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196.

Sovereign Immunity -- Seminole Tribe and State Sovereign Immunity

1.    In Seminole Tribe of Fla. v. Florida, 517 U.S. 44 (1996), the 
      Supreme Court held that Congress does not have the power under Article 

      I Indian Commerce clause to abrogate the States' Eleventh Amendment 
      immunity to permit suits to enforce rights under the Federal Indian 
      Gaming Regulatory Act.  (The Act allows an Indian Tribe to conduct 
      gaming activities only pursuant to a valid compact with the State 
      where activities are located.  The Act required the State to negotiate 

      in good faith and gave Tribes the right to sue in Federal court to 
      compel performance of this duty.) In dissent, Justice Stevens warned 
      that the "majority's opinion does not simply preclude Congress from 
      establishing the rather curious statutory scheme under which Indian 
      tribes may seek the aid of a federal court. . ..  Rather, it prevents 
      congress from providing a federal forum for a broad range of actions 
      against States, from those sounding in copyright and patent law, to 

      those concerning bankruptcy, environmental law, and the regulation 

      of our vast national economy."  116 S. Ct. at 1134 (emphasis added).

2.    Impact of Seminole on § 106(a): see, e.g., Hood 
      v. Tenn. Student Assistance Corp. (In re Hood), 262 B.R. 412 
      (B.A.P. 6th Cir. 2001); Lankford v. Comptroller of Pub. Accounts 
      (In re Lankford), 261 B.R. 410 (Bankr. N.D. Tex. 2001); Pitts 
      v. Ohio Dep't of Taxation (In re Pitts), 241 B.R. 862 (Bankr. N.D. 

      Ohio 1999).  Compare Headrick v. Ga. Dep't of Revenue (In re 

      Headrick), 203 B.R. 805 (S.D. Ga. 1996) (14th Amendment grants 
      Congress authority to subject State to complaints to enforce automatic 

      stay), aff'd sub nom., Ga. Dep't of Revenue v. Burke (In re 
      Burke), 146 F.3d 1313 (11th Cir. 1998), cert. denied, 527 
      U.S. 1043 (1999), with Schlossberg v. Md. Comptroller of the 

      Treasury (In re Creative Goldsmiths of Wash., D.C.), 119 F.3d 1140 

      (4th Cir. 1997) (§ 106(a) as applied to States violates Eleventh 
      Amendment), cert. denied, 523 U.S. 1075 (1998), United 
      States Dep't of Treasury v. Gosselin, 252 B.R. 854 (D. Mass. 2000) 

      (no waiver for proceeding to discharge debt to State), Kish v. 
      Verniero (In re Kish), 212 B.R. 808 (D.N.J. 1997) (same), 
      Womack v. Mays (In re Womack), 253 B.R. 247 (Bankr. E.D. Ark. 
      2000) (no waiver to permit suit against state agency for stay 
      violation), Koehler v. Iowa College Student Aid Comm'n (In re 
      Koehler), 204 B.R. 210 (Bankr. D. Minn. 1997) (proceeding to 
      discharge debt).

3.    Impact on § 106(b): see Arecibo Cmty. Health Care, Inc. 

      v. Puerto  Rico, 244 F.3d 241 (1st Cir. 2001).  "The validity of 
      Section 106(b), already under serious doubt after Seminole 
      Tribe, see [Creative Goldsmiths], is clearly 
      undermined by the holding in [College Sav. Bank v. Fla. Prepaid 
      Postsecondary Educ. Expense Board, 527 U.S. 666 (1999)]."  244 
      F.3d at 245.  Held: 106(b) is unconstitutional. Id.; see 
      also Grabscheid v. Mich. Employment Sec. Comm'n (In re C.J. 
      Rogers, Inc.), 212 B.R. 265 (E.D. Mich. 1997) (holding § 
      106(b) "deemed waiver" for compulsory counterclaims violates Eleventh 
      Amendment).  But see Wyo. Dep't of Transp. v. Straight (In 
      re Straight), 143 F.3d 1387, 1390 (10th Cir.), cert. 
      denied, 525 U.S. 982 (1998); In re Barrett Ref. Corp., 221 
      B.R. 795 (Bankr. W.D. Okla. 1998).

4.    Eleventh Amendment and Seminole do not apply to every 
      proceeding and order which may affect state interests.
      
      a.  The Ex Parte Young doctrine, whereby a suit seeking 
      prospective equitable relief against a state official who has engaged 
      in a continuing violation of Federal law is not deemed to be a suit 
      against the State for purposes of state sovereign immunity, permits 
      enforcement of a discharge order against a state tax official in an 
      action for prospective injunctive and declaratory relief.  Goldberg 

      v. Ellett (In re Ellett), 254 F.3d 1135 (9th Cir. 2001); see 
      also Guiding Light Corp. v. La. Dep't of Health & Hosps. (In re 

      Guiding Light Corp.), 213 B.R. 489 (E.D. La. 1997) (Ex Parte 
      Young permits debtor Medicaid provider to sue to enjoin state 
      official from withholding Medicaid payments); Pac. Gas & Elec. Co. 
      v. Cal. Pub. Utils. Comm'n (In re Pac. Gas & Elec. Co.), 263 B.R. 
      306, 314-15 (Bankr. N.D. Cal. 2001) (Ex Parte Young permits 
      suit against PUC commissioners alleging automatic stay violations); 
      Horwitz v. Zywiczynski (In re Zywiczynski), 210 B.R. 924 
      (Bankr. W.D.N.Y. 1997) (Ex Parte Young permits turnover order; 
      Eleventh Amendment does not preclude threshold inquiry into whether 
      State's claim of adverse interest is more than colorable).

      b.  "[A] bankruptcy discharge is binding on non-consenting States 
      notwithstanding the [Supreme] Court's more recent sovereign immunity 
      jurisprudence."  Goldberg v. Ellett (In re Ellett), 254 F.3d 
      1135, ____ (9th Cir. 2001) (citing In re Collins, 173 F.3d 924, 

      928-31 (4th Cir. 1999) and Texas v. Walker, 142 F.3d 813, 
      822-23 (5th Cir. 1998)); see also Maryland v. Antonelli 
      Creditors' Liquidating Trust, 123 F.3d 777, 786-87 (4th Cir. 1997) 

      (order confirming plan which provided for waiver of state transfer tax 

      not a "suit"); Smith v. Psychiatric Hosps. of Fla., Inc. (In re 
      Psychiatric Hosps. of Fla., Inc.), 216 B.R. 660, 661 (M.D. Fla. 
      1998) (same; motion to determine dischargeability under § 505); 
      In re Sun Healthcare Group, Inc., 245 B.R. 779, 784-87 (Bankr. 
      D. Del. 2000) (same; DIP financing order); Harden v. Gilbert (In re 

      Int'l Heritage, Inc.), 239 B.R. 306, 309-10 (Bankr. E.D.N.C. 1999) 

      (same; proceeding to determine scope of automatic stay, even if a 
      contested matter).

5.    See also Innes v. Kan. State Univ. (In re Innes), 184 
      F.3d 1275, 1284 (10th Cir. 1999) (KSU waived Eleventh Amendment 
      immunity in adversary proceeding by entering into contract with DOE 
      requiring it to perform certain actions in the event of bankruptcy of 
      student loan borrower), cert. denied, 529 U.S. 1037 (2000); 
      In re Barrett Ref. Corp., 221 B.R. 795, 814 (Bankr. W.D. Okla. 
      1998) (State's waiver of sovereign immunity cannot be undone by 
      withdrawing proof of claim).