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Fourth Circuit Rules in Favor of Lac Vieux Desert, Determining That Lending Business Is an Arm of the Tribe Entitled to Sovereign Immunity

In a highly anticipated and long-awaited ruling handed down on July 3, the United States Court of Appeals for the Fourth Circuit affirmed that two companies owned by the Lac Vieux Desert Band of Lake Superior Chippewa Indians are indeed legitimate arms of the Tribe, and as such, are entitled to Tribal sovereign immunity.

The ruling, which reversed an earlier order from the District Court and remanded it with instructions to grant the Tribe’s motion to dismiss for lack of subject matter jurisdiction, represented a major win for the Tribe with implications that could echo across Indian Country. Since 2017, the Tribe has been involved in the litigation, which was filed by a group of five Virginia residents alleging that Tribal sovereignty did not apply to the Tribally-owned businesses.

In a press release issued shortly after the decision was issued, LVD Chairman James Williams, Jr. hailed the decision as a milestone not only for his Tribe, but for Native American sovereign rights in general.

“We could not be more pleased with the Fourth Circuit’s decision upholding our Tribe’s sovereignty and our Tribal businesses’ recognition as arms of the Tribe,” Williams said. “By reversing the District Court, the Fourth Circuit’s ruling is a major victory for Native American sovereign rights across all of Indian Country.”

 

“The decision also provides welcome clarity to the standards used to evaluate Tribal economic instrumentalities,” Chairman Williams added.

At the heart of the case is whether or not the businesses qualified as arms of the Tribe, a legal designation that provides for Tribally-created economic entities to be vested with Tribal immunity.

In the March 2019 issue of Native Business Magazine, we spoke with Maranda Compton (Delaware Tribe of Indians), a partner at Van Ness Feldman LLP, who detailed what the arm of the Tribe designation means.

“Arms of the Tribes are entities that are governmental in status but commercial in behavior,” Compton said. “These sovereign commercial arms are essential for Tribes, but also used by some of the fifty United States. The federal government has long understood that Tribes require an extra level of commercial endeavor to fund their governmental activities.”

We also spoke with Pilar Thomas (Pascua Yaqui), a lawyer in Lewis Roca Rothgerber Christie LLP’s Indian Tribal Nations Practice. She added that “Tribes can and should take on enterprises that are wholly owned by the Tribe and where the revenue of that enterprise is going into the Tribe’s coffers. By definition, they should be considered part of the Tribe.”

In Breakthrough Mgmt. Grp., Inc v. Chukchansi Gold Casino & Resort, the Tenth Circuit outlined six factors to evaluate Tribal economic entities and determine if they qualify as arms of the Tribe.

The six-factor Breakthrough test has thus served as the measuring rod to determine whether an entity furthers Tribal sovereignty, and has been relied upon by Tribal, federal, and state courts. The Tribe’s appellant brief addressed each of these six factors, demonstrating how each weighed in favor of sovereign immunity for both companies.

While the most significant part of the ruling was the court’s determination that “because a proper weighing of the factors demonstrates by a preponderance of the evidence that the Entities are indeed arms of the Tribe, Big Picture and Ascension are entitled to Tribal sovereign immunity,” the opinion included several other noteworthy findings.

First, the court ruled that “while employment of Tribe members may be an indication that an entity is contributing to a Tribe’s self-governance or economic development, it is not required […] to weigh in favor of immunity.”

Second, they determined that “an entity’s decision to outsource management in and of itself does not itself weigh against Tribal immunity.”

Finally, the three-judge panel found that “an entity’s entitlement to Tribal immunity cannot and does not depend on a court’s evaluation of the respectability of the business in which a Tribe has chosen to engage.” In other words, whether a court likes or dislikes the business is irrelevant and sovereignty still applies.

“The Fourth Circuit has affirmed what we have known and argued all along: our businesses are sovereign arms of the Tribe and immune from Plaintiffs’ baseless claims,” Williams said. “We hope that we can now put this issue to bed once and for all, allowing us to fully focus on the needs of our people.”

 

“The Tribe firmly believes that the Court reached the right result, and we hope that this outcome will serve as a model for future decisions,” Williams concluded.

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