Dissension among the ranks--the courts are at odds over 11 U.S.C. (Section) 106 and its purported abrogation of sovereign immunity in the bankruptcy code

University of Memphis Law Review, The, Winter 2002 by Veach, Shauna Fuller

I. INTRODUCTION

state agency servicing his student loans.3 In response to Andrew's adversary complaint, the state agency asserts that it has sovereign immunity under the Eleventh Amendment to the Constitution of the United States and that it does not consent to suit or submit itself to the bankruptcy court's jurisdiction. Of course, if the bankruptcy court does not have proper jurisdiction, it must dismiss the adversary proceeding.

This hypothetical situation poses a familiar dilemma facing bankruptcy courts today. On the one hand, the Eleventh Amendment does provide states and state entities with sovereign immunity.4 On the other hand, the federal courts have "original and exclusive jurisdiction" over bankruptcy matters.5 In order to alleviate this conflict, Congress enacted 11 U.S.C. (section) 106, which addresses the issue by abrogating states' sovereign immunity as to certain types of bankruptcy actions.6

under Article I.8 Other bankruptcy courts have agreed that abrogation is invalid under Article I, but have held that (section) 106 was instead enacted pursuant to Congress' Fourteenth Amendment powers.9 Unfortunately, there is not much middle ground, and until the Supreme Court decides this issue, there will continue to be heated dissension among the various courts at each level.

This Note will first provide a brief overview of Eleventh Amendment sovereign immunity; what is required for abrogation of sovereign immunity; and how the federal courts obtain jurisdiction through a state's waiver and consent. The Note will then address whether a bankruptcy action is a "suit in law or equity" governed by the Eleventh Amendment. Next, it will focus on congressional abrogation of sovereign immunity, beginning with brief synopses of the leading Supreme Court cases rejecting Article I as a valid authority for abrogation. The Note will then discuss Congress' attempted abrogation of sovereign immunity within the Bankruptcy Code through (section) 106(a) and highlight the arguments against valid abrogation. Next, it will discuss the arguments in favor of valid abrogation, first through Article I, and then through the Fourteenth Amendment. Finally, this Note will focus upon the internal split among bankruptcy courts within the State of Tennessee and discuss the reasons why it is imperative that the Supreme Court decide the issue of (section) 106's constitutionality in order to resolve these kinds of conflicts.

II. AN OVERVIWE: SOVEREIGN IMMUNITY THROUGH THE

ELEVENTH AMENDMENT

federal system...[and] it is inherent in the nature of sovereignty not to be amenable to the suit of an individual without its consent."11 Accordingly, federal courts lack jurisdiction over such suits unless immunity is divested through either (1) the state's waiver of sovereign immunity and consent to suit;12 or (2) abrogation by an act of Congress.13 Abrogation is valid only if Congress unequivocally expressed its intent to abrogate, and the legislation was enacted "pursuant to a valid exercise of power."14 A state may raise the defense of Eleventh Amendment sovereign immunity at any time within a lawsuit.15

A. Waiver

When a state waives its sovereign immunity, it consents to the jurisdiction of the federal courts. One basis for waiver of sovereign immunity occurs when a state actually and explicitly agrees to a waiver, which is usually accomplished through a declaration in the state's constitution or statutes or within a specific contract or agreement proclaiming that the state is subjecting itself to the jurisdiction of the federal courts.16 The waiver must be expressly stated to be valid.17

depending on its satisfaction with the judgment, "either: (1) hold[ing] the [p]laintiff to the verdict; or (2) allow[ing] the state to bring a motion to dismiss the case based upon the federal court's lack of jurisdiction under the Eleventh Amendment."19

Finally, if a state voluntarily enters the forum to pursue its own interests, sovereign immunity is considered to be waived.20 For this reason, most courts have held that an affirmative action taken by a state in a bankruptcy case, such as the filing of a proof of claim, constitutes a waiver.21

B. Abrogation

they agree that Congress clearly intended to abrogate sovereign immunity, the courts still differ in their answers to the question remaining: Whether Congress actually had the authority to attempt said abrogation.26 Nevertheless, if the action before the court is not a "suit," it is irrelevant whether sovereign immunity was waived or abrogated, as the Eleventh Amendment only applies to "suits" against the states.

III. ARE BANKRUPTCY ACTIONS "SUITS IN LAW OR EQUITY" AND

THEREFORE SUBJECT TO THE ELEVENTH AMENDMENT?

Under the Eleventh Amendment, a state or state entity cannot be haled into federal court to defend a "suit in law or equity" by a citizen, without its consent.27 Generally, a "suit" is defined as:

remedy which the law affords him for the redress of an injury or the enforcement of a right, whether at law or in equity.28