The Tenth Circuit Court of Appeals decided Sommerlot v. Cherokee
Nation Distributors, Inc., et al, on July 27, 2012 (Case No. 10-6157). In a surprising turn of events, the Circuit
held that because one of the defendants was formed under state law (rather than
tribal law) - that it could not possibly hold the tribe’s sovereign immunity -
even if the Indian tribe were the sole owner.
The Circuit plainly held that its recently announced subordinate economic
entity doctrine was wholly inapplicable to any tribal entity formed under state
law. Breakthrough Management Group, Inc.
v. Chuckansi Gold Casino & Resort, 629 F.3d 1173 (10th Cir. 2010)
(setting forth subordinate economic entity test). The result, is that any tribal entity formed
under federal law, state law, or the law
of another tribe, or a foreign nation, will not hold the tribe’s sovereign
immunity from suit. The most
interesting part of the case, though, is why the Tenth Circuit issued its
holding regarding the inapplicability of the economic entity doctrine at all.
The Circuit ended up ruling in favor of the tribally-owned entities - because
the issue was not preserved properly for appeal. But, if the issue was not preserved for
appeal - then why didn’t the court simply decline to issue an opinion as to the
merits? Answer, the panel wanted to use this opportunity to send a message. It
has been a difficult few years for tribal entities at the Tenth Circuit, and
this opinion appears to be further indication that it is only going to get
tougher.
