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Ameriloan v. Superior Court of Los Angeles County

December 15, 2008; as modified January 14, 2009

AMERILOAN ET AL., PETITIONER,
v.
THE SUPERIOR COURT OF LOS ANGELES COUNTY, RESPONDENT; THE PEOPLE OF THE STATE OF CALIFORNIA, REAL PARTY IN INTEREST.



ORIGINAL PROCEEDING; application for writ of mandate. Joseph R. Kalin, Judge. Petition granted in part and denied in part. (Los Angeles County Super. Ct. No. BC373536).

The opinion of the court was delivered by: Perluss, P. J.

CERTIFIED FOR PUBLICATION

As a matter of federal law, absent congressional authorization or an Indian tribe's consent to suit, a federally recognized Indian tribe enjoys immunity from any suit in state court, even if the activity that is the subject of the lawsuit is purely commercial in nature or occurs on nontribal lands. (Kiowa Tribe of Oklahoma v. Manufacturing Technologies, Inc. (1998) 523 U.S. 751, 754-755 [118 S.Ct. 1700, 140 L.Ed.2d 981 (Kiowa).) That immunity extends to a tribe's for-profit business entities when the entity is operating on behalf of the tribe. (See Agua Caliente Band of Cahuilla Indians v. Superior Court (2006) 40 Cal.4th 239, 247-248 (Agua Caliente); Redding Rancheria v. Superior Court (2001) 88 Cal.App.4th 384, 388-389 (Rancheria).)

Five companies providing short-term loans to California residents over the internet seek a writ of mandate compelling the trial court to vacate its order denying their collective motion to quash service of summons in this action by the California Department of Corporations (Department) to enforce various provisions of the Deferred Deposit Transaction Law (DDTL) (Fin. Code, § 2300 et. seq.). The companies assert they are business entities wholly owned by federally recognized Indian tribes and thus protected from this state enforcement action under the doctrine of tribal sovereign immunity.

Respondent Superior Court erroneously concluded that tribal sovereign immunity does not apply to off-reservation commercial activity, that application of the tribal sovereign immunity doctrine in this enforcement action would intrude on California's exercise of state sovereignty protected by the Tenth Amendment to the United States Constitution and that each of the tribes affiliated with the loan companies had affirmatively waived its immunity and consented to be sued in state court. Accordingly, we grant the petition in part, issue the writ and direct the trial court to vacate its order denying the motion to quash and granting the Department's application for a preliminary injunction. However, because the trial court did not address whether the companies, which are not themselves Indian tribes, operate as "arms of the tribe" for purposes of the tribal sovereign immunity doctrine (see, e.g., Rancheria, supra, 88 Cal.App.4th at p. 389; Trudgeon v. Fantasy Springs Casino (1999) 71 Cal.App.4th 632, 636-637 (Trudgeon)), we direct the trial court to conduct further proceedings to determine whether the doctrine deprives the court of subject matter jurisdiction in this case.

FACTUAL AND PROCEDURAL BACKGROUND

1. The Initiation of the State Enforcement Action

Ameriloan, United Cash Loans, US Fast Cash, Preferred Cash and One Click Cash (collectively payday loan companies) provide internet-based, deferred deposit transactions to California residents, transactions commonly referred to as "payday loans."*fn1 In June 2007, after its cease and desist orders were ignored, the Department filed suit against the payday loan companies in Los Angeles County Superior Court seeking to enjoin them from doing business with California residents on the ground they were operating in violation of various provisions of the DDTL. In addition to preliminary and permanent injunctions, the Department sought civil penalties under the DDTL.

On July 30, 2007 the trial court granted the Department's ex parte request for a temporary restraining order against each of the payday loan companies and set a hearing date of August 10, 2007 for the payday loan companies to show cause why the request for a preliminary injunction should not be granted.

2. The Payday Loan Companies' Motion To Quash and Opposition to the Department's Application for a Preliminary Injunction

After obtaining a continuance of the hearing on the order to show cause, on August 27, 2007 the Miami Nation Enterprise (MNE), "an economic subdivision" of the Miami Tribe of Oklahoma, a federally recognized Indian tribe organized pursuant to the Oklahoma Welfare Act of 1936 (25 U.S.C. § 501 et seq.), specially appeared in the action and filed a motion to quash challenging the court's subject matter jurisdiction. MNE claimed Ameriloan, US Fast Cash and United Cash Loans were trade names utilized in its cash advance business and were immune from this state enforcement action under the doctrine of tribal sovereign immunity.

In support of its motion MNE included a copy of the Constitution of the Miami Tribe of Oklahoma, as well as the declaration of Don Brady, the chief executive officer of MNE. According to Brady, MNE was established by the business committee of the Miami Tribe of Oklahoma in May 2005 through resolution number 05-14 (a copy of which was attached to Brady's declaration) for the purpose of supplying a self-sustaining and diversified stream of revenues for the tribe. Brady declared all profits generated from MNE's cash-advance business are "reinvested in economic and governmental purposes of the Miami tribe to fund critical governmental services to [the tribe's] members, such as tribal law enforcement, poverty assistance, housing, nutrition, preschool, elder care programs, school supplies and scholarships." Brady also testified the cash-advance business is a "critical component" of the Miami Tribe's economy and governmental operations and generated "full-time employment" for approximately 43 of its 3,400 members.

SFS, Inc. (SFS) also specially appeared in the action and filed a joinder in MNE's motion to quash and opposition to the application for a preliminary injunction. According to the declarations accompanying SFS's joinder, One Click Cash and Preferred Cash are trade names utilized by SFS, a corporation wholly owned by the Santee Sioux Nation (Santee Sioux), a federally recognized Indian tribe organized under the Indian Reorganization Act of 1934 (25 U.S.C. § 476). Along with its joinder, SFS provided the declaration of Robert Campbell, a member of the Santee Sioux's tribal counsel and treasurer of SFS. Campbell explained SFS was created by the Santee Sioux in March 2005 for the purpose of establishing a business entity to provide short-term loans and cash-advance services and, through the profits achieved in that effort, "facilitat[e] the achievement of goals relating to the Tribal economy, self-government, and sovereign status of the Santee Sioux nation." According to Campbell, "[a]ll profits earned by SFS go to the Santee Sioux to help fund its government operations and social welfare programs."

In opposition to the Department's request for a preliminary injunction, both MNE and SFS contended their businesses, utilizing automated clearing house transactions,*fn2 were not subject to the provisions of the DDTL, which, by its terms, applies to transactions involving "personal checks."

The Department opposed the motion to quash, arguing the doctrine of tribal sovereign immunity did not apply to the transactions at issue, that is, off-reservation commercial activities. Alternatively, it asserted a finding of tribal sovereign immunity would intrude upon California's exercise of its reserved power under the Tenth Amendment to enforce its consumer protection laws. Finally, the Department insisted MNE and SFS had waived their tribal sovereign immunity by virtue of a "sue and be sued" clause in the resolution creating MNE*fn3 and by an arbitration clause contained in each of the payday loan companies' customer contracts.*fn4 The Department also urged at the hearing on the motion that, at the very least, it should be entitled to conduct discovery to challenge the jurisdictional facts articulated in the declarations accompanying the motions to quash.

3. The Trial Court's Ruling

The trial court denied the motion to quash on the ground sovereign immunity did not apply as a matter of law, citing each of the reasons articulated in the Department's opposition to the motion. In the same order the ...


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