Penobscot Indian v. Palmer
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Penobscot Indian v. Palmer, (1st Cir. 1997).
Opinion
USCA1 Opinion
United States Court of Appeals
For the First Circuit
____________________
No. 96-1670
PENOBSCOT INDIAN NATION,
Plaintiff, Appellee,
v.
KEY BANK OF MAINE, ET AL.,
Defendants, Appellees,
________________
JOHN PALMER, PALMER MANAGEMENT CORPORATION,
AND PALMER DEVELOPMENT CORPORATION,
Appellants.
_____________________
No. 96-1671
PENOBSCOT INDIAN NATION,
Plaintiff, Appellant,
v.
KEY BANK OF MAINE, ET AL.,
Defendants, Appellees.
_________________
No. 96-1672
PENOBSCOT INDIAN NATION,
Plaintiff, Appellee,
v.
KEY BANK OF MAINE, ET AL.,
Defendants, Appellees.
_____________________
JOHN SCHIAVI,
Appellant.
_____________________
No. 96-1736
PENOBSCOT INDIAN NATION,
Plaintiff, Appellee,
v.
KEY BANK OF MAINE,
Defendant, Appellant.
____________________
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. Morton A. Brody, U.S. District Judge]
____________________
Before
Selya and Stahl, Circuit Judges,
and Woodlock,* District Judge.
____________________
ERRATA SHEET
Please make the following changes to the opinion issued on
May 5, 1997:
On page 6, line 9, "May 1988" should read "May 1989"
On page 6, the first full paragraph, lines 9-15, should
be moved in its entirety to become the end of the
paragraph that begins on line 16 (beginning "In April
1989"). Specifically, it should be placed after the
sentence that reads "As part of the liquidation plan,
PIN and Palmer then assigned Schiavi Homes' assets to
Key Bank." It should not form a new paragraph, but,
instead, should form the continuation of the paragraph
that currently is at page 6, lines 16-19. In addition,
footnote marker 2 (currently located after "Key Bank."
on page 6, line 19), should be moved to follow the
sentence that reads "In May 1989, Key Bank notified PIN
that it intended to exercise the purchase option
contained in the Lease-Option Agreement."
On page 17, line 15, replace brackets around
[hereinafter "Indian fee lands"] with parentheses
No. 96-1670
PENOBSCOT INDIAN NATION,
Plaintiff, Appellee,
v.
KEY BANK OF MAINE, ET AL.,
Defendants, Appellees,
________________
JOHN PALMER, PALMER MANAGEMENT CORPORATION,
AND PALMER DEVELOPMENT CORPORATION,
Appellants.
_____________________
No. 96-1671
PENOBSCOT INDIAN NATION,
Plaintiff, Appellant,
v.
KEY BANK OF MAINE, ET AL.,
Defendants, Appellees.
_________________
No. 96-1672
PENOBSCOT INDIAN NATION,
Plaintiff, Appellee,
v.
KEY BANK OF MAINE, ET AL.,
Defendants, Appellees.
_____________________
JOHN SCHIAVI,
Appellant.
_____________________
No. 96-1736
PENOBSCOT INDIAN NATION,
Plaintiff, Appellee,
v.
KEY BANK OF MAINE,
Defendant, Appellant.
____________________
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. Morton A. Brody, U.S. District Judge]
____________________
Before
Selya and Stahl, Circuit Judges,
and Woodlock,* District Judge.
____________________
Peter J. Haley, with whom Stephen F. Gordon, Gordon & Wise,
Ronald C. Caron, and Caron & Sullivan,were on brief for appellant
Penobscot Indian Nation and third-party defendants-appellees, Gerald
Pardilla and Reuben Phillips.
Catherine R. Connors, with whom Debra Brown and Pierce Atwood,
were on brief for appellee and cross-appellant Key Bank of Maine.
Justin W. Leary, with whom Leonard I. Sharon and Sharon, Leary &
Detroy, were on brief for appellee Michael Marcello.
Stephen B. Wade
with whom Skelton, Taintor & Abbott was on brief for defendants-
appellees and cross-appellants, John Palmer, Palmer Management Corp.,
and Palmer Development Corp.
Jeffrey A. Thaler with whom Berman & Simmons, P.A. was on brief
for defendant-appellee and cross-appellant, John Schiavi.
Melissa A. Hewey with whom Drummond Woodsum & MacMahon was on
brief for appellees Consumers Water Company, Burlington Homes of New
England, Inc., and SHC Corporation.
____________________
May 5, 1997
____________________
_____________________
* Of the District of Massachusetts, sitting by designation.
STAHL, Circuit Judge. Appellant, a federally-
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USCA1 Opinion
United States Court of Appeals
For the First Circuit
____________________
No. 96-1670
PENOBSCOT INDIAN NATION,
Plaintiff, Appellee,
v.
KEY BANK OF MAINE, ET AL.,
Defendants, Appellees,
________________
JOHN PALMER, PALMER MANAGEMENT CORPORATION,
AND PALMER DEVELOPMENT CORPORATION,
Appellants.
_____________________
No. 96-1671
PENOBSCOT INDIAN NATION,
Plaintiff, Appellant,
v.
KEY BANK OF MAINE, ET AL.,
Defendants, Appellees.
_________________
No. 96-1672
PENOBSCOT INDIAN NATION,
Plaintiff, Appellee,
v.
KEY BANK OF MAINE, ET AL.,
Defendants, Appellees.
_____________________
JOHN SCHIAVI,
Appellant.
_____________________
No. 96-1736
PENOBSCOT INDIAN NATION,
Plaintiff, Appellee,
v.
KEY BANK OF MAINE,
Defendant, Appellant.
____________________
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. Morton A. Brody, U.S. District Judge]
____________________
Before
Selya and Stahl, Circuit Judges,
and Woodlock,* District Judge.
____________________
ERRATA SHEET
Please make the following changes to the opinion issued on
May 5, 1997:
On page 6, line 9, "May 1988" should read "May 1989"
On page 6, the first full paragraph, lines 9-15, should
be moved in its entirety to become the end of the
paragraph that begins on line 16 (beginning "In April
1989"). Specifically, it should be placed after the
sentence that reads "As part of the liquidation plan,
PIN and Palmer then assigned Schiavi Homes' assets to
Key Bank." It should not form a new paragraph, but,
instead, should form the continuation of the paragraph
that currently is at page 6, lines 16-19. In addition,
footnote marker 2 (currently located after "Key Bank."
on page 6, line 19), should be moved to follow the
sentence that reads "In May 1989, Key Bank notified PIN
that it intended to exercise the purchase option
contained in the Lease-Option Agreement."
On page 17, line 15, replace brackets around
[hereinafter "Indian fee lands"] with parentheses
No. 96-1670
PENOBSCOT INDIAN NATION,
Plaintiff, Appellee,
v.
KEY BANK OF MAINE, ET AL.,
Defendants, Appellees,
________________
JOHN PALMER, PALMER MANAGEMENT CORPORATION,
AND PALMER DEVELOPMENT CORPORATION,
Appellants.
_____________________
No. 96-1671
PENOBSCOT INDIAN NATION,
Plaintiff, Appellant,
v.
KEY BANK OF MAINE, ET AL.,
Defendants, Appellees.
_________________
No. 96-1672
PENOBSCOT INDIAN NATION,
Plaintiff, Appellee,
v.
KEY BANK OF MAINE, ET AL.,
Defendants, Appellees.
_____________________
JOHN SCHIAVI,
Appellant.
_____________________
No. 96-1736
PENOBSCOT INDIAN NATION,
Plaintiff, Appellee,
v.
KEY BANK OF MAINE,
Defendant, Appellant.
____________________
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. Morton A. Brody, U.S. District Judge]
____________________
Before
Selya and Stahl, Circuit Judges,
and Woodlock,* District Judge.
____________________
Peter J. Haley, with whom Stephen F. Gordon, Gordon & Wise,
Ronald C. Caron, and Caron & Sullivan,were on brief for appellant
Penobscot Indian Nation and third-party defendants-appellees, Gerald
Pardilla and Reuben Phillips.
Catherine R. Connors, with whom Debra Brown and Pierce Atwood,
were on brief for appellee and cross-appellant Key Bank of Maine.
Justin W. Leary, with whom Leonard I. Sharon and Sharon, Leary &
Detroy, were on brief for appellee Michael Marcello.
Stephen B. Wade
with whom Skelton, Taintor & Abbott was on brief for defendants-
appellees and cross-appellants, John Palmer, Palmer Management Corp.,
and Palmer Development Corp.
Jeffrey A. Thaler with whom Berman & Simmons, P.A. was on brief
for defendant-appellee and cross-appellant, John Schiavi.
Melissa A. Hewey with whom Drummond Woodsum & MacMahon was on
brief for appellees Consumers Water Company, Burlington Homes of New
England, Inc., and SHC Corporation.
____________________
May 5, 1997
____________________
_____________________
* Of the District of Massachusetts, sitting by designation.
STAHL, Circuit Judge. Appellant, a federally-
recognized Indian tribe, appeals the district court's denial of
its motion for declaratory judgment, pursuant to 25 U.S.C. S
81, seeking to invalidate several agreements concerning the
purchase and operation of a mobile home business. Appellees
cross appeal the district court's summary judgment ruling in
favor of Appellant on several defamation counterclaims as well
as a breach of contract and emotional distress counterclaim
stemming from litigation involving the failure of this same
mobile home business.
Background
Although the district court provided a cogent summary
of the facts and procedural history in its memorandum opinion
below, see Penobscot Indian Nation v. Key Bank, 906 F. Supp.
13, 16-17 (D. Me. 1995), the complexity of this case compels us
to sketch the necessary background information.
In 1983, Consumers Water Company ("CWC") acquired
Schiavi Homes Corporation ("SHC"), a profitable Maine mobile
home sales business, from John Schiavi ("Schiavi"). Under
CWC's ownership, SHC continued to operate successfully. In
1985, John Palmer ("Palmer") became SHC's new president. In
August 1985, Palmer and his wife, Mary Anna, also founded
Palmer Development Corporation ("Palmer Development"). Like
SHC, Palmer Development engaged in the sale of mobile homes
throughout Maine.
-3-
In 1985, the Penobscot Indian Nation ("PIN") hired
Tribal Assets Management ("TAM") to locate, evaluate, and
recommend potential investment opportunities. Late in 1986,
TAM identified SHC as a potential PIN investment and conducted
a detailed analysis of SHC's viability as a successful business
venture. TAM alerted PIN that SHC constituted a good
investment possibility, but cautioned PIN that the success of
the venture would depend largely on PIN's willingness to invest
in new mobile home sites on which the mobile homes it sold to
retail customers could be located. PIN expressed its
willingness to use its lands and invest its resources for such
purposes.
On December 31, 1986, PIN and Palmer Management
Corporation ("Palmer Management"), a corporation formed for the
purpose of purchasing SHC, executed a Partnership Agreement
creating Schiavi Homes ("Schiavi Homes" or "the Partnership"),
a Maine limited partnership. Pursuant to the Partnership
Agreement, PIN became the sole limited partner and Palmer
Management the sole general partner.1 PIN acquired a ninety
percent interest in Schiavi Homes. Palmer Management received
only a ten percent share but secured full control over all
management decisions.
1. Prior to the purchase, TAM informed PIN that Palmer had
been the president of SHC. PIN also knew both that Palmer
and his wife owned Palmer Development and that Palmer
Development engaged in business activities similar to those
of SHC.
-4- 4
Also on December 31, 1986, the Partnership executed
a Purchase and Sale Agreement with SHC, which provided for the
Partnership's purchase of SHC's assets and business for
approximately $5 million. Key Bank of Maine ("Key Bank")
financed the purchase on the condition that Palmer retain full
management control over Schiavi Homes. Key Bank also insisted
that PIN post a $1 million letter of credit to secure its loan
and agree to restrictions on the withdrawal of funds from
Schiavi Homes.
As part of its purchase of SHC, the Partnership
secured three non-competition agreements. CWC entered into a
non-competition agreement with Schiavi Homes and assigned to
the Partnership its interest in an existing non-competition
agreement with Schiavi, which it obtained at the time it
originally acquired the business. Palmer signed a similar
agreement with the Partnership.
Schiavi Homes fared poorly from its inception.
Although sales of mobile homes in Maine reached an all time
high during this time, by the end of 1987 Schiavi Homes' market
share had declined from eighteen to eight percent. Over the
course of its three year existence, PIN made several
investments in Schiavi Homes in an attempt to buoy its business
fortunes. Most significantly, in October 1987, PIN signed a
Lease-Option Agreement with Schiavi Homes leasing for the
nominal fee of $1 per year a twenty-four acre tract of real
-5- 5
property (the "Holden Lot") that PIN purchased during this same
onth. The Lease-Option Agreement afforded the Partnership the
option m to purchase the Holden Lot for $100,000. PIN
subsequently invested approximately $135,000 to develop the
Holden Lot for purposes of the Schiavi Homes business. In
December 1988, with Schiavi Homes unable to make its regular
monthly loan payment of principal and interest to Key Bank, the
Partnership pledged the Lease-Option Agreement to Key Bank.
In April 1989, acting on the advice of its counsel,
Bernstein, Shur, Sawyer & Nelson ("Bernstein"), PIN decided to
liquidate Schiavi Homes. As part of the liquidation plan, PIN
and Palmer then assigned Schiavi Homes' assets to Key Bank.
In May 1989, Key Bank notified PIN that it intended to exercise
the purchase option contained in the Lease-Option Agreement.2
At this time, Key Bank also initiated three foreclosure actions
with respect to real property that the Partnership owned and
encumbered with mortgage deeds given to Key Bank in conjunction
with the initial financing of SHC's purchase.
On September 29, 1989, PIN entered into two
comprehensive Settlement Agreements with Schiavi, SHC, Schiavi
2.
The Area Director of the Eastern Area Office of the Bureau of
Indian Affairs, George Big Eagle, approved the transfer of
the Holden Lot to Key Bank pursuant to Title IV of the Indian
Financing Act of 1974, 25 U.S.C. SS 1451-1543, which forbids,
without written consent, any transfer or disposal of a
project being improved with federal grant funds within three
years of the use of such funds.
-6- 6
Homes, Palmer, Palmer Management, Key Bank, Burlington Homes of
New England3 ("Burlington Homes"), and CWC (collectively
"Appellees"). PIN, Schiavi Homes, Schiavi, Palmer, Palmer
Management, and Key Bank executed the first Settlement
Agreement ("first Settlement Agreement"); PIN, Schiavi Homes,
SHC, Palmer, Palmer Management, Key Bank, CWC, and Burlington
Homes executed the second Settlement Agreement ("second
Settlement Agreement"). The two agreements contained identical
language that served broadly to "release, remise and forever
discharge" all claims involving the signatories. Subsequent to
the signing of the two Settlement Agreements, legal proceedings
deriving from the operation of Schiavi Homes ceased.
The ensuing period of calm ended on September 14,
1994, when PIN filed the lawsuit underlying this appeal. PIN's
suit stemmed from an investigation of Key Bank's activities
relating to Schiavi Homes that Penobscot County Deputy Sheriff
Carl Andrews conducted between approximately 1993 and 1994.4
3. Burlington Homes of New England, a subsidiary of CWC,
manufactured mobile homes. SHC, Schiavi Homes, and Palmer
Development all sold homes that Burlington manufactured.
4. The record does not reveal the exact duration, scope, or
findings of the investigation. Andrews testified that he
provided the Maine Attorney General's office with a three
page report summarizing his findings, but he did not divulge
the report's contents to PIN. No party submitted this report
into evidence; in fact, it is not apparent from the record
that the results of the investigation were set out in writing
or were made known to the public. It is clear, however, that
no criminal proceedings of any kind resulted from Andrews'
investigation.
-7- 7
PIN alleges that Andrews' investigation revealed substantial
improprieties on the part of PIN's business associates in the
Schiavi Homes venture. Also on September 14, 1994, PIN held
two press conferences, one in Bangor, Maine, and one in
Portland, Maine, to announce the filing of its lawsuit in
federal district court. Michael Marcello, PIN's media
relations consultant, prepared the statements that PIN Governor
Reuben Phillips and PIN Lieutenant Governor Gerald Pardilla
read at the two press conferences. Marcello also distributed
the text of the statements to members of the media.
PIN's complaint contained nine counts and named nine
defendants. Most importantly for our purposes, the complaint
alleged that the two Settlement Agreements signed by PIN and
the Appellees were void because they did not receive the
Secretary of the Interior's approval pursuant to 25 U.S.C. S
81.5 SHC filed a motion to dismiss PIN's claims. Key Bank,
Schiavi, Palmer, Palmer Development, Palmer Management, CWC,
and Burlington Homes moved for summary judgment.
5. PIN's complaint also alleged the following: (1) breach
of duty of good faith and fair dealing (against Key Bank,
CWC, SHC, Burlington, Schiavi, Palmer, and Palmer
Management); (2) breach of contract (against Schiavi); (3)
misrepresentation (against CWC, SHC, Burlington, Schiavi, and
Palmer); (4) fraud (against Bernstein); (5) negligence
(against Bernstein); (6) breach of fiduciary duty (against
Key Bank, Palmer, and Palmer Management); and (7) RICO
violations (against Key Bank, CWC, Burlington, Bernstein,
Schiavi, Palmer, Palmer Management, and Palmer Development).
-8- 8
Palmer, Palmer Development, Palmer Management (the
"Palmer Defendants"), Key Bank, and Schiavi filed counterclaims
against PIN for defamation and punitive damages based on the
alleged defamation stemming from the September 14, 1994 press
conferences. Key Bank filed counterclaims for defamation
against Marcello, Phillips, and Pardilla. Also deriving from
these press conferences, Palmer asserted counterclaims against
PIN for intentional and negligent infliction of emotional
distress. Both Palmer and Palmer Management filed
counterclaims against PIN for breach of contract, alleging that
PIN's suit violated the release contained in the Settlement
Agreements. Only Marcello responded with a motion for summary
judgment.
The district court (Brody, J.) concluded that 25
U.S.C. S 81 did not apply to the Settlement Agreements.
Determining that the Settlement Agreements constituted valid
releases, the district court granted summary judgment for the
defendants with respect to all of PIN's claims. See Penobscot
Indian Nation, 906 F. Supp. at 20-21. Treating SHC's motion to
dismiss as a motion for summary judgment, the district court
separately granted summary judgment for SHC based on the
binding nature of the Settlement Agreements. See id. at 21-22.
The district court also ruled that the statute of limitations
barred PIN's RICO claims. See id. at 21.
-9- 9
The district court then considered the counterclaims.
Finding that Key Bank did not allege facts demonstrating even
ence on Marcello's part, the district court granted
Marcello's motion for summary judgment on Key Bank's defamation
terclaim. neglig coun See id. at 23. Despite the fact that only
Marcello filed a motion for summary judgment, the district
court proceeded to grant summary judgment sua sponte for PIN
and the remaining cross-Appellees with respect to the
defamation claims.6 See id. Judge Brody also awarded summary
judgment sua sponte for PIN and the other cross-Appellees on
the punitive damage counterclaims. See id. at 24. Finally,
the district court granted PIN's motion for summary judgment
with respect to the emotional distress and breach of contract
claims. See Penobscot Indian Nation v. Key Bank, Civ. No. 94-
0212-B (D. Me. Dec. 13, 1995).
In the spring of 1996, PIN's malpractice claims
against Bernstein went to trial before a jury. The jury
returned a verdict in favor of Bernstein. The district court
then entered a final judgment resolving all claims on May 7,
1996. These appeals ensued.7
6. The Palmer Defendants immediately filed a motion for
reconsideration, which the district court subsequently denied
See Penobscot Indian Nation v. Key Bank, Civ. No. 94-0212-B,
1 (D. Me. Dec. 13, 1995).
7. PIN did not appeal the adverse judgment respecting either
its RICO claims or its other claims against Bernstein.
Cross-Appellants did not appeal the district court's sua
sponte ruling as to punitive damages.
-10- 10
Standard of Review
The district court must grant summary judgment if
"the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits . . . show
that there is no genuine issue as to any material fact and that
the moving party is entitled to a judgment as a matter of law."
Fed. R. Civ. P. 56(c). "On appeal from the entry of summary
judgment we review the district court's decision de novo,
construing the record in the light most . . . [favorable] to
the non-movant and resolving all reasonable inferences in that
party's favor." Hachikian v. FDIC, 96 F.3d 502, 504 (1st Cir.
1996). We are not "wedded to the district court's reasoning.
Rather, '[w]e are free, on appeal, to affirm a judgment on any
independently sufficient ground.'" Garside v. Osco Drugs,
Inc., 895 F.2d 46, 49 (1st Cir. 1990) (quoting Polyplastics,
Inc. v. Transconex, Inc., 827 F.2d 859, 860-61 (1st Cir.
1987)).
Discussion
This appeal raises several issues which we address in
turn. We begin by resolving an issue of first impression in
this Circuit: whether 25 U.S.C. S 81 applies to agreements
relative to lands that an Indian tribe purchases in fee simple
for investment purposes. We then determine whether PIN's
filing of this action in 1994 constituted an actionable breach
of contract. Subsequently, we decide whether the district
-11- 11
court erred in concluding that the statements Marcello prepared
and individual PIN officials announced to the press in
September 1994 did not amount to defamation. Thereafter, we
touch upon the issue of whether PIN's conduct at the press
conferences constituted either intentional or negligent
infliction of emotional distress. Finally, we evaluate whether
the district court has jurisdiction to hear the remaining state
law claims at issue in this case.
A. Section 81
PIN sought a declaratory judgment from the district
court that the agreements it executed with the Appellees
necessitated approval from the Secretary of the Interior
pursuant to 25 U.S.C. S 81. Section 81 states in pertinent
part:
No agreement shall be made by any person
with any tribe of Indians . . . for the
payment or delivery of any money or other
thing of value, in present or in
prospective, or for the granting or
procuring any privilege to him, or any
other person in consideration of services
for said Indians relative to their lands .
. . unless such agreement be executed and
approved as follows:
. . . .
It shall bear the approval of the
Secretary of the Interior and the
Commissioner of Indian Lands indorsed upon
it.
. . . .
All contracts or agreements made in
violation of this section shall be null
and void . . . .
-12- 12
Congress adopted S 81, originally Revised Statute S 2103, in
1872. To this day, Congress has not repealed S 81 and the few
amendments to its text have been only technical. See Altheimer
& Gray v. Sioux Mfg. Corp., 983 F.2d 803, 805 (7th Cir. 1993).8
Section 81 dictates that any agreement within its
purview that is not approved by the Secretary of the Interior
("the Secretary") is void ab initio. PIN insists that S 81
applies not only to the two Settlement Agreements, but also to
the agreements pertaining to the creation and operation of
Schiavi Homes, specifically the Asset Purchase Agreement, the
Partnership Agreement, and the Lease-Option Agreement. PIN
therefore reasons that the Settlement Agreements, the Purchase
and Sale Agreement, and the Lease-Option Agreement are not
binding. PIN also contends that the Secretary improperly
determined that S 81 did not apply to the Partnership
Agreement.
Significantly, if the Settlement Agreements are not
valid because they never received the Secretary's approval
pursuant to S 81, PIN may pursue its remaining claims against
the Appellees. If, on the other hand, the Settlement
Agreements do not fall within the parameters of S 81, PIN
8. In addition to technical amendments to S 81, Congress
passed the Indian Gaming Regulatory Act, 25 U.S.C. SS 2701-
2721, which provides in part: "The authority of the
Secretary under section 81 of this title, relating to
management contracts regulated pursuant to this chapter, is
hereby transferred to the [National Indian Gaming]
Commission." 25 U.S.C. S 2711(h).
-13- 13
concedes that its remaining non-S 81 claims fail due to the
binding nature of the Settlement Agreements. We therefore
begin our analysis by evaluating the applicability of S 81 to
the Settlement Agreements.
1. Settlement Agreements
Without regard to S 81, the two Settlement Agreements
constituted valid releases. Both Settlement Agreements
provided that the parties "release, remise and forever
discharge each other . . . from all suits . . . at law or in
equity . . . which directly or indirectly relate[] to . . . any
. . . transactions . . . among each other." Whether or not S
81 pertains to and thus voids the Settlement Agreements depends
upon whether either or both constitute an agreement with an
Indian tribe for services relative to Indian lands. See 25
U.S.C. S 81.
a. Agreement with an Indian Tribe
The Appellees contend that the Partnership, rather
than PIN in its individual capacity, represents the applicable
entity in this case. This argument is unavailing. PIN's
Lieutenant Governor signed both Settlement Agreements as PIN's
personal representative, not as the Partnership's Limited
Partner. John Palmer, the Partnership's General Partner,
signed on behalf of Schiavi Homes. Moreover, even if Schiavi
Homes, not PIN in its individual capacity, signed the
agreements, the district court's observation that "[c]ourts
-14- 14
look beyond the mere formality of corporate structure in
construing the identity of parties with regard to S 81,"
Penobscot, 906 F. Supp. at 19, necessitates no elaboration on
our part. Se e Altheimer & Gray, 983 F.2d at 809-10; Pueblo of
Santa Ana v. Hodel, 663 F. Supp. 1300, 1306 (D.D.C. 1987).
b. Services
The district court ruled that "the Settlement
Agreements themselves do not constitute contracts for services.
The Settlement Agreements rather pertain to the release of
legal claims . . . ." Penobscot, 906 F. Supp. at 20. This
conclusion aptly describes the first Settlement Agreement,
which made no reference to any service to be performed by any
party to the Agreement for any other party to the Agreement.
The first Settlement Agreement, consequently, did not involve
services.
The second Settlement Agreement contains a provision
obligating Key Bank to "jointly [with PIN] seek a purchaser for
the Holden Lot9 . . . at a price to be mutually agreed upon."
Because the Supreme Court has instructed that federal statutes
concerning Indian tribes must be construed "liberally in favor
of the Indians," Montana v. Blackfeet Tribe of Indians, 471
U.S. 759, 766 (1985), we assume for purposes of this opinion
9. At oral argument, PIN informed us that the Holden Lot
constitutes the sole tract of land at issue in this case,
and, thus, the only piece of Indian land to which S 81 could
apply.
-15- 15
that this provision in the second Settlement Agreement entailed
a "service" within the meaning of S 81, see Green v. Menominee
Tribe, 233 U.S. 558, 569 (1914) (finding S 81 applicable to
sales contract); see also Wisconsin Winnebago Bus. Comm. v.
Koberstein , 762 F.2d 613, 619 (7th Cir. 1985) (applying S 81 to
management contract); United States ex rel. Citizen Band
Potawatomi Indian Tribe v. Enterprise Management Consultants,
Inc. , 734 F. Supp. 455, 457 (W.D. Okla. 1990) (same), aff'd in
part and rev'd in part, 968 F.2d 22 (10th Cir. 1992); but see
United States ex rel. Harlan v. Bacon, 21 F.3d 209, 211 (8th
Cir. 1994) (determining that lease agreement which provided
that forty percent of produce deriving from use of leased land
be delivered to tribe did not entail service within meaning of
S 81).
c. Relative to Indian lands
The final prong of the S 81 analysis, whether the
Settlement Agreements were "relative to [Indian] lands,"
presents a more difficult question. The first Settlement
Agreement is not relative to Indian lands because it neither
pertained nor referred to any land whatsoever. The second
Settlement Agreement, however, both involved and referred to
land that an Indian tribe owned. Specifically, the second
Settlement Agreement provided for the disposition of the Holden
Lot. At first glance, S 81 may appear to apply to the Holden
Lot because PIN, an Indian tribe, owned this parcel of land.
-16- 16
We believe, however, that the meaning of S 81's language, the
intentions of its drafters, the Interior Secretary'
of S 81, the case law from o-determinatio
e statute does not apply to the Holden s interpretation n support a holding that th
Lot. Although we have uncovered no precedent that explicitly
considers whether or not S 81 applies to land that an Indian
tribe purchased in fee simple for investment purposes, in doing
so now we give voice to an assumption underlying virtually
every decision addressing the applicability of S 81 to service
agreements with Indian tribes relative to their lands.
We base our conclusion primarily on the distinctions
between Indian trust or tribal lands (hereinafter "Indian trust
lands")10 and lands that Indian tribes hold in fee simple
(hereinafter "Indian fee lands"). The phrase "Indian trust
lands" derives from the historic trust relationship existing
between Indian tribes and the federal government, originally
described as "resembl[ing] that of a ward to his guardian."
Worcester v. Georgia, 30 U.S. (5 Pet.) 1, 17 (1831); see also
Oneida County v. Oneida Indian Nation, 470 U.S. 226, 247
10. We use the terms "Indian trust lands" and "Indian tribal
lands" interchangeably because we have not located any
authority that draws a distinction between these terms that
is material for our purposes. See, e.g., Black's Law
Dictionary 772 (1990); Felix S. Cohen's Handbook of Federal
Indian Law 35-36, 476 (Rennard Strickland et al. eds., 1982);
Reid P. Chambers & Monroe E. Price, Regulating Sovereignty:
Secretarial Discretion and the Leasing of Indian Lands, 26
Stan. L. Rev. 1061, 1061 (1974) (referring to Indian lands
delineated "restricted" in 25 U.S.C. S 415 as "Indian trust
land").
-17- 17
(1985); United States v. Sam Pelican, 232 U.S. 442, 447 (1914);
Joint Tribal Council of the Passamaquoddy Tribe v. Morton, 528
F.2d 370, 379 (1st Cir. 1975). Indian trust lands constitute
real property the title to which the United States holds in
trust for an Indian tribe. See 25 U.S.C. S 465; Felix S.
Cohen's Handbook of Federal Indian Law 476 (Rennard Strickland
et al. eds., 1982) [hereinafter Cohen's Handbook].
Fee simple lands, by contrast, are those lands in
which the owner "is entitled to the entire property, with
unconditional power of disposition." Black's Law Dictionary
615 (6th ed. 1990). Federal law recognizes that Indian tribes
may hold certain lands in fee simple and that these lands may
not be subject to the trust relationship between Indian tribes
and the federal government. See, e.g., 25 U.S.C. S 1466.
Specifically, and pertinent to these appeals, the Maine Indian
Claims Settlement Act, 25 U.S.C. SS 1721-1735, indicates that
the Holden Lot constitutes Indian fee land over which the
federal government does not have a trust responsibility because
the Lot does not lie within designated PIN Territory. In fact,
Congress expressly disavowed trust responsibility for Indian
real property encompassing the area in which the Holden Lot is
situated. 11 Accordingly, we find that PIN held the Holden Lot
11. 25 U.S.C. S 1724(d)(3) provides: "Land or natural
resources acquired outside the boundaries of [Penobscot
Indian Territory] . . . shall be held in fee by the
respective tribe or nation, and the United States shall have
no further trust responsibility with respect thereto." 25
-18- 18
in fee simple. We now consider the impact this fact has on
whether S 81 applies to the second Settlement Agreement.
This inquiry necessitates that we first consider the
statute's text. See United States v. Gonzales, 117 S. Ct.
1032, 1034 (1997). As previously noted, S 81 states: "No
agreement shall be made by any person with any tribe of Indians
. . . for the payment or delivery of any money or other thing
of value, in present or in prospective, or for the granting or
procuring any privilege to him, or any other person in
consideration of services for said Indians relative to their
lands . . . ." The statute does not distinguish between Indian
trust lands and Indian fee lands; nor does it refer to all
Indian lands. In fact, S 81's scope is not clearly defined.
See Mark A. Jarboe, Fundamental Legal Principles Affecting
Business Transactions in Indian Country, 17 Harmline L. Rev.
417, 430 (1994); see also Stowell v. Secretary of Health and
Human Servs., 3 F.3d 539, 542 (1st Cir. 1993) ("Given two
plausible alternatives, and recognizing that the universe of
interpretive possibilitie s may extend beyond them, we think the
U.S.C. S 1722(j) defines Penobscot Indian Territory as "those
lands as defined in the Maine Implementing Act." The Maine
Implementing Act defines Penobscot Indian Territory as the
Penobscot Indian Reservation and "[t]he first 150,000 acres
of land acquired by the secretary for the benefit of the
Penobscot Nation" as further defined in this section. Me.
Rev. Stat. Ann. tit. 30, S 6205(2)(B) (1993). The Holden Lot
does not fall within either the Penobscot Indian Reservation
or the remaining area that S 6205(2)(B) designed as current
or potential Penobscot Indian Territory.
-19- 19
statute contains an undeniable ambiguity.").
Section 81's lack of clarity and its failure t
Smith o define the phrase "Indian lands" requires us to determine the "ordinary or natural" meaning of these terms. See v.
United States, 508 U.S. 223, 228 (1993). When Congress has
failed to define statutory language, the Supreme Court has
resorted to authoritative texts to determine the ordinary
meaning of statutory language. See id. at 229. According to
one such text, the term "Indian lands" refers to "[r]eal
property ceded to the U.S. by Indians, commonly to be held in
trust for Indians." Blac k's Law Dictionary 771 (6th ed. 1990).
The definition of Indian tribal or trust land is virtually
identical: "real propt 772.12
In the context of S 81, the phrase "relative to
[Indian] lands" is understood to refer to Indian trust lands.
See Cohen's Handbook at 318 n.293 (explaining that "25 U.S.C.
S 81[] prohibit[s] contracts with Indian tribes concerning
trust property unless approved by the Commissioner of Indian
affairs") (emphasis added); Patrick K. Duffy and Lois A.
12. It is noteworthy that the phrase "Indian country" refers
to "all lands set aside by whatever means for the residence
of tribal Indians under federal protection, together with
trust and restricted Indian allotments." Cohen's Handbook at
34; see also United States v. John, 437 U.S. 634, 648-50
(1978). The phrase "as Indian lands are held" is read
"simply to state the United States will hold title in trust
for the tribe." Cohen's Handbook at 476. These definitions
would seem to indicate that "Indian country" and "Indian
lands" encompass Indian trust lands but not Indian fee lands.
-20- 20
Lofgren, Jurassic Farce: A Critical Analysis of the
Government's Seizure of "Sue," A Sixty-Five-Million-Year-Old
Tyrannosaurs Rex Fossil, 39 S. D. L. Rev. 478, 528 n.169 (1994)
(indicating that pursuant to S 81, the Secretary "has oversight
responsibility for approving or vetoing the terms and
conditions of all contracts involving Native American tribal or
trust property") (emphasis added). No authority directly
states that S 81 applies to Indian fee lands. It is
understood, however, that by adopting S 81 "Congress prohibited
most contracts between non-Indians and tribes . . . unless
approved by the Secretary of the Interior and the Commissioner
of Indian Affairs." Cohen's Handbook at 143. Thus, although
it appears that S 81's "relative to [Indian] lands" language
connotes Indian trust lands rather than Indian fee lands, we
acknowledge that this interpretation is not iron-clad.
Recognizing that we cannot end our inquiry with the
"ordinary" or "natural" meaning of the statute's terms, we
consider the relevant legislative history in an effort to give
effect to the intentions of the statute's drafters. See
Griffin v. Oceanic Contra ctors, Inc., 458 U.S. 564, 571 (1982);
United States ex rel. S. Prawer & Co. v. Fleet Bank, 24 F.3d
320, 327 (1st Cir. 1994); Federal Election Comm'n v.
Massachusetts Citizens for Life, Inc., 769 F.2d 13, 17 (1st
Cir. 1985), aff'd, 479 U.S. 238 (1986). This inquiry is
particularly appropriate in the context of federal Indian law.
-21- 21
The Supreme Court has made it clear that "Indian law[] cannot
be interpreted in isolation but must be read in light of the
common notions of the day and the assumptions of those who
drafted [such law]." Oliphant v. Suquamish Indian Tribe, 435
U.S. 191, 206 (1978); see also Central Machinery Co. v. Arizona
State Tax Comm'n, 448 U.S. 160, 166 (1980) (explaining that
courts must "interpret [certain federal statutes involving
Indian tribes] . . . in light of the Congress that enacted
them").
Congress "intended [S 81] to protect the Indians from
improvident and unconscionable contracts." In re Sanborn, 148
U.S. 222, 227 (1893); see also Cong. Globe, 41st Cong., 3d
Sess. 1483, 1483 (daily ed. Feb. 22, 1871) (declaring that
statute was for Indians' "protection and to prevent them from
being plundered") (comments of Senator Davis). Specifically,
Congress adopted S 81 to protect Indian tribes and individual
Indians from persons, particularly attorneys and claims agents,
offering dubious services, typically the assertion of the
Indians' land claims against the government, in exchange for
enormous fees. See Cong. Globe, 41st Cong. at 1483-86. One
senator indicated that this section "would prevent . . .
contracts being made by [Indian tribes] unless approved by the
Secretary of the Interior in any matter relating to the land or
annuities that they hold under or derive from the United
States." See Cong. Globe, 41st Cong. at 1486 (comments of
-22- 22
Senator Harlan) (emphasis added). Another senator declared
that S 81 "is limited to such agreements or services as are
made or rendered relative to the lands of the Indians or to any
claim against annuities from or treaties with the United
States." Id. (comments of Senator Casserly) (emphasis added).
Evidence of the drafters' assumptions and intentions
does little to resolve whether or not the phrase "relative to
[Indian] lands" pertains to both Indian trust land and Indian
fee lands, or solely to the former. The two statements
addressing the application of S 81 may be read differently:
Senator Harlan's description may indicate that the statute
applies solely to lands over which the federal government
exercises a trust responsibility; Senator Casserly's
explanation may mean that the statute applies to Indian lands
generally. To reconcile this ambiguity, and thus to parse the
ordinary meaning of S 81 at the time of its ratification, we
consider the understanding of the status of Indian lands that
prevailed at the time Congress passed S 81.13 See Oliphant,
13. Our determination to further consider the nature of
Indian land ownership during this time in order to properly
interpret the phrase "relative to [Indian] lands" would be
appropriate even if we read Senator Harlan's statement in the
disjunctive, rather than in the conjunctive as the sentence
was recorded. That is, if we read the phrase "relating to
the land or annuities that they hold under or derive from the
United States" so that the qualifying statement "that they
hold under or derive from the United States" qualifies only
the word "annuities" but not the words "the land," we still
would have learned little more concerning the definition of
"Indian lands." Such a reading, though tortured, would
resolve the ambiguity between the drafters' two statements
-23- 23
435 U.S. at 206.
In 1872, when Congress passed S 81, federal law
provided that Indian tribes enjoyed the right to possess and
occupy lands but not to alienate these lands without the
federal government's approval. See Johnson v. M'Intosh, 21
U.S. (8 Wheat.) 543, 574 (1823) (indicating that United States
possessed title to all Indian lands "subject only to the Indian
right of occupancy"); Uni ted States v. Cook, 86 U.S. (19 Wall.)
591, 592-94 (1873) (explaining that Indians enjoyed only right
of occupancy in Indian lands and that "the fee was in the
United States"); David H. Getches and Charles F. Wilkinson,
Federal Indian Law 161 (1986) ("The United States had the
exclusive right to purchase or extinguish Indian title.")
[hereinafter Federal Indian Law]. Memorializing this
conception of Indian real property rights, Congress adopted
general, comprehensive legislation addressing the rights of
Indian tribes with respect to their lands during this era.
See , e.g. , Nonintercourse Act of 1834, R.S. S 2116 (codified as
25 U.S.C. S 177) (prohibiting "purchase, grant, lease, or other
conveyance of lands , or of any title or claim thereto, from any
Indian nation or tribe of Indians") (emphasis added).14
and would tend to point to a broader definition of the terms
"Indian lands," but it would not dispose of our inquiry into
the meaning of the phrase "relative to [Indian] lands."
14. It was not until the legal relationship between Indian
tribes and the federal government evolved dramatically in the
twentieth century that legislation regulating Indian tribes'
-24- 24
Congress did not distinguish between Indian trust lands and
Indian fee lands at this time presumably because it did not
contemplate that Indian tribes could hold land in fee simple.
During this time, however, Congress did provide for
individual Indians to hold land in fee simple. See 25 U.S.C.
SS 348-349 (1887). The allotment process that these statutes
authorized permitted the Secretary to transfer certain real
property to individual Indians. Typically, the United States
would hold such lands in trust for the designated individuals
for a period of twenty-five years. See Sam Pelican, 232 U.S.
at 447. The Secretary, at his discretion, could "cause to be
issued to such allottee a patent in fee simple, and thereafter
all restrictions as to sale, incumbrance, or taxation of said
land shall be removed." 25 U.S.C. S 349. Despite these
statutes' provision for individual Indians' fee simple
ownership of real property, we have unearthed no legislation
real property routinely distinguished between restricted and
unrestricted tribal lands. See, e.g., 28 U.S.C. S 1360(b)
(1953) (referring specifically to the "alienation,
encumbrance, or taxation of any real or personal property . .
. that is held in trust by the United States or is subject to
a restriction against alienation imposed by the United
States"); 25 U.S.C. S 415 (1955) (referring specifically to
"restricted Indian lands"). Modern statutes routinely
distinguish between Indian trust lands and Indian fee lands.
See, e.g., 25 U.S.C. S 1724(d)(3) (1980) (distinguishing
between Indian trust lands and Indian fee lands, and
indicating that the United States does not have "trust
responsibility" with respect to the latter); 25 U.S.C. S 1466
(1974) (indicating that Indian tribes can purchase real
property "without any restriction on alienation, control, or
use").
-25- 25
enacted during this time that afforded similar rights to Indian
tribes. See Cohen's Handbook at 36 & n.78.
Interpreting S 81 and its legislative history in
light of the understandings and assumptions of those who
drafted it, see Oliphant, 435 U.S. at 206, thus supports the
conclusion that S 81 does not pertain to the Holden Lot. When
Congress passed S 81 it did not envision that Indian tribes
could hold land in the manner that PIN held the Holden Lot.
Cf. Cohen's Handbook at 127-43 (concluding that during this
time "extensive government supervisory power over the everyday
life of Indians was essentially unchecked"). It therefore
would seem anomalous, in endeavoring to give effect to
Congress' intent, to apply S 81 to lands PIN purchased in fee
simple for investment purposes.
Admittedly, the broad remedial purposes that S 81's
drafters attributed to the statute may complicate this
analysis. Congress desired to protect Indian tribes from
unscrupulous business practices, see Cong. Globe 41st Cong. at
1485-86, and enjoyed the sole right to encumber all Indian
lands, see Oneida Indian Nation v. County of Oneida, 414 U.S.
661, 667 (1974) ("Once the United States was organized and the
Constitution adopted . . . tribal rights to Indian lands became
the exclusive province of the federal law. Indian title,
recognized to be only a right of occupancy, was extinguishable
only by the United States."). It may seem plausible,
-26- 26
therefore, that S 81 should apply to agreements for services
relative to all Indian lands. Congress, moreover, occasionally
did authorize individual Indians to hold designated parcels of
real property in fee simple, and, therefore, could have
exempted these fee simple lands from S 81's purview if it did
not want S 81 to apply to Indian fee lands. To our knowledge,
Congress has adopted no such exemption. Our analysis thus
illustrates that although S 81's legislative history,
considered in light of the status of federal Indian law during
the middle of the nineteenth century, points to the conclusion
that S 81 does not apply to Indian fee lands, it does not
provide a clear answer to the issue we face today.
Having failed to arrive at a definitive answer to our
inquiry through reference to S 81's plain meaning and
legislative history, we turn to analyze the interpretation of
the agency responsible for administering the statute. See
Chevron U.S.A., Inc. v. Natural Resources Defense Council,
Inc. , 467 U.S. 837, 843 (1984). Although we have not unearthed
a general interpretation of S 81 advanced by the Secretary of
the Interior, in this case the parties submitted the
Partnership Agreement for the Secretary's approval. The Area
-27- 27
Director of the Eastern Area Office of the Bureau of India
stated: n Affairs15
The Secretary has determined that the
Agreement does not encumber trust land or
other trust assets, that the Agreement is
not subject to the provisions of 25 U.S.C.
S 81 (1982), and that, as a result, the
Nation has contractual capacity to enter
into this Agreement without additional
Secretarial approval.
Declaration of B. D. Ott, Area Director, Eastern Area Office,
Bureau of Indian Affairs (December 31, 1986).
This declaration illustrates that in determining
whether or not an agreement with an Indian tribe falls within
the parameters of S 81, the Secretary focuses on whether or not
the agreement relates to Indian trust lands or assets. See
also B arona Group of the Capitan Grande Bande of Mission
Indians v. American Management & Amusement, Inc., 840 F.2d
1394, 1404-05 (9th Cir. 1987) (quoting Acting Superintendent
for Southern California Bureau of Indian Affairs office
explaining that S 81 does not apply if "trust lands and funds
are not involved"). In this case, the second Settlement
Agreement did not involve Indian trust lands or assets.
Although the administrative agency's interpretation does not
15. The Secretary of the Interior's duties pursuant to the
text of S 81 subsequently have been delegated to the
appropriate Area Director of the Bureau of Indian Affairs.
See Reorganization Plan No. 3 of 1950, 5 U.S.C. S 903(a)(5) &
note; Order of the Secretary of the Interior, Nos. 3150 &
3177, Amend. No. 3 (Dec. 16, 1996); 10 B.I.A.M. Bulletins 13,
9409, & 9602.
-28- 28
function to conclusively resolve our evaluation of whether S 81
pertains to the second Settlement Agreement, see Stowell, 3
F.3d at 544; American Management, 840 F.2d at 1405, we must
afford it considerable deference, see Chevron U.S.A., 467 U.S.
at 843; Strickland v. Commissioner, Maine Dep't of Human
Servs., 96 F.3d 542, 547 (1st Cir. 1996).
Judicial interpretation of S 81 provides further
guidance. See Securities Indus. Ass'n v. Board of Governors of
Fed. Reserve Sys., 839 F.2d 47, 49 (2d Cir. 1988) (explaining
that in determining reasonableness of administrative agency's
interpretation of statute, court should consider judicial
construction) . Courts generally have focused on the existence
of Indian trust land in evaluating S 81's "relative to [Indian]
lands" component. In Koberstein, 762 F.2d at 619, the Seventh
Circuit explicitly stated that S 81 applied to a bingo
management agreement because "S 81 applies to Indian land
transactions concerning their tribal trust property." (emphasis
added). See also Pueblo of Santa Ana, 663 F. Supp. at 1306
(finding S 81 applicable to agreement because it provided for
construction and operation of facility on "tribal trust
property") (emphasis added); Enterprise Management, 734 F.
Supp. at 457 (voiding bingo management agreement providing non-
Indian party exclusive right to operate bingo games on Indian
trust lands because this agreement was "relative to Indian
lands and . . . thus governed by section 81").
-29- 29
The Ninth Circuit in particular has manifested the
importance that the presence of Indian trust lands plays in the
"relative to [Indian] lands" analysis. In A.K. Management Co.
v. San Manuel Band of Mission Indians, 789 F.2d 785, 786 (9th
Cir. 1986), the Ninth Circuit considered the applicability of
S 81 to a bingo management contract that the San Manuel Band of
Mission Indians executed with a bingo management company.
Upholding the district court's grant of summary judgment, the
court held "that the instant Agreement is 'relative to [Indian]
lands' under 25 U.S.C. S 81." Id. at 787. In reaching this
conclusion, the court reasoned that "the Agreement gives the
non-Indian contracting party . . . the express right to build
and control the operation of the bingo facility located on
tribal trust lands and prohibits the Band from encumbering the
land." Id. (emphasis added).
One year later, in American Management, 840 F.2d at
1404, the Ninth Circuit again determined that a contract
between an Indian tribe and a non-Indian bingo management
company providing for the construction and operation of a bingo
facility on Indian trust lands was "'relative to [Indian]
lands' under section 81." The court specifically stated that
it reached this conclusion despite the fact that the agreement
neither afforded the non-Indian party exclusive control over
the bingo facility nor abridged the tribe's ability to encumber
its trust lands. See id. The fact that the non-Indian party
-30- 30
exercised some control over Indian trust lands, however
minimal, proved decisive to the American Management court's
analysis. See id. ; see a lso United States ex rel Yellowtail v.
Little Horn State Bank, 828 F. Supp. 780, 787 (D. Mont. 1992)
("The only interest the government has in overseeing certain
contracts and agreements with Indians flows from its duty as
trustee of tribal resources. . . . The nature of the
government's interest is in the Tribe's trust resources
'relative to the land.'"), aff'd, 15 F.3d 1095 (9th Cir. 1994).
The most recent circuit court decision to
specifically address the "relative to [Indian] lands" component
of S 81, Altheimer & Gray, 983 F.2d at 808-12, offers a
slightly different construct that further supports the
conclusion that the second Settlement Agreement in this case is
not "relative to [Indian] lands." The Altheimer court
considered a Letter of Intent that a federally recognized
Indian tribe, in the form of a wholly owned tribal corporation,
executed with an Illinois corporation providing for the
manufacture of latex medical products on tribal trust lands.
See id . at 806-07. Although manufacture of the products
actually commenced, the parties failed to execute the necessary
contracts. Operations thus ceased shortly after commencement.
The Illinois corporation sued the tribal corporation for breach
of contract. The district court found the Letter of Intent
void pursuant to S 81 and granted summary judgment to the
-31- 31
tribal corporation. See id. at 806-07.
The Seventh Circuit reversed the district court. See
id . at 815. In so doing, the court set forth four factors that
it considered determinative of whether or not a management
contract is "relative to [Indian] lands" pursuant to S 81:
1) Does the contract relate to the management
of a facility to be located on Indian lands?
2) If so, does the non-Indian party have the
exclusive right to operate that facility?
3) Are the Indians forbidden from encumbering
the property? 4) Does the operation of the
facility depend on the legal status of an Indian
tribe being a separate sovereign?
Id. at 811. Despite the fact that the Letter of Intent
involved the operation of a facility on Indian trust lands, the
Altheimer court found that it was not relative to Indian lands
and thus not within the purview of S 81. The Seventh Circuit
emphasized the fact that the non-Indian contracting party did
not have exclusive control of the facility and that "the
business derived no special benefit from its location on
Reservation land." Id. at 812.
Considering the present case in light of Altheimer
compels two initial observations. First, the second Settlement
Agreement obviously did not constitute a management contract.
Second, importing the precise considerations pertinent to an
evaluation of a management contract to an analysis of an
agreement to assist in locating a purchaser for land may
present certain difficulties. See id. at 811 (indicating that
-32- 32
the four factors that it set forth "are not the 'sine qua non'
of a contract which relates to Indian lands").
Despite its distinguishing characteristics, however,
Altheimer informs our analysis of PIN's appeal. Specifically,
the Altheimer court refused to find the agreement "relative to
[Indian] lands" in part because the Indian tribe in Altheimer
remained involved in the business relationship. In this case,
PIN participated in the Partnership, not through daily
management duties, but through financing and leasing activities
promoting Schiavi Homes' business activities. More
importantly, Altheimer emphasized the fact that the subject
matter of the contract derived no special benefit from the
Indian tribe's sovereign status. See id. at 812. The
Altheimer court explained: "Unlike bingo, manufacturers of
latex medical products need not seek refuge from state civil
laws by locating on a reservation." Id. In this case, the
parties to the second Settlement Agreement derived no special
benefit from PIN's sovereign status.16
Notwithstanding the fact that Altheimer, like the
other cases we have considered, supports the conclusion that
16. We note that when the land at issue constitutes Indian
fee land it is difficult for the subject matter of the
contract to derive a special benefit from the Indian tribe's
sovereignty because Indian tribes do not have the same powers
and privileges with respect to Indian fee lands that they do
in the context of Indian trust lands. See Narragansett
Indian Tribe v. RIBO, Inc., 686 F. Supp. 48, 50 (D.R.I.
1988), aff'd on other grounds, 868 F.2d 5 (1st Cir. 1989);
Cohen's Handbook at 232-57.
-33- 33
the second Settlement Agreement does not fall within the
purview of S 81, we consider one additional case in which the
district court for the district of Rhode Island interpreted S
81's "relative to [Indian] lands" requirement. See
Narragansett Indian Tribe v. RIBO, Inc., 686 F. Supp. 48, 51
(D.R.I. 1988), aff'd on other grounds, 868 F.2d 5 (1st Cir.
1989). The N arragansett court considered S 81's applicability
to two management agreements "contemplating acquisition by the
Tribe of property on which a high stakes bingo hall could be
constructed." See id. at 49. Following execution of the
agreements, the Tribe purchased a total of 28.8 acres of land
adjacent to the Tribe's reservation. See id. at 50. The
Tribe, however, failed to secure trust status for this land.
See id.
The Narragans ett defendants specifically argued that
"S 81 pertained only to 'tribal land' . . . [that is,] land
that is part of the Tribe's reservation." Id. The district
court rejected this argument, reasoning:
[S]uch a construction proves to be at
variance with both the plain language of
the statute and with its broad remedial
purpose. Thus the statute uses the term
'their [the Indians'] lands' without
differentiating between original tribal
lands and those subsequently acquired.
Reading into those words the limitation
urged by Defendants would distort their
plain meaning. Moreover, it also would
emasculate the statute and frustrate its
purpose of providing a mechanism to
regulate Indian land transactions.
-34- 34
Id. Although the Narragansett court recognized that S 81 "has
its origin in the longstanding trust relationship between the
federal government and Indian tribes," id. at 50, it held that
"S 81 renders both the agreements and the notes and mortgages
given by the Tribe in accordance with their terms null and
void." Id. at 51.
We find the Narragansett court's reasoning
unpersuasive. The construction that the Narragansett
defendants advanced, we believe, comports with the plain
language of the statute. If S 81 is predicated on the trust
relationship between the federal government and the Indian
tribes, see id.; United States ex rel. Hall v. Tribal Dev.
Corp. , 49 F.3d 1208, 1214 (7th Cir. 1995), then reading S 81 to
apply to Indian lands purchased in fee simple for business
reasons contradicts the statute's purpose and its drafters'
intentions. Even those courts that have propounded a broad
reading of S 81's "relative to [Indian] lands" component,
moreover, have not found that this phrase refers to Indian fee
lands. See, e.g., Koberstein, 762 F.2d at 619; United States
ex rel Shakopee v. Pan American Mgmt. Co., 616 F. Supp. 1200,
1217-18 (D. Minn. 1985) (finding that "the management
agreements [were] . . . inextricably tied up in the property
rights flowing from the establishment of the bingo operations
on tribal trust lands") (emphasis added). We thus find that to
the extent Narragansett can be read to hold that Indian fee
-35- 35
lands purchased for investment purposes and not designated as
trust lands qualify as "Indian lands" under S 81, that holding
is not compelling.
To reach a different conclusion in the context of the
Holden Lot would defy common sense. See United States v.
Carroll, 105 F.3d 740, 744 (1st Cir. 1997) (instructing that
common sense construction that "avoid[s] absurd or counter-
intuitive results" is favored); O'Connell v. Shalala, 79 F.3d
170, 176 (1st Cir. 1996) (explaining that "courts are bound to
afford statutes a practical, common-sense reading"). Were we
to hold that the second Settlement Agreement required the
pproval pursuant to S 81 despite the fact that it 17 Secretary's a
relates only to Indian fee lands purchased for business
reasons, we would force the Secretary to exercise a trust
responsibility with respect to lands over which Congress
specifically disavowed any further trust obligation.18 See 25
17. Perhaps recognizing the Narragansett decision as an
anomaly, at least one circuit court has interpreted
Narragansett as "simply hold[ing] that bingo management
agreements involve services within the meaning of [S 81]."
Bacon, 21 F.3d at 212.
18. We recognize that the Supreme Court determined that the
Nonintercourse Act, 25 U.S.C. S 177, applied to land that the
Pueblo Indian tribes of New Mexico held in fee simple. See
United States v. Candelaria, 271 U.S. 432, 440-44 (1926); see
also United States v. Sandoval, 231 U.S. 28, 45-48 (1913)
(finding that Congress could restrict the alienation of land
that New Mexico Pueblo Indians held in fee simple). The
Pueblo Indians at issue in Candelaria and Sandoval held their
lands in fee simple under both Spanish and Mexican law before
the United States gained control over New Mexico. See
Candelaria, 271 U.S. at 442; Sandoval, 231 U.S. at 44-45.
-36- 36
U.S.C. S 1724(d)(3); 25 U.S.C. 1722(j); Me. Rev. Stat. Ann.
lands. tit. 30, S 6205(2)(B) (1993). In the Maine Indian Claims Settlement Act, Congress not only disavowed further trust responsibility over the area First the Spanish and then the Mexican authorities, however, Candelaria Sandoval, 231 U.S.
at 44-45. We believe that the situation in this case, in
which PIN purchased land in fee simple for investment
Candelaria See retained the authority to restrict the alienation of these , 271 U.S. at 442; purposes, differs substantially from that in both
and Sandoval, in which the tribes held their ancestral tribal
lands in a modified version of fee simple under Spanish and
Mexican rule. We note, however, that several courts,
relying on Candelaria and Sandoval, have found S 177
applicable to lands that other Indian tribes have purchased
in fee simple. See Alonzo v. United States, 249 F.2d 189,
196 (10th Cir. 1957); United States v. 7,405.3 Acres of Land,
97 F.2d 417, 422 (4th Cir. 1938). Given Alonzo's paucity of
analysis and outdated paternalism (the court adopted the
notion that Indians are "'a simple, uninformed people, ill-
prepared to cope with the intelligence and greed of other
races,'" see id. (quoting Candelaria, 271 U.S. at 442)), we
do not find this decision persuasive. This conclusion
applies equally to 7,405.3 Acres of Land.
The situation in this case, moreover, differs
substantially from that in Alonzo and 7,405.3 Acres of Land.
As opposed to the land in question in those cases, Congress
disavowed trust responsibility over the land encompassing the
Holden Lot. See 25 U.S.C. S 1724(d)(3). In Lummi Indian
Tribe v. Whatcom County, 5 F.3d 1355, 1359 (9th Cir. 1993),
the Ninth Circuit took issue with Alonzo and 7,405.3 Acres of
Land and ruled that "parcels of land approved for alienation
by the federal government and then reacquired by the Tribe
did not then become inalienable by operation of the
Nonintercourse Act." See also Federal Power Comm'n v.
Tuscarora Indian Nation, 362 U.S. 99, 110-15 (1960)
(determining that lands that Indian tribe purchased in fee
simple were not subject to federal oversight pursuant to
Federal Power Act, 16 U.S.C. S 797(e), because United States
neither owned these lands nor owned an interest in these
lands). The lands at issue in Lummi Indian Nation and
Tuscarora Indian Nation were similar to the Holden Lot in
that the tribes purchased these lands in fee simple. See
Lummi Indian Tribe, 5 F.3d at 1357; Tuscarora Indian Nation,
362 U.S. at 105-06.
-37- 37
encompassing the Holden Lot, it expressly stated that the
p
as its source the Nonintercourse Act, meaning that th
trust relationship pertains to land transactions which are or
Passamaquoddy Tribe N See 25 U.S.C. S 1724(g)(1). This is significant because we reviously have indicated that "the 'trust relationship' . . . has e may be covered by the Act." , 528 F.2d at
379. Because the Nonintercourse Act no longer pertains to PIN,
Passamaquoddy Tribe dictates that the federal government does
not have a trust obligation with respect to the Holden Lot.
See Imposing such onintercours e Act, 25 U.S.C. S 177, no longer applied to PIN. also 25 U.S.C. S 1724(d)(3).19 a
responsibility pursuant to S 81 would defy not only common
19. Key Bank urges us to rule that the Maine Indian Claims
Settlement Act, 25 U.S.C. SS 1721-1735, implicitly repealed S
81 with respect to PIN generally. Although S 1724 provides
that several statutes, including 25 U.S.C. S 177, no longer
apply to PIN, it makes no mention of S 81. If Congress
desired to repeal completely S 81 with respect to all PIN
real property it could easily have done so, as it did with S
177. Cf. Bailey v. United States, 116 S. Ct. 501, 507 (1995)
(specifying that if Congress desired to alter a statute it
specifically would have done so); Russello v. United States,
464 U.S. 16, 23 (1983) ("'[W]here Congress includes
particular language in one section of a statute but omits it
in another section of the same Act, it is generally presumed
that Congress acts intentionally and purposely in the
disparate inclusion or exclusion.'") (quoting United States
v. Wong Kim Bo, 472 F.2d 720, 722 (5th Cir. 1972)); Hirschey
v. F.E.R.C., 760 F.2d 305, 308 (D.C. Cir. 1985) (indicating
that Congress understands how to effect such results); see
also Altheimer, 983 F.2d at 805 (explaining that Congress has
neither explicitly nor implicitly overruled S 81). We thus
do not find that the Maine Indian Claims Settlement Act
implicitly repealed S 81 with respect to all PIN land.
-38- 38
sense but logic as well.20 v.
, See Lummi Indian Tribe Whatcom County 5 F.3d 1355, 1359 (9th Cir. 1993) (ruling that
Nonintercourse Act did not apply to land Indian tribe purchased
in fee simple over which Congress previously terminated its
trust obligation); cf. Fe deral Power Comm'n v. Tuscarora Indian
Nation, 362 U.S. 99, 110-15 (1960) (finding that federal
government did not own an interest in lands Indian tribe
purchased in fee simple).
Applying S 81 to the Holden Lot also would
necessitate that almost every agreement for services executed
with an Indian tribe, no matter how minute, would require
Secretarial approval. See In re United States ex rel. Hall,
825 F. Supp. 1422, 1434 (D. Minn. 1993) (discussing undesirable
implications of such an interpretation), aff'd, 27 F.3d 572
(8th Cir. 1994), cert. de nied, 115 S. Ct. 1112 (1995); see also
Raymond Cross, De-Federalizing American Indian Commerce:
Toward a New Political Economy for Indian Country, 16 Harv. J.
L. & Pub. Pol'y 445, 489 (1993) (indicating that even as
presently interpreted, "[e]xperience has shown . . . that in
many cases . . . [S 81] harms, rather than helps, Indian
20. The fact that Congress explicitly determined that the
Nonintercourse Act does not apply to PIN further
distinguishes this case from the cases in which courts have
interposed a trust obligation in regard to real property that
Indian tribes have purchased in fee simple. See Alonzo, 249
F.2d at 196; 7,405.3 Acres of Land, 97 F.2d at 422-23.
Congress never stated that the Nonintercourse Act did not
apply to the real property at issue in Alonzo or 7,404.3
Acres of Land.
-39- 39
tribes. Its rigid formalism and over-inclusiveness chill
business dealings between tribes and third parties without
providing substantial offsetting benefits."). We believe that
further extending administrative authority over the Holden Lot
would neither favor, see Montana v. Blackfeet Tribe, 471 U.S.
759, 766 (1985), nor protect, see In re Sanborn, 148 U.S. at
227, Indian tribes. In fact, adopting PIN's interpretation
would frustrate Indian tribes' efforts to promote economic
development and fiscal autonomy.
This analysis reflects the modern trend in federal
Indian policy away from outmoded paternalistic21 practices and
policies. Se e Cohen's Handbook at 180-206; Federal Indian Law
at 151-59. Particularly during the last forty years, Congress
has endeavored to afford Indian tribes the latitude to pursue
their social, political, and economic goals as they determine
appropriate. See, e.g., 25 U.S.C. S 450 (proclaiming that
"prolonged Federal domination . . . has served to retard rather
than enhance the progress of Indian people and their
communities by depriving Indians of the full opportunity to
develop leadership skills crucial to the realization of self
government"); 25 U.S.C. S 450a (declaring Congress' commitment
21. One proponent of S 81 described the statute as follows:
"If it is enacted and becomes part of the law it will be the
best shield, the best protection, and the best security for
the rights and the helplessness of these sons of the forest
that has ever been devised by American legislation or
American humanity." Cong. Globe 41st Cong., 3d Sess. 1483,
1484 (daily ed. Feb. 22, 1871) (comments of Senator Davis).
-40- 40
to "the establishment of a meaningful Indian self-determination
policy"); Blatchford v. N ative Village of Noatak, 501 U.S. 775,
793 (1991) (Blackmun, J., dissenting) (noting that Congress has
passed legislation in recent decades "as part of a larger
national policy of 'self-determination' for the Native American
peoples"). To find S 81 applicable to a tract of real property
that PIN purchased in fee simple to promote its business
interests would contravene modern efforts to secure tribal
self-determination.
In light of these policy considerations, the dictates
of common sense, the vast majority of S 81 jurisprudence, and
the Secretary's interpretation, we conclude that the second
Settlement Agreement does not qualify as "relative to [Indian]
lands." This Agreement did not pertain to Indian trust lands.
In fact, the second Settlement Agreement involved lands PIN
purchased in fee simple to promote its investment objectives
over which Congress expressly disavowed trust responsibility.
To rule that this Agreement necessitated the Secretary's
approval pursuant to S 81, we conclude, would strain the
statute's ordinary meaning and exceed its drafters' intentions.
We recognize that statutes affecting Indian tribes
must be construed liberally in favor of the tribes. See
Blackfeet Tribe, 471 U.S. at 766. The rule recited in
Blackfeet Tribe, however, does not require a court to ignore
compelling authority supporting a conclusion contrary to the
-41- 41
position that a particular Indian tribe advances. See Lyng v.
Northwest Indian Protective Ass'n, 485 U.S. 439, 456 (1988).
We therefore hold that the Settlement Agreements did not fall
within the parameters of S 81, and thus that the two Settlement
Agreements constituted valid, binding releases that preclude
PIN from further pursuing its remaining claims.
2. Underlying Agreements
Despite the fact that S 81 does not apply to the
Settlement Agreements, and thus that the Settlement Agreements
function to release PIN's remaining claims, we must briefly
consider whether S 81 applies to the underlying agreements at
issue in this case. We pursue this inquiry to deter potential
abuse stemming from the execution of a settlement agreement in
the context of S 81. We are particularly concerned that
parties to an agreement for services relative to Indian trust
lands may seek to avoid securing Secretarial approval of such
agreement pursuant to S 81 by executing a relet that this
release did not constitute an agreement with an Indian tribe
for services relative to Indian lands, and that the release
functions to prohibit any action that a party to the release
initiates subsequently to void the underlying agreement
pursuant to S 81.22 To avoid creating a potential safe harbor,
22. Even if such a release did preclude a party's action to
invalidate the underlying agreement pursuant to S 81, as in
the instant case, S 81's qui tam provision would permit
another party to bring suit in the name of the United States
to invalidate the underlying agreements if these underlying
-42- 42
we evaluate the three underlying agreements at issue in this
case to determine whether or not they necessitated the
Secretary's approval pursuant to S 81.
a. Asset Purchase Agreement
The Asset Purchase Agreement23 constituted the
operative agreement relating to the Partnership's purchase of
SHC. This Agreement was a pure sales contract. Without regard
to whether S 81's "services" component pertains to sales
contracts, see Menominee Tribe, 233 U.S. at 570-71 (finding S
81 applicable to contract for sale of logging equipment and
supplies); but see Hall, 825 F. Supp. at 1431-32 (ruling that
"Congress did not intend that section 81 govern sales
contracts"), the only real property that the Agreement
mentioned was real property that the seller, SHC, possessed,
not land that an Indian tribe, specifically PIN, owned. This
Agreement simply stipulated that the Partnership secured a $3.5
agreements did not bear the Secretary's approval. See Tribal
Development, 49 F.3d at 1212; United States ex rel. Yankton
Sioux Tribe v. Gambler's Supply, Inc. 925 F. Supp. 658, 668-
69 (D.S.D. 1996).
23. PIN refers both to the Asset Purchase Agreement and to
"associated contracts and documentation" as being void ab
initio pursuant to S 81. The Partnership executed a Non-
Competition and Consulting Agreement with John Schiavi on
December 30, 1996. Although this Agreement did provide for
services, in the form of consulting duties, it never
mentioned and did not relate to any Indian lands. The non-
competition agreements that the Partnership executed with CWC
similarly did not pertain to any Indian lands. Section 81,
therefore, does not apply to these "associated contracts and
documentation."
-43- 43
million guaranteed loan from Key Bank; it neither required nor
referred to PIN's use of its land as collateral for this loan.
b. Partnership Agreement
We find that the Partnership Agreement did constitute
a services agreement because it contained a provision dictating
that Palmer enjoyed sole responsibility for managing SHC to the
benefit of both Palmer and PIN. See Koberstein, 762 F.2d at
619 (finding that S 81 governs management contracts).
Nonetheless, despite PIN's assertion that the parties
envisioned the use of PIN's lands to advance SHC's business
activities, the Partnership Agreement neither specifically
mentioned nor indirectly referenced any use of land. It merely
stated that PIN would provide a $1 million Letter of Credit to
secure Key Bank's Guaranteed Loan financing the purchase of
SHC. The Partnership Agreement, therefore, does not fall
within the parameters of S 81 because it does not constitute an
agreement for services relative to Indian lands.24
Because the service that the Partnership Agreement
provided for entailed the management of SHC, we briefly
evaluate this Agreement in light of Altheimer, which addressed
the applicability of S 81 to a management agreement. See 983
F.2d at 811. The relevant Altheimer factors indicate that the
24. As previously noted, the parties to the Partnership
Agreement submitted this Agreement for the Secretary's
approval pursuant to S 81. The Secretary specifically
determined that S 81 did not pertain to the Agreement.
-44- 44
Partnership Agreement does not fall within S 81's purview.
Specifically, the Partnership Agreement did not relate to the
management of a facility to be located on Indian lands, and,
even if it did, the operation of such facility would not have
depended in any way on PIN's legal status as a separate
sovereign. See id.
c. Lease-Option Agreement
The Lease-Option Agreement, unlike the Partnership
Agreement, did not pertain to "services" relative to Indian
lands.25 The Lease-Option simply provided that Schiavi Homes
enjoyed the right to use and improve the Holden Lot for the
purpose of conducting its business. It also afforded Schiavi
Homes an option to purchase the Holden Lot. The Lease-Option
never mentioned and did not relate to the provision of
services. In addition, although it did involve real property
that PIN owned (the Holden Lot), as previously noted this land
was not within the parameters of S 81 because it was not trust
land. Even if the Holden Lot did constitute Indian trust
lands, S 81 would not apply to the Lease-Option Agreement
25. The Assignment of Lease executed on December 1, 1988,
transferring Schiavi Homes' entire interest in the Lease, and
particularly the option to purchase the Holden Lot, to Key
Bank as additional collateral for the repayment of its
Guaranteed Loan in the amount of $3,500,000 did not require
Secretarial approval under S 81. This agreement did not
entail any services and pertained only to the Holden Lot not
to PIN's trust lands. On July 20, 1989, moreover, PIN
secured Bureau of Indian Affairs approval for this Assignment
pursuant to Title IV of the Indian Financing Act of 1974, 25
U.S.C. SS 1521-1524.
-45- 45
because the Maine Indian Claims Settlement Act provided that 25
U.S.C. SS 396 & 415 would govern leases involving PIN
territory. See 25 U.S.C. S 1724(g)(3)(A)&(B) (providing that
25 U.S.C. SS 396a-396g & 415-415d govern leasing of PIN
Territory); see also Koberstein, 762 F.2d at 619 (indicating
that S 81 governs transactions relative to Indian lands for
which Congress has not passed a specific statute).
B. Breach of Contract
Palmer and Palmer Management assert that by filing
the instant suit, PIN breached the contractual obligation
memorialized in the Settlement Agreements to "release all
claims." In their counterclaim, these two cross-Appellants
sought damages from this purported breach deriving from the
"loss of time that could otherwise be spent in the pursuit of
legitimate business interests." On appeal, Palmer and Palmer
Management request damages "caused by the lawsuit outside of
attorney fees." 26 Because we find the Settlement Agreements to
constitute valid releases not within the parameters of S 81, we
now consider Palmer and Palmer Management's breach of contract
counterclaims.
26. The district court devoted the majority of its analysis
to the issue of whether a party may recover attorney's fees
for the breach of a settlement agreement's release of claims.
The district court found that a party could not recover such
attorney's fees in the defense of a suit that itself
constituted a breach of a settlement agreement. See
Penobscot Indian Nation v. Key Bank, Civ. No. 94-0212-B, at 6
(D. Me. Dec. 13, 1995). Neither Palmer nor Palmer Management
raises this issue on appeal.
-46- 46
-47- 47
Both Settlement Agreements state: "The parties
hereto have been collectively negotiating a final settlement in
the Schiavi Homes loan transaction, termination of business and
liquidation, and are desirous of reaching a final settlement
between the parties to avoid litigation now in existence or
that could hereafter arise." As mentioned earlier, both
Settlement Agreements expressly provided that the parties
"release, remise and forever discharge each other . . . from
all suits . . . at law or in equity . . . which directly or
indirectly relate[] to . . . any . . . transactions . . . among
each other." The district court dismissed Palmer and Palmer
Management's claim for lost business damages on the grounds
that PIN's lawsuit in violation of the Settlement Agreements
"was seemingly in good faith" and "was not frivolous."
Penobscot Indian Nation v. Key Bank, Civ. No. 94-0212-B, at 6
(D. Me. Dec. 13, 1995).
"A compromise agreement, fairly arrived at, is an
enforceable contract both under Maine law and general
doctrine." 27 Warner v. Rossignol, 513 F.2d 678, 682 (1st Cir.
1975); see al so Phillips v. Fuller, 541 A.2d 629, 629 n.1 (Me.
27. Despite the fact that this case raises a federal
question, and thus that the district court exercised
jurisdiction pursuant to 28 U.S.C. S 1331 not 28 U.S.C. S
1332, we apply Maine law to the remaining claims because they
all involve state law and raise substantive rather than
procedural issues of law. See Erie R.R. Co. v. Tompkins, 304
U.S. 64, 78 (1938); Walton v. City of Southfield, 995 F.2d
1331, 1343 (6th Cir. 1993) (applying state law in federal
question case involving pendent state claims).
-48- 48
1988) (recognizing that claim can be asserted for a breach of
a settlement agreement, and, specifically, that such a claim
can take the form of a counterclaim); A. L. Brown Constr. Co.,
Inc. v. McGuire, 495 A.2d 794, 798 (Me. 1985) (finding
settlement agreement to be an enforceable contract). Whether
or not an enforceable contract is breached does not turn on
whether or not the breaching party acted in good faith. Cf.
John D. Calamari & Joseph M. Perillo, The Law of Contracts 455
(2d ed. 1977) ("Any failure to perform a contractual duty which
has become absolute constitutes a breach."); E. Allan
Farnsworth, Contracts 636 (1982) ("[T]o abandon the traditional
view and take account of good faith in all cases would probably
be unworkable.").
The issue which demands our full attention,
therefore, concerns the nature of the damages that Palmer and
Palmer Management may receive as a result of PIN's breach of
the Settlement Agreements. Palmer and Palmer Management
contend that Dodge v. United States Auto. Ass'n, 417 A.2d 969,
975 (Me. 1980) supports their claim for damages other than
attorney's fees. In Dodge, the parties entered into a
settlement agreement concerning a homeowners insurance policy.
The agreement included a provision releasing all claims
stemming from the insurance policy. Subsequent to the
execution of the agreement, plaintiff filed suit against the
insurance company. The insurance company then responded with
-49- 49
"a counterclaim for specific performance of the settlement
agreement and for damages resulting from [plaintiff's] . . .
breach thereof," id. at 972, which "consisted principally of
its attorney's fees incurred in defending the suit brought by
[the plaintiff] . . . in violation of the settlement
agreement," id. at 975. The Superior Court did not order
specific shed by the court's disposition of the main claims
asserted by [the plaintiff]." Id. at 975. The Superior Court
also denied the insurance company's claim for attorney's fees.
See id.
The insurance company cross-appealed these rulings,
recognizing that if the Maine Supreme Court affirmed the
Superior Court's judgment, there would be no need to reach the
issue of specific performance. The Dodge court held:
Because of the pervasiveness and vigor of
the American rule making each party bear
its own attorney's fees, parties to a
settlement--in absence of an express
contractual provision to the contrary--
must be taken to intend to exclude
attorney's fees from the damages that
otherwise would be recoverable as a
foreseeable and probable consequence of a
breach of the agreement.
Id. The Maine Supreme Court explained in detail its denial of
damages which normally attend a breach of contract in the case
of the breach of a settlement agreement:
An after-the fact rationalization for the
rule denying normal contract damages for
breach of settlement agreements can also
be developed from the strong public policy
favoring such settlements. Were the rule
-50- 50
otherwise, a lawyer would be much more
wary of informal settlement discussions
for fear of subjecting his client to the
added expense of the opposing party's
attorney's fees if it were later
determined that those discussions had in
fact reached the point of a binding
bilateral agreement. On balance it may be
preferable to encourage free settlement
negotiations, undampened by the risk of
the heavy damages that would be assessed
in those relatively few cases where one
party fails to perform its agreement.
Id. at 976. The Dodge court thus denied the insurance
company's cross-appeal in full.
Although it may be debatable whether Dodge resolved
the issue concerning the possibility of a non-breaching party
recovering on a breach of contract theory the costs of
litigation, other than attorney's fees, resulting from its
defense of a suit filed in contravention of a settlement
agreement, we need not take up this debate today. Palmer and
Palmer Management have not directed us to any Maine case that
grants damages of the variety that they seek, and we have not
found any such case on our own initiative. We note that Maine
does recognize the remedy of specific performance in the event
of a breach of a settlement agreement. See McGuire, 495 A.2d
at 798 (indicating that party may seek specific performance as
remedy for breach of settlement agreement). By ruling that S
81 does not apply to the Settlement Agreements in this case,
and thus that these Agreements preclude PIN's remaining claims,
we effectively have provided Palmer and Palmer Management the
-51- 51
equitable remedy of specific performance of the Settlement
Agreements.
We need not sift alternative sources of authority to
resolve the exact issue of whether or not the law affords
damages in addition to specific performance in the event of a
breach of a settlement agreement28 because no material issue of
fact exists as to the damages that Palmer and Palmer Management
sustained as a result of PIN's breach of the Settlement
Agreements in this case. See Fed. R. Civ. P. 56(e); Anderson
28. We recognize that certain jurisdictions may permit a
party to sue for both specific performance and consequential
See, e.g., v. , 428 N.W.2d 647, 658 (Iowa damages in the case of the breach of a settlement agreement. Berryhill Hatt
1988); see also Restatement (Second) of Contracts S 281(3)
(1981). Other jurisdictions, however, apparently require a
party to select between specific performance and monetary
damages in the event of a breach of a settlement agreement.
See, e.g., TNT Marketing, Inc. v. Agresti, 796 F.2d 276, 278
(9th Cir. 1986). Even those jurisdictions that appear to
afford an aggrieved party the right to sue both for specific
performance and for consequential damages are not consistent
in their approach. In Village of Kaktovik v. Watt, 689 F.2d
222 (D.C. Cir. 1982), for instance, the District of Columbia
Circuit first stated: "Upon breach [of a settlement
agreement] by one party, the other party may obtain damages
or specific performance as appropriate." Id. at 230; see
also Jackson v. Washington Monthly Co., 569 F.2d 119, 120 n.
1 (D.C. Cir. 1977). The Watt court then declared: "Upon
anticipatory breach of a settlement contract . . . the non-
breaching party m[ay] choose . . . to enforce the agreement
and perhaps also recover damages resulting from its breach .
. . ." Id. at 231. We therefore believe that further
exposition of this issue, see Blinzler v. Marriott Int'l,
Inc., 81 F.3d 1148, 1151 (1st Cir. 1996) (explaining that
when a state's highest court has not propounded on an issue
in question, "we seek guidance in analogous state court
decisions, persuasive adjudications by courts of sister
states, learned treatises, and public policy considerations
identified in state decisional law"), would be of little
benefit in this case.
-52- 52
v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986) ("[T]here is
no issue for trial unless there is sufficient evidence favoring
the nonmoving party for a jury to return a verdict for that
party."); Celotex v. Catrett, 477 U.S. 317, 323 (1986) ("The
moving party is 'entitled to a judgement as a matter of law'
[if] . . . the nonmoving party has failed to make a sufficient
showing on an essential element of her case with respect to
which she has the burden of proof."); Cortes-Irizarry v.
Corporacion Insular de Seguros, No. 96-1894, slip op. at 7 (1st
Cir. April 16, 1997) ("To defeat a motion for summary judgment,
the nonmoving party must demonstrate the existence of a
trialworthy issue as to some material fact."). Palmer and
Palmer Management have failed to submit any evidence of damages
resulting either from "loss of time that could otherwise be
spent in the pursuit of legitimate business interests," or,
more generally, from "the lawsuit outside of attorney fees."
We thus affirm the district court's grant of summary judgment
for PIN on Palmer and Palmer Management's counterclaims for
breach of the settlement agreement.
C. Defamation
Key Bank asserts that the district court erred in
granting summary judgment for Marcello on Key Bank's defamation
counterclaim. The district court ruled that the press release
Marcello prepared and distributed to the media concerning the
two press conferences in September 1994 did not defame Key
-53- 53
Bank.29 Penobscot n
Maine law governing a defamation claim initiated by a private
person, See , 906 F. Supp. at 22-23. Relying o the district court determined that Marcello was not
negligent in drafting and circulating the press release to the
media because he reasonably relied "on the veracity of PIN's
complaint." Id. Finding that Marcello's conduct did not
amount even to the negligence applicable to private persons,
the district court did not consider whether or not Key Bank
constituted a public figure. See id.
Key Bank insists that a genuine issue of material
fact existed concerning whether or not Marcello was negligent.
Key Bank also argues that the district court improperly granted
summary judgment sua sponte on its defamation claims against
PIN, Phillips, and Pardilla. The other cross-Appellants
(Schiavi, Palmer, Palmer Development, and Palmer Management)
29. As it did below, Key Bank argues that the following
statements, contained in the press release that Marcello
drafted and disseminated, are defamatory: (1) the statement
claiming that "money . . . had been stolen from" PIN; (2) the
statement asserting that Key Bank "conspired and acted to
defraud the Penobscot Nation;" (3) the statement explaining
that "the conduct of Key Bank . . . resulted in the Penobscot
Nation entering into an improvident and unconscionable
partnership investment" pursuant to which it "relinquished
its right, its land, and its money to those who plundered the
Penobscot Nation, lied to the Penobscot Nation and its
members, and stole from the Penobscot Nation and its
members;" (4) the statement positing that "bad acts, fraud,
and bad faith committed by Key Bank . . . against the
Penobscot Nation is a far greater conspiracy than could have
been outlined" in the press conference; and (5) the statement
insisting that PIN "suffered grave financial losses and later
learned that they have been victimized, manipulated, lied to,
and used by Key Bank."
-54- 54
echo Key Bank's objection to the district court's sua sponte
ruling on their defamation claims against PIN. They maintain
that this ruling constituted reversible error.
1. Marcello
We first consider whether the district court properly
granted summary judgment for Marcello on Key Bank's defamation
claim. In order to state a claim for defamation in Maine, a
private person must establish the following: "(a) a false and
defamatory statement concerning another; (b) an unprivileged
publication to a third party; (c) fault amounting at least to
negligence on the part of the publisher; and (d) either
actionability of the statement irrespective of special harm or
the existence of special harm caused by the publication."
Powers, 596 A.2d at 69. The issue in this case is whether
Marcello's conduct constituted negligence.
We find that the existence of material issues of fact
precludes the entry of summary judgment concerning this issue.
See Lipsett v. University of P. R., 864 F.2d 881, 885 (1st Cir.
1988) ("If, after . . . canvassing . . . the material
presented, the district court finds that some genuine factual
issue remains in the case, whose resolution one way or another
could affect its outcome, the court must deny the motion.").
We believe that reasonable jurors could find negligence in this
case. See Liberty Lobby, 477 U.S. at 248 (indicating that a
material issue of fact exists "if the evidence is such that a
-55- 55
reasonable jury could return a verdict for the non-moving
party"); see also Mejias-Quiros v. Maxxam Property Corp., 108
F.3d 425, 427 (1st Cir. 1997) ("Negligence . . . is usually a
jury issue, but only if there exists evidence from which a
rational jury could find negligence in the case at hand.");
Taylor v. Gallagher, 737 F.2d 134, 137 (1st Cir. 1984)
("Summary judgment is inappropriate in [cases involving]
negligence . . . if genuine issues of material fact exist or if
reasonable jurors could draw different inferences from agreed
facts.").
Reasonable jurors could draw a conclusion, at odds
with the district court's finding, that Marcello did much more
than "read the substance of PIN's complaint to the print and
broadcast media at PIN's press conference." Penobscot, 906 F.
Supp. at 23. Marcello's press release did not simply recite
the complaint; it used such language as "lied to," "cheated,"
"manipulated," "stole[] from," and "conspired and acted to
defraud" to describe Key Bank's conduct. Given the negligence
standard in Maine of a reasonably prudent person acting under
like circumstances, see Lambert v. Tripp, 560 A.2d 1097, 1100
(Me. 1989); Wing v. Morse, 300 A.2d 491, 499 (Me. 1973);
Restatement (Second) of Torts S 283 (1978), we believe that
reasonable jurors could find that Marcello's characterization
of Key Bank's conduct amounted not simply to "colorful
adjectives and common parlance," Penobscot, 906 F. Supp. at 23,
-56- 56
but to negligence. See Marston v. Newavom, 629 A.2d 587, 592
(Me. 1993) ("[D]efamatory language must be 'construed in the
light of what might reasonably have been understood therefrom
by the persons who [heard] it. In interpreting the language,
it is . . . a question of . . . the understanding of those to
whom the words are addressed and of the natural and probable
effect of the words on them.") (quoting Picard v. Brennan, 307
A.2d 833, 835 (Me. 1973)).
Regardless of the reasonableness of the statements
that Marcello disseminated to the media at the press
conferences, a material issue of fact remains as to whether
Marcello actually "rel[ied] on the veracity of PIN's
complaint." Penobscot, 906 F. Supp. at 23. In his deposition
testimony, Marcello stated repeatedly that he could not
recollect the exact documents that he used to assemble his
press package. At his deposition, in fact, Marcello could not
locate the written notes or statements that he made in
preparation for the press conferences. There is a material
issue as to whether Marcello even consulted PIN's complaint in
advance of the press conferences.
In any event, Marcello has not made a sufficient
showing that he was privileged to disseminate the defamatory
statements to the media. Maine law provides that "allegations
made in pleadings are absolutely privileged." Dineen v.
Daughan, 381 A.2d 663, 664 (Me. 1978); see also Creamer v.
-57- 57
Danks, 700 F. Supp. 1169. 1171 (D. Me.) (discussing Maine
judicial proceedings pleadings privilege), aff'd, 863 F.2d 1037
(1st Cir. 1988). The Maine Supreme Court has indicated that
the privilege may be "lost by unnecessary or unreasonable
publication beyond the scope of the privileged circumstances."
Vahlsing Christina Corp. v. Stanley, 487 A.2d 264, 267 (Me.
1985); see also Sriberg v. Raymond, 544 F.2d 15, 16-17 (1st
Cir. 1976) ("[I]f an occasion is privileged as to
communications between certain parties, the privilege is lost
if the communication is made in such a manner as to
unnecessarily and unreasonably publish it to others, as to whom
the occasion is not privileged.") (quoting Galvin v. New York,
168 N.E.2d 262, 266 (N.Y. 1960)). The Vahlsing Christina court
reversed the dismissal of a defamation claim predicated on the
dissemination of false statements originally contained in a
complaint on the basis that publication removed the statements
from the privileged context. See id.
In this case, a media relations consultant engaged by
a party to a lawsuit claims protection under the judicial
proceedings privilege for statements that he disseminated to
the press concerning the suit. Marcello published these
statements on the same day that PIN filed the complaint but
prior to the commencement of any courtroom activity. "The
judicial proceedings privilege reflects public policy regarding
the importance and necessity of the free flow of information
-58- 58
during such proceedings." Creamer, 700 F. Supp. at 1171. In
light e
public policy underlying the judicial proceedings privilege, we
doubt very much that this privilege applies to Marcello's
publications, which were neither reasonable nor necessary for
efficient disposition of the legal proceedings at issue of the circumstances of the press conference and th the .
See Frazier v. Bailey, 957 F.2d 921, 932 (1st Cir. 1992)
(explaining that under Massachusetts law, if a communication is
"unnecessarily or unreasonably published," it is no longer
privileged); Dineen, 381 A.2d at 665 ("The purpose of the
privilege is to allow the attorney to litigate strenuously the
interests of his client. To fulfill this purpose the privilege
need only be broad enough to encompass statements relevant to
those interests. To extend the protection beyond this point
would be to abuse the public policy which acts rt has
explained, moreover, that this privilege applies to judges,
parties, witnesses, and attorneys. See id.; Dineen, 381 A.2d
at 664-65. Marcello directs us to no authority indicating that
the judicial proceedings privilege pertains to a media
consultant who is not a party or a witness or an attorney in
the dispute at issue.30
30. Marcello contends that his statements are privileged
because they fairly and accurately report a judicial
proceeding. The privilege that Marcello attempts to adopt at
this point pertains to defamatory statements contained in
reports of judicial proceedings prepared by reporters. See
Brown v. Hearst Corp., 54 F.3d 21, 25 (1st Cir. 1995); Jones
v. Taibbi, 512 N.E.2d 260, 266 (Mass. 1987). Regardless of
-59- 59
We thus conclude that Marcello's statements were not
within the judicial proceedings privilege. Based on this
conclusion, in addition to our findings that reasonable jurors
could determine that Marcello did more than read from PIN's
complaint and that a material issue of fact exists as to
whether Marcello actually relied on PIN's complaint in
formulating these statements, we believe that the district
court improperly granted summary judgment for Marcello.
We note that if the trial court, with the assistance
of further factual development, determines that Key Bank
constitutes a public figure, it may resolve the defamation
issue on alternative grounds. According to the Supreme Court,
it may be possible for someone to become a
public figure through no purposeful action
of his own, but the instances of truly
involuntary public figures must be
exceedingly rare. For the most part those
who attain this status have assumed roles
of especial prominence in the affairs of
society. Some occupy positions of such
persuasive power and influence that they
are deemed public figures for all
purposes. More commonly, those classed as
public figures have thrust themselves to
the forefront of particular public
controversies in order to influence the
resolution of the issues involved.
Gertz v. Robert Welch, Inc., 418 U.S. 323, 345 (1974).
Although ostensibly a question of law suitable for our
the fairness or accuracy of Marcello's publications, he is
not a reporter. In any event, Maine does not appear to have
adopted the "reporter privilege" to this date, and we will
not speculate as to the future development of Maine law.
-60- 60
resolution, see Quantum Elecs. Corp. v. Consumers Union of
United States, Inc., 881 F. Supp. 753, 763 (D.R.I. 1995);
Haworth v. Feigon, 623 A.2d 150, 158 (Me. 1991); Restatement
(Second) of Torts S 580A cmt. c (1978), a finding of public
figure status necessitates a detailed fact-sensitive
determination, see Bruno & Stillman, Inc. v. Globe Newspaper
Co., 633 F.2d 583, 589 (1st Cir. 1980); Quantum, 881 F. Supp.
at 763; Lawrence H. Tribe, American Constitutional Law S 12-13,
at 880-81 (2d ed. 1988) (explaining that the determination of
whether an individual constitutes a limited public figure
necessitates that the trial court establish first the existence
of a "public controversy," and second "that the nature and
extent of the person's participation in the controversy reached
some critical mass at which 'voluntary injection' occurred").
On the record before us now, we cannot make this particularized
factual determination.31
If the trial court determines that Key Bank
constitutes a public figure, Marcello may claim a conditional
privilege regarding his publications concerning Key Bank. Such
a privilege exists for statements concerning public figures.
See Curt is Publ'g Co. v. Butts, 388 U.S. 130, 155 (1967).
31. Marcello must establish sufficient evidence to support a
factual conclusion that Key Bank is a public figure. See
Restatement (Second) of Torts S 580A cmt. e (1977) ("For a
privilege created by the law to apply, the person who seeks
to dispel the seemingly tortious character of his conduct
normally has the burden of raising the issue of the privilege
and proving the existence of its elements.").
-61- 61
Liability does not attach for a defamatory statement concerning
a public figure unless the publisher of the statement acted
with knowledge or reckless disregard of the falsity of the
defamatory publication. See New York Times v. Sullivan, 376
U.S. 254, 279-80 (1964); Curtis Publ'g, 388 U.S. at 155; Time,
Inc. v. Firestone, 424 U.S. 448, 455 (1976); Michaud v.
Inhabitants of Livermore Falls, 381 A.2d 1110, 1113 (Me. 1978).
On the record before us, we do not presume to direct a trial
court finding regarding either the predicates for or, in the
event that the trial court establishes the existence of such
predicates, the consequences of a conditional privilege.
2. PIN, Phillips, and Pardilla
We now turn to the issue of whether the district
court properly granted summary judgment sua sponte for PIN,
Phillips, and Pardilla. "It is [clear] that district courts
have the power to grant summary judgment sua sponte."
Berkovitz v. Home Box Office, Inc., 89 F.3d 24, 29 (1st Cir.
1996). Two conditions, however, circumscribe the district
court's exercise of this power: first, discovery must be
"sufficiently advanced that the parties have enjoyed a
reasonable opportunity to glean the material facts;" second,
the district court must "give[] the targeted party appropriate
notice and a chance to present its evidence on the essential
elements of the claim or defense." Id.; see also Stella v.
Tewksbury , 4 F.3d 53, 55 (1st Cir. 1993); Jardines Bacata, Ltd.
-62- 62
v. Diaz-Marquez, 878 F.2d 1555, 1560 (1st Cir. 1989).
In this case, discovery had proceeded to the point
that the parties understood the material facts. PIN filed its
complaint and conducted the press conferences in September
1994. The district court did not make its sua sponte ruling
until October 1995. By this time, the parties had compiled a
voluminous record that included depositions of all of the
parties involved in the press conference.
As in Berkovitz, however, the district court never
"gave the [cross-Appellants] a meaningful opportunity to cull
the best evidence supporting [their] position[s], and to
present that evidence, together with developed legal
argumentation , in opposition to the entry of summary judgment"
with respect PIN, Phillips, and Pardilla. Id. at 31. On the
contrary, the district court's sua sponte ruling took these
parties by surprise; only Marcello had moved for summary
judgment and neither Schiavi nor the Palmer Defendants filed
defamation claims against Marcello.32
32. Although Key Bank did have the opportunity to present
its position with respect to Marcello, it did not in the case
of PIN, Phillips, and Pardilla because none of these parties
moved for summary judgment. Key Bank's argumentation may
have differed little in response to summary judgment motions
filed by PIN, Phillips, and Pardilla, given the similarity of
the facts and circumstances relating to its claims against
these parties. The nature of PIN, Phillips, and Pardilla's
relationship to the conduct at issue as well as the defenses
that these parties now assert in response to Key Bank's
defamation claims, however, support Key Bank's argument that
it would have responded differently to these parties had the
district court afforded it an opportunity to do so. See
-63- 63
We acknowledge that "[t]his court from time to time
has refused to permit appellants to take advantage of supposed
ghts that had not been called to the district court's
attention by way of a [timely] motion to reconsider." Id.
(citing United States v. Schaefer, 87 F.3d 562, 570 n.9 (1st
1996); oversi Cir. Grenier v. Cyanamid Plastics, Inc., 70 F.3d 667,
678 (1st Cir. 1995); VanHaaren v. State Farm Mut. Auto. Ins.
Co., 989 F.2d 1, 4-5 (1st Cir. 1993)). Like the appellant in
Berkovitz , however, the Palmer Defendants timely filed a motion
to reconsider. Although Key Bank and Schiavi did not follow
suit, the considerations that govern the filing of a motion for
reconsideration are very flexible. See Berkovitz, 89 F.3d at
31; United States v. Roberts, 978 F.2d 17, 21-22 (1st Cir.
1992). In any event, neither the cases that Berkovitz cites
nor Rule 56 imposes an obligation on the subject of a sua
sponte summary judgment ruling to move for reconsideration in
order to preserve its claims on appeal. We therefore refrain
from penalizing Key Bank and Schiavi for their purported
oversight. Because the district court failed to afford the
Stella, 4 F.3d at 56 (noting the special preparation
necessary to defend a motion for summary judgment).
Significantly, Key Bank did not present evidence, either in
its written or in its oral defense to Marcello's summary
judgment motion, concerning PIN, Phillips, or Pardilla. See
Berkovitz, 89 F.3d at 31 n.8 (reasoning that plaintiff at
issue in Berkovitz did not have an opportunity to put forth
evidence relating to summary judgment motion). We thus
include Key Bank in our disposition of the district court's
sua sponte defamation rulings.
-64- 64
cross-Appellants any opportunity to oppose its grant of summary
judgment for PIN, Phillips, and Pardilla, we hold that this
ruling cannot stand.
D. Emotional Distress
The district court awarded PIN summary judgment on
Palmer's claims for both intentional and negligent infliction
of emotional distress deriving from the two press conferences
held in September 1994. In his Brief, Palmer merely adverts to
the issue of whether the district court properly granted
summary judgment on these two claims. Specifically, Palmer
mentions this issue only in the table of contents and a single
heading of his Brief. Other than these floating references,
Palmer never makes any argument in his principal brief
concerning either intentional or negligent infliction of
emotional distress. "It is settled in this circuit that issues
adverted to on appeal in a perfunctory manner, unaccompanied by
some developed argumentation, are deemed to have been
abandoned." Ryan v. Royal Ins. Co., 916 F.2d 731, 734 (1st
Cir. 1990); s ee also Williams v. Poulos, 11 F.3d 271, 285 (1st
Cir. 1993).
We recognize that, in its Reply Brief, PIN notes in
passing the fact that the district court "correctly" ruled
against Palmer and awarded summary judgment to PIN on the
emotional distress claims that Palmer mentioned in his
counterclaim. In his Reply Brief, Palmer articulates a
-65- 65
"response" to PIN concerning the emotional distress claims and
devotes four pages to the argument that the district court
improperly granted PIN summary judgment on these claims. As we
have stated previously, "relief from an appellate court,
requested for the first time in a reply brief, is ordinarily
denied as a matter of course." Aulson v. Blanchard, 83 F.3d 1,
7 (1st Cir. 1996); see also Indian Motorcycle Assocs. v.
Massachusetts Hous. Fin. Agency, 66 F.3d 1246, 1253 n.12 (1st
Cir. 1995). The general rule set forth in Aulson and Indian
Motorcycle applies to thi time in his Reply Brief.
E. Supplemental Jurisdiction
The final issue confronting us is whether or not the
district court properly exercised and now retains jurisdiction
over the state law claims at issue in this case. 28 U.S.C. S
1367(a) provides: "[I]n any civil action of which the district
courts have original jurisdiction, the district courts shall
have supplemental jurisdiction over all other claims that are
so related to claims in the action within such original
jurisdiction that they form part of the same case or
controversy under Article III of the United States
Constitution." Section 1367(a)'s discussion of supplemental
jurisdiction embraces both pendent and, more importantly for
our purposes, ancillary jurisdiction. See Rodriguez v. Doral
Mortgage Corp., 57 F.3d 1168, 1175 n.8 (1st Cir. 1995); Vera-
Lozano v. Int ernational Broadcasting, 50 F.3d 67, 70 (1st Cir.
-66- 66
1995).
In this case, the district court exercised original
jurisdiction pursuant to 28 U.S.C. S 1331 because PIN's primary
claim arose under 25 U.S.C. S 81. The district court correctly
exercised jurisdiction to hear the Appellees' counterclaims
because state and federal claims form part of the same
constitutional case if they "derive from a common nucleus of
operative fact" or "are such that . . . would ordinarily be
expected to [be] tr[ied] . . . in one judicial proceeding."
United States Mine Workers v. Gibbs, 383 U.S. 715, 725 (1966);
see also Baker v. Gold Seal Liquors, 417 U.S. 467, 469 n.1
(1974) (finding ancillary jurisdiction when counterclaim arises
out of the "same transaction or occurrence" as the underlying
claim); Rodri guez, 57 F.3d at 1175-76 (quoting Gibbs, 383 U.S.
at 725). As the Magistrate Judge noted in this case, "the
truth or falsity of the statements [made at the press
conferences] for purposes of the defamation claim . . . turn[s]
on the same 'aggregate of operative facts' as the original
claim." 33 Pe nobscot Indian Nation v. Key Bank, No. 94-0212-B,
33. We do not distinguish between the counterclaims of
Schiavi, Palmer, Palmer Development, Palmer Management, and
Key Bank against PIN and the counterclaims of Key Bank
against Marcello, Phillips, and Pardilla, for purposes of our
discussion of supplemental jurisdiction. All of the
counterclaims satisfy the "basic transaction-or-occurrence
test that is used to distinguish between compulsory and
permissive counterclaims." 6 Charles Alan Wright & Arthur R.
Miller, Federal Practice and Procedure S 1404, at 32 (2d ed.
1990). Supplemental jurisdiction exists for all of the
counterclaims in this case.
-67- 67
at 2 (D. Me. Nov. 10, 1994); see also Painter v. Harvey, 863
F.2d 329, 333 (4th Cir. 1988) (finding counterclaim for
defamation fell within the ancillary jurisdiction of the
district court); Pochiro v. Prudential Ins. Co., 827 F.2d 1246,
1251 (9th cir. 1987) (finding that if "defamatory statements
are sufficiently related to [sic] subject matter of the
original action," defamation claim constitutes a compulsory
counterclaim).
Although our affirmance of the district court's
ruling with respect to S 81 eliminates the sole federal claim
conferring original jurisdiction pursuant to 28 U.S.C. S 1331,
the district court has discretion to hear the remaining state
law claims at issue. "In a federal question case, the
termination of the foundational federal claim does not divest
the district court of power to exercise supplemental
jurisdiction, but, rather, sets the stage for an exercise of
the court's informed discretion." Roche v. John Hancock Mut.
Life Ins. Co., 81 F.3d 249, 256-57 (1st Cir. 1996) (citing 28
U.S.C. S 1367(c)(3)). As the Roche court pointed out, "the
trial court must take into account concerns of comity, judicial
economy, convenience, fairness, and the like" in making this
decision. Id. at 257. This determination necessitates an
evaluation of the facts peculiar to each case.34
34. Finding that the district court properly considered the
state law claims at issue despite the fact that it had
disposed of the federal claim supporting original
-68- 68
We emphasize that the decision to retain or disclaim
jurisdiction over the remaining state law claims at issue in
this case lies in the broad discretion of the district court.
See Vera-Lozano , 50 F.3d at 70; Martinez v. Colon, 54 F.3d 980,
990 (1st Cir.) (finding that "once the court determined so far
in advance of trial that no legitimate federal question
existed, the jurisdictional basis for plaintiff's pendent
claims under Puerto Rico law evaporated"), cert. denied, 116 S.
Ct. 515 (1995). 28 U.S.C. S 1367(c) specifically provides that
the district court may refuse to exercise supplemental
jurisdiction over a state law claim if the claim "raises a
novel or complex issue of State law," if the claim
"substantially predominat es over the claim or claims over which
the district court has original jurisdiction," or if "the
district court has dismissed all claims over which it has
original jurisdiction."
jurisdiction, the Roche court emphasized the following: "The
litigation had matured well beyond its nascent stages,
discovery had closed, the summary judgment record was
complete, the federal and state claims were interconnected,
and powerful interests in both judicial economy and fairness
tugged in favor of retaining jurisdiction." 81 F. 3d at 257.
-69- 69
Conclusion
These appeals present many interesting issues. We
find the question of S 81's applicability to the transactions
at issue in this case particularly important in light of the
evolution of federal Indian law and of the marketplace in which
Indian tribes actively participate. Our conclusion that S 81
does not apply either to the Settlement Agreements or to the
underlying agreements governing the parties' business relations
reflects our determination not simply to dovetail with those
authorities that have offered persuasive interpretations of S
81 before us, but further to reach a logical conclusion that
promotes the interests of Indian tribes as they grapple with
modern economic realities. We believe that in so doing we also
give effect to the intentions of those who adopted S 81 in
1872.
We affirm in part, reverse and vacate in part, and
remand to the district court for further proceedings consistent
with this opinion. Costs to Appellees and cross-Appellants.
-70- 70
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In Re Sanborn
148 U.S. 222 (Supreme Court, 1893)
United States v. Sandoval
231 U.S. 28 (Supreme Court, 1913)
United States v. Pelican
232 U.S. 442 (Supreme Court, 1914)
Green v. Menominee Tribe
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United States v. Candelaria
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Erie Railroad v. Tompkins
304 U.S. 64 (Supreme Court, 1938)
Federal Power Commission v. Tuscarora Indian Nation
362 U.S. 99 (Supreme Court, 1960)
New York Times Co. v. Sullivan
376 U.S. 254 (Supreme Court, 1964)
United Mine Workers of America v. Gibbs
383 U.S. 715 (Supreme Court, 1966)
Curtis Publishing Co. v. Butts
388 U.S. 130 (Supreme Court, 1967)
Oneida Indian Nation v. County of Oneida
414 U.S. 661 (Supreme Court, 1974)
Baker v. Gold Seal Liquors, Inc.
417 U.S. 467 (Supreme Court, 1974)
Gertz v. Robert Welch, Inc.
418 U.S. 323 (Supreme Court, 1974)
Time, Inc. v. Firestone
424 U.S. 448 (Supreme Court, 1976)
Oliphant v. Suquamish Indian Tribe
435 U.S. 191 (Supreme Court, 1978)
United States v. John
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