Wisconsin Lawyer
Vol. 81, No. 11, November 2008

Determining Tribal Jurisdiction Over Non-Tribe Members

by Brian L. Pierson

ccording to a recent report, casinos owned by Wisconsin’s 11 federally-recognized Indian tribes generated $1.335 billion in revenues during 2007.¹ A large portion of tribal earnings are cycled through the state’s economy to pay for a vast array of goods and services needed to operate not only tribal casinos and other commercial enterprises but also tribal governments. In addition, tribe members are starting reservation-based² businesses with increasing frequency. What court – tribal or state – has jurisdiction over disputes arising from these businesses? Attorneys representing parties doing business with tribes and tribe members need to know the jurisdictional principles that apply.

In one of its final decisions of the 2007-08 term, the U.S. Supreme Court, in Plains Commerce Bank v. Long Family Land & Cattle Co.,³ held that the Cheyenne River Sioux Tribal Court lacked jurisdiction over a bank that had engaged in extensive dealings with a corporation owned by members of the Cheyenne River Sioux Tribe of South Dakota. The court relied on an analytic framework established in its 1981 decision in Montana v. United States.⁴ This article summarizes the Montana rule, describes the evolution of the rule in recent decades (culminating in the Plains Commerce Bank decision), and identifies the principles that currently determine tribal court jurisdiction.

The Montana Rule and Exceptions

In Montana v. United States,⁵ a decision authored by Justice Potter Stewart, the U.S. Supreme Court held that the treaties between the United States and the Crow Tribe establishing the Tribe’s Montana reservation did not give the Tribe authority to regulate non-Indian fishing on the Big Horn River, which flows through the heart of the Tribe’s reservation. In rejecting the argument that the Tribe’s inherent sovereign authority supported its regulatory jurisdiction, the Court relied on Oliphant v. Suquamish Indian Tribe⁶ and United States v. Wheeler,⁷ decisions in which the Court had described tribes’ “diminished status as sovereigns”⁸ resulting from their incorporation into the United States and treaties with the federal government. Conceding the retention of certain inherent tribal powers,⁹ the Court denied that these went beyond “what is necessary to protect tribal self-government or to control internal relations.”¹⁰

The power to regulate nonmembers’ activities,¹¹ the Montana Court declared, was beyond the tribes’ scope of authority, with two exceptions. First, even on fee lands within reservation boundaries, “[a] tribe may regulate, through taxation, licensing, or other means, the activities of nonmembers who enter consensual relationships with the tribe or its members, through commercial dealing, contracts, leases, or other arrangements.”¹² Second, “[a] tribe may also retain inherent power to exercise civil authority over the conduct of non-Indians on fee lands within its reservation when that conduct threatens or has some direct effect on the political integrity, the economic security, or the health or welfare of the tribe.”¹³

The two Montana exceptions are strikingly broad. Consensual relationships supporting regulatory jurisdiction under the first Montana exception extend not only to the tribe but to any member of the tribe, and the scope of such relationships includes not only commercial dealings, contracts, and leases, but also “other arrangements.” Even in the absence of a consensual relationship, tribes could exercise regulatory jurisdiction under the second Montana exception provided only that the regulated conduct have “some direct effect” on the “economic security” or on the “health or welfare” of the tribe. These undefined, vague terms suggested a vast sphere of nonmember conduct subject to tribal jurisdiction.

The evolution of the Montana rule, reflecting a gradual conservative trend in the Court from 1981 to 2008, occurred in a series of decisions in which the Court, while never abandoning its 1981 decision, qualified, amended, and fundamentally reinterpreted it to severely limit tribal jurisdiction. In its 1989 decision in Brendale v. Confederated Bands of the Yakima,¹⁴ the Court, applying Montana, held that, except for isolated “land-locked” tracts surrounded by tribal lands, tribes could not zone reservation fee land owned by nonmembers. A tribe’s general interest in regulating reservation land use could not, according to the Court, support its jurisdiction under the second Montana exception.¹⁵

Brian L. Pierson, U.W. 1983, is an attorney with Godfrey & Kahn S.C., Milwaukee.

With Strate v. A-1 Contractors,¹⁶ decided in 1997, the Montana rule assumed its modern form. The issue in Strate was tribal court jurisdiction over claims brought by tribe members against a nonmember arising from a motor vehicle accident on the Fort Berthold reservation. First, the Court extended the Montana rule, previously applied to tribal regulatory authority, to a tribe’s adjudicatory authority, holding that the scope of a tribe’s adjudicatory authority could not exceed the scope of its regulatory authority.¹⁷ Second, the Court effectively held that the exceptions to the general Montana rule really weren’t exceptions at all. Conceding that “[r]ead in isolation, the Montana rule’s second exception can be misperceived,” the Court declared as the “key” to its proper application the underlying principle that a tribe’s authority does not extend beyond what is necessary to protect tribal self-government or to control internal relations.¹⁸ In other words, circumstances that seemed to satisfy one of the two Montana exceptions still would not support tribal jurisdiction if the exercise of such jurisdiction would run afoul of the general Montana rule. Because the authority to adjudicate a motor vehicle dispute between individuals, even when tribe members are involved,¹⁹ was unnecessary to the Tribe’s right to govern its internal affairs, the Court concluded that jurisdiction was unwarranted. Finally, Strate established the jurisdictional equivalency between fee land within reservation boundaries and trust land²⁰ subject to a state right-of-way.

Two cases decided in 2001, Atkinson v. Shirley²¹and Nevada v. Hicks,²² solidified the limitations on the Montana exceptions announced in Strate. In Atkinson, the Court held that acceptance of tribal governmental services by a nonmember-owned hotel, on fee land within reservation boundaries, did not constitute a consensual relationship within the first Montana exception, and that a consensual relationship with a tribe would support regulatory jurisdiction only if the regulation arose out of a consensual relationship.²³ Hicks reinforced the post-Strate weakness of the second Montana exception, holding that tribal jurisdiction over a suit against state wardens arising from a search and seizure on reservation land was not necessary to tribal self-governance and must, therefore, be rejected.²⁴

The Plains Commerce Bank Case

Plains Commerce Bank (the bank), a bank owned by non-Indians and located in Hoven, South Dakota, had a long-term relationship with the Long Family Land and Cattle Company (the company), a South Dakota corporation owned by Cheyenne River Sioux Tribe (CRST) members Ronnie and Lila Long and located on the Tribe’s reservation. Beginning in 1989, the bank made various loans to the company guaranteed by the Bureau of Indian Affairs. Many of the bank’s meetings with the company took place on the reservation. The non-Indian father of one of the company’s owners pledged fee land within reservation boundaries to secure one of the loans. When the company defaulted, the bank foreclosed on the land but later entered into new agreements under which the company received additional loans and an option to buy back the foreclosed property within two years. When the company proved unable to exercise the option, the bank sold the land to non-Indians.

The company sued the bank in the tribal court, alleging that the bank had discriminated against the company based on the race of its owners when it offered terms to the non-Indian purchasers that were more favorable than those offered the company. The tribal court found for the company and the Longs and awarded damages of $750,000. In a later supplemental judgment, the court ordered the bank to give the company an option to purchase the parcel it still occupied on the terms offered to the non-Indian purchasers. The CRST Court of Appeals affirmed. The bank brought a federal action challenging the tribal court’s jurisdiction. The district court, citing the first Montana exception, held that the bank’s consensual relationship with the company supported tribal court jurisdiction. The Eighth Circuit Court of Appeals affirmed.²⁵ On June 25, 2008, the U.S. Supreme Court reversed.²⁶

While previous cases involving tribal adjudicatory jurisdiction had focused on the second Montana exception relating to conduct on fee lands that “threatens or has some direct effect on the political integrity, the economic security, or the health or welfare of the tribe,” Plains Commerce Bank focused on the first Montana exception, which permits a tribe to exercise jurisdiction over “the activities of nonmembers who enter consensual relationships with the tribe or its members, through commercial dealing, contracts, leases, or other arrangements.”²⁷ The company argued that the bank’s longstanding consensual relationship and the reservation locus of the land and many of the parties’ dealings supported tribal jurisdiction. In a 5-4 decision authored by Chief Justice Roberts, the Court held otherwise.

The Court’s decision relies on 1) a narrow construction of the “activities of nonmembers” for purpose of the first Montana exception, and 2) an emphasis on the tribe’s diminished sovereignty and Montana’s general rule against the exercise of sovereignty beyond what is necessary for self-government. With respect to the first point, according to Justice Roberts, the bank’s activities to which the plaintiffs objected were nothing more than the bank’s alleged discriminatory sale of fee land to a third party.²⁸ Because a tribe has no authority to regulate the sale of fee lands, there could be no jurisdiction: “According to our precedents, ‘a tribe’s adjudicative jurisdiction does not exceed its legislative jurisdiction.’… We reaffirm that principle today and hold that the Tribal Court lacks jurisdiction to hear the Longs’ discrimination claim because the Tribe lacks the civil authority to regulate the bank’s sale of its fee land.”²⁹  

With respect to diminished sovereignty, Justice Roberts emphasized the primacy of Montana’s general rule over its exceptions: “[T]he tribes have, by virtue of their incorporation into the American republic, lost the right of governing persons within their limits except themselves.”³⁰ Any assertion of tribal jurisdiction must be justified by its effect on tribal self-rule: “The logic of Montana is that certain activities on non-Indian fee land (say, a business enterprise employing tribal members) or certain uses (say, commercial development) may intrude on the internal relations of the Tribe or threaten tribal self-rule. To the extent that they do, such activities or land uses may be regulated.”³¹ While acknowledging that “noxious uses” of fee land might meet the standard,³² the Court held that a mere sale does not: “Once the land has been sold in fee simple to non-Indians and passed beyond the tribe’s immediate control, the mere resale of that land works no additional intrusion on tribal relations or self-government.”³³

Although the key holding in the Court’s decision was the lack of tribal jurisdiction over fee land, Justice Roberts took the opportunity to narrow the Montana exceptions in other respects. Implicit in the first Montana exception is the notion that the described “consensual relationships” with the tribe or its members per se satisfy the principal rule, that is, they are relationships that affect the tribe’s right of self-government to a degree sufficient to support tribal jurisdiction. Justice Roberts suggested a stricter consent requirement: “Indian courts differ from traditional American courts in a number of significant respects…. And nonmembers have no part in tribal government – they have no say in the laws and regulations that govern tribal territory. Consequently, those laws and regulations may fairly be imposed on nonmembers only if the nonmember has consented, either expressly or by his actions. Even then, the regulation must stem from the tribe’s inherent sovereign authority to set conditions on entry, preserve tribal self-government, or control internal relations.”³⁴ While conceding that the bank “may reasonably have anticipated that its various commercial dealings with the Longs could trigger tribal authority to regulate those transactions,” a question the Court expressly declined to decide, the Court insisted that there is no reason the Bank should have anticipated that its general business dealings with respondents would permit the Tribe to regulate the Bank’s sale of land it owned in fee simple.”³⁵

In dicta, Justice Roberts also suggested a stricter standard for applying the second Montana exception, noting that “[t]he conduct must imperil the subsistence of the tribal community…. One commentator has noted that ‘the elevated threshold for application of the second Montana exception suggests that tribal power must be necessary to avert catastrophic consequences.’”³⁶ The distance between the “catastrophic consequences” standard proposed by Justice Roberts and the “some direct effect” language used in the Montana case is obvious.

Principles Governing a Tribe’s Jurisdication Over Nonmembers Today

Justice Stewart’s 1981 formulation of the Montana exceptions does not aptly describe the rules that the U.S. Supreme Court actually applies to matters of tribal jurisdiction today. Although the Court continues to insist on their continued vitality, the Montana exceptions are so encrusted with corollaries, interpretations, and qualifications as to be almost useless. Moreover, in view of the Court’s proclivity for ad hoc decision-making in situations in which tribal jurisdiction is concerned, any effort to identify rules likely to be applied in future cases is hazardous. The following principles are nonetheless offered as a rough summary of the current law, based on the Plains Commerce Bank case and the antecedent Strate, Atkinson, and Hicks decisions discussed above:

• For purposes of the first Montana exception, there must be a nexus between the nonmember’s consensual relation with a tribe or its members and the conduct being regulated or adjudicated. There is no tribal counterpart to state court “general jurisdiction” based on systematic contacts unrelated to the dispute at bar.³⁷
• Consensual relationships with a tribe or tribe member squarely within the first Montana exception may nonetheless be insufficient to establish tribal jurisdiction in the absence of an identified sovereignty interest relating to self-governance. The tribe’s general interest in protecting the interests of its members does not satisfy this sovereignty interest requirement.
• A tribe’s right to regulate a reservation-based business enterprise that employs tribe members, a reservation-based commercial development, or other nonmember activity depends on whether these activities “intrude on internal relations” or “threaten tribal self-rule.”
• Whether a nonmember “has consented either expressly or by his actions” to tribal jurisdiction is relevant to the court’s authority to exercise its jurisdiction. The reasonableness of a nonmember’s anticipation of tribal regulation is pertinent to this inquiry. It follows that if the tribe enacts and publishes commercial laws governing a nonmember’s dealings with members, the nonmember might reasonably anticipate being regulated by the tribe, thus satisfying the Plains Commerce Bank “consent by action” requirement and supporting the case for tribal jurisdiction.
• For a tribe to establish jurisdiction over nonmembers on fee land under the second Montana exception, it will have to show that the conduct being regulated imperils the subsistence of the tribal community. As the Strate decision illustrates, a tribe’s desire to protect its members from nonmembers’ reckless operation of motor vehicles on the reservation will not meet this standard.
• Except in extraordinary circumstances, such as an isolated parcel of nonmember fee land surrounded by tribal land or an activity that poses a grave risk to the tribal community, a tribe cannot zone fee land or otherwise regulate nonmember uses of fee land.
• Although a tribe’s jurisdiction over nonmembers on trust land is broader than on fee lands, trust lands over which a tribe has ceded a landowner’s right of control, for example, by granting a right of way, are the equivalent of fee lands. Moreover, a tribe still will probably be unable to exercise jurisdiction over the conduct of state officials, even on trust land, with respect to actions within the state’s authority.

Conclusion

As the U.S. Supreme Court decisions make clear, there is a presumption against tribal court jurisdiction over nonmembers and, in the absence of a congressional delegation (a rare thing), the burden is on a tribe to show that one of the Montana exceptions, as construed by the Court, applies. There is no reason to believe that the general trend restricting the Montana exceptions will not continue for the foreseeable future. Tribes that enact and publish legal codes to support the sovereignty basis for their regulation of nonmembers increase nonmembers’ reasonable expectation of tribal jurisdiction. In the long term, tribes’ willingness to model their courts on state and federal courts may allay the fears of nonmembers and the Supreme Court alike and lead to broader tribal jurisdiction.

Endnotes

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