Section 106(c) of the Bankruptcy Code provides that,
"notwithstanding any assertion of sovereign immunity," any
provision of the Code that contains "
creditor,' `entity,' or
`governmental unit' applies to governmental units," § 106(c)(1);
and that "a determination by the court of an issue arising under
such a provision binds governmental units," § 106(c)(2). Petitioner
Hoffman, the bankruptcy trustee in two unrelated Chapter 7
proceedings, filed separate adversarial proceedings in the
Bankruptcy Court. One was a "turnover" proceeding under § 542(b)
against respondent Connecticut Department of Income Maintenance to
recover Medicaid payments owed for services rendered by a bankrupt
convalescence home. The other, filed against respondent Connecticut
Department of Revenue Services, sought under § 547(b) to avoid the
payment of state taxes, interest, and penalties as a preference,
and to recover an amount already paid. Respondents moved to dismiss
both actions as barred by the Eleventh Amendment. The Bankruptcy
Court denied the motions on the ground that Congress, in enacting §
106(c), had abrogated the States' Eleventh Amendment immunity from
actions under §§ 542(b) and 547(b), which contain the "trigger"
words enumerated in § 106(c)(1), and that Congress had authority to
do so under the Bankruptcy Clause of the Constitution. The state
respondents appealed to the District Court, and respondent United
States intervened. The District Court reversed without reaching the
issue of congressional authority. The Court of Appeals affirmed,
concluding that § 106(c)'s plain language abrogates sovereign
immunity only to the extent necessary to determine a State's rights
in the debtor's estate, and does not abrogate such immunity from
recovery of an avoided preferential transfer of money or from a
turnover proceeding.
Held: The judgment is affirmed.
850 F.2d 50, affirmed.
JUSTICE WHITE, joined by THE CHIEF JUSTICE, JUSTICE O'CONNOR,
and JUSTICE KENNEDY, concluded that, in enacting § 106(c), Congress
did not abrogate the Eleventh Amendment immunity of the States.
Congress has not made an intention to abrogate unmistakably clear
in the provision's language. The narrow scope of the waivers of
sovereign immunity
Page 492 U. S. 97
as to certain particular claims in §§ 106(a) and (b) make it
unlikely that Congress adopted in § 106(c) a broad abrogation of
immunity making States subject to all provisions of the Code
containing any of the trigger words. If it did, § 106(c) would
apply to over 100 Code provisions. Section 106(c)(2), joined to
subsection (c)(1) by the conjunction "and," narrows the type of
relief to which the section applies, since, unlike §§ 106(a) and
(b), it does not provide an express authorization for monetary
recovery from the States. Thus, a State that files no proof of
claim would be bound, like other creditors, by a discharge of
debts, including unpaid taxes, but would not be subject to monetary
recovery. Under this construction, the language "notwithstanding
any assertion of sovereign immunity" waives the immunity of the
Federal Government, so that it is bound by the Bankruptcy Court's
determination of issues even when it did not appear and subject
itself to such court's jurisdiction. In contrast, under
petitioner's argument that the sections containing the trigger
words supply the authorization for monetary recovery, § 106(c)
would have exactly the same effect if subsection (c)(2) had been
omitted. This Court is not persuaded that the use of the word
"determine" in the Code's jurisdictional provision, 28 U.S.C. §
157(b)(1), is to the contrary. That provision authorizes bankruptcy
judges to determine "cases" and "proceedings," not issues, and to
"enter appropriate orders and judgments," not merely to bind
governmental units by their determinations. Petitioner's reliance
on § 106(c)'s legislative history and the policies underlying the
Bankruptcy Code is also misplaced, since they are not based on the
text of the statute, and thus cannot be used to determine whether
Congress intended to abrogate the Eleventh Amendment. Pp.
492 U. S.
100-104.
JUSTICE SCALIA, although concluding that petitioner's actions
are barred by the Eleventh Amendment, would affirm the Court. of
Appeals' judgment on the ground that Congress had no power to
abrogate the States' Eleventh Amendment immunity. It makes no sense
to affirm the constitutional principle that the judicial power of
the United States does not extend to a suit directly against a
State by one of its citizens unless the State itself consents to be
sued, and to hold, at the same time, that Congress can override the
principle by statute in the exercise of its Article I powers. P.
492 U. S.
105.
WHITE, J., announced the judgment of the Court and delivered an
opinion, in which REHNQUIST, C.J., and O'CONNOR and KENNEDY, JJ.,
joined. O'CONNOR, J., filed a concurring opinion,
post, p.
492 U. S. 105.
SCALIA, J., filed an opinion concurring in the judgment,
post, p.
492 U. S. 105.
MARSHALL, J., filed a dissenting opinion, in which BRENNAN,
BLACKMUN, and STEVENS, JJ.,
Page 492 U. S. 98
joined,
post, p.
492 U. S. 106.
STEVENS, J., filed a dissenting opinion, in which BLACKMUN, J.,
joined,
post, p.
492 U. S.
111.
JUSTICE WHITE announced the judgment of the Court and delivered
an opinion in which THE CHIEF JUSTICE, JUSTICE O'CONNOR, and
JUSTICE KENNEDY join.
The issue presented by this case is whether § 106(c) of the
Bankruptcy Code, 11 U.S.C. § 106(c), authorizes a bankruptcy court
to issue a money judgment against a State that has not filed a
proof of claim in the bankruptcy proceeding.
Petitioner Martin W. Hoffman is the bankruptcy trustee for
Willington Convalescent Home, Inc. (Willington), and
Page 492 U. S. 99
Edward Zera in two unrelated Chapter 7 proceedings. On behalf of
Willington, he filed an adversarial proceeding in United States
Bankruptcy Court -- a "turnover" proceeding under 11 U.S.C. §
542(b) -- against respondent Connecticut Department of Income
Maintenance. Petitioner sought to recover $64,010.24 in payments
owed to Willington for services it had rendered during March, 1983,
under its Medicaid contract with Connecticut. Willington closed in
April, 1983. At that time, it owed respondent $121,408 for past
Medicaid overpayments that Willington had received, but respondent
filed no proof of claim in the Chapter 7 proceeding.
Petitioner likewise filed an adversarial proceeding in United
States Bankruptcy Court on behalf of Edward Zera against respondent
Connecticut Department of Revenue Services. Zera owed the State of
Connecticut unpaid taxes, penalties, and interest, and, in the
month prior to Zera's filing for bankruptcy, the Revenue Department
had issued a tax warrant resulting in a payment of $2,100.62.
Petitioner sought to avoid the payment as a preference, and recover
the amount paid.
See 11 U.S.C. § 547(b).
Respondents moved to dismiss both actions as barred by the
Eleventh Amendment. In each case, the Bankruptcy Court denied the
motions to dismiss, reasoning that Congress, in § 106(c), had
abrogated the States' Eleventh Amendment immunity from actions
under §§ 542(b) and 547(b) of the Bankruptcy Code, and that
Congress had authority to do so under the Bankruptcy Clause of the
United States Constitution, Art. I, § 8, cl. 4. Respondents
appealed to the United States District Court, and the United States
intervened because of the challenge to the constitutionality of §
106. The District Court reversed without reaching the issue of
congressional authority.
72 B.R.
1002 (Conn.1987). The court held that § 106(c), when read with
the other provisions of § 106, did not unequivocally abrogate
Eleventh Amendment immunity.
Page 492 U. S. 100
The United States Court of Appeals for the Second Circuit
affirmed the District Court. 850 F.2d 50 (1988). The Court of
Appeals concluded that the plain language of § 106(c) abrogates
sovereign immunity "only to the extent necessary for the bankruptcy
court to determine a state's rights in the debtor's estate."
Id. at 55. The section does not, according to the Court of
Appeals, abrogate a State's Eleventh Amendment immunity from
recovery of an avoided preferential transfer of money or from a
turnover proceeding. The Court of Appeals specifically rejected
petitioner's reliance on the legislative history of § 106(c)
because that expression of congressional intent was not contained
in the language of the statute, as required by
Atascadero State
Hospital v. Scanlon, 473 U. S. 234,
473 U. S. 242
(1985). Because the actions brought by petitioner were not within
the scope of § 106(c), the Court held that they were barred by the
Eleventh Amendment.
The Second Circuit's decision conflicts with the decisions of
the Third Circuit in
Vazquez v. Pennsylvania Dept. of Public
Welfare, 788 F.2d 130, 133,
cert. denied, 479 U.S.
936 (1986), and the Seventh Circuit in
McVey Trucking, Inc. v.
Secretary of State of Illinois, 812 F.2d 311, 326-327,
cert. denied, 484 U.S. 895 (1987). We granted certiorari
to resolve the conflict, 488 U.S. 1003 (1989), and we now
affirm.
Section 106 provides as follows:
"(a) A governmental unit is deemed to have waived sovereign
immunity with respect to any claim against such governmental unit
that is property of the estate and that arose out of the same
transaction or occurrence out of which such governmental unit's
claim arose."
"(b) There shall be offset against an allowed claim or interest
of a governmental unit any claim against such governmental unit
that is property of the estate."
"(c) Except as provided in subsections (a) and (b) of this
section and notwithstanding any assertion of sovereign immunity --
"
Page 492 U. S. 101
"(1) a provision of this title that contains 'creditor,'
'entity,' or 'governmental unit' applies to governmental units;
and"
"(2) a determination by the court of an issue arising under such
a provision binds governmental units."
11 U.S.C. § 106.
Neither § 106(a) nor § 106(b) provides a basis for petitioner's
actions here, since respondents did not file a claim in either
Chapter 7 proceeding. Instead, petitioner relies on § 106(c),
which, he asserts, subjects "governmental units," which includes
States, 11 U.S.C. § 101(26), to all provisions of the Bankruptcy
Code containing any of the "trigger" words in § 106(c)(1). Both the
turnover provision, § 542(b) and the preference provision, § 547(b)
contain trigger words -- "an entity" is required to pay to the
trustee a debt that is the property of the estate, and a trustee
can under appropriate circumstances avoid the transfer of property
to "a creditor." Therefore, petitioner reasons, those provisions
apply to respondents "notwithstanding any assertion of sovereign
immunity," including Eleventh Amendment immunity.
We disagree. As we have repeatedly stated, to abrogate the
States' Eleventh Amendment immunity from suit in federal court,
which the parties do not dispute would otherwise bar these actions,
Congress must make its intention "unmistakably clear in the
language of the statute."
Atascadero State Hospital v. Scanlon,
supra, at
473 U. S. 242;
see also Dellmuth v. Muth, 491 U.
S. 223,
491 U. S.
227-228 (1989);
Welch v. Texas Dept. of Highways and
Public Transp., 483 U. S. 468,
483 U. S. 474
(1987) (plurality opinion). In our view, § 106(c) does not satisfy
this standard.
Initially, the narrow scope of the waivers of sovereign immunity
in §§ 106(a) and (b) makes it unlikely that Congress adopted in §
106(c) the broad abrogation of Eleventh Amendment immunity for
which petitioner argues. The language of § 106(a) carefully limits
the waiver of sovereign immunity
Page 492 U. S. 102
under that provision, requiring that the claim against the
governmental unit arise out of the same transaction or occurrence
as the governmental unit's claim. Subsection (b) likewise provides
for a narrow waiver of sovereign immunity, with the amount of the
offset limited to the value of the governmental unit's allowed
claim. Under petitioner's interpretation of § 106(c), however, the
only limit is the number of provisions of the Bankruptcy Code
containing one of the trigger words. With this "limit," § 106(c)
would apply in a scattershot fashion to over 100 Code
provisions.
We believe that § 106(c)(2) operates as a further limitation on
the applicability of § 106(c), narrowing the type of relief to
which the section applies. Section 106(c)(2) is joined with
subsection (c)(1) by the conjunction "and." It provides that a
"determination" by the bankruptcy court of an "issue" "binds
governmental units." This language differs significantly from the
wording of §§ 106(a) and (b), both of which use the word "claim,"
defined in the Bankruptcy Code as including a "right to payment."
See 11 U.S.C. § 101(4)(A). Nothing in § 106(c) provides a
similar express authorization for monetary recovery from the
States.
The language of § 106(c)(2) is more indicative of declaratory
and injunctive relief than of monetary recovery. The clause echoes
the wording of sections of the Code such as § 505, which provides
that "the court may determine the amount or legality of any tax,"
11 U.S.C. § 505(a)(1), a determination of an issue that obviously
should bind the governmental unit, but that does not require a
monetary recovery from a State. We therefore construe § 106(c) as
not authorizing monetary recovery from the States. Under this
construction of § 106 (c), a State that files no proof of claim
would be bound, like other creditors, by discharge of debts in
bankruptcy, including unpaid taxes,
see Neavear v.
Schweiker, 674 F.2d 1201, 1204 (CA7 1982);
cf. Gwilliam v.
United States, 519 F.2d 407, 410 (CA9 1975), but would not be
subjected to monetary recovery.
Page 492 U. S. 103
We are not persuaded by the suggestion of petitioner's
amicus that the use of the word "determine" in the
jurisdictional provision of the Code, 28 U.S.C. § 157(b)(1), is to
the contrary. Brief for INSLAW, Inc., as
Amicus Curiae
1011. That provision authorizes bankruptcy judges to determine
"cases" and "proceedings," not issues, and provides that the judge
may "enter appropriate orders and judgments," not merely bind the
governmental unit by its determinations. Moreover, the construction
we give to § 106(c) does not render irrelevant the language of the
section that it applies "notwithstanding any assertion of sovereign
immunity." The section applies to the Federal Government as well,
see 11 U.S.C. § 101(26) (defining "governmental unit" as
including the "United States"), and the language in § 106(c) waives
the sovereign immunity of the Federal Government, so that the
Federal Government is bound by determinations of issues by the
bankruptcy courts even when it did not appear and subject itself to
the jurisdiction of such courts.
See, e.g., Neavear,
supra, at 1204.
Petitioner contends that the language of the sections containing
the trigger words supplies the necessary authorization for monetary
recovery from the States. This interpretation, however, ignores
entirely the limiting language of § 106(c)(2). Indeed, § 106(c), as
interpreted by petitioner, would have exactly the same effect if
subsection (c)(2) had been totally omitted. "It is our duty
to
give effect, if possible, to every clause and word of a statute,'"
United States v. Menasche, 348 U.
S. 528, 348 U. S.
538-539 (1955) (quoting Montclair v. Ramsdell,
107 U. S. 147,
107 U. S. 152
(1883)), and neither petitioner nor his amicus suggests
any effect that their interpretation gives to subsection
(c)(2).
Finally, petitioner's reliance on the legislative history of §
106(c) is also misplaced. He points in particular to floor
statements to the effect that "section 106(c) permits a trustee or
debtor in possession to assert avoiding powers under title 11
against a governmental unit."
See 124 Cong.Rec. 32394
Page 492 U. S. 104
(1978) (statement of Rep. Edwards);
id. at 33993
(statement of Sen. DeConcini). The Government suggests that these
statements should be construed as referring only to cases in which
the debtor retains a possessory or ownership interest in the
property that the trustee seeks to recover, Brief for United States
20, and cites as an example this Court's decision in
United
States v. Whiting Pools, Inc., 462 U.
S. 198 (1983) (holding that the Internal Revenue Service
could be required to turn over to bankrupt estate tangible property
to which debtor retained ownership).
The weakness in petitioner's argument is more fundamental,
however, as the Second Circuit properly recognized. As we observed
in
Dellmuth v. Muth, supra, at
491 U. S. 230,
"[l]egislative history generally will be irrelevant to a judicial
inquiry into whether Congress intended to abrogate the Eleventh
Amendment." If congressional intent is unmistakably clear in the
language of the statute, reliance on committee reports and floor
statements will be unnecessary, and if it is not,
Atascadero will not be satisfied. 491 U.S. at
491 U. S.
228-229. Similarly, the attempts of petitioner and his
amicus to construe § 106(c) in light of the policies
underlying the Bankruptcy Code are unavailing. These arguments are
not based in the text of the statute, and so, too, are not helpful
in determining whether the command of
Atascadero is
satisfied.
See 491 U.S. at
491 U. S.
230.
We hold that, in enacting § 106(c), Congress did not abrogate
the Eleventh Amendment immunity of the States. Therefore,
petitioner's actions in United States Bankruptcy Court under §§
542(b) and 547(b) of the Code are barred by the Eleventh Amendment.
Since we hold that Congress did not abrogate Eleventh Amendment
immunity by enacting § 106 (c), we need not address whether it had
the authority to do so under its bankruptcy power.
Cf.
Pennsylvania v. Union Gas Co., 491 U. S.
1 (1989). The judgment of the Second Circuit is
affirmed.
@It is so ordered.
Page 492 U. S. 105
JUSTICE O'CONNOR, concurring.
Although I agree with JUSTICE SCALIA that Congress may not
abrogate the States' Eleventh Amendment immunity by enacting a
statute under the Bankruptcy Clause, a majority of the Court
addresses instead the question whether Congress expressed a clear
intention to abrogate the States' Eleventh Amendment immunity. On
the latter question, I agree with JUSTICE WHITE, and join the
plurality's opinion.
JUSTICE SCALIA, concurring in the judgment.
I concur in the Court's judgment that
"petitioner's actions in United States Bankruptcy Court under §§
542(b) and 547(b) of the [Bankruptcy] Code are barred by the
Eleventh Amendment."
Ante at
492 U. S. 104.
I reach this conclusion, however, not on the plurality's basis that
"Congress did not abrogate Eleventh Amendment immunity" of the
States,
ibid., but on the ground that it had no power to
do so. As I explained in my opinion concurring in part and
dissenting in part in
Pennsylvania v. Union Gas Co.,
491 U. S. 1,
491 U.S. 35-42 (1989), it
makes no sense to affirm the constitutional principle established
by
Hans v. Louisiana, 134 U. S. 1 (1890),
that
"'a suit directly against a State by one of its own citizens is
not one to which the judicial power of the United States extends,
unless the State itself consents to be sued,'"
Welch v. Texas Dept. of Highways and Public Transp.,
483 U. S. 468,
483 U. S. 486
(1987) (plurality opinion), quoting
Hans, supra, at
134 U. S. 21
(Harlan, J., concurring), and to hold at the same time that
Congress can override this principle by statute in the exercise of
its Article I powers.
Union Gas involved Congress' powers
under the Commerce Clause, but there is no basis for treating its
powers under the Bankruptcy Clause any differently. Accordingly, I
would affirm the judgment of the Court of Appeals without the
necessity of considering whether Congress intended to exercise a
power it did not possess.
Page 492 U. S. 106
JUSTICE MARSHALL, with whom JUSTICE BRENNAN, JUSTICE BLACKMUN,
and JUSTICE STEVENS join, dissenting.
In my view, the language of § 106(c) of the Bankruptcy Code
(Code), 11 U.S.C. § 106(c), satisfies even the requirement that
Congress' intent to abrogate the States' Eleventh Amendment
immunity be "unmistakably clear."
Atascadero State Hospital v.
Scanlon, 473 U. S. 234,
473 U. S. 242
(1985). Because Congress clearly expressed its intent to authorize
a bankruptcy court to issue a money judgment against a State that
has not filed a proof of claim in a bankruptcy proceeding, and
because Congress has the authority under the Bankruptcy Clause to
abrogate the States' Eleventh Amendment immunity, I respectfully
dissent.
Section 106(c) states that, "notwithstanding
any
assertion of sovereign immunity," any Code provision containing one
of the trigger words -- "creditor," "entity," or "governmental
unit" -- applies to the States, and that "a determination by the
court of an issue arising under such a provision binds [the
States]" (emphasis added). The drafters of § 106(c) were fully
aware of "the requirement in case law that an express waiver of
sovereign immunity is required in order to be effective." 124
Cong.Rec. 32394 (1978) (statement of Rep. Edwards);
id. at
33993 (statement of Sen. DeConcini);
see Employees v. Missouri
Dept. of Public Health and Welfare, 411 U.
S. 279,
411 U. S. 285
(1973). They therefore carefully abrogated the States' sovereign
immunity in three steps. First, they eliminated "any assertion of
sovereign immunity." § 106(c). Second, they included States within
the trigger words used elsewhere in the Code. § 106(c)(1). Third,
they provided that States would be bound by the orders of the
bankruptcy court. § 106(c)(2). What the plurality sees as
redundancy in subsections (c)(1) and (c)(2) is thus more reasonably
understood as evidence of the importance Congress attached to
Page 492 U. S. 107
ensuring that the abrogation of sovereign immunity was express.
[
Footnote 1]
By its terms, § 106(c) makes no distinction between Code
provisions that contain trigger words and permit only injunctive
and declaratory relief and Code provisions that contain trigger
words and permit money judgments. Nevertheless, by placing heavy
emphasis on the word "determination" in § 106(c)(2), the plurality
concludes that § 106(c), in its entirety, is "more indicative of
declaratory and injunctive relief than of monetary recovery."
Ante at
492 U. S. 102.
The plurality justifies this conclusion by accepting an analogy to
the use of the word "determine" in a Code provision dealing with
taxes, § 505(a)(1), while rejecting an equally compelling analogy
to the use of the word "determine" in the Code's jurisdictional
provision, 28 U.S.C. § 157(b)(1) (1982 ed., Supp. V). But instead
of trying to force meaning into the word "determination" through
competing analogies to other Code provisions, we should give
decisive weight to the explicit language abrogating sovereign
immunity.
The plurality correctly points out that the abrogation of
sovereign immunity in § 106(c) should not be read to overwhelm
Page 492 U. S. 108
the narrow scope of the voluntary waiver set forth in §§ 106(a)
and (b). But the plurality's conclusion that § 106(c) must
therefore refer only to declarative and injunctive relief rests on
the mistaken assumption that, without such a narrowing
interpretation, "the
only limit is the number of
provisions in the Bankruptcy Code containing one of the trigger
words."
Ante at
492 U. S. 102
(emphasis added). The plurality then raises the specter that "§
106(c) would apply in a scattershot fashion to over 100 Code
provisions,"
ibid., offering virtually endless
opportunities for money judgments against the States.
Nothing could be further from the truth, for most of the Code
provisions containing trigger words do not contemplate money
judgments. Some provide States, in their role as creditors or
entities, with rights against the debtor. [
Footnote 2] Others limit relief against "creditors,"
"entities," or "governmental units" to declaratory or injunctive
relief. [
Footnote 3] Only a
Page 492 U. S. 109
handful of the triggered sections clearly contemplate money
judgments
against a "creditor," "entity," or "governmental
unit." These include the Code provisions at issue in this case,
i.e., the provision giving a trustee the power to avoid
preferential payments made to "creditors," § 547, and the provision
requiring "entities" to turn over property and money belonging to
the debtor. § 542. [
Footnote 4]
Thus, rather than reading § 106(c) in isolation as the plurality
does, the provision should be read in light of the Code provisions
containing the trigger words "creditor," "entity," and
"governmental unit." Only in this way is it possible to appreciate
the limited extent to which Congress sought to abrogate the States'
sovereign immunity in § 106(c).
See Kelly v. Robinson,
479 U. S. 36,
479 U. S. 43
(1986) (Code should be read as an integrated whole).
By expressly including States within the terms "creditor" and
"entity," Congress intended States generally to be treated the same
as ordinary "creditors" and "entities," who are subject to money
judgments in a relatively small number of Code provisions. The
effect of today's decision is to exempt States from these
provisions, which are crucial to the efficacy of the Code. The
plurality therefore ignores Congress' careful choice of language
and turns States into preferred
Page 492 U. S. 110
actors. [
Footnote 5] By
allowing a trustee to recapture payments made to creditors 90 days
before a bankruptcy petition is filed, the preference provision
prevents anxious creditors from grabbing payments from an insolvent
debtor, and hence getting more than their fair share. After today,
however, any State owed money by a debtor with financial problems
will have a strong incentive to collect whatever it can, as fast as
it can, even if doing so pushes the debtor into bankruptcy.
Ordinary creditors will soon realize that States can receive more
than their fair share; the very existence of this governmental
power will cause these other creditors, in turn, to increase
pressure on the debtor.
See McVey Trucking, Inc. v. Secretary
of State of Illinois, 812 F.2d 311, 328 (CA7),
cert.
denied, 484 U.S. 895 (1987). [
Footnote 6] The turnover provision is designed to prevent
third parties from keeping property of the debtor or from refusing
to make payments owed to the debtor, thereby aiding the
reorganization of the debtor's affairs
Page 492 U. S. 111
or the orderly and equitable distribution of the estate.
See
United States v. Whiting Pools, Inc., 462 U.
S. 198,
462 U. S.
202-203 (1983). Exempting States from this provision, as
well as from the preference provision, undermines these important
policy goals of the Code.
My conclusion that Congress intended § 106(c) to abrogate the
States' Eleventh Amendment immunity against money judgments
requires me to decide whether Congress has the authority under the
Bankruptcy Clause to do so. [
Footnote 7] In
Pennsylvania v. Union Gas Co.,
491 U. S. 1,
491 U. S. 19
(1989) (plurality opinion);
id. at
491 U.S. 57 (WHITE, J., concurring in
judgment), we held that Congress has the authority under the
Commerce Clause to abrogate the States' Eleventh Amendment
immunity. I see no reason to treat Congress' power under the
Bankruptcy Clause any differently, for both constitutional
provisions give Congress plenary power over national economic
activity.
See The Federalist No. 42, p. 271 (C. Rossiter
ed. 1961) (J. Madison) (describing the Bankruptcy Clause and the
Commerce Clause as "intimately connected");
cf. ante at
492 U. S. 105
(SCALIA, J., concurring in judgment).
For the reasons stated, I respectfully dissent.
[
Footnote 1]
Not surprisingly, most courts considering § 106(c) have
concluded that it clearly allows a trustee to recover preferences
from a State and to require a State to turn over money belonging to
the debtor.
See, e.g., WJM, Inc. v. Massachusetts Dept. of
Public Welfare, 840 F.2d 996, 1001 (CA1 1988);
McVey
Trucking, Inc. v. Secretary of State of Illinois, 812 F.2d
311, 326-327 (CA7),
cert. denied, 484 U.S. 895 (1987);
Neavear v. Schweiker, 674 F.2d 1201, 1202-1204 (CA7 1982);
Rhode Island Ambulance Services, Inc. v. Begin, 92 B.R. 4,
6-7 (Bkrtcy.Ct., RI 1988);
Tew v. Arizona State Retirement
System, 78 B.R.
328, 329-331 (SD Fla. 1987);
cf. Gingold v. United
States, 80 B.R. 555, 561 (Bkrtcy.Ct., ND Ga. 1987);
R
& L Refunds v. United States, 45 B.R. 733, 735
(Bkrtcy.Ct.,WD Ky. 1985);
Gower v. Farmers Home
Administration, 20 B.R. 519, 521-522 (Bkrtcy.Ct., MD Ga.
1982);
Remke, Inc. v United States, 5 B.R. 299, 300-302
(Bkrtcy.Ct., ED Mich. 1980). A leading bankruptcy commentator also
reads § 106(c) to abrogate state sovereign immunity. 2 Collier on
Bankruptcy � 106.04 (15th ed. 1989).
[
Footnote 2]
See, e.g., § 303(b)(1) (permitting three or more
"entities" to file an involuntary case against a debtor); § 303(c)
(giving "creditors" who do not file an involuntary case the same
rights as those who do); § 303(j) (requiring notice to all
"creditors" before a court may dismiss an involuntary case); §
341(a) (requiring a meeting of "creditors"); § 343 (permitting
"creditors" to examine the debtor); § 349(b)(3) (revesting property
in an "entity" if the petition is dismissed); § 361 (setting forth
adequate protection for certain property interests of an "entity");
§ 363(c)(2)(A) (preventing use, lease, or sale of cash collateral
assets absent consent of an interested "entity"); §§ 501 and 502
(regulating filing of proofs of claims by "creditors"); § 506(a)
(granting secured status to lien "creditors"); § 553 (granting
rights of setoff to certain "creditors"); §§ 702(a) and 705 (giving
qualified "creditors" the right to vote for the trustee and the
creditors' committee); §§ 507 and 726 (setting forth priorities of
distribution to "creditors"); § 727(c) (giving a "creditor" the
right to object to a discharge); § 1102 (providing for court
appointed creditors' committee); § 1109(b) (giving a "creditor" the
right to be heard on any issue); § 1121(c) (providing that a
"creditor" may file a reorganization plan).
[
Footnote 3]
See, e.g., § 365 (permitting the trustee to assume or
reject executory contracts and unexpired leases in certain
circumstances); § 505 (permitting the bankruptcy court to determine
the debtor's tax liability in certain circumstances); § 525
(protecting the debtor against government discrimination in
licensing and employment); § 1141 (binding "creditors" to the terms
of a confirmed reorganization plan and discharging all other
claims); § 1142 (permitting the bankruptcy court to require
performance of any act necessary to carry out a confirmed
reorganization plan); § 1143 (preventing an "entity" that fails to
perform a required act from participating in the distribution of
estate assets).
[
Footnote 4]
Several Code provisions that permit money judgments do not apply
to States. For example, 11 U.S.C. § 362(h) (1982 ed., Supp. V)
provides that an individual injured as a result of a willful
violation of an automatic stay may recover actual damages and,
where appropriate, punitive damages. Because § 362(h) contains no
trigger words, it does not apply to States.
See also Prime,
Inc. v. Illinois Dept. of Transp., 44 B.R. 924, 925-927
(Bkrtcy.Ct., WD Mo. 1984);
Gillman v. Board of Trustees of
Alpine School Dist., 40 B.R. 781, 788-790 (Bkrtcy.Ct., Utah
1984).
[
Footnote 5]
When Congress wanted to grant States special treatment, it
specifically used the term "governmental unit."
See, e.g.,
§ 101(35) (1982 ed., Supp. V) (defining the term "person" so that
it does not generally include a "governmental unit"); § 346(f)
(requiring the trustee to withhold State and local taxes from
claims based on wages or salaries); §§ 362(b)(4) and (5) (exempting
from the automatic stay provision actions of "governmental units"
to enforce police or regulatory powers); § 362(b)(9) (1982 ed.,
Supp. V) (exempting from the automatic stay provision a
"governmental unit's" issuance of a notice of tax deficiency); §
507(a)(7) (1982 ed., Supp. V) (creating relatively high priority
for certain taxes owed to "governmental units"); §§ 523(a)(1) and
(7) (exempting from discharge certain taxes and fines payable to
"governmental units"); § 523(a)(8) (exempting from discharge
student loans guaranteed by "governmental units"); § 1129(d)
(barring bankruptcy court from confirming a reorganization plan if
the principal purpose of the plan is the avoidance of taxes).
[
Footnote 6]
The plurality's decision to exempt States from the preference
provision is contrary to the understanding of the members of the
Conference Committee who presented § 106(c) to Congress.
See 124 Cong.Rec. 32394 (1978) (statement of Rep. Edwards)
(§ 106(c) will cover situations in which "a trustee or debtor in
possession . . . assert[s] avoiding powers under title 11 against a
governmental unit");
id. at 33993 (statement of Sen.
DeConcini) (same).
[
Footnote 7]
The Bankruptcy Clause provides:
"Congress shall have Power To . . . establish . . . uniform Laws
on the subject of Bankruptcies throughout the United States."
Art. I, § 8, cl. 4.
JUSTICE STEVENS, with whom JUSTICE BLACKMUN joins,
dissenting.
While I join JUSTICE MARSHALL's dissenting opinion, I think it
is appropriate to explain why the legislative history of 11 U.S.C.
§ 106 lends added support to his reading of the statute.
The drafters of the Bankruptcy Code were well aware of the value
to the bankruptcy administration process of a waiver of federal and
state sovereign immunity. In 1973, five years before the Code was
enacted, the Commission on the Bankruptcy Laws of the United States
proposed a broad
Page 492 U. S. 112
waiver of sovereign immunity under which every provision of the
proposed bankruptcy bill would apply to the States. That provision
was not enacted into law, apparently because of concerns that
Congress did not have the constitutional power to abrogate
completely the States' sovereign immunity.
See H.R.Rep.
No. 95-595, p. 317 (1977); S.Rep. No. 95-989, p. 29 (1978).
Instead, the initial legislation drafted by Congress limited the
waiver of sovereign immunity to compulsory counterclaims and
offsets, the provisions that now appear in §§ 106(a) and 106(b).
Section 106(c), added after the bill that became the Bankruptcy
Code was reported by the Senate and House Committees, restored to a
large extent the power of the bankruptcy courts over States that
had first been proposed in 1973. Whereas the waiver contained in
the Commission on the Bankruptcy Laws' proposal would have
subjected the States to suit under every provision of the Code, the
application of § 106(c) was limited to those Code provisions
containing the statutory trigger words. The House and Senate
sponsors explained in floor statements:
"The provision is included to comply with the requirement in
case law that an express waiver of sovereign immunity is required
in order to be effective. Section 106(c) codifies
In re
Gwilliam, 519 F.2d 407 (9th Cir., 1975), and
In re
Dolard, 519 F.2d 282 (9th Cir., 1975), permitting the
bankruptcy court to determine the amount and dischargeability of
tax liabilities owing by the debtor or the estate prior to or
during a bankruptcy case, whether or not the governmental unit to
which such taxes are owed files a proof of claim. . . .
[S]ubsection (c) is not limited to those issues, but permits the
bankruptcy court to bind governmental units on other matters as
well. For example, section 106(c) permits a trustee or debtor in
possession to assert avoiding powers under title 11 against a
governmental unit; contrary language in the House report to H.R.
8200 is thereby overruled "
Page 492 U. S. 113
124 Cong.Rec. 32394 (1978) (statement of Rep. Edwards);
id. at 33993 (statement of Sen. DeConcini).
The sponsors later added:
"Section 547(b)(2) of the House amendment adopts a provision
contained in the House bill and rejects an alternative contained in
the Senate amendment relating to the avoidance of a preferential
transfer that is payment of a tax claim owing to a governmental
unit. As provided, section 106(c) of the House amendment overrules
contrary language in the House report with the result that the
Government is subject to avoidance of preferential transfers."
Id. at 32400 (statement of Rep. Edwards);
id.
at 34000 (statement of Sen. DeConcini).
Although the primary object of § 106(c) was to provide the
bankruptcy court with authority to determine the amount and
dischargeability of tax liabilities even if a claim has not been
filed, the legislative history thus indicates that the provision
was also intended to cover "other matters as well," including
specifically the avoidance of preferential transfers. There was no
suggestion that this authority did not include the power to order
the return of real property and the payment of money damages, or
that the issues that the bankruptcy court could determine under §
106(c) were limited to whether prospective or declaratory relief
was appropriate.
The fact that paragraph (c) was added to the bill after
paragraphs (a) and (b) had been reported out of Committee also
explains why those paragraphs were not rewritten to eliminate any
possible redundancy in the section. Given this history, it is
apparent that the initial phrase in paragraph (c) ("[e]xcept as
provided in subsections (a) and (b)") constituted a declaration
that the new subsection provided an additional mechanism by which
the bankruptcy courts could bind States and did not derogate from
the power granted under the other two subsections.
Page 492 U. S. 114
There is no question that § 106(c) effects a waiver of sovereign
immunity. The statute, which applies to the Federal Government, the
States, and municipalities alike,
see 11 U.S.C. § 101(21),
states in the clearest possible terms that provisions of the Code
using any of the trigger words apply to governmental units
"notwithstanding any assertion of sovereign immunity," and the
legislative history supports that reading. It is well settled that,
when the Federal Government waives its sovereign immunity, the
scope of that waiver is construed liberally to effect its remedial
purposes.
See Block v. Neal, 460 U.
S. 289,
460 U. S. 298
(1983);
United States v. Yellow Cab Co., 340 U.
S. 543,
340 U. S.
554-555 (1951);
Larson v. Domestic & Foreign
Commerce Corp., 337 U. S. 682,
337 U. S. 709
(1949) (Frankfurter, J., dissenting);
Great Northern Life Ins.
Co. v. Read, 322 U. S. 47,
322 U. S. 59
(1944) (Frankfurter, J., dissenting);
see also Finley v. United
States, 490 U. S. 545,
490 U. S.
578-580 (1989) (STEVENS, J., dissenting). The same rule
should be applied under this section when the defendant is a State,
rather than the Federal Government or a municipality.
Cf.
Missouri v. Jenkins, 491 U. S. 274,
491 U. S.
281-282 (1989) (whether Congress intended an enhancement
of a reasonable attorney's fee under § 1988 should not turn on
whether the party against whom fee is awarded is a State). I would
therefore hold that the determinations that a bankruptcy court may
make under § 106(c) include a determination that a State must pay
money damages under a Code provision containing one of the trigger
words.