ALBANY, N.Y. (CN) - A Seneca Nation corporation's plan to build a golf course in western New York cannot use the tribe's cloak of sovereign immunity to avoid litigation, New York's highest court ruled.
The Court of Appeals split 4-3 on Nov. 25 to uphold a midlevel appellate decision that found Lewiston Golf Course Corp. was created to serve as a regional economic engine, not solely to promote tribal welfare on the Seneca reservation, and therefore could be sued.
The Seneca Nation set up the corporation in 2007 as a subsidiary of its casino operation in Niagara Falls, to develop a championship 18-hole golf course in nearby Lewiston.
The golf course, Seneca Hickory Stick, was designed by renowned golf course architect Robert Trent Jones II on 250 acres just minutes from the Seneca Niagara Casino & Hotel. The course opened in 2010.
The Seneca are the largest of six Native American nations in New York. Their 35-square mile Cattaraugus Reservation is south of Buffalo, on three counties south of Lake Erie.
The Seneca are the fifth-largest employer in Western New York, where they operate three casinos, two bingo halls with video gaming and other enterprises, according to the Seneca website.
The Seneca promoted the Lewiston golf course, which is not on reservation land, as an amenity for its Niagara Falls casino, according to an application for tax breaks filed with the Niagara County Industrial Development Agency.
The application depicted the course as a new tourist destination for Canadian and U.S. golfers and other visitors to the Niagara Falls region. The course would "capitalize on the growing tourist market, which will create new jobs and allow for prolonged stays in the area," according to the application.
The Seneca Tribal Council established the corporation as an entity separate from its gaming arm, Seneca Gaming Corp., and its casino subsidiary, Seneca Niagara Falls Gaming Corp., "due to various legal and accounting considerations, including the status of the Lewiston Golf Course as an off-territory business venture of the Nation, subject to legal, tax and other requirements that are not applicable to the Nation's on-territory business," according to court documents.
In the summer of 2007, Sue/Perior Concrete & Paving agreed to build the course for $12.7 million. By 2009, though, the contract relationship had soured, and Sue/Perior filed a mechanic's lien against Lewiston Golf for $4.1 million. In 2010 the company sought to foreclose the lien.
After filing counterclaims, Lewiston Golf, Seneca Gaming and Seneca Niagara Falls moved to dismiss the Sue/Perior lawsuit, alleging protection from litigation under the Seneca Nation's sovereign immunity.
Indian tribes, like sovereign powers, are immune from suit, unless that protection is waived.
The argument was rejected by the Niagara County Supreme Court, which ruled that Lewiston Golf did not qualify as an arm of the Seneca Nation. The Appellate Division in Rochester affirmed.
In the Nov. 25 ruling for the Court of Appeals majority, Judge Eugene Pigott noted that the court in 1995 established criteria in Matter of Ransom v. St. Regis Mohawk Education & Community Fund to help judges decide whether an entity associated with a tribe is entitled to tribal sovereignty.
Applying those criteria to the Lewiston Golf case may make it look as if the corporation merits sovereignty, Pigott wrote. But closer inspection would show otherwise, particularly with the Tribal Council specifying that no liability of the corporation would become an obligation of the Seneca Nation.
"The record firmly indicates the intent to ensure that a suit against Lewiston Golf will not impact the Seneca Nation's fiscal resources," Pigott wrote.
"In short, protection of a tribal treasury against liability in a corporate charter is strong evidence against the retention of sovereign immunity by the corporation."
Judges Victoria Graffeo, Robert Smith and Sheila Abdus-Salaam concurred.
They rejected the argument that the Lewiston Golf case should fall under a 1998 U.S. Supreme Court decision that tribes enjoy immunity from suit on contracts, whether they involve tribal or commercial activities, or whether they occur on or off reservations.
Unlike in Kiowa Tribe of Okla. v. Manufacturing Technologies Inc., the Lewiston Golf case does not involve a complaint against an Indian tribe itself, according to Pigott's 18-page opinion.
"The United States Supreme Court has never held that corporations affiliated with an Indian tribe have sovereign immunity," he wrote.
The 15-page dissent by Judge Jenny Rivera cited the Kiowa ruling, noting that the Supreme Court decision came three years after the Court of Appeals' ruling in Matter of Ransom v St. Regis Mohawk Educ. & Community Fund.
Rivera said the majority decided "to apply outdated decisions, propound unfounded conclusions, and clear its own path on the question of sovereign immunity until such time as the United States Supreme Court speaks on the issue."
"Well," she added, "the Supreme Court has spoken and we are bound to comply with its pronouncement that tribal sovereign immunity is a federal matter 'not subject to diminution by the states.' Thus our court is without authority to render tribal commercial activities meaningless by subjecting tribal entities to suit in contravention of federally recognized immunity."
Joining in dissent were Chief Judge Jonathan Lippman and Judge Susan Read.
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