Opinion
Case No. 3:19-cv-00697-LRH-CLB
2020-05-11
Peter J. MAGEE, Pete Magee CPA and Associates, PLCC, TSG Systems, Inc., Alicia Skolak, Plaintiffs, v. SHOSHONE PAIUTE TRIBES OF the DUCK VALLEY RESERVATION, William Reynolds, Theodore Howard, Brian Thomas, Yvonne Howard, Colin Thomas, Arnold Thomas, Defendants.
Richard D. Monkman, Pro Hac Vice, Nathaniel Amdur-Clark, Sonosky, Chambers, Sachse, Miller & Munson, LLP, Juneau, AK, Wes Williams, Law Offices of Wes Williams Jr., Schurz, NV, for Defendants. Charles A. Jones, Jones Law Firm, Reno, NV, Jack Duran, Jr., Pro Hac Vice, Duran Law Office, Roseville, CA
Richard D. Monkman, Pro Hac Vice, Nathaniel Amdur-Clark, Sonosky, Chambers, Sachse, Miller & Munson, LLP, Juneau, AK, Wes Williams, Law Offices of Wes Williams Jr., Schurz, NV, for Defendants.
Charles A. Jones, Jones Law Firm, Reno, NV, Jack Duran, Jr., Pro Hac Vice, Duran Law Office, Roseville, CA
ORDER
LARRY R. HICKS, UNITED STATES DISTRICT JUDGE
Defendants have filed a motion to dismiss the complaint of plaintiffs (collectively referred to individually as "Magee") (ECF No. 10). Magee responded (ECF No. 16), and defendants replied (ECF No. 25). For the reasons stated below, the Court will grant defendants' motion to dismiss and dismiss Magee's complaint with prejudice.
I. Factual Background and Procedural History
For the purposes of defendants' motion to dismiss, the facts within Magee's complaint are presumed to be true. Magee, a certified public accountant, has been working with the Paiute Shoshone Tribes of the Duck Valley Indian Reservation (the "tribes") for more than a decade as the tribes' CFO. (ECF No. 1 at 6). Magee is not a tribal member, instead working for the tribes on a contractual basis. (Id. ) On September 12, 2017, the tribes informed Magee that he was being placed on administrative leave following the alleged discovery of irregularities in the tribes' financial accounts. (Id. at 7). In the same correspondence, the tribes requested that Magee return as CFO and assist with preparations for the 2018 fiscal year. (Id. ) Magee refused to return. (Id. )
On March 14, 2019, the tribes filed a complaint in the Owyhee tribal court against Magee and his affiliated entities. (ECF No. 1 at 7). The complaint alleged four claims: (1) Magee received improper payments that were in excess of what he was entitled to under contract; (2) Magee negligently paid $49,000 in bonuses to his entities that he had no authority to make; (3) Magee transferred funds from the tribes' account to pay for a tribal vehicle that was never delivered to the tribes, and (4) Magee allegedly "interfered" with a Department of Justice investigation. (Id. ) As part of their request for monetary damages, the tribes cited to tribal criminal code section 6-9 105, which is entitled "Official Misconduct." (Id. ) On April 5, Magee moved to dismiss the complaint for lack of subject matter jurisdiction, centering his argument on the premise that because he was the tribes' CFO, he was entitled to tribal sovereign immunity as a tribal officer. (Id. at 8). Magee and the tribes would argue and brief the issue of sovereign immunity over the course of the summer, and on September 17, 2019, the tribal court issued a ruling denying Magee's motion to dismiss. (Id. )
Although unstated in Magee's complaint, Magee appealed the tribal court's decision to the tribal appellate court. (ECF No. 10 at 4). The appellate court rejected Magee's appeal because the tribal court's order was interlocutory and not final, meaning that Magee did not have a right to appeal the exercise of jurisdiction at that time. (Id. ) The applicable tribal rules do not allow for appeals of interlocutory orders. On October 21, 2019, Magee filed the instant complaint in federal court (originally in the Northern District of California, subsequently transferred to the District of Nevada), requesting declaratory and injunctive relief. (ECF No. 1 at 10–12). Defendants then filed their motion to dismiss on December 9, 2019.
II. Legal Standard
Defendants request dismissal pursuant to both Federal Rule of Civil Procedure 12(b)(1) and 12(b)(6). To survive a motion to dismiss for failure to state a claim, a complaint must satisfy Federal Rule of Civil Procedure 8(a)(2)'s notice pleading standard. See Mendiondo v. Centinela Hosp. Med. Ctr. , 521 F.3d 1097, 1103 (9th Cir. 2008). That is, a complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." FED. R. CIV. P. 8(a)(2). The Rule 8(a)(2) pleading standard does not require detailed factual allegations; a pleading, however, that offers " ‘labels and conclusions’ or ‘a formulaic recitation of the elements of a cause of action’ " will not suffice. Ashcroft v. Iqbal , 556 U.S. 662, 677, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ).
Furthermore, Rule 8(a)(2) requires a complaint to "contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Iqbal , 556 U.S. at 667, 129 S.Ct. 1937 (quoting Twombly , 550 U.S. at 570, 127 S.Ct. 1955 ). A claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference, based on the court's judicial experience and common sense, that the defendant is liable for the misconduct alleged. Id. "The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief. Id.
In reviewing a motion to dismiss, the court accepts the facts alleged in the complaint as true. Iqbal , 556 U.S. at 667, 129 S.Ct. 1937. Even so, "bare assertions...amount[ing] to nothing more than a formulaic recitation of the elements of a...claim...are not entitled to an assumption of truth." Moss v. U.S. Secret Serv. , 572 F.3d 962, 969 (9th Cir. 2009) (quoting Iqbal , 556 U.S. at 681, 129 S.Ct. 1937 ) (brackets in original) (internal quotation marks omitted). The court discounts these allegations because "they do nothing more than state a legal conclusion—even if that conclusion is cast in the form of a factual allegation." Id. (citing Iqbal , 556 U.S. at 681, 129 S.Ct. 1937.) "In sum, for a complaint to survive a motion to dismiss, the non-conclusory ‘factual content,’ and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief." Id.
Although the defendant is the moving party in a motion to dismiss, the plaintiff is the party invoking the Court's jurisdiction. As a result, the plaintiff bears the burden of proving that the case is properly in federal court. McCauley v. Ford Motor Co. , 264 F.3d 952, 957 (9th Cir. 2001). A Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction can be either facial or factual. Safe Air for Everyone v. Meyer , 373 F.3d 1035, 1039 (9th Cir. 2004). In a facial attack, the defendant asserts that the allegations within the complaint are insufficient on their face to invoke federal jurisdiction. Id. In a factual attack, the defendant disputes the truth of the allegations that, by themselves, would otherwise invoke federal jurisdiction. Id. With factual attacks, the Court is permitted to review evidence beyond the complaint without converting the motion to dismiss into a motion for summary judgment. Id. (citing Savage v. Glendale Union High Sch. , 343 F.3d 1036, 1039 n. 2 (9th Cir. 2003) ).
III. Discussion
Defendants raise three arguments as to why the Court should dismiss Magee's complaint. First, defendants argue that Magee failed to exhaust his tribal remedies prior to filing his complaint in federal court. (ECF No. 10 at 6). Second, they argue that even if Magee did exhaust his tribal remedies, his case is barred by the doctrine of tribal sovereignty. (Id. at 9). Third and finally, defendants assert that none of Magee's causes of action raise a federal question. (Id. at 12). The Court will examine defendants' arguments in turn.
Defendants first argue that because their case against Magee is still pending in tribal court and the tribal appellate court did not issue a decision on the merits, Magee has not exhausted his tribal remedies. (ECF No. 10 at 6). They note that the Shoshone-Paiute tribal code does not allow for interlocutory appeals, which is what Magee attempted to do when he appealed the trial court judge's denial of his motion to dismiss. ( Id. ) Accordingly, they argue, the tribal appellate court did not issue a final decision on the merits when it rejected Magee's notice of appeal as improper. ( Id. ) In response, Magee recognizes that the tribal court does not allow for interlocutory appeals, but he argues that his failure to exhaust his tribal remedies should be excused pursuant to Nevada v. Hicks , 533 U.S. 353, 121 S.Ct. 2304, 150 L.Ed.2d 398 (2001). (ECF No. 16 at 6).
Non-Indians may bring a federal common law cause of action under 28 U.S.C. § 1331 to challenge tribal court jurisdiction. Nat'l Farmers Union Ins. Cos. v. Crow Tribe of Indians , 471 U.S. 845, 850–53, 105 S.Ct. 2447, 85 L.Ed.2d 818 (1985). Federal courts, however, must give tribal courts a full opportunity to determine their own jurisdiction, which includes opportunities for appellate review in tribal appellate courts. Iowa Mut. Ins. Co. v. LaPlante , 480 U.S. 9, 16–17, 107 S.Ct. 971, 94 L.Ed.2d 10 (1987). In other words, a defendant in tribal court cannot bring suit in federal court alleging that he was improperly sued in tribal court until he has exhausted all possible avenues for relief in tribal court. In Nevada v. Hicks , the Supreme Court listed four exceptions to the exhaustion doctrine: (1) the assertion of tribal jurisdiction is motivated by a desire to harass or is conducted in bath faith; (2) the tribal action is patently violative of express jurisdictional prohibitions; (3) exhaustion would be futile because of a lack of an adequate opportunity to challenge the tribe's jurisdiction, and (4) exhaustion would serve no purpose other than delay where no federal grant provides for tribal governance of nonmembers' conduct. 533 U.S. 353, 369, 121 S.Ct. 2304, 150 L.Ed.2d 398 (2001).
Magee argues that two of the exceptions apply to his case, the first of which is the bad faith exception. (ECF No. 16 at 7). Magee asserts that defendants commenced the suit against him in bad faith, pointing to statements they allegedly made such as they "could not have a ‘white man’ making as much money" as Magee was making as CFO. ( Id. ) Magee also notes that he was placed on administrative leave only after he terminated the employment of the tribal treasurer's spouse and the former acting CFO of the tribes, the latter of whom was appointed as CFO following his suspension. ( Id. ) Even if these allegations are presumed to be true, what Magee overlooks is that the "bad faith" exception only applies when the tribal court has acted in bad faith, not the party initiating the litigation. Grand Canyon Skywalk Development, LLC v. ‘Sa’ Nyu Wa Inc. , 715 F.3d 1196, 1201 (9th Cir. 2013). As the Ninth Circuit noted, all a party would need to do to remove a case to federal court is allege bad faith by the opposing party, which would become a factual inquiry preventing early dismissal. Id. This is not the purpose of the bad faith exception. Magee does not explain how the tribal court acted in bad faith when it denied his motion to dismiss based on sovereign immunity, so his argument on this ground lacks merit.
Magee's second argument as to why he should be excused from the exhaustion requirements is that tribal jurisdiction over him is "plainly lacking" because of some form of immunity, i.e. sovereign or executive. (ECF No. 16 at 10). This exception arose from Strate v. A-1 Contractors , where the Supreme Court noted that absent a different congressional direction, "Indian tribes lack civil authority over the conduct of nonmembers on non-Indian land within a reservation." 520 U.S. 438, 446, 117 S.Ct. 1404, 137 L.Ed.2d 661 (1997). But tribes "retain considerable control over nonmember conduct on tribal land." Id. at 454, 117 S.Ct. 1404. The general rule is that tribes may exercise control over "the activities of nonmembers who enter consensual relationships with the tribe or its members, through commercial dealing, contracts, leases, or other arrangements." Montana v. U.S. , 450 U.S. 544, 565, 101 S.Ct. 1245, 67 L.Ed.2d 493 (1981).
Magee argues that even though he was sued in his personal capacity, his role as the tribes' CFO granted him the same sovereign immunity given to all tribal officers. (ECF No. 16 at 10). The Court disagrees. Although Magee is correct in arguing that tribal officers are entitled to sovereign immunity, this is only the case when they are acting in their official capacity and within the scope of their authority. Linneen v. Gila River Indian Community , 276 F.3d 489, 492 (9th Cir. 2002). Magee acknowledges that in the underlying tribal case, he was sued in his individual capacity rather than his official capacity as the tribes' CFO. (ECF No. 1 at 2). This is an important fact in this particular case because the tribal officials themselves brought the lawsuit against Magee. One of the recognized purposes of tribal immunity is to protect a tribe's treasury. Cook v. AVI Casino Enterprises, Inc. , 548 F.3d 718, 725–26 (9th Cir. 2008). The tribes' decision to sue Magee in his personal capacity was not, as Magee suggests, an attempt to evade a sovereign immunity defense, but rather the only way in which they could recover funds stemming from his alleged misconduct. Had the tribes sued Magee in his official capacity, any damages awarded to them would have come from the tribes' treasury. In essence, if their lawsuit is successful, they would be paying themselves damages.
Moreover, the tribes' suit in tribal court makes a series of allegations that, if true, show that Magee was not acting within the scope of his authority as tribal CFO. (See generally ECF No. 1-4). These allegations include complaints that Magee improperly paid himself with tribal funds and interfered in a Department of Justice audit. ( Id. at 9–12, 107 S.Ct. 971 ). Although tribal immunity as to the sovereign is not waived when an officer acts outside the scope of his authority, individual immunity for that particular officer is waived. Village of Hotvela Traditional Elders v. Indian Health Services , 1 F.Supp.2d 1022, 1028 (D. Ariz. 1997). So even if Magee is correct in arguing that he is entitled to sovereign immunity because of his status as a tribal officer, the tribes' complaint alleges facts indicating that he acted outside the scope of his authority and, thus, any individual immunity may be waived depending on the outcome of the tribes' claims.
Magee has failed to show that tribal court jurisdiction over him is "plainly lacking." Accordingly, he has not demonstrated that he should be excused from failing to exhaust all tribal remedies before filing suit in federal court. Because Magee has not exhausted the available tribal remedies, the Court does not reach the merits of defendants' tribal sovereignty argument. Defendants' motion to dismiss will be granted.
IV. Conclusion
IT IS THEREFORE ORDERED that defendants' motion to dismiss (ECF No. 10) is GRANTED . Magee's complaint is DISMISSED due to a lack of jurisdiction arising from Magee's failure to exhaust his tribal remedies.
IT IS SO ORDERED.