APPEAL NOS. 12-6004, 12-6005, 12-6006, AND 12-6007 UNITED STATES BANKRUPTCY APPELLATE PANEL FOR THE EIGHT CIRCUIT APPEAL NO. 12-6004 In Re: Linda Rose Whitaker, Debtor. UNITED STATES BANKRUPTCY COURT DISTRICT OF MINNESOTA Bky. Case No. 10-3867 Paul W. Bucher, Trustee Adversary No. 11-3154 Plaintiff-Appellant, vs. Dakota Finance Corporation, Defendant-Appellee. APPEAL NO. 12-6005 In Re: Cecil Ray Barth and Deanna Joan Barth, Debtors. UNITED STATES BANKRUPTCY COURT DISTRICT OF MINNESOTA Bky. Case No. 09-36006 Michael S. Dietz, Trustee Adversary No. 11-3233 Plaintiff-Appellant, vs. The Lower Sioux Indian Community in the State of Minnesota, Defendant-Appellee. Appellate Case: 12-6004 Page: 1 Date Filed: 03/12/2012 Entry ID: 3888992
APPEAL NO. 12-6006 In re: Morris Jerome Pendleton, Sr. and Constance Louise Pendleton, Debtors. UNITED STATES BANKRUPTCY COURT DISTRICT OF MINNESOTA Bky. Case No. 10-3867 Paul W. Bucher, Trustee Adversary No. 11-3234 Plaintiff-Appellant, vs. The Lower Sioux Indian Community in the State of Minnesota, Defendant-Appellee. APPEAL NO. 12-6007 In re: Linda Rose Whitaker, Debtor. UNITED STATES BANKRUPTCY COURT DISTRICT OF MINNESOTA Bky. Case No. 10-38674 Paul W. Bucher, Trustee Adversary No. 11-3235 Plaintiff-Appellant, vs. The Lower Sioux Indian Community in the State of Minnesota, Defendant-Appellee. BRIEF OF APPELLANTS PAUL W. BUCHER, TRUSTEE AND MICHAEL S. DIETZ, TRUSTEE ii Appellate Case: 12-6004 Page: 2 Date Filed: 03/12/2012 Entry ID: 3888992
Christopher D. Nelson (#388089) Paul W. Bucher (#123237) Michael S. Dietz (#188517) John C. Beatty (#338035) Scott J. Hoss (#336993) DUNLAP & SEEGER, P.A. Attorneys for Appellant 206 South Broadway, Suite 505 Rochester, Minnesota 55903 Telephone: (507) 288-9111 ATTORNEYS FOR APPELLANTS PAUL W. BUCHER, TRUSTEE AND MICHAEL S. DIETZ, TRUSTEE iii Appellate Case: 12-6004 Page: 3 Date Filed: 03/12/2012 Entry ID: 3888992
TABLE OF CONTENTS TABLE OF CONTENTS... iv TABLE OF AUTHORITIES... vi LIST OF RELEVANT DOCKET NUMBERS... viii REQUEST FOR ORAL ARGUMENT... 1 STATEMENT OF APPELLATE JURISDICTION... 1 STATEMENT OF THE LEGAL ISSUES AND STANDARD OF REVIEW... 1 STATEMENT OF THE CASE... 2 1. Deanna Joan Barth... 2 2. Morris Jerome Pendleton, Sr.... 2 3. Linda Rose Whitaker.... 3 4. The Adversary Proceedings.... 3 STATEMENT OF THE FACTS... 4 SUMMARY OF ARGUMENT... 5 ARGUMENT... 6 1. Standard of Law... 6 A. Tribal Sovereign Immunity Generally and Congress Abrogation Power.... 6 B. Abrogation of Sovereign Immunity as to Domestic Government... 7 2. Congressional Abrogation of Indian Sovereign Immunity in Bankruptcy Code.... 8 3. Immunity of DFC....12 iv Appellate Case: 12-6004 Page: 4 Date Filed: 03/12/2012 Entry ID: 3888992
CONCLUSION... 14 CERTIFICATE OF COMPLIANCE WITH TYPE-VOLUME LIMITATION, TYPEFACE REQUIREMENTS, AND TYPE STYLE REQUIREMENTS... 16 CERTIFICATION REQUIRED BY L.R.BAP 8 TH Cir. 8010A(b)(1) OF INTERESTED PARTIES... 17 CERTIFICATE OF SERVICE... 21 v Appellate Case: 12-6004 Page: 5 Date Filed: 03/12/2012 Entry ID: 3888992
TABLE OF AUTHORITIES Cases Addison v. Seaver (in re Seaver), 540 F. 3d 805 (8 th Cir. 2008)... 2 Cherokee Nation v. Georgia, 30 U.S. (5 Pet.) 1, 8 L.Ed. 25 (1831)...10 Dacotah Properties-Richfield, Inc. v. Prairie Island Indian Cmty., 520 N.W.2d 167 (Minn. Ct. App. 1994)...13 In re Marcano, 288 B.R. 324 (Bankr. S.D.N.Y. 2003)... 8 In re Mayes, 294 B.R. 146 (10th Cir.2003)...10 In Re Platinum Oil Properties, LLC, 11-09-10832 JA, 2011 WL 3585828 (Bankr.D.New.Mexico 2011)...10 In re Russell, 293 B.R. 34 (Bankr. D. Ariz. 2003)...11 In re Sandmar Corp., 12 B.R. 910 (Bankr.D.N.M.1981)...10 Kiowa Tribe of Okla. v. Mfg Techs., Inc., 523 U.S. 751, 118 S.Ct. 1700, 140 L.Ed.2d 981 (1998)... 6 Klammer v. Lower Sioux Convenience Store, 535 N.W.2d 379 (Minn. Ct. App. 1995)...14 Krystal Energy Co. v. Navajo Nation, 357 F.3d 1055 (9th Cir. 2004)...9, 12 Oklahoma Tax Comm n v. Potawatomi, 498 U.S. 505, 111 S.Ct. 905...6, 10 Russell v. Fort McDowell Yavapai Nation (In re Russell), 293 B.R. 34 (Bankr.D.Ariz.2003)...10 Santa Clara Pueblo v. Martinez, 436 U.S. 49, 98 S.Ct. 1670, 56 L.Ed.2d 106 (1978)... 6, 7, 11 T I Federal Credit Union v. DelBonis, 72 F.3d 921, (1st Cir.1995)... 8 Turning Stone Casino v. Vianese (In re Vianese), 195 B.R. 572 (Bankr.N.D.N.Y.1995)...10 vi Appellate Case: 12-6004 Page: 6 Date Filed: 03/12/2012 Entry ID: 3888992
Warfield v. The Navajo Nation (In re Davis Chevrolet, Inc.), 282 B.R. 674 (Bankr.D.Ariz.2002)...10 Worcester v. Georgia, 31 U.S. (6 Pet.) 515, 8 L.Ed. 483 (1832)...11 Statutes 11 U.S.C. 101... passim 11 U.S.C. 106... 7, 8, 10, 12 11 U.S.C. 523...12 25 U.S.C. 2701 et seq....4, 5 25 U.S.C. 475... 4 Other Authorities H. Rep. No. 95 595, 95th Cong., 1st Sess. (1977)... 8 U.S.Code Cong. & Admin.News 1978, 5963, 6268 (reprinted in App. 2 Collier on Bankruptcy, pt. II (15th ed.1995))... 8 vii Appellate Case: 12-6004 Page: 7 Date Filed: 03/12/2012 Entry ID: 3888992
LIST OF RELEVANT DOCKET NUMBERS In re: Cecil Ray Barth and Deanna Joan Barth Bankruptcy No. 09-36006 Docket No. Petition... 1 Notice of Chapter 7 Bankruptcy Case, Meeting of Creditors, and Deadlines.. 5 In re: Morris Jerome Pendleton, Sr. and Constance Louise Pendleton Bankruptcy No. 10-34267 Petition... 1 Notice of Chapter 7 Bankruptcy Case, Meeting of Creditors, and Deadlines.. 6 Trustee s Motion Objecting to Exemptions... 17 Debtor s Response to Trustee s Motion Objection to Exemptions... 24 Order Sustaining Trustee s Motion Objecting to Exemptions... 25 In re: Linda Rose Whitaker, 10-38674 Petition... 1 Notice of Chapter 7 Bankruptcy Case, Meeting of Creditors, and Deadlines.. 6 Bucher, Trustee v. Dakota Finance Corporation Adversary Proceeding No. 11-3154 Complaint... 1 Answer by Dakota Finance Corporation... 7 Motion to Dismiss by Dakota Finance Corporation... 17 viii Appellate Case: 12-6004 Page: 8 Date Filed: 03/12/2012 Entry ID: 3888992
Affidavit of Gabriel Prescott... 17 Affidavit of Gabriel Prescott Exhibit A... 17 Affidavit of Gabriel Prescott Exhibit B... 17 Plaintiff s Amended Response to Motion to Dismiss by Dakota Finance Corporation... 18 Reply Memorandum in Support of Motion to Dismiss by Dakota Finance Corporation... 20 Order... 22 Notice of Appeal... 26 Dietz, Trustee v. The Lower Sioux Indian Community in the State of Minnesota, et al. Adversary Proceeding No. 11-3233 Complaint... 1 Answer by The Lower Sioux Indian Community in the State of Minnesota... 14 Motion to Dismiss by The Lower Sioux Indian Community in the State of Minnesota... 21 Affidavit of Gabriel Prescott... 21 Affidavit of Gabriel Prescott Exhibit A... 21 Affidavit of Gabriel Prescott Exhibit B... 21 Plaintiff s Response to Motion to Dismiss by The Lower Sioux Indian Community in the State of Minnesota... 22 Reply Memorandum in Support of Motion to Dismiss by The Lower Sioux Indian Community in the State of Minnesota... 23 ix Appellate Case: 12-6004 Page: 9 Date Filed: 03/12/2012 Entry ID: 3888992
Order... 25 Notice of Appeal... 30 Bucher, Trustee v. The Lower Sioux Indian Community In the State of Minnesota, et al. Adversary Proceeding No. 11-3234 Complaint... 1 Answer of The Lower Sioux Indian Community in the State of Minnesota... 15 Motion to Dismiss by the Lower Sioux Indian Community in the State of Minnesota... 22 Affidavit of Gabriel Prescott... 22 Affidavit of Gabriel Prescott Exhibit A... 22 Affidavit of Gabriel Prescott Exhibit B... 22 Plaintiff s Amended Response to Motion to Dismiss by the Lower Sioux Indian Community in the State of Minnesota... 24 Reply Memorandum in Support of Motion to Dismiss by The Lower Sioux Indian Community in the State of Minnesota... 25 Order... 27 Notice of Appeal... 32 Bucher, Trustee v. The Lower Sioux Indian Community in the State of Minnesota, et al. Adversary Proceeding No. 11-3235 Complaint... 1 Answer by The Lower Sioux Indian Community in the State of Minnesota... 13 x Appellate Case: 12-6004 Page: 10 Date Filed: 03/12/2012 Entry ID: 3888992
Motion to Dismiss by The Lower Sioux Indian Community in the State of Minnesota... 20 Affidavit of Gabriel Prescott... 20 Affidavit of Gabriel Prescott Exhibit A... 20 Affidavit of Gabriel Prescott Exhibit B... 20 Plaintiff s Response to Motion to Dismiss by The Lower Sioux Indian Community in the State of Minnesota... 21 Reply Memorandum in Support of Motion to Dismiss by The Lower Sioux Indian Community in the State of Minnesota... 24 Order... 26 Notice of Appeal... 31 xi Appellate Case: 12-6004 Page: 11 Date Filed: 03/12/2012 Entry ID: 3888992
REQUEST FOR ORAL ARGUMENT On January 11, 2011, the United States Bankruptcy Court for the District of Minnesota (hereinafter the Bankruptcy Court ) entered a final order granting the consolidated Motion to Dismiss in adversary proceedings 11-3154, 11-3233, 11-3234, and 11-3235 (collectively referred to as the Adversary Proceedings ) filed by The Lower Sioux Indian Community in Minnesota ( Lower Sioux ) and Dakota Finance Corporation based on lack of jurisdiction. Appellants respectfully request fifteen minutes for oral argument. Oral argument will help clarify the issue before the Court. STATEMENT OF APPELLATE JURISDICTION The basis of appellate jurisdiction is 28 U.S.C. 158. STATEMENT OF THE LEGAL ISSUES AND STANDARD OF REVIEW The issue presented to this Court for review is: 1. Whether foreign or domestic government, in the United States Bankruptcy Code, is an unequivocal expression that includes Indian tribes? 2. Whether the Bankruptcy Court has jurisdiction to hear the contract claim between the bankruptcy estate and Dakota Finance Corporation? 1 Appellate Case: 12-6004 Page: 12 Date Filed: 03/12/2012 Entry ID: 3888992
This Court reviews the Bankruptcy Court s conclusions of law de novo and its findings of facts for clear error. Addison v. Seaver (In re Seaver), 540 F. 3d 805 (8 th Cir. 2008). STATEMENT OF THE CASE 1. Deanna Joan Barth. Debtor, Deanna Joan Barth, ( Barth ) filed a Chapter 7 bankruptcy petition with her husband, Cecil Ray Barth, on August 28, 2009. (09-36006, Docket No. 1). Barth listed an asset on Schedule B described as Lower Sioux Indian Community Member Distribution Not Assignable ( Payments ). (Id.). On August 31, 2009, Michael S. Dietz ( Dietz ) was appointed as the Trustee. (09-36006, Docket No. 5). Dietz filed an adversary proceeding against Barth and the Lower Sioux seeking the turnover of Barth s Payments on August 18, 2011. (11-3233, Docket No. 1). 2. Morris Jerome Pendleton, Sr. Debtor, Morris Jerome Pendleton, Sr., ( Pendleton ) filed a Chapter 7 bankruptcy petition with his wife, Constance Louise Pendleton, on June 10, 2010. (10-34267, Docket No. 1). Pendleton listed an asset on Schedule B described as Lower Sioux Community Periodic Distribution Not Assignable ( Payments ), and claimed the asset exempt in Schedule C pursuant to 11 U.S.C. 522(d)(5). (Id.). On June 10, 2010, Paul W. Bucher ( Bucher ) was appointed as the Trustee. 2 Appellate Case: 12-6004 Page: 13 Date Filed: 03/12/2012 Entry ID: 3888992
(10-34267, Docket No. 6). Bucher filed a Motion Objecting to the Debtor s Exemption of the Payments on August 27, 2010. (10-34267, Docket No. 17). The Bankruptcy Court issued an Order sustaining Bucher s exemption on October 14, 2010. (10-34267, Docket No. 25). Bucher began an adversary proceeding against Pendleton and the Lower Sioux on August 18, 2011 seeking the turnover of Pendleton s Payments. (11-3234, Docket No. 1). 3. Linda Rose Whitaker. Debtor, Linda Rose Whitaker, ( Whitaker ) filed for Chapter 7 bankruptcy on December 6, 2010. (10-38674, Docket No. 1). On Whitaker s petition, she listed a debt to Dakota Finance Corporation ( DFC ) secured by Future Per Capita Payments ( Payments ). (Id.) On December 7, 2010, Paul W. Bucher ( Bucher ) was appointed as the Trustee. (10-38674, Docket No. 6). Bucher filed an adversary proceeding against DFC on June 15, 2011 seeking to avoid DFC s lien on Whitaker s Payments. (11-3154, Docket No. 1). On August 18, 2011, Bucher filed an adversary proceeding against Whitaker and the Lower Sioux seeking the turnover of Whitaker s Payments. (11-3235, Docket No. 1). 4. The Adversary Proceedings. The Lower Sioux filed a Motion to Dismiss in adversary proceeding numbers 11-3154, 11-3233, 11-3234, and 11-3235 (collectively the Adversary Proceedings ) on November 23, 2011 requesting the Bankruptcy Court dismiss the 3 Appellate Case: 12-6004 Page: 14 Date Filed: 03/12/2012 Entry ID: 3888992
Lower Sioux from the Adversary Proceedings due to lack of jurisdiction and the Lower Sioux s right to Sovereign Immunity. (11-3154, 11-3233, 11-3234 and 11-3235, Docket Nos. 17, 21, 22 and 20 respectively). Bucher and Dietz (collectively the Trustees ) filed Responses to the Motions to Dismiss on December 13, 2011 alleging the Lower Sioux s sovereign immunity was abrogated by the legislature in 11 U.S.C. 106, and arguing that the Lower Sioux is a governmental unit as described therein. (11-3154, 11-3233, 11-3234 and 11-3235, Docket Nos. 18, 22, 24 and 21 respectively). The Bankruptcy Court heard arguments on the sovereign immunity issue on January 11, 2011, and issued Orders, dated the same, dismissing DFC and the Lower Sioux from the adversary proceedings. (11-3154, 11-3233, 11-3234, and 11-3235; Docket Nos. 22, 25, 27, and 26 respectively). The appeals consolidated herein were filed on January 24, 2012. (11-3154, 11-3233, 11-3234, and 11-3235; Docket Nos. 26, 30, 32, and 31 respectively). STATEMENT OF THE FACTS The Lower Sioux is a federally recognized Indian Tribe organized according to Section 16 of the Indian Reorganization Act ( IRA ), 25 U.S.C. 475. (11-3154, 11-3233, 11-3234, and 11-3235, Docket Nos. 17, 21, 22, and 20 respectively). The Indian Gaming Regulatory Act, 25 U.S.C. 2701 et seq., authorizes the Lower Sioux to negotiate and execute gaming compacts, but 4 Appellate Case: 12-6004 Page: 15 Date Filed: 03/12/2012 Entry ID: 3888992
requires the adoption of an ordinance indicating how gaming revenue will be distributed. 25 U.S.C. 2701 et seq. (11-3154, 11-3233, 11-3234, and 11-3235, Docket No. 1). The Lower Sioux authorized gaming within its jurisdiction. (Id.) Pursuant to the Membership Privilege and Gaming Revenue Allocation Ordinance of the Lower Sioux, Qualified Members shall have all the privileges of Community membership, including... the privilege of receiving per capita distributions from Community gaming enterprises... (the Ordinance ). (Id.) Debtors Deanna Joan Barth, Morris Jerome Pendleton, Sr., and Linda Rose Whitaker (collectively the Debtors ) are members of the Lower Sioux and Qualified Members under the Ordinance, giving them the privilege of receiving per capita distributions from the Lower Sioux s gaming activities. (Id.) The Trustees sought relief from the Bankruptcy Court directly against the Lower Sioux, including DFC. (Id.) DFC (alternatively known as Dakota Futures, Inc. and Dakota Services Enterprise) is a corporation formed by the Lower Sioux Community Council. (Id.) DFC is a wholly owned subsidiary of the Lower Sioux. (Id.) SUMMARY OF ARGUMENT The language or other foreign or domestic government found in 11 U.S.C. 101(27) includes Indian tribes, such that 11 U.S.C. 106 together with 11 U.S.C. 5 Appellate Case: 12-6004 Page: 16 Date Filed: 03/12/2012 Entry ID: 3888992
101 embodies Congress clear and unequivocal abrogation of tribal sovereign immunity. ARGUMENT 1. Standard of Law A. Tribal Sovereign Immunity Generally and Congress Abrogation Power. It is beyond debate that Indian tribes enjoy sovereign immunity absent waiver or abrogation by Congress. Immunity from suit is recognized by the courts as integral to the sovereignty and self-governance of Indian tribes. Kiowa Tribe of Okla. v. Mfg. Techs., Inc., 523 U.S. 751, 756-58, 118 S.Ct. 1700, 140 L.Ed.2d 981 (1998). It is also beyond debate that Congress can abrogate tribal sovereign immunity and thereby authorize suit against Indian tribes. Santa Clara Pueblo v. Martinez, 436 U.S. 49, 58, 98 S.Ct. 1670, 56 L.Ed.2d 106 (1978) ( This aspect of tribal sovereignty, like all others, is subject to the superior and plenary control of Congress. ); Kiowa Tribe, 523 U.S. at 759, 118 S.Ct. 1700 ( Congress has occasionally authorized limited classes of suits against Indian tribes and has always been at liberty to dispense with such tribal immunity or to limit it ), quoting Potawatomi, 498 U.S. at 510, 111 S.Ct. 905. Such an abrogation must be unequivocally expressed. Santa Clara Pueblo v. Martinez, 436 U.S. 49, 58, 98 6 Appellate Case: 12-6004 Page: 17 Date Filed: 03/12/2012 Entry ID: 3888992
S.Ct. 1670, 56 L.Ed.2d 106 (1978). Unequivocal expression does not require the presence of the magic words Indian Tribe to abrogate sovereignty. Santa Clara Pueblo v. Martinez, 436 U.S. 49, 58, 98 S.Ct. 1670, 56 L.Ed.2d 106 (1978). B. Abrogation of Sovereign Immunity as to Domestic Government 11 U.S.C. 106 states: (a) Notwithstanding an assertion of sovereign immunity, sovereign immunity is abrogated as to a governmental unit to the extent set forth in this section with respect to the following: (1) Sections 105, 106, 107, 108, 303, 346, 362, 363, 364, 365, 366, 502, 503, 505, 506, 510, 522, 523, 524, 525, 542, 543, 544, 545, 546, 547, 548, 549, 550, 551, 552, 553, 722, 724, 726, 744, 749, 764, 901, 922, 926, 928, 929, 944, 1107, 1141, 1142, 1143, 1146, 1201, 1203, 1205, 1206, 1227, 1231, 1301, 1303, 1305, and 1327 of this title. 11 U.S.C. 106 (emphasis added). Governmental unit is expressly defined by 11 U.S.C. 101(27) as: (27) The term governmental unit means United States; State; Commonwealth; District; Territory; municipality; foreign state; department, agency, or instrumentality of the United States (but not a United States trustee while serving as a trustee in a case under this title), a State, a Commonwealth, a District, a Territory, a municipality, or a foreign state; or other foreign or domestic government. 11 U.S.C. 101 (emphasis added). The legislative history shows Congress intended to define governmental unit in the broadest sense. In considering the proper construction of the term 7 Appellate Case: 12-6004 Page: 18 Date Filed: 03/12/2012 Entry ID: 3888992
governmental unit, [l]egislative history suggests that Congress intended to define governmental unit in the broadest sense. T I Federal Credit Union v. DelBonis, 72 F.3d 921, 930 31 (1st Cir.1995), quoting from the House Report accompanying the bill that became the Bankruptcy Reform Act of 1978, H. Rep. No. 95 595, 95th Cong., 1st Sess. (1977) at 311, U.S.Code Cong. & Admin.News 1978, 5963, 6268 (reprinted in App. 2 Collier on Bankruptcy, pt. II (15th ed.1995)). In re Marcano, 288 B.R. 324, 332 (Bankr. S.D.N.Y. 2003) (Emphasis added). 2. Congressional Abrogation of Indian Sovereign Immunity in Bankruptcy Code. Congress expressly abrogated the sovereign immunity of Indian tribes under 11 U.S.C. 106(a) and 101(27) by including the language or other foreign or domestic government. The language or other foreign or domestic government found in 11 U.S.C. 101(27) includes Indian tribes, such that 11 U.S.C. 106 together with 11 U.S.C. 101(27) embodies Congress clear and unequivocal abrogation of tribal sovereign immunity. Indeed, the only Circuit Court to address this precise issue 8 Appellate Case: 12-6004 Page: 19 Date Filed: 03/12/2012 Entry ID: 3888992
held as such. Krystal Energy Co. v. Navajo Nation, 357 F.3d 1055 (9th Cir. 2004). 1 Krystal stated: Id. at 1057. It is clear from the face of 106(a) and 101(27) that Congress did intend to abrogate the sovereign immunity of all foreign and domestic governments. Section 106(a) explicitly abrogates the sovereign immunity of all governmental units. The definition of governmental unit first lists a sub-set of all governmental bodies, but then adds a catch-all phrase, or other foreign or domestic governments. 11 U.S.C. 101(27). Thus, all foreign and domestic governments, including but not limited to those particularly enumerated in the first part of the definition, are considered governmental units for the purpose of the Bankruptcy Code, and, under 106(a), are subject to suit. Indian tribes are certainly governments, whether considered foreign or domestic (and, logically, there is no other form of government outside the foreign/domestic dichotomy, unless one entertains the possibility of extra-terrestrial states). Multiple bankruptcy courts have agreed with the holding in Krystal Energy. The Bankruptcy Court in Arizona held [t]he term other foreign or domestic government in 101(27) unequivocally, and without implication, includes Indian tribes as governmental units[ ] such that Section 106(a) unequivocally, and without implication abrogates sovereign immunity as to governmental units, including Indian tribes, with respect to application of the enumerated sections of the Bankruptcy Code. 1 The Navajo Nation s petition for writ of certiorari was denied by the United States Supreme Court despite Navajo Nation s claim that the Court in Krystal Energy Co. was clearly wrong. Navajo Nation v. Krystal Energy Co., Inc., 543 U.S. 871, 125 S. Ct. 99, L.Ed.2d 118, (2004). 9 Appellate Case: 12-6004 Page: 20 Date Filed: 03/12/2012 Entry ID: 3888992
Russell v. Fort McDowell Yavapai Nation (In re Russell), 293 B.R. 34, 44 (Bankr.D.Ariz.2003); See e.g., In Re Platinum Oil Properties, LLC, 11-09-10832 JA, 2011 WL 3585828 (Bankr.D.New.Mexico 2011) (holding that [t]he language or other foreign or domestic government found in 11 U.S.C. 101(27) includes Indian tribes, such that 11 U.S.C. 106 together with 11 U.S.C. 101(27) embodies Congress clear and unequivocal abrogation of tribal sovereign immunity. 2 The Court has repeatedly held, as the Lower Sioux admits, that Indian tribes are domestic governments. Indian tribes are domestic dependent nations that exercise inherent sovereign authority over their members and territories. Potawatomi, 498 U.S. at 509, 111 S.Ct. 905, quoting Cherokee Nation v. Georgia, 30 U.S. (5 Pet.) 1, 17, 8 L.Ed. 25 (1831). Indian tribes are distinct, independent 2 At least three other bankruptcy court opinions have concluded that 106 does abrogate sovereign immunity as to Indian tribes as domestic governments. Warfield v. The Navajo Nation (In re Davis Chevrolet, Inc.), 282 B.R. 674, 683 (Bankr.D.Ariz.2002); Turning Stone Casino v. Vianese (In re Vianese), 195 B.R. 572, 576 (Bankr.N.D.N.Y.1995); In re Sandmar Corp., 12 B.R. 910 (Bankr.D.N.M.1981); See also, In re Mayes, 294 B.R. 146, 157 60 (10th Cir.2003)(McFeeley, J., dissenting) (arguing that 11 U.S.C. 106(a) abrogates tribal sovereign immunity, reasoning, in part, that if the phrase [in 101(27) ] following the semicolon is not read as referring to Indian tribes and other indigenous peoples, the phrase becomes meaningless [because] [t]here are no other forms of domestic government that have not already been specified[,] and finding further that [t]he fact that Indian tribes have been referred to as domestic dependent nations incorporates them into 11 U.S.C. 106. ). 10 Appellate Case: 12-6004 Page: 21 Date Filed: 03/12/2012 Entry ID: 3888992
political communities, retaining their original natural rights in matters of local self-government. Martinez, 436 U.S. at 55, 98 S.Ct. 1670, quoting Worcester v. Georgia, 31 U.S. (6 Pet.) 515, 559, 8 L.Ed. 483 (1832). They are separate sovereigns pre-existing the Constitution. Martinez, 436 U.S. at 56, 98 S.Ct. 1670. Indeed, if they were not sovereign governments they would not enjoy sovereign immunity at all. In re Russell, 293 B.R. 34, 40 (Bankr. D. Ariz. 2003). Given that Indian tribes are domestic governments the analysis can be boiled down to a basic syllogism as noted in Russell: So the abrogation of tribal sovereign immunity by 101(27) and 106(a) can be stated as a simple syllogism: Sovereign immunity is abrogated as to all domestic governments. Indian tribes are domestic governments. Hence sovereign immunity is abrogated as to Indian tribes. In re Russell, 293 B.R. 34, 40 (Bankr. D. Ariz. 2003). The term other foreign or domestic government in section 101(27) unequivocally, and without implication, includes Indian tribes as governmental units. Section 106(a) unequivocally, and without implication, abrogates sovereign immunity as to governmental units, including Indian tribes, with respect to application of the enumerated sections of the Bankruptcy Code. Further, as noted in Krystal Energy, the Supreme Court decisions in the area of abrogation of tribal sovereign immunity do not require Congress to utter the magic words Indian tribes when abrogating tribal sovereign immunity. Congress speaks unequivocally when it abrogates the sovereign 11 Appellate Case: 12-6004 Page: 22 Date Filed: 03/12/2012 Entry ID: 3888992
immunity of foreign and domestic governments. Because Indian tribes are domestic governments, Congress has abrogated their sovereign immunity in 11 U.S.C. 106(a). Krystal at 1061. It is worth noting that although Indian tribes sovereign immunity is abrogated by section 106(a), Congress also provided special benefits and treatments to Indian tribes as governmental units within the Bankruptcy Code. Were Indian tribes not governmental units for the purpose of section 106(a), a tribe that voluntarily proceeded in federal court under the Code would not be a governmental unit under the other sections of the Bankruptcy Code, either. The sections applicable to governmental units are myriad, and include section 523- Exceptions to discharge-which states: A discharge under [certain sections] of this title does not discharge an individual debtor from any debt... to the extent such debt is for a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit, and is not compensation for actual pecuniary loss, other than [certain] tax penalt[ies]. 11 U.S.C. 523; Krystal at 1060. 3. Immunity of DFC. DFC (alternatively known as Dakota Futures, Inc. and Dakota Services Enterprise) is a corporation formed by the Lower Sioux Community Council. If DFC is not legally distinguishable from the Lower Sioux, it too is a governmental unit and the Bankruptcy Code abrogates its sovereign immunity. Regardless of 12 Appellate Case: 12-6004 Page: 23 Date Filed: 03/12/2012 Entry ID: 3888992
whether DFC is legally distinguishable from the Lower Sioux, this Court has jurisdiction to hear the contract claim between the bankruptcy estate and DFC. First, if Defendants are correct, and DFC is considered the Lower Sioux, then Congress waived DFC s sovereign immunity as shown in the section above. Regardless of the outcome above, the Bankruptcy Court has jurisdiction over DFC based on the activities and allegations involved. The Minnesota Court of Appeals describes the applicable distinction between the governmental and corporate powers of the Indian tribes. Dacotah Properties-Richfield, Inc. v. Prairie Island Indian Cmty., 520 N.W.2d 167, 170 (Minn. Ct. App. 1994). If an Indian tribe mixes its use of governmental and corporate authority, it may waive immunity. Id. In Dakota Properties the Court held that the Indian tribe waived its sovereign immunity as to its economic activities. Id at 172-173. Here the claims are purely economic. The determination as to the perfection of DFC s security in the debtor s property is not subject to sovereign immunity. Appellant sought a determination from the Bankruptcy Court related to DFC s economic activities. Specifically, the Appellant alleges that DFC failed to perfect its security interest in the right of the debtor, Linda Rose Whitaker, to per capita payments. The debtor pledged her interest in her right to receive the per capita payments, but DFC did not perfect its interest (pursuant to either Minnesota or Tribal law). This is merely the avoidance 13 Appellate Case: 12-6004 Page: 24 Date Filed: 03/12/2012 Entry ID: 3888992
of a purely economic transaction between the debtor and DFC (in its capacity as a financial lender). Appellant acknowledges and appreciates the jurisdictional reasons and effect of Native American sovereign immunity; this is not the type of activity that is immune. The fact that the Appellant s claim is in contract rather than tort is determinative. The Minnesota Court of Appeals identified a distinction in the waiver of sovereign immunity in tort actions versus contract claims. Klammer v. Lower Sioux Convenience Store, 535 N.W.2d 379, 383 (Minn. Ct. App. 1995). Here, the claim is purely an economic contract claim for avoidance of a security interest due to lack of perfection, as opposed to a tort claim. Because the action against DFC is purely economic, it has no impact on the Lower Sioux s right or ability to self-govern, and therefore is not immune to suit. CONCLUSION In conclusion, because Indian tribes are clearly and unambiguously domestic governments, Congress unequivocally expressed the abrogation of their sovereign immunity of specific claims under the Bankruptcy Code. Plaintiff-Appellant respectfully requests this Court reverse the Bankruptcy Court s Orders for dismissal. 14 Appellate Case: 12-6004 Page: 25 Date Filed: 03/12/2012 Entry ID: 3888992
Dated: March 12, 2012. DUNLAP AND SEEGER, P.A. By: s/christopher D. Nelson Christopher D. Nelson (#388089) Paul W. Bucher (#123237) Michael S. Dietz (#188517) John C. Beatty (#338035) Scott J. Hoss (#336993) Attorneys for Appellant 206 South Broadway - Suite 505 Post Office Box 549 Rochester, Minnesota 55903-0549 Telephone: (507) 288-9111 15 Appellate Case: 12-6004 Page: 26 Date Filed: 03/12/2012 Entry ID: 3888992
CERTIFICATE OF COMPLIANCE WITH TYPE-VOLUME LIMITATION, TYPEFACE REQUIREMENTS, AND TYPE STYLE REQUIREMENTS 1. The foregoing brief complies with the type-volume limitations as set forth in Fed. R. App. P. 32(a)(7)(B) and L.R. B.A.P. 8 th Cir. 8010A(a) because this brief contains 2,963 words, excluding the parts of the brief exempted by Fed. R. App. P. 32(a)(7)(B)(iii). 2. This brief complies with the typeface requirements of Fed. R. App. P. 32(a)(5) and the type style requirements of Fed. R. App. P. 32(a) because it has been prepared in a proportionally spaced typeface using Microsoft Word 2010, in Times New Roman font, 14 point. Dated: March 12, 2012 DUNLAP AND SEEGER, P.A. By: s/christopher D. Nelson Christopher D. Nelson (#388089) 16 Appellate Case: 12-6004 Page: 27 Date Filed: 03/12/2012 Entry ID: 3888992
CERTIFICATION REQUIRED BY L.R.BAP 8 TH Cir. 8010A(b)(1) OF INTERESTED PARTIES The undersigned, counsel of record for Paul W. Bucher, Trustee and Michael S. Dietz, Trustee, certifies that the following listed parties have an interest in the outcome of this appeal. These representations are made to enable the judges of the panel to evaluate possible disqualifications or recusal. American Home Mortgage c/o Shapiro, Nordmeyer & Zielke, LLP 12550 West Frontage Road, Ste. 200 Burnsville, MN 55337 MinnWest Bank PO Box 439 Redwood Falls, MN 56283 Bank of America Home Loans PO Box 5170 Simi Valley, CA 93062-5170 Minnesota Dept. of Revenue Bankruptcy Section PO Box 64447 St. Paul, MN 55164-0447 American Home Mortgage Servicing, Inc. PO Box 949 Orange, CA 92856-6949 Citizens Automobile Finance, Inc. PO Box 42113 Providence, RI 02940-2113 Popular Mortgage Servicing, Inc. 121 Woodcrest Road Cherry Hill, NJ 08003 IRS 30 E. 7 th St. Ste. 1222 Stop 5700 St. Paul, MN 55101-4940 American Express PO Box 0001 Los Angeles, CA 90096-8000 Ameriquest PO Box 21550 Tulsa, OK 74121-1550 17 Appellate Case: 12-6004 Page: 28 Date Filed: 03/12/2012 Entry ID: 3888992
HSBC/Direct Merchants C/o Rausch, Sturm, et al. 680 Southdale Office Centre 6600 France Avenue South Minneapolis, MN 54543 LHR, Inc. 56 Main Street Hamburg, NY 14075-4905 Beneficial Finance PO Box 4153-K Carol Stream, IL 60197-4153 Capital One PO Box 5155 Norcross, GA 30091 Cash Systems, Inc. c/o Bennett Law PLLC 1265 E. Fort Union Blvd., Ste. 150 Cottonwood Heights, UT 84047 Chase Bank PO Box 94014 Palatine, IL 60094-4014 Citi Platinum PO Box 688910 Des Moines, IA 50368-8910 GM Business Card PO Box 94014 Palatine, IL 60094-4014 Houston Funding II, Ltd. 2620 Fountainview, Ste. 305 Houston, TX 77057 Bank of America PO Box 26012 NCA-105-03-14 Greensboro, NC 27420 Bank of America PO Box 970 Norfolk, VA 23505 Beneficial Finance 138 Second St. South Waite Park, MN 56387 Cash Call, Inc. 1600 S. Douglass Road Anaheim, CA 92806 Chase Bank PO Box 15298 Wilmington, DE 19850-5298 Citi Business Card PO Box 688915 Des Moines, IA 50368-8915 Discover PO Box 30943 Salt Lake City, UT 84130 Herberger s Retain Services Dept. 7680 Carol Stream, IL 60116-7680 Lori Nelson 400007 Rez Hwy. 3 Morton, MN 56270 18 Appellate Case: 12-6004 Page: 29 Date Filed: 03/12/2012 Entry ID: 3888992
Rice Memorial Hospital c/o J.C. Christiensen & Assoc. PO Box 519 Sauk Rapids, MN 56379 Pinnacle Financial Group Dept. 673 PO Box 4115 Concord, CA 94524 Bremer Bank PO Box 459 Redwood Falls, MN 56283 Action Card PO Box 105555 Atlanta, GA 30348-5555 Capital One PO Box 5155 Norcross, GA 30091 NCO Financial Systems, Inc. PO Box 12100 Dept. 64 Trenton, NJ 08650 Client Services, Inc./Citicards PO Box 1503 St. Peters, MO 63376-0027 GE Capital Financial/JC Penny Attn: Bankruptcy Dept. PO Box 103104 Roswell, GA 30074 Suburban Radiological Consult c/o Lofstrom Law Firm, LLC PO Box 21123 Columbia Heights, MN 55421-9849 Timothy S. Brown, DDS Dental Center 105 East Bridge Street Redwood Falls, MN 56283 Central Mortgage Company 801 John Barrow, St.e 1 Little Rock, AR 72205 Action Card PO Box 790318 St. Louis, MO 63179-0318 Citi Cards PO Box 688901 Des Moines, IA 50368-8901 Citibank (South Dakota), N.A. c/o Rausch Sturm, et al. 680 Southdale Office Centre 6600 France Avenue South Minneapolis, MN 55435 HSBC Retail Services Dept. 7680 Carol Stream, IL 60116-7680 Sears PO Box 688956 Des Moines, IA 50368-8956 19 Appellate Case: 12-6004 Page: 30 Date Filed: 03/12/2012 Entry ID: 3888992
Menards HSBC Retail Services Dept. 7680 Carol Stream, IL 60116-7680 Sears Credit Cards PO Box 688957 Des Moines, IA 50368-8957 Wells Fargo Card Services PO Box 6412 Carol Stream, IL 60197-6412 Wells Fargo Visa PO Box 6412 Carol Stream, IL 60197-6412 Hometown Bank 1000 Cook Street Redwood Falls, MN 56283 Bank of America PO Box 851001 Dallas, TX 75285-1001 Discover PO Box 6103 Carol Stream, IL 60197-6103 Deanna Joan Barth 500 Ness Drive Redwood Falls, MN 56283 Dated: March 12, 2012 Slate Chase Cardmember Service PO Box 94014 Palatine, IL 60094-4014 Wells Fargo Servicing Center Personal Credit Management MAC Q2132-013 PO Box 94423 Albuquerque, NM 87199-9833 Dakota Finance Corporation 39527 Reservation Hwy. 1 Morton, MN 56270 Bank of America c/o CollectCorp PO Box 101928 Dept. 4947A Birmingham, AL 35210-1928 Chase PO Box 15298 Wilmington, DE 19850-5298 US Bank PO Box 970408 St. Louis, MO 63179 Morris Jerome Pendleton, Sr. 28 Pleasantview Rd. Slayton, MN 56172 Linda Rose Whitaker 815 E. Flynn St. Redwood Falls, MN 56283 DUNLAP AND SEEGER, P.A. By: s/christopher D. Nelson Christopher D. Nelson (#388089) 20 Appellate Case: 12-6004 Page: 31 Date Filed: 03/12/2012 Entry ID: 3888992
CERTIFICATE OF SERVICE I, CHRISTOPHER D. NELSON, attorney for the Appellants, and an officer of the court, hereby certify that a true and correct copy of the following: APPELLANTS BRIEF was filed electronically with the Clerk of Court on the 12th day of March, 2012, through CM/ECF, and a copy of the above-referenced documents will be delivered to all individuals and entities identified on the electronic notice list for Case Nos. 12-6004, 12-6005, 12-6006, and 12-6007, by automatic e-mail notification pursuant to CM/ECF, and this notice constitutes service. Dated: March 12, 2012 DUNLAP AND SEEGER, P.A. By: s/christopher D. Nelson Christopher D. Nelson (#388089) 21 Appellate Case: 12-6004 Page: 32 Date Filed: 03/12/2012 Entry ID: 3888992