656 B.R. 249
Bankr. D. Mont.2023Background
- Eagle Bear Inc. has operated a KOA campground on Blackfeet Nation land since ~1996 under a 1997 written Lease approved by the BIA.
- Eagle Bear filed Chapter 11 in 2022; Blackfeet Nation filed proof of claim No. 11 (amended) asserting rent/interest, tribal taxes, and priority under 11 U.S.C. § 507(a)(8).
- Multi-day evidentiary hearing held Aug. 14–15, 2023; witnesses included Eagle Bear owner William Brooke, Blackfeet Treasurer Joe Gervais, and an accountant.
- Primary disputed claim categories: (1) interest on late rental payments (1997–2007); (2) lodging facility use taxes (1997–2019); and (3) contractor excise taxes and TERO fees (1997–2008).
- Parties briefed issues including applicable tribal statutes of limitations, tax calculation methodology, interest compounding, and priority classification under § 507(a)(8).
Issues
| Issue | Plaintiff's Argument (Blackfeet Nation) | Defendant's Argument (Eagle Bear) | Held |
|---|---|---|---|
| Interest on late rental payments (1997–2007) | Lease authorizes interest at WSJ prime +3%; Blackfeet seeks accrual/compound through petition date | Time-barred under Blackfeet Tribal Ordinance No. 51 (two-year rule for debts < $5,000) | Each late-rent installment is a distinct debt; amounts < $5,000 are time-barred under Ordinance No. 51 — interest claims disallowed in full |
| Liability for lodging tax | Lodging Tax Code requires facility operator to collect and is liable; Blackfeet seeks collection from Eagle Bear | Lease allegedly displaced/waived the lodging tax; EB asserts due process/equal protection (class-of-one) defenses | Lease contains no clear, unmistakable waiver of the Tribe’s taxing power; no evidentiary showing of intentional disparate enforcement — liability stands |
| Lodging tax calculation, lookback, interest, priority | Unlimited lookback under Ordinance No. 51 to 1997; Blackfeet interprets operator retention as 0.06% (net 5.94%); seeks compound interest; claims § 507(a)(8)(C) priority | EB urges 5-year collection window (Comprehensive Tax Code §5.1) and laches; argues operator net liability is 5% (retain 1% of tax collected); opposes compounding | Ordinance No. 51 governs (no general temporal bar except two‑year for <$5,000); Tax Reporting Form and testimony support operator retains 1% of gross (net 5%); only simple interest at 1%/month allowed; claim (principal >$5,000 + prepetition interest) entitled to §507(a)(8)(C) priority; parties to recalculate amounts |
| Contractor excise tax & TERO fees | Lease language and paragraph 37 impose or shift contractor/TERO tax/fee liability to Eagle Bear | Eagle Bear is not a contractor; Lease does not expressly obligate EB to pay contractor taxes/TERO fees | Contractor excise tax and TERO fees apply only to contractors; Lease does not clearly impose those obligations on Eagle Bear — these claims disallowed |
Key Cases Cited
- Lac du Flambeau Band of Lake Superior Chippewa Indians v. Coughlin, 599 U.S. 382 (2023) (§106(a) abrogates tribal sovereign immunity for many bankruptcy provisions)
- City of Sherrill v. Oneida Indian Nation, 544 U.S. 197 (2005) (laches/equitable considerations can bar certain disruptive sovereign claims in extraordinary circumstances)
- Travelers Cas. & Sur. Co. v. Pac. Gas & Elec. Co., 549 U.S. 443 (2007) (limits on courts’ equitable power to disallow claims outside Bankruptcy Code §502(b))
- Shank v. Washington Dep’t of Revenue (In re Shank), 792 F.2d 829 (9th Cir.) (taxes required to be collected by third parties can qualify for priority under §507 predecessor)
- Rosenow v. Illinois Dep’t of Revenue (In re Rosenow), 715 F.2d 277 (7th Cir.) (collect-and-remit tax liability can be treated as trust-fund tax for priority purposes)
- Ad Hoc Comm. of Holders of Trade Claims v. Pac. Gas & Elec. Co. (In re PG&E Corp.), 46 F.4th 1047 (9th Cir. 2022) (prepetition interest treatment and relation to confirmation solvency issues)