The Oklahoma Bar Journal April 2024

I ndian L aw

Examining the Implications of Lac du Flambeau Band of Lake Superior Chippewa Indians v. Coughlin How are Tribal Business Enterprises Impacted Under the Bankruptcy Code?

By Mark A. Craige, Logan Hibbs and Michael McBride III

O VER THE PAST TWO DECADES, bankruptcy courts and federal circuits have disagreed on whether the Bankruptcy Code waives tribal sovereign immunity and makes tribes subject to the code’s provisions. But in June 2023, the Supreme Court answered this question in Lac du Flambeau Band of Lake Superior Chippewa Indians v. Coughlin , 1 which held that tribes are “governmental units” whose immunity is waived under §§101(27) 2 and 106(a)(1) 3 in the Bankruptcy Code. Therefore, tribes are now subject to certain provisions of the code.

the United States, their sovereignty is derived from their original powers of self-government – not the United States Constitution. 5 As a result, even though tribes have since agreed in treaties to the paramount authority of the United States, federal courts still recognize that Indian tribes are distinct polit ical sovereigns that have inherent authority to govern their own citizens, create their own laws and – relevant here – enter into commercial contracts with non tribal private parties and organize their own business entities under state or tribal law. 6 Importantly, however, Congress has the “plenary and exclusive”

so, part I of this article will provide a general overview of tribal sov ereignty, tribal immunity and the “arm of the tribe” analysis. Part II will analyze the key issues leading up to Coughlin and will highlight the core reasoning for Coughlin ’s holding. Finally, part III will out line the implications of Coughlin for tribal governments and enterprises as creditors and debtors. PART I: GENERAL OVERVIEW OF TRIBAL SOVEREIGNTY, TRIBAL IMMUNITY AND “ARMS OF THE TRIBE” Indian tribes are considered North America’s first nations, and because their nationhood predates

However, in holding that tribes are “governmental units,” a few issues remain unclear, the most pressing of which is how tribally owned businesses – which are often considered an “arm of the tribe” – are impacted. Importantly, the Bankruptcy Code expressly excludes “governmental units” from being able to file for bankruptcy. 4 So does Coughlin ’s holding that “tribes” are “governmental units” mean that tribal businesses are also unable to file for bankruptcy? This article seeks to analyze this question and examine how Coughlin exposes the inadequacies of the Bankruptcy Code when it comes to tribal businesses. To do

Statements or opinions expressed in the Oklahoma Bar Journal are those of the authors and do not necessarily reflect those of the Oklahoma Bar Association, its officers, Board of Governors, Board of Editors or staff.

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THE OKLAHOMA BAR JOURNAL