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Federal Appeals Court Affirms Tribal Immunity from Bankruptcy Code

March 1, 2019

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. As a result, that immunity still applies and the litigation trustee for the Greektown Casino’s Chapter 11 bankruptcy case is not able to seek to recover nearly $177 million. This amount had been transferred from the casino to several entities as part of an ownership restructuring three years before the casino declared bankruptcy.

In upholding the sovereign immunity of the Sault St. Marie Tribe of Chippewa Indians, the court of appeals followed a 2016 decision by the Seventh Circuit Court of Appeals – which has jurisdiction over Wisconsin, Illinois and Indiana – in a case involving the Oneida Tribe of Indians of Wisconsin. The court noted, “There is not one example in all of history where the Supreme Court has found that Congress intended to abrogate tribal sovereign immunity without expressly mentioning Indian tribes somewhere in the statute.”

As a result of this decision, two federal appeals courts have now 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 do not have sovereign immunity from the Bankruptcy Code. Such a split in authority creates the possibility of the filing of a petition for leave to appeal to the Supreme Court, but presently the litigation trustee has not indicated an intent to file that petition.

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