Lac du Flambeau Band of Lake Superior Chippewa Indians v. Coughlin
The Supreme Court ruled that the federal Bankruptcy Code requires Indian tribes to follow the same bankruptcy rules as other creditors, including the automatic freeze on debt collection that kicks in when someone files for bankruptcy.
The decision resolves a longstanding split among lower courts and means tribal businesses that lend money or hold debts can no longer use tribal sovereign immunity to avoid enforcement of bankruptcy protections.
“The Code unequivocally abrogates the sovereign immunity of all governments, categorically. Tribes are indisputably governments. Therefore, § 106(a) unmistakably abrogates their sovereign immunity too.”
The majority's logical conclusion that because the Bankruptcy Code strips all governments of immunity, and tribes are governments, tribes are covered.
How it got here: A bankruptcy court dismissed Coughlin's enforcement motion on tribal immunity grounds; the First Circuit reversed, deepening a circuit split; the Supreme Court agreed to hear the case to resolve conflicting lower-court rulings.
The Case in Depth
What happened
The Lac du Flambeau Band of Lake Superior Chippewa Indians owns a payday lending business called Lendgreen, which gave Wisconsin borrower Brian Coughlin a $1,100 short-term, high-interest loan. When Coughlin filed for bankruptcy shortly afterward, federal law required all his creditors to immediately stop collection efforts. Lendgreen allegedly kept contacting him anyway, causing Coughlin severe emotional distress. He went to bankruptcy court to enforce the collection freeze and recover damages, but the tribe argued it could not be sued because of tribal sovereign immunity.
The question before the Court
Does the Bankruptcy Code strip federally recognized Indian tribes of their legal protection from being sued, even though the law never mentions tribes by name?
The Court's answer
Yes — the Bankruptcy Code does strip federally recognized Indian tribes of their immunity from suit in this context. The Court found that the Code's definition of "governmental unit," which ends with the sweeping phrase "other foreign or domestic government," unambiguously covers every government that can claim immunity — and tribes are unquestionably governments. Because the Code's separate abrogation provision removes immunity from all governmental units without exception, tribes are included.
The Court rejected the tribe's argument that Congress would have named tribes explicitly if it meant to include them. The clear-statement rule that governs immunity cases does not require Congress to use any particular words — only that its intent be unmistakably clear from the statute as a whole. Reading the definition's comprehensive structure and catchall language together, the Court found that bar was met.
Curious how the Court got there? See the step-by-step legal reasoning →
Why it matters
People who borrow from tribal lenders and then file for bankruptcy can now enforce the automatic collection freeze against those lenders in court. Tribal businesses acting as creditors face the same legal consequences other creditors do when they violate bankruptcy rules. States and advocacy groups that long complained about tribal payday lenders sidestepping federal consumer-protection law now have a clearer legal avenue in bankruptcy proceedings.
What changes now
Coughlin's enforcement motion can now proceed in bankruptcy court, where the tribe's immunity defense is no longer available. More broadly, tribal businesses acting as creditors must comply with bankruptcy rules — including automatic stays and discharge injunctions — and can be held liable for damages if they willfully violate them. The ruling does not require Congress to act further, but Justice Thomas's concurrence renewed a call for the Court to reconsider whether judge-made tribal sovereign immunity doctrine should exist at all.
What this does not decide
The Court explicitly declined to decide whether tribes are "domestic" governments in particular — that question was unnecessary once the Court concluded the catchall phrase covers all governments regardless. The ruling also does not address tribal immunity outside the bankruptcy context or change any other aspect of federal Indian law.
Concurrences and dissents
Concurrence — Justice Thomas
Justice Thomas agreed that the bankruptcy stay should be enforceable against the tribe, but on a different ground: he has long maintained that tribal immunity should not extend to commercial activities conducted off tribal land. Because the loan and collection efforts here happened off the reservation, the tribe had no immunity to begin with, making the Bankruptcy Code's abrogation provision beside the point. He used the occasion to renew his broader argument that the Court's judge-made tribal immunity doctrine is constitutionally unsupported, historically accidental, and should be abandoned entirely.
Dissent — Justice Gorsuch
Justice Gorsuch argued that 'other foreign or domestic government' is not the same as 'any government anywhere.' Tribes occupy a unique constitutional status — neither purely foreign nor purely domestic — recognized by two centuries of history, treaty practice, and this Court's own precedents. Because the phrase is at best ambiguous as applied to tribes, the clear-statement rule should have tilted the outcome toward preserving tribal immunity. He would have reversed the First Circuit and held that the Bankruptcy Code fails the clear-statement test.
How the Court got there
The legal reasoning, step by step
- The Court began with the clear-statement rule for abrogating sovereign immunity — the principle that Congress must make its intent to strip immunity 'unmistakably clear' in the statute's text, as demanded for tribal immunity no less than for state or federal immunity. Critically, the rule is not a magic-words test: Congress need not name tribes explicitly as long as the intent to include them is unequivocally discernible through ordinary tools of statutory interpretation.
- The Court then examined the definition of 'governmental unit' in 11 U.S.C. § 101(27), which opens with a long list of specific governments varying in size, location, and type (municipalities, states, territories, foreign states), then adds their subdivisions and instrumentalities, and finally sweeps in 'other foreign or domestic government' as a catchall. The Court found this structure unmistakably comprehensive — the pairing of 'foreign' and 'domestic' works like 'rain or shine' or 'near and far,' meaning the law covers all governments regardless of where they fall on any spectrum.
- The abrogation provision in § 106(a) applies categorically to every 'governmental unit' as defined — Congress did not carve out certain governments or signal that some should be treated differently than others. Reading certain governments out of that all-inclusive definition, as the tribe urged, would disrupt the Code's carefully balanced system, creating a class of creditors immune from enforcement while others face penalties for the same conduct.
- Tribes are unquestionably governments: they make their own laws, operate their own courts, levy taxes, and have been repeatedly described as governments by both Congress and this Court. Because the Code abrogates the immunity of all governments and tribes are governments, the syllogism is complete — the Code abrogates tribal sovereign immunity.
- The Court then addressed the tribe's counterarguments. It rejected the claim that tribes must be named explicitly, noting that Congress had enough when it spoke comprehensively. It rejected the argument that 'or' in 'foreign or domestic' creates a rigid either/or divide that excludes tribes, pointing to a Bankruptcy Code provision stating that 'or' in the Code 'is not exclusive.' And it rejected the historical argument that earlier bankruptcy law treated governments differently, finding that the 1978 Code was a comprehensive overhaul that deliberately expanded coverage to all governments.