Business Deals | Litigation

Sault Tribe protected by sovereign immunity in casino dispute

Tuesday, June 30, 2015

The Greektown Casino, a commercial facility, in Detroit, Michigan. Photo by Santcomm via Wikipedia

Congress did not waive tribal sovereign immunity in bankruptcy proceedings, a federal judge ruled in a case involving the Sault Tribe Tribe of Chippewa Indians in Michigan.

Under Section 106 of the Bankruptcy Code, a "governmental unit" can be sued in federal court. That term is defined in Section 101 but Judge Paul D. Boorman said it is not clear whether that includes tribal governments.

"While Congress may not have to utter 'magic words,' Supreme Court precedent clearly dictates that it utter words that beyond equivocation or the slightest shred of doubt mean 'Indian tribes,'" Boorman wrote in the June 9 decision.

"Congress did not do so in sections 106(a) and 101(27) of the Bankruptcy Code and thus the tribe is entitled to sovereign immunity from suit," Boorman concluded.

The ruling comes in a long-running dispute over the Greektown Casino in Detroit. The tribe was the majority owner of the commercial facility but transferred it to new owners after initiating bankruptcy proceedings.

During the proceedings, some creditors accused the tribe and others of $177 million in fraudulent transactions. A bankruptcy judge allowed the claim to proceed but the tribe appealed to Judge Boorman and won the new ruling.

But attorney Emily Gildar Wagner points out that Boorman's ruling conflicts with decisions from the federal courts in Arizona and the 9th Circuit Court of Appeals. Michigan falls in the 6th Circuit Court of Appeals so it's possible that the case could end up before the U.S. Supreme Court.

"In the meantime, the federal courts are divided over the question of whether sections 106(a) and 101(27) of the Bankruptcy Code abrogate the sovereign immunity of Indian tribes, which division will likely eventually makes its way to the Supreme Court, particularly in light of the ever increasing commercial activities of Indian tribes in this changing economic reality,"

Turtle Talk has posted documents from the case, Buchwald Capital Advisors, LLC v. Papas (In re Greektown Holdings, LLC).

Get the Story:
Emily Gildar Wagner: Despite Changing Economic Reality, Federal Court Holds Indian Tribes Have Sovereign Immunity in Bankruptcy, Absent Waiver (JD Supra 6/29)