Last week, the Supreme Court held in an 8-1 decision that the Bankruptcy Code “unequivocally abrogates the sovereign immunity” of federally recognized Indian tribes, including immunity to the automatic stay under § 362.
I was intrigued when I first heard about the pending Lac du Flambeau Band of Lake Superior Chippewa Indians v. Coughlin case at the ABI Spring Meeting back in April and probably overhyped it with my colleagues when I returned. As it turns out, the decision, like so many bankruptcy decisions from the Supreme Court, is a rather routine statutory analysis case, no matter how much Justice Gorsuch tries to make it more than that in his dissent.
Here’s a concise, if perfunctory, summary.
As background, Coughlin, a Chapter 13 debtor, owed $1,100 to an online payday lender operated by an Indian tribe (the Band) (whose tribal insignia is pictured above). When the lender continued its aggressive collection efforts after the petition date, the debtor filed a stay violation motion against the lender and the Band.
The issue: Is an Indian tribe a “governmental unit” under § 101(27) of the Bankruptcy Code such that § 106(a) applies to tribes when it provides that “sovereign immunity is abrogated as to a governmental unit”? The Bankruptcy Court thought so and dismissed on the basis of the Band’s tribal sovereign immunity. The First Circuit reversed.
The Supreme Court took up the case to resolve a split between the Ninth and First Circuits, on the one hand, and the Sixth Circuit, on the other hand.
Justice Jackson, in her second bankruptcy opinion in two months, wrote for the majority. The holding: While sovereign immunity can’t be abrogated without unmistakably clear statutory language, the “governmental unit” definition in § 101(27) “exudes comprehensiveness from beginning to end,” especially in its catchall, “rain or shine”-style reference to governments “foreign or domestic.” She explains that Congress and the Supreme Court have repeatedly characterized tribes as governments and there’s no indication that Congress intended to distinguish one government from another. Therefore, Indian tribes are, like any other government, governmental units whose immunity the Code abrogates. Justice Jackson’s statutory analysis is rigorous and extensive, and covers over 13 pages, but that’s the gist of it.
Justice Gorsuch spends 17 pages explaining why the language in § 101(27) “flunks this Court’s clear-statement rule.” It’s a far-reaching dissent and provides a rich history of Indian sovereignty and its legal treatment going back to the 1700s. However, when it’s all boiled down, Justice Gorsuch simply disagrees with the majority’s merely “plausible” interpretation of “governmental unit,” concluding that no other language in § 101(27) potentially refers to tribes and the “other foreign or domestic government” catchall is not an unmistakably clear reference to tribes. Thus, he concludes tribes are not governmental units under the Code.
Those who enjoy statutory analysis can click here to read 40 pages of it (as well as Justice Thomas’s concurrence wherein he finds that, abrogated or not, sovereign immunity doesn’t extend to a tribe’s commercial activities outside of its territory).