GM 12-061

Federal Court Holds Arbitration Not Required Under Oklahoma's Model Compact

On April 26, 2012, a judge in the U.S. District Court for the Northern District of Oklahoma held that the Oklahoma Model Tribal Gaming Compact (Compact) does not require the State of Oklahoma (State) to pursue arbitration before bringing suit against an Indian tribe in federal court for alleged violations of the Compact, and that sovereign immunity was no defense to the lawsuit. State v. Hobia, Case No. 12-CV-054-GKF-TLW.

The Court held that the arbitration provisions in the Compact are merely optional. Part 12 of the Compact, Dispute Resolution, provides for a three-step process. The first is notice: the aggrieved party must describe in detail the other party’s alleged violation of the Compact, after which state officials and tribal officials must meet within thirty (30) days. The second is arbitration, which either party may request. Finally, if an arbitration award is made, either party may invoke the power of the federal district court either to enforce the arbitration award, or to review the award decision. The defendants argued that the State’s lawsuit was premature, because the State has not sought arbitration, and the Compact describes a federal lawsuit as a step that comes after arbitration.

The Court rejected that argument for two reasons. First, the Court noted that the Compact describes arbitration using the permissive term “may,” instead of the mandatory “shall.” Thus, the Court reasoned, the Compact allows parties the option to seek arbitration, but does not require them to do so. Second, the Court pointed to Part 9 of the Compact, which provides: “This Compact shall not alter tribal, federal or state civil adjudicatory or criminal jurisdiction,” and to Section 2710(d)(7)(A)(ii) of the Indian Gaming Regulatory Act (IGRA), which authorizes federal district courts to hear “any cause of action initiated by a State or Indian tribe to enjoin a class III gaming activity located on Indian lands and conducted in violation of any Tribal-State compact.” Reading the Compact and the IGRA together, the Court concluded that the IGRA allows the State to sue in federal court, and that the Compact merely offers the State the alternative of pursuing arbitration instead.

The Court also rejected the defendants’ claims to sovereign immunity. Tiger Hobia, the King or Mekko of the Kialegee Tribal Town (Kialege or Town) and the Kialegee Tribal Town Corporation (Kialegee Corporation or Town Corporation), argued that he was immune from suit as a tribal official. The Court, however, followed last year’s Tenth Circuit Court of Appeals decision in Crowe & Dunlevy, P.C. v. Stidham, holding that sovereign immunity does not shield a tribal official from a suit alleging an ongoing violation of federal law. Because the State alleged that Hobia is involved in ongoing violation of federal law, the Court held that he is not immune from suit. The Court also held that the Kialegee Corporation lacks sovereign immunity, finding both that the IGRA abrogated tribal sovereign immunity from a state’s lawsuit in federal district court to enjoin class III gaming on Indian lands that violates a tribal-state compact, and that the “sue and be sued” language in the Kialegee Corporation’s charter serves as a waiver of immunity. The Court acknowledged in a footnote that a “sue and be sued” clause in a corporate charter is insufficient to serve as a waiver of a tribe’s sovereign immunity. However, because the State sued the Town Corporation, and not the Town itself, the Court found the “sue and be sued” clause to be a sufficient waiver of sovereign immunity.

We will continue to monitor this case as it develops. In the meantime, please let us know if we may provide more information regarding this important development.