C&L Enterprises, Inc. v. Citizen Band of Potawatomi Indian Tribe of Oklahoma
532 U.S. 411, 121 S.Ct. 1589 (2001)

Hilary C. Tompkins
Sonosky, Chambers, Sachse,
Endreson & Mielke,
Albuquerque, New Mexico

The question presented in this case was whether the arbitration and choice-of-law clauses in a construction contract constituted a waiver of an Indian tribe’s sovereign immunity against suit. The U.S. Supreme Court held that the Citizen Potawatomi Nation had waived its immunity to suit in state court to enforce an arbitration award for breach of contract. The Court’s decision was unanimous. The opinion was written by Justice Ginsburg.

This case arose from a contract between a non-Indian construction company, C&L Enterprises, and the Citizen Potawatomi Nation for the installation of a roof on a tribally-owned commercial building on non-reservation, non-trust land in Oklahoma. The contract between the Tribe and C&L Enterprises was a form contract prepared by the American Institute of Architects and was proposed by the Indian tribe. The contract contained an arbitration clause that provided that any dispute arising out of the contract would be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association. These rules provide that "parties to these rules shall be deemed to have consented that judgment upon the arbitration award may be entered in any federal or state court having jurisdiction thereof." The contract also contained a choice of law clause, which provided that the contract "shall be governed by the law of the place where the Project is located." The law of the place was Shawnee, Oklahoma. Oklahoma state law provides that an agreement providing for arbitration conferred jurisdiction on "any court of competent jurisdiction of this state," to enforce the agreement and to enter judgment on an award.

The Tribe subsequently decided to use a different material for the roof and retained another company to install the roof. Upon the Tribe’s decision to hire a different company, C&L Enterprises claimed breach of contract and submitted the dispute to arbitration. The Tribe asserted sovereign immunity and declined to participate. The arbiter awarded C&L Enterprises an award of $25,400 in damages, plus attorney’s fees and costs. C&L Enterprises later filed suit to enforce the award in Oklahoma County Court. The Tribe again raised the defense of sovereign immunity. The state court denied the motion, which the Oklahoma Court of Civil Appeals affirmed. The Oklahoma Supreme Court declined review and the Tribe petitioned for certiorari in the U.S. Supreme Court.

While the Tribe’s petition was pending, the U.S. Supreme Court issued its decision in Kiowa Tribe of Okla. v. Manufacturing Technologies, 523 U.S. 751 (1998), holding that an Indian tribe is not subject to suit in state court – even for breach of contract involving off-reservation commercial conduct – unless "Congress has authorized the suit or the tribe has waived its immunity." The Court then granted the Citizen Potawatomi Nation’s petition and remanded the case for review in light of the Kiowa decision. On remand, the Oklahoma Court of Civil Appeals reversed itself, holding that the arbitration and choice-of-law clauses did not expressly and unequivocally waive the Tribe’s immunity. The U.S. Supreme Court then granted C&L Enterprises’ petition for certiorari.

The U.S. Supreme Court unanimously held that the arbitration clause in the contract with C&L Enterprises constituted a waiver of tribal immunity. While the Court recognized that an Indian tribe is immune from suit for off-reservation activities, its decision focused on whether the tribe had waived its immunity. The Court cited the well-established rule that an Indian tribe’s waiver must be clear and unequivocal, but found that the arbitration and choice-of-law clauses amounted to a clear and express waiver. The Court found that the Tribe had submitted itself to arbitration, had agreed to be bound by an arbitration award, and had agreed to be subject to enforcement of the arbitration award in accordance with Oklahoma law in state court, and therefore, had waived its immunity.

The Court rejected the Tribe’s argument that the arbitration clause was not a waiver because it left open the question of what court had proper jurisdiction, which in the Tribe’s view was no court. The Court also rejected the Tribe’s argument that the arbitration clause only served to preclude the resolution of disputes before a trial court. In the Court’s mind, the Tribe could not agree that arbitration was the only forum to resolve disputes, but then refuse to participate in such proceedings. The Court stated that the arbitration clause had a "real world objective," and was "not designed for a game with no practical consequences." Finally, the Court disagreed with the Tribe that a form contract used in private business transactions should not be interpreted as a waiver of a government’s immunity. Because the Tribe was the proponent of the form contract and it had relied on the American Arbitration Association rules, the Court found the Tribe to have waived its immunity.

The Court’s decision seems to further narrow the doctrine of tribal sovereign immunity. The requirement that an Indian tribe’s waiver must be "express" and "unequivocal" has lost some of its strength, for now an express waiver may be found in the standardized arbitration clauses of form contracts. Indeed, the decision suggests that if a contract with an Indian tribe provides for a remedy, the courts will likely enforce any award against the Tribe in the selected forum. On the other hand, there is always the possibility of distinguishing the C&L Enterprises decision. The case involved an off-reservation project, the Tribe proposed the form of contract, and the Court’s decision turned on the specific arbitration language and its terms. It remains to be seen whether different facts will lead to a different result.

The practical impact of the decision is that Indian tribes entering into contracts will need to carefully scrutinize dispute resolution clauses, since the Tribe may be required to participate in the resolution process despite its status as a sovereign nation.

Hilary C. Tompkins is an associate with the Albuquerque, New Mexico, branch office of Sonosky, Chambers, Sachse, Endreson & Mielke, and is the Native American Resources Committee’s technology vice chair.