Bankruptcy Court Upholds Indian Tribe’s Sovereign Immunity We We We Blog Bankruptcy & Restructuring Viewpoints

Bankruptcy Court Upholds Indian Tribe’s Sovereign Immunity We We We Blog Bankruptcy & Restructuring Viewpoints

In a determination published October 19, 2020, Judge Frank J. Bailey for the U.S. Bankruptcy Court for the District of Massachusetts discovered that an Indian tribe wasn’t at the mercy of the Bankruptcy Code’s automatic stay. This choice ended up being a question of first impression in the 1st Circuit and contributes to a growing conflict on the list of federal circuits from the dilemma of Indian tribal sovereign resistance under Section 106 associated with the Bankruptcy Code, which gives that “sovereign immunity is abrogated as to a government unit,” with respect to key conditions of this Bankruptcy Code (including area 362, with respect to the automated stay). The Bankruptcy Court joined nearly all courts recognizing that area 106(a) of this Bankruptcy Code is certainly not a waiver of a Indian tribe’s sovereign resistance because Section 106 does not have enough quality required to manifest Congressional intent.

The problem arose each time a chapter 13 debtor alleged the Lac du Flambeau Band of Lake Superior Chippewa Indians (the “Tribe”) and an amount of its affiliated company entities violated the automated stay by calling the debtor following the filing of their bankruptcy instance so that they can collect for a $1,600 cash advance. The Tribe relocated to dismiss, arguing the Tribe is just a nation that is sovereign, consequently, the Tribe and its particular affiliates are resistant from suit in bankruptcy courts. (notably, the Tribe had asserted, and also the debtor had conceded, that its affiliated business entities are hands for the Tribe, and thus eligible to benefit from the degree that is same of resistance due to the fact Tribe.)

In making their choice, Judge Bailey respected the broad abrogation of sovereign resistance beneath the Bankruptcy Code, but reasoned that “governmental unit,” as defined loans online South Carolina in Section 101(27) associated with the Bankruptcy Code, will not consist of federally recognized Indian tribes. Further, the attempt that is debtor’s claim that Indian tribes are subsumed to the concept of government product as an “other . . . domestic federal federal government” ended up being rejected because this kind of “catch-all phrase” would make the total amount of this area 101(27) surplusage.

Judge Bailey observed that Indian tribes occupy a “special place” in American jurisprudence and, citing a couple of leading Supreme Court situations, that the “baseline position” favors tribal resistance, with “ambiguities in federal legislation construed generously to be able to comport with . traditional notions of sovereignty along with the federal policy of motivating tribal freedom.”

Judge Bailey’s dismissal for the instance for not enough topic matter jurisdiction aligns the Bankruptcy Court because of the Courts of Appeal when it comes to Sixth, Seventh and Eighth Circuits and squarely rejects a choice through the Ninth Circuit Court of Appeals, which ruled that Congress indicated an unequivocal intent to waive immunity for Indian tribes. It stays to be noticed if the debtor may attract the Bankruptcy Court’s ruling, and possibly leading to quality for the circuit split by the Supreme Court or Congress.

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