Bucher v. Dakota Fin. Corp. (In re Whitaker)

Decision Date19 July 2012
Docket Number12–6007.,12–6005,12–6006,BAP Nos. 12–6004
PartiesIn re Linda Rose WHITAKER, Debtor. Paul W. Bucher, Trustee, Plaintiff–Appellant v. Dakota Finance Corporation, Defendant–Appellee. In re Cecil Ray Barth, formerly doing business as Ray Barth Construction; Deanna Joan Barth, Debtors. Michael Scott Dietz, Trustee, Plaintiff–Appellant v. Deanna Joan Barth, Defendant The Lower Sioux Indian Community, in the State of Minnesota, Defendant–Appellee. In re Morris Jerome Pendleton, Sr.; Constance Louise Pendleton, also known as Connie Pendleton, Debtors. Paul W. Bucher, Trustee, Plaintiff–Appellant v. The Lower Sioux Indian Community, in the State of Minnesota, Defendant–Appellee Morris Jerome Pendleton, Sr., Defendant. In re Linda Rose Whitaker, Debtor. Paul W. Bucher, Trustee, Plaintiff–Appellant v. Linda Rose Whitaker, Defendant The Lower Sioux Indian Community, in the State of Minnesota, Defendant–Appellee.
CourtBankruptcy Appellate Panels. U.S. Bankruptcy Appellate Panel, Eighth Circuit

OPINION TEXT STARTS HERE

Paul W. Bucher, Michael Scott Dietz, John C. Beatty, Scott James Hoss, Christopher David Nelson, Rochester, MN, for appellant.

Tyler D. Candee, Minneapolis, MN, Mary Magnuson, R. Reid LeBeau, St. Paul, MN, for appellee.

Before FEDERMAN, VENTERS, and SALADINO, Bankruptcy Judges.

FEDERMAN, Bankruptcy Judge.

These four adversary proceedings involve suits by Chapter 7 bankruptcy trustees against defendants The Lower Sioux Indian Community (the Tribe) and its “subsidiary,” Dakota Finance Corporation. In three of the adversaries, the trustees are pursuing the Tribe and the debtors for turnover of ongoing tribal revenue payments owed to the debtors under the Tribe's ordinances and the Indian Gaming Regulatory Act. In one of the adversaries, the trustee is seeking to avoid a lien assertedby Dakota Finance Corporation on the ongoing revenue payments owed to Debtor Linda Rose Whitaker as being unperfected. Absent the filing of a bankruptcy case, the creditors of these debtors would be prohibited by the Tribe's sovereign immunity from, for example, garnishing those revenues. The issue here is whether the filing of bankruptcy by Tribe members serves to make the debtors' ongoing revenues from the Tribe available to the respective trustees for the benefit of their creditors. The Bankruptcy Court 1 held that both the Tribe and Dakota Finance Corporation are protected by sovereign immunity and dismissed the adversaries as to those parties. The trustees appeal. For the reasons that follow, we affirm.

Standard of Review

We review findings of fact for clear error, and conclusions of law de novo.2 The trustees do not dispute that the Tribe is a federally recognized Indian tribe organized according to Section 16 of the Indian Reorganization Act.3 As a federally recognized Indian tribe, it enjoys sovereign immunity. The question here is whether Congress abrogated that immunity in the Bankruptcy Code, which is a legal conclusion we review de novo.4 The question of whether Dakota Finance Corporation is the type of subsidiary which shares the Tribe's immunity is a question of fact which we review for clear error.

The Tribe's Sovereign Immunity

Indian tribes have long been recognized as possessing common law immunity from suit traditionally enjoyed by sovereign powers. 5 Unlike the immunity of states, which derives from the Eleventh Amendment,6 the immunity of tribes is a matter of common law,7 which has been recognized as integral to the sovereignty and self-governance of tribes.8 Indian tribes enjoy immunity from suits on contracts, whether those contracts involve governmental or commercial activities, and whether they were made on or off a reservation or settlement.9 “This aspect of tribalsovereignty, like all others, is subject to the superior and plenary control of Congress. But without congressional authorization, the Indian Nations are exempt from suit.” 10 Abrogation by Congress of sovereign immunity “cannot be implied,” but must be “unequivocally expressed” 11 in “explicit legislation.” 12

In In re National Cattle Congress,13 the Honorable Paul J. Kilburg described the law as to abrogation as follows, with which we agree:

Courts have found abrogation of tribal sovereign immunity in cases where Congress has included “Indian tribes” in definitions of parties who may be sued under specific statutes. See Blue Legs v. United States Bureau of Indian Affairs, 867 F.2d 1094, 1097 (8th Cir.1989) (finding congressional intent to abrogate Tribe's sovereign immunity with respect to violations of the Resource Conservation and Recovery Act, [which expressly included “an Indian tribe or authorized tribal organization” in the definition of “municipalities” covered by the Act] ); Osage Tribal Council v. United States Dep't of Labor, 187 F.3d 1174, 1182 (10th Cir.1999) (same re Safe Drinking Water Act [which also included “Indian Tribes” in the definition of “municipalities” covered by the Act] ). “Where the language of a jurisdictional grant is unambiguous as to its application to Indian tribes, no more is needed to satisfy the Santa Clara requirement than that Congress unequivocally state its intent.” Osage Tribal Council, 187 F.3d at 1182.

Where the language of a federal statute does not include “Indian tribes” in definitions of parties subject to suit or does not specifically assert jurisdiction over “Indian tribes”, courts find the statute insufficient to express an unequivocal congressional abrogation of tribal sovereign immunity. See Bassett v. Mashantucket Pequot Tribe, 204 F.3d 343, 357–58 (2d Cir.2000) (holding Indian tribe immune from suit under the Copyright Act); Florida Paraplegic [ Ass'n. Inc. v. Miccosukee Tribe of Indians of Florida, 166 F.3d 1126, 1131 (11th Cir.1999)] (stating that because Congress made no specific reference to Tribes anywhere in the ADA, tribal immunity is not abrogated; suit under ADA dismissed). A Congressional abrogation of tribal immunity cannot be implied. Santa Clara Pueblo, 436 U.S. at 58, 98 S.Ct. 1670.14

In bankruptcy cases, Congress's abrogation of sovereign immunity is found in § 106(a) of the Bankruptcy Code. Thus, the issue here is whether § 106(a) evinces Congress's unequivocal intent to abrogate the sovereign immunity of Indian tribes by explicit legislation. Section 106(a) states in relevant part as follows:

§ 106. Waiver of sovereign immunity

(a) Notwithstanding an assertion of sovereign immunity, sovereign immunity is abrogated as to a governmental unit to the extent set forth in this section with respect to ...

(1) [Several enumerated sections of the Bankruptcy Code, including § 542 relating to turnover of estate assets, and § 544 relating to avoidance of liens.]

(2) The court may hear and determine any issue arising with respect to the application of such sections to governmental units.15

As seen above, courts have found abrogation where Congress has included “Indian tribes” in the definition of the parties that may be sued under a statute. Here, the statute does not mention “Indian tribes” specifically, but instead abrogates immunity as to “governmental units,” which are defined in § 101(27) as follows:

(27) “governmental unit” means United States; State; Commonwealth; District; Territory; municipality; foreign state; department, agency, or instrumentality of the United States (but not a United States trustee while serving as a 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.16

The issue here, simply put, is whether, by enacting § 106(a) of the Bankruptcy Code, Congress unequivocally expressed its intent to abrogate the sovereign immunity of Indian tribes, in explicit legislation, by providing for such abrogation as to “other foreign or domestic governments.”

A leading case holding that § 106 did abrogate sovereign immunity as to Indian tribes is Krystal Energy Company v. Navajo Nation.17 There, the Ninth Circuit reasoned as follows:

Indian tribes are certainly governments, whether considered foreign or domestic (and, logically, there is no other form of government outside the foreign/domestic dichotomy, unless one entertains the possibility of extra-terrestrial states).

The Supreme Court has recognized that Indian tribes are ‘domestic dependent nations' that exercise inherent sovereign authority over their members and territories.” Potawatomi, 498 U.S. at 509, 111 S.Ct. 905 (citing Cherokee Nation v. Georgia, 5 Pet. 1, 17, 8 L.Ed. 25 (1831)); see also, Blatchford v. Native Village of Noatak, 501 U.S. 775, 782, 111 S.Ct. 2578, 115 L.Ed.2d 686 (comparing Indian tribes to states and foreign sovereigns, and concluding that both states and Indian tribes are “domestic” sovereigns). So the category “Indian tribes” is simply a specific member of the group of domestic governments, the immunity of which Congress intended to abrogate.18

The trustees cite to two lower courts outside of the Ninth Circuit that have agreed with this analysis.19 The logic of Krystal, as followed by those cases, is that: (1) the Supreme Court has referred to Indian tribes as “domestic dependent nations”; (2) Congress enacted §§ 106 and 101(27) of the Bankruptcy Code with that reference in mind; (3) Congress abrogated sovereign immunity as to states, foreign states, and other foreign or domestic governments; and, therefore, (4) Congress must have intended to include Indian tribes as “other foreign or domestic governments.”

Granted, Indian tribes can and do provide certain governmental functions for their members. But the several steps needed to justify the holding in these cases is far from an unequivocal expression of Congressional intent to abrogate the tribes' immunity, stated in explicit legislation.20 While resort to legislative history should not be needed to conclude that a statute explicitly abrogates immunity, the cases relied on by the trustees do not...

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    ...and 101(27) of the Bankruptcy Code expressly and unequivocally waive the sovereign immunity of an Indian tribe) with In re Whittaker, 474 B.R. 687 (8th Cir. BAP 2003) (finding that Congress did not unequivocally express its intent to abrogate tribal sovereign immunity in actions under the B......
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    ...courts, bankruptcy appellate panels, and bankruptcy courts, using similar reasoning, have agreed. See, e.g. , In re Whitaker , 474 B.R. 687, 695 (B.A.P. 8th Cir. 2012) ; In re Money Ctrs. of Am., Inc. , No. 17-318-RGA, 2018 WL 1535464, at *3 (D. Del. Mar. 29, 2018) ; In re Greektown Holding......
  • In re Greektown Holdings, LLC
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    ...at least for purposes of a § 106(a) waiver of sovereign immunity. In re Greektown Holdings, LLC , 532 B.R. 680 ; accord In re Whitaker , 474 B.R. 687 (8th Cir. BAP 2012).7 Plaintiff cited to Sault Ste. Marie Tribe of Chippewa Indians v. Hamilton , No. 2:09–CV–95, 2010 WL 299483 (W.D. Mich. ......
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2 books & journal articles
  • Sovereign Immunity Tests Bankruptcy's Least Contested Axioms
    • United States
    • Emory University School of Law Emory Bankruptcy Developments Journal No. 39-1, March 2023
    • Invalid date
    ...re Greektown Holdings, LLC), 917 F.3d 451, 460 (6th Cir. 2019) (collecting examples).162. Bucher v. Dakota Fin. Corp. (In re Whitaker), 474 B.R. 687, 691 (B.A.P. 8th Cir. 2012).163. Meyers v. Oneida Tribe of Indians, 836 F.3d 818, 826 (7th Cir. 2016) (alteration in original).164. See Basset......
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    ...Id.11. Id.12. Krystal Energy Co., 357 F.3d at 1057.13. Compare id., with In re Greektown Holdings, 917 F.3d at 462.14. In re Whitaker, 474 B.R. 687, 689 (B.A.P. 8th Cir. 2012).15. Id.16. Id. 17. Id. at 694-97.18. Subranni v. Navajo Times Publ'g Co., 568 B.R. 616, 624 (Bankr. D.N.J. 2016).19......

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