The Oklahoma Bar Journal April 2024

not be abrogated unless 1) Congress clearly and unequivocally abro gates that immunity or 2) the tribe clearly waives its immunity. 11 But although the Supreme Court has ruled that tribal sovereign immu nity extends to a tribal govern ment ’s commercial activities in and outside of Indian Country, 12 the court has said very little on whether lower courts should treat a tribally owned business as a dis tinct entity or whether it should be considered part of the tribe – and, thus, entitled to the tribe’s sovereign immunity. Because the Supreme Court has been relatively silent on this topic, Oklahoma courts use a six-factor test created by the 10th Circuit in Breakthrough Management Group, Inc. v. Chukchansi Gold Casino & Resort to determine whether a tribal enterprise is an “arm of the tribe.” 13 Courts applying this test examine the following factors: creation: Facts weighing in favor of immunity include whether the entity was created under tribal law and whether the tribe’s resolu tions or ordinances creating the entity describe it as an “instrumentality” or “autho rized agency” of the tribe. 2) The entity’s purpose: Granting immunity is favored if the entity was “created for the financial benefit of the tribe and to enable it to engage in various governmental functions.” 14 3) The entity’s structure, ownership and management: This factor weighs in favor of immunity if the tribe has significant managerial control over the entity and wholly owns it. 1) The method of the entity’s

So far, only a few courts have considered whether a tribal business is an arm of the tribe in bankruptcy proceedings, and most consider this question in the context of tribal enterprises as creditors .

4) The tribe intends for the

So far, only a few courts have considered whether a tribal busi ness is an arm of the tribe in bankruptcy proceedings, and most consider this question in the con text of tribal enterprises as creditors . For example, in Solomon v. American Web Loan , the bankruptcy court applied the Breakthrough test to determine whether a payday lend ing company incorporated under tribal law and partially owned by the tribe was entitled to the tribe’s sovereign immunity. 18 There, a non-Indian individual partnered with a tribe to form an online payday loan company. 19 Believing that it shared the tribe’s sovereign immunity and that the state’s interest rate caps were inapplicable, it charged customers exorbitant interest rates for payday loans. A group of debtors eventually sued in bankruptcy court, arguing that the company violated state law. 20 Applying the Breakthrough fac tors, the court found that the tribe received about $8 million in profits, compared to the tribe’s non-Indian partner who earned around $110 million. 21 Additionally, the court found that the non-Indian partner

entity to share its immunity: If a tribe’s resolutions and ordinances express that the enterprise should share the tribe’s immunity, then this intent weighs in favor of granting immunity. between the tribe and entity: This factor weighs in favor of immunity if the entity’s revenue funds the tribe’s “governmental functions, its support of tribal mem bers and its search for other economic development opportunities.” 15 6) Whether extending immunity would “plainly promote and fund the Tribe’s self-determination through revenue generation and the funding of diversified economic development.” 16 It also asks if extending immunity to the entity “directly protects the sovereign tribe’s treasury, which is one of the historic 5) The financial relationship

purposes of sovereign immunity in general.” 17

Statements or opinions expressed in the Oklahoma Bar Journal are those of the authors and do not necessarily reflect those of the Oklahoma Bar Association, its officers, Board of Governors, Board of Editors or staff.

36 | APRIL 2024

THE OKLAHOMA BAR JOURNAL