Heldt v. Payday Financial, LLC
12 F. Supp. 3d 1170
D.S.D.2014Background
- Plaintiffs (four named borrowers from MN, TX, and VA) allege class claims for civil conspiracy and usury against Western Sky Financial LLC, PayDay Financial LLC, Martin Webb (tribal member), CashCall, Inc., and WS Funding LLC, arising from high‑interest online loans.
- Loan agreements contain forum‑selection and arbitration clauses designating the Cheyenne River Sioux Tribe’s law and tribal court/tribal arbitration as exclusive forums; some agreements reference AAA/JAMS as alternative administrators.
- Plaintiffs allege the specified tribal arbitration forum (and consumer dispute rules) does not exist and that defendants used tribal licensing to evade state usury laws.
- Defendants moved to dismiss (venue/personal jurisdiction), to compel arbitration, and to stay proceedings pending arbitration; plaintiffs sought discovery on arbitration availability and to stay the arbitration motion.
- The Court found South Dakota federal venue proper, expressed skepticism that non‑Indian borrowers are subject to tribal jurisdiction under Montana, and concluded tribal‑court exhaustion should occur before resolving tribal‑jurisdiction and arbitration availability.
- The Court stayed the federal case, denied the motion to dismiss without prejudice, denied compelling arbitration for now, and ordered defendants to file a tribal‑court declaratory action within 30 days; parties must report tribal proceedings to this Court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Venue / forum‑selection clause | Clause naming Cheyenne River tribal court is unenforceable because tribal court lacks jurisdiction | Contractually valid forum clause warrants dismissal or transfer; enforce via forum non conveniens | Federal venue proper; clause not enforced now; Atlantic Marine framework applies only if clause valid; dismissal denied without prejudice and case stayed for tribal exhaustion |
| Tribal‑court exhaustion | No exhaustion necessary because tribe plainly lacks jurisdiction over non‑Indian borrowers | Federal courts should defer so tribal court can determine its own jurisdiction | Court skeptical of tribal jurisdiction but not convinced tribal assertion is plainly barred; ordered defendants to file tribal action within 30 days for exhaustion |
| Tribal civil jurisdiction over non‑Indians (Montana exceptions) | Plaintiffs: Montana forbids tribal jurisdiction here (no tribe member contracting; conduct not on reservation) | Defendants: licensing, residence on reservation, and tribal ties support consent/consensual‑relationship exception | Court skeptical that licensed SD LLCs are tribal "members" and that borrowers’ conduct suffices; left issues open for tribal court factmaking; did not resolve jurisdiction finally |
| Enforceability / availability of arbitration | Arbitration clause is unenforceable because tribal arbitration forum and consumer rules do not exist; prior cases found arbitration unavailable | FAA applies; arbitration should be compelled; some agreements permit AAA/JAMS or other administrators | Court declined to compel arbitration now; deferred arbitration enforceability until after tribal‑court exhaustion and potential factual hearing on availability and whether tribal representative/consumer rules exist |
| Personal jurisdiction over California defendants | Plaintiffs: California defendants are liable via agency/conspiracy and agreements; can be bound by arbitration/tribal forum clauses | California defendants lack contacts with SD; challenge personal jurisdiction | Court deferred ruling on personal jurisdiction pending tribal‑court exhaustion |
Key Cases Cited
- Montana v. United States, 450 U.S. 544 (1981) (establishes two exceptions allowing tribal civil jurisdiction over nonmembers)
- Plains Commerce Bank v. Long Family Land & Cattle Co., 554 U.S. 316 (2008) (applies Montana framework and limits tribal authority over nonmembers)
- Atlantic Marine Constr. Co. v. United States Dist. Court, 134 S. Ct. 568 (2013) (forum‑selection clauses enforced via transfer or forum non conveniens; plaintiff’s forum choice merits no weight if clause valid)
- Nat’l Farmers Union Ins. Co. v. Crow Tribe of Indians, 471 U.S. 845 (1985) (supports tribal‑court exhaustion to allow tribal courts first opportunity to assert jurisdiction)
- Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983) (federal policy favoring enforcement of arbitration agreements under the FAA)
- Jones v. GGNSC Pierre LLC, 684 F. Supp. 2d 1161 (D.S.D. 2010) (when specified arbitration forum no longer exists, court assesses whether forum was integral and whether FAA §5 substitution is appropriate)
- PayDay Financial LLC v. FTC (PayDay I), 935 F. Supp. 2d 926 (D.S.D. 2013) (discusses tribal jurisdiction and arbitration language in related lending agreements)