BREAKING NEWS: U.S. Supreme Court Holds Bankruptcy Code Waives Sovereign Immunity of Native American Tribes

Lac du Flambeau Band of Lake Superior Chippewa Indians v. Coughlin, — U.S. — (2023)

On June 15, 2023, the U.S. Supreme Court handed down an opinion holding that the bankruptcy code waives sovereign immunity for Native American tribes.  The opinion involves the Lac du Flambeau Band of Lake Superior Chippewa Indians. 

One of the tribe’s businesses, called Lendgreen, extended a payday loan to Brian Coughlin.  Thereafter, Mr. Coughlin filed a chapter 13 bankruptcy case.  Nevertheless, Lendgreen continued to pursue Mr. Coughlin, who filed a motion to enforce the automatic stay and recover damages. 

The bankruptcy court dismissed the matter on tribal sovereign immunity grounds.  The U.S. Court of Appeals for the First Circuit reversed, holding that the bankruptcy code unequivocally strips tribes of their immunity.

The Supreme Court granted certiorari and proceeded to analyze Bankruptcy Code §§ 101(27) and 106(a), which provide for a broad waiver of sovereign immunity for all governments, including federally-recognized Native American tribes.  Accordingly, the Supreme Court affirmed the First Circuit’s decision.

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