Tsosie v. N.T.U.A. Wireless LLC

• Court: District Court, D. Arizona
• Decided: June 27, 2023
• Docket: 2:23-cv-00105
• Status: Unknown

Opinion

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA

9 Velena Tsosie, No. CV-23-00105-PHX-DGC

10 Plaintiff, ORDER

11 v.

12 N.T.U.A. Wireless LLC, et al.,

13 Defendants. 14 15 16 Plaintiff Velena Tsosie brings this action against her employer, Defendant NTUA 17 Wireless, and her former supervisor, Defendant Walter Haase, and his wife. Doc. 1. 18 Defendants move to dismiss the complaint under Rule 12(b)(1). Doc. 8. The motion is 19 fully briefed and no party requests oral argument. For reasons set forth below, the Court 20 will deny the motion. 21 I. Background. 22 Defendant NTUA Wireless (“Wireless”) provides internet, telephone, and data 23 communication services in and around the Navajo Nation. Doc. 1 ¶ 7; Doc. 11-1 at 10. 24 Wireless is a Delaware limited liability company, owned by Commnet Newco and Navajo 25 Tribal Utility Authority (“NTUA”). Doc. 1 ¶¶ 4, 6. Commnet Newco is also a Delaware 26 limited liability company and the managing member of Wireless. Id. ¶ 6; Doc. 11-1 at 6. 27 NTUA is a tribal enterprise of the Navajo Nation. Doc. 1 ¶ 6. 28 1 Defendant Walter Haase is the general manager of NTUA and served on the board 2 of Wireless until April 2022. Id. ¶ 8. Plaintiff is the general manager of Wireless and 3 reports directly to the Wireless board. Id. ¶ 4. 4 Plaintiff’s claims arise from a working dinner that occurred in March 2022, while 5 Plaintiff reported to Defendant Haase. Id. ¶¶ 8, 13. The complaint alleges that Defendant 6 Haase made unwelcome suggestive comments to Plaintiff (id. ¶¶ 14, 16-17, 20), and 7 initiated unwelcome physical contact with Plaintiff (id. ¶¶ 15-17, 19-21). The complaint 8 alleges that Wireless conducted an inadequate investigation, issued a retaliatory press 9 release, and failed to sufficiently discipline Defendant Haase. Id. ¶¶ 22-25. 10 Plaintiff asserts claims for violation of Title VII of the Civil Rights Act of 1964, 11 violation of the Arizona Civil Rights Act, A.R.S. § 41-1463, assault, battery, and 12 intentional infliction of emotional distress. Id. ¶¶ 27-57. Defendants move to dismiss the 13 complaint on tribal immunity grounds. Doc. 8. 14 II Legal Standards. 15 Federal courts are courts of limited jurisdiction, “possess[ing] only that power 16 authorized by Constitution and statute[.]” Kokkonen v. Guardian Life Ins. Co. of Am., 511 17 U.S. 375, 377 (1994). Courts presume that a claim “lies outside this limited jurisdiction, 18 and the burden of establishing the contrary rests upon the party asserting jurisdiction[.]” 19 Id. (citations omitted); see Kingman Reef Atoll Invs., L.L.C. v. United States, 541 F.3d 20 1189, 1197 (9th Cir. 2008) (same). 21 “A sovereign immunity defense is ‘quasi-jurisdictional’ in nature and may be raised 22 in . . . a Rule 12(b)(1) motion.” Sato v. Orange Cnty. Dep’t of Educ., 861 F.3d 923, 927 23 (9th Cir. 2017). Such a motion may be either a factual or facial attack on jurisdiction. See 24 Thornhill Publ’g Co. v. Gen. Tel. & Elec. Corp., 594 F.2d 730, 733 (9th Cir. 1979). A 25 factual attack “disputes the truth of the allegations that, by themselves, would otherwise 26 invoke federal jurisdiction.” Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th 27 Cir. 2004). A facial attack, like this one, asserts that the allegations in the operative 28 pleading, even when taken as true, are “insufficient on their face to invoke federal 1 jurisdiction.” Id. When considering a facial attack, the Court takes the allegations in the 2 complaint as true. Doe v. Holy See, 557 F.3d 1066, 1073 (9th Cir. 2009) (citing Wolfe v. 3 Strankman, 392 F.3d 358, 362 (9th Cir. 2004)). 4 II. Analysis. 5 Defendants argue that the Court lacks subject matter jurisdiction because Wireless 6 is entitled to tribal immunity as an arm of the Navajo Nation and has not waived tribal 7 immunity for Plaintiff’s claims. Doc. 8 at 3-11.1 8 It is well-established that Indian tribes are immune from suit absent congressional 9 authorization or clear waiver. Santa Clara Pueblo v. Martinez, 436 U.S. 49, 58 (1978) 10 (citation omitted); see also Michigan v. Bay Mills Indian Cmty., 572 U.S. 782, 789 (2014) 11 (citing Kiowa Tribe of Okla. v. Mfg. Techs., Inc., 523 U.S. 751, 756 (1998)). “Tribes enjoy 12 immunity from suits on contracts, whether those contracts involve governmental or 13 commercial activities and whether they were made on or off a reservation.” Kiowa Tribe, 14 523 U.S. at 760. “Tribal sovereign immunity not only protects tribes themselves, but also 15 extends to arms of the tribe acting on behalf of the tribe.” White v. Univ. of California, 765 16 F.3d 1010, 1025 (9th Cir. 2014) (citations omitted). 17 The Ninth Circuit has adopted five factors for assessing whether an entity is an “arm 18 of the tribe” – (1) the method of creation of the entity, (2) the purpose of the entity, (3) the 19 structure, ownership, and management, including the tribe’s control over the entity, (4) the 20 tribe’s intent to share sovereign immunity, and (5) the financial relationship between the 21 tribe and the entity. Id. (quoting Breakthrough Mgmt. Grp., Inc. v. Chukchansi Gold 22 Casino & Resort, 629 F.3d 1173, 1187 (10th Cir. 2010)); see also Allen v. Gold Country 23 Casino, 464 F.3d 1044, 1046 (9th Cir. 2006) (“The question is not whether the activity 24 may be characterized as a business . . . but whether the entity acts as an arm of the tribe so 25 that its activities are properly deemed to be those of the tribe.”). 26 If the Court determines that Wireless is an arm of the Navajo Nation, Wireless is 27 entitled to tribal immunity. The Court will then inquire into whether Congress has

28 1 Defendants also note that Indian tribes and arms of tribes are not proper defendants under Title VII, 42 U.S.C. § 2000e(b). Id. at 3-4. 1 abrogated or Wireless has waived its tribal immunity. If Wireless is not an arm of the 2 Navajo Nation, it is not entitled to tribal immunity and the Court has jurisdiction. 3 A. Method of Creating Wireless. 4 NTUA and Commnet Newco formed Wireless as a corporate entity under Delaware 5 law. Doc. 1 ¶ 4. NTUA holds a 51% interest in Wireless and Commnet Newco holds 49%. 6 Doc. 11-1 at 1. It is undisputed that NTUA enjoys tribal immunity as an enterprise of 7 Navajo Nation. Doc. 8 at 5-6; Doc. 11 at 11. 8 Defendants argue that the tribal immunity enjoyed by NTUA extends to Wireless. 9 Doc. 8 at 5-6. Defendants further argue that the Speaker of the Navajo Nation Council’s 10 approval of the Wireless operating agreement shows the Tribe was involved in Wireless’s 11 creation. Id. 12 District courts in this circuit have recognized that subsidiaries that are wholly owned 13 by an Indian tribe or an arm of the tribe enjoy tribal immunity. See, e.g., Dine Citizens 14 Against Ruining Our Env’t v. Bureau of Indian Affs., No. CV-16-08077-PCT-SPL, 2017 15 WL 4277133, at *3 (D. Ariz. Sept. 11, 2017), aff’d, 932 F.3d 843 (9th Cir. 2019) (“[I]t is 16 clear that Intervenor-Defendant Navajo Transitional Energy Company enjoys sovereign 17 immunity as an arm of the Navajo Nation. Established in 2013, NTEC is a wholly-owned 18 Navajo corporation organized pursuant to Navajo law.”); Cadet v. Snoqualmie Casino, 469 19 F. Supp. 3d 1011, 1015 (W.D. Wash. 2020) (“The Casino is wholly owned and operated 20 by the Tribe [and] was formed by the Tribe pursuant to the SEA Act, a resolution codifying 21 the Tribe’s authority over the Casino. Thus, the first White factor favors the Casino 22 functioning as an ‘arm of the Tribe.’”). 23 This case is different. NTUA does not wholly own Wireless, and Wireless was not 24 formed under the laws governing the Tribe. Other courts considering similar circumstances 25 have declined to confer tribal immunity. See Somerlott v. Cherokee Nation Distribs., Inc., 26 686 F.3d 1144, 1150 (10th Cir. 2012) (“CND, a separate legal entity organized under the 27 laws of another sovereign, Oklahoma, cannot share in the Nation’s immunity from suit.”); 28 Hunter v. Redhawk Network Sec., LLC, No. 6:17-CV-0962-JR, 2018 WL 4171612, at *3 1 (D. Or. Apr. 26, 2018) (“Defendant contends that because Redhawk’s parent 2 corporation . . . was incorporated under tribal law, and Redhawk is only one ‘layer’ 3 removed . . . the method of creation factor weighs in favor of immunity. The first factor 4 in determining whether an entity is an ‘arm of the tribe,’ however, focuses solely on the 5 method of creation of the entity in question. Therefore, this factor weighs against a finding 6 that Redhawk is an ‘arm of the tribe.’”). 7 What is more, Wireless – the Delaware corporation – is the defendant in this case, 8 not NTUA. As a Delaware company, Wireless does not enjoy NTUA’s tribal immunity by 9 virtue of being partly owned by NTUA. McCoy v. Salish Kootenai Coll., Inc., 785 F. App’x 10 414, 415 (9th Cir. 2019) (“[T]he first factor – the method of creation factor – weighs against 11 finding that the College is an arm of CSKT because this action is against the Montana 12 corporation, not the tribal corporation.”).2 This factor weighs against immunity. 13 B. Purpose of Wireless. 14 Wireless was “formed for the purpose of engaging (directly or indirectly) in 15 providing data, internet and voice telephone services in and near the Navajo Nation, and 16 pursuing the same for its income and profit.” Doc. 11-1 at 15. The Federal Trade 17 Commission designated Wireless as an “eligible telecommunications carrier.” Id. This 18 status allows Wireless to provide affordable telecommunications services to low-income 19 consumers and receive subsidies from the federal government. See 47 U.S.C. § 254 20 (c)(3)(e); 47 C.F.R. § 54.201. 21 Although a for-profit business, Wireless builds on NTUA’s history of supplying the 22 Navajo Nation with modern utilities. See Doc. 8 at 6 (“The Navajo Tribal Utility Authority 23 2 That the Navajo Nation Council approved NTUA’s operating agreement does not 24 alter this conclusion. Tribes and their business partners form entities under state law for a variety of reasons. See Dixon v. Picopa Const. Co., 772 P.2d 1104, 1112 (Ariz. 1989) 25 (“[A]n Indian corporation’s successful assertion of immunity . . . may deter persons or entities from entering into contractual relationships with that Indian corporation or any 26 other Indian corporation. Non-Indians will undoubtedly think long and hard before entering into business relationships with Indian corporations that are immune from suit.”); 27 Felix S. Cohen, 1 Cohen’s Handbook of Federal Indian Law § 21.02[2] (2019) (“Some tribes have created separate businesses entities that are not immune from suit. This has 28 been a particularly useful tool for tribes operating off-reservation businesses. Any judgments, however, are limited to assets held by that entity.”). 1 was created by the Navajo Tribal Council on January 22, 1959, in order to bring electric 2 power to Shiprock, Navajo Nation[.] The Authority has expanded into natural gas, water, 3 sewer utility operations, and telecommunications and information services as well as 4 increasing its electric services.”) (citing 21 N.N.C. § 1(A)). 5 Wireless’s purpose helps the Navajo Nation become “more self-sufficient, and 6 better positioned to fund their own sovereign functions, rather than relying on federal 7 funding.” Michigan v. Bay Mills Indian Cmty., 572 U.S. 782, 810 (2014); see Manzano v. 8 S. Indian Health Council, Inc., No. 20-CV-02130-BAS-BGS, 2021 WL 2826072, at *8 9 (S.D. Cal. July 7, 2021) (finding that providing health services weighs in favor of tribal 10 immunity); Hunter, 2018 WL 4171612, at *3 (finding that providing network security 11 services weighs in favor of tribal immunity). This factor favors immunity. 12 C. Structure, Ownership, and Management of Wireless. 13 Wireless is owned 51% by NTUA and 49% by Commnet Newco. Doc. 11-1 at 6. 14 But neither NTUA nor Commnet Newco has the authority to unilaterally act for or bind 15 Wireless. Id. at 27. Commnet Newco is the managing member and is responsible for active 16 management of Wireless, including operations and regulatory matters. Id. at 11; Doc. 11- 17 2 at 3-4. 18 The operating agreement provides that Wireless “shall be managed under the 19 direction of a Board” consisting of four directors. Doc. 11-1 at 23. NTUA and Commnet 20 Newco each appoint two directors with equal voting power. Id. at 23-24. The operating 21 agreement does not require that any director be a member of the Navajo Tribe. 22 Defendants contend that this corporate structure weighs in favor of finding that 23 Wireless is an arm of the Navajo Nation. Doc. 8 at 7-8. Courts, under similar 24 circumstances, have suggested otherwise. See Breakthrough, 629 F.3d at 1193 (finding 25 that the structure of an entity “weigh[ed] both for and against a finding of immunity” when 26 seven board members sat on the tribal council and the tribe chairperson chaired the entity, 27 but twelve directors and three officers were not tribal members); People v. Miami Nation 28 Enters., 386 P.3d 357, 373 (Cal. 2016) (“Evidence that the tribe actively directs or oversees 1 the operation of the entity weighs in favor of immunity; evidence that the tribe is a passive 2 owner, neglects its governance roles, or otherwise exercises little or no control or oversight 3 weighs against immunity.”) (citation omitted). With Commnet Newco designated as the 4 managing member, this factor weighs slightly against immunity. 5 D. Navajo Nation’s Intent to Share Sovereign Immunity. 6 Defendants contend that “Wireless is providing services on the Navajo 7 Nation . . . consistent with NTUA’s statutory mandate to provide telecommunications 8 services,” showing that “NTUA intended to share its immunity with NTUA Wireless.” 9 Doc. 8 at 9. But the relevant inquiry concerns “the tribe’s intent with respect to the sharing 10 of its sovereign immunity.” White, 765 F.3d at 1025 (emphasis added) (citation omitted). 11 It is not clear that the Navajo Nation elected to share its immunity with Wireless. 12 The Speaker of the Navajo Nation Council allowed NTUA to waive NTUA’s 13 sovereign immunity for enforcement of the Wireless operating agreement. Doc. 11-1 at 14 37. The operating agreement provides: “NTUA hereby expressly waives any sovereign 15 immunity or similar protection that may apply to NTUA or of which NTUA may avail itself, 16 and further expressly waives any and all rights to litigate any matter related to this 17 agreement in the courts of the Navajo Nation[.]” Doc. 11-1 at 37 (emphasis added) 18 (cleaned up). 19 The operating agreement is silent on the Navajo Nation Council’s intent to share 20 sovereign immunity with Wireless. But the Tribe’s express waiver of NTUA’s immunity 21 in the operating agreement, and the fact that NTUA’s only partially owns Wireless, imply 22 that the Tribe did not intend to render Wireless immune. Cf. Breakthrough, 629 F.3d at 23 1193 n.15 (“[B]ecause the Casino is wholly owned by the Authority, it is logical to assume 24 that if the Tribe intended for the Authority to have immunity from suit, it also intended for 25 the Casino to have immunity.”). This factor weighs against immunity. 26 E. Financial Relationship Between Navajo Nation and Wireless. 27 The extent to which an Indian tribe relies on an entity “for revenue to fund its 28 governmental functions, its support of tribal members, and its search for other economic 1 development opportunities” determines whether the financial relationship between the 2 tribe and the entity favors tribal immunity. Breakthrough, 629 F.3d at 1195. And where 3 “a judgment against [an] entity would significantly impact the tribal treasury,” the entity is 4 more likely to enjoy tribal immunity. Williams v. Big Picture Loans, LLC, 929 F.3d 170, 5 184 (4th Cir. 2019); see, e.g., Cook v. AVI Casino Enters., Inc., 548 F.3d 718, 726 (9th Cir. 6 2008) (“[T]he economic benefits produced by the casino inure to the Tribe’s benefit 7 because ACE’s articles of incorporation state that all capital surplus from the casino shall 8 be deposited in the Tribe’s treasury and because the Tribe, as the sole shareholder, enjoys 9 all of the benefits of an increase in the casino’s value.”). 10 An entity is less likely to enjoy immunity where a judgment against it would have 11 no financial effect on the tribe. Hunter, 2018 WL 4171612, at *5 (“There is no evidence 12 to suggest a suit against Redhawk would have any effect on the sovereign Tribe’s treasury, 13 because Redhawk is one step removed from Tribal management and control.”) (citations 14 omitted); see also Hwal’Bay Ba: J Enters., Inc. v. Jantzen in & for Cnty. of Mohave, 458 15 P.3d 102, 110 (Ariz. 2020) (“[W]e do not know whether GCRC’s revenues fund any 16 governmental functions of the Tribe or, if they do, the extent to which the Tribe depends 17 on GCRC revenues for these functions. . . . Thus, based on this record, the superior court 18 did not abuse its discretion by refusing to dismiss GCRC.”). 19 Defendants argue that “Wireless is financially coincident with the economic 20 operation of NTUA.” Doc. 8 at 9. They also argue that Wireless is a vehicle through which 21 NTUA achieves its statutory obligation to provide telecommunications services to the tribe. 22 Id. But there is no indication that profits generated by Wireless benefit the Navajo Nation. 23 Indeed, the Wireless operating agreement provides that profits are directly allocated 24 between NTUA and Commnet Newco. Doc. 11-1 at 18. Likewise, the agreement does not 25 indicate that losses reach the Navajo Nation. Losses are allocated between NTUA and 26 Commnet Newco. Id. And neither the operating agreement nor the management 27 agreement suggest a judgment against Wireless will reach the Navajo Nation. 28 This factor weighs against immunity. 1 F. Conclusion. 2 “An entity asserting immunity as an arm of a sovereign tribe must show by a 3 || preponderance of the evidence that it is, in fact, an arm of the tribe.” McCoy v. Salish 4|| Kootenai Coll., Inc., 334 F. Supp. 3d 1116, 1120 (D. Mont. 2018), aff'd, 785 F. App’x 414 5|| (9th Cir. 2019) (cleaned up); see also Williams, 929 F.3d 170, 176-77 (4th Cir. 2019) 6|| (“Unlike the tribe itself, an entity should not be given a presumption of immunity until it || has demonstrated that it is in fact an extension of the tribe.”). Stated differently, Defendants 8 || must show that Wireless is “the kind of tribal entity, analogous to a governmental agency, || which should benefit from the defense of sovereign immunity.” Breakthrough, 629 F.3d at 1184 (citation omitted). 11 Three of the five relevant factors weigh against immunity, and a fourth weighs □□ slightly in that direction. The Court accordingly concludes that Wireless is not “an arm of 13 || [the Navajo Nation], acting as more than a mere business.” Pink v. Modoc Indian Health 14]| Project, Inc., 157 F.3d 1185, 1188 (9th Cir. 1998). 15 IT IS ORDERED that Defendants’ motion to dismiss (Doc. 8) is denied. 16 Dated this 27th day of June, 2023. 17

David G. Campbell 20 Senior United States District Judge 21 22 23 24 25 26 27 28

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