Big Picture Loans Lands Big Win for Tribal Lenders in Sovereign Immunity CaseIn a recent decision by the Fourth Circuit, Big Picture Loans, LLC, an online lender owned and operated by the Lac Vieux Desert Band of Lake Superior Chippewa Indians, a federally recognized Indian tribe (“Tribe”), and Ascension Technologies, LLC, the Tribe’s management and consultant company successfully established that they are each arms of the Tribe and cloaked with all of the privileges and immunities of the Tribe, including  sovereign immunity. As background, Big Picture Loans and Ascension are two entities formed under Tribal law by the Tribe and both are wholly owned and operated by the Tribe. Big Picture Loans offers consumer financial services products online and Ascension offers marketing and technology services solely to Big Picture Loans.

Plaintiffs, consumers who had taken out loans from Big Picture Loans, brought a putative class action in the Eastern District of Virginia, arguing that state law and other various claims applied to Big Picture Loans and Ascension. Big Picture Loans and Ascension moved to dismiss the case for lack of subject matter jurisdiction on the basis that they are entitled to sovereign immunity as arms of the Tribe. Following jurisdictional discovery, the U.S. District Court rejected Big Picture Loans and Ascension’s assertions that they are arms of the Tribe and therefore immune from suit.

The Fourth Circuit held that the U.S. District Court erred in its determination that the entities were not arms of the Tribe and reversed the district court’s decision with instructions to dismiss Big Picture Loans and Ascension from the case, and in doing so, articulated the arm-of-the-tribe test for the Fourth Circuit. The Fourth Circuit first confronted the threshold question of who bore the burden of proof in an arm-of-the-tribe analysis, reasoning that it was proper to utilize the same burden as in cases where an arm of the state defense is raised, and “the burden of proof falls to an entity seeking immunity as an arm of the state, even though a plaintiff generally bears the burden to prove subject matter jurisdiction.” Therefore the Fourth Circuit held the district court properly placed the burden of proof on the entities claiming tribal sovereign immunity.

The Fourth Circuit next noted that the Supreme Court had recognized that tribal immunity may remain intact when a tribe elects to engage in commerce through tribally created entities, i.e., arms of the tribe, but had not articulated a framework for that analysis. As such, the court looked to decisions by the Ninth and Tenth Circuits. In Breakthrough Management Group, Inc. v. Chukchansi Gold Casino & Resort, the Tenth Circuit utilized six non-exhaustive factors: (1) the method of the entities’ creation; (2) their purpose; (3) their structure, ownership, and management; (4) the tribe’s intent to share its sovereign immunity; (5) the financial relationship between the tribe and the entities; and (6) the policies underlying tribal sovereign immunity and the entities’ “connection to tribal economic development, and whether those policies are served by granting immunity to the economic entities.” The Ninth Circuit adopted the first five factors of the Breakthrough test but also considered the central purposes underlying the doctrine of tribal sovereign immunity (White v. Univ. of Cal., 765 F.3d 1010, 1026 (9th Cir. 2014)).

The Fourth Circuit concluded that it would follow the Ninth Circuit and adopt the first five Breakthrough factors to analyze arm-of-the-tribe sovereign immunity, while also allowing the purpose of tribal immunity to inform its entire analysis. The court reasoned that the sixth factor had significant overlap with the first five and was, thus, unnecessary.

Applying the newly adopted test, the Fourth Circuit held the following regarding each of the factors:

  1. Method of Creation – The court found that formation under Tribal law weighed in favor of immunity because Big Picture Loans and Ascension were organized under the Tribe’s Business Entity Ordinance via Tribal Council resolutions, exercising powers delegated to it by the Tribe’s Constitution.
  2. Purpose – The court reasoned that the second factor weighed in favor of immunity because Big Picture Loans and Ascension’s stated goals were to support economic development, financially benefit the Tribe, and enable it to engage in various self-governance functions. The case lists several examples of how business revenue  had been used to help fund the Tribe’s new health clinic,  college scholarships, create home ownership opportunities, fund office space for Social Services Department, youth activities and many others. Critically, the court did not find persuasive the reasoning of the district court that individuals other than members of the Tribe may benefit from the creation of the businesses or that steps taken to reduce exposure to liability detracted from the documented purpose. The court also distinguished this case from other tribal lending cases that found this factor unfavorable.
  3. Structure, Ownership, and Management – The court considered relevant the entities’ formal governance structure, the extent to which the entities were owned by the Tribe, and the day-to-day management of the entities by the Tribe. Here the court found this factor weighed in favor of immunity for Big Picture Loans and “only slightly against a finding of immunity for Ascension.”
  4. Intent to Extend Immunity – The court concluded that the district court had erroneously conflated the purpose and intent factors and that the sole focus of the fourth factor is whether the Tribe intended to provide its immunity to the entities, which it undoubtedly did as clearly stated in the entities’ formation documents, as even the plaintiffs agreed on this point.
  5. Financial Relationship – Relying on the reasoning from Breakthrough test, the court determined that the relevant inquiry under the fifth factor is the extent to which a tribe “depends . . . on the [entity] for revenue to fund its governmental functions, its support of tribal members, and its search for other economic development opportunities” (Breakthrough, 629 F.3d at 1195). The court reasoned that, since a judgment against Big Picture Loans and Ascension would significantly impact the Tribal treasury, the fifth factor weighed in favor of immunity even if the Tribe’s liability for an entity’s actions was formally limited.

Based on that analysis, the Fourth Circuit recognized that all five factors weighed in favor of immunity for Big Picture and all but one factor weighed in favor of immunity for Ascension, resulting in a big win for Big Picture Loans and Ascension, tribal lending and all of Indian Country engaged in economic development efforts. The court opined that its conclusion gave due consideration to the underlying policies of tribal sovereign immunity, which include tribal self-governance and tribal economic development, as well as protection of “the tribe’s monies” and the “promotion of commercial dealings between Indians and non-Indians.” A finding of no immunity in this case, even if animated by the intent to protect the Tribe or consumers, would weaken the Tribe’s ability to govern itself according to its own laws, become self-sufficient, and develop economic opportunities for its members.


Although the time for appeal to the U.S. Supreme Court has not expired in this case, needless to say, this is a major victory for tribal lending.   The order also restates an important principle from the U.S. Supreme Court case in Bay Mills that “it is Congress–not the courts–that has the power to abrogate tribal immunity” and that just because a court does not like the “business in which a tribe has chosen to engage,” it cannot seek to remove its right to immunity on that basis.