The Supreme Court heard oral arguments on Monday, April 24, for the case Lac du Flambeau Band v. Coughlin. The ruling may possibly have implications for tribes and tribal subsidiaries in the bankruptcy process.

This case revolves around Brian Coughlin who took out a payday loan from Lendgreen, a tribally-owned subsidiary of the Lac du Flambeau Band Of Lake Superior Chippewa Indians in Wisconsin, and later filed for bankruptcy. As part of the action, he sued the tribe to enforce an automatic stay on his bankruptcy and for money damages.

The band continued to attempt to collect, not abiding by the Bankruptcy Code, in which the tribe argued they are not obligated to do so. The Supreme Court’s conservative majority will decide if the Bankruptcy Code, that Congress established, meant to include the removal of tribal sovereign immunity in Section 106 (a).

In 1978 Congress revisited the pre-code federal bankruptcy statute from 1938, in which tribes were not listed, and created a definition of governmental unit where tribes were again not included in Section 101 (27).

Whether intentional or accidental, the governmental units whose immunity is abrogated are the United States, states, districts, territories, foreign states, instrumentalities or agencies of any of those governments, followed by a residual clause, “other foreign or domestic government.”

Front row, left to right: Associate Justice Sonia Sotomayor, Associate Justice Clarence Thomas, Chief Justice John G. Roberts, Jr., Associate Justice Samuel A. Alito, Jr., and Associate Justice Elena Kagan.Back row, left to right: Associate Justice Amy Coney Barrett, Associate Justice Neil M. Gorsuch, Associate Justice Brett M. Kavanaugh, and Associate Justice Ketanji Brown Jackson. (Photo credit: Fred Schilling, Collection of the Supreme Court of the United States)

Pratik Shah, who is representing the tribe, argued that Congress has never repealed the sovereign immunity of tribes without mentioning tribes in the history of the country.

“Congress has to use unequivocally clear language if it wants to abrogate the sovereign immunity of tribes,” Shah said.

Justice Elena Kagan expressed how the case can’t be reliant on specific words due to Shah’s argument that “Indian tribes” was not explicitly stated.

But Justice Amy Coney Barrett did agree that it’s a little “odd” to have used very specific words for the other entities listed. Justice Sonia Sotomayor also said it was “very, very puzzling” that tribes were not in the statute where it was stated in every other Congressional statute. Justice Brett Kavanaugh said it does create some ambiguity that Congress did not mention tribes from a historical perspective. Kagan later expressed perplexity as to why tribes were not listed in the type of governments.

“This is just a very odd statute. It lists all these different kinds of governments, governments that really never show up in our abrogation cases,” Kagan said.

Justice Ketanji Brown Jackson and Barrett both stated how it seems the petitioners are asking for a special or extra rule for tribal sovereign immunity in this case.

Shah reiterated the clear statement rule needs to clearly express its intent to abrogate sovereign immunity and identify the governmental units that it wants to abrogate —which it does — but tribes are not on it.

Barrett pointed out how it says “domestic or foreign” in the residual clause. Shah said that tribes are neither domestic or foreign, which is what the Supreme Court has been deciding on for two centuries.

He said he would concede if it stated “domestic dependent nation” instead of “domestic government” because that’s interchangeable with “Indian tribes.” Shah said they have searched the United States Code and did not find a “single reference to domestic government encompassing Indian tribes.”

Gregory Rapawy, for Coughlin, argued how tribes exercise governmental authority and perform governmental functions that are within the domestic government of the United States. As well as the term “governmental units” are broader in what Shah argues and it can be applicable to tribes.

Rapawy said that “or” in the “foreign or domestic government” was stated as not exclusive in the residual clause of the bankruptcy code. It means either or both, and tribes fall under that. And the context of how tribes may have been seen as domestic then and were established as not a foreign state from Chief Justice Marshall’s opinion in Cherokee Nation v. Georgia in 1831.

He conceded Congress may not have thought of governments engaging in “triple digit online loans” in 1978 and “certainly, they wouldn’t have contemplated the Internet.”

Jackson also reiterated how there is a detailed list that includes many entities, territories and municipalities but tribes are not on it.

“..If the idea is we want to make sure that Congress actually considered the entities that are being affected by this rule, we have evidence that they considered others because they listed them in the statute, and here tribes don’t appear, why isn’t that just the answer?” Jackson asked.

Rapawy said it would be presumptuous to think Congress did not mean to include tribes because they didn’t specifically outline it.

“That would, I think, be an approach that this Court has rightfully rejected as inconsistent with the judicial role to construe the law that Congress has applied,” he said.

Austin Raynor, assistant to the Department of Justice’s Solicitor General Elizabeth Prelogar, also spoke for the United States as amicus curiae, supporting Coughlin.

Raynor said the section includes a broad catch-all clause and it’s not a plausible understanding of congressional intent.

“Petitioners respond principally that the statute does not use the word ‘Indian’ or ‘tribe.’ But it’s hornbook law that Congress does not need to use those words to abrogate tribal immunity,” he said. “Congress was thinking about sovereign immunity. It said we are abrogating sovereign immunity. And it said we are doing it to this broad category of governments.”

Chief Justice John Roberts again asked how the statute lists over a dozen government agencies but tribes are not listed.

Raynor said this is the only instance they found where tribes are not included, but said Congress’ prior practices can’t be applied in this instance.

He added how Shah mentioned a few statutes that are specifically targeted at Indian tribes so naturally the word “Indian” or “tribe” will be used.

“In a lot of the other statutes, Congress is specifying a subset of governments, rather than all governments. And when it does that, it makes sense that Congress would have to list the governments that it’s thinking about,” Raynor said. “It can’t use comprehensive language, because it’s not trying to pick up on the universe of governments like it is doing here.”

Shah closed his arguments reiterating that it’s not clear that Congress wanted to include Indian tribes and said even if Congress did put out a general statute then wouldn’t it be “more reason to signify Indian tribes than in Indian statutes.”

A decision could come in late June.

Other cases that are awaiting a decision are Brackeen v. Haaland, concerning the Indian Child Welfare Act, Arizona v. Navajo Nation about water rights for the Navajo Nation.

Lac du Flambeau Band of Lake Superior Chippewa Indians