Buchwald Capital Advisors, LLC v. Papas (In re Greektown Holdings, LLC)

• Decision Date: 09 June 2015
• Docket Number: Bankruptcy No. 08–53104.,No. 14–14103.,Adversary No. 10–05712.,14–14103.
• Citation: 532 B.R. 680
• Parties: In re GREEKTOWN HOLDINGS, LLC, Debtor, Buchwald Capital Advisors, LLC, solely in its capacity as Litigation Trustee for the Greektown Litigation Trust, Plaintiff, v. Dimitrios (“JIM”) Papas, et al., Defendants. Sault Ste. Marie Tribe of Chippewa Indians; Kewadin Casinos Gaming Authority, Appellants, v. Buchwald Capital Advisors, LLC, Litigation Trustee for the Greektown Litigation Trust, Appellees.
• Court: U.S. District Court — Eastern District of Michigan

532 B.R. 680

In re GREEKTOWN HOLDINGS, LLC, Debtor

Buchwald Capital Advisors, LLC, solely in its capacity as Litigation Trustee for the Greektown Litigation Trust, Plaintiff

v.Dimitrios (“JIM”) Papas, et al., Defendants.

Sault Ste. Marie Tribe of Chippewa Indians;

Kewadin Casinos Gaming Authority, Appellants

v.Buchwald Capital Advisors, LLC, Litigation Trustee for the Greektown Litigation Trust, Appellees.

Bankruptcy No. 08–53104.

Adversary No. 10–05712.

No. 14–14103.

United States District Court, E.D. Michigan, Southern Division.

Signed June 9, 2015.

Joel D. Applebaum, Clark Hill, Detroit, Linda M. Watson, Clark Hill, Birmingham, MI, Mark N. Parry, Moses and Singer, New York, NY, for Plaintiff/Appellees.

David A. Lerner, Plunkett & Cooney (Bloomfield Hills), Bloomfield Hills, MI, Grant Cowan, Frost Brown Todd LLC, Cincinnati, OH, for Appellants.

OPINION AND ORDER REVERSING THE BANKRUPTCY COURT'S AUGUST 13, 2014 ORDER DENYING THE TRIBE'S RENEWED MOTION TO DISMISS ON THE GROUNDS OF SOVEREIGN IMMUNITY AND REMANDING FOR FURTHER PROCEEDINGS

PAUL D. BORMAN, District Judge.

This matter is before the Court on Appellants Sault St. Marie Tribe of Chippewa Indians and Kewadin Casinos Gaming Authority's (Appellants or collectively “the Tribe”) appeal of United States Bankruptcy Judge Walter J. Shapero's August 13, 2014 Opinion and Order denying Appellants' motion to dismiss based on sovereign immunity. (ECF No. 1, Notice of Appeal; ECF No. 8, Brief of Appellant.) Appellee Buchwald Capital Advisors LLC, Litigation Trustee for the Greektown Litigation Trust (Appellee or “the Litigation Trustee”) filed a Response (ECF No. 10) and the Tribe filed a Reply (ECF No. 12). The Court held a hearing on April 1, 2015.

For the reasons that follow, the Court REVERSES the decision of the Bankruptcy Court, finds that Congress did not clearly and unequivocally express an intent to abrogate the sovereign immunity of Indian tribes in section 106(a) of the Bankruptcy Code, and REMANDS the matter to the Bankruptcy Court for further proceedings on the issue of whether the Tribe waived its sovereign immunity from suit in the underlying bankruptcy proceedings.

INTRODUCTION

In this bankruptcy appeal, the Tribe challenges the Bankruptcy Court's ruling in the underlying Adversary Proceeding that Congress intended to abrogate tribal sovereign immunity from suit in section 106(a) of the Bankruptcy Code when it abrogated the sovereign immunity of “governmental unit[s],” and further defined a “governmental unit” in section 101(27) of the Bankruptcy Code to include “other ... domestic government[s].” The Tribe appeals the Bankruptcy Court's Order denying its motion to dismiss based on sovereign immunity, arguing that the failure of the Legislature to clearly and unequivocally manifest an intent to abrogate tribal sovereign immunity when describing the entities whose sovereign immunity was abrogated under the Bankruptcy Code requires dismissal of the claims against it in the Bankruptcy Court Adversary Proceeding. The Litigation Trustee responds that the Legislature need not invoke the magic words “Indian tribes” when intending to remove the cloak of sovereign immunity that otherwise shields Indian tribes from suits against them and argues that the Legislature clearly and equivocally intended just that when it included the catchall phrase “or other ... domestic government” in section 101(27) of the Bankruptcy Code when defining the term “governmental unit.”

I. BACKGROUND

On May 28, 2008, Greektown Holdings, LLC and certain affiliates (collectively the “Debtors”), commenced proceedings under Chapter 11 of the United States Bankruptcy Code, In re: Greektown Holdings, LLC, et al., Debtors (E.D.Mich.Bankr.No. 08–53104). On or about May 28, 2010, this Adversary Proceeding was commenced, The Official Committee of Unsecured Creditors on Behalf of the Estate of Greektown Holdings, LLC¹ v. Dimitrios

(“Jim”) Papas, Viola Papas, Ted Gatzaros, Maria Gatzaros, Barden Development, Inc., Lac Vieux Desert Band of Lake Superior Chippewa Indians, Sault Ste. Marie Tribe of Chippewa Indians, Kewadin Casinos Gaming Authority, and Barden Nevada Gaming, LLC

(E.D.Mich.Bankr.Adv.Pro. No. 10–05712). The Complaint in the Adversary Proceeding alleges that $177 million was fraudulently transferred by the debtor, Greektown Holdings, LLC (“Holdings”), to the Defendants for no or inadequate consideration. (Adv. Pro. ECF No. 1, Complaint.)² The Complaint alleges that the fraudulent transfers from Holdings may be avoided and recovered under sections 544 and 550 of the Bankruptcy Code, 11 U.S.C. § 101 et seq., and under the Michigan Uniform Fraudulent Transfers Act (“MUFTA”) (Mich. Comp. Laws § 566.31 et seq. ).

Shortly after the Adversary Proceeding was commenced, on June 25, 2010, the Tribe filed a motion to dismiss the MUFTA claims against it on the grounds of sovereign immunity. (Adv. Pro. ECF No. 8.) The Litigation Trustee opposed the motion (Adv. Pro. ECF No. 56) and the Tribe replied (Adv. Pro. ECF No. 69). Subsequently the parties stipulated to bifurcate the hearing on the motion to dismiss to first decide the purely legal question of whether Congress, in Section 106(a) of the Bankruptcy Code, abrogated the Tribe's sovereign immunity and thereafter, if necessary, to decide whether the Tribe waived its sovereign immunity by participating in the Bankruptcy proceedings. The Bankruptcy Court heard oral argument on December 29, 2010, and took the matter under advisement.

While the issue of sovereign immunity was still under advisement in the Bankruptcy Court, in 2012 the Tribe and the Litigation Trustee reached a settlement, filed a motion to have the settlement approved and requested that the Bankruptcy Court hold off ruling on the Tribe's motion to dismiss pending a decision on the Settlement Motion. This Court approved the Settlement Agreement, which contained a claims bar order that was an important aspect of the Settlement Agreement. (In re Greektown Holdings, LLC, Case No. 12–12340, ECF No. 10, Opinion and Order Granting Corrected Motion for Order Approving Settlement Agreement.) The non-settling Defendants in the Adversary Proceeding, Maria Gatzaros, Ted Gatzaros, Dimitrios Papas and Viola Papas (“the Papas and Gatzaros Defendants”), appealed the Court's Order approving the Settlement Agreement, objecting to the inclusion of the claims bar order. (In re Greektown, No. 12–12340, ECF No. 33, Notice of Appeal.) The Sixth Circuit reversed and remanded with instructions to this Court to reconsider the propriety and scope of the claims bar order. With the claims bar order under fire, the parties stipulated in this Court to withdraw the motion for an order approving the settlement and the case was dismissed. (In re Greektown, No. 12–12340, ECF Nos. 48, 49, Stipulation and Dismissal.) The parties thereafter agreed to voluntary mediation before Bankruptcy Chief Judge Phillip Shefferly in an effort to resolve all of the claims against the all of the remaining Defendants in the MUFTA Adversary Proceeding. Despite their efforts under Judge Shefferly's guidance, the parties were unable to achieve a settlement of the Adversary Proceeding. (Adv. Pro. ECF No. 449, Mediator's Certificate, 6/2/2014). To date, a global settlement has not been reached.

On June 9, 2015, with settlement negotiations at a standstill, the Tribe renewed its 2010 motion to dismiss on the grounds of sovereign immunity. (Adv. Pro. ECF No. 453, Renewed and Supplemented Motion to Dismiss Adversary Proceeding Re: Sovereign Immunity.) On June 27, 2015, the Litigation Trustee responded and opposed the motion. (Adv. Pro. ECF No. 463.)³ The Tribe replied (Adv. Pro. ECF No. 469) and the Bankruptcy Court heard oral argument on July 21, 2014.

On August 13, 2014, the Bankruptcy Court issued its Opinion and Order Denying the Tribe's Renewed and Supplemented Motion, concluding that “Congress sufficiently, clearly, and unequivocally intended to abrogate [the Tribe's] sovereign immunity in [section 106 of the Bankruptcy Code ].” (August 12, 2014 Opinion and Order, Adv. Pro. ECF No. 474 at 36.) The Tribe now appeals that ruling to this Court. The question to be answered is purely one of statutory construction: Does Section 106 of the Bankruptcy Code, by reference to section 101(27)'s definition of “governmental unit” to include “other ... domestic government[s],” clearly and unequivocally express Congress's intent to abrogate the sovereign immunity of Indian tribes? As discussed infra, the Court concludes that it cannot say “with perfect confidence” that Congress intended, by using the generic phrase “other domestic governments” in § 101(27), to clearly, unequivocally, unmistakably and without ambiguity abrogate tribal sovereign immunity in § 106(a) of the Bankruptcy Code.

Accordingly, the Court REVERSES the August 13, 2014 Order of the Bankruptcy Court, finds that Congress did not clearly and unequivocally express an intent to abrogate the sovereign immunity of Indian tribes in section 106(a) of the Bankruptcy Code, and REMANDS this matter to the Bankruptcy Court for further proceedings to address the limited factual issue of whether the Tribe, while enjoying sovereign immunity from suit under the relevant provisions of the Bankruptcy Code, nonetheless waived that immunity in this proceeding.⁴

II. JURISDICTION AND STANDARD OF REVIEW

The parties do not dispute this Court's jurisdiction to entertain the Tribe's appeal. Under 28 U.S.C. § 158(a)(1), this Court has jurisdiction to hear appeals “from final judgments, orders, and decrees” issued by the Bankruptcy Court. The denial of a motion to dismiss on the grounds of sovereign immunity is an immediately appealable “collateral order.” Sault Ste. Marie Tribe of Chippewa Indians v. State of Michigan, 5 F.3d 147, 149–50 (6th Cir.1993). A ruling on a motion to dismiss a bankruptcy court adversary proceeding is reviewed de novo. In re Grenier, 430 B.R. 446, 449 (E.D.Mich.2010) (citing Mezibov v. Allen, 411 F.3d...