ABA Banking Journal - November 2008 - (Page 26)

Community Banking was called upon to address two highlycharged legal issues: (1) tribal sovereignty and the ability to control matters that affect their lands and the treatment of its citizens, and, (2) the terms and conditions under which non-Indian banks and other businesses may be expected to resolve disputes arising from their dealings on the reservation. The majority opinion, written by Chief Justice Roberts, overturned a decision by the Eighth Circuit that held that a tribal court may entertain a discrimination claim over a non-tribe member who regularly conducts business on the reservation. (Roberts was joined by Justices Scalia, Kennedy, Thomas, and Alito.) In reaching its decision, the Court focused on the status of the ownership of the land in question–whether it is owned “in fee simple” (absolute and unencumbered title) by a non-tribe member, or whether it was tribal land. Beginning with the premise that tribal sovereignty “is of a unique and limited character” which “centers on the land held by the tribe and on tribal members within the reservation,” the majority found that once tribal land is converted into fee simple and conveyed to third parties, the tribe loses absolute and complete jurisdiction over it. (Technically this would be called “plenary jurisdiction.”) The Court divided, however, over whether the tribal court’s consideration of the discrimination claim was barred by this jurisdictional limitation. The majority ruled that the tribal court lacked the jurisdiction to hear the claim, reasoning that because alleged discrimination “is tied specifically to the sale of the fee land” it must be treated as “an attempt to regulate the terms on which the bank may sell the land it owns.” Justice Ginsberg (joined by Justices Stevens, Souter, and Breyer) sharply disagreed, writing in her dissenting opinion that the plaintiffs’ case is “at heart” not about “the sale of fee land on a tribal reservation by a non-Indian bank to nonIndian individuals” but rather it is about “the power of the [tribe] to hold non- members like the bank to a minimum standard of fairness when they voluntarily deal with tribal members.” Implications of the ruling The Native American community was understandably disappointed by the result; there had been hopes that the case would provide an opportunity for the Supreme Court to reconsider its views on tribal sovereignty. For bankers, while the case was a victory, the Court’s ruling provides only a narrow clarification of the scope of tribal court jurisdiction: the majority opinion cautions against reading the decision broadly, given that “[o]nly the discrimination claim is before us and that claim is tied specifically to the sale of the fee land.” Back in your office at your small, independent bank in the Dakotas, you have a number of new loan applications on your desk. Some are from customers on the reservation. You want to make the loans, but one question remains: How do you deal with the still-lingering issue of tribal versus non-tribal courts should a dispute arise? Long term, individual institutions and the banking industry as a whole should work with the Native American community and the individual tribes and support their ongoing efforts to modernize the tribal courts and improve the legal and business environment on the reservation. Efforts are under way by tribes in Wisconsin, Montana, and elsewhere to make this happen. In the short term, the most practical solution is to address the issue in the loan documentation. As recognized by Justice Ginsberg in her dissenting opinion, the bank could have avoided the problem by including such items as forum selection, choice-of-law, or arbitration clauses in its contracts. Indeed, some institutions are finding that agreeing to a private arbiter for the resolution of disputes, such as commercial arbitration, is an effective and practical way to allow both parties to move past what is a potentially charged issue. BJ context.” We referred media calls to the Ohio Bankers League, which was very helpful with their responses. We also referred customers to financial rating websites regarding our financial condition. We were hurt by news reports that banks didn’t have any money to lend and weren’t making any loans due to the crisis. The TV talk shows were killing us. We still made loans, but our volumes were hurt by the negative press. Overall, it wasn’t nearly as bad as it could have been, however. Remedy 4 Tom Wolf, president, Platte Valley Bank, North Bend, Neb., $51.4 million-assets. This is our most recent ad as regards this mess. My next ad is going to read, “Not only do we not have any subprime loans, we do not have any mortgage loans that are even 30 days past due.” We have served our community for over 117 years and we will continue to serve our friends and cusPlatte Valley Bank’s recent ad tomers in the deals with the jitters with plain, direct advice. years to come. Remedy 5 Larry Callais, president and CEO, MC Bank & Trust Co., Morgan City, La., $244.8 million-assets. At M C Bank executive officers met with all of our supervisors and other bank officers to bring them up to speed on the state of our bank; the state of banking in Louisiana; and FDIC insurance. We also informed them that they should be able to address FDIC questions, as should their subordinates. We also instructed them that should someone still be uncomfortable with their explanations, that they should direct the questioner to 26 NOVEMBER 2008/ABA BANKING JOURNAL Subscribe at www.ababj.com http://www.pvbonline.com http://www.mcbt.com http://www.ababj.com

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ABA Banking Journal - November 2008 Contents Editor's Column Banking 2.0: Credit, Banking's Essence, Set for Rethinking Snapshot: The Few, the Proud, the Banks that Can Raise Capital Will Strong and Simple Banks Inherit the Business? Back to the Future ABA Resources ABA Chairman's Position Farm Lenders Must Take Care When Lending in Indian Country Pass the Aspirin Into the Breach Adventures Across A Century What the Future Holds, Post Crisis Paul Volcker: A Financial Legend Still Speaks Strong Ed Yingling: Weathering the Storm Dick Kovacevich: "Boring" Banking to Dynamic Financial Services Jim Culberson: Community Banking: What has Changed and What Shouldn't Walter Shipley: How a Chemical Reaction Helped to Mold Today's JPMorgan Chase William Isaac: Challenges and Opportunities Ahead for Banks A Hundred Years from Our Pages Eight Tech Innovations that Brought Banks into 21st Century Bank Cherokee: Third Generaton Marks 100th Year The First National Bank of Altavista: Railroad Gave Birth to a Town, a Hope Chest, and a Bank Rosedales Federal Savings and Loan Association: How a Friendly Game of Cards Turned into a 100-Year Mutual New Washington State Bank: Cooking Up the Next 100 Years Mailbox Banker's Mart To Advertise/Index of Advertisers The Economy

ABA Banking Journal - November 2008

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