What contractors should know about tribes

By MICHAEL P. O'CONNELL
Stoel Rives

Tribal governments engage contractors, design professionals and financial institutions for a wide range of construction projects, usually, but not always, on Indian reservations.

As with any construction project, disputes may arise between the project owner and those providing services and financing. Disputes may also arise between a tribe and project opponents that jeopardize the schedule or the project as a whole. Those impacts ripple through to contractors, design professionals and lenders.

All parties on construction projects in which a tribal government or other entity is involved should understand some key issues that can come up in working with tribes.

Who is it?

Who is the contract with? A tribal government, a tribal government department, a tribal enterprise, a tribal government corporation (a tribally chartered corporation, a federally chartered tribal corporation, a state-chartered business corporation, a state-chartered nonprofit corporation, or a state-chartered limited liability company)? It makes a difference.

Issues such as sovereign immunity and the need for federal approval of certain agreements with tribal governments depend on the answer.

How do you find out? The old-fashioned way -- ask! While you are at it, ask to review the tribal constitution, tribal council resolution, corporation charter or other documents guiding the contracting entity actions.

Immunity

Tribal governments and most tribal business entities have immunity from lawsuits, unless such immunity has been waived.

In February, the discovery of Indian archaeological remains halted construction work on the site of the World Trade Center along the waterfront in Seattle. Photo by Sky-Pix

Many tribal government corporations have charters that include "sue and be sued" clauses or other provisions that permit suits to be brought against them under certain circumstances. Other tribal government corporations frequently are authorized to agree to limited waivers of sovereign immunity on a transaction-by-transaction basis.

Waivers of sovereign immunity are narrowly construed, however, so the terms of any negotiated waiver must be carefully crafted.

Dispute resolution

Enforceable arbitration, mediation and alternative dispute resolution clauses provide a nonjudicial forum for resolving disputes. In federal courts in the Ninth Circuit, a tribal government's promise in a contract to arbitrate is not enforceable by itself.

In a contract with a tribal government or tribal government entity, an express waiver of sovereign immunity is necessary to enforce an alternative dispute resolution clause.

Jurisdiction

Federal and state courts lack jurisdiction over most suits against tribal governments involving on-reservation business transactions.

Where there is a valid waiver of sovereign immunity, tribal courts ordinarily have jurisdiction over such suits. Tribal governments may bring cases in a state court even when a suit could not be brought against a tribe in a tribal court.

The U.S. Supreme Court is expected to decide shortly whether a tribal government entity may be sued in state courts over a commercial transaction that takes place off-reservation. Federal courts in the Ninth Circuit currently do not consider involvement in an off-reservation transaction to waive tribal immunity to a lawsuit in federal courts.

BIA approvals

A critical issue for any party contracting with a tribal government or tribal entity is whether the Secretary of the Interior, acting through the Bureau of Indian Affairs (BIA), must approve such contracts.

What to do when you find bones on a job site On Indian reservations and on federal lands, a permit is necessary to intentionally remove or excavate Native American human remains or "cultural items." The phrase cultural items includes objects of sacred or historical importance to a tribe, including funeral objects and human remains. These objects are often uncovered in construction projects which causes delays, additional expense and sometimes relocation of a project. Recently on the Hanford Reservation human remains were uncovered during construction of a building. As a result, the building had to be moved to a different area on the reservation. If a contractor knows that cultural items will be disturbed a permit must be obtained from the applicable federal land management agency after consultation with the appropriate tribe. When the project is located on an Indian reservation, the governing tribe's consent is required. Any person who unexpectedly discovers Native American human remains or cultural items during construction on an Indian reservation or federal lands must cease construction in the area and give written notification to the applicable tribe. On federal lands notification must be given to the applicable manager. Construction may not resume until 30 days after the federal agency certifies it has received the required written notice. A permit is required if resumption of construction involves intentional disturbance of the Native American human remains or cultural items. Washington law makes it a felony to knowingly remove, mutilate, deface, injure or destroy any Indian grave, cairn or any carved or painted record of any tribe. Persons who inadvertently disturb Indian graves through construction and other activities are required to bury those remains under the supervision of the appropriate tribe. Costs of reburial are to be paid by the State Office of Archaeology and Historic Preservation. Washington law provides tribes and enrolled members with a right of civil action, including recovery of attorneys' fees, punitive damages and injunctive relief, for violation of these Washington law requirements.

Frequently referred to as Section 81, this is a statute which very few people understand but that is at the heart of many disputes. It provides that an agreement with an Indian tribe for the payment of money or other things for services relating to tribal lands must be approved by the BIA and must include certain other provisions. A contract within the scope of Section 81 is null and void if it has not been approved as required by law.

If Section 81 is violated, anyone can sue in federal court to recover the full amount paid by a tribal government or tribal entity. Also tribal governments can raise violations of Section 81 as defenses to suits by contractors for payment.

The range of contracts to which Section 81 applies remains unclear. In circumstances where it is unclear, the BIA will consider giving an "accommodation approval" to an agreement at the request of the tribal government or tribal entity. The BIA can provide retroactive approval if the parties realize belatedly that Section 81 applies to a particular contract.

The Ninth Circuit has ruled that a tribally-owned, state-chartered business corporation is not an Indian tribe and that an agreement by such a corporation is not subject to Section 81. The federal statute authorizing tribal government corporations chartered by the Secretary of the Interior to lease tribal lands for up to 25 years and to enter contracts is silent on the need for BIA approval of such agreements.

One strong inference from this silence is that BIA approval is not needed for agreements within the scope of this statute by tribal government corporations chartered by the Secretary. No case addresses this issue.

Environmental review

BIA Section 81 approvals are subject to review under federal environmental statutes such as the National Environmental Policy Act, National Historic Preservation Act, Endangered Species Act and, where applicable, the Coastal Zone Management Act.

Environmental review under these statutes should take place before the BIA's approval. The defensibility of BIA approvals may turn on the quality of the BIA's environmental review. Thus, all contracting parties have an interest in ensuring the BIA's environmental review is adequate.

On Indian reservations many federal environmental statutes are administered by the Environmental Protection Agency or the tribes -- not the state. For example, a water quality certification issued by the state Dept. of Ecology for a Corps of Engineers permit on Indian lands is useless.

The Washington Department of Ecology determines whether federal permits are consistent with the state's coastal zone program, even for projects located on Indian reservations.

Whether land owned in fee by an Indian tribe within an Indian reservation is subject to local and state land use laws is a matter of some contention.

EPA permit

A general permit for storm water discharges from construction on Indian lands was issued by EPA on Feb. 17, 1998. The permit applies to construction projects that disturb five acres or more.

An "operational control" test established by EPA determines whether the project owner, construction contractor or both must apply for the permit.

The permit also includes complicated provisions regarding the project's effects on listed or proposed threatened or endangered species in the vicinity.

The species does not even have to be located on site. For example, a construction project discharging runoff into a nearby stream with chinook salmon habitat would have to be evaluated for its impacts on both the salmon and the habitat. Increasing water temperature, vibration during core drilling, cutting down vegetation along stream banks, increasing siltation or disturbing eagles' nests all require review and may have to be avoided or mitigated.

These provisions of EPA's new permit are traps for the unwary and are different in important respects from Ecology's storm water permit which people in the construction industry are more familiar with.

Taxes

Tribal governments can tax construction projects for tribal facilities.

A tribe may have more than one tax applicable to business activities on Indian lands. In addition, a tribal business license may be required. Once again, the way to find out is to ask.

Some state taxes in connection with construction projects on Indian reservations cannot be collected under federal law. If you pay them without bringing a proper challenge, the state can keep the money.

Employment

Federal law permits, and in some cases mandates, Indian preference in employment on and near Indian reservations. In some cases contractors can be required to give preference to Indians in employment.

At the same time, the U.S. Equal Employment Opportunity Commission has ruled that tribal specific employment preferences violate federal civil rights laws. Contractors should not give preference to members of a specific tribe but should give a general preference to Indians.

Some contractors mistakenly view reservations as islands where federal employment laws do not apply. Most federal labor laws, such as the National Labor Relations Act, Occupational Safety and Health Act, and Americans with Disabilities Act, apply to private employers on Indian reservations.

Thus, a union can attempt to organize a private employer's work force on an Indian reservation.

Copyright © 1998 Seattle Daily Journal of Commerce.