Plains Commerce Bank v. Long Family Land & Cattle - Oral Argument

Argument of Paul A. Banker

Chief Justice Roberts: We'll hear argument first this morning in Case No. 07-411, Plains Commerce Bank versus Long Family Land and Cattle Company.

Mr. Banker.

Mr. Banker: Mr. Chief Justice, and may it please the Court: Tribes lack inherent sovereign power over nonmembers.

This court in the Montana decision recognized two narrow exceptions based on the underlying principles of protecting tribal self-government and controlling internal relations.

Neither of those exceptions applies here.

The question today is whether the tribal court possessed adjudicatory jurisdiction to hear the Longs' discrimination claim against the nonmember bank.

It did not.

There was no qualifying consensual relationship here of the qualifying kind.

There was... adjudication is not another means of regulating nonmember defendant conduct.

Justice Scalia: We've said that regulation does include regulation by adjudication for purposes of... of Federal pre-emption laws.

Why would it... why would it be different for... for Indian law.

Mr. Banker: Well, I think the reason that it would be different for Indian law is the way that it bears on the nonmember defendants' rights.

The... if you look at what Montana was based on and the underlying principles, I think it is important to recognize that nonmember defendants in tribal court, finding themselves there to adjudicate, that is something that I think was contemplated by the second exception, but not the first exception.

The reason that I think that is that in carving out two exceptions--

Justice Scalia: Yes, I understand, but I'm just talking about the first one now.

You say it is not... it is not regulation, right, under the first?

And that's... that's the only point I'm addressing.

Why should regulation through a process of adjudication not be considered regulation for purposes of our Indian law where... whereas, we have made clear in several cases that it does constitute regulation for purposes of Federal pre-emption under statutes that pre-empt state regulation?

Mr. Banker: --I think that it is different in the tribal-law context because in articulating the... the first exception when the Court said: Regulate nonmember conduct through other means, if the Court had meant to say "adjudication", I think the court could have articulated that there.

And I think it's--

Justice Scalia: We could have said the same thing about the Congress.

Congress just said... just said "regulation", and we interpreted that term to include common-law adjudication.

Mr. Banker: --When I look at the... you know, at the... and compare the language in the first Montana exception of regulation to the language in the Constitution under the Indian Commerce Clause, I see a parallel there between saying that, you know, there are certain types of legislative authority that tribes may exercise over nonmembers versus exercising the power of the courts.

Justice Souter: Well, are you saying that the... that the regulatory authority could be broader than the adjudicatory authority?

Mr. Banker: I think that has been well established: That the regulatory--

Justice Ginsburg: Can you give any example of that?

I mean, I found that rather surprising in your brief.

The Montana... a clear case that Montana talks about is tax, the imposition of a tax.

Well, if a jurisdiction has authority to tax, then surely it has authority to sue to collect that tax.

So I am not aware of a case where a State or tribe or nation has authority to regulate, to legislate, but lacks authority to enforce that regulation.

And if you have an example of that, I would appreciate being enlightened.

Mr. Banker: --Well, I think that there's a tension between what the Court said in the Strate case, where it said, presumptively, if there is the power to regulate, then there is presumptively the power to adjudicate.

That, I believe, was called into question by the second footnote in the Nevada versus Hicks decision, which questioned, in my mind, whether or not there was any adjudicatory power at all.

And I think that is the question that the Court has to determine, is whether--

Justice Ginsburg: What was the regulation that was authorized but unenforceable in the courts?

I don't recall... Montana... Hicks having said anything on that subject.

Mr. Banker: --Well, there was a... the footnote number 2 in Hicks at least called into question about whether or not... you know, I think it's been made clear by the Court's opinions that... that adjudicatory authority is certainly no broader than legislative authority.

The question raised by the second footnote in the Hicks opinion, in my mind, is whether or not adjudicatory authority exists at all in the first exception.

Chief Justice Roberts: Well, what is a tribe supposed to do?

Let's say there is a gas station on the reservation.

The tribe has a tax.

Anybody doing business... it's, you know, 1 percent of gross proceeds.

And at the end of the year the gas station owner says, well, I'm just not going to pay it.

What do they do then?

Mr. Banker: Well, I think that there is a difference between situations where there is a clear ability to regulate and where you would move to enforce that regulation and a situation where you are adjudicating, you know, separate claims under the common law of the tribe.

Chief Justice Roberts: So you think there would be... there would be tribal-court jurisdiction in the case I hypothesized?

Mr. Banker: I don't think so.

I think the nature of the first exception is a consensual relationship.

And I think if there is going to be an ability to regulate in the first instance, then the regulation needs to be clearly consented to.

Chief Justice Roberts: So your case, your entire case, is based on whether or not there's consent to dealing with the tribe by the nonmember?

Mr. Banker: Well, I think it goes further than that.

If I could... you know, in your example of the taxation, if there was clear consent to be taxed--

Justice Ginsburg: Who would consent to be taxed?

I mean the tax is...--

[Laughter]

It's being imposed.

But, say, at the gas station, they don't ask you when you drive up: Now do you consent to the tax?

Mr. Banker: --Well, but by engaging in commerce on the reservation and by, you know... and this Court has addressed it in a number of taxation decisions regarding Indian law, the... there is a quid pro quo for--

Justice Ginsburg: But that's different from consent.

You can say I don't consent as loudly as you like and as often as you like, and you still have to pay the tax.

Mr. Banker: --But that... you know, in the taxation context, I think that is the price of doing business.

Justice Souter: No, but if that kind of implicit consent applies in the tax context, I don't see why in theory it doesn't apply in the situation we've got here.

Mr. Banker: Well--

Justice Souter: If somebody is going to do business with the tribe, with tribal members, in a way that affects the tribe on the reservation, it makes just as much sense to say, well, they implicitly consent not to discriminate against tribal members because of their Indian status.

Mr. Banker: --I think it is, you know, that consent under the first Montana exception can't be implicit.

I think it needs to be explicit.

Justice Souter: Well, I thought it was implicit in the tax situation, as you responded to Justice Ginsburg's question.

Mr. Banker: Well, I think we need to be specific about the taxation context.

You know, I don't think that any taxation context would carry with it implicit consent.

Justice Souter: All right.

Let me take another example, the other explicit example from Montana, which mentioned taxing and licensing.

Are you saying that if a... in any particular activity, say, running a filling station or advertising oneself as a certified mechanic in the... at the filling station on the reservation, and the tribe says, well, we are going to license mechanics to make sure they are competent.

Are you saying that there has got to be an explicit agreement to the licensing in order for the tribe to enforce its licensing restriction against somebody who goes to work for that gas station?

Mr. Banker: I mean in that situation, if the tribe said, here is the licensing that we are going to impose on you for being a mechanic, and the mechanic then went to work at that gas station, knowing about that licensing requirement, I mean, that is... that is the sort of actual--

Justice Souter: Okay.

Then, that's... that's implicit consent then, isn't it?

Mr. Banker: --I think it comes--

Justice Souter: He doesn't sign a document saying "I consent"; he just goes to work.

And your answer says, okay, that's enough to catch him on licensing.

In Justice Ginsburg's example, if they started doing business, that's enough to catch them on taxation.

And if that is so, why isn't tribal dealing sufficient in effect to supply an implicit consent not to discriminate?

Mr. Banker: --Well, I don't know that I would... I would disagree that... I would say that those examples of consent of the licensing of the taxation are much closer to being actual consent.

I'm not saying by "actual consent" that there needs to be a written document that says--

Justice Scalia: You don't really mean "actual consent" by "actual consent", right?

[Laughter]

Mr. Banker: --Well, yes.

Justice Scalia: Maybe you should use a different term, like "implicit consent", maybe.

[Laughter]

Mr. Banker: The... I think that there has to be a line drawn.

Justice Souter: All right.

Why draw the line where you want to draw it?

We've got a line in which the... I'll put a blank, the "X" consent... what did we want... whatever adjective we want suffices for taxation and it suffices for licensing.

Why doesn't it suffice for nondiscrimination?

Why do we draw the line where you want it drawn?

Mr. Banker: The reason where we would draw the line where I want to drawn it is that, you know, the discrimination claim that was made here ultimately turned out to be based on tribal common law.

It arose out of this... the dealings, the contractual dealings, between the bank and a nonmember corporation.

It is important for a nonmember to know where tribal jurisdiction attaches or doesn't attach.

And it is not possible to predict when a common law, tribal... for an outsider to determine when a tribal common-law discrimination claim is going to attach as a form of regulation--

Justice Scalia: Oh, so one of your answers to an earlier question suggests the same point that you now seem to be making, although I don't... I don't recall it from your brief.

Apparently you think that it would be different if this antidiscrimination law of the tribe had been set forth in a tribal ordinance.

Is that right?

Would you say your client could have been held to it if it had been written, rather than simply a... a portion of tribal common law?

Mr. Banker: --If it had been a tribal antidiscrimination statute, there would have at least been the possibility of notice and the possibility of--

Justice Scalia: That's not what I asked.

That's not what I asked.

I asked whether you would acknowledge that your client could be bound if it had been written.

Mr. Banker: --I think what is required to bind a nonmember to tribal law is clear consent, and merely knowing about the tribal antidiscrimination--

Justice Scalia: Well, that doesn't make any difference.

We shouldn't place any weight on the fact that this was a common-law regulation, rather than regulation by a statute or ordinance.

You can't have it both ways.

It either makes a difference or it doesn't make a difference.

Mr. Banker: --I... I think that it does make a difference.

Justice Scalia: But you just told me it didn't.

Mr. Banker: I think--

Justice Scalia: You just told me that even if it were written down, you would still need what you think is express consent.

Mr. Banker: --I think that that provides the clearest guidance for when tribal jurisdiction attaches or doesn't.

Justice Ginsburg: Well, do you recognize that the bank was on notice, at least that it was a Federal requirement that when you deal with individual Indians or what this loan company was, it was an organization of Indians... that's what the Federal law calls it... there is a duty of fair dealing?

The Federal law requires that.

Isn't that so?

Mr. Banker: That is so, but, you know, we're not here to, you know... the Federal courts don't provide a substantive review on the merits.

There is certainly another side to the story about the merits of the discrimination.

Justice Ginsburg: But it's not... it's not uncommon that a State would adopt a Federal standard as its... as its own on a question of civil rights.

A State might stay, well, we choose to construe our human rights law in accord with the Federal... Federal law?

Mr. Banker: No.

That's, that's not uncommon.

But I think it's important to focus on the background about, out of which this discrimination claim arose.

And, you, know it began in the first instance with the bank, a nonmember, entering into a contract with a South Dakota corporation.

And the South Dakota corporation, the Long Family Land and Cattle Company, is not a tribal member, cannot be--

Justice Ginsburg: But it is an organization of Indians?

Mr. Banker: --It is closely held by tribal members.

And it is organized for the purpose of facilitating Bureau of Indian Affairs loan--

Chief Justice Roberts: Can a State distinguish when it grants a corporation status between non-Indian and Indian corporations.

Mr. Banker: --I don't believe so.

Justice Kennedy: Can you incorporate under tribal law.

Mr. Banker: You cannot incorporate under tribal law.

Justice Scalia: Wasn't part of the transaction the obtaining of back-up liability on the part of the individual Indians who, who owned the corporation?

Didn't they guarantee the loan?

Mr. Banker: You have to be specific about the loan guarantees and the contracts that we are talking about.

Before 1996, before the loan contracts that are at issue here, there were lending relationships and loan guarantees that were made.

And after 1996, when additional loans were made, there were personal guarantees that were made.

There was no attempt ever to enforce those personal guarantees, but they were part of the record.

Justice Scalia: No, but it does give the whole thing a decided flavor of dealing with, with Indians on the reservation.

You're dealing with a corporation that, that's majority owned or entirely owned.

Is it majority or entirely?

Mr. Banker: I believe it is certainly 51 percent.

Justice Scalia: Yes.

Mr. Banker: There is a question about whether it's more.

Justice Scalia: And then you get guarantees from, on reservation Indians.

It smells like dealing with Indians on the reservation to me.

Of course, this certainty that you're... that you're asking, your client could have obtained that certainly by inserting a choice of law provision providing that any disputes would be resolved somewhere else, couldn't it?

Mr. Banker: There is no question that this whole question would have been avoided had there been a choice of forum selection that placed the dispute resolution squarely in South Dakota courts.

In the absence of that, in the silence of that--

Justice Scalia: In the absence of that, why should we bend over backwards to give something that has the smell of dealing with the Indians any other name?

Your clients can fully protect themselves by a choice of forum provision.

Mr. Banker: --I think that in the face of silence in the contract, the general rule controls rather than its exceptions.

Chief Justice Roberts: Well, your clients could they fully protect themselves.

What if the tribe sought to enforce tribal law against them, can they bring that claim in State court?

Mr. Banker: If the tribe or if the tribal members sought to enforce that?

Chief Justice Roberts: Right.

Well, just like this and there was a choice of forum provision, says, well, you've got to bring this in State court.

I thought there were restrictions on whether or not tribal law can be enforced in State courts.

Mr. Banker: Well, I think it's the question of who the plaintiff is if the Long Family Land and Cattle Company, the South Dakota corporation, had had a contract with the bank that said your forum for dispute resolution is South Dakota courts, and the Long Family Land and Cattle Company had commenced an action in South Dakota courts, I think the dispute could have been resolved there.

Chief Justice Roberts: Even if it... well, that's if it's a contract claim.

What if it's a discrimination or Indian common law claim arising out of the contractual relationship?

Mr. Banker: That's a more difficult question.

You know, there was... it isn't part of the question presented, but there was a dispute in the underlying tribal court about the nature of the discrimination claim, whether it rose under Federal law or what was its underlying basis.

That was resolved in favor of it being a tribal law claim.

As I understand the tribal court of appeals' explanation of that on an underlying basis that there is little difference between the tribal law claim and the underlying Federal discrimination law.

Justice Scalia: Is it a contract claim?

Mr. Banker: Is it a--

Justice Scalia: Is it a contract claim?

Was... was... was the claim a claim for discrimination in contracting so that it was part of the contract claim.

Mr. Banker: --No.

I believe that the discrimination--

Justice Scalia: It's a freestanding tort action, is that what it was?

Mr. Banker: --It is a freestanding tort action.

Justice Stevens: Would the... would the jurisdiction issue be any different if it were a contract claim?

Supposing your client... they had brought suit against your client claiming a breach of contract, would there have been tribal court jurisdiction?

Mr. Banker: Well, we have to look at, you know, who were the contracting parties.

The contracting parties were the bank on the one hand and the Long Family Land and Cattle Company on the other.

So the individual tribal members I don't believe would have had a breach of contract.

Justice Stevens: Well, we would assume that the corporation had a breach of contract claim, could they have sued in tribal court?

Mr. Banker: I don't think that the Long Family and Cattle Company appropriately was a plaintiff in tribal court to sue on breach of contract.

Justice Ginsburg: Did they--

Justice Stevens: The question isn't whether that was an appropriate plaintiff.

Do you think the tribal court would have had jurisdiction of such a contract claim?

Mr. Banker: I don't think so without some sort of consent to hearing that.

Justice Ginsburg: --I thought that the bank... I thought that the Long Company was a plaintiff in the tribal court?

Mr. Banker: The Long Company was a plaintiff in the tribal court.

Justice Ginsburg: And as I understand it, the Long Company asserted, along with the individuals, contract claims?

Mr. Banker: That's correct.

Justice Ginsburg: But the Long Company did not make a tort claim?

Mr. Banker: That's correct.

Justice Ginsburg: So why isn't this judgment, even if you're right about the individuals in the tort claim, why isn't this judgment good at least as to the contract claim, which are not challenging and which runs to the benefit of the Long Company which has nothing to do with the tort claim that you are challenging?

Mr. Banker: Because of the way that the case was tried.

If you look at the general verdict form at page 192... 191 and 192 in the joint appendix, you'll see that the jury... the tribal court jury was asked interrogatories about liability: Liability for contract, liability for discrimination.

When they got to question 6 on page 192, the question was asked of the jury if you answered "yes" to question four for the other liability questions, four being the discrimination claim, then award damages.

And so the jury awarded $750,000 of undifferentiated damages.

Whether it was for contract, whether it was for tort is not for us to now second-guess.

There was a general award of damages.

And the jury was instructed that they could award damages for breach... for discrimination.

So, you know, that is a feature of how the case was tried.

It is a feature of the way that the jury returned its verdict.

And at this point it's impossible to know... the $750,000 that was ultimately awarded was far less than what the Longs were asking for for breach of contract, and they didn't say they were not asking for damages for discrimination in the tribal... in the tribal court.

So for this Court to say now that there was no jurisdiction over the discrimination claim would basically invalidate that underlying judgment.

Justice Souter: Mr. Banker, you several times have raised a point which seems to me to go to the nature of the first exception in Montana on an issue we haven't discussed yet, and I want to get clear on it.

You have emphasized consistently through your argument the need for consent whether we call it actual, explicit, some kind of consent to at least the regulatory jurisdiction upon which a judicial jurisdiction is premised.

And my understanding is that that's not what... I don't have Montana in front of me, but my understanding is that that is not what Montana, in effect said with respect to the... to the first exception.

As I recall what the court said in Montana it was that there may be situations in which a nonmember enters into a consensual relationship with the tribe or tribal members, and as a result of that consensual relationship, it then would be appropriate to recognize jurisdiction, for example, to tax regulatory jurisdiction.

My understanding is that the consent that Montana was talking about was not a consent to the specific jurisdiction whether it be regulatory or adjudicatory, but rather consent to some kind of, or a consent forming some kind of a relationship that would make it appropriate for the tribe to assert regulatory jurisdiction.

So that the consent does not have to relate to jurisdiction as such.

Am I... if that is correct, then your argument for consent seems to me to miss the point.

But maybe I'm missing the point of... of Montana.

What is your response to that?

Mr. Banker: Well, what Montana said, the actual language of Montana said a tribe may regulate through taxation, licensing or other means the activities of nonmembers who enter consensual relationships with the tribe or its members, through commercial dealings, contracts, leases or other arrangements.

Justice Ginsburg: So the consensual relationship is what you just said, contracts, leases or other commercial.

So the consent is to the commercial relationship.

Mr. Banker: Well, I mean, my interpretation of that is... I mean, Montana in its first exception meant that the consent was in the consensual relationship, then any business dealings with the tribe or its members would result in tribal ability to regulate, and that hasn't been the case, as this Court has, you know, decided--

Justice Souter: But the point of my question was do you agree that there... within the... the description of the exception in Montana, that there need not be a consent, either to the regulation or to an adjudicatory jurisdiction to enforce the regulation?

Mr. Banker: --Not in the actual language of Montana, but in reading Strate and in reading Hicks and in reading Atkinson Trading Company, that is my interpretation of the--

Justice Souter: So you're saying the Montana exception has been modified by later cases.

Mr. Banker: --That is correct.

Justice Souter: Okay.

Justice Ginsburg: Certainly not in Strate, which you quoted before as saying if you have jurisdiction to regulate, then have you jurisdiction to enforce the regulation.

Mr. Banker: True, but I think Strate is an important part of that history.

Justice Alito: Well, I thought that your argument was that the general principle that was adopted in Montana is the tribal jurisdiction extends only to those things that are necessary to protect tribal self-government or to control internal relations, and that merely entering into consensual commercial transactions doesn't fall within that, but if one were to consent to the jurisdiction of the tribal courts, then that would be an additional basis for jurisdiction.

I thought that was what your argument was.

Mr. Banker: I believe that's correct.

Justice Souter: But if that's your argument what's left of the first exception?

Mr. Banker: Well, what's left of the first exception is certainly a tribal ability to regulate, and perhaps that's all.

Justice Souter: So the first... but as I understand it the first exception would have no independent application unless the second exception were met... were satisfied, i.e., there was a tribal need based on self-government, economic self-protection and so on which, which would in effect validate the tribe's attempt to regulate, which seems in effect to say that everything turns on the second exception, not the first.

Mr. Banker: Well, I think the first exception could still have meaning, in the sense that it grants the tribe the ability to regulate.

The question really is how far does that ability go and how far does it stretch.

I don't think that it stretches to adjudication, and I further don't think it stretches to adjudication of nonconsensual tort claims.

If there are no further questions I'd like to reserve the remainder of my time.

Argument of David C. Frederick

Chief Justice Roberts: Thank you, Counsel.

Mr. Frederick.

Mr. Frederick: Thank you, Mr. Chief Justice, and may it please the Court: I'd like to address both standing and the merits, but because there are some additional wrinkles on the standing question in light of how it was briefed in the reply brief, I'd like to make three brief points on the merits before addressing standing.

First, the bank engaged in a seven-year business relationship with the Longs, knowing that they were Indians and deriving substantial commercial benefits from the Longs' tribal status through the BIA loan guarantees.

Second, the bank has not challenged tribal court jurisdiction over the breach of contract claim or the bad faith claim, which are the core claims in the case.

Justice Ginsburg: Well, they said they don't need to because they said if they win on their claim, then their whole case--

Mr. Frederick: And I'll address that, Justice Ginsburg, on the general verdict point, which is there is actually some law of this which I would like to describe for the Court my understanding of.

My third point, though, is that both the district court and the Eighth Circuit below found significant that the bank had conceded tribal court jurisdiction in its motion for summary judgment on its counterclaim, and they found that concession to be important to note, and both courts below found the Indian character of the Long family company to be notable as well.

Under this Court's two court rule, those fact findings are entitled to significant respect.

Now, as to the standing question Justice Ginsburg, let me get to your point on the general verdict.

This is ultimately a question of tribal procedural law, how the tribal court would treat vacature of a claim deemed to be an invalid claim.

Chief Justice Roberts: Where do I look that up in tribal law?

Mr. Frederick: Mr. Chief Justice, under tribal law number 1, the Cheyenne River Sioux Tribe has adopted the Federal Rules of Civil Procedure for procedure in the tribal courts, and under Federal Rules of Civil Procedure 49, there are provisions for special verdicts and general verdicts, and Rule 49(a)(3) provides that if no specific objection is made to a fact or finding requested by the jury, it is waived.

The bank here did not make a specific objection to the general interrogatory number 6, therefore, they may be deemed to have waived their objection to having the damages collected.

Chief Justice Roberts: I'm sorry; I don't understand.

I'm looking at joint appendix 191 to 192.

You have special interrogatories, including number 6 but also number 4 and then they have damages.

And it's not clear whether those damages are based on the finding of liability under 4 or 6.

Mr. Frederick: That's my point, Mr. Chief Justice.

In the trial transcript which is contained at roughly pages 555 through 562 of the tribal court record, there was colloquy on how these special interrogatories were to be framed.

The bank objected to number 4, the discrimination count on the ground that a company cannot be discriminated against, only individuals can be discriminated against.

That objection was sustained, and so special interrogatory 4 was written as you see it in the joint appendix.

The bank did not object to the general verdict question on damages, so the law on Rule 49(a)(3) would be that special verdict is deemed to be waived, and now there is some--

Justice Ginsburg: --There is no objection--

Justice Scalia: Wait.

They are, they are not objecting to a... to a general verdict.

They are objecting to the fact that in their view, one of the elements of that... of that general verdict is based upon what they assert is an invalid claim in the... in the Indian court.

Mr. Frederick: --Precisely so, Justice Scalia.

Justice Scalia: I don't know that they waive that when they when... when they allow a general verdict to go.

Mr. Frederick: The way cases say general verdicts should be deemed, if there is an invalid claim, there are competing views about what to do with that when the damages awarded is treated as a general verdict.

There is a circuit split on the question of what you do when there has not been a specific objection preserved and there is a general verdict and one invalid claim and evidence that supports a valid claim.

Now recall, they don't challenge the breach of contract claim.

Our brief points out how the evidence supports damages for breach of contract.

Now Judge Kozinski in the Ninth Circuit in a case called McCord v. Maguire 873 F 2d 1271 says that this waiver rule means that their ability to challenge the general verdict would be waived and they would be forced to live with the verdict if evidence supports it.

Under that rule--

Justice Scalia: If evidence supports any one of the claims contained in the general rule.

Mr. Frederick: --That's correct.

That's correct.

The First Circuit in a case called Gillespie versus Sears Roebuck, 386 F 3d 21 takes the position that if you have not filed your objection you have not waived it.

Chief Justice Roberts: Who wrote that?

You gave us the benefit of the author of the Ninth Circuit, but not the First.

Mr. Frederick: Chief Judge... I was about to say that.

They are both very fine opinions; they--

Justice Ginsburg: --You're not asking us to resolve that circuit split in this case.

Mr. Frederick: --No.

What I'm saying is that the tribal court, which would be looking to Federal law to resolve the effect of a supposed tainted claim... if you were to conclude that a discrimination complaint is a tainted claim... would have to evaluate what effect that has on the final judgment.

And because there is a circuit conflict on that question, unfortunately, I cannot give you a definitive answer as to how the tribal court would resolve that.

My point, though, is that if this Court concludes that there is a redressibility problem in this case, which we would submit, respectfully, there is, the appropriate course would be to vacate and remand for the lower courts to certify the question to the tribal court of appeals or to make some further inquiry into the law to determine how--

Justice Scalia: The tribal court of appeals would have to be finding Federal law.

It wouldn't be Indian law; it would be Federal law.

Mr. Frederick: --It is--

Justice Scalia: You say they have adopted the Federal rules.

So whatever the Federal law... in other words, we would ask them to answer the question that you don't want us to answer.

Mr. Frederick: --No.

I've asked you to go with the Ninth Circuit Court because that is what I think is the correct rule.

But, Justice Scalia, any time a different jurisdiction incorporates some law into its own system, it is opining as a matter of Cheyenne River Sioux Tribe law.

And, as Cohen's Indian law treatise points out, tribal courts would not look not only to Federal sources but also to State courts, too.

The rule in South Dakota follows the general verdict rule in which--

Chief Justice Roberts: And, presumably, tribal... whatever tribal precedent there may be, as well.

Mr. Frederick: --That's correct although we have not been able to find precedent--

Chief Justice Roberts: Well, neither could... and neither could anybody, right?

I mean if anybody could find it, you could.

It's because it's not published anywhere, right?

Mr. Frederick: --Well, there are published decisions.

This Court... this is a question of first impression.

Justice Scalia: Certainly, your reliance upon the Federal rules doesn't impress me as much as it did when you first told me about it, because apparently the Federal rules mean whatever the tribal courts say they mean; is that right?

Mr. Frederick: No.

I think, Justice Scalia, the Court would look at the various sources of law--

Justice Scalia: And come to its own decision as to what they mean.

Mr. Frederick: --Yes.

Chief Justice Roberts: One of the points you mentioned earlier is that this is an Indian corporation, and that's a concept I don't understand.

If Justices Scalia and Alito form a corporation, is that an Italian corporation?

[Laughter]

Mr. Frederick: I would like to beg the indulgence of the Court in not answering that question specifically.

[Laughter]

My point--

Justice Scalia: And do we get special loan guarantees?

[Laughter]

Chief Justice Roberts: I understand the concept of a minority-owned or an Indian-owned corporation, but the point here is you are trying to say that the corporation is a member of the tribe.

And I just don't know.

And I certainly don't think the State, when it incorporated this entity, said: You're a different type of corporation than every other; you're an Indian corporation.

Mr. Frederick: --Well, to the contrary, Mr. Chief Justice.

There is a State supreme court case on point called Pourier, which we cited in our brief, which says that a majority-owned corporation under South Dakota State law shall be treated as a member of that tribe for the tax purposes that were at issue in that case.

So--

Chief Justice Roberts: How would a normal... I guess a non-Indian or non-Italian or non-Irish... corporation dealing with the Long Family Land and Cattle Company know that it was an Indian corporation--

Mr. Frederick: --Well, I--

Chief Justice Roberts: --putting apart the particulars in this case?

Mr. Frederick: --Mr. Chief Justice, let me step back and say I'm not here to advocate that there can be different racial characteristics of corporations.

What is anomalous about this case and the way the BIA has set up this program is that the BIA establishes principles of Indian identity so that it can determine whether it satisfies congressional mandates for Indian financing.

Chief Justice Roberts: Well, I know the BIA says that.

But if you're a bank and somebody comes in and says: I'm a corporation; I would like a loan, is the bank supposed to start asking questions about whether there are Indian shareholders, and how many, and all of that?

Mr. Frederick: Banks typically do require lots of documentation, Mr. Chief Justice.

Chief Justice Roberts: So they should have a check box on their loan application that says: Are you an Indian?

Mr. Frederick: The difference here, Mr. Chief Justice, is that the bank required BIA loan guarantees as a condition of making the loans.

Chief Justice Roberts: I'm asking you about: In a general case, let's say they don't require BIA loan guarantees.

They require, just as in this case, collateral.

Mr. Frederick: They did not.

They required more, and that's the important point.

The facts actually matter.

Chief Justice Roberts: Well, I am sure the facts here matter.

I have a hypothetical question.

A bank dealing with an Indian-owned corporation, how are they supposed to find out, or may they find out, whether it's an Indian-owned corporation, particularly when under your approach, when they do form that contract, they are subjecting themselves to tribal-court jurisdiction?

Mr. Frederick: I would acknowledge that when there are no BIA loan guarantees required, a bank may or may not know of the identity of the owners of the corporation.

Chief Justice Roberts: And do they subject themselves to tribal-court jurisdiction because they are dealing with, as you call it, an Indian corporation?

Mr. Frederick: Without further facts, no.

Here, though, the bank required the BIA loan.

It went on to the reservation to scrutinize the collateral.

It required personal guarantees from the tribal members.

It got collateral in guarantees on the personal effects and chattels.

It knew that the corporation was doing all of its business on tribal trust lands.

It went into the tribal headquarters to determine that the tribe was comfortable with the various loan arrangements.

It enlisted the assistance of tribal financial officers to ensure that the cash flow would be a sufficient--

Chief Justice Roberts: So that if the bank had two... two different types of loans, in one situation the corporation comes to the bank.

It is an Indian corporation, if there is such a thing; and the bank deals with it, although it doesn't know that.

In the other situation are the facts, as you suggest here; and the... dealing through the normal, collateral consequences and operations of a contract with a bank, they want to know the collateral, and all of that, that constitutes consent, but a commercial relationship with a member does not.

Mr. Frederick: --I think, in general, Mr. Chief Justice, I would agree with that hypothetical.

But here, if you took away the BIA loan piece, I think the facts very strongly point to the bank knowing it was engaging in a consensual relationship with Indians because it went on tribal trust lands.

It involves the officers of the tribe for effectuating the loan.

Justice Alito: Well, there are many facts here that are favorable to your position, but I would appreciate it if you could articulate the rule of law that you would like us to adopt in this case, the general principle that you would like... the general rule that you would like us to adopt.

Mr. Frederick: Justice Alito I don't think I can improve on the language that's in Montana in its first exception, itself, which is that there are consensual relations that are licensing of commercial--

Justice Alito: Can that be the case: Any consensual relationship between a member of the tribe and a nonmember is subject to the jurisdiction of the tribal courts?

Mr. Frederick: --No.

I think that the Strate case imposed a nexus requirement.

I think the liability has to arise out of that consensual relationship, which it clearly does here.

Justice Alito: So an Indian goes to a bank off the reservation and asks for a loan and gets the loan.

That contract is subject to the jurisdiction of the tribal courts?

Mr. Frederick: No.

I don't think necessarily any loan.

I think I answered Mr. Chief Justice's question to the effect that any kind of general loan of that nature would not necessarily give rise to--

Justice Scalia: Well, it has to be a known... a known consensual relationship, for one thing.

Wouldn't you add that requirement.

Mr. Frederick: --Yes.

Justice Alito: All right.

So the Indian goes to the bank and says: I'm an Indian.

Give me a loan.

The bank gives him a loan.

That's subject to the jurisdiction of the tribal courts?

Mr. Frederick: No.

I think, Justice Alito, that there are very fine gradations in the facts.

And we are not asking for an articulation of a general rule of the kind of sweeping effect that the Petitioners are asking for.

We are asking for a straightforward application of Montana 1 on facts here that developed over a substantial number of years.

Justice Alito: Well, isn't it necessary for there to be some kind of clear notice?

Somebody puts an ad in the newspaper to sell a used car.

Someone shows up to purchase the used car.

He purchases the used car and says: And, by the way, I'm an Indian.

That is subject to the jurisdiction of the tribal courts?

Mr. Frederick: I don't think that necessarily would give rise to the kind of consensual relationship that Montana was speaking about.

Justice Alito: Well, why not?

What's missing there?

Mr. Frederick: I think what's missing is the longevity of a relationship, the degree to which the cause of action arose out of the answering of that ad.

I mean one of the features of--

Chief Justice Roberts: It's an odd sort of basis on which to predicate jurisdiction.

We usually... when you're dealing with jurisdiction, we usually look for a bright-line rule.

Mr. Frederick: --Well, I think that the necessary concomitant of having tribes with their elements of sovereignty residing within States and within the United States is to have somewhat less bright-line features to some of these jurisdictional principles.

Our submission here is that the facts--

Chief Justice Roberts: You said earlier... I am sorry.

You said earlier that this was a straightforward application of Montana?

Mr. Frederick: --Given the facts that are present in this case.

Chief Justice Roberts: Yes, given the facts.

But isn't it true that this would be the first case in which we have asserted or allowed Indian tribal jurisdiction to be asserted over a nonmember?

Mr. Frederick: Yes, it would although the court in National Farmers and in Iowa Mutual could have disposed of the case simply on a bright-line-rule basis but rejected that very notion.

Justice Kennedy: Do you think it's inherent in Montana exception number 1, that an Indian tribal court in the course of adjudicating commercial dealings has the capacity to elaborate common law?

Mr. Frederick: Yes.

And... and I don't think--

Justice Ginsburg: To elaborate tribal common law.

Mr. Frederick: --That's how I understood your--

Justice Kennedy: Tribal common law?

Mr. Frederick: --Yes, that's how I understood Justice Kennedy's question.

You know, and it is the same--

Justice Kennedy: And you think that's necessary for regulating consensual relationships?

Mr. Frederick: --I think that, yes, it can be.

I mean the... I thought I heard the Petitioner acknowledge today that if the discrimination rule had been written down, that that would be perfectly fine to put everybody on notice.

These principles of discrimination here are--

Justice Scalia: He backed off on that.

I pressed the point and...--

[Laughter]

Mr. Frederick: --Well, my... my mission here is that the bank did not avail itself of any of the procedures in Rule 12 to clarify the source of the law, to move to dismiss the discrimination claim, to move for summary judgment on the discrimination claim.

Chief Justice Roberts: What about... what about their point that, under our system, governing is based on the consent of the governed, and in this case the bank has no role to play in the nature or establishment of the court to which they are being subjected?

Mr. Frederick: Well, in this particular case, Your Honor, this bank has availed itself purposefully of tribal courts on at least 14 occasions.

This would be the 15th case.

These are set out in the tribe's brief, the amicus brief, footnotes 27, 28, and 29.

Chief Justice Roberts: Well, and I suppose--

Mr. Frederick: This is not a stranger to the tribal court, Mr. Chief Justice.

Justice Kennedy: --Well, suppose it were the first occasion?

I mean, what's the rule?

That doesn't help me.

Mr. Frederick: My point is--

Justice Kennedy: In other words, if you go... if you make a mistake 14 times, you're bound to 15?

That's kind of an estoppel.

Mr. Frederick: --No, I'm saying that the availment of the tribal court is what creates the jurisdiction.

I'm saying it responds to the point that the bank can hardly claim surprise.

They know how to deal with tribal law and tribal procedures.

They could have asked the nonmember judge who presided over this trial to clarify how the discrimination would be done.

In the tribal transcript, the colloquy on discrimination was rather straightforward as to treating members in a fair way as compared to treating nonmembers.

These are not difficult concepts in the law.

Justice Ginsburg: Mr. Frederick, before you finish, I would like for to you give your best answer to a lurking, underlying concern, and that is the the Chief Justice brought up the outsider subjected to courts where the outsider has no vote.

That happens when you sued in a State that's not your own, but there is the right to remove and also at the end of the line is this Court.

And I think in the case of the tribal courts, neither of those exist.

There's no... you can't remove to a State or Federal court, and this Court has no review authority over a tribal court's judgment.

Mr. Frederick: I have two suggested responses to that, Justice Ginsburg.

One is that, when a tribal court judgment needs to be enforced, it can be brought in State court, and South Dakota follows the comity rule, which means that it has to satisfy certain requirements of fairness, adherence to basic principles, and the law before a State... the State court will enforce the tribal court judgment.

Under national--

Justice Ginsburg: Not the same faith and credit that it would give to a sister State judgment?

Mr. Frederick: --That's correct.

It's not full faith and credit; it's comity.

And that comity provides for a substantive review while enforcing the judgment.

Chief Justice Roberts: Well, what if the tribal law has certain cultural principles such as fairness and equity of a sort that aren't recognized under Federal or State law in this type of contractual relationship?

Does that preclude the State court from giving comity or not?

Mr. Frederick: The way the South Dakota statute is worded, Mr. Chief Justice, unfortunately, I can't give you a direct answer to that because it involves a panoply of issues whether State law deems the final judgment ultimately to be a fair one and... and, importantly, when this Court recognized the jurisdictional point as giving rise to Federal jurisdiction in National Farmers, I would submit it also perhaps created the avenue for the enforcement of judgments to be brought in Federal court as well.

I don't understand why a jurisdictional challenge and a challenge to the enforcement of a judgment could not give rise to the same Federal question jurisdiction recognized in National Farmers.

So I think there are two avenues to be in State or Federal court when enforcing a judgment in tribal court that heretofore for have not fully been explored, certainly not by any decisions of this Court.

If the Court has no further questions.

Argument of Curtis E. Gannon

Chief Justice Roberts: Thank you, Mr. Frederick.

Mr. Gannon.

Mr. Gannon: Mr. Chief Justice, and may it please the court: This court's Montana framework confirms that Indian tribes can, in some circumstances, exercise legitimate authority over nonmembers and nonmember land on their reservations.

Unlike what has happened in the criminal context, the political branches have not acted to divest tribes generally of civil jurisdiction over nonmembers.

Both before and after Montana was decided, Congress and this Court have repeatedly articulated the firm Federal policy of encouraging tribal self-government and have recognized that tribal justice systems are an essential part of tribal governments.

Justice Scalia: Well, that may be; it depends on what you mean by "tribal".

I mean, it certainly would be rational to say that all disputes between members of the tribe can be resolved authoritatively by the tribal court, but it's quite a different thing to say that a dispute between a nonmember of the tribe and a member of the tribe can go to the tribal court.

It's sort of the analogue to being home fried in a foreign State.

It's... is pretty close.

Mr. Gannon: Well, Justice Scalia, that's of course true, that there is a difference, but the Montana framework recognizes that the political branches have not completely divested tribes of their jurisdiction over nonmembers in circumstances like this.

And--

Chief Justice Roberts: Well, you agree with your friend Mr. Frederick that Montana did not address jurisdiction over a nonmember and that this would be the first case in which we'd recognize such jurisdiction?

Mr. Gannon: --Well, it did not specifically address any previous cases involving jurisdiction over a nonmember defendant who is hailed into Federal court.

Justice Scalia: Defendant, yes.

Mr. Gannon: But I think it is... it is the case that it clearly recognized a consensual relationship that is established before the lawsuit begins is what provides for regulatory jurisdiction in some of the cases and adjudicatory jurisdiction, as is now clear from Strate and the Court's subsequent decisions.

Justice Kennedy: In your view, does jurisdiction follow all regulatory authority?

If it's within regulatory authority, then is it your position that there is necessarily jurisdiction to enforce in a tribal court--

Mr. Gannon: Well--

Justice Kennedy: --in civil cases?

Mr. Gannon: --Well, in Iowa Mutual, this Court did state that tribal courts are best qualified to interpret and apply tribal law.

And so--

Justice Kennedy: In your position, is regulatory jurisdiction concomitant with civil judicial jurisdiction in the tribal court?

Mr. Gannon: --Generally, yes.

Chief Justice Roberts: What happens if the bank deals with a corporation that is not an Indian corporation, and then that... the shareholders of that corporation sell their shares to Indians?

Mr. Gannon: Well--

Chief Justice Roberts: Does the bank now have a consensual relationship with an Indian corporation?

Mr. Gannon: --Well, I think, Mr. Chief Justice, to expand upon the discussion that you were having with Mr. Frederick, that the consensual relationship that's necessary to establish jurisdiction in the sense of Montana's first exception requires not only that there be a consensual relationship with a member, and which we do think that implicit in that is some knowledge at least objective knowledge that you knew you were dealing with a tribal member.

And so if the consensual relationship were established and with somebody who was not a nonmember who subsequently ended up through sales of shares to become a member, we don't think that that ex post facto development would effect the establishment of the original relationship.

Justice Scalia: You would add on the reservation?

I mean--

Mr. Gannon: Yes, absolutely, Justice Scalia.

That is something--

Justice Scalia: --If he walks into some town in South Dakota, the mere fact that you know he's an Indian... it has to be on the reservation.

Mr. Gannon: --Absolutely, Justice Scalia, and that follows directly from the terms in Montana itself because Montana says that the exceptions are are about instances of, quote,

"civil jurisdiction over non-Indians on the reservation. "

And that's an important factor.

Chief Justice Roberts: Well, but the only reason... the only reason the bank is on the reservation is because the land was collateral, right?

Mr. Gannon: The only reason--

Chief Justice Roberts: They didn't want to buy land on a reservation; they wanted to make a loan and get the interest or whatever, and it just turned out that the Indians defaulted, and therefore they were left with a land on a reservation.

Is that consensual?

Mr. Gannon: --Well, everything about this transaction is related to the reservation.

To be sure, part of it dealt with the land on the reservation, but the rest of the ranch's operations, including places where the bank possessed collateral and security interest in personal property, were on tribal grazing land.

Chief Justice Roberts: So if it's a different... the Indian... the corporation is owned by members on the reservation, the collateral they put up is off the reservation, is there consensual dealings with the corporation then?

Mr. Gannon: Well, the thing that's key here, I believe, is that the subject of the contract was intimately connected with the reservation itself, and that's why it comes within Montana's discussion of civil jurisdiction.

Chief Justice Roberts: Yes, but the subject of the contract is loan to a corporation owned by Indians on the reservation.

The collateral put up is other land that the corporation owns or the individuals own off the reservation.

Jurisdiction or not.

Mr. Gannon: Without any further facts, no, I don't think that would be enough to establish jurisdiction.

What's important here is that the subject of the contract was actually on the reservation, and that's why it comes in--

Chief Justice Roberts: I guess, what I meant, what do you mean by the subject of the contract?

Mr. Gannon: --Well, the loan here was for specific purposes.

It was for... I mean, there were a lot of specific terms in which the bank dictated lots of practices on the ranch, and it knew everything about the way the operation was being conducted or required express approval for individual purchases and things like that.

And so, this is not an instance where a member is engaging in business off the reservation.

And indeed in Blaze Construction the court addressed a case in which there was a member-owned corporation that was doing business on a different reservation, and the parties conceded there that that would not be considered to be a member for purposes of Montana... that was actually a taxation case, but it would not be considered a member for purposes of these exceptions.

Justice Scalia: Am I correct that the collateral here, the land, the land that was collateral was within the reservation but it was not Indian land.

Mr. Gannon: Well, that's generally correct, Justice Scalia.

There is a little bit of a dispute in the probate proceedings about exactly the status of the land.

But, yes, this transaction did involve transfer of the deed to the bank, and therefore, at that point it would have been... to the extent that that transfer was effective, it would have been a nonmember only on the reservation.

Justice Scalia: And you think that that's enough.

It doesn't have to... when you say "on the reservation", you include as on the reservation land that is no longer owned by Indians but... but is within the reservation boundaries.

Mr. Gannon: The thing that triggers the regulation here or the jurisdictional authority of the tribe is the consensual relationship with the tribal member.

And so it's... it's... it's not... this isn't... this isn't like a tort that occurred on a particular piece of land while we are asking--

Justice Scalia: No, no, wait.

You say that consensual relationship is not enough.

If you enter into relationship with Indian in South Dakota on, you know... in the State capital, that isn't enough.

It has to be on the reservation.

You acknowledge that.

And for purposes of on the reservation, it's enough that you're dealing with land that is within the reservation even... even if it is no longer Indian land?

Mr. Gannon: --Yes, Justice Scalia.

And the Montana exception to deal with jurisdiction--

Justice Alito: Does "on the land" mean... "on the reservation" mean land on the reservation or does it extend any further than that?

Mr. Gannon: --I... I... I can't say--

Justice Alito: Let's say an Indian gets an auto loan for a vehicle to be used in a business on the reservation.

Is that on the reservation?

Mr. Gannon: --In general, the sale of goods off the reservation, unless there is some particularly intimate connection with the reservation that... that the parties anticipate at the time, probably isn't going to be enough to trigger jurisdiction.

And so--

Chief Justice Roberts: What about a home equity loan for home on the reservation.

Mr. Gannon: --For a home that's on the reservation?

Chief Justice Roberts: Yes.

Mr. Gannon: And it's for remodeling the home--

Chief Justice Roberts: Whatever home equity loans are for.

Mr. Gannon: --Yes.

I think that that's... if it were going to be used for something completely off the reservation, then maybe an argument could be made that it doesn't have enough to do with regulating activities that are occurring on the reservation.

Chief Justice Roberts: Well, they are going to add... add a new wing onto the... new room on to their home.

Mr. Gannon: And that's an example where I do think that--

Chief Justice Roberts: So if Chase Manhattan gets a home equity loan application from somebody and they grant the home equity loan, they are now subject to being sued in tribal court?

Mr. Gannon: --If they know that they are dealing with a member and they have not included any forum selection or choice of law provisions that say that they want to be sued and resolve disputes in some other forum, then it may well be the case that they will be sued in tribal court.

Chief Justice Roberts: What if the tribal court has a rule that forum selection provisions are not enforceable?

Mr. Gannon: Well, I think it's probably unlikely that the tribal courts would... or that the tribe would adopt a rule like that, because as a pragmatic matter it would make it more difficult for their citizens to engage in business relationships if they had a categorical ban like that.

And so--

Justice Ginsburg: But then could you go into Federal court under what was in farmers and say we had no jurisdiction because we had a forum selection clause?

Mr. Gannon: --I... if... if there was a forum that would be a question about the nature of the underlyng consent.

And I do think that, in general, forum selection clauses here ought to be enforced.

And so, it would be relevant to the scope of the consentual relationship there.

Chief Justice Roberts: Does the judgment here that the bank discriminated against the Indian corporation because they didn't give them as favorable terms as they gave someone who hadn't defaulted on a loan impede dealings with Indian corporations by outside members... outside nonmembers?

Mr. Gannon: Well, as was pointed out earlier, Mr. Chief Justice, the... the... the only duties that the bank was exposed to here were a duty not to breach contracts and not to discriminate.

And the only question is the source of those duties.

Chief Justice Roberts: What was the basis for the finding of discrimination?

Mr. Gannon: It was the... under... according to the jury instruction it was a person or entity denied a privilege to a person based solely upon that person's race or tribal identity.

Chief Justice Roberts: It had nothing to do... the bank's justification had nothing to do with the fact that the entity had defaulted earlier?

Mr. Gannon: No, I don't believe so, Your Honor.

Thank you.

Rebuttal of Paul A. Banker

Chief Justice Roberts: Thank you, counsel.

Mr. Banker, you have two minutes remaining.

Mr. Banker: I think when you step back in listening to the arguments of opposing counsel, you know, what is the other way that tribal courts get... that the tribes get jurisdiction over nonmembers?

Well, Congress can provide it.

And if we look at this Bureau of Indian Affairs loan guaranty program, which Congress authorized, Congress didn't provide jurisdiction over nonmembers in implementation of that program.

So you've got an elaborate loan program and it's designed to provide capital to tribes and tribal members, and Congress is silent on that.

Now, in other instances Congress has provided authorization for tribal courts and tribes to have jurisdiction over nonmembers.

Congress is aware of this Court's opinion in Montana presumably and the cases that follow from it, but in the Bureau of Indian Affairs loan guaranty program Congress remained silent.

What do we infer from that?

I think it is crucial when you think about nonmember defendants in tribal court and whether they can have their rights adjudicated there to think about the structural problems, the lack of a right to remove, the lack of a right to have this Court provide a substantive review.

There is no--

Justice Kennedy: What general principle underscores the validity of your point that it's... is it a republican form of government law, Due Process Clause?

What is the general principle you rely on to say we have to look to the structure of these courts?

If the structure is insufficient, then it violates what prohibition in the Constitution?

Mr. Banker: --I think that the... you know, the tribal courts stand outside of the Federal... of the Federal-State relationship.

I think it is a question of due process.

I think it is a question of equal protection.

Justice Kennedy: Due process for whom?

The tribal courts aren't governed... aren't creatures that are subject to the Due Process Clause.

Mr. Banker: Well, that's exactly the point.

I mean it is the due process right of the nonmember.

Justice Kennedy: What is... what is the constitutional prohibition that is a restriction on assigning cases to a court that does not follow the Due Process Clause if it's an Indian court?

It's not the same as if we assign this to the American Arbitration Association.

What's the difference?

Mr. Banker: I think the difference is the constitutional protections of nonmembers do not apply down to tribal courts.

Chief Justice Roberts: Thank you, counsel.

The case is submitted.