Great Plains Lending, LLC v. Dep't of Banking, SC 20340

• Court: Supreme Court of Connecticut
• Writing for the Court: ROBINSON, C. J.
• Docket Number: SC 20340
• Parties: GREAT PLAINS LENDING, LLC, ET AL. v. DEPARTMENT OF BANKING ET AL.
• Decision Date: 20 May 2021

GREAT PLAINS LENDING, LLC, ET AL.
v.
DEPARTMENT OF BANKING ET AL.

No. SC 20340

Supreme Court of Connecticut

May 20, 2021^[*]

Argued October 21, 2020

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Procedural History

Appeal from the decision of the named defendant ordering the plaintiffs to cease and desist and to pay certain civil penalties and finding that the plaintiffs are not entitled to tribal sovereign immunity, brought to the Superior Court in the judicial district of New Britain, where the court, Hon. Joseph M. Shortall, judge trial referee, denied the defendants' motion to dismiss; thereafter, the case was tried to the court, Hon. Joseph M. Shortall, judge trial referee, who, exercising the powers of the Superior Court, rendered judgment vacating the orders of the named defendant that imposed certain financial penalties on the plaintiffs and remanding the case to the named defendant to hold an evidentiary hearing to reconsider the issue of whether the plaintiffs are entitled to tribal sovereign immunity, from which the plaintiffs appealed and the defendants cross appealed. Reversed in part; judgment directed in part; further proceedings.

Robert A. Rosette, pro hac vice, with whom were Linda L. Morkan and, on the brief, Jeffrey J. White and Saba Bazzazieh, pro hac vice, for the appellants-appellees (plaintiffs).

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Clare E. Kindall, solicitor general, with whom were John Langmaid, Joseph J. Chambers and Robert J. Deichert, assistant attorneys general, and, on the brief, William Tong, attorney general, for the appellees-appellants (defendants).

Robinson, C. J., and Mullins, Kahn, Ecker, Keller and Vertefeuille, Js.

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OPINION

ROBINSON, C. J.

This appeal presents three significant issues of first impression with respect to whether a business entity shares an Indian tribe's sovereign immunity as an "arm of the tribe," as we consider (1) which party bears the burden of proving the entity's status as an arm of the tribe, (2) the legal standard governing that inquiry, and (3) the extent to which a tribal officer shares in that immunity for his or her actions in connection with the business entity. The plaintiffs, Great Plains Lending, LLC (Great Plains), American Web Loan, Inc., doing business as Clear Creek Lending (Clear Creek) (collectively, entities), and John R. Shotton, chairman of the Otoe-Missouria Tribe of Indians (tribe), a federally recognized tribe, appeal^[1] from the judgment of the trial court sustaining their administrative appeal and remanding this case to the defendant Commissioner of Banking (commissioner) for further proceedings with respect to the plaintiffs' entitlement to tribal sovereign immunity in administrative proceedings. On appeal, the plaintiffs claim that the trial court should have rendered judgment in their favor as a matter of law, insofar as it improperly (1) allocated the burden of proving entitlement to tribal sovereign immunity to the plaintiffs, (2) required proof of a functioning relationship between the entities and the tribe, and (3) failed to find Shotton immune in further administrative proceedings. The defendants, the commissioner and the Department of Banking (department), cross appeal and similarly challenge the legal standard adopted by the trial court and its decision to remand the case for further administrative proceedings. We conclude that the entity claiming arm of the tribe status bears the burden of proving its entitlement to that status under the test articulated by the United States Court of Appeals for the Tenth Circuit in Breakthrough Management Group, Inc. v. Chukchansi Gold Casino & Resort, 629 F.3d 1173, 1187 (10th Cir. 2010) (Breakthrough), cert. dismissed, 564 U.S. 1061, 132 S.Ct. 64, 180 L.Ed.2d 932 (2011). We further conclude, as a matter of law, that Great Plains is an arm of the tribe and that Shotton, with respect to his capacity as an officer of Great Plains and the tribe, is entitled to tribal sovereign immunity from civil penalties but not injunctive relief. We also conclude, however, that there is insufficient evidence to support a conclusion that Clear Creek is an arm of the tribe as a matter of law, which requires a remand to the commissioner for further administrative proceedings. Accordingly, we reverse in part the judgment of the trial court.

The record reveals the following undisputed facts and procedural history. The tribe adopted the constitution of the Otoe-Missouria Tribe of Indians on February 4, 1984. In accordance with article IV, § 1, of the tribe's constitution, the Tribal Council (council) adopted the

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Otoe-Missouria Tribe of Indians Limited Liability Company Act (LLC Act) and the Otoe-Missouria Tribe of Indians Corporation Act (Corporation Act) on May 4, 2011. Acting pursuant to the LLC Act, the council passed a resolution creating Great Plains onMay4, 2011. American Web Loan, Inc., was created in accordance with the Corporation Act on February 10, 2010, and did business as Clear Creek. Shotton, as chairman of the tribe, served as secretary and treasurer of both entities.

Following an investigation by the department, the commissioner found that the entities had violated Connecticut's banking and usury laws by making small consumer loans to Connecticut residents via the Internet without a license to do so. The commissioner also found that the interest rates on these loans exceeded those permitted under Connecticut's usury and banking laws. On October 24, 2014, the commissioner issued temporary cease and desist orders to the plaintiffs, orders that restitution be made to the Connecticut residents, and a notice of intent to issue permanent cease and desist orders, as well as to impose civil penalties. The plaintiffs timely filed a motion to dismiss the administrative proceedings for a lack of jurisdiction, asserting that (1) the entities are arms of the tribe entitled to tribal sovereign immunity, and (2) Shotton's involvement in the affairs of the entities was within his official capacity, entitling him to tribal sovereign immunity, as well. On January 6, 2015, the commissioner denied the motion to dismiss, concluding that the administrative action of the department was not a "suit" from which the plaintiffs enjoyed tribal sovereign immunity.

The plaintiffs filed an administrative appeal from the denial of the motion to dismiss in the trial court pursuant to the Uniform Administrative Procedure Act. See General Statutes § 4-183. The trial court, Schuman, J., determined that "the better conclusion is that the tribe possesses sovereign immunity in [an] . . . administrative proceeding filed against [it] by a state commissioner." The court then remanded the case to the commissioner pursuant to § 4-183 (k) in order to determine whether (1) the entities are "arms of the tribe" entitled to tribal sovereign immunity, and (2) Shotton, as a tribal official, shares in that immunity.

After remand, on June 14, 2017, the commissioner again denied the plaintiffs' motion to dismiss the administrative proceedings, concluding that the entities had failed to demonstrate they were arms of the tribe because "Clear Creek simply did not submit any relevant evidence, and Great Plains failed to demonstrate that its relationship with the tribe is meaningful enough [for it] to be considered an arm of the tribe." Because the commissioner found that the entities were not arms of the tribe, the commissioner further concluded that Shotton was not entitled to tribal sovereign immunity. The commissioner thereafter issued final orders requiring

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the plaintiffs (1) to "cease and desist from violating two specified sections of part III of chapter 668 of the General Statutes relating to ‘small loan lending and related activities,' "^[2] and (2) to "pay civil penalties to the department in the following amounts: Great Plains, $700, 000; Clear Creek, $100, 000; [Shotton], $700, 000."

Pursuant to § 4-183 (a), the plaintiffs appealed from the commissioner's final orders to the trial court. The trial court, Hon. Joseph M. Shortall, judge trial referee, ^[3]first determined that the entities bore the burden of demonstrating that they were arms of the tribe entitled to tribal sovereign immunity. In so concluding, the court employed the analysis from Rocky Hill v. SecureCare Realty, LLC, 315 Conn. 265, 105 A.3d 857 (2015), with respect to corporate entities that claim state sovereign immunity from suit as an "arm of the state . . . ." (Internal quotation marks omitted.) Id., 279. The court then determined that the commissioner improperly relied on the finance oriented test outlined in Sue/Perior Concrete & Paving, Inc. v. Lewiston Golf Course Corp., 24 N.Y.3d 538, 546-47, 25 N.E.3d 928, 2 N.Y.S.3d 15 (2014) (Sue/Perior), in finding that the entities were not arms of the tribe. Instead, the trial court deemed the multifactor test articulated in People ex rel. Owen v. Miami Nation Enterprises, 2 Cal. 5th 222, 236, 386 P.3d 357, 211 Cal.Rptr.3d 837 (2016) (Miami Nation), to be the proper legal standard. Upon review of the record, the court concluded that, although the evidence presented by the plaintiffs was sufficient to meet most of the factors outlined in Miami Nation, it nevertheless was not sufficient to establish the entities' ultimate status as arms of the tribe because the plaintiffs had failed to show how the entities actually functioned in relation to their stated purpose.^[4] The court further concluded that Shotton's liability "rises and falls with . . . whether [the entities] are arms of the tribe . . . ." Therefore, the trial court rendered judgment sustaining the appeal and remanded the case to the commissioner pursuant to § 4-183 (j) in order for the plaintiffs to "submit evidence addressing these practical considerations to support their claim of tribal sovereign immunity." This appeal and cross appeal followed.^[5]

On appeal, the plaintiffs claim that the trial court improperly (1) allocated to the entities the burden of proving...