February 26, 2019, Michigan– On February 26, 2019, the Sixth Circuit Court of Appeals – which has jurisdiction over Michigan, Ohio, Kentucky and Tennessee – upheld the decision of a federal court in Michigan, which ruled that Congress did not clearly, and unequivocally abrogate Native American tribes’ sovereign immunity from the Bankruptcy Code.
Plaintiff-Appellant Buchwald Capital Advisors LLC, solely in its capacity as Litigation Trustee for the Greektown Litigation Trust filed a suit against Appellees the Sault Ste. Marie Tribe of Chippewa Indians (“Tribe”) and the Tribe’s political subdivision, Kewadin Casinos Gaming Authority (“Kewadin”), to recover $177 million in alleged fraudulent transfers that the trustee claimed were made to or for the benefit of the Tribe. The alleged amount had been transferred from the casino to several entities as part of an ownership restructuring three years before the casino declared bankruptcy.
The trustee contended that Congress abrogated tribal sovereign immunity in Section 106(a) of the Bankruptcy Code and thereby he was entitled to seek to recover the alleged transfers as fraudulent. The defendant contended that Congress did not abrogate tribal immunity under Section 106(a) of the Bankruptcy Code, and since the Tribe has not waived its tribal immunity as to the claims brought by the trustee, the Tribe was immune from suit and the district court correctly and properly dismissed the trustee’s claims against the Tribe.
The split decision of the Sixth Circuit affirmed the lower court ruling holding that sovereign immunity applies to the Sault Ste. Marie Tribe of Chippewa Indians and the Kewadin Tribal Gaming Authority concerning the avoidance and recovery related to conveyances made by the Tribe and Kewadin in 2005 totaling $177 Million.
The Court found that merely finding that Tribes are “domestic” and “governments” was not enough to determine that Congress clearly, unequivocally, and unmistakably expressed its intent to include Indian tribes. Citing FAA v. Cooper, 566 U.S. 284, 290-91 (2012), the Court added that “while it is true that Congress need not use ‘magic words’ to abrogate tribal sovereign immunity, it still must unequivocally express that purpose. ” Thus, the Court ruled that the litigation trustee for the Greektown Casino’s Chapter 11 bankruptcy case cannot seek to recover nearly $177 million.
With this, now two federal appeals courts have upheld tribal sovereign immunity from the Bankruptcy Code, while one federal appeals court (the Ninth Circuit which has jurisdiction over Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington) held in 2004 that Native American tribes have no sovereign immunity from the Bankruptcy Code.