Third Circuit holds unprofitable tribal lender not entitled to sovereign immunity

When do investments by outsiders turn a tribal business into one that does not share in the tribe’s sovereign immunity?  In a case decided today, the Third Circuit attempted to answer that question.

The Fort Belknap Indian Community, a Montana-based Indian tribe, created a corporation called the Island Mountain Development Group, which manages another tribe-created corporation, called GreatPlains Finance — an online lender that offers consumers “small loans at staggering interest rates.”  In 2021, Newport, a private equity company, lent $10 million to GreatPlains at a 21% interest rate.  Under the terms of that agreement, before returning any profits to Island Mountain (and thus the tribe), GreatPlains must pay Newport.  Newport was also granted a security interest in GreatPlains’ asset.  In 2023, GreatPlains defaulted, and Newport took advantage of provisions in its loan agreement that “ordered GreatPlains’ bankers to block any withdrawal or funds transfer from GreatPlains’ accounts without Newport’s written consent.”

Plaintiff Rashonna Ransom borrowed cash from GreatPlains at rates of 652% and 542% annual interest — leading to $4000 in interest on a $750 loan. She sued GreatPlains for violating New Jersey consumer protection laws.  GreatPlains moved to dismiss on the grounds of sovereign immunity. After that motion was dismissed based on, in part, Newport’s control, Newport excused the default. GreatPlains’ motion for reconsideration was denied, and it appealed.

On appeal, the Third Circuit affirmed–concluding that GreatPlains was not an arm of the tribe, finding that the fact that “GreatPlains’ finances do not affect the tribe’s” dispositive. When GreatPlains loses money, the tribe’s finances are not at risk, since GreatPlains is its own LLC. And while GreatPlains said it would share profits with the tribe, there was no evidence of any profits in excess of what was paid to Newport.