Buchwald Capital Advisors, LLC v. Papas (In re Greektown Holdings, LLC)

Citations: 516 B.R. 462; 2014 Bankr. LEXIS 3558; 60 Bankr. Ct. Dec. (CRR) 11Docket: Bankruptcy No. 08-53104; Adversary No. 10-05712

Court: United States Bankruptcy Court, E.D. Michigan; August 12, 2014; Us Bankruptcy; United States Bankruptcy Court

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The court denied the renewed motion to dismiss by the Sault Ste. Marie Tribe of Chippewa Indians and Kewadin Casinos Gaming Authority, asserting sovereign immunity against a fraudulent transfer action initiated by the Litigation Trustee. The Trustee aimed to avoid transfers made by Greektown Holdings, LLC, arguing these were fraudulent under Michigan law, specifically 11 U.S.C. §§ 544 and 550, alongside Mich. Comp. Laws §§ 566.34 and 566.35. The court bifurcated issues regarding the Tribe's sovereign immunity, focusing on whether Congress abrogated this immunity via 11 U.S.C. § 106. 

The court affirmed its jurisdiction as a core proceeding under 28 U.S.C. §§ 1334(b) and 157, stating that the plaintiff must prove jurisdiction to survive the motion to dismiss. The legal analysis highlighted that § 106(a) abrogates sovereign immunity for governmental units concerning sections 544 and 550, with "governmental unit" encompassing various governmental entities. The court ruled on the motion after reviewing briefs and hearing arguments, ultimately rejecting the Tribe Defendants' claims of sovereign immunity.

The legal issue at hand is whether Indian tribes fall under the Bankruptcy Code's reference to "other foreign or domestic government," potentially affecting their sovereign immunity. The Supreme Court has characterized Indian tribes as "domestic dependent nations" with "inherent sovereign authority," yet they remain subject to Congress's plenary control. This status means tribes retain their sovereign authority unless Congress clearly acts to abrogate it. Abrogation must be explicit, unequivocal, and cannot be implied, with courts requiring perfect confidence in congressional intent to override tribal immunity. Even if a statute generally applies, tribes may not be subject to it unless their immunity is clearly abrogated. Courts have emphasized that ambiguity favors the preservation of tribal immunity. The argument presented suggests that for a statute to effectively abrogate tribal immunity, it must explicitly reference "Indian tribes" or similar terminology. The discussion also clarifies that while tribes are unique entities, they are not classified as "foreign governments" in a legal sense.

Indian tribes have historically not been classified as "foreign" governments in federal courts, despite attempts to do so. The U.S. Constitution's Commerce Clause explicitly distinguishes tribes from foreign nations, allowing Congress to regulate commerce with both foreign nations and Indian tribes. The Supreme Court has primarily referred to Indian tribes as "domestic dependent nations," which implies a unique status distinct from other sovereigns. While some appellate courts recognize tribes as governments, the Supreme Court's careful avoidance of the term "government" reinforces their exceptional status. The term "domestic dependent nations" indicates that Indian tribes possess inherent sovereign authority. Although the Bankruptcy Code does not explicitly categorize tribes as foreign or domestic governments, it was enacted with the understanding of prior Supreme Court rulings defining tribes as domestic nations. A recent concurring opinion by Justice Sotomayor noted that both states and tribes function as domestic governments, but the Tribe Defendants contend that this language lacks precedential value and does not clarify Congressional intent.

The court finds that while certain appellate cases present conflicting views, Krystal Energy is more persuasive than In re Whitaker regarding the status of Indian tribes as governments. It asserts that Indian tribes are indeed governmental entities, holding sovereign immunity as defined by Black’s Law Dictionary. The court emphasizes the need to determine whether Indian tribes are "domestic governments" or foreign entities, noting that the distinction is territorial. Citing various Supreme Court cases, the court confirms that Indian tribes are recognized as part of the domestic territory of the United States, subject to its laws and jurisdiction. The respondents’ argument that Indian tribes resemble states rather than foreign sovereigns is acknowledged, with the court agreeing that tribes are domestic entities. The definitions from Black’s Law Dictionary reinforce this conclusion, indicating that a domestic government operates within the U.S. under established governing principles.

Indian tribes are classified as "domestic governments" under the relevant legal definition, supported by several factors. The Supreme Court has historically described Indian tribes as "domestic," a term that has been consistently applied for nearly two centuries. Since Indian tribes do not fit within the category of foreign entities, they must logically be domestic. The Tribe Defendants' argument that Indian tribes exist in a unique category outside the foreign/domestic dichotomy lacks logical support, as uniqueness does not exempt them from classification within established categories. 

The discussion also emphasizes that the legislative intent behind the term "governmental unit" was to be inclusive, ensuring that no part of the statute is rendered superfluous. The court expresses caution against disregarding the phrase "or other domestic government" from the Bankruptcy Code, highlighting the absence of any alternative examples provided by the Tribe Defendants or other courts that could justify excluding Indian tribes from this classification. Since the term cannot encompass entities already explicitly mentioned (e.g., the United States, states, municipalities, etc.), the only logical interpretation left for "other domestic government" is Indian tribes. Consequently, the abrogation of sovereign immunity for all domestic governments is clear and unequivocal.

A dissenting opinion emphasizes the necessity of interpreting every term used by Congress, asserting that if "other domestic government" in section 101(27) does not refer to Indian tribes, it renders the phrase meaningless since all other forms of domestic government are already listed. The court concludes that "other domestic government" must include Indian tribes, drawing a parallel to a hypothetical statute where "any other color" logically includes blue after red and white. The dissent finds the Tribe Defendants' reliance on the ejusdem generis principle unconvincing, as they fail to identify any comparable entities to states and municipalities that are not already specified in the statute. It argues that the commonality of sovereign immunity among the enumerated entities and Indian tribes supports the interpretation that they fall under "other domestic government." The Tribe Defendants also contend that the lack of explicit mention of "Indian tribes" in the Bankruptcy Code indicates Congress's intention not to include them, citing instances where Congress has specifically referenced tribes in other laws. They point out that in certain statutes, Indian tribes are included alongside states in preemption rules, suggesting an express waiver of tribal sovereignty. The court acknowledges that while Congress could have been clearer, the language used still implies a waiver of tribal immunity.

Congress is not required to explicitly state its intent to waive tribal immunity in so many words, as established in Davidson v. Board of Governors. Instead, intent can be inferred from the statutory language. The Resource Conservation and Recovery Act (RCRA) allows citizens to bring compliance suits against any governmental entity, which includes municipalities defined to encompass Indian tribes. The legislative history of the RCRA suggests a clear intent to abrogate tribal sovereign immunity concerning violations of this act. While an explicit reference to "Indian tribes" is sufficient to demonstrate congressional intent, it is not mandatory. Previous cases have shown that the absence of such terms does not negate Congress's intent to waive immunity, as seen in In re Russell. The Supreme Court has clarified that while an unmistakable expression of intent is necessary, the specific words used by Congress are not the sole determining factor. The language must be unequivocal and unambiguous, and Congress could have been more explicit but is not required to use "magic words" to effectuate a waiver of sovereign immunity. Courts must interpret statutory waivers favorably towards the government if the intent is not clearly discernible.

In Alaska v. EEOC, the Ninth Circuit ruled that a statute allowing state employees to recover damages from their employer effectively abrogated state sovereign immunity, even though the statute did not explicitly mention abrogation or sovereign immunity. The court found Congress's intent to be clear despite the absence of specific language. The Tribe Defendants’ reliance on Florida Paraplegic Ass’n, which held that a lack of reference to Indian tribes indicated no intent to subject them to lawsuits under the ADA, was deemed unpersuasive. The ADA explicitly abrogated state sovereign immunity, and the inclusion of "other domestic governments" in the statute could logically encompass Indian tribes. The court concluded that there was no ambiguity in Congress's intent to abrogate tribal sovereign immunity, countering the argument that the existence of conflicting appellate cases indicated a lack of clarity. The court emphasized that Congressional intent cannot be implied, and any application of the statute to tribes would not be an imposition of rights but rather a direct application of its explicit language.

The excerpt examines the concept of "implying" meanings within legal documents, particularly in relation to sovereign immunity and the inclusion of Indian tribes in statutory provisions. It distinguishes between inferring a meaning that is not explicitly stated and deducing a conclusion from clearly articulated provisions. The text asserts that Congress did not merely imply the abrogation of sovereign immunity for Indian tribes; rather, it is explicitly stated in the relevant statute, Section 106. The Court emphasizes that understanding the scope of an explicitly stated abrogation is different from attempting to identify an abrogation where the statute is silent. 

The excerpt further contrasts the processes of deduction and implication, using examples to clarify that while implication may involve reasoning that can lead to error, deduction is straightforward and based on clear statutory language. The Court argues that Indian tribes are included among "other domestic governments," allowing for the deduction that their sovereign immunity is abrogated. The Court also refutes opposing interpretations by emphasizing that Congress's intent was clear and unequivocal, thereby diminishing the significance of any ambiguity that might favor Indian tribes in interpretation. Ultimately, it concludes that the statutory language sufficiently identifies the abrogation of sovereign immunity for Indian tribes without requiring an explicit list of each entity.

Plaintiff successfully met its burden, leading to the denial of the Tribe Defendants' motion to dismiss, requiring Plaintiff to present an appropriate order. Previous orders indicated that various bankruptcies were consolidated for procedural purposes, with the Official Committee of Unsecured Creditors authorized to pursue bond avoidance claims on behalf of Greektown Holdings, LLC, prompting the initiation of this adversary proceeding. A consent order later allowed Buchwald Capital Advisors, LLC, as Litigation Trustee, to take over prosecution of the case from the Committee.

The Court did not find the legislative history of the Bankruptcy Code relevant, nor did it give weight to Plaintiff's argument that Indian tribes are considered "governments" by various authorities, noting the Tribe Defendants' claim that such references are irrelevant and undermine Plaintiff's position. Additionally, the Court expressed skepticism regarding the Holy See's potential classification as a "foreign state" under the Bankruptcy Code, suggesting that its unique status does not exempt it from the statutory definition. 

The discussion highlighted the broad definition of "governmental unit" under the Bankruptcy Code and noted instances where Congress included Indian tribes in various statutory frameworks but did not necessarily indicate an intent to abrogate tribal sovereign immunity. This raised questions about what terminology might effectively abrogate such immunity, offering examples like "domestic dependent nations" and "tribal nations." The analysis underscored the complexity of defining sovereign immunity within the context of the Bankruptcy Code.