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People v. Miami Nation Enterprises

California Court of Appeal, Second District, Seventh Division

January 21, 2014

The PEOPLE of the State of California, Plaintiff and Appellant,
v.
MIAMI NATION ENTERPRISES et al., Defendants and Respondents.

[REVIEW GRANTED BY CAL. SUPREME COURT]

APPEAL from an order of the Superior Court of Los Angeles County, Yvette M. Palazuelos, Judge. Affirmed. (Los Angeles County Super. Ct. No. BC373536).

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[Copyrighted Material Omitted]

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COUNSEL

[166 Cal.Rptr.3d 802] Uche L. Enenwali, Senior Corporations Counsel, and Mary Ann Smith, Deputy Commissioner, California Corporations Counsel; Kamala D. Harris, Attorney General, Sara J. Drake, Senior Assistant Attorney General, Jennifer T. Henderson, Deputy Attorney General, for Plaintiff and Appellant.

Fredericks Peebles & Morgan, John Nyhan, Sacramento, Nicole E. Ducheneaux and Conly J. Schulte, for MNE and SFS, Inc., Defendants and Respondents.

OPINION

PERLUSS, P.J.

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Applying the arm-of-the-tribe analysis as we directed in Ameriloan v. Superior Court (2008) 169 Cal.App.4th 81, 86 Cal.Rptr.3d 572 ( Ameriloan ), the trial court dismissed for lack of subject matter jurisdiction this action by the Commissioner of the California Department of Corporations against five " payday loan" businesses owned by Miami Nation Enterprises (MNE), the economic development authority of the Miami Tribe of Oklahoma, a federally recognized Indian tribe, and SFS, Inc., a corporation wholly owned by the Santee Sioux Nation, also a federally recognized Indian tribe. Because the two tribal entities and their cash-advance and short-term-loan businesses are sufficiently related to their respective Indian tribes to be protected from this state enforcement [166 Cal.Rptr.3d 803] action under the doctrine of tribal sovereign immunity, we affirm.

FACTUAL AND PROCEDURAL BACKGROUND

1. The Commissioner's Complaint and the Initial Ruling on the Motions To Quash

Following an investigation by the Department of Corporations, in August 2006 the Commissioner [1] issued desist-and-refrain orders to Ameriloan, United Cash Loans, U.S. Fast Cash, Preferred Cash and One Click Cash, directing them to cease their unlicensed and unlawful loan activities in

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California. In June 2007, after the businesses failed to comply with the desist-and-refrain orders, the Commissioner filed a complaint in the name of the People of the State of California for injunctive relief, restitution and civil penalties against Ameriloan, United Cash Loans, U.S. Fast Cash, Preferred Cash and One Click Cash alleging they were providing short-term, payday loans over the Internet to California residents in violation of several provisions of the California Deferred Deposit Transaction Law (DDTL) (Fin.Code, § 2300 et seq.).[2] Specifically, the complaint alleged the five businesses engaged in deferred deposit transactions within California without being licensed (Fin.Code, § 23005, subd. (a)), originated loans in excess of the $300 statutory maximum (Fin.Code, § 23035, subd. (a)), charged excessive loan fees (Fin.Code, § 23036, subd. (a)), and failed to provide their customers with various required written notices (Fin.Code, § 23001, subds. (a), (e)). The trial court granted the Commissioner's ex parte request for a temporary restraining order against each of the businesses and set a date for them to show cause why the request for a preliminary injunction should not be granted.

MNE and SFS specially appeared and moved to quash service of summons and to [166 Cal.Rptr.3d 804] dismiss the complaint on the ground the five payday loan businesses named as defendants were simply trade names (or " dba's" ) of the two tribal entities and, as wholly owned and controlled entities of their respective tribes operating on behalf of the tribes, they were protected from this state enforcement action under the doctrine of tribal sovereign immunity.[3] Both

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tribal entities submitted declarations describing in some detail their relationship to their respective tribes and the economic benefits the tribes obtained from operating the businesses. In opposition, in addition to arguing the doctrine of tribal sovereign immunity did not apply to commercial activities outside of Indian country, the Commissioner urged at the very least discovery should be permitted with respect to the jurisdictional facts articulated in the declarations accompanying the motions to quash.

On October 19, 2007 the trial court denied the motion to quash service, concluding tribal sovereign immunity did not apply to the tribal entities' payday loan activities. In the same order the court granted the Commissioner's request for a preliminary injunction prohibiting the five named defendants from engaging in unlicensed, nonexempt deferred deposit transaction business, charging excessive fees, violating the Commissioner's cease-and-refrain orders and destroying records.

2. Our Ameriloan Decision

MNE and SFS, on behalf of the named payday loan businesses, petitioned this court for a writ of mandate vacating the trial court's order. In Ameriloan, supra, 169 Cal.App.4th 81, 86 Cal.Rptr.3d 572 we granted the petition in part and directed the trial court to vacate its order denying the motions to quash and granting the preliminary injunction and to conduct a new evidentiary hearing to determine the applicability of the doctrine of tribal sovereign immunity in the particular circumstances of this action.[4]

Our opinion briefly summarized the tribal sovereign immunity doctrine, explaining, " An Indian tribe's sovereign nation status confers an absolute immunity from suit in federal or state court, absent an express waiver of that immunity or congressional authorization to sue." ( Ameriloan, supra, 169 Cal.App.4th at p. 89, 86 Cal.Rptr.3d 572.) We then quoted the key language from the United States Supreme Court's decision in Kiowa Tribe v. Manufacturing Tech. (1998) 523 U.S. 751, 118 S.Ct. 1700, 140 L.Ed.2d 981 ( Kiowa ),which held a federally recognized Indian tribe enjoys immunity from suit in state court even if the subject of the action is purely commercial activity that occurs on nontribal lands. Based on Kiowa we concluded the trial court had erred in ruling as a matter of law the doctrine of tribal sovereign immunity did not apply to the payday loan companies' commercial

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activities occurring outside of Indian country. ( [166 Cal.Rptr.3d 805] Ameriloan, at pp. 89-90, 86 Cal.Rptr.3d 572.) [5] We also held the trial court had erred in concluding tribal sovereign immunity had been waived based on a " sue or be sued" clause in the resolution establishing MNE as an economic subdivision of the Miami Tribe of Oklahoma or the arbitration provision contained in each of the payday loan companies' loan agreements with consumers. ( Id. at pp. 94-96, 86 Cal.Rptr.3d 572.)

To decide the motion to quash— that is, to decide whether the tribal entities, operating through the named payday loan companies, are entitled to the benefits of tribal sovereign immunity— we explained, the trial court " must first determine whether those entities, in fact, are acting on behalf of federally recognized tribes." ( Ameriloan, supra, 169 Cal.App.4th at p. 97, 86 Cal.Rptr.3d 572.) " Tribal sovereign immunity extends not only to the Indian tribes themselves but also to those for-profit commercial entities that function as ‘ arms of the tribes.’ [Citations.] The doctrine, however, does not ‘ " cover tribally chartered corporations that are completely independent of the tribe." ’ " ( Ibid .) In light of the trial court's failure to make findings pertinent to the arm-of-the-tribe analysis, we directed it to conduct a new evidentiary hearing and to consider whether the two tribal entities are sufficiently related to their respective tribes to be entitled to the protection of tribal sovereign immunity. " To this end, the court should consider the criteria expressed by the Courts of Appeal in Trudgeon [ v. Fantasy Springs Casino (1999) ] 71 Cal.App.4th [632,] 638[84 Cal.Rptr.2d 65] and [ Redding ] Rancheria [ v. Superior Court (2001) ] 88 Cal.App.4th [384,] 389[105 Cal.Rptr.2d 773], including whether the tribe and the entities are closely linked in governing structure and characteristics and whether federal policies intended to promote Indian tribal autonomy are furthered by extension of immunity to the business entity. (See also Allen v. Gold Country Casino (9th Cir.2006) 464 F.3d 1044, 1046 [the relevant question for purposes of applying tribal sovereign immunity ‘ is not whether the activity may be characterized as a business, which is irrelevant under Kiowa, but whether the entity acts as an arm of the tribe so that its activities are properly deemed to be those of the tribe’ ].)" ( Ameriloan, at pp. 97-98, 86 Cal.Rptr.3d 572.)

In response to the Commissioner's request to be permitted discovery into the assertion that profits from the payday loan operations benefit the two tribes that created MNE and SFS, we observed, " we see no reason why limited discovery, directed solely to matters affecting the trial court's subject matter jurisdiction, should impact the payday loan companies' special appearance...." ( Ameriloan, supra, 169 Cal.App.4th at p. 98, 86 Cal.Rptr.3d 572.) Nonetheless,

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because no issue relating to discovery was raised in the petition for writ of mandate, we made no express ruling on the permissible scope of any discovery when the matter returned to the trial ...


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