The Oklahoma Bar Journal April 2024

corporations or “municipalit[ies]” – but the Bankruptcy Code says it cannot be a “governmental unit.” 45 However, Coughlin held that “tribes” – which, in that case, included the tribe’s government and the tribe’s lending company – are governmental units under the code. So, whether intentional or an oversight, this broad use of “tribes” exacerbates the conflict for classi fying tribal businesses under the Bankruptcy Code. If tribal busi nesses were merely partnerships or corporations, they could file for bankruptcy protection. But if tribal businesses are also “govern ment units,” as Coughlin may hold, they are likely unable to file for bankruptcy. Ultimately, whether tribal businesses are “governmental units” essentially requires lower courts to apply the 10th Circuit’s Breakthrough factors to determine if the business is an “arm of the tribe.” However, this test puts tribes in a difficult position when organizing their businesses. Why? A tribe’s immunity from suit is a fundamental part of their sover eignty and economic development, so tribes will certainly want their businesses to share their immu nity. But Coughlin now exposes a double-edged sword: Should tribes structure their enterprises so as to not resemble an “arm of the tribe” in order for those enterprises to receive bankruptcy protection? If so, this might mean organizing their businesses under state law (which may make them subject to state taxes), hiring non-tribal citizens to operate the enterprise, sharing revenue with non-tribal entities and individ uals, dividing the enterprise’s ownership and possibly losing the ability to assert immunity in cases

abrogation of sovereign immunity. The most obvious impact of this holding is that Indian tribes and their business enterprises can no longer assert immunity from suit in bankruptcy courts. This also means that tribes and their enter prises are subject to other provi sions of the code, including alleged violations of the automatic stay under §362, the use, sale or lease of property under §363, the allow ance of claims or interests under §502, turnover of property to the debtor’s estate under §542, recovery of allegedly preferential or fraud ulent transfers received by tribes under §§547 and 548, and post- petition claims against the debtor in Chapter 13 cases under §1305. However, a few issues remain unclear, the most pressing of which is whether tribal businesses can file for bankruptcy. Remember that for an entity to be able to file for bankruptcy, it must be a “debtor” under the Bankruptcy Code. A “debtor” can be a “person” – which includes individuals, partnerships,

list showed a congressional intent to “categorically abrogate[ ] the sovereign immunity of any gov ernmental unit that might attempt to assert it,” regardless of its location, nature or type. 41 And because tribes “are indisputably governments,” they accordingly fell within the scope of §§101(27) and 106(a)(1). 42 Holding that tribes were exempt, the court explained, would “upend[ ] the policy choices that the code embodies” by allow ing some government creditors to be immune “while others would face penalties for noncom pliance.” 43 So, for the preceding reasons, the court held that the Bankruptcy Code waived tribal sovereign immunity. 44 PART III: IMPLICATIONS FOR TRIBES AND TRIBAL ENTERPRISES UNDER THE BANKRUPTCY CODE Now, the rule under Coughlin is that the Bankruptcy Code treats federal, state and tribal govern ments equally concerning the

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