White, In re, 96-36294

• Decision Date: 23 March 1998
• Docket Number: No. 96-36294,96-36294
• Citation: 139 F.3d 1268
• Parties: 98 Cal. Daily Op. Serv. 2021, 98 Daily Journal D.A.R. 2835, 2 Cal. Bankr. Ct. Rep. 43 In re: Melvin J. WHITE, Debtor. CONFEDERATED TRIBES OF THE COLVILLE RESERVATION TRIBAL CREDIT, Appellant, v. Melvin J. WHITE, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1268

139 F.3d 1268

98 Cal. Daily Op. Serv. 2021, 98 Daily Journal

D.A.R. 2835,

2 Cal. Bankr. Ct. Rep. 43

In re: Melvin J. WHITE, Debtor CONFEDERATED TRIBES OF THE COLVILLE RESERVATION TRIBAL CREDIT, Appellant, v. Melvin J. WHITE, Appellee.

No. 96-36294.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Feb. 3, 1998.

Decided March 23, 1998.

Alan C. Stay, Office of the Reservation Attorney, Nespelem, WA, for appellant.

John F. Bury, Murphy, Bantz & Bury, P.S., Spokane, WA, for appellee.

Appeal from the United States District Court for the Eastern District of Washington Wm. Fremming Nielsen, Chief District Judge, Presiding. D.C. No. CV-96-00247-WFN.

Before: BRUNETTI, RYMER and KLEINFELD, Circuit Judges.

RYMER, Circuit Judge.

Colville Tribal Credit, an agency of the Confederated Tribes of the Colville Reservation which administers the collection of loans to tribal members and had sought to collect a debt of Melvin J. White in White's Chapter 11 reorganization, appeals the district court's order affirming discharge of its claim under Chapter 7. The district court held that Colville Credit submitted to the jurisdiction of the bankruptcy court when it sought to collect White's debt under Chapter 11, that this affirmative act waived its immunity as to the bankruptcy court's jurisdiction over its ability to collect White's debts, and that the waiver survived conversion to Chapter 7.

We agree with the district court and hold that the Tribes's participation as a creditor in White's bankruptcy case under Chapter 11 waived immunity from adjudication of its claim, and that waiver carried forward to Chapter 7. As we have jurisdiction, 28 U.S.C. § 158(d), we affirm.

I

The Confederated Tribes of the Colville Reservation (Colville Tribes) is a federally recognized Indian tribal government. Colville Tribal Credit (Colville Credit) is a Colville Tribes agency that administers the lending of trust monies to tribal members and the collection of tribal trust monies owed to Colville Tribes by tribal members. Colville Credit uses tribal trust funds derived from the Tribes's treasury to make loans available only to tribal members at below-market rates.

Melvin J. White, an enrolled member of Colville Tribes, took advantage of Colville Credit's loan program. Colville Credit loaned White approximately $340,000 and, to ensure repayment on the loan, took a security interest in White's entitlement to dividends from the tribal trust fund. White, however, subsequently filed for bankruptcy under the reorganization provisions of Chapter 11.

White proposed a reorganization plan and, through its private attorneys hired to collect White's debts, Colville Tribes filed an objection to the confirmation of this plan as "one of the Class 6 Unsecured Creditors herein holding a claim in the sum of $336,858.18." The Tribes objected to the plan because it believed that White had not filed the plan in good faith, as required by 11 U.S.C. § 1129(a)(3). Colville Tribes also filed a ballot rejecting the initial reorganization plan which placed its interest in "Class 6." After White amended his plan, the Tribes filed a ballot rejecting the amended plan as well.

White then converted his case from a Chapter 11 reorganization to a Chapter 7 liquidation and was granted a discharge. Colville Credit filed an adversary proceeding contesting the dischargeability of its claim against White. In moving for summary judgment, Colville Credit argued that sovereign immunity precluded the bankruptcy court from asserting jurisdiction over its claims and asked the bankruptcy court to remove it from the list of creditors. The bankruptcy court refused to do so, holding that Colville Credit's objection to, and ballots rejecting the confirmation of, White's reorganization plan were affirmative acts to collect a particular debt in a bankruptcy proceeding. The court concluded that these acts submitted the issue of whether Colville Credit could collect White's debts to the jurisdiction of the court and Colville Credit had accordingly waived sovereign immunity as to that issue. The district court affirmed, and Colville Credit timely appealed. ¹

II

Colville Credit's position is that no matter what actions it took in White's case under Chapter 11, and regardless of whether those actions waived sovereign immunity for purposes of the reorganization, it could not (and had no authority to) waive sovereign immunity once the case was converted from Chapter 11 to Chapter 7. Specifically, it argues that the Colville Tribal representative who filed papers in the case under Chapter 11 lacked authority to waive sovereign immunity. But even if waiver were authorized for purposes of Chapter 11, Colville Credit submits, its participation in White's Chapter 11 does not constitute a waiver of sovereign immunity for purposes of Chapter 7 because the two are different, and separate, proceedings and White's Chapter 7 was subsequent to his Chapter 11. In any event, the Tribes maintains, a waiver would violate its right to make laws and be governed by them.

White responds that participating as a creditor in plan confirmation, like filing a proof of claim, waives immunity from the adjudication of allowance and dischargeability of the debt. He further argues that a bankruptcy case that starts as a Chapter 11 is the same case after conversion to Chapter 7. Finally, White points out that as a United States citizen, he is entitled to protection of the federal bankruptcy laws, and that Colville Credit's right to seek relief in tribal court is not at issue in this action.

A

We turn first to whether Colville Credit's participation in White's Chapter 11 waived sovereign immunity respecting the adjudication of its claim against White's assets.

No one disputes that Colville Credit, as an administrative arm of a tribal sovereign, enjoys common law immunity from suit. Santa Clara Pueblo v. Martinez, 436 U.S. 49, 58, 98 S.Ct. 1670, 1676-77, 56 L.Ed.2d 106 (1978); In re Greene, 980 F.2d 590, 596-97 (9th Cir.1992) (holding that tribe's wholly owned commercial business enjoyed sovereign immunity). However, Indian tribes may consent to suit without explicit Congressional authority. United States v. Oregon, 657 F.2d 1009, 1013 (9th Cir.1981). Such waiver may not be implied, but must be expressed unequivocally. McClendon v. United States, 885 F.2d 627, 630 (9th Cir.1989). Initiation of a lawsuit is an action that "necessarily establishes consent to the court's adjudication of the merits of that particular controversy," id. at 630, including the risk of being bound by an adverse determination. Id.; Oregon, 657 F.2d at 1014.

The Supreme Court made clear in Gardner v. New Jersey, 329 U.S. 565, 67 S.Ct. 467, 91 L.Ed. 504 (1947), that when a sovereign files a claim against a debtor in bankruptcy, the sovereign waives immunity with respect to adjudication of the claim. In Gardner, New Jersey filed a proof of claim for unpaid taxes in Gardner's reorganization. Gardner objected to the claim and filed a petition for adjudication of New Jersey's tax claims in accordance with his objection. New Jersey countered that the court couldn't entertain the petition because it would be a prohibited suit against the state. The Court disagreed, noting that when a state files a proof of claim, "it is using a traditional method of collecting a debt." Id. at 573, 67 S.Ct. at 471. As the Court explained:

It is traditional bankruptcy law that he who invokes the aid of the bankruptcy court by offering a proof of claim and demanding its allowance must abide the consequences of that procedure. If the claimant is a State, the procedure of proof and allowance is not transmuted into a suit against the State because the court entertains objections to the claim. The State is seeking something from the debtor. No judgment is sought against the State. The whole process of proof, allowance, and distribution is, shortly speaking, an adjudication of interests claimed in a res. It is none the less such because the claim is rejected in toto, reduced in part, given a priority inferior to that claimed, or satisfied in some way other than payment in cash. When the State becomes an actor and files a claim against the fund, it waives any immunity which it otherwise might have had respecting the adjudication of the claim.

Id. at 573-74, 67 S.Ct. at 472 (citations omitted).

It follows from Gardner that Colville Credit's actions waived its immunity respecting the adjudication of its claim to recover White's debts. Like New Jersey, Colville Credit sought to collect its debt by actively participating in the reorganization court. It acknowledged that it had a claim, objected to confirmation of White's plan of reorganization because it thought it was entitled to more than the plan would have allowed, and it sought relief from the bankruptcy court in the form of an order denying confirmation. It twice voted against plans of reorganization. Having done this, Colville Credit (like New Jersey) "waive[d] any immunity which it otherwise might have had respecting the adjudication of the claim."

B

If that's so, Colville Credit argues, the waiver was without authority because an agent of the Tribes cannot waive sovereign immunity by filing a proof of claim in a Chapter 11 reorganization, at least not without an express and clear waiver supporting that action by the governing body of the Tribes. There is nothing in the record, however, that suggests what tribal approvals are necessary, or that indicates whether any approval is in fact required. In any event, the Tribes expressly acknowledged in its adversary proceeding and again on appeal that Colville Credit is an agency of the Tribes which administers the lending of tribal trust monies to tribal members and the collection of tribal trust monies owed to the Tribes by tribal members. That...