Federal Arbitration Act Does Not Trump Exhaustion of Tribal Remedies Doctrine

Tim Vollmann
Albuquerque, New Mexico

On February 15, 2002, the U.S. Court of Appeals for the 5th Circuit ruled that a federal court party seeking to compel arbitration of a contract made on an Indian reservation may not avoid the requirement that tribal remedies first be exhausted. The decision in Bank One v. Shumake, Consol. Cases No. 01-60228 through 01-60238, holds that the Federal Arbitration Act provides no basis for avoiding application of the doctrine set out in National Farmers Union Insurance Co. v. Crow Tribe, 471 U.S. 845 (1985), that federal courts should abstain from exercising jurisdiction over civil disputes involving Indians in Indian country until the tribal court has had an opportunity to examine the factual and legal bases of a suit and to determine whether it has jurisdiction.

Bank One had extended credit to residents of the Mississippi Choctaw Indian Reservation to install home satellite systems. Several members of the Choctaw Band later sued Bank One in Tribal Court, seeking damages based on concealment of material information regarding the credit transactions. Bank One reacted by filing the federal court action to compel arbitration under a 1998 modification to the consumer credit contract.

Bank One argued that the tribal exhaustion doctrine is inapplicable to actions under the Federal Arbitration Act for reasons similar to those embraced by the Supreme Court in El Paso Natural Gas v. Neztsosie, 526 U.S. 473 (1999), where Navajo tribal members had pursued claims in tribal court under the Price-Anderson Act involving liability arising out of exposure to radioactive material. The Fifth Circuit disagreed, noting that unlike the Price-Anderson Act, the Federal Arbitration Act does not provide an independent basis for federal court jurisdiction. The Court of Appeals also declined to extend the Supreme Court's ruling last year in C & L Enterprises v. Citizen Band Potawatomi Indian Tribe, 532 U.S. 411, where an arbitration clause was found to have waived tribal sovereign immunity to a suit to compel arbitration in state court, to commercial contracts involving tribal members.