(Reuters) - Online lender CashCall filed a notice of appeal Tuesday in a Consumer Financial Protection Bureau enforcement action that set precedent on whether consumer lenders can evade state interest rate caps by affiliating with Native American tribes and invoking tribal sovereignty. In 2016, U.S. District Judge John Walter of Los Angeles granted partial summary judgment to the CFPB, holding that CashCall was the true lender, rather than a company owned by a member of the Cheyenne River Sioux Tribe, so state laws govern CashCall loans. The company’s notice to the 9th U.S. Circuit Court of Appeals, filed by its lawyers at Latham & Watkins and Skadden Arps Slate Meagher & Flom, indicated that CashCall will challenge the landmark summary judgment decision on tribal sovereignty, as well as other rulings by Judge Walter.

The ironic twist is that CashCall reportedly didn’t intend to bring an appeal at all. The company, as my colleague Dena Aubin reported in January, got off with little more a wrist-slap from Judge Walter. The CFPB had asked for nearly $300 million in restitution and penalties, based on the volume of CashCall loans and the interest it raked in from consumers who were charged annual rates between 89 and 169 percent.

Judge Walter, however, concluded that the bureau hadn’t shown it was entitled to any restitution and that CashCall had not knowingly flouted consumer protection laws. He awarded the bureau only $10.3 million in penalties. CashCall lawyer Thomas Nolan of Latham told the Los Angeles Times that his client has already paid the judgment. The only reason the CFPB’s summary judgment win is now in danger is because the bureau appealed the disappointing penalty Judge Walter ordered.

The ironic double twist is that under acting director Mick Mulvaney, the CFPB has resolved not to bring actions that “interfere with the sovereignty or autonomy of the states or Indian tribes.” As the Native American Financial Services Association – a trade group for tribal lenders – pointed out in a news release last week, Mulvaney’s CFPB dropped a case against four lenders owned and operated by a California tribe soon after he replaced former director Richard Cordray, who had aggressively pursued tribal lenders that charged high interest rates.

The appeal in the CashCall case means that the CFPB will now have to make the awkward choice of defending or abandoning hard-won precedent that gives the bureau authority to police high-interest, short-term loans processed through companies owned by Native American tribes or tribal members.

As Judge Walter’s penalty opinion explained, tribal ownership became a strategy for consumer lenders like CashCall after the financial crisis, when state regulators and the CFPB cracked down on the banks that had supplied their financing. CashCall’s lawyer at the time, a consumer finance partner at Manatt Phelps & Phillips, advised her clients to partner instead with Native American tribes that could advance loans “under the laws of the tribe (that) would not have to comply with licensing and usury laws in states where borrowers resided,” as Judge Walter explained the strategy.

Such so-called rent-a-tribe partnerships have so proliferated in the last 10 years that tribal lenders founded a trade association in 2012 to advocate for their sovereignty over consumer loans. Nevertheless, several federal courts have agreed with Judge Walter’s ruling that consumer lenders partnering with Native American tribes are not true “arms of the tribe” and are therefore not entitled to sovereign immunity from state laws.

The CFPB declined to comment about the CashCall case and tribal sovereignty. I didn’t get an immediate response from the lead defense counsel Nolan of Latham and Allen Lanstra of Skadden.