Great Plains Lending, LLC. v. Connecticut Department of Banking

• Decision Date: 23 November 2015
• Docket Number: HHBCV156028096S
• Court: Connecticut Superior Court
• Parties: Great Plains Lending, LLC et al. v. Connecticut Department of Banking

Great Plains Lending, LLC et al. v. Connecticut Department of Banking

No. HHBCV156028096S

Superior Court of Connecticut, Judicial District of New Britain, New Britain

November 23, 2015

UNPUBLISHED OPINION

MEMORANDUM OF DECISION

Carl J., Schuman, J.

The issue in this administrative appeal is whether two companies created by a federally-recognized Indian tribe, along with the tribe's chairman, have tribal sovereign immunity from an enforcement action by the defendant state department of banking (department) intended to prevent the companies from engaging in the business of online payday loans in violation of state usury law.

I

On October 24, 2014, the commissioner of banking (commissioner) filed an initial order (Initial Order) against plaintiffs Great Plains Lending, LLC (Great Plains) and Clear Creek Lending (Clear Creek), which allege to be businesses created by the federally-recognized Otoe-Missouria Tribe of Indians (the Tribe), located in Oklahoma, and plaintiff James Shotton, who is Tribal Chairman. (Return of Record (ROR), pp 1-17 (Initial Order).) The commissioner alleged that Great Plains, by way of U.S. mail, email, and its website, had offered unsecured consumer loans in amounts ranging from $100 to $2, 000 with annual interest rates of 199.44% to 448.76% to consumers in Connecticut and other states. Similarly Clear Creek had allegedly offered unsecured small loans in amounts of $1, 500 to $2, 000 with annual interest rates of 390% to 420%. According to the commissioner, three Connecticut residents had entered into loan agreements with these companies, which agreements called for repayment at annual interest rates of 199.44%, 349.05%, and 398.20%. The commissioner alleged that at no point were the companies licensed as small loan lenders in Connecticut, nor were they exempt from licensure. (ROR, pp. 1-5.)

Based on these allegations, the commissioner found that the companies had violated Connecticut law by making loans without obtaining the required license and by contracting for and receiving interest at a rate greater than 12% on loans of less than $15, 000. See General Statutes § § 36a-555^[1] and 36a-573(a).^[2] The commissioner found that Shotton had violated Connecticut law by participating in these transactions. (ROR, pp. 6-10.)

Accordingly the commissioner ordered the plaintiffs to cease and desist from further loan activity and to make restitution of any sums obtained from these loans. The order also required the plaintiffs to provide a list of all Connecticut residents who applied for consumer loans from the plaintiffs or contracted with the plaintiffs to pay interest at rates exceeding 12%. Finally, the commissioner gave notice that he intended to impose civil penalties. The notice informed the plaintiffs that they could request a hearing on these matters within fourteen days, and that the hearing would be held in accordance with the Uniform Administrative Procedure Act (UAPA) on December 18, 2014. (ROR, pp. 10-17.)

Instead of requesting a hearing, the plaintiffs filed a motion to dismiss, alleging that tribal sovereign immunity barred all state enforcement action against them. (ROR, pp. 23, 161.) In a nine page decision issued on January 6, 2015, the commissioner denied the motion. (Ruling on Motion.) The commissioner concluded that at least some of the activity in question occurred off-reservation and that the state retained authority to regulate such off-reservation tribal activity in a nondiscriminatory way, at least as long it does not bring suit in court. (ROR, pp. 150-58.)

The commissioner then observed that, because the plaintiffs had not requested a hearing, he could issue a final decision based on the allegations in the October 24 Initial Order. Accordingly, the commissioner ordered the plaintiffs to cease and desist from violating Connecticut lending law, ordered Great Plains and Shotton to pay civil penalties of $700, 000 and ordered Clear Creek to pay a civil penalty of $100, 000. (ROR, pp. 159-65 (Final Order).)^[3]

The plaintiffs appealed to this court. When the plaintiffs filed what the court construed as a motion to stay, the court denied the stay as to the cease and desist order, but granted the stay as to the financial penalties upon the posting of a $1.5 million bond or payment of that amount in escrow. After much litigation, the plaintiffs requested permission to withdraw their motion to stay, which the court granted. At the current time, there is no stay in effect.

II

Under the UAPA, General Statutes § 4-166 et seq., judicial review of an agency decision is " very restricted." (Internal quotation marks omitted.) MacDermid, Inc. v. Dept. of Environmental Protection, 257 Conn. 128, 136-37, 778 A.2d 7 (2001). Section 4-183(j) of the General Statutes provides as follows: " The court shall not substitute its judgment for that of the agency as to the weight of the evidence on questions of fact. The court shall affirm the decision of the agency unless the court finds that substantial rights of the person appealing have been prejudiced because the administrative findings, inferences, conclusions, or decisions are: (1) In violation of constitutional or statutory provisions; (2) in excess of the statutory authority of the agency; (3) made upon unlawful procedure; (4) affected by other error of law; (5) clearly erroneous in view of the reliable, probative, and substantial evidence on the whole record; or (6) arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion."

Stated differently, " [r]eview of an administrative agency decision requires a court to determine whether there is substantial evidence in the administrative record to support the agency's findings of basic fact and whether the conclusions drawn from those facts are reasonable . . . Neither [the appellate] court nor the trial court may retry the case or substitute its own judgment for that of the administrative agency on the weight of the evidence or questions of fact . . . Our ultimate duty is to determine, in view of all of the evidence, whether the agency, in issuing its order, acted unreasonably, arbitrarily, illegally or in abuse of its discretion." (Internal quotation marks omitted.) Okeke v. Commissioner of Public Health, 304 Conn. 317, 324, 39 A.3d 1095 (2012). " It is fundamental that a plaintiff has the burden of proving that the [agency], on the facts before [it], acted contrary to law and in abuse of [its] discretion." (Internal quotation marks omitted.) Murphy v. Commissioner of Motor Vehicles, 254 Conn. 333, 343, 757 A.2d 561 (2000).

Our Supreme Court has stated that " [a]n agency's factual and discretionary determinations are to be accorded considerable weight by the courts . . ." (Internal quotation marks omitted.) Longley v. State Emples. Ret. Comm'n, 284 Conn. 149, 163, 931 A.2d 890 (2007). " Even for conclusions of law, [t]he court's ultimate duty is only to decide whether, in light of the evidence, the [agency] has acted unreasonably, arbitrarily, illegally, or in abuse if its discretion . . . [Thus] [c]onclusions of law reached by the administrative agency must stand if the court determines that they resulted from a correct application of the law to the facts found and could reasonably and logically follow from such facts . . . [Similarly], this court affords deference to the construction of a statute applied by the administrative agency empowered by law to carry out the statute's purposes . . . Cases that present pure questions of law, however, invoke a broader standard of review than is . . . involved in deciding whether, in light of the evidence, the agency has acted unreasonably, arbitrarily, illegally or in abuse of its discretion . . . Furthermore, when a state agency's determination of a question of law has not previously been subject to judicial scrutiny . . . the agency is not entitled to special deference . . . We have determined, therefore, that the traditional deference accorded to an agency's interpretation of a statutory term is unwarranted when the construction of a statute . . . has not previously been subjected to judicial scrutiny [or to] . . . a governmental agency's time-tested interpretation . . . [When the agency's] interpretation has not been subjected to judicial scrutiny or consistently applied by the agency over a long period of time, our review is de novo." (Citation omitted; internal quotation marks omitted.) Chairperson, Connecticut Medical Examining Board v. Freedom of Information Commission, 310 Conn. 276, 281-83, 77 A.3d 121 (2013).

III

On appeal, the plaintiffs renew their claim that tribal sovereign immunity barred the administrative action. In Michigan v. Bay Mills Indian Community, 134 S.Ct 2024, 188 L.Ed.2d 1071 (2014), the United States Supreme Court recently summarized the law of tribal sovereign immunity. As pertinent here, the Court stated: " Indian tribes are 'domestic dependent nations' that exercise inherent sovereign authority . . . As dependents, the tribes are subject to plenary control by Congress.

" Among the core aspects of sovereignty that tribes possess--subject, again, to congressional action--is the common-law immunity from suit traditionally enjoyed by sovereign powers . . . Thus, we have time and again treated the doctrine of tribal immunity [as] settled law and dismissed any suit against a tribe absent congressional authorization (or a waiver).

" In doing so, we have held that tribal immunity applies no less to suits brought by States (including in their own courts) than to those by individuals . . . Or as we elsewhere explained: While each State at the Constitutional Convention surrendered its immunity from suit by sister States, 'it would be absurd to suggest that the tribes'-at...