Second Circuit Upholds District Court, Rejecting Indian Commerce Clause Claim

In The Otoe-Missouria Tribe of Indians v. N.Y. State, Dep’t of Financial Services, the Second Circuit upheld the District Court’s denial for a preliminary injunction sought by two Native American tribes and related entities (collectively the Tribes) engaged in high-interest, short-term loans offered over the Internet.  The interest rates on the loans exceeded state caps, and so the Department of Financial Services (the Department) sought to bar them.  The Tribes sought a preliminary injunction, claiming that the bar violated the Indian Commerce Clause of the U.S. Constitution. 

The Tribes’ claims turned on whether the loans took place on their sovereign territory or in New York State.  The Second Circuit observed that, although the loans were initiated on the Tribes’ territories, they flowed across New York State.  When the Department shut down the Tribes’ loan operations, it had devastating effects on the tribal economies, and so the Tribes sued to enjoin the bar on their loans.  

On review of the denial of the motion for preliminary injunction, the Second Circuit found no clear error.  It concluded that, while the Tribes may ultimately prevail, the record is at this point too murky, and thus the Tribes could not establish their likely success on the merits.