Court Upholds Sovereignty in Dram Shop Case

In a dram shop case against a tribal casino, the 9th Circuit Court of Appeals ruled that the plaintiff had established diversity jurisdiction over the case, but that the district court's dismissal of the case was proper on the grounds of sovereign immunity.

In Cook v. Avi Casino Enterprises, the plaintiff, Christopher Cook, a California resident, was seeking recovery for damages suffered when the motorcycle he was driving was hit by a drunk driver. The drunk driver, Andrea Christensen, was an employee of Avi Casino Enterprises, Inc. (ACE), which is incorporated by the Fort Mojave Tribe. Cook sued ACE and several of its employees alleging negligence and dram shop liability. 

ACE employees, including the on-duty manager, gave Christensen (who was off-duty) free drinks at a party even though she was already intoxicated. They let her board a casino-run shuttle bus that took her to her car so she could drive home. Minutes after driving away from the employee parking lot, Christensen drove into Cook, who was driving his motorcycle home from a visit with his mother-in-law. Cook suffered catastrophic injuries, including the loss of his left leg, resulting in more than $1 million in medical bills. Christensen pleaded guilty to aggravated assault and driving under the influence and was sentenced to four years in prison. 

On the subject of diversity jurisdiction, which required establishing the corporate citizenship of ACE, the 9th Circuit ruled that the District Court erred in applying traditional corporate citizenship analysis under 28 U.S.C. subsection 1332(a), which led it to rule that ACE was a citizen of Nevada because its principal place of busines, the casino, was located there; and that ACE was a citizen of California because it was incorporated by the tribe and the tribe's headquarters were there.

The 9th Circuit held that for diversity purposes, a tribal corporation formed under tribal law is not a citizen of a state merely because its incorporation occurred inside that state. ACE is governed by tribal, not state,  corporate law. From the state's perspective, the court said, a trbal corporation is much like a foreign corporation. Therefore, the court said, ACE is a citizen of the state where it has its principal place of business. 28 U.S.C. subsection 1332(c)(1). The principal place of business clause refers to location and does not require the actions or authority of the state government. The said ACE is a citizen of Nevada, which is the location of its principal place of business. 

The entire case is available on Turtle Talk.