Credit guru Thea Dudley has spent more than 30 years in LBM credit management. Now she’s here to answer your credit and collection questions. Got a question for her mailbag? Contact Thea at theadudley@charter.net
Dear Thea,
This may not be PC, but how do you or other suppliers deal with Native American businesses due to their Sovereign Immunity? How do you determine if the business is a Native American business? is it based on the owners being native or if the business is on tribal land? Once you know that, is it business as usual? Do they have to waive their sovereign rights? How do you even bring this up diplomatically? My sales reps will mention that a customer is Native American and I am not sure what exactly that means to our business.
Signed, Looking for Knowledge in the Four Corners
Dear Four Corners:
How much coffee have you had this morning? That is a whole lotta questions. Did I mention you get one question per column? If that list got any longer I was gonna need to ask to be on your payroll.
But enough about me let’s get back to your barrage of questions. The very concise, very helpful answer is—Wait for it, drumroll please–IT DEPENDS!
Not helpful, says you? Welcome to the world of sovereign immunity and all its confusion. How you move forward depends on the tribe, their rules and how they govern. You may also have to consider that, if the business is conducted on tribal land, the state in which the reservation is located might have jurisdiction. Some tribes allow for individuals/business forfeiting or signing away the right to sovereign immunity. Some do not. Generally speaking, any waiver may need to be approved by the tribal government.
It is a pretty safe bet that if the project is located on tribal land, it falls under the laws of that particular tribal nation. If the project is federally funded it may have a federal government bond. The project may have a Tribal Economic Development bond. If you have never heard of a TED bond, you are not alone. They are a little strange, because a tribe has to apply to the Internal Revenue Service to receive permission to issue a TED bond since there is an annual cap on the amount of TED bonds that can be issued in a given year. Once the tribe is approved to issue a TED bond, the money is raised from private investors. In either case, asking for details on the project and checking thoroughly to see if there is a bond of any kind is advisable.
Get an Education
So the answer to all your questions and many more, is IT DEPENDS. I compare the adventure of learning about tribal law and sovereign immunity to the adventure of mechanic’s lien and bond laws. Every state is different and every state has its nuances. It’s the same with this situation. Your best coarse of action, according a a trusted friend and attorney (though I know you’re thinking “trusted friend and attorney” do not go in the same sentence), is to find out about the tribes in the area where you are selling and work to gain a basic understanding.
Get a map of the tribal land so you can identify exactly where the business or project is located. Then you can go back to your customer and ask questions. Ask specifically if this is a tribal project. Is the customer responsible for payment, or is the tribal governing body paying directly to outside parties (i.e., you)? Ask for the same details you would on any other project. You are still lending money in the form of product, so skipping over details because you are worried about looking uncool, prejudice or lacking of intelligence on the topic is, frankly, just plain stupid.
Contact the tribal community office and ask for some education and information. They are usually very helpful as they want to stimulate their economy and not be trapped by a stigma that they are not going to pay their bills. Ask the person if they can direct you to a tribal attorney. Contact said tribal attorney and set up a hour or so appointment for some Q&A.
Study the Process
For the most part, tribal law is, shall we say, diverse. Procedures vary between tribes; some follow the same patterns as U.S. Civil procedure, but others have few written laws. While some tribes have published their tribal law and do incorporate attorneys, filings, judges, etc. into their processes, far more tribes keep their procedure confidential. Many don’t distribute their laws or processes, which makes it hard to gather information and some have little to no rules in their judicial procedures.
The tribe may require you to use a tribal attorney to represent you in a legal battle. Some may ask for the matter to be put before the tribal council. There is no solid set of answers to unify all the tribes and have one set of laws or governances. Dealing with tribal law is similar to dealing with another nation, because in regards, you are. Imagine you are selling into Mexico or Canada. You can drive across the border, but it is a whole different set of rules to sell and collect by.
By asking for the sovereign immunity to be waived you are essentially asking that tribe or tribal member to commit themselves to the laws of another nation. I understand why you would want it and ask for it. And I understand why the person you are asking would say no So you are now at a stand off. Your company wants to sell, that company wants to buy, but there is no clear path of action and consequences.
Three Courses of Action
So what should a company do if it wants to provide product and help build nations? How do you sell into those circumstances and not use hope as your main credit tool? You do have some choices:
- Require payment upfront.
- Include a waiver of sovereign immunity as a condition to any “loans.” The waiver, if approved by the governing body of the tribe under tribal law, is recognized as a matter of tribal and federal law. These waivers are strictly enforced according to terms. Make sure they are clearly spelled out.
- Do nothing and hope it all turns out okey dokey.
If you are going the waiver route, make sure you address the following:*
- a. Identify the specific court where the tribe consents to be sued.
- b. List of nature of the claim that can be tried (material, project, labor)
- c. Add a waiver of right to enforce any claim against an individual tribe member, officer board member, or other member serving in tribal governance.
- d. Put procedural limitations on claims, such as requiring prior written notice the governing body of the tribe with the matter and amount of claim.
- e. Specify remedies or damages and give lenders the right to foreclose on collateral.
- f. Allow for an Alternative Dispute Resolution mechanism.
* Of course, as I am not an attorney (I just play one here at work) you should consult your local attorney before proceeding to make sure you are checking all the boxes.
Keep in mind that any waiver should be tailored for the limited purpose of the project or your portion of the project. You are not asking for the moon; you are looking to insure you have a clear path to enforce your rights for payment if something goes horribly wrong. Make sure the waiver is signed by someone in the tribe who has authority in that tribe and you understand the tribe’s requirements for a valid waiver. In any contract, unless the tribe expressly waived its immunity in a contract, assume it has not.
What’s Past Isn’t Prologue
When the words “sovereign immunity” are muttered, every credit manager I know rolls her eyes and blows out a long breath. Every CM has an urban legend about not being paid on a reservation job. I, and a whole lot of others, have been burnt beyond recognition by a large reservation job back in the 1990s (we credit people are like elephants—we never forget).
Stereoptypes exist for a reason. Like every group or society, there are good eggs and bad eggs so if I had to make an assumption going by looks, gender, ethnicity, background, urban legend or poor choice of hairstyle, then every contractor rolling up in his F350 with a bandana wearing dog would be labeled a deadbeat. Some of those dogs are actually pretty cool … and their owners are all right.
This short tutorial through the Nations will not have answered all your questions, my dear Four Corners, but you have a starting point. As with any other customer you are going to have to do your homework. Put your preconceived notions and fear aside and find a way forward.
