Georgia Court Upholds TLE Immunity in Dispute with Service Provider

Jun 21, 2017News

The Georgia Court of Appeals issued an opinion on June 19th regarding a contract dispute and arbitration judgment against a tribal lending entity (TLE) initiated by a former service provider. The Georgia state court vacated the arbitration award against the TLE and held that the arbitration clause in the service contract did not waive the enterprise’s sovereign immunity.


Churchill Financial Management Corporation, a TLE wholly-owned by the Guidiville Band of Pomo Indians, entered into a service agreement with ClearNexus to provide call center support for the lending operation. Churchill’s Charter of Incorporation restricted waivers of sovereign immunity to prior approval by the tribal council to be further adopted via resolution by the TLE’s Board of Directors. The arbitration clause found in the service agreement accompanied no waiver of immunity by the tribal council or resolution from the TLE. When a dispute arose between Churchill and ClearNexus, the arbitrator refused to dismiss the proceedings based on sovereign immunity and entered an award for ClearNexus.


Three questions were ultimately brought before the Georgia appellate court: (1) whether Churchill waived sovereign immunity via the arbitration clause; (2) whether Churchill waived sovereign immunity by failing to file with the arbitrator a motion to vacate or modify the award; and (3) whether Churchill could assert the immunity of the tribe. In citing U.S. Supreme Court precedent, the court noted that tribal sovereign immunity differs from the immunity of Georgia and other U.S. states. Tribal immunity is a matter of federal law and could not be diminished by the states. Under this reasoning, the Georgia state court refused to require Churchill to file a motion to vacate or modify prior to asserting sovereign immunity.


As to the final question, the court found two instances in which a tribe might be subject to suit. First, Congress could authorize the suit against the tribe. The second instance occurs when a tribe waives its sovereign immunity. The Georgia appellate court, again relying on U.S. Supreme Court precedent, qualified that the waiver must be clear. The court went on to distinguish that if the tribe had made the service agreement with ClearNexus, then the arbitration clause would constitute a clear waiver. However, Churchill, an economic subdivision of the tribe, entered into the agreement with ClearNexus. Thus, the tribe never waived sovereign immunity in this matter.


The court noted that “arms of the tribe” are afforded the sovereign immunity of the tribe. Most states now have a multi-part analysis to determine if a tribal entity is an arm of the tribe. Since ClearNexus had agreed that Churchill was an arm of the tribe, the court declined to iterate its own arm of the tribe analysis for Georgia courts to follow.


The Georgia appellate court chose to follow federal circuit guidance on immunity waivers and tribal charter provisions. Since the tribe had a charter requirement that all immunity waivers come from tribal council approval, the court refused to enforce the waiver of immunity via arbitration clause. Churchill only participated in the arbitration hearing to the extent that it asserted immunity, so their mere presence was insufficient to impute a waiver.


Although limited in scope and jurisdiction, the opinion of the Georgia Court of Appeals represents a judicial affirmation of tribal sovereign immunity and the rights of tribes to extend self-determination to economic development activities.

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