You are here

Civil Resource Manual 195. Limits Of The § 106 Waiver Of Sovereign Immunity


Limits of the § 106 Waiver of Sovereign Immunity

1. Forum
2. Sovereign Immunity v. Bankruptcy Jurisdiction
3. Sue-and-Be-Sued Agencies.
4. Application of 28 U.S.C. § 2410
5. Effect of § 106 On Non-Bankruptcy Jurisdictional Prerequisites
6. Multiple Agencies in Case

 1.   Forum.          Section 106 is a forum waiver only and does not expose governments to causes   of action from which they would be immune in a non-bankruptcy context.   See WJM, Inc. v. Mass. Dep't of Pub. Welfare, 840 F.2d 996  (1st Cir. 1988) (waiver of sovereign immunity under § 106 does not  include prejudgment interest absent express statutory authority creating  right to payment); see also Minnesota v. United States, 305  U.S. 382, 399 (1939) (Congress determines not only whether the United States   may be sued but also in what courts suit may be brought); 2 Collier on  Bankruptcy  106.06[1] (15th ed. 1997) (whether estate has a valid and  enforceable claim against government depends upon the applicable substantive   law, whether state or Federal).  This argument is strengthened by the 1994  Reform Act's new language stating:  "Nothing in this section shall create  any substantive claim for relief or cause of action not otherwise existing  under this title, the Federal Rules of Bankruptcy Procedure, or  nonbankruptcy law."  11 U.S.C. § 106(a)(5).  See Hardy v. IRS   (In re Hardy), 97 F.3d 1384 (11th Cir. 1996) (1994 act unequivocally  waived sovereign immunity permitting court to hold IRS in contempt under  § 105 for violation of § 524 discharge injunction; court may  impose sanctions that are coercive, not punitive, and attorney fees if  consistent with EAJA and 26 U.S.C. § 7430); Jove Eng'g, Inc. v.  IRS, 92 F.3d 1539 (11th Cir. 1996) (same for automatic stay violation);  United States v. Pullman Constr. Indus., Inc., 210 B.R. 302 (N.D.  Ill. 1997) (Bankruptcy Code does not expressly waive U.S. sovereign immunity   with regard to pre- judgment interest).         2. Sovereign Immunity v. Bankruptcy Jurisdiction.    We also argue that a non-bankruptcy waiver of sovereign immunity, e.g.,  Federal Tort Claims Act, may not be combined with 28 U.S.C. § 1334(b)  ("co-exclusive" jurisdiction of district court sitting in bankruptcy) and 28   U.S.C. § 157 (referral of jurisdiction to bankruptcy court) to waive  sovereign immunity in the bankruptcy court.  Sections 157 and 1334 address  subject matter jurisdiction and do not waive sovereign immunity.    See United States v. Nordic Vill., Inc., 503 U.S. 30 (1992);  see also Williamson v. USDA, 815 F.2d 368 (5th Cir. 1987);  Kjeldahl v. United States (In re Kjeldahl), 52 B.R. 916 (D. Minn.  1985); FDIC v. Ginn (In re Ginn), 128 B.R. 719 (Bankr. D.S.C. 1990)  (all holding that FTCA jurisdictional requirements cannot be circumvented by   § 106).  Contra Quality Tooling, Inc. v. United States,  47 F.3d 1569 (Fed. Cir. 1995) (Tucker Act and Contract Disputes Act waivers  of sovereign immunity apply to bankruptcy courts despite apparent language  limiting jurisdiction under those statutes to Court of Federal Claims);  Anderson v. FDIC, 918 F.2d 1139 (4th Cir. 1990) (claim lacking waiver   of sovereign immunity under FTCA permitted to proceed as counterclaim based  on § 106(a) waiver of sovereign immunity); Town & Country Home  Nursing Servs., Inc. v. Blue Cross of Cal. (In re Town & Country Home  Nursing Servs., Inc.), 112 B.R. 329 (B.A.P. 9th Cir. 1990) (independent  grants of bankruptcy jurisdiction in 28 U.S.C. §§ 157 and 1334 and   11 U.S.C. § 106(a) overcome limitations on judicial review found in  Medicare statute, Tucker Act and FTCA), aff'd, 963 F.2d 1146 (9th  Cir. 1992); TPI Int'l Airways, Inc. v. FAA (In re TPI Int'l Airways,  Inc.), 141 B.R. 512 (Bankr. S.D. Ga. 1992) (filing of FAA claim for  civil penalties waived immunity under § 106(a) for misrepresentation,  conversion, and interference with business in connection with FAA's failure  to return forfeited operating specifications; however, notwithstanding  waiver, FAA immune under FTCA's discretionary function exception),  aff'd, No. CV292- 230 (S.D. Ga. Dec. 21, 1992) (in unpublished  opinion, district court stated that all of the substantive  limitations on the FTCA applied, including the misrepresentation exception);   Inslaw, Inc. v. United States (In re Inslaw , Inc.), 76 B.R. 224  (Bankr. D.D.C. 1987), aff'd, 83 B.R. 89 (D.D.C. 1989), rev'd on  other grounds, 932 F.2d 1467 (D.C. Cir. 1991); cf. Ashbrook v.   Block, 917 F.2d 918 (6th Cir. 1990) (U.S. filing of proof of claim  obviates FTCA administrative claim filing requirement).  In a nonbankruptcy  case, the Supreme Court unanimously held that an FTCA action cannot be  maintained when the claimant failed to exhaust the administrative claim  requirement even if he did so while the suit was pending. McNeil v.  United States, 508 U.S. 106 (1993).  This may cast doubt on the  continued validity of some of the above decisions.  In addition, in  Department of the Army v. Blue Fox, Inc., 525 U.S. 255 (1999), the  Supreme Court reiterated that waivers of sovereign immunity must be both  explicit and narrowly construed.  At least one court, in the context of a  Tucker Act case, has cited Department of the Army as compelling  rejection of the Federal Circuit's Quality Tooling decision.   Carrington Gardens Assocs. v. United States (In re Carrington Gardens  Assocs.), 248 B.R. 752, 768-69 n.7 (Bankr. E.D. Va. 2000), aff'd,   258 B.R. 622 (E.D. Va. 2001).          3. Sue-and-Be-Sued Agencies.        Courts have held that "sue and be sued" statutes waive sovereign immunity,  and, therefore, courts do not need to consider applicability of § 106.    In re Epps, 110 B.R. 691 (E.D. Pa. 1990) (sovereign immunity waived  under National Housing Act authorizing HUD to "sue and be sued" in carrying  out certain provisions of the Act).  Such "sue and be sued" statutes waive  sovereign immunity only of particular agencies, not the United States  generally.  See Lomas & Nettleton Co. v. Pierce, 636 F.2d 971,   972-73 (5th Cir. 1981); Indus. Indem., Inc. v. Landrieu, 615 F.2d  644, 646 (5th Cir. 1980).  If the judgment sought by the plaintiff would  "expend itself on the public Treasury," the suit is in reality against the  United States regardless of whether the complaint names only Federal  agencies or officials.  Dugan v. Rank, 372 U.S. 609, 620 (1963)  (quoting Land v. Dollar, 330 U.S. 731, 738 (1947)); see also  FHA V. Burr, 309 U.S. 242, 250-51 (1940) (garnishment action against  Federal agency permitted only to the extent it had funds outside the  Treasury); Presidential Gardens Assocs. v. United States ex rel. Sec'y of   HUD, 175 F.3d 132, 141 (2d Cir. 1999) (waiver of HUD's immunity limited  to funds under control of HUD, does not reach general Treasury funds).   Finally, in the case of "sue-and-be-sued" agencies, one can argue that,  although such governmental units may have independent litigating authority,  the Bankruptcy Code, § 106, places limits upon the jurisdiction of the  bankruptcy courts over any governmental unit.  Cf. Aetna Cas. &  Sur. Co. v. United States, 655 F.2d 1047 (Ct. Cl. 1981) (although HUD  might be suable in other courts upon certain causes of action, Tucker Act  places limits upon Court of Claims' jurisdiction over them).         4. Application of 28 U.S.C. § 2410.  Harmon v. United States Through FmHA, 101 F.3d 574 (8th Cir. 1996).  In this case of first impression for the courts of appeal, the Eighth  Circuit held that chapter 12 permits a debtor to strip down an undersecured  creditor's lien to the value of the collateral, and that the United States  waived sovereign immunity under 28 U.S.C. § 2410(a)(1).  That statute  provides that the U.S. "may be named a party in any civil action or suit . .   . to quiet title to . . . real property on which the United States has or  claims a mortgage or other lien." Because of this statute, the individual  defendants (an AUSA and the FmHA state director), who were sued in their  official capacities, were not entitled to dismissal either.         5. Effect of § 106 On Non-Bankruptcy Jurisdictional  Prerequisites.  To the extent parties assert claims under non-bankruptcy statutes, they  should be required to comply with the statutes' prerequisites to bring suit,   including exhaustion of administrative remedies. Compare Farmers  State Bank v. Norris (In re Norris), 90 B.R. 424, 427-28 (Bankr. D. Neb.   1988) (to extent debtor invokes FTCA as jurisdictional basis for action, he  is bound by the Act's procedural requirements and substantive exceptions),  and Farmers State Bank v. Norris (In re Norris), 88 B.R. 213,  214 (Bankr. D. Neb. 1988) (state tort claims act did not waive State's  sovereign immunity for actions brought in Federal bankruptcy court)  with Prudential Lines, Inc. v. United States Maritime Admin. (In  re Prudential Lines, Inc.), 79 B.R. 167, 182-83 (Bankr. S.D.N.Y. 1987)  (if § 106 applies, need not comply with administrative claim  prerequisite of FTCA), and MacLeod Co. v. United States, No.  C-1-88-931 (S.D. Ohio Oct. 27, 1989) (decision of contracting officer which  is a jurisdictional requirement under the Contract Disputes Act need not be  obtained to assert counterclaim against United States), aff'd, 1991  U.S. WL 96718 (6th Cir. 1991) (unpublished opinion).  See also  Gingold v. United States ex rel. Dep't of Health & Human Servs. (In re  Shelby County Healthcare Servs., Inc.), 80 B.R. 555 (Bankr. N.D. Ga.  1987) (although 42 U.S.C. § 405(h) jurisdictionally precludes review of   HHS Medicare findings, waiver in § 106 obviates need to exhaust  administrative remedies or defer to HHS (but court deferred to expeditious  administrative process)); Kenny v. Block (In re Kenny), 75 B.R. 515,  520-21 (Bankr. E.D. Mich. 1987) (§ 106 waiver "is separate and distinct   from the FTCA waiver" and exhaustion of administrative remedy requirement of   FTCA is not to be read into § 106) (note: reversed by district court in   unpublished decision); In re Parker N. Am. Corp., 24 F.3d 1145 (9th  Cir. 1994) (debtor need not comply with FIRREA filing requirements before  asserting preference claim against RTC).          6. Multiple Agencies in Case.  Are different agencies part of the same "governmental unit" for § 106  purposes?  E.g., does IRS proof of claim waive immunity for a claim by the  estate against HHS?  [Note: issue could arise under 106(b) or (c) but is  less likely in case of the former because of the "same transaction or  occurrence" requirement.]       a.    11 U.S.C. § 101(27) defines "governmental unit" to include             "United States" but also "department, agency, or instrumentality             of the United States."  Although we assert that U.S. agencies are              part of one entity for setoff purposes, we could argue that they             are different governmental units for § 106 purposes because             of the § 101 definition and the requirement that sovereign             immunity waivers must be strictly construed.       b.    In Doe v. United States, 58 F.3d 494, 497-98 (9th Cir.             1995), the court held that agencies of the United States are one             entity for purposes of the waiver of sovereign immunity and under              § 106(c).  This holding reflected the original position             taken by the U.S. but was rendered after the court instructed the              DOJ attorneys to consult with the Solicitor General, the IRS, and              other agencies.  Id. at 498.  The court stated as follows:              "The United States takes this position out of a commendable sense              of fairness and reciprocity because it often seeks to be treated             as a single unitary creditor under the offset provisions of 11             U.S.C. § 553."  Id.       c.    See also Ossen v. Conn. Dep't of Soc. Servs. (In re             Charter Oak Assocs.), 203 B.R. 17 (Bankr. D. Conn. 1996)             (applying single entity approach to state agencies); but             see In re NVR L.P., 206 B.R. 831, 852 (Bankr. E.D. Va.              1997) (discussing diverse views on multiple agencies in             bankruptcy and non-bankruptcy contexts and holding that taxing             officials signing proof of claim must be authorized by state law             to waive immunity of court clerks of same county), aff'd in             part, rev'd in part on other grounds sub nom., Clerk of             Circuit Court for Anne Arundel County v. NVR Homes, Inc., 222              B.R. 514 (E.D. Va. 1998), rev'd in part, vacated in part on             other grounds, 189 F.3d 442 (4th Cir. 1999), cert.             denied, 528 U.S. 1117 (2000).
Updated February 19, 2015