Bankrupting Tribes: an Examination of Tribal Sovereign Immunity as Reparation in the Context of Section 106(a)

JurisdictionUnited States,Federal
Publication year2021
CitationVol. 37 No. 2

Bankrupting Tribes: An Examination of Tribal Sovereign Immunity as Reparation in the Context of Section 106(A)

Joshua Santangelo



This Comment concerns section 106(a) of the Bankruptcy Code, which abrogates sovereign immunity of "a State, a Commonwealth, a District, a Territory, a municipality, or a foreign state; or other foreign or domestic government." A circuit split exists as to whether this section applies to Native Nations. The Sixth Circuit interpreted this section to maintain sovereign immunity for Native Nations in the Code, while the Ninth Circuit interpreted it to abrogate tribal sovereign immunity. This Comment argues that the Sixth Circuit's interpretation of section 106(a) is the correct interpretation because of the unique relationship between Native Nations and the federal government. This Comment first reviews the history between the federal government and Native Nations to explore this unique relationship and to establish a reparative legislative history. It then compares tribal immunity to other forms of sovereign immunity in order to establish Native sovereign immunity as unique and to demonstrate congressional intent to exclude Native Nations from section 106(a). Finally, it argues that tribal sovereign immunity should be maintained in the context of the Code because the renewed sovereign status of Native Nations and the privileges associated with that sovereign status are reparations efforts and therefore deserve significant weight in any calculus that considers the weakening of sovereign privileges.

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The relationship between the United States federal government and Native Nations is one most emblematized by its uniqueness. "The United States is the only country in the world to recognize the inherent sovereignty of Native Nations within its borders and to recognize the ability of Native Nations to regulate and govern reservation lands."1 The legal relationship that they share is considered sui generis in public law.2 The unique relationship between the federal government and Native Nations has informed the doctrines around which tribal governments legally interact with the state and federal governments of the United States, including the doctrine of tribal immunity.3 Tribal immunity is separate and unique from both the sovereign immunity employed by states within the legal framework of the United States and by foreign nations within the context of legal proceedings in the United States.4 This means that tribal immunity can defend a tribe from suit in contexts where state sovereign immunity would not protect a state.5 One such context is the application of sovereign immunity under section 106(a) of the Bankruptcy Code.

Section 106(a) states that "notwithstanding an assertion of sovereign immunity, sovereign immunity is abrogated as to a governmental unit to the extent set forth in this section with regard to the following . . . ."6 To understand whose sovereign immunity is abrogated by this section, one must consult the definitions section of the Code. This section defines the term "governmental unit" as "[the] United States; State; Commonwealth; District; Territory; municipality; foreign state; department, agency or instrumentality of the United States (but not a United States 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."7

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Only two federal circuit courts have considered the issue of the treatment of tribal immunity in the context of section 106(a), and these courts reached markedly different conclusions.8 In the more recent case, Buchwald Capital Advisors, LLC, the Sixth Circuit held that section 101(27) of the Code did not explicitly mention tribal governments as "governmental units" whose sovereign immunity was abrogated.9 The Court determined that the tribe retained its sovereign immunity and that it did not waive this right in adversary proceedings simply by filing a bankruptcy petition.10 Accordingly, the case was dismissed.11

Conversely, in Krystal Energy Company, the Ninth Circuit held that section 106(a) explicitly revoked tribal sovereign immunity for matters within the Code because tribes were "domestic governments" and therefore fell under the umbrella of "governmental units" as defined by section 101(27).12 The circuit split on this issue has yet to be clarified by the Supreme Court.13 Without clarification the issue lacks national uniformity, which makes it difficult for both Native Nations and their creditors to make decisions about how to approach bankruptcy.

While only two federal circuit courts have considered this issue, recent case law from lower federal courts around the treatment of tribal immunity in the context of section 106(a) demonstrates a modern trend towards maintaining tribal immunity. In In re Whitaker, the Eighth Circuit Bankruptcy Appellate Panel affirmed the bankruptcy court's decision to maintain sovereign immunity for both the Lower Sioux Indian Community and its subsidiary, Dakota Finance Corporation.14 The Lower Sioux Indian Community and the Dakota Finance Corporation owed debtors in a bankruptcy case tribal revenue payments in accordance with the Indian Gaming Regulatory Act.15 The trustee of the bankruptcy estate sought to garnish the revenues of the tribe and its subsidiary for the benefit of the estate and its creditors.16 The court held that the trustee was prevented from doing so because the sovereign immunity of the Lower Sioux

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Indian Community was not abrogated by section 106(a) and that this sovereign immunity extended to the tribe's subsidiary.17

Similarly, in Subranni, the bankruptcy court for the District of New Jersey held that a newspaper organized under the Navajo Nation Corporation Code could assert the privilege of sovereign immunity against a bankruptcy trustee who sought to recover preferential transfers made to the newspaper.18 The court held that section 106(a) did not include the Navajo Nation within the list of governmental units whose sovereign immunity was abrogated.19 Cases decided within the last ten years by lower courts favor the preservation of tribal immunity in the context of the Code. This modern trend weighs in favor of the interpretation of section 106(a) that is advocated in this Comment.

The modern trend of maintaining tribal immunity within the context of the Code is the correct interpretation of section 106(a) because precedent, congressional intent, and the historical relationship between the federal government and Native Nations favor it. The courts who have ruled this way focus on the language of section 101(27) and canons of statutory construction for support.20 Occasionally these courts will turn to congressional intent in the context of the Indian Reorganization Act to justify their holding.21 While these are legitimate arguments, they lack a comprehensive understanding of the complexities of the relationship between Native Nations and the federal government and how this history informs the doctrine of tribal immunity. Neither side of the debate comprehensively discusses the history of violence against Native Nations and the trend in federal Indian law towards righting those injustices. By failing to consider the full history, these courts weaken the doctrine of tribal immunity because they fail to qualify it as a form of reparations that encourages fairness and justice in the law.

Courts should hold that tribes retain sovereign immunity under section 106(a) of the Code. The language of the statute and the history between the United States government and Native Nations do not indicate an intention by Congress to abrogate tribes' sovereign immunity; additionally, Congress explicitly expressed an intention to encourage the political and economic growth of Native Nations, and tribal immunity can operate as a form of reparations for

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atrocities committed against Native populations. For purposes of this Comment, "reparations" is defined with a three-prong test: "recognizing and accepting responsibility for historic injustice; repairing present-day damage traceable to past injustice; and building productive group relationships."22 This perspective on the law is correct because it is supported by precedent and legal argument and because it promotes justice by propelling Native Nations towards economic prosperity.

To reach this conclusion, this Comment will first focus on the history of federal Indian law, the establishment of tribal immunity, and how tribal immunity compares to other forms of sovereign immunity. second, it will explore the application of tribal immunity to section 106(a) and address fundamental misunderstandings of tribal immunity. Finally, it will focus on the maintenance of tribal sovereign immunity within the Code as a form of reparations and will confront the effects this may have on the future of bankruptcy in the United States.

I. The Birth of Federal Indian Law and the Establi shment of Tribal Immunity

This Section will confront the history of the United States government's interaction with Native Nations. It will emphasize the sovereign status of Native peoples and how that sovereignty was slowly weakened by the federal government. Finally, it will review the history of tribal sovereign immunity and begin to compare it to other forms of sovereign immunity recognized by the federal government in order to establish it as unique.

A. Tribal Immunity: A History

1. Establishing a Nation Amid the "Indian Threat"

Tribal sovereign immunity was not accidental, but rather was an evolution of common law over years of interactions with the five "civilized" Native Nations23 that the United States recognized as sovereign and independent.24 The

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recognition of the sovereignty of Native Nations was a...

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