In re Greektown Holdings, LLC

• Decision Date: 29 September 2016
• Docket Number: Adv. Pro. No. 10-05712,Case No. 08-53104 Jointly Administered
• Citation: 559 B.R. 842
• Parties: In re: Greektown Holdings, LLC, et al.,Debtors.
• Court: U.S. Bankruptcy Court — Eastern District of Michigan

559 B.R. 842

In re: Greektown Holdings, LLC, et al.,¹ Debtors.

Case No. 08-53104 Jointly Administered

Adv. Pro. No. 10-05712

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

Signed September 29, 2016

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

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

OPINION ON REMANDED SOVEREIGN IMMUNITY WAIVER ISSUE (DKT. 649)

Walter Shapero

, United States Bankruptcy Judge

INTRODUCTION AND BACKGROUND

The Litigation Trustee (“Plaintiff”) by this adversary proceeding essentially 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”).² Plaintiff brought this fraudulent transfer action under 11 U.S.C. §§ 544

and 550, incorporating Mich. Comp. Laws §§ 566.34 and 566.35. This Opinion follows the District Court's Opinion, In re Greektown Holdings, LLC , 532 B.R. 680 (E.D. Mich. 2015) reversing this Court's Opinion at 516 B.R. 462 (Bankr. E.D. Mich. 2014). This Court had concluded that 11 U.S.C. § 106(a) abrogated the Tribe Defendants' sovereign immunity, but the District Court (a) reversed on appeal finding that the statute does not thereby waive tribal sovereign immunity; and (b) remanded the case for further proceedings relative to whether or not the Tribe Defendants had waived sovereign immunity.

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 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

I. The Parties' Arguments

The Tribe Defendants base their argument on precedent stating that “[s]uits against Indian tribes are thus barred by sovereign immunity absent a clear waiver by the tribe or congressional abrogation.” Oklahoma Tax Comm'n v. Citizen Band Potawatomi Indian Tribe of Oklahoma , 498 U.S. 505, 509, 111 S.Ct. 905, 112 L.Ed.2d 1112 (1991)

. This Opinion deals with what constitutes a “clear waiver by the tribe”. The Tribe Defendants' initial argument is that the indicated clear waiver may only be accomplished by the required passage of duly adopted resolutions by the boards governing each of the Tribe Defendants.³ It is undisputed that no such resolutions were ever adopted. Further, it is also an undisputed fact that the Tribe Defendants never entered into any contract containing provisions purporting to waive sovereign immunity.

Plaintiff responds arguing that, notwithstanding the lack of enacted resolutions, the Tribe Defendants can and should be seen as having waived their sovereign immunity by virtue of their conduct in, or incident to, these bankruptcy and related proceedings, as well as the involved underlying business transactions. Specifically that alleged conduct involves the Tribe Defendants having pervasive involvement in the events leading up to and after the Debtors' bankruptcy filings, including the Tribe Defendants doing the following: (a) intermingling the functions of the various tribal and non-tribal parties in carrying out the Debtors' business; (b) utilizing the Debtors as their agents and causing the Debtors to make the alleged fraudulent transfers; (c) directing the Debtors to initiate their bankruptcy petitions; (d) dominating and controlling the Debtors, directing their postpetition litigation strategy, and sharing the same professionals; and (e) filing in the bankruptcy cases multiple proofs of claim, objections to plan confirmation, and an application for allowance of administrative expense claim. Based on these facts and events, Plaintiff argues that (1) the Tribe Defendants should be considered as legally standing in the shoes of the Debtors as their equivalents via theories of alter ego, piercing the corporate veil, and/or agency; and (2) by reason of such, the Tribe Defendants thusly should be seen as having voluntarily waived their sovereign immunity. The questions presented thus are: (a) is appropriate and specific governing board action the only way the Tribe Defendants can waive their sovereign immunity; and (b) if not, and if waiver can be accomplished by conduct, was there such a waiver in the circumstances of this case?

II. Can the Tribe Defendants' Sovereign Immunity Be Waived Only by the Required Tribal Resolutions?

The Tribe Defendants rely principally on Memphis Biofuels, LLC v. Chickasaw Nation Indus., Inc. , 585 F.3d 917 (6th Cir. 2009)

, in which MBF, a non-tribal entity, entered into a transaction and contractual relationship with CNI, a tribally incorporated entity. That Court summarized the salient facts as follows:

MBF recognized that, should a dispute arise, CNI might try to claim sovereign immunity. Thus, MBF insisted on a contractual provision expressly waiving any sovereign immunity and a “representation and warranty” that CNI's waiver was valid, enforceable, and effective.

Throughout the negotiations, the parties exchanged draft versions of the agreement. On October 5, 2006, CNI forwarded MBF a draft of the agreement that CNI's in-house lawyers had reviewed and electronically edited. The edits included five separate comments; two of the comments addressed the sovereign-immunity waiver provision and said that CNI board approval was necessary to waive tribal-sovereign immunity. Ultimately, however, both parties signed the agreement, and the board did not waive immunity.

Id. at 918–19

. After CNI repudiated the agreement and litigation arose, the Sixth Circuit opined that “a tribe may choose to expressly waive its tribal-sovereign immunity either in its charter or by agreement. Here, however, CNI did not make that choice. CNI's charter requires board approval to waive sovereign immunity.” Id. at 921 (citation omitted). It further opined:

In addition to the tribal charter, an agreement can validly waive tribal-sovereign immunity. Here, the parties agree that the board of directors did not pass a resolution waiving sovereign immunity. The parties did, however, sign a waiver provision whereby both parties waived all immunities. MBF believed that CNI obtained the required approval for this waiver provision—but regardless of what MBF may have thought, board approval was not obtained, and CNI's charter controls. In short, without board approval, CNI's sovereign immunity remains intact.

Id. at 922

. The Sixth Circuit thus, and notwithstanding the specific contractual waiver of immunity provision, also dismissed separate additional arguments that CNI waived sovereign immunity based on equitable doctrines when it signed the untrue representation that it waived sovereign immunity, reasoning and concluding that unauthorized acts of tribal officials are insufficient to waive sovereign immunity. Id.⁴

Memphis Biofuels

is most relevant and applicable here and the Court is not persuaded by Plaintiff's attempts to distinguish it. Plaintiff first argues that its holding should be seen as applying only to contractual waivers, and not waivers by conduct , as Plaintiff argues occurred here. Contracts, by their nature, require mutuality of agreement. Chires v. Cumulus Broad., LLC , 543 F.Supp.2d 712, 717 (E.D. Mich. 2008). On this point, one must first observe that if a specific contractual waiver cannot carry the day, one would be hard put to conclude as a matter of logic or law that conduct , which necessarily and by its very nature is or can be ambiguous, and in any event less directed, specific, or clear as a writing (and thus usually considered to be of somewhat lesser legal force and effect), might nevertheless carry the day. Every contract is in essence the culmination of some form of “conduct” (i.e. usually negotiation between and among its parties); the agreement being seen as the greater inclusive and embodiment of that process. If one conceives a specific agreement being, in essence, the form and result of conduct and/or an expression of conduct and intent put into definitive written terms, such agreement ought to be seen as in effect subsuming the possibility that something less than the written agreement, i.e. conduct that either led to it or, in this case, conduct that did not lead to an agreement, might nevertheless produce a result that even the existence of a written agreement itself does not legally provide for or permit. In this context, we have the Sixth Circuit's clear statement that in addition to and notwithstanding the existence of such an agreement, an enabling resolution is required. The agreement situation in Memphis Biofuels

cannot therefore be properly distinguished as mere “contract, rather than conduct.” In fact, in that case, what CNI did (signed an express, written contract including a representation and warranty that CNI's waiver was valid, enforceable, and effective) was in essence the clearest, and most explicit form of “conduct” imaginable. Yet the Sixth Circuit still found that to be insufficient to waive sovereign immunity, given the tribal charter's specific requirement that such waiver be by tribal board resolution. If what CNI did (or failed to do) in Memphis Biofuels was insufficient to waive its sovereign immunity, what Plaintiff alleges the Tribe Defendants did should also be seen as insufficient. Therefore, what Pla...