A deep-pockets law firm is back in court suing a lending company owned by a Native American tribe, raising questions among tribal advocates about its targeting minority-owned businesses.
Edelman Combs Latturner & Goodwin LLC portrays itself as a consumer advocate that protects rights via “individual and class-action lawsuits.” The Chicago firm, however, also has a history of going after Native American tribes over sovereignty issues — particularly ones involving payday loans. Edelman filed a pair of suits against tribes in February and March, claiming they violated racketeering laws in Illinois and Indiana.
It is big business for Daniel Edelman, whose firm has made Native American-owned lenders a frequent target. The law firm targeted the Menominee Tribe of Wisconsin in a similar suit last year. Months later, the group sued the Big Valley Band of Pomo Indians of the Big Valley Rancheria.
Court documents feature a similar refrain. Plaintiffs accuse the payday lenders and tribes of preying on them by issuing loans with higher interest rates. It’s suggested that the lenders are trying to slip around state usury laws by claiming affiliation to the tribes via a “rent-a-tribe” scheme. According to Edelman, the “rent-a-tribe” phrase suggests leaders of smaller, rural tribes essentially reach a naming rights deal with lenders in exchange for a pittance.
Tribal leaders dispute the “rent-a-tribe” claim and vow they know what they are doing. “It is reprehensible when critics imply that we are unsophisticated or have been ‘suckered’ into business relationships,” wrote James Williams Jr., chairman of the Lac Vieux Desert Band of Lake Superior Chippewa Indians, in “Native Business Magazine.” The LVD Band had been sued over its payday lending company and settled in 2020.
“The suggestion that my Tribal Council and I (or the governing body of any tribe) would place our sovereignty for sale to the highest bidder is deeply offensive. Each of the 576 federally recognized American Indian Tribes has the freedom and authority to engage in legal business operations (like tribal lending).”
Williams sees lending as advantageous because tribes can govern themselves through sovereignty, regardless of size. That sovereignty ability means tribes with small memberships can raise funds through new businesses since their tax base is so small, regardless of state law. “Instead of taxing citizens to pay for a bridge, community building, or meal program for hungry seniors, Tribes’ funding comes from their businesses.”
Non-Native Americans who grew up on reservations agree that tribes are well-versed in financial matters. “After 40 years in tribal gaming regulation, tribes quickly became expert in highly regulated online businesses as well, including those that provide customers with access to important financial products,” said Kate Spilde, endowed chair of the Sycuan Institute on Tribal Gaming in the L. Robert Payne School of Hospitality & Tourism Management at San Diego State University.
“Tribal governments also drive job growth and poverty reduction on-reservation by creating remote work opportunities on isolated reservations. … To claim or infer otherwise is insulting and grossly inaccurate. In fact, tribal governments and communities use business revenue for life-changing social programs, elder care, infrastructure improvements, and educational programs for their citizens and surrounding community.”
Edelman believes otherwise. His legal filings include allegations that sovereign immunity doesn’t apply due to the 2017 conviction of Scott Tucker and Timothy Muir in New York. Federal prosecutors successfully argued Tucker and Muir violated state laws by claiming Tucker’s payday lending operation was owned by several tribal governments.
“Attempting to circumvent state interest rate caps by fraudulently hiding behind tribal sovereign immunity has been found to constitute criminal conduct,” Edelman writes in the documents. “Telltale indicia of a ‘rent-a-tribe’ scheme are the fact that telephone numbers and websites used by the lending scheme are identified with locations not connected with the tribe.”
Native Americans say those allegations are nonsense. “Suits against tribal lenders are generally premised on the idea tribes cannot treat non-Indians fairly,” said Adam Crepelle, a member of the United Houma Nation and an assistant professor at George Mason University’s Antonin Scalia Law School.
“However, tribes have developed robust lending commissions, and some are staffed with non-Indians who have impressive credentials. For example, the Tunica-Biloxi Tribe of Louisiana’s lending commission includes a former U.S. attorney and former state attorney general.”
Case law appears to be against Edelman. Tucker and Muir were convicted of violating federal law, not state law. Tribal sovereignty possibly still applies because the suits almost exclusively focus on either the Illinois Consumer Fraud Act, Illinois Predatory Loan Prevention Act, Illinois Interest Act, or Indiana Uniform Consumer Credit Code.
The U.S. Supreme Court ruled in the 1980 Washington v. Confederated Tribes case that tribes must follow federal law but are exempt from state law. Justices reinforced the decision in 2020’s McGirt v. Oklahoma.
Native American tribes may win in federal court but face a battle in Congress. Democrats attempted to revive a federal 36 percent consumer loan rate cap last year. The legislation died in the House and Senate, although several hearings were held in the Senate Banking, Housing and Urban Affairs committees. Then-ranking member Sen. Pat Toomey (R-Penna.) warned, “History is littered with examples of government planners’ failed attempts to set prices. They fail because they generate huge unintended consequences, which inevitably harm the very people they are supposed to protect.”