OPINION OF THE COURT
CENTRAL VA. COMMUNITY COLLEGE V. KATZ
546 U. S. ____ (2006)
SUPREME COURT OF THE UNITED STATES
NO. 04-885
CENTRAL VIRGINIA COMMUNITY COLLEGE, et al.,
PETITIONERS
v. BERNARD KATZ, LIQUIDATING SUPERVISOR FOR
WALLACE’S BOOKSTORES, INC.
on writ of certiorari to the united states court of
appeals for the sixth circuit
[January 23, 2006]
Justice Stevens delivered the
opinion of the Court.
Article I, §8, cl. 4, of the
Constitution provides that Congress shall have the power to
establish “uniform Laws on the subject of Bankruptcies throughout
the United States.” In
Tennessee Student Assistance
Corporation v.
Hood, 541 U. S. 440 (2004), we granted
certiorari to determine whether this Clause gives Congress the
authority to abrogate States’ immunity from private suits. See
id., at 443. Without reaching that question, we upheld the
application of the Bankruptcy Code to proceedings initiated by a
debtor against a state agency to determine the dischargeability of
a student loan debt. See
id., at 451. In this case we
consider whether a proceeding initiated by a bankruptcy trustee to
set aside preferential transfers by the debtor to state agencies is
barred by sovereign immunity. Relying in part on our reasoning in
Hood, we reject the sovereign immunity defense advanced by
the state agencies.
I
Petitioners are Virginia
institutions of higher education that are considered “arm[s] of the
State” entitled to sovereign immunity. See,
e.g.,
Alden v.
Maine,
527 U. S. 706, 756
(1999) (observing that only arms of the State can assert the
State’s immunity). Wallace’s Bookstores, Inc., did business with
petitioners before it filed a petition for relief under chapter 11
of the Bankruptcy Code, 11 U. S. C. §101
et seq.
(2000 ed. and Supp. III), in the United States Bankruptcy
Court for the Eastern District of Kentucky. Respondent, Bernard
Katz, is the court-appointed liquidating supervisor of the bankrupt
estate. He has commenced proceedings in the Bankruptcy Court
pursuant to §§547(b) and 550(a) to avoid and recover alleged
preferential transfers to each of the petitioners made by the
debtor when it was insolvent.[
Footnote 1] Petitioners’ motions to dismiss those
proceedings on the basis of sovereign immunity were denied by the
Bankruptcy Court.
The denial was affirmed by the
District Court and the Court of Appeals for the Sixth Circuit on
the authority of the Sixth Circuit’s prior determination that
Congress has abrogated the States’ sovereign immunity in bankruptcy
proceedings. See
Hood v.
Tennessee Student Assistance
Corporation (In re Hood), 319 F. 3d 755
(2003). We granted certiorari, 544 U. S. ___ (2005), to consider
the question left open by our opinion in
Hood: whether
Congress’ attempt to abrogate state sovereign immunity in 11 U.
S. C. §106(a)[
Footnote 2]
is valid. As we shall explain, however, we are persuaded that the
enactment of that provision was not necessary to authorize the
Bankruptcy Court’s jurisdiction over these preference avoidance
proceedings.
Bankruptcy jurisdiction, at its core, is
in rem. See
Gardner v.
New Jersey,
329 U. S. 565, 574 (1947) (“The whole
process of proof, allowance, and distribution is, shortly speaking,
an adjudication of interests claimed in a
res”). As we
noted in
Hood, it does not implicate States’ sovereignty
to nearly the same degree as other kinds of jurisdiction. See 541
U. S., at 450–451 (citing admiralty and bankruptcy cases). That was
as true in the 18th century as it is today. Then, as now, the
jurisdiction of courts adjudicating rights in the bankrupt estate
included the power to issue compulsory orders to facilitate the
administration and distribution of the res
.
It is appropriate to presume that the Framers
of the Constitution were familiar with the contemporary legal
context when they adopted the Bankruptcy Clause[
Footnote 3]—a provision which, as we explain in
Part IV,
infra, reflects the States’ acquiescence in a
grant of congressional power to subordinate to the pressing goal of
harmonizing bankruptcy law sovereign immunity defenses that might
have been asserted in bankruptcy proceedings. The history of the
Bankruptcy Clause, the reasons it was inserted in the Constitution,
and the legislation both proposed and enacted under its auspices
immediately following ratification of the Constitution demonstrate
that it was intended not just as a grant of legislative authority
to Congress, but also to authorize limited subordination of state
sovereign immunity in the bankruptcy arena. Foremost on the minds
of those who adopted the Clause were the intractable problems, not
to mention the injustice, created by one State’s imprisoning of
debtors who had been discharged (from prison and of their debts) in
and by another State. As discussed below, to remedy this problem,
the very first Congresses considered, and the Sixth Congress
enacted, bankruptcy legislation authorizing federal courts to,
among other things, issue writs of habeas corpus directed at state
officials ordering the release of debtors from state prisons.
We acknowledge that statements in both the
majority and the dissenting opinions in
Seminole Tribe of
Fla. v.
Florida,
517 U. S. 44 (1996),
reflected an assumption that the holding in that case would apply
to the Bankruptcy Clause. See also
Hoffman v.
Connecticut Dept. of Income Maintenance,
492 U. S. 96, 105 (1989) (O’Connor, J.,
concurring). Careful study and reflection have convinced us,
however, that that assumption was erroneous. For the reasons stated
by Chief Justice Marshall in
Cohens v.
Virginia,
6 Wheat. 264 (1821), we are not bound to follow our dicta in a
prior case in which the point now at issue was not fully debated.
See
id., at 399–400 (“It is a maxim not to be disregarded,
that general expressions, in every opinion, are to be taken in
connection with the case in which those expressions are used. If
they go beyond the case, they may be respected, but ought not to
control the judgment in a subsequent suit when the very point is
presented for decision”).
II
Critical features of every
bankruptcy proceeding are the exercise of exclusive jurisdiction
over all of the debtor’s property, the equitable distribution of
that property among the debtor’s creditors, and the ultimate
discharge that gives the debtor a “fresh start” by releasing him,
her, or it from further liability for old debts. See,
e.g.,
Local Loan Co. v.
Hunt,
292 U. S. 234, 244
(1934). “Under our longstanding precedent, States, whether or not
they choose to participate in the proceeding, are bound by a
bankruptcy court’s discharge order no less than other creditors.”
Hood, 541 U. S., at 448. Petitioners here, like the state
agencies that were parties in
Hood, have conceded as much.
See
id., at 449 (noting concession that “States are
generally bound by a bankruptcy court’s discharge order”); Tr. of
Oral Arg. 8–9 (Oct. 31, 2005).
The history of discharges in
bankruptcy proceedings demonstrates that the state agencies’
concessions, and
Hood’s holding, are correct. The term
“discharge” historically had a dual meaning; it referred to both
release of debts and release of the debtor from prison. Indeed, the
earliest English statutes governing bankruptcy and insolvency
authorized discharges of persons, not debts. One statute enacted in
1649 was entitled “An act for discharging Poor Prisoners unable to
satisfy their creditors.” See 2 Acts and Ordinances of the
Interregnum, 1642–1660, pp. 240–241 (C. Firth & R. Rait eds.
1911). The stated purpose of the Act was to “Discharge … the
person of [the] Debtor” “of and from his or her Imprisonment.”
Ibid. Not until 1705 did the English Parliament extend the
discharge (and then only for traders and merchants) to include
release of debts. See 4 Ann., ch. 17, §7 (providing that upon
compliance with the statute, “all and every person and persons so
becoming bankrupt . . . shall be discharged from all debts by him,
her, or them due and owing at the time that he, she, or they did
become bankrupt”); see also McCoid, Discharge: The Most Important
Development in Bankruptcy History, 70 Am. Bankr. L. J. 163,
167 (1996).
Well into the 18th century, imprisonment for
debt was still ubiquitous in England[
Footnote 4] and the American Colonies. Bankruptcy and
insolvency laws remained as much concerned with ensuring full
satisfaction of creditors (and, relatedly, preventing debtors’
flight to parts unknown[
Footnote
5]) as with securing new beginnings for debtors. Illustrative
of bankruptcy laws’ harsh treatment of debtors during this period
was that debtors often fared worse than common criminals in prison;
unfortunate insolvents, unlike criminals, were forced to provide
their own food, fuel, and clothing while behind bars. See B. Mann,
Republic of Debtors: Bankruptcy in the Age of American Independence
78–108 (2002).
Common as imprisonment itself was, the
American Colonies, and later the several States, had wildly
divergent schemes for discharging debtors and their debts.
Id., at 79 (“The only consistency among debt laws in the
eighteenth century was that every colony, and later every state,
permitted imprisonment for debt—most on
mesne process, and
all on execution of a judgment”). At least four jurisdictions
offered relief through private Acts of their legislatures. See
Railway Labor Executives’ Assn. v.
Gibbons,
455 U. S. 457, 472 (1982). Those Acts
released debtors from prison upon surrender of their property, and
many coupled the release from prison with a discharge of debts.
Other jurisdictions enacted general laws providing for release from
prison and, in a few places, discharge of debt. Others still
granted release from prison, but only in exchange for indentured
servitude. Some jurisdictions provided no relief at all for the
debtor. See generally P. Coleman, Debtors and Creditors in America:
Insolvency, Imprisonment for Debt, and Bankruptcy, 1607–1900
(1999).[
Footnote 6]
The difficulties posed by this patchwork of
insolvency and bankruptcy laws were peculiar to the American
experience. In England, where there was only one sovereign, a
single discharge could protect the debtor from his jailer and his
creditors. As two cases—one litigated before the Constitutional
Convention in Philadelphia and one litigated after it—demonstrate,
however, the uncoordinated actions of multiple sovereigns, each
laying claim to the debtor’s body and effects according to
different rules, rendered impossible so neat a solution on this
side of the Atlantic.
In the first case,
James v.
Allen, 1 Dall. 188 (C. P. Phila. Cty. 1786), Jared
Ingersoll, an attorney who a year later would become a delegate to
the Philadelphia Convention,[
Footnote 7] represented a Pennsylvania creditor seeking
recovery from a debtor who had been released from prison in New
Jersey. Shortly after his release, the debtor traveled to
Pennsylvania, where he was arrested for nonpayment of the
Pennsylvania debt. In seeking release from the Pennsylvania prison,
he argued that his debt had been discharged by the New Jersey
court. Ingersoll responded that the order granting relief under New
Jersey’s insolvency laws “only discharged the person of the debtor
from arrest within the State of New Jersey.”
Id., at 190.
The court agreed: Whatever effect the order might have had in New
Jersey, the court said, it “goes no further than to discharge [the
debtor] from his imprisonment in the Gaol of Essex County in the
State of New Jersey; which, if the fullest obedience were paid to
it, could not authorize a subsequent discharge from imprisonment in
another Gaol, in another State.”
Id., at 192. The court
further observed that “[i]nsolvent laws subsist in every State in
the Union, and are probably all different from each other …
. Even the Bankrupt Laws of England, while we were the
subjects of that country, were never supposed to extend here, so as
to exempt the persons of the Bankrupts from being arrested.”
Id., at 191.
In the second case,
Millar v.
Hall, 1 Dall. 229 (Pa. 1788), which was decided the year
after the Philadelphia Convention, Ingersoll found himself arguing
against the principle announced in
James. His client, a
debtor named Hall, had been “discharged under an insolvent law of
the state of Maryland, which is in the nature of a general
bankrupt[cy] law.” 1 Dall., at 231. Prior to his discharge, Hall
had incurred a debt to a Pennsylvanian named Millar. Hall neglected
to mention that debt in his schedule of creditors presented to the
Maryland court, or to personally notify Millar of the looming
discharge. Following the Maryland court’s order, Hall traveled to
Pennsylvania and was promptly arrested for the unpaid debt to
Millar.
Responding to Millar’s counsel’s argument that
the holding of
James controlled, Ingersoll urged adoption
of a rule that “the discharge of the Defendant in one state ought
to be sufficient to discharge [a debtor] in every state.” 1 Dall.,
at 231. Absent such a rule, Ingersoll continued, “perpetual
imprisonment must be the lot of every man who fails; and all hope
of retrieving his losses by honest and industrious pursuits, will
be cut off from the unfortunate bankrupt.”
Ibid. The court
accepted this argument. Allowing a creditor to execute “upon [a
debtor’s] person out of the state in which he has been discharged,”
the court explained, “would be giving a superiority to some
creditors, and affording them a double satisfaction—to wit, a
proportionable dividend of his property there, and the imprisonment
of his person here.”
Id., at 232. Indeed, the debtor
having already been obliged to surrender all of his effects, “to
permit the taking [of] his person here, would be to attempt to
compel him to perform an impossibility, that is, to pay a debt
after he has been deprived of every means of payment,—an attempt
which would, at least, amount to perpetual imprisonment, unless the
benevolence of his friends should interfere to discharge [his]
account.”
Ibid.
These two cases illustrate the backdrop
against which the Bankruptcy Clause was adopted. In both
James and
Millar, the debtors argued that the
earlier discharge should be given preclusive effect pursuant to the
Full Faith and Credit Clause of the Articles of Confederation. See
James, 1 Dall., at 190;
Millar, 1 Dall., at 231.
That possibility was the subject of discussion at the
Constitutional Convention when a proposal to encompass legislative
Acts, and insolvency laws in particular, within the coverage of the
Full Faith and Credit Clause of the Constitution was committed to
the Committee of Detail[
Footnote
8] together with a proposal “ ‘[t]o establish uniform laws
upon the subject of bankruptcies, and respecting the damages
arising on the protest of foreign bills of exchange.’ ” See
Nadelmann, On the Origin of the Bankruptcy Clause, 1 Am. J. Legal
Hist. 215, 216–217, 219 (1957); see also Plank, The Constitutional
Limits of Bankruptcy, 63 Tenn. L. Rev. 487, 527–528 (1996). A
few days after this proposal was taken under advisement, the
Committee of Detail reported that it had recommended adding the
power “ ‘[t]o establish uniform laws upon the subject of
bankruptcies’ ” to the Naturalization Clause of what later
became Article I.
The Convention adopted the Committee’s
recommendation with very little debate two days later. Roger
Sherman of Connecticut alone voted against it, apparently because
he was concerned that it would authorize Congress to impose upon
American citizens the ultimate penalty for debt then in effect in
England: death. See J. Madison, Notes of Debates in the Federal
Convention of 1787, p. 571 (Ohio Univ. Press ed. 1966). The absence
of extensive debate over the text of the Bankruptcy Clause or its
insertion indicates that there was general agreement on the
importance of authorizing a uniform federal response to the
problems presented in cases like
James and
Millar.[
Footnote
9]
III
Bankruptcy jurisdiction, as
understood today and at the time of the framing, is principally
in rem jurisdiction. See
Hood, 541 U. S., at 447;
Local Loan Co., 292 U. S., at 241;
Straton v.
New,
283 U.
S. 318, 320–321 (1931);
Hanover Nat. Bank v.
Moyses,
186
U. S. 181, 192 (1902);
New Lamp Chimney Co. v.
Ansonia Brass & Copper Co.,
91 U. S. 656, 661–662
(1876). In bankruptcy, “the court’s jurisdiction is premised on the
debtor and his estate, and not on the creditors.”
Hood,
541 U. S., at 447. As such, its exercise does not, in the usual
case, interfere with state sovereignty even when States’ interests
are affected. See
id., at 448.
The text of Article I, §8,
cl. 4, of the Constitution, however, provides that Congress
shall have the power to establish “uniform Laws on the subject of
Bankruptcies throughout the United States.” Although the interest
in avoiding unjust imprisonment for debt and making federal
discharges in bankruptcy enforceable in every State was a primary
motivation for the adoption of that provision, its coverage
encompasses the entire “subject of Bankruptcies.” The power granted
to Congress by that Clause is a unitary concept rather than an
amalgam of discrete segments.
The Framers would have understood that laws
“on the subject of Bankruptcies” included laws providing, in
certain limited respects, for more than simple adjudications of
rights in the res. The first bankruptcy statute, for example, gave
bankruptcy commissioners appointed by the district court the power,
inter alia, to imprison recalcitrant third parties in
possession of the estate’s assets. See Bankruptcy Act of 1800, §14,
2 Stat. 25 (repealed 1803). More generally, courts adjudicating
disputes concerning bankrupts’ estates historically have had the
power to issue ancillary orders enforcing their
in rem
adjudications. See,
e.g., 2 W. Blackstone, Commentaries on
the Laws of England 486 (1766) (noting that the assignees of the
bankrupt’s property—the 18th-century counterparts to today’s
bankruptcy trustees—could “pursue any
legal method of
recovering [the debtor’s] property so vested in them,” and could
pursue methods in equity with the consent of the creditors); Plank,
63 Tenn. L. Rev., at 523 (discussing State insolvency and
bankruptcy laws in the 18th century empowering courts to recover
preferential transfers); see also
Ex parte Christy, 3 How.
292, 312, 314 (1844) (Story, J.) (describing bankruptcy
jurisdiction under the 1841 Act in broad terms);
Wright v.
Union Central Life Ins. Co.,
304 U. S. 502, 513–514
(1938) (defining “bankruptcy” as the “ ‘subject of the
relations between an insolvent or nonpaying or fraudulent debtor
and his creditors,
extending to his and their
relief’ ” (emphasis added)).
Our decision in
Hood illustrates the
point. As the dissenters in that case pointed out, it was at least
arguable that the particular procedure that the debtor pursued to
establish dischargeability of her student loan could have been
characterized as a suit against the State rather than a purely
in rem proceeding. See 541 U. S., at 455–456 (Thomas, J.,
dissenting). But because the proceeding was merely ancillary to the
Bankruptcy Court’s exercise of its
in rem jurisdiction, we
held that it did not implicate state sovereign immunity. The point
is also illustrated by Congress’ early grant to federal courts of
the power to issue
in personam writs of habeas corpus
directing States to release debtors from state prisons, discussed
in Part IV,
infra. See
Braden v.
30th
Judicial Circuit Court of Ky.,
410 U. S. 484, 494–495
(1973) (“The writ of habeas corpus does not act upon the prisoner
who seeks relief, but upon the person who holds him in what is
alleged to be unlawful custody”).
The interplay between
in rem
adjudications and orders ancillary thereto is evident in the case
before us. Respondent first seeks a determination under 11 U.
S. C. §547 that the various transfers made by the debtor to
petitioners qualify as voidable preferences. The §547
determination, standing alone, operates as a mere declaration of
avoidance. That declaration may be all that the trustee wants; for
example, if the State has a claim against the bankrupt estate, the
avoidance determination operates to bar that claim until the
preference is turned over. See §502(d). In some cases, though, the
trustee, in order to marshal the entirety of the debtor’s estate,
will need to recover the subject of the transfer pursuant to
§550(a). A court order mandating turnover of the property, although
ancillary to and in furtherance of the court’s
in rem
jurisdiction, might itself involve
in personam
process.
As we explain in Part IV,
infra, it
is not necessary to decide whether actions to recover preferential
transfers pursuant to §550(a) are themselves properly characterized
as
in rem.[
Footnote
10] Whatever the appropriate appellation, those who crafted the
Bankruptcy Clause would have understood it to give Congress the
power to authorize courts to avoid preferential transfers and to
recover the transferred property. Petitioners do not dispute that
that authority has been a core aspect of the administration of
bankrupt estates since at least the 18th century. See,
e.g.,
Rust v.
Cooper, 2 Cowp. 629,
633–634, 98 Eng. Rep. 1277, 1280 (K. B. 1777);
Alderson v.
Temple, 1 Black. W. 660, 661–663, 96
Eng. Rep. 384, 385 (K. B. 1768); see also McCoid, Bankruptcy,
Preferences, and Efficiency: An Expression of Doubt, 67 Va.
L. Rev. 249, 251–253 (1981) (discussing English precedents,
dating back to Sir Edward Coke’s discussion in
The Case of
Bankrupts, 2 Co. Rep. 25a, 76 Eng. Rep. 441 (K. B. 1589),
addressing bankruptcy commissioners’ power to avoid preferences);
In re Dehon, Inc., 327 B. R. 38, 62–65 (Bkrtcy.
Ct. Mass. 2005) (collecting historical materials). And it, like the
authority to issue writs of habeas corpus releasing debtors from
state prisons, see Part IV,
infra, operates free and clear
of the State’s claim of sovereign immunity.
IV
Insofar as orders ancillary to
the bankruptcy courts’
in rem jurisdiction, like orders
directing turnover of preferential transfers, implicate States’
sovereign immunity from suit, the States agreed in the plan of the
Convention not to assert that immunity. So much is evidenced not
only by the history of the Bankruptcy Clause, which shows that the
Framers’ primary goal was to prevent competing sovereigns’
interference with the debtor’s discharge, see Part II,
supra, but also by legislation considered and enacted in
the immediate wake of the Constitution’s ratification.
Congress considered proposed
legislation establishing uniform federal bankruptcy laws in the
first and each succeeding Congress until 1800, when the first
Bankruptcy Act was passed. See C. Warren, Bankruptcy in United
States History 10 (1935) (“[I]n the very first session of the 1st
Congress, during which only the most necessary subjects of
legislation were considered, bankruptcy was one of those subjects;
and as early as June 1, 1789, a Committee of the House was named to
prepare a bankruptcy bill”). The Bankruptcy Act of 1800 was in many
respects a copy of the English bankruptcy statute then in force. It
was, like the English law, chiefly a measure designed to benefit
creditors. Like the English statute, its principal provisions
permitted bankruptcy commissioners, on appointment by a federal
district court, to arrest the debtor, see §4, 2 Stat. 22; to “cause
the doors of the dwelling-house of [the] bankrupt to be broken,”
§4,
id., at 23–24; to seize and collect the debtor’s
assets, §5,
id., at 23; to examine the debtor and any
individuals who might have possession of the debtor’s property,
§§14, 18, 19,
id., at 25–27; and to issue a “certificate
of discharge” once the estate had been distributed, §36,
id., at 31.
The American legislation differed slightly
from the English, however. That difference reflects both the
uniqueness of a system involving multiple sovereigns and the
concerns that lay at the core of the Bankruptcy Clause itself. The
English statute gave a judge sitting on a court where the debtor
had obtained his discharge the power to order a sheriff, “Bailiff
or Officer, Gaoler or Keeper of any Prison” to release the
“Bankrupt out of Custody” if he were arrested subsequent to the
discharge. 5 Geo. 2, ch. 30, ¶13 (1732). The American version of
this provision was worded differently; it specifically granted
federal courts the authority to issue writs of habeas corpus
effective to release debtors from state prisons. See §38, 2 Stat.
32; see also
In re Comstock, 6 F. Cas. 237, 239 (No.
3,073) (Vt. 1842) (observing that Bankruptcy Act of 1800, then
repealed, would have granted a federal court the power to issue a
writ of habeas corpus to release a debtor from state prison if he
had been arrested following his bankruptcy discharge).
This grant of habeas power is remarkable not
least because it would be another 67 years, after ratification of
the Fourteenth Amendment, before the writ would be made generally
available to state prisoners. See
Ex parte Royall,
117 U. S. 241,
247 (1886).[
Footnote 11]
Moreover, the provision of the 1800 Act granting that power was
considered and adopted during a period when state sovereign
immunity could hardly have been more prominent among the Nation’s
concerns.
Chisholm v.
Georgia, 2 Dall. 419, the
case that had so “shock[ed]” the country in its lack of regard for
state sovereign immunity,
Principality of Monaco v.
Mississippi,
292 U. S. 313, 325
(1934), was decided in 1793. The ensuing five years that culminated
in adoption of the Eleventh Amendment were rife with discussion of
States’ sovereignty and their amenability to suit. Yet there
appears to be no record of any objection to the bankruptcy
legislation or its grant of habeas power to federal courts based on
an infringement of sovereign immunity. See Haines 184–185.
This history strongly supports the view that
the Bankruptcy Clause of Article I, the source of Congress’
authority to effect this intrusion upon state sovereignty, simply
did not contravene the norms this Court has understood the Eleventh
Amendment to exemplify. Cf.
Blatchford v.
Native
Village of Noatak,
501 U. S. 775, 779
(1991) (“[W]e have understood the Eleventh Amendment to stand not
so much for what it says, but for the presupposition of our
constitutional structure which it confirms …”).[
Footnote 12] Petitioners, ignoring this
history, contend that nothing in the
words of the
Bankruptcy Clause evinces an intent on the part of the Framers to
alter the “background principle” of state sovereign immunity.
Seminole Tribe of Fla., 517 U. S., at 72. Specifically,
they deny that the word “uniform” in the Clause implies anything
about pre-existing immunities or Congress’ power to interfere with
those immunities. See Brief for Petitioners 32–42. Whatever the
merits of petitioners’ argument,[
Footnote 13] it misses the point; text aside, the
Framers, in adopting the Bankruptcy Clause, plainly intended to
give Congress the power to redress the rampant injustice resulting
from States’ refusal to respect one another’s discharge orders. As
demonstrated by the First Congress’ immediate consideration and the
Sixth Congress’ enactment of a provision granting federal courts
the authority to release debtors from state prisons, the power to
enact bankruptcy legislation was understood to carry with it the
power to subordinate state sovereignty, albeit within a limited
sphere.
The ineluctable conclusion, then, is that
States agreed in the plan of the Convention not to assert any
sovereign immunity defense they might have had in proceedings
brought pursuant to “Laws on the subject of Bankruptcies.” See
Blatchford, 501 U. S., at 779 (observing that a State is
not “subject to suit in federal court unless it has consented to
suit, either expressly or in the ‘plan of the convention’ ”);
Alden v.
Maine, 527 U. S., at 713
(same).[
Footnote 14] The
scope of this consent was limited; the jurisdiction exercised in
bankruptcy proceedings was chiefly
in rem—a narrow
jurisdiction that does not implicate state sovereignty to nearly
the same degree as other kinds of jurisdiction. But while the
principal focus of the bankruptcy proceedings is and was always the
res, some exercises of bankruptcy courts’ powers—issuance of writs
of habeas corpus included—unquestionably involved more than mere
adjudication of rights in a res. In ratifying the Bankruptcy
Clause, the States acquiesced in a subordination of whatever
sovereign immunity they might otherwise have asserted in
proceedings necessary to effectuate the
in rem
jurisdiction of the bankruptcy courts.[
Footnote 15]
V
Neither our decision in
Hood, which held that States could not assert sovereign
immunity as a defense in adversary proceedings brought to
adjudicate the dischargeability of student loans, nor the cases
upon which it relied, see 541 U. S., at 448–449 (discussing
New
York v.
Irving Trust Co.,
288 U. S. 329 (1933);
Gardner,
329 U. S. 565; and
Van Huffel
v.
Harkelrode,
284 U. S. 225 (1931)),
rested on any statement Congress had made on the subject of state
sovereign immunity. Nor does our decision today. The relevant
question is not whether Congress has “abrogated” States’ immunity
in proceedings to recover preferential transfers. See 11 U.
S. C. §106(a).[
Footnote
16] The question, rather, is whether Congress’ determination
that States should be amenable to such proceedings is within the
scope of its power to enact “Laws on the subject of Bankruptcies.”
We think it beyond peradventure that it is.
Congress may, at its option,
either treat States in the same way as other creditors insofar as
concerns “Laws on the subject of Bankruptcies” or exempt them from
operation of such laws. Its power to do so arises from the
Bankruptcy Clause itself; the relevant “abrogation” is the one
effected in the plan of the Convention, not by statute.
The judgment of the Court of Appeals for the
Sixth Circuit is affirmed.
It is so ordered.
Footnote 1
A preferential transfer is defined as “any
transfer of an interest of the debtor in property—
“(1) to or for the benefit of a creditor;
“(2) for or on account of an antecedent debt owed by the debtor
before such transfer was made;
“(3) made while the debtor was insolvent;
“(4) made—
“(A) on or within 90 days before the date of the filing of the
petition; or
“(B) between ninety days and one year before the date of the
filing of the petition, if such creditor at the
time of such transfer was an insider; and
“(5) that enables such creditor to receive more than such
creditor would receive if—
“(A) the case were a case under chapter 7 of this title;
“(B) the transfer had not been made; and
“(C) such creditor received payment of such debt to the extent
pro- vided by the provisions of this title.” 11 U.
S. C. §547(b).
Respondent also instituted adversary proceedings
against some of the petitioners to collect accounts receivable. He
has, however, filed a letter with this Court indicating his intent
not to pursue those claims further.
Footnote 2
Section 106(a), as amended in 1994, provides
in part as follows:
“Notwithstanding an assertion of sovereign immunity, sovereign
immunity is abrogated as to a governmental unit . . . with respect
to the following:
“(1) Sections 105, 106, 107, 108, 303, 346, 362, 363, 364,
365, 366, 502, 503, 505, 506, 510, 522, 523, 524, 525, 542, 543,
544, 545, 546, 547, 548, 549, 550, 551, 552, 553, 722, 724, 726,
728, 744, 749, 764, 901, 922, 926, 928, 929, 944, 1107, 1141, 1142,
1143, 1146, 1201, 1203, 1205, 1206, 1227, 1231, 1301, 1303, 1305,
and 1327 of this title.
“(2) The court may hear and determine any issue arising
with respect to the application of such sections to governmental
units.
“(3) The court may issue against a governmental unit an
order, process, or judgment under such sections of the Federal
Rules of Bankruptcy Procedure, including an order or judgment
awarding a money recovery, but not including an award of punitive
damages. . . .”
The term “governmental unit” is defined to
include a “State,” a “municipality,” and a “department, agency, or
instrumentality of … a State.” §101(27).
The above-quoted version of §106(a) is the
product of revisions made in the wake of some of our precedents.
The Bankruptcy Reform Act of 1978, 92 Stat. 2549, contained a
provision indicating only that “governmental unit[s],” defined to
include States, were deemed to have “waived sovereign immunity”
with respect to certain proceedings in bankruptcy and to be bound
by a court’s determinations under certain provisions of the Act
“notwithstanding any assertion of sovereign immunity.”
Id., at 2555–2556. This Court’s decisions in
Hoffman v.
Connecticut Dept. of Income
Maintenance,
492 U. S. 96 (1989), and
United
States v.
Nordic Village, Inc.,
503 U. S. 30 (1992),
which held that Congress had failed to make sufficiently clear in
the predecessor to §106(a) its intent either to “abrogate” state
sovereign immunity or to waive the Federal Government’s immunity,
see 492 U. S., at 101; 503 U. S., at 39, prompted Congress in 1994
to enact the text of §106(a) now in force. See generally Gibson,
Congressional Response to
Hoffman and
Nordic
Village: Amended Section 106 and Sovereign Immunity, 69 Am.
Bankr. L. J. 311 (1995).
Footnote 3
In
Cannon v.
University of
Chicago,
441 U.
S. 677, 699 (1979), we endorsed the presumption “that Congress
was thoroughly familiar” with contemporary law when it enacted
Title IX of the Civil Rights Act of 1964. It is equally proper to
presume that the delegates to the Constitutional Convention were
fully aware of the potential for injustice, discussed in Part II,
infra, presented by the nonuniform state laws authorizing
imprisonment as a remedy for the nonpayment of an insolvent’s
debts.
Footnote 4
Imprisonment for debt was not abolished in
England until 1869, and then only subject to certain exceptions.
See Debtors Act, 1869, 32 & 33 Vict., ch. 62, §4; see also
Cohen, The History of Imprisonment for Debt and its Relation to the
Development of Discharge in Bankruptcy, 3 J. Leg. Hist. 153, 164
(1982).
Footnote 5
The legislation widely acknowledged to be the
first English bankruptcy statute, 34 & 35 Hen. 8, ch. 4, §1
(1542), contained a provision explaining that the statute was
needed to deal with the growing number of debtors who, after
“craftily obtaining into their Hands great Substance of other Men’s
Goods, do suddenly flee to Parts unknown.”
Footnote 6
“At the time of the Revolution, only three of
the thirteen colonies … had laws discharging insolvents
of their debts. No two of these relief systems were alike in
anything but spirit. In four of the other ten colonies, insolvency
legislation was either never enacted or, if enacted, never went
into effect, and in the remaining six colonies, full relief was
available only for scattered, brief periods, usually on an
ad hoc basis to named insolvents.” Coleman, Debtors
and Creditors in America, at 14.
Footnote 7
Ingersoll was admitted to the Philadelphia
bar in 1773 and elected a member of the Continental Congress in
1780. After serving as a delegate to the Constitutional Convention,
he became a member of the Philadelphia Common Council. He served as
attorney general of Pennsylvania from 1790 to 1799 and again from
1811 to 1817. From March 1821 until his death in 1822 he served as
a judge in the District Court for the City and County of
Philadelphia. Among the cases he litigated before this Court was
Chisholm v.
Georgia, 2 Dall. 419 (1793)—for the
State of Georgia, see
ibid. See also 9 Dictionary of
American Biography 468–469 (1932).
Footnote 8
The Committee of Detail was created by the
Convention on July 25, 1787, to prepare a draft text of the
Constitution based on delegates’ proposals.
Footnote 9
Of course, the Bankruptcy Clause, located as
it is in Article I, is “ ‘intimately connected’ ” not
just with the Full Faith and Credit Clause, which appears in
Article IV of the Constitution, but also with the Commerce Clause.
See
Railway Labor Executives’ Assn. v.
Gibbons,
455 U. S. 457, 466 (1982) (quoting The
Federalist No. 42, p. 285 (N. Y. Heritage Press 1945)). That
does not mean, however, that the state sovereign immunity
implications of the Bankruptcy Clause necessarily mirror those of
the Commerce Clause. Indeed, the Bankruptcy Clause’s unique
history, combined with the singular nature of bankruptcy courts’
jurisdiction, discussed
infra, have persuaded us that the
ratification of the Bankruptcy Clause does represent a surrender by
the States of their sovereign immunity in certain federal
proceedings. That conclusion is implicit in our holding in
Tennessee Student Assistance Corporation v.
Hood,
541 U. S. 440 (2004)
.
Footnote 10
The proper characterization of such
actions is not as clear as petitioners suggest. The Court in Nordic
Village, Inc., 503 U. S., at 38, stated, as an alternative
basis for rejecting a bankruptcy trustee’s argument that a suit to
avoid a preferential transfer made to the Internal Revenue Service
was an action
in rem, that any
in rem “exception”
to sovereign immunity was unavailable in that case because the
trustee sought to recover a “sum of money, not ‘particular
dollars.’ ” There was, in the Court’s view, “no
res
to which the [bankruptcy] court’s
in rem jurisdiction
could have attached.”
Ibid. In making that determination,
the Court distinguished our earlier decision in
United
States v.
Whiting Pools, Inc.,
462 U. S. 198 (1983),
which held that the debtor’s “estate,” the res, “includes property
of the debtor that has been seized by a creditor prior to the
filing of a [bankruptcy] petition.”
Id., at 209; see also
Begier v.
IRS,
496 U. S. 53, 58 (1990)
(“ ‘property of the debtor’ subject to the preferential
transfer provision is best understood as that property that would
have been part of the estate had it not been transferred before the
commencement of bankruptcy proceedings”). We observe that the
trustee in this case, unlike the one in
Nordic Village,
seeks, in the alternative, both return of the “value” of the
preference, see 11 U. S. C. §550(a), and return of the actual
“property transferred,”
ibid. See Brief for Respondent 37
(“Respondent invokes the
in rem jurisdiction of the
bankruptcy court to recover under section 550 ‘the property
transferred’ ”).
Footnote 11
The Judiciary Act of 1789 authorized issuance
of the writ, but only to release those held in
federal
custody. See Haines, The Uniformity Power: Why Bankruptcy is
Different, 77 Am. Bankr. L. J. 129, 179–181 (2003)
(hereinafter Haines). Also, in the interim between 1800 and 1867,
Congress authorized limited issuance of the writ in response to two
crises it viewed as sufficiently pressing to warrant a federal
response: The South Carolina nullification controversy of 1828–1833
and the imprisonment of a foreign national by New York State a few
years later. See 4 Stat. 632 (1833); 5 Stat. 539 (1842); see also
W. Duker, A Constitutional History of Habeas Corpus 187–189 (1980).
The 1833 statute made the writ available to U. S. citizens
imprisoned by States for actions authorized by federal law, while
the 1842 statute gave federal judges the power to release foreign
nationals imprisoned for actions authorized by foreign
governments.
Footnote 12
Further evidence of the Framers’ intent to
exempt laws “on the subject of Bankruptcies” from the operation of
state sovereign immunity principles can be gleaned from §62 of the
Bankruptcy Act of 1800. That section provided that “nothing
contained in this law shall, in any manner, affect the right of
preference to prior satisfaction of debts due to the United States
as secured or provided by any law heretofore passed, nor shall be
construed to lessen or impair any right to, or security for, money
due to the United States or to any of them.” 2 Stat. 36. That
Congress felt the need to carve out an exception for States’
preferences undermines any suggestion that it was operating against
a background presumption of state sovereign immunity to bankruptcy
laws. Indeed, one contemporary commentator read this section of the
Act as requiring that the protected “priorit[ies]” would have to be
“specifically given by some act of the Legislature of the Union”
before they would be exempt from operation of the Act’s provisions.
See T. Cooper, The Bankrupt Law of America, Compared with the
Bankrupt Law of England 334 (1801) (reprint 1992) (“But I do not
apprehend [that] this extends to give any priority to the United
States, not specifically given by some act of the Legislature of
the Union; nor will the English doctrine of priorities in favour of
the crown be extended by analogy into this country”).
Footnote 13
Petitioners make much of precedents
suggesting that the word “uniform” represents a limitation, rather
than an expansion, of Congress’ legislative power in the bankruptcy
sphere. See,
e.g.,
Gibbons, 455 U. S., at 468
(“Unlike the Commerce Clause, the Bankruptcy Clause itself contains
an affirmative limitation or restriction upon Congress’ power:
bankruptcy laws must be uniform throughout the United States”).
They also cite Justice Frankfurter’s concurring opinion in
Vanston Bondholders Protective Comm. v.
Green,
329 U. S. 156
(1946), for the proposition that “[t]he Constitutional requirement
of uniformity is a requirement of geographic uniformity,”
id., at 172. Based on these authorities, petitioners argue
that the word “uniform” in the Bankruptcy Clause cannot be
interpreted to confer upon Congress any greater authority to
impinge upon state sovereign immunity than is conferred, for
example, by the Commerce Clause. See Brief for Petitioners 33.
Petitioners’ logic is not persuasive. Although
our analysis does not rest on the peculiar text of the Bankruptcy
Clause as compared to other Clauses of Article I, we observe that,
if anything, the mandate to enact “uniform” laws supports the
historical evidence showing that the States agreed not to assert
their sovereign immunity in proceedings brought pursuant to “Laws
on the subject of Bankruptcies.” That Congress is constrained to
enact laws that are uniform in application, whether geographically
or otherwise, cf.
Gibbons, 455 U. S., at 470 (invalidating
a bankruptcy law aimed at “one regional bankrupt railroad” and no
one else), does not imply that it
lacks power to enact
bankruptcy legislation that is uniform in a more robust sense. See
Haines 158–172. As our holding today demonstrates, Congress has the
power to enact bankruptcy laws the purpose and effect of which are
to ensure uniformity in treatment of state and private creditors.
See
Sturges v.
Crowninshield, 4 Wheat. 122,
193–194 (1819) (Marshall, C. J.) (“The peculiar terms of the
grant certainly deserve notice. Congress is not authorized merely
to pass laws, the operation of which shall be uniform, but to
establish uniform laws on the subject throughout the
United States”); see also
In re Dehon, Inc., 327
B. R. 38, 57–58 (Bkrtcy. Ct. Mass. 2005) (discussing
Lathrop v.
Drake,
91 U. S. 516 (1876)); The
Federalist Nos. 32 and 81, pp. 197–201, 481–491 (C. Rossiter ed.
1961) (A. Hamilton) (pointing to the “uniform[ity]” language of the
Naturalization Clause, which appears in the same clause of Article
I as the bankruptcy provision, as an example of an instance where
the Framers contemplated a “surrender of [States’] immunity in the
plan of the convention”).
Footnote 14
One might object that the writ of habeas
corpus was no infringement on state sovereignty, and would not have
been understood as such, because that writ, being in the nature of
an injunction against a state official, does not commence or
constitute a suit against the State. See
Ex parte Young,
209 U. S. 123,
159–160 (1908). While that objection would be supported by
precedent today, it would not have been apparent to the Framers.
The
Ex parte Young doctrine was not finally settled until
over a century after the Framing and the enactment of the first
bankruptcy statute. Indeed, we have recently characterized the
doctrine as an expedient “fiction” necessary to ensure the
supremacy of federal law. See
Pennhurst State School and
Hospital v.
Halderman,
465 U. S. 89, 114, n. 25
(1984); see also
Idaho v.
Coeur d’Alene Tribe of
Idaho,
521 U.
S. 261, 281 (1997).
Footnote 15
We do not mean to suggest that every law
labeled a “bankruptcy” law could, consistent with the Bankruptcy
Clause, properly impinge upon state sovereign immunity.
Footnote 16
Cf.
Hoffman, 492 U. S., at 101 (holding
that, in an earlier version of 11 U. S. C. §106, Congress had
failed to make sufficiently clear its intent to abrogate state
sovereign immunity).
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