Commentary

The Alaska Native Claims Settlement Act of 1971 created a unique form of business entity to satisfy the aboriginal land claims of the Alaska Native people. Rather than establish traditional reservations in the manner of the nineteenth century Indian treaties, ANCSA provided that cash and land would be transferred to Alaska Native Corporations of which Natives would be shareholders. Although in form business corporations, the ANCs were also expected to fulfill traditional tribal social and quasi-governmental functions. This dual role created problems when economic strains arising from business operations threatened an ANC's continued vitality.

Excerpt from "When Worlds Collide, Alaska Native Corporations and the Bankruptcy Code," Authors: Kathryn Black, David H. Bundy, Cabot Christianson and Cynthia Christianson, Alaska Law Review Volume 6:73, July 1989:

To a considerable degree, the goals and values embodied in the Bankruptcy Code conflict with those in the Alaska Native Claims Settlement Act (ANCSA). The Bankruptcy Code creates a complex but systematic ordering of creditors' claims, but gives relatively scant attention to equity-holders' (including shareholders') interests. Further, the Bankruptcy Code accords payment of creditors' claims a higher priority than protection of the value of shareholders' stock; ANCSA, as amended, inverts this preference by protecting ANCSA stock and ANCSA land from certain voluntary and involuntary conveyances and creditors' claims. The Byzantine complexity of ANCSA's provisions regarding the issuance and transfer of stock stands in stark contrast to its sometimes incomplete treatment of creditors' claims. Indeed ANCSA, as originally enacted, practically ignored the powerful role played by debt-holders of a corporation.

These two statutory schemes value the rights of the debt-holders as compared to the equity-holders quite differently. Many of the Bankruptcy Code's most fundamental underlying assumptions about corporations (that is, voluntary creation, capitalization for the purpose of investing risk capital, performance measured entirely by financial indicators, no need for a fresh start because a new entity can be created) do not apply to Native corporations at all. Indeed, ANCSA and its amendments can be viewed as a progression of efforts to protect Native corporations from creditors' claims and the threat of non-Native control in order to fulfill Congress' promise of just compensation for the extinguishment of Alaska Natives' aboriginal claims. The stock transfer restrictions contained in ANCSA as enacted in 1971, the land bank provisions contained in the 1980 amendments, and the automatic land bank provisions and stock inalienability extensions of the 1987 amendments were all specifically designed to insulate the corporations and their shareholders from free market and creditor pressures. Thus, as amended, ANCSA attempts to provide Alaska Native corporations with the flexibility to enter the marketplace on the one hand, and protect some of their assets from loss on the other.

Bankruptcy is the acid test of whether the dominant culture will, in fact, permit the Alaska Native people to maintain the basis for a lifestyle outside the mainstream of the cash economy, while also giving them a chance at the brass ring offered by a capitalistic society. In the context of a bankruptcy, creditors of the Native corporation, relying on the explicit provisions of the Bankruptcy Code and the policies implicit in the Code, will seek to apply the assets and income of the Native corporation to their claims. The shareholders and management of the Native corporation, on the other hand, will rely on ANCSA's purposes and legislative language to support their desire to preserve the corporate existence and minimize creditor payments so that the debtor will continue to fulfill its functions as provided in ANCSA. When an ANCSA corporation enters bankruptcy proceedings, these tensions must be resolved.

Alaska was one of the first states to codify the concept of a self-settled trust to which a trust grantor could transfer property which would under certain condition be thereafter free from the claims of the grantor's creditors. These trusts, referred to as Domestic Asset Protection Trusts (in contrast to similar trusts established in an offshore jurisdiction) may be challenged if the trust grantor later files a bankruptcy case. This article examines the possibility of a bankruptcy trustee being able to reach the trust assets.

Excerpt from "Domestic Asset Protection Trusts and the Bankruptcy Challenge," Authors: David G. Shaftel and David H. Bundy; Estate Planning Magazine, Volume 32, No. 5, May 2005 at 14.

Absent a bankruptcy filing, if the Domestic Asset Protection Trust (DAPT) trustee avoids doing any business or holding any trust assets in another state, a judgment against the settler in that state may be hard to enforce against the DAPT trustee. Under Hanson v Denkla, where the Supreme Court held that Florida lacked jurisdiction over a Delaware trustee, and World-Wide Volkswagen Corp. v. Woodson, there must be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum state. If a state or federal court cannot obtain jurisdiction over a nonresident DAPT trustee, such a court cannot order the trustee to turn over assets to the judgment creditor.

However, if the DAPT settler becomes a debtor in a bankruptcy case, voluntary or involuntary, the jurisdictional problems are simplified. The constitutional bankruptcy power of the United States is vested in the U. S. District Courts but is exercised by the bankruptcy courts which are Article I courts created as "units" of the district courts. Each of the district courts has entered a general order of reference providing that bankruptcy cases are referred to the bankruptcy judges for the district.

The bankruptcy jurisdiction of the district courts and bankruptcy courts is nationwide so that a summons issued in, or in connection with, a bankruptcy case may be served anywhere in the United States. Therefore, if a bankruptcy trustee files an action in the debtor's "home" bankruptcy court against the DAPT trustee in another state, the court will have jurisdiction to determine whether the trust's asset protection features should be enforced and, if not, to order the turnover of trust assets.

Copies of the full articles may be obtained from David H. Bundy at 3201 C Street, Anchorage AK 99503; (907) 248-8431; dhb@alaska.net