Rosette Firm on the Second Circuit’s Decision in Otoe-Missouria Tribe


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Statement of Rosette, LLP Regarding the Second Circuit’s Decision in Otoe-Missouria Tribe of Indians v. New York State Department of Financial Services

As counsel of record for the Otoe-Missouria Tribe of Indians and the Lac Vieux Desert Band of Lake Superior Chippewa Indians, Rosette, LLP wishes to express its views regarding the United States Court of Appeals for the Second Circuit’s recent decision in Otoe-Missouria Tribe of Indians v. New York State Department of Financial Services. For several reasons, this case should be seen as a clear victory, not only from our clients’ perspective, but for Indian country as a whole.

As those familiar with the case are aware, in denying the Tribes’ request for a preliminary injunction, the District Court had made the erroneous finding that the Tribes’ lending activity took place in the State of New York. In doing so, the District Court appeared to give dispositive weight to the fact that the borrowers lived in New York. The Tribes successfully appealed this finding. As the Second Circuit clarified, “[n]either our court nor the Supreme Court has confronted a hybrid transaction like the loans at issue here, e-commerce that straddles borders and connects parties separated by hundreds of miles. We need not resolve that novel question today . . . .” The panel went on to recognize that “the transaction being regulated by New York could be regarded as on-reservation, based on the extent to which one side of the transaction is firmly rooted on the reservation.”

The Tribes also appealed based on the District Court’s failure to consider the Tribes’ interest in operating businesses pursuant to tribal law for the better of their community. On this issue, again, the appeal was successful. As the Second Circuit recognized, “[t]he tribes are independent nations, and New York’s regulatory efforts may hinder the tribes’ ability to provide for their members and manage their own internal affairs.”

Similarly, the panel expressly acknowledged an important fact that was overlooked by the District Court—that the tribal lending entities have provided immense benefits to the Tribes. Recognizing these economic benefits, the Opinion states that “[p]rofits from lending have fueled expansion of childhood education programs, employment training, healthcare coverage, [etc.],” and “[w]ithout revenue from lending, the tribes faced large gaps in their budgets.”

The panel also fully adopted the Tribes’ position regarding the federal interests at stake. While the District Court ignored the well-documented federal interest in tribal economic development and self-sufficiency, the Second Circuit forthrightly recognized that the federal government and Tribes have a “shared commitment to the continued growth and productivity” of tribal businesses.

But most importantly, the Second Circuit correctly reframed the issues as being analogous to the landmark case regarding the reach of state regulatory authority over Indian tribes—California v. Cabazon Band of Mission Indians, 480 U.S. 202 (1987). Of course, in Cabazon, the Supreme Court held that the State of California could not regulate tribal gaming activity (in that case, bingo), even though the majority of the customers were non-Indian. In doing so, the Supreme Court acknowledged that the Tribes had “built modern[,] . . . comfortable, clean, and attractive facilities.” This was in contrast to cases like Washington v. Confederated Tribes of the Colville Indian Reservation, 447 U.S. 134 (1980), where the Supreme Court noted that certain tribal smokeshops were offering “solely an exemption from state taxation.”

Viewing the tribal lending activity against the backdrop of these precedents, the Second Circuit correctly places the Tribes’ lending entities in the same category as the Cabazon Band’s bingo game. In fact, the panel expressly found that “the tribes may have built the electronic equivalent of ‘modern[,] . . . comfortable, clean, attractive facilities’ like the ones in Cabazon, and they may have ‘engaged in a concerted and sustained undertaking to develop and manage’ limited capital resources.”

Indeed, in appealing the District Court decision, the Tribes’ primary goal was to make the Second Circuit understand that tribal lending should be analyzed as the modern-day equivalent of tribal gaming. Like the early days of tribal gaming, lending has come under attack from overreaching state regulators, and like pre-IGRA gaming, lending should be analyzed under the framework set forth in Cabazon. As the Opinion makes clear, the Second Circuit has fully agreed with this position, and accordingly, the appeal was an unequivocal success, notwithstanding the denial of the tribes’ preliminary injunction.