December 30, 2021 - This Week at the Ninth

This Week at the Ninth: Tribal Disputes and Interstate Mushrooms

This week, the Ninth Circuit explores the limits of federal subject matter jurisdiction over intratribal governing disputes and addresses the scope of the Federal Arbitration Act’s exception for workers engaged in “interstate commerce.”

NEWTOK VILLAGE v. PATRICK

The Court holds that a district court lacked subject matter jurisdiction over a tribal governing authority’s suit to enjoin another tribal group from exercising governing authority.

The panel: Judges Gould, Tallman, and Bumatay, with Judge Tallman writing the opinion.

Key highlight: “Taken together, the New Council’s claims are not of a federal nature. They rely primarily on tribal law for resolution. As we have previously said, ‘[t]he federal nature of the right to be established is decisive—not the source of the authority to establish it.’”

Background: Newtok Village is a federally recognized tribe of Yup’ik Eskimo living on the Ninglick River in Alaska. To save the tribe’s village from devastating erosion, Congress approved a land swap to relocate the village to a new site.

In 2005, the Bureau of Indian Affairs (BIA) began negotiations with the “Old Council,” Newtok’s governing body at the time, which signed various resolutions and authorizations for contracts with the federal government. But in 2012, a tribal election dispute arose in which both the Old Council and a “New Council” asserted that each was the legitimate governing body of Newtok Village and refused to recognize the other.

Both groups tried to work with the BIA, which informed them that the agency “has a duty to determine the authorized representatives of the governing body of Newtok” for purposes of the federal contracts. The New Council submitted additional evidence that a majority of members at a subsequent meeting attended by both councils had voted to recognize the New Council’s governing authority. The BIA decided to recognize the New Council, and the Old Council appealed the BIA’s determination to the Interior Board of Indian Appeals.

While that appeal was pending, the New Council sued the Old Council in federal district court, seeking an order enjoining the Old Council from representing itself as the legitimate governing body and mandating that the Old Council hand over various records, equipment, and property. The Old Council did not respond, and the district court entered default judgment and issued an injunction.

Nearly five years later, the New Council sought an order “directing Andy Patrick to show cause why he should not be held in contempt for willful violation” of the injunction. After the district court held Partrick in contempt, the Old Council moved to set aside both the contempt order and underlying injunction for lack of subject matter jurisdiction. The district court denied the motion and awarded attorneys’ fees to the New Council.

Result: The Ninth Circuit vacated and remanded. First, the Court explained that to confer subject matter jurisdiction, a claim must arise under federal constitutional, statutory, or common law. The New Council’s complaint failed that test because it “does not allege that the Old Council wrongfully received any federal funds,” and none of the “claims actually rely upon federal law.” It was not enough that the complaint mentioned that Newtok Village entered into federal contracts when the claims in fact “sound in common law tort and conversion and lack a federal foundation.”

Nor did the complaint raise “a substantial question of federal law” under the Supreme Court’s decision in Grable & Sons Metal Prods., Inc. v. Darue Eng’g & Mfg., 545 U.S. 308, 312 (2005). That standard is met where a federal issue is: “(1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress.” But, as the Court explained, Grable did not create an exception to the well-pleaded complaint rule. Because the New Council’s complaint “did not specify facts showing that the construction and effect of … federal law is an essential element of the claims,” no substantial federal question was present.

The Court also held that the New Council’s claims presented a non-justiciable intratribal dispute. Because “New Council’s claims are more akin to conversion, fraud, and other common law claims between tribal members,” they “stem directly from an ongoing internecine dispute” and cannot be adjudicated in federal court. “Continuing to enforce the permanent injunction here risks the federal court’s impermissible involvement in interpreting the Tribe’s constitution and laws.” This case was distinguishable from a direct APA challenge to a BIA determination recognizing a particular tribal governing body, the Court said. And in any event, the New Council “in effect sought the district court’s determination of Newtok’s legitimate governing body for all purposes, not just” for recognition by the BIA for federal contracting purposes.

Finally, the Court held that the district court lacked power to award attorneys’ fees because it lacked subject matter jurisdiction.

CARMONA v. DOMINO'S PIZZA, LLC

The Court holds that the in-state delivery of out-of-state products qualifies as “interstate commerce” exempting drivers from application of the Federal Arbitration Act (FAA).

Panel: Wardlaw, Parker (CA2), and Hurwitz, with Judge Hurwitz writing the opinion.

Key Highlight: “Like Amazon, Domino’s is directly involved in the procurement and delivery of interstate goods; the D&S drivers, like the Amazon package delivery drivers, transport those goods ‘for the last leg’ to their final destinations. Like Amazon, Domino’s is involved in the process from beginning to the ultimate delivery of the goods to their destinations and its ‘business includes not just the selling of goods, but also the delivery of those goods.’” (Citations omitted).

Background: Plaintiffs are three employees of Domino’s Pizza who delivered supplies from Domino’s supply center in California to various Domino’s franchisees in the state. They sued Domino’s on behalf of a putative class, alleging violations of California labor law. Domino’s moved to compel arbitration, invoking the arbitration clauses in the plaintiffs’ employment contracts. The district court denied the motion to compel on the ground that the plaintiffs were engaged in interstate commerce.

Result: The Ninth Circuit affirmed. As the Court explained, while the FAA generally compels enforcement of arbitration agreements, Section 1 of the Act exempts “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” And, the Court continued, while this provision must be “construed narrowly,” it encompasses any “class of workers” that “is engaged in a ‘single, unbroken stream of interstate commerce’ that renders interstate commerce a ‘central part’ of their job description.” Thus, the Ninth Circuit had previously held that Amazon package delivery drivers were “engaged in foreign or interstate commerce” within the meaning of the FAA because they regularly transported packages that had come across state lines (even if the delivery drivers themselves did not cross state lines).  Here, the Court concluded, the Domino’s delivery drivers were a similarly integral part of the process of transporting goods from out of state to their final destination, as they likewise “operate in a single, unbroken stream of interstate commerce that renders interstate commerce a central part of their job description.” The Court further explained that while “some of the goods are transformed into pizza dough,” many other food items (like mushrooms) were not similarly “transformed into a different form,” and thus the plaintiff drivers were a part of those goods’ interstate delivery.