Lac du Flambeau Band of Lake Superior Chippewa Indians v. Coughlin
The Supreme Court ruled that federally recognized Indian tribes cannot use tribal sovereign immunity to shield themselves from bankruptcy court proceedings, because the Bankruptcy Code clearly strips all governments — including tribes — of that protection.
The decision resolves a split among federal appeals courts and means that tribal businesses that keep collecting debts after a borrower files for bankruptcy can be sued in court just like any other creditor.
“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 core syllogism explaining why tribal sovereign immunity is stripped by the Bankruptcy Code.
How it got here: The Bankruptcy Court dismissed Coughlin's suit on tribal sovereign immunity grounds; the First Circuit reversed; the Supreme Court took the case to resolve conflicting rulings among federal appeals courts.
The Case in Depth
What happened
Brian Coughlin took out an $1,100 high-interest payday loan from Lendgreen, a business owned by the Lac du Flambeau Band of Lake Superior Chippewa Indians in Wisconsin. Before fully repaying the loan, Coughlin filed for Chapter 13 bankruptcy — a legal process to restructure personal debt. Federal law automatically freezes all collection efforts when someone files for bankruptcy, but Coughlin says Lendgreen kept calling and pursuing him so aggressively that he suffered severe emotional distress and at one point attempted suicide.
The question before the Court
Does the Bankruptcy Code's rule stripping government entities of their immunity from lawsuits also apply to federally recognized Indian tribes, so that a tribal business can be held accountable for violating a debtor's bankruptcy protections?
The Court's answer
Yes — the Bankruptcy Code does strip federally recognized Indian tribes of their immunity from bankruptcy proceedings. The statute defines "governmental unit" to include a long list of governments and then adds a broad catchall covering "other foreign or domestic government." The Court read that phrase — like "rain or shine" or "near and far" — as an all-encompassing expression covering every type of government without exception. Because the sovereign immunity abrogation provision then applies to every governmental unit without carving out any exceptions, it sweeps in tribes along with every other government.
The only remaining step was confirming that tribes qualify as governments at all — a question the Court found easy. Tribes make their own laws, run their own courts, and levy taxes; Congress and the Supreme Court have long recognized them as governments. Since the Code abrogates all governments' immunity and tribes are governments, the abrogation covers tribal immunity too.
Curious how the Court got there? See the step-by-step legal reasoning →
Why it matters
Tribal businesses that lend money — including the growing number of online payday lenders that operate through tribal entities — can now be sued in bankruptcy court for violating the automatic stay, which freezes debt collection the moment a borrower files for bankruptcy. Consumers dealing with tribal creditors gain a meaningful enforcement tool, and tribal lenders can no longer rely on immunity to sidestep federal bankruptcy protections.
What changes now
The case returns to the lower courts with the First Circuit's ruling affirmed. Coughlin may now pursue his motion to enforce the bankruptcy automatic stay against the Band and its subsidiaries and seek damages for alleged willful violations. More broadly, tribal creditors across the country now face the same bankruptcy enforcement mechanisms as any other government creditor, and tribal lending businesses cannot rely on sovereign immunity to sidestep automatic-stay requirements.
What this does not decide
The Court expressly declined to decide whether tribes qualify as purely "domestic" governments under §101(27) — that question was unnecessary given the holding that tribes fall within the broader catchall covering all governments. The ruling also does not address the scope of tribal sovereign immunity outside the bankruptcy context.
Concurrences and dissents
Concurrence — Justice Thomas
Justice Thomas agreed with the outcome but on a different ground: because the loan was made off tribal land and involved commercial activity outside the reservation, he believes tribes have no sovereign immunity from suit in that context regardless of what the Bankruptcy Code says. He also used the occasion to urge the Court to abandon its tribal immunity doctrine altogether, arguing it is a judicially invented doctrine with no constitutional basis, out of step with modern realities, and increasingly used as a shield to evade both state and federal law.
Dissent — Justice Gorsuch
Justice Gorsuch argued that the phrase 'other foreign or domestic government' does not clearly cover Indian tribes, which the Constitution and two centuries of precedent treat as a unique hybrid status — neither fully foreign nor fully domestic. Under the clear-statement rule, any ambiguity must be resolved in favor of immunity. He would have held that the Bankruptcy Code falls short of that standard and reversed the First Circuit, leaving it to Congress to speak unambiguously if it wants to abrogate tribal immunity.
How the Court got there
The legal reasoning, step by step
- To strip away tribal sovereign immunity — the legal protection preventing tribes from being sued without their consent — Congress must make its intent unmistakably clear in the statute's text. Ambiguity is resolved in favor of preserving immunity. But Congress need not use any specific magic words; plain statutory language can satisfy this demanding standard as long as the intent is clearly discernible from the text.
- Two Bankruptcy Code provisions drive the analysis: §101(27), which defines 'governmental unit,' and §106(a), which states that 'notwithstanding an assertion of sovereign immunity, sovereign immunity is abrogated as to a governmental unit.' The question is whether, read together, these provisions unambiguously strip tribes of their immunity.
- The Court found that §101(27)'s definition of 'governmental unit' is explicitly all-encompassing. It opens with a long list of specific governments — municipalities, states, territories, foreign states, and their subdivisions — and closes with a broad catchall: 'other foreign or domestic government.' The Court read the pairing of 'foreign' and 'domestic,' like phrases such as 'rain or shine' or 'near and far,' as signaling that every possible type of government is covered, wherever it falls on any spectrum.
- Section 106(a) then abrogates sovereign immunity for every governmental unit in that definition without picking and choosing. Congress created no carve-out for any particular class of government; the abrogation is categorical. Reading an exception for tribes into the statute, the Court reasoned, would disrupt the Code's carefully balanced system of rules that apply uniformly to all creditors.
- The final step was confirming that federally recognized tribes qualify as governments under the statute — a point the Court called straightforward. Tribes make their own substantive laws, run their own courts, and levy taxes on reservation activity. Both Congress and the Supreme Court have repeatedly and explicitly characterized tribes as governments, including in the context of tribal sovereign immunity itself.
- Putting the pieces together: the Code abrogates the immunity of all governments categorically; tribes are indisputably governments; therefore the Code unmistakably abrogates tribal sovereign immunity. The Band's counterarguments — that tribes weren't named explicitly and that historical bankruptcy practice treated some governments differently — failed because Congress is free to express abrogation intent without naming tribes specifically, and the 1978 Bankruptcy Code comprehensively rewrote prior law rather than carrying forward any differential treatment.