Lower Brule Sioux Tribe loses immunity argument in loan case

Wednesday, January 16, 2013  

The Lower Brule Sioux Tribe of South Dakota can't raise a sovereign immunity defense at the discovery stage of a lawsuit involving a failed loan, a judge in New York ruled.

Lower Brule Community Development Enterprises, a corporation formed by the tribe, entered into an agreement with Seaport Loan Products to market a $22.5 million loan that was backed by the Bureau of Indian Affairs. Seaport found a buyer for the loan but the tribe apparently loaned the money to a different entity.

Seaport responded with a lawsuit in New York state court that accused the tribe of breach of trust and unjust enrichment. As part of the case, the firm requested documents from the tribe and sought to depose tribal executives.

In a 12-page decision, Judge Eileen Bransten acknowledged that tribes and their corporate entities enjoy sovereign immunity. But she said the Lower Brule Community Development Enterprises was not formed under the Indian Reorganization Act.

"Plaintifs have shown, and LBCDE admits, that LBCDE is a Delaware limited liability company," Bransten wrote.

Bransten ordered the tribe to comply with the document requests and to make a tribal executive available for a deposition. A status conference is scheduled for February 19.

Documents can be found on the New York Supreme Court Record On-Line Library The case is Seaport Loan Products v. Lower Brule Community Development Enterprises, No. 651492/2012.

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Tribal Corporation Cannot Block Discovery by Invoking Sovereign Immunity (The New York Law Journal 1/16)
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