Arizona District Court Finds Tribally Co-Owned Wireless Provider Not Entitled to Sovereign Immunity

Snell & Wilmer

Snell & Wilmer

In an order filed on June 27, 2023, the Arizona District Court determined that a wireless provider co-owned by the Navajo Nation was not immune from suit in federal court. In Tsosie v. N.T.U.A. Wireless LLC, et al., CV-23-00105-PHX-DGC, the plaintiff filed suit against NTUA Wireless and others, alleging violations under Title VII of the Civil Rights Act of 1964, and Arizona state law claims. The plaintiff’s claims were levied against her employer, NTUA Wireless (and former supervisor), which provides communication services in and around the Navajo Nation. Defendants moved to dismiss the complaint on the grounds of tribal immunity. The Court considered the allegations that NTUA Wireless is a Delaware limited liability company, owned 49% by Commnet Newco (also a Delaware limited liability company and managing member of NTUA Wireless), and 51% by the Navajo Tribal Utility Authority (the “Authority”). The Authority is a tribal enterprise of the Navajo Nation.

As a general principle of Federal Indian Law, Tribes are immune from suit on contracts unless there is clear waiver or congressional authorization. This immunity also extends to economic “arms” of the Tribe acting on the Tribe’s behalf. See, e.g., White v. Univ. of Calif., 765 F.3d 1010, 1025 (9th Cir. 2014). The Court applied the Ninth Circuit’s test for assessing whether NTUA Wireless is an “arm” of the Tribe, which considers the following factors: (1) the method of creation of the economic entity; (2) the purpose of the entity vis-à-vis the tribal community; (3) the structure, ownership, and management (including the Tribe’s control over the entity); (4) the Tribe’s intent as to sharing of its sovereign immunity; and (5) the financial relationship between the Tribe and the entity.  

In assessing the first factor, the Court recognized that the Authority was indisputably a Tribal enterprise. However, it determined that NTUA Wireless did not enjoy the Authority’s tribal immunity just by virtue of being partly owned by the Authority, finding that the first factor weighed against immunity.  

The Court found the second factor weighed in favor of immunity, given NTUA Wireless’s practice of building on the Authority’s history of supplying the Navajo Nation with modern utilities, including to become more self-sufficient.

The third factor weighed slightly against immunity, given the Authority’s minority membership, and that Commnet Newco was the managing member.

The Court determined that the fourth factor weighed against immunity, because although NTUA Wireless’s operating agreement was silent on the Navajo Nation’s intent to share sovereign immunity of it. The Tribe had expressly waived the Authority’s immunity in the operating agreement for purposes of enforcement.

Finally, the Court concluded the fifth factor weighed against immunity, where there was no indication that NTUA Wireless’s profits or losses reach the Navajo Nation. The Court determined that three of the five factors weighed against immunity, with a fourth “slightly” weighing in that direction.

Because NTUA Wireless did not show by a preponderance of the evidence that it was an arm of the Navajo Nation, the Court held it was a “mere business,” and denied the Defendants’ motion to dismiss on sovereign immunity grounds.

The Court’s analysis and holding demonstrates the importance of all relevant facts in assessing tribal business entities and their operations under the Ninth Circuit’s five-factor test.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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