In re National Cattle Congress, Bankruptcy No. 97-03581-W.
| Decision Date | 22 March 2000 |
| Docket Number | Bankruptcy No. 97-03581-W. |
| Citation | 247 BR 259 |
| Parties | In re NATIONAL CATTLE CONGRESS, Debtor. |
| Court | U.S. Bankruptcy Court — Northern District of Iowa |
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John Titler, Cedar Rapids, IA, for debtor.
Steve Olson, Jack Blair, Minneapolis, MN, for Sac and Fox Tribe of the Mississippi in Iowa.
This matter came before the undersigned on March 8, 2000 pursuant to assignment. The matter at issue is the Court's jurisdiction over the Sac and Fox Tribe. Attorney John Titler represented Debtor National Cattle Congress, Inc. Attorneys Steven Olson and Jack Blair represented the Sac and Fox Tribe of the Mississippi in Iowa. After argument by counsel, the Court took the matter under advisement. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A), (B), (K), and (O).
Debtor's Chapter 11 Plan proposes to extinguish a real estate mortgage lien held by the Sac and Fox Tribe ("the Tribe"). In exchange, Debtor offers a restrictive covenant prohibiting gambling on the property. The Tribe argues its sovereign immunity prevents this Court from allowing Debtor to negate its legal rights in the mortgage lien through a Chapter 11 Plan.
This is Debtor's second Chapter 11 reorganization. In its first filing, Debtor's Plan paying all creditors in full was implemented through a "bail-out" by the Sac and Fox Tribe. Debtor and the Tribe entered into a Master Agreement through which the Tribe paid $9.1 million to Debtor in exchange for a note and mortgage creating a lien on all of Debtor's real estate, Debtor's agreement not to carry on gambling activities on its property, and other provisions concerning management of Debtor's property and businesses. The Court confirmed Debtor's plan in the first Chapter 11 case on January 17, 1996.
The Tribe was not a creditor in Debtor's first Chapter 11 case. It entered no appearance in the case and filed no claims. After confirmation of the plan, on March 6, 1996, the Tribe, represented by attorneys Robert Wilson and John Stitely, filed an "Application to Modify Chapter 11 Plan of Debtor and Modify the Order re: Confirmation of Plan." Debtor filed a Motion to Strike the Tribe's Application. On March 21, 1996, Attorneys Wilson and Stitely filed a motion to withdraw as counsel for the Tribe. On March 29, 1996, the Tribe, represented by substitute counsel, withdrew the Application to Modify.
Debtor filed the pending Chapter 11 case on November 20, 1997. Its Plan of Reorganization seeks to restructure the rights and obligations between Debtor and the Tribe under the Master Agreement. Essentially, the Plan proposes to extinguish the mortgage lien and other rights of the Tribe under the Master Agreement in exchange for a restrictive covenant on the real estate prohibiting use of the premises for gambling or gaming of any type.
On March 20, 1998, the Tribe filed a Proof of Claim in this case in the amount of $9,199,892, of which $9.1 million is claimed secured by Debtor's real estate. Attached to the Proof of Claim is a Waiver Disclaimer. The disclaimer states that the Tribe filed the proof of claim to preserve all rights with regard to its mortgage lien. Further, it states:
By filing a proof of claim, the Tribe does not intend to participate in or submit to any plan of reorganization or in any way compromise its secured interest. Nor does the Tribe intend, by this filing, to submit to the jurisdiction of this or any other forum with regard to any adversary proceeding. The Tribe hereby expressly retains its sovereign immunity from adversary proceedings.
Claim No. 16, Waiver Disclaimer (filed Mar. 20, 1998).
The Tribe filed a "Motion to Dismiss Petition as it Relates to the Sac & Fox Tribe of the Mississippi in Iowa, and, in the Alternative, Objections to Debtor's Proposed Plan of Reorganization" on January 24, 2000. Among other things, the Tribe asserts its sovereign immunity bars this Court from altering the Tribe's security interest in Debtor's property. The Tribe also asserts other collateral arguments regarding the Court's jurisdiction. The Court carved out these jurisdictional issues for hearing prior to consideration of the remainder of the Tribe's Motion to Dismiss and Objections to the Plan.
The focus of this matter is the Tribe's sovereign immunity. The Tribe also asserts Debtor is improperly attempting to determine the validity, priority, or extent of its lien in the confirmation process rather than through an adversary proceeding. Further, the Tribe argues this is not a core proceeding and does not present a justiciable "case or controversy."
Debtor argues the Code allows modification of rights of secured creditors in a Chapter 11 Plan. It asserts it is not seeking to determine the validity, priority or extent of the Tribe's lien. Rather, Debtor is extinguishing the Tribe's lien in the Chapter 11 reorganization process by offering the "indubitable equivalent" in its Plan. Debtor argues the Code abrogates the Tribe's sovereign immunity. In the alternative, Debtor asserts the Tribe waived its sovereign immunity by appearing in the first Chapter 11 case and by filing a proof of claim in this case. Additionally, Debtor asserts that confirmation of its Plan is not a suit against the Tribe and therefore is not barred by sovereign immunity.
General acts of Congress apply to Indians as well as to all others in the absence of a clear expression to the contrary. Federal Power Comm'n v. Tuscarora Indian Nation, 362 U.S. 99, 120, 80 S.Ct. 543, 4 L.Ed.2d 584 (1960); E.E.O.C. v. Fond du Lac Heavy Equip. & Constr. Co., 986 F.2d 246, 248 (8th Cir.1993). This general rule does not apply when the interest sought to be affected is a specific right reserved to the Indians. Fond du Lac, 986 F.2d at 248. As otherwise stated, general statutes presumptively apply to Indian tribes unless such application would: 1) abrogate rights guaranteed under an Indian treaty; 2) interfere with purely intramural matters dealing with the tribe's right to self-governance; or 3) contradict the intent of Congress. Florida Paraplegic Assoc., Inc. v. Miccosukee Tribe, 166 F.3d 1126, 1129 (11th Cir.1999). General federal laws which courts have recently found broad enough to apply to Indian tribes include OSHA and ERISA. Id. n. 3. A tribe's commercial dealings with non-Indians are not "matters dealing with the tribe's right to self-governance." Id.
The Bankruptcy Code is a general statute having broad application. Congress has not expressed a clear and plain intent to except Indian tribes from its application. Thus, the Code presumptively applies to Indian tribes. See In re Sandmar Corp., 12 B.R. 910, 917 (Bankr.D.N.M. 1981) (); Aubertin v. Colville Confederated Tribes, 446 F.Supp. 430, 435 (E.D.Wash.1978) (applying Bankruptcy Act to Indian tribe). General application of the Code to Indians does not abrogate rights under an Indian treaty, interfere with the Tribe's right to self-governance, or contradict Congressional intent.
Although Indian Tribes may be subject to general federal laws, they continue to enjoy immunity from suits. The Supreme Court recently noted that there is a difference between the right to demand compliance with general laws and the means available to enforce them. Kiowa Tribe v. Manufacturing Technologies, Inc., 523 U.S. 751, 754, 118 S.Ct. 1700, 140 L.Ed.2d 981 (1998). This principle spells out the distinction between a right and a remedy. Florida Paraplegic, 166 F.3d at 1130. While the Bankruptcy Code applies to the Tribe, the Tribe can, nevertheless, retain its sovereign immunity from suit under the Code. "Whether an Indian tribe is subject to a statute and whether the tribe may be sued for violating the statute are two entirely different questions." Id. (emphasis in original).
It is undisputed that an Indian Tribe enjoys sovereign immunity from suit. Hagen v. Sisseton-Wahpeton Comm. College, 205 F.3d 1040, 1043 (8th Cir.2000). "As a matter of federal law, an Indian tribe is subject to suit only where Congress has authorized the suit or the tribe has waived its immunity." Kiowa Tribe v. Manufacturing Technologies, Inc., 523 U.S. 751, 754, 118 S.Ct. 1700, 140 L.Ed.2d 981 (1998). 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. Id. Sovereign immunity is a jurisdictional question. Hagen, 205 F.3d at 1043.
Indian tribes have long been recognized as possessing the common law immunity from suit traditionally enjoyed by sovereign powers. Santa Clara Pueblo v. Martinez, 436 U.S. 49, 59, 98 S.Ct. 1670, 56 L.Ed.2d 106 (1978); United States v. United States Fidelity & Guar. Co., 309 U.S. 506, 512-513, 60 S.Ct. 653, 84 L.Ed. 894 (1940). Santa Clara Pueblo, 436 U.S. at 59, 98 S.Ct. 1670; In re Prairie Island Dakota Sioux, 21 F.3d 302, 304 (8th Cir.1994). Abrogation by Congress of sovereign immunity cannot be implied but must be unequivocally expressed. Santa Clara Pueblo, 436 U.S. at 59, 98 S.Ct. 1670. Applying these principles, the court in Florida v. Seminole Tribe, 181 F.3d 1237, 1242 (11th Cir.1999), stated: "Congress may abrogate a sovereign's immunity only by using statutory language that makes its intention unmistakably clear, and . . . ambiguities in federal laws implicating Indian rights must be resolved in the Indians' favor." See also State v. Whitebreast, 409 N.W.2d 460, 461 (Iowa 1987) (...
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