United States District Court, D. Delaware
IN RE MONEY CENTERS OF AMERICA, INC., et al, Debtors.
THUNDERBIRD ENTERTAINMENT CENTER, INC., Appellee. MARIA APRILE SAWCZUK, as Trustee of the Liquidating Trust of Money Centers of America, Inc., and Check Holdings, LLC, Appellant, Adv. Pro., 16-50410-CSS
appeals the Bankruptcy Court's Order, In re Money
Centers of America, Inc., 565 B.R. 87 (Bankr. D. Del.
2017) ("Dismissal Order"), which dismissed
Trustee's complaint against Thunderbird Entertainment
Center, Inc. ("Thunderbird"), a wholly owned entity
of the Absentee Shawnee Tribe of Oklahoma, seeking to avoid
and recover certain transfers to Thunderbird. For the reasons
set forth below, the Dismissal Order is affirmed.
concedes that Trustee's complaint accurately sets forth
the facts concerning its relationship with the Debtors. (D.I.
17 at 2). Debtors provided debit card and credit card
processing for patrons of Thunderbird's casino. Patrons
presented their credit or debit cards to Thunderbird, who
would then run those cards through equipment provided by
Debtors. If the transaction was approved, Thunderbird
advanced funds to the patrons, and Debtors would obtain an
amount equal to the advanced amount from the patrons'
credit or debit card issuers and forward those funds to
Thunderbird, less a fee. (Adv. D.I. 1 at ¶
Debtors filed voluntary petitions for relief under Chapter 11
in March 2014. On March 21, 2016, the complaint against
Thunderbird was filed, seeking to avoid and recover $230,
633.80 in allegedly preferential transfers or fraudulent
conveyances paid by Debtors to Thunderbird in the 90 days
prior to Debtors' bankruptcy filing. (Adv. D.I. 1).
Thunderbird filed a motion to dismiss the complaint on May 5,
2016, arguing that it had not waived its tribal sovereign
immunity and that the Bankruptcy Court lacked subject matter
jurisdiction over the adversary proceeding. (Adv. D.I. 5).
The Bankruptcy Court agreed and entered the Dismissal Order
on February 28, 2017. On March 13, 2017, a timely appeal was
filed. (D.I. 1).
is undisputed that Thunderbird is wholly owned by the
Absentee Shawnee Tribe of Oklahoma and is a tribal
corporation and tribal entity with sufficient relationship
with the Absentee Shawnee Tribe to enjoy the tribe's
sovereign immunity. The sole issue on appeal is whether the
Bankruptcy Court correctly held that Congress did not
abrogate tribal sovereign immunity in the Bankruptcy Code.
The appeal is fully briefed. (See D.I. 15, 17
(adopting and incorporating the arguments set forth in D.I.
Jurisdiction and Standard of Review. The Court has
jurisdiction to hear an appeal from a final judgment of the
Bankruptcy Court pursuant to 28 U.S.C. § 158(a)(1).
"On appeal from an order issued by the Bankruptcy Court,
the Court 'review[s] the Bankruptcy Court's legal
determinations de novo, its factual findings for
clear error and its exercise of discretion for abuse
thereof" In re Energy Future Holdings Corp.,
558 B.R. 684, 686 (D. Del. 2016) (quoting In re Trans
World Airlines, Inc., 145 F.3d 124, 131 (3d Cir. 1998)).
The sole issue on appeal is whether the Bankruptcy Court
properly construed §§ 106(a) and 101(27) of the
Bankruptcy Code in holding that tribal sovereign immunity is
not abrogated under the Bankruptcy Code, which is a legal
determination to be reviewed de novo.
Discussion. "Among the core aspects of sovereignty that
tribes possess - subject... to congressional action - is the
'common law immunity from suit traditionally enjoyed by
sovereign powers."' Michigan v. Bay Mills Indian
Cmty., 134 S.Ct. 2024, 2030 (2014) (quoting Santa
Clara Pueblo v. Martinez, 436 U.S. 49, 58 (1978)).
Tribal sovereign immunity is based on tribes' status as
"distinct, independent political communities, retaining
their original natural rights" and "separate
sovereigns pre-existing the Constitution[.]" Santa
Clara, 436 U.S. at 55-56. Because of this unique status,
tribal sovereign immunity is not congruent with immunity
enjoyed by the states or the federal government. Three
Affiliated Tribes of the Ft. Berthold Reservation v. Wold
Eng'g, 476 U.S. 877, 890 (1986). In its most recent
reaffirmation, the Supreme Court acknowledged tribal
sovereign immunity as a "special brand of sovereignty
the tribes retain." Bay Mills, 134 S.Ct. at
Trustee opposed dismissal, asserting that Congress abrogated
Thunderbird's sovereign immunity in 11 U.S.C. § 106.
While Congress may waive tribal sovereign immunity by
statute, the Supreme Court has held that "such a
congressional decision must be clear." Bay
Mills, 134 S.Ct. at 2031. Congressional waivers further
"cannot be implied, but must be unequivocally
expressed." Santa Clara, 436 U.S. at 58;
Bay Mills, 134 S.Ct. at 2031-32 ("That rule of
construction reflects an enduring principle of Indian law:
Although Congress has plenary authority over tribes, courts
will not lightly assume that Congress in fact intends to
undermine Indian self-government.") Section 106 waives
sovereign immunity for "governmental units" which
are defined at § 101(27) as "a State, a
Commonwealth, a District, a Territory, a municipality, or a
foreign state; or other foreign or domestic government."
11 U.S.C. § 106. Trustee argued that the reference to
"other ... domestic governments]" can only mean
Indian tribes, thus the congressional waiver is clear and
unequivocal. Recognizing a split of authority on this issue,
the Bankruptcy Court rejected Trustee's argument and
adopted the rationale of Buchwald Capital Advisors, LLC
v. Papas (In re Greektown Holdings, LLC), 532 B.R. 680
(E.D. Mich. 2015) and Whitaker v. Dakota Finance Corp.
(In re Whitaker), 474 B.R. 687 (B.A.P. 8th Cir. 2012).
See Money Centers, 565 B.R. at 101-03. These
decisions, holding that Congress has not clearly and
unequivocally expressed an intent to abrogate sovereign
immunity of Indian tribes under §§ 106(a) and
101(27), were "well reasoned, and carefully construe the
text of the Bankruptcy Code." Id. at 103.
appeal, Trustee argues that the Dismissal Order should be
reversed because, in Krystal Energy, the only court
of appeals to consider this issue determined that tribes are
"domestic governments." (D.I. 15 at 7). The Ninth
Circuit held that "[i]t is clear from the face of
§§ 106(a) and 101(27) that Congress did intend to
abrogate the sovereign immunity of all 'foreign
and domestic governments." See Krystal Energy Co. v.
Navajo Nation, 357 F.3d 1057 (9th Cir. 2003)
(emphasis in original). "Indian tribes are certainly
governments, " which the Supreme Court has described as
'"domestic dependent nations that exercise inherent
sovereign authority over their members and
territories.'" Id. (citations omitted).
"[T]he category 'Indian tribes' is simply a
specific member of the group of domestic governments."
Id. at 1058. Trustee urges the Court to adopt this
interpretation. (D.I. 15 at 8). Trustee argues that
Thunderbird has offered no other possible definition for
"other ... domestic governments], " which can only
mean Indian tribes "because there is nothing else to
which it could possibly refer." (See id.).
Trustee further argues that Congress need not invoke any
"magic words" (i.e., Indian tribes);
rather, the intent to abrogate must simply be "clearly
discernable from the statutory text in light of traditional
interpretive tools." (Id. at 10).
Conversely, Thunderbird argues that the Bankruptcy Court
properly joined Whitaker in rejecting Krystal
Energy's reliance on "domestic dependent
nations" language in prior cases, finding a waiver by
implication, which is prohibited by Supreme Court precedent.
(See D.I. 16 at 11). Thunderbird contends that
Congress included the catch-all "other ... domestic
government[s]" to avoid any argument over terminology
used by many types of local domestic governments not
expressly identified - e.g., towns, townships,
villages, boroughs, counties, and parishes. (Id. At
14). Thunderbird argues it would make little sense to include
a catch-all provision solely to address Indian tribes, when
the term "Indian tribe" would have been much
clearer and consistent with the Supreme Court's
long-standing requirement that Congress be explicit in
enacting waivers of tribal sovereign immunity. (Id.)
Thunderbird argues that the overwhelming weight of recent
authority is in agreement and cites a recent decision on this
issue from a bankruptcy court in the Third Circuit with
nearly identical facts. (See D.I. 16 at 9 (citing
Subranni v. Navajo Times Publishing Co., Inc.), 568
B.R. 616 (Bankr. D.N.J. 2016)). Subranni also
involved a claim against a tribe to avoid preferential
payments. See Id. at 618. The tribe moved to
dismiss, arguing that §§ 106(a) and 101(27) were
not sufficiently clear or unequivocal to constitute a waiver.
Id. The court adhered to the basic canons of
statutory interpretation by following the plain language of
§ 106. Id. At 624. "The plain language of
[§] 106(a) is clear and unambiguous. It does not
abrogate sovereign immunity for Indian tribes. If Congress
had intended to abrogate sovereign immunity to Indian tribes
under [§] 106, it could easily and expressly have done
so, but it did not." Id. at 625.
Court agrees with the reasoning set forth in Whitaker,
Greektown and Subranni. In Whitaker,
the Eighth Circuit Bankruptcy Appellate Panel adopted the
bright line rule set forth in In re National Cattle
Congress, 247 B.R. 259, 267 (Bankr. N.D. Iowa. 2000).
Absent a specific mention of "Indian tribes" in the
Bankruptcy Code, any finding of abrogation under §
106(a) necessarily relies on inference or implication, both
of which are prohibited by the Supreme Court:
Courts have found abrogation of tribal sovereign immunity in
cases where Congress has included "Indian tribes"
in definitions of parties who may be sued under specific
statutes ... Where the language of a jurisdictional grant is
unambiguous as to its application to Indian tribes, no more
is needed to satisfy the Santa Clara requirement
than that Congress unequivocally state its intent... Where
the language of a federal statute does not include
"Indian tribes" in definitions of parties subject
to suit or does not specifically assert jurisdiction over
"Indian tribes, " courts find the statute
insufficient to express an unequivocal congressional
abrogation of tribal sovereign immunity.
Whitaker, 474 B.R at 61 (quoting National
Cattle, 247 B.R. at 267 (internal citations and
quotation marks omitted)). In National Cattle, Judge
The [Bankruptcy] Code makes no specific mention of Indian
tribes. Unlike States and foreign governments, Indian tribes
are not specifically included in the § 101(27)
definition of "governmental unit." In order to
conclude Congress intended to subject Indian tribes to suit
under the Code, the Court would need to infer such intent
from language which does not unequivocally and unambiguously
apply to Indian tribes. Considering the ...