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Becker v. Ute Indian Tribe of Uintah and Ouray Reservation

United States Court of Appeals, Tenth Circuit

August 25, 2017

LYNN D. BECKER, Plaintiff Counterclaim Defendant -Appellee,
UTE INDIAN TRIBE OF THE UINTAH AND OURAY RESERVATION, a federally chartered corporation; UINTAH AND OURAY TRIBAL BUSINESS COMMITTEE; UTE ENERGY HOLDINGS, LLC, a Delaware LLC, Defendant Counterclaimants Third-Party Plaintiffs - Appellants,
JUDGE BARRY G. LAWRENCE, Third-Party Defendant-Appellee.

         Appeal from the United States District Court for the District of Utah (D.C. No. 2:16-CV-00958-CW)

          Jeffrey S. Rasmussen (Frances C. Bassett, Thomas W. Fredericks, Jeffrey J. Patterson, and Thomasina Real Bird, with him on the briefs), Fredericks Peebles & Morgan LLP, Louisville, Colorado, for Ute Indian Tribe of the Uintah and Ouray Reservation, Uintah and Ouray Tribal Business Committee, Ute Energy Holdings, LLC, Defendant Counterclaimants Third-Party Plaintiffs-Appellants.

          David K. Isom, Isom Law Firm, PLLC, Salt Lake City, Utah, for Plaintiff, Counterclaim Defendant-Appellee, Lynn D. Becker.

          Brent M. Johnson and Keisa L. Williams, Utah Administrative Office of the Courts, Salt Lake City, Utah, for Third-Party Defendant-Appellee, Judge Barry G. Lawrence.

          Before HARTZ and EBEL, Circuit Judges. [*]


         The Ute Indian Tribe of the Uintah and Ouray Reservation[1] appeals a preliminary injunction ordering it not to proceed with litigation in tribal court against a nonmember former contractor, Lynn Becker. The district court ruled that although the parties' dispute would ordinarily come within the tribal court's jurisdiction, their Independent Contractor Agreement (the Contract) waived the Tribe's right to litigate in that forum.

         The Tribe mounts two challenges to the preliminary injunction. First, it contends that the tribal-exhaustion rule, which ordinarily requires a federal court to abstain from determining the jurisdiction of a tribal court until the tribal court has ruled on its own jurisdiction, deprived the district court of jurisdiction to determine the tribal court's jurisdiction. We do not agree that the rule is jurisdictional but agree that the district court should have abstained on the issue. Although the Contract contains a waiver of the tribal-exhaustion rule, Mr. Becker, on the record and arguments before us on this appeal, has not shown a likelihood of success based on the validity of the waiver. He has failed to adequately counter the Tribe's contention that the entire Contract, including the waiver, is void because it did not receive federal-government approval, as is required for contracts transferring property held in trust for the Tribe by the federal government. Second, the Tribe contends that even if exhaustion is not required, the preliminary injunction was improper because the Contract did not waive the Tribe's right to litigate this dispute in tribal court. Although the author, in a separate concurrence, believes the contention has substantial merit, the panel relies only on the first issue as ground for reversal.

         In addition, the Tribe challenges the district court's dismissal of its claims under the federal civil-rights act, 42 U.S.C. § 1983, seeking to halt state-court litigation between it and Mr. Becker. We reject the challenge. The Tribe has not stated a claim under § 1983 because it is not a "person" entitled to relief under that statute when it is seeking, as here, to vindicate only a sovereign interest.

         To resolve the remaining issues raised in this case, we adopt our decision in the companion case of Ute Indian Tribe v. Lawrence, No. 16-4154 (August 25, 2017).

         I. BACKGROUND

         In 2005 Mr. Becker and the Tribe executed the Contract, which made Mr. Becker a manager in the Tribe's Energy and Minerals Department. He was to receive a salary of $200, 000 and 2% of "net revenue distributed to Ute Energy Holding, LLC from Ute Energy, LLC." Becker Compl. at Ex. 1 (the Contract), Aplt. App., Vol. I at 46. The two LLCs are tribal entities "capitalized with . . . oil and gas interest[s] . . . held in trust for the Tribe by the United States." Id. at Ex. 3 (Tribal Court Complaint), Aplt. App., Vol. I at 56. Mr. Becker resigned in 2007. He claims that the Tribe breached its compensation promises while the Tribe maintains that he was part of a scheme to defraud it out of valuable interests in oil and gas.

         The parties' litigation began when Mr. Becker filed suit in the United States District Court for the District of Utah seeking damages. The court dismissed the suit for lack of subject-matter jurisdiction because the claim did not arise under federal law. We affirmed in Becker v. Ute Indian Tribe, 770 F.3d 944 (10th Cir. 2014). Mr. Becker then filed suit in Utah state court in December 2014. In July 2015 the state court rejected the Tribe's attempt to have the action dismissed on the grounds that the state court lacks jurisdiction and that the Tribe is protected by tribal sovereign immunity. The Tribe sued in federal court the following June to enjoin the state proceeding on the ground that the state court lacks jurisdiction to hear the parties' dispute. But the district court dismissed the Tribe's federal suit for lack of federal-court subject-matter jurisdiction. That dismissal is the subject of a separate appeal in this court. See Ute Indian Tribe v. Lawrence, No. 16-4154.

         Having been unsuccessful in state and federal court, the Tribe turned to tribal court, seeking, among other things, declarations (1) that the Contract is void because it grants Mr. Becker a tribal trust asset without federal-government approval, in violation of both federal and tribal law, and (2) that its purported waiver of sovereign immunity in the Contract was executed in violation of tribal law. Mr. Becker responded on September 14, 2016, by filing this action against the Tribe and affiliated entities. The district court promptly granted Mr. Becker's request for a temporary restraining order against the tribal-court proceeding. While awaiting a hearing on Mr. Becker's request for a preliminary injunction, the Tribe filed counterclaims against Mr. Becker and third-party claims against the judge presiding over Mr. Becker's state action, including claims under § 1983 seeking an injunction against the state-court proceedings on the ground that they violate the Tribe's due-process rights. The district court later granted Mr. Becker a preliminary injunction. It also dismissed the Tribe's § 1983 claims without prejudice. And, adopting the decision by the district court in the related case of Ute Indian Tribe v. Lawrence, Case No. 2:16-CV-00579-RJS (Aug. 16, 2016), the court in this case dismissed the Tribe's remaining counterclaims and third-party claims for lack of jurisdiction. (We reverse the Lawrence dismissal today in a separate decision.)


         We have jurisdiction under 28 U.S.C. § 1292(a)(1) to review the grant of a preliminary injunction by a district court. "We review the . . . grant of a preliminary injunction for abuse of discretion. A district court abuses its discretion when it commits an error of law or makes clearly erroneous factual findings." Planned Parenthood of Kan. & Mid-Mo. v. Moser, 747 F.3d 814, 822 (10th Cir. 2014) (internal quotation marks omitted). A party must establish four elements to obtain a preliminary injunction: "(1) [that it has] a substantial likelihood of prevailing on the merits; (2) [that it will suffer] irreparable harm unless the injunction is issued; (3) that the threatened injury outweighs the harm that the preliminary injunction may cause the opposing party; and (4) that the injunction, if issued, will not adversely affect the public interest." Diné Citizens Against Ruining Our Env't v. Jewell, 839 F.3d 1276, 1281 (10th Cir. 2016) (internal quotation marks omitted). "[E]ach of these elements is a prerequisite for obtaining a preliminary injunction . . . ." Id. We agree with the Tribe that Mr. Becker has failed to establish the first element because he has not shown a substantial likelihood that he can escape the tribal-exhaustion rule, which usually requires that the issue of tribal jurisdiction be decided by the tribal court in the first instance.

         The tribal-exhaustion rule states that "absent exceptional circumstances, federal courts typically should abstain from hearing cases that challenge tribal court jurisdiction until tribal court remedies, including tribal appellate review, are exhausted." Crowe & Dunlevy, P.C. v. Stidham, 640 F.3d 1140, 1149 (10th Cir. 2011) (internal quotation marks omitted). The rule follows from the Supreme Court's recognition "that Congress is committed to a policy of supporting tribal self-government and self-determination." Nat'l Farmers Union Ins. Cos. v. Crow Tribe of Indians, 471 U.S. 845, 856 (1985). It ensures that "the forum whose jurisdiction is being challenged [is provided] the first opportunity to evaluate the factual and legal bases for the challenge." Id.

         The parties do not dispute these general propositions. The only matters in dispute are the Tribe's contention that exhaustion is a matter of federal subject-matter jurisdiction and Mr. Becker's contention that exhaustion is not required because the Tribe waived exhaustion in the Contract. We reject both contentions, holding that exhaustion is not a jurisdictional matter and that Mr. Becker has not satisfied his burden of showing waiver because he has failed to establish the validity of the Contract. [2]

         A. Is the Exhaustion ...

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