In 2007, a construction company in upstate New York signed a contract to build an 18-hole championship golf course in the town of Lewiston for $12.7 million. A dispute later arose between the construction company and the property owner over who would pay for cost overruns. The company demanded an extra $4.1 million. The property owner refused to pay. The construction company then filed a mechanic's lien and a breach of contract lawsuit in New York State Supreme Court.
Sue/Perior Concrete & Paving v. Lewiston Golf Course Corporation
What makes this case noteworthy is the defendants. Lewiston Golf Course Corporation operates the property at the center of the dispute. The Seneca Niagara Falls Gaming Corporation (SNFGC) owns Lewiston. SNFGC is a wholly owned subsidiary of another company, Seneca Gaming Corporation (SGC). The Seneca Nation of New York, a federally recognized Indian tribe, in turn, wholly owns SGC.
Indian tribes enjoy a special legal status under the United States Constitution and federal law. They are in some respects treated as foreign nations. This means tribes traditionally enjoy "sovereign immunity" from lawsuits in U.S. courts. Congress may waive or abrogate such immunity by legislation.
In this case, the Seneca Nation argued that since Lewiston Golf was ultimately its subsidiary, it enjoyed the same sovereign immunity as the tribe itself, meaning the Supreme Court could not hear the construction company's lawsuit. Both Niagara County Supreme Court and theAppellate Department, Fourth Department, disagreed with the tribe's interpretation of Lewiston Golf's status. The Fourth Department noted the golf course's business had little to do with the objectives of the Seneca tribe. The golf course is not located on Seneca reservation lands, and there was nothing to suggest the business would do anything to improve "the quality of life on reservation lands" or create jobs for Seneca tribe members.
In adecision published on November 25 of this year, a divided New York Court of Appeals agreed with the two lower courts the Seneca Nation was not entitled to sovereign immunity in this case. Judge Eugene F. Pigott, writing for the majority, said the primary purpose of the golf course was to "act as a regional economic engine and thereby serve the profit-making interests of the Seneca Nation's casino operations in the area." Corporations affiliated with an Indian tribe do not automatically enjoy sovereign immunity. And even though the golf course's parent corporations were created and controlled by the Seneca Nation, an affiliated company, not the tribe itself, owns the golf course. Nor did the tribe assumed any responsibility for the golf course's debts. As Judge Pigott explained, "protection of a tribal treasury against liability in a corporate charter is strong evidence against the retention of sovereign immunity by the corporation." Judge Pigott went so far as to suggest that beyond Lewiston Golf, neither SNFGC nor SGC enjoy sovereign immunity under New York law, despite some federal court decisions to the contrary.
Litigating Against the Government
Sovereign immunity often complicates breach of contract and other civil litigation involving state, federal, and tribal governments. If you are contemplating litigation against any government body, you should speak with a qualified New York business attorney as soon as possible.Contact our office today with any questions.