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Tribal Bankruptcy

posted by Katie Porter

The Wall Street Journal reported last week about a challenge to a bankruptcy filing by the Santa Ysabel Resort and Casino. The casino, located on a reservation outside San Diego, filed a chapter 11 case, listing debts of about $40 million. The bankruptcy filing is being contested by the debtor's lender on the grounds that Native American tribes are sovereign nations and they are cannot use chapter 11. The twist in this case is that the lender raising that argument and trying to get the Resort and Casino tossed out of bankruptcy is itself a federally-recognized Native American tribe, the Yavapai-Apache Nation. It bought the Resort and Casinos' debt from JPMorgan Chase.

When I was in practice I worked on some related issues. For example, whether a tribe who was a creditor of a debtor waived its sovereign immunity by filing a proof claim. The Santa Ysabel case seems to raise much more fundamental issues about the availability of bankruptcy protection. If Santa Ysabel cannot file chapter 11, could it somehow file chapter 15? Would it need its own tribal bankruptcy system to do so? Does it matter whether the resort had incorporated under state law (it apparently is unincorporated)? Does it matter if the resort were not located on tribal land, even if it were wholly owned by a tribe?

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