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Grand Canyon Skywalk Development, LLC v. Hualapai Indian Tribe of Arizona

United States District Court, Ninth Circuit

August 19, 2013

Grand Canyon Skywalk Development, LLC, a Nevada Limited Liability Company, Plaintiff,
The Hualapai Indian Tribe of Arizona, et al., Defendants.


DAVID G. CAMPBELL, District Judge.

Defendants Hualapai Indian Tribe and seven named members of the Hualapai Tribal Council have filed a motion to dismiss Plaintiff Grand Canyon Skywalk Development, LLC's ("GCSD") first amended complaint to compel arbitration. Doc. 19; see Doc. 18. The motion has been fully briefed. Docs. 21, 29. Defendants also have filed a motion to disqualify Greenberg Traurig ("GT") as counsel for GCSD and for related orders protecting the Tribe's confidential information. Doc. 25. GT has filed a response in opposition which GCSD joined. Docs. 43, 37. For the reasons that follow, the Court will grant Defendants' motion to dismiss GCSD's first amended complaint, and deny Defendant's motion to disqualify GCSD's counsel and for related orders.[1]

I. Background.

The following facts are taken from GCSD's complaint, which the Court takes as true at the pleading stage, and the Court's orders in three prior actions.[2]

This action arises from the Hualapai Indian Tribe's February 2012 taking through eminent domain of GCSD's contract rights to operate the Skywalk and related facilities at the South rim of the Grand Canyon on the Hualapai Indian Reservation. The Skywalk began as a joint revenue-sharing venture between GCSD, a Nevada-based limited liability corporation, and Sa' Nyu Wa, Inc. ("SNW"), a tribally-chartered corporation of the Hualapai Tribe.

On December 31, 2003, GCSD and SNW entered into a Development and Management Agreement ("the 2003 Agreement") governing the planning, construction, and management of the Skywalk. GCSD alleges that it thereafter paid approximately $30 million for the construction of the Skywalk. Doc. 18, ¶ 24. The Skywalk opened to visitors on March 28, 2007, with GCSD in charge of operating the facilities and SNW in charge of maintaining the books and records. Id., ¶ 25. GCSD alleges that SNW breached material terms of the 2003 Agreement almost immediately after the Skywalk opened. Id.

On February 25, 2011, after the parties failed to resolve their disputes through negotiation, GCSD filed an action to compel arbitration against SNW in Hualapai Tribal Court. The Tribal Court found that it lacked jurisdiction to compel arbitration under the terms of the 2003 Agreement. Id., ¶ 27. GCSD then filed a complaint in arbitration with the American Arbitration Association, seeking to arbitrate alleged outstanding management fees and other issues, and SNW responded by filing 19 counterclaims. Id., ¶¶ 28-29. SNW paid arbitration fees and participated in the initial discovery portion of the arbitration. Id., ¶ 29.

In February of 2012, the Hualapai Tribe filed an action in Tribal Court purportedly taking GCSD's past and future contract rights. Id., ¶ 30. Counsel for the Tribe then announced that the Tribe had stepped into the shoes of GCSD for purposes of the 2003 Agreement and the ongoing arbitration, and was terminating the arbitration. Id., ¶ 31. Arbitrator Shawn Aiken ruled that the parties to the arbitration remained GCSD and SNW and that the Tribe had not intervened and was without authority to terminate the arbitration. Mr. Aiken nonetheless stayed the arbitration hearing to give SNW and the Tribe an opportunity to obtain an order from either federal or tribal court enjoining the arbitration. SNW and the Tribe sought such an injunction in Tribal Court, but the court declined to enjoin the arbitration. The arbitration continued without SNW's participation, and the arbitrator found in favor of GCSD and against SNW on all claims.

The arbitrator entered an award of $28.5 million in damages against SNW on August 16, 2012, and, on February 8, 2013, this Court granted GCSD's application for confirmation of that award. See Grand Canyon Skywalk Dev., Co. v. Sa' Nyu Wa, Inc., No. 3:12-cv-08183-DGC, Doc. 22 (Feb. 8, 2013). The Court found that SNW had waived its sovereign immunity and consented to binding arbitration, including an award of money damages, in the 2003 Agreement, and that the Tribe's exercise of eminent domain did not extend to the taking of GCSD's right to arbitrate or right to money damages on its already-accrued breach of contract claims. Id.

On February 27, 2013, the Tribe designated another tribal entity, Grand Canyon Resort Corporation ("GCRC"), to take over operational control of the Skywalk and made all SNW employees GCRC employees. Doc. 18, ¶ 39. SNW filed for bankruptcy on March 4, 2013. Id., ¶ 40. Counsel for the Tribe and SNW had represented to this Court at a hearing on February 24, 2012 that revenues from the Skywalk were being placed into escrow pending resolution of the eminent domain action in the Tribal Court. Id., ¶ 41; see Doc. 1-2 at 63-64. On December 13, 2012, however, the chief financial officer for the Tribe testified at deposition that $2 million in net profits from the Skywalk had been transferred to the Tribe. Id., see Doc. 1-2 at 71-72.

GCSD now seeks to compel arbitration against the Tribe and the named Tribal Council members as to the following: (1) the value of GCSD's contract rights on the date of the Tribe's taking, (2) whether the Tribe may take GCSD's contract rights as a way to avoid the contract remedies set forth in the 2003 Agreement, and (3) whether the Tribe's use of its eminent domain ordinance to take GCSD's contract rights violates the Hualapai and United States Constitutions. Doc. 18, ¶ 51. The Complaint also asks the Court to retain jurisdiction to enforce any judgment awarded in arbitration. Id., ¶ 52.

GCSD filed two prior actions naming tribal entities and/or Tribal Council members. The first, Grand Canyon Skywalk Dev., LLC v. Vaughn ("GCSD I"), No. 3:11-cv-08048-DGC, filed on March 30, 2011, sought to enjoin the Tribal Council from passing the proposed eminent domain ordinance. The second, Grand Canyon Skywalk Dev., LLC v. Sa' Nyu Wa ("GCSD II") No. 3:12-cv-08030-DGC, filed on February 16, 2012, after the Tribe's purported taking, sought to enjoin SNW and several named Tribal Council members from enforcing the condemnation on the grounds that doing so was an illegal taking of GCSD's contractual rights. The Court dismissed GCSD I and stayed GCSD II, finding in both actions that comity required GCSD to exhaust its remedies in tribal court and that GCSD had not shown that it met any of the recognized exceptions to the exhaustion requirement. The Ninth Circuit has since affirmed the Court's exhaustion ruling. See Grand Canyon Skywalk Dev., LLC v. Vaughn, 715 F.3d 1196 (9th Cir. 2013).

Defendants argue that this action should be dismissed for several reasons: (1) the Court lacks subject-matter jurisdiction because there is no diversity of citizenship between an out-of-state corporation and an Indian Tribe, and there is no federal question involved in the underlying dispute; (2) the Tribe has not waived its sovereign immunity for the purpose of arbitrating disputes with GCSD arising from its exercise of eminent domain; (3) the Tribe's eminent domain action does not arise out of the 2003 Agreement, and the Tribe is not bound by that agreement's arbitration provision; (4) GCSD has waived any ability to compel arbitration with the Tribe regarding its exercise of eminent domain based on its extensive litigation against the Tribe on that issue in federal and tribal court; (5) GCSD's challenge to the constitutionality of the Tribe's eminent domain ordinance implicates issues of tribal law that must be, and have been, brought in Tribal Court; and (6) the Tribal Council members are not proper parties to this action.

II. Motion to Dismiss Legal Standards.

A. Rule 12(b)(1): Lack of Subject Matter Jurisdiction.

"The party asserting jurisdiction has the burden of proving all jurisdictional facts." Indus. Tectonics, Inc. v. Aero Alloy, 912 F.2d 1090, 1092 (9th Cir. 1990) (citing McNutt v. Gen. Motors Acceptance Corp., 298 U.S. 178, 189 (1936)); see Fenton v. Freedman, 748 F.2d 1358, 1359, n.1 (9th Cir. 1994). The Court has subject matter jurisdiction over cases involving federal questions pursuant to 28 U.S.C. § 1331, which provides that "[t]he district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States." The Court has diversity jurisdiction over cases between citizens of different states involving claims greater than $75, 000 pursuant to 28 U.S.C. § 1332, which provides that "[t]he district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75, 000, exclusive of interest and costs, and is between... citizens of different States." 28 U.S.C. ...

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