Tribe Members’ Monthly Casino Profit Allocations Can’t Be Seized By Bankruptcy Trustee

by Craig Andresen, Minneapolis, MN, Bankruptcy Attorney

February 24, 2013

Minnesota bankruptcy court judge Dennis D. O’Brien ruled that future monthly per capita casino revenue payments belonging to members of the Lower Sioux Indian Community, a federally recognized Indian tribe in Minnesota, cannot be taken by a chapter 7 trustee when a tribe member files for personal bankruptcy.  In re Barth, No. 09-36006, ADV No. 11-03233 (Bky.D.Minn. Feb. 11, 2013).  The court ruled that under tribal law, the members’ right to receive future casino revenue allocation payments was not a property right recognized by the bankruptcy law’s section 541(a).

Under the Indian Gaming Regulatory Act, a tribe engaging in Indian casino gambling must negotiate a compact with its state.  Such a compact must be approved by the Secretary of the Interior.  Each tribe must also adopt an ordinance regulating per capita payments to tribe members.  Such ordinances must also be approved by the Secretary.

In this case, each bankruptcy debtor was a qualified member of the Lower Sioux tribe.  Each member’s right to casino revenue allocation payments was contingent on the Lower Sioux tribe’s decision to make a distribution of net profits to its members.

The Lower Sioux tribe’s revenue allocation ordinance was amended on October 27, 2009, and approved by the Secretary of the Interior.  The ordinance contained a new section entitled “Anti-alienation/Spendthrift Provisions,” which stated:

… The per capita payments are periodic payments, not a property right….  Additionally, no benefit, right or interest of any Community Member under this Ordinance … shall be subject to anticipation, alienation, sale, transfer, assignment pledge, encumbrance or charge, seizure, attachment or other legal, equitable or other process….

The chapter 7 trustee argued that Minnesota law should govern whether a member’s future tribal revenue allocation payments should be deemed property of the bankruptcy estate.  The court rejected the trustee’s argument, stating that the Lower Sioux tribe had the sole authority to characterize tribe members’ rights, if any, in future casino payments.

Also, the court observed there were compelling historical reasons for this.  The Lower Sioux had long ago learned their lesson about accepting per capita payments, when the tribe lost much of its land to the State of Minnesota in return for periodic per capita payments to tribe members.  These payments were often made late, and when they were eventually made, tribe members had often assigned their future payment rights to unscrupulous white traders, in return for subsistence goods.  The goods were often sold to Indians at outrageous prices, and then marked up by the traders even further with false charges, resulting in “repetitive cycles of assgnments and rip-offs.  The traders got rich and the Sioux got screwed.”

The bankruptcy court’s vivid summary of the history of assignments of Indian per capita payments provided a sound basis for its ruling that the Lower Sioux ordinance was controlling law, which prevented the chapter 7 bankruptcy trustee from taking the future casino revenue payments from the tribe members.

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Craig W. Andresen is a consumer bankruptcy lawyer in Bloomington, Minnesota, with 22 years’ experience in consumer and small business bankruptcy cases. He is the Minnesota chair of the National Association of Consumer Bankruptcy Attorneys, and is a member of the Minnesota State Bar Association’s Bankruptcy Section. Mr. Andresen lectures often on the topic of consumer bankruptcy at local and national legal seminars.

Last modified: February 24, 2013