Leasing in Indian Country —
Understanding Important Issues
BY EDWARD RUBACHA AND JOHN SINODIS
A lessor contemplating a finance transaction in Indian country should exercise due diligence by consulting
with counsel familiar with tribes and tribal law, waivers of sovereign immunity, and their effect on the
finance transaction. Ultimately, it is a business decision whether to lease or finance equipment to a tribe,
tribal entity or tribal member where the equipment will be on a reservation. Understanding the issues
surrounding such a decision is the first step toward a successful transaction.
ED WARD RUBACHA
Haug & Cunningham
Haug & Cunningham
Leasing to Native American tribes, tribal entities and tribal members presents opportunities for equipment finance companies, but these opportunities are not without specific challenges: sovereign
immunity, a myriad of tribal laws and tribal court
jurisdiction, to name a few. Together with reported
decisions, the underlying framework of federal Indian
law provides insight into these challenges, allowing a
more informed decision to be made when an equipment finance company looks to the tribal marketplace
for additional finance opportunities.
Sovereign Immunity & Enforceable Waivers
Native American tribes enjoy sovereign immunity from
suit “on contracts, whether those contracts involve
governmental or commercial activities and whether
they were made on or off a reservation.” See Kiowa
Tribe of Oklahoma v. Manufacturing Tech., 523 U.S.
751, 754-55 (1988). This immunity also extends to
tribal enterprises. Without an effective waiver, most
tribal entities cannot be sued in federal, state or tribal
court to recover equipment or for a deficiency under
either a lease or equipment finance agreement (EFA).
The careful lessor will have, at least, analyzed the
applicable tribal laws and tribal court procedures that
will apply in the event of a default under the equipment
lease or EFA.
Unless the lessor believes that every payment will be
made on time and for the full term, it should consider,
in the case of a tribe or tribal entity, requiring a waiver
of sovereign immunity. Although there has never been a
requirement of any “magic language,” the waiver must
be express. See, e.g., Santa Clara Pueblo v. Martinez,
436 U.S. 49, 58-59 (1978), which said: “a waiver of
sovereign immunity cannot be implied but must be
unequivocally expressed.” Additionally, any waiver must
be obtained as required by the applicable tribal law.
For example, in World Touch Gaming, Inc. v.
Massena Management, LLC, 117 F.Supp.2d 271, 273
(N.D.N. Y.2000), the lease agreement provided that the
“Lessee [casino] agrees to waive its sovereign immunity
from suit to enforce the provisions of this agreement and
acknowledges that this waiver allows lessor the right
to pursue both legal and equitable remedies as lessor
deems necessary.” An officer of the casino management company signed the lease. When a dispute arose,
the lessor attempted to sue in federal district court.
Because tribal law, stemming from the tribal constitution, required a tribal council resolution to effectuate
a valid waiver, the court held that the signature of the
casino management company officer was insufficient
to bind the tribe to the waiver in the lease agreement.
The court further stated the lessor should have been
“careful to assure that either the management company
had the express authority of the tribe to waive sovereign immunity, or that the tribe itself expressly waived
sovereign immunity with respect to the ... lease agreements.” World Touch Gaming, 117 F.Supp.2d at 275.
Who has the authority so sign a waiver often
depends on the applicable tribal law. Research is