Adopting deciding factors, Connecticut Supreme Court awards victory to tribal lending entity Great Plains Lending – Finance and Banking
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At the end of May, the Connecticut Supreme Court ruled1 that the Great Plains Lending (Great Plains) tribal lending entity is protected by tribal sovereign immunity as an “arm of the tribe”, adopting a test first established by the Tenth Circuit in Breakthrough Management Group, Inc. v. Chukchansi Gold Casino & Resort.2 The case represents a major victory for the tribe and for tribal lending entities in general, and serves as a further guide to other courts facing similar claims as the tribes continue to establish a strong presence in the activities of the tribe. electronic commerce loan.
The case involved two lending entities, Great Plains and American Web Loan, Inc. d / b / a Clear Creek Lending (Clear Creek) – both established by the federally recognized Otoe-Missouria (Otoe-Missouria) tribe and located in Oklahoma – as well as President of Otoe-Missouria, John Shotton (Shotton).
The Connecticut Banking Department – represented by the Connecticut Attorney General – investigated the two entities, as well as Shotton, for potential violations of Connecticut bank loans and usurious. The banking commissioner found that the entities had made online consumer loans to Connecticut residents without the required license. In addition, the commissioner found that interest rates exceeded state ceilings. Following administrative appeals, the Commissioner issued a final order directing the applicants to cease their lending activities and to pay civil penalties totaling $ 1,500,000.
The tribe filed a motion to dismiss the administrative proceedings for incompetence, claiming tribal immunity for themselves and for Shotton as an official of the tribe. The commissioner dismissed the appeal and the tribe appealed the commissioner’s final orders to the trial court. The trial court concluded that the onus was on the lending entities to prove they were tribal weapons and applied a multi-factor test from People ex rel. Owen v. Miami Nation Enterprises.3 Under the Miami Country test, the trial court determined that the lending entities had not established their status as tribal weapons. The entities and Shotton appealed.
The case presented the Connecticut Supreme Court with three first-impression questions: (1) which party has the burden of proving the entity’s status as an arm of the tribe, (2) the legal standard governing this investigation , and (3) the extent to which a tribal officer shares this immunity for his actions in connection with the business entity.
Well-established law states that tribal sovereign immunity extends to any business enterprise deemed to be an “arm of the tribe,” but the United States Supreme Court has not yet established a test or standard for taking this. decision. More recently, the Fourth Circuit adopted the Breakthrough factors in arguing that two tribal entities with varying levels of tribal involvement were immune from a lawsuit alleging illegally high interest rates in Williams v Big Picture Loans, LLC.4 BreakthroughThe factual investigation of s involves evaluating the following non-exhaustive factors: (1) the method of creation of the entities; (2) their purpose; (3) their structure, ownership and management; (4) the intention of the tribe to share its sovereign immunity; (5) the financial relationship between the tribe and the entities; and (6) the policies underlying tribal sovereign immunity and the entity’s linkage to tribal economic development, and whether these policies are served by granting immunity to economic entities.
Adopt the Breakthrough factors, the Connecticut judges held that Great Plains had established itself as an arm of the tribe in law and that Shotton, as an officer of Great Plains and the Otoe-Missouria tribe was also entitled to immunity. sovereign civil sanctions. The court referred the commissioner for further administrative proceedings to determine whether Clear Creek could also establish itself as an arm of the tribe in law.
As with circuit court cases, the state court ruling provides useful guidance to Indian tribes using commercial lending entities as a means of establishing financial independence through a legitimate tribal enterprise. Outside of games, tribal loan entities represent an important source of income for the tribes. Tribes wishing to establish tribal lending entities should focus on Breakthrough factors to ensure that their business ventures operate as an arm of the tribe. In particular, tribes should carefully consider the method of establishing the business entity; goal; structure, ownership and management; lack of intention to extend immunity to third parties; and the entity’s financial relationship with the tribe.
Otoe-Missouria’s approach to establishing Clear Creek’s status as an arm of the tribe before the Commissioner, in light of this decision, should also prove instructive. We will monitor the referred case, the Commissioner’s decision and any subsequent court appeals and provide updates in this space.
1 Great Plains Lending, LLC v. Conn. Dep’t of Banking, 2021 Connecticut LEXIS 136 (Connecticut 2021), at * 3-4.
2 Breakthrough Mgmt, Grp., Inc. v Chukchansi Gold Casino & Resort, 629 F.3d 1173, 1187 (10th Cir. 2010).
3 People ex rel. Owen v. Miami Nation enters., 386 P.3d 357, 365 (Cal. 2016).
4 Williams v Big Picture Loans, LLC, 929 F.3d 170, 177 (4th Cir. 2019).
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