State ex rel. Suthers v. Cash Ad. and Pref., No. 07CA0582.

• Docket Nº: No. 07CA0582.
• Citation: 205 P.3d 389
• Case Date: April 17, 2008
• Court: Court of Appeals of Colorado

205 P.3d 389 STATE of Colorado, ex rel. John W. SUTHERS, Attorney General, and Laura E. Udis, Administrator, Uniform Consumer Credit Code, Plaintiffs-Appellees,
v.
CASH ADVANCE AND PREFERRED CASH LOANS, Defendants-Appellants. No. 07CA0582. Colorado Court of Appeals, Div. II. April 17, 2008. As Modified on Denial of Rehearing July 10, 2008.

[205 P.3d 393]

John W. Suthers, Attorney General, Paul Chessin, Assistant Attorney General, Denver, Colorado, for Plaintiffs-Appellees.

Jones & Keller, P.C., Thomas Burke, Jr., Edward T. Lyons, Jr., Denver, Colorado; Fredericks & Peebles, L.L.P., Conly J. Schulte, Shilee T. Mullin, Omaha, Nebraska, for Defendants-Appellants.

Wynkoop & Thomas, P.C., Richard B. Wynkoop, Denver, Colorado; AARP Foundation Litigation, Deborah Zuckerman, Michael Schuster, Washington, DC; Norman A. Googel, West Virginia Assistant Attorney General, Charleston, West Virginia, for amici curiae AARP; Center for Responsible Lending; Consumer Federation of America; National Association of Consumer Advocates; National Association of Consumer Agency Administrators; National Consumer Law Center; Talis J. Colberg, Attorney General, State of Alaska; Dustin McDaniel, Attorney General, State of Arkansas; Thomas J. Miller, Attorney General, State of Iowa; Paul J. Morrison, Attorney General, State of Kansas; Jeremiah W. Nixon, Attorney General, State of Missouri; Catherine Cortez Masto, Attorney General, State of Nevada; W.A. Drew Edmondson, Attorney General, State of Oklahoma; Donald K. Hardin, Administrator, Oklahoma Department of Consumer Credit; Deb Bortner, Division Director, Washington State Department of Financial Institutions Consumer Services Division; and Darrell V. McGraw, Jr., Attorney General, State of West Virginia.

Gill, Lindquist & Associates, LLC, Anne Whalen Gill, Castle Rock, Colorado, for amicus

[205 P.3d 394]

curiae Gill, Lindquist, & Associates, LLC.

Opinion by Judge BERNARD.

In this interlocutory appeal, we discuss the parameters of a Colorado trial court's jurisdiction to determine the ownership and management of two Internet lending businesses in the face of claims that they are owned and operated by Indian tribes. We examine the analytical structure necessary to decide whether tribal sovereign immunity applies to these businesses, and, if so, whether it protects them, and individuals associated with them, from action undertaken by the Attorney General to enforce the Uniform Commercial Credit Code (UCCC) and the Colorado Consumer Protection Act (CCPA). For the reasons set forth below, we reverse the trial court's order and remand for further proceedings.

 Table of Contents
                 I. Background 394
                 A. Introduction 394
                 B. Initial Discovery 394
                 C. Motions to Dismiss 395
                 D. Subsequent Discovery 395
                 E. Attorney General's Questions About Ownership 396
                 F. Trial Court's Order 396
                 II. Syllabus 397
                 III. Preliminary Issues 398
                 A. Finality of Trial Court's Order for Appellate Purposes 398
                 B. Waiver of Issue 398
                 IV. General Principles of Sovereign Tribal Immunity 398
                 V. Off-Reservation Conduct 400
                 VI. Colorado Regulatory Scheme 401
                 VII. Authority to Obtain Information 401
                VIII. Determining the Relationship Between the Tribes, the Corporations, and the
                 Internet Lending Businesses 403
                 A. New York 403
                 B. Minnesota 403
                 C. Arizona 403
                 D. Alaska 404
                 E. Washington 405
                 F. Analysis 405
                 IX. Tribal Officers and Members of Tribes 406
                 X. Waiver 407
                 XI. Burden of Proof on Remand 408
                 XII. Conclusion 410
                

(This Table of Contents and the section headings throughout this opinion are offered solely for the convenience of the reader and do not control or modify the substance of each section.)

I. Background A. Introduction

In 2004, Colorado residents filed complaints with the Attorney General about two Internet businesses, Cash Advance and Preferred Cash Loans (Preferred Cash), centering on allegations they were making usurious small, short-term payday loans to Colorado residents via the Internet. The Attorney General opened an investigation, and later issued cease-and-desist letters to Cash Advance and Preferred Cash in November 2004.

"Cash advance loans" or "payday loans" are typically used by consumers who have few other sources from which to borrow funds in times of personal financial crisis. Creola Johnson, Payday Loans: Shrewd Business or Predatory Lending?, 87 Minn. L.Rev. 1, 8-11, 103 (2002). Such loans are often accompanied by interest rates higher than those charged by more traditional lending institutions. Id. at 2, 27.

B. Initial Discovery

In January 2005, the Attorney General, employing the UCCC, sections 5-1-101 to -9-103,

205 P.3d 395

C.R.S.2007, and the CCPA, sections 6-1-101 to -115, C.R.S.2007, issued investigative subpoenas to Cash Advance and Preferred Cash. These subpoenas were not answered.

In the course of this investigation, the Attorney General obtained documents indicating that C.B. Service Corporation (CBSC) did business as Cash Advance, and Executive Global Management Corporation (EGMC) did business as Preferred Cash. CBSC and EGMC were incorporated in Nevada, and listed addresses, consisting of different suites in the same building, in Carson City as their corporate headquarters. James Fontano was listed as CBSC's and EGMC's sole executive officer and director.

The administrative subpoenas were issued to the Carson City address, and ordered Cash Advance and Preferred Cash to produce documents describing their corporate structure—including listing the names of all principals and officers; listing any other names under which they operated; demonstrating their authority to conduct business; detailing all contact with Colorado consumers related to loan offers, agreements, and the collection of interest; itemizing any enforcement actions or litigation in which they were involved; and enumerating all Internet sites by which they did business. After these subpoenas went unanswered, the trial court, at the Attorney General's request, issued orders to comply that were again served in Carson City.

Because Cash Advance and Preferred Cash failed to honor the trial court's order to comply, the trial court authorized the Attorney General to serve citations on CBSC, Cash Advance, EGMC, Preferred Cash, and Fontano at their Carson City address to show cause why they should not be held in contempt. Up to this point, neither the trial court nor the Attorney General had received any information to indicate that CBSC, Cash Advance, EGMC, Preferred Cash, or Fontano was affiliated with any Indian tribes.

C. Motions to Dismiss

In July 2005, CBSC, EGMC, and Fontano filed motions to dismiss, asserting they were not connected with Cash Advance and Preferred Cash. Two corporations, Miami Nations Enterprises, Inc. (MNE), and SFS, Inc. (SFS), filed a joint motion to dismiss the proceedings against Cash Advance and Preferred Cash, although they had not been served with the cease-and-desist letters, the subpoenas, or the contempt citations.

MNE claimed it did business as Cash Advance, and stated it had been incorporated by the Miami Nation of Oklahoma, an Indian tribe. SFS claimed it did business as Preferred Cash, and stated it had been incorporated by the Santee Sioux Nation, another Indian tribe. MNE and SFS argued they owned and operated the Internet lending businesses, and therefore, Cash Advance and Preferred Cash were immune from any enforcement action the Attorney General might pursue because of the doctrine of tribal sovereign immunity.

The Miami Nation is recognized as an Indian tribe under the Oklahoma Indian Welfare Act of 1936, 25 U.S.C. §§ 501 to 509 (2007), and is headquartered in Miami, Oklahoma. The Santee Sioux Nation is recognized as an Indian tribe under section 16 of the Indian Reorganization Act of June 18, 1934, 25 U.S.C. § 476 (2007), and is located on the Santee Sioux reservation in Nebraska. We refer to the Miami Nation and the Santee Sioux Nation collectively as "the Tribes."

D. Subsequent Discovery

In August 2005, the Attorney General issued written requests to the Miami Nation, MNE, Cash Advance, the Santee Sioux Nation, SFS, Preferred Cash, CSBC, EGMC, and Fontano to produce documents indicating the nature of their relationships with each other.

In September 2005, CSBC, EGMC, and Fontano filed a statement denying they had any documents that the Attorney General had requested. MNE and SFS separately filed a motion objecting to the Attorney General's request for documents, stating, in part, that they were not required to produce the documents based on tribal sovereign immunity. However, they agreed to make some documents available.

205 P.3d 396

The Attorney General filed a motion to compel production of the documents it had requested from all parties. The trial court denied this motion in October 2005, finding the requests were too broad in light of the jurisdictional issue raised by the motion to dismiss pending before the court.

The trial court partially reconsidered this ruling in April and June 2006, after the Attorney General filed a second motion to compel the production of documents. The court concluded that some of the information would aid the court in deciding whether it had jurisdiction over Cash Advance and Preferred Cash, and ordered MNE and SFS to produce some of the documents by early July 2006.

In the course of these proceedings, MNE and SFS argued they had produced sufficient documentation to show that Cash Advance and Preferred Cash were "tribal entities," and were immune from the Attorney General's enforcement action because of tribal sovereign immunity. They objected to providing anything else.

E. Attorney General's Questions About Ownership

The Attorney General produced evidence that raised questions about whether MNE and SFS owned and operated Cash Advance and Preferred Cash, and, if so, when they acquired them. For example, the Attorney General showed that the State of Kansas had commenced proceedings against Cash...