Federal Trade Commission v. Payday Financial, LLC
2013 U.S. Dist. LEXIS 44151
D.S.D.2013Background
- FTC sues relating to unfair and deceptive practices under federal law involving short-term loans.
- Defendants are South Dakota LLCs licensed by the Cheyenne River Sioux Tribe and owned by a tribal member.
- Borrowers reside off the Reservation; lending decisions occur on Reservation; funds flow via banks on Reservation.
- Loan contracts include provisions asserting exclusive tribal court jurisdiction and, separately, arbitration provisions.
- Court must decide tribal court jurisdiction over nonmembers under Montana’s first exception in light of Plains Commerce Bank.
- Dispute centers on whether the Montana exception applies given organizational status of lenders and contract terms.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does Montana's first exception apply to nonmembers when lenders are not tribe members? | FTC argues lenders are tribal members via ownership and licensing. | Defendants contend lenders are SD LLCs, not tribal members, so exception fails. | No summary judgment; lack of tribal membership prevents Montana first exception. |
| Are Borrowers' on-reservation activities sufficient to trigger jurisdiction under Montana? | Borrowers’ contract formation and related conduct on Reservation foresee tribal jurisdiction. | Borrowers’ physical location off Reservation undermines on-reservation conduct trigger. | Insufficient on-reservation conduct; jurisdiction not established under Montana. |
| Should the arbitration clause immunize the dispute from tribal jurisdiction or vice versa? | Arbitration provisions enforceable; tribal jurisdiction arguments conflict with FAA policy. | Consent to tribal court jurisdiction is explicit; arbitration does not reconcile all provisions. | Ambiguity and conflict in contract language prevent enforcement of tribal jurisdiction; arbitration issues unresolved. |
Key Cases Cited
- Montana v. United States, 450 U.S. 544 (1981) (two Montana exceptions for tribal civil authority over nonmembers)
- Strate v. A-1 Contractors, 520 U.S. 438 (1997) (describes Montana as pathmarking)
- Plains Commerce Bank v. Long Family Land & Cattle Co., 554 U.S. 316 (2008) (limits and clarifies Montana exceptions; on-reservation conduct)
- Williams v. Lee, 358 U.S. 217 (1959) (tribal authority over nonmembers may arise from contract disputes)
- Iowa Mut. Ins. Co. v. LaPlante, 480 U.S. 9 (1987) (civil jurisdiction over nonmembers on reservation; presumes tribal jurisdiction unless limited)