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Buchwald Capital Advisors LLC v. Sault Ste. Marie Tribe (In re Greektown Holdings)

Case Type:
Case Status:
18-1165, 2019 WL 922658 (6th Circuit, Feb 26,2019) Published
Native American Tribe has sovereign immunity against suits to recover allegedly fraudulent transfers.
Procedural context:
Chapter 11 Liquidating Trustee sued Native American Tribe to recover allegedly fraudulent transfers. Tribe filed motion to dismiss alleging sovereign immunity. Bankruptcy Court denied motion holding that Congress abrogated tribal sovereign immunity and that tribe waive sovereign immunity by actually or effectively filing Debtor’s bankruptcy petition. On appeal, District Court reversed holding that tribe’s conduct was insufficient to waive sovereign immunity; waiver of tribal sovereign immunity would not be implied through litigation conduct of tribes alter ego; and that filing bankruptcy petition does not waive sovereign immunity as to any socially filed adversary. The 6th Circuit affirmed the District Court and dismissed the adversary based on sovereign immunity.
The Sault Ste. Marie Tribe of Chippesa Indians (the “Tribe”) undertook to build and operate a casino in the city of Detroit. The Tribe created an entity, Greektown Holdings, LLC, to own the casino while other entities, all owned by Tribe, held the ownership interests in Greektown. Greektown obtained financing and paid $177 million to various entities who were either directly or indirectly owners of Greektown. After the Tribe caused Greektown to file for relief under Chapter 11, Greektown confirmed a Plan that assigned to the Greektown Litigation Trust the right to prosecute avoidance actions. The Trustee of the Trust brought action against Tribe asserting that $177 million paid by Greektown was either distributed to the Tribe or distributed to 3rd parties for the benefit of the Tribe. The Tribe asserted sovereign immunity as a defense and the Trust asserted that sovereign immunity was not available. The 6th Circuit concluded that any waiver of sovereign immunity requires on expression intention of congressional intent, with any doubt to be resolved in favor of Tribe. Section 106 abrogates Sovereign immunity over United States and its political subdivisions plus “other foreign or domestic government”. Section 106 is not clear as to whether Native American Tribe is “foreign or domestic government”. Congress did not unequivocally include Native American Tribes in waiver of sovereign immunity. Further, Tribe can waive sovereign immunity by litigation conduct but only to extent of specific litigation asserted, and not by litigation conduct of Tribe’s alter ego. Tribe did not expressly waive sovereign immunity as Tribe’s governing code requires board approval of any waiver and there was no evidence that Tribe’s governing board had adopted such a resolution.
Clay and Griffin. Zouhary dissented.

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