Banking and Finance Law Daily Wrap Up, LOANS—3d Cir.: Consumer class action against tribally-created online lender remanded for further litigation, (Aug 5, 2025)

By Justin Marcus Smith, J.D.

The Third Circuit held the lender did not enjoy tribal sovereign immunity because it did not appear to be contributing anything to tribal finances.

In an interlocutory appeal on a collateral issue of sovereign immunity, the United States Court of Appeals for the Third Circuit affirmed a district court denial of a motion to dismiss a class action against a tribally-organized online lender. In weighing five Tenth Circuit factors on the core question of tribal sovereign immunity, the Third Circuit largely concluded that a judgment against the online lender would not harm tribal finances because the lender appeared to have never turned a profit. The Third Circuit said this factor cut “decisively” against a finding of tribal sovereign immunity (Ransom v. GreatPlains Finance, LLC, No. 24-1908 (3d Cir. Aug. 4, 2025)).

Background. A New Jersey consumer-borrower brought a putative class action against online lender GreatPlains in connection with alleged high-interest loans. The consumer claimed GreatPlains broke several New Jersey consumer protection laws.

GreatPlains moved to dismiss on the basis of tribal sovereign immunity. The district court held Great Plains was not an arm of the Fort Belknap Indian Community, a federally recognized Indian tribe in rural Montana. The court denied the tribe’s motion to dismissal accordingly.

The tribe had incorporated the Island Mountain Development Group (Island Mountain) to manage and collect profits from the tribe’s various businesses. GreatPlains was one of those businesses. It was a limited liability corporation under tribal law and one of the tribe’s eight online lenders. The online lenders collectively contributed about 90% of Island Mountain’s total revenue. However, GreatPlains, specifically, seemed to be the tribe’s only unprofitable online lender.

The tribe wholly owned GreatPlains through a subsidiary. Island Mountain managed and leased workers to GreatPlains. The GreatPlains articles of organization purported to shield it with tribal sovereign immunity. GreatPlains lent money at interest rates illegal in most states.

In 2021, Newport Funding, a non-tribal private equity fund, lent up to $10 million to GreatPlains in exchange for 21% interest per year, certain fees, and a pledge of GreatPlains assets as collateral with a security interest. GreatPlains eventually fell into default, and NewPort ordered GreatPlains’ bankers to freeze its accounts.

After the district court declined to dismiss the consumer’s class action, Newport waived GreatPlains’ default and restored tribal control of GreatPlains’ assets. With the Newport waiver in hand, GreatPlains moved for reconsideration of dismissal. The district court denied the motion.

GreatPlains then filed the instant appeal challenging both denial of its motion to dismiss and the later denial of reconsideration. The United States Court of Appeals for the Third Circuit consolidated review of both denials, for clear error on the facts and de novo review of tribal sovereign immunity, because both turned on the same facts and question of sovereign immunity. The single question on review was whether GreatPlains was an arm of the tribe.

Jurisdiction. The Third Circuit held it had jurisdiction over the instant interlocutory appeal of a collateral order. The court reasoned the question of sovereign immunity was an important collateral issue that would be unreviewable after entry of final judgment.

Changed facts. The court held it could consider many relevant facts that changed after the consumer sued. The issue of sovereign immunity, which a sovereign defendant can invoke, waive, or withdraw at any time, qualified for an exception to the time-of-filing rule.

No immunity. The Third Circuit held GreatPlains was not an arm of the tribe. The court adopted a Tenth Circuit test (see Breakthrough Mgmt. Grp. v. Chukchansi Gold Casino & Resort, 629 F.3d 1173, 1181 (10th Cir. 2010)), which examines, non-exclusively:

1. how the entity was created;

2. its purpose;

3. its ownership, management, structure, and how much the tribe controls it;

4. the tribe’s intent to give it sovereign immunity;

5. its financial relationship with the tribe; and

6. whether giving it immunity would serve tribal sovereign immunity’s purposes.

The Third Circuit, placing substance over form, said the most important factor was tribal control over the entity and whether a judgment would immediately cut tribal revenue. It noted most courts that adopted Breakthrough do not treat factor six as its own factor. In applying Breakthrough, the Third Circuit analyzed the most important goals are (1) respect for tribal governance; and (2) protection of the tribal treasury so the tribe has the means to govern and provide for the tribal welfare. The court noted sovereign immunity is really immunity for the sovereign’s treasury. However, another purpose of the tribal immunity test is to separate true arms of the tribe from shams.

Factor one, the method of incorporation, favored a finding that GreatPlains was an arm of the tribe. The district court did not clearly err when it found the tribe created GreatPlains under tribal law. The facts suggested the tribe used outsiders to help start the business, but outsiders did not create it.

Factor two, the purpose of the entity, raising revenue for the tribe, slightly favored arm-of-the-tribe treatment. A tribal resolution creating GreatPlains declared it was meant to further the economic well-being of tribe members. However, the court put little stock in this factor because it is easily manipulated, so the court considered next whether GreatPlains was suited to its purpose. On this point, the evidence was mixed. GreatPlains had no employees. It leased them from Island Mountain, albeit this did create tribal jobs. However, unlike the tribe’s other lending entities, the district court did not see any indication that GreatPlains ever turned a profit for the tribe. The Third Circuit called GreatPlains a “mysterious outlier.” In any event, the Third Circuit concluded this factor slightly favored immunity.

Factor three, control, also leaned toward an arm-of-the-tribe finding. However, the facts were mixed on who was running GreatPlains. The Island Mountain board served as the GreatPlains board, with all board members being members of tribal council and appointed and removed by tribal council. However, the Newport loan agreement limited tribal control. Among other things, it forced the tribe to treat GreatPlains as an independent entity beyond the tribe’s full control. Outside funding was understandable, but it was inescapable that the tribe controlled the business less because the funding restricted the tribe’s freedom of action by putting the lender’s interest ahead of all else. GreatPlains’ incomplete control reduced the weight ascribed to this factor.

Factor four, tribal intent, also favored immunity. The articles of organization declared GreatPlains was to enjoy tribal sovereign immunity. However, the court largely discounted this factor because it was so easy to meet.

Most importantly, factor five, the financial relationship between the tribe and GreatPlains, weighed “heavily” against immunity. Again, the court analyzed that GreatPlains apparently never returned a profit for the tribe. The court concluded here that GreatPlains did not show that an adverse judgment would harm the tribe. That cut “decisively” against immunity.

In conclusion, the Third Circuit held GreatPlains was not an arm of the tribe and consequently lacked tribal sovereign immunity. The court affirmed and remanded accordingly.

The case is No. 24-1908.

Judge: Bibas, S.

Attorneys: Daniel Baczynski (Baczynski Law PLLC) for Rashonna M. Ransom. Adam H. Charnes (Kilpatrick Townsend LLP) for GreatPlains Finance LLC.

Companies: GreatPlains Finance LLC

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