Cook Inlet Dispute Will Remain in Federal Court

     (CN) – The 9th Circuit agreed that federal jurisdiction exists in a dispute involving shareholders of an Alaskan regional corporation set up after the discovery of oil in Prudhoe Bay.
     The Cook Inlet Region, which encompasses the traditional Dena’ina territory of southcentral Alaska, has more than 7,400 Alaska Native shareholders.
     To keep shareholders from selling Native Alaskan lands at low prices, the Alaska Native Claims Settlement Act restricts bars shareholders in regional corporations from selling or otherwise transferring their stock except under limited circumstances.
     One of two ways that shareholders can lift these stock-alienability restrictions is to petition for a shareholder vote.
     Two of the region’s shareholders, Robert Rude and Harold Rudolph, circulated petitions in this vein three years ago.
     “The first petition sought a vote to lift the alienability restrictions,” according to the 9th Circuit. “The second petition sought to convene a special shareholder meeting to consider six advisory resolutions concerning dividends, elections, financial reporting, voting rights, and compensation of senior management. The petitions suggested that [the region’s] board of directors and senior management were mismanaging the corporation.”
     Cook Inlet Region then sued Rude and Rudolph, claiming that the shareholders violated the settlement act by circulating solicitation materials that contained false and materially misleading statements. It also claimed that another section requires such petitions to disclose certain information.
     Since the provision about false and misleading statements incorporates Alaska law, Rude and Rudolph claimed that the U.S. District Court for the District of Alaska lacks federal jurisdiction over the dispute.
     Chief U.S. District Judge Ralph Beistline concluded otherwise, and the federal appeals court affirmed from Anchorage on Monday.
     “Defendants’ first and second arguments conflate the sometimes difficult jurisdictional question posed when federal law is embedded in a state-law claim with the much more straightforward question posed when state law is embedded in a federal-law claim,” Judge William Fletcher wrote for a three-member panel. “There is federal question jurisdiction over a state-law claim only if it ‘necessarily raise[s] a stated federal issue, actually disputed and substantial, which a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibilities.’ By contrast, there is federal question jurisdiction over a federal-law claim simply by virtue of its being a claim brought under federal law, whether or not it incorporates state law.”
     Though the allegation of a misleading petition implicates Alaska law, it “was not brought as a state-law claim,” the eight-page decision states.
     “Plaintiff did not bring, and indeed could not have brought, a claim directly under Alaska law because the relevant provision of Alaska law governs proxy solicitations rather than shareholder petitions,” Fletcher added.
     Enactment of the settlement act in 1971 gave Native Alaskans title to 40 million acres of land after oil was discovered in Prudhoe Bay. Cook Inlet is one of 12 regional corporations created under the act. Oil companies had to wait to explore in Alaska until settlement of the land claims.

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