CENTRAL VIRGINIA COMMUNITY COLLEGE ET AL. v. KATZ, LIQUIDATING SUPERVISOR FOR WALLACE‘S BOOKSTORES, INC.
No. 04-885
Supreme Court of the United States
Argued October 31, 2005—Decided January 23, 2006
546 U.S. 356
William E. Thro, State Solicitor General of Virginia, argued the cause for petitioners. With him on the briefs were Judith Williams Jagdmann, Attorney General, Bernard L. McNamee II, Chief Deputy Attorney General, Maureen Riley Matsen, Deputy Attorney General, Brian J. Goodman and Cynthia H. Norwood, Assistant Attorneys General, and Matthew M. Cobb, Carla R. Collins, Eric A. Gregory, Joel C. Hoppe, Courtney M. Malveaux, Valerie L. Myers, A. Cameron O‘Brion, Ronald N. Regnery, D. Mathias Roussy, Jr., and William R. Sievers, Associate State Solicitors General.
Kim Martin Lewis argued the cause for respondent. With her on the brief were Jon L. Fleischaker, Mark A. Vander Laan, Jeremy S. Rogers, and G. Eric Brunstad, Jr.*
*Briefs of amici curiae urging reversal were filed for the State of Ohio et al. by Jim Petro, Attorney General of Ohio, Douglas R. Cole, State Solicitor, and Elise W. Porter, Assistant Solicitor, and by the Attorneys General for their respective States as follows: Troy King of Alabama, David W. Márquez of Alaska, Terry Goddard of Arizona, Mike Beebe of Arkansas, Bill Lockyer of California, John W. Suthers of Colorado, Richard Blumenthal of Connecticut, M. Jane Brady of Delaware, Charles J. Crist, Jr., of Florida, Thurbert E. Baker of Georgia, Mark J. Bennett of Hawaii, Lawrence G. Wasden of Idaho, Lisa Madigan of Illinois, Steve Carter of Indiana, Thomas J. Miller of Iowa, Phill Kline of Kansas, Gregory D. Stumbo of Kentucky, Charles C. Foti, Jr., of Louisiana, G. Steven
Briefs of amici curiae urging affirmance were filed for the National Association of Bankruptcy Trustees by Martin P. Sheehan; and for Susan Block-Lieb et al. by Susan M. Freeman and Richard Lieb.
Brady C. Williamson filed a brief of amicus curiae for Bruce H. Mann.
JUSTICE STEVENS delivered the opinion of the Court.
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 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 Clause3—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
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
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 satisfie their Creditors.” 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, 11 Statutes at Large 165 (D. Pickering ed. 1764) (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).
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 re-
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,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 Pennsylva-
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
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 Detail8 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
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.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.
The text of
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 trans-
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
As we explain in Part IV, infra, it is not necessary to decide whether actions to recover preferential transfers pursuant to
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
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 Congress passed the Fourteenth Amendment, before the writ would be made generally available to state prisoners. See Ex parte Royall, 117 U. S. 241, 247 (1886).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
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
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,13 it 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. 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“).
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 pur
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‘“);
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 immu
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.
JUSTICE THOMAS, with whom THE CHIEF JUSTICE, JUSTICE SCALIA, and JUSTICE KENNEDY join, dissenting.
Under our Constitution, the States are not subject to suit by private parties for monetary relief absent their consent or a valid congressional abrogation, and it is “settled doctrine” that nothing in Article I of the Constitution establishes those preconditions. Alden v. Maine, 527 U. S. 706, 748 (1999). Yet the Court today casts aside these long-established principles to hold that the States are subject to suit by a rather unlikely class of individuals—bankruptcy trustees seeking recovery of preferential transfers for a bankrupt debtor‘s estate. This conclusion cannot be justified by the text, structure, or history of our Constitution. In addition, today‘s ruling is not only impossible to square with this Court‘s settled state sovereign immunity jurispru
The majority maintains that the States’ consent to suit can be ascertained from the history of the Bankruptcy Clause. But history confirms that the adoption of the Constitution merely established federal power to legislate in the area of bankruptcy law, and did not manifest an additional intention to waive the States’ sovereign immunity against suit. Accordingly, I respectfully dissent.
I
The majority does not appear to question the established framework for examining the question of state sovereign immunity under our Constitution. The Framers understood, and this Court reiterated over a century ago in Hans v. Louisiana, 134 U. S. 1 (1890):
“It is inherent in the nature of sovereignty not to be amenable to the suit of an individual without its consent. This is the general sense and the general practice of mankind; and the exemption, as one of the attributes of sovereignty, is now enjoyed by the government of every State in the Union. Unless, therefore, there is a surrender of this immunity in the plan of the convention, it will remain with the States....” Id., at 13 (quoting The Federalist No. 81, pp. 548-549 (J. Cooke ed. 1961) (hereinafter The Federalist No. 81); emphasis added and deleted).
See also Ex parte New York, 256 U. S. 490, 497 (1921) (“That a State may not be sued without its consent is a fundamental rule of jurisprudence having so important a bearing upon the construction of the Constitution of the United States that it has become established by repeated decisions of this court that the entire judicial power granted by the Constitution does not embrace authority to entertain a suit brought by
These principles were further reinforced early in our Nation‘s history, when the people swiftly rejected this Court‘s decision in Chisholm v. Georgia, 2 Dall. 419 (1793), by ratifying the Eleventh Amendment less than two years later. See Hans, supra, at 11; Reid v. Covert, 354 U. S. 1, 14, n. 27 (1957) (plurality opinion). Thus, “[f]or over a century [since Hans] we have reaffirmed that federal jurisdiction over suits against unconsenting States ‘was not contemplated by the Constitution when establishing the judicial power of the United States.‘” Seminole Tribe, supra, at 54 (quoting Hans, supra, at 15); see also Seminole Tribe, supra, at 54-55, n. 7 (collecting cases).
The majority finds a surrender of the States’ immunity from suit in Article I of the Constitution, which authorizes Congress “[t]o establish ... uniform Laws on the subject of Bankruptcies throughout the United States.”
It is difficult to discern an intention to abrogate state sovereign immunity through the Bankruptcy Clause when no such intention has been found in any of the other clauses in Article I. Indeed, our cases are replete with acknowledgments that there is nothing special about the Bankruptcy Clause in this regard. See Seminole Tribe, 517 U. S., at 72-73, n. 16; see also id., at 93-94 (STEVENS, J., dissenting) (“In confronting the question whether a federal grant of jurisdiction is within the scope of Article III, as limited by the Eleventh Amendment, I see no reason to distinguish among statutes enacted pursuant to the power granted to Congress to regulate commerce among the several States, and with the Indian tribes, the power to establish uniform laws on the subject of bankruptcy, [or] the power to promote the progress of science and the arts by granting exclusive rights to authors and inventors” (citations omitted)); id., at 77-78, and n. 1 (STEVENS, J., dissenting); Hoffman, 492 U. S., at 105 (SCALIA, J., concurring in judgment). Today‘s decision thus cannot be reconciled with our established sovereign immunity jurisprudence, which the majority does not purport to overturn.
The majority‘s departure from this Court‘s precedents is not limited to this general framework, however; the majority also overrules sub silentio this Court‘s holding in Hoffman, supra. The petitioner in Hoffman, id., at 99—like respondent Katz here—sought to pursue a preference avoidance action against a state agency pursuant to
After today‘s decision, however, Hoffman can no longer stand. For today‘s decision makes clear that no action of Congress is needed because the Bankruptcy Clause itself manifests the consent of the States to be sued. Ante, at 378.
II
The majority supports its break from precedent by relying on historical evidence that purportedly reveals the Framers’ intent to eliminate state sovereign immunity in bankruptcy proceedings. Ante, at 362-363, 373. The Framers undoubtedly wanted to give Congress the authority to enact a national law of bankruptcy, as the text of the Bankruptcy Clause confirms. But the majority goes further, contending that the Framers found it intolerable that bankruptcy laws could vary from State to State, and demanded the enactment of a single, uniform national body of bankruptcy law. Ante, at 365-368. The majority then concludes that, to achieve a uniform national bankruptcy law, the Framers must have intended to waive the States’ sovereign immunity against suit. Ante, at 362. Both claims are unwarranted.
In contending that the States waived their immunity from suit by adopting the Bankruptcy Clause, the majority conflates two distinct attributes of sovereignty: the authority of a sovereign to enact legislation regulating its own citizens, and sovereign immunity against suit by private citizens.² Nothing in the history of the Bankruptcy Clause suggests that, by including that clause in Article I, the founding generation intended to waive the latter aspect of sovereignty. These two attributes of sovereignty often do not run together—and for purposes of enacting a uniform law of bankruptcy, they need not run together.
For example, Article I also empowers Congress to regulate interstate commerce and to protect copyrights and patents. These provisions, no less than the Bankruptcy Clause, were motivated by the Framers’ desire for nationally uniform legislation. See James Madison, Preface to Debates in the Convention of 1787, reprinted in 3 M. Farrand, Records of the Federal Convention of 1787, pp. 539, 547-548 (1911) (hereinafter Farrand‘s Debates) (noting lack of national regulation of commerce and uniform bankruptcy law as defects under the Articles of Confederation); M. Farrand, The Framing of the Constitution of the United States 48 (1913) (noting that the Articles of Confederation failed to provide for uniform national regulation of naturalization, bankruptcy, copyrights, and patents). Thus, we have recognized that “[t]he need for uniformity in the construction of patent law is undoubtedly important.” Florida Prepaid, 527 U. S., at 645. Nonetheless, we have refused, in addressing patent law, to give the need for uniformity the weight the majority today
Nor is the abrogation of state sovereign immunity from suit necessary to the enactment of nationally uniform bankruptcy laws. The sovereign immunity of the States against suit does not undermine the objective of a uniform national law of bankruptcy, any more than does any differential treatment between different categories of creditors. Cf. Railway Labor Executives’ Assn. v. Gibbons, 455 U. S. 457, 469 (1982) (“The uniformity requirement is not a straightjacket that forbids Congress to distinguish among classes of debtors, nor does it prohibit Congress from recognizing that state laws do not treat commercial transactions in a uniform manner“).
B
The majority also greatly exaggerates the depth of the Framers’ fervor to enact a national bankruptcy regime. The idea of authorizing Congress to enact a nationally uniform bankruptcy law did not arise until late in the Constitutional Convention, which began in earnest on May 25, 1787. 1 Farrand‘s Debates xi. The Convention charged the Committee of Detail with putting forth a comprehensive draft Constitution, which it did on August 6. Ibid.; 2 id., at 177. Yet the Convention did not consider the language that eventually became the Bankruptcy Clause until September 1, id., at 483-485, and it adopted the provision with little debate two days later, id., at 489. Under the majority‘s analysis, which emphasizes the Framers’ zeal to enact a national law of bankruptcy, this timing is difficult to explain.
The majority‘s premise fares even worse in explaining the postratification period. The majority correctly notes that the practice of the early Congresses can provide valuable
The historical record thus refutes, rather than supports, the majority‘s premise that the Framers placed paramount importance on the enactment of a nationally uniform bank3
Moreover, the majority identifies no historical evidence suggesting that the Framers or the early Legislatures, even if they were anxious to establish a national bankruptcy law, contemplated that the States would subject themselves to private suit as creditors under that law. In fact, the historical record establishes that the Framers held the opposite view. To the Framers, it was a particularly grave offense to a State‘s sovereignty to be hauled into court by a private citizen and forced to make payments on debts. Alexander Hamilton, the author of Federalist No. 81, followed his general discussion of state sovereign immunity by emphasizing that the Constitution would be especially solicitous of state sovereignty within the specific context of payment of state debts:
“[T]here is no color to pretend that the state governments would, by the adoption of that plan, be divested of the privilege of paying their own debts in their own way, free from every constraint but that which flows from the obligations of good faith. The contracts between a nation and individuals are only binding on the conscience of the sovereign, and have no pretension to a compulsive force. They confer no right of action independent of the sovereign will. To what purpose would it be to authorize suits against States for the debts they owe? How could recoveries be enforced? It is evident that it could not be done without waging war against the contracting State; and to ascribe to the federal courts by mere implication, and in destruction of a pre-existing right of the state governments, a power which would involve such a consequence, would be altogether forced and unwarrantable.” Hans, 134 U. S., at 13 (quoting The Federalist No. 81, at 549).
The majority attempts to bolster its historical argument by making three additional observations about the bankruptcy power: (1) Congress’ early provision of habeas corpus relief in bankruptcy to forbid the imprisonment of a debtor by one State, in violation of a discharge order issued by the courts of another State, ante, at 365-366, 374-375; (2) the inability of debtors, first in the American Colonies and then under the Articles of Confederation, to enforce in one state court a discharge order issued by another state court, ante, at 366-368; and (3) the historical understanding that bankruptcy jurisdiction is principally in rem, ante, at 369-373. The implication is that, if these specific observations about bankruptcy are correct, then States must necessarily be subject to suit in transfer recovery proceedings, if not also in other bankruptcy settings. Ante, at 370; ante, at 377-378. But none of these observations comes close to demonstrating that, under the Bankruptcy Clause, the States may be sued by private parties for monetary relief.4
1
The availability of habeas relief in bankruptcy between 1800 and 1803 does not support respondent‘s effort to obtain monetary relief in bankruptcy against state agencies today.5 The habeas writ was well established by the time 6
“The right to so discharge has not been doubted by this court, and it has never been supposed there was any suit against the State by reason of serving the writ upon one of the officers of the State in whose custody the person was found. In some of the cases the writ has been refused as matter of discretion; but in others it has been granted, while the power has been fully recognized in all.” Id., at 168 (collecting cases).
This Court has reaffirmed Young repeatedly—including in Seminole Tribe, 517 U. S., at 71, n. 14. Although the majority observes that Young was not issued “until over a century after the framing and the enactment of the first bankruptcy statute,” ante, at 378, n. 14, this observation does nothing to reconcile the majority‘s analysis with Young, as the majority does not purport to question the historical underpinnings of Young‘s holding. The availability of federal habeas relief to debtors in state prisons thus has no bearing whatsoever on whether the Bankruptcy Clause authorizes suits against the States for money damages.
The majority‘s second observation—that the Framers were concerned that, under the Articles of Confederation, debtors were unable to obtain discharge orders issued by the court of one State that would be binding in the court of another State, ante, at 366-368—implicates nothing more than the application of full faith and credit, as is apparent from the majority opinion itself. Accordingly, it has nothing to do with state sovereign immunity from suit.
To support its observation, the majority describes at length two Pennsylvania court rulings issued under the Articles of Confederation. See James v. Allen, 1 Dall. 188 (C. P. Phila. Cty. 1786); Millar v. Hall, 1 Dall. 229 (Pa. 1788). But as the majority‘s explanation makes clear, the problem demonstrated by these cases is the need for recognition of sister-state judgments by state courts, not disregard for state sovereign immunity against suit in federal courts. Both James and Millar involved litigation between a private debtor and a private creditor. In both cases, the creditor filed suit in a Pennsylvania court to enforce a debt. And in both cases, the debtor sought but failed to obtain recognition of a judgment of discharge that had previously been entered by a court of another State. Ante, at 368.
Accordingly, it is unsurprising that, when the issue of bankruptcy arose at the Constitutional Convention, it was also within the context of full faith and credit. See ante, at 368-369.7 As the majority correctly points out, the Framers 7
3
Finally, the majority observes that the bankruptcy power is principally exercised through in rem jurisdiction. Ante, at 369-373. The fact that certain aspects of the bankruptcy power may be characterized as in rem, however, does not determine whether or not the States enjoy sovereign immunity against such in rem suits. And it certainly does not answer the question presented in this case: whether the Bankruptcy Clause subjects the States to transfer recovery proceedings—proceedings the majority describes as “ancillary to and in furtherance of the court‘s in rem jurisdiction,” though not necessarily themselves in rem, ante, at 372.
Two years ago, this Court held that a State is bound by a bankruptcy court‘s discharge order, notwithstanding the State‘s invocation of sovereign immunity, because such actions arise out of in rem jurisdiction. See Tennessee Student Assistance Corporation v. Hood, 541 U. S. 440, 448 (2004). In doing so, however, the Court explicitly distinguished recovery of preferential transfers, noting that the debt discharge proceedings there were “unlike an adversary proceeding by the bankruptcy trustee seeking to recover
The fact that transfer recovery proceedings fall outside any possible in rem exception to sovereign immunity is confirmed by United States v. Nordic Village, Inc., 503 U. S. 30 (1992), which involved similar facts. There, the Bankruptcy Trustee filed a transfer avoidance action against the United States, in order to recover a recent payment the debtor had made to the Internal Revenue Service on a tax debt. See id., at 31. After determining that the United States had not waived its sovereign immunity, the Court rejected the trustee‘s alternative argument based on in rem jurisdiction. As the Court explained, “[r]espondent sought to recover a sum of money, not ‘particular dollars,’ so there was no res to which the court‘s in rem jurisdiction could have attached.” Id., at 38 (quoting Begier v. IRS, 496 U. S. 53, 62 (1990); citations omitted and emphasis deleted).8
The majority attempts to evade Nordic Village by claiming that “the trustee in this case, unlike the one in Nordic Village, seeks, in the alternative, both return of the ‘value’ of the preference, ... and return of the actual ‘property transferred.‘” Ante, at 372, n. 10 (quoting
In light of the weakness of its historical evidence that the States consented to be sued in bankruptcy proceedings, the majority‘s effort to recast respondent‘s action as in rem is understandable, but unconvincing.
* * *
It would be one thing if the majority simply wanted to overrule Seminole Tribe altogether. That would be wrong, but at least the terms of our disagreement would be transparent. The majority‘s action today, by contrast, is difficult to comprehend. Nothing in the text, structure, or history of the Constitution indicates that the Bankruptcy Clause, in contrast to all of the other provisions of Article I, manifests the States’ consent to be sued by private citizens.
I respectfully dissent.
Notes
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 provided by the provisions of this title.”
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.
The parties in Hoffman likewise agreed that the suit was barred by Eleventh Amendment immunity absent some further action by Congress. 492 U. S., at 101.“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.”
The above-quoted version of
For over a dozen years after the ratification of the Constitution, Congress failed to adopt a single bankruptcy law. See, e. g., 9 Annals of Congress 2671 (1799) (noting that Congress had “not ... passed [bankruptcy legislation] for these ten years past, and the States [have] legislated upon it in their own way” (statement of Rep. Baldwin)); 3 Farrand‘s Debates 380 (same). It was not until April 4, 1800, that the Sixth Congress finally adopted our Nation‘s first bankruptcy law, ch. 19, 2 Stat. 19, and even that law left an ample role for state law, § 61, id., at 36. (By contrast, the very first Congress enacted, inter alia, patent and copyright legislation. 1 Stat. 109, 124.)
Moreover, that first Act was short lived; Congress repealed it just three years later: 2 Stat. 248. And over a decade later, this Court confirmed what Congress’ inattention had already communicated—that the Bankruptcy Clause does not vest exclusive power in Congress, but instead leaves an ample role for the States. See Sturges v. Crowninshield, 4 Wheat. 122 (1819). It was not until 1841 that Congress would enact another bankruptcy law, ch. 9, 5 Stat. 440, only to repeal it less than two years later, ch. 82, id., at 614. The economic upheaval of the Civil War caused Congress to pass another bankruptcy law in 1867, ch. 176, 14 Stat. 517, but that too was repealed after just over a decade, ch. 160, 20 Stat. 99.
Begier involved funds held by the debtor in statutory trust for the United States—so its analysis of those “particular dollars” does not help the respondent in this case. 496 U. S., at 62 (emphasis deleted). Nor does United States v. Whiting Pools, Inc., 462 U. S. 198 (1983), support the majority‘s effort. In Whiting Pools, the United States waived its immunity by filing suit. See id., at 200-201; see also Nordic Village, 503 U. S., at 39 (“The Court‘s opinion in Whiting Pools contains no discussion of § 106(c) [the waiver provision]“). Furthermore, in Whiting Pools the Government possessed merely a secured interest in the property on the basis of a tax lien, see 462 U. S., at 202. By contrast, here, as in Nordic Village, it is uncontested that the State owns the funds, barring any subsequent transfer by operation of bankruptcy law. See 503 U. S., at 39 (“A suit for payment of funds from the Treasury is quite different from a suit for the return of tangible property in which the debtor retained ownership“).