Oklahoma Bar Journal

Examining the Implications of Lac du Flambeau Band of Lake Superior Chippewa Indians v. Coughlin: How are Tribal Business Enterprises Impacted Under the Bankruptcy Code?

By Mark A. Craige, Logan Hibbs and Michael McBride III

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Over the past two decades, bankruptcy courts and federal circuits have disagreed on whether the Bankruptcy Code waives tribal sovereign immunity and makes tribes subject to the code’s provisions. But in June 2023, the Supreme Court answered this question in Lac du Flambeau Band of Lake Superior Chippewa Indians v. Coughlin,[1] which held that tribes are “governmental units” whose immunity is waived under §§101(27)[2] and 106(a)(1)[3] in the Bankruptcy Code. Therefore, tribes are now subject to certain provisions of the code.

However, in holding that tribes are “governmental units,” a few issues remain unclear, the most pressing of which is how tribally owned businesses – which are often considered an “arm of the tribe” – are impacted. Importantly, the Bankruptcy Code expressly excludes “governmental units” from being able to file for bankruptcy.[4] So does Coughlin’s holding that “tribes” are “governmental units” mean that tribal businesses are also unable to file for bankruptcy?

This article seeks to analyze this question and examine how Coughlin exposes the inadequacies of the Bankruptcy Code when it comes to tribal businesses. To do so, part I of this article will provide a general overview of tribal sovereignty, tribal immunity and the “arm of the tribe” analysis. Part II will analyze the key issues leading up to Coughlin and will highlight the core reasoning for Coughlin’s holding. Finally, part III will outline the implications of Coughlin for tribal governments and enterprises as creditors and debtors.


Indian tribes are considered North America’s first nations, and because their nationhood predates the United States, their sovereignty is derived from their original powers of self-government – not the United States Constitution.[5] As a result, even though tribes have since agreed in treaties to the paramount authority of the United States, federal courts still recognize that Indian tribes are distinct political sovereigns that have inherent authority to govern their own citizens, create their own laws and – relevant here – enter into commercial contracts with non-tribal private parties and organize their own business entities under state or tribal law.[6]

Importantly, however, Congress has the “plenary and exclusive” power to “enact legislation that both restricts and, in turn, relaxes those restrictions on tribal sovereign authority.”[7] Pursuant to this power, it has imposed sweeping abrogations of tribal sovereignty, including restricting the ability of tribes to prosecute major crimes on their lands, forcing tribes to enter into state compacts to conduct Class III gaming within the state and even fully terminating tribal governments.[8] But although the Supreme Court has upheld congressional abrogation of tribal sovereignty, it will not “lightly assume that Congress ... intends to undermine Indian self-government.”[9] Instead, to find congressional abrogation of tribal sovereignty, the Supreme Court requires a clear, unequivocal intent from Congress.[10]

The Supreme Court has similarly held that tribal sovereign immunity – which generally protects tribal governments and tribal entities from lawsuits against private individuals and states – will also not be abrogated unless 1) Congress clearly and unequivocally abrogates that immunity or 2) the tribe clearly waives its immunity.[11] But although the Supreme Court has ruled that tribal sovereign immunity extends to a tribal government’s commercial activities in and outside of Indian Country,[12] the court has said very little on whether lower courts should treat a tribally owned business as a distinct entity or whether it should be considered part of the tribe – and, thus, entitled to the tribe’s sovereign immunity.

Because the Supreme Court has been relatively silent on this topic, Oklahoma courts use a six-factor test created by the 10th Circuit in Breakthrough Management Group, Inc. v. Chukchansi Gold Casino & Resort to determine whether a tribal enterprise is an “arm of the tribe.”[13] Courts applying this test examine the following factors:

  • The method of the entity’s creation: Facts weighing in favor of immunity include whether the entity was created under tribal law and whether the tribe’s resolutions or ordinances creating the entity describe it as an “instrumentality” or “authorized agency” of the tribe.
  • The entity’s purpose: Granting immunity is favored if the entity was “created for the financial benefit of the tribe and to enable it to engage in various governmental functions.”[14]
  • The entity’s structure, ownership and management: This factor weighs in favor of immunity if the tribe has significant managerial control over the entity and wholly owns it.
  • The tribe intends for the entity to share its immunity: If a tribe’s resolutions and ordinances express that the enterprise should share the tribe’s immunity, then this intent weighs in favor of granting immunity.
  • The financial relationship between the tribe and entity: This factor weighs in favor of immunity if the entity’s revenue funds the tribe’s “governmental functions, its support of tribal members and its search for other economic development opportunities.”[15]
  • Whether extending immunity would “plainly promote and fund the Tribe's self-determination through revenue generation and the funding of diversified economic development.”[16] It also asks if extending immunity to the entity “directly protects the sovereign tribe's treasury, which is one of the historic purposes of sovereign immunity in general.”[17]

So far, only a few courts have considered whether a tribal business is an arm of the tribe in bankruptcy proceedings, and most consider this question in the context of tribal enterprises as creditors. For example, in Solomon v. American Web Loan, the bankruptcy court applied the Breakthrough test to determine whether a payday lending company incorporated under tribal law and partially owned by the tribe was entitled to the tribe’s sovereign immunity.[18] There, a non-Indian individual partnered with a tribe to form an online payday loan company.[19] Believing that it shared the tribe’s sovereign immunity and that the state’s interest rate caps were inapplicable, it charged customers exorbitant interest rates for payday loans. A group of debtors eventually sued in bankruptcy court, arguing that the company violated state law.[20]

Applying the Breakthrough factors, the court found that the tribe received about $8 million in profits, compared to the tribe’s non-Indian partner who earned around $110 million.[21] Additionally, the court found that the non-Indian partner had majority control of the company’s board and in the day-to-day operations.[22] Finally, even though the entity was created by a tribal ordinance that expressed an intent for the corporation to share the tribe’s immunity, the court believed the parties’ true intentions were to shield the non-Indian partner from legal liability.[23] For these reasons, the court held that the payday lending operation was not an arm of the tribe, and therefore, the company and the non-Indian partner could not assert sovereign immunity.[24]

American Web Loan illustrates how predatory creditors can take advantage of tribal sovereign immunity in an attempt to protect themselves from state laws. This case also provides an example of how courts apply the Breakthrough test to tribal enterprises as creditors. But what about when tribal enterprises enter bankruptcy proceedings as debtors?

In perhaps the only case to address this issue, creditors in In re Santa Ysabel Resort and Casino argued that a tribally owned casino could not file for Chapter 11 bankruptcy because it was an arm of the tribe.[25] In that case, the tribe’s casino filed for bankruptcy after accruing more than $50 million in debt.[26] Although the casino argued that it was separate from the tribe and could file for bankruptcy, several other creditors moved to dismiss the petition, citing loan documents listing the tribe as the obligor as evidence that the casino was an arm of the tribe.[27] Ultimately, the court sided with the creditors and dismissed the casino’s bankruptcy petition without an opinion.[28] Consequently, the casino was unable to negotiate with its creditors and closed a few years later.[29]

Beyond this case, few bankruptcy courts, if any, have analyzed whether a tribal debtor is an arm of the tribe and eligible for bankruptcy protection. But, as will be discussed later, Coughlin’s holding that “tribes” are government units will soon invite the question of whether the applicable Bankruptcy Code provisions, such as exclusion from bankruptcy protection, also apply to tribal enterprises.


Leading up to Coughlin, the 6th and 9th circuits differed on whether §106(a)(1) of the Bankruptcy Code, which abrogates the sovereign immunity of certain “governmental units,” also applied to tribes. The core issue for both courts – and Coughlin – was whether tribes fell within the definition of a “governmental unit” in §101(27).[30] On one side of the split, the 9th Circuit in Kyrstal Energy Co. v. Navajo Nation held that §106(a)(1) abrogated tribal immunity.[31] Because §106(a)(1) abrogated the immunity of “all governments,” including “domestic governments,” the court believed this abrogation also applied to tribes as “domestic dependent nations.”[32] And since Congress abrogated the immunity of essentially any government, the court found this sufficient to find that Congress clearly and unequivocally intended to abrogate tribal sovereign immunity as well.[33]

In contrast, the 6th Circuit in In re Greektown Holdings, LLC disagreed with the 9th Circuit and held that §106(a)(1) did not abrogate tribal immunity.[34] According to the court, listing every other sovereign – except for tribes – in §101(27) did not constitute a clear intent to abrogate tribal immunity. Additionally, Congress knew about the Supreme Court’s clear statement rule when it adopted the Bankruptcy Reform Act of 1978, yet it failed to mention tribes anywhere in the statute.[35] So, for these reasons, the 6th Circuit held that Congress did not abrogate tribal immunity in the Bankruptcy Code.

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In June 2023, the Supreme Court finally resolved this circuit split in Lac du Flambeau Band of Lake Superior Chippewa Indians v. Coughlin.[36] In Coughlin, the tribe owned a payday loaning operation that extended a payday loan to Mr. Coughlin.[37] Unable to pay his loan and other debts, Mr. Coughlin eventually filed for Chapter 13 bankruptcy, which triggered the automatic stay.[38] But when the tribe’s payday lender tried to bypass the automatic stay by attempting to collect some of his assets, Mr. Coughlin filed a motion to enforce the stay and recover damages against the lender and the tribe.[39] However, the bankruptcy court dismissed Mr. Coughlin’s motion based on tribal sovereign immunity, and his appeal eventually made its way to the U.S. Supreme Court.

The court ultimately sided with Mr. Coughlin and held that §106(a)(1) indeed abrogates tribal sovereign immunity. In determining whether tribes are “governmental unit[s]” under §106(a), the court emphasized the “strikingly broad scope” of the long list of governments in §101(27)’s definition, which included categories of governments ranging from the United States to municipalities, territories, foreign states and domestic governments.[40] According to the court, creating such a “comprehensive” list showed a congressional intent to “categorically abrogate[ ] the sovereign immunity of any governmental unit that might attempt to assert it,” regardless of its location, nature or type.[41] And because tribes “are indisputably governments,” they accordingly fell within the scope of §§101(27) and 106(a)(1).[42] Holding that tribes were exempt, the court explained, would “upend[ ] the policy choices that the code embodies” by allowing some government creditors to be immune “while others would face penalties for noncompliance.”[43] So, for the preceding reasons, the court held that the Bankruptcy Code waived tribal sovereign immunity.[44]


Now, the rule under Coughlin is that the Bankruptcy Code treats federal, state and tribal governments equally concerning the abrogation of sovereign immunity. The most obvious impact of this holding is that Indian tribes and their business enterprises can no longer assert immunity from suit in bankruptcy courts. This also means that tribes and their enterprises are subject to other provisions of the code, including alleged violations of the automatic stay under §362, the use, sale or lease of property under §363, the allowance of claims or interests under §502, turnover of property to the debtor’s estate under §542, recovery of allegedly preferential or fraudulent transfers received by tribes under §§547 and 548, and post-petition claims against the debtor in Chapter 13 cases under §1305.

However, a few issues remain unclear, the most pressing of which is whether tribal businesses can file for bankruptcy. Remember that for an entity to be able to file for bankruptcy, it must be a “debtor” under the Bankruptcy Code. A “debtor” can be a “person” – which includes individuals, partnerships, corporations or “municipalit[ies]” – but the Bankruptcy Code says it cannot be a “governmental unit.”[45] However, Coughlin held that “tribes” – which, in that case, included the tribe’s government and the tribe’s lending company – are governmental units under the code. So, whether intentional or an oversight, this broad use of “tribes” exacerbates the conflict for classifying tribal businesses under the Bankruptcy Code. If tribal businesses were merely partnerships or corporations, they could file for bankruptcy protection. But if tribal businesses are also “government units,” as Coughlin may hold, they are likely unable to file for bankruptcy.

Ultimately, whether tribal businesses are “governmental units” essentially requires lower courts to apply the 10th Circuit’s Breakthrough factors to determine if the business is an “arm of the tribe.” However, this test puts tribes in a difficult position when organizing their businesses. Why? A tribe’s immunity from suit is a fundamental part of their sovereignty and economic development, so tribes will certainly want their businesses to share their immunity. But Coughlin now exposes a double-edged sword: Should tribes structure their enterprises so as to not resemble an “arm of the tribe” in order for those enterprises to receive bankruptcy protection? If so, this might mean organizing their businesses under state law (which may make them subject to state taxes), hiring non-tribal citizens to operate the enterprise, sharing revenue with non-tribal entities and individuals, dividing the enterprise’s ownership and possibly losing the ability to assert immunity in cases involving employment disputes or torts. Essentially, in exchange for bankruptcy protection, tribes would lose much of their sovereignty and control over their revenue streams.

To add another layer of difficulty, federal law often prohibits tribes from even structuring their entities in a way that makes them distinct from the tribe. For example, the Indian Gaming Regulatory Act (IGRA) mandates that tribes “have the sole proprietary interest and responsibility for the conduct of any gaming activity.”[46] This means that only the tribe itself can own, control and possess an Indian gaming operation, which would undoubtedly satisfy an arm of the tribe analysis. Furthermore, even if the tribe were to successfully argue that its casino was a valid debtor, the IGRA would likely require that equity interests in the casino remain with the tribe – even if the debtor’s more senior creditors were not fully repaid.[47] Thus, the IGRA’s propriety interest requirement would directly conflict with the absolute priority rule in Chapter 11 bankruptcy proceedings, which requires that creditors be paid in full before equity can receive anything in a bankruptcy.[48] So, “[e]ven if deemed eligible to file for [C]hapter 11, if a tribal debtor cannot propose a plan that conforms with absolute priority – and compliance with the IGRA likely means it cannot – it will be unable to use the bankruptcy system to restructure its debts.”[49] Before Coughlin, tribal enterprises may have been able to avoid these issues by presenting themselves as a distinct corporation or LLC. But now, Coughlin will put pressure on courts to consider whether those entities are truly separate from the tribe to be entitled to bankruptcy protection. And tribes will have to decide whether that protection is worth their sovereignty.


Ultimately, Coughlin did not create these issues, but it does expose how the Bankruptcy Code fails to adequately address the treatment of tribal enterprises. To gain bankruptcy protection, tribes must organize and structure their businesses so that they do not look like an “arm of the tribe.” But in doing so, they may lose sovereign immunity for those businesses in non-bankruptcy lawsuits. And even if tribes can successfully argue that their business is a valid debtor, they probably cannot satisfy the conflicting requirements of other federal laws, such as the IGRA. As a result, tribes are left with either a difficult choice to exchange their sovereignty for protection or with no protection at all for some of its most important industries.


Mark A. Craige is a shareholder and director with Crowe & Dunlevy, practicing in insolvency, reorganization and related areas. He served on the board of the American Board of Certification for more than 30 years and is an American Bankruptcy Institute member. He is a fellow of the American College of Bankruptcy, where he recently served as the 10th Circuit’s Regent, is a frequent CLE lecturer, published numerous articles and is a 1998 OBA Earl Sneed Award recipient. Mr. Craige received his B.S., cum laude, from Southeastern Oklahoma State University in 1979 and his J.D. from the TU College of Law in 1981.




Logan Hibbs is an Indian law attorney at Crowe & Dunlevy in Tulsa. He represents tribal entities in tribal, state and federal courts and advises tribes on economic development and employment policies. A Choctaw Nation citizen, Mr. Hibbs graduated with honors from the OU College of Law, where he was on the editorial board of the Oklahoma Law Review, inducted into the Order of the Scribes and earned an American Indian Law certificate.





Michael McBride III is shareholder and director at Crowe & Dunlevy and chairs the firm’s Indian Law & Gaming Practice Group. He has more than three decades of legal experience and has served as Seminole Nation attorney general, Kaw Nation and Pawnee Nation supreme courts justice, Sac and Fox Nation attorney general and an adjunct settlement judge for the U.S. District Court for the Northern District of Oklahoma. He is a former chair for the Federal Bar Association Indian Law Section, has won numerous awards and served in various leadership roles. He is an author, a regular conference speaker and a former adjunct professor at the TU College of Law.  He received his B.A. from Trinity University and his J.D. from the OU College of Law.




[1] 599 U.S. 382 (2023).

[2] 11 U.S.C. §106(a)(1) (waiving sovereign immunity for a “governmental unit” in certain provisions of the code).

[3] 11 U.S.C. §101(27) (defining “governmental unit” as “United States; State; Commonwealth; District; Territory; municipality; foreign state ... a State, a Commonwealth, a District, a Territory, a municipality, or a foreign state; or other foreign or domestic government”).

[4] See 11 U.S.C. §§109(a), 101(41).

[5] 1 Cohen's Handbook of Federal Indian Law §4.01 (2023).

[6] See generally, United States v. Wheeler, 435 U.S. 313, 323-24 (1978); Id. §21.02.

[7] United States v. Lara, 541 U.S. 193, 202 (2004).

[8] See Major Crimes Act (18 U.S.C. §1153); Indian Gaming Regulatory Act (25 U.S.C. §2701); Charles F. Wilkinson and Eric R. Biggs, “The Evolution of the Termination Policy,” 5 A. Ind. L. Rev. 139, 151–154 (1977).

[9] Michigan v. Bay Mills Indian Community, 572 U.S. 782, 790 (2014).

[10] Id.

[11] Three Affiliated Tribes of Fort Berthold Rsrv. v. Wold Eng'g, 476 U.S. 877, 890 (1986).

[12] See Oklahoma Tax Commission v. Citizen Band Potawatomi Indian Tribe, 498 U.S. 505 (1991), (holding that the tribe was entitled to sovereign immunity after Oklahoma attempted to collect taxes on cigarettes sold by a tribally owned convenience store on tribal trust land); Kiowa Tribe of Oklahoma v. Mfg. Techs., Inc., 523 U.S. 751 (1998) (holding that tribe’s sovereign immunity would not be abrogated without clear congressional intent even for commercial activity occurring off tribal lands).

[13] 629 F.3d 1173 (10th Cir. 2010).

[14] Id. at 1192.

[15] Id. at 1195.

[16] Id.

[17] Id.

[18] 375 F. Supp. 3d 638, 645 (E.D. Va. 2019).

[19] Id. at 648-49.

[20] Id. at 651.

[21] Id. at 654.

[22] Id. at 655-56.

[23] Id. at 657.

[24] Id. at 660.

[25] In re Santa Ysabel Resort and Casino, Case No. 12-09415-PB11 (Bankr. S.D. Cal. 2012).

[26] See Laura N. Coordes, “Beyond the Bankruptcy Code: A New Statutory Bankruptcy Regime for Tribal Debtors,” 35 Emory Bankr. Dev. J. 363, 378 (2019).

[27] County of San Diego's Motion to Dismiss Debtor's Bankruptcy Case; Memorandum of Points and Authorities in Support Thereof, In re Santa Ysabel Resort and Casino, Case No. 12-09415-PB11 (S.D. Cal. Aug. 7, 2012). (available at https://bit.ly/3vd7QPk); Memorandum of Points and Authorities in Support of Motion to Dismiss Bankruptcy Case for Lack of Eligibility and Authority, In re Santa Ysabel Resort and Casino, Case No. 12-09415-PB11 (S.D. Cal. Aug. 2, 2012) (available at https://bit.ly/3ItHNGL); Acting United States Trustee's Motion to Dismiss Case, In re Santa Ysabel Resort and Casino, Case No. 12-09415-PB11 (S.D. Cal. Aug. 7, 2012) (available at https://bit.ly/3V8Y2kf).

[28] Minute Order, In re Santa Ysabel Resort and Casino, Case No. 12-09415-PB11 (S.D. Cal. Sept. 4, 2012), available at https://bit.ly/3vd8axw.

[29] See Coordes, supra note 26.

[30] See 11 U.S.C. §101(27) (defining “governmental unit” as “United States; State; Commonwealth; District; Territory; municipality; foreign state ... a State, a Commonwealth, a District, a Territory, a municipality, or a foreign state; or other foreign or domestic government”).

[31] 357 F.3d 1055 (9th Cir. 2004).

[32] Id. at 1057 (citing Cherokee Nation v. Georgia, 30 U.S. 1, 13 (1831)).

[33] Id. at 1058.

[34] 917 F.3d 451 (6th Cir. 2019), abrogated by Lac du Flambeau Band of Lake Superior Chippewa Indians v. Coughlin, 599 U.S. 382 (2023).

[35] For example, Congress had already expressly mentioned tribes in prior statutes, yet it made no mention of them in the Bankruptcy Code. See, e.g., Resource Conservation and Recovery Act of 1976, 42 U.S.C. §§6972(a)(1)(A), 6903(13), 6903(15) (authorizing suits against an “Indian tribe”); Safe Water Drinking Act of 1974, 42 U.S.C. §§300j-9(i)(2)(A), 300f(10), 300f(12) (authorizing suits against an “Indian tribe”).

[36] 599 U.S. 382 (2023).

[37] Id. at 385.

[38] Id.

[39] Id. at 386.

[40] Id. at 389.

[41] Id. at 390.

[42] Id. at 393.

[43] Id. at 391.

[44] Id. at 399.

[45] 11 U.S.C. §§109(a)-(c), 101(41).

[46] 25 U.S.C. §2710(b)(2)(A).

[47] See Coordes, supra note 26, at 382.

[48] Id.

[49] Id.

Originally published in the Oklahoma Bar JournalOBJ 95 No. 4 (April 2024)

Statements or opinions expressed in the Oklahoma Bar Journal are those of the authors and do not necessarily reflect those of the Oklahoma Bar Association, its officers, Board of Governors, Board of Editors or staff.