Court Decisions

The Bankruptcy Code's abrogation of the sovereign immunity of "governmental units," while not expressly mentioning "Indian tribes," is sufficiently explicit to override tribal immunity from bankruptcy proceedings, the U.S. Court of Appeals for the Ninth Circuit held Feb. 10 in a case of first appellate impression (Krystal Energy Co. v. Navajo Nation, 9th Cir., No. 02-17047, 2/10/04).

Indian tribes are among the "domestic governments" listed in Section 101(27)'s definition of "governmental units," Judge Marsha S. Berzon said, rejecting the Navajo Nation's argument that Section 106(a)'s abrogation of immunity of "governmental units" is only implied rather than explicit, as required to be effective.

The Ninth Circuit had previously held in In re Mitchell, 209 F.3d 1111 (2000), that Section 106 is unconstitutional insofar as it attempts to abrogate states' sovereign immunity. The U.S. Supreme Court will hear arguments on that issue March 1 in a case from the Sixth Circuit, Tennessee Student Assistance Corp. v. Hood (No. 02-1606). But Section 106's constitutionality as it applies to Indian tribes was not at issue in this appeal. The only issue was whether its abrogation of tribal immunity is sufficiently explicit.

The plaintiff brought an adversary proceeding against the Navajo Nation under Sections 505 (determination of tax liability) and 542 (turnover of property to the estate). The district court dismissed the suit, ruling that the Nation enjoyed immunity from suit in the absence of an explicit congressional abrogation.

All Domestic Governments Suable.

The Ninth Circuit reversed. Congress may annul Indian tribes' historic immunity from suit, but any abrogation must be "unequivocally expressed," not implied, Berzon said, citing Santa Clara Pueblo v. Martinez, 436 U.S. 49 (1978).

Section 106(a) states that "sovereign immunity is abrogated as to a governmental unit to the extent set forth in this section with respect to" a list of 60 enumerated sections of the Bankruptcy Code, including Sections 505 and 542. "Governmental unit" is defined in Section 101(27) as "United States; State; Commonwealth; District; Territory; municipality; foreign state; department, agency, or instrumentality of the United States …; or other foreign or domestic governments[.]"

"The definition of 'governmental unit' first lists a subset of all governmental bodies, but then adds a catch-all phrase, 'or other foreign or domestic governments,'" the judge observed. "Thus, all foreign and domestic governments, including but not limited to those particularly enumerated in the first part of the definition, are considered 'governmental units' for the purpose of the Bankruptcy Code, and, under § 106(a), are subject to suit," Berzon said.

Indian tribes were recognized as "domestic dependent nations" exercising sovereignty over their members and lands in Okla. Tax Comm. v. Citizen Band Potowatomi Indian Tribe of Okla., 498 U.S. 505 (1991), the judge said. "So the category 'Indian tribes' is simply a specific member of the group of domestic governments, the immunity of which Congress intended to abrogate."

Unique 'Generic' Abrogation of Immunity.

Congress "need not make its intent to abrogate 'unmistakably clear' in a single section of a statute," Berzon said, citing Kimel v. Fla. Bd. of Regents, 528 U.S. 62 (2000), which held that the abrogation of state immunity in the Age Discrimination in Employment Act was sufficiently explicit even though it required reading several statutory subsections to grasp the whole of Congress's intent. Although the ADEA did list "States" in its definition of a "public agency" against which employees were authorized to bring suits, while no definition in the Bankruptcy Code lists "Indian tribes" as either a foreign or domestic government, that difference between the statutes is "unimportant," the judge said. The Bankruptcy Code was enacted against the backdrop of Supreme Court decisions that do define Indian tribes as domestic nations or governments, she explained.

Just as Congress need not list each state separately in a law abrogating states' immunity, it need not list Indian tribes among the domestic governments whose immunity was lifted in Section 106, Berzon said.

"We can find no other statute in which Congress effected a generic abrogation of sovereign immunity and because of which a court was faced with the question of whether such generic abrogation in turn effected specific abrogation of the immunity of a member of the general class," the judge said. She noted that Bassett v. Mashantucket Pequot Tribe, 204 F.3d 343 (2d Cir. 2000), and Fla. Paraplegic Ass'n v. Miccosukee Tribe of Indians of Fla., 166 F.3d 1126 (11th Cir. 1999), held that Congress had not expressly abrogated tribal immunity in the Copyright Act or the Americans with Disabilities Act, respectively. "However, the sections of those statutes purporting to abrogate states' sovereign immunity do not also purport to abrogate the sovereign immunity of 'other foreign or domestic governments,' or some similarly generic term," Berzon said.

Section 106 is not just a "general authorization for suit in federal court" of the kind held insufficiently explicit to abrogate state immunity in Atascadero State Hosp. v. Scanlon, 473 U.S. 234 (1985), the judge said. Instead, it "specifically abrogates the sovereign immunity of governmental units, a defined class that is largely made up of parties that could claim sovereign immunity. … No implication beyond the words of the statute is necessary to conclude that Congress 'unequivocally expressed' its intent to abrogate Indian tribes' immunity."

Judges Edward Leavy and Richard A. Paez joined the opinion.

J. Kent MacKinlay, Warnock, MacKinlay & Associates, Mesa, Ariz., argued for the plaintiff. Marcelino R. Gomez, Navajo Nation Department of Justice, Window Rock, Ariz., argued for the Nation.