Opinion ID: 1266472
Heading Depth: 1
Heading Rank: 4

Heading: Whether the Government Has Waived its Sovereign Immunity

Text: In a related argument, the government asserts that the Bankruptcy Code's waiver of sovereign immunity in 11 U.S.C. § 106 limits the extent to which a plan may bind the government. According to the government, pursuant to § 106(a)(1), it has waived its sovereign immunity with regard to, inter alia, 11 U.S.C. § 1227 and, therefore, has agreed to be paid on its prepetition claims pursuant to a confirmed Chapter 12 plan. But the government contends that § 106(a)(1) does not contain a waiver of sovereign immunity as to 11 U.S.C. § 1222, except to the extent that its provisions regarding the contents of a plan can bind the government as a creditor under § 1227(a). Thus, the government concludes that, without an express waiver of sovereign immunity for purposes of postpetition claims, a Chapter 12 plan that provides for treatment of a postpetition claim of the government cannot bind the government. Although our review of the record indicates that the government never raised the defense of sovereign immunity before the bankruptcy court in either the Knudsens' case or Schilke's case, sovereign immunity is a jurisdictional issue that may be raised for the first time on appeal. Satcher v. Univ. of Ark. at Pine Bluff Bd. of Trustees, 558 F.3d 731, 735 (8th Cir. 2009) (citing Harmon Indus. v. Browner, 191 F.3d 894, 903 (8th Cir.1999)). But a belated assertion of sovereign immunity is a factor that may be relevant to the issue of waiver. Rose v. U.S. Dep't of Educ. (In re Rose), 187 F.3d 926, 930 n. 7 (8th Cir.1999). Therefore, although we will consider the government's sovereign immunity argument, we bear in mind that such argument is belated and that its untimeliness can be a factor used in evaluating whether the government has waived its sovereign immunity. Section 106(a)(1) provides that sovereign immunity is abrogated as to a governmental unit to the extent set forth in this section with respect to . . . [§] 1227 . . . of this title. In turn, § 1227 states that the provisions of a confirmed plan bind the debtor, each creditor, each equity security holder, and each general partner in the debtor, whether or not the claim of such creditor, such equity security holder, or such general partner in the debtor is provided for by the plan, and whether or not such creditor, such equity security holder, or such general partner in the debtor has objected to, has accepted, or has rejected the plan. (Emphasis added.) Section 101(10)(A) of 11 U.S.C. defines creditor as, inter alia, an entity that has a claim against the debtor that arose at the time of or before the order of relief concerning the debtor. In turn, 11 U.S.C. § 501(a) informs us who may file a proof of claim. According to this section, [a] creditor or an indenture trustee may file a proof of claim. In the present case, the government essentially argues that because it is not a creditor within the meaning of § 101(10)(A)i.e., its claims against the Knudsens and Schilke did not arise at the time of or before the order of reliefit cannot be bound under a Chapter 12 plan that provides for the treatment of a government's postpetition claim under § 1222(a)(2)(A), as § 1227(a) only waives sovereign immunity as to the claim of a creditor. But, as we previously acknowledged, § 1222(a)(2)(A) `specifically exempts from priority status a claim owed to a governmental unit.' See supra Part II.A.1 (quoting Dawes, 2009 WL 641278, at ). Nowhere in the language of § 1222(a)(2)(A) does it condition application of the section to situations in which the government is a creditor of the debtor. Instead, § 1222(a)(2)(A) clearly and unequivocally applies to a governmental unit, regardless of whether that governmental unit qualifies as a creditor of the debtor under § 1227(a). See supra Part II.A.1. Furthermore, aside from the straightforward and specific language of § 1222(a)(2)(A), Dawes, 2009 WL 641278, at , the government, pursuant to § 106(a)(1), has waived its sovereign immunity with regard to, inter alia, 11 U.S.C. § 503. Section 1222(a)(2)(A) states that if the claim is a claim owed to a governmental unit that arises as a result of the sale. . . of any farm asset used in the debtor's farming operation, then the claim is treated as an unsecured claim that is not entitled to priority under section 507.  (Emphasis added.) Section 507(a)(2) gives priority status to  administrative expenses allowed under section 503(b).  (Emphasis added.) In turn, § 503(b)(1)(B)(i) allows for any tax . . . incurred by the estate, whether secured or unsecured to be treated as an administrative expense. As explained infra, incurred by the estate means incurred postpetition. See infra Part II.A.3. Section 106 explicitly states that the government's sovereign immunity is abrogated as to a governmental unit to the extent set forth in this section with respect to . . . [§] 503 . . . of this title. Accordingly, we hold that the government's sovereign immunity argument necessarily fails.