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

• Decision Date: 12 August 2014
• Docket Number: Bankruptcy No. 08–53104.,Adversary No. 10–05712.
• Citation: 516 B.R. 462
• Court: U.S. Bankruptcy Court — Eastern District of Michigan
• Parties: In re GREEKTOWN HOLDINGS, LLC, et al., Debtors. Buchwald Capital Advisors, LLC, solely in its capacity as Litigation Trustee to the Greektown Litigation Trust, Plaintiff, v. Dimitrios (“JIM”) Papas, Viola Papas, Ted Gatzaros, Maria Gatzaros, Barden Development, Inc., Lac Vieux Desert Band of Lake Superior Indians, Sault Ste. Marie Tribe of Chippewa Indians, Kewadin Casinos Gaming Authority, and Barden Nevada Gaming, LLC, Defendants.

516 B.R. 462

In re GREEKTOWN HOLDINGS, LLC, et al., Debtors.Buchwald Capital Advisors, LLC, solely in its capacity as Litigation Trustee to the Greektown Litigation Trust, Plaintiff

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

Bankruptcy No. 08–53104.

Adversary No. 10–05712.

United States Bankruptcy Court, E.D. Michigan, Southern Division–Detroit.

Signed Aug. 12, 2014.

Shannon L. Deeby, Clark Hill PLC, Joel D. Applebaum, Linda M. Watson, Birmingham, MI, Mark Parry, New York, NY, for Plaintiff.

Michael O. Fawaz, Lisa Sommers Gretchko, Nancy K. Stone, Royal Oak, MI, Patrick M. McCarthy, Ann Arbor, MI, for Defendants.

OPINION DENYING RENEWED AND SUPPLEMENTED MOTION TO DISMISS OF DEFENDANTS SAULT STE. MARIE TRIBE OF CHIPPEWA INDIANS AND KEWADIN CASINOS GAMING AUTHORITY (DKT. 453)

WALTER SHAPERO, Bankruptcy Judge.

Introduction

Plaintiff, as Litigation Trustee, seeks to avoid transfers made by a debtor corporation to several parties, arguing that the transfers were fraudulent transfers under applicable Michigan law. Two Defendants, an Indian tribe and its political subdivision, moved to dismiss on the basis of sovereign immunity. The motion is denied.

Background

The Litigation Trustee (“Plaintiff”) seeks to avoid aspects of a restructuring and financing transaction whereby Greektown Holdings, LLC, a Debtor, directly or indirectly transferred money to multiple parties, including the Sault Ste. Marie Tribe of Chippewa Indians and its political subdivision Kewadin Casinos Gaming Authority (together, “the Tribe Defendants”).¹ Plaintiff brought this fraudulent transfer action under 11 U.S.C. §§ 544 and 550, incorporating Mich. Comp. Laws §§ 566.34 and 566.35. Shortly thereafter, the Tribe Defendants moved to dismiss the adversary proceeding as to themselves, asserting Indian tribal sovereign immunity. Dkt. 8. Upon stipulation by Plaintiff and the Tribe Defendants, the Court entered an order bifurcating these two sovereign immunity issues: (1) Whether Congress abrogated the Tribe Defendants' sovereign immunity by enacting 11 U.S.C. § 106 ; and (2) whether the Tribe Defendants consensually waived their sovereign immunity. Dkt. 85. This opinion deals solely with the former issue, with the latter issue remaining in abeyance. The Court entertained briefs, held a hearing, and took the matter under advisement.

Plaintiff and the Tribe Defendants then reached a settlement. The District Court withdrew its reference of this matter and entered a settlement order. Other Defendants, who had previously objected to aspects of the District Court's settlement order, appealed it. The Sixth Circuit Court of Appeals agreed with them, to an extent, and remanded to the District Court. A fuller discussion of the procedural history (which is not of particular relevance to this opinion) can be found in that remanding opinion: Papas, et al. v. Buchwald Capital Advisors, LLC, et al., 728 F.3d 567 (6th Cir.2013). Thereafter, Plaintiff and the Tribe Defendants unsuccessfully mediated this matter as part of global settlement discussions. It appearing that those settlement discussions are no longer being presently pursued, the Tribe Defendants renewed and supplemented their motion to dismiss. Dkt. 453. The Court again entertained briefs, held a hearing, and took the matter under advisement.

Jurisdiction

This is a core proceeding under 28 U.S.C. § 157(b)(2)(H). The Court has jurisdiction under 28 U.S.C. §§ 1334(b) and 157, and E.D. Mich. L.B.R. 83.50(a).

Motion to Dismiss Standard

Fed.R.Bankr.P. 7012 incorporates Fed.R.Civ.P. 12(b)(1) and provides that a party may by motion assert the defense of lack of subject-matter jurisdiction. The Court must assume that the allegations in Plaintiff's complaint are true and Plaintiff bears the burden of proving jurisdiction in order to survive a motion to dismiss. 3D Sys., Inc. v. Envisiontec, Inc., 575 F.Supp.2d 799, 802–03 (E.D.Mich.2008).

Discussion

The Legal Issue and the Standard for Abrogation of Tribal Sovereign Immunity

11 U.S.C. § 106(a) provides: “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 the following: (1) Sections ... 544 ... [and] 550.” In turn, “governmental unit” is defined in § 101(27).

The term “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.

These statutes do not specifically mention “Indian tribes,” nor does any other provision in the Bankruptcy Code. In re Nat'l Cattle Cong., 247 B.R. 259, 267 (Bankr.N.D.Iowa 2000). The specific legal issue is whether the phrase “or other foreign or domestic government” includes Indian tribes and thus abrogates their sovereign immunity for purposes of the Bankruptcy Code.

The Supreme Court has referred to and described Indian tribes as follows:

Indian tribes are “ ‘domestic dependent nations' ” that exercise “inherent sovereign authority.” Oklahoma Tax Comm'n v. Citizen Band Potawatomi Tribe of Okla., 498 U.S. 505, 509, 111 S.Ct. 905, 112 L.Ed.2d 1112 (1991) ( Potawatomi ) (quoting Cherokee Nation v. Georgia, 5 Pet. 1, 17, 8 L.Ed. 25 (1831) ). As dependents, the tribes are subject to plenary control by Congress. See United States v. Lara, 541 U.S. 193, 200, 124 S.Ct. 1628, 158 L.Ed.2d 420 (2004) (“[T]he Constitution grants Congress” powers “we have consistently described as ‘plenary and exclusive’ ” to “legislate in respect to Indian tribes”). And yet they remain “separate sovereigns pre-existing the Constitution.” Santa Clara Pueblo v. Martinez, 436 U.S. 49, 56, 98 S.Ct. 1670, 56 L.Ed.2d 106 (1978). Thus, unless and “until Congress acts, the tribes retain” their historic sovereign authority. United States v. Wheeler, 435 U.S. 313, 323, 98 S.Ct. 1079, 55 L.Ed.2d 303 (1978).

Michigan v. Bay Mills Indian Cmty., ––– U.S. ––––, 134 S.Ct. 2024, 2030, 188 L.Ed.2d 1071 (2014). Congressional actions abrogating tribal sovereign immunity must be clear, unequivocal, and not to be lightly assumed by a court. Id. at 2031–32. Even if an Indian tribe is subject to a law of general applicability, it is not necessarily subject to suit thereunder unless sovereign immunity is abrogated. Fla. Paraplegic, Ass'n, Inc. v. Miccosukee Tribe of Indians of Fla., 166 F.3d 1126, 1130 (11th Cir.1999) (discussing Kiowa Tribe of Okla. v. Mfg. Technologies, Inc., 523 U.S. 751, 755, 118 S.Ct. 1700, 140 L.Ed.2d 981 (1998) ). “Evidence of congressional intent must be both unequivocal and textual.” Dellmuth v. Muth, 491 U.S. 223, 230, 109 S.Ct. 2397, 105 L.Ed.2d 181 (1989). It must be said with “perfect confidence” that Congress intended to abrogate sovereign immunity and “imperfect confidence will not suffice.” Id. at 231, 109 S.Ct. 2397. Abrogation of tribal sovereign immunity may not be implied. Santa Clara Pueblo v. Martinez, 436 U.S. 49, 58, 98 S.Ct. 1670, 56 L.Ed.2d 106 (1978). As one court artfully stated, “If there were no thumbs on the interpretive scale, the question of intent reasonably could be decided either way and that exemplifies ambiguity. Because there is ambiguity, the thumb that presses down in favor of tribal sovereign immunity tips the balance.” Freemanville Water Sys., Inc. v. Poarch Band of Creek Indians, 563 F.3d 1205, 1210 (11th Cir.2009) (citations omitted).

In essence, and as will be further discussed, the Court takes the Tribe Defendants' argument to be that, in light of the foregoing pronouncements, (a) for a statute to abrogate tribal sovereign immunity, it must specifically use the words “Indian tribes” (or perhaps some synonymous verbiage); and (b) if the statute does not use such verbiage, and irrespective of any other language used, the purported abrogation fails to meet the foregoing pronouncements and is not effective as to Indian tribes.

A. Parsing the Language of § 101(27), Are Indian Tribes “Other Foreign or Domestic Governments”?

One aspect of this definition can be easily eliminated from consideration: “foreign governments.” The Supreme Court has found or stated that Indian tribes are unique entities, but has also indicated that they are not “foreign governments” per se. “Although we early rejected the notion that Indian tribes are ‘foreign states' for jurisdictional purposes under Art. III, Cherokee Nation v. Georgia, 5 Pet. 1, 8 L.Ed. 25 (1831), we have also recognized that the tribes remain quasi-sovereign nations which, by government structure, culture, and source of sovereignty are in many ways foreign to the constitutional institutions of the federal and state governments.” Santa Clara Pueblo, 436 U.S. at 71, 98 S.Ct. 1670 (citation omitted); see also Bay Mills Indian Cmty., 134 S.Ct. at 2040–41 (2014) (Sotomayor, J., concurring) (“Indian Tribes have never historically been classified as ‘foreign’ governments in federal courts even when they asked to be.... Two centuries of jurisprudence therefore weigh against treating Tribes like foreign visitors in American courts.”). The Commerce Clause of the U.S. Constitution distinguishes Indian tribes from “foreign nations,” providing: “The Congress shall have Power ... To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes[.]” Art. 1, § 8, cl. 3. This Court is thus satisfied that Indian tribes are not “foreign governments” within the definition of § 101(27).

B. If Indian Tribes are not “Foreign Governments,” are they “Governments” in the First Place?

The Tribe Defendants stress that the Supreme Court has gone to...