Finn v. Great Plains Lending , 689 F. App'x 608 ( 2017 )

FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT June 1, 2017
_________________________________
Elisabeth A. Shumaker
Clerk of Court
KEITH FINN,
Plaintiff - Appellant,
v. No. 16-6348
(D.C. No. 5:16-CV-00415-M)
GREAT PLAINS LENDING, LLC, (W.D. Okla.)
Specially-Appearing
Defendant - Appellee.
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ORDER AND JUDGMENT*
_________________________________
Before TYMKOVICH, Chief Judge, McKAY and LUCERO, Circuit Judges.
_________________________________
The district court dismissed Keith Finn’s lawsuit against Great Plains Lending,
LLC, based on tribal sovereign immunity. Finn appeals, contending that the district
court should have granted his request for limited discovery into matters relevant to
immunity. Exercising jurisdiction under 28 U.S.C. § 1291, we vacate the judgment
and remand for further proceedings.
*
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist in the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and collateral
estoppel. It may be cited, however, for its persuasive value consistent with
Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
I
Great Plains is a limited liability company formed by the Otoe-Missouria Tribe
of Indians, a federally recognized tribe. Great Plains offers short-term loans at high
interest rates. After the company made numerous automated calls to Finn’s cell
phone, he sued under the Telephone Consumer Protection Act, 47 U.S.C. § 227.
Great Plains filed a motion to dismiss under Fed. R. Civ. P. 12(b)(1), asserting
that it was entitled to tribal sovereign immunity. Finn argued that sovereign
immunity should not protect Great Plains because the company is actually controlled
by and exists for the benefit of a non-tribal entity, Think Finance, Inc. He requested
limited jurisdictional discovery to substantiate this claim. The district court
dismissed based on tribal sovereign immunity and denied Finn’s request for
jurisdictional discovery. Finn appeals.
II
“As a matter of federal law, an Indian tribe is subject to suit only where
Congress has authorized the suit or the tribe has waived its immunity.” Kiowa Tribe
of Okla. v. Mfg. Techs., Inc., 523 U.S. 751, 754 (1998). “Tribal immunity extends to
subdivisions of a tribe, and even bars suits arising from a tribe’s commercial
activities.” Native Am. Distrib. v. Seneca-Cayuga Tobacco Co., 546 F.3d 1288, 1292
(10th Cir. 2008); see also Michigan v. Bay Mills Indian Cmty., 134 S. Ct. 2024,
2036-39 (2014) (declining to limit tribal immunity for off-reservation commercial
activities). Tribal immunity is a jurisdictional issue. Bonnet v. Harvest (U.S.)
Holdings, Inc., 741 F.3d 1155, 1158 (10th Cir. 2014).
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Finn appeals the district court’s denial of his request for limited jurisdictional
discovery. “[I]mmunity entitles a [sovereign] not only to protection from liability,
but also from suit, including the burden of discovery, as a party, within the suit.”
Univ. of Tex. at Austin v. Vratil, 96 F.3d 1337, 1340 (10th Cir. 1996). Nevertheless,
we have held that “[w]hen . . . there is a factual question regarding a . . . sovereign’s
entitlement to immunity, and thus a factual question regarding a district court’s
jurisdiction, the district court must give the plaintiff ample opportunity to secure and
present evidence relevant to the existence of jurisdiction.” Hansen v. PT Bank
Negara Indon. (Persero), TBK, 601 F.3d 1059, 1063-64 (10th Cir. 2010) (quotation
omitted).
As with other types of discovery, district courts possess discretion to permit
jurisdictional discovery. See Sizova v. Nat’l Inst. of Standards & Tech., 282 F.3d
1320, 1326 (10th Cir. 2002). We review the denial of such discovery for abuse of
discretion. Breakthrough Mgmt. Grp., Inc. v. Chukchansi Gold Casino & Resort,
629 F.3d 1173, 1189 (10th Cir. 2010). “[A] refusal to grant [jurisdictional] discovery
constitutes an abuse of discretion if the denial results in prejudice to a litigant.
Prejudice is present where pertinent facts bearing on the question of jurisdiction are
controverted or where a more satisfactory showing of the facts is necessary.” Sizova,
282 F.3d at 1326 (citations and quotations omitted); see also Breakthrough Mgmt.
Grp., 629 F.3d at 1189. It is Finn’s burden, as the party seeking discovery, to
demonstrate his entitlement to jurisdictional discovery and the resulting prejudice
from its denial. Breakthrough Mgmt. Grp., 629 F.3d at 1189 n.11.
3
To determine whether a tribal entity is entitled to immunity, we consider the
following factors: (1) the method of the entity’s creation; (2) the entity’s purpose;
(3) the entity’s “structure, ownership, and management, including the amount of
control the Tribe has over the entit[y]”; (4) “whether the Tribe intended for [the
entity] to have tribal sovereign immunity”; (5) the financial relationship between the
Tribe and the entity; and (6) “whether the purposes of tribal sovereign immunity are
served by granting [the entity] immunity.” Id. at 1191. Finn argues that evidence
produced from limited discovery could support his allegations regarding
Think Finance’s effective control of Great Plains, affecting the analysis of factors
2, 3, 5, and 6.
We conclude that a more satisfactory showing regarding the actual workings of
Great Plains and its financial relationship with the Tribe is necessary for a thorough
consideration of the Breakthrough factors. Finn’s allegations are specific and
plausible. They are also supported by several pieces of circumstantial evidence,
including website screenshots listing Great Plains as a Think Finance product, media
reports, and judicial pleadings in a different case against Think Finance. In that case,
Pennsylvania’s Attorney General alleged that Think Finance contracted with three
tribe-created payday lending companies, including Great Plains, to evade
Pennsylvania’s cap on interest rates and that the tribes received less than 5% of the
profits generated. Additionally, unlike in Breakthrough, 629 F.3d at 1189-90, in
which we affirmed the denial of jurisdictional discovery, Finn specifies which
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documents he would have sought in discovery and describes their relevance to the
immunity analysis.
Further, a recent California Supreme Court decision illustrates the potential
importance of jurisdictional discovery in sovereign immunity cases involving
tribe-created payday loan companies. In People ex rel. Owen v. Miami Nation
Enters., 386 P.3d 357 (Cal. 2016), the California Supreme Court adopted the first five
Breakthrough factors, and applying that test, denied immunity to two tribe-created
payday loan companies. Id. at 371-73, 375. The court “[took] into account both
formal and functional considerations—in other words, not only the legal or
organizational relationship between the tribe and the entity, but also the practical
operation of the entity in relation to the tribe.” Id. at 365. In this regard, the court
noted that “the purpose factor considers the extent to which the entity actually
promotes tribal self-governance; the control factor examines the degree to which the
tribe actually, not just nominally, directs the entity’s activities; and the financial
relationship factor considers the degree to which the entity’s liability could impact
the tribe’s revenue.” Id. at 371. As the court recognized, “organizational
arrangements on paper do not necessarily illuminate how businesses operate in
practice.” Id. at 375.
The district court in this case largely relied on such formal arrangements as set
forth in Great Plains’ organizational paperwork to hold that tribal sovereign
immunity applied. The court recognized that a contract detailing the profit ratio
between Think Finance and Great Plains could be material to its decision, but it
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denied Finn the opportunity to obtain any such document. Thus, practically
speaking, Finn has no way to secure evidence to verify—or disprove—his belief
about Great Plains’ lack of tribal control or benefit without engaging in the
jurisdictional discovery that the district court disallowed. See Ignatiev v. United
States, 238 F.3d 464, 467 (D.C. Cir. 2001) (holding that the district court erred in
denying limited jurisdictional discovery because although plaintiff suspected the
existence of policies relevant to sovereign immunity, he had no way to know if such
policies actually existed absent discovery).
Under these circumstances, we conclude that there is a “need for further
factual development” regarding Great Plains’ actual operation. Sizova, 282 F.3d at
1328. Of course, “discovery should be ordered circumspectly and only to verify
allegations of specific facts crucial to an immunity determination,” and a discovery
order should be “narrowly tailored . . . to the precise jurisdictional fact question
presented.” Hansen, 601 F.3d at 1064 (quotations omitted).
III
The district court’s judgment is VACATED, and this case is REMANDED
for further proceedings consistent with this decision.
Entered for the Court
Carlos F. Lucero
Circuit Judge
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