Supreme Court Rules Bankruptcy Code Abrogates Tribal Sovereign Immunity

Supreme Court Rules Bankruptcy Code Abrogates Tribal Sovereign Immunity

Legal Sidebari

Supreme Court Rules Bankruptcy Code
Abrogates Tribal Sovereign Immunity
August 4, 2023
On June 15, 2023, the Supreme Court decided Lac du Flambeau Band of Lake Superior Chippewa
Indians v. Coughlin (Lac du Flambeau). The case involved a dispute over lifting an automatic stay in a
Chapter 13 bankruptcy proceeding, but more broadly presented a conflict between the Bankruptcy Code
and tribal sovereign immunity. Ultimately, the Court held that the Bankruptcy Code (the Code)
unambiguously abrogates the sovereign immunity of all governments, including that of federally
recognized Indian tribes.
This Sidebar provides an overview of tribal sovereign immunity and introduces § 106 of the Code, which
contains the sovereign immunity provision at issue in Lac du Flambeau. It then discusses the factual and
procedural history of Lac du Flambeau, and summarizes the Supreme Court’s opinion. This Sidebar then
examines the ramifications of the decision for both bankruptcy law and federal Indian law, including
considerations for Congress.
Tribal Sovereign Immunity and Bankruptcy Code Section 106
Federally recognized tribes maintain “inherent sovereign authority,” which generally includes a common-
law immunity from lawsuits. This tribal sovereign immunity applies equally to lawsuits brought by states
and lawsuits brought by individuals.
Tribal sovereign immunity may be overcome in two ways, each allowing suits to be brought against
tribes. Either the tribe itself may waive sovereign immunity in certain cases, or Congress may abrogate,
or eliminate, tribal sovereign immunity in certain contexts using its plenary constitutional authority to
legislate with respect to Indian tribes. In Lac du Flambeau, the Court considered this latter path: whether
Congress had abrogated tribal sovereign immunity in particular circumstances—namely, those governed
by certain provisions of the Bankruptcy Code.
Although Congress has the power to legislate with regard to tribal sovereign immunity and other tribal
rights, courts have developed canons of construction when evaluating whether Congress has done so. One
of these canons generally requires that if Congress wishes to diminish tribal rights or authority, it must do
so unequivocally. The Supreme Court has explained that courts must “tread lightly” and not presume a
congressional intent to undermine tribal authority absent a clear indication of such intent. The Court has
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cautioned, however, that the clear-statement rule does not require any “magic words”; Congress “need not
state its intent” to abrogate tribal sovereign immunity “in any particular way.”
The Code contains a provision speaking to sovereign immunity, Section 106, which is entitled “Waiver of
sovereign immunity.” Notwithstanding the word “waiver” appearing in the section’s title, subsection (a)
provides that “sovereign immunity is abrogated as to a governmental unit” with respect to dozens of Code
sections. Pertinent to Lac du Flambeau, one of those Code sections is Section 362, which imposes an
automatic stay on the commencement or continuation of lawsuits against a debtor once that debtor has
declared bankruptcy. The Code defines “governmental unit” 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.”
Factual and Procedural History
The tribe at the center of this case is the petitioner, Lac du Flambeau Band of Lake Superior Chippewa
Indians (the Band). A federally recognized Tribe, the Band owns a number of businesses, including
Lendgreen, “a financial loans network that connects payday loan lenders with borrowers seeking short-
term loans.” Respondent Brian Coughlin (Coughlin) took out a $1,100 payday loan from Lendgreen in
2019. Later that year, Coughlin filed a Chapter 13 bankruptcy petition in the U.S. Bankruptcy Court for
the District of Massachusetts. Under Chapter 13, an individual may discharge certain debts pursuant to a
court-supervised repayment plan.
In accordance with the Code, after Coughlin filed the Chapter 13 petition, the bankruptcy court imposed
an automatic stay prohibiting all actions to collect on Coughlin’s debts. Lendgreen nevertheless continued
to contact Coughlin about the payday loan repayment, the bill for which had grown to $1,600 by the time
of the petition.
Coughlin moved in bankruptcy court to enforce the automatic stay against Lendgreen and its corporate
parents, including the Band. The Band moved to dismiss Coughlin’s motion and asserted that, as a tribal
sovereign nation, it was immune from suit. The bankruptcy court agreed with the Band and dismissed the
motion for lack of subject matter jurisdiction. The court reasoned that Code Section 106(a) broadly
abrogates sovereign immunity for governmental units, but that the Bankruptcy Code’s definition section
does not specifically include federally recognized Indian Tribes in its list of governmental units. In
support of that reasoning, the bankruptcy court noted multiple circuits had held that Section 106 lacked
the necessary specificity to abrogate tribal sovereign immunity.
A divided First Circuit reversed the bankruptcy court’s decision. The court observed that the statutory list
of governmental units covered essentially all forms of domestic government, including a catchall for
“other … domestic government[s].” The court also noted that when Congress enacted the relevant Code
provisions, Congress would have understood that Indian tribes were legally considered “domestic
independent nations.” Accordingly, the First Circuit held that when Congress abrogated the sovereign
immunity of domestic governments, it necessarily abrogated the sovereign immunity of tribes. The court
did not find persuasive the Band’s arguments that neither the Code nor its legislative history used the
word “tribe,” nor any other specific reference to tribal nations, explaining that the statute’s text was
nonetheless clear on the abrogation.
The Supreme Court: Majority Opinion and Dissent
The Supreme Court granted certiorari to answer the question whether Congress unequivocally intended to
abrogate the sovereign immunity of Indian tribes. Like the courts below, the Supreme Court focused on

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the text of Section 106, as well as the established rule that Congress must make its intent unmistakably
clear in the text of a statute to abrogate sovereign immunity—the “clear-statement rule.” However, the
Court reiterated that the clear-statement rule does not entail a “magic-words requirement.”
After analyzing the relevant statutory provisions, the Court affirmed the First Circuit in an 8–1 opinion,
determining that the Code unequivocally abrogated the sovereign immunity of any and every government
possessing authority to assert sovereign immunity. Federally recognized tribes such as the Band, the Court
concluded, were necessarily covered by that comprehensive abrogation.
The Court found support from the statutory text, the Code’s policy goals, and Congress’s understanding of
tribes’ governmental function, as follows. According to the Court, the Code’s definition of governmental
unit “exudes comprehensiveness from beginning to end,” and the phrase “other foreign or domestic
government” signaled congressional intent to cover all governments. The Court labeled “far-fetched” the
Band’s argument that federally recognized tribes—described in long-standing Supreme Court precedent
as “domestic dependent nations”—are neither completely foreign nor purely domestic, and thus should
not be covered by the Bankruptcy Code’s language. In other words, the Court rejected the premise that the
text imposed a rigid division between foreign and domestic governments, covering both but not
governmental entities with characteristics of both.
The Court also reasoned that the Code in general provides broad protections to debtors against all
creditors. Although the Code contains a number of exceptions for government creditors, it generally does
not subdivide those exceptions among certain types of governmental units. In the Court’s view, this
supported an interpretation that Congress intended comprehensive abrogation of sovereign immunity. As
to the Band’s argument that neither of the relevant Code provisions mentions Indian tribes specifically,
the Court referred to the lack of a “magic-words requirement” for abrogating sovereign immunity.
The sole dissenting justice, Justice Gorsuch, countered with an analogy: a host who gives a guest
permission to help herself to “chocolate or vanilla ice cream,” he wrote, has not clearly given permission
for the guest to eat the Neapolitan ice cream she may also find in the freezer. If a clear statement is
required, the Neapolitan ice cream is not available to be eaten, notwithstanding that it shares some
characteristics with both chocolate and vanilla ice cream. Justice Gorsuch recognized that “tribes may
have some features of both domestic and foreign governments, but they do not qualify as either, and they
have some features found in neither.” Therefore, he reasoned, they cannot be included within the phrase
“foreign or domestic government.”
Considerations for Congress
The holding in Lac du Flambeau generally redounds to the benefit of debtors like Coughlin by making
automatic stays of debt collection efforts more widely applicable to creditors. One could view the
implications from two perspectives. On one hand, the decision may have the practical effect of
eliminating tribal sovereign immunity in situations where it was previously perceived to be intact. This
result may be viewed by some as an infringement or limitation of tribal self-governance principles
because it limits tribal sovereign immunity without input or consent from the tribe itself. Although
Congress has constitutional authority to limit tribal sovereign immunity unilaterally, proponents of tribal
sovereignty may object that Lac du Flambeau functionally undermined—albeit while technically
reiterating—the “enduring principle of Indian law” that “courts will not lightly assume that Congress in
fact intends to undermine Indian self-government.”
From another perspective, the decision could be framed as consistent with the Code’s goal of preventing
certain types of government creditors—in this case, tribally owned lenders—from being able to pursue
debt collection when others may not. Put differently, the Lac du Flambeau holding furthers one of the
automatic stay’s purposes, preventing a race to the courthouse by creditors. This framing may be viewed

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by some as potentially promoting a more orderly recovery for a greater number of creditors in certain
situations, such as cases with limited bankruptcy estate assets.
As discussed above, under the Court’s decision in Lac du Flambeau, tribal sovereignty in bankruptcy
cases is abrogated and debtors may take action against tribes to enforce the Code’s automatic stay, just as
a debtor could generally do for any other creditor. Should Congress choose to eliminate the abrogation of
tribal sovereign immunity, the relevant Bankruptcy Code provisions offer at least three textual options for
doing so. First, Congress could expressly carve out tribal governments from Section 106(a), the
abrogation provision, either by stating that the provision does not apply to tribal governments, or that
tribal sovereign immunity is not abrogated. Congress may consider, however, that carving out tribal
governments from Section 106(a)’s immunity waiver would create multiple classes of governmental
entities. A court could view such an action as running counter to the “policy choices” embodied in the
Code, which “generally subjects all creditors (including governmental units) to certain overarching
requirements.”
Second, Congress could expressly include in Section 101, the definition provision, that tribal
governments are not governmental units. Eliminating or excepting tribal governments from the definition
of governmental units entirely may be seen by a court as consonant with the principle of generally
treating governmental units (though not all creditors) alike.
In either scenario, Congress could also consider altering the catchall provision—“other foreign or
domestic government”—at the end of Section 101, thereby narrowing the scope of the statute to align
with Congress’s specific intent to waive certain categories of sovereign immunity.

Author Information

Michael D. Contino
Mainon A. Schwartz
Legislative Attorney
Legislative Attorney

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