Sue/perior Concrete & Paving, Inc. v. Lewiston Golf Course Corp., — N.Y.S.2d—, 2013 WL 2674470 (N.Y. App. Div. June 14, 2013)
In Sue/perior Concrete, the Appellate Division, Fourth Department, clarifies how closely a corporation must be tied to an Indian tribe to be entitled to tribal sovereign immunity.
Defendant, Lewiston Golf Course Corporation, was an Indian tribe-affiliated entity formed under the laws of the Seneca Nation of Indians. Lewiston hired the plaintiffs, Sue/perior Concrete & Paving, Inc. to construct a golf course that would increase revenue for an adjoining casino. The casino was owned by Lewiston’s parent company, Seneca Niagara Falls Gaming Corporation. Seneca Niagara Falls Gaming Corporation was in turn owned by another corporation, which itself was in turn owned by the Seneca Nation. Thus, the Seneca Nation was Lewiston’s ultimate owner, but the Nation was three steps removed from construction of the golf course. The construction project took over a year longer than estimated, and upon completion Sue/perior sued Lewiston for $4.1 million for extra work performed as well as delay-related damages. Lewiston moved to dismiss on the grounds that they were entitled to the Seneca Nation’s sovereign immunity.
“Indian tribes are immune from lawsuits in both state and federal court unless ‘Congress has authorized the suit or the tribe has waived its immunity.’” Sue/perior Concrete at *4. In order to determine whether Lewiston had sufficient ties with the Seneca Nation to benefit from the Nation’s sovereign immunity, the court examined five factors, including: a) whether Lewiston is organized under the tribe’s laws; b) whether Lewiston’s purposes are similar to those of the tribal government; c) whether the Lewiston’s governing body is primarily composed of tribe officials; d) whether Lewiston is owned by the tribe; and e) whether tribe officials exercise control over Lewiston’s operations. The court also looked at “financial factors” such as the effect of Lewiston operations on the Nation’s treasury and Lewiston’s power to obligate the funds of the Nation. Id. at *4 – 6.
Under this analysis, the court found that Lewiston was organized under tribal law, and that tribal officials composed the governing body and operated the corporation, both factors weighing in favor of extending immunity. On the other hand, the court also found: (i) that Lewiston’s for-profit purposes were not sufficiently similar to those of the tribal government; (ii) that the golf course was owned by Lewiston and not the tribe; and (iii) that Lewiston’s and the Seneca Nation’s finances were not significantly intertwined. Balancing these factors, the court ultimately decided that immunity should not be extended to Lewiston.
Sovereign immunity protects tribe-affiliated entities from suit, but, as noted by the Fourth Department, entities that enjoy immunity may also have trouble contracting with outside parties who may be reluctant to do business with an entity against which they have limited legal remedies in the case of a breach. Id. at *8. This decision emphasizes the need for both sovereign nations and private contractors to properly evaluate the impact of potential sovereign immunity on their business dealings.