Oglala Lakota College v. Hudson Insurance Company et al

Filing 25

ORDER granting 9 Motion to Compel and denying 9 Motion to Dismiss; granting 9 Motion to Stay. Signed by Chief Judge Jeffrey L. Viken on 9/20/17. (SB)

UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
WESTERN DIVISION
CIV. 16-5093-JLV

OGLALA LAKOTA COLLEGE,
Plaintiff,

ORDER

vs.
HUDSON INSURANCE GROUP,
TRIBAL FIRST RISK MANAGEMENT,
Defendants.
INTRODUCTION

Defendant Hudson Insurance Group filed a motion to dismiss the case and
compel arbitration or, in the alternative, to stay this litigation pending
arbitration.
motion.

(Docket 9).

(Docket 16).

(Docket 15).

Defendant Tribal First Risk Management joins in the

Plaintiff Oglala Lakota College resists the motion.

For the reasons stated below, defendant Hudson’s motion is

granted in part and denied in part.
ANALYSIS
The 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”).
¶ 5.02.

On August 7, 2015, OLC made a claim against the policy.

The claim was denied.

Id.

This litigation followed.

Id.

Id. ¶ 5.06.

Defendants 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.
(referencing Docket 1-1 at p. 37 § S).

(Docket 10 at p. 1)

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).

OLC resists defendants’ motion.

(Docket 15).

Plaintiff’s grounds for

opposing the motion are two-fold: first, under South Dakota law an arbitration

2

provision in an insurance contract is void and unenforceable; and second, the
arbitration clause does not compel binding arbitration.

Id. at pp. 1-2.

OLC 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.

reason, OLC contends defendants’ motion should be denied.

For this

Id.

In the alternative, OLC argues the policy is ambiguous and “contains other
provisions suggesting that alternatives to arbitration are permissible.”
p. 5.

Id. at

According to OLC, those alternatives to mandatory arbitration are found

in Section L, Appeals, and Section M, Litigation Proceedings, of the policy.
pp. 2-3 (capitalization omitted).

Id. at

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)).
In 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)
3

(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.

The 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.
4

“Indian 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

internal matters . . . and to enforce that law in their own forums . . . .”

Santa

Clara Pueblo, 436 U.S. at 55-56 (internal citations omitted).
“[T]ribal sovereignty is dependent on, and subordinate to, only the Federal
Government, not the States . . . .” Baker Elec. Co-op., Inc. v. Chaske, 28 F.3d
1466, 1478 (8th Cir. 1994) (referencing California v. Cabazon Band of Mission
Indians, 480 U.S. 202, 207 (1987) (quoting Washington v. Confederated Tribes of
Colville Indian Reservation, 447 U.S. 134, 154 (1980)). “[S]tate laws may be
applied to tribal Indians on their reservations if Congress has expressly so
provided.” Id.
There is no federal statute making the law of the state of South Dakota
applicable to the Pine Ridge Indian Reservation. “[T]he controlling law remained
federal law.” Oneida Indian Nation v. County of Oneida, 414 U.S. 661, 674
(1974). “[A]bsent federal statutory guidance, the governing rule of decision
would be fashioned by the federal court in the mode of the common law.” Id.

5

OLC’s argument that South Dakota law governs the enforcement of the
arbitration clause in the policy is without merit.
“[T]he Federal Arbitration Act . . . establishes a national policy favoring
arbitration when the parties contract for that mode of dispute resolution. The
Act, which rests on Congress’ authority under the Commerce Clause, supplies
not simply a procedural framework applicable in federal courts; it also calls for
the application, in . . . federal courts, of federal substantive law regarding
arbitration.” Preston v. Ferrer, 552 U.S. 346, 349 (2008) (referencing Southland
Corp. v. Keating, 465 U.S. 1 (1984)).
The policy in this case is not ambiguous. Section L, which addresses only
whether to appeal an adverse judgment against the insured, articulates a
specific exception to arbitration, an exception not relevant to the issue before the
court. Additionally, Section M, which addresses the ability of a third-party but
not the insured to bring suit, identifies a specific course of action the third-party
must follow. Neither of these sections makes Section S, the arbitration clause,
ambiguous. Section S clearly and unequivocally calls for binding arbitration.
The court concludes the parties are obligated under the FAA to proceed in
accordance with Section S of the policy. 9 U.S.C. § 4. The court will not
dismiss the case but will stay this litigation until the arbitration process is
completed pursuant to 9 U.S.C. § 3.

6

ORDER
Based on the above analysis, it is
ORDERED that defendants’ motion (Docket 9) is granted in part and
denied in part.
IT IS FURTHER ORDERED that pursuant to 9 U.S.C. § 4 the parties shall
promptly proceed to arbitration in compliance with Section S of the policy
(Docket 1-1 at p. 37 § S).
IT IS FURTHER ORDERED that pursuant to 9 U.S.C. § 3 this litigation is
stayed pending resolution of arbitration.
Dated September 20, 2017.
BY THE COURT:
/s/ Jeffrey L. Viken
JEFFREY L. VIKEN
CHIEF JUDGE

7