Federal Court Agrees With Magistrate That Whether A Tribal Lender Is A For-Profit Corporation Is A Triable Issue Of Fact

On March 7, 2014, the United States District Court for the District of Nevada in Federal Trade Commission (the FTC) v. AMG Services, Inc., et al. granted a partial victory to Indian tribal payday lenders in their ongoing fight against regulation by United States federal and state authorities when it issued an order to accept and adopt a magistrate judge's Report and Recommendation (the Report) to grant in part and deny in part the FTC's motion for partial summary judgment against the defendants. The District Court adopted the Report's recommendation to deny the FTC's motion for summary judgment as to the claim that the tribal defendants are "corporations" covered by the FTC Act and subject to the FTC's regulatory authority, opening the door to the possibility that at trial the court could rule that the defendants are not for-profit corporations subject to the FTC Act and are, therefore, beyond the jurisdiction of the FTC.

The FTC filed its complaint against AMG Services, Inc. and related Indian tribal defendants on April 2, 2012, alleging that the defendants violated portions of the FTC Act, the Truth in Lending Act (TILA) and the Electronic Funds Transfer Act (EFTA), all in connection with the defendants' activities in offering and extending online "payday loans."

The parties agreed to bifurcate the trial such that in Phase I of the proceedings, the court would adjudicate both the merits of the FTC's claims and the legal question of whether, and to what extent, the FTC has authority over Indian tribes for violations of the FTC Act. The defendants' initial responses to the FTC's complaint were that the FTC does not have jurisdiction over any of the defendants because: (i) the FTC does not have authority to regulate Indian tribes so it may not regulate the lending activities of arms of Indian tribes and employees of arms of Indian tribes and (ii) the tribal-chartered defendants are not "corporations" for purposes of the FTC Act and, therefore, the FTC does not have jurisdiction to regulate the lending activities of the tribal-chartered defendants or their employees.

The magistrate's Report, issued on July 16, 2013, recommended denying certain of the defendants' summary judgment claims based upon the magistrate's conclusion that the FTC Act is a statute of general applicability even if it is otherwise silent on its applicability to Indian tribes, citing to Ninth Circuit precedent and the test in the Tuscarora Indian Nation decision, 362 U.S....