Pub. 13 2016 Issue 1

O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G N E W M E X I C O R E A L I Z E D R E A M S 14 DEBBIE RAMIREZ MODRALL SPERLING LAW FIRM COUNSELOR’S CORNER Following a hearing, the district court preliminarily enjoined the tribal entities from proceeding against the financial entities in tribal court. The tribal entities appealed the district court’s grant of the injunction to the Seventh Circuit Court of Appeals. Managing Jurisdictional Risk in Transactions in Indian Country Under the doctrine of tribal court exhaustion, a party involved in a lawsuit with an Indian tribe must exhaust remedies in tribal courts before proceeding in a state or federal court. Because lenders prefer to enforce agreements and seek remedies in their “home courts,” the tribal court exhaustion doctrine requires careful drafting of forum selection clauses in loan documents. A recent case from the Seventh Circuit Court of Appeals highlights the importance of loan docu- ment provisions addressing the issues of sover- eign immunity and tribal court exhaustion. 1 Background: In January 2008, Lake of the Torches Economic Development Corporation, a borrowing entity wholly-owned by the Lac du Flambeau Band of Lake Superior Chippewa In- dians, issued $50 million in taxable gaming rev- enue bonds to build a riverboat casino, hotel and bed and breakfast in Natchez, Mississippi, and to refinance existing debt. The bonds were pur- chased and resold by various financial entities. The tribe later met difficulty in meeting its bond obligations. The borrower eventually repudiated its obligations under the bonds and refused to re- pay the outstanding principal or interest. The Litigation: A series of lawsuits arose among the parties to the bond transaction. After over three years of litigating in federal and state court, the tribe and the borrower brought an ac- tion in tribal court seeking a declaration that the bonds were invalid under tribal law and the Indi- an Gaming Regulatory Act (IGRA) in an attempt to avoid their obligations on the bonds. In response, the financial entities instituted an action in the United States District Court for the Western District of Wisconsin seeking a rul- ing that the tribal court lacked jurisdiction over them and an injunction to prevent the tribal en- tities frompursuing their tribal court action. Fol- lowing a hearing, the district court preliminari- ly enjoined the tribal entities from proceeding against the financial entities in tribal court. 2 The tribal entities appealed the district court’s grant of the injunction to the Seventh Circuit Court of Appeals. Tribal Court Exhaustion Not Required: The SeventhCircuit agreedwith the district court that tribal court exhaustion was not required. The Court of Appeals concluded that, because the tribal entities expressly consented in the E xpansion of economic opportunities in Indian country has created new opportunities for New Mexico’s lenders, but it has also presented unique risks to those lenders. Two of those risks arise from doctrines known as the tribal sovereign immunity doctrine and the tribal court exhaustion doctrine. Indian tribes, as sovereigns, enjoy the same immunity from suit as states and foreign governments, which can create challenges for lenders seeking to enforce loanprovisions or exercise remedies indefault situations.