Of State Sovereign Immunity and Prospective Remedies: The Bankruptcy Discharge as Statutory Ex Parte Young Relief

This article addresses the enforceability of the Bankruptcy Code’s remedial scheme vis-a-vis the states as creditors of bankruptcy debtors, in the wake of the Supreme Court’s decisions in Seminole Tribe v. Florida and Alden v. Maine. Those decisions, by denying to Congress the ability to abrogate states’ sovereign immunity from suit through Article I legislation, seriously undermined the efficacy of federal bankruptcy relief. Case law and scholarly opinion in the wake of those decisions has not articulated any legitimate, viable means of binding states to the orders and decrees of federal bankruptcy courts, other than simply ignoring Seminole Tribe in the bankruptcy context (which is, at bottom, the holding of the Supreme Court’s subsequent Katz decision).This article propose a very simple and (in retrospect) obvious, yet overlooked solution to the problem of binding states in federal bankruptcy proceedings, by relying upon the longstanding corollary to states’ sovereign immunity known as the Ex parte Young doctrine. The Ex parte Young doctrine permits a federal court to issue prospective declaratory and injunctive orders against state officials in their official capacities (irrespective of the immunity of the state itself from such orders), ordering the state officials to conform their future conduct to the requirements of federal law. As a first step in illustrating the full measure of Ex parte Young’s significance for federal bankruptcy proceedings, this article addresses the most powerful and prominent form of relief that a federal bankruptcy court can award: discharge of a debtor’s personal liability on debts. For various reasons, the courts and commentators have concluded that Ex parte Young has little or no role to play in discharge of debts owing a state. In fact, if one were to take these opinions to their logical conclusion, one would have to conclude that it is impossible to obtain a bankruptcy discharge of a debt owing a state, even though the Supreme Court has assumed that discharge of state debts in bankruptcy is perfectly valid. The simple thesis of the enclosed article is precisely the opposite of the prevailing “received wisdom”: a federal bankruptcy court’s discharge order, in and of itself, is a permissible Ex parte Young order! A discharge order is a declaratory and injunctive decree that directly restrains state officials from any future collection efforts on behalf of a state that would violate federal bankruptcy law. A state official that knowingly violates a debtor’s bankruptcy discharge, therefore, has violated a valid Ex parte Young injunction and is subject to the contempt sanctions of the federal bankruptcy court from which the discharge order issued.The nature of the federal bankruptcy discharge itself as a form of permissible Ex parte Young relief against state officials has been obscured by codification of the discharge’s primary enforcement remedy as an automatic, statutory discharge injunction. Through a comparative historical study of the simultaneous evolution of both the Ex parte Young doctrine and the remedies for enforcing a bankruptcy discharge, though, this article reveals that a federal bankruptcy discharge has always been in the nature of an Ex parte Young remedy. An innate linkage between the bankruptcy discharge and Ex parte Young lies in the federal courts’ undisputed power, since the forming of the Union, to order the release of state prisoners on the authority of federal law by writ of habeas corpus, which likewise was the original function of the bankruptcy discharge in freeing imprisoned debtors. The subsequent development of a federal discharge injunction to restrain creditors’ collection actions precisely parallels the origins of and impetus for the injunctive remedy recognized in Ex parte Young. And codification of the modern discharge injunction merely confirms Congress’s plenary power to displace implied common law relief with express statutory remedies — a congressional power to provide for statutory Ex parte Young relief fully acknowledged by both the majority and the dissenters in Seminole Tribe.