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Churchill Financial Management Corp. v. Clearnexus, Inc.

Court of Appeals of Georgia, Second Division

June 19, 2017

CHURCHILL FINANCIAL MANAGEMENT CORP.
v.
CLEARNEXUS, INC.

          DOYLE, C. J., MILLER, P. J, and REESE, J.

          DOYLE, CHIEF JUDGE.

         This appeal arises from the trial court's confirmation of an arbitration award to ClearNexus, Inc., ("ClearNexus") in the amount of $255, 021 against Churchill Financial Management Corporation ("Churchill") based on Churchill's alleged termination of a service contract with ClearNexus without proper notice. Churchill appeals, arguing that the trial court erred by finding that (1) Churchill waived sovereign immunity via the arbitration clause in the contract between the parties; (2) Churchill waived sovereign immunity by failing to file with the arbitrator a motion to vacate or modify the award; and (3) Churchill could not assert the sovereign immunity of the Guidiville Band of the Pomo Indians under which Churchill is incorporated. For the reasons that follow, we vacate the order confirming the arbitration award and remand the case for further proceedings consistent with this opinion.

         Our review of the issue of sovereign immunity, which is a question of law, is de novo.[1] And although the bar for granting relief from an award of arbitration is high, the issue of whether the arbitrator lacked jurisdiction on the basis that the arbitration is barred by the doctrine of tribal sovereign immunity is an issue for which relief can be granted.[2]

         The record reveals that the Guidiville Rancheria of California is a federally recognized tribal entity ("the Tribe").[3] In 2013, Churchill, which is a secured consumer lending entity chartered by the tribe, entered into a service contract with ClearNexus in which ClearNexus would provide call center services for Churchill's lending operation. Churchill's corporate charter states that Churchill "is a legal entity wholly owned by the Tribe, but distinct and separate from the Tribe." The articles of incorporation also state that "[n]othing in this Charter of Incorporation shall be deemed to waive, or to permit the Corporation to waive, the sovereign immunity of the Tribe." The articles further provide that

Subject to applicable federal law, [Churchill] is authorized and empowered to engage in, carry on and conduct any lawful business, including, but without limiting the broad authorization of the foregoing, the following:
A. To sue in its corporate name and to permit suit against itself in its corporate name in the Guidiville Tribal Court or in other courts of competent jurisdiction, notwithstanding the privileges and immunities the Corporation otherwise enjoys by virtue of its status; provided, that [Churchill] may only exercise this power to waive the defense of sovereign immunity from suit by written resolution of the Board of Directors and the Guidiville Tribal Council . . . .
C. Nothing in this Charter and no action taken by [Churchill] pursuant to this Charter shall be construed as a waiver of the sovereign immunity conferred upon [Churchill] by the Tribe unless the Board of Directors by Board Resolution expressly waives said immunity on a case by case basis.

         The articles contained a limited waiver of sovereign immunity, which required Tribal approval:

A. Nothwithstanding any other provision of law, [Churchill] is authorized to waive sovereign immunity from suit of [Churchill], the Directors, officers, employees[, ] or agents for any particular agreement matter or transaction, on a case by case basis, as may be entered into to further the purposes of [Churchill]. Such resolution shall require the approval of the Tribal Council before being valid.[4]
B. Any waiver of immunity authorized by paragraph A of this Article shall be in the form of a resolution adopted by the Board of Directors. The resolution shall indentify the parties for whose benefit the waiver is granted, the transaction or transactions and the claims or classes of claims for which the waiver is granted, the property of [Churchill] which may be subject to execution to satisfy any judgment which may be entered regarding the claim or claims, and shall identify the court or courts in which suit against [Churchill], its Directors, officers, employees or agents may be brought.
C. Any waiver of immunity shall be limited to the assets and/or income of [Churchill], and the acts or omissions of [Churchill], its Directors, officers, employees or agents shall not create any liability, obligation or indebtedness either of the Tribe or payable out of assets, revenues or income of the Tribe.

         In the service agreement between ClearNexus and Churchill, the following provision appeared:

11. Arbitration. All claims, controversies[, ] and disputes (other than a claim for equitable relief) between [ClearNexus] and Client arising out of or in connection with this Agreement or the transactions and business contemplated thereby, shall be submitted to final and binding arbitration, as the exclusive dispute resolution mechanism. All arbitration proceedings shall be held in Atlanta, Georgia, unless [ClearNexus] and Client agree in writing to another location. Issuance of an arbitration demand shall suspend any judicial or administrative proceedings instituted in connection therewith (except for equitable remedies), for the duration of the arbitration proceedings. Arbitration shall be governed by the commercial rules of the American Arbitration Association (the "AAA"). Arbitration shall be conducted by one arbitrator who shall be chosen by the AAA within five (5) days of receipt of the arbitration demand, unless the Parties sooner agree upon an arbitrator. The arbitrator may award attorney[] fees and costs to the prevailing party . . . [ClearNexus] and Client hereby consent to the enforcement of any arbitration award rendered pursuant to this Section in the courts of competent jurisdiction of each state of the United States of America or elsewhere where Client or [ClearNexus] have offices or significant assets. All arbitration hearings shall be conducted in English, and any monetary award of the arbitrator shall be granted in U.S. Dollars.

          After a business dispute arose between the parties, ClearNexus filed a claim against Churchill with the American Arbitration Association, and Churchill filed a motion to dismiss the claim based on its immunity from suit as a tribal sovereign. The arbitrator denied Churchill's motion to dismiss, finding that by signing the service agreement with its arbitration clause, Churchill had waived the protections of tribal sovereign immunity. The arbitrator entered an award to ClearNexus, but Churchill did not file an application to vacate the arbitration award. Within a year of the arbitrator's decision, ClearNexus filed an application to confirm the award in the ...


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