Taking sides on a circuit split, Bankruptcy Judge Frank J. Bailey of Boston held that the Bankruptcy Code does not waive sovereign immunity with respect to Indian tribes, even though Sections 106 and 101(27) effect a broad waiver for other governmental units.
The chapter 13 debtor alleged that the defendants violated the automatic stay after he filed a chapter 13 petition by making phone calls and sending emails to collect a $1,600 payday loan. The defendants were a federally recognized Indian tribe and three entities that were “arms” of the tribe.
The defendants filed a motion to dismiss, contending that a claim for violation of the automatic stay is barred by tribal sovereign immunity.
Citing the Supreme Court in his October 19 opinion, Judge Bailey said that tribes have a direct relationship with the federal government, thus conferring sovereign immunity on the tribe and its arms.
However, Section 106(a) abrogates sovereign immunity “as to a governmental unit” with respect to enumerated sections of the Bankruptcy Code, including Section 362, under which the debtor was suing the tribe.
In turn, Section 101(27) defines “government unit” to “mean” (not “include”), among other things, the U.S., states, municipalities, foreign states or “other foreign or domestic government.”
Judge Bailey noted that Section 101(27) does not specifically include tribes as governmental units. Thus, he was tasked with deciding whether Section 106(a) abrogates sovereign immunity for tribes.
The debtor urged Judge Bailey to follow the Ninth Circuit by holding that Congress did express an unequivocal intent to waive immunity for tribes. See Krystal Energy Co. v. Navajo Nation, 357 F.3d 1055 (9th Cir. 2004). The tribe urged the judge to adopt the Sixth Circuit’s holding in Buchwald Capital Advisors LLC v. Sault Ste. Marie Tribe of Chippewa Indians (In re Greektown Holdings LLC), 917 F.3d 451 (6th Cir. Feb. 26, 2019).
In a 2/1 decision, the Sixth Circuit in Buchwald said that the “real question” is “whether Congress . . . unequivocally expressed an intent to abrogate tribal sovereign immunity.” Id. at 459. The majority held that Sections 106 and 101(27) “lack the requisite clarity of intent to abrogate tribal sovereign immunity.” Id. at 461. To read ABI’s report on Buchwald, click here.
Judge Bailey said that Krystal had been rejected in two other circuits, in addition to the Sixth.
Based on sovereign immunity, Judge Bailey sided with Buchwald and dismissed the suit for lack of subject matter jurisdiction. He said that the debtor “ignores the special place that Indian tribes occupy in our jurisprudence.”
Stay tuned for an appeal to see how the split develops. The question will end up in the Supreme Court someday.
Taking sides on a circuit split, Bankruptcy Judge Frank J. Bailey of Boston held that the Bankruptcy Code does not waive sovereign immunity with respect to Indian tribes, even though Sections 106 and 101(27) effect a broad waiver for other governmental units.
The chapter 13 debtor alleged that the defendants violated the automatic stay after he filed a chapter 13 petition by making phone calls and sending emails to collect a $1,600 payday loan. The defendants were a federally recognized Indian tribe and three entities that were “arms” of the tribe.
The defendants filed a motion to dismiss, contending that a claim for violation of the automatic stay is barred by tribal sovereign immunity.
Citing the Supreme Court in his October 19 opinion, Judge Bailey said that tribes have a direct relationship with the federal government, thus conferring sovereign immunity on the tribe and its arms.
However, Section 106(a) abrogates sovereign immunity “as to a governmental unit” with respect to enumerated sections of the Bankruptcy Code, including Section 362, under which the debtor was suing the tribe.
In turn, Section 101(27) defines “government unit” to “mean” (not “include”), among other things, the U.S., states, municipalities, foreign states or “other foreign or domestic government.”