United States District Court, D. South Dakota, Western Division
JEFFREY L. VIKEN CHIEF JUDGE
Hudson Insurance Group filed a motion to dismiss the case and
compel arbitration or, in the alternative, to stay this
litigation pending arbitration. (Docket 9). Defendant Tribal
First Risk Management joins in the motion. (Docket 16).
Plaintiff Oglala Lakota College resists the motion. (Docket
15). For the reasons stated below, defendant Hudson's
motion is granted in part and denied in part.
parties do not dispute the facts necessary to resolve the
defendants' motion. For purposes of analysis, the facts
are as follows. Oglala Lakota College (“OLC”) is
an educational institution chartered by the Oglala Sioux
Tribe. (Docket 1 ¶ 5.01). OLC purchased an insurance
policy from Hudson Insurance Company (“Hudson”),
identified as Policy No. NACL00549-06 (the
“policy”). Id. ¶ 5.02. On August 7,
2015, OLC made a claim against the policy. Id.
¶ 5.06. The claim was denied. Id. This
seek dismissal of the case on the basis of mandatory
arbitration or, in the alternative, for a stay of the case
pending resolution of the outcome of arbitration. (Docket 9).
Defendants' motion is premised on paragraph S, the
arbitration clause of the policy. (Docket 10 at p. 1)
(referencing Docket 1-1 at p. 37 § S). The provision
provides in relevant part as follows:
ARBITRATION: All disputes which may arise between
“Hudson” and the “Assured” out of or
in relation to this policy (including disputes as to its
validity, construction or enforceability), or for its breach,
shall be finally settled by arbitration based, insofar as
possible, upon the rules and procedures of the American
Arbitration Association, by which “Hudson” and
the “Assured” agree to be bound. In addition to
the rules governing such arbitration, the parties shall have
at their disposal the broadest pre-trial discovery rights as
are then available under the laws and judicial rules of the
jurisdiction in which the arbitration is to be held, provided
that any dispute between the parties relating to discovery
shall be submitted to the arbitration panel for resolution.
(Docket 1-1 at p. 37 § S). Defendants contend that under
the Federal Arbitration Act (“FAA”), 9 U.S.C.
§ 1 et seq., the arbitration clause of the
policy is enforceable. (Docket 10 at p. 6). Based on this
argument, the defendants seek “an order directing the
parties to proceed to arbitration in accordance with the
terms of the [policy].” Id. (citing 9 U.S.C.
§ 4) (emphasis omitted). Defendants also ask the court
to stay this litigation until the arbitration process is
completed. Id. at p. 7 ((citing 9 U.S.C. § 3).
resists defendants' motion. (Docket 15). Plaintiff's
grounds for opposing the motion are two-fold: first, under
South Dakota law an arbitration provision in an insurance
contract is void and unenforceable; and second, the
arbitration clause does not compel binding arbitration.
Id. at pp. 1-2.
argues South Dakota “law governs whether an arbitration
agreement is valid.” Id. at p. 3 (referencing
Quam Construction Co. v. City of Redfield, 770 F.3d
706, 708 (8th Cir. 2014). Under South Dakota law, OLC argues
“the use of arbitration provisions in insurance
contracts via the South Dakota Uniform Arbitration Act”
is prohibited. Id. (referencing SDCL §
21-25A-3). OLC submits that because of the McCarren-Ferguson
Act, 15 U.S.C. § 1012(b), and SDCL § 21-25A-3, this
arbitration clause is void. Id. at p. 4. For this
reason, OLC contends defendants' motion should be denied.
alternative, OLC argues the policy is ambiguous and
“contains other provisions suggesting that alternatives
to arbitration are permissible.” Id. at p. 5.
According to OLC, those alternatives to mandatory arbitration
are found in Section L, Appeals, and Section M, Litigation
Proceedings, of the policy. Id. at pp. 2-3
(capitalization omitted). OLC argues the policy is ambiguous
or not “sufficiently clear on arbitration . . . to show
the parties had a meeting of the minds with respect to the
agreement to arbitrate, [so] the provision may be
invalidated.” Id. at p. 5 (referencing
American Heritage Life Ins. v. Lang, 321 F.3d 533,
537-38 (5th Cir. 2003)).
rebuttal to OLC's response, defendants contend the policy
provides it will “be governed by and construed in
accordance with the internal laws of the ‘Assured,
' ” that is, the tribe. (Docket 17 at p. 3) (citing
Docket 1-1 at p. 37 § T) (emphasis omitted). Defendants
argue “[i]t is seemingly beyond question that
‘the internal laws of the Assured' is reference to
the internal laws of the Oglala Sioux Tribe. To hold
otherwise would be to hold that the Oglala Sioux Tribe and
Oglala Lakota College reside in and are subject to the laws
of the State of South Dakota.” Id. at p. 3.
Defendants submit “[t]here is no law promulgated by the
Oglala Sioux Tribe which prevents, invalidates, or voids an
arbitration clause in an insurance contract or otherwise
conflicts with the provisions of the Federal Arbitration
Act.” Id. at p. 6.
defendants further contend OLC's claim the policy is
ambiguous is without merit. Id. at p. 7. First,
defendants argue Section L of the policy does not apply by
its clear language. Id. (referencing Docket 1-1 at
p. 36 ¶ L). Defendants submit the use of a
“disinterested attorney” in determining whether
to appeal from an adverse judgment applies only in the event
a third-party “obtained a judgment against Oglala
Lakota College under the liability coverage provided by the
policy.” Id. at p. 8. Next, defendants argue
Section M is not applicable because the provision relates to
a lawsuit brought “by a third-party after a successful
claim has been pursued against Oglala Lakota College.”
Id. Finally, defendants contend Section S, the
arbitration provision, is clear and applies to “all
disputes which may arise between ‘Hudson' and
[Oglala Lakota College] out of or in relation to this policy
. . . .” Id. For these reasons, defendants
conclude the FAA applies and the policy “clearly and
unequivocally calls for arbitration of this dispute.”
Id. at p. 11.
tribes are distinct, independent political communities,
retaining their original natural rights' in matters of
local self-government, . . . although Congress has plenary
authority to limit, modify, or eliminate the powers of local
self-government which tribes otherwise possess.”
Weeks Construction, Inc. v. Oglala Sioux Housing
Authority, 797 F.2d 668, 673 (8th Cir. 1986) (internal
quotation marks omitted) (referencing Santa Clara Pueblo
v. Martinez, 436 U.S. 49, 55 (1978)). Tribes “have
power to make their own substantive law in ...