processing facility as assignee of the CA-04040 lease. Item 8, p. 10 and Ex. J.
On October 5, 1994, AG filed a motion in this court to stay all further proceedings in the Peacemakers' Court, and to compel the parties to submit their dispute to binding arbitration under the provisions of Article 16 of the CA-04040 lease. Items 8 and 37. On the same day, Robert B. Porter, the Seneca Nation's Attorney General, wrote to Mr. Gutman explaining that the Article 16 arbitration provisions in 40/40 leases such as the CA-04040 lease apply only to disputes arising between the Seneca Nation and lessees, and only with respect to a party's compliance with or obligations under the terms of the lease. Item 12, Ex. A, p. 2. AG's dispute with Mr. John was a private one, appearing to arise from agreements made between AG and Mr. John, and not arising under any of the provisions of the 40/40 lease. Id. The Seneca Nation was not a party. Accordingly, the proper forum for resolution of the dispute was the tribal courts. Id.
Oral argument on AG's motion to compel arbitration and for a stay of the Peacemakers' Court action was held on October 12, 1994. Item 36. At that time, this court denied AG's application for an immediate stay of proceedings in the Peacemakers' Court, but deferred ruling on its motion to compel arbitration and for a permanent stay. Id. at 21-24; Item 11. No further decision was made on the question of whether AG was required to exhaust, or had in fact exhausted, its tribal remedies on the issue of tribal court jurisdiction. Item 36, pp. 24-25.
On the same day as oral argument was held on AG's motion to compel arbitration, AG filed a new action against Mr. John in this court. AG Organic Inc. v. Daniel John, Jr., Civil Action No. 94-CV-728. In its complaint, AG claimed that as Arrow's assignee, it was entitled to the exclusive occupancy and use of the property leased to Arrow by Mr. John. 94-CV-728, Item 1. It alleged further that on or before September 20, 1994, Mr. John had entered the land and forcibly ejected AG from the land, by barring AG's equipment vendors from retrieving equipment, by effectuating the arrest for trespass of AG's agent and attorney, Adele Fine, and by other unspecified acts and declarations. Mr. John remained in possession of the premises, it claimed, "by menace and threats of violence." Id. at P 13. Again, AG asserted that this court had both federal question jurisdiction, on the basis of the applicability of the 1875 Act, and diversity jurisdiction. Id. at PP 3-5. The company sought relief by way of a judgment affirming its right to exclusive possession, occupancy, and use of the premises. Id. at 4. Subsequently, it filed an amended complaint adding claims for damages for conversion of AG's personal property, deprivation of the value of improvements made to the property, and loss of business and anticipated profits. Civil Action No. 94-CV-728, Item 2.
On December 30, 1994, the Peacemakers' Court issued its decision on the merits of Mr. John's action against AG and Mid-American, finding in favor of Mr. John and granting him, inter alia, compensatory damages of $ 135,000 and punitive damages of $ 3,000,000 against AG. Item 18, Gutman Declaration, PP 2-3 and Ex. A. The court's order directed AG to remove all sludge, and the sludge processing facility, from the site within thirty days. Id., P 4 and Ex. A. On or about January 17, 1995, AG filed a Notice of Appeal in the Seneca Nation Court of Appeals. Id., P 11 and Ex. B.
On January 29, 1995, AG filed a motion in this court (1) for an order consolidating Civil Action No. 94-CV-728 with its original action, Civil Action No. 94-CV-586; (2) for a preliminary injunction enjoining enforcement of the Peacemakers' December 30, 1994, order; (3) for a preliminary injunction restraining Mr. John from interfering with AG's use and occupancy of the property at issue; and (4) pending a hearing on its motion for injunctive relief, for a TRO restraining Mr. John from preventing AG from gaining access to, occupying, and using the property. Item 18.
In its motion papers, AG argued that under National Farmers Union, 471 U.S. at 856, n. 21, immediate federal court intervention was warranted, and no exhaustion of tribal remedies was required, because the Peacemakers' Court had "exceeded its jurisdiction, and was motivated by bad faith against, and a desire to harass, AG ORGANIC." Item 18, Gutman Declaration, P 13.
The Peacemakers' December 30, 1994, order, AG claimed, was "based upon a legislative and political determination " id at P 25, that AG's facility violated the June 25, 1992, resolution of the Seneca Nation Council which cancelled the CA-04040 lease and prohibited sludge processing at the site. The Peacemakers, AG argued, omitted from their decision any reference to the June 23, 1993, Council resolution that rescinded the June 25, 1992, resolution. Id. at PP 25-26. In so doing they acted legislatively, abrogating the Tribal Council's June 23, 1993, resolution, and it was upon this legislative act that the court's award to Mr. John of compensatory and punitive damages and other relief was based. Id. at P 27. See also, Item 19, pp. 8-14. Further, the award of $ 3,000,000 in punitive damages violated the Indian Civil Rights Act, 28 U.S.C. § 1302, which places limits on the authority of Indian tribes to impose fines and other penalties. Item 19, p. 8. And since Mr. John had sued to recover rent and other money damages, rather than possession of the leasehold, the court "patently lacked jurisdiction to decree, beyond the scope of the pleadings and the issues joined at trial, that AG ORGANIC must quit its leasehold and remove the sludge processing facility." Id. at 13-14.
The Peacemakers' Court's decision, AG maintained, "betrayed blatantly political motivations." Item 18, Gutman Declaration, P 28. The three member of the court, Carol Moses, Grace John and Calvin Lay, were all, according to AG, "members of a political faction, aligned with Mr. DANIEL JOHN, which in December 1994, turned out the Tribal councilors who approved AG ORGANIC's operation." Id. at P 29. Prior to the December 30, 1994, decision, these Peacemakers had "met sub rosa and privately" with Mr. John and his attorney, Mark O'Connor, "to discuss the merits of a case pending before the Peacemakers' Court in which actions by the newly elected President of the Nation were being challenged." Id. at P 30. In that case, AG asserted, "Mr. O'Connor was representing Dennis J. Bowen, a political ally of Mr. JOHN, who was recently elected president of the Seneca Nation." Item 19, pp. 6-7. The New York State Supreme Court in Cattaraugus County had taken jurisdiction of an action brought by Nation members questioning the authority of Mr. Bowen. Item 18, Gutman Declaration, P 31. It was "not mere coincidence" that the Peacemakers' decision in Mr. John's case against AG and Mid-American "was rushed to publication at midnight on December 30, 1994, on the eve of the hearings before Justice Doyle in State Supreme Court: the decision in this case is nothing less than a exclamation [sic] of political power, by a new tribal regime." Id. at P 32.
At the least, the Peacemakers' meeting with Mr. O'Connor and Mr. John raised questions as to the Peacemakers' impartiality. Item 19, pp. 6-7; Item 24. See also, Civil Action No. 94-CV-728, Item 6, Gutman Declaration, PP 2-7.
In response to AG's motion, Mr. John cross-moved to dismiss and for sanctions under Fed. R. Civ. P. 11. Items 21 and 22. He argued, inter alia, (1) that this court lacked jurisdiction over the subject matter of the dispute (Item 21, pp. 8-9, 17-18, 20-22); (2) that the court should not exercise jurisdiction because AG had still failed to exhaust its tribal remedies (Item 21, pp. 9-11, 22-24; Item 22, PP 5-7); (3) that AG's claim that the December 30, 1994, decision of the Peacemakers' Court was motivated by bad faith and a desire to harass AG was baseless and defamatory, warranting the imposition of sanctions on AG's counsel, Mr. Gutman (Item 21, pp. 18-20, 23; Item 22, PP 42-56); and (4) that Fed. R. Civ. P. 19 required dismissal of the action for failure to join the Seneca Nation as an indispensable party (Item 21, pp. 12-17).
Oral argument on the various motions was held on January 30, 1995. Item 30. On February 2, 1995, the court issued an order (1) granting AG's motion to consolidate Civil Action No. 94-CV-728 with Civil Action No. 94-CV-586; (2) denying AG's motion for injunctive relief, on the grounds that the company had failed to show that, absent an injunction, it would suffer irreparable harm; and (3) finding it premature to rule on Mr. John's motions to dismiss and for sanctions. Item 23. In addition, the court concluded that the Seneca Nation of Indians qualified under Fed. R. Civ. P. 19(a) as an indispensable party to the resolution of at least some of the claims asserted by AG. Id. The court recognized that the Nation might take the position that sovereign immunity precluded joinder; nevertheless, AG was directed to file an amended complaint for the purpose of joining the Nation as a defendant. Id. No decision was made at that time on the issue of subject matter jurisdiction.
The court has subsequently received a number of letters and affidavits from the parties, which do little to assist the court in reaching a decision on the outstanding motions, but serve to underscore the contentious nature of the dispute. Items 25-29, 31, 33, 39-40, 42-43, 45.
In National Farmers Union, the Supreme Court made it clear that a federal district court may determine under 28 U.S.C. § 1331 whether a tribal court has exceeded the lawful limits of its jurisdiction. National Farmers Union Insurance Cos. v. Crow Tribe of Indians, 471 U.S. at 853. At the same time, the Court held that the tribal court whose civil jurisdiction is being challenged must be given "the first opportunity to evaluate the factual and legal bases for the challenge." Id. at 856. The party contesting the tribal court's jurisdiction must exhaust the remedies available to it in the tribal court system, and until it has done so, it is premature for a federal court to consider granting any relief. Id. at 857. This means that tribal court appellate review of the issue of tribal court jurisdiction must be complete before the federal court may intervene. Iowa Mutual Life Insurance Co. v. LaPlante, 480 U.S. at 17. The exhaustion rule applies equally in cases where federal jurisdiction is premised on diversity of citizenship, under 28 U.S.C. § 1332, rather than on the existence of a federal question. Id. at 16. The rule does not deprive the federal courts of subject matter jurisdiction; rather, district courts must "determine whether the federal action should be dismissed or stayed pending exhaustion of the remedies available in the tribal court system." Id. See also, Bowen v. Doyle, 880 F. Supp. 99, 123-24 (W.D.N.Y. 1995).
In National Farmers Union, the Supreme Court indicated that exhaustion need not be required
where an assertion of tribal jurisdiction "is motivated by a desire to harass or is conducted in bad faith," cf. Juidice v. Vail, 430 U.S. 327, 338, 51 L. Ed. 2d 376, 97 S. Ct. 1211 (1977), 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.
National Farmers Union Insurance Cos. v. Crow Tribe of Indians, 471 U.S. at 856, n. 21. AG relies on this language in contending that exhaustion should not be required in the present case.
a. The Exercise of Jurisdiction by the Peacemakers' Court is Not Patently Violative of § 7 of the 1875 Act
AG's first argument, which it has made both here and before the Peacemakers' Court, is that since its dispute with Mr. John centers on the issue of the rights of the two parties to the possession, occupancy, and use of real property within the Congressional Village of Carrollton, subject matter jurisdiction is governed by § 7 of the 1875 Act. Section 7 provides that:
the courts of the State of New York within and for the county of Cattaraugus, having jurisdiction in real actions, and the circuit and district courts of the United States in and for the northern [now western] district of said State, shall have jurisdiction of all actions for the recovery of rents and for the recovery of possession of any real property within the limits of [the Congressional Villages], whether actions of debt, ejectment, or other forms of action, according to the practice in said courts.