In an October 22, 2013 decision by Justice Bransten, the court found that a for-profit entity owned by an Indian tribe was not entitled to sovereign immunity for allegedly breaching a contract to sell a loan.
The defendant is a Delaware LLC owned by an entity formed under the Indian Reorganization Act of 1934 (the “IRA”), which is in turn wholly owned by an Indian tribe. The Defendant previously moved to dismiss, arguing that because it was a wholly owned subsidiary of an Indian Tribe, through an entity formed under the IRA, it was entitled to the sovereign immunity granted to each of those entities under the IRA. The Court rejected that argument on the prior motion, and allowed limited jurisdictional discovery to see if the Defendant was entitled to sovereign immunity under a multi-factor test established by the Court of Appeals in Matter of Ransom v St. Regis Mohawk Educ. & Cmty. Fund, 86 NY2d, 553, 559 (1995). In this decision the Court analyzed those factors.
The Court found that the Defendant only satisfied three of the eight factors listed in Rasom. In coming to that conclusion, the Court rejected the Defendant’s attempts to rely upon its Articles of Organization and Operating Agreement to satisfy the test. Instead, factually analyzing its actual activities, the Court found that the Defendant is an independent, state-incorporated, for-profit enterprise operating in New York’s financial services market, with separate assets and liabilities, purposes and goals from the Indian tribe. The Court found that the Defendant, therefore, could not be considered an arm of the Indian tribe, entitled to share in its immunity from suit.
The Court also rejected the Defendant’s motion to dismiss based on documentary evidence. The Court, however, dismissed an unjust enrichment claim because of the existence of a contract governing the parties’ dispute. In addition, the Court dismissed the third-party beneficiary claim brought by an intermediary who participated in the sale and marketing of the loan for the failed transaction to sell the loan. The Court found that the putative third-party beneficiary was, at most, only an incidental beneficiary of the contract between the Plaintiff and the Defendant, was never in privity of contract with the Defendant, and that the broken contract made no mention of that party or of any consideration the putative third-party beneficiary was to receive under the contract. Accordingly, it could not bring third-party beneficiary claims.
Seaport Loan Products, LLC and Aldwych Capital Partners, LLC v Lower Brule Community Development Enterprise LLC, Sup Ct, New York County, October 22, 2013, Bransten, J, Index No, 651482/12.