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

the Bankruptcy Court for the Western District of Tennessee held that (section) 106(a) of the Bankruptcy Code was constitutionally valid and abrogated sovereign immunity of the state agent student loan creditor in an adversary proceeding filed by a debtor to determine dischargeability of student loans under (section) 523(a)(8) of the Bankruptcy Code.217 The court stated that bankruptcy courts would have no authority to issue judgments affecting the interest of any state entity if (section) 106, abrogating sovereign immunity, was unconstitutional.218 Citing the strong presumption of the constitutionality of federal statutes, the court decided that (section) 106 was validly enacted under the Fourteenth Amendment.219 The court agreed with the opinion set forth in Sparkman v. Florida Department of Revenue (In re York-Hannover Developments, Inc.)220 that the Bankruptcy Code "contain[ed] a vast number of privileges and immunities which are validly enforceable through Section 5 of the [Fourteenth] Amendment," and "public interest and other economic and social concerns are statutorily injected into the remedial, federal bankruptcy laws by virtue of the powers granted by Article I, Section 8, Clause 4, of the Constitution."221

Conversely, the Eastern District of Tennessee, Northern Division, took the opposite view. In Dodson v. Tennessee Student Assistance Corp. (In re Dodson),228 the court rejected the reasoning of In re Arnold and instead followed the line of cases holding that (section) 106 was unconstitutional.229 The court first examined the ability of Congress to abrogate pursuant to the Bankruptcy Clause in Article I of the Constitution.230 Relying upon the Supreme Court's decisions in Seminole Tribe v. Florida231 and Kimel v. Florida Board of Regents,232 the court agreed that Article I did not give Congress the power to validly abrogate sovereign immunity in (section) 106.233

The court then examined whether Congress enacted (section) 106 pursuant to the Fourteenth Amendment, noting that Congress' enforcement powers under Section 5 were "remedial in nature."234 The court also stated that "for Congress to invoke its [Section] 5 powers, `it must identify conduct transgressing the Fourteenth Amendment's substantive provisions, and must tailor its legislative scheme to remedying or preventing such conduct.'"235 Noting its consideration of the cases addressing the subject, the court joined the majority of jurisdictions and held that Congress did not validly abrogate sovereign immunity through (section) 106 pursuant to any Fourteenth Amendment powers.236

Bankruptcy Clause within that same legislative history.238 More importantly, the court noted that the plaintiff failed to cite either a "Fourteenth Amendment 'evil' or 'wrong' that Congress intended to remedy" or a "history of 'widespread and persisting deprivation of constitutional rights.'"239 Accordingly, the court ruled that it was without jurisdiction to entertain the plaintiffs complaint against the state agent.240