On June 15, 2023, the U.S. Supreme Court decided Lac du Flambeau Band of Lake Superior Chippewa Indians et al. v. Coughlin, No. 22-227, holding that the Bankruptcy Code unambiguously abrogates the sovereign immunity of all governments, including federally recognized Indian tribes.

Lac du Flambeau Band of Lake Superior Chippewa Indians is a federally recognized Indian tribe. One of its businesses, Lendgreen, extended a payday loan to Brian Coughlin, who then filed for Chapter 13 bankruptcy. Filing for bankruptcy automatically stayed all collection efforts by Coughlin’s creditors. Despite this, Lendgreen continued to try to collect on the loan. Coughlin moved in Bankruptcy Court to enforce the stay and recover damages.

The Bankruptcy Court dismissed the suit because it impeded on tribal sovereignty and the First Circuit reversed. The Supreme Court affirmed the First Circuit and held that the Bankruptcy Code unambiguously abrogates the sovereign immunity of all governments, including federally recognized Indian tribes. Under its existing precedents, the Court only finds a statute abrogates tribal sovereign immunity when Congress has conveyed its intent to do so in unequivocal terms. The Bankruptcy Code met that high bar.

The Court based its decision on two provisions of the Bankruptcy Code. The first, 11 U.S.C. § 106(a), states explicitly that “sovereign immunity is abrogated as to a governmental unit.” The second, 11 U.S.C. § 101(27), defines “governmental unit” to include all foreign and domestic governments. The Court determined that Congress intended the abrogation provision to be construed broadly to include federally recognized Indian tribes even though they are not mentioned by name. This is consistent, the Court reasoned, with the rest of the Bankruptcy Code that applies broadly to all government creditors.

Justice Jackson delivered the opinion of the Court, which Chief Justice Roberts and Justices Alito, Sotomayor, Kagan, Kavanaugh and Barrett joined. Justice Thomas filed an opinion concurring in the judgment. Justice Gorsuch filed a dissenting opinion.

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