LAC DU FLAMBEAU BAND OF LAKE SUPERIOR CHIPPEWA INDIANS V. COUGHLIN

The Supreme Court held in Lac du Flambeau Band of Lake Superior Chippewa Indians v. Coughlin 599 U.S. 382 (2023) that  the Bankruptcy Code unequivocally abrogates the sovereign immunity of Indian tribes with respect to the provisions specified in Section 106(a).

FACTS OF THE CASE

Brian Coughlin borrowed money from Lendgreen, a lending business wholly owned and operated by the Lac du Flambeau Band of Lake Superior Chippewa Indians. After experiencing financial difficulties, Coughlin filed a petition under Chapter 13 of the Bankruptcy Code.

Upon the filing of the bankruptcy case, the automatic stay under Section 362 came into effect, prohibiting creditors from continuing collection activities against the debtor. Despite the stay, Coughlin alleged that Lendgreen continued its efforts to collect the debt.

Coughlin commenced an adversary proceeding seeking damages for violation of the automatic stay. The tribal entities moved to dismiss the action, arguing that they were protected by tribal sovereign immunity and could not be sued without their consent or an unequivocal congressional abrogation of that immunity.

ISSUE BEFORE THE SUPREME COURT

The principal issue before the Supreme Court was whether Section 106(a) of the Bankruptcy Code, which abrogates sovereign immunity for certain governmental units, also abrogates the sovereign immunity of federally recognized Indian tribes.

FINDINGS OF THE SUPREME COURT

Justice Jackson, writing for the majority, focused on the language of the Bankruptcy Code. Section 106(a) provides that sovereign immunity is abrogated with respect to numerous Bankruptcy Code provisions for a “governmental unit.” The Code defines “governmental unit” broadly to include the United States, states, municipalities, foreign states, and other governmental entities.

The Court noted that the definition extends to “other foreign or domestic governments.” Applying ordinary principles of statutory interpretation, the Court concluded that federally recognized Indian tribes fall within the ordinary meaning of domestic governments. Because tribes exercise governmental authority and possess sovereign powers, they fit naturally within the statutory definition.

The Court emphasized that Congress need not specifically mention Indian tribes by name when abrogating their immunity. What is required is a clear and unequivocal expression of congressional intent. The Court found that the broad language used in the Bankruptcy Code clearly encompassed tribes and therefore satisfied that requirement.

The tribal entities argued that tribal sovereign immunity should receive special treatment absent an explicit reference to tribes. The Court rejected this contention, concluding that the statutory text was sufficiently comprehensive to include tribal governments.

SIGNIFICANCE OF THE JUDGMENT

The decision is one of the most important modern cases involving tribal sovereign immunity and bankruptcy law. It ensures that tribal creditors, like other governmental entities, are subject to key provisions of the Bankruptcy Code, including the automatic stay and related enforcement mechanisms.

The ruling strengthens the effectiveness of bankruptcy protections by preventing tribal entities from invoking sovereign immunity to avoid compliance with the Bankruptcy Code’s requirements. It also promotes uniform application of federal bankruptcy law across different categories of governmental creditors.

More broadly, the case illustrates the Supreme Court’s continuing emphasis on statutory text when determining whether Congress has abrogated sovereign immunity.

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Mukesh Suman is a lawyer and legal author based at Delhi, India. He has extensive experience in insolvency and bankruptcy matters. He also provides legal support services to USA based bankruptcy lawyers. Mukesh can be approached at mukesh_suman@outlook.com or +91 9717864570.