Tribal Courts Have Say On Project Suit: Arizona Panel

An Arizona appeals court on Tuesday upheld the dismissal of a suit alleging that several Hualapai Tribe officials committed fraud in terminating a company’s contract to run a tribal tourist attraction, saying tribal courts rather than state courts must tackle a case that deals entirely with on-reservation activity.

WD at the Canyon LLC had asked the Arizona Court of Appeals to overturn a lower court’s ruling that state courts didn’t have jurisdiction over the company’s suit alleging the tribal officials wrongly canceled its contract to manage the Hualapai Ranch. The company contended that the acts of fraud and misrepresentation it alleged weren’t only located on the reservation and were actually subject to state court jurisdiction.

The appeals court rejected that argument Tuesday, saying that the company’s claims were directed against tribal officials acting in their officially capacity and that the suit hinged on two activities — the euthanization of a horse and a letter describing the company’s alleged breach of its management contract for the ranch — that “occurred solely on the Hualapai reservation.”

“Because extending state jurisdiction here would infringe on the tribe’s sovereignty and ability to self-govern, the superior court did not err by granting the motion to dismiss,” Judge Randall M. Howe wrote on behalf of the court’s panel.

WD at the Canyon reached an agreement with a Hualapai Tribe-owned entity called the Grand Canyon Resort Corporation in 2005 for the construction and management of Western Town, a western-themed attraction. WD inked a further deal in 2006 to build cabins nearby and manage the entire complex, known as Hualapai Ranch.

Those two deals were then combined in a 2010 follow-up agreement, according to the opinion.

But the relationship soured, with the tribe’s company investigating a 2012 incident in which a ranch horse with hip issues was put down by a Hualapai police offer at WD’s behest. The tribe later sent a letter to WD detailing how the company had allegedly breached the 2010 agreement, according to the opinion.

WD disputed that it had breached the deal, and the tribal company terminated the agreement in February 2013.

WD launched a suit against the Grand Canyon Resort Corp. in the Hualapai tribe’s court for breach of contract in 2014. After the tribal court ruled that the tribe and its officials had sovereign immunity to the suit, WD filed the current case in Maricopa County Superior Court.

The lower court tossed the suit in June 2016, saying that having a state court consider the suit against Grand Canyon Resort Corp. board members and executives as well as tribal council members would infringe on the tribe’s sovereignty and self-governance.

The appeals court affirmed that ruling Tuesday, saying the horse incident and the tribe’s letter dealt purely with on-reservation events, including the letter’s claims that several on-reservation buildings had to be condemned because WD didn’t maintain them properly. Those statements formed part of the fraud alleged by WD.

D. Samuel Coffman of Dickinson Wright PLLC, who represents the tribe and other defendants, told Law360 on Wednesday that the case is an important one in light of the U.S. Supreme Court April ruling in Lewis v. Clarke.

In that decision, the high court ruled that a Mohegan Tribe limousine driver didn’t share the tribe’s sovereign immunity and must face claims over an off-reservation car accident, a decision that threatened to expose tribal employees to more suits as a way of circumventing the sovereign immunity of a tribe.

The Hualapai case “basically says that no, you don’t get to go into state court. Indian tribes have a right to govern their own affairs,” Coffman said.

Representatives for the plaintiffs were not immediately available for comment Wednesday.

In addition to Judge Howe, Presiding Judge James P. Beene and Judge Kent E. Cattani sat on the panel for the Arizona Court of Appeals.

WD at the Canyon LLC is represented by Ali J. Farhang, Roscoe J. Mutz and Robert A. Bernheim of Farhang & Medcoff PLLC.

The defendants are represented by D. Samuel CoffmanGlenn M. Feldman and Mitesh V. Patel of Dickinson Wright PLLC. Jennifer Turner of the Grand Canyon Resort Corp. is represented by James P. Curran, Eileen Dennis GilBride and Diana J. Elston of Jones Skelton & Hochuli PLC.

The case is WD at the Canyon LLC et al. v. Waylon Honga et al., case number 1 CA-CV 16-0468, in the Arizona Court of Appeals, Division One.

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Samuel Coffman (Member, Phoenix) practices primarily in the area of employment law. His practice includes the representation of private businesses, tribal entities, including casinos and telephone companies, and municipalities. Mr. Coffman’s practice emphasizes advising and defending employers in employment related law and litigation. His experience includes: conducting investigations; handling discrimination charges; and defending all types of employment-related litigation in state, federal and tribal courts. Sam may be reached at 602-285-5029.