Sovereign Immunity Does Not Extend to State-Corporate Tribal Subsidiaries: Tenth Circuit in Somerlott v. Cherokee Nation Distributors

Introduction

In Somerlott v. Cherokee Nation Distributors, Inc., 686 F.3d 1144 (10th Cir. 2012), the plaintiff, Tina Marie Somerlott, challenged the dismissal of her federal employment discrimination claims against Cherokee Nation Distributors, LLC (“CND”). The dismissal was based on the doctrine of tribal sovereign immunity, which shields certain tribal entities from legal actions. This case critically examines the boundaries of tribal sovereign immunity, especially concerning tribal subsidiaries incorporated under state law.

Summary of the Judgment

Somerlott alleged that CND violated Title VII of the Civil Rights Act of 1964 and the Age Discrimination in Employment Act (ADEA) by unlawfully terminating her employment as a chiropractic technician. CND sought dismissal of the case, invoking tribal sovereign immunity, arguing that it was not an “employer” under Title VII due to its status as a tribal entity. The district court granted CND's motion to dismiss, determining that CND was a subordinate economic entity of the Cherokee Nation and thus protected by tribal sovereign immunity. On appeal, the Tenth Circuit affirmed the dismissal, holding that because CND was incorporated under Oklahoma state law as a limited liability company—a separate legal entity—it did not share in the tribe's sovereign immunity.

Analysis

Precedents Cited

The court extensively referenced Kiowa Tribe of Okla. v. Mfg. Techs., Inc., 523 U.S. 751 (1998), which established that tribal sovereign immunity extends to subdivisions of a tribe engaged in commercial activities. Additionally, Breakthrough Management Group, Inc. v. Chukchansi Gold Casino & Resort, 629 F.3d 1173 (10th Cir. 2010), was pivotal in formulating a six-factor test to assess the relationship between tribes and their economic entities concerning sovereign immunity.

Legal Reasoning

The core legal question revolved around whether CND, as a state-incorporated limited liability company, could be considered a subordinate economic entity of the Cherokee Nation entitled to share in its sovereign immunity. The district court had applied the subordinate economic entity test, concluding that CND met the necessary criteria to be shielded by tribal sovereign immunity. However, the Tenth Circuit diverged from previous applications of the test by emphasizing that entities incorporated under state law as separate legal persons do not fall within the scope of tribal sovereign immunity. The court reasoned that sovereign immunity traditionally does not extend to subsidiaries incorporated under the laws of another sovereign when those laws expressly permit the entity to be sued.

Impact

This judgment significantly clarifies the limitations of tribal sovereign immunity, particularly in the context of tribal subsidiaries structured as independent legal entities under state law. Moving forward, tribal entities incorporated as corporations or LLCs in their respective states may not be shielded by their tribe's sovereign immunity, thereby allowing them to be subject to lawsuits under federal and state laws. This delineation fosters greater accountability for tribal businesses operating in the broader economic marketplace and ensures that traditional corporate forms do not exploit sovereign immunity protections.

Complex Concepts Simplified

Tribal Sovereign Immunity

Tribal sovereign immunity is a legal doctrine that protects federally recognized Indian tribes from being sued without their consent. This immunity extends to the tribe itself and its subdivisions, such as corporations wholly owned and controlled by the tribe, provided they engage in governmental functions.

Subordinate Economic Entity Doctrine

This doctrine assesses whether a tribal subdivision is sufficiently connected to the tribe's governance to merit sharing in its sovereign immunity. The six-factor test includes considerations like ownership, control, and the nature of business activities conducted by the entity.

Separate Legal Entity

A separate legal entity, such as an LLC or corporation incorporated under state law, is recognized as having its own legal rights and obligations, distinct from its owners or parent organizations. This status means that such entities can be sued independently of their parent or owning bodies.

Conclusion

The Tenth Circuit's decision in Somerlott v. Cherokee Nation Distributors, Inc. reinforces the principle that tribal sovereign immunity does not automatically extend to entities incorporated under state law as separate legal persons. By affirming that CND, LLC is a distinct entity structured under Oklahoma law, the court ensures that such subsidiaries are subject to the same legal standards and liabilities as any other state-incorporated business. This ruling promotes fairness and accountability within the marketplace, preventing tribal sovereign immunity from being a blanket protection for all tribal-associated entities, especially those operating beyond traditional governmental functions.