Oglala Sioux and State of South Dakota sign historic lien-filing agreement

Efforts to enhance economic development activities on Native American reservations continue to build across the Ninth Federal Reserve District. To bolster these efforts, a number of tribes have taken steps to establish "business-friendly" legal environments by revising or adopting laws that facilitate commercial transactions on reservations. To ease the implementation of these laws, some tribes are also establishing formal agreements with state governments to take advantage of established lien-filing systems.

Recently, a tribe in the Ninth District publicly celebrated its completion of both steps. In a ceremony on July 30, 2008, on the Pine Ridge Indian Reservation in South Dakota, the Oglala Sioux Tribe held a ceremony to mark the one-year anniversary of its Secured Transactions Act becoming law.

The one-year-old law, which is based on the Model Tribal Secured Transactions Act developed by the National Conference of Commissioners on Uniform State Laws, was designed to promote private business development on the reservation by establishing a legal framework that supports secured transactions. (For more on the Model Tribal Secured Transactions Act, see Community Dividend Issue 1.) Secured transactions are loans or other extensions of credit in which personal property other than real estate is used as collateral. Many types of loans that are crucial for business start ups, such as loans for the purchase of equipment and inventory, fall in this category.

As it celebrated the anniversary of the Secured Transactions Act, the Oglala Sioux Tribe took the next step toward building a private sector economy on Pine Ridge. During the July 30 ceremony, the tribe formalized a Joint Sovereign Uniform Commercial Code Filing System Memorandum of Understanding (MOU) with the South Dakota Secretary of State's Office. The MOU establishes that the South Dakota Secretary of State's Office will provide Uniform Commercial Code (UCC) filing services for liens on personal property collateral that are created under the tribe's Secured Transactions Act. The agreement is modeled closely on a recently signed lien-filing compact between the Crow Nation and the State of Montana. (For more on the Crow-Montana compact, see the News and Notes section of Community Dividend Issue 2, 2008.)

The MOU enables creditors to comply with a major provision of Article 9 of the UCC. The provision requires creditors involved in secured transactions to file UCC financing statements that establish their legal priority in relation to other creditors who may have an interest in the same collateral.

Although many tribes have passed secured transactions laws, such laws are often underutilized or not utilized at all because of the lack of a publicly accessible UCC lien-filing system. UCC filing systems, however, can be costly to implement and administer. For many tribes, establishing such a system is prohibitively expensive. Under the MOU between the Oglala Sioux Tribe and the State of South Dakota, the latter will in effect serve as the tribe's filing system agent, thus enabling creditors to file liens confidently and seamlessly under tribal law and boosting the potential for more business and consumer lending on the Pine Ridge Reservation.

Through the MOU, the Oglala Sioux Tribe became the first tribe to enter a UCC filing agreement in South Dakota under a wholly tribal commercial law within a tribe's home jurisdiction. Oglala Sioux Tribe President John Yellow Bird Steele notes that this historic tribal-state partnership is an important step in helping the Oglalas develop as a "powerful economic force" with private entrepreneurship at the base.

Coming full circle

With the signing on July 30, tribal-state UCC filing agreements in the Ninth District have come full circle in some respects. In 2000, the Cheyenne River Sioux Tribe adopted South Dakota's UCC Article 9, with several modifications, as its secured transactions law. The South Dakota Secretary of State's Office has served as Cheyenne River's lien-filing agent pursuant to an MOU since that time. Last year, the Crow Nation in Montana, following its enactment of the Model Tribal Secured Transactions Act, adapted the Cheyenne River-South Dakota MOU to facilitate an agency arrangement for UCC filings, but did so under the Crow Nation's secured transactions law, not state law. Now, the Oglala Sioux Tribe, in agreement with the State of South Dakota, has adapted the Crow Nation-Montana filing system compact for its purposes.

To facilitate filing and help create awareness of the tribe's law and filing system arrangement, the South Dakota Secretary of State's Office has added a unique page to its UCC filing web site for filings under the Oglala law, as it had already done for Cheyenne River. This is a significant change for lenders, as a lien filing under the Oglala law in the state's system will now also constitute a filing under state law. The new arrangement helps address the uncertainty that lenders commonly face regarding legal jurisdiction on Indian lands.

Agreement earns high praise

Attendees at the July 30 signing ceremony included tribal and state dignitaries; members of South Dakota's Congressional staff; and representatives from numerous organizations that have helped nurture the Oglala Sioux Tribe's economic development efforts. These organizations include the Federal Reserve Bank of Minneapolis and the Wakpa Sica Reconciliation Place, a Native cultural and legal center in Fort Pierre, S.D., that has advocated for the adoption of the Model Tribal Secured Transactions Act by South Dakota tribes for two years. Also present were the co-chairs of the South Dakota Indian Business Alliance (SDIBA), Kim Tilsen-Brave Heart of Rural Community Innovations and Dani Daugherty of the U.S. Department of the Interior's Office of Indian Energy and Economic Development (OIEED). SDIBA is working to cultivate efficient and effective business environments and promote state-tribal collaboration to advance economic development in Indian Country. (For more on SDIBA, see the sidebar below.)

South Dakota Secretary of State Chris Nelson summed up his message about the day's events in one word: potential. Nelson noted that he was pleased to see the tribe and state arriving at a place of trust and expressed his openness to assisting in future economic development efforts. Representatives from South Dakota's three U.S. congressional delegates—Senators Tim Johnson and John Thune, and Representative Stephanie Herseth-Sandlin—each spoke briefly about the significance of the agreement.

In a written statement, Thune praised the agreement as an important tool for developing a private sector economy on the reservation. According to Thune, "This agreement will help tribal businesses create jobs and empower tribal courts to create a legal environment in which businesses can thrive." Thune also indicated that he was impressed with the partnership of state and tribal leaders, along with the Federal Reserve Bank of Minneapolis, the OIEED, and the Wakpa Sica Reconciliation Place, who came together to work on the issue.

This theme of partnership was echoed in a statement from Johnson, who thanked the staff of the Federal Reserve Bank of Minneapolis for providing technical assistance in support of the effort. With regard to the overall agreement, Johnson commended the efforts of the Oglala Sioux Tribe and the Secretary of State in South Dakota for working together to create the first UCC filing system agreement of its kind in the state.

In his address at the ceremony, South Dakota Secretary of Tourism and State Development Richard Benda described the agreement as a historic effort that embodies the "economic reconciliation" dream of the late governor George Mickelson. Benda applauded the joint sovereign filing agreement as a classic example of the possibilities of "productive government-to-government relations" between tribes and states. He noted that securing capital for business development can be a challenge, but investment is more likely to happen when a familiar set of rules exists.

Jack Stevens, chief of the Division of Economic Development at the OIEED's Office of the Assistant Secretary for Indian Affairs, spoke briefly about the promise of this historic event. He recognized the efforts of the tribe's director of credit and finance, Courtney Two Lance, for her two years of effort to bring the secured transactions law and joint sovereign agreement to fruition. The OIEED provided the original grant money for the tribe to review and pass the secured transactions law. Stevens expressed the hope that the OIEED would be able to secure funding to assist other South Dakota tribes with similar efforts in the upcoming fiscal year. In response, Yellow Bird Steele said he had discussed these efforts with other tribal leaders in South Dakota, several of whom have indicated a strong desire to move in the same direction.

Some attendees recounted the difficulties of promoting business development on the reservation in the decades prior to the passage of the Secured Transactions Act. For example, Oglala Sioux Tribal Councilman Chuck Jacobs spoke of the challenges faced 20 years ago in organizing the first Native community development financial institution in the country, the Lakota Fund (now known as Lakota Funds), in the absence of basic commercial laws.

Wakpa Sica Reconciliation Place Executive Director Stacey LeCompte expressed the belief that tribes are indeed moving forward. According to LeCompte, "It's clear that the tribes are learning how to communicate in the language of business—that it's possible to preserve your nation and create economic opportunity through bigger-picture changes in governance. This is a significant moment, and we'll reap tremendous benefits from it over time."

A suite of business-friendly laws

The Oglala Sioux Tribe's Secured Transactions Act and UCC filing agreement with the state are complemented by other legislative initiatives designed to make the reservation a business-friendly environment. In addition to its Secured Transactions Act, the tribe is in the process of implementing a full suite of modernized business laws and has created a court-supervised business arbitration process for efficient dispute resolution. For example, Chapter 44 of the Oglala Sioux Tribe Law and Order Code is now a modernized nine-part business code that includes private for-profit and nonprofit corporations, tribal government entities, partnerships, limited partnerships, limited liability companies, unincorporated associations, trusts and cooperatives, trademarks and tradenames, securities, and a consumer protection act. Additional provisions empower the tribe's entrepreneurs and business owners to create business entities at minimal cost, thereby reducing barriers to entry for start-up businesses within the tribe's jurisdiction. To further promote economic development, the tribe wrote its business code in language that ensures ease of use and interpretation by business owners and lawyers from all jurisdictions.

With efforts to address tribal legal infrastructure needs at both the state and tribal levels gaining momentum in South Dakota, the goal of building business-friendly environments in Indian Country appears to be within reach. The recent work that culminated in the signing ceremony on the Pine Ridge Reservation demonstrates how a partnership among a tribe and public, private, and nonprofit agencies can bring these efforts to fruition.

Dani Daugherty serves as chair of the South Dakota Indian Business Alliance and economic development director for the OIEED at the Bureau of Indian Affairs Great Plains Regional Office in Aberdeen, S.D.