Metropolitan News-Enterprise


Thursday, November 2, 2005


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Arbitration Clauses in Employment Contracts Did Not Waive Tribe’s By a MetNews Staff WriterImmunity From Suit—Court of Appeal


By a MetNews Staff Writer


An arbitration clause in an Indian tribe’s contracts with its employees did not constitute a waiver of the tribe’s sovereign immunity with respect to a breach of contract suit not authorized by the clause, the First District Court of Appeal ruled yesterday.

Overturning a contrary ruling by a Lake Superior Court judge, Div. Three granted a writ of mandate and directed that the Big Valley Band of Pomo Indians’ demurrer to a complaint by five former employees be sustained. The decision was a partial victory for the employees, however, because it leaves the door open to an action to compel arbitration.

The plaintiffs worked at the tribe’s Konocti Vista Casino until they were, their complaint alleges, dismissed without cause and without the four months’ severance pay to which they were entitled.

They claimed they had valid employment contracts, signed on the tribe’s behalf by the casino’s then-general manager, which entitle them to four months’ severance pay and require arbitration of disputes related to the contracts. The general manager, whose contract was signed by the tribal chairman and had a similar severance provision, was also fired but reached a settlement with the tribe.

In filing suit, the plaintiffs claimed that the tribe waived its immunity by including arbitration clauses in the contracts and waived arbitration by not responding to their demands that the tribe either make the severance payments or arbitrate the matter.

The tribe argued that because the general manager had entered into the contracts without the approval of the tribal authorities, there was no waiver of sovereign immunity. It also argued that if there was a waiver, the only available judicial remedy was an order compelling arbitration.

Superior Court Judge Galen Hathaway overruled the tribe’s demurrer, citing Smith v. Hopland Band of Pomo Indians (2002) 95 Cal.App.4th 1. The Smith court held that a tribe waived sovereign immunity by including an arbitration clause in an employment contract.

But Justice Carol Corrigan, writing for the Court of Appeal, said the demurrer should have been sustained. Smith, she explained, did not resolve the issue of whether the waiver limited the plaintiff’s remedy to an order compelling arbitration; a footnote in the Smith opinion says the issue was not decided because it was raised for the first time in connection with a petition for rehearing.

Corrigan concluded that in this case the waiver was so limited because the arbitration clauses did not reveal a clear intent to effect a general waiver. The contention that failure to respond to demands for arbitration itself effects a waiver of suit fails, the jurist said, because “[s]overeign immunity may not be waived by implication.”

The justice emphasized that in holding that the tribe may not be subjected to a breach of contract action in superior court, the panel was not ruling on whether it may be compelled to arbitrate. That issue cannot be resolved on demurrer, she explained, but requires the taking of evidence as to whether the tribe ratified the contracts.

The case is Big Valley Band of Pomo Indians v. Superior Court (McAllister), A108615.


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