Everette v. Mitchem et al
Filing
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MEMORANDUM. Signed by Chief Judge Catherine C. Blake on 11/20/2015. (bmhs, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
ALICIA EVERETTE
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v.
JOSHUA MITCHEM, et al.
Civil No. CCB-15-1261
MEMORANDUM
Alicia Everette seeks to bring a class action lawsuit against Joshua Mitchem; Jeremy
Shaffer; Scott Tucker; NDG Financial Corporation; MobiLoans, LLC (“MobiLoans”); and
Riverbend Finance, LLC (“Riverbend”) on behalf of consumers who received payday loans
between May 1, 2012, and May 1, 2015, from the following companies: Action Payday, Bottom
Dollar Payday, Ameriloan, United Cash Loans, CashTaxi.com, MobiLoans, or Riverbend Cash.
Everette requests an order certifying this lawsuit as a class action; a judgment against the
defendants for violations of various Maryland commercial laws and the Electronic Fund Transfer
Act, 15 U.S.C. § 1693; and the costs of litigation and attorney’s fees.
Now pending are MobiLoans’ and Riverbend’s motions to dismiss for lack of
jurisdiction, as well as the plaintiff’s motion for discovery. The court will address the remaining
motions to dismiss filed by Mitchem, Shaffer, and Tucker in a separate opinion. An order of
default was entered against defendant NDG Financial Corporation on August 6, 2015. The issues
have been fully briefed, and no hearing is necessary. See Local R. 105.6 (D.Md.2014). For the
reasons stated below, Everette’s motion for discovery will be denied, and MobiLoans’ and
Riverbend’s motions to dismiss will be granted.
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BACKGROUND
Everette obtained a loan from MobiLoans, a tribal lending entity wholly owned by the
Tunica-Biloxi Tribe of Louisiana, in 2013. (Compl. ¶¶ 101, 107, ECF No. 1.) Also in 2013,
Everette received two payday loans from Riverbend Cash, which is owned and operated by
Riverbend, a tribal lending business owned by the Fort Belknap Indian Community. (Compl. ¶¶
114, 121.) The plaintiff claims that MobiLoans and Riverbend engaged in unlawful consumer
lending and collection practices. (See Compl. ¶¶ 27-28, 106-113, 120-128.) MobiLoans and
Riverbend filed motions to dismiss for lack of subject matter jurisdiction. Both defendants argue
they are “arms of the tribe” entitled to tribal sovereign immunity because tribes created the
lending companies under tribal law, tribes have complete ownership and control over the
companies, and the companies protect the tribes’ sovereignty by funding governmental services
for tribal members. In response, the plaintiff argues that Riverbend and MobiLoans are not
entitled to tribal sovereign immunity because they are not tribes, traditional government
agencies, or casinos, but are instead “mere business[es]” engaging in off-reservation commercial
activity; they are limited liability companies, and therefore a judgment against them will not
reach the tribes’ assets; and granting the defendants sovereign immunity would leave the plaintiff
without a judicial remedy. (Pl.’s Opp’n 5-13, ECF No. 40.)
ANALYSIS
A motion pursuant to Federal Rule of Civil Procedure 12(b)(1) should be granted “only if
the material jurisdictional facts are not in dispute and the moving party is entitled to prevail as a
matter of law.” Evans v. B.F. Perkins Co., 166 F.3d 642, 647 (4th Cir. 1999); see also United
States ex rel. Vuyyuru v. Jadhav, 555 F.3d 337, 347–48 (4th Cir. 2009). The plaintiff bears the
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burden of proving that subject matter jurisdiction exists. Piney Run Preservation Ass’n v. Cnty.
Comm’rs of Carroll Cnty., Md., 523 F.3d 453, 459 (4th Cir. 2008). Moreover, “[w]hen a
defendant challenges subject matter jurisdiction via a Rule 12(b)(1) motion to dismiss, the
district court may regard the pleadings as mere evidence on the issue and may consider evidence
outside the pleadings . . . .” Blitz v. Napolitano, 700 F.3d 733, 736 n.3 (4th Cir. 2012) (quoting
Velasco v. Gov’t of Indonesia, 370 F.3d 392, 398 (4th Cir. 2004)).
I. Jurisdictional Discovery
Both defendant lending companies have provided substantial evidence that they are
wholly owned by tribes and were formed under tribal law to raise revenue for the tribes.
MobiLoans and Riverbend have filed declarations of tribal members and officers of the
companies attesting to the facts stated in this opinion, as well as copies of tribal resolutions that
created the companies. Everette has failed to identify any specific facts to support her assertion
that tribes do not own, operate, and control MobiLoans and Riverbend. “When a plaintiff offers
only speculation or conclusory assertions…, a court is within its discretion in denying
jurisdictional discovery.” Carefirst of Maryland, Inc. v. Carefirst Pregnancy Centers, Inc., 334
F.3d 390, 402 (4th Cir. 2003); see also White v. Univ. of California, 765 F.3d 1010, 1025 (9th
Cir. 2014) (upholding denial of jurisdictional discovery where the district court concluded that an
entity was an “arm of the tribe” and the plaintiff offered “only speculative arguments” that the
entity was not entitled to sovereign immunity). Because there is no evidence that tribes do not
own and control MobiLoans and Riverbend, and permitting jurisdictional discovery would
undermine the purposes of the sovereign immunity doctrine, the plaintiff’s motion for
jurisdictional discovery will be denied.
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II. Tribal Sovereign Immunity
“Indian tribes have long been recognized as possessing the common-law immunity from
suit traditionally enjoyed by sovereign powers.” Santa Clara Pueblo v. Martinez, 436 U.S. 49, 58
(1978). “As a matter of federal law, an Indian tribe is subject to suit only where Congress has
authorized the suit or the tribe has waived its immunity.” Kiowa Tribe of Okla. v. Mfg. Techs.,
Inc., 523 U.S. 751, 754 (1998). Abrogation or waiver “cannot be implied but must be
unequivocally expressed.” Santa Clara Pueblo, 436 U.S. at 58 (internal citations and quotation
marks omitted). “Sovereign immunity deprives a court of jurisdiction.” United States v. Jones,
225 F.3d 468, 469 (4th Cir. 2000).
The Supreme Court has made clear that tribes are entitled to sovereign immunity when
they engage in off-reservation commercial activity. Michigan v. Bay Mills Indian Cmty., 134 S.
Ct. 2024, 2028 (2014); Kiowa, 523 U.S. at 760 (“Tribes enjoy immunity from suits on contracts,
whether those contracts involve governmental or commercial activities and whether they were
made on or off a reservation.”). Unless Congress chooses to limit tribal sovereign immunity,
tribes will continue to be immune from suits arising from a tribe’s commercial activities, even
when they take place off Indian lands. Bay Mills Indian Cmty., 134 S. Ct. at 2037 (“[I]t is
fundamentally Congress's job, [not the Supreme Court’s], to determine whether or how to limit
tribal immunity.”). The settled law of tribal sovereign immunity is not without unfortunate
consequences. See id. at 2052 (Thomas, J., dissenting) (“payday lenders... often arrange to share
fees or profits with tribes so they can use tribal immunity as a shield for conduct of questionable
legality”).
“Tribal sovereign immunity may extend to subdivisions of a tribe, including those
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engaged in economic activities, provided that the relationship between the tribe and the entity is
sufficiently close to properly permit the entity to share in the tribe's immunity.” Breakthrough
Mgmt. Grp., Inc. v. Chukchansi Gold Casino & Resort, 629 F.3d 1173, 1183 (10th Cir. 2010). To
determine whether an entity is entitled to sovereign immunity as an “arm of the tribe,” courts
examine several factors, including: “(1) their method of creation; (2) their purpose; (3) their
structure, ownership, and management, including the amount of control the tribe has over the
entities; (4) whether the tribe intended for the entities to have tribal sovereign immunity; (5) the
financial relationship between the tribe and the entities; and (6) whether the purposes of tribal
sovereign immunity are served by granting immunity to the entities.” Id. at 1181; see also White,
765 F.3d at 1025 (adopting the same factors). The sixth factor examines “the policies underlying
tribal sovereign immunity and its connection to tribal economic development, and whether those
policies are served by granting immunity to the economic entities.” Breakthrough Mgmt. Grp.,
Inc., 629 F.3d at 1187. “Those policies include protection of the tribe’s monies, as well as
preservation of tribal cultural autonomy, preservation of tribal self-determination, and promotion
of commercial dealings between Indians and non-Indians.” Id. at 1188 (internal citations and
quotation marks omitted).
Applying the Breakthrough factors to MobiLoans and Riverbend leads to the conclusion
that both defendants are “arms of the tribe” entitled to immunity. The first factor, the method and
creation of MobiLoans and Riverbend, weighs in favor of this finding. MobiLoans is organized
and chartered under the laws of the Tunica-Biloxi Tribe of Louisiana. (Decl. of Marshall Pierite
¶ 6, MobiLoans Mot. Dismiss Ex. A, ECF No. 21-2; MobiLoans Charter Art. I, MobiLoans Mot.
Dismiss Ex. A-1, ECF No. 21-3; MobiLoans Operating Agreement §§ 2.1, 6.1, MobiLoans Mot.
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Dismiss Ex. A-2, ECF No. 21-4.) Riverbend was established by the Fort Belknap Indian
Community’s government under tribal law, and it operates pursuant to tribal law. (Decl. of
Michelle Fox ¶ 6, Riverbend Mot. Dismiss. Ex. 1, ECF No. 22-2; Riverbend Articles of
Organization, Riverbend Mot. Dismiss Ex. 1-A, ECF No. 22-2; Decl. of Mark Azure ¶ 6,
Riverbend Mot. Dismiss Ex. 2, ECF No. 22-3.)
The second factor, the purpose of the entities, also weighs in favor of immunity because
the tribes created the companies to financially benefit the tribes and fund governmental services.
The MobiLoans operating agreement states that “[t]he Company’s primary purpose is to engage
in lending related activities that will generate additional revenues for the Tribe.” (MobiLoans
Operating Agreement § 2.1.) According to the president of the Fort Belknap Indian
Community’s tribal council, Riverbend was formed “to fulfill the fundamental government
purpose of promoting the general welfare of the Tribe by encouraging economic development.”
(Azure Decl. ¶ 7.) The revenue from the lending companies benefits the tribes. The TunicaBiloxi Tribe of Louisiana uses revenue from MobiLoans to fund various tribal governmental,
educational, and social services, including Teach For America positions. (Pierite Decl. ¶ 7.)
Revenue from Riverbend is used to provide essential services, including police, ambulance, and
fire services, to members of the Fort Belknap Indian Community, and to reinvest in the tribe’s
other economic efforts, such as its store, restaurant, construction business, and information
technology business. (Fox Decl. ¶ 7; Azure Decl. ¶ 8.)
The third factor, the structure, ownership, and management of the entities, also weighs in
favor of granting immunity. MobiLoans is a limited liability company that is wholly owned and
operated by the Tunica-Biloxi Tribe of Louisiana. (MobiLoans Charter Arts. I, V.) All four
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members of MobiLoans’ board of managers are enrolled members of the tribe, and at least two
members of the board must be sitting members of the tribal council. (MobiLoans Operating
Agreement § 3.2.) The tribe exercises a fair amount of control over MobiLoans, as MobiLoans
must obtain the tribal council’s approval to adopt a budget or business plan, appoint executive
officers, sell or transfer any asset of the company outside the annual budget and business plan or
the ordinary course of business, waive its immunity, commit or burden any tribal resource,
amend its charter or operating agreement, and approve a written agreement between the company
and another business. (MobiLoans Operating Agreement § 3.5.) Riverbend is a limited liability
company wholly owned by the Fort Belknap Indian Community. (Riverbend Articles of
Organization; Fox Decl. ¶ 6; Azure Decl. ¶ 6.) The chief executive officer of Riverbend is a
member of the tribe. (Fox Decl. ¶¶ 1, 9.) The tribal council monitors and regulates Riverbend’s
economic ventures. (Azure Decl. ¶ 13.) Riverbend is located on the reservation, where tribal
employees, who are also tribal members, originate all loans. (Azure Decl. ¶ 10; Fox Decl. ¶ 8.)
Members of the tribe also work in Riverbend’s call center, which is located on the reservation.
(Azure Decl. ¶ 10.) About 70 members of the tribe on the reservation are employed by the tribe’s
lending operations, which include Riverbend and other entities. (Id.)
As for the fourth factor, both tribes clearly intended for the lending companies to share in
the tribes’ sovereign immunity. The MobiLoans charter states that “[t]he LLC shall be vested
with all of the privileges and immunities of the Tribe, including, without limitation, the
immunity from suit by any person or entity in any forum.” (MobiLoans Charter Art. X.) The
MobiLoans operating agreement provides that “[a]s an arm of the Tribe, an entity wholly-owned
by the Tribe and as a Tribally-chartered entity, the Company is clothed by tribal and federal law
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with all the privileges and immunities of the Tribe… including sovereign immunity from suit in
any state, federal or tribal court.” (MobiLoans Operating Agreement § 6.1.) Similarly,
Riverbend’s articles of organization state that “[t]he Company, being wholly owned by the Tribe,
is to enjoy the Tribe’s sovereign immunity. In furtherance thereof, the Tribe hereby confers on
the Company sovereign immunity from suit to the same extent that the Tribe would have such
sovereign immunity if it engaged directly in the activities undertake by the Company.”
(Riverbend Articles of Organization.)
The fifth factor also weighs in favor of granting immunity. The declarations submitted by
tribal members involved in the lending businesses reveal that the tribes use revenue from
MobiLoans and Riverbend to fund the provision of governmental services to tribal members.
(See Pierite Decl. ¶ 7; Fox Decl. ¶ 7; Azure Decl. ¶ 8.)
Finally, the sixth factor, the purposes of sovereign immunity, is served by granting
immunity to the defendants. MobiLoans and Riverbend “plainly promote and fund the Tribe’s
self-determination through revenue generation and the funding of diversified economic
development.” See Breakthrough Mgmt. Grp., Inc., 629 F.3d at 1195. Extending sovereign
immunity to the lending companies would protect a significant source of the tribes’ revenue from
suit, thereby “directly protect[ing] the sovereign Tribe's treasury, which is one of the historic
purposes of sovereign immunity in general.” See Allen v. Gold Country Casino, 464 F.3d 1044,
1047 (9th Cir. 2006). All six factors lead to the conclusion that MobiLoans and Riverbend are
“arms of the tribe” that are closely enough related to the tribes to share in their sovereign
immunity. Accordingly, the plaintiff’s claims against MobiLoans and Riverbend are barred
under the doctrine of tribal sovereign immunity and must be dismissed for lack of subject matter
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jurisdiction.
CONCLUSION
For the reasons stated above, the court will deny the plaintiff’s motion for discovery and
grant MobiLoans’ and Riverbend’s motions to dismiss.
A separate order follows.
November 20, 2015
Date
/S/
Catherine C. Blake
United States District Judge
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