A decision by the United States District Court for Eastern Michigan has upheld the sovereign immunity of a tribe as it relates to bankruptcy.
Since this disagrees with other decisions that have held tribes to be bound by bankruptcy laws, this latest decision leaves open more questions than it settles.
As Indian tribes have ventured into a variety of businesses, not just gaming, prompting critics to urge that Congress set limits on tribal immunity from lawsuit.
In the latest decision, the District Court ruled that Congress was not sufficiently clear in abrogating the sovereign immunity of tribes when it adopted the current bankruptcy code. However, the court left it to the Bankruptcy Court to decide whether the Sault Ste. Marie Tribe of Chippewa Indians waived that immunity by agreeing to appear in the court.
The tribe is one of several defendants in a case that alleges that $177 million were fraudulently transferred. The tribe claimed sovereign immunity and the litigation trustee opposed it, claiming that the Bankruptcy Code specifically names tribes. The Bankruptcy Court agreed with this interpretation, arguing that Congress intended to include “other domestic governments,” although Indian tribes were not named specifically.
According to the District Court, “an Indian tribe is subject to suit only where Congress has authorized the suit or the tribe has waived its immunity.
“To abrogate tribal immunity, Congress must ‘unequivocally’ express that purpose.”
Since other federal courts (the 9th Circuit Court of Appeals and federal courts in Arizona) have not reached this decision, the issue remains open, possibly to be settled by the U.S. Supreme Court.
The 9th Circuit declared, “the Supreme Court’s decisions do not require Congress to utter the magic words ‘Indian tribes’ when abrogating tribal sovereign immunity.”
The Bankruptcy Court must now address the question of whether the tribe waived its immunity when it submitted to bankruptcy proceedings.
