Tribes’ Co-Regulator Status Not Sufficient to Negate Ninth Circuit’s General Applicability Standard

By: Sandra L. Shippey | Partner | sandra.shippey@procopio.com
Theodore J. Griswold | Partner | ted.griswold@procopio.com

The United States District Court for the Central District of California recently issued an Order a granting a petition by the federal Consumer Financial Protection Bureau (“CFPB”) to enforce its civil investigative demands (“CID’s”) against three tribally owned online lending companies operating on tribal reservations and in doing so followed the Ninth Circuit rule set forth in Federal Power Commission v. Tuscarora Indian Nation (1960) and Donovan v. Coeur d’Alene Tribal Farm (1985) holding that Federal statutes of general applicability, that do not specifically exclude tribes, will apply to Indian tribes, (with certain exceptions noted below).

Each tribal lender provides small dollar loan products, including payday loans, installment loans and lines of credit to nationwide customers who are not tribal members. The District Court granted this Order, but it also granted the lender’s request for a stay pending the lenders’ appeal of the order to the Ninth Circuit.

The CFPB was created by the Consumer Financial Protection Act (the “CFPA”). The CFPB issued the CID’s to obtain information and documents as part of its inquiry into whether these tribal lenders have engaged in unlawful practices. The tribal lenders refused to comply with the CID’s issued by the CFPB because they argued that: (i) the CFPA was not applicable to them because Coeur d’Alene and it progeny were wrongly decided based upon an incorrect interpretation of Tuscarora (to which the District Court said it was not in a position to reconsider the Ninth Circuit’s interpretation of law), (ii) a more recent case, Vermont Agency of Natural Resources v. United States ex rel. Stevens (2000) overrides the Coeur d’Alene rule (with which the District Court disagreed), (iii) only “persons” are subject to investigation and Indian Tribes and arms of Indian tribes are not “persons” within the meaning of the CFPB’s investigative authority to whom the CFPB can issue CID’s (which the District Court rejected), (iv) Indian tribes are explicitly included in the definition of “State” in the CFPA as co-regulators which should be understood as a decision on behalf of Congress to refrain from regulating the tribes because they cannot be both a regulator and regulated (with which the District Court disagreed and stated that Congress does not express an intent to exclude tribes by merely mentioning them as sovereign regulators while remaining silent on whether the unrelated provision at issue is also intended to regulate Indian tribes), and (v) the tribal lenders were not subject to the CID’s because as arms of Indian Tribes, the tribal lenders enjoyed sovereign immunity (which the District Court rejected stating that “(u)nder settled Ninth Circuit Law, tribal sovereign immunity does not bar a suit by a federal agency, even when Congress has not specifically abrogated tribal immunity.”)

The District Court noted that in the Tuscarora case, the Ninth Circuit Court stated that “it is now well settled by many decisions of this Court that a general statute in terms applying to all persons includes Indians and their property interests.” This rule was followed in the Coeur d’Alene case, when the Ninth Circuit Court stated that the Occupational Safety and Health Act was generally applicable, and it therefore applied with equal force to Indian tribes, unless the tribes were specifically excluded. The Coeur d’Alene court did acknowledge three exceptions to its general principle:

A federal statute of general applicability that is silent on the issue of applicability to Indian tribes will not apply to them if: (1) the law touches “exclusive rights of self-governance in purely intramural matters”; (2) the application of the law to the tribe would “abrogate rights guaranteed by Indian treaties”; or (3) there is proof “by legislative history or some other means that Congress intended [the law] not to apply to Indians on their reservations . . . .” In any of these three situations, Congress must expressly apply a statute to Indians before we will hold that it reaches them.

The tribal lenders argued that the third exception applies to them because Indian tribes are mentioned in the CFPA as co-regulators which should be understood as a decision on behalf of Congress to exclude tribes from the CFPA’s applicability because tribes cannot be both a regulator and regulated. However, the District Court disagreed and held that the tribal lenders did not show any proof that Congress intended the CFPA not apply to Indian tribes. Based on this Order issued by the District Court, the Ninth Circuit’s general applicability standard is alive and well.

Sandra L. Shippey is experienced in representing lenders making loans to Native American tribal governments as well as experienced in representing tribes in connection with large commercial loans. Ms. Shippey has more than 25 years of experience representing finance companies, banks and other asset-based lenders and borrowers in connection with all types of traditional credit activities, asset-based financing, mezzanine financing, and other commercial financing. She has significant expertise and experience in the structure, documentation and negotiation of borrowing base working capital facilities, syndicated loans, secured and unsecured credit facilities for acquisitions, as well as traditional loans secured by all types of personal property.

Ted is head of the Native American Law practice group and primary editor for the Blogging Circle. Connect with Ted at ted.griswold@procopio.com and 619.515.3277.

Does the 9th Circuit Have Buyer’s Remorse? Carcieri in the Context of IGRA’s “Good Faith” Requirement of States

By: Christopher R. Scott | Intern
Theodore J. Griswold | Partner | ted.griswold@procopio.com

In a move heartening to many in the field of Indian Law, the 9th Circuit has decided to rehear en banc the appeal of the Big Lagoon Indian Gaming Regulatory Act (IGRA) case.  The previous hearing in front of a three-judge panel resulted in a decision against the Tribe founded on the Carcieri principle, apparently applied retroactively.  The decision caused concerns among the Native American Bar, and now the 9th Circuit is reconsidering its decision.

Despite 10 years of negotiation history with the Big Lagoon Rancheria Tribe wherein the State of California claimed State interests trumped Tribal interests, the State switched its legal position to a brand new position adopted for litigation purposes — that the land on which the Tribe proposed to build a casino was not legally taken into trust, according to Carcieri.  The Carcieri decision stated that Tribal Governments not specifically recognized when the Indian Reorganization Act was adopted in 1934 were unable to have land taken into Trust by the BIA on their behalf.  Carcieri v. Salazar, 555 U.S. 379 (2009).  The Tribe filed an action in Federal District Court alleging that the State had violated the good faith negotiation requirements in its Compact.  The State reasoned that the Compact good faith bargaining requirement was irrelevant if gaming could not occur on the proposed land.

The lower District Court saw through this newfound position of the State and held that they could not be acting in good faith by ignoring past negotiations and now rely on a legal theory to justify their behavior in compact negotiations; after all, negotiations began around 1998 and Carcieri wasn’t decided until 2009! Big Lagoon Rancheria v. State of California, No. 09-01471 CW (2010).

However. the 9th Circuit panel held in favor of the State, ruling  that valid Tribal jurisdiction over property on which a casino is proposed under an IGRA compact is a necessary prerequisite in order for the Tribe to rely on its Compact requirement that the State engage in good faith dealings.   On second thought, perhaps the 9th Circuit has recognized the extraordinary limitations this decision would have on Tribal-State compacts and relations, and is now rehearing the matter.  Stay tuned!

Christopher is a citizen of the Cherokee Nation and just completed his second year at the University of Oklahoma College of Law. 

Ted is head of the Native American Law practice group and primary editor for the Blogging Circle. Connect with Ted at ted.griswold@procopio.com and 619.515.3277.