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Financial Services Law Insights and Observations

Florida court grants sovereign immunity to lender and company officials

Courts State Issues Florida Payday Lending Tribal Lending Tribal Immunity Sovereign Immunity Interest Rate Usury Consumer Finance

Courts

On April 11, a Florida county court concluded that a defendant lender and certain company officials were entitled to sovereign immunity in a case concerning alleged usury claims. The plaintiff claimed the lender used its supposed federally-recognized tribal affiliation to escape state usury regulations. The court dismissed the complaint, however, finding that the lender is an “arm of the tribe” under a six-prong test established by the U.S. Court of Appeals for the Tenth Circuit in Breakthrough Management Group, Inc. v. Chukchansi Gold Casino & Resort. The test determines whether sovereign immunity should apply by examining, among other factors, an entity’s creation, the amount of control a tribe has over the entity, and the financial relationship between the tribe and the entity. According to the court, the defendant’s evidence suggests that the tribe created the defendant as a business entity “to generate and contribute revenues” to the tribe’s general fund. The court found that insufficient detail was presented to support the plaintiff’s assertion that the defendant pays a relatively small percentage of its gross revenues to the tribe. The court added that the plaintiff also failed to present evidence proving that large portions of the defendant’s revenue were distributed to non-tribal entities. In dismissing the case with prejudice, the court also dismissed claims against three individual defendants because they were entitled to sovereign immunity. The court concluded that the plaintiff’s allegations demonstrated that the individuals committed the alleged wrongs in their capacities as employees and officers and therefore the “real party in interest” is the lender.

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