Why a rich law firm is suing Native tribes

Adeep-pockets Chicago law firm has been targeting businesses run by Native American tribes.

In September, Daniel Edelman filed yet another lawsuit against a short-term, small-dollar lending business, this one owned by the Lac Courte Oreilles Band of Lake Superior Chippewa Indians. They are a small band, fewer than 8,000 members, and their land — mostly covered in lakes and forests — is in Wisconsin’s remote northwest corner.

Thanks to their federal tribal status, tribes can run and self-regulate businesses that are traditionally regulated by state officials, so long as they comply with federal laws. For some tribes, that has meant building casinos. For the Lac Court Oreilles and many other tribes, financial businesses like lending, which can be conducted online, are a better fit.

But now the Lac Courte Oreilles are in court, dragged in by Edelman and his firm, Edelman, Combs, Latturner & Goodwin. This lawsuit is just the latest in a series targeting Native American tribes across the U.S. for years. Recent instances include suits against tribes in Wisconsin, California, Illinois and Indiana.

The economic impact of their lawsuits, tribal advocates say, has been devastating.

“There is a common perception that all tribal governments and tribal nations are operating successful casinos and therefore doing just fine economically,” said Kate Spilde, chair of the Sycuan Institute on Tribal Gaming at San Diego State University. “Meanwhile, fewer than one-third of all tribes offer casino gaming, and many tribal gaming facilities are small, local properties that mainly provide jobs and entertainment.”

E-commerce activities are particularly attractive to tribes because the physical infrastructure for traditional commerce requires U.S. government leases, and their land is often quite out of the way. So, many tribes have branched into lending activities, where they are exempt from the rate caps that some state governments have placed on short-term, small-dollar loans.

Lending of that type is itself a tricky issue. While such lenders are often characterized as predatory, they are often lifesavers to the people who use them because they can’t access capital any other way. And there is a thriving short-term loan industry in America that tribes and their governments have a legitimate right to participate in, Spilde said.

“Under the Dodd-frank Act, tribal governments have the legal right to offer and regulate financial services,” Spilde noted. “When these tribal businesses are threatened by legal challenges, the impact on tribal economic and community development are immediate and profound since they affect employees and tribal programs that are dependent on that industry.”

Edelman’s firm makes no secret of the fact that it wants to drive Native American tribes out of the short-term lending business entirely.

In a post on their law blog, they brag about their litigation against the Cheyenne River Sioux tribe, another small group of 8,000 or so living on a massive reservation in rural South Dakota. “As should be expected by this time, payday lending in Indian country is creating bad law for tribal interests,” the post reads. “My initial recommendations to tribal leaders and counsel — shut down on-reservation-based payday lending operations operated privately immediately.”

Edelman’s argument is that the outside firms brought in to operate these financial businesses are merely using the tribes as fronts, collecting profits on high-interest rates tribes are allowed to charge that would be illegal under state regulations. Tribal advocates are insulted by what they see as a condescending view of Native Americans as unsophisticated and inept. They note many businesses hire outside experts and consultants, and arguing that American Indians do so out of incompetence or corruption borders on racism.

It’s also no secret that other financial players in the short-term loan business don’t like competing with tribal lenders. By suing the tribes, Edelman is advancing the interests of big financial corporations that collect profits from the industry.

And then there is the impact of Edelman’s actions on the local economies. Noting how vital tribal commerce is, Indian Country Today reporter Mark Trahant told NPR last year that tribes are themselves usually the largest employers in regions where they live.

“(A healthy tribal economy) just creates jobs that didn’t exist a decade ago,” Trahant said. “During the pandemic … a lot of the large tribal employers tried to keep people on as long as possible. Not everyone, of course, but in many cases, they tried to keep people working even when the casino operations were shut down, and I think that was really remarkable.”

If the federal government wants to end the short-term lending business, it has the power. And if the government is interested in being even-handed, it should apply to every business, including banks and credit unions, which also offer expensive credit in the form of overdrafts, not just those owned by Native American tribes.

“The fact is, short-term, small-dollar lending is an economic lifeline for many tribes, advancing tribal sovereignty, enabling economic development and better economic opportunity on reservations across the country,” said Steve Parker, a member of Montana’s Chippewa Cree Tribe and a fintech entrepreneur.

“You hurt tribal lending, you hurt American Indians.”