Opinion ID: 50245
Heading Depth: 2
Heading Rank: 2

Heading: Eleventh Amendment Sovereign Immunity: Hood and Katz

Text: 6 The only issue presented by this appeal is whether, on grounds of Eleventh Amendment sovereign immunity, the State may avoid discharge of Soileau's forfeiture judgments incurred as surety on bail bonds issued to the State in conformity with its statutory scheme. 5 Under the Eleventh Amendment, the jurisdiction of the federal courts shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State. 6 As interpreted, however, the Eleventh Amendment is not limited to its text; the Supreme Court has repeatedly held that an unconsenting State also is immune from suits by its own citizens. 7 Despite this general prohibition of suits against a non-consenting or non-waiving state, [s]tates, nonetheless, may still be bound by some judicial actions without their consent. 8 Hood and Katz, both recent Supreme Court cases addressing sovereign immunity in the bankruptcy context, provide two such examples; and their holdings inform our analysis of the State's claim today. 7 In Hood, the debtor had signed promissory notes for educational loans guaranteed by the Tennessee Student Assistance Corporation (TSAC), a governmental corporation created by the State to administer student loans. Early in 1999, Hood filed a Chapter 7 bankruptcy petition and was granted a general discharge that did not cover her student loans. Later that year, Hood reopened her petition, filing an adversary proceeding against, inter alia, TSAC, seeking a determination by the bankruptcy court that her student loans were dischargeable. TSAC sought dismissal on sovereign immunity grounds. 9 8 The bankruptcy court concluded that Hood's debt to the state was dischargeable, rejecting TSAC's contention that the court lacked jurisdiction because of sovereign immunity. A Bankruptcy Appellate Panel (BAP) affirmed, as did the Sixth Circuit Court of Appeals thereafter. 10 The Supreme Court granted certiorari to determine whether the Bankruptcy Clause of the Constitution 11 grants Congress the authority to abrogate state sovereign immunity from private suits. 12 9 The Hood Court affirmed the BAP and the Court of Appeals, but did so without reaching the broader question whether 11 U.S.C. § 106(a) 13 is a valid abrogation of sovereign immunity. The Court held more narrowly that a proceeding initiated by a debtor to determine the dischargeability of a student loan debt is not a suit against the State for purposes of the Eleventh Amendment. 14 As the Court explained, [t]he discharge of a debt by a bankruptcy court is . . . an in rem proceeding, as the bankruptcy court is concerned with the estate of the debtor. 15 The Court in Hood concluded that, [a]t least when the bankruptcy court's jurisdiction over the res is unquestioned, our cases indicate that the exercise of its in rem jurisdiction to discharge a debt does not infringe state sovereignty. 16 10 The Supreme Court went on in Hood to reject another of TSAC's contentions, i.e., that because the proceedings to challenge the dischargeability of a student loan debt were inherently adversarial, 17 the discharge of the student loan debt was an infringement on state sovereignty. In rejecting this argument, the Court ruled that, despite the adversarial nature of the proceeding, the bankruptcy court's jurisdiction is premised on the res, not the on the persona . . . . A debtor does not seek monetary damages or any affirmative relief from a State by seeking to discharge a debt; nor does he subject an unwilling State to a coercive judicial process. He seeks only a discharge of his debts. 18 Accordingly, the Court held that, for purposes of the Eleventh Amendment, the undue-hardship determination under § 523(a)(8) of the Bankruptcy Code is not a suit against the state. 19 11 In Katz, decided two years after Hood and two years after Soileau filed her Chapter 7 petition, the Court assayed to answer the question left open in Hood, viz, whether Congress' attempt to abrogate the states sovereign immunity in 11 U.S.C. § 106(a) is valid. 20 Katz involved a proceeding initiated by a bankruptcy trustee under Sections 547(b) and 550(a) of the Bankruptcy Code to set aside the debtor's pre-petition preferential transfers of funds to state agencies. 21 The State contended that sovereign immunity barred the proceedings to avoid and recover the preferential transfers. 22 The Court concluded that the transfer did not offend state sovereign immunity, holding that, [i]n ratifying the Bankruptcy Clause [of the United States Constitution], the States acquiesced in a subordination of whatever sovereign immunity they might otherwise have asserted in proceedings necessary to effectuate the in rem jurisdiction of the bankruptcy courts. 23 Discussing the transfer involved in Katz, the Court held that [i]nsofar as orders ancillary to the bankruptcy courts' in rem jurisdiction, like orders directing turnover of preferential transfers, implicate States' sovereign immunity from suit, the States agreed in the plan of the Convention not to assert that immunity. 24