensive determination of every action.””° For

purposes of expediting both an appeal of the subject matter

jurisdiction issues raised in Notti’s motion and the ultimate

disposition of this controversy, it may be most efficient for

the parties to move for dispositive relief immediately if the

court denis the motion to remand.

V. CONCLUSION

For the foregoing reasons it appears probable to the

court that Notti’s motion at docket 11 should be denied. It

also seems probable to the court that CIRI is entitled to some

form of dispositive relief, although the parties have not yet

briefed such issues. The court remains open to be persuaded

otherwise, of course, and intends its comments ‘to facilitate

settlement or—failing that—to assist the parties prepare for

and conduct oral argument. The court may or may not adopt

this preliminary order as its final order following oral

argument. This preliminary order does not authorize the filing

of any supplemental briefing.

DATED at Anchorage, Alaska, this .8th day of

November 2000.

3 See Fed. R. Civ. P. 1.

15a

/s/ John W. Sedwick

john W. Sedwick

United States District Judge

l6a

APPENDIX B

UNITED STATES DISTRICT COURT

DISTRICT OF ALASKA

Case No. JOO-20 CV (JWS)

EMIL NOTTI; JAMES GROTHA; GLEN KERR; SAM

PEDRO; ELLA RING, et al., PLAINTIFFS

v.

COOK INLET REGION, INC. [CIRI], DEFENDANT

Filed December 5, 2000

ORDER FROM CHAMBERS

[Re: Motion to Remand - Docket 11]

At docket 11, plaintiffs Emil Notti, et al. (“Notti’”),

move to remand this case to state court. Defendant Cook

Inlet Region, Inc. (“CIRI’) opposes the motion. The court

issued a preliminary order on November 9, 2000, at docket

28, expressing its views that the motion should probably be

denied.' Oral argument was conducted on November 30,

2000, in Anchorage, Alaska.

As discussed at length in this couri’s preliminary

' The court herein incorporates by reference its order at docket 28.

17a

order at docket 28, federal question jurisdiction exists in

cases of complete preemption or if “vindication of a right

under state law necessarily turn[s] on some construction of

federal law.”” The Ninth Circuit has distilled the relevant

principles into the following test:

A state-created cause of action can be deemed to

arise under federal law (1) where federal law

completely preempts state law [citations omitted];

(2) where the claim is necessarily federal in

character [citation omitted]; or (3) where the right to

relief depends on the resolution of a substantial,

disputed federal question.”

Here, Notti’s claims allege violation of the Alaska

State Corporation Code, AS 10.06 et seg. for discriminatory

dividend distribution. However, Title 10 expressly

incorporates ANCSA with respect to its application. In

relevant part, Title 10 provides:

Notwithstanding the other provisions of this chapter,

a corporation organized under [ANCSA] is governed

by [ANCSA] to the extent [ANCSA] is inconsistent

with this chapter, and the corporation may take any

action, including amendment of its articles,

authorized by [ANCSA].. hi

Consequently, application of Alaska state law “turns

” See Berg v. Leason, 32 F.3d 422, 423 (9th Cir. 1994) (quoting

Franchise Tax, supra, 463 U.S. 1, 9,103 S. Ct. 2841, 2846 (1983)).

* See ARCO Environmental Remediation L. L. C. v. Department of

Health and Environmental Quality, 213 F.3d 1108, 1114 (9th Cir.

1998).

* See AS 10.06.960(f).

18a

on” construction of ANCSA, which is undeniably a federal

law. This case is closest to Sparta Surgical Corp. v. National

Assoc. of Securities Dealers, Inc., where the Ninth Circuit

held that federal question jurisdiction existed because

“although Sparta’s theories are posited as state law claims,

they are founded on the defendants’ conduct in suspending

trading and de-listing the offering, the propriety of which

must be exclusively determined by federal law.”° ANCSA is

an integral part of the state provisions forming the basis of

Notti’s complaint. The substantive scope of state law is

defined by reference to federal law. The federal question does

not arise as a defense; instead, it defines the nature of state

law. Under these circumstances—admittedly somewhat

unique—federal law is a “necessary element” of the state

claim. Federal question jurisdiction exists.

At oral argument, Notti’s counsel cited Redwood

Theatres v. Festival Enterprises,’ and argued it compelled

remand. Redwood does not help Notti. Redwood concerned

state antitrust provisions independent of federal law. This

court reviewed and explained the relevant principles in its

preliminary order. In Rains v. Criterion Systems, Inc.,°—one

of the cases discussed in this court’s preliminary order—the

Ninth Circuit held that if a claim “can be supported by

alternative and independent theories—one of which is a state

law theory and one of which is a federal law theory—federal

question jurisdiction does not attach because federal law is

* 159 F.3d 1209 (9th Cir. 1998).

° Id. at 1212.

” 908 F.2d 477, 479 (9th Cir. 1990).

* 80 F.3d 339 (9th Cir. 1996).

19a

not a necessary element of the claim.”” In Berg v. Leason,!"—

another case reviewed in this court’s preliminary order—the

Ninth Circuit held that a state law malicious prosecution

claim did not arise under federal law just because one of the

elements required analysis of the underlying federal claim to

determine whether it was legally untenable. '!

But these authorities are inapposite to the

circumstances facing the court in this case. Here, Congress

has not precluded private causes of action regarding the

ANCSA provision in question. Unlike the situation in

Redwood, Rains, or Berg, the court is not faced with

alternative and independent theories. Instead, there is one

state claim which expressly incorporates federal law and

which hinges upon interpretation and application of federal

law. Remand is therefore inappropriate under governing

precedent. The balance of Notti’s arguments are simply

inapposite for reasons discussed at length in this court’s

preliminary order at docket 28.

For the foregoing reasons and those set out in the

preliminary order at docket 28, Notti’s motion to remand at

docket 11 is DENIED.

* Id.. at 346.

0 39 F.3d 422 (9th Cir. 1994).

'! Td. at 424-26.

20a

DATED at Anchorage, Alaska, this Sth day of

December 2000.

/s/ John W. Sedwick

John W. Sedwick

United States District Judge

2la

APPENDIX C

UNITED STATES DISTRICT COURT

DISTRICT OF ALASKA

Case No. JOO-20 CV (JWS)

EMIL NOTTI; JAMES GROTHA; GLEN KERR; SAM

PEDRO; ELLA RING, et al., PLAINTIFFS

Vv.

COOK INLET REGION, INC. [CIRI}, DEFENDANT

Filed May 1, 2001

ORDER FROM CHAMBERS

[Re: Motions at Docket Nos. 39, 40 and 41A]

I. MOTIONS BEFORE THE COURT

At docket 39, defendant Cook Inlet Region, Inc.

(“CIRI’) moves for summary judgment or, in the

alternative, for judgment on the pleadings. The motion

was filed February 28, 2001. Plaintiffs Emil Notti, et ai.

(“Notti’), have never filed an opposition. CIRI’s motion

is therefore ripe. At docket 40, Notti seeks leave to file

an interlocutory appeal regarding this court’s previous

order denying a motion to remand. CIRI opposes Notti’s

22a

motion. At docket 41A, Notti seeks to stay proceedings

pending resolution of its motion at docket 40. CIRI

opposes this motion, too. The motion at docket 41A is

technically not yet ripe. However, for reasons which will

become clear further below, there is no reason to delay

resolving the motion at docket 41A with the motions at

dockets 39 and 40. Oral argument has not been requested

and would not assist the court.

Il. BACKGROUND

CIRI is a corporation organized pursuant to the

Alaska Native Claims Settlement Act, 43 U.S.C. §§ 1601

et seq. (“ANCSA”). CIRI instituted an Elders Benefit

Program which distributed dividends to shareholders age

65 or older. Notti contends that the Elders Benefit

Program violates Alaska state law which prohibits

discriminatory dividend distribution among

shareholders.’ CIRI removed to federal court asserting

federal question jurisdiction existed because an ANCSA

provision, 43 U.S.C. § 1606(r), authorizes the

preferential dividend that CIRI granted. Notti sought

remand. The court denied Notti’s motion. Other facts are

noted below.

lil. STANDARDS OF REVIEW

A Motion for Summary Judgment

Rule 56 of the Federal Rules of Civil Procedure

provides that summary judgment should be granted if

there is no genuine dispute as to material facts and if the

moving party is entitled to judgment as a matter of law.

The moving party has the burden of showing that there is

' See AS 10.06.305(b).

23a

no genuine dispute as to material fact.” The moving party

need not present evidence; it need only point out the lack

of any genuine dispute as to material fact.’ Once the

moving party has met this burden, the non-moving party

must set forth evidence of specific facts showing the

existence of a genuine issue for trial.* All evidence

presented by the non-movant must be believed for

purposes of summary judgment, and all justifiable

inferences must be drawn in favor of the non-movant.”

However, the non-moving party may not rest upon mere

allegations or denials, but must show that there is

sufficient evidence supporting the claimed factual

dispute to require a fact-finder to resolve the parties’

differing versions of the truth at trial.°

B. Interlocutory Appeal

Certification of an interlocutory appeal under 28

U.S.C. § 1292 (b) is only appropriate if the issue presents

a controlling question of law, there is a substantial

ground for difference of opinion, and an immediate

appeal “may materially advance the ultimate termination

of the litigation.”’ Interlocutory appeals are rarely

? Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

* Id. at 323-325.

* Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-9 (1986).

* Id. at 255.

° Id. at 248-9.

” See 28 U.S.C. § 1292(b); see also 16 Charles Alan Wright,

Arthur R. Miller, and Edward H. Cooper, Federal Practice and

Procedure, § 3930 at 415-442 (2d ed. 1996) (discussing criteria for

permissive interlocutory appeals).

24a

granted and sparingly used in deference to the federal

policy disfavoring piecemeal review.”

IV. DISCUSSION

. Notti’s claims allege violation of the Alaska State

Corporations Code, AS 10.06 et seqg., for discriminatory

dividend distribution. However, Title 10 expressly

incorporates ANCSA with respect to its application. In

relevant part, Title 10 provides:

Notwithstanding the other provisions of

this chapter, a corporation organized under

[ANCSA] is governed by [ANCSA] to the

extent [ANCSA] is inconsistent with this

chapter, and the corporation may take any

action, including amendment of its articles,

authorized by [ANCSA]...”

ANCSA provides, in part:

The authority of a Native Corporation to

provide benefits to its shareholders who

are Natives or descendants of Natives or to

its shareholders’ immediate family

members who are natives or descendants of

Natives to promote the health, education,

or welfare of such shareholders or family

members is expressly authorized and

confirmed. Eligibility for such benefits

need not be based on share ownership in -

* See United States v. Woodbury, 263 F.2d 784, 788 n.11 (9th Cir.

1959); Vaughn v. Regents of the Univ. of Cal., 504 F. Supp. 1349,

1355 (E.D. Cal. 1981).

” See AS 10.06.960(f).

25a

the Native Corporation and such benefits

may be provided on a basis other than pro

rata based on share ownership.”

Thus, ANCSA permits preferential distributions. In

summary, State law authorizes ANCSA corporations to

“take any action ... authorized by [ANCSA]... ‘ak

ANCSA_ permits ANCSA corporations to allot

shareholder dividends on a preferential basis. It therefore

follows that there is no genuine issue of material fact in

dispute, and CIRI is entitled to summary judgment as a

matter of law. In light of this disposition, Notti’s

motions at dockets 40 and 41A are moot, because Notti

may now appeal this court’s final judgment.

V. CONCLUSION

For the foregoing reasons:

(1) CIRI’s~ motion for summary

judgment at docket 39 is GRANTED;

(2) Notti’s motion at docket 40 seeking

leave to file an interlocutory appeal is DENIED

as moot; and

(3) Notti’s motion at docket 41A

seeking leave to stay proceedings is DENIED as

moot.

' See 43 U.S.C. § 1606(r). This provision was added by

amendment in 1998. See Pub. L. 105-333, § 12, 112 Stat. 3135

(October 31, 1998) ‘codified at 43 U.S.C. § 1606(r)).

'' See AS 10.06.960(f).

26a

DATED at Anchorage, Alaska, this Ist day of May

2001.

/s/ John W. Sedwick

John W. Sedwick

United States District Judge

{Reconsideration was summarily denied in a minute order

from chambers on 11 May 2001.}

27a

APPENDIX D

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

Nos. 01-35521, 01-35569

EMIL NOTTI, et al., PLAINTIFFS - APPELLANTS

v.

COOK INLET REGION, INC. , DEFENDANT - APPELLEE

Decided March 22, 2002.

MEMORANDUM

Appeal from the United States District Court for the District

of Alaska, John W. Sedwick, District Judge, Presiding.

Before ALARCON, SILVERMAN, Circuit Judges and

BREWSTER, District Judge’.

l

The Honorable Rudi M. Brewster, Senior United States District

Judge for the Southern District of California, sitting by

designation.

28a

MEMORANDUM?

Appellants are shareholders of Cook Inlet Region, Inc.

(CIRI), a Regional Corporation established pursuant to the

Alaska Native Claims Settlement Act, 43 U.S.C. § § 1601 er

seq (ANCSA). They appeal the district court's denial of their

motion to remand this action to state court, grant of summary

judgment in favor of CIRI, and denial of their motion for

reconsideration.

We have jurisdiction pursuant to 28 U.S.C. § 1291. We lack

jurisdiction to consider appellants’ taking claim, raised to the

district court on reconsideration, because appellants must

raise that claim under the Tucker Act in the Federal Court of

Claims. Bay View, Inc. ex rel. AK Native Vill. Corps. v.

AHTNA, Inc., 105 F.3d 1281, 1284-85 (9th Cir.1997).

Appellants argue that the district court lacked removal

federal question jurisdiction over this action and therefore,

that the case was improperly removed to federal court. We

review the issue de novo. Prize Frize, Inc. v. Matrix (U.S.)

Inc., 167 F.3d 1261, 1265 (9th Cir.1999). We also review de

novo the district court's denial of the motion to remand.

ARCO Env't Remediation, L.L.C. v. Dept. of Health and Env't

Quality, 213 F.3d 1108, 1111 (9th Cir.2000). The district

court had subject matter jurisdiction because the complaint

raises a substantial federal question of whether Section 7(r) of

ANCSA, 43 U.S.C. § 1606(r), authorizes CIRI to pay

dividends to Native leaders who were original CIRI

shareholders.

* This disposition is not appropriate for publication and may not be

cited to or by the courts of this circuit except as may be provided

by Ninth Circuit Rule 36-3

29a

Appellants argue that the district court erred in holding that

ANCSA preempts the Alaska corporations statute. We

review the district court's decision regarding preemption de

novo. Williamson v. General Dynamics Corp., 208 F.3d

1144, 1149 (9th Cir.2000). The plain language of § 7(r)

allows CIRI to make the distributions made in this case. 43

U.S.C. § 1606(r). ANCSA expressly preempts Alaska law.

43 U.S.C. § 1606(p). Moreover, legislative history of § 7(r)

confirms that Congress intended that ANCSA corporations

provide the type of benefits provided by CIRI in this case.

144 Cong. Rec. 12589-01 (1998) (daily ed. October 14, 1998)

(statement of Sen. Murkowski). Thus, the district court did

not err in granting summary judgment.

AFFIRMED.

30a

APPENDIX E

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

No. 01-35521

EMIL NOTTI, et al., PLAINTIFFS - APPELLANTS

v.

COOK INLET REGION, INC. , DEFENDANT - APPELLEE

Filed April 21, 2001

ORDER

Before: ALARCON and SILVERMAN, Circuit Judges, and

BREWSTER, District Judge®

Appellants’ Petition for Rehearing is DENIED.

Counsel for Appellants is advised that the Reply Brief was

accepted for filing on February 28,2002.

* The Honorable Rudi M. Brewster, Senior United States District

Judge for the Southern District of California, sitting by

designation.

3la

Constitutional and Statutory Provisions Involved

Alaska Corporations Code (AS 10.06)

TITLE 10 — Corporations and Associations

Chapter 06. Alaska Corporations Code (underlining added)

AS 10.06.305. Creation, classes, and issuance of shares.

(a) Subject to the provisions of this chapter, a

corporation may issue one or more classes or series of shares

or both, with full, limited, or no voting rights and with other

rights, preferences, privileged, and restrictions as are stated or

authorized in its articles of incorporation. A denial or

limitation of voting rights is not effective unless at the time

one or more classes or series of outstanding shares or debt

securities, singly or in the aggregate, are entitled to full voting

rights. A denial or limitation of dividend or liquidation

rights is not effective unless at the time one or more classes or

series of outstanding shares, singly or in the aggregate, are

entitled to unlimited dividend or liquidation rights.

(b) All shares of a class shall have the same

voting, conversion, and redemption rights and other rights,

preferences, privileges, and restrictions, unless the class is

divided into series. If a class is divided into series, all the

shares of a series shall have the same voting, conversion, and

redemption rights and other rights, preferences, privileges,

and restrictions. (§ 1 ch 166 SLA 1988).

AS 10.06.313. Variation in rights and preferences of

shares. Any or all of the rights and preferences of a series of

a preferred or special class of shares and the variations in the

relative right and preferences between different series may be

fixed and determined by the articles of incorporation, but

shares of the same class shall be identical except of the

32a

following relative rights and preferences as to which there

may be variations between series:

(1) the rate of dividend

(2) the price and the terms and conditions on

which shares may be redeemed;

(3) the amount payable upon shares in the even of

involuntary liquidation;

(4) the amount payable upon shares in the even of

voluntary liquidation;

(5) sinking fund provisions for the redemption or

purchase of shares;

(6) the terms and conditions on which shares may

be converted, if the shares of a series are issued with the

privilege of conversion;

(7) voting rights, if any. (§ 1 ch 166 SLA 1988)

Sec. 10.06.408. Closing of transfer books and fixing

record date.

(a) To determine the shareholders entitled to

notice of or to vote at a meeting of shareholders or an

adjournment of a meeting, or to determine the shareholders

entitled to receive payment of a dividend, or to determine the

shareholders for any other proper purpose, the board of a

corporation may provide that the stock transfer books shall be

closed for a stated period not exceeding 70 days. If the stock

transfer books are closed to determine shareholders entitled to

notice of or to vote at a meeting of shareholders, they shall be

closed for at least 20 days immediately preceding the

meeting.

(b) Instead of closing the stock transfer books, the

bylaws or, in the absence of an applicable bylaw, the board

may fix a date as the record date for the determination of

shareholders. This record date may not be more than 60 days

and, in case of a meeting of shareholders, not less than 20

days before the date on which the particular action requiring

33a

the determination of shareholders is to be taken. If the stock

transfer books are not closed and a record date is not fixed for

the determination of shareholders entitled to notice of or to

vote at a meeting of shareholders or for the determination of

shareholders entitled to receive payment of a dividend, the

date on which notice of the meeting is mailed or the date on

which the resolution of the board declaring the dividend is

adopted, is the record date for the determination of

shareholders. When a determination of shareholders entitled

to vote at a meeting of shareholders has been made as

provided in this section, the determination applies to an

adjournment of the meeting of shareholders.

AS 10.06.478. Director conflicts of interest.

(a) A contract or other transaction between a

corporation and one or more of the directors of the

corporation, or between a corporation and a corporation, firm,

or association in which one or more of the directors of the

corporation has a material financial interest, is neither void

nor voidable because the director or directors or the other

corporation, firm, or association are parties or because the

director or directors are present at the meeting of the board

that authorizes, approves, or ratifies the contract or

transaction, if the material facts as to the transaction and as to

the director’s interest are fully disclosed or known to the

(1) shareholders and the contract or

transaction is approved by the shareholders in good faith,

with the shares owned by the interested director or directors

not being entitled to vote; or

(2) board, and the board authorizes,

approves, or ratifies the contract or transaction in good faith

by a sufficient vote without counting the vote of the interested

director or directors, and the person asserting the validity of

the contract or transaction sustains the burden of proving that

the contract or transaction was just and reasonable as to the

34a

corporation at the time it was authorized, approved, or

ratified.

AS 10.06.542. Disparate treatment of shares of the

same class or series prohibited; exceptions.

(a) Except as provided in (b) of this section all

shares of the same class or series shall be treated equally with

respect to _a distribution of shares, cash, property, rights, or

securities in any plan of merger, consolidation, or share

exchange.

(b) Disparate treatment of shares of the same class

or series may be proposed in a plan of merger, consolidation,

or share exchange if

(1) disparate treatment is necessary to

preserve a subchapter S election under the Internal Revenue

Code of 1954;

(2) there is a sound business reason for

disparate treatment and proponents of the plan prove it is

consistent with fiduciary duties owed to all shareholders; or

(3) there is unanimous consent of all

shareholders. ( § 1 ch 166 SLA 1988).

AS 10.06.960. Corporations organized under ANCSA.

(a) A corporation organized under 43 U.S.C. 1601

- 1629e as amended (Alaska Native Claims Settlement Act)

shall _be incorporated under and is subject to this chapter

except

(1) each corporation shall issue without further

consideration the number of shares of common stock that

may be necessary to comply with the requirements of the act

and all stock so issued is considered fully paid and

nonassessable when issued;

35a

(2) unless otherwise provided in the articles of

incorporation, the capital

(A) is considered the consideration for the

initial issuance of shares; and

(B) of a corporation organized under the

act includes the

(i) land or interests in it conveyed to

the corporation by the United States under the act, except that

which is required to be conveyed under 43 U.S.C. 1613(c)(1),

(3), and (4), entered at its fair value to the corporation upon

receiving the conveyance of it; and

(ii) money, when received under 43

U.S.C. 1605 and 43 U.S.C. 1608, that is retained by the

corporation and that is not immediately distributed or

required to be distributed under 43 U.S.C. 1606()).

(f) Notwithstanding the other provisions of this

chapter, a corporation organized under the act is governed by

the act to the extent the act is inconsistent with this chapter,

and the corporation may take any action, including

amendment of its articles, authorized by the act, and the

action is considered to be approved and adopted if approved

under the act. An amendment approved under the act and

delivered to the commissioner under AS 10.06.512 shall be

filed by the commissioner under AS 10.06.910, and a

certificate of amendment shall be issued.

AS 10.06.990. Definitions.

In this chapter, unless the context otherwise requires,

(17) “distribution to its shareholders” means the

transfer of cash or property by a corporation or its subsidiary

to its shareholders without consideration, whether by way of

dividend or otherwise, except a dividend in shares of the

36a

corporation, or the purchase or redemption of its shares for

cash or property; the time of a distribution of a dividend is the

date of the declaration of the dividend and the time of a

distribution by purchase or redemption of shares is the date

cash or property is transferred by the corporation, whether or

+4444

CONSTITUTION OF THE UNITED STATES

ARTICLE III — THE JUDICIARY

Section 2, Clause 1. Jurisdiction of Courts

Section 2. The judicial Power shall extend to all

Cases, in Law and Equity, arising under this Constitution, the

Laws of the United States, and Treaties made, or which shall

be made, under their Authority; — to all Cases... .

U.S. Code, Title 28, Judiciary and Judicial Procedure

Chapter 85, District Courts; Jurisdiction Chapter 89,

District Courts; Removal of Cases from State Courts

§ 1331. Federal question

The district courts shall have original jurisdiction of

all civil actions arising under the Constitution, laws, or

treaties of the United States.

§ 1441. Actions removable generally

(a) Except as otherwise expressly provided by Act

of Congress, any civil action brought in a State court of which

the district courts of the United States have original

jurisdiction, may be removed by the defendant or the

defendants, to the district court of the United States for the

—— oe

37a

district and division embracing the place where such action is

pending. For purposes of removal under this chapter, the

citizenship of defendants sued under fictitious names shall be

disregarded. ,

(b) Any civil action of which the district courts

have original jurisdiction founded on a claim or right arising

under the Constitution, treaties or laws of the United States

shall be removable without regard to the citizenship or

residence of the parties. Any other such action shall be

removable only if none of the parties in interest properly

joined and served as defendants is a citizen of the State in

which such action is brought.

(c-e) (omitted)

++++4++

U.S. Code, Title 43, Public Lands, Chapter 33,

Alaska Native Claims Settlement Act [ANCSA]

(underlining added)

ANCSA § 2(f) [43 U.S.C. § 1601(f)] — Declaration of

Policy.

Congress finds and declares that —

(f) no provision of this Act shall be construed to

constitute a jurisdictional aci, to confer jurisdiction to sue, nor

to grant implied consent to Natives to sue the United States or

any of its officers with respect to claims extinguished by the

operation of this Act; and....

38a

ANCSA § 3 [43 U.S.C. § 1602] — Definitions.

(g) “Regional Corporation” means an Alaska

Native Regional Corporation established under the laws of

the State of Alaska in accordance with the provisions of this

Act;

(t) “Settlement Trust” means a trust —

(1) established and registered by a Native

Corporation under the laws of the State of Alaska pursuant to

a resolution of its shareholders, and

(2) operated for the sole benefit of the

holders of the corporation’s Settkement Common Stock in

accordance with section 39 [ANCSA § 39, 43 U.S.C.

§ 1629e] and the laws of the State of Alaska.

ANCSA §& 7(d) [43 U.S.C. § 1606(d)] — Procedures for

incorporation.

(d) Five incorporators within each region, named

by the Native association in the region, shall incorporate

under the laws of Alaska a Regional Corporation to conduct

business for profit, which shall be eligible for the benefits of

this Act so long as it is organized and functions in accordance

with this Act. The articles of incorporation shall include

provisions necessary to carry out the terms of this Act.

39a

ANCSA § 7(h)(1)(A) [43 U.S.C. § 1606(h)(1)(A)]

REGIONAL CORPORATIONS—SETTLEMENT STOCK—

7(h)(1) RIGHTS AND RESTRICTIONS.—

(A) Except as otherwise expressly provided in this

Act, Settlement Common Stock of a Regional Corporation

shall—

(i) carry a right to vote in elections for the

board of directors and on such other questions as properly

may be presented to shareholders;

(ii) | permit the holder to receive dividends

or other distributions from the corporation; and

(iii) vest in the holder all rights of a

shareholder in a business corporation organized under the

laws of the State.

ANCSA § 7(p) [43 U.S.C. § 1606(p)]

(p) FEDERAL-STATE LAWS, CONFLICTS.

In the event of any conflict between the provisions of

this section and the laws of the State of Alaska, the provision

of this section shall prevail.

ANCSA § 7(r) [43 U.S.C. § 1606(r)]

(r) BENEFITS FOR SHAREHOLDERS OR IMMEDIATE

FAMILIES.

The authority of a Native Corporation to provide

benefits to its shareholders who are Natives or descendants of

Natives or to its shareholders’ immediate family members

who are Natives or descendants of Natives to promote the

health, education, or welfare of such shareholders or family

members is expressly authorized and confirmed. Eligibility

for such benefits need not be based on share ownership in the

Native Corporation and such benefits may be provided on a

basis other than pro rata based on share ownership.