In Re: Money Centers of America, Inc., et al.

Filing 23

MEMORANDUM. Signed by Judge Richard G. Andrews on 3/29/2018. (nms)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
IN RE: MONEY CENTERS OF AMERICA, INC., et al.,
Debtors.

MARIA APRILE SAWCZUK, as Trustee of the
Liquidating Trust of Money Centers of America, Inc.,
and Check Holdings, LLC,

Chapter 11
Banla. Case No. 14-10603-CSS
(Jointly Administered)

Adv. Pro. No. 16-50410-CSS
Civ. No. 17-319-RGA

Appellant,
v.
THUNDERBIRD ENTERTAINMENT CENTER, INC.,
Appellee.

MEMORANDUM
Trustee appeals the Bankruptcy Court's Order, In re Money Centers ofAmerica, Inc., 565
B.R. 87 (Banla. 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.
1.

Background. Thunderbird 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~ 10). 1

1

The docket of the adversary proceeding, captioned Sawczuk v. Thunderbird Entertainment Center,
Inc., Adv. Pro. No. 16-50410-CSS (Banla. D. Del.), is cited herein as "Adv. D.I. _."

2.

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. 2 On March 13, 2017, a timely appeal was filed. (D.I. 1).
3.

It 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. 3 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. 16), 18).
4.

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)(l). "On appeal from
an order issued by the Bankruptcy Court, the Court 'review[s] the Bankruptcy Court's legal
determinations de nova, 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

2

The Dismissal Order also addressed an adversary proceeding captioned Sawczuk v. Quapaw
Casino Auth. of the Quapaw Tribe of Okla., Adv. No. 14-50437-CSS, which involved the sovereign
immunity of the defendant ("Quapaw"). Quapaw also appealed the Dismissal Order. (Misc. No.
17-78-RGA). On April 6, 2017, the appeals were consolidated under Civ. No. 17-319-RGA. On
February 28, 2018, the parties stipulated to dismissal of the appeal as it relates to Quapaw. (D.I.
19). This Memorandum Order addresses the appeal solely as it relates to Thunderbird.
3
See D.l. 15 at 5, n.2.
2

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 nova.
5.

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, 4 76 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 2031.
6.

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 selfgovernment.") 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 government[ s]" can only mean Indian tribes, thus the congressional waiver is
3

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.
7.

On 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

I

I

(emphasis in original). "Indian tribes are certainly governments," which the Supreme Court has

I
I

described as "'domestic dependent nations that exercise inherent sovereign authority over their

f

domestic governments." See Krystal Energy Co. v. Navajo Nation, 357 F.3d 1057 (9 1h Cir. 2003)

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 government[s]," 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 discemable from the statutory text in light of traditional interpretive tools."
(Id. at 10).

8.

Conversely, Thunderbird argues that the Bankruptcy Court properly joined Whitaker

in rejecting Krystal Energy's reliance on "domestic dependent nations" language in prior cases,
4

r

'I

l
i

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 oflocal 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 ofrecent authority is

l

I
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.
9.

The 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 (Banlcr. 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
5

I

I
I
~

~

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 Kilburg explained:
The [Bankruptcy] Code makes no specific mention oflndian 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 Supreme
Courts pronouncements on tribal sovereign immunity, such an inference is inappropriate.
Id. The Whitaker court agreed, holding that any other interpretation "requires an inference which is
inappropriate in this analysis." Whitaker, 474 B.R. 695. Similarly, Greektown concerned an
adversary proceeding against an Indian tribe seeking to avoid an alleged fraudulent transfer, and the
tribe responded by asserting sovereign immunity. Greektown, 532 B.R. at 682-83. Relying heavily
on Whitaker, the court looked to whether, in§ 106, "Congress unequivocally, unmistakably and
without ambiguity, by invoking the phrase 'or other domestic government[s],' intended to abrogate
the 'special brand of sovereignty' that Indian tribes enjoy." Id. at 690. "[T]here is not one example
in all of history where the Supreme Court has found that Congress intended to abrogate tribal
sovereign immunity without expressly mentioning Indian tribes somewhere in the statute." Id. at
693. Because it could not say with "perfect confidence" that Congress intended the phrase to waive
tribal sovereign immunity, the Greektown court dismissed the action. Id. at 697.
10.

Conclusion. The Court is persuaded by these well-reasoned decisions and finds no

error in the Bankruptcy Court's conclusion that Congress did not unequivocally express an intent to
abrogate sovereign immunity oflndian tribes in§§ 106(a) and 101(27). Section 101(27)'s reference
to "other ... domestic government[ s]" falls short of the clarity required for abrogation of tribal
sovereign immunity.
6

A separate order will be entered.
Entered this

lJ_

day of March, 2018.

7