An Indian tribe accused of abusive collection practices told the First Circuit Thursday that they do not have to honor bankruptcy protection. Tribes have a “unique status” under American law, and a bankruptcy court can’t tell them what to do, said Andrew Adams III of Hogen Adams in St. Paul, Minnesota, representing a Chippewa tribe before the Boston-based federal appeals court. The judges seemed highly skeptical of this argument, however, because tribes routinely try to take advantage of bankruptcy law when it works to their advantage.
“You’re proposing a two-way ratchet operating differently depending on whether there’s a benefit to the tribe,” U.S. Circuit Judge Sandra Lynch told Adams. U.S. Circuit Judge David Barron agreed and said, “You’re asking us to read the law to include them for some purposes and not for others.” Adams struggled repeatedly for a response and finally conceded that his argument would mean that tribes could “have their cake and eat it, too.”
Adams' clients, the Lac du Flambeau Band of Lake Superior Chippewa Indians in northern Wisconsin, are under fire in the case over their payday-lending business where small loans are made at exorbitant interest rates. In 2019 the tribe’s company, Lendgreen, loaned $1,100 to a man named Brian Coughlin. By that December, Coughlin owed $1,594.91 because the Chippewa were charging him interest of 108% a year.
Coughlin filed bankruptcy. Ordinarily, this would trigger an automatic stay that sends any creditors to bankruptcy court if they seek to collect anything. In Coughlin’s case, the court approved a plan for him to pay off all his debts over five years.