Hoffman v. Connecticut Department Of Income Maintenance/Dissent Marshall

by Thurgood Marshall

Justice MARSHALL, with whom Justice BRENNAN, Justice BLACKMUN, and Justice STEVENS join, dissenting.

In my view, the language of § 106(c) of the Bankruptcy Code (Code), 11 U.S.C. § 106(c), satisfies even the requirement that Congress' intent to abrogate the States' Eleventh Amendment immunity be "unmistakably clear." Atascadero State Hospital v. Scanlon, 473 U.S. 234, 242, 105 S.Ct. 3142, 3147, 87 L.Ed.2d 171 (1985). Because Congress clearly expressed its intent to authorize a bankruptcy court to issue a money judgment against a State that has not filed a proof of claim in a bankruptcy proceeding, and because Congress has the authority under the Bankruptcy Clause to abrogate the States' Eleventh Amendment immunity, I respectfully dissent.

Section 106(c) states that, "notwithstanding any assertion of sovereign immunity," any Code provision containing one of the trigger words-"creditor," "entity," or "governmental unit"-applies to the States, and that "a determination by the court of an issue arising under such a provision binds [the States]" (emphasis added). The drafters of § 106(c) were fully aware of "the requirement in case law that an express waiver of sovereign immunity is required in order to be effective." 124 Cong.Rec. 32394 (1978) (statement of Rep. Edwards); id., at 33993 (statement of Sen. DeConcini); see Employees v. Missouri Dept. of Public Health and Welfare, 411 U.S. 279, 285, 93 S.Ct. 1614, 1618, 36 L.Ed.2d 251 (1973). They therefore carefully abrogated the States' sovereign immunity in three steps. First, they eliminated "any assertion of sovereign immunity." § 106(c). Second, they included States within the trigger words used elsewhere in the Code. § 106(c)(1). Third, they provided that States would be bound by the orders of the bankruptcy court. § 106(c)(2). What the plurality sees as redundancy in subsections (c)(1) and (c)(2) is thus more reasonably understood as evidence of the importance Congress attached to ensuring that the abrogation of sovereign immunity was express. ^[1]

By its terms, § 106(c) makes no distinction between Code provisions that contain trigger words and permit only injunctive and declaratory relief, and Code provisions that contain trigger words and permit money judgments. Nevertheless, by placing heavy emphasis on the word "determination" in § 106(c)(2), the plurality concludes that § 106(c), in its entirety, is "more indicative of declaratory and injunctive relief than of monetary recovery." Ante, at 102. The plurality justifies this conclusion by accepting an analog to the use of the word "determine" in a Code provision dealing with taxes, § 505(a)(1), while rejecting an equally compelling analogy to the use of the word "determine" in the Code's jurisdictional provision, 28 U.S.C. § 157(b)(1) (1982 ed., Supp. V). But instead of trying to force meaning into the word "determination" through competing analogies to other Code provisions, we should give decisive weight to the explicit language abrogating sovereign immunity.

The plurality correctly points out that the abrogation of sovereign immunity in § 106(c) should not be read to overwhelm the narrow scope of the voluntary waiver set forth in §§ 106(a) and (b). But the plurality's conclusion that § 106(c) must therefore refer only to declarative and injunctive relief rests on the mistaken assumption that, without such a narrowing interpretation, "the only limit is the number of provisions in the Bankruptcy Code containing one of the trigger words." Ante, at 102 (emphasis added). The plurality then raises the specter that "§ 106(c) would apply in a scattershot fashion to over 100 Code provisions," ibid., offering virtually endless opportunities for money judgments against the States.

Nothing could be further from the truth, for most of the Code provisions containing trigger words do not contemplate money judgments. Some provide States, in their role as creditors or entities, with rights against the debtor. ^[2] Others limit relief against "creditors," "entities," or "governmental units" to declaratory or injunctive relief. ^[3] Only a handful of the triggered sections clearly contemplate money judgments against a "creditor," "entity," or "governmental unit." These include the Code provisions at issue in this case, i.e., the provision giving a trustee the power to avoid preferential payments made to "creditors," § 547, and the provision requiring "entities" to turn over property and money belonging to the debtor. § 542. ^[4] Thus, rather than reading § 106(c) in isolation as the plurality does, the provision should be read in light of the Code provisions containing the trigger words "creditor," "entity," and "governmental unit." Only in this way is it possible to appreciate the limited extent to which Congress sought to abrogate the States' sovereign immunity in § 106(c). See Kelly v. Robinson, 479 U.S. 36, 43, 107 S.Ct. 353, 358, 93 L.Ed.2d 216 (1986) (Code should be read as an integrated whole).

By expressly including States within the terms "creditor" and "entity," Congress intended States generally to be treated the same as ordinary "creditors" and "entities," who are subject to money judgments in a relatively small number of Code provisions. The effect of today's decision is to exempt States from these provisions, which are crucial to the efficacy of the Code. The plurality therefore ignores Congress' careful choice of language and turns States into preferred actors. ^[5] By allowing a trustee to recapture payments made to creditors 90 days before a bankruptcy petition is filed, the preference provision prevents anxious creditors from grabbing payments from an insolvent debtor and hence getting more than their fair share. After today, however, any State owed money by a debtor with financial problems will have a strong incentive to collect whatever it can, as fast as it can, even if doing so pushes the debtor into bankruptcy. Ordinary creditors will soon realize that States can receive more than their fair share; the very existence of this governmental power will cause these other creditors, in turn, to increase pressure on the debtor. See McVey Trucking, Inc. v. Secretary of State of Illinois, 812 F.2d 311, 328 (CA7), cert. denied, 484 U.S. 895, 108 S.Ct. 227, 98 L.Ed.2d 186 (1987). ^[6] The turnover provision is designed to prevent third parties from keeping property of the debtor or from refusing to make payments owed to the debtor, thereby aiding the reorganization of the debtor's affairs or the orderly and equitable distribution of the estate. See United States v. Whiting Pools, Inc., 462 U.S. 198, 202-203, 103 S.Ct. 2309, 2312-2313, 76 L.Ed.2d 515 (1983). Exempting States from this provision, as well as from the preference provision, undermines these important policy goals of the Code.

My conclusion that Congress intended § 106(c) to abrogate the States' Eleventh Amendment immunity against money judgments requires me to decide whether Congress has the authority under the Bankruptcy Clause to do so. ^[7] In Pennsylvania v. Union Gas Co., 491 U.S. 1, 19, 109 S.Ct. 2273, 2284, 105 L.Ed.2d 1 (1989) (plurality opinion); id., at 57, 109 S.Ct., at 2296 (WHITE, J., concurring in judgment), we held that Congress has the authority under the Commerce Clause to abrogate the States' Eleventh Amendment immunity. I see no reason to treat Congress' power under the Bankruptcy Clause any differently, for both constitutional provisions give Congress plenary power over national economic activity. See The Federalist No. 42, p. 271 (C. Rossiter ed. 1961) (J. Madison) (describing the Bankruptcy Clause and the Commerce Clause as "intimately connected"); cf., ante, at 105 (SCALIA, J., concurring in judgment).

For the reasons stated, I respectfully dissent.

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