In a June 15, 2023, decision authored by Justice Jackson, the United States Supreme Court has held that § 106(a) the United States Bankruptcy Code abrogates sovereign immunity of Indian tribes and their businesses. As such, tribes are subject to the § 362 automatic stay (and other enumerated provisions enumerated under § 106(a)) and may be held liable for violating the automatic stay. In reaching this outcome, Justice Jackson found that the standard to waive sovereign immunity, although very high, is met by the language of the Bankruptcy Code § 101(27), which, among other things, inherently includes tribes within the phrase “other foreign or domestic government.” The opinion was joined by six other Justices (Chief Justice Roberts, along with Justices Alito, Sotomayor, Kagan, Kavanaugh and Barrett) with Justice Thomas writing an opinion concurring in the judgment. Justice Gorsuch wrote a dissent. 

The case arose out of a motion brought by the debtor/Respondent (Coughlin) in a Chapter 13 case against the Petitioner Lac du Flambeau of Lake Superior Chippewa Indians (the Band), a federally recognized tribe that owns several business entities, including Lendgreen. In 2019, Lendgreen lent Coughlin $1,100. Coughlin then filed for bankruptcy, which triggered the automatic stay against creditors. Coughlin claims that notwithstanding the automatic stay, Lendgreen continued to pursue collections effort, which Coughlin asserts was so aggressive as to cause him substantial emotional distress. Coughlin moved to enforce the automatic stay and sought damages for emotional distress and attorney’s fees under Bankruptcy Code § 362(k). 

Petitioners moved to dismiss the claim on the basis that the Bankruptcy Court lacked subject matter jurisdiction because the Band and its subsidiaries were protected tribal sovereign immunity, and that the Bankruptcy Code did not clearly express Congress’s intent to abrogate this immunity. The Bankruptcy Court agreed with the Band, but on appeal, the First Circuit, in a divided opinion, reversed. As Justice Jackson noted, the First Circuit decision “deepened a split among the Courts of appeal on this question.”

In addressing the question before the Court, Justice Jackson recognized that “[t]wo provisions of the Bankruptcy Code lie at the crux of this case.” The first is §106(a), which abrogates the sovereign immunity of “governmental unit[s]” as to enumerated Bankruptcy Code provisions, including the automatic stay under § 362. The second is §101(27), which defines “governmental unit” under Bankruptcy Code, and “means United States; State; Commonwealth; District; Territory; 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.” The Court further noted, ‘[t]he central question before us is whether the abrogation provision in §106(a) and the definition of “governmental unit” in §101(27), taken together, unambiguously abrogate the sovereign immunity of federally recognized tribes.

Justice Jackson recognized that to abrogate sovereign immunity, “Congress ‘must make its intent . . . ‘unmistakably clear in the language of the statute.’” citing Financial Oversight and Management Bd. for P. R. v. Centro De Periodismo Investigativo, Inc., 598 U. S. ___, ___ (2023) (slip op., at 6). This rule “is not a magic-words requirement, however,” and to abrogate sovereign immunity, “Congress need not state its intent in any particular way. . .The clear-statement question is simply whether, upon applying ‘traditional’ tools of statutory interpretation, Congress’s abrogation of tribal sovereign immunity is ‘clearly discernable’ from the statute itself.” 

Justice Jackson found that, although the word “tribe” is not enumerated within §101(27), the two provisions of the Code, read together, “unequivocally abrogate[] the sovereign immunity of any and every government that possesses the power to assert such immunity. Federally recognized tribes undeniably fit that description; therefore, the Code’s abrogation provision plainly applies to them as well.” In support, Justice Jackson relied on several provisions of the text and structure of §101(27), including the phase “other foreign and domestic government,” which the Court found to be all inclusive – akin to the phrase rain or shine.

In concurrence, Justice Thomas noted that “because respondent’s stay-enforcement motion arose from petitioners’ off-reservation commercial conduct, petitioners lack sovereign immunity regardless of the Bankruptcy Code’s abrogation provision.”

In dissent, Justice Gorsuch found that although the language of the Bankruptcy Code could be interpreted to abrogate sovereign immunity, it was not sufficiently clear.