Since the inception of Tribal1 gaming, billions of dollars have been provided to Tribal casinos by investors and lenders. Clearly, these investments and loans were not considered to be a gamble. Tribal debtors borrow for many reasons; their debt is considered “sovereign” due to their unique legal standing.
Tribal economies are not immune to the recent global financial crisis and economic downturn. The Indian gaming industry was hit especially hard. After consistent year-over-year growth in tribal gaming revenues during the 1990s and continuing through 2008, industry revenues declined in 2009 and have continued to stagnate. Amid reports of several tribal casino defaults—and many more tribes with significant debt maturing in the near future that will need to be restructured—tribes and creditors must consider two questions: Are tribes and their corporations eligible for bankruptcy?
INTRODUCTION
The U.S. Court of Appeals for the Fourth Circuit has upheld the dismissal of a debtor’s chapter 11 petition filed two days before for the expiration of a holdover, at-will tenancy, finding that the debtor’s lack of good faith in filing the petition constituted cause for dismissal. Maryland Port Admin. v. Premier Auto. Svcs., Inc. (In re Premier Auto. Svcs., Inc.), 492 F.3d 274 (4th Cir. 2007).
On June 15, 2023, the United States Supreme Court held that “the Bankruptcy Code unambiguously abrogates the sovereign immunity of all governments, including federally recognized Indian tribes.”1 In other words, Native American Tribes' sovereign immunity does not shield them from suits brought by debtors who declare bankruptcy.
INTRODUCTION
On February 28, 2017, Judge Sontchi of the Delaware Bankruptcy Court issued an opinion (the “Opinion”) in the Money Center of America bankruptcy – Bankr. D. Del., Case 14-10603. The Opinion is available here. This Opinion decided two separate, but similar, motions to dismiss filed by 2 entities owned by federally recognized Indian Tribes and sovereign nations (the “Tribes”).