Justices to consider tribal immunity from bankruptcy process
on Apr 20, 2023 at 6:49 pm
Monday’s arguments in Lac du Flambeau Band v Coughlin takes the justices back once again to the question of tribal immunity. The specific question in this case is whether the Bankruptcy Code is sufficiently clear to abrogate the sovereign immunity of a federally recognized Indian tribe.
To put the dispute in context, two points of common agreement are important. First, although tribes start with sovereign immunity as a lingering relic of their existence before the Constitution, Congress has plenary authority to abrogate that immunity. Second, courts will read federal statutes to abrogate that immunity only when they speak to the point “unequivocal[ly].” The relevant provision, the definition of “governmental unit” in the Bankruptcy Code, is undeniably broad, extending to include “United States; State; Commonwealth; District; Territory; municipality; foreign state; department, agency, or instrumentality of [any of the foregoing]; or other foreign or domestic government.” The question for the justices is whether that provision is broad enough to match that standard – does it “unequivocally” abrogate tribes’ sovereign immunity.
The particular facts of the case certainly put the Lac du Flambeau Band of Lake Superior Chippewa Indians in a bad position, as it presents a disadvantageous case for sovereign immunity. Specifically, the Band operates an online payday lending operation, which advances loans that would be illegal under the law of the jurisdictions in which many of their borrowers, including Brian Coughlin, reside. After Coughlin borrowed money from that lender, he filed for bankruptcy. Notwithstanding the Bankruptcy Code’s automatic stay, the lender continued to engage in collection attempts; eventually Coughlin was hospitalized after a suicide attempt, which he links to the aggressive collection activity. The lower court’s rejected Coughlin’s request for an order – which would have been routine in a case involving a commercial lender – compelling the lender to comply with the automatic stay and to pay damages for the injuries caused by its cavalier violation of the stay.
The case is one of the simplest the justices will hear this year, because it involves no constitutional questions and, in truth, only the interpretation of a single phrase of a single statutory provision. The Band’s argument is simple: the statute never mentions Indian tribes. Because it doesn’t mention Indian tribes, the Band contends that the statute does not unequivocally extend to them. For one thing, because the relation between Indian tribes and the government created by the Constitution is murky, it is difficult to be sure exactly what type of government the tribes are. For another, the Band points to numerous other statutes that abrogate tribal sovereign immunity and refer specifically to “tribes” as such. Collectively, they argue, the statute is just not clear enough.
For Coughlin, the case is just as straightforward. The only natural reading of the code’s definition of governmental unit is that it is intended to extend to all forms of government. The tribe plainly is a governmental unit of some kind – otherwise it would have no claim of sovereign immunity. And it certainly is not a foreign government, so it must be a domestic government, something that the statute explicitly covers. Coughlin acknowledges that Congress needs to be unequivocal for Coughlin to prevail, but notes that the Supreme Court has emphasized that Congress is not required to use any particular “magic words.” The only way Coughlin can lose, he suggests, is for the court to require Congress to mention “Indian tribes” in those exact words; that is just the approach the court previously has rejected.
One major problem for the Band is the appearance of the United States as an amicus in support of Coughlin. The United States frequently appears as an amicus in support of the Native American side of questions like these, and only rarely appears in the Supreme Court opposing the interests of tribes in a dispute with states. I think the justices will read this as an acknowledgment that the federal government sees the Band’s side of the case as really quite weak.
Perhaps an even bigger problem for the Band appears when you step back from the specific question before the court. The behavior in question would be intolerable if this was the United States, or the Federal Deposit Insurance Corporation, or the Small Business Administration. Or the state of Wisconsin (where the Band resides). It is easy to imagine Congress every now and then wanting to be deferential and respectful of tribal sovereignty. And it is also easy to imagine Congress occasionally treating the tribes as respectfully as they treat states. But what is not easy to imagine is writing a statute that abrogates sovereign immunity for the federal government and all of the states (as this one does) but gives tribes a free pass – treating the sovereignty of Native American tribes as categorically more august than the sovereignty of the United States and the individual states. That seems to me quite a hard sell.
Against that backdrop, I will not be at all surprised if most of the justices next Monday think the statute is unequivocal in abrogating the immunity of the Band. I look forward to seeing what they have to say.