Divide Over Bankruptcy Code’s Abrogation of Tribal Sovereign Immunity Comes Before the Supreme Court: Lac du Flambeau Band v. Coughlin

Reed Smith

Reed Smith

On April 24, 2023, the First Circuit’s opinion in Lac du Flambeau Band of Lake Superior Chippewa Indians v. Coughlin came up for oral argument before the Supreme Court. At issue in this appeal is whether this provision’s “abrogat[ion]” of sovereign immunity “as to a governmental unit,” defined to include any “other … domestic government” in section 101(27), embodies a congressional intention to revoke the sovereign immunity of a Native American tribe with sufficient and obvious clarity to be construed as such a revocation.

Both sides of the question were articulated below. In finding abrogation, the panel majority had concurred with the Ninth Circuit’s 2004 decision in Krystal Energy Co. v. Navajo Nation, 357 F.3d 1055 (9th Cir. 2004), and rejected the Sixth Circuit’s 2019 ruling in In re Greektown Holdings, LLC, 917 F.3d 451 (6th Cir. 2019). Naturally, the dissenting judge discerned no “clear[] and unequivocal[]” evidence that Congress intended to include any Native American constituency, much less the Lac du Flambeau Band of Lake Superior Chippewa Indians, in section 101(27)’s definition of “governmental unit.”

In short, the majority (and the Ninth Circuit) and the dissent (and the Sixth Circuit) split over three overlapping issues:

  • (1) the appropriate statutory interpretation of sections 106(a) and 101(27);
  • (2) the proper application of, and the propriety of applying, the established federal standard for the abrogation of tribal, as opposed to state, sovereign immunity; and
  • (3) the application of the principle of federal Native American law holding that “statutes are to be construed liberally in favor of ... [Native American populations], with ambiguous provisions interpreted to their benefit,’” County of Yakima v. Confederated Tribes and Bands of the Yakima Indian Nation, 502 U.S. 251, 269 (1992),

For bankruptcy purposes, Coughlin's influence may be greater than any specific holding. Depending on how the justices rule, the Supreme Court could henceforth subject Native American tribes to various provisions of the Bankruptcy Code. In addition, it could amplify ambiguity about whether such entities are eligible for relief as debtors under it.

In light of these possible consequences, with briefing and argument (from which some quotes appear below) over, more than just the parties await the Supreme Court's take.

"The Bankruptcy Code 'abrogate[s]' the 'sovereign immunity' of 'a governmental unit' as to certain enumerated ... provisions, .... The term 'Indian tribes' does not appear in ... the[se] ... or elsewhere in the Bankruptcy Code." "The question whether the Bankruptcy Code abrogates tribal sovereign immunity has reached circuit courts only three times since Congress enacted the Bankruptcy Code ..... The general importance of tribal immunity is not a reason to rush to decide particular cases about it." "[I]n your thinking and argument, Congress would actually have to say 'tribe'? ... [C]an you think of any other government, governmental unit, that would be required to be named specifically ... ?" "What if the statute said 'every government'?" "[T]hat is clearly perplexing in this statute because you're absolutely right, in every other situation, it has listed Indian tribes when intended."


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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