Coughlin v. Lac Du Flambeau Band Indians (In re Coughlin)

33 F.4th 600

IN RE: Brian W. COUGHLIN, Debtor.

Brian W. Coughlin, Appellant,

v.Lac du Flambeau Band of Lake Superior Chippewa Indians; L.D.F. Business Development Corp.; L.D.F. Holdings, LLC; Niiwin, LLC, d/b/a Lendgreen, Appellees.

No. 21-1153

United States Court of Appeals, First Circuit.

May 6, 2022

Gregory G. Rapawy, with whom Terrie L. Harman, Richard N. Gottlieb, Michael D. Cameron, Kellogg, Hansen, Todd, Figel & Frederick, P.L.L.C., Alfano Law Office, PLLC, and the Law Offices of Richard N. Gottlieb were on brief, for appellant.

Andrew Adams, III, with whom Peter J. Rademacher, Zachary R.G. Fairlie, Andrew W. Lester, Adrienne K. Walker, Hogen Adams PLLC, Spencer Fane LLP, and Locke Lord LLP were on brief, for appellees.

Seth Davis, Kaighn Smith, Jr., Amy K. Olfene, and Drummond Woodsum on brief for amici curiae professors of federal Indian law in support of appellees.

Patrick O. Daugherty, Laura E. Jones, and Van Ness Feldman LLP on brief for amicus curiae Native American Financial Services Ass'n in support of appellees.

Before Barron, Chief Judge, Lynch, Circuit Judge, and Burroughs,^* District Judge.

LYNCH, Circuit Judge.

This case presents an important question of first impression in our circuit: whether the Bankruptcy Code abrogates tribal sovereign immunity. Two of our sister circuits have already considered the question and reached opposite conclusions. Compare Krystal Energy Co. v. Navajo Nation, 357 F.3d 1055, 1061 (9th Cir. 2004) (holding that the Code abrogates immunity), with In re Greektown Holdings, LLC 917 F.3d 451, 460-61 (6th Cir. 2019) (holding that the Code does not abrogate immunity), cert. dismissed sub nom. Buchwald Cap. Advisors LLC v. Sault Ste. Marie Tribe, ––– U.S. ––––, 140 S. Ct. 2638, 206 L.Ed.2d 711 (2020). Like the Ninth Circuit, we hold that the Bankruptcy Code unequivocally strips tribes of their immunity.

Our decision permits debtor Brian W. Coughlin to enforce the Bankruptcy Code's automatic stay against one of his creditors, a subsidiary of the Lac Du Flambeau Band of Lake Superior Chippewa Indians ("Band"). As the bankruptcy court held otherwise, see In re Coughlin, 622 B.R. 491, 494 (Bankr. D. Mass. 2020), we reverse.

I.

In July 2019, Coughlin took out a $1,100 payday loan from Lendgreen, a wholly owned subsidiary of the Band.¹ Later that year, he voluntarily filed a Chapter 13 bankruptcy petition in the District of Massachusetts. On the petition, he listed his debt to Lendgreen, which had grown to nearly $1,600, as a nonpriority unsecured claim. He also listed Lendgreen on the petition's creditor matrix, and his attorney mailed Lendgreen a copy of the proposed Chapter 13 plan.

When Coughlin filed his petition, the Bankruptcy Code imposed an automatic stay enjoining "debt-collection efforts outside the umbrella of the bankruptcy case." Ritzen Grp., Inc. v. Jackson Masonry, LLC, ––– U.S. ––––, 140 S. Ct. 582, 586, 205 L.Ed.2d 419 (2020) (citing 11 U.S.C. § 362(a) ). Despite the automatic stay, Lendgreen repeatedly contacted Coughlin seeking repayment of his debt. Though Coughlin told Lendgreen representatives that he had filed for bankruptcy and provided his attorney's contact information, Lendgreen continued to call and email him directly. Two months after he filed the petition, Coughlin attempted suicide. He attributes that attempt to his belief that his "mental and financial agony would never end," and blamed his agony on Lendgreen's "regular and incessant telephone calls, emails and voicemails."

To stop Lendgreen's collection efforts, Coughlin moved to enforce the automatic stay against Lendgreen and its corporate parents, including the Band. He sought an order prohibiting further collection efforts as well as damages, attorney's fees, and expenses. In response, the Band and its affiliates asserted tribal sovereign immunity and moved to dismiss the enforcement proceeding. The bankruptcy court agreed with the Band and granted the motions to dismiss. See In re Coughlin, 622 B.R. at 494.

We permitted a direct appeal from that decision, see 28 U.S.C. § 158(d), and now reverse.²

II.

We review de novo the Bankruptcy Court's determination of a pure question of law. In re IDC Clambakes, Inc., 727 F.3d 58, 63 (1st Cir. 2013).

A.

Congress may abrogate tribal sovereign immunity if it " ‘unequivocally’ express[es] that purpose."³

Michigan v. Bay Mills Indian Cmty., 572 U.S. 782, 790, 134 S.Ct. 2024, 188 L.Ed.2d 1071 (2014) (quoting C & L Enters., Inc. v. Citizen Band Potawatomi Tribe of Okla., 532 U.S. 411, 418, 121 S.Ct. 1589, 149 L.Ed.2d 623 (2001) ). "That rule of construction reflects an enduring principle of Indian law: Although Congress has plenary authority over tribes, courts will not lightly assume that Congress in fact intends to undermine Indian self-government." Id.

To abrogate sovereign immunity "Congress need not state its intent in any particular way." FAA v. Cooper, 566 U.S. 284, 291, 132 S.Ct. 1441, 182 L.Ed.2d 497 (2012). The Supreme Court has "never required that Congress use magic words" to make its intent to abrogate clear. Id. To the contrary, it has explained that the requirement of unequivocal abrogation " ‘is a tool for interpreting the law’ and that it does not ‘displac[e] the other traditional tools of statutory construction.’ " Id. (quoting Richlin Sec. Serv. Co. v. Chertoff, 553 U.S. 571, 589, 128 S.Ct. 2007, 170 L.Ed.2d 960 (2008) ) (alteration in original); cf. Penobscot Nation v. Frey, 3 F.4th 484, 493, 503 (1st Cir. 2021) (en banc) (holding that the Indian canons play no role in interpreting an unambiguous statute), cert. denied, No. 21-838, ––– U.S. ––––, 142 S.Ct. 1669, ––– L.Ed.2d –––– (U.S. Apr. 18, 2022).

In determining whether the Bankruptcy Code unequivocally abrogates tribal sovereign immunity, we begin with the text. Section 106(a) of the Code provides that "[n]otwithstanding an assertion of sovereign immunity, sovereign immunity is abrogated as to a governmental unit to the extent set forth in this section with respect to" dozens of provisions of the Code, including the automatic stay. Congress enacted § 106 in 1994 to overrule two Supreme Court cases, which held that a prior version of the section was insufficiently clear to abrogate state and federal sovereign immunity. 140 Cong. Rec. 27693 (Oct. 4, 1994) (citing Hoffman v. Conn. Dep't of Income Maint., 492 U.S. 96, 109 S.Ct. 2818, 106 L.Ed.2d 76 (1989) and United States v. Nordic Vill., Inc., 503 U.S. 30, 112 S.Ct. 1011, 117 L.Ed.2d 181 (1992) ). The provision's plain statement satisfies Congress' obligation to unequivocally express its intent to abrogate immunity for all governmental units.

We thus focus on whether Congress intended to abrogate tribal sovereign immunity when it used the phrase "governmental unit." Section 101(27) of the Code, enacted as part of the Bankruptcy Reform Act of 1978, defines "governmental unit" capaciously as:

United States; State; Commonwealth; District; Territory; municipality; foreign state; department, agency, or instrumentality of the United States (but not a United States trustee while serving as a trustee in a case under this title), a State, a Commonwealth, a District, a Territory, a municipality, or a foreign state; or other foreign or domestic government.

11 U.S.C. § 101(27). That enumerated list covers essentially all forms of government. See Krystal Energy, 357 F.3d at 1057 ("[L]ogically, there is no other form of government outside the foreign/domestic dichotomy ...."). The issue is then whether a tribe is a domestic government.

First, there is no real disagreement that a tribe is a government. Tribes are not specifically excluded and fall within the plain meaning of the term governments. Tribes are governments because they act as the "governing authorit[ies]" of their members. Government, Webster's Third New International Dictionary 982 (1961); accord government, The Random House Dictionary of the English Language 826 (2d ed. 1987) ("[T]he governing body of people in a state, community, etc.; administration."). While tribes have limited authority over non-members, they exercise sovereignty over their members and territories. See Atkinson Trading Co. v. Shirley, 532 U.S. 645, 650–51, 121 S.Ct. 1825, 149 L.Ed.2d 889 (2001). As examples, "Indian tribes retain their inherent power to determine tribal membership, to regulate domestic relations among members, and to prescribe rules of inheritance for members," Montana v. United States, 450 U.S. 544, 564, 101 S.Ct. 1245, 67 L.Ed.2d 493 (1981) ; see, e.g., Constitution and Bylaws of the Lac Du Flambeau Band of Lake Superior Chippewa Indians of Wisc., art. VI, https://www.ldftribe.com/uploads/files/Court-Ordinances/CONSTITUTION% 20AND% 20BYLAWS.pdf, and also largely retain the authority to prosecute members for offenses committed in their territories, 18 U.S.C. § 1152 ; see Negonsott v. Samuels, 507 U.S. 99, 102-03, 113 S.Ct. 1119, 122 L.Ed.2d 457 (1993). Indeed, the very purpose of tribal sovereign immunity is to protect "Indian self-government." Bay Mills, 572 U.S. at 790, 134 S.Ct. 2024.

Second, it is also clear that tribes are domestic, rather than foreign, because they "belong[ ] or occur[ ] within the sphere of authority or control or the ... boundaries of" the United States. Domestic, Webster's Third, supra, at 671.⁴ Thus, a tribe is a domestic government and therefore a government unit.

This conclusion is drawn from the text. It is also supported by historical context. When Congress abrogated immunity in 1994, it did so against the preexisting backdrop of § 101(27). Indeed, at least one published bankruptcy opinion shows an understanding even before 1978 that tribes could function as and claim the benefits of governments. See In re Bohm's Inc., 5 Bankr. Ct. Dec. 259, 259 (Bankr. D. Ariz. 1979) (prohibiting discharge of and prioritizing fees owed to tribe under pre-1978 bankruptcy law). As Coughlin argues, Congress was aware of the existing definition of "governmental unit" when it incorporated it...