Originally from Dispute Resolution Journal

CONSTRUCTION

Arbitration Clause Ruled a Waiver Of Tribal Sovereign Immunity

A provision calling for arbitration of disputes under the contract in accordance with AAA rules was a clear expression of intent to waive tribal sovereign immunity with respect to contract, but not tort, claims, the U.S. Court of Appeals for the Eighth Circuit ruled.

The dispute arose out of a $6.3 million construction contract between the Rosebud Sioux Tribe and Val-U Construction. Val-U demanded arbitration under the arbitration clause, but the tribe refused to participate and filed a lawsuit against Val-U, in which Val-U asserted both contract and tort counterclaims. The arbitration continued and resulted in an award in Val-U's favor.

The tribe was ultimately made whole through payments under certain payment bonds and it's suit was dismissed with prejudice . Val-U's claims for recoupment were also dismissed on the ground that they became moot upon dismissal of the tribe's complaint. The court had previously ruled that the arbitration clause was not enforceable since it was not an explicit waiver of immunity, and that to the extent Val-U sought recovery beyond recoupment, its claims were barred by sovereign immunity.

Upon de novo review, the 8th Circmt held that the arbitration clause was a clear expressiOn that the tribe had waived its immunity with respect to contract claims. The clause stated that disputes under the contract ''shall be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association." By designating arbitration in accordance with specified arbitration rules as the forum for dispute resolution, the parties clearly intended to waive sovereign immunity with respect . to contract disputes . The designated rules exphCltly provided for judicial enforcement of any award.

However, the court held that there was no waiver under the arbitration clause with respect to Val-U 's tort claims. The court remanded the case to the district court to hear Val-U' s contract counterclaims and to determine the validity and effect of the arbitration award. Rosebud Sioux Tribe v. Val-U Construction of South Dakota, Inc., No. 94-2083 (8th Cir. Mar. 16, 1995).