UNITED STATES DISTRICT COURT DISTRICT OF OREGON

Kimberly D Aquila, OSB #96255 kim.daquila@grandronde.org Deneen Aubertin Keller, OSB #94240 deneen.aubertin@grandronde.org Tribal Attorney s Office Confederated Tribes of Grand Ronde 9615 Grand Ronde Road Grand Ronde, Oregon 97347 503/879-4664 Fax: 503/879-2333 Attorneys for Defendant UNITED STATES DISTRICT COURT DISTRICT OF OREGON FIRST SPECIALTY INSURANCE CORPORATION, v. Plaintiff, THE CONFEDERATED TRIBES OF THE GRAND RONDE COMMUNITY OF OREGON Case No.: 3:07-CV-05-KI DEFENDANT S MEMORANDUM IN RESPONSE TO PLAINTIFF S MOTION FOR SUMMARY JUDGMENT (Oral Argument Requested) Defendant. Page 1 DEFENANT S MEMORANDUM IN RESPONSE TO PLAINTIFF S MOTION FOR

TABLE OF CONTENTS 1. Table of Authorities...3 2. Introduction...5 3. Argument...6 FSIC s Motion for Summary Judgment Should be Denied A. The Tribal Court had jurisdiction to vacate the arbitration award because the action arose out of SWM and Sizemore s undisputed on-reservation consensual dealings with the Tribe...6 B. The Tribal Court was the first, and only, court to decide the issues raised in the Tribe s petition to vacate...10 C. Because the Tribal Court had jurisdiction to vacate the arbitration award, FSIC s Summary Judgment Motion should be denied...15 D. The Tribal Court acted within its authority in vacating the Panel s award of fees and costs...16 i. The Court is not required to defer to the arbitrators on the scope of any waiver of immunity...16 ii. a. The Federal Arbitration Act does not apply...17 b. Waivers of sovereign immunity are reviewed de novo...17 c. Tribal Court correctly found the Tribe did not waive sovereign immunity for attorney fees and costs...19 d. The Agreement does not waive immunity to attorney fees...22 e. The Tribe did not waive immunity by arbitrating its claims under AAA rules...26 f. The Tribe did not waive immunity by bringing claims under the Oregon Securities Act...28 The Arbitrators exceeded their power in finding the Tribe waived its sovereign immunity for an award of attorney fees and costs...29 4. Conclusion...31 Page 2 DEFENANT S MEMORANDUM IN RESPONSE TO PLAINTIFF S MOTION FOR

TABLE OF AUTHORITIES Cases Alyeska Pipeline Serv. Co. v. Wilderness Soc y, 421 U.S. 240 (1975)...1, 23 AT&T Corp. v. Coeur D Alene Tribe, 295 F.3d 899 (9 th Cir. 2002)...16 Atkinson Trading Company, Inc. v. Shirley, 532 U.S. 645 (2001)...7 C & L Enterprises, Inc. v. Citizen Band Potawatomi Indian Tribe of Oklahoma, 532 U.S. 411 (2001)...24, 25 C & L Enterprises, Inc. v. Citizen Band Potawatomi Indian Tribe of Oklahoma, 72 P.3d 1 (Okla. 2002)...25 Chemehuevi Indian Tribe v. California State Bd. of Equalization, 757 F.2d 1047 (9 th Cir 1985), rev d on other grounds, 474 U.S. 9 (1985)...20 Cogo v. Central Council of Tlingit & Haida Indians, 465 F. Supp. 1286 (D. Alaska 1979)...20 Comanche Indian Tribe of Oklahoma v. 49, LLC, 391 F.3d 1129 (10 th Cir. 2004)...17 Confederated Tribes of Grand Ronde v. Strategic Wealth Mgmt., Case No. C-04-08-003 (Grand Ronde Tribal Ct. Aug. 5, 2005)...20, 25, 27 Coutee v. Barington Capital Group, L.P., 336 F.3d 1128 (9 th Cir. 2003)...30 Demontiney v. United States ex rel Dept. of Interior, 255 F.3d 801 (9 th Cir. 2001)...21, 22 First Specialty Ins. Corp. v. Confederated Tribes of Grand Ronde, Case No. A-05-09-001 (Grand Ronde Tribal Ct. App. Oct. 31, 2006)... passim Fitzgerald v. United States Civil Service Commission, 554 F.2d 1186 (D.C. Cir. 1977)...21, 23 Gildorn Savings Assoc. v. Commerce Savings Assoc., 804 F.2d 390 (7 th Cir. 1987)...15 Guardipee v. Confederated Tribes of the Grand Ronde Community of Oregon, Case No. C-91-12-002-LJM (Grand Ronde Tribal Court 1992)...21 Iowa Mutual Ins. Co. v. LaPlante, 480 U.S. 9 (1987)...15, 16 Kennerly v. United States, 721 F.2d 1252 (9 th Cir. 1983)...20 Kiowa Tribe of Oklahoma v. Mfg. Tech., Inc., 523 U.S. 751 (1998)...29 Kunzelman v. Thompson, 799 F.2d 1172 (7 th Cir. 1986)...15 Lane v. Pena, 518 U.S. 187 (1996)...21 Manion v. Nagin, 392 F.3d 294 (8 th Cir. 2004)...29 McClendon v. United States, 885 F.2d 627 (9 th Cir. 1989)...21, 28 Missouri River Services, Inc. v. Omaha Tribe of Nebraska, No. 8:96CV202 (D. Neb. Nov. 17, 1999) (Memorandum Opinion)...19 Missouri River Services, Inc. v. Omaha Tribe of Neb., 267 F.3d 848 (8 th Cir. 2001), cert. denied, 535 U.S. 1053 (2002)... passim Montana v. United States, 450 U.S. 544 (1981)...7 Najjar v. Safeway, Inc., 203 Or. App. 486 (Or. Ct. App. 2005)...11, 12, 14 Nelson v. Emerald People s Utility Distr., 318 Or. 99 (Or. 1993)...11 Ninigret Development Corp. v. Narragansett Indian Wetuomuck Housing Authority, 207 F.3d 21 (1 st Cir. 2000)...16, 22 Oklahoma Tax Comm n v. Citizen Band of Potawatomi Tribe of Okla., 498 U.S. 505 (1991)...21, 22, 28 Orff v. United States, 358 F.3d 1137 (9 th Cir. 2004)...17 Pan American Co. v. Sycuan Band of Mission Indians, 884 F.2d 416 (9 th Cir. 1989)...21 Plains Commerce Bank v. Long Family Land and Cattle Co., Inc., 440 F. Supp. 2d 1070 (2006)...7 Page 3 DEFENANT S MEMORANDUM IN RESPONSE TO PLAINTIFF S MOTION FOR

Ramey Construction Co. v. Apache Tribe of Mescalero Reservation, 673 F.2d 315 (10 th Cir. 1982)...28 Santa Clara Pueblo v. Martinez, 436 U.S. 49 (1978)...20, 21 Smith v. Salish Kootenai College, 2003 WL 24868920 (D. Mont. 2003)...16 Smith v. Salish Kootenai College, 434 F.3d 1127 (9 th Cir. 2006)...7 Sole Resort v. Allure Resorts Management, LLC, 450 F.3d 100 (2 nd Cir. 2006)...8, 9 Strate v. A-1 Contractors, 520 U.S. 438 (1997)...7 Three Affiliated Tribes of Fort Berthold Reservation v. Wold Eng g., 476 U.S. 877 (1986)...28, 29 United States ex rel. Shakopee v. Pan American Management, 650 F. Supp. 278 (D. Minn. 1986)...28 United States v. Horn, 29 F.3d 754 (1 st Cir. 1994)...21, 22 United States v. Nordic Village, Inc., 503 U.S. 30 (1992)...21, 23 United States v. United States Fidelity & Guaranty Co., 309 U.S. 506 (1940)...28 Statutes and Other Authority 9 U.S.C. 10(a)...29 Page 4 DEFENANT S MEMORANDUM IN RESPONSE TO PLAINTIFF S MOTION FOR

I. INTRODUCTION In its Memorandum in Support of Plaintiff s Motion for Summary Judgment ( FSIC Memo ), First Specialty Insurance Corporation ( FSIC ) states that this case centers on whether the Grand Ronde Tribal Court ( Tribal Court ) had jurisdiction over a petition to vacate an arbitration award granting attorney fees and costs 1 to the Tribe s former investment advisors. The Tribe agrees. As long as the Tribal Court properly defined its jurisdiction, proper deference for tribal court systems prevents reconsideration of any merits related issues decided by the Tribal Court. Accordingly, the existence of Tribal Court jurisdiction is dispositive of the issues in this case. The facts which gave rise to Tribal Court jurisdiction over the Tribe s petition to vacate are not in dispute. FSIC just ignores them. FSIC s argument that Tribal Court lacked jurisdiction over the Tribe s petition rests instead, on its assertion that the petition attacked the conduct of the nonparty arbitration panel sitting in Seattle, Washington, and that it therefore involved the off-reservation activity of nonmembers over which tribal courts lack jurisdiction. FSIC s argument misapplies the law. Because there is a nexus between the Tribal Court action and the consensual on-reservation activities of the Tribe s former investment advisors, the test for tribal court jurisdiction over nonmembers is satisfied. FSIC also argues that the Tribal Court was precluded from hearing the Tribe s petition to vacate because the Multnomah County Circuit Court ( Multnomah Court ) had already decided the issues raised by the Tribe s petition. That argument simply misrepresents the facts. The issues raised in the Tribe s petition were neither argued by the parties nor addressed (implicitly or directly) by the Multnomah Court. The Tribal 1 All references to attorney fees hereinafter refers to attorney s fees and costs. Page 5 DEFENANT S MEMORANDUM IN RESPONSE TO PLAINTIFF S MOTION FOR

Court was the first and only court to address whether the Tribe had waived its immunity to an award of attorney fees and costs in a contract with its investment advisors. 2 FSIC has failed to establish a reason to deny the Tribal Court judgment recognition. In fact, no such reason exists. This Court should therefore refrain from addressing the remaining issues in FSIC s motion and FSIC s motion for summary judgment should be denied. II. ARGUMENT FSIC S MOTION FOR SHOULD BE DENIED A. The Tribal Court had jurisdiction to vacate the arbitration award because the action arose out of SWM s and Sizemore s undisputed on-reservation consensual dealings with the Tribe. SWM s and Sizemore s on-reservation consensual dealings with the Tribe are not in dispute. FSIC does not dispute that SWM had a contract ( 1992 Agreement ) with the Tribe pursuant to which SWM and Sizemore provided significant on-reservation services. Nor does FSIC dispute that the Tribe asserted claims against SWM and Sizemore arising out of those services in arbitration, or that the arbitration was conducted pursuant to an arbitration provision in the 1992 Agreement. FSIC even acknowledges that SWM s and Sizemore s dealings with the Tribe may have given the tribal courts jurisdiction over them. FSIC Memo at 7. FSIC simply contends that those dealings do not give the Tribal Court jurisdiction over the Tribe s action to vacate the arbitration award because, according to FSIC, the Tribe s action challenged the 2 FSIC claims that the only reason the Tribal Court was in a position to consider the arbitration award is because the Multnomah County Circuit Court had mistakenly dismissed the original lawsuit after ordering the Tribe s claims to arbitration. FSIC Memo at 5 n.2. There was no mistake involved. Strategic Wealth Management, Inc. ( SWM ) and Patrick Sizemore ( Sizemore ), FSIC s predecessors in interest, argued, against the Tribe s objections, that Judge Nely Johnson should dismiss the Tribe s action rather than abate it. See Ex. 1 to the Affidavit of Kimberly D Aquila in Support of Defendant s Motion for Summary Judgment ( D Aquila Aff. ). Page 6 DEFENANT S MEMORANDUM IN RESPONSE TO PLAINTIFF S MOTION FOR

conduct of the nonmember arbitrators and not conduct by SWM and Sizemore. Id. What FSIC ignores is the fact that the Tribal Court action had a clear nexus to the Tribe s consensual relationship with SWM and Sizemore thus, the test for tribal court jurisdiction under Montana v. United States, 450 U.S. 544 (1981) was satisfied. The first exception to Montana s general premise that tribal courts lack jurisdiction over the activities of nonmembers covers activities of nonmembers who enter consensual relationships with the tribe or its members, through commercial dealing, contracts, leases, or other arrangements. Strate v. A-1 Contractors, 520 U.S. 438, 456-457 (1997), citing Montana, 450 U.S. at 565. The exception is satisfied if the exercise of jurisdiction has a nexus to the consensual relationship itself. Atkinson Trading Company, Inc. v. Shirley, 532 U.S. 645, 656 (2001). The analysis is similar to the Due Process Clause analysis for purposes of personal jurisdiction. Smith v. Salish Kootenai College, 434 F.3d 1127, 1138 (9 th Cir. 2006). There must be a connection or link between the cause of action sued upon in this case, the Tribe s petition to vacate and the consensual dealings. See, e.g., Plains Commerce Bank v. Long Family Land and Cattle Co., Inc., 440 F. Supp. 2d 1070, 1080 (2006) (claimed tortuous conduct of bank had connection to bank s lease with tribal member company). As explained in the Memorandum in Support of Defendant s Motion for Summary Judgment ( Tribe s Memo ) at 11, there can be no doubt that the Tribal court action to vacate the arbitration award was substantially connected to SWM s and Sizemore s consensual dealings on the Tribe s reservation. Indeed, absent SWM s and Sizemore s consensual dealings with the Tribe, there would have been no dispute, no arbitration, and hence, no award to vacate. The nexus between a petition to vacate an arbitration award and the consensual dealings underlying a contract that gives rise to the arbitration is illustrated by the Second Circuit in Sole Page 7 DEFENANT S MEMORANDUM IN RESPONSE TO PLAINTIFF S MOTION FOR

Resort v. Allure Resorts Management, LLC, 450 F.3d 100 (2 nd Cir. 2006). In Sole, two foreign companies, Sole Resort ( Sole ) and Allure Resorts Management, LLC, ( Allure ) entered into a contract providing that disputes would be resolved by arbitration in Miami, Florida. Alleging that Sole breached the contract, Allure commenced an arbitration proceeding in Miami. The arbitrators awarded damages to Allure. Sole then filed an action to vacate the arbitration award in the Southern District of New York alleging that the arbitrators acted in manifest disregard of the law in awarding damages. Allure moved to dismiss the petition for lack of personal jurisdiction. Allure contended much like FSIC does here that the only activities relevant to the question of jurisdiction were those related to the arbitration itself because Sole s claim is about the actions of the arbitrators, not about the facts underlying the dispute that led to the arbitration. Sole, 450 F.3d at 101, 105. The Second Circuit rejected Allure s argument finding that New York s long-arm statute provides for personal jurisdiction over a foreign defendant if the claim asserted arises from the defendant s business activity in the state. Id. at 103. It then observed that a claim aris[es] from a particular transaction when there is some articulable nexus between the business transacted and the cause of action sued upon. Sole, 450 F.3d at 102 (citation omitted). In holding that an articulable nexus existed between Allure s New York contacts and Sole s petition to vacate the Miami arbitration award, the Second Circuit stated:... [W]e think that New York contacts underlying a contract that provides for arbitration have the requisite relationship... to a claim challenging the results of that arbitration. Arbitration is entirely a creature of contract. The rules governing arbitration, its location, the law the arbitrators will apply, indeed, even which disputes are subject to arbitration, are determined entirely by an agreement between the parties. Any arbitration proceeding is thus an extension of the parties contract with one another, a mechanism through which they attempt to ensure compliance with the terms of that contract. Without the contract, the arbitration, and its resultant judgment, a subsequent challenge to that judgment never could exist. There is therefore a substantial relationship between a challenge to the arbitrators decision and the contract that provided for the arbitration. Accordingly, we think that any transaction of business in New York Page 8 DEFENANT S MEMORANDUM IN RESPONSE TO PLAINTIFF S MOTION FOR

in connection with a contract as to which there is an arbitration provision bears an articulable nexus to a challenge to the arbitrators disposition of a dispute pursuant to that arbitration provision. Id. at 104 (emphasis added). The same nexus exists between the Tribe s action to vacate the arbitration award and the parties 1992 Agreement as the one described in Sole. Without the 1992 Agreement, the arbitration, and its resultant judgment, the Tribe s petition could never exist. FSIC apparently believes that the Tribal Court cannot vacate an arbitration award unless it establishes jurisdiction over the arbitrators that issued the award. FSIC Memo at 8-9. That notion is absurd. If jurisdiction over the arbitration panel were necessary, no Oregon court could vacate the arbitration award because they would lack personal jurisdiction over the Seattle arbitrators. The Tribal Court no more needs to establish jurisdiction over an arbitration panel than state or federal courts do when they review arbitration awards. In any case, the focus of the Tribe s petition to vacate was not on the action of the arbitrators, but on the parties agreement and the activities that preceded the arbitration. At issue in the Tribal Court action was the scope of the arbitration provision in the 1992 Agreement and the extent to which it, or the Tribe s actions in connection with that Agreement, constituted a waiver of immunity for attorney fees. Absent such a waiver, the arbitrators had no authority to grant affirmative relief in the form of attorney fees against the Tribe. Thus, the 1992 Agreement defined the limits of the Tribe s agreement to arbitrate, and was key in resolving the Tribe s petition. FSIC s attempt to equate Tribal Court jurisdiction over the petition to jurisdiction over an action to vacate a state-court judge s order, falls far short of its mark. FSIC Memo at 8-9. The two situations are not analogous. Courts review arbitration awards all the time. The Tribal Court may review an arbitration award in the same manner as a state or federal court. Moreover, Page 9 DEFENANT S MEMORANDUM IN RESPONSE TO PLAINTIFF S MOTION FOR

the Tribal Court did not, as FSIC claims, exercise jurisdiction over the Tribe s petition simply because the tribe was a party to the action. FSIC Memo at 9. If that were the case, the Tribal Court would have retained jurisdiction over Mark Sizemore and Paradigm Financial Services, Inc. the other parties named in the Tribe s petition. Instead, the Tribe s Court of Appeals determined that Mark Sizemore and Paradigm did not conduct business on tribal land and thus, [t]he tribal court system does not have adjudicatory jurisdiction over them. First Specialty Ins. Corp. v. Confederated Tribes of Grand Ronde, Case No. A-05-09-001 at 21 (Grand Ronde Tribal Ct. App. Oct. 31, 2006). No matter how much FSIC would like to divorce the Tribal Court proceedings from SWM s and Sizemore s consensual dealings with the Tribe, it is clear that the issues before the Tribal Court revolved around the 1992 Agreement pursuant to which SWM and Sizemore provided services to the Tribe on the Tribe s reservation. 3 Thus, Montana s consensual relationship exception is met. B. The Tribal Court was the first, and only, court to decide the issues raised in the Tribe s petition to vacate. FSIC argues that the Tribal Court was precluded from determining whether the Tribe waived its immunity to the award of attorney fees because that issue had already been decided by the Multnomah Court in its order granting SWM s and Sizemore s motion to compel arbitration. FSIC Memo at 10-11. FSIC is wrong. The Tribe s immunity from claims for attorney fees and costs was not addressed by the Multnomah Court s Order Granting Defendants Strategic Wealth 3 This point is also apparent from the fact that FSIC makes references to the arbitration provision in its argument on the merits. FSIC Memo at 16. Page 10 DEFENANT S MEMORANDUM IN RESPONSE TO PLAINTIFF S MOTION FOR

Management, Inc. s and Patrick Sizemore s Motion to Compel Arbitration ( Order Compelling Arbitration ). 4 The Order Compelling Arbitration cannot, therefore, be given preclusive effect. In Oregon, a state court order may only be given preclusive effect if all of the following requirements are met: (a) (b) (c) (d) (e) The issue in the two proceedings is identical The issue was actually litigated and was essential to a final decision on the merits in the prior proceeding. The party sought to be precluded has had a full and fair opportunity to be heard on the issue. The party sought to be precluded was a party or was in privity with a party to the prior proceeding. The prior proceeding was the type of proceeding which should be given preclusive effect. Najjar v. Safeway, Inc., 203 Or. App. 486, 496-497 (Or. Ct. App. 2005), citing Nelson v. Emerald People s Utility Distr., 318 Or. 99, 104 (Or. 1993). The Order Compelling Arbitration fails the first three requirements. The proceedings to compel arbitration and the proceeding on the Tribe s petition to vacate the arbitration award did not involve identical issues. In the Multnomah Court proceeding, SWM and Sizemore moved to compel arbitration pursuant to the 1992 Agreement. The Tribe opposed the motion arguing that the Tribe s claims uniformly [arose] out of a 1995 Agreement between the parties, not the 1992 Agreement. See Tribe s Memorandum in Opposition to Motion to Compel Arbitration and to Abate ( Tribe s Opposition to Compel ), Chaimov Decl., Ex. 2 at 5. The issue before the Multnomah Court was whether the Tribe was required to arbitrate its claims. That issue turned on whether the 1995 Agreement, which did not contain an arbitration provision, or the 1992 Agreement, controlled the parties relationship. The 4 The Order Granting Defendants Strategic Wealth Management, Inc. s and Patrick Sizemore s Motion to Compel Arbitration is attached as Ex. 4 to the Declaration of Gregory A. Chaimov in Support of Plaintiff s Motion for Summary Judgment ( Chaimov Decl. ). Page 11 DEFENANT S MEMORANDUM IN RESPONSE TO PLAINTIFF S MOTION FOR

Tribe s petition to vacate, on the other hand, turned on the specific language of the 1992 Agreement and the extent to which it, or the events surrounding that agreement, waived the Tribe s immunity to a claim for attorney fees. The scope of any waiver of Tribal immunity was simply never an issue in the Multnomah Court proceeding. Issues of waiver and the scope of the arbitration provision were also never litigated before the Multnomah Court. No discussion or argument regarding immunity or the scope of any waiver took place during the proceedings. In fact, with the exception of a footnote, the words sovereign immunity and attorney fees are not mentioned anywhere in the Tribe s opposition memo, SWM s and Sizemore s motion to compel arbitration, or the Order Compelling Arbitration. 5 See Claimov Decl., Ex. 2-5. Despite these facts, FSIC insists that a determination that the Tribe waived its immunity to an award of attorney fees is implicit in the Multnomah Court s decision to send all claims without exception to arbitration. FSIC Memo at 12. FSIC s argument does not comport with the applicable law or facts in this case. As an initial point, FSIC fails to cite any Oregon law holding an issue may be implicitly decided. 6 Even if an issue may be implicitly decided under Oregon law, the issue must still have been actually litigated. Najjar, 203 Or. App. at 496. As explained above, the issue of waiver was never litigated. 5 FSIC acknowledges the absence of any discussion in the briefing or the Multnomah Court s order regarding sovereign immunity. FSIC Memo at 12 n.3. However, FSIC suggests that a footnote in the Tribe s Opposition to Compel is relevant. Id. The footnote is of no consequence. The reference to sovereign immunity in that footnote was only to explain that the court was precluded from implying an arbitration clause in the 1995 Agreement. See Chaimov Decl., Ex. 2 at 15. 6 FSIC has argued that this Court looks to Oregon law to determine the preclusive effect of the Order Compelling Arbitration. FSIC Memo at 11. Page 12 DEFENANT S MEMORANDUM IN RESPONSE TO PLAINTIFF S MOTION FOR

Second, FSIC grossly overstates the scope of the Order Compelling Arbitration. The Order Compelling Arbitration decided only that the 1995 Agreement did not abrogate the arbitration provision in the 1992 Agreement and that the Tribe was therefore required to arbitrate its claims pursuant to the 1992 Agreement. Order Compelling Arbitration at 4-5. Contrary to FSIC s assertion, the Multnomah Court did not hold, or for that matter, even state, that [t]he Agreement covered all claims not just those for breach of the Agreement or closely-related to breaches of the Agreement. FSIC Memo at 11. FSIC simply adds its own twist to what was merely the Multnomah Court s recitation of the arbitration provision contained in the 1992 Agreement. What the Multnomah Court actually stated was: Pursuant to ORS 36.310 and paragraph 11(h) of the January 9, 1992 Investment Advisory Agreement, all claims and controversies between plaintiff Confederated Tribes of the Grand Ronde Community of Oregon and Strategic Wealth Management, Inc. and Patrick Sizemore concerning any transaction or the construction, performance or breach of the 1992 Agreement or any other agreements whether entered into prior, on, or subsequent to the date of the 1992 Agreement, are subject to binding arbitration. Order Compelling Arbitration at 5-6. That language was pulled directly from paragraph 11 of the 1992 Agreement. Chaimov Decl., Ex. 1 at 4. Judge Nely Johnson recited the arbitration language without considering or addressing what claims, beyond the ones asserted by the Tribe before, fell within the terms of the arbitration provision. FSIC relies extensively on Judge Johnson s use of the words all claims. FSIC Memo at 11-12. That reliance is misplaced. The phrase all claims does not stand alone. It is modified by the phrase concerning any transaction or the construction, performance or breach of the 1992 Agreement. The question of what claims actually concern a transaction or the construction, performance or breach of the Agreement was not answered by the court. Indeed, there was no reason for the court to engage in such a discussion. The only claims before the Multnomah Court were the claims asserted by Page 13 DEFENANT S MEMORANDUM IN RESPONSE TO PLAINTIFF S MOTION FOR

the Tribe. SWM and Sizemore never answered the Tribe s complaint. See Order Compelling Arbitration at 6 ( All claims before this Court asserted by plaintiff [ ] against defendants [ ] are hereby dismissed. ). Judge Johnson s use of the words all claims cannot, therefore, be read to include claims for attorney fees against the Tribe. FSIC s assertion that all claims includes claims for attorney fees against the Tribe, merely restates its argument on the merits of the case. Because the Order Compelling Arbitration did not reach this issue, it cannot be given preclusive effect. Third, even if the Order Compelling Arbitration addressed the issue of immunity or attorneys fees, and it did not, it cannot be give preclusive effect. Issue preclusion applies only when the issue was essential to the decision in the prior proceeding. Najjar, 203 Or. App. at 497. A determination regarding waiver of sovereign immunity with respect to attorney fees was not essential to the decision compelling arbitration. To compel arbitration, the Multnomah Court needed only to determine whether the arbitration provision was (1) binding on the Tribe and (2) whether the Tribe s claims were subject to arbitration. As explained above, the only claims before the Multnomah Court at the time were those asserted by the Tribe. The court had no reason to consider the scope of claims that might be covered by the arbitration provision. For this same reason, FSIC s assertion that the court could not send a claim against a tribe to arbitration unless the Tribe has, by waiving its immunity, consented to litigate the claims in that forum, fails. FSIC Memo at 12. The Multnomah Court did not send a specific claim against the Tribe to arbitration. At that point in the proceedings, no claim against the Tribe existed. In fact, SWM s and Sizemore s claims for attorney fees did not even arise until after they were determined to be the prevailing party in the arbitration. Given that claims for attorney fees did Page 14 DEFENANT S MEMORANDUM IN RESPONSE TO PLAINTIFF S MOTION FOR

not even exist until after the arbitration, such claims cannot be viewed as essential to a final decision in the proceeding to compel arbitration. Finally, the Tribe did not have a full and fair opportunity to be heard on the issue of attorney fees in the Multnomah Court. Critical to the application of collateral estoppel is the guarantee that the party sought to be estopped had the opportunity and the incentive to litigate the issue aggressively. Gildorn Savings Assoc. v. Commerce Savings Assoc., 804 F.2d 390, 393-394 (7 th Cir. 1987), quoting Kunzelman v. Thompson, 799 F.2d 1172, 1176 (7 th Cir. 1986). Sovereign immunity is a defense to claims and liability. The Tribe was the plaintiff in the Multnomah County action and no counterclaims had yet been filed. There was certainly no incentive, let alone a reason, for the Tribe to raise sovereign immunity against non-existent claims. In sum, the Order Compelling Arbitration did not decide (expressly or implicitly) the issue of whether the Tribe waived its immunity to an award of attorney fees and costs by entering into the 1992 Agreement. C. Because the Tribal Court had jurisdiction to vacate the arbitration award, FSIC s Summary Judgment Motion should be denied. The above discussion establishes that the Tribal Court not only had jurisdiction to hear the Tribe s petition to vacate, but was also the first court to decide those issues. Consequently, consideration of FSIC s remaining claims is barred by the principles of comity and res judicata. Both comity and res judicata were addressed in the Tribe s Memo at 14-17. For this reason, the Tribe will only comment briefly on them here. Principles of comity provide that once Tribal Court jurisdiction is established, proper deference to the tribal court system precludes relitigation of issues raised by [plaintiff] and resolved in the Tribal Courts. Iowa Mutual Ins. Co. v. LaPlante, 480 U.S. 9, 19 (1987). This is Page 15 DEFENANT S MEMORANDUM IN RESPONSE TO PLAINTIFF S MOTION FOR

true regardless of whether those issues involve questions of federal, state or tribal law. See AT&T Corp. v. Coeur D Alene Tribe, 295 F.3d 899, 904 (9 th Cir. 2002), citing Iowa Mutual, 480 U.S. at 19 ( federal courts may not readjudicate questions whether of federal, state or tribal law already resolved in tribal court absent a finding that the tribal court lacked jurisdiction or that its judgment be denied comity for some other valid reason. ). FSIC has offered no reason to deny comity to the Tribal Court decision. In addition, the Tribal Court s decision on the issues of sovereign immunity has res judicata effect in this proceeding. See Smith v. Salish Kootenai College, 2003 WL 24868920 (D. Mont. 2003) ( [I]f tribal court jurisdiction exists then the tribal court s decision on the merits of the claims has res judicata effect in any subsequent proceeding. ). This Court should not be tempted to look beyond the issue of Tribal Court jurisdiction. See Ninigret Development Corp. v. Narragansett Indian Wetuomuck Housing Authority, 207 F.3d 21, 35 (1 st Cir. 2000). Nevertheless, consideration of the merits of this case would not alter the result. For the reasons explained below, the Tribal Court properly vacated the award of attorney fees and costs. D. The Tribal Court acted within its authority in vacating the Panel s award of fees and costs. i. The Court is not required to defer to the arbitrators on the scope of any waiver of immunity. FSIC asserts that the Tribal Court erred by failing to employ the highly deferential standard of review required by the Federal Arbitration Act ( FAA ) for review of arbitration awards. Specifically, FSIC faults the Tribal Court for making a determination of whether the Tribe waived its immunity to an award of attorney fees and costs, and not simply deferring to the arbitrators determination. FSIC s assertion is incorrect for a number of reasons. First, the FAA Page 16 DEFENANT S MEMORANDUM IN RESPONSE TO PLAINTIFF S MOTION FOR

does not apply. Second, even if the FAA did apply the scope of the Tribe s waiver of immunity (if any) for attorney fees and costs contained in the 1992 Agreement is an issue to be reviewed de novo by the Tribal Court. Third, the Arbitrators clearly exceeded their authority in finding a waiver of sovereign immunity for attorney fees in the 1992 Agreement when no such waiver existed. a. The Federal Arbitration Act does not apply. The FAA applies to arbitration agreements involving commerce. Comanche Indian Tribe of Oklahoma v. 49, LLC, 391 F.3d 1129, 1131 (10 th Cir. 2004). The arbitration agreement here the 1992 Agreement is not an agreement involving or affecting commerce. The 1992 Agreement provided for consulting services, including development of investment policy statements, performance monitoring and supervision of Tribal assets and other investment related services. Most, if not all, of the investment services under the agreement were provided at the Tribe s offices. Therefore, the FAA is not applicable. However, as shown below, even if the FAA did apply the Tribal Court determinations are consistent with how waivers of sovereign immunity are to be reviewed in matters subject to the FAA. b. Waivers of sovereign immunity are reviewed de novo. As the Tribal Court of Appeals correctly stated, [t]he issue of the extent and meaning of a tribal waiver of sovereign immunity is a legal question that we review de novo. First Specialty Ins. Corp., Case No. A-05-09-001 at 4, citing Orff v. United States, 358 F.3d 1137, 1142 (9 th Cir. 2004). This is consistent with the Eighth Circuit Court s determination in Missouri River Services, Inc. v. Omaha Tribe of Neb., 267 F.3d 848 (8 th Cir. 2001), cert. denied, 535 U.S. 1053 (2002), in which the Court expressly held that [it] review[s] de novo the question of Page 17 DEFENANT S MEMORANDUM IN RESPONSE TO PLAINTIFF S MOTION FOR

whether the Tribe waived its sovereign immunity. Missouri River Services, 267 F.3d at 852. 7 Sovereign immunity is a jurisdictional concern to be addressed without deference to the arbitrators. See id., 267 F.3d at 852 (district court erred in believing it could not disturb arbitrators interpretation of waiver of immunity). A court lacks jurisdiction to enter an award that violates a tribe s sovereign immunity. See id., 267 F.3d at 852 ( Because a waiver of immunity from suit implicates jurisdictional concerns, a court must satisfy itself that jurisdiction exists ). Accordingly, a court s analysis of the scope of a waiver of immunity is not subject to the same limitations which may generally be imposed on judicial review of arbitration awards. See id., 267 F.3d at 854. FSIC faults the Tribal Court for what it describes as failing to appreciate that, in submitting its claims for decision by the Association s panel, the Tribe gave the panel the authority to decide *** any objections with respect to the *** scope *** of the arbitration agreement. 8 However, a AAA rule allowing arbitration panels to decide the scope of an arbitration agreement does not change the analysis. The arbitration agreement at issue in 7 The Court then went on to distinguish its review of the immunity issue from its review of the award itself. Id. at 854. 8 FSIC states that the Tribal Court of Appeals cited the FAA and paid lip service to the idea that review of arbitration awards should be deferential, but then proceeded to engage in a lengthy, de novo review of the underlying Agreement. FSIC Memo at 15. FSIC implies that the Tribal Court of Appeals acknowledged the FAA applied, but then failed to apply it. FSIC is wrong. The Tribal Court of Appeals opinion is clear, the standard of review of tribal waivers of sovereign immunity is de novo review. What the Tribal Court of Appeals further stated is that the Court was also charged with setting out the general standard of review that Grand Ronde courts will use in reviewing arbitration awards and held that as to the general review of arbitration awards, the Tribal Court review will be a limited one and it will only reverse or modify arbitration awards when the award is completely irrational or evidences a manifest disregard for the law. First Specialty Ins. Corp., Case No. A-05-09-001 at 4, citing Missouri River Services, 267 F.3d at 854. What the Tribal Court of Appeals did was essentially follow the Eighth Circuit s articulated standard of review found in Missouri River Services which is that review of waivers of sovereign immunity issues is de novo and otherwise review is limited. Page 18 DEFENANT S MEMORANDUM IN RESPONSE TO PLAINTIFF S MOTION FOR

Missouri River Services also provided for arbitration in accordance with AAA rules. That agreement stated, in relevant part, that: In the event any controversy or claim arising out of this Agreement cannot be settled by the parties hereto, such controversy or claims shall be settled by binding arbitration in accordance with the then current rules of the American Arbitration Association. (Emphasis added.) See Memorandum Opinion, Missouri River Services, Inc. v. Omaha Tribe of Nebraska, No. 8:96CV202 (D. Neb. Nov. 17, 1999) at 24a. 9 In addition, the parties in that case stipulated that the interpretation of any limitation on the Omaha Tribe s waiver was subject to arbitration and the district court entered an order in accordance with what it determined was the parties stipulation. Id. at 21a-22a. These facts did not prevent the Eighth Circuit from holding that it reviews de novo the question of whether the Omaha Tribe waived immunity. Missouri River Services, 267 F.3d at 852. The cases cited by FSIC do not support a contrary result. Those cases involve private parties, not sovereign Indian tribes or any other form of sovereign government, and do not address waivers of sovereign immunity. The Tribal Court of Appeals applied the correct de novo standard of review on the question of the scope of a waiver of immunity by a sovereign Indian tribe. c. Tribal Court correctly found the Tribe did not waive sovereign immunity for attorney fees and costs. The Tribal Trial Court correctly found that: Nothing in the arbitration provision or any other contract between the Tribe and SWM demonstrated an unequivocal and express waiver of sovereign immunity with respect to an affirmative award of prevailing party attorney fees 9 This Memorandum Opinion was included in Missouri River Service s Petition for a Writ of Certiorari, and is cited for factual purposes only. A copy is attached as Ex. 3 to the D Aquila Aff. Page 19 DEFENANT S MEMORANDUM IN RESPONSE TO PLAINTIFF S MOTION FOR

and costs against the Tribe. And, nothing in the evidence presented to this Court demonstrates that the Grand Ronde Tribal Council either discussed or anticipated that it was authorizing a contract that would place it at risk for attorney fees and costs should it arbitrate claims under the 1992 Agreement. Nothing the Tribe did by way of filing its suit in Multnomah Court can be said to constitute a waiver with respect to an affirmative award of attorney fees and costs. In the absence of any facts to demonstrate the intent of the Council to waive its immunity with respect to the recovery of prevailing party attorney fees and costs, it would be improper for this Court to imply a waiver that was nowhere expressed by the Tribal Council, either explicitly or implicitly. Confederated Tribes of Grand Ronde v. Strategic Wealth Mgmt., Case No. C-04-08-003 at 28-29 (Grand Ronde Tribal Ct. Aug. 5, 2005). The Tribal Court of Appeals agreed and held that the Tribe had not waived its immunity with respect to an affirmative award of attorney fees and costs and further held that the arbitration panel showed a manifest disregard for the law when it decided that Grand Ronde had waived its immunity on these issues. First Specialty Ins. Corp., Case No. A-05-09-001 at 21. The Tribal Court decisions are correct. 10 Indian tribes possess immunity from liability as well as suit similar to that enjoyed by the United States. See Santa Clara Pueblo v. Martinez, 436 U.S. 49, 58 (1978); see also Kennerly v. United States, 721 F.2d 1252, 1258 (9 th Cir. 1983). Sovereign immunity serves an important public policy of protecting tribal assets from loss through litigation. See Chemehuevi Indian Tribe v. California State Bd. of Equalization, 757 F.2d 1047, 1051 (9 th Cir 1985), rev d on other grounds, 474 U.S. 9 (1985); Cogo v. Central Council of Tlingit & Haida Indians, 465 F. Supp. 1286, 1288 (D. Alaska 1979). It is not a discretionary principle subject to the vagaries of the commercial bargaining process or the 10 FSIC blatantly misrepresents a Multnomah County Circuit Court letter opinion in footnote 4 of the FSIC Memo. The court in that case did not find that the Tribe waived its sovereign immunity and its decision rested on different grounds. In any event, a Multnomah County Circuit Court letter opinion with respect to a stipulated arbitration agreement is not relevant to this case. Page 20 DEFENANT S MEMORANDUM IN RESPONSE TO PLAINTIFF S MOTION FOR

equities of a given situation. Pan American Co. v. Sycuan Band of Mission Indians, 884 F.2d 416, 418 (9 th Cir. 1989). As a result, courts lack jurisdiction to adjudicate claims for affirmative relief against tribes absent a clear tribal or congressional waiver of immunity. Id. When considering whether and to what extent a tribe has waived its immunity from suit or liability, several well established principles of state and federal law must be respected. Those principles include the strong presumption against waiver of tribal sovereign immunity. Demontiney v. United States ex rel Dept. of Interior, 255 F.3d 801, 811 (9 th Cir. 2001). To be effective, a waiver of immunity must be clear and unequivocally expressed. Oklahoma Tax Comm n v. Citizen Band of Potawatomi Tribe of Okla., 498 U.S. 505, 509 (1991); Santa Clara Pueblo, 436 U.S. at 58; McClendon v. United States, 885 F.2d 627, 629 (9 th Cir. 1989). To the extent a waiver is found to exist, it must be strictly and narrowly construed in favor of the tribe. See Lane v. Pena, 518 U.S. 187, 192 (1996); United States v. Nordic Village, Inc., 503 U.S. 30, 34 (1992); Guardipee v. Confederated Tribes of the Grand Ronde Community of Oregon, Case No. C-91-12-002-LJM (Grand Ronde Tribal Court 1992). 11 Additionally, a waiver may not be enlarged beyond what its language permits. Nordic Village, Inc., 503 U.S. at 34. A general waiver of immunity by a sovereign does not extend to a claim for attorney fees unless the waiver of sovereign immunity expressly so provides. Fitzgerald v. United States Civil Service Commission, 554 F.2d 1186, 1189 (D.C. Cir. 1977). As the Court in United States v. Horn, 29 F.3d 754 (1 st Cir. 1994) explained, the principles of sovereign immunity prohibit the collection of monetary penalties against the government in order to protect the public coffers from direct assaults. Id., 29 F.3d at 761. The Court concluded that because attorney fee 11 A copy of this Opinion is available on the Tribe s website, www.grandronde.org, and is attached for the Court s convenience as Ex. 4 to the D Aquila Aff. Page 21 DEFENANT S MEMORANDUM IN RESPONSE TO PLAINTIFF S MOTION FOR

awards imposed by a court would deplete the public coffers, absent an express waiver, such awards are barred by sovereign immunity. Id., 29 F.3d at 766. Likewise, sovereign immunity bars enforcement of the Panel s award of attorney fees in the present case because the Tribe did not expressly waive its immunity to claims for fees. d. The Agreement does not waive immunity to attorney fees. The 1992 Agreement relied on by FSIC as a waiver of the Tribe s immunity lacks the clear and unequivocal expression necessary to waive the Tribe s immunity from an award of attorney fees. The extent to which an arbitration provision waives immunity from suit turns on the specific terms of the provision itself. See Ninigret Development Corp., 207 F.3d at 29. The arbitration provision in the 1992 Agreement states, in pertinent part, that All controversies which may arise between [the Tribe] and [SWM] concerning any transaction or the construction, performance or breach of this or any other agreements between them... shall be determined by arbitration.... Any arbitration shall be in accordance with the rules then applying of the American Arbitration Association. Affidavit of Deneen Aubertin Keller in Support of Motion for Summary Judgment ( Keller Aff. ), Ex. 4 at 4. There is no mention of attorney fees in this provision or anywhere in the 1992 Agreement. This omission is significant in light of the strong presumption against waivers of immunity and the requirement that any waiver be clearly and unequivocally expressed. See Demontiney, 255 F.3d at 811; Oklahoma Tax Comm n, 498 U.S. at 509. The Tribe could not have waived immunity as to attorney fees without some reference to such claims. Moreover, a claim for prevailing party attorney fees falls outside the plain language of the arbitration provision itself. The provision expressly limits its coverage to disputes concerning a transaction under the agreement or concerning the construction, performance or Page 22 DEFENANT S MEMORANDUM IN RESPONSE TO PLAINTIFF S MOTION FOR

breach of the agreement. FSIC s claim for attorney fees is not one of those disputes. As the Panel recognized, the attorney fees claim is a post-hearing claim which arises under a statute s fee-shifting provision not under the parties agreement. See Final Award, attached to Chaimov Decl. as Ex. 8 at 49-50. Indeed, FSIC could not assert the claim independent of the Tribe s claim under the Oregon Securities Act. Reading a post-hearing claim for attorney fees into the clause impermissibly expands the Tribe s waiver of immunity beyond its express limitations. See Nordic Village, Inc., 503 U.S. at 34. FSIC asserts that the arbitration clause constitutes the Tribe s consent to arbitrate any and all claims arising under the 1992 Agreement. However, even if this was correct, which it is not, that consent does not encompass claims for attorney fees. A general waiver of sovereign immunity may not be construed to include attorney fees. See Fitzgerald, 554 F.2d at 1189. In Fitzgerald, the D.C. Circuit cited the principle set forth in the Supreme Court s opinion in Alyeska Pipeline Serv. Co. v. Wilderness Soc y, that [i]n the United States, the prevailing litigant is ordinarily not entitled to collect a reasonable attorney fee from the loser. 421 U.S. 240, 260 (1975). The D.C. Circuit then stated that the clear import of the principle in Alyseka and Supreme Court precedent prohibiting relief in the absence of an express waiver is that a general waiver of sovereign immunity should not be construed to extend to attorney fees unless Congress clearly indicated that it should. Fitzgerald, 554 F.2d at 1189. The Fitzgerald analysis applies equally here. Because the 1992 Agreement does not expressly provide for relief in the form of prevailing party attorney fees, even a broad construction of the arbitration provision as an agreement to arbitrate all disputes does not waive the Tribe s immunity from claims for attorney fees. Page 23 DEFENANT S MEMORANDUM IN RESPONSE TO PLAINTIFF S MOTION FOR

Despite the well settled principle that waivers of immunity for attorneys fees must be express and that general waivers of immunity do not serve to waive immunity as to claims for attorneys fees unless expressly so provided, FSIC argues that the Supreme Court s ruling in C & L Enterprises, Inc. v. Citizen Band Potawatomi Indian Tribe of Oklahoma, 532 U.S. 411 (2001) changes everything. However, C & L Enterprises did not alter the requirement that a waiver of immunity be express and unequivocal. See id., 532 U.S. at 418. It addressed the broad question of whether the Potawatomi Tribe waived immunity to a state-court suit to enforce an arbitral award in favor of C & L by agreeing: (1) to arbitrate disputes arising under a construction contract with C & L, (2) to the governance of Oklahoma law, and (3) to enforcement of arbitral awards in any court having jurisdiction thereof. Id., 532 U.S. at 414. The Court found that the Potawatomi Tribe had waived its immunity from suit by C & L through the arbitration and choice of law provisions in the agreement and as such consented to the enforcement of arbitration awards in Oklahoma State Court. The claims at issue in C & L Enterprises plainly fell within the confines of the arbitration and choice of law provisions in that agreement. The question of the extent of that waiver whether it included a waiver for recovery of specific affirmative relief beyond the terms of the contract was not raised or addressed by the Court. See id., 532 U.S. at 415-17 (describing procedural history). The issue presented in this case is much narrower than that addressed in C & L Enterprises whether the Tribe waived immunity to claims for attorney fees by agreeing to arbitrate all controversies concerning transactions or the construction, performance or breach of the agreement. FSIC argues that because the arbitration award in C & L Enterprises included attorney fees, that decision is controlling on the question of waiver presented here. The Tribal Court, both Trial Court and Court of Appeals, correctly rejected this argument. While the procedural Page 24 DEFENANT S MEMORANDUM IN RESPONSE TO PLAINTIFF S MOTION FOR

history of that case states that the arbitral award included attorney fees, the propriety of an attorney fee award was neither raised nor addressed by the Supreme Court. Id., 532 U.S. at 414-17. Despite this fact, FSIC insists that the Supreme Court could not have approved the arbitration award if the tribe had not waived its immunity to the portion of the award that included fees. FSIC Memo at 17. That argument is fundamentally flawed. The Supreme Court was not deciding whether to confirm or vacate the arbitration award. The question before the Court was whether the Potawatami waived immunity to enforcement of an arbitral award in the state courts of Oklahoma. The Supreme Court answered that question in the affirmative and the propriety of the attorney fee award was therefore a question for the Oklahoma courts to decide. Indeed, the Oklahoma Supreme Court ultimately determined that the fee award in favor of C & L was not authorized by the parties agreement. C & L Enterprises, Inc. v. Citizen Band Potawatomi Indian Tribe of Oklahoma, 72 P.3d 1, 3 (Okla. 2002). 12 As the Tribal Trial Court found, the holding in C & L Enterprises is thus of little assistance regarding the question whether a Tribe waives immunity for an affirmative award of attorney fees merely by entering into a contract with an arbitration clause. Strategic Wealth Mgmt., Case No. C-04-08-003 at 26. The Tribal Court of Appeals agreed, stating C & L Enterprises provides no assistance on the issue before us... [t]he only real guidance we glean from C & L Enterprises is its strict adherence to the language and terms of the contract before it. First Specialty Ins. Corp., Case No. A-05-09-001 at 15, citing C & L Enterprises, 532 U.S. at 418-419. 12 The attorney fee award before the Oklahoma Supreme Court involved an Oklahoma statute allowing fees and costs to be awarded to a prevailing party in a suit on a contract for labor or services. C & L Enterprises, Inc., 72 P.3d at 5. The Oklahoma Supreme Court vacated the award based on its determination that C & L did not furnish labor or services as required by the statute. It is not significant that the Court rejected the award under the statute rather than on sovereign immunity principles. The parties agreed that Oklahoma law would govern their construction agreement. C & L Enterprises, 532 U.S. at 413-14. Page 25 DEFENANT S MEMORANDUM IN RESPONSE TO PLAINTIFF S MOTION FOR