In Re: Sacred Heart ( 1998 )

Opinions of the United
1998 Decisions States Court of Appeals
for the Third Circuit
1-8-1998
In Re: Sacred Heart
Precedential or Non-Precedential:
Docket 97-1126
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Filed January 8, 1998
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 97-1126
IN RE: SACRED HEART HOSPITAL OF NORRISTOWN, dba
SACRED HEART HOSPITAL & REHABILITATION CENTER,
Debtor
SACRED HEART HOSPITAL OF NORRISTOWN, dba
SACRED HEART HOSPITAL & REHABILITATION CENTER
v.
COMMONWEALTH OF PENNSYLVANIA,
DEPARTMENT OF PUBLIC WELFARE
(D.C. Civil No. 96-cv-06172)
IN RE: SACRED HEART HOSPITAL OF NORRISTOWN,
d/b/a SACRED HEART HOSPITAL &
REHABILITATION CENTER,
Debtor
SACRED HEART HOSPITAL OF NORRISTOWN
v.
COMMONWEALTH OF PENNSYLVANIA,
DEPARTMENT OF PUBLIC WELFARE
(D.C. Civil No. 96-cv-06286)
Sacred Heart Hospital of Norristown,
Appellant
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Nos. 96-cv-06172 and 96-cv-06286)
Argued September 25, 1997
BEFORE: COWEN, ROTH and LEWIS, Circuit Judges
(Filed January 8, 1998)
William A. Slaughter, Esq. (Argued)
Matthew M. Strickler
Ballard, Spahr, Andrews & Ingersoll
1735 Market Street
51st Floor
Philadelphia, PA 19103
COUNSEL FOR APPELLANT
Sacred Heart Hospital of
Norristown
Sallie A. Rodgers, Esq.
Commonwealth of Pennsylvania,
Office of Legal Counsel
Department of Public Welfare
Health & Welfare Building
P.O. Box 2675
Harrisburg, PA 17105-2675
Thomas Blazusiak, Esq. (Argued)
Pennsylvania Department of
Public Welfare
1600 Hanover Avenue
Allentown, PA 18103
COUNSEL FOR APPELLEE
Commonwealth of PA, Department
of Public Welfare
Leonard H. Gerson, Esq.
Angel & Frankel
460 Park Avenue
New York, NY 10017
COUNSEL FOR AMICUS-
APPELLANT
Business Bankruptcy Law
Committee of the New York
County Lawyers' Association
2
OPINION OF THE COURT
COWEN, Circuit Judge.
This appeal involves a challenge to the constitutionality
of section 106(a) of the Bankruptcy Code, 11 U.S.C.
S 106(a). That section purports to abrogate state sovereign
immunity in federal court. The defendant-appellee,
Commonwealth of Pennsylvania Department of Public
Welfare ("DPW"), argued before the bankruptcy court that
section 106(a) was not enacted pursuant to a valid exercise
of congressional power. Therefore, DPW asserted that the
Eleventh Amendment to the United States Constitution
bars Debtor-appellant Sacred Heart Hospital of
Norristown's ("Sacred Heart") lawsuit against DPW. The
bankruptcy court denied DPW's claim of Eleventh
Amendment immunity. It also entered an order on the
merits granting declaratory judgment for Sacred Heart. The
district court reversed the bankruptcy court's order dealing
with Eleventh Amendment immunity and thereafter vacated
the order of the bankruptcy court concerning the merits of
the dispute. We will affirm the district court.
I.
Sacred Heart, an acute care community hospital in
Norristown, Pennsylvania, began providing medical
treatment to patients under Pennsylvania's Medical
Assistance program ("the Program"), 55 Pa. Code S 1101.11
et seq., in 1967. By May of 1994, however,financial
difficulties forced Sacred Heart to cease operations and lay
off substantially all of its several hundred employees.
Shortly thereafter, Sacred Heart filed a voluntary petition
for relief under Chapter 11 of the United States Bankruptcy
Code.
During the course of Sacred Heart's Chapter 11
proceedings, the Commonwealth asserted various claims
against the Debtor. The Commonwealth's Department of
Labor and Industry ("DLI") asserted claims against the
Debtor for amounts claimed to be owed to the
3
Commonwealth under the Commonwealth's Unemployment
Compensation and Workers' Compensation statutes; the
Commonwealth's Department of Revenue ("DOR") asserted
claims against the Debtor for sales and use taxes; and DPW
asserted a claim against the Debtor arising under a lease.1
Earlier in the bankruptcy proceedings, the Debtor
submitted invoices to DPW to obtain payment for some of
the medical treatments it provided to patients under the
Program. The Commonwealth's Office of Inspector General
("OIG") returned the invoices to the Debtor, however,
because they were incorrectly completed. The Debtor
resubmitted them to OIG in January of 1996, and
submitted additional invoices to DPW in May of 1996. DPW
denied all of the Debtor's claims because the Debtor failed
to comply with 55 Pa. Code S 1101.68. This statute requires
claims to be submitted to DPW within 180 days after the
treatment is rendered.
The Debtor subsequently filed in the bankruptcy court
the instant adversary proceeding against DPW, demanding
judgment against DPW "in the amount to which it is
entitled under the Medical Assistance program." Adv.
Compl. at 5. The Debtor did not request a declaratory
judgment, nor did it request any prospective injunctive
relief against any Commonwealth officials.
DPW filed motions to dismiss based principally on the
Eleventh Amendment to the United States Constitution.
Sacred Heart responded by claiming that no
Commonwealth agency was entitled to Eleventh
Amendment immunity in these proceedings because the
DLI and DOR claims in the bankruptcy proceedings
constituted a waiver of the Commonwealth's sovereign
_________________________________________________________________
1. Although DPW filed a proof of claim against the Debtor in these
proceedings, it is undisputed that this claim was misdocketed. The lease
in question was between DPW and the Sacred Heart General Hospital
("SHGH"), which also had a matter pending in the Bankruptcy Court for
the Eastern District of Pennsylvania. Once DPW recognized that its claim
against SHGH was unrelated to the Debtor, it agreed not to pursue any
claim against the Debtor and not to oppose the Debtor's objection to the
claim. Sacred Heart has never argued that DPW waived its Eleventh
Amendment immunity because of this inadvertent filing.
4
immunity.2 Sacred Heart did not argue that the Eleventh
Amendment did not apply or that DPW had waived its
immunity under 11 U.S.C. S 106(c).
The bankruptcy court denied DPW's motions. It held that
the Eleventh Amendment was not implicated because: (1)
the adversary complaint sought not monetary relief but
only a declaration that section 108(a) of the Bankruptcy
Code affected state billing rules to require that otherwise
untimely invoices be accepted as timely; and (2) the
Commonwealth waived its sovereign immunity as to all
claims relating to Sacred Heart's bankruptcy proceedings
when DLI filed its proof of claim for unreimbursed
unemployment benefits.3 The bankruptcy court
subsequently issued a final order, stating that "[u]pon
advice of the Debtor's counsel . . . the Debtor would
presently be satisfied with an Order declaring 11 U.S.C.
S 108(a) applies here." App. at A52.4 The bankruptcy court
ordered that DPW accept as timely all billings that were not
untimely under state rules as of the filing of Sacred Heart's
bankruptcy. The Commonwealth appealed both orders to
the district court.
_________________________________________________________________
2. While it is unclear whether Sacred Heart's waiver argument before the
bankruptcy court was based on 11 U.S.C. S 106(b) or some undefined
general waiver principle, we need not be concerned with this ambiguity
(or the constitutional issues concerning either theory) because Sacred
Heart has failed to pursue these arguments in this appeal.
3. DPW filed an immediate appeal of this order under the collateral order
exception to the final judgment rule. Although the bankruptcy court
refused to grant a stay pending appeal, the district court subsequently
granted the stay.
4. Section 108(a) provides as follows:
(a) If applicable nonbankruptcy law, an order entered in a non-
bankruptcy proceeding, or an agreement fixes a period within which
the debtor may commence an action, and such period has not
expired before the date of the filing of the petition, the trustee
may
commence such action only before the later of--
(1) the end of such period, including any suspension of such
period occurring on or after the commencement of the case; or
(2) two years after the order for relief.
11 U.S.C. S 108(a) (1993).
5
The district court by order entered on January 21, 1997,
reversed the bankruptcy court. Specifically, the district
court held that 11 U.S.C. S 106(a), which purports to
abrogate state sovereign immunity, violates the Eleventh
Amendment to the United States Constitution in light of the
Supreme Court's decision in Seminole Tribe of Florida v.
Florida, ___ U.S. ___, 116 S. Ct. 1114 (1996).5 The district
court also determined that, because there was no
contention that Sacred Heart's claims against DPW arose
out of the same transaction or occurrence as either DLI's or
DOR's claims against Sacred Heart, DPW did not waive its
immunity pursuant to 11 U.S.C. S 106(b). In addition,
because Sacred Heart never argued before the bankruptcy
court that its claims were raised to offset DLI's or DOR's
claims pursuant to 11 U.S.C. S 106(c), the district court
found this issue waived. Finally, the district court held that
the bankruptcy court lacked jurisdiction over the adversary
proceeding after DPW appealed the August 7, 1996, order
of the bankruptcy court, which was a collateral order
dealing with the jurisdiction of the bankruptcy court. It also
vacated the August 15, 1996, order of the bankruptcy court
which dealt with the merits of the adversary proceedings.
This appeal followed.
_________________________________________________________________
5. Section 106 of the Bankruptcy Code, entitled "Waiver of sovereign
immunity," provides, in pertinent part:
(a) Notwithstanding an assertion of sovereign immunity, sovereign
immunity is abrogated as to a governmental unit to the extent set
forth in this section with respect to the following:
(1) Sections . . . 106 [and] 108 . . . of this title.
. . . .
(b) A governmental unit that has filed a proof of claim in the
case
is deemed to have waived sovereign immunity with respect to a
claim against such governmental unit that is property of the estate
and that arose out of the same transaction or occurrence out of
which the claim of such governmental unit arose.
(c) Notwithstanding any assertion of sovereign immunity by a
governmental unit, there shall be offset against a claim or
interest
of a governmental unit any claim against such governmental unit
that is property of the estate.
11 U.S.C. S 106 (1994).
6
Sacred Heart essentially raises three arguments on
appeal. First, it contends that the Eleventh Amendment
does not limit bankruptcy court jurisdiction because
bankruptcy courts do not exercise the judicial power of the
United States under Article III. Second, it asserts that the
Bankruptcy Clause, U.S. Const. art. I, S 8, cl. 4, vests
Congress with the power to abrogate state sovereign
immunity from suit in federal court. Third, it maintains
that even if the Bankruptcy Clause itself does not authorize
Congress to abrogate state sovereign immunity, Congress'
abrogation of sovereign immunity in section 106(a) should
be sustained as a valid exercise of its enforcement power
under the Fourteenth Amendment.6
II.
"Because in bankruptcy cases the district court sits as an
appellate court, our review of the district court's decision is
plenary." Brown v. Pennsylvania State Employees Credit
Union, 851 F.2d 81, 84 (3d Cir. 1988) (citing Universal
Minerals, Inc. v. C.A. Hughes & Co., 669 F.2d 98, 101-02
(3d Cir. 1981)). We review the findings of fact of the
bankruptcy court only for clear error. Id. (citing In re
Morrissey, 717 F.2d 100, 104 (3d Cir. 1983)). Findings of
fact by a trial court are clearly erroneous when, after
reviewing the evidence, the appellate court is "left with a
definite and firm conviction that a mistake has been
committed." Anderson v. City of Bessemer City, N.C., 470
U.S. 564, 573, 105 S. Ct. 1504, 1511 (1985) (quotation
marks omitted). We exercise plenary review over legal
questions. In re Fegeley, 118 F.3d 979, 982 (3d Cir. 1997)
(citing In re Siciliano, 13 F.3d 748, 750 (3d Cir. 1994)). It is
error for a district court, when acting in the capacity of a
court of appeals, to make its own factual findings. Universal
Minerals, 669 F.2d at 104.
_________________________________________________________________
6. DPW also contends that because DLI and DORfiled proofs of claim in
these proceedings, Sacred Heart may bring a declaratory judgment
action against DPW pursuant to section 106's "offset" provision, 11
U.S.C. S 106(c). However, we need not address this argument and, thus,
the constitutionality of 11 U.S.C. S 106(c), because Sacred Heart failed
to
raise this issue below and, therefore, for purposes of this appeal, has
waived it.
7
The bankruptcy court had jurisdiction pursuant to 28
U.S.C. S 1334(a) and 28 U.S.C. S 157(a). The district court's
appellate jurisdiction was based upon 28 U.S.C. S 158(a)
and the collateral order exception to the final judgment
rule. See Puerto Rico Aqueduct & Sewer Auth. v. Metcalf &
Eddy, Inc., 506 U.S. 139, 142-43, 113 S. Ct. 684, 687
(1993). We have jurisdiction pursuant to 28 U.S.C.S 158(d).
III.
The Eleventh Amendment provides:
The Judicial power of the United States shall not be
construed to extend to any suit in law or equity,
commenced or prosecuted against one of the United
States by Citizens of another State, or by Citizens or
Subjects of any Foreign State.
U.S. Const. amend. XI. Although the Amendment expressly
prohibits only suits against States by citizens of other
States, the Supreme Court has long held that the Eleventh
Amendment also bars suits against the State by its own
citizens, Edelman v. Jordan, 415 U.S. 651, 662-63, 94 S.
Ct. 1347, 1355 (1974) (collecting cases), and may bar suits
invoking the federal question jurisdiction of Article III
courts. See Idaho v. Coeur d'Alene Tribe of Idaho, ___ U.S.
___, ___, 117 S. Ct. 2028, 2033 (1997) (citing Seminole
Tribe, ___ U.S. at ___, 116 S. Ct. at 1114). This immunity
is based on a two-part presupposition: (1) "each State is a
sovereign entity in our federal system[,]" Seminole Tribe, ___
U.S. at ___, 116 S. Ct. at 1122; and (2) "[i]t is inherent in
the nature of sovereignty not to be amenable to the suit of
an individual without its consent." Id. at ___, 116 S. Ct. at
1122 (quotation marks omitted).
Eleventh Amendment immunity, however, is not
absolute. When, as here, a plaintiff seeks recovery only
from the state, and not from its officials, there are two ways
to divest a state of its Eleventh Amendment sovereign
immunity and hale the state into federal court. First, a
state may waive its Eleventh Amendment immunity and
consent to suit in federal court. See Atascadero State Hosp.
v. Scanlon, 473 U.S. 234, 238, 105 S. Ct. 3142, 3145
(1985). Second, Congress can abrogate a state's Eleventh
8
Amendment immunity, but only if two requirements are
met: Congress must unequivocally express an intent to
abrogate state immunity, and the legislative action must be
"pursuant to a valid exercise of power . . . ." Green v.
Mansour, 474 U.S. 64, 68, 106 S. Ct. 423, 425-26 (1985)
(citing Pennhurst State Sch. & Hosp. v. Halderman, 465
U.S. 89, 98, 104 S. Ct. 900, 906 (1984)).
"Congress' intent to abrogate the States' immunity from
suit must be obvious from `a clear legislative statement.' "
Seminole Tribe, ___ U.S. at ___, 116 S. Ct. at 1123 (quoting
Blatchford v. Native Village of Noatak, 501 U.S. 775, 786,
111 S. Ct. 2578, 2584 (1991)). "A general authorization for
suit in federal court is not the kind of unequivocal statutory
language sufficient to abrogate the Eleventh Amendment."
Atascadero, 473 U.S. at 246, 105 S. Ct. at 3149. Rather,
abrogation will be effected only when the intent to abrogate
is "stated by the most express language or by such
overwhelming implication from the text as [will] leave no
room for any other reasonable construction." Id. at 239-40,
105 S. Ct. at 3146 (quotation marks omitted).
If congressional intent to abrogate is found, a federal
court must next determine whether Congress, in enacting
the specific legislation, was acting pursuant to a valid
exercise of power. Prior to Seminole Tribe, the Supreme
Court had recognized two sources of authority through
which Congress could validly abrogate state sovereign
immunity: section 5 of the Fourteenth Amendment,
Fitzpatrick v. Bitzer, 427 U.S. 445, 96 S. Ct. 2666 (1976),
and the Interstate Commerce Clause. Pennsylvania v. Union
Gas Co., 491 U.S. 1, 109 S. Ct. 2273 (1989). In Seminole
Tribe, however, the Court overruled Union Gas and held
that "[t]he Eleventh Amendment restricts the judicial power
under Article III, and Article I cannot be used to circumvent
the constitutional limitations placed upon federal
jurisdiction." ___ U.S. at ___, 116 S. Ct. at 1131-32. "Thus,
since Seminole Tribe section five of the Fourteenth
Amendment has been the sole basis for Congress to
abrogate the states' immunity under the Eleventh
Amendment."7 College Savings Bank v. Florida Prepaid
_________________________________________________________________
7. As the Fitzpatrick Court explained, the Fourteenth Amendment,
adopted well after the adoption of the Eleventh Amendment, expanded
9
Postsecondary Education Expense Bd., ___ F.3d ___, ___,
1997 WL 749514, at *4 (3d Cir. Dec. 5, 1997).
In light of the foregoing, we must determine, first,
whether Congress expressly abrogated the states' Eleventh
Amendment immunity when enacting the current version of
section 106(a),8 and, second, whether the Act in question
was passed pursuant to a constitutional provision granting
Congress the power to abrogate.
There can be no doubt that Congress unequivocally
expressed its intent to abrogate the states' Eleventh
Amendment immunity under the Bankruptcy Code. See
Matter of Fernandez, 123 F.3d 241, 243 (5th Cir. 1997); In
re Creative Goldsmiths of Washington, D.C., Inc., 119 F.3d
1140, 1145 (4th Cir. 1997). Section 106(a) explicitly states
that, "[n]otwithstanding an assertion of sovereign immunity,
sovereign immunity is abrogated as to a governmental unit
to the extent set forth in this section . . . ." The only
question before us, therefore, is whether Congress acted
pursuant to a valid exercise of its power.
_________________________________________________________________
federal power at the expense of state autonomy and thereby
fundamentally altered the pre-existing balance between state and federal
power achieved by Article III and the Eleventh Amendment. 427 U.S. at
453-56, 96 S. Ct. at 2670-71. The Court reaffirmed this view of section
5 in Seminole Tribe. ___ U.S. at #6D 6D6D#, 116 S. Ct. at 1128.
8. Pursuant to section 113 of the Bankruptcy Reform Act of 1994, Pub.
L. No. 103-394, 108 Stat. 4106 (1994), former section 106(c) was
amended and recodified as current section 106(a). The Amendment was
intended to overrule United States v. Nordic Village, Inc., 503 U.S. 30,
112 S. Ct. 1011 (1992) and Hoffman v. Connecticut Dep't of Income
Maintenance, 492 U.S. 96, 109 S. Ct. 2818 (1989), "two Supreme Court
cases that have held the States and Federal Government are not deemed
to have waived their sovereign immunity by virtue of enacting section
106(c) of the Bankruptcy Code." 140 Cong. Rec. H10766 (daily ed. Oct.
4, 1994) (Section-By-Section Description). The amendment was also
intended "to clarify[ ] the original intent of Congress in enacting
Section
106 of the Bankruptcy Code with regard to sovereign immunity." See
Matter of Merchants Grain, Inc., 59 F.3d 630, 634 (7th Cir. 1995)
(quotation marks omitted), judgment vacated sub nom. Ohio Agr.
Commodity Depositors Fund v. Mahern, ___ U.S. ___, 116 S. Ct. 1411(1996).
10
Sacred Heart contends that Seminole Tribe merely held
that Congress could not abrogate sovereign immunity
pursuant to the Indian and Interstate Commerce Clauses
and did not address Congress' other Article I powers.
Sacred Heart also argues that the Bankruptcy Clause is
distinguishable from other Article I clauses because it
contains an affirmative requirement of uniformity. In
addition, Sacred Heart asserts that we should uphold
section 106(a) as a valid exercise of Congress' power under
section 5 of the Fourteenth Amendment.9 We find each of
these arguments unpersuasive.
The Seminole Tribe Court held that Congress may not
abrogate state sovereign immunity by legislation passed
pursuant to its Article I powers. ___ U.S. at ___, 116 S. Ct.
at 1131-32. The Court stated:
Even when the Constitution vests in Congress complete
law-making authority over a particular area, the
Eleventh Amendment prevents congressional
authorization of suits by private parties against
unconsenting States. The Eleventh Amendment
restricts the judicial power under Article III, and Article
I cannot be used to circumvent the constitutional
limitations placed upon federal jurisdiction.
Id. (footnote omitted). The Court thereby overruled Union
Gas, its only prior case finding congressional authority to
abrogate state sovereign immunity pursuant to an Article I
power, and "restored the balance of power between
Congress and the Judiciary anticipated by the Framers in
Article I and Article III of the Constitution . . . ." Close v.
New York, 125 F.3d 31, 38 (2d Cir. 1997).
_________________________________________________________________
9. While Sacred Heart also contends that the Eleventh Amendment is not
even implicated in this matter because bankruptcy courts do not
exercise the judicial power of the United States under Article III, this
argument cannot withstand the Supreme Court's recent pronouncement
in Seminole Tribe that "[t]he Eleventh Amendment restricts the judicial
power under Article III, and Article I cannot be used to circumvent the
constitutional limitations placed upon federal jurisdiction." ___ U.S. at
___, 116 S. Ct. at 1131-32. See also In re Grewe, 4 F.3d 299, 304 (4th
Cir. 1993) ("[W]hile functionally there may appear to be a separate
bankruptcy court, for jurisdictional purposes there is only one court,
i.e.,
the district court." (quotation marks and citation omitted)).
11
Moreover, there is simply no principled basis to
distinguish the Bankruptcy Clause from other Article I
clauses. See Matter of Fernandez, 123 F.3d at 244; In re
Creative Goldsmiths, 119 F.3d at 1145-46; see also
Hoffman, 492 U.S. at 111, 109 S. Ct. at 2828 (Marshall, J.,
dissenting) ("I see no reason to treat Congress' power under
the Bankruptcy Clause any differently [than the Commerce
Clause], for both constitutional provisions give Congress
plenary power over national economic activity." (citation
omitted)). Nor does the uniformity requirement in the
Bankruptcy Clause change this analysis. "The
Constitutional requirement of uniformity is a requirement
of geographic uniformity" and nothing more. Vanston
Bondholders Protective Comm. v. Green, 329 U.S. 156, 172,
67 S. Ct. 237, 244 (1946) (Frankfurter, J., concurring).
Because Eleventh Amendment immunity applies uniformly
to all states and to all parties in a bankruptcy proceeding,
the uniformity requirement is not frustrated, and Sacred
Heart's argument must fail. As such, we hold that the
Bankruptcy Clause is not a valid source of abrogation
power.
Equally unavailing is Sacred Heart's assertion that
Congress enacted section 106(a) pursuant to section 5 of
the Fourteenth Amendment. Section 5 of the Fourteenth
Amendment provides that "Congress shall have the power
to enforce, by appropriate legislation, the provisions of this
article." U.S. Const. amend. XIV, S 5. "Correctly viewed, S 5
is a positive grant of legislative power authorizing Congress
to exercise its discretion in determining whether and what
legislation is needed to secure the guarantees of the
Fourteenth Amendment." Katzenback v. Morgan, 384 U.S.
641, 651, 86 S. Ct. 1717, 1723-24 (1966). Congress' power,
however, "extends only to enforc[ing] the provisions of the
Fourteenth Amendment." City of Boerne v. Flores, ___ U.S.
___, ___, 117 S. Ct. 2157, 2164 (1997) (quotation marks
omitted). "Any suggestion that Congress has a substantive,
non-remedial power under the Fourteenth Amendment is
not supported by our case law." Id. at ___, 117 S. Ct. at
2167-68.
While Congress need not "recite the words `section 5' or
`Fourteenth Amendment' or `equal protection' " when
12
enacting laws pursuant to this power, E.E.O.C. v. Wyoming,
460 U.S. 226, 243 n.18, 103 S. Ct. 1054, 1064 n.18 (1983)
(citation omitted), "if Congress does not explicitly identify
the source of its power as the Fourteenth Amendment,
there must be something about the act connecting it to
recognized Fourteenth Amendment aims." Wilson-Jones v.
Caviness, 99 F.3d 203, 210 (6th Cir. 1996), modified on
other grounds, 107 F.3d 358 (6th Cir. 1997) (per curiam);10
see also Pennhurst State Sch. & Hosp. v. Halderman, 451
U.S. 1, 16, 101 S. Ct. 1531, 1539 (1981) (respect for state
sovereignty requires that courts "should not quickly
attribute to Congress an unstated intent to act under its
authority to enforce the Fourteenth Amendment"). Here,
there is simply no evidence suggesting that section 106(a)
was enacted pursuant to any constitutional provision other
than Congress' Bankruptcy Clause power. See Matter of
Fernandez, 123 F.3d at 245; In re Creative Goldsmiths, 119
F.3d at 1146; In re Kish, 212 B.R. 808, 815 (D.N.J. 1997);
In re C.J. Rogers, Inc., 212 B.R. 265, 272-73 (E.D. Mich.
1997). On the contrary,
the conclusion seems logically inescapable that in
passing the 1994 Act Congress exercised the same
specifically enumerated Article I bankruptcy power that
it has traditionally relied on in enacting prior
incarnations of the bankruptcy law dating back to
1860--68 years before the passage of the Fourteenth
Amendment. We will not presume that Congress
intended to enact a law under a general Fourteenth
Amendment power to remedy an unspecified violation
of rights when a specific, substantive Article I power
clearly enabled the law.
In re Creative Goldsmiths, 119 F.3d at 1146 (citation
omitted). Sacred Heart's argument must fail.
_________________________________________________________________
10. Although the Wilson-Jones court indicated that the only cases it
"could locate where legislation was upheld under the Fourteenth
Amendment's enforcement clause concerned discrimination by state
actors on the basis of race or gender[,]" 99 F.3d at 210, this court
recently considered whether the Trademark Remedy Clarification Act of
1992, Pub. L. No. 102-542, 106 Stat. 3567 (1992), was a valid
mechanism to enforce the Due Process Clause. See College Savings
Bank, ___ F.3d at ___-___, 1997 WL 749514, at *5-9.
13
Finally, we also reject Sacred Heart's contention that
bankruptcy constitutes a "privilege or immunity" under
section 1 of the Fourteenth Amendment, thereby enabling
Congress to utilize section 5 of the Fourteenth Amendment
to abrogate Eleventh Amendment immunity. As we
observed in Lutz v. City of York, 899 F.2d 255, 264 (3d
Cir. 1990), the Privileges and Immunities Clause of
the Fourteenth Amendment "has remained essentially
moribund" since the Supreme Court's decision in The
Slaughter-House Cases, 83 U.S. (16 Wall.) 36 (1873), and
the Supreme Court has subsequently relied almost
exclusively on the Due Process Clause as the source of
unenumerated rights.11 Moreover, the Supreme Court has
expressly held that there is no constitutional right to a
bankruptcy discharge, see United States v. Kras, 409 U.S.
434, 446-47, 93 S. Ct. 631, 638-39 (1973), and we can
conceive of no reason to resuscitate this section of the
Fourteenth Amendment by finding that bankruptcy is a
privilege of national citizenship. See Matter of Fernandez,
123 F.3d at 245 ("[T]here is no indication that Congress
passed the 1994 Act to remedy any incipient breaches or
even some unarticulated, general violation of the rights
specified in S 1 of the Fourteenth Amendment." (citation
omitted)); see also In re Kish, 212 B.R. at 817; In re NVR,
L.P., 206 B.R. 831, 842 (Bankr. E.D. Va. 1997).
Having concluded that Congress may not abrogate state
sovereign immunity pursuant to any of its Article I powers,
_________________________________________________________________
11. "The Fourteenth Amendment forbids states from abridging the
privileges and immunities that flow from national citizenship." In re
Storer, 58 F.3d 1125, 1128 (6th Cir. 1995) (citing U.S. Const. amend.
XIV, S 1). The most prominent rights of national citizenship were
catalogued in Twining v. New Jersey, 211 U.S. 78, 29 S. Ct. 14 (1908),
and include the right to inform federal officials of violations of federal
law, In re Quarles, 158 U.S. 532, 15 S. Ct. 959 (1895), the right to be
free from violence while in the lawful custody of a United States marshal,
Logan v. United States, 144 U.S. 263, 12 S. Ct. 617 (1892), the right to
enter the public lands, United States v. Waddell, 112 U.S. 76, 5 S. Ct.
35 (1884), the right to vote in national elections, The Ku-Klux Cases, 110
U.S. 651, 4 S. Ct. 152 (1884), the right to petition Congress for redress
of grievances, United States v. Cruikshank, 92 U.S. (2 Otto) 542 (1875),
and the right to pass freely from state to state, Crandall v. Nevada, 73
U.S. (6 Wall.) 35 (1867).
14
and that there is no evidence that Congress enacted section
106(a) of the Bankruptcy Code pursuant to section 5 of the
Fourteenth Amendment, we hold that section 106(a) is
unconstitutional to the extent that it purports to abrogate
state sovereign immunity in federal court. The January 21,
1997, order of the district court will be affirmed in all
respects.
15
ROTH, Circuit Judge, concurring.
I agree with the majority holding rejecting the
Bankruptcy Clause as a source of abrogation power post-
Seminole Tribe of Florida v. Florida, ___ U.S. ___, 116 S. Ct.
1114 (1996), and consequently declaring 11 U.S.C. S 106(a)
unconstitutional. I write separately, however, to express my
concern about the breadth of the language used by the
majority in reaching this holding.
The Supreme Court in Seminole Tribe, rejected both the
Indian Commerce Clause and, by overruling Pennsylvania
v. Union Gas Co., 491 U.S. 1, 109 S. Ct. 2273 (1989), the
Interstate Commerce Clause as sources of abrogation
power. ___ U.S. at __, 116 S.Ct. at 1127, 1131. The majority
in the instant case, concludes that "there is simply no
principled basis to distinguish the Bankruptcy Clause from
other Article I clauses." Majority Op. at 12. I would not go
so far as to discuss the merits of Article I powers other than
the ones at issue in Seminole Tribe and the instant case:
the Interstate Commerce Clauses, and the Bankruptcy
Clause, respectively. I would hold that there is simply no
principled basis to distinguish the Bankruptcy Clause from
the Interstate Commerce Clause. In both words and scope,
the Bankruptcy Clause is identical to the Indian Commerce
Clause. Both clauses read as follows: "The Congress shall
have Power [t]o . . . ." Furthermore, nothing in the history
or text of the Bankruptcy Clause indicates any more an
"alter[ation of the] pre-existing balance between state and
federal power," Seminole Tribe, #6D6D 6D# U.S. at ___, 116 S.Ct. at
1128, than the Indian Commerce Clause.
In short, I would not foreclose the possibility that in the
post-Seminole Tribe era, there exist any Article I powers
sufficiently [powerful/unique/similar to the Fourteenth
Amendment in effect as] to abrogate state sovereign
immunity. See, e.g., Diaz-Gandia v. Dapena-Thompson, 90
F.3d 609, 616 (1st Cir. 1996) (reaffirming that Congress,
acting pursuant to its War Powers, see U.S. Const. art. I,
S 8, abrogated state sovereign immunity to damages actions
brought under the Veterans' Reemployment Rights Act, 38
U.S.C. S 2021 et seq.). As the First Circuit reasoned, it is
not clear that the Court's holding in Seminole Tribe was so
broad as to strike down all sources of abrogation power in
16
Article I. 90 F.3d at 616. I would deal with potential
sources of abrogation power in Article I, as they arise on a
case-by-case basis.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
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