Tenth Circuit Upholds Injunction against Tribal Court Order for Return of Attorney's Fees

On May 27, 2011, the Tenth U.S. Circuit Court of Appeals issued a decision in Crowe & Dunlevy v. Stidham, No. 09-5071, affirming the U.S. District Court’s injunction barring a Muscogee (Creek) Nation trial court judge from enforcing an order that would have required the law firm of Crowe & Dunlevy (“Crowe”) to return attorneys’ fees paid by its client, the Thlopthlocco Tribal Town (“Thlopthlocco” or “Town”). The case was watched closely by Indian law practitioners and scholars, and by tribal judges, because of Crowe’s argument that the Muscogee courts had no jurisdiction over the firm, even though lawyers in the firm represented Indian clients in those courts.

The case arose out of a dispute over which of two bodies was the true government of Thlopthlocco, a Muscogee tribal town. Crowe represented the Town in its suit against a member of the Thlopthlocco Business Committee and his associates (“Defendants”), who claimed to be the true government of Thlopthlocco. Crowe, on behalf of the Town, argued that the defendants had illegally usurped the Business Committee’s authority. Lacking its own court, Thlopthlocco brought suit within the Muscogee court system, which consisted of a district court and an appeals court. The Defendants filed a cross-claim and requested that their legal fees be paid from the Thlopthlocco treasury. Judge Stidham of the Muscogee District Court granted the Defendants’ motion, and Thlopthlocco appealed.

That is where the case took an unexpected turn. The Muscogee Supreme Court reversed and, although no such request had been made by anyone, ordered that any attorneys’ fees paid from the Thlopthlocco Treasury be returned to the Treasury. Then Judge Stidham issued an order for Crowe to return to the Thlopthlocco Treasury more than $371,000 in fees it had collected. Crowe then asked the U.S. District Court of the Northern District of Oklahoma for an injunction to stop the Muscogee courts from enforcing their orders. Before the federal court took any action, Judge Stidham ordered Crowe to show cause why its attorneys should not be held in contempt. Crowe challenged this in the U.S. District Court. Judge Stidham, now the defendant in the federal court action, moved to dismiss Crowe’s challenge on the grounds of tribal sovereign immunity. After a hearing, the U.S. District Court ruled for Crowe. Judge Stidham appealed, and the Tenth Circuit also ruled for Crowe.

The Tenth Circuit explained that Crowe was not required to first present its case to the tribal court (which is the usual rule) because it was clear that the tribal court lacked jurisdiction. The court said that the Muscogee courts could exercise jurisdiction over Crowe, a non-Indian entity, only if Crowe fell within one of two exceptions articulated in the 1981 U.S. Supreme Court case Montana v. United States. Judge Stidham argued that, by its membership in the Muscogee bar association and by practicing in front of the Muscogee courts, Crowe had entered into a consensual relationship with the Tribe and submitted to those courts’ jurisdiction, thus falling within the first Montana exception. However, the Tenth Circuit noted that there was no accusation against Crowe of misconduct. Nor was there a dispute between Crowe and its client, Thlopthlocco, over the fees; in fact, Thlopthlocco appeared to support Crowe. Finally, the Tenth Circuit noted that the issue of Crowe’s fees was not part of the original dispute, and had not been raised by either party.
“While Crowe attorneys submitted themselves to the Muscogee (Creek) Nation tribal court when they brought the Thlopthlocco litigation, there is no basis to conclude they or the firm submitted themselves to the general subject matter jurisdiction of the tribal court for all purposes, especially not for the purpose of voiding their contractual relationship with the Thlopthlocco, when that contract is not, directly or indirectly, part of the Anderson defendants’ claims before the court.”

Therefore, although Crowe had entered a consensual relationship with the Muscogee Nation, and had submitted itself to the jurisdiction of Muscogee courts, the Tenth Circuit found no connection between that consensual relationship and the order that Crowe return its fees. Lacking that connection, the Tenth Circuit concluded that the Muscogee courts lacked jurisdiction to order the return of fees and, therefore, that Crowe was not required to try his case first in the tribal court.

The Tenth Circuit also rejected Judge Stidham’s argument that tribal sovereign immunity barred the injunction sought by Crowe. In doing so, the court for the first time expressly applied to Indian tribes the exception to sovereign immunity articulated in Ex parte Young, a 1908 U.S. Supreme Court case. Ex parte Young allows plaintiffs to get around the State’s immunity by suing state officers for an injunction instead of suing the State itself, when the State through its officers is allegedly interfering with federal rights.

Reasoning that Judge Stidham’s ongoing assertion of jurisdiction over Crowe was a violation of the federal common law rule that tribal courts generally do not have jurisdiction over non-Indians, the court concluded that Crowe’s requested injunction fell within the Ex parte Young exception. Judge Stidham argued that Ex parte Young applied only to violations of the U.S. Constitution or a federal statute. However, the court ruled that it also applies to violations of federal common law (judge-made law). Although the Tenth Circuit had implicitly applied Ex parte Young in tribal sovereign immunity cases, this was the first time this Circuit has explicitly adopted the exception, joining three other Circuits that have applied Ex parte Young in tribal sovereign immunity cases.

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