Law Article: The case for tribal self-governance and bankruptcy law

Friday, February 4, 2011  

"For businesses unable to pay creditors, bankruptcy can offer rebirth or an orderly demise. In either case, the federal bankruptcy process can protect debtors from their creditors, giving “to the honest but unfortunate debtor ... a clear field for future effort, unhampered by the pressure and discouragement of pre-existing debt.” (Local Loan Co. v. Hunt, 292 U.S. 234, 244 (1934).) In other words, filing bankruptcy can be a valuable tool in the life of a business concern. But it is one tool that has not been used widely by tribal enterprises, let alone tribal governmental gaming operations.

The federal bankruptcy code dictates how businesses die and how their creditors divide what is left. Its use, like the use of corporate codes at the inception of a business, goes to the heart of what it means to be a firm in a particular jurisdiction. So it is somewhat curious that tribal businesses are prevented, either practically or legally, from using tribal law to order their affairs in bankruptcy. At the very least, it runs counter to the right of tribes “to make their own laws and be ruled by them.” (Williams v. Lee, 358 U.S. 217, 220 (1959).)

The current economic climate has triggered speculation regarding how tribal gaming operations would navigate the bankruptcy process. Fanned by the bankruptcy of Greektown Casino Hotel (once partially owned by a tribe) and the Wells Fargo/Lac du Flambeau debacle, that speculation, coupled with cases abrogating tribal sovereign immunity in the bankruptcy context, suggests that tribes should at least attempt to control their exposure to insolvency by (1) legislating tribal approaches to bankruptcy and (2) contracting with potential future creditors and potentially tribal debtors regarding a common treatment for bankruptcy in Indian country. If federal bankruptcy laws do not work for tribe-owned businesses, tribal bankruptcy laws should."

Get the Story:
Anthony Broadman: Indian Self-Governance and Bankruptcy: The Case for Tribal Law (Casino Enterprise Management 2/1)