Leaders of the Lac Vieux Desert Band of Lake Superior Chippewa Indians are seen outside of the 4th Circuit Court of Appeals in Richmond, Virginia, on May 7, 2019. Photo: LVD

Appeals court turns back attack on tribal lending operation

Online lending businesses owned by the Lac Vieux Desert Band of the Lake Superior Chippewa Indians are "arms of the tribe" and entitled to sovereign immunity, a federal appeals court ruled this week in a closely-watched case.

By a unanimous vote, a three judge panel of the 4th Circuit Court of Appeals on Wednesday turned back a non-Indian attack on the tribe's operation. The decision, issued on the eve of America's Fourth of July celebration, represents a "victory" for sovereignty in Indian Country, Chairman James Williams, Jr. said.

"We could not be more pleased with the Fourth Circuit's decision upholding our tribe's sovereignty and our tribal businesses' recognition as arms of the tribe," said Williams, who was among the Lac Vieux leaders who attended the packed hearing barely two months ago.

"By reversing the district court, the Fourth Circuit's ruling is a major victory for Native American sovereign rights across all of Indian Country," said Williams, referring to a prior ruling which opened the tribe's lending operation to lawsuits filed by non-Indian consumers. "The decision also provides welcome clarity to the standards used to evaluate tribal economic instrumentalities."

Indianz.Com on SoundCloud: 4th Circuit Court of Appeals - Williams v. Big Picture Loans - May 7, 2019

The decision in Williams v. Big Picture Loans marked a quick turnaround for the tribe. Oral arguments took place in Richmond, Virginia, on May 7, and the questions posed by the judges during the hearing indicated they were well versed in the fundamentals of Indian law and policy, especially those affecting sovereign immunity.

That understanding showed up in the court's opinion. Over 28 pages, Chief Judge Roger Gregory explained how the tribe's online lending entities deserve immunity because they promote self-governance and self-determination and help fund critical operations on the reservation in remote Michigan.

"A finding of no immunity in this case, even if animated by the intent to protect the tribe or consumers, would weaken the tribe’s ability to govern itself according to its own laws, become self-sufficient, and develop economic opportunities for its members," Gregory wrote in the decision.

In examining how Big Picture Loans was established, the purpose it serves, who controls it, the intent behind the business and its financial relationship with the tribe, the 4th Circuit determined that the operation meets five out of five factors of the so-called "arm-of-the-tribe analysis." The district court had reached the opposite conclusion but that has been thrown out of court as a result of Wednesday's ruling.

"The Fourth Circuit has affirmed what we have known and argued all along: our businesses are sovereign arms of the tribe and immune from plaintiffs' baseless claims," Chairman Williams said. "We hope that we can now put this issue to bed once and for all, allowing us to fully focus on the needs of our people."

Indianz.Com on YouTube: John Shotton, Chairman of Otoe-Missouria Tribe, #WiringTheRez

Tribes -- even those without lending operations -- have been paying close attention to the case because of its potential to impact the way business is done in Indian Country. The National Congress of American Indians, the National Indian Gaming Association and the National Center for American Indian Enterprise Development submitted a brief to the court, warning of a return to the "paternalistic" eras of federal policy, and the lawsuit was the subject of significant discussion during the Wiring the Rez conference earlier this year.

"When you hear things like 'rent-a-tribe,' when you hear things like 'It's a fraud, it's fake,' Chairman John Shotton of the Otoe-Missouria Tribe said at the event, "I take it very personal."

Shotton's tribe engages in online lending but its operation is not at issue in Big Picture. But non-Indian consumers in Virginia, emboldened by the prior ruling in the case, also have sued Otoe-Missouria and two other tribes in hopes of stifling the industry.

"For so long, we had been dependent and lived our lives in such a state of dependence," Gary Davis, a citizen of the Cherokee Nation who serves as executive director of the Native American Financial Services Association, a group that advocates for the tribal lending industry.

"As we are beginning to move into these more self-sustaining, self-sufficient forms of economic development where we are bringing revenues in, it becomes threatening to folks," Davis said at the conference. "Because they look at what we are doing and we are standing up."

Tribal lending operations have long been controversial because they can engage in practices that might not be legal in a particular state. Complaints typically focus on high interest rates, with one recently filed class action citing rates double and even triple those allowed under Virginia law.

The non-Indian plaintiffs in Big Picture can ask the 4th Circuit to rehear the case in hopes of keeping their lawsuit alive. An appeal to the U.S. Supreme Court, whose last sovereign immunity decision went in favor of tribal interests five years ago, is also possible.

The 4th Circuit otherwise directed the lawsuit filed by the non-Indians to be dismissed once it returns to the federal court in the Eastern District of Virginia.

4th Circuit Court of Appeals Decision
Williams v. Big Picture Loans (July 3, 2019)

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