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January 15, 2025 Article

Sovereign Immunity: From Policy to Practice

Reneau J. Longoria

From Haaland v. Brackeen, 599 U.S. 255 (2023) to Lac du Flambeau Band of Lake Superior Chippewa Indians v. Coughlin, 599 U.S. 382 (2023) (Lac) and a path forward in the lessons of Eagle Bear, Inc. v. Independence Bank, No. CV-22-93-GF-BMM, 2023 WL 8529145, 705 F. Supp. 3d 1141 (D. Mont. Dec. 8, 2023)

The U.S. Supreme Court decision in Haaland v. Brackeen upheld the constitutionality of the Indian Child Welfare Act and the sovereignty of Tribes; however, that same year, the U.S. Supreme Court diminished tribal sovereign immunity as it pertains to the U.S. Bankruptcy Code. The practical impact of this struggle, as well as imbedded obstacles to actual sovereignty, is clearly illustrated in the recent decision in Eagle Bear, Inc. v. Independence Bank.

The U.S. Supreme Court decision in Brackeen upheld and protected tribal sovereignty while specifically addressing the protection of Native children. At first glance, the June 15, 2023, decision in Lac—affirming the First Circuit’s decision refusing to apply the principles of sovereign immunity over the U.S. Bankruptcy Code and resolving a split in the circuits—appears to be a straightforward statement that the Bankruptcy Code applies to Tribal creditors. Peeling back the history of the case, as well as the path carved through the heart of the sacred principles of sovereign immunity, reveals the significance of the decision. Eagle Bear highlights how this decision is impacting Indian country, which illustrates deeper, more systemic barriers to true sovereign immunity. The analysis takes us from the courtrooms of Massachusetts, which look out onto the Atlantic Ocean, to the Eagle Bear KOA campground, which sits in the shadow of the Rocky Mountains on the boarder of Glacier Park on lands leased from the Black Feet Indian Nation.

In 2019, in the underlying bankruptcy case in Lac, Coughlin, a Massachusetts debtor, obtained and defaulted on an online payday loan from an entity affiliated with, but not directly owned by, Lac du Flambeau Band of Lake Superior Chippewa Indians, a federally recognized Tribe. The debtor filed a motion in the U.S. Bankruptcy Court of Massachusetts alleging “catastrophic” damages from emails and calls attempting to collect on his payday loan following his declaration of bankruptcy. In Coughlin’s surreply in response to a motion to dismiss for lack of jurisdiction, he argued for the first time that “the long line of Supreme Court cases finding that Indian tribes are entitled to sovereign immunity subject only to precise congressional limitations should be overruled.” That argument would become the tail that wagged the dog of this case as it evolved, even though, as Judge Bailey pointed out, “Coughlin has not stated [overruling precedent that Indian tribes are entitled to sovereign immunity] [as] a basis for that relief.” Citing the sovereignty of the Tribe, Judge Bailey declined to exercise jurisdiction over the dispute, recognizing that “[t]he Tribe is a federally recognized Indian tribe and Indian tribes are sovereign nations with a ‘direct relationship with the federal government’” and that Coughlin’s argument ignored “the special place that Indian tribes occupy in our jurisprudence. Any consideration of the statutory waiver of tribal immunity starts with the ‘baseline position [that the Supreme Court has] often held is tribal immunity.’” Thus, Judge Bailey acknowledged that “[a]mbiguities in federal law [are] construed generously in order to comport with . . . traditional notions of sovereignty and with the federal policy of encouraging tribal independence.” As a result, Judge Bailey granted the motions to dismiss. Coughlin appealed.

In 2020, the First Circuit reversed Judge Bailey’s dismissal order, thereby aligning itself with the Ninth Circuit in finding that the language in the Bankruptcy Code was sufficient to find that Congress had “clearly” intended to abrogate Tribal sovereign immunity. The First Circuit reached its holding notwithstanding the lengthy detailed historical analysis of precedent provided by Chief Judge Barron in his dissent. Justice Barron analyzed not only the precedent but also the legislative language clearly identifying those decision in which certain legislative provisions were not subject to the sovereign immunity of tribes. The fiery debate between the majority and the dissent is uncharacteristic of the First Circuit and illustrates the division of thought within the circuit, and the country as a whole, over these issues.

In June 2023, the United States Supreme Court resolved the First Circuit’s division, which permeated circuit courts across the nation, when the Court affirmed the decision in Coughlin II opining, “[O]ur analysis of the question whether the Code abrogates the sovereign immunity of federally recognized tribes is remarkably straightforward. 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 Court specifically held that Section 106(a) of the Bankruptcy Code “unequivocally abrogates the sovereign immunity of any and every government that possesses the power to assert such immunity,” including federally recognized Indian tribes, for the purposes of myriad sections of the Bankruptcy Code.

The sharp contrast in opinions on the issue of tribal sovereignty is reflected throughout the Supreme Court’s opinion in Lac, in a dialogue that is woven through the footnotes and the text as the arguments are discussed and criticized. What is even more significant, however, is how this opinion has been used across the circuit courts over the past nine months to further erode the historical principles of sovereign immunity, as well as the support for a myriad of other arguments.

The erosion of sovereign immunity all too often happens in ways that are far less publicized but is part of the daily fabric of life as tribes across the United States struggle to govern themselves and bring prosperity and self-sufficiency to their people. One example of this is illustrated in Eagle Bear.

In Eagle Bear, U.S. District Court Judge Brian Morris took great care to explain the history of not only the formation of Indian trust lands but also the creation of the Bureau of Indian Affairs (BIA) to oversee those lands and contracts relating thereto, which included the lease at issue between the Black Feet Tribe and non-tribal member William Brooke who had a well-documented history of severe delinquency and default that lasted over a decade. Judge Morris explained that the “regulatory structures that insert the BIA into nearly every facet of federally recognized Indian tribes’ existence, however, too often hobble tribal self-governance and self-determination. Flawed regulations and inept federal administration trammel tribal interests and disserve the federal trust responsibility.” As a practical matter, this means:

The Blackfeet Nation stands as the lessor, as identified in the campground lease document (Doc. 29-1 at 1), yet it does not administer, monitor, or enforce its lease. The Blackfeet Nation also possesses no statutory or regulatory obligation to compel the BIA to act against a lessee who repeatedly violates the terms of a lease agreement. The BIA possesses the sole authority to administer and enforce the lease, including by collecting rent and ensuring that lessees comply with lease terms. The Blackfeet Nation also bears no statutory or regulatory obligation to compel the BIA to take enforcement action against a delinquent lessee. The Blackfeet Nation depends upon the BIA to perform these duties.

In resolving the controversy, the court determined that the lease with Eagle Bear was terminated in 2008. Recognizing that this determination was not likely to satisfy either the Tribe or Eagle Bear, let alone the lender who held a mortgage of over $500,000.00 on the campground, the court acknowledged that it

cannot restore Eagle Bear’s nearly a decade of investment, and it cannot compensate the Blackfeet Nation for the erroneous deprivation of nearly a decade’s control over its own land. The Court can offer its assessment, however, of the gross failings of the Parties to this case. The Blackfeet Nation unmistakably stands as no idle spectator in this case. Regulations may limit the Blackfeet Nation’s role in leasing Indian trust lands, but the Blackfeet Nation remains the final arbiter. The BIA must defer to a tribe’s determination that a lease is in its best interest “to the maximum extent possible.” The protracted litigation entangling Eagle Bear’s finances and the Blackfeet Nation’s economic development could have been avoided had the BIA properly consulted with the Blackfeet Nation from Eagle Bear’s very first violation in 1997 and mandated compliance or enforced termination of the lease. The BIA possessed no authority to require the Blackfeet Nation to accept Eagle Bear’s serially late payments or attempted cures. The Blackfeet Nation may have received revenue as BIA collected the rent, interest, and royalties on the Blackfeet Nation’s behalf, but the BIA effectively forced the Blackfeet Nation to accept Eagle Bear’s violations for close to a decade. . . . A state, municipality, or private party retains a business edge over a tribe when the BIA fails its mandate. Today, when lack of investment can spell a dearth of jobs and sap economic life for a Native nation, byzantine regulations enforced by federal officials who play it by ear threaten to starve tribes of opportunity and the economic fruits of their own land.

The struggle of Maine tribes is another example. Because of the Maine Indian Claims Settlement Act, which stipulates that Maine tribes are bound by state law, Maine tribes do not enjoy federal recognition or sovereign immunity. In Maine, “reservations” are treated more like municipalities, not sovereign nations. Thus, unlike the other 570 federally recognized tribes across the United States, who were able to access federal funds during the pandemic and federal emergency management funds following other disasters, Maine tribes were not. Practical implications of this variance are inestimable and include systemic poverty, lack of infrastructure to prosper, and a bar to educational funding and opportunities available to federally recognized tribes.

The impact of the decision in Lac clearly extends beyond bankruptcy law, as seen in Eagle Bear and in recently enacted legislation in Maine to allow federal recognition for Maine tribes. The court divisions, the legislatures, and the practices of the tribes, the BIA, and those doing business in and with the tribes reflect that this conversation is far from over.

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    Reneau J. Longoria

    Doonan, Graves & Longoria LLC

    Reneau J. Longoria Esq. is an enrolled member of The Little Shell Tribe of Montana, was born and raised in Montana, and has practiced civil and criminal law in Montana, Texas, and New York. For twenty-seven years, Reneau has practiced bankruptcy and default litigation in the Northeast, including Massachusetts, Maine, and New Hampshire. Reneau is the sole owner and Managing Member of Doonan, Graves & Longoria LLC.