DENVER – Two tribes’ Internet payday lending enterprises won at least a partial victory in the Colorado Supreme Court, which ruled Nov. 30 that the state has the burden of proving they are not entitled to sovereign immunity.
The full court also said tribal sovereign immunity protects tribal officers acting within their lawful authority as defined by the tribe, not by state law, and limited only by federal law.
“We hold that tribal sovereign immunity applies to state investigatory enforcement actions,” the Supreme Court said, adding that the trial court on remand must determine whether Cash Advance and Preferred Cash Loans “act as arms of the Miami Nation of Oklahoma and the Santee Sioux Nation, respectively” and are entitled to the tribes’ sovereign immunity from subpoena enforcement.
The controversy arose in 2005 when Colorado subpoenaed documents related to lending operations in the state by Miami Nation Enterprises Inc. of the Miami Nation of Oklahoma, which said it conducts business under the trade name Cash Advance, and SFS Inc. of the Santee Sioux Nation, conducting business under the trade name Preferred Cash Loans.
Issues of tribal sovereign immunity in the context of a state investigation into tribally created businesses have moved up the chain from the lower court through the appeals court to the state’s highest court, which has remanded some aspects back to the trial court.
MNE was established by the tribe as a “subordinate economic enterprise” of the Miami Tribe under tribal law and SFS Inc. was incorporated as “an economic and political subdivision of the Santee Sioux Nation,” the court record shows.
Sovereign immunity applies “without distinction between on- or off-reservation activities or between governmental or commercial activities” and is “irrespective of the location or type of activity at issue,” the court said. Further, it “protects subordinate secular or commercial entities acting as arms of a tribe.”
Factors that help to determine whether the companies operate as “arms” of the tribes are whether the tribes created them under tribal law, whether the tribes own and operate them, and whether the entities’ immunity protects the tribes’ sovereignty, the court said.
Earlier, in remanding the case to the trial court, the state appeals court had proposed an elaborate, 11-part analysis designed to show whether the loan operations were tribal arms entitled to the defense of sovereign immunity which the tribes contended is an inherent, not created, attribute.
The state Supreme Court said the appellate court’s 11-factor test “is contrary to federal law in at least some respects and threatens to intrude on tribal sovereign immunity by articulating limits on the doctrine’s application for which Congress has not provided.”
Any waiver of tribal sovereign immunity must be “explicit and unequivocal,” the state’s high court said.
“The central question is whether states can carve out exceptions to tribal sovereign immunity,” an attorney for the tribes said in earlier oral argument.
The state has been concerned about regulating Internet lending, and Colorado and the attorney general’s office have been “very active” in enforcement actions in that area, he said.
Although the two tribes were relocated to remote wastelands over a century ago, in recent years the Internet “has offered the tribe a meaningful opportunity to participate in our nation’s economy despite their desolate locations” through making “small, unsecured loans to consumers via the Internet,” their petition stated.
Two members of the state Supreme Court concurred in part and, one of the two, Justice Nathan Coats, also sharply dissented in part, asserting that while he accepts that tribes are independent sovereign powers, “I believe the duty of state governments to protect vulnerable consumers from criminally unscrupulous predators, especially in the current technological environment, militates against the expansion of that immunity beyond existing mandates of federal law.”
He also noted a lack of uniformity among the federal circuit courts concerning tests to determine whether enterprises are arms of tribes in question.
Friend-of-the-court briefs were filed by consumer and Native groups, the latter including the Colorado Indian Bar Association, Ute Mountain Ute Tribe, American Indian Law Clinic of the University of Colorado School of Law, and the American Indian Law Center, Albuquerque, N.M.