Opinion ID: 583437
Heading Depth: 3
Heading Rank: 3

Heading: Principles of sovereign immunity

Text: 29 The Secretary also argues that basic principles of federal and state sovereign immunity preclude an expansive reading of section 106. The Secretary maintains that even if we reject his reading of the legislative history of section 106, we must interpret narrowly any waiver of immunity. See Ruckelshaus v. Sierra Club, 463 U.S. 680, 685, 103 S.Ct. 3274, 3277, 77 L.Ed.2d 938 (1983). The Secretary argues that to the extent the provision is ambiguous, the waiver must be narrowly construed to apply only to the filing of formal claims by the government. Waivers of sovereign immunity, however, are not construed as strictly as the Secretary suggests. It is well established that when the federal government waives its immunity, the scope of the waiver is construed to achieve its remedial purpose. As the Supreme Court observed in Block v. Neal, 460 U.S. 289, 103 S.Ct. 1089, 75 L.Ed.2d 67 (1983), [t]he exemption of the sovereign from suit involves hardship enough where consent has been withheld. We are not to add to its rigor by refinement of construction where consent has been announced. Id. at 298, 103 S.Ct. at 1094 (citations omitted); see also Franchise Tax Board v. United States Postal Service, 467 U.S. 512, 521, 104 S.Ct. 2549, 2554, 81 L.Ed.2d 446 (1984) (instructing that the scope of a waiver of sovereign immunity is ascertained by reference to congressional policy); Indian Towing Co. v. United States, 350 U.S. 61, 69, 76 S.Ct. 122, 126, 100 L.Ed. 48 (1955) (Frankfurter, J.) (holding that a court should not act as self-constituted guardian of the Treasury [and] import immunity back into a statute designed to limit it). The language and legislative history of section 106(a) manifest Congress's desire to waive immunity under circumstances such as those present in this case. The Secretary therefore cannot carry the day by invoking general maxims of judicial policy. 30 The government next points to Eleventh Amendment jurisprudence to bolster its analysis of congressional intent. Section 106 waives immunity not only for the federal government and its agencies, but also for all governmental units, including states and localities. See 11 U.S.C. § 101(27). The Secretary argues that if subsection (a) operated to waive sovereign immunity in cases where a state did not invoke the jurisdiction of the bankruptcy court by filing a formal proof of claim, the subsection would raise problematic questions concerning Congress's authority to abrogate the Eleventh Amendment. The Secretary suggests that if Congress had intended to abrogate immunity in cases in which a state had not filed a claim in bankruptcy court, it would have done so explicitly. See Atascadero State Hosp. v. Scanlon, 473 U.S. 234, 242, 105 S.Ct. 3142, 3147, 87 L.Ed.2d 171 (1985) (requiring an unmistakably clear statement of congressional intent to abrogate the states' Eleventh Amendment immunity). Asserting that Congress should not be presumed to have created a substantial constitutional question, the Secretary contends that congressional concern with the scope of Eleventh Amendment immunity negates the possibility that section 106 waives sovereign immunity whenever any governmental unit has a right to payment and asserts this right outside of bankruptcy court. 2 31 The Secretary's speculation about congressional concern with Eleventh Amendment abrogation elevates form over substance. As discussed above, the BAP did not hold that the mere existence of a claim by a governmental unit is sufficient to waive immunity under section 106(a). Rather, the BAP held more narrowly that on the facts of this case the government's self-help in lieu of a claim against assets of the estate was tantamount to filing a claim and therefore effected a waiver of sovereign immunity. We fail to see how this principle, even if applied in the context of counterclaims against state governmental units, would give rise to Eleventh Amendment difficulties. 3 32 The Secretary acknowledges that section 106(a) is invoked when the government seeks distribution from the bankruptcy estate by filing a claim. Here, the government obtained distribution from the estate without ever filing a formal proof of claim. The Secretary is thus put in the precarious position of arguing that whereas the mere filing of a claim is sufficient to waive sovereign immunity, the actual receipt of payment on a claim not formally filed produces no such waiver. 33 We hold that the government's actions in enforcing post-petition payment were the functional equivalent of filing a claim and that they were sufficient to waive sovereign immunity under 11 U.S.C. § 106(a). To hold otherwise would enable the government to achieve by self-help what it could not accomplish through the procedures of the bankruptcy court, i.e., retain its immunity while extracting payment from the estate. The government had a choice concerning whether to force distribution from T & C's assets, and it chose to do so by pursuing post-petition offsets. Congress made the consequences of this action clear in the final language of section 106(a), and the government cannot now ask us to raise a shield of immunity between it and the estate.