By Anthony Broadman
The Eastern District of Virginia’s decision in Williams v. Big Picture this week is another reminder that Tribal LLCs will be held to a different standard in the lending context.
Despite a legitimate business entity regulatory framework, the court set aside the Lac Vieux Desert LLC’s sovereign immunity. Courts are almost uniformly rejecting sovereign immunity for Tribal LLCs in the lending context. Further, the judicial skepticism found in lending cases is going to bleed into treatment of all Tribal LLCs.
Doctrinally and technically, Big Picture and the Lac Vieux Desert Band of Lake Superior Chippewa Indians may have done everything right. The court recognized legitimate governmental authority to form businesses, regulate those businesses, and return significant, important revenue to the Tribe. But, reflecting the perceived stink of moneylending, the court rejected the LLC as an arm of the Tribe under the Breakthrough standard.
Like many multi-part tests applied to Indian economic development, the Breakthrough 6-part test gives courts cover to do whatever they want. And what the Big Picture court wanted was to ignore sovereign immunity and un-shield a scheme under which non-Tribal stakeholders enjoyed a much stronger position within this particular moneylending operation.
It’s hard to say whether courts have been so hard on Tribal LLCs in the lending context because courts don’t like moneylending, or because moneylending tribal LLCs have done a poor job of shaping themselves in line with Breakthrough and its progeny.
Still, the “big picture” should now be clear. Entities participating in this industry must exceed the standards that we know courts will apply. And because moneylenders have made the law courts will apply to all Tribal LLCs, non-moneylending LLCs must, too.
Anthony Broadman is a partner at Galanda Broadman PLLC. He can be reached at 206.321.2672, firstname.lastname@example.org, or via www.galandabroadman.com.