Circuits More Deeply Split on Waiver of Sovereign Immunity for Native American Tribes

Deepening a split of circuits, the First Circuit held over a lengthy dissent that the Bankruptcy Code waived sovereign immunity as to tribes of Native Americans.

The majority’s May 6 opinion by Circuit Judge Sandra L. Lynch took sides with the Ninth Circuit, which had held in 2004 that Section 106(a) abrogated sovereign immunity for tribes. Krystal Energy Co. v. Navajo Nation, 357 F.3d 1055, 1061 (9th Cir. 2004).

Judge Lynch disagreed with the Sixth Circuit, which found no waiver in 2019. In re Greektown Holdings, LLC, 917 F.3d 451, 460- 61 (6th Cir. 2019), cert. dismissed sub nom. Buchwald Cap. Advisors LLC v. Sault Ste. Marie Tribe, 140 S. Ct. 2638 (2020). While the certiorari petition was pending in Greektown, the case settled, and the petition was dismissed. To read ABI’s report on Greektown, click here.

Chief Circuit Judge David J. Barron “respectfully” dissented. His 33-page dissent is half again as long as the majority’s.

The likelihood of a petition for certiorari is high. Assuming there is a petition, Prof. Jack F. Williams told ABI he “believe[s] that certiorari will be granted.” Prof. Williams is a professor at Georgia State University College of Law and the university’s Middle East Studies Center. He is a leading authority on both bankruptcy law and tribal law.

The Compelling Facts

Someone wanting a waiver of sovereign immunity could not have found more compelling facts.

Before bankruptcy, the debtor borrowed $1,100 from a corporate payday lender owned by a federally recognized tribe. By the time the debtor had filed a chapter 13 petition, the debt had grown to almost $1,600 as an unsecured, nonpriority claim.

Despite the automatic stay and despite being told about the bankruptcy, the tribal lender continually called the debtor demanding payment.

Two months after bankruptcy, the debtor attempted to commit suicide, blaming his action on the incessant calls.

In bankruptcy court, the debtor sought an injunction to halt collections attempts, along with damages and attorneys’ fees. The bankruptcy court granted the tribe’s motion to dismiss, based on sovereign immunity.

The First Circuit accepted a direct appeal.

The Majority Opinion

For the majority, Judge Lynch began by laying out the general principle that Congress must “unequivocally” express an intent to abrogate tribal sovereign immunity. Did Section 106(a) accomplish the task?

Section 106(a) says that “sovereign immunity is abrogated as to a governmental unit to the extent set forth in this section with respect to” dozens of provisions in the Bankruptcy Code, including Section 362. In turn, “governmental unit” is defined in Section 101(27) to mean:

United States; State; Commonwealth; District; Territory; municipality; foreign state; department, agency, or instrumentality of the United States, (but not a United States trustee while serving as a trustee in a case under this title), a State, a Commonwealth, a District, a Territory, a municipality, or a foreign state; or other foreign or domestic government. [Emphasis added.]

Judge Lynch noted that Section 106 was amended in 1994 because the prior version had been held to be insufficiently clear to abrogate state and federal sovereign immunity.

For Judge Lynch, the question was whether “domestic government” includes tribes. She said there was “no real disagreement” that a tribe is a government.” It “is also clear,” she said, that a tribe is domestic.

Judge Lynch had “no doubt that Congress understood tribes to be domestic dependent nations . . . that are a form of domestic government.” “Thus,” she said, “a tribe is a domestic government and therefore a government unit.”

Having held that Congress “unmistakably abrogated the sovereign immunity of tribes,” Judge Lynch devoted the remainder of her opinion to countering arguments made by the tribe and the dissent. Noting that the Supreme Court does not require “magic words” to waive immunity, she first rejected the idea that the waiver could not apply to tribes without the use of the word “tribes” in the statute.

Next, Judge Lynch dismissed the argument that the legislative history led to ambiguity, because “legislative history cannot introduce ambiguity into an unambiguous statute.”

Judge Lynch did not agree with the idea that “domestic government” only refers to governments that arose under the Constitution. To the contrary, she said that “domestic refers to the territory in which the government exists.”

Finally, Judge Lynch said that an “interpretation of the phrase ‘domestic government’ that excludes Indian tribes with no textual basis for so doing is implausible.”

The Dissent

By failing to use the word “tribes” in the statute, Judge Barron said in dissent that Congress “did not use the surest means of clearly and unequivocally demonstrating that they are” governmental units.

Judge Barron asked:

Why, if Congress wanted to be crystal clear in abrogating tribal immunity through the Code, did it not use the clearest means of abrogating that immunity by including “Indian Tribe” — or its equivalent — in the list of expressly named governmental types that makes up the bulk of § 101(27)?

Judge Barron noted the peculiar absence of the word “tribes” in the Bankruptcy Code’s immunity waiver. He said that “Congress has expressly named them when abrogating their sovereign immunity in every other instance in which a federal court has found that immunity to have been abrogated.”

Judge Barron said he had “no choice but to conclude that § 101(27) does not clearly and unequivocally include Indian tribes, because, as I have explained, its text plausibly may be read not to cover them.”

Scholarly Commentary

“Aside from the split,” Prof. Williams told ABI that “this is an important issue striking at the meaning of sovereignty and self-determination of Indian tribes. This is especially the case in the commercial and economic landscape largely because it is through these vehicles a tribe can fund all the governmental activities that are necessary for tribal governance.”