Extended producer responsibility (“EPR”) laws are increasingly making companies that market, distribute, and sell packaged consumer products responsible for the cost to dispose of the packaging that they place in the market. EPR packaging laws seek to improve recycling efficiency and reduce paper and plastic use by shifting the costs of packaging disposal from state and local governments to companies that market, distribute, and sell consumer products. For these companies, EPR laws can mandate membership in “producer responsibility organizations,” which require the payment of fees and impose significant reporting obligations. EPR laws also can carry per-violation penalties of tens of thousands of dollars.
California, Colorado, Maine, Maryland, Minnesota, Oregon, and Washington have enacted EPR statutes. Illinois, New Jersey, North Carolina, and other states are considering similar laws.
Below, we discuss how the new regimes work, which packaging materials are covered, where implementation stands, how enforcement will operate, opportunities to influence rulemaking, bases for potential legal challenges, and long‑term business implications.
EPR Packaging Laws Regulate Most Businesses That Sell Packaged Products
EPR laws shift financial responsibility for the disposal of used packaging materials from state and local governments to “producers.” That term is typically defined as someone who sells packaged products. Depending on the jurisdiction, this could encompass (1) the brand owner (or licensee) of the packaged product; (2) the manufacturer of the packaged product (or, in some instances, of the packaging itself); (3) the importer of the packaged product; and (4) the distributor or retailer of the packaged product. In addition, some states also specifically designate e-commerce platforms that package and ship products as the producer of the packaging.
Although definitions of “producer” can be complex, the idea behind them is straightforward: states seek to associate each package with exactly one in-state business, which they designate as the “producer” subject to EPR requirements. The selection of a single “producer” from all the businesses involved in the manufacture and use of packaging in the sale of consumer goods can, however, differ by state.
Given this wide variation, businesses selling packaged products should be attuned to potential EPR requirements and the implications for business decision-making. Likewise, manufacturers of packaging materials should consider the impact of EPR laws on their customers (i.e., companies that acquire packaging), including the fact that EPR laws may impact the demand for packaging and the types of packaging that customers purchase.
EPR Packaging Laws Cover Packaging in Any Shape or Form
EPR packaging laws generally cover consumer‑facing packaging—boxes, bags, containers, and the like—regardless of material. But the rules vary, both by state and with time, as regulators create and revise lists of covered materials. The technical and nonuniform nature of these definitions underscores the need for businesses to monitor EPR packaging laws (and implementing regulations) in their areas of operation.
For example, EPR regulations vary for food serviceware and different types of plastics. At present:
California covers single‑use packaging and single‑use plastic food serviceware.
Colorado covers packaging material intended for single or short-term use and paper products.
Maine covers packaging material used to distribute products (including over the Internet).
Maryland covers packaging and paper products.
Minnesota covers packaging (including food packaging) and paper products.
Oregon covers packaging, printing and writing paper, and food serviceware.
Washington covers packaging and paper products.
Still more variation lurks beneath the surface. Although EPR laws generally use the term “packaging,” different states give that term different meanings. In California, for example, packaging “means any separable and distinct material component used for the containment, protection, handling, delivery, or presentation of goods by the producer for the user or consumer, ranging from raw materials to processed goods.”[1] In Maine, by contrast, it “means a discrete type of material, or a category of material that includes multiple discrete types of material with similar management requirements and similar commodity values, used for the containment, protection, delivery, presentation or distribution of a product, including a product sold over the Internet, at the time that the product leaves a point of sale with or is received by the consumer of the product.”[2]
Definitions of “packaging” may come with a host of exceptions. For example, some states exempt materials used to ship prescription drugs, medical devices, infant formula, hazardous materials, and certain printed publications.
EPR Packaging Laws Require Membership in Producer Responsibility Organizations
EPR laws seek to shift the burden of paying for the disposal of packaging from state and local governments to the businesses that manufacture, use, or sell packaging or packaged products.
Under EPR laws, companies that manufacture, distribute, or sell packaged products are subject to a number of new rules, which often include joining a state‑approved producer responsibility organization (“PRO”), paying fees to the PRO based on the amount of packaging they use, and reporting data on that packaging by material and weight, among other things. The PRO, in turn, is responsible for creating recycling or other programs to address and remediate waste from used packaging materials.
As this description suggests, both state and private actors play a role in adopting and enforcing EPR regulations. State agencies operate at a high level, setting minimum program elements and statewide lists or performance targets, and they enforce noncompliance through penalties and other sanctions. Meanwhile, private PROs like the Circular Action Alliance (“CAA”), which operates in multiple states, collect fees from producers and gather data on their use of packaging products. PROs then put the fees they collect toward programs designed to recycle packaging after consumers dispose of it.
EPR Packaging Laws Are Taking Effect Across the Country
Given the complexity of EPR packaging laws, states tend to roll them out over time. This process proceeds in several steps. First, a state establishes a regulatory framework (often through the state’s notice-and-comment rulemaking procedure). Next, the state selects one or more approved PROs. Finally, the state establishes deadlines for covered businesses to register with and pay fees to an approved PRO.
In addition, EPR laws frequently contain substantive requirements for packaging. These requirements are designed to ensure that packaging both can be recycled and is in fact recycled, with target recycling rates in some states (e.g., California) increasing over time.
Consistent with this framework, EPR packaging laws are beginning to take effect in a number of states. This process will accelerate through the rest of the decade.
California: Rulemaking to implement the state’s EPR packaging law is in progress, and guidance about covered materials has been released. Producers must join a PRO by January 1, 2027, with escalating performance standards through 2032. During its first two years of operation, the PRO will determine the fee schedule for each producer based on factors like operating costs, the cost of completing a needs assessment, and the cost to reimburse the department. In the third year and each successive year of operation, each producer will pay an annual fee as established in the PRO plan.
Colorado: Producers were required to join a PRO by July 1, 2025, to sell or distribute products. Fees are due in January of each following year.
Maine: Final program rules were adopted in 2024. Producers will be required to register with the PRO, report initial data, and pay startup fees in 2026, with full implementation slated for 2027.
Maryland: PRO registration and producer onboarding begins in 2026, with regulators to list covered materials by July 1, 2027, and the PRO to submit “responsibility” plans for producers by July 1, 2028. Those plans will be financed through reimbursements set to begin in 2028 and increase until reaching a maximum level in 2030.
Minnesota: Producers will be subject to limited registration requirements in 2025–2026, with a PRO to begin operations in 2027–2028. Full implementation of the PRO’s stewardship plan will occur between 2029 and 2032, with substantive requirements for packaging and paper products to take effect in 2032.
Oregon: Program implementation began on July 1, 2025. Producers must be registered with the PRO, report data, and pay fees.
Washington: Producers must join the PRO in 2026, with rulemaking to proceed over the following years. Nonmembers cannot sell their products in Washington after March 2029.
Importantly, some of the phase-in dates above could be pushed back as regulators receive input from stakeholders. For example, California’s first rulemaking process (from 2024–2025) ended without the adoption of final regulations, requiring the state to revise the proposed regulations and begin the process anew.
EPR Packaging Laws Will Impact the Bottom Line
EPR laws have significant financial implications for companies that manufacture, distribute, or sell packaged products—from fees to reporting obligations to internal process modifications—and they carry the potential for substantial penalties and even packaging bans.
To start, covered businesses must pay PRO fees based on the amount of packaging they place in the stream of commerce—that is, use to package goods sold to consumers. These fees often are higher for hard‑to‑recycle materials and lower for readily recyclable, reusable, or compostable materials.
The levels of fees that PROs will charge in different states are still uncertain. However, some figures are available. The CAA’s 2026 Oregon fee schedule ranges from as little as $0 per pound (nonconsumer corrugated cardboard) and $0.05 per pound (paper) to more than $1.30 per pound (certain plastic containers and foamed cushioning), with most fees somewhere near the midpoint.
In light of state-by-state variation in the rules authorizing PROs to set fees, covered businesses must pay close attention to fee-setting methodologies in jurisdictions where their products are sold. Some companies may consider adjusting the makeup of packaging materials that they use to minimize compliance costs. Indeed, doing so could become a business imperative.
In Oregon, for example, businesses manufacturing, distributing, or selling packaged products face the prospect of paying approximately $100 million per year in the aggregate in PRO fees, even assuming their products are subject to low-end fees of $0.05 per pound. Every additional $0.01 per pound in fees (whether imposed through rate increases or arising from increased sales of products in hard-to-recycle packaging) would translate to over $20 million more per year in total industrywide costs.[3]
Covered businesses also will face new obligations to record and report the volumes of packaging used in products that they sell in the applicable state, as well as the characteristics of that packaging. In order to meet these obligations, companies are required to collect and validate audit-ready data on the packaging that they use to manufacture, distribute, or sell goods in each state and the extent to which it can be recycled, reused, or composted, or otherwise satisfies state sustainability targets. Companies may need to adopt logistics systems capable of supplying this information.
Costs also may increase as businesses update their policies and procedures in accordance with new EPR requirements. Legal departments must review the evolving web of statutes and implementing regulations across different jurisdictions to ensure that their companies meet each set of requirements. The multiple layers of review in each state—including state environmental agencies and quasi-private PROs—further add to this complexity. Additional expenses could arise in working with state agencies throughout the rulemaking process to ensure that proposed regulations do not unduly burden industry. For example, during state notice-and-comment rulemaking processes, companies and industry groups might need to model the costs and benefits of proposed regulations and potential alternatives to identify methods for implementing EPR packaging laws.
Noncompliance carries the potential for significant penalties for businesses that fall under EPR laws. State environmental agencies generally have authority to enforce EPR laws, including through assessing penalties. Depending on the jurisdiction, penalties range from $1,000 for a first violation (Washington) to $100,000 per day for successive violations (Minnesota). Several states increase penalties for repeated incidents of noncompliance. Repeat noncompliance can also increase the penalty classification. In Maryland, for example, regulators may levy administrative penalties of $5,000 and $10,000 for first and second violations, respectively, followed by civil penalties of $20,000 for subsequent violations.[4]
Finally, EPR laws often prohibit the sale of packaging (either on its own or when used to package something else) by unregistered or noncompliant businesses. In Minnesota, for example, businesses cannot “introduce” packaging into the state after January 1, 2029, absent a PRO-approved stewardship plan.[5] Similarly, if a business violates Oregon’s PRO membership requirement, the state can “bring an action seeking to prohibit [its] sale” of packaging.[6] Provisions like this effectively authorize regulators to obtain injunctions against the sale of packaging (or packaged goods) in violation of applicable EPR statutes, offering regulators yet another tool to enforce compliance.
Businesses Have Opportunities to Offer Input on EPR Regulations and Enforcement
The rapidly evolving EPR landscape offers ample opportunities for stakeholder input. First, the administrative rulemaking process provides regulated businesses the opportunity to inform state agencies of harmful or inefficient aspects of proposed EPR rules before they take effect. In Washington, for example, the Department of Ecology plans to begin rulemaking this year and conduct studies that will shape its PRO programs. Oregon’s Department of Environmental Quality has likewise launched a rulemaking process designed to “improve clarity, make identified corrections and provide increased consistency across the rules implementing to [sic] the Plastic Pollution and Recycling Modernization Act.”
Stakeholder input matters. For example, California’s first attempt to issue EPR rules failed, which led the state to launch a second round of rulemaking in late 2025. In January 2026, California regulators withdrew proposed EPR packaging rules to make targeted revisions focused on food and agricultural commodity packaging, and it held an additional fifteen-day public comment period. Businesses subject to EPR laws therefore may consider opportunities to participate in further rulemaking efforts in that state and elsewhere. Through this process, companies and industry groups can propose definitions to clarify the scope of covered packaging materials, offer input on timelines for implementation, discuss costs and benefits of possible fee calculation methodologies, harmonize data and labeling requirements, and ensure the creation of appropriate procedural guardrails. Businesses also can flag inefficiencies and other consequences of product definitions, vague fee schedules, rigid penalty regimes, and other issues.
Industry may also have other opportunities to participate in program design, implementation, and oversight outside the formal rulemaking process. States such as Maryland and Minnesota, for instance, have established advisory EPR councils. These bodies solicit input from the public about the effect and operation of EPR laws as they are developed and once they are in effect. The use of advisory councils to provide feedback to regulators, such as the Maryland Department of the Environment or the Minnesota Pollution Control Agency, offers another path to shape regulatory policies and practices.
More States Are Considering Future EPR Packaging Rules
State interest in EPR packaging regimes is increasing. In fact, several states are actively considering legislation to implement EPR packaging rules. States currently considering EPR legislation include the following:
Illinois: The Extended Producer Responsibility and Recycling Refund Act (HB4064) would require producers of packaging to join a PRO that funds and implements a statewide program to reduce, reuse, recycle, and compost covered materials and meet escalating performance targets, including through fee modulation designed to incentivize recyclable, reusable, and post-consumer content packaging.
New Jersey: The Packaging and Paper Product Stewardship Act (S673) would establish an EPR program requiring producers of packaging and paper products to join a PRO or implement their own approved plan and pay a surcharge toward recycling programs. The Act would also establish aggressive targets for recycling packaging products and create an Office of Plastics and Packaging Management to enforce these requirements.
North Carolina: The Break Free From Plastic & Forever Chemicals Act (HB882) would establish an EPR program for certain packaging and plastics products, including creating a PRO, requiring manufacturers and distributors of packaged products to join that PRO, and enforcing the program through participation fees, reporting requirements, and potential penalties.
These proposals, if adopted, would add further complexity to the patchwork of state EPR laws and impose additional regulatory costs on covered companies.
Trade Associations Have Begun to Sue over EPR Packaging Laws
As states begin to enforce EPR packaging laws, some businesses and trade associations have launched legal challenges. For example, a lawsuit brought by the National Association of Wholesaler-Distributors challenging Oregon’s Plastic Pollution and Recycling Act presents a number of legal theories that, if successful, could serve as templates for challenges to other EPR laws.[7] In February 2026, the court granted a preliminary injunction barring enforcement of the Act against the plaintiffs while the case proceeds to a trial scheduled for July 2026. The plaintiff’s theories include:
Dormant Commerce Clause: The U.S. Supreme Court has inferred from the Constitution’s Commerce Clause that states cannot unduly burden interstate commerce.[8] Under this principle (sometimes called the Dormant Commerce Clause), state laws that facially discriminate against out-of-state commerce are almost all invalid, and formally neutral laws with that effect also may be invalid, depending on the extent of the burden they impose on interstate commerce. For example, the Court in City of Philadelphia v. New Jersey held invalid a New Jersey law purporting to bar the importation of waste from other states as an attempt to “isolate [New Jersey] in the stream of interstate commerce from a problem shared by all.”[9] To the extent EPR packaging laws disproportionately burden out-of-state commerce, they too could be subject to challenge under the Dormant Commerce Clause.
That said, prior attempts to challenge other kinds of EPR laws on dormant-commerce-clause grounds have come up short. For example, the 2018 Second Circuit decision in VIZIO, Inc. v. Klee affirmed the dismissal of a manufacturer’s challenge to a Connecticut law requiring financial contributions to a television recycling program.[10] The court reasoned that the law “merely affects pricing decisions,” as opposed to out-of-state conduct, and the manufacturer failed to allege that out-of-state manufacturers faced significantly greater burdens than in-state manufacturers.[11]
Unconstitutional Conditions: In certain contexts, “the government may not deny a benefit to a person because he exercises a constitutional right.”[12] Yet EPR packaging laws require businesses manufacturing, distributing, or selling packaged goods to join PROs in order to continue operating, which has downsides: they must pay fees and may be required to accept other terms, including not contracting with other businesses and waiving the right to a jury trial. It could therefore be argued that EPR packaging laws violate rules barring states from coercing businesses to give up their constitutional rights.
Due Process: States must provide fair, nonarbitrary procedures before depriving regulated entities of their liberty or property.[13] In the 1994 case Honda Motor Co. v. Oberg, for instance, the Supreme Court rejected Oregon’s attempt to bar judicial review of punitive damages awards, holding that the bar facilitated “arbitrary” penalties without adequate procedural safeguards.[14] In the EPR context, delegating fee-setting and enforcement responsibilities to PROs raises questions about the extent to which regulated businesses will receive a full and fair opportunity to challenge those fees. Some PROs also require members to engage in binding arbitration to resolve disputes, raising further questions about the extent to which members will be entitled to traditional procedural safeguards.
Private Nondelegation: The private nondelegation doctrine limits the government’s authority to hand core regulatory power over to private actors.[15] Similar principles contained in state constitutions could place barriers on delegating authority over recycling to private entities. That poses a potential problem for EPR packaging laws conferring substantial regulatory authority—including defining schedules of covered materials, setting and collecting fees, and making value judgments about the most suitable forms of packaging—on private PROs.
In granting a preliminary injunction, the court found that “serious questions go to the merits” of the Dormant Commerce Clause and the Due Process claims. The court declined to rule on the likelihood of success on the merits, applying a lower threshold that the Ninth Circuit uses in certain cases. Importantly, the injunction is limited to National Association of Wholesaler-Distributors and its members. Nonetheless, the ruling signals potential vulnerabilities in the PRO model that Oregon and other states have adopted.
In addition to the above theories being advanced in the Oregon case, some states believe that PRO coordination of recycling practices could raise antitrust concerns. Late last year, the attorneys general of Florida, Iowa, Nebraska, Montana, and Texas sent letters to environmental organizations questioning whether their efforts to increase collaboration among producers violates antitrust law.[16] Several months later, those attorneys general were joined by four others in sending similar letters to more than eighty companies that purportedly are PRO members.[17] To the extent states believe the collaborative efforts of environmental groups involve the adoption of coordinated rules designed to advance ideological objectives in lieu of consumer welfare, the letters raise the prospect of potential state enforcement actions against PROs or their members. Private antitrust challenges are also possible, at least to the extent that PRO rules do not reflect “clearly articulated state policy” and state agencies do not “actively supervise” the implementation of such rules.[18]
Businesses Should Act Now to Prepare for Today’s EPR Packaging Regimes
With Oregon already enforcing EPR packaging rules and other states close behind, EPR compliance is a near‑term operational requirement and a long-term strategic imperative for companies that place covered packaging on the market, including brand owners, licensees, importers, retailers, and distributors that are deemed “producers.” Understanding the legal landscape and proactively navigating EPR regimes can preserve market access and position companies to more effectively compete.
Among other measures, regulated entities should confirm “producer” status by state and map where covered materials are manufactured, distributed, and sold; register with applicable PROs; create internal processes to collect jurisdiction-specific data on packaging attributes, material weight, recycled content, and reuse performance; and monitor legislation, rulemaking, and litigation that may affect the scope of state EPR requirements. Beyond compliance, EPR has direct business implications for pricing, product and packaging design, and supply chain governance: fee schedules and eco‑modulation can shift unit economics, and reporting obligations necessitate investments in data systems and board‑level oversight.
Early alignment of legal, sustainability, procurement, and finance functions can reduce compliance risk, lower total cost, and capture commercial advantage with more recyclable, lower‑fee packaging.
These calculations assume that Americans consume about 82.2 million tons of packaging per year and that Oregon consumers account for about 1.25% of that total, corresponding to the state’s share of the nation’s population. ↑
Amendments to the Delaware Limited Liability Company Act, 6 Del. C. § 18-101 et seq. (the “LLC Act”), and the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. § 17-101 et seq. (the “LP Act”), have been proposed for adoption by the Delaware General Assembly in 2026. The proposed amendments to the LLC Act and LP Act include adding a definition of “certificate of registered series,” confirming that an operating agreement may establish or provide for the establishment of one or more series that are not protected series or registered series, and confirming the ability of limited partnerships and limited liability companies with series to engage in mergers, conversions, or consolidations. Additional amendments have been proposed to the LP Act regarding amendments to certificates of limited partnership and certificates of registered series, requirements for execution of certificates of amendment and certificates of correction, liability for materially false statements in a certificate authorized to be filed by the LP Act, and statements required to be included in the application for registration for foreign limited partnerships.
If adopted, the amendments to the LLC Act and LP Act are proposed to take effect on August 1, 2026.
Definition of Certificate of Registered Series
Amendments to Section 18-101(2) of the LLC Act and Section 17-101(1) of the LP Act have been proposed to add a definition of “certificate of registered series,” in light of multiple statutory references to this term. Both Delaware limited liability companies and Delaware limited partnerships can establish a registered series of such company or limited partnership. The process of establishing a registered series includes filing a certificate of registered series with the Delaware Secretary of State. The proposed definition provides that a “certificate of registered series” means the certificate and any amendments thereto referred to in Section 18-218 of the LLC Act and Section 17-221 of the LP Act.
Confirming Flexibility of Limited Liability Companies and Limited Partnerships with Series
Amendments to Section 18-218(a) of the LLC Act and Section 17-218(a) of the LP Act have been proposed to confirm that (i) a limited liability company agreement or partnership agreement may establish or provide for the establishment of one or more series that are not protected series or registered series, and (ii) the limitation on merger, conversion, and consolidation of a series in Section 18-215(a) of the LLC Act and Section 17-218(a) of the LP Act does not restrict a limited liability company or limited partnership with series from merging, converting, or consolidating pursuant to any section of the LLC Act or LP Act, as applicable, or as otherwise permitted by law.
Amendments of Certificates of Limited Partnership and Certificates of Registered Series
Amendments to Section 17-202 of the LP Act have been proposed to allow a limited amendment of a certificate of limited partnership to be made by a person who has ceased to be a general partner of the limited partnership but is shown on the certificate of limited partnership as a general partner. The proposed amendments, in the form of a new Section 17-202(d), would require the certificate of amendment to state only (i) the name of the limited partnership and (ii) that the person has ceased to be a general partner of the limited partnership. Because the amendment has the effect of amending the information required to be set forth in a certificate of limited partnership by Section 17-201(a)(3) of the LP Act, it also constitutes notice that the person has ceased to be a general partner. The proposed amendments also amend Section 17-202(c)(2) of the LP Act to clarify that, unless a certificate of amendment has already been filed pursuant to new Section 17-202(d) of the LP Act, Section 17-202(c)(2) applies any time a person has ceased to be a general partner of a limited partnership and not just upon a withdrawal of a general partner.
Similar amendments have been proposed to Section 17-221(d) of the LP Act with respect to the limited amendment of a certificate of registered series to be made by a person who has ceased to be a general partner associated with the registered series but is shown on the certificate of registered series as a general partner associated with the registered series. The proposed amendments, in the form of a new Section 17-221(d)(6), would require the certificate of amendment to state only (i) the name of the limited partnership, (ii) the name of the registered series, and (iii) that the person has ceased to be a general partner associated with the registered series. Because the amendment has the effect of amending the information required to be set forth in a certificate of registered series by Section 17-221(d) of the LP Act, it also constitutes notice that the person has ceased to be a general partner associated with the registered series. The proposed amendments also amend Section 17-221(d)(5)b. of the LP Act to clarify that, unless a certificate of amendment has already been filed pursuant to new Section 17-221(d)(6) of the LP Act, Section 17-221(d)(5)b. applies any time a person has ceased to be a general partner associated with a registered series and not just upon a withdrawal of a general partner associated with a registered series. The proposed amendments also make conforming changes to certain provisions of Section 17-221 of the LP Act by changing the word “of” to the words “associated with,” as used elsewhere in the LP Act. These changes are intended to provide a consistent approach when referring to the relationship between a general partner and a registered series of a Delaware limited partnership.
Execution of Certificates of Amendment and Certificates of Correction
Amendments to Section 17-204(a)(2) of the LP Act, which addresses execution of certificates of amendment and certificates of correction, have been proposed to clarify that the former general partner of a limited partnership that has filed a certificate of amendment of a certificate of limited partnership under Section 17-202 of the LP Act must execute a certificate of amendment authorized by new Section 17-202(d).
An additional amendment has been proposed to Section 17-204(a)(9) of the LP Act, which addresses the execution of certificates of amendment of certificates of registered series and certificates of correction of certificates of registered series. Due to the proposed amendments to Section 17-221(d) of the LP Act that allow a person who was formerly a general partner associated with a registered series to file a certificate of amendment of a certificate of registered series in certain circumstances, the proposed amendment to Section 17-204(a)(9) of the LP Act clarifies that the former general partner must execute a certificate of amendment authorized by new Section 17-221(d)(6) of the LP Act or any certificate of correction that is correcting a certificate of amendment filed pursuant to new Section 17-221(d)(6) of the LP Act.
Liability for False Statements in Certificates
The proposed amendments to Section 17-207 of the LP Act, which addresses liability for materially false statements in any certificate authorized to be filed by the LP Act, clarify that Section 17-207 of the LP Act applies to any person who executed a certificate pursuant to subchapter IX of the LP Act, whether or not such person is a general partner of the foreign limited partnership. Subchapter IX of the LP Act was previously amended to clarify that certain documents filed in the office of the secretary of state with respect to a foreign limited partnership may be executed by any person authorized to execute the document on behalf of the foreign limited partnership (which may or may not be a general partner of the foreign limited partnership).
Required Statement in Application for Registration of Foreign Limited Partnerships
The proposed amendment to Section 17-902(1) of the LP Act provides that the statement required to be included in an application for registration as a foreign limited partnership shall be made by the person who signs the application (whether or not such person is a general partner of the foreign limited partnership).
Between the end of World War II and the first term of President Donald Trump, the average tariff rate on foreign goods entering U.S. commerce hovered around 2 percent. According to geopolitical strategist Peter Zeihan, the United States maintained low tariff barriers as part of a deliberate—and ultimately successful—Cold War strategy of “bribing up” a global alliance of countries willing to contain the Communist threat posed by the Soviet Union.[1] When the Cold War ended in 1989, however, so did the national security justification for allowing easy, low-tariff access to the American market, according to Zeihan.[2]
Whether or not one agrees with Zeihan’s thesis, tariff burdens that once operated as marginal costs for American businesses have increased dramatically since Trump’s second term began. The average U.S. tariff rose from 2.2 percent in January 2025 to 10.91 percent in October, an increase of nearly 394 percent in under a year.[3] In some sectors, the average tariff burden is even more pronounced.[4] Steel and aluminum imports now face average duties of 39.8 percent, while automotive goods are subject to tariffs of about 21 percent.[5] In antidumping cases brought by the U.S. Department of Commerce—which impose additional duties on imported goods found to be sold in the United States at unfairly low, “dumped” prices that injure U.S. industries— duty rates reaching well into triple digits are not uncommon. As tariff rates have leaped upward, costs that were once a rounding error have, for many companies, become a major factor influencing pricing, sourcing, supply‑chain structuring, and margin planning.
In this context, whether one’s competitors pay their fair share of tariffs becomes a significant—if not existential—issue for many businesses. After all, if a business is playing by the new tariff rules and their competitors are not, those competitors gain a critical pricing advantage that can cause the business to lose substantial market share and even threaten the company’s financial viability.
This is where the False Claims Act (“FCA”) comes in. The FCA is a federal statute dating back to the Civil War, when price gouging of the U.S. government by military suppliers was epidemic. The FCA allows the federal government to sue parties that knowingly submit false payment claims or otherwise avoid paying monies owed to the government and can also trigger criminal exposure under related federal criminal laws.
A key feature of the FCA is its qui tam mechanism, which grants private individuals (“relators”) the right to file an FCA claim on behalf of the government. If the case succeeds, the relator is rewarded with up to 30 percent of the government’s recovery. The FCA thus effectively deputizes private individuals and companies to help enforce the law. Yet because the Court of International Trade (“CIT”) has exclusive jurisdiction over certain civil actions “commenced by the United States,” for years a threshold procedural question has lingered: in what court may private litigant FCA claims arising from underpayment of duties/tariffs be brought—only the CIT or also federal district courts?
On June 23, 2025, the U.S. Court of Appeals for the Ninth Circuit answered this question, at least for that circuit. In Island Industries v. Sigma Corp.,[6] the court upheld a $26 million judgment in an FCA case for evasion of antidumping duties. In so doing, it also ruled that a relator’s FCA claim based on failure to pay duties may proceed in either federal district court or the CIT. The court reasoned that the CIT’s exclusive jurisdiction provision for customs actions “commenced by the United States” does not bar a private relator from bringing an FCA claim in district court, even if the federal government later intervenes in the private action, as frequently occurs.[7]
Island Industries also clarified that 19 U.S.C § 1592 of the Tariff Act does not displace or supersede the FCA. Instead, the court explained that the Tariff Act and the FCA overlap, so a relator may pursue an FCA claim in district court while U.S. Customs and Border Protection pursues remedies under the Tariff Act in the CIT. Courts evaluating customs-related FCA claims in other jurisdictions have reached similar conclusions.
The decision in Island Industries adds significantly to the toolkit of lawyers representing businesses that suspect their competitors may not be paying their fair share of tariffs and thereby may be gaining a competitive edge. If the Island Industries rationale is widely adopted, it will allow these lawyers to bring relator claims for tariff avoidance against their clients’ competitors in the local district court as opposed to being forced into the CIT with its specialized rules and procedures. Lawyers representing clients who are playing by the new tariff rules should therefore welcome this decision.
This article offers a framework for advising clients on how to identify, assess, and respond to potential FCA issues raised in the customs/tariff context as a relator in a private qui tam action.
It should be noted at the outset that this article does not attempt to address the specific issues raised by so-called whistleblower FCA claims brought against a company by one of its own employees. While the issues arising from an FCA whistleblower lawsuit overlap with many of those treated in this article, such actions also involve topics peculiar to whistleblower claims and so go beyond our scope.
Island Industries’ Road Map for Identifying Duty/Tariff Evasion by Competitors
The Island Industries opinion provides insight for lawyers and outlines how a relator can identify potentially unlawful duty-avoidance practices on the part of business competitors using information that market participants already possess or can easily and lawfully obtain.
In Island Industries, the relator began with a discovery that the competitor’s pricing appeared inconsistent with what antidumping duties would ordinarily require for welded outlets, the product at issue.[8] The relator then compared the competitor’s publicly available marketing descriptions and the observable physical features of the products to the duty requirements for welded outlets under the applicable antidumping orders.[9] This comparison indicated that the products’ advertised characteristics matched items subject to antidumping duties, even though the competitor’s customs filings classified them as duty-free.[10] In other words, when the relator compared the readily accessible sources with the competitor’s customs filings, the relator uncovered discrepancies that suggested the duty status declared at entry did not match how the products were being marketed in the industry.[11]
The relator also noted that the competitor publicly described the goods as welded outlets yet declared them as steel couplings on its customs forms, a classification that avoided antidumping duties.[12] This example illustrates how competitors’ product descriptions on the internet and pricing patterns—combined with scope rulings, binding letter rulings, and the Harmonized Tariff Schedule—can be valuable sources for determining whether one’s competitors are playing by the tariff rules.
It is important to note, however, that public sources alone may not be sufficient to sustain a qui tam claim where the core allegations have already been aired publicly.[13] Under the FCA’s public disclosure bar, 31 U.S.C. § 3730(e)(4)(A), dismissal may be required (unless opposed by the government) if “substantially the same allegations or transactions” were publicly disclosed in a qualifying federal hearing, a federal report/audit/investigation, or the news media.
Nevertheless, IslandIndustries demonstrates how publicly available market facts can signal duty evasion by a competitor and so produce a substantial recovery. Indeed, the relator’s investigation in IslandIndustries led to a $26 million judgment against the defendant, of which the relator received more than $2.7 million.
Step by Step: How to Tell If Your Client’s Competitors Are Abiding by the New Tariff Landscape
Step 1: Begin with Industry Expertise and Market Knowledge
The strongest initial indicator that something may be amiss is often a business’s own understanding of its products, including its supply chain and tariff obligations. When a competitor’s pricing or other market terms diverge in ways that cannot be justified by volume, logistics, or commercial factors, that discrepancy may warrant closer scrutiny. Certain unfair practices, when taken, can first manifest as unusual or unexplained pricing advantages. Some of the most common include: (1) misclassification, where a product is assigned an incorrect—often lower‑duty—tariff category under the Harmonized Tariff Schedule (“HTS”), the system the United States uses to classify imported goods; (2) implausible country‑of‑origin claims, where goods with a true origin in a higher‑tariff jurisdiction are declared as originating in a lower‑tariff country; and (3) undervaluation, where the declared customs value is set below the actual price paid or payable, reducing the duty base and artificially lowering tariff‑related costs.
Step 2: Identify Red Flags
Certain patterns surface repeatedly in customs‑related FCA cases. These red flags can include (1) a competitor classifying its product under an awkward or clearly inappropriate HTS code, which can lead to undeservedly low duty rates—for example, when an importer declares precision‑machined stainless‑steel valves under an HTS code intended for unprocessed steel billets, potentially bypassing the higher duties that would otherwise apply to finished industrial equipment; (2) origin declarations that do not align with known manufacturing presence, meaning the declared country‑of‑origin does not match where the product’s meaningful manufacturing actually occurs, because customs generally determines origin based on the location of the product’s substantial transformation—not where the goods were merely shipped, packaged, or lightly finished; or (3) valuation practices that seem inconsistent with industry standards.
Step 3: Collect and Preserve Reliable, Lawful Evidence
If concerns persist, the next step is gathering supporting documentation. For example, one can draw from trade data platforms (including manifest‑based shipment data), product catalogs, pricing histories, scope rulings, and (as in Island Industries) marketing materials to test whether a competitor’s public product representations and observable product characteristics are consistent with the duty treatment that the importer appears to be claiming. In some cases, import‑related information may only become available later in the process through government information requests or subpoenas, Freedom of Information Act responses, or litigation discovery.
Step 4: Evaluate Whether Key FCA Elements May Be Implicated
Once irregularities are identified, it is essential to understand whether the legal elements that underpin a customs‑related FCA theory might be present. Lawyers should look for:
A plausible obligation to pay duties on a given product
Indications that the competitor’s conduct was not an error and instead was a knowing or at least reckless effort to avoid duties/tariffs
Evidence that any false statements made by the competitor would have affected duty assessment
Patterns across multiple entries, repeated misclassifications, or persistent valuation discrepancies often indicate more than one‑off clerical errors.
Step 5: Organize a Coherent Factual Narrative
As Island Industries demonstrates, a strong submission—whether to internal compliance teams, outside counsel, or when seeking the government’s intervention in a qui tam action—depends on presenting a clear account of what the competitor is doing and why it matters. Companies should thus assemble a narrative supported by documentation, trade data, scope or letter rulings, and detailed comparisons between commercial representations and importer filings, if these are available. The relator in Island Industries did precisely this by aligning publicly observable facts with the duty framework and highlighting where the two could not be reconciled.
Step 6: Engage Counsel and Consider Appropriate Next Steps
If concerns remain after an internal assessment, businesses should consult counsel experienced in customs and FCA matters. Counsel can help evaluate potential exposure, assess whether additional information is needed, and determine whether intervention by the government in a private FCA action is likely. Timing can also be important, particularly under the FCA’s first‑to‑file rule, which bars later suits alleging the same facts as a pending FCA action.[14] Thus, early legal engagement helps ensure that next steps are taken thoughtfully and in compliance with applicable confidentiality rules.
Conclusion
Island Industries demonstrates how the qui tam, that is, private litigant provisions of the FCA can level the playing field if tariff-dodging shenanigans are giving an unfair advantage to your clients’ business competitors. This Ninth Circuit decision significantly expanded lawyers’ forum selection options for bringing private FCA claims to include the local district court and not just the CIT. Accordingly, if your business client is seeking to address unfair tariff avoidance by its competitors, the practical framework offered in this article can help you navigate the FCA’s complex private litigant provisions in order to protect your clients’ interests.
Snell & Wilmer L.L.P. One East Washington Street, Suite 2700 Phoenix, AZ 85004-2556 (602) 382-6939 [email protected] www.swlaw.com
§ 1. Tribal Litigation & the Third Sovereign
We have been writing this annual update of cases relevant to tribal litigation for many years. Recognizing that the average practitioner consulting this volume may not have much experience with federal Indian law, we have endeavored to provide historical context and citation to most relevant circuit and even district court cases in every volume. To target primarily those cases decided within the last year, this chapter focuses on cases decided between October 1, 2024, and October 1, 2025. The chapter begins with a Supreme Court overview and then is structured around sovereigns—Indian Tribes, the United States, and the fifty sister States.
Retired Supreme Court Justice Sandra Day O’Connor has aptly referred to tribal governments as the “third sovereign” within the United States.[4] Much like federal and state governments, tribal governments are elaborate entities often consisting of executive, legislative, and judicial branches.[5] Tribes are typically governed pursuant to a federal treaty, presidential executive order, tribal constitution and bylaws, and/or tribal code of laws, implemented by an executive authority such as a tribal chairperson, governor, chief, or president (similar to the United States’ president or a state’s governor) and a tribal council or senate (the legislative body). Tribal courts adjudicate most matters arising from their reservations or under tribal law.[6]
Indian tribes are “distinct, independent political communities, retaining their original natural rights” in matters of local self-government.[7] Thus, state laws generally “have no force” in Indian Country.[8] While in the eyes of federal and state government, tribes no longer possess “the full attributes of sovereignty,” they remain a “separate people, with the power of regulating their internal and social relations.”[9]
This chapter explores the repose of tribal sovereignty, federal plenary oversight of that sovereignty, and perennial state encroachment upon that sovereignty. Federal trial and appellate courts issue more than 650 written opinions in cases dealing with Indian law each year,[10] and settle, dismiss, or resolve without opinion countless others. This chapter introduces those cases most relevant to a business litigation focused audience.
§ 2. Indian Law & the Supreme Court
§ 2.1. The 2024–2025 Term
The U.S. Supreme Court hears an average of between one and three new Indian law cases every year.[11] During the 2024–2025 term, the Supreme Court did not decide any Indian law cases.
§ 2.2. Preview of the 2025–2026 Term
As of November 13, 2025, there are five petitions for certiorari pending before the Supreme Court on cases involving Indian law. If any new cases are granted and decided, they will be included in next year’s volume.
§ 3. The Tribal Sovereign
§ 3.1. Tribal Courts
More than half of the 574 federally recognized tribes have created their own court systems and promulgated extensive court rules and procedures to govern criminal and civil matters involving their members, businesses, and activity conducted on their lands. Notwithstanding federal restrictions on tribal adjudicatory power, tribes have extensive judicial authority. As the complexity of life on reservations has increased, so has Congress’ willingness to enhance and aid tribal courts’ adjudicatory responsibilities.
While tribal courts are similar in structure to other courts in the United States, the approximately 400 Indian courts and justice systems currently functioning throughout the country are unique in many significant ways.[12] It cannot be overemphasized that every tribal court is different and distinct from the next.[13] For example, the qualifications of tribal court judges vary widely depending on the court.[14] Some tribes require tribal judges to be members of the tribe and to possess law degrees, while others do not.[15] Some tribal courts meet regularly and have a fairly typical court calendar, while others may meet on Saturdays or only a couple days a month in order to meet the more limited needs of a court system serving a smaller population or a particularly isolated tribal community.
Tribal courts can have their own admissions rules, and counsel should not assume that because they are licensed in the state where the tribal court is located that they can automatically appear in tribal court. While many tribes allow members of the state bar to join the tribal bar, often for a nominal annual fee, the requirements vary from one tribe to another. For example, the Navajo Nation has its own bar exam that tests knowledge of Navajo tribal law as well as other requirements.[16]
Counsel should keep this uniqueness in mind when addressing a tribal court orally or in writing. If counsel has never appeared before a particular tribal court, it would be wise to solicit common court practices from persons who regularly appear before the court.
Tribal court jurisdiction depends largely on: (1) whether the defendant is a tribal member[17]; and (2) whether the dispute occurred in Indian Country,[18] particularly lands held in trust by the United States for the use and benefit of a tribe or tribal member or fee lands within the boundaries of an Indian reservation.[19] These two highly complex issues should be analyzed first in any tribal business dispute.
In the context of a tribe’s civil authority, the important distinction is between tribal members and non-members (whether or not the non-member is an Indian). Generally, tribal courts have jurisdiction over a civil suit by any party, member, or non-member against a tribal member Indian defendant for a claim arising on the reservation.[20] Even in tribal court, claims against the tribe itself require a waiver of tribal immunity.[21] Indian tribes also generally have regulatory authority over tribal member and non-member activities on Indian land.[22]
In the “path-making” decision of Montana v. United States,[23] however, the U.S. Supreme Court held that a tribal court cannot generally assert jurisdiction over a non-tribal member when the subject matter of the dispute occurs on land owned in fee by a non-member, explaining that “exercise of tribal power beyond what is necessary to protect tribal self-government or to control internal relations is inconsistent with the dependent status of tribes, and so cannot survive without express Congressional delegation.”[24] To help lower courts determine when the assertion of tribal power is necessary, the Court articulated two exceptions: (1) a tribe may have civil authority over the activities of non-tribal persons who enter into consensual relations with the tribe or its members via a commercial dealing, contract, lease, or other arrangement; or (2) the tribe has civil authority over non-Indians when their actions threaten or have a direct effect upon the “political integrity, the economic security, or the health or welfare of the tribe.”[25]
These exceptions are “limited,” and the burden rests with the tribe to establish the exception’s applicability.[26] The first exception specifically applies to the “activities of non-members,” and the second exception is extremely difficult to prove, as it must “imperil the subsistence of the tribal community.”[27] These exceptions have become known as the “Montana rule.”
There are new opinions issued every year on the limits of tribal court jurisdiction that are built upon Montana and its exceptions. This section highlights those most relevant.
Tix v. Tix, 758 F.Supp.3d 960 (D. Minn. 2024).
In Tix v. Tix, the court held that a tribal court had authority, under Montana’s first exception, to adjudicate a marriage dissolution proceeding where one of the parties to the marriage is a nonmember who does not reside on tribal land. In this case, the plaintiff, Kristin Tix, married Robert Tix, a member of the Prairie Island Mdewakanton Dakota Indian Community (“PIIC”). They had three children who were each enrolled members of the PIIC. During their marriage, the family did not reside on the reservation, instead residing in Edina, Minnesota. However, neither spouse was employed during the marriage. Rather, they supported themselves through Robert’s per capita payments from the PIIC. Additionally, the plaintiff, defendant and the children each received health and dental insurance through the PIIC.
The couple eventually decided that they would divorce. In February of 2022 Kristin filed for dissolution of their marriage in Hennepin County District Court. Simultaneously, Robert filed for dissolution of the marriage in the Court of the Prairie Island Mdewakanton Dakota Community (the “Tribal Court”). Despite numerous efforts by Kristin to proceed in the Hennepin County Court, the case was ultimately deferred until the Tribal Court reached its ultimate decision. The Tribal Court ultimately issued its Order for Judgment (the “Order”). The Order denied Kristin any spousal maintenance, as the PIIC Judicial Code prohibited the Tribal Court from considering Robert’s per capita payments when establishing any form of maintenance. However, the Order further provided for child support to be paid by Robert to Kristin and divided the parenting time between the two of them. While Kristin appealed the Order, she was ultimately unsuccessful.
Dissatisfied with her lack of success on appeal from the Order, Kristin filed the action at the center of this case in the Federal District Court for the District of Minnesota (the “District Court”). Her most relevant argument on appeal was that federal law, established in the Montana decision, prohibits the Tribal Court from exercising jurisdiction over a nonmember in circumstances such as these. The District Court disagreed, relying on Montana’s first exception. As provided in Montana, while generally a tribe may not regulate nonmembers on non-Indian fee land, “a tribe may regulate . . . the activities of nonmembers who enter consensual relationships with the tribe or its members, through commercial dealing, contracts, leases, or other arrangements.” Montana v. United States, 450 U.S. 544, 565 (1981). The District Court found that a “consensual relationship” was in fact entered into by Kristin for purposes of Montana. While Kristin argued that this off-reservation act should not fall under the first Montana exception, the District Court disagreed. The District Court considered not only the act of marrying a PIIC member, but also the benefits that her and her children received from the PIIC. These factors made clear, to the District Court, that Kristin not only entered into a consensual relationship with a PIIC member, but also that she could reasonably anticipate that the PIIC could exercise control over the marriage dissolution.
The plaintiff relied on two cases to support her argument that the Tribal Court could not have jurisdiction over her marriage dissolution dispute. First, she referenced Sanders v. Robinson, 864 F.2d 630 (9th Cir. 1988). Sanders permitted a tribal court jurisdiction over a marriage dissolution dispute when the nonmember spouse resided on the reservation. The plaintiff argued that Sanders suggests that if the nonmember spouse did not reside on the reservation, then the tribal court jurisdiction would be improper. The District Court found this argument unpersuasive, because Sanders simply did not explore the factual scenario present in this case. Sanders dealt only with the limits of tribal courts to exercise authority over nonmembers on reservation land. Next, the plaintiff cited Hornell Brewing Co. v. Rosebud Sioux Tribal Court, 133 F.3d 1087 (8th Cir. 1998) for the proposition that Montana does not allow tribal courts to exercise jurisdiction over nonmembers for conduct occurring outside of the reservation. However, the District Court quickly dismissed this argument, as Hornell Brewing did not even involve the first Montana exception, but was rather only concerned with the second exception.
The District Court cited to only one case which supported tribal court jurisdiction over a nonmember who did not reside on the reservation, this being Turpen v. Muckleshoot Tribal Court, No. C22-0496-JCC, 2023 WL 4492250 (W.D. Wash. July 12, 2023). In Turpen, the court permitted tribal court jurisdiction over the marriage dissolution dispute between a member and nonmember of the tribe. This couple lived on the reservation prior to their marriage but resided off the reservation during the entirety of their marriage.
Based on this consensual relationship, the District Court ultimately decided that the Tribal Court’s jurisdiction over this marriage dissolution was proper based on Montana’s first exception and dismissed the plaintiff’s complaint with prejudice.
In Lexington Ins. Co. v. Mueller, the court found that Montana’s first exception permitted a tribal court to retain jurisdiction over a dispute between a nonmember owned insurance company and a tribe. In this case, Lexington Insurance Company (“Lexington”) entered into agreements with businesses run by the Cabazon Band of Cahuilla Indians (the “Cabazon Band”), a federally recognized Indian tribe. During the Covid-19 pandemic, the Cabazon Band temporarily closed their businesses. This led the Cabazon Band to submit insurance claims for these losses. When Lexington denied coverage, the Cabazon Band sued Lexington in the Cabazon Reservation Court (the “Tribal Court”). Lexington, attempting to avoid litigating in the Tribal Court, sued the Reservation Court judges in federal court, seeking injunctive relief. The district court granted in part and denied in part the defendants’ motion to dismiss and granted the defendants’ summary judgment motion.
On appeal, the court addressed whether jurisdiction would be proper in the Tribal Court. Relying on the Ninth Circuit case Lexington Ins. Co. v. Smith, 94 F.4th 870 (9th Cir. 2024), the court found that the Tribal Court does have jurisdiction to hear this dispute under the first Montana exception. The business relationship with the Cabazon Band satisfies the requirements under Montana’s first exception as the relationship is a commercial dealing directly with the Cabazon Band. This case reaffirms Lexington Ins. Co. v. Smith, as the facts of both cases were said to be indistinguishable from one another.
§ 3.2. Exhaustion of Tribal Court Review
The doctrine of exhaustion of tribal remedies reflects the ongoing tension between tribal and federal courts. If a tribal court claims jurisdiction over a non-Indian party to a civil proceeding, the party usually[28] is required to exhaust all options in the tribal court prior to challenging tribal jurisdiction in federal district court.[29] If tribal options are not exhausted prior to bringing suit in federal court, the federal court will likely dismiss[30] or stay[31] the case.
Ultimately, the question of whether a tribal court has jurisdiction over a nontribal party is one of federal law, giving rise to federal questions of subject matter jurisdiction.[32] Thus, non-Indian parties can challenge the tribal court’s jurisdiction in federal court.[33] Pursuant to this doctrine, a federal court will not hear a matter arising on tribal lands until the tribal court has determined the scope of its own jurisdiction and entered a final ruling.[34] Ordinarily, a federal court should abstain from hearing the matter “until after the tribal court has had a full opportunity to determine its own jurisdiction.”[35] And again, notwithstanding a provision that appears to vest jurisdiction with an arbitrator, several federal courts have ruled that a tribal court should be “given the first opportunity to address [its] jurisdiction and explain the basis (or lack thereof) to the parties.”[36]
After the tribal court has ruled on the merits of the case[37] and all appellate options have been exhausted,[38] the non-tribal party can file suit in federal court, whereby the question of tribal jurisdiction is reviewed under a de novo standard.[39] The federal court may look to the tribal court’s jurisdictional determination for guidance; however, that determination is not binding.[40] If the federal court affirms the tribal court ruling, the nontribal party may not relitigate issues already determined on the merits by the tribal court.[41]
There are several exceptions to the exhaustion doctrine. First, federal courts are not required to defer to tribal courts when an assertion of tribal jurisdiction is “motivated by a desire to harass or is conducted in bad faith . . . or where the action is patently violative of express jurisdictional prohibitions, or where exhaustion would be futile because of the lack of an adequate opportunity to challenge the court’s jurisdiction.”[42] Second, when “it is plain that no federal grant provides for tribal governance of non-members’ conduct on land covered by Montana’s main rule,” exhaustion “would serve no purpose other than delay.”[43] Third, where the primary issue involves an exclusively federal question, exhaustion of tribal remedies may not be mandated.[44]
Because litigation is expensive, the question of whether the defendant is required to exhaust their tribal court remedies before challenging the jurisdiction of the tribal court is regularly litigated.[45]
Plaintiff filed a writ of habeas corpus under the Indian Civil Rights Act of 1968 (“ICRA”) against several members of the Cayuga Nation Council in their official capacities. He alleged that the Respondents banished him from the reservation and seized his smoke shop. The Plaintiff had filed multiple actions in tribal, state, and federal court prior to the suit at issue. The Respondents motioned the District Court to dismiss for lack of subject matter jurisdiction.
The Respondents moved to dismiss the Plaintiff’s claims because the banishment was not permanent and thus did not fall under the ICRA, the Plaintiff failed to exhaust his tribal court remedies, and the Plaintiff failed to state a claim of denial of due process. The Respondents raised failure to exhaust tribal remedies because although the Plaintiff had challenged the banishment in tribal court, he raised new arguments to the District Court that had not been previously raised to the tribal court.
In 2023, the Plaintiff filed a writ of habeas corpus in tribal court alleging a “deprivation of liberty without due process of law.” The tribal court denied his petition, and he appealed to the Cayuga Nation’s Tribal Appellate Court, who affirmed the lower court’s denial. The Plaintiff did not deny that he made additional argument to the District Court, and he argued that the “tribal exhaustion principles require[d] only that he exhaust[ed] ‘jurisdictional arguments’ and that his filing of the Nation Court petition satisfied this requirement.”
The District Court determined that Plaintiff’s new arguments that the Tribal Court lacked subject matter jurisdiction and that the tribal court judges lacked partiality were subject to the exhaustion requirement. The Plaintiff argued he fell into the first and third exceptions to the tribal exhaustion doctrine—“[1] where an assertion of tribal jurisdiction is motivated by a desire to harass or is conducted in bad faith . . . or [3] where exhaustion would be futile because of the lack of an adequate opportunity to challenge the court’s jurisdiction.” The District Court held that the Plaintiff’s arguments for an exception concerned “subsequent orders that [were] irrelevant to the banishment claim.”
The Court then dismissed the banishment claims premised on the tribal court’s jurisdiction and impartiality due to failure to exhaust tribal remedies. However, the District Court allowed the claims premised on “violations of due process and the contention that the Banishment Ordinance is a bill of attainder or ex post facto law” to proceed.
Temple v. Mercier, 127 F.4th 709 (8th Cir. 2025).
The Plaintiff was a Native American cattle rancher and member of the Oglala Sioux tribe who challenged the reallocation of tribal grazing permits after he was denied due to exceeding the number of cattle. The Plaintiff filed appeals to the Board of Indian Appeals (“BIA”) and the Interior Board of Indian Appeals (“IBIA”) but was unsuccessful with the BIA and voluntarily dismissed the IBIA appeal. Plaintiff filed another suit against the grazing permit allocation committee in tribal court, and the tribal court dismissed, but the Plaintiff never appealed to the tribal supreme court.
Over two years, the BIA found hundreds of Plaintiff’s cattle grazing impermissibly. After multiple warnings, the BIA impounded Plaintiff’s cattle.
Plaintiff filed in the District of South Dakota in August of 2024 seeking a temporary restraining order against the BIA for impounding his cattle, but the district court denied and dismissed the claim, stating that Plaintiff must exhaust his tribal court remedies prior to seeking relief from the district court. Plaintiff appealed, and while the Court of Appeals dismissed several claims, it determined that exhaustion of tribal remedies was not required for Plaintiff’s surviving due process claim.
On appeal, Plaintiff argued that the district court erred in dismissing his permit allocation claim for failure to exhaust tribal remedies. The Court held that because the grazing issues were “tribal-related activities on reservation land,” the Plaintiff was required to fully exhaust his tribal court remedies to allow the tribal court the opportunity to rule on the tribal law issue. The Court of Appeals affirmed the district court’s dismissal due to failure to exhaust tribal court remedies.
Schmasow v. Little Shell Tribe of Chippewa of Mont., No. CV 24-41-BLG-SPW-TJC, 2025 WL 345824 (D. Mont. Jan. 30, 2025).
The pro se Plaintiff petitioned the District Court for a writ of habeas corpus and memorandum in support because the Little Shell Tribe of Chippewa Indians of Montana threatened to suspend her from full tribal membership and withhold federal resources if she refused to comply with their code of conduct.
The District Court laid out the Tribal Remedy Exhaustion Doctrine and stated that in order for the court to have jurisdiction, the Plaintiff must have exhausted both “detention and exhaustion.” The court noted that there was no evidence that the Plaintiff had exhausted all her tribal remedies. Because the Plaintiff failed to allege that she had exhausted her tribal court remedies, the Court denied and dismissed the petition with prejudice for lack of jurisdiction.
George v. Colville Confederated Tribes, No. 2:24-CV-00123-SAB, 2025 WL 595161 (E.D. Wash. Feb. 24, 2025).
The Plaintiff sued Colville Confederate Tribes and several of their employees in federal court alleging that they refused to certify her candidacy due to her removal as a member of the Colville Business Counsel. Plaintiff also brought claims of negligence, emotional distress, conspiracy, and breach of the implied covenant of good faith and fair dealing. The Plaintiffs had filed two previous lawsuits in the Colville Tribal Court seeking an injunction, declaratory relief, and money damages. In the first suit, the Colville Court of Appeals held that Colville Business Counsel alone decided whether individuals could remain members of the Counsel. The Colville Tribal Court dismissed her second suit.
In the present action, the Plaintiff attempted to argue that her exhaustion of tribal court remedies provided the District Court with subject matter jurisdiction to hear her claim. However, the District Court rejected her argument and held that the exhaustion of tribal remedies doctrine does not itself allow a plaintiff to assert subject matter jurisdiction. Further, “the mere presence of an Indian tribe as a party does not create a controversy that arises under federal law.”
Vipond v. DeGroat, No. 24-CV-3125, 2025 WL 713312 (D. Minn. Mar. 5, 2025).
The Plaintiff motioned the District Court for a preliminary injunction to enjoin certain activities of the Defendant, a judge on the White Earth Tribal Court. The Plaintiff was a non-tribal member who owned land in fee on the White Earth Reservation (the “Reservation”). He received a permit from the Minnesota Department of Natural Resources (“MNDNR”) to install a high-capacity water pump on his property. While his permit was processing, the Reservation passed a new ordinance that required applicants of high-capacity water pump permits to also have a tribal permit. The Plaintiff never applied for a tribal permit.
Although the Plaintiff had not yet installed the water pump, the White Earth Department of Natural Resources filed suit against him in the White Earth Tribal Court seeking a declaration that the Plaintiff must have a tribal permit to install the water pump and that his pumping would fall under the tribal ordinance.
The Plaintiff participated in these court actions but denied the tribal court’s jurisdiction over him. The lower tribal court entered a preliminary injunction against the Plaintiff but did not discuss jurisdictional issues. The Plaintiff appealed and the tribe’s appellate court remanded the case requiring the lower court to determine jurisdiction. While the lower court was determining the jurisdiction, the Plaintiff filed in District Court.
The Plaintiff sought “a declaration that the tribal court lack[ed] jurisdiction over him and lack[ed] subject matter jurisdiction to hear the tribal court case against him; a declaration that ‘when the State of Minnesota permits water pumping activity from a navigable body of water for use on non-member fee lands, the pumping activity cannot meet the second Montana exception for tribal court jurisdiction over a non-member for activities on fee lands;’ and an injunction against any further proceedings in the tribal court.” The Plaintiff also asked the federal judge to enjoin the tribal judge and the director of White Earth Department of Natural Resources, the Defendant, from “taking further actions to advance the suit in Tribal Court pending a final resolution of Plaintiff’s subject matter jurisdiction objections in this [Federal Court] action.” The Defendant filed a motion to stay the federal litigation until the exhaustion of Plaintiff’s tribal remedies.
While the District Court noted that typically the extent of tribal power does not extend to non-members, it cited to the Montana Exceptions, which allowed a tribe to “[1] regulate, through taxation, licensing, or other means, the activities of nonmembers who enter consensual relationships with the tribe or its members, through commercial dealing, contracts, leases, or other arrangements, [or 2] retain inherent power to exercise civil authority over the conduct of non-Indians on fee lands within its reservation when that conduct threatens or has some direct effect on the political integrity, the economic security, or the health or welfare of the tribe.” The Defendant argued that their jurisdiction over the Plaintiff fell into the second Montana exception.
The District Court first determined the issue of tribal remedy exhaustion. The court listed four exception to exhaustion: “[1] where an assertion of tribal jurisdiction is motivated by a desire to harass or is conducted in bad faith, [2] where the action is patently violative of express jurisdictional prohibitions, [3] where exhaustion would be futile because of the lack of an adequate opportunity to challenge the court’s jurisdiction, [and 4 where] it is ‘plain’ that tribal jurisdiction does not exist and the assertion of tribal jurisdiction is for ‘no purpose other than delay.’” The Eighth Circuit has held that the fourth exception was only applicable if the tribal court jurisdiction was “frivolous or obviously invalid under clearly established law.” The Plaintiff argued that the fourth factor, known as the Strate Factor, was applicable.
The District Court considered the merits of the case in order to determine whether Plaintiff must exhaust all tribal remedies. The court did not determine whether the Plaintiff fell into the second Montana exception. It held that the Plaintiff must exhaust his tribal remedies before seeking relief in the federal court system. However, it clarified that in order for Plaintiff to meet the exhaustion requirements, the tribal court must determine whether it has jurisdiction over Plaintiff and his pumping activities, and Plaintiff must seek and fail to receive a reversal from the tribal appellate court. Accordingly, the District Court denied Plaintiff’s motion and stayed the litigation pending the full exhaustion of tribal court remedies.
Musick v. Prairie Band Potawatomi Nation, No. 24-2299-DDC-TJJ, 2025 WL 1952519 (D. Kan. July 16, 2025).
The Plaintiff was stopped by tribal officers just before driving out of a casino parking lot on the reservation. The officers who pulled him over administered two breathalyzer tests, which the Plaintiff passed. The officers then arrested the Plaintiff and took him to the police station where two more breathalyzer tests were administered. The Plaintiff passed one and failed the second. However, the second breathalyzer machine was faulty, and the officers admitted they knew it was faulty. The Plaintiff filed several claims against the tribal police officials under the Kansas Tort Claims Act for violations of the Fourth and Fourteenth Amendments.
The tribal officers motioned the court to dismiss the claims for several reasons including failure to exhaust tribal remedies. The District Court agreed because it determined that the Plaintiff failed to shoulder his burden of proving he fell into an exception for the exhaustion requirement. Because Plaintiff’s claims were against the Tribe itself and the events from which the claims arose occurred on tribal land, the Plaintiff was required to exhaust his tribal remedies before pursuing relief in the District Court.
The Plaintiff also argued that the Tribe waived the exhaustion requirement and consented to suit in district court. However, the District Court disagreed because the Tribe’s Code “expressly withholds its consent to suit in any forum other than Tribal Court.” The Plaintiff then argued that because tribal officers could exercise the power of Kansas law enforcement, suit in federal court is proper. The court again disagreed because the statute granting this power to tribal officers did not contain a forum-selection clause nor could the State determine the Tribe’s consent to suit.
The Plaintiff also asserted that the Tribal Courts did not have jurisdiction over state law tort claims, but the court rejected the argument because the Plaintiff never asserted a state law claim. Further, even if he had, the state of Kanas had no authority to subject the Tribe to its laws due to the Tribe’s sovereignty. While the Tribe had adopted parts of the Kansas Tort Claims Act, it absorbed those parts of the statue into its own body of law. Thus, such a claim would not require the Tribal Court to adjudicate state law claims, but rather adjudicate tribal law claims adopted from state law.
The District Court did not determine whether the tribal court had jurisdiction, but rather only that the Tribes jurisdiction was “colorable.” The District Court dismissed the case.
§ 3.3. Tribal Sovereignty & Sovereign Immunity
An axiom in Indian law is that Indian tribes are considered domestic sovereigns.[46] Like other sovereigns, tribes enjoy sovereign immunity.[47] As a result, a tribe is subject to suit only where Congress has “unequivocally” authorized the suit or the tribe has “clearly” waived its immunity.[48] The U.S. Supreme Court, in a 2008 decision, pronounced that tribal sovereign immunity “is of a unique limited character.”[49] Unlike the immunity of foreign sovereigns, the immunity enjoyed by sovereign tribal governments is limited in scope and “centers on the land held by the tribe and on tribal members within the reservation.”[50]
Nontribal entities must be aware that, absent a clear and unequivocal tribal immunity waiver, tribes and tribal entities may not be subject to suit should a deal go bad. With regard to contracts, “[t]ribes retain immunity from suits . . . whether those contracts involve governmental or commercial activities and whether they were made on or off a reservation.”[51]
Tribal immunity generally shields tribes from suit for damages and requests for injunctive relief,[52] whether in tribal, state, or federal court.[53] Sovereign immunity has been held to bar claims against the tribe even when the tribe is acting in bad faith.[54]
Tribes enjoy the benefit of a “strong presumption” against a waiver of their sovereign immunity.[55] Moreover, federal courts have made clear that simply participating in litigation does not waive the tribe’s sovereign immunity.[56] Any waiver of tribal sovereign immunity “cannot be implied but must be unequivocally expressed.”[57]
Exactly what contract language constitutes a clear tribal immunity waiver is somewhat unclear.[58] The Supreme Court in C & L Enterprises, Inc. v. Citizen Band Potawatomi Indian Tribe of Oklahoma[59] ruled that the inclusion of an arbitration clause in a standard-form contract constitutes “clear” manifestation of intent to waive sovereign immunity.[60] In C & L Enterprises, the Tribe proposed that the parties use a standard-form contract that contained an arbitration clause and a state choice-of-law clause.[61] Although the contract did not clearly mention “immunity” or “waiver,” the Supreme Court believed the alternative dispute resolution (ADR) language manifested the tribe’s intent to waive immunity.[62]
Finally, waivers of immunity must come from a tribe’s governing body and not from “unapproved acts of tribal officials.”[63] Attorneys must evaluate a tribe’s structural organization to determine precisely which tribal agents have authority to properly waive tribal sovereign immunity or otherwise bind the tribal entity by contract. If attorneys do not have a working knowledge of pertinent tribal documents, they risk leaving their clients without an enforceable deal. Below are summaries from some of the most relevant sovereign immunity cases of the last year.[64]
United Indian Health Servs., Inc./Tribal First v. Workers’ Comp. Appeals Bd., 333 Cal. Rptr. 3d 234 (2025).
In United Indian Health Services, the California Court of Appeal reversed the Workers’ Compensation Appeals Board’s denial for reconsideration of an order by the administrative judge that rejected United Indian Health Services, Inc.’s (“United Indian”) claim of tribal sovereign immunity and held that the organization actually was entitled to sovereign immunity. The court reasoned that United Indian’s “existence, purpose, and operations are central to tribal self-governance,” thus “extending tribal immunity to United Indian would further the self-governance and autonomy policies that such immunity is intended to promote.”
United Indian is a subcontractor of the California Rural Indian Health Board (“Indian Health Board”). Indian Health Board is a tribal organization, which eighteen tribes have authorized to enter into self-determination agreements with the federal government to provide health services for the tribes. After an injury, a medical assistant for United Indian filed a claim through the organization’s tribal workers’ compensation system. After a dispute arose, the employee then filed a claim with California’s workers’ compensation system. United Indian took the position that its tribal immunity meant the state’s workers’ compensation system lacked jurisdiction to adjudicate the claim. In a 2024 decision, the workers’ compensation administrative law judge (“ALJ”) rejected United Indian’s claim of sovereign immunity. The Board then denied United Indian’s reconsideration request and proceeded to adopt and incorporate the ALJ’s report. The question that then came before the California Court of Appeal was whether United Indian was entitled to sovereign immunity.
Tribal immunity may extend to an entity affiliated with an Indian tribe but is not itself a tribe. When determining whether an affiliate is an “arm of the tribe” and therefore entitled to the tribe’s immunity, courts examine five Miami Nation factors that “pertain to the relationship between the affiliate and the tribe: (1) the affiliate’s method of creation; (2) whether the tribe intended to share its immunity; (3) the affiliate’s purpose; (4) the level of control exercised by the tribe over the affiliate; and (5) the financial connection between the tribe and the affiliate.”
The court found that United Indian’s method of creation weighed somewhat in favor of sovereign immunity as several tribes established United Indian and authorized it as their local health care provider. Next, the intent factor weighed somewhat against immunity as the record contained no tribal documents stating the tribes’ intent to extend sovereign immunity to United Indian. Still, the court found that this weighed only somewhat against immunity as “tribal intent may be inferred from the tribe’s actions or other circumstances even without express statements.” After that, the purpose factor weighed in favor of immunity as United Indian’s provision of health care served a purpose central to tribal self-sufficiency and self-governance. Then, the control factor weighed in favor of immunity as the tribes participate in the management and control of United Indian regarding its bylaws and day-to-day operations. Finally, the financial relationship factor weighed in favor of immunity as subjecting United Indian to liability for state workers’ compensation claims would undercut its ability to carry out its self-governance purpose and reduce funds available for tribal health care. Ultimately, the court held that United Indian is entitled to sovereign immunity as four of the five Miami Nation factors pointed to it properly being classified as an arm of the tribe that it serves.
Maverick Gaming LLC v. United States, 123 F.4th 960 (9th Cir. 2024).
In Maverick Gaming, the Ninth Circuit affirmed a motion to dismiss and held that a tribe does not waive its sovereign immunity by intervening for the limited purpose of moving to dismiss and that said immunity meant that it could not be feasibly joined to an action. The court reasoned that the intervening tribe, the Shoalwater Bay Indian Tribe (“Tribe”), was a required party to the suit that could not be joined in the litigation due to its sovereignty, so the suit could not proceed in equity and good conscience in the Tribe’s absence.
The Indian Gaming Regulatory Act (“IGRA”) provides a regulatory scheme for the creation and administration of tribal-state gaming compacts, which allow tribes to conduct casino-style gambling. In 2019, the Washington legislature enacted a law that allowed Indian tribes to amend their gaming compacts to authorize sports betting on their land but refused to legalize sports betting for private entities. This act prompted Plaintiff, Maverick Gaming LLC, to sue alleging that Washington’s tribal-state compacts and sports betting compact amendments violated the IGRA and various U.S. Constitution provisions. The Tribe then moved to intervene in the suit for the limited purpose of filing a motion to dismiss under the theory that it was a required party that could not be joined because of its sovereign immunity. The district court agreed with the Tribe and granted the motion to intervene and the ensuing motion to dismiss. The questions relevant to sovereign and tribal immunity presented to the Ninth Circuit were whether a tribe waives its right to sovereign immunity by intervening for the limited purpose of moving to dismiss and whether the suit could equitably continue in the Tribe’s absence.
The Ninth Circuit found that the Tribe was a required party as it had a legally protected interest that may have been impaired or impeded in its absence. The court then found that the Tribe cannot be joined in the litigation as it enjoys sovereign immunity, to which it “unequivocally expressed its intent to not waive its immunity.” The court reasoned that “a tribe does not waive its sovereign immunity where, as here, it asserted its immunity defense promptly upon intervention in the suit and only ever voiced an intent to do precisely that.” Finally, the court found that the suit could not continue in good conscience in the Tribe’s absence as the litigation posed threats to the Tribe’s legal entitlements and sovereignty. For these reasons, the Ninth Circuit affirmed the district court’s dismissal.
Federated Inds. of Graton Rancheria v. Haaland, 762 F. Supp. 3d 888 (N.D. Cal. 2025).
In Federated Indians of Graton Rancheria, the United States District Court of the Northern District of California denied Plaintiff Federated Indians of Graton Rancheria’s (“Graton Rancheria”) motion for a temporary restraining order regarding Koi Nation’s request that the federal government take a parcel of land into trust. Relating to tribal sovereignty, the court examined the questions of whether Plaintiff had standing and whether a preliminary injunction was proper in the circumstances. The court found that it had subject matter jurisdiction over the case and that granting a preliminary injunction would be improper.
In 2021, Koi Nation applied to the federal government to take a parcel of land into trust for the purpose of authorizing the tribe to open a gaming facility on the land. Koi Nation has historical connections to the parcel of land in question but so does Plaintiff. Because both Graton Rancheria and Koi Nation had historical connections to the parcel, the Department of Interior (“DOI”) was required to consider the potential effects that any project would have on the ancestral remains, artifacts, and other historic properties of the land. Koi Nation’s application triggered statutory obligations under the National Historic Preservation Act (“NHPA”). Under the NHPA, once a tribe is recognized as one that may attach religious and cultural significance to historic properties potentially affected, the tribe must be given a reasonable opportunity to “identify its concerns about historic properties, advise on the identification and evaluation of historic properties . . . articulate its views on the undertaking’s effects on such properties, and participate in the resolution of adverse effects.”
The consultation process for this case “suffered from many deficiencies.” These deficiencies led the State Historic Preservation Officer (“SHPO”) to send a letter to the agency detailing concerns and requesting the Agency to reinitiate consultation. The DOI did not reinitiate consultation and, instead, published its Final Environment Impact Statement (“EIS”) acknowledging the Bureau of Indian Affair’s (“BIA”) finding of No Historic Properties Affected was appropriate for the proposed action. Plaintiffs then filed for a temporary restraining order on the grounds that Defendants violated the NHPA by failing to engage in a meaningful consultation.
The court found that Plaintiff had Article III standing as the procedural violation for failure to consult was connected to an underlying harm in the effects on Plaintiff’s sacred cultural artifacts and ancestral remains that would have been overlooked as a result of being shut out of the decision-making process. The court reasoned that the right to consultation under the NHPA exists to respect and effectuate tribal sovereignty.
The court also found that a preliminary injunction would be improper because Plaintiff failed to show a likelihood of immediate irreparable harm. The court reasoned that any possible harm to cultural artifacts or remains was too remote as the construction was not slated to occur until the beginning of 2026. Additionally, the court reasoned that the EIS proposed mitigation measures that would preserve Plaintiff’s right to be consulted if Native American remains and artifacts were discovered on the land after construction commenced—this made the harms associated with any potential changes to Plaintiff’s rights too speculative to assess. The court also found that concerns that Plaintiff would lack an adequate remedy if Koi Nation did not comply with the consultation requirements were not enough to form a basis for a finding of irreparable harm.
In Rollin, the Eleventh Circuit held that the district court had to conduct a claim-by-claim and defendant-by-defendant analysis to determine whether tribal officials were entitled to sovereign immunity. At the district court, Plaintiff, Muscogee (Creek) Nation, filed suit regarding the excavation and development of a burial site. After excavation of the site, the Poarch Band, a different federally recognized tribe, announced plans to develop a hotel and casino on the site. Plaintiff then sued the Poarch Band, its gaming authority, officials from both, and other defendants. The district court dismissed the complaint and held that the Poarch Band officials enjoyed sovereign immunity against all claims brought without conducting a claim-by-claim analysis. This left it up to the Eleventh Circuit to decide whether a claim-by-claim analysis was required.
The Poarch Band purchased the burial site in fee simple in 1980. In 1984, the United States accepted legal title to the majority of the site to hold it in trust for the benefit of the Poarch Band. Over the objections of the Muscogee Nation, the Poarch Band and others excavated the site; they recovered dozens of sets of human remains and associated funerary artifacts.
In 2012, Plaintiff filed this lawsuit after the Poarch Band announced plans to develop a hotel and casino on the site. The casino opened in 2014 despite the ongoing litigation. In 2020, after unsuccessful settlement negotiations, Plaintiff filed a second amended complaint alleging eleven claims under federal and state law against the Poarch Band and various other parties.
The district court granted dismissal on behalf of the Poarch Band and other defendants because it determined that the Poarch Band, its gaming authority, and officials enjoyed sovereign immunity from all claims and that the suit could not proceed without the Poarch Band defendants. Regarding sovereign immunity, the district court explained that the Poarch officials enjoyed sovereign immunity for claims that are “the functional equivalent of a quiet title action” and implicate “special sovereignty interests.” The district court decided it was warranted to apply this exception for all claims brought without analyzing whether it applied to each claim individually.
The Eleventh Circuit held that the district erred when it failed to analyze the Poarch officials’ plea for sovereign immunity in a claim-by-claim manner because “a court cannot know whether a claim is the functional equivalent of quiet title or if it implicates special sovereignty interests without examining the relief sought for that claim.” Thus, the Eleventh Circuit held that district court should have considered each claim against the Poarch officials and the relief sought to see whether the exception applied. The court then remanded this issue back to the district court as the Plaintiff’s complaint failed to attribute specific claims to specific prayers for relief, so the Eleventh Circuit was in no position, in the first instance, to decide whether the Poarch officials enjoyed sovereign immunity for each claim.
Comm’r of New York State Dep’t of Transportation v. Polite, 236 A.D.3d 82 (N.Y. App. Div. 2024).
In Polite, the Supreme Court of New York, Appellate Division, found as a matter of first impression that Native American nation officials may be sued in New York State courts for off-reservation violations of New York state law. The court reasoned that liability for these violations is justified in a theory analogous to the theory forwarded in Ex Parte Young, 209 U.S. 123, 159–160 (1908).
Plaintiff, the New York State Department of Transportation, sued Defendants, members of the Council of Trustees of the Shinnecock Indian Nation (“the Nation”), alleging violations of state highway law. Defendants claimed that the Nation owned the land with the alleged violations, so the Nation’s sovereign immunity shielded Defendants from any possible suit even though the Nation was not a party itself. Plaintiff opposed this by arguing that the land was only owned in fee simple by the Nation rather than as sovereign land of the Nation or part of the Nation’s Reservation, so this conduct was beyond reservation boundaries and thus subject to generally applicable state laws.
The court agreed with Plaintiff and held that the Nation’s officials who permitted Defendants state law violations could be sued in state court. The court reasoned that this holding was necessary as barring suits in this context would leave the state and its citizens without recourse for these violations and Native American nations and their officials would be free to violate state laws outside of reservation lands with no threat of legal consequences.
In applying rule, the court found that the causes of action brought by Plaintiff could proceed except the portions of them which sought to recover monetary damages, penalties, and interest against Defendants. The court reasoned that “actions that ‘seek to recover funds from tribal coffers or establish vicarious liability of a tribe for damages . . . are barred by tribal sovereign immunity even when nominally styled as against individual officers.’”
Finally, the court held that the Nation itself, rather than just certain officials from the Nation, was not a necessary party to the action and thus the suit was permissible even with the Nation’s absence. The court reasoned that the Nation was not a required party because Plaintiffs would have had no other effective remedy if the suit was dismissed on account of nonjoinder, the presence of Defendants in this action outweighed the risk of prejudice to the Nation, the Nation voluntarily chose to not participate in this action, and the trial court could have rendered an effective judgment in the absence of the Nation if Plaintiff ultimately prevailed on the merits.
Erwine v. Churchill Cnty., No. 3:24-CV-00045-MMD-CSD, 2025 WL 822687 (D. Nev. Mar. 13, 2025), judgment entered, No. 3:24-CV-00045-MMD-CSD, 2025 WL 1422714 (D. Nev. Apr. 23, 2025).
In Erwine, the District of Nevada dismissed claims against Washoe Tribe (“Tribe”) police officers and the Tribe’s general counsel because the Washoe Tribe was seen as a necessary party, who was entitled to sovereign immunity. The case arose from a plaintiff who was disciplined and later fired by the Tribe. Although Plaintiff sued Defendants in their individual capacities, the court found that the Tribe was a necessary party to the suit because the suit included tribal police officers in their official capacity. The court reasoned that this suit against the officers implicated the Tribe’s sovereign interests via control over its police department. As the Tribe was deemed a necessary party, the claims were thus dismissed due to the Tribe’s sovereign immunity.
Butrick v. Dine Dev. Corp., No. 3:23-CV-884-HEH, 2024 WL 4643258 (E.D. Va. Oct. 30, 2024).
In Butrick, the United States District Court for the Eastern District of Virginia dismissed Plaintiff’s claims for a lack of subject matter jurisdiction due to Defendant’s tribal immunity. The court reasoned that Plaintiff’s argument that the Family and Medical Leave Act (“FMLA”) abrogated the Defendant’s immunity was incorrect and that Defendant never waived its immunity.
Defendant, Dine Development Corporation, is a wholly owned corporation of the Navajo Nation, which is recognized as an arm of the tribe. Plaintiff alleged Defendant committed two violations of the FMLA. Additionally, Plaintiff alleged that Congress abrogated tribal immunity under the FMLA and that Defendant waived their immunity by stating that it would voluntarily comply with the FMLA in its handbook. The court rejected both arguments by holding that Congress did not unequivocally abrogate tribal immunity under the FMLA and that an Indian tribe’s voluntary compliance with a law does not automatically waive sovereign immunity or provide a cause of action beyond the remedies available to any party to a contract. For the latter holding, the court reasoned that the handbook could not serve as a waiver because it was not both (1) unambiguous and (2) indicative of where the entity may be sued.
Clark v. Haaland, No. 22-2141, 2024 WL 4763759 (10th Cir. Nov. 13, 2024).
In Clark, the Tenth Circuit affirmed dismissal of Plaintiff’s claims against Navajo Defendants because their tribal immunity rendered them outside of the district court’s jurisdiction. Plaintiffs alleged a deprivation of water rights by Navajo Defendants and other defendants. The district court then granted dismissal to claims against the Navajo Defendants due to lack of jurisdiction. The Ninth Circuit affirmed the district court by first reasoning that there was no unequivocal waiver of immunity by the Tribe nor an abrogation by Congress in this context. Next, the court reasoned that the McCarran Amendment does not provide consent to sue the Navajo Defendants but rather only to sue the United States concerning the adjudication of water rights. Finally, the court reasoned that no Ex Parte Young exception to sovereign immunity was present as Plaintiff failed to point to any nonconclusory allegations of ongoing violations of federal law by the Navajo Defendants.
§ 3.4. Tribal Corporations
A majority of non-Alaskan tribes are organized pursuant to the Indian Reorganization Act of 1934 (IRA).[65] Under Section 16 of the IRA, a tribe may adopt a constitution and bylaws that set forth the tribe’s governmental framework and the authority given to each branch of its governing structure.[66] A tribe may also incorporate under Section 17 of the IRA, under which the Secretary of the U.S. Department of the Interior issues the tribe a federal commercial charter.[67]
Through Section 17 incorporation, the tribe creates a separate legal entity to divide its governmental and business activities.[68] The Section 17 corporation has a federal charter and articles of incorporation, as well as bylaws that identify its purpose, much like a state-chartered corporation.[69] Section 17 incorporation results in an entity that largely acts like any state-chartered corporation.[70]
An Indian corporation may also be organized under tribal or state law.[71] If the entity was formed under tribal law, formation likely occurred pursuant to its corporate code; but it could have also occurred by tribal resolution (i.e., specific legislation chartering the entity).[72] Under federal common law, the corporation likely enjoys immunity from suit.[73] However, it is unclear whether a tribal corporation’s sovereign immunity is waived through state incorporation such that the entity may be sued in state court.[74]
Therefore, when negotiating a tribal business transaction, counsel should consult the tribe’s governmental and corporate information—for example, treaty or constitution, federal or corporate charters, tribal corporate code—which, taken together, identify the entity with which you are dealing, the authority of that entity, and any applicable legal rights and remedies.
There are comparatively few cases decided on the basis of tribal corporate formation, but tribal corporations are often able to claim immunity from suit. In addition to IRA Section 17 entities, Native Alaskan communities are organized as corporations under some unique provisions within the Alaska Native Claims Settlement Act. Below find a discussion of recent cases dealing with tribal corporations.
In Ransom, Rashonna Ransom sued GreatPlains Finance, LLC (“GreatPlains”) on her own behalf and for a putative class, for violations of several New Jersey consumer-protection laws. GreatPlains, an online consumer lender created by the Fort Belknap Indian Community (“Fort Belknap”) in Montana, moved to dismiss the complaint, claiming it was entitled to tribal sovereign immunity. After a district court denied GreatPlains’ motion, GreatPlains appealed.
On appeal, the central issue was whether GreatPlains operated as an “arm of the tribe” such that it was entitled to sovereign immunity. To judge whether GreatPlains “counted[ed] as an arm of a tribe,” the Fourth Circuit considered five factors: “1) how the entity was created; 2) its purpose; 3) its ownership, management, structure, and how much the controls it; 4) the tribe’s intent to give it sovereign immunity; [and] 5) its financial relationship with the tribe[.]” In doing so, however, the court emphasized that “on these facts, the most important factors [were] how much the tribe control[led] the entity and especially whether a judgment would immediately cut tribal revenue.” Accordingly, the court “pa[id] particular attention to [factor] (3) and especially to [factor] (5).”
Based on the foregoing considerations, the court concluded that GreatPlains was not “an arm of a tribe” that was entitled to sovereign immunity. The court acknowledged that GreatPlains was created by Fort Belknap as a limited-liability corporation under tribal law, wholly owned by Fort Belknap, managed by members of Fort Belknap, and entitled to tribal immunity in its articles of incorporation. However, the court emphasized that because GreatPlains’ had never turned a profit to Fort Belknap and insulated the tribe from its liability, the financial relationship between the tribe and GreatPlains “cut[] decisively against immunity.” And because this financial determination was at “the core of sovereign immunity,” the court concluded this consideration outweighed all of the other evidence indicating that GreatPlains was entitled to sovereign immunity. As a result, the Fourth Circuit affirmed the district court’s denial of GreatPlains’ motion to dismiss.
Eggers v. Healing Lodge of the Seven Nations, No. 2:24-CV0078-SAB, 2025 WL 2346885 (E.D. Wash. Aug. 13, 2025).
In Eggers, Andrea L. Asan sued her former employer, The Healing Lodge of the Seven Nations (“Healing Lodge”), for violations of Title VII, the American with Disabilities Act (“ADA”), the Age Discrimination in Employment Act (“ADEA”), and various state law claims. In response, Healing Lodge, a tribal-owned non-profit incorporated in Washington, moved to dismiss the complaint, arguing it was entitled to tribal sovereign immunity.
The court granted Healing Lodge’s motion to dismiss, concluding that Healing Lodge was entitled to tribal sovereign immunity. In reaching this conclusion, the court relied on White v. University of California, 765 F.3d 1010 (9th. Cir. 2014), which outlines five factors courts consider in determining whether an entity qualifies as an “arm of a tribe” that is entitled to tribal sovereign immunity. These factors include (1) the method of creation of the economic entity; (2) its purpose; (3) its structure, ownership, and management, including the amount of control the tribe has over the entity; (4) the tribe’s intent with respect to the sharing of its sovereign immunity; and (5) the financial relationship between the tribe and the entity.
Applying the factors outlined in White, the court determined that Healing Lodge was entitled to tribal sovereign immunity. The court reached this conclusion because Healing Lodge was formed by a consortium of various tribes, served an important purpose for tribal self-determination and self-government (healthcare), demonstrated a strong preference for serving Native American communities, contained significant tribal membership within its ownership and management structure, and received federal funds under the Indian Self-Determination and Education Assistance Act (“ISDEAA”). Accordingly, the court granted Healing Lodge’s motion to dismiss Asan’s claim.
United Indian Health Servs. v. Workers’ Comp. Appeals Bd., 333 Cal. Rptr. 3d 234 (Cal. Ct. App. 2025).
In United Indian, Deborah Hemsted filed a workers’ compensation claim against her employer, United Indian Health Services (“United Indian”). In response, United Indian, a non-profit California corporation created by several tribes to offer healthcare services to tribal communities, argued it was entitled to tribal sovereign immunity. On appeal, the central issue was whether the California Workers’ Compensation Appeals Board (the “Board”) was correct in concluding that United Indian was not entitled to sovereign immunity under the “arm of the tribe” test set forth by the California Supreme Court in People ex. rel. Owen v. Miami Nation Enterprises, 386 P.3d 357 (Cal. 2016).
The court began by explaining that under Miami Nation, courts consider five non-dispositive factors to determine if a tribal affiliate should qualify as “arm of [a] tribe” that is entitled to sovereign immunity: “(1) the affiliate’s method of creation; (2) whether the tribe intended to share its immunity; (3) the affiliate’s purpose; (4) the level of control exercised by the tribe over the affiliate; and (5) the financial connection between the tribe and the affiliate.”
The court then applied Miami Nation’s factors and concluded that the Board erred in concluding that United Indian was not entitled to sovereign immunity. In reaching this conclusion, the court focused on the first, third, fourth, and fifth Miami Nation factors. As to the first factor, the court concluded that the formation of United Indian weighed in favor of sovereign immunity because it ensured that tribal services were administered and managed by tribal organizations rather than by the federal government. As to the third factor, the court determined that because United Indian provided services pursuant to the Indian Self-Determination Act, its provisions of health care services furthered tribal self-sufficiency. As to the fourth factor, the court found that the extended level of tribal involvement in the management of United Nation weighed in favor of sovereign immunity. For example, the court emphasized that under United Indian’s bylaws, each participating, federally recognized tribe was entitled to select a representative to serve on the company’s Board of Directors. Finally, the court determined that the fifth factor weighed in favor of sovereign immunity because a judgment against United Indian would significantly reduce the entity’s funds.
§ 4. The Federal Sovereign
§ 4.1. Indian Country & Land into Trust
The Indian Reorganization Act (“IRA”) authorizes the Secretary of the Interior to take land into trust for the benefit of an Indian tribe’s reservation.[75] In 2009, however, the U.S. Supreme Court issued a landmark ruling reversing the Interior’s prior interpretation of the IRA, 25 U.S.C. § 465, now located at 25 U.S.C. § 5108, and limiting the Secretary’s ability to take land into trust on behalf of tribes.[76]Carcieri held that the Secretary may only acquire land in trust for tribes that (1) were “under federal jurisdiction” in 1934, and (2) currently enjoy federal recognition.[77] This effectively precludes certain tribes from avoiding state tax and regulatory compliance, or conducting gaming or other economic development activities on newly acquired or reacquired lands.
Despite the Carcieri ruling, the Interior seems willing to issue final decisions on fee-to-trust applications by tribes that were recognized, restored, or reaffirmed after June 1934 on the basis that the tribe may have been under the jurisdiction of the United States in 1934 even if that recognition was not formally documented.[78] The Interior will continue processing applications for tribes that have enjoyed uninterrupted, formal recognition since June 1934 and for tribes that can point to a non-IRA statute granting the Secretary acquisition authority.[79] In sum, any non-Indian party looking to enter into a joint venture with a tribe to develop Indian lands not yet in trust status must pause to consider the implications of Carcieri.[80]
In response to the Carcieri decision, in 2014, the Interior Department issued a Memorandum that provided guidance on the meaning of “under federal jurisdiction.”[81] The Solicitor’s M-37029 Memorandum outlined a two-part test for interpreting the phrase “under federal jurisdiction.” The first part of this inquiry examines whether, before June 18, 1934, the federal government took an action or series of actions through a course of dealings or other relevant acts reflecting its obligation to, responsibility for, or authority over, an Indian tribe, bringing such tribe under federal jurisdiction.[82] The second prong examines whether this jurisdictional status remained intact in 1934.[83] Satisfying either prong will suffice to establish that the tribe was “under federal jurisdiction.” In a more recent decision, Confederated Tribes of Grand Ronde Community of Oregon v. Jewell, the D.C. Circuit Court of Appeals upheld the Interior’s application of the two-part test outlined in M-37029.[84] M-37029 appears to be a non-statutory Carcieri fix.
As if Carcieri were not complicated enough, in 2012, the U.S. Supreme Court issued its opinion in Match-E-Be-Nash-She-Wish Band of Pottawatomi Indians v. Patchak.[85] In that case, a local landowner by the name of David Patchak launched a legal challenge against the Interior Secretary’s decision to take the tribe’s land into trust for the purpose of gaming. Importantly, Patchak did not allege that he had a legal interest in the land to be taken into trust. Rather, Patchak brought an action under the APA[86] asserting that the IRA did not authorize the Department of Interior to take land into trust for the tribe. The remedy Patchak sought was for the issuance of an injunction prohibiting the Interior from taking the land into trust. The basis for the injunction, in Patchak’s opinion, was that the requirements of the IRA were to be satisfied per the Supreme Court’s opinion in Carcieri. Both the federal government and the tribe argued that only the Quiet Title Act (QTA)[87] could grant the waiver of sovereign immunity. Under the theory advanced by the defendants, the APA waiver of sovereign immunity was negated.
The Court determined that the QTA only applies to quiet title actions where a person claims an interest in the property that conflicts with, or is superior to, the government’s claim in the property.[88] In addition, because the exception causing the APA waiver of sovereign immunity to be negated did not apply, the Court held Patchak had standing under the APA to pursue his challenge.
The result of this decision is that any party claiming harm to property nearby proposed trust land, even damage to an “aesthetic” interest, has legal standing under the APA to bring a lawsuit. This creates considerable risk for casino developers because the statute of limitations under the APA is considerably longer than that of the QTA, creating much more time for a party to challenge Interior’s trust transaction.[89]
The Interior Department revised its land-into-trust regulations at Part 151 in response to the Patchak decision during the Obama Administration, in late 2013.[90] This “Patchak Patch” provides that if the Interior Secretary or Assistant Secretary approves a trust acquisition, the decision represents a “final” agency determination subject immediately to judicial review.[91] If a Bureau of Indian Affairs (“BIA”) official issues the decision, however, the decision is subject to administrative exhaustion requirements[92] before it becomes a “final agency action.”[93] In this instance, parties must file an appeal of the BIA official’s decision within 30 days of its issue.[94] If no appeal is filed within the 30-day administrative appeal period, the BIA official’s decision becomes a “final agency action.”
More recently, the BIA, to improve and streamline the tribal land acquisition application process, announced changes to land-into-trust regulations (at Part 151).[95] Under the new rule, the BIA will now have to meet a 120-day deadline. Prior to the change, the average land acquisition application took an average of 985 days.
A brief discussion of this past year’s cases involving the taking of land into trust follow.[96]
Ute Indian Tribe of Uintah & Ouray Rsrv. v. U.S. Dep’t of the Interior, No. 18-CV-546 (CJN), 2025 WL 1091969 (D.D.C. Feb. 13, 2025).
In Ute, the Ute Indian Tribe of the Uintah and Ouray Reservation (the “Tribe”) asked the government to restore certain land located in the Uncompahgre Reservation in Utah to tribal ownership under the Indian Reorganization Act of 1934. The government denied the Tribe’s request because it believed that the Tribe did not have compensable title to the land. The court agreed with the government’s denial of the restoration based on its interpretation of the history of the land under three acts enacted in 1880, 1894, and 1897.
The effect of the 1880 Act was to relocate the Tribe from its reservation in Colorado to an undetermined area in Utah. The Utah land would then be allotted to individual Tribe members rather than the Tribe itself, and any “unallotted land” would be sold to cover the cost of relocation and land ceded by the government in Utah. Any remaining proceeds from the sale were to be held in trust by the government. The parties disagreed, however, on whether the “unallotted land” described the land granted to the Tribe in Utah or the land ceded by the Tribe in Colorado.
In the wake of the 1880 Act, the Tribe opposed the allotment of the Utah land to individuals rather than the Tribe as a whole and the lands were never allotted. Congress then passed the 1894 Act and 1897 Act, which had the combined effect of again allotting the Utah land to individual Tribe members and releasing any unallotted land to the government on the first day of April, 1898, with no proceeds going to the Tribe.
The court began with the principle that whether a tribe has compensable title to land depends on whether the tribe would be entitled to its proceeds if it were sold. Thus, whether the tribe was entitled to restoration of the land in Utah depended on whether they were entitled to some of its proceeds. The court held that the 1880 Act did not entitle the Tribe to the proceeds of the Utah land. Instead, the court interpreted the proceeds from the “unallotted land” to mean those generated by the sale of the Colorado land ceded by the Tribe, not the unallotted land in Utah. Further, even if the “unallotted land” did include the land in Utah, any title granted to the Tribe by the 1880 Act was subsequently eliminated by the 1894 and 1897 Acts, which released such unallotted land in Utah to the government with no proceeds flowing to the Tribe.
The court held that under either interpretation, the Tribe was not entitled to the proceeds of the land and therefore did not hold compensable title over the unallotted land in Utah. Therefore, the land in the Uncompahgre Reservation did not meet the criteria for restoration to tribal ownership.
Federated Indians of Graton Rancheria v. Haaland, 762 F. Supp. 3d 888 (N.D. Cal. 2025).
In Federated Indians, Koi Nation submitted an application to the Department of the Interior (DOI) requesting that the federal government take certain land into trust so that Koi Nation could be authorized to operate a gaming facility on the land. The Federated Indians of Graton Rancheria (“Plaintiff”), whose members have historical connections to the land, sought a temporary restraining order and preliminary injunction to prevent DOI from taking the land into trust. The court denied the preliminary injunction, reaching conclusions on the standing, ripeness, and merits of the Plaintiff’s motion.
As part of the process for taking land into trust, DOI was required under section 106 of the National Historic Preservation Act (NHPA) to consult with Plaintiff regarding the potential effects of the proposed action to any historical properties or cultural artifacts on the land. Though DOI eventually reached the conclusion that no historic properties would be affected by the action, Plaintiff claimed, and the court agreed, that the section 106 consultation process appeared to be extremely deficient. During its investigation, DOI repeatedly failed to communicate with Plaintiff, leading Plaintiff to challenge the DOI finding due to a section 106 violation for a failure to consult.
The court first discussed whether Plaintiff had Article III standing to pursue the preliminary injunction. Specifically, the court analyzed whether Plaintiff’s alleged procedural injury met the injury-in-fact requirement for Article III standing. To have standing for a procedural injury, Plaintiff must allege that the injury is tied to some concrete, underlying harm. Here, the court held that Plaintiff met that burden by alleging a section 106 violation for a failure to consult. By failing to consult with Plaintiff in reaching its finding, DOI essentially shut Plaintiff out of the decision-making process and prevented it from having its voice heard with respect to the potential effects on sacred cultural artifacts and ancestral remains. The court held that there was sufficient concrete harm associated with the section 106 violation to meet the injury-in-fact requirement under Article III.
Next, the court discussed whether the alleged procedural violation was ripe for review. A federal court has authority to review an agency action only if it is a final agency action. Here, the court found that DOI’s finding that no historical properties would be affected constituted a final agency action. Though DOI argued that the agency’s action was not final because the agency may still reconsider, the court noted that it was under no legal obligation to do so. Therefore, DOI’s finding that no historical properties would be affected was ripe for review.
Finally, the court assessed the merits of the motion for a preliminary injunction. Because Plaintiff could not show a likelihood of immediate irreparable harm, the court denied the motion. Plaintiff first argued that if DOI is not enjoined from taking the land into trust, there will be damage or disturbance caused to cultural artifacts and remains on the land. The court rejected this argument, holding that Plaintiff had not introduced any evidence suggesting when this disturbance would take place if the land were taken into trust. Contrarily, Koi Nation’s plans for the gaming facility would not begin until the beginning of 2026. Therefore, any potential damage or disturbance was not sufficiently imminent.
Plaintiff’s second argument was that if DOI were not enjoined, Plaintiff would lose its right to be consulted about the disposition of remains and artifacts found on the land. The court found, however, that sufficient mitigation measures were in place to protect Plaintiff’s consultation rights. Further, the court found that any potential changes to the Plaintiff’s rights resulting from taking the land into trust were too speculative. Because Plaintiff’s alleged injuries were neither imminent nor likely, the court denied Plaintiff’s motion for a preliminary injunction.
Scotts Valley Band of Pomo Indians v. Burgum, No. 1:25-CV-00958 (TNM), 2025 WL 1178598 (D.D.C. Apr. 23, 2025) (Scotts I).
In Scotts I, the Scotts Valley Band of Pomo Indians (the “Scotts Tribe”) sued the government after it rescinded its decision to allow the Scotts Tribe to conduct gaming activities on a parcel that it recently took into trust. Separately, three other tribes had also sued the government, claiming that the Scotts Tribe should not have any rights to the land in the first place. These three tribes then sought to intervene in the Scotts Tribe’s suit against the government supporting the rescission. Additionally, the former property owner of the land taken into trust also sought to intervene because the proceeds of the sale of the land depended on gaming activity taking place on the land. The court denied all four parties’ motions to intervene.
The court noted that there are two paths to intervention under the Federal Rules of Civil Procedure. First, a party may intervene as of right if they claim an interest in a property or transaction that is the subject of the litigation. Second, the court has wide latitude to grant permissive intervention where it is in the interest of justice.
The first two tribes (the “Patwin Tribes”) sought to intervene as of right because they claimed that a casino built on the land in question would compete with their casinos, causing economic injury. Prior to this litigation, the two tribes had attempted to intervene in another action by the Scotts Tribe asking the government to reconsider its initial denial of its request to take land into trust. The court in the previous litigation had held that the tribes did not have standing to intervene because their injuries were not imminent and were too attenuated. Here, because the situation was substantially similar to the first attempt to intervene, the court denied the intervention on similar grounds. Namely, even if the government reversed its decision to rescind the gaming allowance, the Scotts Tribe would still need to seek approval for gaming activities at the federal and state level in numerous other capacities. The court held that because the prospects of opening a casino on the land depended on several key steps, the Patwin Tribes’ injury-in-fact remained far too attenuated and not sufficiently imminent to justify a finding of standing.
The third tribe (the “Auburn Tribe”) attempted to intervene by alleging similar economic injuries as the Patwin Tribes. For the same reasons, the court found that the claimed injury was not sufficiently imminent to grant standing. However, the Auburn Tribe also claimed an injury in that the government failed to consult the tribe in its taking of the land into trust. The court found that this injury was only procedural and, without an accompanying concrete harm, could not grant standing.[97] For these reasons, the court denied each of the tribes’ motions to intervene as of right.
Lastly, the previous owner of the land (“GTL”) attempted to intervene by claiming that its economic interests were dependent on the Scotts Tribe being allowed to conduct gaming activity on the land. The court held that GTL’s injury was not redressable and therefore lacked standing to intervene. In GTL’s sale of the land to the Scotts Tribe, the proceeds of the sale were to be generated by the casino that would eventually be built on the land. However, because the government rescinded its allowance of gaming activity, GTL was left without a means of being compensated for the transaction although the land had already been transferred and taken into trust. The court held that although the allowance of gaming activity was necessary for GTL’s compensation, it was not the only condition that had to be met. As noted, the Scotts Tribe still had several administrative hurdles to clear at the federal and state levels before they could operate a casino on the land. Therefore, even if the government did reverse its rescission, the tribe would not necessarily be allowed to operate a casino and GTL would not be compensated. Because GTL’s injury was not redressable, GTL did not have standing and the court denied its motion to intervene as a matter of right.
Finally, the court considered permissive intervention for each of the parties. Because each party seemed to be disputing issues that were tangential to the claimed procedural violations of the government’s rescission by the Scotts Tribe, the court held that permissive intervention would not contribute to the just and equitable adjudication of the matter. In fact, the court held that allowing intervention would serve only to substantially complicate the matter. For these reasons, the court denied each party’s motion to intervene.
Scotts Valley Band of Pomo Indians v. Burgum, No. 1:25-CV-00958 (TNM), 2025 WL 1639901 (D.D.C. June 10, 2025) (Scotts II).
In Scotts II, the Scotts Valley Band of Pomo Indians (the “Tribe”) sought a preliminary injunction preventing the government from reconsidering its approval of a gaming facility on the Tribe’s land held in trust. Because the court found that no irreparable harm would result from the denial of such injunction, it denied the motion.
As in Scotts I, the Tribe’s land had previously been taken into trust by the government and their request to construct a gaming facility had been approved. After the government later reconsidered and suspended the approval, the Tribe initiated this lawsuit, arguing that the consideration was procedurally deficient and moving for a preliminary injunction against the suspension.
The court noted that a preliminary injunction would only be granted if, among other things, the Tribe could meet its burden of showing that irreparable harm would result in the absence of an injunction. The Tribe argued that it would suffer both monetary irreparable harm and harm to its sovereignty. The court rejected both arguments.
The Tribe argued that it would suffer monetary harm because it had already entered into various contracts in reliance on the government’s allowance of conducting gaming activities on the land. The court held that because monetary damages are not alone sufficient to show irreparable harm, the Tribe had not met its burden. Further, the Tribe’s alleged harms were merely conclusory, and the Tribe did not elaborate on how its monetary losses could not be sufficiently redressed by the time a decision was reached on the merits. Particularly important to the court’s decision was that the Tribe had entered into many of these contracts before the government had approved of the gaming activities in the first place, so the suspension of this approval could not have caused monetary harm.
Next, the Tribe argued that it would suffer an irreparable injury to its sovereignty. The court rejected this argument because the Tribe’s legal status was hardly affected by the suspension of gaming eligibility. Even after gaming activity had been approved, the Tribe was required to clear several other administrative barriers before it could operate a casino, which it had not even begun constructing. As a result, the Tribe was not engaging in any gaming activities before the suspension took effect. Even if gaming activity were not suspended, the Tribe would not be engaging in any such activity for at least a year. This led the court to find that any alleged harm to the Tribe’s sovereignty was merely theoretical and not actual or concrete.
Because theoretical harm is not sufficient to clear the irreparable harm requirement and because the alleged monetary harm was insufficient, the court denied the Tribe’s motion for a preliminary injunction.
Cow Creek Band of Umpqua Tribe of Indians v. U.S. Dep’t of the Interior, No. 24-CV-03594 (APM), 2025 WL 548316 (D.D.C. Feb. 19, 2025), dismissed sub nom. Cow Creek Band of Umpqua Tribe of Indians v. U.S. Dep’t of the Interior, No. 25-5034, 2025 WL 914195 (D.C. Cir. Mar. 24, 2025).
In Cow Creek, three Indian Tribes (the “Plaintiff Tribes”) brought a suit against the Department of the Interior (DOI) to oppose its taking of certain land into trust so that another tribe could operate a gaming facility on the land. The Plaintiff Tribes sought a preliminary injunction divesting title from the other tribe and prohibiting the tribe from operating a gaming facility. The court denied the preliminary injunction because the Plaintiff Tribes failed to show irreparable harm.
The Plaintiff Tribes first argued that they would suffer financial losses from the increased competition to their casinos caused by the new gaming facility. As a result, many tribal government services and programs would suffer due to the diminished revenue generated by their casinos. The court held that any financial losses projected by the opening of a new gaming facility were not certain to occur in the near future as the new facility was not set to be fully operational until 2029. While some gaming activity had already been taking place on the land that was taken into trust, the Plaintiff Tribes had only made conclusory allegations as to how this would impact their tribal programs and services. Because the alleged economic harm was not sufficiently imminent and its immediate results were not clearly demonstrated by the Plaintiff Tribes, they could not allege irreparable harm as a result of financial losses.
The Plaintiff Tribes next argued that they suffered irreparable harm as a result of being subjected to an unlawful review process based on unconstitutional regulations in relation to the procedure of taking land into trust. The Plaintiff Tribes relied on Axon[98] to demonstrate that this type of injury constitutes irreparable harm. However, the court held that Axon does not support the Plaintiff Tribes’ argument because it made no conclusion about what constitutes irreparable harm and bore no resemblance to the case at issue in the first place.
Finally, the Plaintiff Tribes argued that a number of other irreparable harms would result from the operation of a new gaming facility, including injuries to their tribal employees, the environment, and public opinion. The court held that the Plaintiff Tribes’ arguments were too conclusory and speculative to be irreparable for the same reasons as its economic harm analysis and any alleged effects to the public’s perception of the historic ties to the land were without proof.
Because the Plaintiff Tribes’ alleged injuries were not sufficiently imminent and concrete, they could not constitute irreparable harm. Therefore, the court denied the motion for a preliminary injunction.
§ 4.2. Federal Approval for Reservation Activity
Due to the unique trust status of Indian lands, contracts involving those lands are subject to various forms of federal oversight. The Secretary of the Interior must approve any contract or agreement that “encumbers Indian lands for a period of seven or more years,” unless the Secretary determines that approval is not required.[99] Federal regulations explain that “[e]ncumber means to attach a claim, lien, charge, right of entry, or liability to real property.”[100] Encumbrances may include leasehold mortgages, easements, and other contracts or agreements that, by their terms, could give to a third party “exclusive or nearly exclusive proprietary control over tribal land.”[101]
Per revisions to Section 81 in 2000, the Interior Secretary will not approve any contract or agreement if the document does not (1) set forth the parties’ remedies in the event of a breach; (2) disclose that the tribe can assert sovereign immunity as a defense in any action brought against it; and (3) include an express waiver of tribal immunity.[102] Leaseholds for Indian lands, which typically run 25 years, also require secretarial approval.[103] Failure to secure secretarial approval could render the agreement null and void.[104] Therefore, if the transaction implicates tribal lands, counsel should analyze whether the Secretary must approve the underlying contract or lease.[105] Regardless of whether Secretary approval is necessary, all parties should be careful as to how they draft agreements which may encumber the land.[106] If the contract pertains to a tribal casino, the parties must also consider whether the contract should be submitted to the National Indian Gaming Commission (“NIGC”) for approval pursuant to the Indian Gaming Regulatory Act (“IGRA”).[107] Any “management agreement” for a tribal casino or “contract collateral to such agreement” requires NIGC approval to be valid and enforceable.[108] The NIGC has recently found that certain consulting, development, lease, and financing documents that confer management authority to the consultant, developer, landlord, or lender thereby constitute a management contract that is void unless approved by the NIGC.
Non-Indian contractors must also consider whether they need to obtain an Indian Traders License from the Bureau of Indian Affairs (“BIA”) and/or a tribal business license to properly do business with a tribe.[109] Federal regulations do not preclude certain tribes from imposing additional fees on non-Indian contractors. Failure to obtain appropriate licenses could subject the contractor to a fine or forfeiture, if not tribal qui tam litigation.[110]
With much tribal and media fanfare, in 2012, President Obama signed into law the Helping Expedite and Advance Responsible Tribal Homeownership (“HEARTH”) Act.[111] As noted above, prior to the passage of this bill, under 25 U.S.C. § 415, every lease of a tribe’s lands must undergo federal review and approval by the Secretary of the Interior under a sprawling, burdensome set of regulations.[112] The HEARTH Act changes that scheme of Indian land leasing by allowing tribes to lease their own land. The Act gives tribal governments the discretion to lease restricted lands for business, agricultural, public, religious, educational, recreational, or residential purposes without the approval of the Secretary of the Interior. Tribes are able to do so with a primary term of 25 years, and up to two renewal terms of 25 years each (or a primary term of up to 75 years if the lease is for residential, recreational, religious, or educational purposes).
There are some caveats, though. First, before any tribal government can approve a lease, the Secretary must approve the tribal regulations under which those leases are executed (and mining leases will still require the Secretary’s approval). Second, before the Secretary can approve those tribal regulations, the tribe must have implemented an environmental review process—a “tribal,” or “mini” National Environmental Policy Act—that identifies and evaluates any significant effects a proposed lease may have on the environment and allows public comment on those effects. The HEARTH Act authorizes the Interior Secretary to provide a tribe, upon the tribe’s request, with technical assistance in developing this regulatory environmental review process. HEARTH Act implementing regulations went into effect in 2013.[113] As of November 4, 2025, the BIA lists 97 tribes whose regulations have been approved to exercise the enhanced rights of sovereignty associated with taking control over the leasing of tribal land.[114]
The following highlights several of the more relevant cases decided in the last year.
Maverick Gaming LLC. v. United States, 123 F.4th 960 (9th. Cir. 2024).
In Maverick Gaming, Maverick Gaming LLC (“Maverick”), a casino-gaming company, challenged the Washington state legislature’s decision to preclude private entities from engaging in sports betting while simultaneously authorizing the practice on Indian lands through a variety of tribal-gaming compacts. According to Maverick, these legislative actions violated the Indian Gaming Regulatory Act (“IGRA”), the Equal Protection Clause, and the Tenth Amendment of the United States Constitution.
Although Maverick sought relief that would invalidate the gaming compacts of all tribes in Washington, the company failed to include any of these tribes as parties to the suit. Because of this, the court engaged in an extensive inquiry to determine whether the Shoalwater Bay Indian Tribe (the “Tribe”) could intervene in the case for the limited purpose of filing a motion to dismiss on account of its sovereign immunity. After concluding that the Tribe was a required party entitled to intervene, the court granted the Tribe’s motion to dismiss on the ground of tribal sovereign immunity.
But in reaching the above conclusion, the court also noted that Maverick’s suit also ran afoul of IGRA’s central purpose: to confer legal entitlements to federally recognized Indian tribes in the form of tribal-state gaming compacts. Indeed, the court noted that Maverick’s attempt to invalidate the tribal-state gaming compacts throughout the state of Washington could ultimately “destroy these legal entitlements” and significantly threaten the IGRA’s mission of promoting tribal economic development, tribal self-sufficiency, and strong tribal governments.
California v. U.S. Dep’t of Interior, No. 25-cv-03850-RFL, 2025 WL 2459355 (N.D. Cal. Aug. 26, 2025).
In California v. United States Department of Interior, the court granted the Koi Nation’s (“Koi”) motion to intervene in a land dispute between California and the Department of Interior (“DOI”). At the core of the dispute was California’s challenge to the DOI’s decision to take the “Shiloh Site,” a 68-acre parcel of land in California, into trust for the purpose of authorizing gaming on the parcel under the Indian Gaming Regulatory Act’s (“IGRA”) restored lands exception. Under this exception, the DOI may authorize gaming on trust land where a tribe has demonstrated a significant historical connection to the land.
According to Koi, it was entitled to intervene in the case because it had a legally protected interest in the litigation that would not be adequately represented by the DOI and other federal defendants. The court agreed. The court noted that when the DOI concluded that IGRA’s restored lands exception applied, Koi obtained a legally protected interest to engage in Class II gaming. Moreover, the court emphasized that because Koi had received approval of its gaming ordinances from the Chair of the National Indian Gaming Commission, its rights to Class II gaming had fully materialized. The court therefore concluded that Koi was entitled to intervene as of right in the land dispute between California and the DOI.
§ 4.3. Labor and Employment Law & Indian Tribes
When Indian tribes act as commercial entities and hire employees, they are not subject to the same labor and employment laws as nontribal employers. For example, state labor laws and workers’ compensation statutes are inapplicable to tribal businesses.[115] Moreover, tribal employers may not be subject to certain federal labor and employment laws.[116]
Tribal employers are ordinarily exempt from antidiscrimination laws. Both Title VII of the Civil Rights Act of 1964[117] and the Americans with Disabilities Act[118] expressly exclude Indian tribes,[119] and state anti-discrimination laws usually do not apply to tribal employers.[120] In addition, tribal officials are generally immune from suits arising from alleged discriminatory behavior.[121]
The circuits remain severely split regarding the application of federal regulatory employment laws to tribal employers. The Eighth and Tenth Circuits have refused to apply to tribes such laws as the Occupational Safety and Health Act (OSHA),[122] the Employee Retirement Income Security Act (ERISA),[123] the Fair Labor Standards Act (FLSA),[124] the National Labor Relations Act (NLRA),[125] and the Age Discrimination in Employment Act (ADEA),[126] because doing so would encroach upon well-established principles of tribal sovereignty and tribal self-governance.[127]
Conversely, the Second, Seventh, and Ninth Circuits have applied OSHA and ERISA to tribes.[128] Moreover, the Seventh and Ninth Circuits lean toward application of FLSA to tribes.[129] These circuits reason that, because Indian tribes are not explicitly exempted from these statutes of general applicability, the laws accordingly govern tribal employment activity.[130] Following this reasoning, the Department of Labor has stated that the FMLA[131] applies to tribal employers.[132] However, aggrieved employees may experience difficulty enforcing federal employment rights due to the doctrine of sovereign immunity.[133] For example, the Second Circuit has held that, because Congress did not explicitly authorize suits against tribes in the language of the FMLA or the ADEA, tribal employers cannot be sued for money damages in federal court by employees under these statutes.[134]
Questions remain concerning whether federal statutes of general applicability extend beyond the labor and employment arena where they do not affirmatively contemplate whether Indian tribes govern tribal or reservation-based activities. For example, do federal franchise laws apply in Indian Country? What about the federal Copyright Act or other federal intellectual property statutes? What about Sarbanes-Oxley? While subject to the split in circuits discussed immediately above, it is unclear in which federal jurisdictions a court would hold that such federal laws apply to tribes.[135]
Federal courts have continued to decide cases involving the application of federal labor and employment rules to tribal employers. More generally, courts have grappled with how to apply statutes of general applicability to tribal sovereigns.
Metropolitan Life Ins. Co. v. Mundahl, No. 3:24-CV-03029-RAL, 2025 WL 2682509 (D.S.D. Sept. 19, 2025).
In Metropolitan Life Ins. Co. v. Mundahl the court found that tribal courts do not have jurisdiction to hear ERISA claims, aside from initial determinations of whether the plan in dispute is covered by the act.
Joye M. Braun (“Joye”) was an employee of the Indigenous Environmental Network, as well as a member of the Cheyenne River Sioux Tribe. As a benefit of her employment, Joye participated in a life insurance and accidental death and dismemberment plan (the “Plan”). While Joye did not designate a beneficiary for the Plan, in November of 2022 she designated her children as beneficiaries of the Plan. However, less than two weeks later, Joye died of an unexpected cardiac event. A dispute arose over whether the designation of beneficiaries made by Joye was effective as of the date of the election, or beginning the following year. The Defendant, on behalf of Joye’s estate, brought a suit in the Cheyenne River Sioux Tribal Court (the “Tribal Court”). The Plaintiff filed a suit in federal court which sought to enjoin the Defendants from proceeding in the Tribal Court.
The District Court first had to decide whether the Plan was subject to ERISA. While there was some language in an email confirming Joye’s benefit elections to the contrary, the court found that ERISA governs the Plan. The court then turned to whether they should defer to the Tribal Court’s jurisdiction. While ERISA provides federal courts with exclusive jurisdiction for certain claims, the act does provide that state courts may also have concurrent jurisdiction over certain claims. However, the court found that at no point does ERISA contemplate concurrent tribal court jurisdiction for any claims governed by ERISA. This exclusion of tribal courts from the language of ERISA led the court to find that it was Congress’ intent to exclude tribal courts as suitable forums for ERISA governed claims. Therefore, while the court acknowledged that it is generally federal policy to stay certain cases to provide tribal courts the first opportunity to determine their own jurisdiction, there are exceptions to this rule. One such exception is where the action in tribal court would be violative of an express jurisdictional prohibition. The fact that ERISA does provide such a prohibition led the court to refuse to stay the federal case.
Finally, in determining whether or not to issue injunctive relief, the District Court examined the Dataphase factors. The first factor, the likelihood of success on the merits, tends to favor injunctive relief. While the Plaintiff has not shown that they will necessarily be successful on the underlying ERISA claim, the Plaintiff has shown that they will likely be successful on the jurisdictional question discussed above. The second factor, the threat of irreparable harm, is also satisfied, as the Plaintiffs would be irreparably harmed by having to litigate in a court that lacks jurisdiction over the claim at issue in the case. Further, the third factor, balance of the equities, also favors granting the injunction, as the Defendants cannot be said to be harmed by the injunction. The Defendants are not entitled to litigate in the Tribal Court. Therefore, the court found that being prevented from doing so does is not a cognizable harm. Finally, the public interest, being the fourth and final factor of the Dataphase factors, weighs in favor of granting the injunction as it will be in the public interest to further a uniform regulatory regime. Therefore, the Plaintiff met their burden, and the court granted the preliminary injunction to prevent the Tribal Court from proceeding in this case.
Parrotta v. Island Resort & Casino, No. 2:24-CV-56, 2025 WL 643180 (W.D. Mich. Jan. 16, 2025), report and recommendation adopted, No. 2:24-CV-56, 2025 WL 640793 (W.D. Mich. Feb. 27, 2025).
In this case, the District Court held, by adopting a report and recommendation (the “Report”) issued by a magistrate judge, that while the Fair Labor Standards Act (the “FLSA”) may be applicable to tribes, the Act itself did not waive the sovereign immunity held by tribes. The Plaintiff in this case was employed as an executive chef for the Island Resort and Casino, a federally recognized tribe. The Plaintiff claimed that she was unlawfully misclassified as overtime exempt, and therefore was never paid for overtime, despite working more than forty hours per week. In 2023, the Plaintiff had a child and took maternity leave, as approved by her management team. When she returned, she was told that she would have to either quit or work a different schedule than she had previously agreed to. She resigned.
The Report first discussed the status of tribes as domestic dependent nations, and affirmed that, absent Congressional abrogation or tribal waiver, tribes retain sovereign immunity. Arms of the tribe acting on behalf of the tribe similarly retain this sovereign immunity.[136] Applying several factors, the Report concluded that Island Resort and Casino is an arm of their tribe, thus entitled to the same sovereign immunity.
The Report then discussed the application of the FLSA to tribes. The Report found that the FLSA, being a statute of general applicability does apply to Indian tribes. While the Sixth Circuit recognizes an exception when the generally applicable statute would interfere with a tribe’s ability to govern itself, the Report found this exception not to apply to this case. In determining whether this exception applies, the Sixth Circuit utilizes the Coeur d’Alene framework. This framework will not apply the statute to the tribe if “(1) the law touches exclusive rights of self-governance in purely intramural matters; (2) the application of the law to the tribe would abrogate rights guaranteed by Indian treaties; or (3) there is proof of legislative history or some other means that Congress intended [the law] not to apply to Indians on their reservations.”[137]
Applying this framework, the Report found no reason to apply this exception, and the Defendant failed to even contest the FLSA’s applicability to the tribe. However, the fact that the statute applies to the tribe does not determine whether the tribe may be sued for violating the statute. A statute of general applicability can apply to the tribes, and yet still fail to abrogate the tribe’s sovereign immunity. Such an abrogation may only occur when Congress has made it unmistakably clear in the statute’s language that it is doing so. Here, the FLSA includes no such clear expression. While the FLSA explicitly abrogates sovereign immunity for other agencies, it makes no such abrogation for tribes. Therefore, while the FLSA may be a statute of general applicability that applies to the tribes, a private party may not bring a civil suit to enforce the FLSA against the tribe.
Butrick v. Dine Dev. Corp., No. 3:23-CV-884-HEH, 2024 WL 4643258 (E.D. Va. Oct. 30, 2024).
In Butrick v. Dine Dev. Corp., the court found that while the Family and Medical Leave Act (the “FMLA”) is applicable to Indian tribes, the Act does not abrogate tribal sovereign immunity. In this case, the Plaintiff was employed as a contracts administrator for Dine, which is wholly owned by the Navajo Nation. The Plaintiff began her maternity leave in 2023 and returned later that year. After returning from her leave, Plaintiff was placed on a performance improvement plan, despite receiving positive reviews prior to her leave. Not long after she was terminated due to “inefficiencies” in her performance. Plaintiff brought this suit under the theory that these actions amounted to interference with her right to take maternity leave, in violation of the FMLA.
The parties conceded that the employer, Dine, was an arm of the Navajo Nation, and therefore presumably entitled to sovereign immunity. However, the Plaintiff argued that the FMLA, though silent on tribal sovereign immunity, is generally applicable and thus must allow her to bring suit against Dine. The court rejected this argument, finding that the question of whether the FMLA is applicable to tribes, and whether the tribe may be sued for violations of the Act to be entirely separate inquiries. Sovereign immunity protects tribes unless there has been a clear abrogation by Congress. Here, the text of the FMLA makes no mention of tribal sovereign immunity, as admitted by the Plaintiff. Therefore, it cannot be used to abrogate sovereign immunity.[138]
Tribal sovereign immunity may also be waived by a tribe itself. The Plaintiff argued that the Defendant did so in their employee handbook. This handbook stated that despite its sovereign immunity, it voluntarily complies with the FMLA. The court refused to read this provision as a waiver of sovereign immunity because (1) the waiver is not explicit due to other provisions in the handbook expressly preserving sovereign immunity, and (2) the waiver does not identify where a lawsuit would be permitted to take place. Therefore, the court refused to find either an abrogation of sovereign immunity by Congress, nor a waiver of sovereign immunity by the tribe.
Eggers v. Healing Lodge of the Seven Nations, No. 2:24-CV-00078-SAB, 2025 WL 2346885 (E.D. Wash. Aug. 13, 2025).
In Eggers v. Healing Lodge of the Seven Nations, the District Court dismissed the Plaintiff’s complaint asserting violations of 42 U.S.C.§ 2000e et seq., the Americans with Disabilities Act (the “ADA”), the Age Discrimination in Employment Act (the “ADEA”), and state law claims, due to the Defendant’s sovereign immunity.
In this case, the Plaintiff previously worked as an administrative assistant for the Healing Lodge of the Seven Nations (the “Healing Lodge”), a tribal-owned nonprofit. In 2022, Plaintiff was diagnosed with lupus. While she requested special accommodations for her condition, not all of them were met. In 2023, the Plaintiff was terminated at age 65. She later brought this suit in federal court asserting that both the Healing Lodge and Stensgar, an employee of the Healing Lodge, violated 42 U.S.C. § 2000e et seq., the ADA, the ADEA, as well as state law claims.
The court applied the White factors to determine whether the Healing Lodge qualified as an arm of the tribe entitled to sovereign immunity. Specifically, the court examined several factors including: “(1) the method of creation of the economic entities; (2) their purpose; (3) their structure, ownership, and management, including the amount of control the tribe has over the entities; (4) the tribe’s intent with respect to the sharing of its sovereign immunity; and (5) the financial relationship between the tribe and the entities.” While factors weighed both in favor of and against a finding that the Healing Lodge was an arm of the tribe, the court found, on balance, that these factors favored a finding that the Healing Lodge was an arm of the tribe entitled to sovereign immunity. Based on this immunity, the claims against the Healing Lodge were dismissed.
The court also dealt with the claims against Stensgar. While Stensgar, as an employee, is not given sovereign immunity for her own actions, an employee of a tribe is given sovereign immunity against suits against them in their official capacity. The court found that in the claims against Stensgar, the tribe was the “real, substantial party in interest” and therefore the claims against Stensgar were truly claims against her in her official capacity. Thus, the court also dismissed the claims against Stensgar due to the sovereign immunity held by the tribe. Without any federal law claims, the court was left with no jurisdiction over the remaining state law claims and therefore remanded any remaining state law claims to the Spokane County Superior Court.
§ 4.4. Federal Court Jurisdiction
Federal court jurisdiction is limited to cases that invoke a federal court’s limited subject matter jurisdiction. Such cases may involve a federal question[139] or claims that are brought involving diversity of citizenship.[140] Litigation that arises from a deal with a federally recognized tribe, or otherwise has federal overtones, does not necessarily present a federal question that will allow a federal district court to assume jurisdiction,[141] nor does the possibility that a tribe may invoke a federal statute in its defense confer federal court jurisdiction.[142] Moreover, courts have generally held that a tribe is not a citizen of any state for diversity purposes and, therefore, cannot sue or be sued in federal court based on diversity jurisdiction.[143] However courts are split on whether a business incorporated under federal statute, state law, or tribal law can qualify for diversity jurisdiction.[144] Because the potential judicial forums for commercial litigation arising out of Indian Country are likely restricted to state or tribal court, choosing federal court as the choice of venue may not make sense.
The following highlights several of the more relevant cases decided in the last year.
In Langenderfer v. Miller, the court dismissed a pro se plaintiff’s case for lack of subject matter jurisdiction. The Plaintiff’s primary argument in favor of subject matter jurisdiction was based on his membership in the Mendocino Indian Reservation, and that he entered the contract at issue in the case as a representative of the Mendocino Indian Reservation. The court presumed that this argument hinged on the assumption that a federal question is presented because he, as the plaintiff, was a member of an Indian tribe.
The court denied this as a basis for federal question subject matter jurisdiction, which would require that the claim arise under the Constitution, federal law, or a federal treaty. The court made clear that federal question jurisdiction simply does not exist whenever an Indian tribal member is involved. Rather, the contract dispute at issue in this case is simply one that arises under state law, without raising any issues of federal law.
The plaintiff also attempted to rely on 28 U.S.C. § 1362 to find that the court had jurisdiction. This was also misplaced. § 1362 provides district court’s jurisdiction over matters brought by Indian tribes, but it still requires that the matter arise under federal law. The court’s determination that this is solely a state law claim thus prohibits § 1362 from providing the court with subject matter jurisdiction over this case.
Liveious v. Caesars Ent., Inc., No. 4:24-CV-00145-TWP-KMB, 2025 WL 2022619 (S.D. Ind. July 18, 2025).
In Liveious v. Caesars Ent., Inc., the court dismissed the case for lack of subject matter jurisdiction. In this case, the plaintiff sued EBCI Holdings (“EBCIH”), a for-profit LLC whose sole member is the Eastern Band of Cherokee Indians (the “Tribe”), and CSI Operating Company, LLC (“CSI”), an LLC whose sole member is EBCIH. The plaintiff alleged negligence, wrongful death, loss of consortium and other related state law claims. The only theory of subject matter jurisdiction pled by the plaintiff was diversity jurisdiction under 28 U.S.C. § 1332. When determining the citizenship of an LLC, the court must look to the members of the LLC. Thus, both EBCIH and CSI are considered to have the same citizenship as the Tribe.
While previous decisions in the Seventh Circuit had dealt with how to determine citizenship under diversity jurisdiction for corporations chartered under tribal laws, the issue of how to determine the citizenship of an LLC whose sole member is a tribe had yet to be addressed. In the Seventh Circuit, the court had previously held that a corporation chartered under tribal law is to be treated as a citizen of a state for purposes of diversity jurisdiction.[145] The plaintiff sought to extend this holding to include the LLCs they brought suit against in this case.
While the court admitted that they were not bound by precedent on this issue, they did note that the majority of courts that have decided the issue have found that similar defendants are not citizens of any state for purposes of diversity jurisdiction. The court joined these jurisdictions in finding that unincorporated tribal entities are not citizens of any state for the purpose of determining whether complete diversity exists. Thus, both defendants fail to be diverse from the plaintiff, as they are not citizens of any state. Since the plaintiff’s sole theory of subject matter jurisdiction was diversity jurisdiction, the court dismissed the case for a lack of such jurisdiction.
Gila River Indian Cmty. v. Schoubroek, 145 F.4th 1058 (9th Cir. 2025).
In Gila River Indian Cmty. v. Schoubroek, the court found that subject matter jurisdiction existed for the claims at issue based on federal questions jurisdiction. Here, the Gila River Indian Community (the “GRIC”) sued the defendant homeowners, alleging that their groundwater use violated their rights. Before grappling with the merits, the court first had to decide two jurisdictional issues. First, the court examined whether the district court had exclusive jurisdiction to hear the claims. Second, the court examined whether subject matter jurisdiction exists for these claims.
Here, both parties argued that the prior exclusive jurisdiction doctrine applied. The GRIC argued that the District Court for the District of Arizona had exclusive jurisdiction based on their exercise of jurisdiction since 1935. Opposing this theory, the defendants argued that the Arizona Adjudication court had exclusive jurisdiction based on their decisions since 1981. The district court had previously agreed with the GRIC and found that the district court had exclusive jurisdiction. However, the Court of Appeals, here reversed this decision, finding that neither court had exclusive jurisdiction over these claims.
Importantly, the court then took up the issue of whether subject matter jurisdiction exists for this controversy. The plaintiff argued that subject matter jurisdiction existed under 28 U.S.C. § 1362. This provision permits tribes to sue in federal court when the matter arises under federal law. In determining the scope of this grant of jurisdiction, the court examined key precedent that found § 1362 was intended to allow tribes to bring suit in federal court to protect their federally derived property rights when the United States had declined to act.[146] Based on this understanding of § 1362, the court found that jurisdiction was proper. The United States is the entity who owns the reserved land in question, as well as the appurtenant water rights, on behalf of the GRIC. Thus, the United States could have sued to safeguard these rights for the Tribe but declined to do so. This failure to take action to protect the Tribe’s possessory water rights thus placed this within the ambit of § 1362, and thereby permits the GRIC to sue in federal court to protect these rights. Therefore, while the district court did not have exclusive jurisdiction, they were permitted to hear the dispute under § 1362.
Rosales v. Roman Cath. Bishop of San Diego, No. 24-3754, 2025 WL 1720996 (9th Cir. June 20, 2025).
In Rosales v. Roman Cath. Bishop of San Diego, the court addressed whether federal question jurisdiction provided the court with subject matter jurisdiction over the case. The court found that it did, based on the attempt by plaintiff to enjoin activity on federal trust land. In this case, the plaintiff sought an injunction to prevent construction on a disputed parcel, and all land within 100 feet. This zone encompassed federal trust land.
The district court in this case erred by exercising supplemental jurisdiction without determining first whether any claim provided original jurisdiction. Despite this mistake, the court in this case examined whether original jurisdiction would have existed under federal question jurisdiction, and found that it did. The court noted that a case may arise under federal law when either federal law creates the cause of action being asserted, or when a substantial federal issue is necessarily raised, actually disputed and capable of resolution in a federal court without disrupting the federal-state balance as approved by Congress.
Here, the complaint did not assert a claim that was created under federal law, but it did raise a federal issue that the court found satisfied the requirements for federal question jurisdiction. By seeking to enjoin activity on federal trust land using state law, a substantial federal issue arose. This scenario had previously been addressed by the Supreme Court, who explained that the question is a matter of federal law.[147] Further, the court determined that allowing the issue to be resolved by the federal court did not disturb the balance of judicial responsibilities between the federal and state governments. The issue of tribal rights on federal trust land is one reserved for Congress; thus, it would be appropriate for a federal court to resolve a dispute relating to this matter. Therefore, despite the district court’s erroneous decision to exercise supplemental jurisdiction, the court found that they did in fact have subject matter jurisdiction through federal question jurisdiction.
Santos-Vercelli v. Moses, No. 1:25-CV-00074-DCN, 2025 WL 1332157 (D. Idaho May 7, 2025).
The court in Santos-Vercelli v. Moses found that subject matter jurisdiction did not exist to allow for what was essentially a child custody dispute to proceed in federal court. The plaintiff’s asserted claims included a real property dispute (in the form of her child), personal injury, assault, libel, slander, constitutionality of state statutes, the False Claims Act, and other civil rights. However, the court found that at its core, this case is essentially a custody proceeding, which would generally be a matter left solely to state courts.
The plaintiff argued that her constitutional rights and indigenous rights were implicated and therefore a federal forum would be the appropriate place to litigate her claims. However, the court found these claims to be lacking. Specifically, she never clearly indicated what provisions of the Constitution had been implicated. The court assumed that she claimed that her child was the property that she had been deprived of, which would be an incorrect understanding of the Fourth Amendment. Therefore, the court was unable to find a basis for federal question jurisdiction. The plaintiff also cited diversity jurisdiction as a means of gaining subject matter jurisdiction. However, both her and the defendant were domiciled in Idaho, and therefore she could not satisfy the complete diversity requirement.
Finally, the court addressed her argument that jurisdiction was proper due to alleged violations of her indigenous rights. The plaintiff referenced several specific treaties but failed to explain how those treaties created the right for her to bring these claims in federal court. The court made clear that a party simply being indigenous does not automatically grant the federal court with subject matter jurisdiction over the claims being asserted. Therefore, the court found that it lacked subject matter jurisdiction.
§ 5. The State Sovereign
With billions of dollars being exchanged in Indian Country, state government is naturally looking for a piece of the action, giving rise to tax clashes between tribes and their business partners, and states and counties. These conflicts are primarily decided under the “federal preemption doctrine,” which asks whether a state’s attempted regulation or taxation of non-Indian activities in Indian Country is preempted by federal statutes or treaties, taking into account overarching notions of tribal sovereignty.[148]
Generally, state taxes apply to everyone “outside a tribe’s reservation” and are “federally preempted only where the state law is contrary to express federal law.”[149] Within Indian Country, on the other hand, “the initial and frequently dispositive question in Indian tax cases is who bears the legal incidence of the tax.”[150] When the legal incidence falls on tribes, tribal members, or tribal corporations,[151] “[s]tates are categorically barred” from implementing the tax.[152]
When the legal incidence falls on non-Indians, however, a more nuanced analysis applies. Although, historically, the U.S. Supreme Court asked whether any assertion of state power on Indian land would impinge on the tribal right to make its own laws and be ruled by them, in recent years, the High Court has moved away from that inherent tribal sovereignty analysis in favor of a federal preemption regime.[153] Because Congress does not often explicitly preempt state law,[154] the Supreme Court and the lower federal courts engage in a balancing act to determine whether tribal self-governance rights, bolstered by federal laws, preempt state laws.[155] This balancing act weighs a state’s interest in policing non-Indian conduct against combined federal and tribal interests in regulating affairs that arise out of tribal lands within the state’s boundaries.[156]
In New Mexico v. Mescalero Apache Tribe,[157] the Supreme Court explained that “state jurisdiction is preempted by the operation of federal law if it interferes or is incompatible with federal and tribal interests embodied in federal law, unless the state interests at stake are sufficient to justify the assertion of state authority.”[158] In Mescalero, the Court held that New Mexico could not impose its own fishing and hunting regulations on non-Indians on the reservation because of strong federal interests in “tribal self-sufficiency and economic development” and a lack of state interests.[159]
When non-Indian parties operate in Indian Country, lawyers must proactively evaluate whether, or to what extent, a state or local government’s interest in policing or taxing conduct that relates to neighboring tribal lands outweighs relevant federal and tribal interests pertaining to that same conduct arising within those lands. The issues of preemption and infringement are regularly litigated in the federal courts.
Williams v. Martorello, 143 F.4th 555 (4th. Cir. 2025).
In Williams, the court considered whether a district court had erred in evaluating the lawfulness of loans issued by Matt Martorello and a group of tribal lending entities (the “Entities”) under Virginia, rather than tribal, law. According to five Virginia citizens (the “Borrowers”) who had received loans from the Entities, Martorello and the Lac Vieux Desert Band of Chippewa Indians (the “Tribe”) had established the Entities under tribal law as a means to cloak the Entities in the sovereign immunity of the Tribe, thereby precluding the enforcement of otherwise applicable usury laws capping interest rates. After the district court granted summary judgment in favor of the Borrowers, Martorello argued, among other things, that the district court erred in evaluating the lawfulness of loans issued by the Entities to the Borrowers under Virginia (and not tribal) law.
The Fourth Circuit rejected Martorello’s argument, concluding that the district court had properly applied Virginia law to evaluate the lawfulness of the loans issued to the Borrowers. In making this determination, the court determined that a White Mountain Apache Tribe v. Bracker, 448 U.S. 136 (1980) analysis was inapplicable to the challenged conduct because: 1) the Entities’ lending activities were broadly marketed online and in direct mailing to consumers; 2) the Borrowers lived off the Tribe’s reservation when they applied for and made payments under the loans; 3) the Borrowers were not tribal members; and 4) the effect of the challenged lending practices were felt off the Tribe’s reservation through collection and other actions. The court therefore applied Mescalero Apache Tribe v. Jones, 411 U.S. 145 (1973) and held that because Martorello and the Entities’ “challenged conduct was clearly part of the Tribe’s off-reservation conduct subject to nondiscriminatory state regulation,” the district court properly applied Virginia law to evaluate the lawfulness of the loans issued to the Borrowers.
City of Tulsa v. O’Brien, S-2023-715, 2024 WL 5001684 (Okla. Crim. App. Dec. 5, 2024).
In City of Tulsa, the Oklahoma court of criminal appeals evaluated whether the city of Tulsa (the “City”) had jurisdiction to prosecute traffic misdemeanors that were allegedly committed by Nicholas Ryan O’Brien (“O’Brien”), a member of the Osage Nation tribe, within the concurrent boundaries of the City and the Muscogee (Creek) Nation (the “Tribe”). The court ultimately determined that the City’s jurisdiction to prosecute O’Brien was not preempted under federal law or by principles of tribal self-government. Accordingly, the court held that City could prosecute O’Brien.
In reaching the above conclusion, the court began by noting that “unless preempted by federal law, as a matter of state sovereignty, a State has jurisdiction over all of its territory, including Indian country.” But at the same time, the court also noted that “Tribes have the inherent power to regulate their own members and internal affairs through tribal self-government.” Accordingly, the court applied the following overarching principle to resolve the issue before it: “a State’s jurisdiction in Indian country may be preempted (1) by federal law under ordinary principles of federal preemption, or (ii) when the exercise of state jurisdiction would unlawfully infringe on tribal government.”
Applying the above rule, the court held that the City’s criminal jurisdiction to prosecute O’Brien was not preempted under federal law or by principles of self-government. First, the court held that neither the General Crimes Acts, Public Law 280, the Indian Civil Rights Act, the Tenth Amendment, nor Supreme Court caselaw preempted the City’s authority to prosecute O’Brien’s alleged crimes. Second, the court determined that the City’s prosecution of O’Brien was not preempted by principles of tribal self-government because the prosecution did not affect the Muscogee (Creek) Nation’s authority to regulate its own citizens for violations of tribal law, did not harm the federal interest in protecting Indians on the Creek reservation, and promoted the City’s strong sovereign interest in ensuring public safety on the roads and highways of its territory. Accordingly, the court authorized the City to proceed with its prosecution of O’Brien.
§ 6. Conclusion
Economic growth and development throughout Indian Country have spurred many businesses to engage in business dealings with tribes and tribal entities. Confusion may arise during these transactions because of the unique sovereign and jurisdictional characteristics attendant to business transactions in Indian Country. As a result, these transactions have prompted increased litigation in tribal and nontribal forums. Accordingly, counsel assisting in these transactions, or any subsequent litigation, should conduct certain due diligence with respect to the pertinent tribal organizational documents and governing laws that may collectively dictate and control the business relationship.
To maximize the client’s chances of a successful partnership with tribes and tribal entities, counsel should ensure that the transactional documents contain clear and unambiguous contractual provisions that address all rights, obligations, and remedies of the parties. Therefore, even if the deal fails, careful negotiation and drafting, and, in turn, thoughtful procedural and jurisdictional litigation practice, will allow the parties to more expeditiously litigate the merits of any dispute, without jurisdictional confusion. As business between tribes and nontribal parties continues to grow, ensuring that both sides of the transaction fully understand and respect the deal will lead to a long-lasting and beneficial business relationship for all.
Ed J. Hermes is a Partner at Snell & Wilmer L.L.P. and is based in the firm’s Phoenix, Arizona office. Ed is a litigator whose practice is focused on complex commercial, tax, construction, and property disputes, and disputes involving Federal Indian Law. Ed regularly appears on behalf of his clients in state, federal, and tribal courts and administrative tribunals throughout the Southwest. Having previously lived and worked in Indian Country, Ed also advises companies and economic development entities in conducting business and creating job opportunities in Indian Country. Ed is a member of the Native American Bar Association of Arizona, as well as admitted to practice law on the Navajo Nation.
Special thanks to Snell & Wilmer L.L.P. Litigation, Investigations, and Trials attorneys Courtney Moore, Matthew Racioppo, and Michael Feeney for their assistance in drafting this chapter, as well as Snell & Wilmer L.L.P.’s 2025 summer associate class. ↑
Zachary Smith is an attorney in the Commercial Litigation Group at Snell & Wilmer, L.L.P. Zach has assisted in the representation of a variety of clients across multiple industries and general commercial litigation matters. ↑
Christian Fernandez is an attorney in the Commercial Litigation Group at Snell & Wilmer, L.L.P. Christian has assisted in the representation of a variety of clients across multiple industries, including matters involving construction litigation, real estate litigation, general commercial litigation, and white-collar crime and investigations. ↑
The Honorable Sandra Day O’Connor, Lessons from the Third Sovereign: Indian Tribal Courts, 33 Tulsa L.J. 1 (1997). ↑
Jack F. Williams, Integrating American Indian Law into the Commercial Law and Bankruptcy Curriculum, 37 Tulsa L. Rev. 557, 560 (2001). See also Frank Pommersheim, What Must Be Done to Achieve the Vision of the Twenty-First Century Tribal Judiciary, 7 Kan. J.L. & Pub. Pol’y 8, 11–12 (1997). ↑
Frank Pommersheim, What Must Be Done to Achieve the Vision of the Twenty-First Century Tribal Judiciary, 7 Kan. J.L. & Pub. Pol’y 8, 17 (1997). ↑
Worcester v. Georgia, 31 U.S. (1 Pet.) 515, 559 (1832). ↑
Id.; Steven J. Gunn, Compacts, Confederacies, and Comity: Intertribal Enforcement of Tribal Court Orders, 34 N.M. L. Rev. 297, 306 (2004). ↑
Kristen Carpenter and Eli Wald, Lawyering for Groups: The Case of American Indian Tribal Attorneys, 81 Fordham L. Rev. 3085, 3159 (2013). ↑
SeeMontana v. United States, 450 U.S. 544, 566 (1981) (“Indian tribes retain inherent sovereign power to exercise some forms of civil jurisdiction over non-Indians on their reservations . . . .” (emphasis added)); Means v. Navajo Nation, 432 F.3d 924, 930 (9th Cir. 2005) (holding that the tribe had jurisdiction over defendant because he was an Indian by political affiliation). ↑
Indian Country includes: (1) all land within the limits of any Indian reservation; (2) “dependent Indian communities” within the borders of the United States; and (3) all Indian allotments, including rights-of-way. 28 U.S.C. § 1151 (2000). “Although [that] definition by its terms relates only to . . . criminal jurisdiction . . . it also generally applies to questions of civil jurisdiction . . . .” Alaska v. Native Vill. of Venetie Tribal Gov’t, 522 U.S. 520, 527 (1998). ↑
“The ownership status of land . . . is only one factor to consider in determining whether [tribal courts have jurisdiction over non-members]. It may sometimes be a dispositive factor.” Nevada v. Hicks, 533 U.S. 353, 360 (2001) (emphasis added). ↑
Water Wheel Camp Recreational Area, Inc. v. LaRance, 642 F.3d 802 (9th Cir. 2011); see also Iowa Mut. Ins. Co. v. LaPlante, 480 U.S. 9, 14 (1987) (“We have repeatedly recognized the Federal Government’s long-standing policy of encouraging tribal self-government. . . . This policy reflects the fact that Indian tribes retain ‘attributes of sovereignty over both their members and their territory . . . .’”) (quotingUnited States v. Mazurie, 419 U.S. 544, 557 (1975)). ↑
Lesperance v. Sault Ste. Marie Tribe of Chippewa Indians, 259 F. Supp. 3d 713, 716 (W.D. Mich. 2017) (a non-Indian sued the tribe in tribal court but provided notice in a letter to a customer representative and not to the tribal Secretary as required under the tribe’s waiver authority. The tribal trial court and appellate court upheld dismissal and the federal district court affirmed.). ↑
Water Wheel, 642 F.3d 802; Washington v. Confederated Tribes of the Colville Indian Reservation, 447 U.S. 134 (1980) (power to tax transactions on trust lands). Indian land in this context includes land owned by the tribe or its members as well as land owned in fee by the United States but held in trust for the benefit of the tribe or its members. Notably, the land beneath a navigable waterway is not “Indian land,” Montana v. United States, 450 U.S. 544 (1981); neither is land owned by the United States but with a right-of-way granted to a state for the purposes of the construction and use of a state highway, Strate v. A-1 Contractors, 520 U.S. 438 (1997). ↑
Plains Commerce, 554 U.S. 316 (2008). Although Montana originally pertained to civil jurisdiction over non-Indians on non-Indian fee lands within reservation boundaries (450 U.S. at 564), the Ninth Circuit Court of Appeals has previously maintained “that the general rule of Montana applies to both Indian and non-Indian lands.” Ford Motor Company v. Todeecheene, 394 F.3d 1170, 1178–79 (9th Cir. 2005), overruled on other grounds, 488 F.3d 1215 (9th Cir. 2007). More recently, however, the Ninth Circuit has indicated a reversion to its original rule. SeeWater Wheel, 642 F.3d 802. ↑
Id. It appears, however, that courts have become more sympathetic to the second exception as of late. See, e.g., Knighton v. Cedarville Rancheria of N. Paiute Indians, 922 F.3d 892, 905 (9th Cir.), cert. denied, 140 S. Ct. 513 (2019); Norton v. Ute Indian Tribe of the Uintah & Ouray Reservation, 862 F.3d 1236, 1246 (10th Cir. 2017). ↑
Exhaustion is not always required. SeeNat’l Farmers Union Ins. Co. v. Crow Tribe of Indians, 471 U.S. 845, 857 n. 21 (1985) (“We do not suggest that exhaustion would be required where an assertion of tribal jurisdiction is motivated by a desire to harass or is conducted in bad faith, or where the action is patently violative of express jurisdictional prohibitions, or where exhaustion would be futile because of the lack of an adequate opportunity to challenge the court’s jurisdiction.”). ↑
Id. at 857. (“Until petitioners have exhausted the remedies available to them in the Tribal Court system . . . it would be premature for a federal court to consider any relief.”); Progressive Advanced Ins. Co. v. Worker, No. CV-16-08107-PCT-DJH, 2017 U.S. Dist. LEXIS 19283 (D. Ariz. February 8, 2017) (“Progressive issued an insurance policy that listed a tribal member as a named insured and covered vehicles that were kept on tribal lands . . . however Progressive never mailed anything to an address on tribal lands. To the extent that factor is dispositive, it may be that the tribal court lacks jurisdiction. But this is a question that must be answered first by the tribal courts of the Navajo Nation.”). ↑
Whitetail v. Spirit Lake Tribal Ct., Civ. No. 07-0042, 2007 U.S. Dist. LEXIS 87312, at *4–5 (N.D. Nov. 28, 2007). The doctrine applies even to federal habeas corpus actions filed under 25 U.S.C. § 1303. See, e.g., Valenzuela v. Silversmith, No. 11-2212, 2012 WL 5507249 (10th Cir. Nov. 14, 2012). ↑
SeeRincon Mushroom, 490 Fed. Appx. 11, 13 (9th Cir. 2012) (“[H]old[ing] that the district court abused its discretion in dismissing the case rather than staying it.”); but seeProgressive Advanced Ins. Co. v. Worker, No. CV-16-08107-PCT-DJH, 2017 U.S. Dist. LEXIS 19283 (D. Ariz. February 8, 2017) (dismissing the case); Window Rock Unified School District v. Reeves, 2017 U.S. App. LEXIS 14254 (9th Cir. August 3, 2017) (same). ↑
Iowa Mut. Ins. Co. v. LaPlante, 480 U.S. 9, 19 (1987) (“If the Tribal Appeals Court upholds the lower court’s determination that the tribal courts have jurisdiction, petitioner may challenge that ruling in the District Court.”). ↑
SeeFord Motor Co. v. Todecheene, 474 F.3d 1196, 1197 (9th Cir. 2007), amended and superseded by 488 F.3d 1215, 1216 (9th Cir. 2007); Duncan Energy Co., Inc. v. Three Affiliated Tribes of the Fort Berthold Reservation, 27 F.3d 1294, 1300 (8th Cir. 1993); Plains Commerce Bank, 128 S. Ct. at 2726. It is unclear whether state courts must likewise abstain from hearing a matter arising on tribal lands until the tribal court has determined the scope of its own jurisdiction and entered a final ruling. In Drumm v. Brown, 245 Conn. 657, 716 A.2d 50 (Conn. 1998), the Connecticut Supreme Court held that “[o]ur analysis, which is based primarily on the three United States Supreme Court exhaustion cases, persuades us that the courts of this state must apply the exhaustion of tribal remedies doctrine.” 245 Conn. at 659. However, the Drumm Court found that exhaustion was not required in the absence of a pending action in tribal court. Id. at 684. ↑
Nat’l Farmers Union, 471 U.S. at 857; see,e.g., Evans v. Shoshone-Bannock Land Use Policy Comm’n, 4:12-CV-417-BLW, 2012 WL 6651194 (D. Idaho Dec. 20, 2012) (requiring plaintiff to exhaust its tribal court remedies). ↑
See, e.g., Bruce H. Lien Co. v. Three Affiliated Tribes, 93 F.3d 1412, 1421 (8th Cir. 1996). ↑
See id. at 17 (“At a minimum, exhaustion of tribal remedies means that tribal appellate courts must have the opportunity to review the determinations of the lower tribal courts.”); see alsoWhitetail v. Spirit Lake Tribal Ct., No. 07-0042, 2007 U.S. Dist. LEXIS 87312, at *4 (D.N.D. Nov. 28, 2007) (declining review of the case because the plaintiff had failed to exhaust his tribal court remedies). ↑
See Nat’l Farmers Union, 471 U.S. at 853 (reasoning that “a federal court may determine under § 1331 whether a tribal court has exceeded the lawful limits of its jurisdiction”). ↑
Id. (“Unless a federal court determines that the Tribal Court lacked jurisdiction . . . proper deference to the tribal court system precludes relitigation of issues raised . . . and resolved in the Tribal Courts.”). A thorough analysis of post-judgment proceedings is beyond the scope of this chapter, but there is case law on the issue. See, e.g., AT&T Corp. v. Coeur d’Alene Tribe, 295 F.3d 899, 903–04 (9th Cir. 2002); Burrell v. Armijo, 456 F.3d 1159, 1168 (10th Cir. 2006), cert.denied, 549 U.S. 1167 (2007); Brenner v. Bendigo, No. 13-0005, 2013 WL 5652457 (D.S.D. Oct. 15, 2013); Bank of America, N.A. v. Bills, No. 00-0450, 2008 WL 682399, at *5 (D. Nev. Mar. 6, 2008); First Specialty Ins. Corp. v. Confederated Tribes of Grand Ronde Community of Oregon, No. 07-0005, 2007 WL 3283699, at *4 (D. Or. Nov. 2, 2007); U.S. ex rel. Auginaush v. Medure, No. 12-0256, 2012 WL 5990274 (Minn. Ct. App. Dec. 3, 2012). ↑
Nevada v. Hicks, 533 U.S. 353, 369 (2001); Strate v. A-1 Contractors, 520 U.S. 438, 459 n. 14 (1997). ↑
El Paso Natural Gas v. Neztsosie, 526 U.S. 473 (1999). ↑
Maya Dominguez helped to research and summarize the cases in this section. Maya is a rising third-year law student at the Sandra Day O’Connor College of Law, Arizona State University, and expects to graduate in May 2026. ↑
SeeSanta Clara Pueblo v. Martinez, 436 U.S. 49, 57–58 (1978). ↑
Tribal immunity can be abolished via federal statute. Alvarado v. Table Mountain Rancheria, 509 F.3d 1008, 1015–16 (9th Cir. 2007) (“[The] cornerstone of federal subject matter jurisdiction is statutory authorization.”); E.F.W. v. St. Stephen’s Indian High School, 264 F.3d 1297, 1302 (10th Cir. 2001) (“Tribal sovereign immunity is a matter of subject matter jurisdiction.”); McClendon v. United States, 885 F.2d 627, 629 (9th Cir. 1989) (“The issue of sovereign immunity is jurisdictional in nature.”). Tribal immunity can be voluntarily waived. Kiowa Tribe of Okla. v. Mfg. Techs., 523 U.S. 751, 755–56 (1998); Filer v. Tohono O’odham Nation Gaming Enters., 129 P.3d 78, 83 (Ariz. Ct. App. 2006) (applying for a liquor license did not waive the tribe’s sovereign immunity); Seminole Tribe of Fla. v. McCor, 903 So. 2d 353, 359–60 (Fla. Dist. Ct. App. 2005) (purchasing liability insurance is not a clear waiver of a tribe’s sovereign immunity); Furry v. Miccosukee Tribe of Indians of Fla., 685 F.3d 1224, 1234 (11th Cir. 2012) cert. denied, 133 S. Ct. 663, 184 L. Ed. 2d 462 (U.S. 2012) (tribe did not waive its immunity from private tort actions by applying for a state liquor license). ↑
Plains Commerce Bank v. Long Family Land & Cattle, 554 U.S. 316 (2008). ↑
Kiowa Tribe, 523 U.S. at 760. The U.S. Constitution provides a basis for suits to enforce state election and campaign finance laws. The U.S. Supreme Court has yet to take a position on this matter. ↑
Santa Clara Pueblo v. Martinez, 436 U.S. 49, 58 (1978).↑
Id.; United States v. Oregon, 657 F.2d 1009, 1013 (9th Cir. 1981); Filer, 129 P.3d at 86; Bellue v. Puyallup Tribe of Indians, No. 94-3045 (Puyallup 1994); Colville Tribal Enter. v. Orr, 5 CCAR 1 (Colville Confed. 1998). ↑
Miccosukee Tribe of Indians v. Tein, 2017 Fla. App. LEXIS 11442 (Fla. App. August 9, 2017) (holding that evidence of vexatious and bad faith litigation did not amount to a waiver of immunity “even where the results are deeply troubling, unjust, unfair, and inequitable”). ↑
In re Greektown Holdings, LLC, No. 12-12340, 2012 WL 4484933 (E.D. Mich. Sept. 27, 2012), aff’d, 728 F.3d 567 (6th Cir. 2013) (holding that for Congress to waive the tribe’s immunity the waiver must be “express, unequivocal, unmistakable, unambiguous, clearly evident in statutory language, and allow the Court to conclude with perfect confidence that Congress intended to waive sovereign immunity”). See alsoDemontiney v. United States ex rel. Bureau of Indian Affairs, 255 F.3d 801, 811 (9th Cir. 2001); Sanchez v. Santa Ana Golf Club, Inc., 104 P.3d 548, 551 (N.M. Ct. App. 2004) (reasoning that ambiguity within an immunity waiver should be interpreted in favor of the Tribe). ↑
Contour Spa at the Hard Rock, Inc. v. Seminole Tribe of Fla., 692 F.3d 1200, 1206 (11th Cir. 2012) cert. denied, 133 S. Ct. 843 (2013) (holding Indian tribe’s removal of action to federal court did not waive its sovereign immunity). But seeGuidiville Rancheria of California v. United States, 2017 U.S. App. LEXIS 14394 (9th Cir. August 4, 2017) (holding that raising the issue of attorneys’ fees in the first instance was sufficient to constitute a waiver of the Tribe’s right to claim sovereign immunity when defendant subsequently claimed for fees against the tribe). ↑
Santa Clara Pueblo v. Martinez, 436 U.S. 49, 58 (1978) (internal quotation marks and citations omitted); see alsoGilbertson v. Quinault Indian Nation, 495 F. App’x 779 (9th Cir. 2012) (holding language in the Quinault Indian Nation’s employee handbook indicating that employees were protected by Title VII was not a sufficiently clear waiver of the Nation’s sovereign immunity). ↑
See, e.g., Memphis Biofuels, L.L.C. v. Chickasaw Nation Indus., Inc., 585 F.3d 917 (6th Cir. 2009) (holding that the presence of a sue-and-be-sued clause in the charter of a tribal corporation, alone, was “insufficient” to waive the corporation’s immunity because it made approval by the corporation’s board of directors a prerequisite to legal action by the corporation); accord Ninigret Dev. Corp v. Narragansett Indian Wetuomuck Hous. Auth, 201 F.3d 21, 30 (1st Cir. 2000) (holding that “the enactment of such an ordinance . . . does not waive a tribe’s sovereign immunity [where the ordinance] authorize[d] the [tribal corporation] to shed its immunity ‘by contract’” because “these words would be utter surplusage if the enactment of the ordinance itself served to perfect the waiver”); cf.Rosebud Sioux Tribe v. Val-U Constr. Co., 50 F.3d 560, 562 (8th Cir. 1995) (holding that the mere presence of an arbitration provision in the agreement represented a waiver of immunity from a judgment being enforced in federal court). ↑
Id. at 418; seeTrump Hotels and Casino Resorts Dev. Co. v. Rosow, No. X03CV034000160S, 2005 Conn. Super. LEXIS 1224, at *41 (Conn. Super. Ct. May 2, 2005) (concluding that the tribe “clearly and unequivocally waived sovereign immunity” in its contract). ↑
Calvello v. Yankton Sioux Tribe, 584 N.W.2d 108, 114 (S.D. 1998) (holding that the chairman of the tribal business committee did not have authority to waive immunity); see alsoSandlerin v. Seminole Tribe of Fla., 243 F.3d 1282, 1286–87 (11th Cir. 2001) (reasoning that the tribal chief did not have authority to waive the tribe’s immunity through contract where the tribal code provided procedure for effecting a waiver); Chance v. Coquille Indian Tribe, 963 P.2d 638, 639 (Or. 1998) (reasoning that the tribal corporation president did not have authority to bind the corporation to a contract waiving tribal immunity); Harris v. Lake of the Torches Resort and Casino, 363 Wis. 2d 656 (2015) (holding that a third-party workers compensation administrator lacked the authority to waive the tribe’s immunity). But seeRush Creek Solutions, Inc. v. Ute Mountain Ute Tribe, 107 P.3d 402, 407 (Colo. App. 2004) (holding that the tribal chief financial officer had apparent authority to waive immunity when the tribal law was silent). ↑
Blake Comeaux helped to research and summarize the cases in this section. Blake is rising third year law student at Washington University School of Law and expects to graduate in May 2026. ↑
Native American Distrib. v. Seneca-Cayuga Tobacco Co., 546 F.3d 1288, 1295 (10th Cir. 2008) (holding that, because the tribal enterprise was not a corporation with a “sue-and-be-sued clause,” the tribal enterprise was immune from suit, as it did not explicitly waive its sovereign immunity). C.f. Grand Canyon Skywalk Dev. LLC v. Cieslak, 2015 U.S. Dist. LEXIS 73186 (D. Nev. June 5, 2015) (holding that, while sovereign immunity may protect the tribal corporation, it does not extend to an employee of the tribal corporation to allow the employee to refuse to comply with a federal subpoena). ↑
SeeSeaport Loan Products v. Lower Brule Community Development Enterprise LLC, 2013 NY slip op. 651492/12 [Sup Ct. NY County 2013] (concluding that an independent, state-incorporated, for-profit tribal enterprise that was principally operating in the financial services markets, with separate assets, liabilities, purposes, and goals could not claim immunity); Arrow Midstream Holdings v. 3 Bears Construction LLC, 873 N.W.2d 16 (N.D. 2015) (holding that a corporation wholly owned by tribal members but incorporated under state law was a non-member entity for the purposes of litigation and therefore subject to state jurisdiction). ↑
25 U.S.C. § 463 (2000) (transferred to 25 U.S.C. § 5103); seeTOMAC v. Norton, 433 F.3d 852, 866–67 (D.C. Cir. 2006) (upholding Congress’s delegation of power to the Secretary to acquire land in trust for the tribe under § 1300j-5). ↑
Record of Decision, Trust Acquisition of, and Reservation Proclamation for the 151.87-acre Cowlitz Parcel in Clark County, Washington, for the Cowlitz Indian Tribe (Dec. 2010). The Cowlitz Indian Tribe was not federally recognized until 2002, but, in 2010, the BIA nonetheless approved a fee-to-trust application, determining that the tribe was “under Federal Jurisdiction” in 1934, even though the federal government did not believe so at that time. Id. The D.C. District Court upheld the BIA’s Record of Decision, Confederated Tribes of Grand Ronde Cmty. of Or. v. Jewell, 75 F. Supp. 3d 387 (D.D.C. 2014) and the D.C. Circuit upheld the District Court, Confederated Tribes of Grand Ronde Cmty. of Or. v. Jewell, 830 F.3d 552 (D.C. Cir. 2016); see also Record of Decision, Trust Acquisition and Reservation Proclamation for 151 Acres in the City of Taunton, Massachusetts, and 170 Acres in the Town of Mashpee, Massachusetts, for the Mashpee Wampanoag Tribe (Sept. 2015). Although the Interior Department did not federally acknowledge the Mashpee Wampanoag Tribe until 2007, Interior applied M-37029 Memorandum’s two-part test to determine that the Tribe was “under federal jurisdiction” in 1934, which provided the legal basis for the trust acquisition outlined in the 2015 Record of Decision and circumvented the Tribe’s Carcieri issues. However, the District Court of Massachusetts rejected the Secretary’s interpretation and has returned the decision to take land into trust on behalf of the Mashpee to the Secretary of Interior. Littlefield v. U.S. Dept. of Interior, 2016 U.S. Dist. LEXIS 98732 (D. Mass. July 28, 2016). ↑
See, e.g.,Stand Up for California! v. U.S. Dep’t of the Interior, 204 F. Supp. 3d 212 (D.D.C. 2016) (challenging the Department’s fee-to-trust decision for the benefit of the North Fork Rancheria of Mono Indians on the basis that the tribe wasn’t a “federally-recognized tribe under jurisdiction” in 1934 as required under Carcieri). ↑
The decision thus did not upset the rule that the “QTA provides the exclusive remedy for claims involving adverse title disputes with the government.” McMaster v. United States, 731 F.3d 881, 899 (9th Cir. 2013). ↑
The statute of limitations under the APA is six years. See, e.g., Cachil Dehe Band of Wintun Indians of Colusa Indian Cmty. v. Salazar, No. 12-3021, 2013 WL 417813, at *4 (E.D. Cal. Jan. 30, 2013) (holding that under Patchak, “federal district courts do have the power to strip the federal government of title to land taken into trust for an Indian tribe under the APA so long as the claimant does not assert an interest in the land.”). ↑
Land Acquisitions: Appeals of Land Acquisitions, 78 Fed. Reg. 67,928, 67,929 (Nov. 13, 2013) (codified at 25 C.F.R. pt. 151). ↑
Department of the Interior Bureau of Indian Affairs, Land Acquisitions (last visited Nov. 4, 2025). ↑
Connor O’Loughlin helped to research and summarize the cases in this section. Connor is a rising third-year law student at Georgetown University Law Center and expects to graduate in May 2026. ↑
But seeFederated Indians of Graton Rancheria v. Haaland, 762 F. Supp. 3d 888 (N.D. Cal. 2025) (holding that a procedural violation for a failure to consult was sufficient to grant standing). ↑
Axon Enter., Inc. v. Fed. Trade Comm’n, 598 U.S. 175 (2023). ↑
25 U.S.C. § 81 (2000) (Section 81). For a list of contracts that are exempt from secretarial approval, see 25 C.F.R. § 84.004 (2008). ↑
The approval process for alternative energy projects on tribal lands has been particularly burdensome. See Ryan Dreveskracht, The Road to Alternative Energy in Indian Country: Is It a Dead End?, 19 Indian L. Newsl. 3 (2011). For a jurisdictional analysis of the complications created by real property transactions in Indian Country see Grant Christensen, Creating Brightline Rules for Tribal Court Jurisdiction Over Non-Indians: The Case of Trespass to Real Property, 35 Am. Indian L. Rev. 527 (2011). ↑
Outsource Servs. Mgmt., LLC. v. Nooksack Bus. Corp., 198 Wash. App. 1032 (2017) (tribal business defaulted on a $15 million loan secured by future profits generated from tribal land on which the tribe intended to build a casino. When the tribe subsequently used the land—not for a casino but for other revenue raising operations—the creditor sought those profits to satisfy the loan obligation. The tribe claimed that the Creditor’s attempt would unlawfully encumber their lands in violation of 25 U.S.C. 81. The court disagreed, holding that “[t]he pledged security is not a legal interest in the land itself. Nor does [creditor]’s right interfere with the tribe’s exclusive proprietary control over the land” and that “[b]ecause the tribe retains complete control over the casino building and property and can use the facilities for any purpose, there is no encumbrance for purposes of Section 81, and thus the agreements did not require preapproval.”). ↑
25 U.S.C. §§ 2701–21 (1988). The jurisdictional and regulatory powers of the NIGC have received criticism in several court decisions. In October 2006, the U.S. Court of Appeals for the District of Columbia Circuit ruled that the IGRA did not confer authority upon the NIGC to promulgate operational control regulations for Class III gaming operations. SeeColo. River Indian Tribes v. Nat’l Indian Gaming Comm’n, 466 F.3d 134, 140 (D.C. Cir. 2006); Colo. River Indian Tribes v. Nat’l Indian Gaming Comm’n, 383 F. Supp. 2d 123, 137 (D.D.C. 2005). The Colorado River Indian Tribes cases are significant because some Indian tribes have interpreted the trial court’s decision to mean that the NIGC has no regulatory authority whatsoever over Class III gaming. Indeed, in the wake of the decision, several tribes advised the NIGC that they believe the decision strips the NIGC of all regulatory power over Class III gaming and therefore will not permit any NIGC auditors or other oversight into their casinos. As a result, the NIGC filed a petition for a panel rehearing in late December 2006. This petition was denied per curiam on Dec. 27, 2007. Colo. River Indian Tribes, 466 F.3d 134 (denying the motion for rehearing). ↑
25 U.S.C. § 2711; First Am. Kickapoo Oper. v. Multimedia Games, Inc., 412 F.3d 1166, 1172 (10th Cir. 2005); United States v. President, 451 F.3d 44, 50 n.5 (2d Cir. 2006). ↑
25 U.S.C. § 264 (1882); 25 C.F.R. §§ 140–41 (1996). “Trading” is broadly defined as “buying, selling, bartering, renting, leasing, permitting and any other transaction involving the acquisition of property or services.” 25 C.F.R. § 140.5(a)(6) (1984). For an example of tribal business license requirements, seeNavajo Nation Code, 5 N.N.C. § 401, et seq. (2005). ↑
See 25 C.F.R. § 140.3. Dahlstrom v. Sauk-Suiattle Indian Tribe, No. C16-0052JLR, 2017 U.S. Dist. LEXIS 40654 (W.D. Wash. March 21, 2017) (a former employee brought a qui tam action against the tribe and against a medical clinic for filing false claims through the Indian Health Service (IHS)). The court barred the action against the tribe; “Like a state, a Native American tribe ‘is a sovereign that does not fall within the definition of a ‘person’ under the FCA.’” However, the court held that the medical clinic was not “an arm of the tribe” and so it was ineligible to claim sovereign immunity. ↑
Any failure of a federal agency to complete its obligations in relation to Indian lands can be catastrophic to businesses operating under federal permits. See, e.g., Tribe v. U.S. Forest Serv., No. 13-0348, 2013 WL 5212317 (D. Idaho Sept. 12, 2013). ↑
See, e.g., Middletown Rancheria of Pomo Indians v. Workers’ Comp. Appeals Bd., 71 Cal. Rptr. 2d 105, 114–15 (Cal. Ct. App. 1998) (holding that the Workers’ Compensation Board has no jurisdiction over tribe); Tibbets v. Leech Lake Reservation Bus. Comm’n, 397 N.W.2d 883, 890 (Minn. 1986) (holding Minnesota workers’ compensation law inapplicable to tribal employer); see generallyNew Mexico v. Mescalero Apache Tribe, 462 U.S. 324, 332–33 (1983) (discussing applicability of state laws to tribes). ↑
Seegenerally Steven G. Biddle, Indian Law Theme Issue: Labor and Employment Issues for Tribal Employers, 34 Ariz. Att’y 16 (1998) (discussing the applicability of federal labor and employment laws to tribal employers); but seeState ex rel. Indus. Comm’n v. Indian Country Enters., Inc., 944 P.2d 117 (Idaho 1997) (applying 40 U.S.C. § 290 to require the application of state workers’ compensation laws to tribal companies incorporated under state law); State ex rel. Workforce Safety & Ins. v. J.F.K. Raingutters, 733 N.W.2d 248, 253–54 (N.D. 2007) (same); Martinez v. Cities of Gold Casino, Pojoaque Pueblo, and Food Industries Self-Insurance Fund, No. 28,762, slip op. at ¶ 27 (N.M. Ct. App. filed Apr. 24, 2009) (holding that a tribal corporation waived immunity from claims brought under the Workers’ Compensation Act by voluntarily complying with other provisions of the act and submitting to the jurisdiction of the Workers’ Compensation Administration). ↑
42 U.S.C. §§ 2000e–2000e-17 (1991). Bruguier v. Lac du Flambeau Band of Lake Superior Chippewa Indians, 237 F. Supp. 3d 867 (W.D. Wis. 2017) (“Title VII expressly does not authorize suits against tribes; “the term employer . . . does not include . . . an Indian tribe . . . .”). ↑
Id. §§ 2000e(b)(1), 12111(5). Additionally, discrimination based on tribal affiliation is often not considered unlawful national origin discrimination. See, e.g., E.E.O.C. v. Peabody W. Coal Co., No. 12-17780, 2014 WL 6463162 (9th Cir. Nov. 19, 2014) (discrimination based on tribal affiliation as it relates to lease agreements containing a Navajo reference in hiring provision does not constitute unlawful national origin discrimination but is a political classification and, thus, not within the scope of Title VII of the Civil Rights Act). See alsoMorton v. Mancari, 417 U.S. 535 (1974) (holding that the United States Department of Interior may affirmatively hire and promote American Indians because the preference is based on a political classification (membership in a federally recognized tribe) and not a racial classification and is, therefore, subject only to rational basis scrutiny to avoid constitutional challenge). ↑
See, e.g., Ariz. Rev. Stat. Ann. § 41-1464 (2005) (exempting tribes from Arizona’s discrimination laws). Even if a state’s antidiscrimination laws do not provide an express exemption, the doctrine of sovereign immunity will ordinarily operate to achieve the same effect. SeeSanchez v. Santa Ana Golf Club, Inc., 104 P.3d 548, 554 (N.M. Ct. App. 2004) (affirming dismissal of employee’s state law discrimination claim based on tribal employer’s sovereign immunity); see alsoAroostook Band of Micmacs v. Ryan, 404 F.3d 48, 67–68 (1st Cir. 2005) (discussing the probable inapplicability of state antidiscrimination laws to a tribal employer). ↑
SeeHardin v. White Mountain Apache Tribe, 779 F.2d 476, 479 (9th Cir. 1985) (extending the tribe’s sovereign immunity to tribal officials acting in a representative capacity). ↑
N.L.R.B. v. Pueblo of San Juan, 276 F.3d 1186, 1200 (10th Cir. 2002) (holding NLRA inapplicable to tribes); E.E.O.C. v. Fond du Lac Heavy Equip. & Const. Co., 986 F.2d 246, 248 (8th Cir. 1993) (refusing to apply the ADEA to an Indian employed by the tribe); Donovan v. Navajo Forest Prods. Indus., 692 F.2d 709, 712 (10th Cir. 1982) (holding OSHA inapplicable to the tribe partly because enforcement “would dilute the principles of tribal sovereignty and self-government recognized in the treaty”). ↑
Menominee Tribal Enter. v. Solis, 601 F.3d 669 (7th Cir. 2010) (applying OSHA); Lumber Indus. Pension Fund v. Warm Springs Forest Prods. Indus., 939 F.2d 683, 683 (9th Cir. 1991) (applying ERISA); U.S. Dep’t of Labor v. OSHA Rev. Comm’n, 935 F.2d 182, 182 (9th Cir. 1991) (applying OSHA); Smart v. State Farm Ins., 868 F.2d 929, 935 (7th Cir. 1989) (stating the “argument that ERISA will interfere with the tribe’s right of self-government is over-broad,” and applying ERISA); Donovan v. Coeur d’Alene Tribal Farm, 751 F.2d 1113, 1116–17 (9th Cir. 1985) (right of self-government is too broad to defeat applicability of OSHA); see alsoReich v. Mashantucket Sand & Gravel, 95 F.3d 174 (2d Cir. 1996) (following Ninth and Seventh Circuits to apply OSHA). ↑
SeeReich v. Great Lakes Indian Fish and Wildlife Comm’n, 4 F.3d 490, 493–94 (7th Cir. 1993) (holding that the tribe’s law enforcement officers were exempt from FLSA, but noting that not all employees of tribes are exempt); Solis v. Matheson, 563 F.3d 425, 434–35 (9th Cir. 2009) (applying FLSA to retail business on tribal land because business did not involve tribal self-governance and was not protected by treaty rights). ↑
Reich, 4 F.3d at 493–94; Lumber Indus. Pension Fund, 939 F.2d at 683; U.S. Dept. of Labor, 935 F.2d at 182; Smart, 868 F.2d at 935; Donovan, 751 F.2d at 1113; see alsoMashantucket Sand & Gravel, 95 F.3d at 174. ↑
Cf.Multimedia Games, Inc. v. WLGC Acquisition Corp., 214 F. Supp. 2d 1131, 1131 (N.D. Okla. 2001) (holding that the federal Copyright Act of 1976 was inapplicable to tribes). ↑
White v. Univ. of California, 765 F.3d 1010, 1025 (9th Cir. 2014). ↑
The Plaintiff attempted to use Lac du Flambeau Band of Lake Superior Chippewa Indians v. Coughlin, 599 U.S. 382 (2023) to broaden the definition of “public agency” to include all governmental units, including tribal governments. The court rejected this expansion by distinguishing Coughlin based on the difference in terms used. Coughlin used the term “governmental unit” which was broadly defined, while the FMLA used the term “public agency,” a term without such broad a definition. ↑
28 U.S.C. § 1331 (“Federal Question: The district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States.”). ↑
Id. § 1332 (“Diversity of Citizenship: The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between—(1) citizens of different states . . . .”). ↑
SeePeabody Coal Co. v. Navajo Nation, 373 F.3d 945, 945 (9th Cir. 2004) (dismissing a complaint against the Navajo Nation that sought enforcement of an arbitration agreement for lack of federal question jurisdiction); accord,TTEA v. Ysleta Del Sur Pueblo, 181 F.3d 676, 681 (5th Cir. 1999) (“The federal courts do not have jurisdiction to entertain routine contract actions involving Indian tribes.”); Gila River Indian Cmty. v. Henningson, Durham & Richardson, 626 F.2d 708, 714–15 (9th Cir. 1980) (finding “no reason to extend the reach of the federal common law to cover all contracts entered into by Indian tribes”). See alsoBurlington N. & Santa Fe Ry. Co. v. Vaughn, 509 F.3d 1085, 1089 (9th Cir. 2007) (holding that a federal court may review a denial of sovereign immunity by interlocutory appeal). ↑
SeeYsleta Del Sur Pueblo, 181 F.3d at 681 (holding that “an anticipatory federal defense is insufficient for federal jurisdiction”). ↑
SeePayne v. Miss. Band of Choctaw Indians, 159 F. Supp. 3d 724, 726–27 (S.D. Miss. 2015); Am. Vantage Cos. v. Table Mountain Rancheria, 292 F.3d 1091, 1095 (9th Cir. 2002); Akins v. Penobscot Nation, 130 F.3d 482, 485 (1st Cir. 1997); Romanella v. Hayward, 114 F.3d 15, 16 (2d Cir. 1997); Gaines v. Ski Apache, 8 F.3d 726, 728–29 (10th Cir. 1993); Oneida Indian Nation v. Cnty. of Oneida, 464 F.2d 916, 923 (2d Cir. 1972), rev’d and remanded on other grounds, 414 U.S. 661 (1974); Standing Rock Sioux Indian Tribe v. Dorgan, 505 F.2d 1135, 1040–41 (8th Cir. 1974); Tenney v. Iowa Tribe of Kan., 243 F. Supp. 2d 1196, 1198 (D. Kan. 2003); Victor v. Grand Casino-Coushatta, No. 02-2348, 2003 U.S. Dist. LEXIS 24770, at *4 (D. La. Jan. 21, 2003); Worrall v. Mashantucket Pequot Gaming Enter., 131 F. Supp. 2d 328, 329–30 (D. Conn. 2001); Barker-Hatch v. Viejas Group Baron Long Capitan Grande Band of Digueno Mission Indians of the Viejas Group Reservation, 83 F. Supp. 2d 1155, 1157 (D. Cal. 2000); Abdo v. Fort Randall Casino, 957 F. Supp. 1111, 1112 (D.S.D. 1997); Calvello v. Yankton Sioux Tribe, 899 F. Supp. 431, 435 (D.S.D. 1995); Whiteco Metrocom Div. v. Yankton Sioux Tribe, 902 F. Supp. 199, 201 (D.S.D. 1995); Weeder v. Omaha Tribe of Neb., 864 F. Supp. 889, 898–99 (N.D. Iowa 1994); GNS, Inc. v. Winnebago Tribe, 866 F. Supp. 1185, 1191 (D. Iowa 1994). But seeCook, 548 F.3d at 723 (holding that, for diversity purposes, a tribal corporation is “a citizen of the state where it has its principal place of business”). Cf.R.J. Williams Co. v. Fort Belknap Hous. Auth., 719 F.2d 979, 982 (9th Cir. 1983) (stating that the tribal corporation had its principal place of business in Montana); R.C. Hedreen Co. v. Crow Tribal Hous. Auth., 521 F. Supp. 599, 602–03 (D. Mont. 1981) (stating that a tribal corporation had its principal place of business in Montana and “[a]ccordingly, it is a citizen of the state for purposes of diversity jurisdiction”); Parker Drilling Co. v. Metlakatla Indian Cmty., 451 F. Supp. 1127, 1138 (D. Alaska 1978) (“As [the tribal corporation’s] only major business activities, and situs, are located in Alaska, it is an Alaskan corporation for diversity purposes.”). ↑
See Inglish Interests LLC v. Seminole Tribe of Florida, 2011 U.S. Dist. LEXIS 6123 (M.D. Fla. January 21, 2011) (describing this split). ↑
Wells Fargo Bank, Nat’l Ass’n v. Lake of Torches Econ. Dev. Corp., 658 F.3d 684 (7th Cir. 2011). ↑
See Gila River Indian Cmty. v. Henningson, Durham & Richardson, 626 F.2d 708 (9th Cir. 1980). ↑
Iowa Mut. Ins. Co. v. LaPlante, 480 U.S. 9, 15 (1987). ↑
White Mountain Apache Tribe v. Bracker, 448 U.S. 136, 143 (1980). ↑
Mescalero Apache Tribe v. Jones, 411 U.S. 145, 148–49 (1973); Cabazon Band of Mission Indians v. Smith, 388 F.3d 691, 694–95 (9th Cir. 2004). ↑
Wagnon v. Prairie Band Potawatomi Nation, 546 U.S. 95, 101 (2005). ↑
There has been some question as to what exactly constitutes a tribally owned corporation. The general rule is that “[a] subdivision of tribal government or a corporation attached to a tribe may be so closely allied with and dependent upon the tribe that it is effectively an arm of the tribe. It is then actually a part of the tribe per se” and is nontaxable. Uniband, Inc. v. C.I.R., 140 T.C. 230, 252 (U.S. Tax Ct. 2013) (quotation omitted). Although preemption of state taxes “is most assured for tribal corporations organized pursuant to federal or tribal law,” Cohen’s Handbook of Federal Indian Law § 8.06 (2012 ed.), “the mere organization of such an entity under state law does not preclude its characterization as a tribal organization as well.” Duke v. Absentee Shawnee Tribe of Okla. Housing Auth., 199 F.3d 1123, 1125 (10th Cir. 1999). ↑
Wagnon v. Prairie Band Potawatomi Nation, 546 U.S. 95, 101 (2005); see also Bercier v. Kiga, 103 P.3d 232, 236 (Wash. Ct. App. 2004) (“[T]he State may not tax Indians or Indian tribes in Indian country . . . .”) (citing Wash. Admin. Code § 458-20-192(5)); Pourier v. S. D. Dept. of Revenue, 658 N.W.2d 395, 403 (S.D. 2003), aff’d in relevant part and rev’d in part on other grounds on reh’g, 674 N.W.2d 314 (S.D. 2004) (“If the legal incidence of a tax falls upon a Tribe or its members . . . the tax is unenforceable.”). See also Seminole Tribe of Florida v. Stranburg, 799 F.3d 1324, 1345–46 (11th Cir. 2015) (reaffirming the legal incidence test but determining that a gross receipts tax more properly fell on utility companies instead of the tribe and, therefore, the tax was not preempted). ↑
SeeMcClanahan v. Ariz. State Tax Comm’n, 411 U.S. 164, 172-–73 (1973). ↑
Williams v. Lee, 358 U.S. 217, 220 (1959); but see 25 C.F.R. § 162.415(c) (“Any permanent improvements” on business leased Indian land “shall not be subject to any fee, tax, assessment, levy, or other such charge imposed by any State or political subdivision of a State, without regard to ownership of those improvements.”). See alsoCalifornia v. Cabazon Band of Mission Indians, 480 U.S. 202, 216 (1987) (“Decision in this case turns on whether state authority is pre-empted by the operation of federal law; and “[state] jurisdiction is pre-empted . . . if it interferes or is incompatible with federal and tribal interests reflected in federal law, unless the state interests at stake are sufficient to justify the assertion of state authority.”). ↑
Id. at 144; see alsoAroostook Band of Micmacs v. Ryan, No. 03-0024, 2007 WL 2816183, at *4, *9–11 (D. Me. Sept. 27, 2007) (discussing whether federal law or state law affects the Aroostook Band, even though the tribe is exempt from state civil and criminal laws). ↑
New Mexico v. Mescalero Apache Tribe, 462 U.S. 324 (1983). ↑
Recently, a number of corporations have moved their state of incorporation away from Delaware.[1] Many more are now considering doing so. The movement to leave Delaware as a state of incorporation, or “DEXIT,” initially garnered momentum following Elon Musk and Tesla’s June 2024 noisy, high-profile departure to Texas. This movement gained more steam with a July 2025 article posted online by Jai Ramaswamy, Andy Hill, and Kevin McKinley of Andreessen Horowitz arguing in favor of leaving Delaware as a state of incorporation.[2] Most corporations considering leaving Delaware for more pro-management jurisdictions, it seems, have focused primarily on moving to Texas or Nevada. However, we believe that one nearby state, Maryland, perhaps being overlooked due to its liberal politics, provides the sort of pro-management corporation law sought by these corporations and should be considered before deciding on Texas or Nevada.
To start, Maryland is well-accepted by Wall Street as a state of incorporation for public companies, particularly in the real estate investment trust (“REIT”) sector. Over 70 percent of publicly traded REITs are incorporated or formed in Maryland.[3] Further, many mutual funds and mutual fund complexes have also historically been incorporated in Maryland. The data demonstrates that of new initial public offerings (“IPOs”) in excess of $250 million (excluding SPACs) from 2022 through the end of the first half of 2025, most companies still selected Delaware (on average about 80 percent of IPOs per year); but Nevada and Maryland were running nearly even in second place with 5–10 percent of the IPOs on average each year.[4] Only one other state, Florida, had two IPOs. All other states had one or none.
Why Maryland? The Maryland General Corporation Law (“MGCL”) includes a number of statutory provisions unique to Maryland that are not found in the corporation laws of any other state and that give directors of Maryland corporations protection, flexibility, leeway, and deference in decision-making—and, as a result, provide greater leverage in dealing with third parties, particularly in the context of an acquisition of control.
“Just Say No” Defense
One such provision is Maryland’s “just say no” provision. MGCL section 2‑405.1(f)(1) establishes that directors are not required to accept, recommend, or respond to acquisition proposals. This provision effectively grants directors the absolute statutory authority to decline takeover bids outright.
By contrast, in Delaware, the directors’ “just say no defense” has developed by case law; is not absolute; has seemingly ebbed and flowed in its strength over the decades; and is subject to a heightened scrutiny review, which has been rejected by statute in Maryland. (See the “Anti-Unocal” discussion below.) While Nevada similarly rejects enhanced scrutiny review in this context, Texas and Nevada grant directors only general authority to manage corporate affairs through business-judgment principles without expressly recognizing “just say no” as a statutory right.
Anti-Revlon
Maryland rejects Delaware’s Revlon duty requiring boards to maximize price when a sale becomes inevitable. Under MGCL section 2-405.1(f)(5)(ii), directors are not required to act based solely on the amount or form of consideration offered in a potential change of control. Maryland, in MGCL section 2-405.1(h), also bars courts from applying heightened scrutiny to board decisions, including those relating to acquisitions. Moreover, the statute makes these provisions the exclusive source of director duties, preventing the importation of judicially created Revlon-style obligations. The Maryland General Assembly adopted these provisions specifically to override the Maryland Court of Appeals’ suggestion of judicially created enhanced duties in a sale context in Shenker v. Laureate Education, Inc.[5]
While there is little case law in Nevada interpreting its statute, the Nevada statute seems similarly to reject Revlon by virtue of its constituency provision, which allows directors of a Nevada corporation to consider many other constituencies, such as employees, suppliers, creditors, or customers, and put the interests of those constituencies ahead of the interests of stockholders. Constituency statutes, however, come with their own disadvantages since it may become more difficult to attract investors and raise capital if directors are permitted to place the interests of other constituencies ahead of the investor/stockholder.
By contrast, Texas has not expressly rejected Revlon by statute or caselaw in hostile takeover settings, leaving Texas’s takeover standards uncertain. Maryland, on the other hand, clearly allows boards to reject unsolicited bids and eliminates any auction duties, but at the same time remains attractive to investors and capital formation because it does not allow directors to place other constituencies ahead of stockholders in their corporate decision-making.
Anti-Unocal
Delaware applies enhanced scrutiny to defensive measures, particularly in a change in control context under the Unocal Corp. v. Mesa Petroleum Co. framework,[6] requiring directors to reasonably identify a threat and adopt a proportionate response. Unitrin, Inc. v. American General Corp. clarifies that coercive or preclusive defenses fall outside the range of reasonableness and fail enhanced review.[7] Accordingly, Delaware boards bear the burden of justifying the proportionality of defensive actions under Unocal.
Maryland law takes a significantly different approach by having a statutory anti-Unocal provision that ensures that all decisions, including those related to changes in control and those involving the exercise of the rights of stockholders, are reviewed solely under the lens of the business judgment rule, without any heightened scrutiny standard.
Nevada mostly rejects Unocal-style enhanced scrutiny and applies the business judgment rule. Nevada does, however, apply Unocal-style heightened scrutiny in cases involving the exercise of the voting rights of stockholders generally, and specifically with respect to the removal of directors. Texas has not yet resolved whether Unocal applies.
Unsolicited Takeovers Act
By providing directors with a unique and immediate charter-bypassing authority, Maryland’s Unsolicited Takeovers Act (“MUTA”) gives boards of certain public companies superior flexibility and speed to resist hostile takeover bids. It authorizes directors, “notwithstanding any provision in the charter or bylaws,” to adopt certain enumerated takeover defenses, including staggered board terms, supermajority removal requirements, exclusive authority to set board size, and exclusive control over filling board vacancies. Election into MUTA requires only board action, allowing swift adoption even during a takeover attempt. With these available tools at boards’ disposal, MUTA ensures that boards can establish stability at critical moments without stockholder approval.
Delaware, Texas, and Nevada allow similar defenses only if adopted in governing documents. Many of these defenses require charter amendments, necessitating stockholder approval (often unattainable as a practical matter), while some may be adopted through board-approved bylaw amendments. Only in one other state, Indiana, does any U.S. corporation law grant the board MUTA’s level of unilateral statutory authority to override the charter and bylaws.
Bylaw Allocation Authority
The balance of power between the board and stockholders often plays out on the issue of who has the power to amend or repeal corporate bylaws. Ensuring that this power resides in the board is helpful in protecting directors from activist-driven proposals and can be fundamental to stable governance. MGCL section 2-104(b)(1) permits Maryland corporations to vest exclusive authority in the board of directors to amend or repeal bylaws, thereby eliminating stockholder amendment rights if the charter or bylaws so provide. This ensures that directors, not stockholders, control foundational governance rules, which, in turn, insulates boards from campaigns that seek to mandate proxy access, special meeting rights, or other potentially destabilizing measures.
Delaware, by contrast, reserves bylaw authority primarily to stockholders, permitting concurrent board power only if expressly provided in the charter, and does not permit the elimination of this stockholder power. Texas and Nevada also authorize both directors and stockholders to adopt or amend bylaws. None of the three, however, provide Maryland’s statutory approval of exclusive board power over bylaws. Maryland, therefore, gives directors greater certainty and protection against activist pressure through bylaw proposals.
Indemnification and Exculpation
Maryland offers broad indemnification and exculpation protections for directors and officers. MGCL section 2-418 authorizes indemnification for judgments, settlements, and expenses in both third-party and derivative actions; permits advancement upon an undertaking; and extends coverage to officers, employees, and agents. Maryland’s indemnification statute permits indemnification unless the director (i) acted in bad faith; (ii) acted with active and deliberate dishonesty; (iii) received an improper personal benefit; or (iv) in a criminal case, knew that their action was unlawful. Maryland law also allows corporations to exculpate directors and officers from personal liability, subject only to two narrow exceptions: (i) where the director receives an improper personal benefit or (ii) where the director engaged in active and deliberate dishonesty. These provisions reduce litigation risk and give directors confidence to act decisively.
In comparison, Delaware’s indemnification under Delaware General Corporation Law section 145 and exculpation under section 102(b)(7) is narrower, and its officer exculpation was only recently added in 2022.
Texas’s indemnification statute permits indemnification unless the director engaged in (i) willful or intentional misconduct, (ii) breached their duty of loyalty, or (iii) committed an action not in good faith that constituted a breach of duty to the corporation. Both the “breach of duty of loyalty” prong and the “any other breach not in good faith” prong seem to provide less indemnification protection to directors of a Texas corporation than what directors of a Maryland corporation receive. Similarly, Texas’s exculpation statute allows a Texas corporation to adopt a provision in its Certificate of Formation, eliminating the liability of directors for monetary damages unless the director (i) breaches the duty of loyalty, (ii) commits an action not in good faith that either constitutes a breach of duty to the corporation or involves intentional misconduct or a knowing violation of law, (iii) receives an improper personal benefit, or (iv) is otherwise liable under another Texas statute. Thus, Texas’s exculpation exceptions are much broader and less protective of directors than those under the Maryland statute, although the new “codified business judgment rule” provisions of Senate Bill (“SB”) 29, discussed below, in circumstances in which they may apply, may limit liability for or exculpate certain directors unless that director committed (i) fraud, (ii) intentional misconduct, (iii) an ultra vires act, or (iv) a knowing violation of law.
Nevada law on exculpation is similar to that of Texas under SB 29 in that, under Nevada Revised Statutes (“NRS”) section 78.138, directors are presumed to act in good faith, on an informed basis, and with a view to the interests of the corporation—and only if that standard is rebutted and only if it is established that the director committed (i) fraud, (ii) intentional misconduct, or (iii) a knowing violation of law can a director be liable. Nevada law, however, differs from all of the other states in that this is the default law, unless the corporation’s articles provide otherwise; and it differs from Texas in that this standard applies to all Nevada corporations, not only to public corporations or certain Nevada corporations. Nevada’s indemnification statutes (NRS sections 78.7502 and 78.751) appear to be among the most permissive of the group, permitting indemnification unless the director (i) is adjudged liable pursuant to the very pro-director standard of NRS section 78.138 set forth above or (ii) either (a) is determined to have acted in good faith and not opposed to the interests of the corporation, if the case is a derivative suit, or (b) is determined to have acted in good faith, not opposed to the interests of the corporation, and had no reasonable cause to believe their conduct was unlawful with respect to any criminal case, if the case was not a derivative suit.
Texas offers indemnification and exculpation protection that is likely narrower than that offered in Maryland or Nevada regardless of which Texas exculpation provisions may apply to a particular Texas corporation. Nevada, on the other hand, likely offers greater director and officer indemnification and exculpation protection than any of the other three states.
Statutory Authorization for Stockholder Rights Plans
Maryland’s corporation statute expressly authorizes boards to adopt stockholder rights plans, providing a predictable and stable legal foundation for “poison pill” implementation and making Maryland a favored venue for their use. MGCL section 2-201(c)(1) provides that a board may, “in its sole discretion,” authorize the issuance of rights, options, or warrants to stockholders on terms it determines appropriate. Furthermore, MGCL section 2-201(c)(2)(ii) permits directors to bar a newly elected board from redeeming or modifying a poison pill for up to 180 days during a control contest. Together, these provisions provide one of the strongest statutory foundations for rights plans among all U.S. states, giving boards confidence that defenses cannot be overturned immediately after a proxy fight. Further, the board’s authority to adopt and trigger a poison pill was also recently upheld judicially in Maryland in Hartman v. Silver Star Properties REIT, Inc.[8]
Delaware has not codified poison pill authority. Instead, the Delaware Supreme Court first upheld poison pills in Moran v. Household International, Inc., under directors’ general statutory power to issue stock.[9] But poison pills remain subject to the enhanced scrutiny standard established by the holding in Unocal. This enhanced scrutiny requires directors to show both a reasonable threat and a proportionate response.
Nevada has a statute authorizing the adoption of poison pills, but it lacks the “sole discretion” deference granted to the directors under the Maryland statute. There is no Nevada case that has yet upheld the triggering of a poison pill under Nevada law, making Maryland’s statute and judicial position stronger. Nevada’s statute does, however, protect poison pill decisions from enhanced scrutiny, like Maryland. Texas lacks a poison pill–specific statute or case law. Instead, boards rely on their general authority to issue securities under the Texas Business Organizations Code (“Texas BOC”), with any such decision subject to common law business judgment principles and, for corporations that have opted into the SB 29 framework, the codified business judgment presumption established thereunder.
Business Combinations Statute
Maryland’s Business Combinations Act bars business combinations with an “interested stockholder” for five years after a stockholder becomes an interested stockholder unless the board approves the transaction, which is among the most restrictive time periods of any state’s anti-takeover law. An “interested stockholder” includes anyone holding 10 percent or more of voting power, a lower threshold than Delaware’s 15 percent. Even after the freeze, transactions require either approval by 80 percent of all voting power and two-thirds of disinterested shares or compliance with strict “fair price” provisions. Opt-outs are tightly restricted, preserving statutory strength.
The Delaware General Corporation Law’s section 203 imposes only a three-year freeze with broader exceptions, such as the 85 percent tender offer carve-out. Nevada’s statute limits restrictions to two years and permits easy opt-outs. Texas imposes a three-year bar but allows flexible opt-outs and requires only two-thirds disinterested stockholder approval. Maryland’s longer duration, lower thresholds, and strict opt-out rules provide boards with significantly more leverage against hostile acquirers.
Control Share Acquisition Statute
Maryland’s Control Share Acquisition Act ensures that voting rights tied to “control shares”—those acquired in excess of each of the 10 percent, 33⅓ percent, or 50 percent ownership thresholds—remain suspended absent approval by two-thirds of disinterested stockholders. Acquirers must provide disclosure, and corporations may call special meetings to decide on restoration of voting rights. If rights are denied, corporations may redeem the excess shares at fair value. This framework deters creeping accumulations and ensures proper consent before control shifts.
Delaware has not enacted a control share statute, leaving corporations to rely on alternative defensive measures. Nevada has adopted a control share statute that permits stockholders to acquire up to 20 percent before the statute applies, allowing a hostile acquirer to gain a significantly greater foothold before triggering the defensive measures than in Maryland. Nevada further allows voting rights to be restored by a simple majority of disinterested stockholders, compared to Maryland’s two-thirds supermajority requirement. Texas has not adopted a control share statute or any comparable restrictions. As a result, Maryland’s statute is the most comprehensive, as it affords boards the strongest statutory protection against creeping or stealth acquisitions.
Legislative Responsiveness
Maryland’s legislature has shown itself to be responsive in preserving the statutory intent of its corporation law even in the face of occasionally misguided judicial activism. In Shenker, the Maryland Court of Appeals (now the Supreme Court) incorrectly held that directors owed fiduciary duties other than those enumerated by the MGCL. To prevent Delaware-style judicially determined fiduciary duties from evolving in Maryland, the General Assembly amended MGCL section 2-405.1 in 2016, confirming that the standard of conduct in Maryland runs only to the corporation and that the statute is the exclusive source of the standard of conduct of directors of Maryland corporations and their obligations. The Maryland Supreme Court later upheld the standard established by these statutory amendments in Eastland Food Corp. v. Mekhaya.[10] This demonstrates the Maryland legislature’s willingness to respond firmly to protect the integrity of the MGCL and prevent judicially created duties. Maryland’s willingness to recalibrate statutory law ensures predictability not yet tested in newly competing jurisdictions.
Delaware, by contrast, has allowed fiduciary duty law to develop almost entirely through the judiciary and case law, with less (until the recent threat of DEXIT) of a statutory scheme and rare legislative correction.
Business Courts
Historically, one of Delaware’s greatest attractions as a state of incorporation has been the sophistication, consistency, and predictability of its judiciary, most particularly, its world-renowned Court of Chancery. Comparatively, neither Texas nor Nevada has any lengthy statewide track record handling sophisticated business disputes, any long-term experience with specialized courts, or any extensive well of business and corporate case law to draw on to predict outcomes or on which businesses or litigants may rely. Texas only recently established a business court in 2024, and Nevada only has localized business courts in Las Vegas and Reno but not a statewide program. In contrast, Maryland’s Business and Technology Case Management Program has been in operation since 2003 and has generated a body of business and corporate case law over that time on which parties can rely.
Recent Texas Legislation Directed at Public Companies
In fairness, Texas did recently adopt several laws that have attracted attention, enacting a series of provisions to make the Texas BOC more attractive, particularly to public companies. In June 2025, Texas enacted Senate Bill 29 (“SB 29”), which, among other things, (i) allows certain Texas corporations to provide a presumption for the directors that they have met their duties in taking actions, (ii) allows certain Texas corporations to limit derivative actions, (iii) limits legal fees in disclosure-only securities settlements, (iv) limits the definition of books and records available for inspection, and (v) allows certain Texas corporations to obtain a preemptive judicial determination of the independence and disinterestedness of a special committee. In two other bills, Texas took aim at the public company proxy process: (1) SB 1057, which limited shareholder proposals by enacting higher thresholds for making shareholder proposals for companies incorporated in Texas or with certain other Texas connections than those established by U.S. Securities & Exchange Commission Rule 14a-8, and (2) SB 2337, which targets proxy advisors and makes it burdensome for those firms to advise shareholders of companies with Texas ties.
For public companies and companies that are able to opt-in in their governing documents (which may not be possible or practical for many Texas corporations), SB 29 purports to create a statutory presumption that the directors have met their standard of conduct under what typically might be described as the business judgment rule, that they (i) acted in good faith, (ii) on an informed basis, (iii) in furtherance of the interests of the corporation, and (iv) in obedience to the law and governing documents. This presumption may only be rebutted by fraud, intentional misconduct, an ultra vires act, or a knowing violation of law. Unlike Maryland, however, where the standard of conduct is clearly stated by statute and then the statute further presumes that all corporate directors, regardless of whether the corporation is public or private or any opt-in, have met that standard, Texas does not have a statute that articulates the fiduciary duty or standard of conduct of directors of a Texas corporation along the lines of the presumption in SB 29. The result is that there may be a mismatch in the future between what a court views as the duties of a director and the presumptions established by SB 29, meaning that the presumptions established by SB 29 may not extend to all of the elements of the duties of a director of a Texas corporation. Yet, a number of commentators have nonetheless referred to this as the codification of the business judgment rule in Texas. Moreover, as we point out, unlike Maryland, whose codified business judgment rule and presumption apply to all Maryland corporations, many, if not most, Texas corporations and their directors will likely be unable to opt-in and therefore unable to avail themselves of the statutory “business judgment rule” protections of SB 29. SB 29 also allows publicly traded Texas corporations and Texas corporations with five hundred or more stockholders that are able to opt-in to the “codified business judgment rule” to restrict stockholder derivative litigation by adopting a minimum beneficial common share ownership threshold in order to institute a derivative proceeding in an amount up to 3 percent in the certificate of formation or bylaws. SB 29 prohibits the recovery of attorney fees for derivative proceedings resulting solely in additional or amended disclosures to stockholders, placing Texas law on equal footing with recent case law in Delaware. SB 29 narrows stockholders’ statutory books and records inspection rights by excluding emails, text messages, and social media communications, unless such communications directly affect corporate action. In a novel provision, SB 29 authorizes publicly traded Texas corporations and Texas corporations that are able to opt-in to the “codified business judgment rule” to petition the Texas Business Court for an advance determination of the independence and disinterestedness of a special committee of directors formed to review and approve a transaction. Such a determination is “dispositive,” absent facts, not originally presented to the court, later being presented constituting evidence sufficient to prove that a director is not independent or disinterested (which, on some level, seems to defeat the purpose of the advance preliminary determination being dispositive).
To make a “shareholder proposal” under SB 1057, a stockholder must: (1) hold at least (i) 3 percent or (ii) $1 million in market value, of the corporation’s outstanding voting shares; (2) satisfy a six-month continuous ownership requirement preceding and through the stockholder meeting; and (3) solicit approval from holders of at least 67 percent of the corporation’s voting power on the proposal.
Texas seeks to expand protections and management authority for directors and officers through the provisions of SBs 29, 1057, and 2337; however, it is important to note that the practical impact of these provisions may be limited as many provisions apply only to public companies, or to corporations that are able to and expressly do opt-in through their governing documents.
Conclusion
As illustrated above, Maryland provides boards with greater discretion and stability in takeover-response strategies than Delaware, Nevada, or Texas. As a result, depending on what a corporation seeking to DEXIT is looking for in a new state, and what the needs and interests of its board and stockholders may be, Maryland may provide a better alternative than either Texas or Nevada and should be compared and considered before any decision on state of reincorporation is made.
The authors would like to thank Marshall Paul, a partner at Saul Ewing, LLP; Hirsh Ament, a partner at Venable LLP; Rew Goodenow, a partner at Parsons Behle & Latimer; and Emily Leitch, a partner at Jackson Lewis LLP, for their input. ↑
Over the past several years—starting with the landmark Murdockdecision in 2021 supporting insurability of alleged fraud[1]—Delaware courts have issued a string of significant, pro-policyholder decisions on important insurance issues under directors’ and officers’ (“D&O”) liability policies. Recent rulings involving noncash settlements, government investigations, bump-up exclusions, and related claims reinforce Delaware’s increasingly influential role in shaping national coverage law.
Two themes stand out. First, Delaware is producing a growing body of notable, policyholder-friendly guidance, including from an active Delaware Supreme Court. And second, many outcomes are tied to Delaware law—often uniquely so—such that policyholders may not have achieved the same results before other courts or under other state laws.
What follows is a brief summary of some of the latest developments in Delaware D&O insurance coverage jurisprudence and what they mean for Delaware corporations, boards, and executives in placing and renewing policies, pursuing claims, and navigating insurance coverage disputes in and out of litigation.
I. Delaware Courts Are Driving Meaningful Policyholder Wins Across Key Coverage Issues
A. Alleged Fraud Is Insurable in Delaware, and Delaware Law Governs D&O Policies Protecting Delaware Insureds
In RSUI Indemnity Co. v. Murdock, a go-private transaction led to stockholder suits alleging fiduciary violations against the company and its directors and officers. At trial, the individual defendants were found to have fraudulently manipulated the stock price prior to the merger and to be liable for more than $148 million in damages. Before judgment was entered, the parties entered into a settlement, which the company’s D&O insurer refused to fund.
The Delaware Supreme Court held that Delaware public policy does not prohibit the insurability of fraud under D&O policies, particularly for sophisticated corporate parties. Delaware law strongly favors freedom of contract and expressly authorizes corporations to purchase D&O insurance covering directors and officers even where indemnification is unavailable, including for claims alleging fraudulent conduct.
Notwithstanding the policy’s “relative exposure” language, the court rejected the insurer’s attempt to apply the “relative exposure” test and instead followed the more policyholder-friendly “larger settlement” rule.[2] Under that rule, the entire settlement is covered unless the insurer proves that uncovered conduct increased the amount of the settlement. Because the policy promised coverage for “all monetary amounts” the insureds became legally obligated to pay, and the allocation provision did not specify a method for resolving disputes, the insurer’s preferred pro rata allocation method was inconsistent with the policy as a whole. The insurer failed to show that noncovered conduct drove a larger settlement, so the full settlement was recoverable.
Applying the “most significant relationship” test, the court also held that Delaware law governs D&O policies for a Delaware corporation, even though a company may be headquartered in another state or the policy may have been issued elsewhere. Where the insured risk is the directors’ and officers’ fidelity to the corporation, the state of incorporation has the predominant interest. The court emphasized that Delaware is the “center of gravity” for D&O policies because the First State’s corporate law framework affirmatively supports broad indemnification and insurance rights.[3] As a result, directors and officers of Delaware corporations should receive the benefit of Delaware law in D&O coverage disputes.
Why it matters: The court departed from the often-followed “relative exposure” allocation application and endorsed the idea that Delaware law should govern interpretation of D&O policies issued to Delaware corporations, spurring discussion about Delaware choice of law. The court also held that fraud is insurable in Delaware if merely alleged but not proven. Murdock has been cited repeatedly by courts in and out of Delaware to affirm this idea.[4] Delaware policyholders can take advantage of more favorable coverage for settlements in various forms that may not be available in other states with less developed shareholder jurisprudence.
B. Exclusions Construed Narrowly and in Favor of Coverage
In Pangea Equity Partners v. Great American, a Chicago-based real estate management company’s directors and officers faced a whistleblower lawsuit accusing them of submitting false certifications about rent rates for Section 8 housing in violation of the False Claims Act (“FCA”). When the company’s D&O insurers denied coverage under a contractual liability exclusion, the Delaware Superior Court refused to accept the insurers’ “overbroad application” of the exclusion where the underlying qui tam complaint alleged violations of federal law and was not for breach of contract.[5] In finding that the insurers had a duty to defend, the court said that the contract exclusion was inapplicable because the underlying lawsuit involved alleged regulatory violations and there was only a “tenuous connection” between the whistleblower allegations and the underlying government contracts.[6]
Why it matters: In addition to reinforcing Delaware courts’ commitment to narrowly construing exclusions, the Pangea Equity Partners decision follows a broader trend showing that FCA litigation is often covered by D&O insurance despite being subject to recurring disputes about insurability of FCA remedies, various exclusions, and coverage for government investigations.[7]
C. Government CIDs Can Qualify as “Claims”
In Cigna Group v. XL, a healthcare company sought coverage under a management liability policy for costs incurred in responding to a civil investigative demand (“CID”) issued by the Department of Justice (“DOJ”) in connection with an investigation into suspected FCA violations.[8] The insurers argued that the CID was not covered because it did not intend to hold the company responsible for any wrongful acts. The Delaware Superior Court disagreed, concluding that—even though the policy provided separate coverage for “Governmental Investigations” that expressly referenced CIDs—the DOJ’s CID was nevertheless covered as a “Claim” because it investigated specific alleged wrongdoing by the recipient and demonstrated an intent to hold the receiver accountable for that conduct.[9]
In Delaware, the court explained, references to “investigation” of potential wrongdoing were not materially different from an accusation that the recipient violated the FCA. Covering the CID as a “Claim” also did not render the standalone investigation coverage superfluous because that coverage could still apply to CIDs that do not become claims.
Why it matters: The Cigna ruling builds upon prior rulings addressing coverage for costs associated with subpoenas and CIDs,[10] further cementing Delaware’s broad government investigation coverage. That view contrasts with courts in other jurisdictions that have taken narrower positions on government investigation coverage, construing similar policy language more restrictively and treating subpoenas, CIDs, and similar governmental demands as mere investigatory tools that do not rise to the level of a claim that can trigger coverage. Similar to the Pangea Equity Partners decision above, Cigna also supports defense coverage for FCA matters, even during the investigation phase before regulators file formal charges or commence litigation.
D. Delaware’s “Meaningful Linkage” Standard for Related Claims
In Forte Biosciences v. Wesco, a pharmaceutical company and several D&O insurers disagreed over what policies covered an investor’s 2023 shareholder lawsuit.[11] The insurers, which issued policies for the 2022 policy period, argued the 2023 suit wasn’t covered because it was unrelated to a 2022 books and records demand that they had accepted as a “notice of circumstances” that could lead to a future claim. The Delaware Superior Court disagreed, ruling earlier this year that the claims related back to the 2022 demand.[12] Applying the Delaware Supreme Court’s “meaningful linkage” standard for determining if different D&O claims are related, the court rejected the insurer’s narrower interpretation because it would run counter to the Delaware Supreme Court’s direction to interpret meaningful linkage “broadly” to “find coverage.”[13]
Why it matters: While “related” claim disputes are inherently unpredictable and very policy- and fact-specific, Delaware’s meaningful linkage test for relatedness is different because Delaware courts assess relatedness in favor of the policyholder to find coverage. This differs from other jurisdictions that may apply a more neutral approach favoring neither the policyholder nor the insurer.[14]
E. Noncash Settlements Can Constitute Covered “Loss”
In Midvale Indemnity v. AMC Entertainment Holdings, the Delaware Supreme Court affirmed that a settlement paid in stock—not cash—can qualify as a covered “Loss” under a D&O policy.[15] The Superior Court had emphasized that, under Delaware law, stock is a form of currency usable for a variety of corporate transactions, including settling debts. This Delaware precedent undermined the insurers’ attempts to confine “Loss” to monetary payments only.[16]
The Superior Court then relied on the term “paid” in the policy’s bump-up exclusion. Again citing Delaware law, the court said “paid” has been interpreted to apply to stock transfers, implying that stock can be “paid” to create a covered loss. Finally, the court concluded that the parties’ disputes about whether the company sought consent on a phone call was a factual issue to be presented to a jury, as Delaware law allows policyholders to preserve coverage after failing to obtain consent by rebutting a presumption that the insurer was prejudiced. The Delaware Supreme Court upheld the lower court’s ruling in full.
Why it matters:AMC Entertainment highlights Delaware’s favorable view on yet another important issue, consent to settle, preserving potential coverage as long as the policyholder rebuts a presumption that the insurer was prejudiced and that the settlement was reasonable. The decision also shows how Delaware’s leading role in shaping corporate governance and shareholder litigation jurisprudence bleeds over into insurance disputes, supporting broader coverage for nontraditional payments like stock. Other states may not recognize stock as “currency” or may enforce stricter consent requirements that limit or eliminate coverage.
F. Delaware Narrows the “Bump-Up” Exclusion
In Illinois National Insurance Company v. Harman International, a policyholder paid $28 million to settle a securities class action challenging an M&A transaction on the grounds that the target’s proxy statement contained false and misleading statements in violation of the Securities Exchange Act of 1934.[17] The Delaware Supreme Court refused to enforce a D&O policy “bump-up” exclusion to bar coverage for the settlement, affirming a lower court ruling that the insurers failed to show that any portion of the settlement represented an “effective increase” in deal consideration.[18] The insurers could not deny under the exclusion—which in Delaware is enforced only if “specific, clear, plain, conspicuous, and not contrary to public policy”—because they failed to demonstrate that the “real result” of the settlement was that the payment increased the amount of deal consideration the shareholders received in the transaction.
Why it matters:Harman highlights how Delaware frequently holds insurers to high burdens in enforcing exclusions, including on bump-up exclusions that have favored insurers in other jurisdictions.[19] As the Delaware Supreme Court recognized, however, “not all bump-up provisions contain the same claim and loss requirements,” so results may vary based on different governing law, policy language, or facts.[20]
II. Takeaways
These decisions provide important takeaways for Delaware corporations and their in-house counsel, risk managers, board members, and executives to consider in purchasing and recovering under D&O and other management liability policies.
Understand and leverage governing law: Variances in state law can be outcome determinative in coverage disputes. In Murdock, the Delaware Supreme Court endorsed the idea of consistently applying Delaware law to claims involving Delaware companies and their directors and officers. In many cases that followed, Delaware policyholders have benefited from that approach, supporting the perception that Delaware is increasingly policyholder friendly.
That perception may result in updated policy language, like choice-of-law and forum‑selection provisions, that could steer claims away from Delaware and materially impact D&O coverage outcomes. Companies incorporated in Delaware—or able to litigate there—will benefit from paying careful attention to governing law and how policies may impact the default rules.
Policy wording matters: Regular policy audits should scrutinize key terms, especially as hot-button issues like government investigations coverage, bump-up exclusions, and related claims result in new forms, endorsements, and policy updates that alter the status quo under standard forms.
Force insurers to clearly demonstrate exclusions: Insurance policy interpretation is subject to many policyholder-friendly principles that can be leveraged in favor of coverage, especially when insurers rely on exclusions (like the insurers in Harman and Pangea Equity Partners). The Delaware Supreme Court, like courts of virtually all states, demands clear and specific language to enforce exclusions that policyholders can use to their advantage.
Be proactive, not reactive: Virtually all D&O policy terms change year over year, even with the same insurers. Even static language can take on new meaning as courts interpret and rule on a particular issue, like in the decisions discussed above. The time to assess a problematic exclusion, new endorsement, updated form, or potential gap is during the placement or renewal process, not after a claim is made.
Of course, recent rulings do not uniformly favor policyholders,[21] but even cases ruling against coverage show that Delaware courts, particularly the Delaware Supreme Court, do not shy away from tackling nuanced, complex D&O coverage issues that can provide important guidance to corporate policyholders facing similar insurance claims in the future.
III. Conclusion
Delaware courts continue to support the view that Delaware is an increasingly policyholder-friendly jurisdiction on D&O coverage. Delaware policyholders should keep pace with this growing body of law by taking into consideration governing law and forum when navigating claim denials and potential coverage litigation.
See, e.g., Origis USA LLC v. Great Am. Ins. Co., No. 461, 2024, 2025 WL 2055767 (Del. July 23, 2025) (holding that allegations referencing post–policy inception conduct did not constitute a separate “Claim” and, in any event, were barred in full by the policies’ Prior Acts exclusion because they arose from pre-exclusion wrongful acts); In re Aearo Techs. LLC, 346 A.3d 584 (Del. 2025) (affirming ruling that a parent company cannot satisfy its subsidiary’s self-insured retention and providing guidance to entities structuring insurance programs). ↑
Sales and assignments of legal claims have generated increasing interest in recent years. Quite apart from the tax impact of such transactions, various nontax issues may arise. They include what types of claims can be transferred as a matter of nontax law, and what formalities need to be observed. There also may be questions whether the court or defendant may respect the transfer. The attorney-client relationship and the lawyer’s legal right to a fee may also be impacted.
But apart from any nontax issues, how taxes will be impacted can be a surprisingly nuanced question, or group of questions. Parties may talk of assigning or selling their claim, and they may assume that there is a one-size-fits-all set of tax rules for how their taxes will be impacted. However, the tax treatment is likely to depend largely on the documentation.
Family Transfers
Outside the commercial context, sometimes plaintiffs transfer some or all of their claim to someone else as part of their own financial and tax planning. Likely suspects are family members, a family entity (such as a partnership or LLC), or even a charity. The idea, typically, is to shift some or all the income to someone other than the plaintiff—usually someone in a lower tax bracket—before the case is resolved and money is paid.
Whether it will be effective for tax purposes depends on timing and other factors, including continuing involvement by the plaintiff. It may be necessary to value the claim at the time of transfer, and to treat it as a gift for tax purposes. Unless the plaintiff is assigning the claim to their wholly owned entity, it may be a gift or a sale for tax purposes, and timing is important. Tax worries are likely to be less if a transfer occurs years before a settlement or verdict.
For example, suppose that you file a complaint, and shortly thereafter assign the claim to a family-owned LLC. There may be few tax worries if the case is not resolved by settlement or judgment for three years. The transferee may pay tax on the recovery without incident. In contrast, the original plaintiff may be stuck paying all the taxes if the transfer happens a month before settlement, despite the transfer. The assignment of income doctrine is a classic tax rule, and many tax cases give the IRS the ability to disregard a purported transfer if you have already earned—or almost earned—the income. More about that issue below, after we review the other varieties of transactions.
Outright Sale of Claims
Some transfers are to unrelated third-party buyers, such as where a commercial buyer offers a plaintiff a flat fee to take over any entitlement the plaintiff has. A common fact pattern involves a class action where recoveries are expected but still face appeals or other procedural hurdles. Some plaintiffs may not want to wait months or years before receiving any payment. It may also be clear that a settlement will be paid out in installments when it eventually arrives.
In such cases, plaintiffs may find it attractive to sell their claim at a discount and to collect a lesser amount without delay. Properly documented, these can be among the simplest transactions to analyze from a tax viewpoint. The seller/plaintiff receives money and pays tax on it in the year of receipt. Usually, sellers/plaintiffs are taxed on the sales price the same way that they wouldhave been taxed had they held onto their claim and ultimately received a settlement or judgment from the defendant. For example, if the underlying claim is about royalties or interest, when selling the claim, the plaintiff should have royalty or interest income.
The buyer then typically stands in the shoes of the selling plaintiff. That should mean that the buyer is paid out and taxed (although not necessarily in the same way as the original plaintiff) when the case finally resolves—assuming that the defendant treats the sale as effective and agrees to pay the buyer. This kind of sale usually raises no special tax issues. But what if the contract isn’t as clear as this?
Loans
What if the “sale” document is really a nonrecourse loan? Loans may be used for several reasons, including if the plaintiff cannot agree to an outright sale of the claim for nontax reasons. The loan might function a little like a sale, if it is clear that the loan never has to be paid back. Nonrecourse litigation funding is usually the norm, so that if the litigation fails, the loan need not be repaid.
But what happens for tax purposes? Technically, even a nonrecourse loan is still a loan. That means that the plaintiff still owns the claim and is still entitled to the settlement or judgment when the case is ultimately resolved, subject to the rights of the lender. On the positive side, it also means that the loan proceeds are not income to the plaintiff, so they should not trigger taxes when they are received.
Sometimes, such loans involve lockboxes or other payment protections, so that the lender collects what is due without the plaintiff having the chance to divert the funds. For tax purposes, this is most likely a loan, but the IRS may treat it as a sale in some cases. However, assuming that the form of the loan is respected, the upfront loan money is not taxable to the plaintiff, but the later settlement payment will be—even if it goes directly to the lender.
Hopefully, the plaintiff will have enough money left to pay the tax. Unfortunately, a large part of the settlement is likely to go to the lender for interest. And under surprisingly complex tax rules about what interest payments are and are not tax deductible, some plaintiffs may not be able to claim a tax deduction for the full amount of a large interest payment.
Prepaid Forward Contract
Another type of contract is a variable prepaid forward purchase agreement, or prepaid forward contract. It is a sale document, but with a curious twist. It calls for an advance payment—a kind of deposit—of the purchase price. However, the amount of property that the buyer will actually purchase is not determined under the contract until later, when the sale closes. These contracts are popular in the securities industry, and with many litigation funders.
The idea is that the plaintiff still owns the claim and receives a nontaxable deposit representing the purchase price under a sale contract. How could the advance payment not trigger immediate tax? The trick is that the contract has a price with conditions involving timing and amount that prevents the sale from being taxed immediately, as it would be if the identity and amount of the property being sold were already fixed. Done properly, the deposit is not immediately taxable, and the plaintiff still owns the claim.
Then, when the case is resolved, the sale contract closes, and the plaintiff is paid. But as in the loan example, usually there is a payment mechanism so that the funder actually collects the money. From a tax point of view, the plaintiff is still required to take the full amount of the settlement payment into account.
The plaintiff takes the payment to the funder into account, but separately, as part of the settlement of the prepaid forward contract. In most cases, the plaintiff reports ordinary gain or ordinarily loss from the settlement of the contract equal to the difference between the amount the funder paid at the outset (the advance) and the amount the plaintiff paid to the funder when the claim was resolved. In cases where the payment to the funder results in a loss, the plaintiff should generally be able to use the loss to offset all or a portion of the income they report from the settlement of the litigation claim.
In cases where the claim generates a disappointing recovery, the plaintiff may end up paying the funder less than the amount of the advance. If the litigation is a total bust, there will be no recovery, and the plaintiff usually pays the funder nothing. In that case, the plaintiff should have no taxable recovery to report, but they will have to report an ordinary gain under the contract equal to the funder’s advance.
This illustrates the deferral element in these transactions. The plaintiff was not taxed on receipt of the advance but later pays tax on that amount when they settle the prepaid funding, without having to pay anything to the funder. If the litigation is unsuccessful and no more money is coming to the plaintiff, they still must pay tax on the advance—albeit in that later tax year.
Timing and Assignment of Income Issues
Let’s turn back to the timing question and the assignment of income tax authorities. The assignment of income doctrine is usually not a concern in the case of loans or in the case of prepaid forward contracts. In both of those situations, the plaintiff should still be treated as the owner of their claim despite a funding transaction. But in the assignment or the sale, the first two items we discussed above, a major goal is for the plaintiff to no longer to be taxed on the recovery.
Can that goal be achieved? It depends on the formalities that are observed and on timing. Tax lawyers are accustomed to worrying about the assignment of income doctrine. When income is too close to being earned, it typically cannot be transferred to someone else without tax effects. That is why it is unlikely to shift the tax burden if an independent contractor finishes a job and says, “Don’t pay me, please pay my cousin instead.” In fact, in some cases, the act of assigning the item can accelerate the income, making a bad situation worse.
Under the assignment of income doctrine, a taxpayer who earns or otherwise creates a right to receive income will be taxed on any income or gain realized from it. If you transfer the right after you earn it, but before receiving the income, it remains your income.[1] A review of the tax case law suggests that the assignment of income doctrine can require the transferor to include the proceeds of the claim in gross income when recovery on the transferred claim is certain at the time of transfer.
Conversely, that is not required when recovery on a claim is doubtful or contingent at the time of transfer. Accordingly, in general, one who transfers a claim in litigation to a third person before the expiration of appeals should not be required to include the proceeds of the judgment in income. If the plaintiff assigns their entire interest in the case while it is on appeal and before any settlement or final judgment, it should usually be okay (although it still may trigger gift tax consequences).
As a practical matter, some plaintiffs may think that the assignment of income doctrine cannot apply to them. In that sense, whatever tax advisers may say, most assignment of income tax issues may arise in unfortunate audits where it is the IRS saying, “Hey, wait a minute, we think you are still taxable on this.” If you are someone who transferred your claim and therefore did not collect the money, a later assignment of income claim from the IRS can ruin your day. Clearly, getting tax advice before any transfer is best.
Fortunately, the assignment of income doctrine seems more likely to be of concern with family transactions and gifts, rather than with commercial parties and arm’s-length sale contracts.
Tax Reporting and Form 1099
Finally, there is also the tax reporting end of the spectrum. Tax reporting may depend on the type of transfer and the degree to which the defendant respects the transaction. The easiest case to describe involves an outright sale of the claim, where the plaintiff is paid a discounted sum to walk away, and the buyer takes over the claim. What should happen tax-wise in such a case?
Here, the plaintiff/seller usually has an immediate tax bill on their sale proceeds. The only exception should be if the plaintiff sold a claim for compensatory personal physical injuries that would be excludable under Section 104. After all, if the plaintiff would have a tax-free recovery if paid by the defendant, the same treatment should apply if the plaintiff sells their interest in the case. Apart from that factual setting, though, the plaintiff has sold a claim and should be taxed on the sales proceeds in the same way they would have been taxed had they collected from the defendant.
An example is the name, image, and likeness (“NIL”) settlements for athletes, which generate an active sale market. In the case of outright sales, the athlete/sellers should be taxed on their sales proceeds, and the settlement payments post-sale should go to the buyers of those claims. The tax treatment and tax reporting should follow. The IRS and the Taxpayer Advocate Service published guidance for athletes about the tax characterization of NIL payments, which generally confirm that such payments are usually taxed as nonemployee compensation or royalty income.[2]
In multiple other contexts, the IRS and courts have similarly ruled that streams of future income can be monetized in a sale to a purchaser in exchange for a lump-sum payment. These cases reflect that when a stream of future income is sold in a completed sale, the sales proceeds are taxed in the same manner as the income that was sold.
For example, in 1958, the U.S. Supreme Court issued its opinion in Commissioner v. P.G. Lake, Inc.,[3] which held that proceeds received for the purchase of future payments for oil production royalties were taxable as ordinary income to the recipient, because the future oil production royalty payments would have been ordinary income to the seller when received if he had not sold them. This same principle has been applied in other contexts, including in the following cases: Hort v. Commissioner,[4]Fisher v. Commissioner,[5]Rhodes’ Estate v. Commissioner,[6]Helvering v. Smith,[7] and Charles E. Sorenson v. Commissioner.[8]
None of these authorities suggest that a completed sale in which the sales proceeds are immediately taxed to the seller should be subject to tax to the seller again when the future payments are paid to the purchaser of the income stream. The sales proceeds substitute for the future income payments. They are already subject to income tax by the seller when received as part of the sale.
The IRS Form 1099 rules follow this straightforward tax treatment. Form 1099 reporting to a seller is only required if a payment represents gross income under applicable tax rules.[9] Because the future income payments are not gross income to the seller after the completed sale, none of the post-sale payments should be reported to the seller post-sale.
The sales proceeds may be reportable to the seller, because the sales proceeds are gross income to the seller. However, the responsibility to report the sales proceeds belongs to the “payor” of the payment, which in the case of the sales proceeds, should be the buyer.[10] When the buyer is later paid by the defendant, the buyer will have tax obligations, generally treating the claim as an investment, paying taxes on the excess over its purchase price.
Payments to the buyer may be subject to Form 1099 reporting, depending on a variety of factors. Often, though, the buyer might expect to receive a Form 1099-MISC, with the amount shown in Box 3 as “Other income.”
Conclusion
Any transfer of all or part of a legal claim should be considered thoroughly and documented carefully. Plaintiffs can be vulnerable to the allure of money now rather than waiting for the slow grind of the legal process to play out. Yet sometimes, even deep discounts in claims can turn out to be shrewd financial planning if a lawsuit later results in a defense verdict or is reversed on appeal.
In other cases, the plaintiff may feel the pain of a relatively high cost of money, coupled with a later tax situation that is not something they planned on. In that sense, thinking through the specific type of contract involved, and running out some possible examples, can be time well spent.
Whatever the timing and financial impact on the upfront money and the later payment of a settlement or judgment, the tax impact may be more nuanced than the parties realize. No one wants to be taxed on money they did not receive. Moreover, receiving an unexpected Form 1099 can be alarming, even if you have confidence that you can explain to the IRS that the form is wrong and that you actually did not receive the payment.
Robert W. Wood is a tax lawyer with Wood LLP (www.WoodLLP.com). This discussion is not intended as legal advice.
See, e.g., Doyle v. Commissioner, 147 F.2d 769 (4th Cir. 1945) (taxpayer who assigned judgment award after it was affirmed on appeal was required to include the proceeds in income). ↑
90 F.2d 590 (2d Cir. 1937) (sale of partnership interest in earned fees). ↑
22 T.C. 321 (1954) (sale of stock options given as compensation by taxpayer’s employer taxed as employment compensation to seller). ↑
See, e.g., I.R.C. § 6041; Treas. Reg. § 1.6041-1(f) (“The amount to be reported as paid to the payee is the amount includible in the gross income of the payee.”). ↑
The Barton doctrine, first articulated by the Supreme Court in 1881, requires a party to obtain leave from the appointing court (frequently a bankruptcy court) before suing a court-appointed officer in another court for actions taken in their official capacity.[1] The purpose of the doctrine is to prevent the suing party from obtaining an advantage over the other claimants while the court-appointed officer is in control of the estate.[2]
Under the doctrine, failure to seek permission from the appointing court deprives the second court of subject matter jurisdiction. Thus, any proceeding commenced without leave must be dismissed; otherwise, it would constitute a “usurpation of the powers and duties” reserved to the appointing court.[3] The Barton doctrine does not prevent suits against court‑appointed officers but rather requires that permission be granted by the appointing court before a suit can proceed elsewhere.
Though originally applied to receivers, nearly all federal circuits—except the D.C. Circuit—have held that the Barton doctrine applies in bankruptcy proceedings.[4] While a bankruptcy case is ongoing, a suit filed against a bankruptcy trustee or similar officer in another court without prior permission must be dismissed, although the same suit can be brought directly in the bankruptcy court itself.[5] There is a circuit split, however, over whether the Barton doctrine applies after a bankruptcy case has closed.
I. Barton v. Barbour
In Barton v. Barbour, the plaintiff, Ms. Barton, was a passenger who was injured in a railway accident. Barbour had previously been appointed as receiver for the railroad company and was operating the railroad for the benefit of creditors at the time of the accident.[6] Ms. Barton sued Mr. Barbour in the District of Columbia, seeking $5,000 for her injuries. He responded that he could not be sued there because the plaintiff had not obtained leave from the Virginia state court that had appointed him to serve as the receiver. The District of Columbia court agreed and dismissed the case. The plaintiff appealed to the United States Supreme Court, which affirmed, creating what is now known as the Barton doctrine.
The Supreme Court stated that “[i]t is a general rule that before suit is brought against a receiver[,] leave of the court by which he was appointed must be obtained.”[7] The Court stated that any suit against a receiver necessarily involves an attempt to obtain receivership property. In fact, the Court suggested that the main reason a person would sue a receiver is to obtain a position ahead of other creditors. The Court also reasoned that, to enforce the judgment, the plaintiff would need to levy against property already in the hands of another court—the one that had appointed the receiver. The Court stated that it could not allow this outcome, as it would undermine the power of the appointing court. The Court concluded that the court administering the receivership should act as a gatekeeper, determining whether a claim has enough merit to proceed, whether in front of it or in another venue. This prevents estate assets from being “wasted in the costs of unnecessary litigation.”[8]
The Court did note an exception to its rule, though: “[I]f one claims that the assignee has wrongfully taken possession of his property as property of the bankrupt, he is entitled to sue him in his private capacity as a wrong-doer in an action at law for its recovery.”[9] Comparing the receiver to “an assignee in bankruptcy,” the Court observed that if “by mistake or wrongfully, the receiver takes possession of property belonging to another, such person may bring suit therefor against him personally as a matter of right; for in such case the receiver would be acting ultra vires.”[10] But when the receiver is acting within the scope of his or her authority, then the matter must be handled with the blessing of the appointing court.
II. 28 U.S.C § 959
Congress enacted legislation in the wake of Barton to address the concern that operating trustees and receivers were improperly being shielded from legitimate actions while running a business. This legislation has been amended many times but is now codified at 28 U.S.C. § 959. That section provides:
(a) Trustees, receivers or managers of any property, including debtors in possession, may be sued, without leave of the court appointing them, with respect to any of their acts or transactions in carrying on business connected with such property. Such actions shall be subject to the general equity power of such court so far as the same may be necessary to the ends of justice, but this shall not deprive a litigant of his right to trial by jury.
(b) Except as provided in section 1166 of title 11, a trustee, receiver or manager appointed in any cause pending in any court of the United States, including a debtor in possession, shall manage and operate the property in his possession as such trustee, receiver or manager according to the requirements of the valid laws of the State in which such property is situated, in the same manner that the owner or possessor thereof would be bound to do if in possession thereof.
In addition to requiring that trustees, receivers, and debtors in possession comply with nonbankruptcy law, the statute prohibits a court from using its equity jurisdiction to deprive a person of a right to a jury trial.
III. The Barton Doctrine Protects Court-Appointed Fiduciaries in Bankruptcy
As noted, substantially all circuit courts of appeal have held that the Barton doctrine applies in bankruptcy. The Barton doctrine protects not just trustees but all officers appointed by the bankruptcy court when they act in their official capacity.[11] This includes receivers, attorneys for trustees, and officers acting under the trustee/receiver’s direction or serving in a functionally equivalent role.[12] The Barton doctrine has in recent years been expanded to cover trustees appointed pursuant to a plan of reorganization and other court-appointed roles.[13]
The American Bankruptcy Institute Commission to Study the Reform of Chapter 11 in 2014 proposed an amendment to the Bankruptcy Code that expressly adopts and expands the Barton doctrine. The proposed amendment would expand the scope of the Barton doctrine to the following persons in Chapter 11 reorganization cases: Chapter 11 trustees, estate neutrals/examiners, and statutory committees and their members, as well as professionals retained by each of the foregoing. According to the Commission’s Final Report, the proposed expansion reflects the Commissioners’ beliefs that it “would (i) allow any trustee, estate neutral, and statutory committee and its members to perform their fiduciary duties with confidence and focus, and (ii) eliminate unnecessary litigation concerning the application of the Barton doctrine and whether the court in which a litigant files the action has subject matter jurisdiction over the dispute.”[14]
IV. A Circuit Split Exists Regarding Whether the Barton Doctrine Remains Applicable Once a Bankruptcy Case Is Closed
The question of whether the Barton doctrine continues to apply after a bankruptcy case has closed has resulted in a 5–1 circuit split. Circuits holding that the Barton doctrine continues to apply after a case has closed reason that it is necessary to protect court-appointed officers. The bankruptcy court that approves a professional’s employment can hold them accountable, but the professional can be confident that if the bankruptcy court blesses what they have done, they do not have to worry about nettlesome litigation elsewhere. In this way, application of the Barton doctrine increases the likelihood that parties will be interested and willing to serve as estate fiduciaries. As one court noted, “the court that appointed the trustee has a strong interest in protecting him from unjustified personal liability for acts taken within the scope of his official duties.”[15]
Despite the policy merits of such an approach, the Eleventh Circuit has held that extension of the doctrine after a case is closed is unwarranted because bankruptcy courts lack in rem jurisdiction once a case is closed. Separately, the Eleventh Circuit has suggested that judicial immunity provides fairly strong protection for court-appointed officers.
A. Circuits That Support the Barton Doctrine’s Extension
Seventh Circuit: In In re Linton,[16] the Seventh Circuit held that the Barton doctrine continues to apply after a bankruptcy case is closed. In that case, a Chapter 7 trustee commenced a fraudulent transfer action against the debtor, her husband, and their sons. The trustee later dismissed the action, and the bankruptcy proceeding was closed. Eleven months later, the debtor and her husband sought leave from the bankruptcy court to file a malicious prosecution suit against the trustee in state court, arguing that the adversary proceeding was meritless. They had already filed the suit without waiting for the court’s permission, and it remained dormant pending the court’s decision. The bankruptcy court denied their motion, and the district court affirmed this decision.
The Seventh Circuit held that the Barton doctrine continued to apply notwithstanding the fact that the bankruptcy case had closed. Acknowledging that Barton was a bankruptcy case, not a receivership case, the Seventh Circuit stated:
Just like an equity receiver, a trustee in bankruptcy is working in effect for the court that appointed or approved him, administering property that has come under the court’s control by virtue of the Bankruptcy Code. If he is burdened with having to defend against suits by litigants disappointed by his actions on the court’s behalf, his work for the court will be impeded.[17]
The court stated that the trustee’s burden of defending against suits by litigants is most concerning while the bankruptcy proceeding is ongoing. “The threat of his being distracted or intimidated is then very great.”[18]
Nevertheless, the court stated, the doctrine should be continued after the bankruptcy “had been wound up.”[19] Without the doctrine, “trusteeship will become a more irksome duty,” and it will be more difficult for courts to appoint competent trustees.[20] The court continued that the expense of bankruptcy administration—already a source of considerable concern—will become even more expensive because trustees will need to pay higher malpractice premiums.[21] Moreover, the court reasoned, “requiring that leave to sue be sought enables bankruptcy judges to monitor the work of the trustees more effectively. It does this by compelling suits growing out of that work to be as it were prefiled before the bankruptcy judge that made the appointment; this helps the judge decide whether to approve this trustee in a subsequent case.”[22]
Finally, the court expressed concern for the integrity of bankruptcy jurisdiction absent extension of the doctrine:
If debtors, creditors, defendants in adversary proceedings, and other parties to a bankruptcy proceeding could sue the trustee in state court for damages arising out of the conduct of the proceeding, that court would have the practical power to turn bankruptcy losers into bankruptcy winners, and vice versa. A creditor who had gotten nothing in the bankruptcy proceeding might sue the trustee for negligence in failing to maximize the assets available to creditors, or to the particular creditor. A debtor who had failed to obtain a discharge might through a suit against the trustee obtain the funds necessary to pay the debt that had not been discharged.[23]
First Circuit: Similarly, in Muratore v. Darr,[24] the owner of a corporate debtor sued the Chapter 11 trustee in the district court, asserting claims for alleged misfeasance or malfeasance, abuse of process, negligence and violations of RICO while administering the bankruptcy estate. Specifically, the owner claimed that the trustee had failed to pay taxes, improperly sold properties, and allowed the purchase of property with illegal funds, among other allegations. The district court granted the trustee’s motion to dismiss for lack of subject matter jurisdiction based on the Barton doctrine because such suit was brought without the prior permission of the bankruptcy court. The owner appealed.
The First Circuit affirmed the district court’s dismissal, concluding that the Barton doctrine did apply and that the owner’s claims did not fall under the exception provided by 28 U.S.C. § 959(a), which allows trustees to be sued without leave for acts in carrying on business connected with the estate. The court found that the owner’s allegations pertained to the trustee’s administrative duties as a trustee rather than acts in furtherance of the debtor’s business. The court held that merely taking actions to preserve the estate—holding, collecting, liquidating or maintaining property—did not constitute “carrying on business.”[25] Rather, the statute is intended to permit redress for torts committed while operating a business.
The court specifically rejected the owner’s argument that the Barton doctrine should not apply because the bankruptcy case was closed, noting that the doctrine serves purposes beyond protecting estate assets, such as ensuring competent trustees and effective monitoring by bankruptcy judges.[26]
Ninth Circuit: In In re Crown Vantage, Inc.,[27] the Ninth Circuit held that the Barton doctrine applied notwithstanding the fact that a plan had been confirmed and therefore a bankruptcy estate no longer existed. The court required plaintiffs pursuing claims against a post-confirmation liquidating trustee to obtain leave from the bankruptcy court before filing suit in Delaware.
The court observed that if leave of the bankruptcy court were not first obtained, then the other forum lacked subject matter jurisdiction over the suit. The court noted that “[t]he Barton doctrine applies in bankruptcy, because ‘[t]he trustee in bankruptcy is a statutory successor to the equity receiver,’ and ‘[j]ust like the equity receiver, a trustee in bankruptcy is working in effect for the court that appointed or approved him, administering property that has come under the court’s control by virtue of the Bankruptcy Code.’”[28]
The court explained:
Indeed, the policies underlying the Barton doctrine apply with greater force to bankruptcy proceedings than to other proceedings involving receivers. The filing of a bankruptcy petition creates a bankruptcy estate, consisting of all of the debtor’s legal or equitable interests in property “wherever located and by whomever held.” 11 U.S.C. § 541(a). Thus, “[t]he district court in which the bankruptcy case is commenced obtains exclusive in rem jurisdiction over all of the property in the estate.” The court’s exercise of in rem bankruptcy jurisdiction “essentially creates a fiction that the property—regardless of actual location—is legally located within the jurisdictional boundaries of the district in which the court sits.” Thus, the jurisdiction of the bankruptcy court exceeds that of any other court-appointed receiver. The requirement of uniform application of bankruptcy law dictates that all legal proceedings that affect the administration of the bankruptcy estate be brought either in bankruptcy court or with leave of the bankruptcy court.[29]
The First Circuit held that the bankruptcy court’s in rem jurisdiction continues post-confirmation.[30] The court agreed “with the analysis of [its] sister circuits that ‘the doctrine serves additional purposes even after the bankruptcy case has been closed and the assets are no longer in the trustee’s hands.’”[31] If there were any objections to anything regarding the estate, the court stated, the objections should have been registered before confirmation. If a party fails to timely object, the party cannot later complain about a specific provision, even if the provision is inconsistent with the Bankruptcy Code. To raise identical issues in a second court “is an impermissible collateral attack.”[32]
Tenth Circuit: In Satterfield v. Malloy,[33] the debtor brought an action against the Chapter 7 trustee of his bankruptcy estate based on the trustee’s allegedly wrongful actions in his capacity as trustee. The debtor argued that the trustee’s actions were ultra vires, meaning beyond his legal power or authority, and thus not protected by the Barton doctrine. The debtor also contended that his action was authorized by 28 U.S.C. § 959, which allows trustees to be sued without leave of the appointing court for acts or transactions in carrying on business connected with the estate. Finally, the debtor argued that the Barton doctrine was inapplicable because his bankruptcy proceedings had concluded.
The court rejected all of these arguments. Regarding the debtor’s last argument related to applicability of the Barton doctrine after the case was closed, the Tenth Circuit stated: “Consistent with the holdings of other circuits, we reject this proposition. . . . [T]he Barton doctrine continues to serve important purposes even after a bankruptcy is complete.”[34] The court continued:
The Barton doctrine exists to ensure other courts do not intervene in the bankruptcy court’s administration of an estate without permission. A holding that [the trustee] acted ultra vires simply because he allegedly discharged his duties as trustee with improper motives would severely undermine this important judicial goal. We conclude that [the trustee’s] actions fell within the scope of his court-appointed authority as trustee because each of the alleged actions was related to his trusteeship duties. Accordingly, [the debtor] was required to obtain leave of the bankruptcy court before filing suit in the district court.[35]
Fifth Circuit: In In re Foster,[36] the Chapter 7 debtor listed three properties as assets in her bankruptcy case, but her husband claimed these properties were his separate property. The trustee initiated a case against the debtor’s husband to determine if the properties were part of the bankruptcy estate and intervened in the divorce proceedings to protect the estate’s interest. Ultimately, the bankruptcy court determined that the properties were part of the bankruptcy estate and authorized their sale by the trustee. Thereafter, the bankruptcy case was closed.
Almost ten months later, the debtor filed a motion to reopen the bankruptcy case to sue the trustee and vacate the judgment for lack of subject matter jurisdiction, which was denied. She then filed a complaint in Texas state court against the trustee, the trustee’s lawyers, and others asserting that they acted in an ultra vires manner, without obtaining permission from the bankruptcy court. The trustee moved to reopen the bankruptcy case to remove the action, dismiss the complaint, and impose sanctions. The bankruptcy court granted that motion and ultimately dismissed the complaint. The debtor appealed the bankruptcy court’s decisions, but the district court affirmed.
The Fifth Circuit held that the bankruptcy court properly applied the Barton doctrine. Acknowledging that the Barton doctrine does not apply to acts outside the scope of the trustee’s official duties, the court noted that such exception is applied narrowly and only “to the actual wrongful seizure of property by a trustee.”[37] The court found that such exception was inapplicable because all the alleged acts by the defendants occurred in their official capacity. The court affirmed dismissal of the complaint pursuant to the Barton doctrine notwithstanding the fact that the bankruptcy case had been closed when the complaint was filed. But, in doing so, it did not discuss the impact of closure of the case.
B. The Eleventh Circuit Does Not Support the Barton Doctrine’s Extension
Eleventh Circuit: In Tufts v. Hay,[38] Mr. Hay and his law firm represented a debtor in a Chapter 11 case in North Carolina. Mr. Tufts and his firm were representing the debtor in various cases in Florida when the bankruptcy case began. Hay told Tufts that there was a court order approving Tufts’s continued representation of the debtor. Relying on those representations, Tufts did extensive legal work for the debtor. There was no court authorization for Tufts to do this work, however. Because the work was done without authorization, the bankruptcy court ordered Tufts to disgorge the funds collected and held him in contempt when he failed to do so. The underlying bankruptcy case itself was ultimately dismissed by consent order. After dismissal, Tufts sued Hay in district court without first seeking leave from the bankruptcy court. The district court dismissed the suit based on the Barton doctrine. Tufts appealed.
The Eleventh Circuit held that the Barton doctrine does not extend beyond a bankruptcy case’s closure because bankruptcy courts have in rem jurisdiction over the estate. Once the assets of the estate were distributed, nothing that happened later would have any effect on the assets of the estate. Thus, there was no longer subject matter jurisdiction. The court stated:
[U]nder the “conceivable effects” test for section 1334(b), the Bankruptcy Court did not have jurisdiction to consider Tufts’s action, and Tufts counsel were not required to obtain leave from that court before filing this action in the District Court. The Barton doctrine did not therefore deprive the District Court of subject matter jurisdiction over this case. We expressly note that our holding here creates no categorical rule that the Barton doctrine can never apply once a bankruptcy case ends. We address this case only, and here these parties agreed this action could have no conceivable effect on the bankruptcy estate. On this record, the Bankruptcy Court lacked jurisdiction, and the Barton doctrine does not apply.[39]
The Eleventh Circuit revisited and clarified its view on this issue in Chua v. Ekonomou.[40] Chua ran a solo medical practice in Georgia. In 2005, a premed student moved into Chua’s home with him. Chua began prescribing medications to treat symptoms the student was displaying until, one day, Chua came home to find the student dead from an apparent drug overdose. Chua asserted that a conspiracy arose to “pin the blame” for the student’s death on him. The alleged conspiracy included a judge, a receiver appointed in a forfeiture action against him, the receiver’s attorney, and others. A jury found Chua guilty of felony murder and other offenses. Years later, Chua was released from prison, and he sued various defendants in district court, including the receiver, the receiver’s attorney, and the attorney’s law firm. The district court dismissed the claims against the receiver and related defendants for lack of subject matter jurisdiction under the Barton doctrine because Chua had not sought leave from the court that had appointed the receiver.
On appeal, the court reiterated its holding in Tufts v. Hay that “the Barton doctrine has no application when jurisdiction over a matter no longer exists in the bankruptcy court.”[41] The court explained that the policy arguments of the Seventh Circuit might be legitimate, but those concerns overlook subject matter jurisdiction. In any event, the Eleventh Circuit stated, there was no need to base the Barton doctrine on policy grounds “because court-appointed receivers enjoy judicial immunity for acts taken within the scope of their authority.”[42] The court concluded that “[r]eceivers do not need the Barton doctrine to provide an additional layer of protection for the performance of their duties” once the jurisdiction of the court that appointed the receiver comes to an end.[43] That immunity applies even if a trustee’s acts were malicious or in error. Ultimately, the Eleventh Circuit vacated the district court’s dismissal of claims against the receiver and related defendants based on the Barton doctrine and remanded with instructions to dismiss the claims against these defendants based on judicial immunity.
Conclusion
The Barton doctrine plays an important role in protecting court-appointed bankruptcy fiduciaries during the case. In that context, the doctrine has near-universal approval. While most circuits extend the doctrine past a bankruptcy case’s closure for policy reasons, the Eleventh Circuit’s jurisdictional analysis presents a strong argument that the doctrine should not be extended once the bankruptcy court no longer retains authority over a bankruptcy estate.
See, e.g., Alexander v. Hedback, 718 F.3d 762, 767 (8th Cir. 2013); Satterfield v. Malloy, 700 F.3d 1231, 1234–35 (10th Cir. 2012); McDaniel v. Blust, 668 F.3d 153, 156–57 (4th Cir. 2012); In re VistaCare Group, LLC, 678 F.3d 218, 224 (3d Cir. 2012); Lawrence v. Goldberg, 573 F.3d 1265, 1269 (11th Cir. 2009); Beck v. Fort James Corp. (In re Crown Vantage, Inc.), 421 F.3d 963, 970 (9th Cir. 2005); Muratore v. Darr, 375 F.3d 140, 147 (1st Cir. 2004); In re Linton, 136 F.3d 544, 545 (7th Cir. 1998); Lebovits v. Scheffel (In re Lehal Realty Assocs.), 101 F.3d 272, 276 (2d Cir. 1996); Allard v. Weitzman (In re DeLorean Motor Co.), 991 F.2d 1236, 1240 (6th Cir. 1993); Anderson v. United States, 520 F.2d 1027, 1029 (5th Cir. 1975). ↑
For an excellent discussion of the Barton doctrine and the cases interpreting it, see Ronald A. Spinner, Breaking Down the Gate—Changes to the Barton “Gate Keeper” Role in the Eleventh Circuit, Norton Bankr. L. Adviser, May 2022. ↑
In re Yellowstone Mt. Club, 841 F.3d 1090, 1094 (9th Cir. 2016). ↑
In re Nathurst, 207 B.R. 755, 758 (Bankr. M.D. Fla. 1997). ↑
In re Swan Transportation Co., 596 B.R. 127 (Bankr. D. Del. 2018) (Barton doctrine applied to actions against future claims trustee and is intended to protect liquidating trustees and other court appointees); Lankford v. Wagner, 853 F.3d 1119, 1122 (10th Cir. 2017) (extending Barton doctrine to trustee’s counsel where counsel acts under the direction of, or as the functional equivalent of, the trustee); In re MF Global Holdings Ltd., 562 B.R. 866, 869 (Bankr. S.D.N.Y. 2017) (enjoining action commenced by insurers against foreign provisional liquidator in Chapter 15 proceeding); In re Yellowstone Mt. Club, 841 F.3d at 1094 (applying doctrine to members of creditors’ committee); In re Circuit City Stores, Inc., 557 B.R. 443, 449 (Bankr. E.D. Va. 2016) (Barton doctrine applied to enjoin compliance with subpoena by liquidating trustee); In re East Coast Foods, Inc., 652 B.R. 910, 921 (B.A.P. 9th Cir. 2023) (Barton doctrine extended to post-confirmation Chapter 11 trustee); In re PH Dip, Inc., No. 2:23-cv-02843, 2023 WL 158879, at *1 (C.D. Cal. Jan. 11, 2023) (chief restructuring officer is entitled to quasi-judicial immunity when he is acting within the scope of his authority). ↑
Commission to Study the Reform of Chapter 11, American Bankruptcy Institute, Final Report of the ABI Commission to Study the Reform of Chapter 11, § IV(A)(5), at 44 (2014) (citation omitted). ↑
Lebovits v. Scheffel (In re Lehal Realty Assocs.), 101 F.3d 272, 276 (2d Cir. 1996). ↑
In re Linton, 136 F.3d 544, 546 (7th Cir. 1998). ↑
Retirement plans are the bedrock of financial security for millions of Americans. Historically, these systems’ complexity has insulated plan managers from accountability if they fail to meet legal obligations.
That shield is now cracking.
Courts are establishing precedents favoring plaintiffs earlier in the process, and the arrival of legal intelligence driven by artificial intelligence is making it possible to detect violations at scale. In this article, we explore how the legal community can seize this new opportunity to protect plan participants more effectively than ever before.
The Scope of ERISA Litigation Is Expanding
ERISA class actions are growing in volume and financial impact. The total of the top ten publicly reported ERISA settlement values reached $580.5 million in 2023 alone (an all-time high) and $413.3 million the following year, according to Duane Morris. Data analyzed from Westlaw indicates that filing counts have risen dramatically, too, from just fifteen cases in 2020 to more than 180 in 2025 (see graph below).
This growth comes as plaintiffs broaden their scrutiny of plan sponsors’ fiduciary responsibilities, moving beyond excessive fees and employee stock ownership plan (“ESOP”) violations to include an increasing number of claims involving forfeiture, pharmacy benefit manager (“PBM”) fees, and more.
The litigation has focused on two employer-sponsored retirement plan types:
Defined contribution plans: Employees have individual accounts, such as 401(k)s, and their retirement outcomes depend on contributions and investment performance.
Defined benefit plans: These traditional pension plans promise employees a fixed benefit at retirement. The employer must ensure the plan has enough assets to pay those benefits; oversight of how employers manage these plans is critical.
ERISA Class Actions 2020–2025
ERISA class actions have risen from just fifteen cases filed in 2020 to more than 180 in 2025.
Why Are ERISA Violations So Difficult to Detect?
Five structural features of retirement plans make detecting ERISA violations a challenge.
Data structures are complex and opaque. The information needed to assess plan performance is buried in Form 5500 filings, schedules, and attachments. These dense materials often lack standardized naming, contain inconsistent spellings, and require reconciliation with external data.
Investments are hidden inside complex vehicles. Many plans invest through collective trusts, pooled separate accounts, and target-date funds. Aggregated reporting can make underperformance in a fund’s underlying holdings difficult to detect.
Fee indication challenges are excessive. Fee arrangements vary by recordkeeper and investment provider, making it difficult to compare costs across plans and to determine whether fiduciaries secured reasonable pricing.
Forfeiture practices lack transparency. Determining how employer contributions are handled when an employee leaves often requires plan-by-plan reviews, as plan changes and payroll or vesting records often aren’t shown in Form 5500 filings.
Multiyear plan reconstruction is time-consuming. Addressing imprudent investment claims often requires examining performance over multiyear periods and determining whether the right comparison benchmarks were used. Without automation, this analysis is cumbersome.
Six Cases Driving New ERISA Filings
Several recent Supreme Court decisions have established precedents that have pushed ERISA litigation forward.
Reduced the reliability of ERISA statute of limitations defenses by requiring proof that plaintiffs read and understood the disclosures. This has allowed more fiduciary breach claims, particularly older ones, to proceed.
Closed the door on many defined benefit fiduciary breach lawsuits, causing plaintiff firms to shift focus to defined contribution plans, contributing to the rise in excessive fee and imprudent investment class actions.
Gave states more room to regulate PBMs, creating a pathway for more state law claims over drug pricing, reimbursement practices, and cost-containment structures within ERISA health plans. (State laws tend to be stricter on insurance plans.)
Made it easier for plaintiffs to get their ERISA cases heard, triggering a wave of excessive fee and recordkeeping fee lawsuits, many of which survived motions to dismiss based on this case.
Made it easier for ERISA lawsuits to survive early dismissal, encouraging plaintiffs to combine prohibited transaction claims with excessive fee and fiduciary breach claims. This increases plaintiffs’ ability to get their cases heard and expands the ERISA case types that proceed to discovery.
Five Trends and Signals Shaping ERISA Litigation Today
With new precedent expanding accountability across the retirement and benefits ecosystem, litigation is moving into areas that require data-driven analysis.
Excessive fee litigation and imprudent investment claims remain the core of ERISA class actions. Most new cases continue to challenge recordkeeping fees, investment expenses, and fiduciary oversight in defined contribution plans. Stable value funds, share class practices, and recordkeeping arrangements remain frequent targets. These claims will continue to anchor ERISA litigation.
Fee litigation is expanding into midsized plans. Lawsuits have long focused on large plans with billions in assets because they offered the most significant potential recoveries. That is shifting. Over 40 percent of cases in 2024 were filed against plans with assets under $1 billion, indicating an emerging area of opportunity.
Adviser and service provider liability is emerging as a new frontier. Plaintiffs are naming plan advisers, brokers, and consultants as co-fiduciaries, particularly where conflicts of interest or self-interested fee structures appear to have influenced plan decisions. Future litigation may also include business-to-business claims in which employers seek indemnification from advisers whose recommendations created fiduciary exposure.
Health and welfare plan litigation is gaining momentum. Although ERISA litigation has traditionally centered on retirement plans, new transparency rules, limited federal enforcement activity, and a history of troubling fiduciary breaches could spur more private litigation. This area, which has significantly higher total spend and less oversight, includes:
PBM pricing and rebate structures
excessive commissions and conflicts in voluntary benefit products
claims handling practices in self-funded plans
gaps in employer oversight of third-party administrators and algorithms
Regulatory developments are creating new areas of fiduciary risk. The White House’s 2025 executive order calling to expand alternative investments in 401(k) plans may encourage new claims regarding valuation, liquidity, fees, and risk disclosure. Fiduciaries that adopt these products without adequate documentation and monitoring may face higher risk of investment lawsuits.
The Opportunity: Legal Intelligence and ERISA Enforcement
Legal intelligence—the use of AI, data analysis, web intelligence, and legal expertise to identify actionable violations—is changing how plaintiff attorneys detect ERISA noncompliance. Instead of manually reviewing and reconciling fragmented plan documents, attorneys can now systematically surface patterns and anomalies that warrant closer legal analysis and select comparable funds. Peer groups can be selected that closely mirror the characteristics of the challenged funds to maximize chances of success on the merits at trial.
The comparators for each fund align closely with their corresponding fund across various dimensions, including: (1) similar equity-to-fixed-income allocations; (2) active management rather than passive or index-based strategies; (3) comparable asset sizes, ensuring scale-appropriate performance comparisons; and/or (4) similar expense ratios.
Aligning these factors between the challenged funds and the selected peer comparators ensures that the identified underperformance reflects genuine deficiencies in investment management.
Using legal intelligence, attorneys can:
Aggregate Form 5500 data and harmonize fund disclosures across disparate naming conventions and share classes.
Map investment lineups and fee evolution, accounting for plan amendments, freezes, or conversions.
Identify outliers in administrative fees and persistent investment underperformance relative to peer groups.
Detect friction between plan documents and actual reported practices.
Surface plans with data signatures that mirror past ERISA litigation triggers.
As ERISA litigation becomes more specialized and reliant on large datasets, AI-driven analysis is essential for effective case development. Legal intelligence brings hidden risk into view, supporting a more deliberate, evidence-based approach to identifying fiduciary failures and safeguarding plan participants.
A great benefit of living in today’s technological age is the opportunity to go “back to school” to take in recent lectures of prominent college professors. In the field of valuation, there is likely no more highly regarded college professor than Dr. Aswath Damodaran of New York University, whose entire Spring MBA 2025 valuation course is publicly available online.
Session 21 of Damodaran’s Spring MBA 2025 valuation class, recorded on April 16, 2025, provides instruction on the valuation of private (versus public) companies and includes several insightful observations regarding such valuations.[1] However, interested parties might find session 21 remarkable for not only what it includes but also what it excludes.
Exclusion of the (Ubiquitous) Size Premium
Notably absent from session 21 is the oft-cited and so-quantified adjustment of the size premium (“SP”),[2] which, according to popular wisdom, ought to be employed when figuring cost of equity (“COE”) estimates in virtually all private company valuations. This apparent omission, while on one hand glaring given the widespread acceptance and usage of SP by most valuation practitioners, is on the other hand understandable given both SP’s documented weaknesses[3] and Damodaran’s attendant track record of being extremely critical of it.[4] This dissonance, while certainly not the sole example of disagreement in valuation opinion and practice, is perhaps one of the more striking examples of it.
Inclusion of a Risk Element for (Suboptimal) Diversification
Just a few minutes into session 21, Damodaran lays the foundation for a lone, additional risk element when estimating COE for a “smaller” private, versus a “larger” public, company that has nothing to do with SP but, rather, everything to do with the relative level of diversification realized by the marginal investor in either company: “It’s not really a question of private versus public. It’s who the investor in the business is and whether they’re diversified. . . .”[5]
Damodaran goes on to suggest that when valuing a private company, analysts should not be including SP, nor any other such questionable risk factor, in their COE models but rather should be considering an additional risk element for the relatively poorer diversification that is likely to be realized, in some measure, by the marginal investor in that private company (versus the reduced risk from greater diversification that is readily available for the marginal investor in publicly traded stocks). This contrast between investments that carry material diversification risk and those that readily offer material diversification benefits is well-taken, given that traditional risk-and-return models incorporate as their foundation the pricing and characteristics of publicly traded stock. Indeed, as Damodaran notes on slide 136 of this Spring 2025 presentation, “[c]onventional risk and return models in finance are built on the presumption that the marginal investors in the company are diversified.”[6]
The Practical Boundaries of Diversification-Related Risk (and Return)
Damodaran’s example in session 21 of valuing a mature, yet small, single-location French restaurant (beginning around 20:00 of the lecture, or slide 134) is both entertaining and helpful in illustrating how this single incremental risk element can, as a practical matter, describe the boundaries of diversification-related risk and return. Simply put, if a private individual invests effectively all his or her wealth in the restaurant, then that market participant might assess a COE more consistent with that derived using the concept of Total Beta (i.e., the highest effective COE, suggesting the lowest potential valuation, all else equal). Conversely, if a public company considers purchasing the restaurant, then that market participant might assess a COE that is more consistent with that derived using the concept of Beta (i.e., the lowest effective COE, suggesting the highest potential valuation, all else equal). While not necessarily prescribing a method by which to figure a COE between these two bookend notions of compensable risk during his lecture, Damodaran does acknowledge the existence and importance of this middle ground, as well as market participants who may fall therein, by commenting that “everyone else is going to fall somewhere in that continuum. . . .”[7]
Stuck in the Middle
Whether market participants for private companies end up at a particular point within this continuum through negotiation, or a more detailed analysis of compensable risk, or some other reason is largely beside the main point, which is that the boundaries of this continuum may be understood to be a function of a single additional risk element related to relative diversification. Accordingly, acknowledgment of the continuum itself, and how market participants for private companies may be “stuck” somewhere in the middle of it, appears to be as fundamental to understanding private company valuations as is the exclusion of specious risk/return elements from them.
In fact, given the decades-long proliferation of college textbooks that have encouraged generations of analysts to exclude questionable, or “fudge,” risk factors from their COE calculations, one might reasonably expect that the landscape of today’s valuation texts would reflect an ever-deepening root of that basic mandate. However, as Damodaran apprises his class later in session 21: “I know there are books on how to build a cost of capital from scratch for a private business. And most of them break every rule.”[8]
Synthesis
Going “back to school” can be illuminating on certain key aspects of private company valuations. One of these key aspects relates to suboptimal diversification and, specifically, how the marginal private company investor may bear incremental risk from it relative to the marginal public company investor. Accordingly, valuation analyses of private companies that communicate and quantify such a “diversification discount,” while simultaneously eschewing specious risk/return elements, may intimate that their preparers have been “back to school.”[9]
Aswath Damodaran, Session Webcast No. 21: Recorded Session, Valuation MBA Spring 2025 (last visited Feb. 21, 2026) [hereinafter Session No. 21 Recorded Session]. Click link titled “Recorded Session” to begin the class recording. Note that Damodaran is currently on sabbatical as of the publication of this article in Spring 2026. ↑
SP may also be characterized in literature and valuation reports as the size effect, small-stock premium, or small-cap premium, among other similar terms. ↑
Numerous empirical studies conclude that SP is a market anomaly that lacks persistence in out-of-sample testing. In other words, these studies find SP to be a methodological artifact that weakens or disappears once examined outside of the original historical sample. See, for example, Ron Alquist, Ronen Israel & Tobias Moskowitz, Fact, Fiction, and the Size Effect, J. Portfolio Mgmt., Fall 2018. ↑
