Lac du Flambeau Band of Lake Superior Chippewa Indians v. Coughlin

The Lac du Flambeau Band of Lake Superior Chippewa Indians, a federally recognized tribe, operated a lending business. Brian W. Coughlin, who had obtained a loan from the tribe, filed for Chapter 13 bankruptcy. The automatic stay halting collection efforts took effect. Despite this, the tribe continued to enforce the loan, prompting Coughlin to seek sanctions. The tribe asserted sovereign immunity. The United States Court of Appeals for the First Circuit held that the Bankruptcy Code unequivocally abrogated tribal sovereign immunity. The Supreme Court of the United States granted certiorari to resolve a circuit split on whether the Bankruptcy Code, through its definitions of governmental units, clearly and unequivocally abrogates tribal sovereign immunity.

In an 8-1 decision, the Supreme Court held that the Bankruptcy Code unambiguously abrogates tribal sovereign immunity. Justice Ketanji Brown Jackson authored the opinion, finding that the Code's definition of "governmental unit" applies to all sovereigns, including tribes, thus subjecting them to its enforcement mechanisms.

The central dispute was whether the U.S. Bankruptcy Code unequivocally abrogates the sovereign immunity of Native American tribes, thereby subjecting them to the automatic stay and other provisions, or if congressional intent to do so was insufficiently clear.

The ruling affirmed that tribal sovereign immunity is not absolute in the context of federal bankruptcy law, providing greater legal certainty for creditors and debtors involved with tribal lending entities. It resolved a significant circuit split and clarified the broad reach of the Bankruptcy Code over all domestic sovereigns, potentially impacting tribal commercial activities and their legal accountability.