Court: District Court, E.D. Michigan; June 9, 2015; Federal District Court
The Court reverses the Bankruptcy Court's August 13, 2014 order that denied the Sault St. Marie Tribe of Chippewa Indians and Kewadin Casinos Gaming Authority's motion to dismiss based on sovereign immunity. The ruling is based on the finding that Congress did not clearly express an intention to abrogate tribal sovereign immunity in section 106(a) of the Bankruptcy Code. The matter is remanded for further proceedings to determine if the Tribe waived its sovereign immunity in the bankruptcy case. The Tribe argues that the lack of explicit mention of "Indian tribes" in the Bankruptcy Code means their immunity should not be compromised, while the Litigation Trustee contends that the inclusion of "other domestic governments" in the definition of "governmental unit" implies such an intent. The context involves an Adversary Proceeding initiated by the Official Committee of Unsecured Creditors related to alleged fraudulent transfers amounting to $177 million by Greektown Holdings, LLC, with the Tribe seeking dismissal of claims against it based on sovereign immunity.
The parties agreed to bifurcate the hearing on the motion to dismiss, first addressing whether Congress abrogated the Tribe's sovereign immunity under Section 106(a) of the Bankruptcy Code, and subsequently, if necessary, whether the Tribe waived that immunity by participating in the proceedings. The Bankruptcy Court heard arguments on December 29, 2010, but while the immunity issue was still pending, the Tribe reached a settlement with the Litigation Trustee in 2012 and requested a delay in the decision on the motion to dismiss. The Bankruptcy Court approved the Settlement Agreement, which included a claims bar order. Non-settling Defendants appealed this approval, leading the Sixth Circuit to reverse and remand for reconsideration of the claims bar order's scope. Consequently, the parties withdrew the settlement motion, and the case was dismissed.
Efforts to mediate further claims against remaining Defendants were unsuccessful, and on June 9, 2015, the Tribe renewed its motion to dismiss based on sovereign immunity. The Litigation Trustee opposed this motion, and oral arguments were held on July 21, 2014. The Bankruptcy Court ultimately denied the Tribe's renewed motion, asserting that Congress clearly intended to abrogate tribal sovereign immunity in Section 106 of the Bankruptcy Code. The Tribe appealed this ruling, leading to the question of whether Section 106, through its definition of "governmental unit," unequivocally expresses Congress's intent to abrogate tribal sovereign immunity. The Court concluded it could not confirm that Congress intended to abrogate such immunity, thus reversing the Bankruptcy Court's order and remanding the case to determine if the Tribe waived its sovereign immunity in the proceedings.
Jurisdiction is established under 28 U.S.C. 158(a)(1), allowing the Court to hear appeals from final Bankruptcy Court decisions. The denial of a motion to dismiss based on sovereign immunity is considered an immediately appealable "collateral order." Rulings on such motions are reviewed de novo, with the burden on the plaintiff to prove jurisdiction when challenged under Fed. R. Civ. P. 12(b)(1). An Indian tribe can only be sued if Congress has authorized the suit or the tribe has waived its immunity. Tribal sovereign immunity is a judicially created doctrine, not derived from the Eleventh Amendment, and requires clear congressional intent for abrogation. Courts favor interpretations that preserve tribal immunity, construing ambiguities in statutes to the tribe's benefit. Legislative history cannot alone demonstrate a waiver unless explicitly stated in the statute's language. Thus, any ambiguities favor the interpretation that the tribe's consent to be sued is limited.
Ambiguity arises when a statute can be interpreted in a way that does not permit a lawsuit against a Tribe. Indian tribes are immune from lawsuits unless Congress explicitly abrogates this immunity, yet they are still required to comply with laws, even if those laws cannot be enforced against them. The distinction lies in the ability to demand compliance versus the means to enforce it. The Supreme Court case Oklahoma Tax Com’n v. Citizen Band Potawatomi Indian Tribe established that while a state may impose taxes on a Tribe's sales to nonmembers, the Tribe retains immunity from lawsuits to collect unpaid taxes. The central issue in this bankruptcy appeal is whether Congress has clearly indicated its intent to abrogate tribal sovereign immunity under section 106 of the Bankruptcy Code. Different courts have reached conflicting conclusions on this question. For instance, the Ninth Circuit found that sections 106(a) and 101(27) of the Bankruptcy Code explicitly waive tribal sovereign immunity, while the Eighth Circuit held that Congress did not clearly express such intent. Section 106(a) outlines the abrogation of sovereign immunity for governmental units regarding specific sections of the Bankruptcy Code, stipulating that courts can issue judgments against these units, provided they follow existing laws and do not create new causes of action. Additionally, a governmental unit that files a proof of claim is considered to have waived its sovereign immunity concerning claims that arose from the same transaction or occurrence.
Claims in the MUFTA Adversary Proceeding arise under Sections 544 and 550 of the Bankruptcy Code, which allows for claims against "governmental units" whose sovereign immunity has been abrogated. "Governmental unit" is defined to include various sovereign entities but does not explicitly mention "Indian tribes." Citing In re Nat’l Cattle Cong., the document notes that Congress has not clearly abrogated tribal sovereign immunity under the Bankruptcy Code.
The key legal question is whether a Tribe qualifies as a "governmental unit" under section 106(a) given Congress's broader definition, which includes "domestic" governments. The Litigation Trustee argues that the Tribe, as a domestic entity with sovereign status, fits this definition, referencing the Supreme Court's characterization of Indian tribes as "tribal governments" and "domestic dependent nations." Conversely, the Tribe contends that Congress must specifically reference "Indian tribes" to abrogate their immunity, asserting that the term "domestic government" lacks the necessary clarity.
Additionally, the Supreme Court's decision in Michigan v. Bay Mills Indian Community affirms the principle of tribal sovereign immunity, emphasizing that it can only be abrogated by explicit Congressional intent or waiver. The Court's historical context frames tribes as "domestic dependent nations" under the plenary control of Congress, reiterating that Congress holds exclusive legislative power over Indian tribes.
Tribes are recognized as "separate sovereigns preexisting the Constitution," maintaining their historic sovereign authority unless Congress intervenes. This sovereignty includes common-law immunity from lawsuits, which is essential for Indian sovereignty and self-governance. Tribal immunity is inherently tied to sovereignty, meaning tribes cannot be sued without consent, although Congress holds the power to modify this immunity. Precedent established in cases such as *Kiowa Tribe of Oklahoma v. Manufacturing Technologies, Inc.* confirms that tribal sovereign immunity is well-settled law, and suits against tribes require congressional authorization or waiver.
In a recent Supreme Court decision, Justice Kagan upheld the doctrine of tribal sovereign immunity, emphasizing that any changes to this legal framework should come from Congress. The dissent, led by Justice Thomas, argued for a reevaluation of the broad immunity given the significant increase in tribal commercial activities, suggesting that the current immunity status is misaligned with modern economic realities and creates issues. The majority recognized the potential need for change but remained committed to existing precedents, particularly *Kiowa*, which affirmed the congressional control over tribal sovereignty.
The analysis then turns to whether Congress intended to abrogate tribal sovereign immunity in Section 106(a) of the Bankruptcy Code, specifically questioning if Congress clearly and unambiguously included tribes as "other domestic governments." This inquiry is set against the reaffirmed recognition of tribal sovereignty by the Supreme Court.
The Ninth Circuit's decision in *Krystal Energy* confirms that Section 106 of the Bankruptcy Code unequivocally abrogates tribal sovereign immunity. The court interprets the definition of "governmental unit" in Section 101(27) as encompassing all foreign and domestic governments, including Indian tribes, which are classified as "domestic dependent nations." Thus, Section 106(a) explicitly subjects all governmental units, including Indian tribes, to legal action under the Bankruptcy Code. The court cites that had Congress intended to exclude Indian tribes from this abrogation, it would have explicitly done so. Supporting this interpretation, the Ninth Circuit parallels its reasoning with the Supreme Court's ruling in *Kimel v. Florida Board of Regents*, where Congress was found to have clearly indicated its intent to abrogate state sovereign immunity despite states not being explicitly named in the relevant statute. The Ninth Circuit concludes that, similar to the ADEA's treatment of states as public agencies, the Bankruptcy Code's framework indicates Congress's intent to include Indian tribes under the umbrella of governmental units whose sovereign immunity is abrogated.
The Ninth Circuit determined that Congress, in enacting the Bankruptcy Code, intended to include Indian tribes within the definition of "domestic governments," thereby abrogating their sovereign immunity without the need for explicit mention. This conclusion is supported by the context of prior Supreme Court decisions that recognize Indian tribes as domestic nations. The court likened this to Congress not needing to specify Alabama and Wyoming when addressing the Eleventh Amendment immunity of all states. The Ninth Circuit asserted that recognizing Indian tribes as part of the "generic class" of domestic governments does not conflict with the Supreme Court's guidance to tread carefully in abrogating tribal sovereign immunity. The court referenced section 106(a) of the Bankruptcy Code, asserting it clearly and unequivocally expresses Congress's intent to abrogate tribal sovereign immunity, distinguishing between inference and deduction in statutory interpretation. Other bankruptcy cases, such as In re Russell and In re Platinum Oil Properties, similarly supported this interpretation, indicating that the language in the Bankruptcy Code includes Indian tribes. Additionally, Justice Sotomayor's concurring opinion in Bay Mills used the term "domestic governments" to describe both states and tribes, reinforcing the notion of their sovereign status, although she did not suggest her phrasing was intended to replace the specific reference to Indian tribes in legislative contexts.
Indian tribes have not been designated as "domestic governments" by the Supreme Court, except for a single statement in Justice Sotomayor’s concurring opinion years after the enactment of section 106(a) of the Bankruptcy Code. Both the bankruptcy court and the current court give minimal importance to this statement. It is uncontested that Indian tribes are "domestic" and possess governmental attributes, as reaffirmed in the Bay Mills case, which emphasizes that tribal immunity is integral to Indian sovereignty and self-governance and that Congress does not intend to undermine this without clear intent.
The Litigation Trustee argues that Congress intended to include Indian tribes in the term "domestic governments" in section 101(27) of the Bankruptcy Code, supported by rulings in Krystal Energy, In re Platinum Oil, and In re Russell. However, these cases overlook the historical precedent that the Supreme Court has always required explicit mention of Indian tribes when intending to abrogate their sovereign immunity. Notably, when Congress has intended to abrogate tribal immunity, it has explicitly included the phrase "Indian tribes" in the relevant statutes.
The Eighth Circuit Bankruptcy Appellate Panel's ruling in In re Whittaker contradicts the Ninth Circuit’s view in Krystal, asserting that without a direct mention of "Indian tribes" in the Bankruptcy Code, any claim of abrogation under section 106(a) must rely on inference, which is disallowed by Supreme Court rulings. The panel cites past cases where Congress clearly abrogated tribal immunity by specifically including "Indian tribes" in the definitions of parties eligible for lawsuits under various statutes, underscoring the necessity for explicit language in such legal contexts.
In Osage Tribal Council v. United States Dep’t of Labor, the Tenth Circuit emphasized that for Congress to abrogate tribal sovereign immunity, it must explicitly include "Indian tribes" within the jurisdictional language of federal statutes. The court referenced the Safe Drinking Water Act as an example where Indian tribes are clearly defined as municipalities, satisfying the requirement set forth in Santa Clara Pueblo v. Martinez. Conversely, statutes lacking explicit mention of Indian tribes, such as the Copyright Act and the Americans with Disabilities Act (ADA), do not demonstrate congressional intent to waive tribal immunity, leading courts to dismiss suits against tribes based on those statutes. The Tenth Circuit rejected the idea that tribal immunity could be implied or inferred, supporting the principle that statutes should be interpreted favorably toward tribes. The panel concluded that Section 106(a) of the Bankruptcy Code did not unequivocally express intent to abrogate tribal immunity, as it does not specifically mention tribes, nor does it apply the term "domestic government" in a way that clarifies application to tribes. The overall conclusion asserts that tribal sovereign immunity remains intact, preventing suits against tribes under the discussed statutes.
Congress must clearly and unequivocally express its intent to abrogate the sovereign immunity of Indian nations, as implied actions are insufficient. In *Santa Clara Pueblo v. Martinez*, the Supreme Court reinforced that any abrogation must be explicit. The precedent set in *Atascadero State Hospital v. Scanlon* established that a general provision allowing suits against "any recipient of federal assistance" did not adequately convey Congress's intent to waive state immunity under the Eleventh Amendment. The Court emphasized that states, due to their constitutional status, are distinct from other entities receiving federal aid, requiring specific legislative language for abrogation.
In *Dellmuth v. Muth*, the Supreme Court further reiterated that mere references to legislative history or nontextual sources cannot substitute for clear statutory language. The Court rejected claims that amendments to related statutes indicated an intent to waive state immunity, asserting that Congress's intent must be unmistakably clear within the statute's text. The absence of explicit reference to the Eleventh Amendment or state immunity in the Education of Children With Handicaps Act (EHA) led the Court to conclude that Congress did not intend to abrogate sovereign immunity, reaffirming that legislative history is irrelevant in this context if the statutory intent is not clear.
The Court rejected the inference that the frequent references to "states" in the Education of the Handicapped Act (EHA) imply congressional intent to subject states to lawsuits for EHA violations. While the statutory structure may suggest that states could logically be defendants, any conclusion regarding congressional intent to abrogate sovereign immunity requires unequivocal textual support. The ruling in Dellmuth emphasizes that non-textual evidence and logical inference cannot be used to determine congressional intent without clear textual backing.
Bankruptcy Judge Shapero adopted the Ninth Circuit's reasoning in Krystal Energy and the deductive logic from In re Russell, distinguishing between statutes that are silent on sovereign immunity abrogation and those that address it but lack clarity. Judge Shapero argued that when a statute explicitly discusses sovereign immunity, deduction is permissible to identify its scope. For example, although the Bankruptcy Code does not explicitly name Arizona, it can be deduced that sovereign immunity is abrogated for Arizona as it is a state. Similarly, Indian tribes are categorized as "other domestic governments," thus sovereign immunity is also abrogated for them. Judge Shapero concluded that the statute in question directly addresses abrogation of sovereign immunity, and the Tribe's objection pertains to the clarity regarding its specific sovereign immunity, which constitutes a deductive reasoning scenario rather than a prohibited inference.
The excerpt analyzes the interpretation of section 106(a) of the Bankruptcy Code concerning the abrogation of tribal sovereign immunity. It argues that while Indian tribes qualify as "domestic" and exhibit characteristics of "governments," this does not imply that Congress intended to include them in the generic term "other domestic governments" found in section 101(27). The court expresses skepticism about the conclusion that combining these attributes in one phrase clearly indicates an intent to abrogate tribal immunity. It emphasizes that Supreme Court precedent requires more than logical inference to determine congressional intent in such matters. The lack of specific mention of Indian tribes in the Bankruptcy Code raises questions about whether Congress intended to include them, contrasting their unique status with that of states and foreign entities. The discussion references historical distinctions made by the Supreme Court, particularly in Cherokee Nation v. Georgia, which clearly delineates the status of Indian tribes as distinct from other sovereign entities. This distinction is reinforced by Justice Sotomayor’s comments in a recent case, illustrating the ongoing relevance of this legal understanding.
The Cherokee Nation's lawsuit against Georgia claimed violations of federal law and treaties, relying on Article III, Section 2, Clause 1 for jurisdiction. The Court ruled it lacked jurisdiction, determining that tribes are not "foreign states" but rather "domestic dependent nations." This characterization has been consistent in subsequent cases. The Court emphasized that historical treatment of Indian tribes suggests Congress did not intend to include them among sovereign entities without explicitly referencing them. There is no Supreme Court precedent indicating Congress intended to abrogate tribal sovereign immunity without specific mention of "Indians" or "Indian tribes." Counsel for the Litigation Trustee cited F.A.A. v. Cooper, which addressed government immunity but did not pertain to tribal immunity, hence was irrelevant. Additionally, Amoco Production Co. v. Village of Gambell, also cited, did not involve tribal sovereign immunity. Conversely, lower courts have recognized abrogation of tribal immunity when Indian tribes are explicitly named in statutes, such as in the Osage Tribal Council case regarding the Safe Drinking Water Act.
In United States v. Weddell, the court determined that Indian tribes can be subjected to garnishment under the Fair Debt Collection Practices Act (FDCPA), as the term "garnishee" includes "person," which encompasses Indian tribes. Conversely, in Blue Legs v. United States Bureau of Indian Affairs, the Eighth Circuit found that the Resource Conservation and Recovery Act (RCRA) intended to abrogate tribal immunity since "person" and "municipality" include Indian tribes. In contrast, the Eleventh Circuit's decision in Florida Paraplegic highlighted that the Americans With Disabilities Act (ADA) does not abrogate tribal sovereign immunity, as it fails to explicitly mention Indian tribes, indicating Congress's intent not to subject them to lawsuits under the ADA. The court emphasized that any abrogation of tribal immunity must be clearly expressed, aligning with Supreme Court precedent that favors resolving ambiguities in favor of Indian tribes. The Eleventh Circuit noted that the ADA's lack of specific references to Indian tribes suggests that Congress did not intend to include them, a conclusion supported by Congress's consistent distinction between Indian tribes and other governmental entities in various statutes. The document further underscores that the Supreme Court has previously rejected inferences of abrogation based on general definitions that could inadvertently include sovereign entities like Indian tribes, affirming the necessity for explicit mention in legislative texts.
Indian tribes maintain their historical sovereign immunity, which can only be abrogated by clear and unequivocal congressional language. The Court notes that any ambiguity in the language of section 106(a) prevents a conclusion that it clearly addresses the sovereign immunity of Indian tribes, as the phrase "other domestic government" is not unambiguously linked to them. The Bankruptcy Court's ruling overlooked the Supreme Court's guidance that the nature and extent of tribal sovereignty are determined by Congress, which has not explicitly acknowledged Indian tribes in the relevant sections of the Bankruptcy Code. Consequently, the Court reverses the Bankruptcy Court's ruling, affirms the Tribe's sovereign immunity in the MUFTA proceeding, and remands the case for further examination of sovereign immunity waiver as per the Bankruptcy Court's earlier order. The Litigation Trustee and other defendants involved have acknowledged this sovereign immunity issue, with some indicating that if the Tribe is immune, their own rights could be adversely affected. The Litigation Trustee also argued that the Tribe might have waived its immunity by initiating bankruptcy filings.
On December 23, 2010, the Bankruptcy Court issued a stipulated order to bifurcate the proceedings concerning the Tribe's motion to dismiss. The agreement allowed the court to first determine whether Congress had abrogated the Tribe's sovereign immunity under section 106 of the Bankruptcy Code, while deferring the waiver issue until after that ruling. If the court ruled in favor of the Tribe, a status conference would be scheduled to outline the briefing and possible discovery on the waiver issue. During the April 1, 2015 hearing, the parties reaffirmed this agreement, indicating that Judge Shapero should initially address the waiver issue. Consequently, the Court remanded the case to the Bankruptcy Court for further proceedings on the waiver.
Tribal immunity is rooted in common law, as noted in Santa Clara Pueblo v. Martinez, and has been interpreted in light of Eleventh Amendment immunity cases, which establish that Congress must clearly express its intent to abrogate such immunity. Courts have utilized state sovereign immunity precedents to assess the explicitness required for abrogation. The document also clarifies that decisions from a Bankruptcy Appellate Panel (BAP) are not binding precedents, although the reasoning of the Eighth Circuit BAP is considered persuasive. Congress has responded to prior rulings by enacting clarifying legislation, such as 42 U.S.C. 2000d-7(a)(1), which explicitly removes state immunity in federal court for violations of the Rehabilitation Act. This case differs from Dellmuth as the issue of sovereign immunity abrogation is directly addressed in section 106(a) of the Bankruptcy Code.
