In re also Coughlin sandwich nom Coughlin v

In a matter of first impression, the US Court of Appeals for the First Circuit has held that the provisions of the Bankruptcy Code that abrogate and set aside the derican Tribes and their “payday lender” subsidiaries, so that such creditors can no longer ignore the fact a borrower has filed for federal bankruptcy protection. In the case of Lac Du Flambeau Number of River Advanced Chippewa Indians, ainsi que al., _____ F.4 th _____, Case No. 21-1153 (), in a 2-1 decision, the First Circuit found that the abrogation provisions of Section 106(a) of the Bankruptcy Code, which eliminates the defense of “sovereign immunity” for “governmental units” as defined by Section 101(27) of the Code, encompasses and explicitly applies to Native American Indian Tribes and the “arms of the tribe” that conduct online “payday lending” operations.


In Coughlin, the borrower had taken out and $1,100 “payday loan” from Lendgreen in 2019, a wholly-owned online “payday lending” subsidiary of the Appellee Indian Tribe, charging more than 500% interest per annum on each loan made. Later that year, the debtor filed a Chapter 13 bankruptcy case in Massachusetts. Lendgreen was listed in the debtor’s bankruptcy filing and mailing matrix. By the time of the debtor’s bankruptcy filing his debt to Lendgreen had grown to nearly $1600 with the accrual of interest. Mr. Coughlin submitted a Chapter 13 Plan provided that all creditors would receive a 100% “dividend”, paying all creditors that filed proofs of claim 100% in full. The debtor, by his attorney, Richard N Gottlieb, Esq. of Boston, served a copy of the debtor’s Chapter 13 Plan on Lendgreen. Notwithstanding the fact that the bankruptcy code imposed an “automatic stay” barring all creditors from taking any further debt-collection activity without first obtaining bankruptcy court approval for the same, Lendgreen nonetheless repeatedly “dunned” Mr. Coughlin seeking repayment of its debt through numerous and repetitive debt collection letters, emails and voicemail messages to the debtor. 2 months after he filed his Chapter 13 bankruptcy case, Coughlin attempted to take his own life, based upon his belief that, notwithstanding his bankruptcy filing, his “mental and financial agony would never end” and blamed such agony on Lendgreen’s “ regular and incessant telephone calls, emails and voicemails.”

The first Routine discovered that the definition of a good “political unit” as the shown into the point 101(27) of your own Bankruptcy Password is identified as broadly since humanly possible, namely:

Whenever Coughlin gone to live in demand brand new Automated Stay significantly less than 11 U. § 362(k) up against Lendgreen and its business mothers, brand new Native Native indian Tribe, looking to an order each other prohibiting then range services and damages attorney’s charge and you can costs, the newest tribe and its own affiliates mentioned that it liked “tribal sovereign disease fighting capability” and you can transferred to overlook the enforcement step. You.S. Case of bankruptcy Legal Frank J. Bailey agreed on Indian Tribe’s claim out-of “tribal sovereign defense mechanisms”, held that the abrogation specifications away from Area 106(a) failed to connect with new Indian Group whilst wasn’t a beneficial “Governmental Unit” underneath the Personal bankruptcy Code’s concept of an equivalent identity, immediately after which proceeded to grant this new Tribe’s Activity so you can Dismiss the debtor’s enforcement action. Debtor’s the advice next took the fresh new over the top step of seeking head appellate opinion by Very first Routine Courtroom regarding Is attractive of your own bankruptcy court’s decision, thereby missing this new intermediate appellate courts, the U.S. Area Courtroom with the Area from Massachusetts therefore the Personal bankruptcy Appellate Panel of your own Basic Routine, significantly less than twenty-eight You. § 158(d)(2). Both the You.S. Bankruptcy proceeding Courtroom for the Area out of Massachusetts while the You Court off Is attractive toward Earliest Circuit provided direct appellate summary of the latest bankruptcy proceeding court’s totally new decision lower than.

Inside a 2-, a lot of the committee held that bankruptcy court’s choice below (you to definitely the Personal bankruptcy Code’s “abrogation” provisions don’t apply at brand new Indian Group and it’s pay-day financing procedure) are lawfully incorrect and corrected the choice of your bankruptcy proceeding courtroom below and remanded the issue right back to possess proceedings consistent with the Very first Circuit’s judgment throughout the amount. The initial Routine discovered that the fresh Indian Tribe is actually, indeed , an effective “government” as they acted once the governing power of their membership, and therefore, given that an authorities, it was “domestic” in nature since it lived into the United states.

All of us; State; Commonwealth; District; Territory; municipality; international state; department, service, otherwise instrumentality of Us ( not a beneficial All of us Trustee if you’re offering as the an excellent trustee in an instance below it title), your state, a common- wealth, a community, a region, an effective local government, otherwise a foreign county; or any other overseas otherwise home-based bodies.

It was this last “catch-all” definition that the First Circuit held explicitly covered Indian Tribes, finding that not only did the text of the definition clearly encompass Indian Tribes, but the conclusion was also supported by the historical context so that when Congress abrogated sovereign immunity in 1994, it did so “against the pre-existing backdrop of § 101(27).” The court adopted the debtor’s reasoning, stating “[a]s Coughlin argues, Congress was aware of the existing definition of “governmental unit“ when it incorporated it into § 106.” The majority of the panel rejected the Indian tribes attempt to argue that, notwithstanding both the broad original definition of “governmental unit” and the historical context underlying the enactment of that definition and the later-enacted § 106, that Congress did not “unequivocally express” its intent to abrogate “tribal sovereign immunity”. The tribe contended that, because neither the bankruptcy code nor the legislative history of the same used the phrase “Indian Tribe“, Congress did not mean to abrogate the tribe’s rights of sovereign immunity unequivocally and expressly. The First Circuit rejected this approach as a requirement to use of “magic words” in order to expressed congressional intent. The court had no difficulty in finding recent Supreme Court precedent that explicitly rejected such an approach in the case of Cooper v. FAA, 566 U.S. 291 (2012) when Congress seeks to affect an abrogation of sovereign immunity in a federal statute. The Tribe was similarly unsuccessful in persuading the First Circuit that they were entitled to “special” treatment because of the fact that they were an Indian tribe.

It is not obvious, at this point in time, if the Group will be seeking next appellate feedback about Earliest Circuit otherwise find a much deeper interest the new You Finest Legal. Yet not, the initial Circuit’s choice helps it be absolutely obvious you to definitely no organization, actually an Indian Tribe asserting its “tribal sovereign disease fighting capability” regarding fit, would be to lose this new Case of bankruptcy Code lightly. The latest carrying of your own Very first Routine together with makes it clear that no body, not really an excellent “governmental device” that have pretensions off somehow are unique, titled or else unconstrained of the same statutes that most someone else need pursue, was, actually, not above the rule out of legislation you to definitely controls the us of The united states, particularly in the area out of user protections like those considering in government Case of bankruptcy Password.