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Justices reject tribal immunity from bankruptcy stay

On Thursday in Lac du Flambeau Band of Lake Superior Chippewa Indians v. Coughlin, the Supreme Court held that Native American tribes are not immune from the automatic stay of the Bankruptcy Code. The decision is in no way surprising, as it merely obligates creditors operated by Native American tribes to submit to the bankruptcy process in the same way that the states and the federal government do.

The case involves an online payday lending operation owned by the Lac du Flambeau Band of Lake Superior Chippewa Indians. When one of its customers sought relief in bankruptcy, the Band argued that its sovereign immunity exempted the business from the Bankruptcy Code’s automatic stay. The lower courts rejected that idea, and on Thursday Justice Ketanji Brown Jackson’s opinion for an 8-1 majority affirmed those rulings.

Jackson’s opinion starts by restating the long-standing rule that a congressional statute “abrogates” sovereign immunity only if Congress uses language that is “unmistakably clear.” She comments that, although it is a “demanding standard,” it “is not a magic-words requirement.” Examined through that lens, Jackson easily concludes that “the Bankruptcy Code unequivocally abrogates the sovereign immunity of any and every government” and that “[f]ederally recognized tribes undeniably fit that description.”

There is no doubt that the Bankruptcy Code abrogates governmental sovereign immunity, she explains: “Notwithstanding an assertion of sovereign immunity, sovereign immunity is abrogated as to a governmental unit.” The only question for Jackson to analyze, then, is whether a federally recognized tribe falls within the definition of “governmental unit.” On that question, Jackson explains that “the definition of ‘governmental unit’ exudes comprehensiveness from beginning to end.” Summarizing the provision, she points out that “Congress has rattled off a long list of governments that vary in geographic location, size, and nature,” moved on “to capture subdivisions and components of every government within that list,” and then “conclude[d] with a broad catchall phrase, sweeping in ‘other foreign or domestic government[s].’”

The key analytical move (and the basic point on which she parts ways with the lone dissenter, Justice Neil Gorsuch) is Jackson’s treatment of the phrase “foreign or domestic.” For Jackson it is crucial that “[f]ew phrases in the English language express all-inclusiveness more than the pairing of two extremes.” She underscores the point emphatically: “‘Rain or shine’ is a classic example: If an event is scheduled to occur rain or shine, it will take place whatever the weather that day might be.” If that were not clear enough, she continues with an extended string of examples, starting with “near and far,” and then including exemplary uses of “foreign and domestic”: “car manufacturers, foreign or domestic,” and then finally the promise to “defend the Constitution … against all enemies, foreign and domestic.” For Jackson, “coupling foreign and domestic together, and placing the pair at the end of an extensive list,” is enough to demonstrate the requisite “unmistakabl[e] intent to cover all governments.”

Jackson makes one further statutory point, relying on the various exceptions to the automatic stay that apply to governmental units, which allow them to enforce “police and regulatory” authority during a bankruptcy, give special powers to their taxing authorities, and permit the collection of fines. It would make little sense of that arrangement, Jackson contends, to read the definition of “governmental unit” to “exclud[e]” “certain governments … from those provisions’ reach, notwithstanding the fact that they engage in tax and regulatory activities” just as states and the federal government do.

After making the point that the “uniquely governmental functions” that federal recognized tribes exercise make it “no surprise” that Congress always has treated them as governments, Jackson concludes syllogistically: “Putting the pieces together, …. [t]he Code unequivocally abrogates the sovereign immunity of all governments, categorically. Tribes are indisputably governments. Therefore, [the statute] unmistakably abrogates their sovereign immunity too.”

The bulk of Jackson’s opinion is devoted to dismissing the arguments of the Band and Gorsuch’s dissent. As for the Band’s point that the statute does not mention tribes by name, she repeats the point from the beginning of her opinion that “the clear-statement rule is not a magic-words requirement.” She acknowledges that the court has not previously “found an abrogation of tribal sovereign immunity where the statute did not reference Indian tribes explicitly,” but she points out that the “universe” of those cases is “exceedingly slim” and does not include a “provision that was worded analogously to, and structured like, the ones at issue here.”

As to the argument that the statute reflects a “rigid division between foreign governments on the one hand and domestic governments on the other, leaving out” entities like tribes that “have both foreign and domestic characteristics,” she points to the Code’s instruction that “or,” as used in the Bankruptcy Code, should not be read as “exclusive.” In a footnote to that discussion, she responds pointedly to a series of hypotheticals from Gorsuch’s dissent, including his notable use of “chocolate or vanilla ice cream” to exclude Neapolitan. Jackson retorts that “unlike … ice creams (which need not be chocolate or vanilla), every government must be foreign or domestic to some degree; the question is just where on the spectrum it falls.”

As I mentioned at the beginning of this piece and in my article about the argument, the Band faces a difficult challenge in seeking an immunity that Congress admittedly denied to the states and the federal government. It is almost impossible to imagine that Congress would grant tribes such a favored status, and the near-unanimity of the opinion shows how little interest the justices have in contorting straightforward language to reach such a counter-intuitive result.

Recommended Citation: Ronald Mann, Justices reject tribal immunity from bankruptcy stay, SCOTUSblog (Jun. 15, 2023, 3:32 PM),