MODEL TRIBAL SECURED TRANSACTIONS ACT AND TRIBAL ECONOMIC DEVELOPMENT

December 22, 2012 Comments Off on MODEL TRIBAL SECURED TRANSACTIONS ACT AND TRIBAL ECONOMIC DEVELOPMENT

Does the Model Tribal Secured Transactions Act (MTSTA) really promote tribal economic development? The drafters of the MTSTA believe it will provide certainty and protection for lenders and borrowers in Indian Country, but at least one law-review article has taken a critical view of the MTSTA. In the end, however, each tribe must make its own choice whether to adopt the MTSTA.

The Model Tribal Secured Transactions Act

In 2005, after several years of work, a committee of the National Conference of Commissioners on Uniform State Laws (NCCUSL) produced a final draft of the MTSTA.[1] Based primarily on Article 9 of the Uniform Commercial Code (UCC), the MTSTA provides a consistent and predictable legal framework for secured transactions involving a tribe or tribal member and personal property on tribal land.[2] Secured transactions are agreements between creditors and debtors in which the debtor gives some property interest (called a security interest) to the creditor as collateral for a loan or other financial arrangement.[3]

In some ways, the MTSTA is unique because it is a model law proposed for adoption by Indian tribes. To be suitable for use by tribes in Indian Country, the drafters had to consider issues such as tribal sovereignty, custom, and cultural traditions, yet also provide consistency and uniformity with state commercial laws and the UCC.[4] For example, in recognition of sovereign immunity, the MTSTA provides that, if a tribe is a party to a transaction with a non-member, the parties may agree whether the transaction will be governed by the MTSTA or by the law of the other party’s state or tribe.[5] For a detailed discussion of the MTSTA, see Tim Berg, Growing Indian Economies: The Model Tribal Secured Transactions Act, Ariz. Att’y, Mar. 2006, at 30-35.

The main purpose of the MTSTA is to promote economic development on tribal land. As early as the mid- to late-1990s, the NCCUSL had identified a need for a “sound legal and business infrastructure to accommodate [the] growing cross-border commercial activity” between Indian Country and businesses located outside of Indian Country.[6] Because of the importance of loans and other financing for business and entrepreneurship, the NCCUSL viewed the development of consistent and predictable commercial laws as essential to tribal economic development. As Arizona attorney Tim Berg stated in a 2006 article:

Access to financing and capital is key to economic growth, and such access is hampered in Indian Country by the lack of standard laws governing business and lending transactions. Lenders and other sources of capital want the protection of commercial laws with which they are familiar. When it comes to loans on personal property . . . they are looking for enforceability of their security interest. And when a dispute arises, they seek assurance that they have sufficient recourse to enforce that security interest.[7]

Criticism of MTSTA

At least one commentator has strongly criticized the MTSTA, arguing against tribal adoption of this model act.[8] In a 2010 law-review comment, Aaron Drue Johnson argued that tribes should “just say no” to American capitalism and to the MTSTA because the MTSTA will promote predatory lending practices by non-Indian businesses to tribal members residing on tribal land.[9]

In particular, Johnson cites data suggesting that Native Americans often lack financial literacy, have limited English proficiency, and are not experienced at dealing with off-reservation banks.[10] Off-reservation creditors, according to Johnson, will consider loans in Indian Country to be high-risk and charge higher interest rates compared to the rates offered to off-reservation debtors.[11] As further support, Johnson points to a federal study that concluded that unfair lending practices are often directed toward ethnic and racial minorities.[12]

Examining the MTSTA itself, Johnson contends that the model act is inadequate on three grounds. First, he argues that the MTSTA is inadequate because it does not distinguish between the debtor in a commercial transaction and the debtor in a consumer transaction—leaving the latter at higher risk of predatory lending. Second, the model act is inadequate because it does not limit the type of property that can serve as collateral, exposing Indian Country debtors to financial disaster. Third, Johnson argues that the MTSTA is inadequate because the term “default” is not clearly defined, which allows a creditor to define the term in a favorable way.[13]

Although he acknowledges the need for tribal economic development, Johnson believes that “the negative consequences of the MTSTA will likely outweigh its practical economic benefits.”[14]

Economic Development, Self-Determination, and MTSTA

Since the 1970s, the prevailing policy toward Indian tribes has been to foster tribal self-determination, and tribal economic development is best seen within the context of the self-determination policy.[15] Viewed from the perspective of self-determination, Johnson’s rejection of the MTSTA seems to have a rather narrow—and perhaps even protectionist—view. Johnson seems to ignore the purpose of self-determination, which allows tribes to make their own choices and determine their own future. Those choices include decisions regarding whether and how to pursue economic development on tribal land.

Since its final draft, the MTSTA has been considered important to tribal economic development. In 2006, William H. Henning, former Executive Director of NCCUSL, reported that one tribe had adopted the MTSTA, that eight tribes were considering whether to adopt it, and that eleven other tribes were seeking funding from the Department of the Interior “with a view toward ultimate enactment.”[16] Currently, the Bureau of Indian Affairs and the Federal Reserve Bank are jointly sponsoring a series of training workshops on the MTSTA for tribal judges and attorneys.[17]

Contrary to Johnson’s suggestion, the MTSTA will not force American capitalism onto the Indian tribes, thereby exposing them to inevitable exploitation. Rather, like all uniform laws, the MTSTA is offered as a choice to those Indian tribes that desire to promote the economic development on tribal land. Very few people, if any, will deny the existence of predatory lending, but the choice for Indian tribes is one between continued dependent nation status with few good options and the opportunity for self-directed economic development. Given the number of tribes interested in the MTSTA, a significant number of tribes appear to be pursuing in the latter. The reason is simple: they do not want to be left behind as a complex and technological global economy rushes into the future.

In the end, the policy of self-determination allows each tribe to make its own choices about its social and economic interactions with the off-reservation world. Based on this policy, a tribe’s decision to adopt the MTSTA should be left to the tribe.

For more information on the legal services offered by the Law Office of James D. Griffith, P.L.L.C., please visit our website.

Endnotes

[1] Tim Berg, Growing Indian Economies: The Model Tribal Secured Transactions Act, Ariz. Att’y, Mar. 2006, at 32 (Mr. Berg is the chair of the NCCUSL committee that drafted the MTSTA), available at http://www.myazbar.org/AZAttorney/PDF_Articles/0306Tribal.pdf.

[2] Nat’l Conference of Comm’rs on Unif. State Laws, Implementation Guide and Commentary to the Model Tribal Secured Transactions Act 13 (2005) [hereinafter Implementation Guide], available at http://www.uniformlaws.org/shared/docs/mtsta/mtsta_implemguide_jun05.pdf.

[3] Id.

[4] Berg, supra note 1, at 34.

[5] Model Tribal Secured Transactions Act § 9-117 (2005), available at http://www.uniformlaws.org/shared/docs/mtsta/mtsta_aug05_final.pdf.

[6] Implementation Guide, supra note 2, at 14.

[7] Berg, supra note 1, at 32.

[8] Aaron Drue Johnson, Just Say No (to American Capitalism): Why American Indians Should Reject the Model Tribal Secured Transactions Act and Other Attempts to Promote Economic Assimilation, 35 Am. Indian L. Rev. 107 (2010).

[9] Id. at 120-23, 140.

[10] Id. at 116-18.

[11] Id. at 118-20.

[12] Id. at 119-20.

[13] Id. at 120-23.

[14] Id. at 107.

[15] Nell Jessup et al., Cohen’s Handbook of Federal Indian Law § 1.07 (2005 ed.).

[16] William H. Henning, A History and Description of the Model Tribal Secured Transactions Act Project 3 (2007) (presentation at 2007 annual conference of Int’l Ass’n of Commercial Adm’rs), available at http://www.iaca.org/iaca/wp-content/uploads/MTSTA_Article.pdf.

[17] Fed. Reserve Bank of San Francisco, Tribal Courts and Secured Transactions Law Workshops, http://www.frbsf.org/community/resources/2013/0131-Tribal-Courts-and-Secured-Transactions-Law-Workshops/index.html (last visited Dec. 22, 2012).

JUDGE ORDERS ATTORNEYS TO MEET FOR LUNCH: The Power of “Legal Levity”

December 7, 2012 Comments Off on JUDGE ORDERS ATTORNEYS TO MEET FOR LUNCH: The Power of “Legal Levity”

This week I was reminded of the lighter side of the law when I recalled the time a Maricopa County Superior Court judge ordered two attorneys to meet for lunch (at their own expense, of course). The judge’s tongue-in-cheek order is quite humorous, and I thought I’d share it for anyone not familiar with this bit of “legal levity.”

Background

In 2006, the attorney for the plaintiff in a commercial litigation case asked the attorney for the defendant to meet for lunch. The plaintiff’s attorney wanted to discuss the schedule and deadlines for pretrial investigation of facts (referred to as “discovery”), but the defendant’s attorney was suspicious of plaintiff’s attorney’s motives. When the defendant’s attorney did not respond to these requests, the plaintiff’s attorney filed a “Motion to Compel Acceptance of Lunch Invitation” with the judge. In other words, he wanted the judge to order the defendant’s attorney to meet for lunch.

The Order

Judge Gaines, a well-respected judge in Maricopa County, saw an opportunity for little fun and entered an order granting the motion. Major portions of his order follow:

The Court has searched in vain in the [procedural rules, case law, and] leading treatises on federal and Arizona procedure, to find specific support for Plaintiff’s motion. Finding none, the Court concludes that motions of this type are so clearly within the inherent powers of the Court and have been so routinely granted that they are non-controversial and require no precedential support.

The writers support the concept. Conversation has been called “the socializing instrument par excellence” (Jose Ortega y Gasset, Invertebrate Spain) and “one of the greatest pleasures in life” (Somerset Maugham, The Moon and Sixpence). John Dryden referred to “Sweet discourse, the banquet of the mind” (The Flower and the Leaf).

Plaintiff’s counsel extended a lunch invitation to Defendant’s counsel “to have a discussion regarding discovery and other matters.” Plaintiff’s counsel offered to “pay for lunch.” Defendant’s counsel failed to respond until [this] motion was filed.

Defendant’s counsel distrusts Plaintiff’s counsel’s motives and fears that Plaintiff’s counsel’s purpose is to persuade Defendant’s counsel of the lack of merit in the defense case. The Court has no doubt of Defendant’s counsel’s ability to withstand Plaintiff’s counsel’s blandishments and to respond sally for sally and barb for barb. Defendant’s counsel now makes what may be an illusory acceptance of Plaintiff’s counsel’s invitation by saying, “We would love to have lunch at Ruth’s Chris with/on . . .” Plaintiff’s counsel. [Here, the judge added a footnote: Everyone knows that Ruth’s Chris, while open for dinner, is not open for lunch. This is a matter of which the Court may take judicial notice.]

. . . .

There are a number of fine restaurants within easy driving distance of both counsel’s offices, e.g., Christopher’s, Vincent’s, Morton’s, Donovan’s, Bistro 24 at the Ritz-Carlton, The Arizona Biltmore Grill, Sam’s Café (Biltmore location), Alexi’s, Sophie’s and, if either counsel has a membership, the Phoenix Country Club and the University Club. Counsel may select their own venue or, if unable to agree, shall select from this list in order. The time will be noon during a normal business day. The lunch must be conducted and concluded not later than August 18, 2006.

. . . .

The cost of the lunch will be paid as follows: Total cost will be calculated by the amount of the bill including appetizers, salads, entrees and one non-alcoholic beverage per participant. [Another footnote added by the judge: Alcoholic beverages may be consumed, but at the personal expense of the consumer.] A twenty percent (20%) tip will be added to the bill (which will include tax). Each side will pay its pro rata share according to number of participants.

Judge Gaines then ordered that the attorneys discuss pretrial discovery motion, protective order, and out-of-state depositions, which the attorneys were disputing. Here, a footnote states: “The Court suggests that serious discussion occur after counsel have eaten. The temperaments of the Court’s children always improved after a meal.” The judge then ordered that the attorneys file a “joint report detailing the parties’ agreements and disagreements regarding these motions [and] filed with the Court not later than one week following the lunch . . . .”

The court docket shows that a “Joint Report on Outstanding Discovery Disputes” was filed by the attorneys to comply with the order. Just goes to show that, sometime, a little bit of “legal levity” can be as powerful as “legal logic.” Click here for a full copy of the order.

For more information on the legal services offered by the Law Office of James D. Griffith, P.L.L.C., please visit our website.

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