Tribe-Owned Pay-Day Lender Loses Bid for Immunity

MANHATTAN (CN) – An online lending company owned by the Chippewa Cree cannot invoke tribal immunity to block claims that it charged two Vermonters usurious interest rates, the Second Circuit ruled.

Invoking the 1908 U.S. Supreme Court decision Ex parte Young, the federal appeals court said an analogous theory “protects a state’s important interest in enforcing its own laws and the federal government’s strong interest in providing a neutral forum for the peaceful resolution of disputes between domestic sovereigns, and it fairly holds Indian tribes acting off-reservation to their obligation to comply with generally applicable state law.”

The dispute arose from multiple loans Jessica Gingras and Angela Given obtained from Plain Green, which is owned by the Chippewa Cree Tribe of the Rocky Boy’s Indian Reservation in Montana.

An online company, Plain Green offers pay-day loans whose interest rates exceed the caps otherwise set by Vermont. In the case of Gingras and Given, those rates went as high as 376%. Vermont’s usury regulations meanwhile set the interest cap on pay-day loans at 24%.

“Plain Green is a payday lending entity cleverly designed to enabled defendants to skirt federal and state consumer protection laws under the cloak of tribal sovereign immunity. That immunity is a shield, however, not a sword,” U.S. Circuit Peter Hall wrote for a three-judge panel. “It poses no barrier to plaintiffs seeking prospective equitable relief for violations of federal or state law. Tribes and their officers are not free to operate outside of Indian lands without conforming their conduct in these areas to federal and state law.”

Plain Green’s loan agreement, which Gingras and Given signed, also requires that disputes be settled in arbitration. If a borrower opts out of arbitration, then the agreement requires that they submit to tribal law.

Several defendants associated with Plain Green appealed when a federal judge rejected both their bids for immunity and arbitration. The Second Circuit affirmed Tuesday.

Hall explained that the arbitration clause is invalid because the loan agreement mandates that all arbiters’ decisions must be confirmed in tribal court, a venue that could bias any claims against Plain Green in favor of the tribe-owned lender.

“Ultimately, the tribal court is directed to interpret its own law — alleged to be completely one-sided in favor of the tribe — which effectively insulates the tribe from any adverse award and leaves prospective litigants without a fair chance of prevailing in arbitration,” Hall wrote. “Requiring non-tribal plaintiffs to be subject to an illusory arbitration reviewed in toto by a tribal court with a strong interest in avoiding an award adverse to the lender is unconscionable.”

The plaintiffs were represented by Gravel & Shea in Burlington. 

Plain Green’s associates were represented by the firms Hogan Lovells in Washington; Pepper Hamilton in Philadelphia; Sutherland Asbill & Brennan in Washington; and Jones Day in  San Francisco.

They did not return a request for comment.

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