Lac du Flambeau Band of Lake Superior Chippewa Indians v. Coughlin

Background

A federally recognized Indian tribe owned a payday-lending business called Lendgreen that made a short-term, high-interest $1,100 loan to a man, Brian Coughlin. After Coughlin filed for Chapter 13 bankruptcy, an automatic stay barred creditors from further collection, but Lendgreen allegedly continued seeking payment. Coughlin sued in Bankruptcy Court to enforce the stay and recover damages; the Bankruptcy Court dismissed the case based on tribal sovereign immunity, and the First Circuit reversed, creating a split among courts of appeals.

Reasoning

The Court addressed whether two Bankruptcy Code provisions—one that cancels sovereign immunity for governmental units and another that defines "governmental unit" broadly—unambiguously cover tribes. The majority found the definition comprehensive, highlighting its long list of governments and a catchall phrase "other foreign or domestic government," and concluded that the Code's abrogation provision applies to every governmental unit listed. The Court rejected arguments that Congress had to name tribes specifically or that the catchall could plausibly exclude tribes. Because federally recognized tribes exercise governmental functions, the Court held the Code plainly abrogates their immunity and affirmed the First Circuit.

Real world impact

This decision allows bankruptcy judges to hear enforcement claims and award damages when tribal businesses violate bankruptcy protections like the automatic stay. Tribal lenders and tribal corporations that operate off reservation and conduct commercial lending are now subject to those bankruptcy enforcement tools nationwide.

Dissents or concurrances

One Justice concurred, saying off-reservation commercial activity lacks immunity regardless; another Justice dissented, arguing the statute does not clearly show Congress intended to abrogate tribal immunity.