PEOPLE v. MIAMI NATION ENTERPRISES

Appellant’s Opening Brief on the Merits

Cal.July 28, 2014

In the Supreme Court of the State of California PEOPLE OF THE STATE OF CALIFORNIA, Plaintiff and Appellant, Vv. MIAMI NATION ENTERPRISES, ET AL., Defendants and Respondents. Case No. 8216878 atomee UP CLD Ee Pe JUL 28 2h Court of Appeal, Second Appellate District, Case No. B242644°""” Superior Court of California, County of Los Angeles Case No. BC373536 Yvette M. Palazuelos, Judge OPENING BRIEF ON THE MERITS KAMALA D. HARRIS Attorney General of California EDWARD C. DUMONT Solicitor General SARA J. DRAKE Senior Assistant Attorney General JANILL L. RICHARDS Principal Deputy Solicitor General MaryANN SMITH Deputy Commissioner Department of Business Oversight UCHE L. ENENWALI Senior Corporations Counsel *JENNIFER T. HENDERSON State Bar No. 206231 TIMOTHY M. MUSCAT State Bar No. 148944 WILLIAM P. TORNGREN State Bar No. 58493 Deputy Attorneys General 1300 I Street, Suite 125 P.O. Box 944255 Sacramento, CA 94244-2550 Telephone: (916) 324-5366 Fax: (916) 327-2319 Email: Jennifer.Henderson@doj.ca.gov Attorneysfor PlaintiffandAppellant the People ofthe State ofCalifornia In the Supreme Court of the State of Caltfornta PEOPLE OF THE STATE OF CALIFORNIA, Plaintiff and Appellant, Vv. MIAMI NATION ENTERPRISES,ET AL., Defendants and Respondents. Case No. 8216878 Court of Appeal, Second Appellate District, Case No. B242644 Superior Court of California, County of Los Angeles Case No. BC373536 Yvette M. Palazuelos, Judge OPENING BRIEF ON THE MERITS KAMALA D. HARRIS Attorney General of California EDWARD C. DUMONT Solicitor General SARA J. DRAKE Senior Assistant Attorney General JANILL L. RICHARDS Principal Deputy Solicitor General MARY ANN SMITH Deputy Commissioner Department of Business Oversight UCHE L. ENENWALI Senior Corporations Counsel *JENNIFER J. HENDERSON State Bar No. 206231 TIMOTHY M. MUSCAT State Bar No. 148944 WILLIAM P. TORNGREN State Bar No. 58493 Deputy Attorneys General 1300 I Street, Suite 125 P.O. Box 944255 Sacramento, CA 94244-2550 Telephone: (916) 324-5366 Fax: (916) 327-2319 Email: Jennifer.Henderson(@doj.ca.gov Attorneysfor Plaintiffand Appellant the People ofthe State ofCalifornia TABLE OF CONTENTS Page Issues Presented .........ccscccsssesssceeeseeeeceenceeseseceseeeeceneeeeeesesesneessneeesnseeessesenees 1 INtrOductiOn ....cccccccccscsscssceseeesesscseceeseeseeeecseecdceecessasseaseasntensesseesseenesneseneesags 1 Statement of Appealabilityciccccceesscecseeseesseseeeesenecesseneseenssetaseasens 4 Factual and Procedural Background 00... ecceceseeceeseeeeeseeeetenseeneeeeenseenseees 4 1, State and Federal Governments Take Action to Protect Consumers of Payday Lending Services «0.0... eeeeeererees 4 Il. Consumer Complaints Spur Department Enforcement Against the Payday LenderS...........cceccccceseeseereneeeseneteeseeseens 6 lll. The Payday Lenders Ignore the Department’s Desist and Refrain Order; the People File Suit...ee7 IV. The Payday Lenders Assert Arm-of-the-Tribe Status and Claim Immunity 0.0... cece eeeecseceseecsssesensecssesesseeseeeseae 8 V. Evidence Concerning the Payday Lenders’ Status as Aris Of Tribes ........cccccsccscsssccsesesssseseeeseseeeteeseeeseseeareneeeseeeeees 8 A. Use and Registration of the Payday Lenders’ MarkS ooo. .ccccececsscsccsscesscesecececseeeacecsceeseeesenersseatpeenseeenes 9 B. | SES, Ine.eeeecceecscceeeeseeeeesssnneneceeeseeeseesseesseseeeseeeae 10 1. Public information regarding SFS,Inc.’s ownership and use of marks OneClickCashand PreferredCashLoans....... 10 2. SFSInc.’s creation, formation documents, and governing laws......... 10 3. The Payday Lenders’ declaration concerning SFSInc.’s operations............0. 12 4. Evidence concerning the Payday Lenders’ actual operations........eeeeee 14 C. MNE Services, Inc. .....cccccccccssssececcsssseeesceeceesseeeeseeeres 15 l. Public information regarding MNE Services, Inc.’s ownership and use of marks Ameriloan, UnitedCashLoans, and USFastCash.........ccececessecescesesneesssessceseeenes 15 TABLE OF CONTENTS (continued) Page 2. MNE Services, Inc.’s creation, formation documents, and governing laws...............8 16 3. The Payday Lenders’ declarations concerning MNE Services,Inc.’s OPCTAtIONS 0... ee eececseceseeeeseessessenesteseeseseeeees 18 4, Evidence concerning the Payday Lenders’ actual operations ........ccseceeeeeeeeeees 19 VI. The Court of Appeal Affirms Dismissal of the Case Against the Payday Lenders on Their Renewed Motion tO QUASH 0... eeceeceeeseeesecerceeeseescsseeceeeseeesessseeseseeeeneenseneees 21 Legal Discussion ......ccccsscsssesssescsesesssecsscessecsesereneeseeeenenseseteseassanenanesaeeenenns 21 I. Standard Of REVICW ........::ccccceeseeccesrecessessetseseeeseeeseeeseeseteeees 21 I. Summary of Argument 00...cece scsessesesseeetseneeneenetseseeenes 22 TIL. AnallySiS.....eeeeeeeeeessseseeeseenscesesseesseesseeseeseeeesesseseeeeeeeneeee® 24 A. There is No Nationally Coherent Arm-of-the- Tribe Doctrine .........cecceeceesceeeseeeneeeseeseeseeeseeesesseeeaneees 24 B. The California Courts of Appeal Have Developed Conflicting Arm-of-the-Tribe Tests....... 26 The Court Should Bring Arm-of-the-Tribe Doctrine Into Alignment With Arm-of-the-State DOCHriNe......ccceeesscceeseecesceeeneeeseeeeeaeeesseessessessesereeesuas 28 1. Summary of arm-of-the-state doctrine.......... 29 2. Becausetribal and state sovereignty are fundamentally similar, it is reasonable to consider arm-of-the-state doctrine in applying arm-of-the-tribe doctrine................ 31 An entity claiming arm-of-the-tribe status should bear the burden ofproof........... 33 The samethree fundamental considerations should govern the determination of both arm-of-the-state and arm-of-the-tribe status...eeeeee 34 il TABLE OF CONTENTS (continued) Page Financial relationship .......0....cee 35 Function and purpose... 36 C. Governmental control versus Independence .......eeeecseeseeseeseseeeeeeees 38 D. Applying a Properly Realigned Arm-of-the- Tribe Test, the Payday Lenders Have Not Established Entitlement to Immunity on the Present Record .........cccescsceeeseeeeenseesessecesneeseeeesenessenees 39 1. SFS,Inc. has disavowed a relationship with PreferredCashLoans, and the People’s suit against this entity should be allowed to proceed... eeesesesseeseeeceseeeeees 40 2. The evidencepresented fails to establish that SFS, Inc., dba as OneClickCash,is an arm of the Santee Sioux Nation... 40 Financial relationship...........eee AQ Function and purpose.........ceceeeee 4] C. Governmental control versus Independence ....... eeeeeeeseeseeeeeseesens 43 3. The evidence presented fails to establish that MNE Services,Inc., dba as Ameriloan, United Cash Loans, and USFastCash, is an arm of the Miami Tribe... eecceceeceeseeceeeeseeceeeeeesceceneeesaseeseeneeneees 44 Financial relationship ...........cceeseeee 44 b. Function and purpose...wees 4S c. Governmental control versus Independence... eeeeeeseeeeeseeeeeees 45 E. Under Any Reasonable Arm-of-the-Tribe Test, and on the Present Record, the Payday Lenders are Not IMMUN..........c ce ceeeeceeeeeeeneeeseeeeeeeseeseueesaaeees 46 COnCIUSION.........cccccccsseeccccceseseceecececcecececceesececeuceesecssauesceesnaessescsseasesseseessenss 47 ill TABLE OF AUTHORITIES Page CASES Agua Caliente Band ofCahuilla Indians v. Superior Court (2006) 40 Cal4th 239iccecsceseeeeseeeseseseeeeseseeneeeeneeeeeey 1,26,27 | Aguilar v. Atlantic Richfield Co. (2001) 25 Cal4th 826 oceccccccsccscesesesseseneeeesenseneseeeeneeseeaseeneenenes 22 Alaska Cargo Transport, Inc. v. Alaska Railroad Corp. (Oth Cir. 1993) 5 F.3d 378 oo cccecccesesseseseesessseseeseeesesseecseessneenspassim Alden v. Maine (1999) 527 U.S. 706 wee eeeccsessseeesesessessesseeeesescsessensesseneesseeeseaneens 32, 33 Allen v. Gold Country Casino (9th Cir. 2006) 464 F.3d 1044cecceeceeneseeseeeeeeseneeeeetensseneenenees 31 American Property Management Corp. v. Superior Court (2012) 206 CalApp.4th 491oeecseesenteeeneeneeseereeeeneeeney passim Ameriloan v. Superior Court (2008) 169 CalApp.4th 81cccccceeseserenseeneeeneeteneeeeeeeeeeneneey 27 Auer v. Robbins (1997) 519 U.S. 452 vecessceeceessenscseesasesesseneesseesessneeesenes 29, 30 Breakthrough Management Group, Inc. v. Chukchansi Gold Casino and Resort (10th Cir. 2010) 629 F.3d 1173 oo. cecceseseseeseeeeeseseeeseneeeeeees 25, 28, 35 Cash Advance and Preferred Cash Loansv. State (Colo. 2010) 242 P.3d 1099... csesseeseteteeteenesteeteteeeeeeeeeenes passim City ofSherrill, New York v. Oneida Indian Nation ofNew York (2005) 544 U.S. 197 eeeeeesseecessesesseesesereneeseeseseeseeeeseneeeseeneeeeeaey 34 Cooley v. Superior Court (2002) 29 Cal.4th 228 occecesesseceeseeseneneesesseseneeseneesseseseneeneneeney 21 iv Del Campov. Kennedy (9th Cir. 2008) 517 F.3d 1070 vcccuseitacecseaecesessecesseceesueasessececssevsasessens 31 Durning v. Citibank, N.A. (9th Cir. 1991) 950 F.2d 1419 oo cccceeseseeeeneeeeeeaeeeneeesseeeeneenesens 30 Engle v. Isaac (1982) 456 U.S. 107 veeeccecsssesesseseeesensessenerstecteneestieneseescaseaseasacens 24 Estate ofJoseph (1998) 17 Cal4th 203 oo cecesccseseeeseseneeeseseeeteeeenseeeeeenesetenenerenesnenens 21 Ex parte Young (1908) 209 U.S. 123 .eeeccescseseseesenenseseseenseestenenaeseeeceeseneneneneneneees 33 Federal Maritime Commission v. South Carolina State Ports Authority (2002) 535 U.S. 743cessessseseeereereeseseeeeesaetensenetactacnetseesestananes 29, 32 Federal Trade Commission v. AMG Services, Inc. (D.Nev. May 28, 2014, No. 2:12cv536)___ F.Supp.2d__ [2014 WL 2927148] ..ccccccsccseseesceseercescessessecessnsscssesscsessecsseneeseeseseeeseenereeages 5,6 Gavle v. Little Six, Inc. (Minn. 1996) 555 N.W.2d 284 oo. cceceseeseneeeeseteeeneeneereeeeees 26, 27, 37 Gristede’s Foods, Inc. v. Unkechuage Nation (E.D.N.Y. 2009) 660 F.Supp.2d 442 ....ccecsceeseeeeteeeteteeeetseey 25, 31 Hess v. Port Authority Trans-Hudson Corp. (1994) 513 U.S. 30ccccsceseeeneeseeeeeeeesstenseneteeraseeraeneees 29, 30, 33 Inyo County, California v. Paiute-Shoshone Indians ofthe Bishop Community ofthe Bishop Colony (2003) 538 U.S. TO] .eeesssseeeseeseeesseesesesesesscessseresseenerecaenenensesanasiens 1 ITSI T.V. Productions, Inc. v. Agricultural Associations (9th Cir. 1993) 3 F.3d 1289 woe cceeeseceeseseteeeeeteteeeteteetereeeneaspassim Kiowa Tribe ofOklahoma v. Manufacturing Technologies, Inc. (1998) 523 U.S. 751 vecescceeeeeeeeeseneneneesenesaereetceeetenessnenstenseseeny 42 Lake Country Estates, Inc. v. Tahoe Regional Planning Agency (1979) 440 U.S. 391ececceseeereeneeeesensneeerseeeenerseneteeneneees 29, 30, 39 Lawrence v. Barona Valley Ranch Resort and Casino (2007) 153 Cal.App.4th 1364...eeeseeeeesesesesaesescenenenees 26 Michigan v. Bay Mills Indian Community (2014) —- U.S. __ [134 S.Ct. 2024]... ceeeetetetteeneesseeceesenene passim Mitchell v. Los Angeles Community College District (9th Cir. 1988) 861 F.2d 198 ccceesesseseseteeeneeseeeeecetsesnenteessees 30 Ransom v. St. Regis Mohawk Education & Community Fund (N.Y. 1995) 86 N.Y.2d 553 oooceceeects eeeeeneeseeeeeeetensenenenenes 25, 35 Redding Rancheria v. Superior Court (2001) 88 Cal.App.4th 384 oo eceeceeseseeseeseeeseeeenetestereeeeney 27, 33 Regents ofthe University ofCalifornia v. Doe (1997) 519 U.S. 425 eeccccseneseeeeesesesscseeessessessnssesseeneseeeseeseneaeas 29, 30 Runyonex rel. B.R. v. Association of Village Council Presidents . (Alaska 2004) 84 P.3d 437 otc cccceccseseesesessesenenseeseeneseeneneeeaees 25, 31 Sossamon v. Texas (2011) US. [131 S.Ct. LOS 1D)eeecen eeneeeeeneeeeeeeenens 29, 32 Trudgeon v. Fantasy Springs Casino (1999) 71 CabApp.4th 632 occccccccssessesseeseesesessestecneseeteneeespassim United States ex rel. Oberg v. Pennsylvania Higher Education Assistance Agency (4th Cir. 2014) 745 F.3d 131ceceeeeeceeeeeeeeeneeneeeeseteteneeesneees 31 Washington v. Confederated Tribes ofColville Indian Reservation (1980) 447 U.S. 134 vec ceceecseesseeesecsssesesseseescseneesseeeseneceeenenens 34, 38 Woods v. Rondout Valley Central SchoolDistrict Board of Education (2d Cir. 2006) 466 F.3d 232 oo. iececcceceseseseeeessenseeeessetensteessererene 31 Wright v. Colville Tribal Enterprise Corp. (Wash. 2006) 147 P.3d 1275 oo. eeccceseeeeeeseeseseeseesesecsenseseeeessenenenas 36 STATUTES Q5 U.S.C. § 477 ciccccccccscssseesceceneesecsesserseescneseassesecsseseesaeeeeneeessensaensesseaes 36 25 U.S.C. §§ 2701-2721 eceececccestecceecessesensecessesesseseesaseassaseneeseeeuensenenecaes 37 Vi 25 U.S.C. § 2702 woeccccccccccecsrccesceeseesessessccssccseesanenseeseeeseeseessesaneneesnentenaeeegs 38 25 U.S.C. § 2710(b)(2)(B) oe eee eeeeseeesceeseeseeseeseeeeseessenenseeneneeseneeeeereseees 38 Code of Civil Procedure § 904.1, subd. (€)(3) ceceeeseeeeeesteeeeeteeeeneees 4 Federal Trade Commission Act (15 U.S.C. §§ 41-58)...cccececcere cere eees 5 Financial Code, § 23000 et SOQ. .......eececcsscesesesseecsseseeeeeeneeeaeneeteeneenenees 5 Financial Code, § 23001, subd. (8) .....eec eee seeeeereeeteesvnunet5 Financial Code, § 23005, subd. (8) ....ecccececececeesseeseeeetenseseneeeenenareneenes 5 Financial Code, § 23035, subd. (8) .....eeccccseeseeseeeneeneeenseneseeeeeeeteeenaees 5 Financial Code, § 23035, subd. (€)(1).....ccceccessesereseeneeensenneesteeeeeeeeenees 5 Financial Code, § 23036, subd. (a) oo... ccc ccsseceeesecsseneessesseneeesensesseearens 5 Financial Code, § 23036, subd. (C) oo. .ececeecscseesseereeteenseneenenestesteeseeeeees 5 Financial Code, § 23050 .....eceeceeescessssssteseessesseeneeceaseeeenseneeeseeeesaetaeesaees 7 Financial Code, § 23051, subd. (a) oe. cccceeccseseeseerseneeeteeseeeenseeseeseeeenens 7 Government Code, § 11180 oc.ceeecesecsseresseeeseeeeeseeeeseseestessrnersnees 7 Truth in Lending Act (15 U.S.C. §§ 1601-16672) ........cccceeteeeeteeeeeee 5 OTHER AUTHORITIES 79 Fed. Reg. 4748 (Jan. 20, 2014) voce eecceseesessensesenseenenseeeseeeeeaeeersens 3 Atkinson and Nilles, Tribal Business Structure Handbook 2008 (Office of Indian Energy and Economic Development)..............++ 36 Fletcher, Jn Pursuit of Tribal Economic Development as a Substitute for Reservation Tax Revenue (2004) 80 N.D. L. Rev. 759eee37 Harte and Zuckerman Bernstein (June 17, 2014) Payday Nation, pt. Tiicccecccccscccsscsecesssseseseneenecnereeeseienseneeenseenens 6,7 Martin & Schwartz, The Alliance Between Payday Lenders and Tribes: Are Both Tribal Sovereignty and Consumer Protection at Risk? (2012) 69 Wash. & Lee L. Rev. 751 ...ccccecceeeeteteteeeeneneens 6, 26 Vil Mayle, Usury on the Reservation: Regulation of Tribal-Affiliated Payday Lenders (2011) 31 Rev. Banking & Fin. L. 1053... 25 Papke, Perpetuating Poverty: Exploitative Businesses, the Urban Poor, and the Failure ofReform (2014) 16 Scholar St. Mary’s L. Rev. & Soc. Just. 223 .cecccccsecseseceesssseseesereeceseeseeseeeceneeeeseeesseeeneesnsnees 5 Pew Charitable Trusts, Payday Lending in America (SeTICS) .......:seceee 4 Vill ISSUES PRESENTED 1. Cana business—here, an Internet-based payday loan company exacting triple-digit interest rates from its customers—establish tribal sovereign immunity, and thus avoid enforcement of California’s consumer protection laws, simply by making a showing that it is formally affiliated with a federally recognized Indian tribe? 2. May acourt look behind the evidence of formaltribal affiliation to determine whetherthe tribe exercises actual control, management, and oversight of the business and, if not, reject the business’s assertionoftribal sovereign immunity on that basis? INTRODUCTION As a sovereign,a federally recognized Indian tribe is immune from suit in both state and federal courts, unless the tribe has waivedits immunity or consented to suit or Congress has authorized the action. Both the United States Supreme Court and this Court have observed that an instrumentality or “arm”of a tribe shares in that tribe’s immunity. (See Inyo County, Cal. v. Paiute-Shoshone Indians ofthe Bishop Community of the Bishop Colony (2003) 538 U.S. 701, 705, fn. 1; Agua Caliente Band of Cahuilla Indians y. Superior Court (2006) 40 Cal.4th 239, 247-248 (Agua Caliente).) To date, however, neither court hasset out a test to determine arm-of-the-tribe status, and the lower federal and state courts have developed a variety of conflicting approaches. This case offers an opportunity to clarify the law for California andto establish persuasive authority for other jurisdictions confronting this difficult issue. The present matter involves a consumer enforcement action brought by the Peopleof the State of California againstfive Internet cash-advance or “payday”lenders. In ruling on the payday lenders’ renewed motion to quash, the Court of Appeal surveyed the case law and devised yet another arm-of-the-tribe test. That test gave effectively dispositive weight to paper connections between the Tribe and the payday lendersandto tribal statements of intent to confer immunity. Further, the Court of Appeal required the People to prove a negative—thatthe payday lenders were not arms of tribes. Applyingits test, the court affirmed dismissal of the People’s action, preventing California from ensuring that these particular payday lenders,in their dealings with the State’s consumers, comply with the State’s consumerfinance laws. The Court of Appeal’s approach to determining arm-of-the-tribe status does not comport with the purposes of sovereign immunity. Immunity is not a benefit that a sovereign may confer on a third party simply by stating its intent to do so. Rather, immunityis a legal protection the law recognizesfor the sovereignitself, serving to protect the sovereign’s fisc and its right to direct its governmentalaffairs. A valid arm-of-the-tribe test must ensure that a tribe’s immunity extends to an entity only where that entity is, in certain essential respects, so closely connected to and aligned with the tribal sovereign that a suit against the entity is in practical effect a suit against the tribeitself. Becausestate and tribal sovereignty share fundamentalsimilarities, in clarifying the arm-of-the-tribe doctrine, this Court should look to the comparatively cohesive body of law concerning the immunityofentities claiming to be armsof states. In general, whatever their precise factors, tests for arm-of-the-state status focus on the actual connection,identity of interest, and control between the sovereign and the entity. Applying the logic of arm-of-the-state cases to tribal circumstances produces sensible, practical, and fair test for arm-of-the-tribe status. That test takes into account three considerations grounded in the purposesof sovereign immunity: (1) the financial relationship between the entity andthetribe; (2) whetherthe entity serves central governmental functions; and (3) whether the tribal governmentexercises actual, practical control over the entity’s operations. Further, the overwhelming weight of the law treats arm-of-the- state status as an affirmative defense, thus placing the burden ofproof on the entity seeking immunity. An entity claiming arm-of-the-tribe status should bear the same burden. Asset out in greater detail below, while much is unknownor unclear on the present record,it is undisputed that the entities standing behind the payday-lending trade namesat issue here——MNE Services, Inc. and SFS, Inc.—are corporations. The resulting limited liability of the corporations’ shareholders— Miami Nation Enterprises, a parent corporation owned by the Miami Tribe of Oklahoma (MiamiTribe), and the Santee Sioux Nation of Nebraska (Santee Sioux Nation)—weighs against immunity.’ Further,it appears that recognizing arm-of-the-tribe status for these corporations would protect primarily the revenue streamsof third parties who have no relationship with or responsibility to the Tribes and their members. Protecting private economicinterests is not the purpose of sovereign immunity. Finally, evidence resulting from a Federal Trade Commission (FTC) investigation into payday lending suggests that, in practice, the entities’ purse strings and key financial decisionsare left in the hands of private third parties and are not meaningfully controlled or overseen by the Tribes. Applying the considerations articulated above, and on the existing record, the entities have not established that they should be accorded sovereign immunity as arms ofthe Tribes. ' The Court of Appeal’s Opinion refers to Miami Nation Enterprises as “MNE.” The People will spell out Miami Nation Enterprises when referring to that entity to avoid confusion with MNE Services, Inc. In addition, the Peoplerefer to both Tribes using their currentofficial names. (79 Fed. Reg. 4748, 4750, 4751 (Jan. 20, 2014).) STATEMENT OF APPEALABILITY On March3, 2014, the People timely sought review of the Court of Appeal’s final decision of January 21, 2014 (Opinion), which affirmed the superior court’s May 10, 2012 order granting the renewed motion to quash service of the summons and complaint and dismissing the complaint. (25 CT 6074 [notice of appeal]; 24 CT 5754-5769 forder].)* An order granting a motion to quash service of summonsis appealable pursuant to Code of Civil Procedure section 904.1, subdivision (a)(3). FACTUAL AND PROCEDURAL BACKGROUND I. STATE AND FEDERAL GOVERNMENTSTAKE ACTION TO PROTECT CONSUMERS OF PAYDAY LENDING SERVICES As the Court of Appeal noted, citing a study from the Pew Charitable Trusts, 12 million Americans take out payday loans each year, spending approximately $7.4 billion annually. The average loan is $375. The average borroweris in debtfor five months during the year, spending $520 in interest to repeatedly renew the loan. (Opinion,at pp. 2-3, fn. 2.)° Further, while payday loans are marketedas a wayto bridge a gap until the borrower’s next paycheck, in practice they often lead to longer-term debt. “Sixty-nine percentof first-time borrowers * This brief uses the following referencesto the record, preceded by the volume number and followed by the page number: CT = Clerk’s Transcript; SCT = Supplemental Clerk’s Transcript; SSCT = Second Supplemental Clerk’s Transcript. 3 The Pew Charitable Trusts’ Payday Lending in Americaseriesis available at [as of July 23, 2014]. use the loan for recurring bills, including rent or utilities; only 16 percent use them to deal with an unexpected expensesuchasa car repair.” (/d.) The volumeand circumstances of payday lending highlight the need to protect consumers through effective government oversight and enforcement. California is among the manystates that have enacted statutes regulating consumerfinance practices, including payday lending.’ The People broughtthis action to enforce the State’s payday lending statutes. (See Fin. Code, § 23000 et seq.) While there are no federal lawsthat specifically target payday lending, the FTC has investigated andfiled enforcementactions against payday lenders using the Federal Trade Commission Act (15 U.S.C. §§ 41- 58) (prohibiting deceptive trade practices) and the Truth in Lending Act (15 U.S.C. §§ 1601-1667f) (requiring specific disclosures in lending documents). On April 2, 2012, the FTC filed a lawsuit in the United States District Court for the District ofNevada against 19 defendants, including MNE Services, Inc. and SFS, Inc. (See FTC v. AMGServices, Inc. (D.Nev. May 28, 2014, No. 2:12cv536)__ F.Supp.2d __ [2014 WL 2927148].) To date, the FTC hasprevailed against MNE Services, Inc., SFS, Inc., and other related defendants on certain claims related to misleading website “ See Papke, Perpetuating Poverty: Exploitative Businesses, the Urban Poor, and the Failure ofReform (2014) 16 Scholar: St. Mary’s L. Rev. & Soc. Just. 223, 248; see also [as of July 24, 2014]. > Payday lenders doing business in California mustbe licensed by the State. (Fin. Code, § 23005, subd. (a).) Further, the State requires written loan contracts disclosing the fee as an Annual Percentage Rate (APR);limits payday loan amounts to $300; limits loan fees to 15 percent of the loan amount; and prohibits multiple, simultaneous loans to the same consumer. (Fin. Code, §§ 23001, subd. (a); 23035, subds.(a), (e)(1); 23036, subds.(a), (c).) statements and inaccurate disclosures. Additional claims remain pending. (Id. at *4-5, 14-15.)° In the face of increased enforcement, some online payday lenders have soughttribal affiliation in an effort to take advantageoftribal immunity, promising some share of revenuesin return. (See Martin & Schwartz, The Alliance Between Payday Lenders and Tribes: Are Both Tribal Sovereignty and Consumer Protection at Risk? (hereinafter, Martin) (2012) 69 Wash. & Lee L. Rev. 751, 754-755, 763, 766-777; see also Harte and Zuckerman Bernstein (June 17, 2014) Payday Nation, Part L)' The amount a giventribe actually receives in any specific affiliation deal will vary, but at least one commentary has notedthat a tribe’s share of revenues often amounts to “crumbs.” (Martin, supra, at p. 767.) Il. CONSUMER COMPLAINTS SPUR DEPARTMENT ENFORCEMENT AGAINST THE PAYDAY LENDERS Roughly a decade ago, in 2004, the California Departmentof Corporations, predecessor agency to the California Department of Business Oversight, began receiving complaints from California consumers who had taken out payday loans overthe Internet. One early complaintabout Ameriloan is typical. The consumer applied for a loan online. Money quickly appearedin his bank account, but without any information about the lender or howto repay the loan. (17 CT 3908.) He “tried to look them up online, but could not find the same company... .” (/bid.) The ® The district court did not have occasion to determine whether MNE Services, Inc. and SFS, Inc. would be immuneas armsoftribes. The court held that under the FTC Act, Congress granted FTC the authority to regulate tribes. (FTC v. AMGServices, Inc., et al. (D. Nev. 2012) No. 2:12cv536, Doc. No. 559 (filed 03/07/14).) ’ Payday Nation PartI is available at [as of July 24, 2014]. consumer concludedthat “this company intentionally keeps you from knowing whohas funded the loan and whatthe termsare . . . so that they can collect as many fees by ‘automatically renewing the loan’ as they can before you are even aware that they are doing it.” (/bid.; see also 3 SSCT 638 [discussing extended history of complaints].) Any delayin repaying a payday loan may haveserious consequences,as effective annualinterest rates in the range of 300 to 400 percent are not unusual. (See Opinion at pp. 2-3, fn. 2.) The Departmentinvestigated and determined that a numberof Internet payday lending operations were violating California law. On August 22, 2006, the Department’s Commissioner issued a Desist and Refrain Orderto certain payday lenders requiring the businesses to come into compliance. (16 CT 3864-3 868.)® Having no additional information about these businesses’ legal status or structure, the Department issued the order using the nameslisted on their websites—Ameriloan, United Cash Loans, USFastCash, and Preferred Cash Loans. (16 CT 3864.) IIL. THE PAYDAY LENDERS IGNORE THE DEPARTMENT’S DESIST AND REFRAIN ORDER; THE PEOPLE FILE SUIT Faced with the Payday Lenders’ continued non-compliance, and spurred by mounting complaints, in June 2007 the People brought an enforcementaction against five Internet payday lenders, identifying each by its website name: Ameriloan, UnitedCashLoans, USFastCash, OneClickCash, and PreferredCashLoans(collectively, the Payday Lenders).” The People alleged that the Payday Lenders charged fees 8 See Fin. Code, § 23050. ” See Gov. Code, § 11180; Fin. Code, § 23051, subd. (a). A screenshotofthe representative Ameriloan website taken May 18, 2007,is attached. (See Attachmentat p. 1, 4 SSCT 729.) exceeding the amounts permitted under California law, failed to provide required loan notices, were operating withouta license, and were violating the Desist and Refrain Order. The complaint sought injunctiverelief, restitution, and civil penalties. (1 CT 38-39.) As of June 2007, the Payday Lenders’ websites—the sole method by which consumers applied for loans—reflected only these businesses’ trade names. (4 SSCT 729-733, 735-738, 739-740, 742-745, 753-754.) Therefore, the complaint designated each Payday Lenderas “a business organization, form unknown”and,alternatively a corporation,a limited liability company,or a partnership. (1 CT 27; see also 4 SSCTat 28-29.) IV. THE PAYDAY LENDERS ASSERT ARM-OF-THE-TRIBE STATUS AND CLAIM IMMUNITY On July 30, 2007, the superior court issued a temporaryrestraining order against the Payday Lenders. (See 1 CT 48.) Shortly thereafter, the businesses appeared specially, one group asserting that they were instrumentalities or “arms” of the Miami Tribe (Ameriloan, UnitedCashLoans, and USFastCash) (1 CT 47-53) and the other claiming the samerelationship with the Santee Sioux Nation (OneClickCash and PreferredCashLoans) (1 CT 67-68). The businesses contendedthat they weretherefore entitled to invoke these Tribes’ sovereign immunity. This wasthe State’s first notice that these businesses claimed anytribal connection. V. EVIDENCE CONCERNING THE PAYDAY LENDERS’ STATUS AS ARMSOF TRIBES The following factual summary is based on what the People know or understand from the evidence presently available. A. Use and Registration of the Payday Lenders’ Marks The best available evidence concerning what entities actually own and are legally responsible for the Payday Lender businessesis the history of the ownership anduse of the relevant marks. Between Mayand July of 2004, a Kansaslimited liability company named CLK Management, LLC (CLK)applied to register a number of marks with the U.S. Patent and Trademark Office for businesses providing payday loans. (23 CT 5529-5533; 24 CT 5704-5708, 5720-5721, 5620- 5621.)'°. These businesses included four ofthe five Payday Lenders: Ameriloan, UnitedCashLoans, USFastCash, and OneClickCash. (23 CT 5529-5533; 24 CT 5704-5708, 5720-5724, 5620-5624.) According to the registration documents, some ofthe trademarks had been in use since 2002. (23 CT 5539-5541; 24 CT 5704-5705, 5720-5724, 5620-5624.) An -individual named Scott Tucker waslisted as CLK’s President and signed the registration documents. (23 CT 5530; 24 CT 5621, 5705, 5721.)"’ The record contains no evidence that CLK hadorhasanytribalaffiliation. The name PreferredCashLoanshas never been registered with the U.S. Patent and Trademark Office. (People’s Request for Judicial Notice (RIN), Ex. J.) Websites using the Payday Lenders’ marksare all currently active. (RJN, Exs. A-E.) © The citations are to exhibits to the declaration of FTC investigator Victoria M. L. Budich. (See 18 CT 4149-4191 [text of declaration]; 18 CT 4193 through 24 CT 5748 [exhibits].) Scott Tucker is a defendant in the FTC’s enforcementaction. His role in the Payday Lenders’ operationsis discussed further below. B. SES,Inc. 1. Public information regarding SFS,Inc.’s ownership and use of marks OneClickCash and PreferredCashLoans In September 2006—one monthafter the issuance of the Desist and Refrain Order, and approximately nine monthsbeforethis case was filed— CLK conveyed the OneClickCash trademark to an entity named SFS,Inc. (24 CT 5630-5632.) SFS, Inc. retained ownership of the mark in May 2012, whenthe superior court ruled on the renewed motion to quash. (24 CT 5754; 18 CT 4189-4190 [Budich Decl., § 95].) The U.S. Patent and Trademark Office website reflects that SFS, Inc. is still the owner of the OneClickCash mark. (RJN, Ex. I.) In 2007, OneClickCash’s Website did not state any tribalaffiliation. (4 SSCT 739-740 [screenshot].)’ The website now claimsaffiliation with the Santee Sioux Nation through SFS, Inc. (RJN, Ex. D.) | As noted, the U.S. Patent and Trademark Office has no records relating to PreferredCashLoans. (RJN, Ex. J.) The current website for PreferredCashLoans does not assert a connection to SFS,Inc. or the Santee Sioux Nation. (RJN, Ex. E.) 2. SESInc.’s creation, formation documents, and governing laws SFS,Inc. is a corporation created under the procedures and laws of the Santee Sioux Nation. In February 2005, the Santee Sioux Tribal Council, the Tribe’s governing body, passed a resolution incorporating SFS, Inc. “pursuant to the laws of the Santee Sioux Nation.” (4 SSCT 771 " This citation is to an exhibit to the declaration of Department examiner Peter Mock. (See 3 SSCT 634-638 [text of declaration]; 3 SSCT 639 through 4 SSCT 754 [exhibits].) 10 [Constitution], 800-801 .)° The resolution authorized SFS, Inc. to engage in “short-term loans and cash advanceservices (“payday loans’),” stating that “it is in the best interest of the Tribe to establish a tribally-owned corporation to facilitate the achievement ofgoals relating to the Tribal economy,self-government, and sovereign status of the Santee Sioux Nation.” (4 SSCT 800.) SFS, Inc.’s original Articles of Incorporation (Articles) were attached to the resolution. (4 SSCT 800, 802-806.) Amended Articles were issued in June 2008. (4 SSCT 808-812.) Asset out in the Articles, the Tribe ownsall shares of SFS, Inc. (4 SSCT 802, 808.) The Articles state that SFS’s Inc.’s Board of Directors consists of the Tribal Council and that the Board “shall manage”the corporation. (4 SSCT 803, 809.) The Articles do not define what such managemententails. Pursuantto its Articles and the Tribe’s Business Corporation Code, SFS, Inc. has the usual attributes of a corporation. The Tribe as shareholder, the Tribal Council, and SFS, Inc.’s officers or directors cannot be held liable to SFS, Inc.’s creditors. (5 SSCT 913 [Santee Sioux Tribe of Nebraska Business Corporation Code (BCC), § 11-1022], 915 [BCC § 11- 1092].) Any recovery against SFS, Inc.is limitedto its assets. (5 SSCT 912 [BCC § 11-1003, subd. (3)(b)].) The Articles require SFS, Inc. to maintain bank accounts in its own name andto hold its funds separate from those of any other person or entity. (4 SSCT 804, 810.) Additionally, pursuantto its Articles and tribal law, SFS,Inc.also possessestypical corporate powers and privileges. (See 4 SSCT 802-806, 808-812; 5 SSCT 912 [BCC § 11-1003, subd. (3)].) The corporation hasits 13 The citations to documents in this subsection are to exhibits of the declaration of Robert Campbell. (See 4 SSCT 761-767 [text of declaration]; 4 SSCT 769 through 5 SSCT 970 [exhibits].) 11 ownassets, funds, and property interests, as well as “the authority to acquire, manage, own, use, pledge, encumber, or otherwise dispose of” such property, “subject to the contractual and sovereign rights of others, including the Tribe.” (5 SSCT 914 [BBC § 11-1030, subd. (1)].) It appears that, undertribal law, SFS, Inc. as a corporation has the powerto sueinits own name. (See 5 SSCT 907 [BBC § 11-783, transferring right to sue in corporation’s nameto officers, etc., on dissolution].) The corporation has authority to consent to be sued, provided that the consentis explicit, is contained in a written contract or commercial document that names the corporation as a party, and is specifically approved by the Board of Directors, and that any recovery is limited to the corporation’s assets. (5 SSCT 912 [BCC § 11-1003, subd. (3)].) The Articles express an intention | that SFS, Inc. share in the Tribe’s immunity (see 4 SSCT 805, 811), but the corporation may not waive that immunity to allow recourse beyondthe corporation’s separate assets (4 SSCT 800). Because SFS,Inc. is tribally owned, undertribal law any “net income”that the corporation receives from its operations is required to be “distributed to the Tribe at such timeas the Tribal Council may determine.” (5 SSCT 914-915 [BCC § 11-1030, subd. (2)].) Tribal law does not further define “net income,” and nothing in SFS, Inc.’s formation documents or tribal law specifies how any net income must be used once distributed. 3. The Payday Lenders’ declaration concerning SFS Inc.’s operations To support their renewed motion to quash service, OneClickCash and PreferredCashLoansrelied primarily on information provided in Robert Campbell’s April 2012 declaration. Campbell is a memberofthe Santee 12 Sioux Nation and the Santee Sioux Tribal Council, and Treasurer of SFS, Inc. (4 SSCT 762-763 [9 2, 7].)" Campbell’s declaration contained limited information aboutthe day- to-day operations of SFS, Inc. Among other things, Campbell stated that during a four-year period between 2007 and 2011, the Tribal Council—the corporation’s Board—did not attain a quorum on regular basis for routine meetings. (4 SSCT 765 [§ 14].) Campbell also declared that, from its inception, SFS, Inc. has contracted with third parties—most recently AMG Services, Inc. (AMG)—1toprovide employees to perform the corporation’s core function of “loan servicing.” (4 SSCT 763-764 [§9 9-10].)'° What precisely this entails, or how muchit affects net revenues flowingto the Tribe, is not discussed.’® Campbell stated that “SFS[, Inc.]’s loan transactions .. . are approved daily by an SFS[, Inc.] officer or employee at whichtime the loans are ‘consummated.’” (4 SSCT 764 [4 10].) He did not explain what constitutes approval or consummation, and whetherit involves any substantive review of individual loans or of SFS, Inc.’s loan practices. Campbell did not provide information on any required distributions from SFS, Inc. to the Tribe. He declared summarily that the payday lending revenues from SFS,Inc. “assist” in funding the Tribe’s “operations, expenditures and social welfare programs.” (4 SSCT 765 [§ 13].) Campbell stated that “SFS[, Inc.] does not currently actively issue loans underthe trade name ‘Preferred Cash Loans,’ although it has the '* Campbell is also a defendant in the FTCaction. '> AMGis a defendantin the FTCaction. 16 AMG’sfees are likely substantial. In 2011 alone, AMGreported to the State of Kansas that well over $20.5 million in employee wages were paid to 14 people, six ofwhom havethe last name of “Tucker.” (20 CT 4670.) 13 ability to utilize the trade namein the future, should it determineto reinstitute its use.” (4 SSCT 764-765 [§ 12].) 4. Evidence concerning the Payday Lenders’ actual operations In opposition to the renewed motion to quash, the People submitted evidence that SFS, Inc. was, in fact, neither closely connected with nor actually controlled by the Tribe. The People relied in part on documents obtained by the FTC, and FTC investigator Victoria M. L. Budich’s explanation of those documents. (18 CT 4149-4191 [text]; 18 CT 4193 through 24 CT 5758 [exhibits].)'’ Budich’s investigation revealed a network of payday lending and other businessesthat had associations with third-party individuals Scott Tucker andhis brother Blaine Tucker, among others. (18 CT 4149-4150, 4160-4161 [9 4, 34, 36].)"8 Both Scott and Blaine Tucker are or were associated with AMG and a numberofother companies. (/d.) Budich reviewed bank records and some 10,000 check images for payments made amongthepersons andentities in the payday lending network. (18 CT 4168-4170 [ff 61-64].) Either Scott or Blaine Tucker was an authorized signatory for every accountin the network,and one of the Tuckers signed every check that Budich reviewed. (18 CT 4168 [§ 61]; 21 CT 5124 through 22 CT 5127; 18 CT 4170 [4 64].) Both Tuckers were authorized to sign checksin SFS,Inc.’s name. (22 CT 5220-5221 [corporatecertificate of authority]; see also 3 SSCT 635 [Mock Decl., { 6 " The trial court overruled the Payday Lenders’ objection to submission of the Budich declaration and attached exhibits. (24 CT 5755.) The information from the FTC investigation was part of the record before the Court of Appeal. 18 Blaine Tucker, now deceased, was also a defendant in the FTC action, 14 (A)(B)].) The FTC’s investigation showedthat the SFS, Inc. dba OneClickCash made paymentsnot only to AMG,but to a substantial numberof other companies. (18 CT 4169 [{ 62]22 CT 5129 [Ex. CC].) These included companies with no apparent relation to loan servicing, and companies associated with the Tuckers, including, for example, Level 5 Motor Sports. (/bid.) The complicated flow of revenues from payday loan customers, including those of OneClickCash, through the payday loan network identified by the FTC, and Scott Tucker’s relationship to various entities in that network, are summarized graphically in Budich’s Exhibits CC and AS. (18 CT 4161, 4169 [94 35, 62]; 20 CT 4644 [Ex. AS]; 22 CT 5129 [Ex. CC]; see Attachment at pp. 2-10.) C. MNEServices,Inc. 1. Public information regarding MNEServices, Inc.’s ownership and use of marks Ameriloan, UnitedCashLoans, and USFastCash In September 2006, Scott Tucker’s company, CLK, conveyed the trademarks for Ameriloan, UnitedCashLoans, and USFastCashto a business named “TFS Corp.” (23 CT 5547-5549, 24 CT 5714-5716, 5744- 5746.) In early March 2012, approximately two monthsbefore the superior court’s ruling on the renewed motion to quash, TFS Corp.assigned the three trademarks to MNE Services, Inc., which remains the current owner. (RIN, Exs. F, G, H.)” When the complaint wasfiled, the websites for these three businesses reflected only their trade names. (4 SSCT 729-733 [Mock Decl.], 735-738, '9 Budich’s investigation, described in her March 15, 2012 declaration, apparently was completed before TFS Corp.’s transfer of the marks to MNE Services, Inc. (See 18 CT 4189-4191.) 15 742-751.) Currently, the websites claim an affiliation with the Miami Tribe through MNE Services, Inc. (RJN, Exs. A-c.y 2. MNEServices, Inc.’s creation, formation documents, and governing laws In May 2005, the Miami Tribe created Miami Nation Enterprises, a corporation wholly owned by the Tribe. (6 SSCT 1256-1257.)"' Its stated purpose, amongotherthings, is to “provid[e] for the economic development of the Tribe throughtribal business activities and governmental powers,to provide opportunities for tribal membersand other personsresiding within the tribal jurisdiction.” (6 SSCT at 1259.)” The Tribe as shareholderis not liable for the obligations of Miami Nation Enterprises. (7 SSCT 1452 [Ordinance, § 15.3.3, subd. (b)].) In August 2008, the Board of Directors of Miami Nation Enterprises created a new corporation, MNE Services, Inc. (6 SSCT 1315.) MNE Services, Inc.’s stated purposes include “‘stimulat[ing] the Tribe’s economy” (6 SSCT 1316 [art. II]}) and, morespecifically, “further[ing] the *” The People argued before the Court of Appeal that MNE Services, Inc. was not an arm of the Miami Tribe. (See, e.g., Appellant’s Opening Brief (Court of Appeal) at pp. 9-10.) The Payday Lenders’ presentation to the court effectively conflated MNE Services, Inc. with a separate corporation, Miami Nation Enterprises. (See, e.g., Respondents’ Brief (Court of Appeal) at pp. 25-26.) This confusion is reflected in the Court of Appeal’s Opinion, whichat one pointrefers to the business operating the Payday Lenders as “MNE/MNE ServicesInc.” (Opinionat p. 8.) The People continue to focus on the relevant entity—MNE Services,Inc. *! The citations to documentsin this subsection are largely to the exhibits of the declaration of Don Brady. (See 6 SSCT 1213-1220 [text of declaration]; 6 SSCT 1222 through 7 SSCT 1559 [exhibits].) *2 Miami Nation Enterprises’ current website states that it operates eight companies, including two casinos. The website does not mention MNE Services, Inc. or payday lending operations. See [as of July 24, 2014]. 16 financial lending business of Miami Nation Enterprises.” (6 SSCT 1322.) According to the declaration of Don Brady, the CEO of the Business Management Division of Miami Nation Enterprises, MNE Services,Inc. took over the payday lending business previously operated by TFS Corp. (6 SSCT 1216 [§§ 9-10].)” MiamiNation Enterprises is the sole shareholder ofMNE Services, Inc. (6 SSCT 1318 [art. VIII].) MNE Services, Inc.’s Board of Directors consists of three people appointed by the CEO of Miami Nation Enterprises. (6 SSCT 1318 fart. VII].) MNE Services,Inc.’s bylaws contain additional details regarding meeting requirements and duties for the corporation’s Board of Directors, but do not addressthe relationship, if any, between the Board ofMNE Services, Inc. and the Tribe. (17 CT 4074-4079.) Pursuant to its Articles and the Tribe’s Business Corporation Ordinance, MNE Services, Inc. has the usual attributes of a corporation, including limited liability and separateness from its shareholder, Miami Nation Enterprises. (See, e.g., 6 SSCT 1317-1318 [art. V, subd. (D)]; 7 SSCT 1456 [§ 15.10], 1452-1453 [§ 15.3.3, subd. (b)].) MNE Services, Inc. also possesses typical corporate powers. It can sue and be suedin its own name, acquire andsell property, exercise all powers necessary or convenient to do business, conduct business under an assumed name, enter into contracts, and borrow money. (7 SSCT 1375-1377 [Business Corporation Ordinance, § 4.1]; 6 SCCT 1317 [art. III, subd. (C)].) In forming MNE Services, Inc., Miami Nation Enterprises expressed its intent that the Tribe’s sovereign immunity be further extended to the new subsidiary corporation. (6 SSCT 1317-1318 [art. IV].) To the extent > Brady is a defendantin the FTC action. 17 that immunity is effectively extended, MNE Services,Inc. is not authorized to waive it. (6 SSCT 1318 [art. V, subd. (D)].) Undertribal law, on the requestof the Tribe’s Business Committee, the Miami Nation Enterprises’ Board is required to cause its subsidiary, MNE Services, Inc., to distribute to Miami Nation Enterprises “all or such portion of the net incomeofthe subsidiary as may be requested by the Business Committee.” (7 SSCT 1455 [§ 15.8.2].)4 Miami Nation Enterprises, Inc.’s “net income”in turn must be distributed to the Tribe. (Ibid.) While the Miami Nation Enterprises Act states that revenues accruing to the Tribe from the operations of Miami Nation Enterprises allowthe Tribe to address “pressing matters,” the People’s review reveals no specified use for such revenuessetout in the Act. (6 SSCT 1301 [§ 102, subd.(c)].) 3. The Payday Lenders’ declarations concerning MNEServices, Inc.’s operations Miami Nation Enterprises submitted two declarations in support ofthe renewed motion to quash service and dismiss the People’s complaint, one by Brady and the other by Thomas Gamble, Chief of the Miami Tribe. (6 SCCT 1213-1220 [text of Brady Decl.], 1208-1211 [text of Gamble Decl.].) Like SFS, Inc., MNE Services,Inc. also contracted with AMGfor the “purpose ofproviding employeesto service the loans... .” (6 SSCT 1216- 1217 [§ 12].) Brady declared that the Miami Tribe formed AMGforthis purpose. (bid.) Brady’s declaration contains, however, virtually no information about AMG’s operations. Evidence from the FTC’s investigation strongly suggests that the Tuckers controlled AMG’s financial operations. (See, e.g., 18 CT 4170-4174 [9 65-72]).) Brady stated *4 The Business Committee is comprised of the Tribe’s five officers. (6 SSCT 1224 [Const., art. VI].) 18 summarily that he or “another MNE [Miami Nation Enterprises] executive” “processes and approves”the loans “pursuantto criteria that MNE has approved,” but providedno additional details concerningthe financial or managerial arrangement between Miami Nation Enterprises, MNE, Services, Inc. and AMG. (6 SSCT 1217 [§ 14].) Brady declared that “[a]ll profits that MNE [Miami Nation Enterprises] and MNE Services, Inc. receive from their loan businessare utilized for the benefit of the Miami Tribe, and are distributed to many different programs and for many different services.” (6 SSCT 1218 [§ 18].) He provided, however, no specific details concerning the flow of revenues from MNE Services, Inc. to the Tribe. What any revenue stream from MNE Services, Inc. to the Tribe represents as a portion of the Tribe’s total incomeis not clear from the record. Nor does the record provide any information concerning the dollar or percentage contribution that funds generated by MNE Services, Inc. provide to any identified tribal operation or expenditure. Chief Gamble declared that heis “intimately familiar” with the Tribe’s “budget, finances, programs, and attendant financial requirements.” (6 SSCT 1209 [4 5].) He stated summarily that “[p]rofits from the Tribe’s online short-term loan company support many Tribal programsand services and have contributed significantly to Tribal development” andto the Tribe’s general fund. (6 SSCT 1209 [4 7], 1210 [§ 9].) He doesnot further describe the amounts the Tribe received from payday lending or any specific programsthat are actually supported by payday lending revenues. 4, Evidence concerning the Payday Lenders’ actual operations Evidence uncovered by the FTC’s and the Department’s investigations raised serious questions concerning who wasin actual control of the Payday Lenders and MNE Services,Inc. 19 Bank documents indicate that third parties Scott and Blaine Tucker were authorized to sign checks in the nameofvariousentities doing business as UnitedCashLoans and USFastCash. (See 18 CT 4169-4170 [§ 63-64]; 22 CT 5228-5229, 5185-5186.)Onthe creation ofMNE Services, Inc. in 2008, its Board passed a resolution providing that the CEO and CFO werethe only authorized signatories on the corporation’s bank accounts. (17 CT 4080.) Nonetheless, either Scott or Blaine Tucker signed all checks drawn on MNE Services, Inc.’s account during the sample two- month period analyzed by the Department’s examiner. (3 SSCT 636 [Mock Decl. { 6H].) The FTC’s investigation further showed that businesses behind the relevant payday lending marks (Ameriloan, UnitedCashLoans, and USFastCash) made payments not only to AMG,butto a substantial number of other companies, including companies with no apparentrelation to loan servicing, and companiesassociated with the Tuckers. (17 CT 4169 [{ 62]; 22 CT 5129 [Ex. CC]; 20 CT 4644 [Ex. AS]; see Attachmentat pp. 2-10.) Further, the FTC investigator noted payments from Scott Tucker’s businesses to MNEServices, Inc. (18 CT 4179 [§ 81].) Bank records revealed that between January 2008 and March 2011, Black Creek Capital Corp., owned by Scott Tucker, made payments to MNEServices,Inc., MNE Services, Inc. dba Ace Cash Services, and MNE Services,Inc. dba Star Cash Processing, which totaled over $3.3 million dollars. (/bid.) The reason for these paymentsis unexplained in the currentrecord. *5 Tt is not clear why the account authorizations remained in the names of “MTE Financial Services Inc.” and “TFS Corp.” after Miami Nation Enterprises created MNE Services,Inc. to take over the payday lending business. (See CT 6 SSCT 1216 [{ 10].) 20 VI. THE COURT OF APPEAL AFFIRMS DISMISSAL OF THE CASE AGAINST THE PAYDAY LENDERS ON THEIR RENEWED MOTION TO QUASH On January 21, 2014, the Court of Appeal issued its opinionaffirming the superior court’s dismissal. The procedural backgroundofthe case predating the renewedmotion to quashis detailed in the Opinionat pages 2 through 7. While the superior court had applied a two-factor arm-of-the- tribe test adopted from Trudgeon v. Fantasy Springs Casino (1999) 71 Cal.App.4th 632, 638 (Trudgeon), the Court of Appeal surveyed the case law andarticulated its own multi-factor test for determining the Payday Lenders’status as arms of the Miami Tribe and the Santee Sioux Nation.”° The Court of Appeal gave predominant, if not dispositive, weight to the purely formalfactorsthat the tribal entities were created bytribal resolution and accordingto tribal law. It concluded that the Payday Lenders were arms of the Tribes and entitled to invoke the Tribes’ sovereign immunity. The Peoplepetitioned for review, which this Court granted on May 21, 2014. LEGAL DISCUSSION I. STANDARD OF REVIEW Whether the Court of Appeal applied the correct legal standard in determining the Payday Lenders’status as armsof tribes, and whetherit properly placed the burden of proof on the People rather than on the entities asserting arm-of-the-tribe status, are questions of law subject to this Court’s independent review. (See Estate ofJoseph (1998) 17 Cal.4th 203, 216; Cooley v. Superior Court (2002) 29 Cal.4th 228, 250 fn. 11.) Whetherthe *6 The court’s reasoning is discussed in greater detail in Legal Discussion III.B., below. 21 evidenceas it exists in the current record weighsin favor of or against arm- of-the-tribe immunity is, similarly, subject to this Court’s independent review. (See Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 860 [mixed question of fact and law reviewed independently when questions of law predominate].) Il. SUMMARY OF ARGUMENT The flaw in the Court of Appeal’s decision is a commononein the arm-of-the-tribe case law: The court did not consider the fundamental purposes of sovereign immunity in articulating and applying an arm-of-the- tribe test. Sovereign immunity serves to protect the sovereign’s fisc and its “dignity”—thatis, the sovereign’s right to direct its governmentalaffairs. Whether immunity should be extended to an entity that is not itself the tribe should turn on whether and to what extent such extension would serve these sovereign interests. To fashion a test that will function in this manner,this Court should look to the law governing the analogous question of when state sovereign immunity extendsto an entity that is not itself the state. To begin with, the arm-of-the-state doctrine suggests that the burden of proof mustrest with the entity claiming immunity. Virtually every court that has examined the matter, including the Ninth Circuit Court of Appeals, has placed the burden of proving arm-of-the-state status squarely on the entity seeking to invoke the state’s immunity. They hold that arm-of-the- state immunity is best viewed as an affirmative defense, and note the unfairness of requiring a plaintiff to prove a negative—especially when the defendantis the party with ready access to the relevant information. There is no reason for reaching a different result in the directly analogous context of an entity asserting arm-of-the-tribe status. Turning to substance, three fundamental considerations, bearing on protection of the sovereign’s fisc and respect for its governmental 22 autonomy, are relevant to the arm-of-the-state analysis and,similarly, should be relevant to arm-of-the-tribe analysis. These are: (1) Thefinancialrelationship betweenthe entity and the sovereign, including whether the sovereign fisc would be putat risk if the entity were unable to invoke the sovereign’s immunity; (2) The function andpurposeofthe entity, including whetherthe entity serves central governmental functions; and (3) Whether the entity is underthe sovereign’s legal and actual governmental control or instead operates independently. Applying these considerations, and the factors relevant under each, to the facts of this case, the evidenceas it stands tips heavily against immunity for both SFS, Inc. and MNE Services, Inc., operating in the names of the Payday Lenders. The entities’ corporate form already shields the tribal treasuries from liability. Payday lending, marketed over the Internet to the generalpublic, is not a central governmental function, and the present record does not establish that the entities here serve such a function simply by providing unspecified revenues. And the existing evidencefalls far short of demonstrating actual control of these entities by the tribal governments. To be clear, the People agree that the fact that entities are commercial in nature does not end the inquiry into whethertheir activities serve central governmental functions. It should, however,trigger additional scrutiny to ensure that extending immunity to an essentially commercial entity would in fact serve tribal governmental interests, rather than primarily benefit private third parties. Here, beyond summary declarationsasserting that payday lending revenuesassist in funding tribal services, the defendant entities have submitted no evidence to establish that payday lending revenues provide more than de minimis support fortribal governmental functions. There is no evidence in the current record that a substantial 23 portion of the Payday Lenders’ gross revenuesflowsto the Tribes, or that payday lending generates stable and substantial revenues funding central tribal governmental operationsor services. Similarly, the current record contains no evidenceto substantiate the defendantentities’ assertions that the Tribes actually exercise control over these business operations. On the contrary, the available evidence, including evidence obtained from the FTC’s investigation, strongly indicates that private third parties actually continue to manage the Payday Lenders’ operations and controltheir purse strings——just as they did before the paper connections were established—withoutany effective tribal governmentalcontrol or oversight, and overwhelmingly to their own financial advantage. If, as the People request, this Court announces a new rule to govern determination of arm-of-the-tribe status, the Payday Lenders should be afforded a reasonable opportunity to meet their burden of proof under that rule. The People, similarly, should be afforded an opportunity to respond and conduct any appropriately focused discovery that might be necessary to test new factual assertions. Accordingly, the People request that the Court remand the matter for proceedings consistent with the Court’s opinion. If. ANALYSIS A. There is No Nationally Coherent Arm-of-the-Tribe Doctrine There is no nationwide consensus concerning how to assess arm-of- the-tribe status. In many cases, for example, courts have not addressed the threshold question of whobears the burden of proving whether or not an entity with tribal associations may invoke the tribe’s immunity, despite the potential importanceofthat issue. (See Engle v. Isaac (1982) 456 U.S. 107, 149 [noting that placement of burden of proof may be decisive of outcome].) At least one court explicitly placed the burden of proof on the 24 entity claiming immunity as an arm ofthe tribe. (Gristede’s Foods, Inc. v. Unkechuage Nation (E.D.N.Y. 2009) 660 F.Supp.2d 442, 466.) In contrast, in Cash Advance and Preferred Cash Loansv. State (Colo. 2010) 242 P.3d 1099 (Cash Advance), the Colorado Supreme Court expressly placed the burden on the plaintiff—there, the state enforcer. (/d. at p. 1102; see also id. at p. 1119 [Coats, J., concurring in part and dissenting in part].) Similarly, state and federal courts have developed a variety of multi- factor tests to determine arm-of-the-tribe status. For example, in Ransomv. St. Regis Mohawk Education & Community Fund (N.Y. 1995) 86 N.Y.2d 553, 558-560, New York’s highest court listed nine relevant factors, including whetherthe “organization’s purposesare similar to or serve those of the tribal government,” and placed special emphasis on factorsrelating to the financial relationship between the entity and the tribe. In Runyon ex rel. B.R. v. Association of Village Council Presidents (Alaska 2004) 84 P.3d 437, 441, the Alaska Supreme Court held that an entity cannot be an arm of the tribe wherethetribe is not legally liable for the entity’s debts, regardless of other factors. And in Breakthrough Management Group, Inc. v. Chukchansi Gold Casino and Resort (10th Cir. 2010) 629 F.3d 1173 (Breakthrough), the Tenth Circuit set out six non-exclusive factors thatit deemed “helpful,” expressly rejecting Alaska’s approach in Runyon and holding that lack oftribal liability was not dispositive. (/d. at p. 1187.) Even where courts identify similar relevantfactors, differences in how those factors are applied, the weight given to certain factors, and whether certain factors should be considered dispositive have resulted in “conflicting standards.”*’ The lack of a uniform body of law has made *7 Mayle, Usury on the Reservation: Regulation ofTribal-Affiliated Payday Lenders (2011) 31 Rev. Banking & Fin. L. 1053, 1074, 1076. 25 litigation against entities with assertedtribal affiliations expensive, inefficient, and unpredictable.” B. The California Courts of Appeal Have Developed Conflicting Arm-of-the-Tribe Tests The arm-of-the-tribe doctrine in California state courts reflects a similar lack of cohesion. This Court, while it has acknowledged the doctrine’s existence (see Agua Caliente, supra, 40 Cal.4th at pp. 247-248), has not previously addressed how to assess an assertion of arm-of-the-tribe immunity. The California appellate courts that have addressed the burden of proof have required—without substantial discussion—thattheplaintiff provethat an entity with ostensible tribal affiliation is not an arm of the tribe. (American Property Management Corp. v. Superior Court (2012) 206 Cal.App.4th 491, 498 (American Property); Opinion at p. 12; see also Lawrence v. Barona Valley Ranch Resort and Casino (2007) 153 Cal.App.4th 1364, 1369 (Barona Valley).)”? Asto the relevant factors andtheir relative importance, the Courts of Appeal have takendiffering approaches. The Fourth Appellate District, Division Two, wasthe first to address the substance of the arm-of-the-tribe doctrine, in Trudgeon, supra, 71 Cal.App.4th 632, a personal injury suit against a casino. (See id. at p. 637 [noting lack of California authority].) The Trudgeon court looked to the Minnesota Supreme Court’s then-recent decision in Gavlev. Little Six, Inc. (Minn. 1996) 555 N.W.2d 284, which attempted to synthesizethe divergent arm-of-the-tribe case law into three 8 Martin, supra, 69 Wash. & Lee L.Rev. at 778. ? Tn Barona Valley, the issue was not whetherthe casino was an arm of the relevant tribe, but whether the tribe had waived its immunity in its compact with the State of California. (Barona Valley, supra, at pp. 1366- 1367.) 26 factors: “‘1) whether the business entity is organized for a purposethatis governmental in nature, rather than commercial; 2) whetherthe tribe and the business entity are closely linked in governing structure and other characteristics; and 3) whether federal policies intended to promote Indian tribal autonomyare furthered by the extension of immunity to the business entity.” (Id. at pp. 638-639, quoting Gavle, supra, 555 N.W.2d,at p. 294.) Noting the importance of gaming in promotingtribal self-determination, the court determinedthat all three factors weighed in favor ofthe casino corporation’s immunity. (Jd. at pp. 640, 639-642.) Twoyears later, the Third Appellate District considered the immunity of a tribally owned and operated casino in Redding Rancheria v. Superior Court (2001) 88 Cal.App.4th 384 (Redding Rancheria). In that case, a casino employeefiled a personal injury suit against her employer. (/d. at p. 386.) Citing the facts and holding of Trudgeon, the court concludedthat the casino was immuneas an armofthetribe. (/d. at p. 389.) In 2008, the Second Appellate District, Division Seven addressed arm-of-the-tribe immunity in an earlier phase of this case. (Ameriloanv. Superior Court (2008) 169 Cal.App.4th 81.) The court did not articulate a test, but merely noted that, as an outer boundary, the arm-of-the-tribe “doctrine . . . does not ‘covertribally chartered corporationsthat are completely independentofthetribe.’” (/d. at p. 97, citing Agua Caliente, supra, 40 Cal.4th at pp. 247-248.) The court remandedthe matter to the superior court to consider, after an evidentiary hearing, the criteria identified in Zrudgeon and Redding Rancheria. (Id. at p. 98.) Next, the Fourth Appellate District, Division One, considered whether a hotel corporation, connected to a tribe through an ownership chain that involved three layers of California limited liability companies, was entitled to invokethe tribe’s immunity. (American Property, supra, 260 Cal.App.4th at p. 495.) Citing the Tenth Circuit’s six-factortest in 27 Breakthrough, the American Property court examined a numberoffactors, but ultimately held that the fact that the corporation was formed under California law, rather than tribal law, was “dispositive.” (/d. at p. 501; see also id. at p. 502, fn. 8; but cf. id. at pp. 509, 512-513 [Huffman,J., concurring, contending that, among otherthings, the “full extent and nature ofthe financial ties between the entities” and the tribe’s interest in “self- determination through revenue generation” should be considered].) In 2014,in this matter’s second appearance before the Court of Appeal, Second District, Division Seven, the court surveyed the current state of the arm-of-the-tribe doctrine, discussing a numberofcases including Trudgeon, American Property, and the Colorado Supreme Court’s decision in Cash Advance. (Opinionat pp. 14-17.) While the court ostensibly considered a numberof factors in holding that “MNE”and SFS, Inc. were immune from the People’s enforcementaction (id. at pp. 19-25), it stated that the Tribes’ “method and purpose”in creating the entities were the “most significant”(id. at p. 20). It then analyzed “method and purpose” primarily by observing that, as a formal matter, the entities were created undertribal law, and summarilyasserting that the entities supportedtribal economic development. (See id. at pp. 19-21.) The court noted that the entities’ incorporation would insulate the Tribes’ treasuries from the entities’ obligations, but stated that this fact did “not appear to be | significant.” (d. at p. 20.) C. The Court Should Bring Arm-of-the-Tribe Doctrine Into Alignment With Arm-of-the-State Doctrine To resolve the conflicts in current arm-of-the-tribe case law, the People proposethat this Court look to the analogousandbetter-developed doctrine governing arm-of-the-state immunity. 28 1. Summary of arm-of-the-state doctrine “It has long been settled”that the sovereign immunity reserved by states under the federal Constitution “encompasses not only actions in which a State is actually namedas the defendant, but also certain actions against state agents and state instrumentalities.” (Regents ofthe Univ. of Cal. v. Doe (1997) 519 U.S. 425, 429 (Regents).) The United States Supreme Court has addressed on numerousoccasions whethera state- created or state-related entity shares in the state’s immunity. (See,e.g., Auer v. Robbins (1997) 519 U.S. 452, 456,fn. 1 (Auer) [board of police commissioners not immune]; Regents, supra, 519 U.S.at pp. 431-432 [state university as managerof laboratory immune]; Hess v. Port Auth. Trans- Hudson Corp. (1994) 513 U.S. 30, 32 (Hess) [bistate railway authority formed by compact with commissioners selected by each state not immune]; Lake Country Estates, Inc. v. Tahoe Regional Planning Agency (1979) 440 U.S. 391, 400-402 (Lake Country) [regional planning agency formed by compact not immune].) It is not sufficient simply that an entity “exercise a slice of state power.” (Lake Country, at p. 401.) Rather, a court must examine “[iJndicators of immunity” to determine whetherthe entity, on balance, is an arm of the state. (Hess, at p. 44.) While the United States Supreme Court hasnotarticulated a specific test for assessing arm-of-the-state status, the facts and circumstances it has considered relevant fall generally into categoriesthat reflect the main purposes of sovereign immunity. These purposesare shielding the sovereign treasury and respecting the dignity and governmental autonomy inherent in sovereign status. (Federal Maritime Com. v..South Carolina State Ports Auth. (2002) 535 U.S. 743, 760, 765; see also Sossamonv. Texas (2011) __ U.S. ___ [131 S.Ct. 1651, 1659].) The Court has considered, for example, whetherthestate is legally responsible for the entity’s liabilities or debts (Auer, supra, 519 U.S.at p. 456,fn. 1; Regents, 29 supra, 519 U.S.at p. 430; Hess, supra, 513 U.S.at pp. 45-46), or whether, instead, the entity is “fiscally independent”(Hess, at p. 45). Whether a money judgmentagainst the entity would be enforceable against the state is of “considerable importance”in the evaluation. (Regents, at p. 430.) Further, the Court has considered evidence of the state’s control over the entity (Auer, at p. 456, fn. 1; Hess, at p. 44), and whetherthe entity serves a state function (Hess, at p. 45). And the Court also has taken into account the state’s intent to create either an instrumentality that shares its immunity or a “separate legal entity.” (Lake Country, supra, 440 U.S.at pp. 401- 402.) The lowerfederal courts have articulated a numberoftests reflecting these same considerations. The Ninth Circuit, for example, has held courts should consider whether a money judgmentagainst an entity would be satisfied out of state funds, whether the entity performs “central governmental functions,” and various factors related to corporate structure and state control. (See Mitchell v. Los Angeles Community College Dist. (9th Cir. 1988) 861 F.2d 198, 201 [setting out factors].) Ofthe various factors, whetherthe state is legally responsible for the entity’s debts and obligations is generally considered to be the most important. (Durning v. Citibank, N.A. (9th Cir. 1991) 950 F.2d 1419, 1424.) Legalfiscal responsibility is not, however, dispositive. (Compare ITS/ T.V. Productions, Inc. v. Agricultural Assns. (9th Cir. 1993) 3 F.3d 1289, 1293 (ITSI) [state fair was not an arm of the state whereit did not serve “central governmental functions” and operated independently, and state was not legally liable for its obligations] with Alaska Cargo Transport, Inc.v. Alaska Railroad Corp. (9th Cir. 1993) 5 F.3d 378, 381 (Alaska Cargo) [railroad serving as a “lifeline” for state residents was an arm of the state, even though state was notlegally liable for its obligations].) 30 The indicators of immunity considered in these cases can be organized into three general considerationsreflecting the fundamental purposes of sovereign immunity: (1) The financial relationship between the entity andthestate, including whether a money judgment would besatisfied outof state funds; (2) Whetherthe entity performs central governmental functions such that an action or judgment against the entity would effectively interfere with state governmental prerogatives; and (3) Whetherthe entity is underthe state’s legal and actual control, or instead is independent. The Ninth Circuit, like most other federal courts, has determined that the burden to prove arm-of-the-state status rests on the entity seeking to assert the state’s immunity. (Del Campo v. Kennedy (9th Cir. 2008) 517 F.3d 1070, 1075; ITSI, supra, 3 F.3d at p. 1292; see also Woods v. Rondout Valley Central School Dist. Bd. ofEd. (2d Cir. 2006) 466 F.3d 232, 237 [citing consistent out-of-circuit cases]; but see U.S. ex rel. Oberg v. Pennsylvania Higher Ed. Assistance Agency (4th Cir. 2014) 745 F.3d 131, 142.) 2. Because tribal and state sovereignty are fundamentally similar, it is reasonable to consider arm-of-the-state doctrine in applying arm-of-the- tribe doctrine It is reasonable for this Court to look to arm-of-the-state authority to help give appropriate form and content to arm-of-the tribe doctrine. A numberof courts have noted the similarities between the doctrines, although most arm-of-the-tribe cases make only passing reference to arm- of-the-state precedent. (See, e.g., Allen v. Gold Country Casino(9th Cir. 2006) 464 F.3d 1044, 1047; Gristede’s Foods, Inc. v. Unkechuage Nation, supra, 660 F.Supp.2d at p. 465; Runyonex rel. B.R. v. Assn. of Village Council Presidents, supra, 84 P.3d at p. 440; see also Opinion at p. 13.) In 31 Cash Advance, the Colorado Supreme Court rejected the argument of fourteen amici states that the court should look to arm-of-the-state law for guidance in fashioning an arm-of-the-tribe test, but the court’s only stated justification was that “the inherent nature of tribal sovereignty. . . requires us to distinguish tribal sovereign immunity from state sovereign immunity.” (Cash Advance, supra, 242 P.3d at p. 1110, fn. 11.) A closer examination of the nature of both tribal and state sovereignty establishes the wisdom of bringing the doctrines into alignment. Tribal sovereignty certainly differs from state sovereignty in important respects. The process of forming the United States had different effects on state and tribal sovereign powers. Thetribes, “separate sovereigns pre-existing the Constitution,” became “domestic dependent nations” (Michigan v. Bay Mills Indian Community (2014) ___ U.S. __ [134 S.Ct. 2024, 2030] (Bay Mills)), whose immunity may be abrogated only by Congress(id. at p. 2039). In contrast, the states, on ratification of the Constitution, generally enteredthe Union with their sovereignty intact. (Federal Maritime Com. v. South Carolina State Ports Authority, supra, 535 US. at p. 751.) In ratifying the Constitution, however, each state surrendered a portion of its immunity by, for example, consenting to certain suits brought by sister states. (See Alden v. Maine (1999) 527 U.S. 706, 755; see also Bay Mills, at p. 2031.) This negotiated limit on state sovereignty does not applyto tribes, which were not parties to the Constitutional Convention and did not “cede[] their immunity against state- initiated suits.” (Bay Mills, supra, at p. 2031.) Despite these and other significant differences, the ultimate source of state and tribal immunity is the same. Simply,“[i]t is ‘inherent in the nature of sovereignty not to be amenable’ to suit without consent.” (Bay Mills, supra, 134 S.Ct. at p. 2030 [quoting The Federalist No. 81 regarding tribal immunity]; see also Sossamonv. Texas, supra, 131 S.Ct. at p. 1657 32 [quoting The Federalist No. 81 regarding state immunity].)*” Such immunity shields the sovereign from suits in courts that are not underits jurisdiction, leaving parties with claims to present them,if the sovereign’s laws permit, in the sovereign’s own tribunals. (See Hess, supra, 513 U.S. at p. 39; see also Redding Rancheria, supra, 88 Cal.App.4th at p. 390 [noting existence oftribal mechanismstoresolvecivil disputes].)"! The United States Supreme Court precedent that has developed around the immunityoftribes and states accordingly reflects a preference for like treatment “in like circumstances” and an aversion to “asymmetry.” (See Bay Mills, supra, 134 S.Ct. at p. 2042 [Sotomayor, J., concurring].) Treating states andtribes similarly when extending immunityto their instrumentalities shows appropriate respect for both sovereigns. (Jd. (noting that equal treatment serves comity].) 3. Anentity claiming arm-of-the-tribe status should bear the burden of proof In TST, the Ninth Circuit explained whyit is both permissible and warranted to place the burden ofprooffor establishing arm-of-the-state status on the entity claiming immunity. The court observed that sovereign immunity is not a true jurisdictional bar; a court is not required to raise and resolve immunity on its own motion, and it may be expressly waived or forfeited by failure to assert. (J7SJ, supra, 3 F.3d at p. 1291.) The court concludedthat an assertion by an entity that it is an arm ofthestate, 30 As the Court noted in Alden v. Maine, supra, 527 US.at p. 713, the shorthand of “Eleventh Amendment immunity,” while “convenient”is “something of a misnomer, for the sovereign immunity ofthe States... is a fundamental aspect of the sovereignty which the States enjoyed before the ratification of the Constitution... .” 3! Alternatively, a plaintiff may often bring an action against a sovereign’s officials or employees seeking injunctiverelief. (Bay Mills, supra, 134 S.Ct. at p. 2035; Ex parte Young (1908) 209 US. 123.) 33 “whatever its jurisdictional attributes, should be treated as an affirmative defense.” ([bid.) “Like any other such defense,” arm-of-the-state status “must be proved by the party that asserts it and would benefit from its acceptance.” (Ibid.) Moreover,“fairness” requires placing the burden on the entity claiming immunity, especially where “a relatively complex institutional arrangement makesit unclear whether a given entity oughtto be treated as an arm ofthe state.” (/d. at p. 1292.) In that instance, knowledgeofthe “true facts” will lie within the knowledge of the entity, which “oughtto bear the burden ofproving the facts that establish its immunity ....” (bid) The same reasoning applies where an entity asserts that a suit against it is in effect a suit against a tribe. That entity should bear the burden of proving its arm-of-the-tribe status. 4. Thesame three fundamental considerations should govern the determination of both arm-of- the-state and arm-of-the-tribe status The three fundamental considerations that govern arm-of-the-state analysis—financialrelationship, purpose and function, and sovereign control—should similarly govern arm-of-the-tribe analysis. Factors relevant to these considerations should remain in or be added to the arm-of- the-tribe analysis, adapted as appropriate to fit the tribal context. Factors that are not should be disregarded. Thetest that emerges recognizes that sovereign immunity is an attribute of the sovereign and its ownactivities. Thus, a sovereign may not “market” this aspect of its sovereignty, even if substantial economic benefits might result. (See Washington v. Confederated Tribes ofColville Indian Reservation (1980) 447 U.S. 134, 155 (Colville) [prohibiting tribe from “market[ing]” exemption fromstate taxation]; see also, e.g., City of Sherrill, N.Y. v. Oneida Indian Nation ofN.Y. (2005) 544 U.S. 197, 224 34 [immunity from state taxation is “a core incidentoftribal sovereignty”].) Rather, for an entity distinct from the sovereignitself to be entitled to assert the sovereign’s immunity from suit, there must be sufficient identity between the entity and the sovereign to make the sovereign the “real, substantial party in interest” in the suit. (See Alaska Cargo, supra, 5 F.3d at p. 380; see also American Property, supra, 206 Cal.App.4th at p. 506.) Necessarily, this identity must exist not only in form, but in substance. a. Financial relationship Courts should consider, for example, whether the entity generates its own revenueor instead receives funds from the sovereign treasury; whether the entity has the powerto obligate the tribe’s funds; and whetherthe tribe is legally or practically liable for the entity’s debts and obligations. (American Property, supra, 206 Cal.App.4th at p. 506,citing Breakthrough, supra, 629 F.3d at p. 1181; see also ITSI, supra, 3 F.3d at pp. 1292-1293 [noting state’s lack oflegalliability for state fair’s obligations]; Alaska Cargo, supra, 5 F.3d at p. 381 [noting state’s practical fiscal responsibility for “lifeline” railroad should it face financial need].) The Court of Appealerred in summarily dismissing the relevance of the Tribes’ lack ofliability for the payday lending corporations’ obligations. (See Opinion at p. 21.) As in arm-of-the-state cases, a tribe’s legalliability, or lack ofliability, for the entity’s obligations, though not dispositive, is an important consideration. This follows from sovereign immunity’s central fisc-protecting purpose. “‘The vulnerability of the tribe’s coffers in defending a suit against the subentity indicates that the real party in interest is the tribe.’” (See American Property, supra, 206 Cal.App.4th at p. 506, quoting Ransom v. St. Regis Mohawk Educ. & Community Fund, supra, 86 N.Y.2d at pp. 559-560.) In contrast, if the entity is structured to shield the tribe fromliability, this tips the balance away from immunity. (See American Property, at p. 506.) 35 Following the lead of other courts, the Court of Appeal in this case held that if an entity’s “method of creation” was governed by tribal rather than state law, this fact, standing alone, weighed strongly in favor of immunity. (Opinion at pp. 19-20; see, also American Property, supra, 206 Cal.App.4th at p. 501, citing Cash Advance, supra, 242 P.3d at p. 1110; Wright v. Colville Tribal Enterprise Corp. (Wash. 2006) 147 P.3d 1275, 1279 (Wright).) The inquiry should not hinge, however, on the source of the applicable law. Instead, a court should look to the substance and operation of that law—whethertribal or state—to determinethe nature of the relationship betweenthe entity and the sovereign. (See Alaska Cargo, supra, 5 F.3d at p. 380 [analyzing Alaska statutes governingliability of Alaska Railroad Corporation]; see also Wright, supra, 147 P.3d atpp. 1277-1278 [analyzing Colville tribal code provisions governing operation of governmentaltribal corporations]; American Property, supra, 206 Cal.App.4th at p. 503 [analyzing California statutes governing creation and liability of California limited liability companies].)”” b. Function and purpose Whetheran entity serves a central governmental function or purpose is also relevant to the entity’s status as an instrumentality of the sovereign. (See American Property, supra, 206 Cal.App.4th at p. 504; Trudgeon, supra, 71 Cal.App.4th at pp. 639-640; Alaska Cargo, supra, 5 F.3dat p. 381; c.f. TSI, supra, 3 F.3d at p. 1293.) Where anentity provides services of a type “traditionally shouldered bytribal government,” such as providing >? Tribes may also form corporations under federal law pursuant to section 17 of the Indian Reorganization Act of 1934, 25 U.S.C. § 477. (See, e.g., Atkinson and Nilles, Tribal Business Structure Handbook 2008 (Office of Indian Energy and Economic Development) at p. I-5, available at [as of July 24, 2014]. 36 tribal members with housing or social services, the entity’s purpose will generally tip toward immunity. (See American Property, at p. 504.) Less traditional, more commercial endeavors can also serve a “vital government function,” weighing in favor ofthe entity being entitled to assert the sovereign’s immunity. (See Alaska Cargo,at p. 381 [railroad served as “lifeline” for state’s residents]; cf. JTSI, supra, 3 F.3d at p. 1294 [state fairs did not serve “central governmental functions”].) If, for example, a tribe established a corporation to generate renewable energy for on-reservation use and to sell excess powerinto the larger, interconnected grid, or to operate a gravel mine on tribal landto provide raw materials for reservation roads, those functions would weigh in favor of immunity. It is also possible that a largely or purely commercial endeavor might serve central governmental functions simply by generating needed funds for important government servicesor operations. As Justice Sotomayor observed in her concurrence in Bay Mills, raising revenues through taxation is harder for tribes than for states. Accordingly,a tribal commercial enterprise may be “critical to the goals of tribal self-sufficiency because such enterprises in some cases ‘may be the only means by which tribe can raise revenues.” (Bay Mills, supra, 134 S.Ct. at p. 2043 [Sotomayor, J., concurring, internal quotation omitted]; see also Fletcher, Jn Pursuit of Tribal Economic Development as a Substitute for Reservation Tax Revenue (2004) 80 N.D.L. Rev. 759, 803.) Entities engaged in gaming onIndian lands under the Indian Gaming Regulatory Act IGRA) (25 U.S.C. §§ 2701-2721), for example, serve a “‘unique role . . . in the economic life of here-to-fore impoverished Indian communities acrossthis country.”” (Trudgeon, supra, 71 Cal.App.4th at p. 640, quoting Gavle, supra, 555 37 N.W.2dat p. 295.)> Theremay be other commercial enterprises that serve this same tribal revenue-generating purpose. In such cases, however, courts should consider whetherthe enterprise operates under conditions similar to those imposed by IGRA, designedto ensure that more than de minimis revenues flow back to the tribe and will be used for governmental purposes. (Id.; see also Colville, supra, 447 U.S. at p. 156; 25 U.S.C. § 2702.) An entity’s bare declaration that some undisclosed amountof revenue flows back to a tribe to be used in unspecified ways—justas it would flow to any investor in any ordinary commercial venture—should notbesufficient to meet the entity’s burden ofproof. ec. Governmental control versus independence Finally, in both arm-of-the-tribe and arm-of-the-state cases, courts must examine whetherin form and in practice the entity is under the sovereign’s substantial, actual control (suggesting the entity is an arm of the sovereign), or whether instead it is essentially independent(suggestingit is not). (See American Property, supra, 206 Cal.App.4th at p. 505; Trudgeon, supra, 71 Cal.App.4th at p. 641; Alaska Cargo, supra, 5 F.3d at p. 381.) Borrowing from both tribe and state cases, factors that are relevant to this inquiry may includethe nature ofthe sovereign’s ownershipofthe entity, including whetherthe entity is wholly owned by the sovereign, and whetherthe sovereign’s ownership interest is direct or indirect (American Property, supra, 206 Cal.App.4th at p. 505; Trudgeon, supra, 71 33 TGRA,“which governsall Indian gaming, requires that revenues from gaming be usedonly ‘(i) to fund tribal governmentoperations or programs;[4] (ii) to provide for the general welfare ofthe Indiantribe and its members;[{] (iii) to promotetribal economic development;[{jJ (iv) to donate to charitable organizations;or [§] (v) to help fund operations oflocal government agencies... .’” (Trudgeon, supra, 71 Cal.App.4that p. 640, citing 25 U.S.C. § 2710(b)(2)(B).) 38 Cal.App.4th at p. 639); whetherthe entity can sue and be sued andtake title to, convey, and encumberproperty in its own name (Alaska Cargo, supra, 5 F.3dat p. 380); the extent of the sovereign’s actual control over the appointmentofthe entity’s board andofficers(id. at p. 381; Trudgeon,at p. 639) and over the entity’s business activities (Alaska Cargo, at p. 382); whetherthe entity is in fact managed by a private, third-party entity (American Property, supra, 206 Cal.App.4th at p. 505); whether the entity hasits “own separate identity” (TSI, supra, 3 F.3d at p. 1293); and, finally, whether the entity was intendedby the sovereign to share in its immunity (American Property, at p. 505; see also Lake County, supra, 440 U.S. at pp. 401-402 [considering California and Nevada’s lack of intent to confer immunity on regional planning agency and intent to create “separate entity’’].) Totip toward immunity, the tribe’s control should be established both as a legal and “as a practical matter.” (See Trudgeon, supra, 71 Cal.App.4th at p. 641.) Requiring actualtribal control ensures that, where an entity is held immuneasan arm ofthe tribe, the dignity and autonomy being respected is genuinely that of the sovereign. It will also help ensure that, as a functional matter, if the entity engages in unlawfulactivity, appropriate plaintiffs will be able to seek an effective injunction against responsibletribal officials. (See Bay Mills, supra, 134 S.Ct. at p. 2035 [noting availability of such relief].) D. Applying a Properly Realigned Arm-of-the-Tribe Test, the Payday Lenders Have Not Established Entitlement to Immunity on the Present Record Applying the test proposed by the People to the evidence in the current record, neither SFS, Inc. (purportedly doing businessas PreferredCashLoans and OneClickCash) nor MNE Services, Inc. (purportedly doing business as Ameriloan, UnitedCashLoans, and 39 USFastCash) hassatisfied its burden to showthatit is an arm of the relevant Tribe. 1. SES,Inc. has disavowed a relationship with PreferredCashLoans, and the People’s suit against this entity should be allowed to proceed The website for PreferredCashLoans appears to be currently active. (RIN, Ex. E.) SFS,Inc. does not hold the mark for PreferredCashLoans. SFS,Inc. asserted in April 2012 that it does not “currently actively issue loans under the trade name ‘Preferred Cash Loans.’” (4 SSCT 764-765 [{ 12].) Because SFS,Inc. has disavoweda relationship with PreferredCashLoans, that business cannot claim arm-of-the-tribe immunity, and the People’s suit against PreferredCashLoans should be allowed to proceed. 2. The evidence presentedfails to establish that SFS, Inc., dba as OneClickCash,is an arm of the Santee Sioux Nation a. Financial relationship SES,Inc. is incorporated. Under the laws of the Santee Sioux Nation, as well as SES,Inc.’s Articles, recovery on any judgment against SFS,Inc. is limited to its corporate assets. (Background V.B.IJ.) The Tribeis not legallyliable for any judgment against SFS, Inc. Andthere is no suggestion that the Tribe wouldstep in to ensure SFS,Inc.’s continued operation, should the corporation face financialdifficulty. (Compare Alaska Cargo, supra, 5 F.3d at p. 381.) Otherfactors related to the financial relationship between SFS,Inc. and the Tribe also suggest a lack of financial identity. SFS, Inc. generates its own revenues from payday lending, andthere is no suggestion that the Tribe makes any ongoing contribution to SFS, Inc. (See /TSY, supra, 3 F.3d at p. 1292.) Granted, there is somefinancial connection between SFS,Inc. 40 and the Tribe. The Tribe receives some unknown amountof “net revenue,” as attested to by Campbell. (See Background V.B.3.)" Evidence uncovered by the FTC’s investigation, however, establishes that the financial relationship between SFS,Inc. and the Tribeis indirect at best, given the involvementof Scott and Blaine Tucker and AMG,andthe flow of funds to and from persons andentities that have no apparent connection to SFS,Inc. Onbalance, the evidenceoffinancial relationship in the existing record weighs against a determination that SFS,Inc. is an arm of the Santee Sioux Nation. b. Function and purpose Similarly, SFS, Inc.’s function and purpose do not support the corporation’s immunity. (See Background V.B.3.-4.) SFS,Inc. doesnot, for example, provide traditional governmentservices for tribe members, such as housing, education, or healthcare, or even specialized financial services for tribe membersor tribal businesses. Nor doesit serve any other function traditionally shouldered by tribal governments that would favor a finding of immunity. Instead, SFS, Inc.’s stated purpose and functionis a purely commercial one—to generate revenue by marketing payday loans to the general public over the Internet. SFS, Inc. may arguethat it supports tribal governmentalfunctions by providing the Tribe with needed funds. The People agree that a commercial enterprise can serve sovereign purposes by providing the sovereign with a stable and substantial income stream, much as IGRA gamingoften does. (See Bay Mills, supra, 134 S.Ct. at p. 2043 [Sotomayor, J., concurring]; see *4 The use of the monies apparently received by the Tribe from SFS, Inc. is discussed in the next subsection on function and purpose. Control over SFS,Inc.’s fundsis discussed in the section concerningtribal control versus independence. . 4] also Kiowa Tribe ofOkla. v. Manufacturing Technologies, Inc. (1998) 523 U.S. 751, 758.) Beyond bare assertions, however, there is no evidence in the record that revenues from SFS,Inc. serve this purpose. Campbell declared that SFS,Inc. provides the Tribe with some revenues, but he did not disclose any specific facts about their amountor regularity. (Background V.B.3.) SES, Inc. provided no information concerning,for example, whatpercentage ofthetotal tribal revenue it generates for the Santee Sioux Nation. (Jbid.) This omissionis significant in light of the evidence from the FTC’s investigation suggesting that the revenue stream maybe irregular or very small (both in absolute termsandrelative to the entities’ overall gross revenue). (See Opinionat p. 10.) Campbell summarily stated that loss of SFS Inc.’s revenues would be “devastating”to the Tribe, provided no details about specific programs funded by revenue from SFS,Inc., or whether and to what extent the programs would exist without income from payday lending. (4 SSCT 765 if] 13].)°° Campbell madeassertions about the timing ofcertain tribal services, but did notstate that these services were actually created by or dependent on revenuesfrom state law-compliant payday lending. (See, e.g., ibid. [stating that “prior to the Tribe’s creation of SFS, there was no Tribal daycare facility”].) Although Campbell noted that the corporation’s sole income source is payday lending, he wassilent as to whether SFS Inc.’s payday lending operation is a substantial income source for the Tribe. Without knowing more, there is a very real possibility that extending immunity to SFS, Inc. would primarily protect private revenue streams, rather than sovereign prerogatives. * The People note that its enforcementaction is not designed to put the Payday Lenders out of business, but only to ensure compliance with California consumerprotection laws. 42 On this record, what is know about SFSInc.’s function and purpose tips against immunity. c. Governmental control versus independence The final arm-of-the tribe consideration is legal and actualtribal control versus functional independence and separate identity. SFS,Inc.’s corporate documents specify, for example, that its Board of Directors shall be comprised of the Tribal Council, and state the Tribe’s intent that SFS, Inc. share in the Tribe’s sovereign immunity. (Background V.B.2.) But formalities, standing alone, do not establish actual control. Otherfacts in the record show that the Tribe in practice exercised little control over SFS, Inc., which operated independently of the Tribe. For a substantial period oftime, the Board did not hold regular meetings and therefore could not managethe corporation. (Background V.B.3.) Further, Scott and Blaine Tucker, who are not membersofthe Tribal Council, in fact controlled the corporation’s purse strings. They were signatories to SFS, Inc.’s and AMG’s bank accounts. (Background V.B.4.) The Tuckers made payments from the corporation’s revenuesto other businesses with no apparentrelationship to SFS,Inc. or the Tribe. (Background V.B.4.) These facts suggest that, whatever formal authority the Tribe might haveto control the corporation’s operations,it has not exercised any meaningful control or oversight. Campbell’s summary assertions of unspecifiedtribal control of SFS,Inc.are entitledto little or no weightin light of this evidence. (See Background V.B.3.) In addition, SFS, Inc. has the power to sue and be sued andto take property in its own name, anddoes not possess authority to waive the Tribe’s sovereign immunity. (Background V.B.2.) Andit has long had an independent presence onthe Internet as a payday lender. (Background V.B.1.) These factors likewise point to SFS, Inc.’s functional independence fromthe Tribe. 43 The lack of actual tribal control over SFS, Inc., and evidence of the corporation’s independentidentity and operation, together with the other considerations discussed above,tip the balance of the existing evidence against recognizing arm-of-the-tribe status for SFS,Inc. 3. The evidence presentedfails to establish that MNEServices, Inc., dba as Ameriloan, United Cash Loans, and USFastCash,is an arm ofthe MiamiTribe The analysis for MNE Services, Inc., is substantially similar to that for SFS, Inc. Under the People’s proposedtest, and with MNE Services, Inc. bearing the burden ofproof, the existing evidence fails to show that the corporation is an arm of the MiamiTribe. a. Financial relationship The MiamiTribe is more financially insulated from the operation of MNE Services, Inc., than the Santee Sioux Nation is from SFS, Inc. MNE Services, Inc. is incorporated, protecting its shareholder Miami Nation Enterprises from legalliability. (Background V.C.2.) And Miami Nation Enterprisesis also incorporated, protecting its shareholder, the Miami Tribe. (Ibid.) Thereis nothing to suggest that the Tribe would ignore the corporate structure and step in to fund MNE Services,Inc. and its payday lending business, should the entity face financial difficulties. MNE Services, Inc. is expected to, and does, generate its own operating revenues. The financial connection from MNE Services, Inc., to Miami Nation Enterprises, and ultimately the Tribe, is unclear due to the subsidiary nature of MNEServices,Inc. and the involvement of AMGandthethird-party Tuckers in the Payday Lenders’ finances. (See Background V.C.2., V.C.3.- 4.) 44 Onthe current record, considerations of demonstrated financial relationship between MNE Services,Inc. and the Miami Nation weigh heavily against immunity. b. Function and purpose Similarly, considerations of function and purpose do not weigh in favor of arm-of-the-tribe status for MNE Services, Inc. The corporation does not, for example, directly provide traditional governmental services for tribe members, or serve other functions that would favor a finding of immunity. Like SFS, Inc., MNE Services, Inc.’s purpose andfunctionis to provide short-term Internet-based payday loansto the public, a purely commercial endeavor. (Background V.C.2.) Again, a commercial enterprise could serve sovereign purposes by providing a tribe with a stable and substantial income stream to support central governmental functions and services. (See Bay Mills, supra, 134 S.Ct. at p. 2043 [Sotomayor, J., concurring].) But as with SFS,Inc., the current record consists largely of generalized assertions that the Tribe receives some unspecified amount of funds from payday lending. There are virtually no details regarding how much or how often revenue flowsto the Tribe (either in absolute terms orrelative to the businesses’ gross income), or whattribal programsor operations the funds support. The record shows that MNE Services, Inc.’s central purpose and function are purely commercial, and that substantial fundsflow to private third parties. On the current record,this consideration, too, therefore weighs against immunity. c. Governmental control versus independence As with SFS,Inc., the present record fails to show that the Miami Tribe’s governmentever effectively exercised the legal controlit theoretically had over MNE Services, Inc., through the Tribe’s ownership 45 of Miami Nation Enterprises, MNE Services’ corporate parent. (Background V.C.2.; see also American Property, supra, 206 Cal.App.4th at p. 504 [notingindirect nature of corporate ownership].) Moreover, the record strongly suggests that MNE Services,Inc., in practice, was not controlled by the Tribe. As with SFS,Inc., despite prohibitions in corporate documents regarding access to bank accounts and control of funds, it appears that MNE Services, Inc.’s accounts were controlled by the third-party Tuckers, who made payments that do not appear to be for managementservices. (See Background V.C.4.) The lack of evidence of the Miami Tribe’s actual control over the operations ofMNE Services, Inc. weighs strongly against immunity. | On balance, and on the current record, the Payday Lenders have not established that they are arms of the Santee Sioux Nation or of the Miami Tribe. E. Under Any Reasonable Arm-of-the-Tribe Test, and on the Present Record, the Payday Lendersare Not Immune The analysis proposed in this brief reflects the fundamental purposes of sovereign immunity and is reasonable and fair. Of course, this Court may concludethat the relevant considerations includeadditional factors or are better expressed in somedifferent way. (See, e.g., Brief of Amici Curiae States in Support of Respondents in Cash Advancev. State of Colorado (Colo., Aug. 31, 2009, Case No. 08SC639), 2009 WL 3170028at *2] [proposing test that would include consideration of“the extent to which the entity serves as a disclosed agent or agencyofthe tribe”’].) But the People respectfully submit that, whatever the specific formulation, any acceptable arm-of-the-tribe test must result in recognizing arm-of-the-tribe immunity only where “the purposesoftribal sovereign immunity are served by granting immunity to the entit[y].” (See American Property, supra, 206 46 Cal.App.4th at p. 507, internal quotation, citation omitted.) In this case, the existing record establishes only that the Tribes have some economicinterest in payday lending businesses, whoseessentially private operations generate revenues that appear to flow mostly to parties other than the Tribes. On this record, the defendantentities have not established that the purposes of tribal sovereign immunity would be served byinsulating them andtheir private revenuestreams from the routine enforcementof California’s consumerfinance laws. CONCLUSION The People respectfully request that the Court hold that the burden of proving arm-of-the-tribe status rests on the defendant claiming immunity andthat the following three fundamental considerations must guide the inquiry: (1) the financial relationship between the entity and thetribal sovereign, including whetherthetribe is legally obligated for the entity’s debts and obligations; (2) the function and purposeofthe entity, including whether it serves central governmental functions; and (3) whetherthe entity is under the tribe’s legal and actual contro! or rather operates independently and with a separate identity. The People suggest that the Court then remandthe case for further proceedings consistent with the Court’s opinion. 47 Dated: July 28, 2014 Respectfully submitted, KAMALAD. HARRIS Attorney General of California EDWARD C. DUMONT Solicitor General SARA J. DRAKE Senior Assistant Attorney General JANILL L. RICHARDS Principal Deputy Solicitor General TIMOTHY M. MUSCAT WILLIAM P. TORNGREN Deputy Attorneys General Deputy Attorney General Attorneysfor Plaintiffand Appellantthe People ofthe State ofCalifornia 48 CERTIFICATE OF COMPLIANCE I certify that the attached OPENING BRIEF ON THE MERITS uses a 13 point Times New Romanfont and contains 13,516 words. Dated: July 28, 2014 KAMALAD. HARRIS Attorney General of California $ OC . HENDERSON éputy Attorney General Attorneysfor Appellant and Petitioner ATTACHMENTTO PEOPLE’S OPENING BRIEF ; Screenshot of Ameriloan website dated Page 1: 5/18/2007 - 4 SSCT 729 Excerpts from declaration of Federal 18 CT 4149-4150, Pages 2-8: Trade Commission investigator 4169-4171. 4191 Victoria M. L. Budich dated 3/15/2012 a Page 9: Exhibit AS to Budich declaration 20 CT 4644 Page 10: Exhibit CCto Budich declaration 22 CT 5129 AmeriLoan® :: Online Cash Advance Flay Loans - No Fax! - Fast Cash Til P. Jay Loans, Paycheck... Page | of MCED AWORRKS TES IMONIALS | QUES HONS NEED CASH FAST? eae:t10]00]0 BY TOMORROW! Existing CustomerLog In Check Status, View Payments, Apply fora New Loan! Usemame:(1 Password: [s—] My Loan Application has been Submitted Online _I don't have a printer and | wantto print a copy of my loan documents. Can | get my documents another way? How do | reprint my joan documents? | Have Received My Funds Yes No m I'ma little iow on funds, can! get an extension? @ C {amcurrently employed or| receive recurring incomeregularly. Cash Advance @ CC Imake atleast $1000 per month. @- C (currently have an active checking account. OO) C |ama Citizen of the USA andat least 18 years of age. Send me details on other credit offers. RELATED OFFERS tnaereAeat pervert https://www.ameriloan.com/ s/t 27900 Attachment to Opening Brief -- Page 1 _- Case 2:12-cv-00536-GMN -VCF Document5-23 Filed 04/02/12 Page 2 of 16 DECLARATIONOFVICTORIA M.L. BUDICH PURSUANT TO 28 US.C. § 1746 L Victoria Budich, hereby state that I have personal knowledge ofthe facts set forth below. Ifcalled as a witness, I could and wouldtestify competently as follows: lam a citizen ofthe United States and am over the age of eighteen (18) years old. I am employed as an investigator with the Federal Trade Commission (“FTC”) in the Division ofFinancial Practices. My office address is 600 Pennsylvania Avenue, N.W., NJ-3158, Washington, D.C. 20580. I began workingat the FTC in February 2002. My responsibilities for the FTC. includeinvestigating suspected violations ofconsumer protection laws, including the Federal Trade Commission Act, the Truth In LendingAct, and the Electronic Fund Transfer Act. In the normal course ofcarrying out my investigative responsibilities, | regularly use Internet search engines, electronic databases, spreadsheet software, and a variety ofother software-based investigative and organizational tools.1 also am the custodian ofdocuments and other materials that the FTC collects in the course ofthe investigations to which I am assigned. I maintain all such documents in my custody and control. On oraround October 18, 2010, 1 was assigned to the FTC's investigation ofthis matter, which cameto include, as Defendants, AMG SERVICES,INC., an Oklahoma Tribal Entity; RED CEDAR SERVICES,INC. an OklahomaTribal Entity, also dba . 500FastCash; SFS, INC., 2 Nebraska Tribal Entity, also dba OneClickCash; TRIBAL FINANCIAL SERVICES, at Oklahoma Tribal Entity, also dba Ameriloan, UnitedCashLoans, USFastCash, and Miami Nation Enterprises, AMGCAPITAL PX 22 587 Attachment to Opening Brief -- Page 2 004 49 Case 2:12-cv-00536-GMN -VCF Document5-23 Filed 04/02/12 Page 3 of 16 MANAGEMENT,LLC, aNevada Limited LiabilityCompany; LEVEL 5 MOTORSPORTS,LLC,a Nevada Limited LizbilityCompany; LEADFLASH CONSULTING, LLC, a Nevada Limited LiabilityCompany, PARTNER WEEKLY, LLC,a Nevada limited liability company; BLACKCREEKCAPITAL CORPORATION,aNevada Cotporation, BROADMOOR CAPITAL PARTNERS,LLC, a Nevada Limited LiabilityCompany; THE MUIR LAW FIRM, LLC,a Kansas Limited Liability Company; SCOTT A. TUCKER, in his individual and corporate capacity; BLAINE A. TUCKER, in his individual and corporate capacity; TIMOTHY J. MUIR, in his individual and corporate capacity, DON E. BRADY,in his individual and corporate capacity; ROBERT D. CAMPBELL,in his individual and corporate capacity, and TROY LITTLEAXE,in his individual nd corporate capacity, Defendants, and PARK 269, LLC, a Kansas Limited Liability Company; and KIM C. TUCKER, in her individual and corporate capacity, ReliefDefendants. CorporateRegistration 5. During the investigation, the FTC obtained corporate filings, including articles of incorporation, fictitious business namefilings, and other documents, from various public sources. From the NevadaSecretary of State, the FTC obtained copies ofthe Articles of Incorporation and Annual Lists relating to certain Defendants and associatéd entities. True and correct copies ofthe Articles of Incorporation and Statements ofInformation ‘that the FTC obtained are appended as follows: a. Black CreekCapital Corporation - Att. A; b. Broadmoor Capital Parmers, LLC - Att. B; c, LeadFlash Consulting, LLC - Att. C; d. Level 5 Motorsports, LLC - Att. D; PR 22 Attachment to Opening Brief -- Page 3 0041; Case 2:12-cv-00536-GMN -VCF Document 5-23 Filed 04/02/12 Page 13 of 16 ofthe corporation. True and correct copies ofthe corporate filings thet the FTC obtained are appended as Att. AD. 33. ‘Duringthe investigation the FTC obtained court filings, including Defendant affidavits from litigation in the State of California and the State of Colorado. True and correct copies ofthe materials that the FTC obtained are appended as follows: S P A T Rr S r p p m e p p o P Affidavit ofOneClickCash Former Employee William James — Att. AD1 Affidavit ofDon Brady - Att. AE Affidavit ofDon Brady - Att. AF Affidavit ofDon Brady - Att. AG Affidavit ofDon Brady - Att. AH Affidavit ofRobert Campbell - Att. Al Affidavit ofRobert Campbell - Att. AJ Affidavit ofRobert Campbell - Att AK Troy Little Axe Privilege Log - Att. AL Affidavit ofTroy Little Axe - Att. AM Affidavit ofTroy Little Axe.- Att. AN Affidavit ofTroy Little Axe - Att. AO Affidavit ofTroy Little Axe - Att. AP Affidavit ofTroy Little Axe - Att, AQ Affidavit ofThomas Assenzio - Att. AR Individual Defendants and Individual ReliefDefendants 34. Scott Tucker is connected to many ofthe Corporate Defendants and other related entities as a principal, organizer, or employee. Scott Tucker is associated with at least the following entities: r e s e r p g r e e p p o P MTE Financial Services, Inc. Red Cedar Services, Inc. dba 500FastCash Tribal Financial Services Broadmoor Capital Partaers, LLC WestFund, LLC , Level5 Motorsports, LLC Black Creek Capital Corporation AMGServices, Inc. TCS Services, LLC GEO Capital Services, LLC Partner Weekly, LLC Level 5 Worldwide, LLC 12 PX 22 Attachment to Opening Brief -- Page 4 _ 00 4160 Case 2:12-cv-00536-GMN -VCF Document 5-23 Filed 04/02/12 Page 14 of 16 m. 35. Latin Global Entertainment Network, LLC Throughout the investigation I compiled a chart detailing Scott Tucker’s corporate connections. A true and correct copyofthe chart is appended as Att AS. 36. Blaine Tucker is connected to many ofthe Corporate Defendants and other related entities as a principal, organizer, or employee. Blaine Tucker is associated with at least the following entities: 37. V O R R r r s s p e m e p p o P MTE Financial Services,Inc. Red Cedar Services, Inc. dba 500FastCesh Tribal Financial Services Key Financial SystemsCorp; Broadmoor Capital Parmers, LLC WesiFund, LLC LevelS Motorsports, LLC Black Creek Capital Corporation AMGServices, Inc. TCS Services, LLC GEO Capital Services, LLC Partner Weekly, LLC Level 5 Worldwide, LLC Latin Global Entertainment Network, LLC B.A.T, Services, Inc, LeadFlash Consulting, LLC Throughout the investigation I compiled achart detailing Blaine Tucker's corporate connections. A true and correct copy ofthe chart is appended as Att. AT. 38. Timothy Muir is connected to manyofthe Corporate Defendants and other related entities as a principal, organizer, resident agent, or employee. Timothy Muir is “associated with at least the following entities: m o p a p o P The Muir Law Firm, LLC Black Creek Capital Corp. Parmer Weekly, LLC Level 5 Worldwide, LLC Sangria South Ventures, LLC ST Capital, LLC WestFund, LLC 13 PX 22 Attachmentto Opening Brief -- Page 5 094164 Case 2°12-cv-00536-GMN -VCF Document5-24 Filed-04/02/12 Pag es of 13 62. 63. Throughout the investigation I reviewed numerous bank records and identified regular payments from the Defendants to service providers. Regular payments from several of the defendants’ corporate bank accounts to associated entities and closely related service providers. A true and correct copy ofa chart showing regular payments from Defendants to closely related service providers is appended as Att. CC. Accompanying the US Bank records are documents that denote account signatories, account holders, state ofincorporation, and Corporate Secretary. Scott Tucker and Blaine Tucker are signatories on the accounts listed below. Some accounts have additional signatories, but Scott and Blaine Tucker appear to bethe only individuals actually signing the checks. True and correct copies of each known US Bank Corporate Certificate of Authority or Signatory Card that the FTC obtained are appended as ‘follows: AMGCapital Management, LLC - Att. CCI; AMG Services, Inc.- Att, CD; AMG Servicss, Inc. - Att. CE; BlackCreekCapital - Att. CF; Black Creek Capital -Att. CG; Black Creek Capital - Att. CH; Black:Creek Capital - Att. CHI; Black Seas Investments, LLC - Att. CI; Broadmoor Capital Partners, LLC - Att CJ; Cash Dise.com, Inc. - Att. CK; CVCServices, Inc. - Att. CL: ECM Services, Inc. - Att. CM; ESSFA AC, LLC - Att. CN; GEO Capital Services, LLC - Att.CO; Key Financial Services, Inc. - Att. CP; Key Financial Systems, Inc. - Att, CQ; LeadFlash-Consulting,LLC ~Att.CR; Level 5 Motorsports, LLC - Att. CS; MITE Financial Services dba PC Today ~ Att. CT; MTE Financial Services dba Instant ‘Cash USA ~ Att. CU; MITE Financial Services dba United Cash Loans - Att. CV; MTE Financial Services dba Cash Advance - Att. CW;A P R P R P V P O R A E R S Br H o A P o P 21 PX 22 607 Attachment to Opening Brief -- Page 6 00A169 Case 2:12-cv-00536-GMN -VCF Document5-24 Filed 04/02/12 Page 7 of 13 -MTE Financial Services dbaCash Advance Network - Att. CX; MTE Financial Services dba AxcessCash- Att. CY; MTE-Financial Services dba Xtra ‘Cash - Att.CZ; ’ MTE Financial Services dbaWeb Cash Network - Ait. DA; MTE Financial ‘Services dba PreferredCash Loans - Att. DB; MTE Financial Services dba Xtra Cash (SecondAccount) - Att. DC, MTE‘Financial Services dba-Rio Resources - Att. DD; Pinion: Management - Att DE; PSB Services, LLC - Att. DF; RedCedar Services, Inc. - Att. DG; SFS, Inc. dbaOneClickCash - Att DH; ‘SMCServices, LLC - Att. DI; ‘TCS Services,LLC - Att.DY; TFSCorp dba‘USFastCash - Att. DK; Tribal Financial dba Preferred Cash Loans - Att. DL; Universal Management Services, Inc. - Att. DM; West Fund, LLC Collection Account - Att. DN; and WestFund, LLC - Att DO. a BE RE Sr ER MR ER ER Y < M 64, in the course ofmy investigative daties, I reviewed the records produced by US "Bank to examine accountactivity, including deposits, withdrawals, and transfers. Most records spanned three years, while some went back nine years or more, These records showed consistent pattems in deposits, transfers, payments, and account holders. Over "the courseofthe investigation I reviewed approximately 10,000 check images and hundreds ofbank statements, As such, Scott Tucker or Blaine Tucker signed every check discussed in this deslaration. «in addition to being voluminous, the recomds provided by US Bank contained several instances ofblank, missing, or removed pages. Therefore, the . analysis includes onlyidentifiable data. True and correst copies ofthe complete corporate bank records are available upon request. In lien ofproducing all ofthe documents, [have mapped out account data with tables and charts. OverviewofAMG Services. Inc, Bank Accounts: 65. ‘The FTC identified two AMGServices, Inc. accounts with US Bank. Scott Tucker and Blaine Tucker are the only signatories an the accounts. PX 22 "BOB Attachment to Opening Brief -- Page 7 0044 70 Case 2:42-cv-00536-GMIN CF Document 5-24 - Filed 04/02/12 Page 8 of 13 66. AMG Services,Inc. account xxx0600, receives regular deposits from the following Defendants: TFS Corp dba Ameriloan; TFS Corp dba United Cash Loans, TFS Corp dba USFastCash; MTE Financial Services dba S00FastCash; Red Cedar Services dba 500FastCash; and SFS, Inc. dba OneClickCash. Subsequently, systematic payments are wired to 2 company named Halinan Capital. Table 3, below, summarizes the deposits and wire transfers from January 2010 through March 2011 for account xxx0600. TABLE 3: AMGServices. Inc. Accountxxx0600 [Withdrawals to Halinan Capital $22,000,000.00 67. The AMG Services, Inc. accountxxx0270 appears to be the corporate operations account. Checks ate regularly deposited into the AMG Services, Inc, xxx0270 account from theentities listed below. The word “payroll”is within the note on each check. A true and correct copy ofselect “payroll” checks from these entities are appended as follows: TFS Corp.dba Aineriloan, Att. DP; TFS Corp.dbaUnited Cash Loans, At DQ; TFS Corp dbaUSFastCash, Att. DR; MTE Financial Services dba 300FastCash, Att. DS; Red Cedar Services dba 500FastCash, Att. DT; SPS, Inc-dba- OneClickCash, Att,DU; Black: Creek Capital -Corp., Att. DV; EclipseRenewable Holdings, LLC, Att. DW; Broadmoor Capital:Partners, LLC, Att. DX, Real Estate Capitel Services, LLC, At,DY; MNEServices, Ine. dba Ace Cash Services, Att. DZ;- MNEServices, Inc. dba Star Cash Processing, Att. EA; and ‘WestFund, LLC, Att. EB.B o w e h a t e m p a s o p Attachment to Opening Brief -- Page 8 004644 e e e MT E Fi na nc ia lS éi vi ca s, In e, R e d C e d a r Se rv ic es d b a S0 0F as tC as tt : co cr et ar y & Si gn at or y . Z Tr ib al Fi na nc ta l Se rv ic es MN E F i n a n c i a l Se rv ic es M i a n T r i b e of O k l a h o m a ie Br oa dr ho dr Ca pi ta l Pa rt ne rs , LL C A) 47 1 Co to na do Ce nt er Be . 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P a g e 1 of 1 A t t a c h m e n t to O p e n i n g Br ie f - P a g e 9 Case 2:12-cv-00536-GMN -VCF Document5-35 Filed 04/02/12 Page 12 of 215 Case 2:12-cv-00536-GMN -VCF Document 5-37 Filed 04/02/12 Page 141 of 153 M o d o c Tr ib e Re d Ce da r Se rv ic es db a S0 0F as tC as h Tr ib al Fi na nc ia l Se rv ic es d b a U S F a s t C a s h K e Y \ N O WG M i a n Tr ib e o f O k l a h o m a 7 M i a m i Tr ib e o f O k l a h o m A RY, “ Z R > d o x y x e g py T r i b a l F i n a n c l a i S e r v i c e s d b a U n i t e d C a s h L o a n s @ o n “ T r i b a l F i n a n c i a l S e r v i c e s d b a A m e r i l o a n yy R O V N Ss | : S A < » % oO 5 V R Q E E R O A S R S 4 B E R Y L a h s A X D > / x \ SF S, In c. db a On eC li ch Ca sh P a g e 1 o f 1 005129 A t t a c h m e n t t o O p e n i n g Br ie f -- P a g e 1 0 DECLARATION OF SERVICE Case Name: People of the State of California v. Miami Nation Enterprises,et al. Case No.: 8216878 J declare: I am employed in the Office of the Attorney General, whichisthe office of a memberofthe California State Bar, at which member’sdirection this service is made. I am 18 years of age or older and nota party tothis matter; my business addressis 1515 Clay Street, 20" Floor, P.O. Box 70550, Oakland, CA 94612-0550. On July 28, 2014, I served the attached OPENING BRIEF ON THE MERITSbyplacinga true copy thereof enclosed in a sealed envelope with postage thereon fully prepaid, in the internal mail collection system at the Office of the Attorney General; or, where indicated, causing such envelope to be personally delivered by messengerserviceto the office of the addresseelisted below: California Supreme Court Earl Warren Building 350 McAllister Street, Room 1295 San Francisco, CA 94102 Original + 13 copies Sent via Messenger (Ace Attorney Service, Inc.) John Nyhan Fredericks Peebles & Morgan LLP 2020 L Street, Suite 250 Sacramento, CA 95811 Attorney for Defendants and Respondents Sentvia First-Class U.S. Mail Nicole E. Ducheneaux Fredericks Peebles & Morgan LLP 3610 North 163rd Plaza Omaha, NE 68116 Attorney for Defendants and Respondents Sentvia First-Class U.S. Mail Conly J. SchulteFredericks Peebles & Morgan LLP1900 Plaza DriveLouisville, CO 80027 Attorney for Defendants andRespondentsSent via First-Class U.S. Mail California Court of Appeal 1 copy Second Appellate District . Ronald Reagan State Building Sent via Golden State Overnight 300 S. Spring Street 2™ Floor, North Tower Los Angeles, CA 90013 Hon. Yvette M. Palazuelos 1 copy Los Angeles County Superior Court Central District Sent via First-Class U.S. Mail Stanley Mosk Courthouse 111 North Hill Street, Dept. 28 Los Angeles, CA 90012 UcheL. Enenwali Courtesy CopyDept. of Business Oversight320 West 4th Street, Suite 750 Sent via First-Class U.S. MailLos Angeles, CA 90013-2344 I declare under penalty of perjury under the laws of the State of California the foregoing is true and correct and that this declaration was executed on July 28, 2014, at Oakland, California. Debra Baldwin baleMitr Declarant Signature