Indian Law Focus: October 2015
Supreme Court grants certiorari in reservation diminishment case
Over the opposition of the Department of Justice, the Supreme Court has granted the State of Nebraska’s petition for review of the Eighth Circuit’s decision in Smith v. Parker, 774 F.3d 1166 (8th Cir. 2014). The case arose from the Omaha Tribe’s attempt to enforce its liquor licensing and taxation regulations against business owners in and near the Village of Pender. The Village and business owners sued, contending that the Tribe lacked jurisdiction. Applying the test established by the Supreme Court in Solem v. Bartlett, the district court denied the plaintiffs’ motion for summary judgment, concluding that Pender and the relevant areas involved were located within the Omaha reservation and that an 1882 act of Congress by which 50,000 acres were sold did not diminish the reservation. According to the court, the act did not clearly evince Congress’ intent to change reservation boundaries, but rather reflected congress’ intent that “the United States intended to act as the Omaha Tribe’s sales agent for purposes of surveying and auctioning its reservation land . . . with the proceeds held in trust in the United States Treasury for the benefit of members of the Omaha Tribe.”
The focus of the State’s argument in the Supreme Court is clear from its petition. Nebraska complains that the district court based its decision on the ambiguity surrounding Congress’ intent in 1882 and the canon of construction requiring that ambiguities be resolved in tribes’ favor but failed to sufficiently consider whether a diminishment based on demographic factors and practical considerations (a “de facto” diminishment) had occurred. Citing the Supreme Court’s decisions in Hagen v. Utah and Oneida Tribe v. City of Sherrill, the 25-page petition makes seven references to the “justifiable expectations” of non-Indians and emphasizes the absence of trust land within the 50,000 tract and its 98-99 percent non-Indian population.
Selected court decisions
In U.S. v. Webster, 797 F.3d 531 (8th Cir. 2015), Webster, an Omaha Indian, was convicted of sexual assault of a child on the Omaha Reservation under the General Indian Crimes Act, 18 U.S.C. § 1152, which includes the proviso that “this section shall not extend to offenses committed by one Indian against the person or property of another Indian, nor to any Indian committing any offense in the Indian country who has been punished by the local law of the tribe.” Webster sought to set aside his conviction on the ground that the indictment failed to allege that the child was a non-Indian and that the tribe had not already punished him. The trial court rejected Webster’s arguments, and the Eighth Circuit affirmed: “Even if the victim’s status is an element of § 1152, the indictment’s failure to allege A.C.’s status did not render it so defective that by no reasonable construction can it be said to charge the offense. ... [T]his court concludes the absence of tribal prosecution is not an element of § 1152. It is far more manageable for Webster to initially show he was punished by the local law of the tribe than it is for the government to initially show the negative—that Webster has not been punished.”
In Harvey v. UTE Indian Tribe of the Uintah and Ouray Reservation, 797 F.3d 800 (2015), in April 2013, non-Indian business owners sued certain officials of the Ute Tribal Employment Rights Office of the Ute Indian Tribe of the Uintah and Ouray Reservation (Tribe) in state court, seeking to enjoin alleged harassment of their businesses by the defendants, in violation of state law. The defendants removed the action to federal court, but the federal court, on the motion of certain plaintiffs, remanded to state court, holding that certain of the defendants waived their right to removal by participating in state court proceedings, undermining the unanimity required for removal and depriving the federal court of jurisdiction. On appeal, the Tenth Circuit affirmed: “We have no trouble concluding that the order issued by the district court can be colorably characterized as based on lack of unanimity. That order specifically states that the initial defendants “waived their right ... to consent to removal[ ] because they manifested an intent to litigate in state court. Thus, the unanimity requirement cannot be met.”
In Citizens Against Casino Gambling in Erie County v. Chaudhuri, 2015 WL 5331971 (2d. Cir. 2015), organizations and individuals opposed to the operation of a casino by the Seneca Nation (Nation) sued the chairman of the National Indian Gaming Commission (NIGC), challenging his approval of an ordinance that the Nation adopted to authorize the casino on land that the Nation had purchased in Buffalo under a provision of the Seneca Nation Settlement Act of 1990 that permitted the Nation to purchase land within its aboriginal area with funds appropriated under the Act and provided that such land would be held in restricted fee status pursuant to 25 U.S.C. § 177. On cross- appeals from various rulings by the district court, the Second Circuit Court of Appeals held that (1) the Buffalo parcel was a dependent Indian community over which the Nation exercised jurisdiction, (2) the property constituted “Indian lands” within meaning of Indian Gaming Regulatory Act (IGRA), and (3) the property did not fall within scope of IGRA’s gaming prohibition: “Section 20 prohibits gaming on “lands acquired by the Secretary in trust for the benefit of an Indian tribe after the date of IGRA’s enactment. 25 U.S.C. § 2719(a) .... The plain text of Section 20 therefore refers only to trust lands acquired by the Secretary, not to lands held in restricted fee by a tribe.”
In Cobell v. Jewell, 2015 WL 5474186 (D.C. Cir. 2015), Class representatives petitioned for an award of class counsel’s fees, expenses, and costs, and for an incentive award for class representatives following a congressionally approved $3.4 billion settlement in a class action arising out of the Department of the Interior’s misadministration of Native American trust accounts. The United States District Court for the District of Columbia granted the petition in part and denied in part. On appeal, the Circuit Court held that (1) the district court order did not become final and thus appealable until the district court’s denial of reconsideration, (2) the appeal was ripe for judicial review, (3) the district court properly compensated class representatives for personal costs as part of incentive awards, and (4) class representatives’ claim that the settlement authorized an incentive award to compensate them for third-party costs was not procedurally barred.
In Organized Village of Kake v. U.S. Dept. of Agriculture, 795 F.3d 956 (2015) In 2001, the United States Department of Agriculture (Department) promulgated the “Roadless Rule,” limiting road construction and timber harvesting in national forests. The Department expressly found that exempting the Tongass National Forest from this Rule “would risk the loss of important roadless area [ecological] values.” Two years later, relying on the identical factual record compiled in 2001, the Department reversed itself, finding that it was unnecessary to apply the rule to Tongass or to maintain roadless values. The Native Village of Kake and others, sued under the National Environmental Policy Act (NEPA) and Administrative Procedure Act (APA), arguing that the Department failed to explain sufficiently the reasons for its reversal. The district court granted the Village summary judgment. The Ninth Circuit initially reversed but, on rehearing en banc, affirmed the district court: “[W]e have previously held that unexplained conflicting findings about the environmental impacts of a proposed agency action violate the APA. ... The 2003 ROD does not explain why an action that it found posed a prohibitive risk to the Tongass environment only two years before now poses merely a ‘minor’ one. The absence of a reasoned explanation for disregarding previous factual findings violates the APA. ‘An agency cannot simply disregard contrary or inconvenient factual determinations that it made in the past, any more than it can ignore inconvenient facts when it writes on a blank slate.’”
In Cascadia Wildlands v. Bureau of Indian Affairs, 2015 WL 5306321 (9th Cir. 2015), environmental organizations sued the Bureau of Indian Affairs (BIA) asserting that its approval of timber sales in a national forest violated the National Environmental Policy Act (NEPA) and the Coquille Restoration Act (CRA). The district court granted summary judgment to BIA and tribe. The Ninth Circuit affirmed, holding that (1) BIA could aggregate past and reasonably foreseeable future actions to create a baseline from which to consider the incremental impact of project, and (2) the objective listed in the forest management plan, to protect an endangered species, was not a standard or guideline that BIA was required to comply with pursuant to CRA, and thus BIA did not violate CRA by failing to ensure the project was consistent with the recovery plan for endangered species.
In Alabama v. PCI Gaming Authority, 2015 WL 5157426 (11th Cir. 2015), the Poarch Band of Creek Indians (Tribe) operated three casinos on tribal trust land within the State of Alabama. Lacking a compact with the State, the Tribe offered games classified as Class II under the Indian Gaming Regulatory Act (IGRA), including electronic bingo games that resembled Class III slot machines. Because Alabama permitted the operation of Class II gaming, the National Indian Gaming Commissioner Chair approved the Tribe’s gaming ordinance regulating the Tribe’s gaming enterprises. The State sued the Tribe and 13 individuals (Individual Defendants), seeking an injunction and a declaratory judgment on the ground that the operation of illegal slot machines constituted a public nuisance under Alabama law and a violation of 18 U.S.C. § 1166. The district court dismissed for lack of subject matter jurisdiction based on federal preemption of state nuisance law and sovereign immunity and failure to state a claim. The Eleventh Circuit Court of Appeals affirmed, holding that (1) tribal officials may be subject to suit in federal court for violations of state law under the fiction of Ex parte Young when their conduct occurs outside of Indian lands, (2) the Individual Defendants enjoyed immunity from state law claims, however, with respect to their activities on Indian lands, (3) Alabama could not challenge the “Indian lands” status of the casino locations based on the Supreme Court’s 2009 decision in Carcieri v. Salazar because the state had failed to file a timely challenge to the Department of Interior’s acquisition of the lands in trust under the Administrative Procedure Act, (4) the exception to the timely challenge rule for parties affected by an administrative rule when the party could not have brought a timely challenge did not apply: “Alabama does not argue it was unaware that the Secretary was taking land into trust for the Tribe; indeed, record evidence confirms that Alabama was given notice when the Secretary took the lands into trust. Because Alabama could have brought a timely APA challenge, we will not carve out an exception to the six-year statute of limitations,” and (5) by enacting 18 U.S.C. § 1166, which makes certain gambling activities a criminal federal offense, Congress did not create a cause of action for states to use against tribes: “[T]hat Congress may have intended for a state to be free from Indian gaming within its borders where such gaming was completely prohibited under the state’s law does not mean that 18 U.S.C. § 1166 creates a remedy for the state to enforce this right.”
In Quapaw Tribe of Oklahoma v. United States, 2015 WL 5731494 (Fed. Cl. 2015), the Quapaw Indian Tribe of Oklahoma (Tribe) sued the federal government for breach of fiduciary duty and breach of trust obligations and moved for partial summary judgment, contending that the government was liable for (1) annual educational payments of $1,000 from 1932 to the present under a provision of the Treaty of 1833 that the United States “also agree to appropriate one thousand dollars per year for education purposes to be expended under the direction of the President of the United States; ... the above appropriation for education purposes to be continued only as long as the President of the United States deems necessary for the best interests of the Indians;” (2) $31,680.80 in unauthorized disbursements from the Quapaw Tribe’s trust accounts, as found in the 1995 Tribal Trust Funds Reconciliation Project Report prepared by Arthur Andersen LLP; and (3) $70,330.71 in transactions that should have been credited to the Quapaw Tribe’s trust accounts but were not, as reported in the 2010 Quapaw Analysis. The court granted the Tribe’s motion. With respect to the claimed payments due under the 1833 treaty, the court held that the claim accrued in 2010 when it was revealed through an audit, defeating the government’s statute of limitations defense. The court also rejected the government’s arguments that the payments were discretionary: “The Court will not employ a twisted interpretation of the 1833 Treaty to allow the Government to escape a promise it so clearly made. ... Similarly, the fact that the President possessed a right he never exercised in 83 years does not change the outcome. Reading the Treaty as the Quapaw Tribe would read it (or indeed as any reasonable person would read it), the Government has breached its promise to make annual educational payments, and should be held accountable.”
In Brown v. Western Sky Financial, LLC, 84 F.Supp.3d 467 (M.D.N.C. 2015), plaintiffs sought to bring a class action lawsuit against Western Sky Financial, LLC (WSF), a company based on the Cheyenne River Sioux Tribe (CRST) reservation and owned by a tribal member, and other entities involved in offering and servicing payday loans originated by WSF, alleging that the loan terms, including provisions that tribal law would apply and that disputes must be resolved by arbitration, violated state and federal law. The federal district court dismissed without prejudice, holding that the plaintiffs were required to first bring their challenges to the enforceability of the loan provisions in the CRST tribal court: “There is nothing in the current record suggesting any actions taken by Plaintiffs themselves to warrant a finding by this court that the CRST is a fraudulent forum and not the proper jurisdiction for the action, when Plaintiffs entered into contracts which clearly stated that it is. On the present record, it would be inappropriate for this court to assume that another court is unable to decide whether or not it is the proper jurisdiction without allowing that court the first attempt to answer the question.”
In Citizens for a Better Way v. U.S. Dept. of Interior, 2015 WL 5648925 (E.D. Cal. 2015), the Department of Interior (DOI) had issued a final environmental impact statement (FEIS) and Record of Decision finding that the acquisition of land in Yuba, California, for gaming purposes by the Estom Yumeka Maidu Tribe of the Enterprise Rancheria (Enterprise) would be in the best interest of Enterprise and its members and would not be detrimental to the surrounding community. The governor of California concurred, satisfying the “Two-Part Determination” exception to the general rule of the Indian Gaming Regulatory Act (IGRA) that land acquired by tribes after the date of IGRA’s enactment in 1988 is ineligible for gaming. Plaintiffs, including two Indian tribes, sued. The district court granted the defendants summary judgment, holding that (1) the FEIS adequately considered alternatives and was otherwise free from defects, (2) there was a sufficient showing of need for the acquisition, (3 the Secretary’s determination that Enterprise was under federal jurisdiction at the time the IRA was enacted, and eligible to have land taken into trust under the rule of Carcieri, was reasonable, and (4) the DOI adequately considered the adverse impact on affected tribes: “The Court acknowledges that this planned casino will have some negative impacts; however this is not the question posed to the Secretary. The Secretary must determine whether the project will be detrimental to the surrounding community. Here, the Secretary concluded that the proposed casino would not be detrimental. The Court notes that competition alone from the proposed gaming facility in an overlapping gaming market is not sufficient to conclude that it would result in a detrimental impact on UAIC. The Court concludes that the Secretary considered the impacts of this proposed casino, and therefore considered what was required under the IGRA. Given the Secretary’s expertise, the Court confers deference to the Secretary’s decision.”
In Sisseton Wahpeton v. Jewell, 2015 WL 5474487 (D.D.C. 2015), four tribes sued federal officials, accusing the government of mismanaging funds and assets held in trust and seeking a declaration that certain previous attempts to reconcile the trust accounts did not satisfy the government’s responsibility to provide a complete and accurate accounting of those accounts and injunctive relief compelling the defendants to provide complete and accurate accountings, preserve any and all documents concerning Plaintiffs’ trust accounts, and make their accounts whole. The government moved to dismiss, but the court denied the motion: “Defendants’ arguments that Plaintiffs’ claims are improperly based on an inherent fiduciary duty owed by the government to the Plaintiffs are misguided. Plaintiffs are entitled to seek enforcement of their statutory rights provided for in the [Indian Trust Fund Management Reform Act] 1994 Act.”
In Archambault v. U.S., 82 F.Supp.3d 961 (D.S.D. 2015), Archambault sued the federal government under the Federal Tort Claims Act (FTCA) after his wife died, at the age of 41, at the McLaughlin Indian Health Services Health Center, operated by the Indian Health Service (IHS) of the United States Health and Human Services (HHS). Archambault alleged that HHS and the IHS were negligent by failing to reasonably screen, hire, investigate, train and/or supervise medical employees, and that, as a result his wife died from medical malpractice. The district court dismissed on the ground that the alleged negligence fell under the FTCA’s “discretionary function” exception: “The discretionary function exception is applicable to this case. Part of the plaintiff’s case rests on the staffing and the manner in which the McLaughlin Health Clinic operates. Varig Airlines makes it clear that courts are not to ‘second-guess’ administrative policies that are grounded in economic, social, or political policies. ... The staffing and operating procedures of an IHS health clinic fall under that category of administrative policies. There are finite resources available to IHS. Decisions as to staffing and operating procedures need to be made in an effort to maximize the effectiveness of the agency.”
In Tohono O’odham Nation, Plaintiff, v. Douglas A. Ducey, 2015 WL 5475290 (D. Ariz. 2015), the Secretary of the Department of Interior (DOI) had approved a tribal-state compact (Compact) between the Tohono O’odham Nation (Nation) and Arizona state that permitted the Nation to operate four gaming facilities and required prospective gaming employees, contractors, and vendors to obtain certification from State. After the Compact was executed, the Nation purchased unincorporated land in Glendale, Arizona, located just west of Phoenix, and announced plans to use the land for a Class III gaming facility. The State sued, arguing that gaming on the Glendale land was not authorized by IGRA and violated the Compact’s ban on additional casinos in the Phoenix area. The State also asserted that the Nation committed fraud by agreeing with the State and the voters that there would be no more casinos in the Phoenix area, while secretly planning to acquire land and open the West Valley Resort. The district court held that the Nation’s construction of the Glendale casino would not violate the Compact and was permitted by IGRA and, further, that the State’s claims of fraud and promissory estoppel were barred by the Nation’s sovereign immunity. While the appeal was pending, the Nation commenced construction. When state officials refused to certify vendors and employees to work at the casino, the Nation sued Arizona governor Douglas Ducey, Arizona Attorney General Mark Brnovich, and Arizona Department of Gaming Director Daniel Bergin. for declaratory and injunctive relief to prohibit the State from continuing to bar the casino’s progress. The court dismissed, holding that the defendants’ responsibility for the actions complained of was too indirect to support a suit under the Ex parte Young exception to state sovereign immunity: “The Court cannot conclude, however, that this advice establishes the connection required by Ex parte Young. State executive officers routinely influence decisions of the state’s executive branch – which is virtually always the branch whose actions are challenged in cases raising the Ex parte Young exception – and yet courts consistently hold that ‘general supervisory power over the persons responsible for enforcing the challenged provision will not subject an official to suit.’”
In Yaroma v. Cashcall, Inc., 2015 WL 5475258 (E.D. Ky. 2015), Yaroma, a non- Indian resident of Kentucky, had obtained an online payday loan from Western Sky, a company based on the Cheyenne River Sioux reservation owned by a member of the tribe, at an annual interest rate of 138.91 percent, which is illegal under Kentucky law. Western Sky sold the loan to Defendant CashCall, a California corporation, which referred the loan to Delbert, a Nevada corporation, for servicing. When Delbert attempted to collect payment, Yaroma sued, alleging that Delbert made false representations to her and furnished negative credit information about her loan to consumer reporting agencies, that Delbert purchased her account from CashCall, that Yaroma sent a dispute letter to Experian, a consumer reporting agency located in California and registered to do business in Kentucky disputing negative credit information and that her loan was unenforceable. Cashcall and Delbert moved to compel arbitration pursuant to a provision in the loan agreement providing for arbitration of any disputes and permitting the borrower “to select any of following arbitration organizations to administer the arbitration: the American Arbitration Association ...; JAMS ...; or an arbitration organization agreed upon by you and the other parties to the Dispute..... Any arbitration under this Agreement may be conducted either on tribal land or within thirty miles of your residence, at your choice.” The court granted the motion, holding that the court was bound by the Federal Arbitration Act to enforce the arbitration clause and that the arbitrator would have the power to determine the legality of the loan agreements: “Thus, to the extent Yaroma contends she should not be compelled to arbitrate because the entire contract itself is void ab initio, the Supreme Court has found that Sections 2 and 3 of the FAA rendering arbitration agreements enforceable when arising out of a ‘contract’ should not be interpreted so narrowly as to only apply to contracts that have already been determined valid.... Therefore, the remaining issues in this case are more properly resolved by the arbitrator rather than the Court.”
In Glacier Elec. Co-op., Inc. v. Gervais, 2015 WL 5437615 Not Reported in F.Supp.3d (D. Mont. 2015), Glacier Electric Cooperative, Inc. (Glacier Electric), a non-profit corporation headquartered in Cut Bank, Montana, served as the sole provider of electricity to the Blackfeet Reservation. Members of the cooperative who were members of the Blackfeet Tribe sued Glacier Electric in tribal court. Glacier Electric filed a federal action seeking a declaration that the tribal court lacked jurisdiction under the rule of Montana v. United States. The federal court ordered that Glacier Electric exhaust tribal court remedies, and the tribal court determined that it had jurisdiction. The federal court then denied Glacier Electric’s motion for reconsideration: “The Court may relieve a non-Indian from the duty to exhaust all tribal court remedies only where it determines tribal court jurisdiction to be ‘plainly’ lacking. Strate v. A–1 Contractors, 520 U.S. 438, 459 n. 14 (1997). This Court determined that the Blackfeet Tribal Court did not ‘plainly’ lack jurisdiction, and, therefore, declined to excuse Glacier Electric from the requirement to exhaust tribal court remedies.”
In, Kizer v. PTP, Inc., 2015 WL 5165871 (D. Nev. 2015), Kizer, a member of the Washoe Indian Tribe of Nevada and California (Tribe), owned a 62.76-acre parcel of allotted trust land. In 1997, Kizer entered into a 99-year lease (50 years plus an automatic renewal of 49 years) of the property (the Master Lease) with PTP, a commercial developer, for $331,000, with a purchase option that granted PTP or a homeowners association right at any point after 10 years from the date of the Master Lease to purchase the property for a certain sum. (Id. ¶ 21). The Master Lease was approved by the BIA Superintendent pursuant to 25 U.S.C. § 415 and subdivided into 250 individual lots for single-family and manufactured homes. The lease was amended in 2000, with BIA approval, to require BIA approval of any extension beyond 50 years, to permit a sublessee homeowner to exercise a purchase option by making a one-time payment of $1,000 and by requiring Kizer, upon exercise of the option, to “take all steps necessary to secure a fee patent pursuant to federal regulations governing Indian-trust lands.” After the Tribe raised concerns, the BIA issued a letter stating that the term of the lease appeared to violate 25 U.S.C. § 415, which limits leases of the Tribe’s lands to 25 years with one 25-year extension and that the option provision appeared contrary to the requirement that Indian lands be sold for fair market value. The BIA offered to work with the homeowners association to address the issues with the lease. Kizer took a different approach and sued to have the lease declared invalid and his own title confirmed. On the defendants’ motion to dismiss, the court held that (1) the defendants’ argument that Kizer was unjustly enriched was premature pending a determination of the validity of the lease, (2) rather than estop Kizer from challenging the option provision based on his long-time acquiescence, the court would interpret the purchase option to incorporate the “fair value” requirements of the federal regulations, (3) the court would not estop Kizer from challenging the lease term because “[t]he power of the federal courts to enforce the terms of private agreements is at all times exercised subject to the restrictions and limitations of the public policy of the United States as manifested in federal statutes.... despite Plaintiff’s conduct that may have, in other circumstances, properly triggered the doctrine of estoppel,” and (4) The BIA was a necessary party whose joinder would be ordered: “The Court’s ultimate judgment in this case regarding Plaintiff’s claims may result in an invalidation of portions of the Master Lease, or in its entirety. On the other hand, it could result in an upholding of portions of the Master Lease, or in its entirety. In either situation, the BIA might disagree and proceed under aconflictinginterpretationofthedisputed provisions. Thus, joinder of the BIA is necessary here.”
In Eilert v. Turner, 2015 WL 5178081 (S.D. Tex. 2015), Eilert, a resident of Texas, sued Turner, a New Jersey attorney, alleging violations of the Fair Debt Collection Practices Act (FDCPA) based on letters that Turner sent to Eilert attempting to collect on a payday loan allegedly made to Eilert. Turner disputed that he was a “debt collector” within the meaning of the FDCPA and in addition asserted that, as the in-house attorney for United Credit Specialists, a tribal entity, he was immune from suit. The court denied Eilert’s motion for summary judgment, finding that there remained disputed factual issues with respect to Turner’s status as a debt collector but also rejected Turner’s claim to immunity without additional evidence: “Turner has not provided any evidence to substantiate his claim that United Credit Specialists is a tribal entity created by the Indian tribe, Guideville Indian Rancheria, nor shown that it has not waived it immunity here, nor moved to dismiss based on sovereign immunity from suit. The Court orders that within twenty days of entry of the Opinion and Order, Turner shall file with the Court a statement whether he has such evidence and, if he does, an appropriate motion to dismiss this action.”
In Alto v. Jewell, 2015 WL 5734093 (S.D. Cal. 2015), the Department of Interior (DOI) had adopted regulations in 1959 providing for the preparation of a membership roll for the San Pasqual Band (tribe), including a provision for DOI approval. In 2007, the Tribe’s enrollment committee determined that Alto had previously been enrolled erroneously and he and his descendants were disenrolled. The Assistant Secretary for Indian Affairs affirmed the decision, and the district court rejected Alto’s challenge under the Administrative Procedure Act: “The Assistant Secretary was tasked with the unenviable responsibility to review thousands of pages in the administrative record, some of which are over a hundred years old, and determining the membership status of the now-deceased Marcus Alto, Sr. Plaintiffs expend considerable effort to identify facts in the record either unmentioned, potentially ignored, or devalued, but as the Court has repeatedly stated, it “must defer to a reasonable agency action ‘even if the administrative record contains evidence for and against its decision.’” ...Under the standard prescribed by 5 U.S.C. § 706(2)(A), which is highly deferential to the agency, Plaintiffs fail to meet their burden to demonstrate that the Assistant Secretary’s decision is in any way “arbitrary, capricious, an abuse or discretion, or otherwise not in accordance with law.”
In CashCall, Inc. v. Massachusetts Div. of Banks, 2015 WL 5173531 Not Reported in N.E.3d (Mass. Sup. Ct. 2015), Western Sky, a payday lender owned by a member of the Cheyenne River Sioux Tribe and based on the Tribe’s reservation, advertised small payday loans to Massachusetts residents, directing those interested in applying for a loan to do so through Western Sky’s internet address. A number of Massachusetts residents applied for and obtained loans through the internet or telephone. After accepting the loan applications, Western Sky sold the loans to CashCall Inc.’s wholly owned subsidiary, WS Funding, LLC., a California Corporation, which then serviced the loans for WS Funding. The loan agreements provided that the agreements were subject solely to the laws and jurisdiction of the Tribe and the Tribe’s court to the exclusion of state or federal law, that the agreements were “executed and performed solely within the exterior boundaries of the Cheyenne River Sioux Indian Reservation, a sovereign Native American Tribal Nation” and that disputes would be resolved “by arbitration, which shall be conducted by the Cheyenne River Sioux Tribal National by an authorized representative in accordance with its consumer dispute rules.” The Massachusetts Division of Banks found Western Sky and the Cashcall entities (Plaintiffs) in violation of state anti-usury laws and issued cease and desist orders which directed the plaintiffs to cease collecting on loans made to Massachusetts borrowers, refrain from transferring the loans, refund all interest charges and fees received from borrowers during the last four years, and submit a list of borrowers to whom reimbursement is owed. The Plaintiffs sought judicial review and moved for judgment on the pleadings, arguing that the Massachusetts Division of Banks lacked jurisdiction and had failed to hold a hearing. The Superior Court held that the Plaintiffs were entitled to a hearing but otherwise rejected their arguments, holding that the state had jurisdiction to regulate the loans and the Tribe lacked jurisdiction: “All of the loans were applied for, paid from, and collected from Massachusetts. Western Sky reached well beyond the reservation’s boundaries to transact business with Massachusetts residents. The Massachusetts statutes at issue are non- discriminatory and apply to all citizens of the state and those who conduct their business here. Massachusetts may therefore regulate the loans made by Western Sky. ... The relevant General Laws consider the acts done in Massachusetts because the individuals completed and submitted their applications in Massachusetts and the money was advanced to Massachusetts. ...These loans are not related to ‘on-reservation activity’ and are not necessary to protect tribal self-government or internal relations. ... The tribal courts utterly lack jurisdiction, which cannot be granted through a contract, and thus, the choice of forum clauses are a nullity.”