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In re Estate of Colombe

Supreme Court of South Dakota

August 31, 2016

IN THE MATTER OF THE ESTATE OF CHARLES C. COLOMBE, deceased.
v.
WESLEY COLOMBE, as Personal Representative for the Charles C. Colombe Estate, Defendant and Appellant. ROSEBUD SIOUX TRIBE, Plaintiff and Appellee,

          ARGUED ON APRIL 26, 2016

         APPEAL FROM THE CIRCUIT COURT OF THE SIXTH JUDICIAL CIRCUIT TODD COUNTY, SOUTH DAKOTA THE HONORABLE KATHLEEN F. TRANDAHL Judge

          DANA HANNA Rapid City, South Dakota Attorney for plaintiff and appellee.

          CLINT L. SARGENT RALEIGH HANSMAN of Meierhenry Sargent, LLP Sioux Falls, South Dakota Attorneys for defendant and appellant.

          KERN, Justice

         [¶1.] An estate appealed from a circuit court's decision to grant comity to a Rosebud Sioux Tribal Court order. The order pierced a business's corporate veil and held decedent personally liable for a judgment in favor of the Rosebud Sioux Tribe. We affirm.

         BACKGROUND

         [¶2.] Charles Colombe, a member of the Rosebud Sioux Tribe (RST) died on June 9, 2013. His son, Wesley Colombe, filed a petition for informal probate in Todd County, Sixth Judicial Circuit, and was appointed as personal representative of Charles's estate (the Estate). In February 2014, Wesley provided written notice to creditors. The RST filed a notice of creditor's claim, seeking to enforce an April 19, 2012 Rosebud Sioux Tribal Court (tribal court) order and judgment for $527, 146.76. In response, Wesley filed a notice of disallowance of claim, asserting the RST could not show that the order was entitled to comity by satisfying the requirements of SDCL 1-1-25. The circuit court granted comity to the tribal court order and judgment. Wesley, on behalf of the Estate, appeals.

         [¶3.] The April 19, 2012 tribal court judgment was the culmination of more than a decade of steady litigation between RST and BBC Entertainment Inc. (BBC). Aspects of this case have been reviewed by the tribal court, the Rosebud Sioux Tribe Supreme Court (RST Supreme Court), the federal district court, and the Eighth Circuit Court of Appeals. A truncated history of the litigation is necessary to provide context for the parties' arguments.

         [¶4.] The Indian Gaming and Regulatory Act of 1988 (IGRA) authorized creation and subsequent regulation of gaming by Indian tribes. 25 U.S.C. §§ 2701-2721 (2012). IGRA established the National Indian Gaming Commission (NIGC) to provide oversight of Indian gaming. Under IGRA, tribes are authorized to build casinos and enter into management contracts. However, the Chairman of the NIGC must approve all contracts and modifications. In 1994, RST entered into a five-year contract with BBC to build and manage a Class III gaming casino on the Rosebud Reservation. Wayne Boyd and Charles were the shareholders of BBC, with Charles being the primary shareholder and general manager of the casino.

         [¶5.] The agreement provided for a management fee of 35% of the net gaming revenue of the casino for a period of five years. The contract required BBC to deposit initial operating capital in an Operating Expense Reserve (OER) account. BBC failed to do so. RST and BBC later orally agreed that instead of the required deposit, BBC would contribute 7.5% of the casino's monthly net profits to the account. This modification was not presented to the Chairman of the NIGC for approval. Prior to the expiration of the contract in August 1999, BBC withdrew $415, 857 from the OER account under the theory that they were entitled to this sum as part of their contractual share of the net profits.

         [¶6.] In August 2001, RST sued BBC in tribal court for breach of contract, alleging that the oral modification was invalid as the Chairman of the NIGC did not approve it. Additionally, RST argued that BBC was not entitled to any share of the OER account because BBC did not fund the OER as required by the contract. In January 2004, the case was tried before Judge B.J. Jones[1] who ruled in favor of BBC. RST appealed to the RST Supreme Court who reversed Judge Jones's finding for BBC. The RST Supreme Court determined that the oral modification to the management agreement was invalid as it was not approved by NIGC. The RST Supreme Court remanded the matter to the tribal court for a hearing to determine damages.

         [¶7.] RST filed a motion for rehearing en banc, arguing in part that no hearing was necessary as RST was entitled to the full amount withdrawn by BBC. The RST Supreme Court granted the request, but limited the en banc hearing solely to the proper measure of damages. On October 2, 2006, the RST Supreme Court affirmed its prior ruling and remanded the case to the tribal court for a detailed accounting. The Court clarified that it found invalid only the portion of the management contract that changed the funding mechanism for the OER account. On remand, BBC was not foreclosed from presenting its potential claims for unjust enrichment under the contract.

         [¶8.] On October 16, 2007, Judge Jones entered judgment against BBC for $399, 353.61 plus accrued interest of $127, 793.15, a total of $527, 146.76. BBC moved for a new trial and its request was denied. BBC did not appeal the judgment to the RST Supreme Court. As BBC was insolvent, it did not pay any part of the judgment.

         [¶9.] In February 2009, RST filed a complaint in tribal court against Charles, Boyd, and BBC. RST sought to pierce BBC's corporate veil and hold Charles and Boyd[2] personally liable for the judgment. In March 2009, Charles moved to dismiss the lawsuit. He argued RST failed to comply with a 2007 amendment to the Constitution of the Rosebud Sioux Tribe (RST Constitution), [3]depriving the tribal court of jurisdiction. In April 2010, Chief Judge Sherman Marshall, who presided over the lawsuit, denied Charles's motion to dismiss. In response, Charles sought permission to bring a discretionary interlocutory appeal. Chief Judge Marshall denied this request and ordered Charles to comply with written discovery requests by January 22, 2011.

         [¶10.] Instead, Charles filed a lawsuit in federal court naming Chief Judge Marshall, the tribal court, and RST as defendants. Colombe v. Rosebud Sioux Tribe, No. CIV 11-3002-RAL, 2011 WL 3654412 (D.S.D. Aug. 17, 2011). Charles sought three things: (1) to vacate Judge Jones's October 16, 2007 judgment on the basis that the tribal court lacked jurisdiction to find the oral modifications to the contract void. He also argued that the IGRA did not provide for private action by RST; (2) a judgment on the merits finding that BBC did not violate the contract; and (3) an injunction preventing RST from pursuing any litigation against him relating to Judge Jones's October 16, 2007 judgment.

         [¶11.] In light of the federal lawsuit, Chief Judge Marshall and the tribal court's associate judges recused themselves from the tribal court lawsuit seeking to pierce BBC's corporate veil. On November 7, 2011, Chief Judge Marshall appointed Patricia Meyers as a special judge to handle the case. During the prior proceedings, Charles had failed to answer requests for discovery and comply with the tribal court's discovery orders. RST filed a motion for summary judgment and a hearing was scheduled for March 13, 2012. At the beginning of the hearing Charles's lay advocate, Oliver Seamans, orally moved for the recusal of Judge Meyers. Seamans argued he had not received notice of her appointment. Judge Meyers denied the request finding that the motion failed to comply with the requirements of tribal law. Judge Meyers proceeded with the hearing and took the matter under advisement.

         [¶12.] On April 19, 2012, Judge Meyers entered an order granting RST summary judgment. The order pierced the corporate veil and held Charles personally liable for the October 16, 2007 judgment. Judge Meyers found that because Charles refused to comply with discovery requests, RST's requests for admissions were all deemed admitted. Further, Judge Meyers found that Charles had engaged in fraudulent conduct by misappropriating assets for his personal use, restructuring BBC without notice to RST, and misusing the corporate structure to conduct his own business. Judge Meyers concluded that the "liability incurred . . . arises from the fraud and injustice perpetrated on the Tribe." Charles appealed to the RST Supreme Court. The court dismissed Charles's appeal for a failure to provide proof of financial responsibility as required by the Rosebud Sioux Tribal Court Rules of Appellate Procedure.

         [¶13.] During the litigation in federal court, the parties raised numerous issues resulting in four written opinions from the district court.[4] Only limited portions of the dispute are relevant to these proceedings. In response to Charles's complaint, RST filed a motion to dismiss on several grounds including its claim that BBC did not exhaust its tribal court remedies. The district court granted RST's motion in part, dismissing the claims related to Judge Jones's October 16, 2007 judgment. The court found BBC failed to appeal Judge Jones's second judgment and had not exhausted its remedies.

         [¶14.] The parties eventually filed cross-motions for summary judgment. They asked the district court to consider whether the tribal court had jurisdiction to determine if the parties' oral modification to the casino management contract was void. The court granted RST's motion for summary judgment finding the tribal court had jurisdiction to rule on the validity of the oral modifications. Colombe v. Rosebud Sioux Tribe, 918 F.Supp.2d 952, 961 (D.S.D. 2013). Charles appealed this and other rulings to the Eighth Circuit Court of Appeals. RST cross-appealed, "arguing the district court should have dismissed the entire complaint for failure to exhaust tribal court remedies." Colombe v. Rosebud Sioux Tribe, 747 F.3d 1020, 1021 (8th Cir. 2014). The Court of Appeals agreed with RST and reversed the district court. It held that BBC's entire complaint should have been dismissed for BBC's failure to challenge the tribal court's jurisdiction in tribal court and exhaust tribal court remedies. It was during the pendency of the appeal before the Eighth Circuit Court of Appeals that RST filed its creditor's claim in the Estate.

         [¶15.] As personal representative of the Estate, Wesley moved to disallow RST's creditor's claim. Wesley alleged that Judge Meyers's appointment was invalid as it did not comport with the provisions of Article XI, §§ 2 and 4 of the RST Constitution or the RST Law and Order Code (RST Code) § 9-1-5(c). According to Wesley, this rendered Judge Meyers's decision invalid because she lacked jurisdiction to preside over the lawsuit. RST filed a motion to dismiss the probate, which they later withdrew, instead seeking comity for Judge Meyers's order.

         [¶16.] On January 8, 2015, the circuit court held an evidentiary hearing on Wesley's motion to disallow RST's creditor's claim. At the hearing, RST presented testimony from Eric Antoine, the in-house attorney for RST. The Estate presented testimony from Oliver Seamans, Charles's lay advocate during the tribal court action.

         [¶17.] On July 22, 2015, the circuit court entered findings of fact and conclusions of law granting comity to Judge Meyers's April 12, 2012 order and judgment. In making its decision, the circuit court noted that Charles had not exhausted his tribal court remedies by appealing Judge Meyers's final judgment to the RST Supreme Court. Accordingly, the RST Supreme Court did not have the opportunity to review Wesley's claim that Chief Judge Marshall lacked authority to appoint Judge Meyers. Nor did the RST Supreme Court review Wesley's claim that RST failed to comply with the 2007 constitutional amendment allegedly depriving the tribal court of jurisdiction.[5]

         [¶18.] The circuit court concluded that Chief Judge Marshall had authority under RST Constitution Article XI, §§ 2 and 4 to appoint Judge Meyers as a special tribal court judge. In reaching this decision, the court also relied upon RST Code § 4-2-8, which mandates that any matter not expressly covered by applicable tribal or federal laws shall be decided according to the customs and usages of RST. The court found that it was a long-standing practice of the tribal court for the Chief Judge to appoint special judges when necessary because of recusals. Additionally, the court noted that the RST Tribal Council implicitly approved of this practice by authorizing the tribal court's budget, which always included an amount to pay for special judges. The circuit court concluded that the ...


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