ron bender (sbn 143364) john-patrick m. fritz … · avi casino enterprises, inc. 548 f.3d 718 (9th...

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Omnibus Opposition to San Diego County’s and U.S. Trustee’s Motions to Dismiss

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RON BENDER (SBN 143364) JOHN-PATRICK M. FRITZ (SBN 245240) LEVENE, NEALE, BENDER, YOO & BRILL L.L.P. 10250 Constellation Boulevard, Suite 1700 Los Angeles, California 90067 Telephone: (310) 229-1234 Facsimile: (310) 229-1244 Email: [email protected]; [email protected] Proposed Counsel for Chapter 11 Debtor and Debtor in Possession

UNITED STATES BANKRUPTCY COURT

Southern District of California

In re: SANTA YSABEL RESORT AND CASINO, Debtor and Debtor in Possession.

)))))))))))))))))))))))))

Case No. 12-09415-PB11 Chapter 11 OMNIBUS OPPOSITION TO (I) COUNTY OF SAN DIEGO’S MOTION TO DISMISS BANKRUPTCY CASE AND (II) ACTING UNITED STATES TRUSTEE’S MOTION TO DISMISS CASE Date: September 4, 2012 Time: 11:00 a.m. Place: 325 West F. Street Dept. 4, Courtroom 328 Judge: Hon. Peter W. Bowie

Case 12-09415-PB11 Filed 08/24/12 Doc 82 Pg. 1 of 42

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TABLE OF CONTENTS

I. INTRODUCTION ........................................................................................................ 2 II. THE DEBTOR IS NOT A GOVERNMENTAL UNIT ............................................ 3

A. By Definition, Under the Bankruptcy Code, the Debtor Cannot Be a

Governmental Unit ........................................................................................... 3 B. The Case Law Cited by the County and UST on Tribal Sovereign Immunity Is Contrary to Bankruptcy Law and Inappropriate for

Determining Whether an Entity Is a Governmental Unit ............................ 6 III. THE DEBTOR AND IIPAY NATION ARE TWO SEPARATE ENTITIES ......... 10

A. The Sovereign Immunity Cases Establish the Existence of Separate Entities Between a Tribe and Its Business Enterprise, Just Like the Iipay Nation and the Debtor ............................................................................ 11 B. The Facts Support that the Debtor and Iipay Nation Are Separate Entities ............................................................................................................... 14

1. The Debtor’s Bankruptcy Schedules and Prepetition Loans and Agreements ............................................................................................ 14

a. The YAN’s Claims .................................................................... 15 b. The County’s Claim and the Intergovernmental Agreement ................................................................................. 18 c. Bankruptcy Schedules, Debtor’s Pleadings, and 7-Day Package ...................................................................................... 19

2. Debtor’s Proposed Counsel’s Employment Application .................. 21 3. Resolution Authorizing Debtor’s Bankruptcy Filing ........................ 21 4. D/B/A Filings ......................................................................................... 22

IV. THE DEBTOR IS A PROPER DEBTOR UNDER THE BANKRUPTCY CODE ............................................................................................................................ 23 V. THE DEBTOR’S CASE WAS FILED IN GOOD FAITH ........................................ 24 VI. CONCLUSION ............................................................................................................. 27


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TABLE OF AUTHORITIES

Page(s) FEDERAL CASES

Allen v. Gold Country Casino 464 F.3d 1044 (9th Cir.2006) ........................................................................................ 4, 12, 22

Breakthrough Management Group v. Chukchansi Gold Casino and Resort 629 F.3d 1173 (2010) .............................................................................................. 7, 11, 12, 13

Cook v. Avi Casino Enterprises, Inc. 548 F.3d 718 (9th Cir.2008) ................................................................................ 7, 8, 11, 12, 13

Gallagher v. Hannigan 5 F.2d 171 (1st Cir.1925) ........................................................................................................ 25

In re Las Vegas Monorail Company 429 B.R. 770 (Bankr.D.Nev.2010) ........................................................................ 6, 7, 9, 10, 25

In re Marshall 298 B.R. 670 (Bankr.C.D.Cal.2003) ....................................................................................... 19

In re Sletteland 260 B.R. 657 (Bankr.S.D.N.Y.2001) ...................................................................................... 24

In re Thirtieth Place, Inc. 30 B.R. 503 (9th Cir.B.A.P.1983) ........................................................................................... 26

In re Woodbrook Assocs. 19 F.3d 312 (7th Cir.1994) ...................................................................................................... 24

Kiowa Tribe of Oklahoma v. Manufacturing Technologies, Inc. 523 U.S. 751 (1998) ........................................................................................................ 8, 9, 10

Krystal Energy Co. v. Navajo Nation 357 F.3d 1055 (9th Cir.2004) reh’g en banc denied ................................................................. 4

Vadakin v. Cass (In re Order of Sparta) 242 F. 235 (3d Cir.1917) ................................................................................................... 20, 25

CALIFORNIA CASES

Pinkerton v. Superior Court 49 Cal.App.4th 1342 (1996) .................................................................................................... 22

Trudgeon v. Fantasy Springs Casino 71 Cal.App.4th 632 (1999) ...................................................................................................... 13


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Yavapai-Apache Nation v. Iipay Nation of Santa Ysabel 201 Cal.App.4th 190 (2011) .......................................................................................... 2, 15, 17

FEDERAL STATUTES

11 U.S.C. § 101(9) ........................................................................................................................... 5

11 U.S.C. § 101(27) ................................................................................................. 2, 3, 4, 7, 10, 14

11 U.S.C. § 101(40) ............................................................................................................... 4, 9, 10

11 U.S.C. § 102(2) ................................................................................................. 14, 16, 17, 18, 19

11 U.S.C. § 102(3) ........................................................................................................................... 5

11 U.S.C. § 106 ............................................................................................................................... 4

11 U.S.C. § 109 ............................................................................................................................... 2

11 U.S.C. § 1104(a) ....................................................................................................................... 23

11 U.S.C. § 1104(a)(1) .................................................................................................................. 23

11 U.S.C. § 1112(b) ....................................................................................................................... 23

11 U.S.C. § 1112(b)(1) .................................................................................................................. 23

11 U.S.C. § 1121 ........................................................................................................................... 24

FEDERAL RULES

FED.R.BANKR.P. 7033 ................................................................................................................... 21

FED.R.BANKR.P. 7034 ................................................................................................................... 21

FED.R.BANKR.P. 7036 ................................................................................................................... 21

FED.R.BANKR.P. 9014 ............................................................................................................. 20, 21


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I.

INTRODUCTION

Santa Ysabel Resort and Casino (the “Debtor”), the chapter 11 debtor and debtor in

possession in the above-captioned bankruptcy case, hereby submits its omnibus opposition (the

"Opposition") to (i) the County of San Diego’s Motion to Dismiss Bankruptcy (the “SD Motion”)

[docket entry no.66] filed by the County of San Diego (the “County”) and (ii) the Acting United

States Trustee’s Motion to Dismiss Case (the “UST Motion”) [docket entry no.65] filed by the

Acting United States Trustee (the “UST”).

Without accepting or denying or arguing the point, the Debtor assumes that the Iipay

Nation of Santa Ysabel (the “Iipay Nation”) is a governmental unit under section 101(27) of title

11 of the United States Code, sections 101 et seq. (the “Bankruptcy Code”) and therefore

ineligible to be a debtor under section 109 of the Bankruptcy Code. The intent of the Debtor, and

of the Iipay Nation as 100% owner of the Debtor, was to file the chapter 11 bankruptcy for the

Santa Ysabel Resort and Casino only. If the Court determines that the Santa Ysabel Resort and

Casino is not its own entity as an unincorporated company separate and apart from the Iipay

Nation, then the Iipay Nation voluntarily requests that the Court dismiss the bankruptcy case

without addressing whether Indian tribes actually are or are not eligible to be debtors under

chapter 11.

Starting from the premise that the Iipay Nation is a governmental unit, this Opposition

begins with an analysis as to why Santa Ysabel Resort and Casino, the debtor and debtor in

possession herein, is not a governmental unit under section 101(27) of the Bankruptcy Code.

Pursuant to the specific terms set forth by Congress in section 101(27), the Debtor cannot be a

governmental unit, even if the Iipay Nation is. The case law analysis for tribal sovereign

immunity, which the County and UST propose to use as a test for whether the Debtor is a

governmental unit, is inapplicable, as well as contrary to bankruptcy law, on the issue of whether

an entity is a governmental unit.

This Opposition refers to and relies on the Opposition to Motion to Dismiss for Lack of

Eligibility and Authority (the “YAN Opposition”) [docket entry no.76], filed by the Debtor in


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opposition to the Motion to Dismiss Bankruptcy Case for Lack of Eligibility and Authority (the

“YAN Motion”) [docket entry no.57] filed by the Yavapai-Apache Nation (the “YAN”), for the

point that the Debtor is an unincorporated company separate and apart from the Iipay Nation.

However, to the extent that the County and UST contend that the Debtor is a governmental unit

(whether as an entity separate from the Iipay Nation or as one in the same with the Iipay Nation)

by way of reference to case law on tribal sovereign immunity, this Opposition refutes those

contentions. The case law cited by the County and UST supports a distinction between two

entities in a tribe and its business. This Opposition also refutes certain factual contentions made

by the County and UST to prove that the Debtor and Iipay Nation are, and have been, two

separate entities.

Finally, this Opposition refutes the assertions that the Debtor cannot comply with the

Bankruptcy Code and that the case was filed in bad faith in the vein of “new debtor syndrome.”

The Debtor filed the case in good faith, there is no “new debtor syndrome” here, the Debtor has

good reason for the bankruptcy filing, and Debtor is not in danger of violating the Bankruptcy

Code. Therefore, as explained more fully below, the Court should deny the SD Motion and UST

Motion in their entirety and allow the Debtor to reorganize its business under the protections of

the Bankruptcy Code.

II.

THE DEBTOR IS NOT A GOVERNMENTAL UNIT

A. By Definition, Under the Bankruptcy Code, the Debtor Cannot Be a Governmental

Unit

The Court should find that the Debtor is not a governmental unit simply by virtue of being

connected with the Iipay Nation. For the sake of argument (though without admitting it) for

purposes of Section 101(27), the Debtor will assume that the Iipay Nation is a governmental unit.

However, the Iipay Nation can only be a governmental unit by way of reference to “other . . .

domestic government” and no other type of governmental unit under section 101(27).

/ / /

/ / /


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Section 101(27) of the Bankruptcy Code provides, in full: The term “governmental unit” means United States; State; Commonwealth; District; Territory; municipality; foreign state; department, agency or instrumentality of the United States (but not a United States trustee while serving as a trustee in a case under this title), a State, a Commonwealth, a District, a Territory, a municipality, or a foreign state; or other foreign or domestic government.

11 U.S.C. § 101(27). Although decided with reference to abrogation of sovereign immunity

under section 106 of the Bankruptcy Code and not section 101(27) defining “governmental unit,”

the Ninth Circuit has stated that a federally recognized Indian tribe is a “governmental unit”

because “Indian tribes are certainly governments, whether considered foreign or domestic.”

Krystal Energy Co. v. Navajo Nation, 357 F.3d 1055, 1057 (9th Cir.2004) reh’g en banc denied

2004. The Ninth Circuit has also stated, in a sovereign immunity context, that Indian tribes are

not foreign states. Allen v. Gold Country Casino, 464 F.3d 1044, 1047 (9th Cir.2006).

To confirm and reiterate the Ninth Circuit’s point, the Iipay Nation could not be the

United States, a State, a Commonwealth, a District, a Territory, a municipality, or a foreign state.1

Accordingly, the Iipay Nation could not be a “department, agency, or instrumentality” of any of

these. Thus, the only category into which the Iipay Nation could fit as a “governmental unit” is

the last one enumerated by section 101(27), that of an “other foreign or domestic government.”

And thus, the Ninth Circuit stated, beyond a doubt: “Indian tribes are domestic governments.”

Krystal Energy Co., 357 F.3d at 1061.

Turning now to the Debtor, the Debtor is not the United States, a State, a Commonwealth,

a District, a Territory, a municipality, or a foreign state. And, likewise, the Debtor cannot be a

“department, agency, or instrumentality” of any of these. The only way that the Debtor could be

a “governmental unit,” would be if it fits into the last category enumerated by section 101(27) – a

“domestic government.”

1 “Municipality” is defined by Bankruptcy Code section 101(40) to mean “political subdivision

or public agency or instrumentality of a State,” 11 U.S.C. § 101(40) (emphasis added). The Iipay Nation is not a State.


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While it makes sense that the Iipay Nation, a federally recognized Indian tribe, would fit

into the category of a “domestic government,” it makes no sense to say that the Debtor, the Santa

Ysabel Resort and Casino, is a “domestic government.” The term “governmental unit” includes

the departments, agencies, and instrumentalities for only the United States, a State, a

Commonwealth, a District, a Territory, a municipality, and a foreign state. The “department,

agency, or instrumentality” rubric does not extend to the “other foreign or domestic government”

category. Therefore, the Debtor cannot be adjudged a “governmental unit” by being named a

department, agency, or instrumentality of the Iipay Nation. Rather, if the Debtor is to be a

governmental unit, it must actually be the Iipay Nation or be itself a “domestic government.”

Consequently, the Court should find that the County is incorrect in its contention that “any arm or

instrumentality of the Tribe [Iipay Nation] would likewise qualify as a governmental unit.” SD

Motion p.5 ln.5-6. The correct statement is that the Debtor itself must be the domestic

government if it is to be a “governmental unit,” but, as the facts show, the Santa Ysabel Resort

and Casino is not a government.

The Court should not expand governmental unit beyond what has been set forth in the

Code by Congress because, while “governmental unit” is to be given a broad reading, it cannot be

overly broad, as Congress defined the term by defining what it “means” and not what it

“includes.” The Bankruptcy Code’s rules of construction clarify that the term “includes” is not

limiting. 11 U.S.C. § 102(3). The term “includes” is, thus, expansive, while the term “means” is

more confined. “The use of the term ‘means,’ rather than ‘includes,’ in the definition [of

governmental unit] is to insure that the interpretation is not given an all-inclusive construction.” 2

COLLIER ON BANKRUPTCY ¶ 101.27, at 101-130 (Alan N. Resnick & Henry J. Sommer eds., 16th

ed. rev.). Collier goes on to state in its next sentence that “it has been held that Congress intended

to define governmental unit in the broadest possible sense,” but this cannot be without limit, as

Congress also intended that the governmental unit “should actually be carrying out governmental

rather than private objectives.” Id.; cf. 11 U.S.C. § 101(9) (defining the term “corporation” by use

of the term “includes” rather than “means”). Even though the definition of “governmental unit” is

broad, it only means what it says and does not include more. Therefore, the Debtor cannot be a


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governmental unit by way of being a “department, agency, or instrumentality” of the Iipay

Nation. If the Debtor is a governmental unit, it must be one by virtue of being a “foreign or

domestic government.”

The Debtor is not a government. As explained in the YAN Opposition, the Debtor is an

unincorporated company and a business of 120 people running a casino with its own management

structure, led by David Chelette as general manager and Charles Bauman as controller, neither of

whom are members of the Iipay Nation, and with a middle management structure. The Debtor’s

business includes several gaming tables for blackjack, craps, poker and other games, as well as

slot machines, a restaurant, and a bar. The Debtor does not make any governmental decisions,

hold elections, have any elected officials or bureaucrats. It enacts no laws, enforces no laws,

interprets no laws, and judges no laws. The Debtor only runs a business. To the extent there

would be profits (though there have been little to none) after operating expenses and debt service,

those profits would have been paid to the Iipay Nation as the 100% owner of the Debtor to do

with as it saw fit. However, the Debtor and its management have no say over how those would-

be profits are spent. The Debtor and its management simply run a business in gaming with 120

employees. Therefore, the Court should find that the Debtor cannot be a governmental unit under

the Bankruptcy Code.

B. The Case Law Cited by the County and UST on Tribal Sovereign Immunity Is

Contrary to Bankruptcy Law and Inappropriate for Determining Whether an Entity

Is a Governmental Unit

Even if the Court decided that the term “governmental unit” should include (though

contrary to Congress’ use of “means” rather than “includes” in its definition) an “instrumentality

of a domestic government” (though it appears nowhere in Congress’ definition), the Court should

still find that the Debtor is not a governmental unit under the Bankruptcy Code because the cases

cited by the UST and County do not address the definition of governmental unit or instrumentality

at all. The court in In re Las Vegas Monorail Company, 429 B.R. 770 (Bankr.D.Nev.2010), gave

a lengthy analysis as to whether the debtor was a governmental unit. That court cited to the

United States Supreme Court and found that the word “instrumentality” as used in other areas of


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the law could not be transplanted to bankruptcy law for purposes of addressing the question of

whether a debtor was an “instrumentality” and “governmental unit” for purposes of eligibility

under the Bankruptcy Code. Id. at 789-91. “While the various definitions may be similar, they

are not the same, thus necessitating a separate and full inquiry as to the content of the term

‘instrumentality’ in the Bankruptcy Code.” Id. at 791. The court specifically noted that the term

“instrumentality” plays a role in federal courts’ sovereign immunity analysis in other federal

contexts, but that it would not be appropriate for determining an “instrumentality” under the

Bankruptcy Code for debtor eligibility. Id. at 791 n.21.

The County and UST contend that the Debtor is a governmental unit because it is an “arm

of the tribe” or an “instrumentality” of the tribe, but there is no support for such contention

because of a lack of consistency in the terms used in that analysis, which touches on bankruptcy

law not at all. The Bankruptcy Code’s definition of “governmental unit” does not mention “arm”

of anything in it anywhere. To write “arm of the tribe” into 11 U.S.C. § 101(27) is contrary to

Congress’ enactment of the statute. Furthermore, although the Bankruptcy Code uses the term

“instrumentality” in its definition of governmental unit, the case law upon which the County and

UST rely does not use “instrumentality” at all. “We note that the courts that have addressed this

issue [of extending tribal sovereign immunity] have utilized different turns of phrases to describe

a tribe’s economic entities. . . . “an arm of the tribe,” “a division of the Tribe,” “a tribal agency,”

“a sub-entity of the Tribe” and “a subordinate tribal organization.” Breakthrough Management

Group v. Chukchansi Gold Casino and Resort, 629 F.3d 1173, 1185 n.9 (2010); see also Cook v.

Avi Casino Enterprises, Inc., 548 F.3d 718, 722 (9th Cir.2008) (naming yet another type of entity,

the “unincorporated arm of a tribe” as separate from the “Indian tribe”). “Instrumentality,” as

used in one area of federal law does not mean “instrumentality” as used in the Bankruptcy Code.

In re Las Vegas Monorail Company, 429 B.R. at 791. Here, the Court should find that the term

“arm of the tribe” as used in federal case law on tribal sovereign immunity does not mean

“instrumentality” under the Bankruptcy Code. Accordingly, the Court should find that the Debtor

is not a governmental unit.

/ / /


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Most importantly, the Court should find that the tribal sovereign immunity analysis cannot

be carried over and applied properly to the question of whether an entity is a governmental unit

under the Bankruptcy Code because of sovereign immunity analysis of governmental functions is

at odds with the bankruptcy law analysis. The case of Cook v. Avi Casino Enterprises, Inc., 548

F.3d 718 (9th Cir.2008), cited by the UST, along with most all of the tribal sovereign immunity

case law, cites to and relies on Kiowa Tribe of Oklahoma v. Manufacturing Technologies, Inc.,

523 U.S. 751 (1998). Cook cites to Kiowa and states that “immunity applies to the tribe’s

commercial as well as governmental activities.” Cook, 548 F.3d at 725 (citing Kiowa, 523 U.S. at

754-55). It is more accurate to say that the Supreme Court draws no distinction between

commercial and governmental activities when it comes to sovereign immunity: “Nor have we yet

drawn a distinction between governmental and commercial activities of a tribe . . . Though

respondent asks us to confine immunity from suit . . . to governmental activities, our precedents

have not drawn these distinctions.” Kiowa, 523 U.S. at 754-55. The Supreme Court recognized

that tribal sovereign immunity has nothing to do with commercial or governmental actions and

acknowledged that it is extended to the most basic commerce that has no connection to

government: The petitioner [in Oklahoma Tax Comm’n v. Citizen Band Potawatomi Indian Tribe of Okla., 498 U.S. 505 (1991)] there asked us to abandon or at least narrow the doctrine because tribal business had become far removed from tribal self-governance and internal affairs. We retained the doctrine, however, on the theory that Congress had failed to abrogate it in order to promote economic development and tribal self-sufficiency. . . . *** . . . In our interdependent and mobile society, however, tribal immunity extends beyond what is needed to safeguard tribal self-governance. This is evident when tribes take part in the Nation’s commerce. Tribal enterprises now include ski resorts, gambling, and sales of cigarettes to non-Indians.

Kiowa, 523 U.S. at 757-58. Thus, at its core, the inquiry into whether to extend sovereign

immunity has nothing to do with governmental or commercial functions or activities. This is


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starkly different from the Bankruptcy Code’s inquiry into whether an entity is a governmental

unit. To be a governmental unit, “[t]he department, agency or instrumentality in question should

actually be carrying out governmental rather than private objectives.” 2 COLLIER ON

BANKRUPTCY ¶ 101.27, at 101-130. If an entity is a “governmental unit” by virtue of being an

“instrumentality,” then it usually has at least traditional government attributes or a traditional

governmental function. In re Las Vegas Monorail, 429 B.R. 770, 795 (Bankr.D.Nev.2010).

The case law cited by the County and UST and the progeny of Kiowa would extend

sovereign immunity to ski resorts, casinos, and cigarette shops regardless of governmental

function as long as they are arms of the tribe. The Bankruptcy Code, on the other hand, would

treat these business entities as governmental units only if they were carrying out governmental

objectives, that is, having traditional government attributes or serving traditional governmental

functions. Casinos and gaming enterprises are commercial businesses. They may generate

significant revenues that inure to the benefit of the governments in their jurisdictions by way of

taxes, licensing fees, and generally creating jobs and economic activity, but the casinos are not

themselves governments. The court in In re Las Vegas Monorail specifically used casinos as an

example of businesses with some indicia of an “instrumentality” but which were obviously not

“governmental units.” 429 B.R. at 797. Therefore, due to the fundamental difference in the two

analyses, the Court should find that the tribal sovereign immunity analysis is not useful or

informative in determining whether an entity is a governmental unit under the Bankruptcy Code.

If the Court must use a test for a governmental unit that is an “instrumentality of a

domestic government” (despite being beyond the definition set by Congress) the Court should use

the “instrumentality” test set forth by the court in In re Las Vegas Monorail because at least that

test was developed in the context of bankruptcy law and chapter 11 debtor eligibility.

Admittedly, this is not a perfect fit because the Las Vegas Monorail court had to address whether

the debtor was a “governmental unit” by way of being a “municipality,” as defined by section

101(40) to mean “political subdivision or public agency or instrumentality of a State,” but the

court quickly determined that the debtor was not a political subdivision or public agency and

/ / /


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focused on “instrumentality.” In re Las Vegas Monorail Co., 429 B.R. at 795; see 11 U.S.C. §

101(40).

The Las Vegas Monorail court analyzed three factors on instrumentality: (1) the extent to

which the entity has traditional governmental attributes or engages in traditional governmental

functions; (2) the extent to which the State controls the entity’s operations; and (3) the extent to

which the State itself categorizes the entity. 429 B.R. at 795. Here, the Debtor is not an

instrumentality and thus not a governmental unit. First, the Debtor has no traditional

governmental attributes, and it does not engage in any traditional governmental functions, which

has been discussed above. To the extent that the Debtor may have sovereign immunity (which

might be seen as a governmental attribute), the Supreme Court in Kiowa made clear that the

extension of sovereign immunity to a tribe’s business has nothing to do with its governmental

function. Second, the Iipay Nation does not control the Debtor’s daily operations. The Iipay

Nation’s tribal Chairman deals with the Debtor’s management approximately three to four times a

year and on only the most important financial decisions (such as whether to file for bankruptcy)

like the chairman of a corporation’s board of directors. The Debtor is regulated by the Iipay

Nation’s Gaming Commission and pays sales taxes to the Iipay Nation, but this is no different

from the regulation and taxes paid by non-Indian casinos to states, which the Las Vegas Monorail

court found certainly does not make casinos into governmental units. 429 B.R. at 795. Third, the

Iipay Nation categorizes the Debtor as not being a government or an instrumentality but as its

business, which, under the Bankruptcy Code, is an unincorporated company (factually addressed

in the YAN Opposition and in this Opposition below). Therefore, to the extent that an

“instrumentality” test for governmental unit even applies (though it is beyond Congress’ limited

definition in section 101(27)), the Court should find that the Debtor is not an instrumentality and

not a governmental unit under the Bankruptcy Code.

III.

THE DEBTOR AND IIPAY NATION ARE TWO SEPARATE ENTITIES

The case law cited by the County and UST for the proposition that the Debtor is an “arm

of the tribe” and therefore one and the same with the Iipay Nation (or at least a governmental unit


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separate from the Iipay Nation) actually establish that courts treat tribal businesses as separate

entities of the tribes. The Court should find that the facts support that the Debtor is, and always

has been, a separate entity from the Iipay Nation, despite certain parties’ presumptions otherwise.

In the YAN Opposition, the Debtor explained that it is an unincorporated company, separate and

apart from the Iipay Nation, though wholly owned by the Iipay Nation. The Debtor refers to the

YAN Opposition to the extent relevant in responding to the UST and County regarding the

Debtor’s separate entity status. Additionally, in this Opposition, the Debtor responds to certain

contentions of the County and UST to establish that the Debtor and Iipay Nation are separate

entities. For the reasons explained herein, the Court should find that the Debtor is a separate

entity and an unincorporated company eligible to be a chapter 11 debtor.

A. The Sovereign Immunity Cases Establish the Existence of Separate Entities Between

a Tribe and Its Business Enterprise, Just Like the Iipay Nation and the Debtor

As explained above, the courts have used several terms to refer to a tribe’s entities: “We

note that the courts that have addressed this issue [of extending tribal sovereign immunity] have

utilized different turns of phrases to describe a tribe’s economic entities. . . . “an arm of the tribe,”

“a division of the Tribe,” “a tribal agency,” “a sub-entity of the Tribe” and “a subordinate tribal

organization.” Breakthrough Management Group v. Chukchansi Gold Casino and Resort, 629

F.3d 1173, 1185 n.9 (2010); (ultimately using yet another phrase “subordinate economic entity”);

see also Cook, 548 F.3d at 722 (noting the “unincorporated arm of a tribe” as separate from the

“Indian tribe”). As discussed above, these cases cannot be used to show that the entities are

“governmental units,” but they do show that courts distinguish between the tribe and the entity as

separate entities, then ask how close or far the relationship is between the two.

The closeness of the relationship does not result in the two entities being one and the

same. “Arm of the tribe” is one of the phrases used when the entity is sufficiently close to the

tribe so as to enjoy the extension of sovereign immunity. Chukchansi, 629 F.3d at 1185 n.9.

However, the phrase “arm of the tribe” is used for unincorporated as well as incorporated

companies. In Gold Country Casino, the Ninth Circuit addressed an unincorporated company:

“Gold Country Casino is a tribal entity formed by a compact between the federally recognized


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Tyme Maidu Tribe and the State of California. The Casino is wholly owned and operated by the

Tribe.” Allen v. Gold Country Casino, 464 F.3d 1044, 1045 (9th Cir.2006). The Ninth Circuit

determined that “the Casino functions as an arm of the Tribe.” Id. at 1047. Compare this to

Cook, where Avi Casino was “owned and operated by Avi Casino Enterprises, Inc., a corporation

organized under the Fort Mojave Business Corporation Ordinance, which is a tribal law of the

Fort Mojave Indian Tribe.” Cook v. Avi Casino Enterprises, Inc., 548 F.3d 718, 721 (9th

Cir.2008). There, the Ninth Circuit stated that “the settled law of our circuit is that tribal

corporations acting as an arm of the tribe enjoy the same sovereign immunity granted to the tribe

itself.” Id. at 725. The Ninth Circuit was cognizant of the term “tribal corporation” as a tribal

corporation incorporated under tribal law (as opposed to an unincorporated company) when in it

used that term in Cook because it carefully analyzed Avi Casino Enterprises, Inc.’s corporate

existence as a key fact in the court’s decision on the issue of federal diversity jurisdiction for

tribal corporations; thus it would not be an inadvertent slip for the Ninth Circuit to use “tribal

corporation” to refer generally to incorporated and unincorporated companies. Comparing Cook

with Gold Country Casino, it is apparent that the Ninth Circuit uses “arm of the tribe” to refer to

both incorporated and unincorporated entities. An officially incorporated tribal corporation

certainly is established as its own entity. If the phrase “arm of the tribe” applies to the tribal

corporation, then its use cannot imply that the tribe and the “arm of the tribe” are the same entity.

As used by the Ninth Circuit, “arm of the tribe” only means that the separate entity has a close

relationship to the tribe. Thus, even if the Debtor is an arm of the tribe of the Iipay Nation, it is

still a separate entity.

Case law consistently speaks of the “arm of the tribe” as being an entity closely related to

the tribe, but not the tribe itself. For example, the County cites Breakthrough Management Group

v. Chukchansi Gold Casino and Resort, 629 F.3d 1173 (2010), which addressed a casino that was

an “unincorporated entity created by and wholly owned by a federally recognized Indian tribe.”

Id. at 1180. To start, the County’s quote from Chukchansi is itself not a quote of the Tenth

Circuit, but a quote from a law review article, which the Tenth Circuit used to frame its issue:


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“The tribal organization may be part of the tribal government and protected by tribal immunity, even though it may have a separate corporate structure.” William V. Vetter, Doing Business with Indians and the Three “S” es: Secretarial Approval, Sovereign Immunity, and Subject Matter Jurisdiction, 36 Ariz.L.Rev. 169, 174 (1994). That leads to the question presented here: “Does the resulting entity have a distinct, nongovernmental character and therefore is not immune, or is it merely an administrative convenience, i.e., a ‘subordinate [tribal] economic organization,’ and therefore immune?” Id. at 176 (alternation in original).

Chukchansi, 629 F.3d at 1184. The distinction posed by this inquiry may be relevant for deciding

whether to extend immunity or not from the tribe to its separate entity, but in either instance, the

question acknowledges that the entity is separate from the tribe. Just as in Cook, the Chukchansi

court spoke in terms of closeness of the relationship between the two entities, and not in terms of

them being the same entity: “We conclude that, under these factors, the Authority and Casino

have a sufficiently close relationship to the Tribe to share in its immunity.” Id. at 1181.

Therefore, this line of case law recognizes that the tribe is separate from its casino, then seeks to

determine whether sovereign immunity is to be extended. The case law does not stand for the

proposition that the entities are one and the same.

The analysis in Gold Country Casino is the same. “When the tribe establishes an entity to

conduct certain activities, the entity is immune if it functions as an arm of the tribe.” Gold

Country Casino, 464 F.3d at 1046. The statement “the tribe establishes an entity” shows that a

separate entity is specifically recognized. Other cases speak in the same terms of recognizing two

entities and then extending immunity from one to the other: “whether tribal immunity should be

extended to a tribal business entity should depend on the degree to which the tribe and entity are

related in terms of such factors as purpose and organizational structure.” Trudgeon v. Fantasy

Springs Casino, 71 Cal.App.4th 632, 638 (1999). The analysis does not alter between

incorporated corporations owned by the tribe and unincorporated entities owned by the tribe.

Thus, this line of cases supports a finding that the Debtor and the Iipay Nation are separate

entities, regardless of formal incorporation or unincorporated company status.

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The separate existence of the Debtor from the Iipay Nation is significant to prove that the

Debtor is not a governmental unit. As explained in Part II of this Opposition, the Iipay Nation is a

“domestic government” and no other type of “governmental unit” enumerated in 11 U.S.C.

§101(27). If the Court holds true to Congress’ definition of “governmental unit,” then the Debtor

can be a governmental unit only if it, too, is a “domestic government” because the “department,

agency, or instrumentality” rubric found in section 101(27) does not apply to the term “domestic

government.” If the Debtor and Iipay Nation were the same entity, then the Debtor would be the

government. However, the line of tribal-sovereign-immunity case law shows that the Debtor and

Iipay Nation are not the same entity. The Debtor, Santa Ysabel Resort and Casino, is a casino, an

unincorporated company, and a business; it is not a government. Therefore, the Debtor is not a

“governmental unit,” and the Court should find that it is eligible to be a chapter 11 debtor.

B. The Facts Support that the Debtor and Iipay Nation Are Separate Entities

1. The Debtor’s Bankruptcy Schedules and Prepetition Loans and Agreements

The Court should find that the Debtor’s Bankruptcy Schedules are consistent with the

prepetition loan agreements concerning the casino and other agreements and that the Debtor and

Iipay Nation are two separate entities, as they have been for many years. The UST insinuates that

the Debtor and Iipay Nation must be one and the same entity because the Debtor lists the YAN’s

claims on its Bankruptcy Schedules. However, the claims as listed against the Debtor, separate

and apart from the Iipay Nation, are consistent with the history of the claim, and both the UST

and County are incorrect in their assertions that the Debtor’s Bankruptcy Schedules and other

statements are admissions that the Iipay Nation and Debtor are one in the same.

The Iipay Nation’s dealings with the YAN and County are both marked by limited

waivers of sovereign immunity and limited recourse to casino assets, i.e., Debtor’s assets (with

one exception), as shown in the loans and agreements with these parties. Under the Bankruptcy

Code, “‘claim against the debtor’ includes claim against property of the debtor.” 11 U.S.C. §

102(2). Because the County’s and the YAN’s claims are limited in recourse to the Debtor’s

assets, they are claims against the Debtor. Both the YAN loan agreements and County’s

Intergovernmental Agreement show that the Casino was walled off and separated from the Iipay


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Nation with limited waivers of sovereign immunity and limited recourse to the Debtor, thus

distinguishing the casino from the tribe, i.e., the Debtor from the Iipay Nation. The Court should

find that the factual analysis bears this out.

a. The YAN’s Claims

The UST is incorrect in its insinuation that the Debtor’s listing the YAN’s claims on the

Bankruptcy Schedules is evidence that the Debtor and Iipay are the same. The history of the loan

documents bears out a distinction between the Debtor and the Iipay Nation tracing back to the

loan’s inception. This distinction was explored somewhat in the YAN Opposition. Here, it is

explored in the context of the waiver of sovereign immunity and limited recourse, bearing on the

point raised by the UST.

The Court should find that the Iipay Nation’s limited waiver of sovereign immunity

regarding the casino evidences a distinction of the tribe from the Debtor. As pointed out by the

UST, the California Court of Appeals found that the “[Iipay] Nation expressly and irrevocably

waived tribal sovereign immunity and allowed court resolution of disputes in those courts having

subject matter jurisdiction of any loan agreement problems.” Yavapai-Apache Nation v. Iipay

Nation of Santa Ysabel, 201 Cal.App.4th 190, 196 (2011). This was a limited waiver of sovereign

immunity in article XV of the loan agreements with the YAN. Id. at 197. Article XV states, in

pertinent part: Section 15.03. Waiver of Sovereign Immunity; Consent to Jurisdiction (a) . . . any recover upon any judgment resulting therefrom shall be limited to recovery against the Casino Assets (other than the Real Property) in a manner consistent with Section 15.04. *** Section 15.04. Limitations to Recourse In any action or proceeding against Borrower to enforce the Loan Documents, Agent and Lenders agree that they shall have no recourse against any Excluded Assets. . . . THE LIENS OF AGENT AND LENDERS ARE LIMITED TO THE COLLATERAL SPECIFICALLY REFERRED TO IN THE


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COLLATERAL DOCUMENTS DESCRIBED HEREIN AND ANY OTHER COLLATERAL SPECIFICALLY PLEDGED TO THE PAYMENT OF THE OBLIGATIONS.

Amended and Restated Loan Agreement (dated December 1, 2005) at p.74-75, found in YAN

Opposition, Mr. Havel’s Request for Judicial Notice (hereinafter “Havel RJN”) at p.167-67.

These statements in Sections 15.03(a) and 15.04 are the same in the Fourth Amendment to

Amended and Restated Loan Agreement, dated January 30, 2009. See Havel RJN at p.202 and

207-09. “Excluded Assets” is a defined term meaning “any Cash, Cash Equivalents, or Property

of Borrower that is not Casino Assets.” Havel RJN p.18. “Casino Assets” is a defined term that

references property associated with “Casino Operations” and “Pledged Revenues” and

“Property,” all of which are defined terms, but all of which, by definition, point to tangible

property utilized in connection with operating the casino and “gaming, entertainment, lodging,

food and beverage, retail, and other operations in connection with the Casino.” Havel RJN p.15

(defining defined terms: Casino, Casino Assets, and Casino Operations). “Property” means all

property. Havel RJN p.108. “Pledged Revenues” is defined by reference to the security

agreement. Havel RJN p.107. The grant of security interest in the Amended and Restated

Security Agreement defines “Collateral” to mean bank accounts specified with the designation of

“d/b/a Santa Ysabel Gaming Enterprise,” bank accounts for Pledged Revenue, all personal

property that is Casino Assets, and Pledged Revenues, which is defined to mean “all receipts,

revenues and rents from Casino Assets” and from Casino Operations. See Havel RJN p.224-25.

Therefore, the loan agreements with the YAN were written with and speak to limited recourse to

the Debtor, apart from the Iipay Nation. Accordingly, the Court should find that it is proper to

characterize these claims as against the Debtor and listed on the Debtor’s Bankruptcy Schedules

by reference to the facts and pursuant to 11 U.S.C. § 102(2).

The limited recourse to the Debtor and the Debtor’s assets as separate and apart from the

Iipay Nation is supported by other prepetition loan documents as well: Separately, but in connection with the loan agreement, [the Iipay] Nation borrowed millions of dollars from YAN, by entering into promissory notes in favor of YAN, and significantly, a written loan guaranty agreement with Yan dated February 12, 2005 (the loan


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guaranty). The operative version of this loan guaranty is a second amended and restated loan and guaranty agreement (referred to as the SARLG) with promissory note dated July 5, 2007.

Yavapai-Apache Nation, 201 Cal.App.4th at 202. Litigation on this loan guaranty (the “Loan

Guaranty”) was pursued in the YAN’s tribal court, not in the California court or before this

California appellate court. Id. at 208. The ruling from the arbitrator in the YAN tribal court

litigation on the loan guaranty, the Hon. James Hancock, Arizona Superior Court (ret.), found that

the monies owed to the YAN fell into two buckets based on the (1) original set of loan

agreements with JP Morgan Chase and (2) the SARLG and its accompanying note. See Havel

RJN p.40-44. The Hon. James Hancock (ret.) determined that the award in the amount of

$8,552,319.86 should be split into two separate buckets for recourse – one in the amount of

$3,000,000 with recourse to collateral that includes revenue sharing payments that the Iipay

Nation receives from other gaming tribes in California, and a second in the amount of

$3,466,254.66 with recourse to collateral defined as Casino Assets of the Debtor that do not

include the Iipay Nation’s revenue sharing payments.2 Havel RJN p.46 ¶¶ 1.a and 1.b. This

distinction in recourse signifies a distinction between Debtor separate and apart from the Iipay

Nation.

Opponents of the Debtor might point out that Judge Hancock’s award speaks only in terms

of “IIPAY” and not the Debtor, but nomenclature here is beside the point. The point is that there

is – and always has been – a distinction between the Debtor in the Casino, Casino Operations, and

Casino Assets, on the one hand, and the Iipay Nation with a specific exclusion of its assets, on the

other hand, which was invaded only in a very specific context and through the separate, though

related, SARLG. As noted above, a claim against property of the debtor means a claim against

the debtor. 11 U.S.C. § 102(2). Since 2005, recourse for the YAN’s claim is specifically limited

to the Debtor’s casino assets and operations, except for only $3,000,000 of a claim that totals over

$40,000,000. This not only reinforces a division and distinction between the Debtor and the Iipay

2 The Iipay Nation has argued against this ruling, but, nonetheless, it is the decision from Judge

Hancock.


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Nation, but also justifies the listing of the YAN’s claim on the Debtor’s schedules. Except for the

$3,000,000 carve-out, the entire YAN claim is to be satisfied against the Debtor’s assets.

Therefore, the Court should find that the Debtor and Iipay Nation are separate entities and the

YAN’s claim is properly listed on the Debtor’s schedules.

b. The County’s Claim and the Intergovernmental Agreement

The Debtor voluntarily will amend its Bankruptcy Schedules to remove the

Intergovernmental Agreement Between the County of San Diego and the Santa Ysabel Band of

Diegueno Mission Indians (the “Intergovernmental Agreement”). With the benefit of more time

to review with counsel, the Debtor agrees that this is a contract between the Iipay Nation and

County. However, just as with the YAN’s claim, pursuant to 11 U.S.C. § 102(2), and based on

the limited waiver of sovereign immunity and limited recourse in the Intergovernmental

Agreement, the County’s claim against the Debtor will remain on the Debtor’s Bankruptcy

Schedules.

The Court should find that the terms of the Intergovernmental Agreement support a

finding that the Debtor and Iipay Nation are separate and that the County’s claim is against the

Debtor because of limited waivers of sovereign immunity and limited recourse to the Debtor’s

assets. The Iipay Nation waived sovereign immunity with respect to the County in the

Intergovernmental Agreement: D. CONSENT TO JURISDICTION: LIMITED EXPRESS WAIVER OF SOVEREIGN IMMUNITY 1. . . . The County and the Tribe expressly consent to be sued in such courts for the purposes of confirmation of such an award and the Tribe expressly and irrevocably waives its sovereign immunity specifically and exclusively to the County for the limited purposes set forth in Paragraphs 2 through 6 of this Section D. . . . *** 3. Notwithstanding any other provision of this Agreement, the Tribe’s waiver of sovereign immunity shall not extend to any assets of the Tribe other than the revenue stream from the Facility.


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Intergovernmental Agreement p.14 (found in YAN Opposition, Mr. Bibbero’s Declaration,

Exhibit 2). Importantly, as shown by paragraph 3, this waiver was limited to the Debtor’s assets.

The Intergovernmental Agreement defines “Facility” to mean “a 70,000 square foot Class III

gaming casino of no more than 350 gaming devices, support offices and restaurant/food areas (the

‘Facility’) . . .” Intergovernmental Agreement p. 2 ¶ H. This shows a specific separation of the

Debtor from the Iipay Nation by recognizing a waiver of immunity and recourse for collection

limited to the Debtor.

Despite the Intergovernmental Agreement being between the County and Iipay Nation, the

County’s limited recourse to the Debtor’s assets makes the County a creditor of the Debtor’s

estate. Under the Bankruptcy Code, “‘claim against the debtor’ includes claim against property of

the debtor.” 11 U.S.C. § 102(2). Under the Code, the County is a creditor of the estate.

Moreover, under the Intergovernmental Agreement, is has recourse only to the Debtor and its

assets, not the Iipay Nation. The Iipay Nation, being shuttered off from the Debtor by way of the

Intergovernmental Agreement, and the Bankruptcy Code’s specific acknowledgement of a claim

against property of the Debtor being a claim against the Debtor, the County is inextricably tied to

the Debtor and its assets, separate and apart from the Iipay Nation. Therefore, the Court should

recognize that the Intergovernmental Agreement distinguishes between the Iipay Nation and the

Debtor and makes the County’s claims limited to the Debtor’s assets. Accordingly, the Court

should find that the Debtor is a separate entity with the County’s claim against it properly listed

on its Schedules.

c. Bankruptcy Schedules, Debtor’s Pleadings, and 7-Day Package

The Court should find that the Debtor’s Bankruptcy Schedules are a generally trustworthy

disclosure of the Debtor’s entire assets, liabilities, and financial affairs as of the petition date and

that they do not serve as admissions on contested matters of a complex nature, particularly as

these contested motions to dismiss had not been filed at the time the Schedules were signed. “The

principal purpose of the schedules in a chapter 11 case is to inform creditors of the nature of the

debtor's assets and liabilities . . . [and] give interested parties enough information to decide

whether they want to engage in further inquiry.” In re Marshall, 298 B.R. 670, 677


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(Bankr.C.D.Cal.2003) (quoting, in part, 9 COLLIER ON BANKRUPTCY ¶ 1007.03[1]. Furthermore,

a chapter 11 debtor’s schedules often are amended as a matter of course as investigation permits.

The Court’s docket will reflect that the Debtor requested an additional two weeks beyond the

original deadline of July 16, 2012, to prepare its Schedules, but, upon the opposition of the UST,

the Debtor was granted an extension of only one week. Furthermore, the Third Circuit noted that

there is some difficulty in sorting out assets and liabilities when dealing with an unincorporated

company, but noted that “the same difficulty would exist in any court that was winding up the

[debtor], and a court of bankruptcy has all the machinery of a court of equity, and is not likely to

find the difficulty insurmountable.” Vadakin v. Cass (In re Order of Sparta), 242 F. 235, 239 (3d

Cir.1917). Because the Debtor is an unincorporated company, naturally, it would take a little

extra time to fully sort out its assets and liabilities through the bankruptcy process. The Court

should find that this is no prejudice to the Debtor, which has operated in good faith in all of its

matters and filings before this Court.

The UST misplaces too much reliance on the Debtor’s shorthand term “blanket lien” on

the Schedule D, as well as the Debtor’s summary explanation of the YAN’s purported lien as used

in its first-day pleadings. The Debtor’s shorthand terms and summary cannot be used to reflect

the true and full significance of the YAN’s claim, which arises from a loan agreement that is over

600 pages in length, has been amended and restated four times, and has been litigated in multiple

courts over collection and enforcement. This is especially so when the Debtor’s first-day

pleadings amounted to over 10 filings, were prepared on an emergency basis, and were for the

purpose of giving the Court a general background upon which to grant emergency relief. The

Debtor does not sign its declarations and Bankruptcy Schedules lightly, as they are signed under

penalty of perjury. However, contrary to the UST’s contention, all of these statements do not

amount to admissions that the Debtor is the same entity as the Iipay Nation. As explained above,

these creditors properly are listed on the Schedules with claims against the Debtor.

The Debtor objects to the UST’s use of information supplied by way of the Debtor’s

Supplemental 7-Day Package as evidence in support of the UST Motion, which is a contested

matter. Contested matters under the Bankruptcy Code are governed by Rule 9014 of the Federal


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Rules of Bankruptcy Procedure, which incorporates discovery rules, including Rule 7033 for

interrogatories, Rule 7034 for producing documents, and Rule 7036 for requests for admission.

See FED.R.BANKR.P. 7033, 7034, 7036, and 9014. These Rules provide the producing party with

protections to allow them to carefully consider answers, to assert objections, and to ask for

clarifications, knowing that the statements made and documents produced are done so in

connection with adversarial, contested matters and often for the purpose of the responding parties’

undoing. Due to the nature of this case, the information requested by the UST in the 7-Day

Supplement was of an unusual nature and outside the normal administrative matters involved in a

7-Day Package. The Debtor compiled the information in the spirit of cooperation and regulation,

not discovery in a contested matter. The protections of Rules 7033 and 7034 provide the

responding party 30 days to answer discovery. Here, the UST requested and the Debtor presented

the 7-Day Supplement in under 10 days. The Court should find that the Debtor’s statements made

in connection with generalized disclosure of an administrative nature are not admissions to be

used against it in a contested matter.

2. Debtor’s Proposed Counsel’s Employment Application

The Court should not consider the original retainer agreement for Levene, Neale, Bender,

Yoo and Brill L.L.P. (“LNBYB”) to be evidence that the Iipay Nation and Debtor are the same

entity. The Debtor has addressed this point in the YAN Opposition.

3. Resolution Authorizing Debtor’s Bankruptcy Filing

The Court should find that the Resolution authorizing the Debtor’s bankruptcy filing is not

evidence that the Debtor and Iipay Nation are the same entity. The County and UST persist in

their illogical point that reference to the Iipay Nation’s Chairman, Virgil Perez, in the Resolution

can only mean that the Iipay Nation and the Debtor are the same. The County and UST present

an incomplete picture, though, because they conveniently cite to the fact that Chairman Perez is a

designated officer while conveniently ignoring the fact that the Resolution also names the

Debtor’s general manager, David Chelette, as a designated officer: “(and/or other ‘Designated

Officer’ of the Casino, including, but not limited to its General Manager, David Chelette”).

Docket Entry No.1, Resolution No.10-12 at p.1. Since the petition date, David Chelette, and not


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the Chairman, signed the declarations in support of the Debtor’s first day motions, signed the

Debtor’s Bankruptcy Schedules and Statement of Financial Affairs, attended the initial debtor’s

interview with the UST, and represented the Debtor at the 341(a) meeting of creditors.

Contrary to the County’s insinuation, the fact that the Chairman authorized the filing of

the bankruptcy instead of “directors, officers, or managers of the Debtor” does not prove that the

Debtor and Iipay Nation are the same entity, or that it is a “governmental unit.” It only proves

what the Debtor and the Iipay Nation have stated all along, that the Debtor is wholly owned by

the Iipay Nation. The Iipay Nation’s Chairman acts something akin to a corporation’s board of

directors when it comes to the Iipay Nation’s economic business activities, as is the tradition of

the tribe. By way of comparison, a corporation’s filing of a bankruptcy would not be based on the

decision of a CEO, but on the decision of the board of directors. Likewise the Debtor’s filing of

bankruptcy would not be done by the decision of its general manager, but by the decision of the

Chairman. This is no proof of a governmental unit, as discussed above. The Chairman’s

involvement in the Debtor is limited to a few discussions with the general manager throughout the

year and on decisions of the highest level, like whether to file bankruptcy.

4. D/B/A Filings

The Debtor has addressed the insignificance of the d/b/a filings in the analysis of the

existence of an unincorporated company in the YAN Opposition. The cases cited by the County

are equally insignificant on the Debtor’s separate existence from the Iipay Nation and status as an

unincorporated company. Pinkerton v. Superior Court, 49 Cal.App.4th 1342 (1996) is wholly

outside of bankruptcy law and any discussion of bankruptcy eligibility. Likewise, Allen v. Gold

Country Casino, 464 F.3d 1044 (9th Cir.2006), discusses tribal sovereign immunity and not the

existence of “governmental units” or “unincorporated companies” or eligibility under bankruptcy

law. Despite the County’s reliance on Gold Country Casino to suggest that a tribal business with

a d/b/a is the tribe itself, as discussed above, the tribal-sovereign-immunity analysis treats the

casino as a separate entity from the tribe and asks whether they are close enough that immunity

should extend from one to the other. Therefore, the Court should find that the Debtor is an

unincorporated company separate from the Iipay Nation, regardless of non-bankruptcy, d/b/a law.


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IV.

THE DEBTOR IS A PROPER DEBTOR UNDER THE BANKRUPTCY CODE

The Court should find that the Debtor is eligible to be a debtor under the Bankruptcy Code

notwithstanding hypothetical conundrums about appointment of a chapter 11 trustee because

mitigating steps can be taken under 11 U.S.C. § 1112(b) to more appropriately deal with any

hypothetical situation involving a trustee. Section 1104(a)(1) states that the bankruptcy court

“shall order the appointment of a trustee,” but only if it finds “cause.” 11 U.S.C. 1104(a)(1). A

finding of “cause” is examined on a case-by-case basis where the court “should generally balance

the benefit to be gained from such an appointment against the detriment to the reorganization

effort and the rights of the debtor that may result from such an appointment.” 7 COLLIER ON

BANKRUPTCY ¶ 1104.02[3][a], at 1104-8. Despite the County’s ominous and oppressive

interpretation of the “shall” mandate to mean that the bankruptcy court would be forced to appoint

a trustee in violation of the Indian Gaming Regulatory Act (“IGRA”), the bankruptcy court could

consider the ensuing detriment against the benefit and find that “cause” does not exist under the

circumstances.

Alternatively, if a party moved for the appointment of a trustee under 11 U.S.C. § 1104(a),

then the Debtor could move for voluntary dismissal under 11 U.S.C. § 1112(b) and offer the

Court the choice of dismissing the case, converting it to chapter 7, or appointing a chapter 11

trustee. Section 1112(b) also uses the “shall” mandate such that the court “shall” dismiss a

chapter 11 case instead of converting it to one under chapter 7 or appointing a chapter 11 trustee

under section 1104(a) if it “is in the best interest of creditors and the estate, for cause.” 11 U.S.C.

§ 1112(b)(1). The Debtor will assume for the sake of argument that appointment of a chapter 7 or

11 trustee would be a violation of IGRA, just as would be the appointment of a receiver. The

Court, in considering the violation of IGRA and the policies behind IGRA, could find cause to

dismiss instead of appointing a trustee. Therefore, the Court should find the hypothetical (and

highly attenuated possibility) of chapter 11 trustee appointment to be no bar to the Debtor’s

eligibility as a debtor under the Bankruptcy Code.

/ / /


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The Court should find the County’s hypothetical problems with the chapter 11 plan

confirmation process to be equally insignificant, especially at this early stage of the case. The

Debtor’s exclusivity period for proposing a plan of reorganization has not yet run under 11 U.S.C.

§ 1121, and no other parties are able to propose a competing plan at this stage. Moreover, until

the plan process plays out, these imagined concerns are not yet ripe and cannot be addressed.

Therefore, the Court should consider them not at all.

V.

THE DEBTOR’S CASE WAS FILED IN GOOD FAITH

The Court should find that the Debtor’s case was filed in good faith, that there is no “new

debtor syndrome” here, and that the Debtor’s statements regarding its existence are consistent

with the statements made by the Iipay Nation to the National Indian Gaming Commission

(“NIGC”) in prepetition litigation. “Many cases hold that courts should dismiss on bad faith

grounds sparingly.” In re Sletteland, 260 B.R. 657, 662 n.2 (Bankr.S.D.N.Y.2001). The movant

has the burden of prove by a preponderance of the evidence. In re Woodbrook Assocs., 19 F.3d

312, 317 (7th Cir.1994); 7 COLLIER ON BANKRUPTCY ¶ 11.04[8]. The County has failed to carry

its burden of proof, much less by a preponderance of the evidence.

The County’s “new debtor syndrome” bad faith theory begins with the faulty premise that

the Iipay Nation created the Debtor out of thin air in some week or two prior to the bankruptcy

filing. As explained in the YAN Opposition, the Debtor has existed as an unincorporated

company for years. It is further supported by the record and history of the loan documents with

the YAN and the Intergovernmental Agreement, both of which included limited waivers of

immunity and limited recourse that draw a distinction between the Iipay Nation and the Debtor.

This distinction has existed for years.

The fact that the County did not take note of the Debtor as a separate entity by virtue of it

being an unincorporated company under the Bankruptcy Code is inconsequential. The Third

Circuit addressed this objection and dismissed it as being no bar to the existence of an

unincorporated company:


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Two minor objections may be briefly noticed. The first is that the order [i.e, the Order of Sparta, the debtor] is not a legal entity, and cannot be sued qua order. To this it is enough to answer that, as Congress has permitted a suit in bankruptcy to be brought against such a company, no reason is apparent why the proceeding should not bring the company into court under its own name – of course with notice to the proper officials.

Vadakin v. Cass (In re Order of Sparta), 242 F. 235, 239 (3d Cir.1917). Furthermore, the fact

that an entity is known to a creditor in a capacity other than an unincorporated company “is no

reason for holding that bankruptcy may not be invoked in order to provide equality of treatment

of all creditors of this separate entity.” Gallagher v. Hannigan, 5 F.2d 171, 174 (1st Cir.1925).

Therefore, the County’s lack of insight into the Debtor’s existence as an unincorporated company

under the Bankruptcy Code is no reason to declare it a “new debtor” created in bad faith. The

Debtor has not been created recently, its assets have not been hidden or transferred, much less for

inadequate consideration. Prepetition, by virtue of limited waivers of immunity and limited

recourse, the County had claims against the casino assets only. Postpetition, it is the same; the

County has claims against the casino assets only. The casino assets are in the same place, only

now the County is aware of the “unincorporated company” entity under the Bankruptcy Code.

Therefore, the Court should overrule the County’s objection on bad faith and new debtor

syndrome.

The Debtor’s existence as an unincorporated company wholly owned by the Iipay Nation

is not inconsistent with the statements made by the Iipay Nation’s counsel’s motion to the NIGC.

See SD Motion, Mr. Bunton’s Declaration, Exhibit “1” p.1. To say that the “Iipay Nation

operates a class III gaming facility” is consistent with the Iipay Nation doing so through its

wholly owned unincorporated company, the Debtor. Differing minutia in prepetition phrasing are

inconsequential, as prepetition statements made by a debtor in a non-bankruptcy context have no

bearing on acknowledgment of eligibility or ineligibility for chapter 11. In re Las Vegas

Monorail Co., 429 B.R. 770, 790-91 (Bankr.D.Nev.2010) (stating that debtor’s disclosure and

description of itself as “instrumentality of the State of Nevada” in its tax certificate was no

evidence of it being an “instrumentality” or “municipality” under the Bankruptcy Code because


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“it is critical to note that [the debtor] did not make its representation in connection with an

acknowledgment that it was ineligible for Chapter 11”). The statements are logically consistent

and with the terms of the Intergovernmental Agreement. Therefore, the Court should find that the

Debtor is a proper debtor under the Bankruptcy Code.

The Debtor filed the case in good faith because it was necessary and proper, as a practical

matter, in order to save its business, the jobs of 120 employees, and reorganize its affairs. “The

reorganization process of Chapter 11 was designed . . . to prevent economically wasteful

liquidation of valuable entities.” In re Thirtieth Place, Inc., 30 B.R. 503, 506 (9th

Cir.B.A.P.1983). In the weeks leading up the bankruptcy filing, the County had levied on bank

accounts that made it impossible for the Debtor to pay its vendors and employees, and the

economic survival of the business was threatened severely. In a letter of May 24, 2012, from the

County to the NIGC, it became apparent that the County’s collection efforts would force the loss

of the Debtor’s business and 120 jobs: The County wants all casino revenues applied to satisfy the Tribe’s contractual obligations to the County. The letter also confirms that the lender may “foreclose[] on all or any portion of the property securing the Loan.” (Id.) The County is effectively attempting to “foreclose” on the property securing the Contract, which is the revenue stream of the Tribe’s casino. The January 23rd letter also states that in the case of a default, the lender may “demand payment in full and cause the bankruptcy or insolvency of the gaming operation.” (Id.) The Tribe has asserted that the County cannot enforce the judgment because doing so will render it insolvent and force it to close. We are happy that you have rejected the Tribe’s position.

Letter from Thomas Bunton, Senior Deputy, Office of County Counsel, County of San Diego to

National Indian Gaming Commission, at pp.2-3 attached as Exhibit “A” hereto. The Debtor filed

the bankruptcy to stop such a senseless liquidation by one creditor and save the estate, 120 jobs,

and attempt a reorganization for the benefit of the entire estate. Therefore, the Court should find

that the Debtor’s case was filed in good faith.

As a practical matter, if the Court dismisses the case, there will be no sovereign immunity

available to protect the casino from the YAN and County (that immunity specifically having been


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waived), and there will be no protection from the Bankruptcy Code’s automatic stay. The Debtor

will once again be at the mercy of the County’s bank levies, the business will shut down, 120 jobs

will be lost, and all opportunity for reorganization will be obliterated, much to the detriment of

other creditors in the estate. Therefore, the Court should deny the motions to dismiss and permit

the Debtor to attempt reorganization under the protection of the Bankruptcy Code.

VI.

CONCLUSION

WHEREFORE, the Debtor respectfully requests that the Court: (i) overrule the County’s

Motion in its entirety, (ii) overrule the UST’s Motion in its entirety, (iii) find that the Debtor is

not a “governmental unit” under the Bankruptcy Code, (iv) find that the Debtor is an

unincorporated company eligible for relief under the Bankruptcy Code, (v) find that the Debtor’s

bankruptcy filing is in good faith, and (vi) grant such other and further relief as the Court may

deem just and proper under the circumstances. Dated: August 24, 2012 SANTA YSABEL RESORT AND CASINO By: /s/ Ron Bender

RON BENDER JOHN-PATRICK M. FRITZ LEVENE, NEALE, BENDER, YOO & BRILL L.L.P. Proposed Counsel for Debtor and Debtor in Possession


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DECLARATION OF VIRGIL PEREZ

I, Virgil Perez, hereby declare as follows:

1. I am over 18 years of age. I have personal knowledge of the facts set forth herein,

and, if called as a witness, could and would testify competently with respect thereto.

2. I am the duly elected and sitting Chairman of the Iipay Nation of Santa Ysabel (the

“Iipay Nation”). I have held my position as Chairman since December 5, 2010.

3. I have access to the books and records of the Iipay Nation. I am familiar with the

history, organization, operations and financial condition of the Iipay Nation. The records and

documents referred to in this Declaration constitute writings taken, made, or maintained in the

regular or ordinary course of the Iipay Nation’s business at or near the time of act, condition or

event to which they relate by persons employed by the Iipay Nation who had a duty to the to

accurately and completely take, make, and maintain such records and documents.

4. I make this declaration based on my own personal knowledge and upon the books

and records of the Iipay Nation.

5. I make this declaration in support of the Omnibus Opposition to (i) County of San

Diego’s Motion to Dismiss Bankruptcy Case and (ii) Acting United States Trustee’s Motion to

Dismiss Case (the “Opposition”) filed by Santa Ysabel Resort and Casino (the “Debtor”). Unless

otherwise stated all capitalized terms herein have the same meanings as ascribed to them in the

Opposition.

6. The Debtor is not a government. As explained in the YAN Opposition, the Debtor

is an unincorporated company and a business of 120 people running a casino with its own

management structure, led by David Chelette as general manager and Charles Bauman as

controller, neither of whom are members of the Iipay Nation, and with a middle management

structure. The Debtor’s business includes several gaming tables for blackjack, craps, poker and

other games, as well as slot machines, a restaurant, and a bar. The Debtor does not make any

governmental decisions, hold elections, have any elected officials or bureaucrats. It enacts no

laws, enforces no laws, interprets no laws, and judges no laws. The Debtor only runs a business.

To the extent there would be profits (though there have been little to none) after operating


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DECLARATION OF DAVID CHELETTE

I, David Chelette, hereby declare as follows:

1. I am over 18 years of age. I have personal knowledge of the facts set forth herein,

and, if called as a witness, could and would testify competently with respect thereto.

2. I am the general manager of Santa Ysabel Resort and Casino (the “Debtor”), the

chapter 11 debtor and debtor in possession in the above-referenced bankruptcy case. I have been

employed by the Debtor since March 11, 2007.

3. I have access to the books and records of the Debtor. I am familiar with the history,

organization, operations and financial condition of the Debtor. The records and documents referred

to in this Declaration constitute writings taken, made, or maintained in the regular or ordinary

course of the Debtor’s business at or near the time of act, condition or event to which they relate by

persons employed by the Debtor who had a business duty to the Debtor to accurately and

completely take, make, and maintain such records and documents.

4. I make this declaration based on my own personal knowledge and upon the books

and records of the Debtor.

5. I make this declaration in support of the Omnibus Opposition to (i) County of San

Diego’s Motion to Dismiss Bankruptcy Case and (ii) Acting United States Trustee’s Motion to

Dismiss Case (the “Opposition”) filed by the Debtor. Unless otherwise stated all capitalized terms

herein have the same meanings as ascribed to them in the Opposition.

6. The Debtor is not a government. As explained in the YAN Opposition, the Debtor

is an unincorporated company and a business of 120 people running a casino with its own

management structure, led by me, David Chelette as general manager, and Charles Bauman as

controller, and neither of us are members of the Iipay Nation, and with a middle management

structure. The Debtor’s business includes several gaming tables for blackjack, craps, poker and

other games, as well as slot machines, a restaurant, and a bar. The Debtor does not make any

governmental decisions, hold elections, have any elected officials or bureaucrats. It enacts no

laws, enforces no laws, interprets no laws, and judges no laws. The Debtor only runs a business.

To the extent there would be profits (though there have been little to none) after operating


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expenses and debt service, those profits would have been paid to the Iipay Nation as the 100%

owner of the Debtor to do with as it saw fit. However, the Debtor and its management have no

say over how those would-be profits are spent. The Debtor and its management simply run a

business in gaming with 120 employees.

7. The Debtor has no traditional governmental attributes, and it does not engage in

any traditional governmental functions. The Iipay Nation does not control the Debtor’s daily

operations. The Iipay Nation’s tribal Chairman deals with the Debtor’s management

approximately three to four times a year and on only the most important financial decisions (such

as whether to file for bankruptcy) like the chairman of a corporation’s board of directors. The

Debtor is regulated by the Iipay Nation’s Gaming Commission and pays sales taxes to the Iipay

Nation. The Iipay Nation categorizes the Debtor as not being a government or an instrumentality

but as its business and an unincorporated company.

8. The Debtor voluntarily will amend its Bankruptcy Schedules to remove the

Intergovernmental Agreement Between the County of San Diego and the Santa Ysabel Band of

Diegueno Mission Indians (the “Intergovernmental Agreement”). With the benefit of more time

to review with counsel, the Debtor agrees that this is a contract between the Iipay Nation and

County. However, the County’s claim against the Debtor will remain on the Debtor’s Bankruptcy

Schedules.

9. The Debtor filed the case in good faith because it was necessary and proper, as a

practical matter, in order to save its business, the jobs of 120 employees, and reorganize its

affairs. In the weeks leading up the bankruptcy filing, the County had levied on bank accounts

that made it impossible for the Debtor to pay its vendors and employees, and the economic

survival of the business was threatened severely. It became apparent that the County’s collection

efforts would force the loss of the Debtor’s business and 120 jobs.

10. The Debtor filed the bankruptcy to stop a senseless liquidation by the County and

save the estate, 120 jobs, and attempt a reorganization for the benefit of the entire estate.

11. As a practical matter, if the Court dismisses the case, there will be no sovereign

immunity available to protect the casino from the YAN and County (that immunity specifically


EXHIBIT “A”


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In re Santa Ysabel Resort and Casino

Debtor(s).

Chapter 11 Case No. 12-09415-PB11

PROOF OF SERVICE OF DOCUMENT

I am over the age of 18 and not a party to this bankruptcy case or adversary proceeding. My business address is: 10250 Constellation Boulevard, Suite 1700, Los Angeles, CA 90067 A true and correct copy of the foregoing document entitled (specify): OMNIBUS OPPOSITION TO (I) COUNTY OF SAN DIEGO’S MOTION TO DISMISS BANKRUPTCY CASE AND (II) ACTING UNITED STATES TRUSTEE’S MOTION TO DISMISS CASE will be served or was served (a) on the judge in chambers in the form and manner required by LBR 5005-2(d); and (b) in the manner stated below: I. TO BE SERVED BY THE COURT VIA NOTICE OF ELECTRONIC FILING (NEF): Pursuant to controlling General Orders and LBR, the foregoing document will be served by the court via NEF and hyperlink to the document. On (date) August 24, 2012, I checked the CM/ECF docket for this bankruptcy case or adversary proceeding and determined that the following persons are on the Electronic Mail Notice List to receive NEF transmission at the email addresses stated below:

Ron Bender [email protected] Peter L. Duncan [email protected], [email protected] Jennifer E. Duty [email protected] Mary Testerman Duvoisin [email protected],

[email protected];[email protected];[email protected] Richard Havel [email protected] Gregory K. Jones [email protected] United States Trustee [email protected]

II. SERVED BY UNITED STATES MAIL: On August 24, 2012, I served the following persons and/or entities at the last known addresses in this bankruptcy case or adversary proceeding by placing a true and correct copy thereof in a sealed envelope in the United States mail, first class, postage prepaid, and addressed as follows. Listing the judge here constitutes a declaration that mailing to the judge will be completed no later than 24 hours after the document is filed. Service information continued on attached page III. SERVED BY PERSONAL DELIVERY, FACSIMILE TRANSMISSION OR EMAIL (state method for each person or entity served): Pursuant to F.R.Civ.P. 5 and/or controlling LBR, on August 24, 2012, I served the following persons and/or entities by personal delivery, overnight mail service, or (for those who consented in writing to such service method), by facsimile transmission and/or email as follows. Listing the judge here constitutes a declaration that personal delivery on, or overnight mail to, the judge will be completed no later than 24 hours after the document is filed. Served By Attorney Service: Hon. Peter W. Bowie U.S. Bankruptcy Court Jacob Weinberger U.S. Courthouse 325 West F Street, Room 328 San Diego, CA 92101-6998

Mary Testerman Duvoisin Office of the United States Trustee 402 West Broadway, Suite 600 San Diego, CA 92101

I declare under penalty of perjury under the laws of the United States that the foregoing is true and correct. August 24, 2012 Stephanie Reichert /s/ Stephanie Reichert Date Printed Name Signature


RSN Santa Ysabel Resort and Casino

II. SERVED BY U.S. MAIL:

Securities Exchange Commission 5670 Wilshire Boulevard, 11th Floor Los Angeles, CA 90036

Counsel for International Game Technology Eve H. Karasik/Gregory K. Jones Christine M. Pajak Stutman, Treister & Glatt 1901 Avenue of the Stars, 12th Floor Los Angeles, CA 90067

Counsel for Yavapai-Apache Nation Richard W Havel Sidley & Austin: 555 W 5th Street, Suite 4000 Los Angeles, CA 90013

Counsel for Yavapai-Apache Nation Eric George/Ira Bibbero Brown George Ross LLP 2121 Avenue of the Stars, Suite 2400 Los Angeles, CA 90067

Counsel for County of San Diego Thomas D. Bunton, Esq. Office of County Counsel 1600 Pacific Highway, Room 355 San Diego, CA 92101-2469

Counsel for County of San Diego Peter L. Duncan Jennifer E. Duty Pyle Sims Duncan & Stevenson 401 B St Ste 1500 San Diego, CA 92101
