People Ex Rel. Owen v. Miami Nation Enters.
211 Cal. Rptr. 3d 837
| Cal. | 2016Background
- Two federally recognized tribes (Miami Tribe of Oklahoma and Santee Sioux Nation) formed tribal subsidiaries (MNE → MNE Services; SFS) that operated online deferred-deposit (payday) lending under trade names (Ameriloan, United Cash Loans, U.S. Fast Cash, Preferred Cash, One Click Cash).
- California Commissioner issued desist-and-refrain orders and sued the lenders in state court for violating the Deferred Deposit Transaction Law; tribal affiliates moved to quash service claiming tribal sovereign immunity.
- Discovery showed management and operational involvement by nontribal actors (notably AMG and the Tucker brothers), trademarks and initial capital originating with nontribal entities, limited documented revenue flows to tribes, and evidence of commingled funds and third-party control.
- The trial court granted the motion to quash on tribal-immunity grounds; the Court of Appeal affirmed, giving dispositive weight to tribal-formation and intent under tribal law.
- The California Supreme Court adopted a five-factor arm-of-the-tribe test (method of creation; tribal intent; purpose; tribal control; financial relationship), placed the burden on the tribal entity to prove immunity by a preponderance, and held on this record the online lenders were not entitled to arm-of-the-tribe immunity.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether tribal affiliates/lenders are "arms of the tribe" entitled to sovereign immunity | Commissioner: entities are commercial actors not sufficiently tied to tribes; immunity should not bar enforcement of state consumer-protection laws | Tribes/entities: formed under tribal law, declared tribal purpose, tribal governance/ownership and management agreements confer immunity | Entity asserting immunity bears burden; apply five-factor test; on this record defendants failed to prove arm-of-the-tribe immunity |
| Proper burden of proof for arm-of-the-tribe claim | Commissioner: entity claiming immunity must prove it | Defendants: plaintiff should prove tribe is not immune (as in some appellate rulings) | Court: entity claiming immunity must prove by preponderance it is an arm of the tribe |
| What factors govern extension of tribal immunity to tribal sub-entities | Commissioner: favor a functional test focused on whether immunity would impair tribal self-governance/treasury | Defendants: emphasize formal/organizational creation under tribal law and tribal intent as dispositive | Court adopts modified Breakthrough five-factor test balancing formal and functional considerations (creation, intent, purpose, control, financial links) |
| Whether delegation of day-to-day operations to nontribal managers defeats immunity | Commissioner: heavy outsourcing and practical control by nontribal managers weigh against immunity | Defendants: delegation alone does not forfeit immunity if tribe retains ultimate control and formed entity under tribal law | Delegation is not dispositive; excessive practical control by nontribal actors and weak financial/oversight ties here support denial of immunity |
Key Cases Cited
- United States v. U.S. Fidelity & Guaranty Co., 309 U.S. 506 (1940) (recognizing tribes are exempt from suit absent Congressional authorization)
- Santa Clara Pueblo v. Martinez, 436 U.S. 49 (1978) (tribal immunity not abrogated by Indian Civil Rights Act; waiver/abrogation must be clear)
- Three Affiliated Tribes v. Wold Engineering, P.C., 476 U.S. 877 (1986) (tribal immunity protects tribal sovereignty and may preempt state requirements to waive immunity to sue)
- Kiowa Tribe of Oklahoma v. Manufacturing Technologies, Inc., 523 U.S. 751 (1998) (tribes immune for off-reservation commercial conduct; courts reluctant to limit immunity)
- Michigan v. Bay Mills Indian Community, 134 S. Ct. 2024 (2014) (tribal immunity bars state suit over off-reservation commercial activity; discusses limits and policy rationales)
- Breakthrough Management Group, Inc. v. Chukchansi Gold Casino and Resort, 629 F.3d 1173 (10th Cir. 2010) (adopted a multi-factor arm-of-the-tribe test informing the five-factor approach)
- White v. University of California, 765 F.3d 1010 (9th Cir. 2014) (Ninth Circuit adoption of Breakthrough-style factors for arm-of-the-tribe analysis)