On June 29, the Seventh Circuit Court of Appeals affirmed the Western District of Wisconsin’s decision that an entity created under tribal law was entitled to immunity as an arm of the tribe and dismissed claims characterized as personal capacity claims against individual employees of the tribal entity as being inherently asserted against the tribe itself (ruling available here). This ruling recognizes the important role that sovereign immunity plays in the structuring of economic ventures for tribal communities and demonstrates how a properly enacted tribal code can safeguard immunity protections.
Background and Rulings. The plaintiff sued the Lac Courte Oreilles Community Health Center (Health Center), five Health Center employees, and one independent contractor — but did not sue the Lac Courte Oreilles Band of Lake Superior Chippewa Indians (Tribe) — in federal court for alleged violations of the False Claims Act (FCA) and Wisconsin law for allegedly terminating the plaintiff as a whistleblower. In affirming the district court’s decision to dismiss the case, the Seventh Circuit:
- Found the FCA does not abrogate tribal immunity;
- To reach this conclusion, the Seventh Circuit briefly discussed the U.S. Supreme Court’s decision in Coughlin finding the bankruptcy code abrogated tribal immunity (analysis available here) and found Congress did not include a similar “catch-all abrogation” in the FCA.
- Joined the Fourth, Ninth, and Tenth Circuits in adopting the Breakthrough factors to assess whether an entity is an arm of the tribe entitled to join in the tribe’s immunity;
- Determined that the individual defendants were entitled to sovereign immunity because they were sued in their official capacities (despite formal personal capacity allegations);
- Determined the Health Center was entitled to sovereign immunity as an arm of the tribe; and
- Declined to exercise supplemental jurisdiction over the sole remaining “independent contractor” defendant “when no other federal claim could proceed.”
Arm of the Tribe Analysis. The Seventh Circuit held the district court correctly took judicial notice of the tribal code and then deployed the code heavily in its arm of the tribe legal analysis. Specifically, taking each Breakthrough factor in turn:
- Method of Creation (Favorable) – The court found that the tribal code established the Health Center as a subordinate tribal entity “pursuant to the inherent authority of the” Tribe. As the entity (and documents) “emerged through an exercise of tribal authority,” the court held this factor weighed in favor of immunity.
- Purpose (Favorable) – The court used the Health Center’s mission statement in the tribal code to establish its purpose was for the Tribe’s health and welfare.
- Structure, Management, and Ownership (Not Favorable) – After emphasizing that, at the motion to dismiss stage, well-pleaded facts govern, the court found allegations that employees who made hiring or firing decisions were not accountable to the Tribe sufficient to “cut against a conclusion that the Health Center acted as an arm of the Tribe.”
- Intent to Share Immunity (Favorable) – The court found that tribal code language which states “no private lawsuit can be maintained against … [the Health Center], unless the Tribe consents” to clearly indicate an intent to share immunity.
- Financial Relationship (Neutral) – The court found that since “neither the complaint nor official governance documents paint a clear picture of the financial ties” between the Tribe and Health Center, this factor was “inconclusive.”
The court emphasized that immunity analysis was not “a scorekeeping exercise” and in “some cases one factor might weigh more heavily than others” to allow some flexibility in the analysis. However, the use of judicially noticed tribal code significantly benefited the assertion of tribal immunity, particularly for the method of creation, purpose, and intent to share immunity factors.
Official Capacity Analysis. For the individual Health Center employee defendants, the Seventh Circuit found that — despite formal personal capacity allegations — the “claims implicated only these defendants’ official capacities because the relief [the plaintiff] requested would effectively run against the Tribe — meaning sovereign immunity applied.” To reach this conclusion, the court:
- Emphasized courts may not simply rely on the complaint’s characterization of the remedy sought;
- Noted relief is only against an individual in their personal capacity when it “will not require action by the sovereign or disturb the sovereign’s property;”
- Determined: (1) any monetary relief would necessarily come from the Health Center’s coffers (i.e., a tribal arm); and (2) any reinstatement would require action by the Health Center, not the individuals.
Takeaways. This is a significant win for tribal communities hoping to grow their economic footprint and establish entities operating under their immunity. This decision emphasizes the importance of properly enacting tribal code in establishing arm of the tribe status. It also makes clear that sovereign immunity cannot be easily circumvented merely by claiming the allegations are against individual defendants in their personal, and not official, capacities.