## Facts

- The California Commissioner of Business Oversight brought a civil enforcement action alleging that tribally affiliated online payday-lending entities made unlawful “deferred deposit” loans to California residents in violation of the California Deferred Deposit Transaction Law (CDDTL).
- The defendants were Miami Nation Enterprises, Inc. and MNE Services, Inc. (associated with the Miami Tribe of Oklahoma) and SFS, Inc. (associated with the Santee Sioux Nation of Nebraska).
- The entities were created under tribal law and licensed by their tribes to conduct internet payday lending nationwide, including in California.
- The Commissioner alleged the entities’ loan amounts and fees exceeded CDDTL limits and that effective APRs were extremely high.
- Defendants sought dismissal on the ground that they were “arms of the tribe” entitled to tribal sovereign immunity.
- The Commissioner offered evidence that day-to-day operations were largely run by non-tribal outside managers, that profit flows to tribes and support for governmental functions were not meaningfully documented, and that tribal assets were insulated from the entities’ liabilities.
- The trial court granted summary judgment to defendants based on immunity, and the Court of Appeal affirmed.

## Issues

1. What standard and burden of proof govern whether a tribally affiliated business entity qualifies as an “arm of the tribe” entitled to tribal sovereign immunity?
2. Under that standard, did MNE and SFS prove they were arms of their respective tribes and therefore immune from California’s enforcement action?

## Decision

- The California Supreme Court reversed the Court of Appeal.
- It adopted a nonexclusive six-factor test for determining arm-of-the-tribe status and held the entity claiming immunity bears the burden to prove entitlement by a preponderance of the evidence.
- Applying the factors, the court held MNE and SFS did not carry their burden on the existing record and were not entitled to summary judgment on tribal sovereign immunity.
- The case was remanded for the trial court to determine whether to allow additional evidence under the clarified standard and for further proceedings.

## Legal Principles

- Federally recognized tribes possess sovereign immunity, and immunity may extend to tribal business entities only when they function as arms of the tribe; tribal affiliation or tribal ownership alone is insufficient.
- Arm-of-the-tribe status is evaluated through a six-factor, substance-focused inquiry:
  - the entity’s method of creation;
  - its stated purposes;
  - its structure, ownership, and management (including actual tribal control);
  - tribal intent regarding shared immunity;
  - the entity’s financial relationship with the tribe (including exposure of tribal assets and flow of revenues to the tribe);
  - the effect of granting or denying immunity on tribal integrity, self-determination, and economic security.
- No single factor is dispositive; actual control and financial integration, including whether tribal assets are at risk from an adverse judgment, are especially significant.
- The party asserting arm-of-the-tribe immunity bears the burden of proof by a preponderance of the evidence.

## Conclusion

The court required tribally affiliated commercial entities to prove, under a structured multi-factor test, that they truly operate as arms of a tribe before receiving tribal sovereign immunity, and it rejected summary judgment where the record did not show meaningful tribal control or a financial relationship that would place tribal assets at risk.


People ex rel. Owen v. Miami Nation Enters., 2 Cal. 5th 222 (Cal. 2016)