375 F. Supp. 3d 638
E.D. Va.2019Background
- Plaintiffs are individual borrowers who took online short-term loans from American Web Loan (AWL). They allege usurious rates and claim many defendants (including Mark Curry, AWL entities, Sol Partners, and various investors) structured tribal entities to shield the scheme with tribal sovereign immunity.
- Curry negotiated acquisition of his for‑profit entities (MacFarlane, AWLH, Bullet Hole) by a tribal vehicle (Red Stone → AWL II) and structured a promissory note and consulting agreement that guaranteed large, prioritized payments to Curry‑controlled Note Holders and Sol Partners while limiting tribe distributions.
- Governance documents gave the Tribe formal rights, but the Note: (a) allocated board seats to Curry‑appointed persons until large principal payments were made, (b) required supermajority board votes, (c) defined broad “Adverse Tribal Government Action/Change of Tribal Law” defaults, and (d) waived tribal immunity in certain circumstances and provided indemnities to Curry/entities.
- Plaintiffs contend the documents and operation show Curry retained effective control and shifted most economic benefit and risk to Curry and his entities, not the Tribe, so tribal sovereign immunity should not bar suit; Curry and Sol assert immunity/official‑capacity protection and seek dismissal, transfer, and arbitration enforcement.
- After jurisdictional discovery and a two‑day evidentiary hearing, the court found the functional realities weigh against treating AWL II (and related entities) as an arm of the tribe and denied motions to dismiss for lack of subject‑matter jurisdiction, denied transfer, and denied motions to compel arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Tribal sovereign immunity (arm‑of‑tribe) | Curry and entities acted for themselves; Tribe received small share; control and financial arrangements show Curry retained control and put Tribe at risk | AWL II was formed under tribal law, regulated by tribal ordinance, and intended to be an arm of the Tribe entitled to immunity | Denied: Breakthrough factors (formal + functional) weighed against immunity — Tribe lacked meaningful control, financial risk shifted to Tribe, and documents show intent to use immunity to shelter Curry |
| Individual/official immunity for Curry | Claims are against Curry personally — he ran and profited from the lending enterprise; relief would not be truly “against” the Tribe | Curry acted within his official capacity as CEO/director of AWL II and any judgment would financially affect the Tribe | Denied: Court found claims target Curry individually; his actions served personal interests and he cannot cloak them with official immunity |
| Derivative immunity for Sol Partners (contractor) | Sol is part of Curry’s scheme and not entitled to immunity | Sol contends derivative tribal immunity via AWL II | Denied: No arm‑of‑tribe status for AWL II, and independent contractors cannot assert derivative tribal immunity |
| Compel arbitration / enforce tribal arbitration clause | Arbitration clause is procedurally/substantively unconscionable and seeks to exclude federal/state law; clause conflicts with Promissory Note and would create perverse incentives and waiver of federal rights | Loan agreements were electronically signed and contain tribal‑law arbitration that should be enforced; governing‑law references include Indian Commerce Clause | Denied: Under Hayes and Dillon the clause is invalid because it effectively requires wholesale renunciation of federal/state substantive rights and is part of a scheme to evade legal obligations; conflicts with Note and tribal review create unconscionable and improper waiver |
Key Cases Cited
- Kiowa Tribe of Okla. v. Mfg. Tech., Inc., 523 U.S. 751 (tribal sovereign immunity applies to commercial activities unless waived)
- Michigan v. Bay Mills Indian Cmty., 572 U.S. 782 (tribal immunity extends to off‑reservation commercial conduct)
- Breakthrough Mgmt. Grp., Inc. v. Chukchansi Gold Casino & Resort, 629 F.3d 1173 (10th Cir.) (factors to determine whether entity is an arm of the tribe)
- Hayes v. Delbert Servs. Corp., 811 F.3d 666 (4th Cir. 2016) (tribal‑law choice/arbitration clauses that attempt to exclude federal law and statutory rights are unenforceable)
- Dillon v. BMO Harris Bank, N.A., 856 F.3d 330 (4th Cir. 2017) (affirming Hayes; arbitration provisions that operate to prospectively waive federal statutory remedies violate public policy)
- People ex rel. Owen v. Miami Nation Enters., 2 Cal.5th 222 (Cal. 2016) (advocates a functional as well as formal inquiry into whether entity is an arm of the tribe)
- Otoe‑Missouria Tribe of Indians v. New York State Dep't of Fin. Servs., 769 F.3d 105 (2d Cir. 2014) (tribe cannot market evasion of state law; states may regulate off‑reservation conduct)
- Williams v. Big Picture Loans, LLC, 329 F. Supp. 3d 248 (E.D. Va. 2018) (applying Breakthrough factors; revenue allocation and control weigh against immunity)