Tribal Corporate Bankruptcy Petition Raises Issues Of First Impression For Bankruptcy Court

Article by Christine Swanick, Carren Shulman, Wilda Wahpepah, and Shawn Watts On March 4, 2013, 'SA' NYU WA, Inc., a tribally-chartered corporation wholly owned by the Hualapai Indian Tribe, filed a Chapter 11 bankruptcy petition in the United States Bankruptcy Court, District of Arizona. This is a very important case for tribes and any party conducting business with tribes because the petition will raise a question of first impression for the Bankruptcy Court. The Bankruptcy Court will have to decide whether a tribal corporation is eligible to be a debtor under the Bankruptcy Code. Federally recognized tribes likely are not eligible for bankruptcy protection. This is because Section 109 of the Bankruptcy Code provides direction as to who may be a debtor: only a "person" or a "municipality" may file a bankruptcy petition for relief. Neither "person" or "municipality," as defined by the Bankruptcy Code, expressly includes or excludes an Indian tribe, and no reported court decisions have expressly addressed whether an Indian tribe is eligible to file for bankruptcy as person, municipality, or otherwise. The definition of "person" under the Bankruptcy Code excludes "governmental units" from being eligible debtors. The Bankruptcy Code defines a "governmental unit" as, among other things, an "other foreign or domestic government." A number of courts have examined whether an Indian tribe is a "governmental unit" for purposes of applying the sovereign immunity provisions contained in Section 106 of the Bankruptcy Code. The majority of cases (including cases decided in the United States Bankruptcy Court for the District of Arizona) examining Section 106 of the Bankruptcy Code have found that an Indian tribe is a "governmental unit" within the meaning of the Bankruptcy Code. See In re Platinum Oil Properties, LLC, 465 B.R. 621 (Bankr. D.N.M. 2011) reconsideration denied, 11-09-10832 JA, 2011 WL 6293132 (Bankr. D.N.M. Dec. 12, 2011); Russell v. Ft. McDowell Yavapai Nation, 293 B.R. 34 (Bankr. D. Ariz. 2003); Davis Chevrolet Inc. v. Navajo Nation, 282 B.R. 674 (Bankr. D. Ariz. 2002); Turning Stone Casino v. Vianese, 195 B.R. 572 (Bankr. N.D.N.Y. 1995); Gilbert v. Shape, 25 B.R. 356 (Bankr. D. Mont. 1982); In re Sandmar Corp., 12 B.R. 910 (Bankr. N.M. 1981). Additionally, last year the United States Bankruptcy Court, Southern District of California dismissed a Chapter 11 petition filed by the Santa Ysabel Resort and Casino, a gaming enterprise of the...