FIDELITY AND GUARANTY INS. CO. v. BRADLEY, (W.D.N.C. 2002)

MAX O. COGBURN, JR., United States Magistrate Judge

THIS MATTER is before the court upon defendant's Motion to Dismiss. Having carefully considered defendant's motion and reviewed the pleadings, the undersigned enters the following findings, conclusions, and recommendation.

I. Background

Defendant is an enrolled member of the Eastern Band of Cherokee Indians and is engaged in the construction trade. Plaintiff is an Iowa corporation, with its principle place of business in Maryland, and is engaged in the business of issuing insurance and bonds.

In 2000, defendant contracted with the Eastern Band of Cherokee Indians to construct certain improvements to the Tribe's ceremonial grounds. As part of that agreement, defendant was required to secure a performance bond, and he secured such a bond from plaintiff. As a condition of issuance of that bond, plaintiff required defendant to execute a "General Agreement of Indemnity," under which defendant agreed to indemnify plaintiff for any liability he sustained on the bond. Allegedly, defendant failed to complete the contract within the time specified and failed to correct improperly competed work. In 2001, the Eastern Band of Cherokee Indians declared default and filed suit against defendant in tribal court. Defendant, thereafter, refused to return to the job site.

According to the allegations of the complaint, plaintiff was called upon to honor the terms of its completion bond upon defendant's default, and did so by providing the Tribe with an acceptable contractor and a substantial payment that exceeded $400,000.

In the construction contract with defendant, the Tribe included a forum-selection clause, which required litigation of any dispute between the contracting parties in tribal court pursuant to tribal law. Defendant has moved to dismiss this action, contending that this court lacks subject-matter jurisdiction and arguing, in the alternative, that even if subject-matter jurisdiction exists, this court should abstain as a matter of comity.

II. Standard

Defendant has moved for dismissal pursuant to Rule 12(b)(1), Federal Rules of Civil Procedure, contending that this court lacks subject-matter jurisdiction over this claim. Rule 12(b) authorizes dismissal based upon a dispositive issue of law. Neitzke v. Williams, 490 U.S. 319, 109 S.Ct. 1827, 1832 (1989); Hishon v. King Spalding, 467 U.S. 69, 73 (1984); Conley v. Gibson, 355 U.S. 41 (1957). As the Court discussed in Neitzke:

This procedure [for dismissal], operating on the assumption that the factual allegations in the complaint are true, streamlines litigation by dispensing with needless discovery and fact finding. Nothing in Rule 12(b)(6) confines its sweep to claims of law which are obviously insupportable. On the contrary, if as a matter of law "it is clear that no relief could be granted under any set of facts . . . a claim must be dismissed, without regard to whether it is based on outlandish legal theory. . . . What Rule 12(b)(6) does not countenance are dismissals based on a judge's disbelief of a complaint's factual allegations."

Id., at 1832 (citation omitted). For the limited purpose of making a recommendation as to disposition of defendant's motion, the undersigned has accepted as true the facts alleged by plaintiff in the complaint and viewed them in a light most favorable to plaintiff.

III. Subject-Matter Jurisdiction

Plaintiff brings this action under the diversity jurisdiction of this court. 28 U.S.C. § 1332. Diversity jurisdiction requires that plaintiff and defendant be residents of different states and that the amount in controversy exceed $75,000. Plaintiff is a resident of both Iowa and Maryland. While a member of the Tribe, defendant is also a citizen and resident of Swain County, North Carolina. Iowa Mut. Ins. Co. v. LaPlante, 480 U.S. 9, 18, n. 10 (1987). A good-faith reading of plaintiff's claim for indemnification reveals that the amount in controversy well exceeds $400,000. Inasmuch as the parties are diverse and the amount in controversy exceeds the jurisdictional minimum, this court has jurisdiction over the subject matter of this action.

IV. Forum-Selection Clause

What is obvious from the complaint and pleadings is that the Eastern Band of Cherokee Indians and defendant bargained for and entered into an agreement that any disputes arising from their performance of mutual promises would be resolved in tribal court. Currently, those parties appear to be engaged in just such litigation in tribal court. In this action, plaintiff does not seek to enforce any aspect of the construction contract. Instead, it seeks to enforce the terms of the indemnification agreement it entered into with defendant.

While courts routinely enforce forum-selection and choice-of-law provisions against makers, Chasser v. Achille Lauro Lines, 844 F.2d 50, 54 (2d Cir. 1988), aff'd, 490 U.S. 495 (1989), no precedent has been cited for enforcing such provisions against those who were not parties to the contract and its forum selection clause. In United Airlines, Inc. v. ALG, Inc., 873 F. Supp. 147 (N.D.Ill. 1995), the district court held, as follows:

[I]n Lemme v. Wine of Japan Import, Inc., 631 F. Supp. 456, 460-61 (E.D.N.Y. 1986), the court held that a guarantor who had agreed to assume every obligation under the contract in dispute necessarily agreed to abide by the consent to jurisdiction clause contained in the agreement, despite the absence of a forum selection clause in the guarantee.

We conclude that UAL has properly alleged that TAL's unconditional guarantee of Tajik Air's performance under the Sublease obligated it to abide by all of the terms of the Sublease, including the commitment to adjudicate any disputes arising out of it in Illinois. Although the guarantee agreement was entered into before the Sublease, it clearly contemplated the later agreement since it refers to ALG as the lessor, identifies the exact aircraft to be leased, and specifies various terms of delivery and payment. Given the unconditional nature of the guarantee, and TAL's knowledge of the subsequent Sublease, we find that TAL has waived objections to personal jurisdiction.

* * *

In a case similar to the one at bar, the Ninth Circuit found that a defendant who had guaranteed the obligations of a party to sale-lease contract could be subject to jurisdiction in California, since the underlying contract was expressly subject to California law as well as interpretation by California courts. Forsythe v. Overmyer, 576 F.2d 779, 783 (9th Cir.), cert. denied, 439 U.S. 864, 99 S.Ct. 188, 58 L.Ed.2d 174 (1978). Despite the fact that the guarantee agreement did not contain a forum selection clause and the defendant was not a party to the underlying obligation, the court found that the guarantor "interjected himself into the transaction by assuming personal liability in the event of default on a contract expressly subject to jurisdiction in the California forum." Id.

Id., at 151-52.

The decision in United Airlines would stand for exactly what defendant attempts to argue, save one salient fact — there is no issue that involves performance of the underlying construction contract. In United Airlines, the plaintiff sought enforcement of the contract which the defendant guaranteed. The same holds true for the cases the United Airlines court cited: in Lemme, the plaintiff brought a breach-of-contract action against the guarantor and the obligee for lack of performance by either; in Forsythe, the plaintiff sought to enforce the promise of a guarantor of a bankrupt corporation.

In this action, plaintiff does not seek to enforce the underlying obligation, but to enforce the contract of indemnification, which contains absolutely no forum-selection clause. The forum-selection clause in the underlying contract, therefore, cannot form a basis for dismissal of this action in these particular circumstances.

V. Comity

Defendant also argues that this court should dismiss the action or abstain in deference to refiling in tribal court, thereby allowing the tribal court to pass on jurisdiction first. The court can find no compelling reason to recommend either course of action. Indeed, the most recent opinions of the United States Supreme Court counsel against compelling participation in tribal court by nonmembers. In a concurring opinion, Justice Souter opined:

The ability of nonmembers to know where tribal jurisdiction begins and ends, it should be stressed, is a matter of real, practical consequence given "[t]he special nature of [Indian] tribunals," which differ from traditional American courts in a number of significant respects. To start with the most obvious one, it has been understood for more than a century that the Bill of Rights and the Fourteenth Amendment do not of their own force apply to Indian tribes. Although the Indian Civil Rights Act of 1968 (ICRA) makes a handful of analogous safeguards enforceable in tribal courts, "the guarantees are not identical," and there is a "definite trend by tribal courts" toward the view that they "ha[ve] leeway in interpreting" the ICRA's due process and equal protection clauses and "need not follow the U.S. Supreme Court precedents `jot-for-jot[.]'" In any event, a presumption against tribal-court civil jurisdiction squares with one of the principal policy considerations underlying Oliphant, namely, an overriding concern that citizens who are not tribal members be "protected . . . from unwarranted intrusions on their personal liberty[.]"

Nevada v. Hicks, 533 U.S. 353, 383 (2001) (citations and footnote omitted). Defendant's argument that this court should abstain from hearing this matter in favor of a yet-to-be-filed action in tribal court (presumably, to be filed by plaintiff herein) does not appear to be consistent with the "comity" the Supreme Court addressed in Iowa Mut. Ins. Co. v. LaPlante, supra:

Regardless of the basis for jurisdiction, the federal policy supporting tribal self-government directs a federal court to stay its hand in order to give the tribal court a "full opportunity to determine its own jurisdiction." Ibid. In diversity cases, as well as federal-question cases, unconditional access to the federal forum would place it in direct competition with the tribal courts, thereby impairing the latter's authority over reservation affairs.

Id., at 16.

The "tribal exhaustion rule" of Iowa Mut. Ins. Co. v. LaPlante has no application in this case, because there is no case or controversy between these parties in tribal court. To hold as defendant suggests would require this court to find that either plaintiff is bound to adhere to a forum-selection provision to which it was not a party on a contract which it is not seeking to enforce, or that a presumption exists that when one does business with a member of the Tribe, one must expect to forego one's constitutional right to access the federal or state courts until a tribal court has determined whether to exercise its jurisdiction, regardless of whether an action is pending in such tribal forum. As discussed above, there is no contractual basis to require resolution of this dispute in tribal court, and this court's hand need not, and cannot be, stayed where no hand has been dealt in the competing forum. The consequences of what defendant proposes would have a dramatic impact on the willingness of non-Indians to contract with tribal members, because added to the consideration would be the forfeiture of one's right to access the federal and state courts. Had defendant, before this action was filed, filed a declaratory-relief action against plaintiff in tribal court, seeking to have himself declared not liable under the indemnification agreement, this court would have certainly stayed its hand under Iowa Mut. Ins. Co. v. LaPlante pending exhaustion of tribal remedies. Comity has no application under these circumstances, because there is no judicial proceeding, much less a decision, to which this court can defer.

IT IS, THEREFORE, RESPECTFULLY RECOMMENDED that defendant's Motion to Dismiss (#6) be DENIED.