Supreme Court Grants Certiorari to Determine Whether the Bankruptcy Code Waives Sovereign Immunity of Native American Tribes

By Heidi McNeil Staudenmaier and Jacklyn M. Branby

On January 13, 2023, the Supreme Court granted the Lac du Flambeau Band of Lake Superior Chippewa Indians’ Petition for a Writ of Certiorari to resolve the split of circuits on whether Section 106 of the Bankruptcy Code evinces Congress’ unequivocal intent to abrogate Native American Tribes’ sovereign immunity.¹

The First Circuit Court of Appeals deepened an existing circuit split by holding that the Bankruptcy Code waived the sovereign immunity of Native American Tribes.² The May 2022 decision by Judge Sandra L. Lynch sided with the Ninth Circuit Court of Appeals, which similarly held in 2004 that Section 106(a) of the Bankruptcy Code abrogated sovereign immunity for Native American Tribes.³ The decision is in opposition with the Sixth Circuit Court of Appeals, which found no waiver in its 2019 decision.⁴

The issue before the Supreme Court is of “utmost importance” according to the Lac du Flambeau Band of Lake Superior Chippewa Indians (“Lac du Flambeau”). Lac du Flambeau states in its Petition for a Writ of Certiorari that the First Circuit Court of Appeals decision is an “existential threat to self-governance” and “subjects tribes to expensive lawsuits and potentially debilitating liability.”⁵ “Worse yet,” Lac du Flambeau added, “it erects barriers for tribal economic enterprises to generate essential revenues for their governments only in certain parts of the country, thereby creating geographic-dependent and non-uniform results in bankruptcy proceedings.”⁶

In support of the Petition for a Writ of Certiorari, the Native American Financial Services Association filed an Amicus Brief, noting the following issue with the First Circuit decision: 

[P]ermitting courts to abrogate tribal sovereign immunity by implication, rather than by express congressional action intended to achieve that result, has the potential to diminish tribal sovereignty not just in the context of the Bankruptcy Code, but in countless other areas where Congress legislates broadly and generally without considering the special status of Indian tribes. ⁷

Similarly, the Professors of Federal Indian Law stated in their Amicus Brief that “[t]raditional [sovereign] immunity is important to Native Nations' self-determination and economic development.”⁸ According to the Professors of Federal Indian Law, the First Circuit improperly applied the “unequivocal expression requirement”⁹ and that a proper application of this requirement is of national importance because “it concerns legal principles that preserve Tribal sovereignty and shape Tribal economic development.”¹⁰

In response to Lac du Flambeau’s claims of importance, Respondent Brian Coughlin (“Coughlin”) states in his Opposition Brief that “[t]he Court should give no weight to the Band’s exaggerated claim (at 28) that abrogation of immunity in the Bankruptcy Code poses an ‘existential threat’ to tribal ‘self-governance.’”¹¹ According to Coughlin, the Ninth Circuit’s decision Krystal Energy has been the law of that circuit for over 18 years and “[t]hose tribes have not ceased to be self-governing.”¹² Coughlin also claims Lac du Flambeau’s assertions that bankruptcy jurisdiction will interfere with tribes’ commercial enterprises and economic development “are similarly overblown.”¹³

Despite Coughlin’s efforts, the Supreme Court granted certiorari. The issues laid out by Lac du Flambeau, Native American Financial Services Association, and Professors of Federal Indian Law seemed to be of “utmost importance” to the Supreme Court. Oral argument in this case will likely take place in April, with decisions before the end of the term in late June.¹⁴