319 F.3d 755 (6th Cir. 2003), 01-5769, In re Hood

Docket Nº:01-5769.
Citation:319 F.3d 755
Party Name:In re Pamela L. HOOD, Debtor. Page 756 Pamela L. Hood, Appellee, v. Tennessee Student Assistance Corporation, Appellant.
Case Date:February 03, 2003
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit

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319 F.3d 755 (6th Cir. 2003)

In re Pamela L. HOOD, Debtor.

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Pamela L. Hood, Appellee,


Tennessee Student Assistance Corporation, Appellant.

No. 01-5769.

United States Court of Appeals, Sixth Circuit

February 3, 2003

Argued: Sept. 20, 2002.

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[Copyrighted Material Omitted]

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Leonard H. Gerson (argued and briefed), Angel & Frankel, New York, NY, William A. Cohn (briefed), Cohn Law Firm, Cordova, TN, for Appellee.

Marvin E. Clements, Jr., Asst. Atty. Gen. (argued and briefed), Office of the Attorney General, Bankruptcy & Collection Division, Nashville, TN, for Appellant.

Michelle T. Sutter (briefed), Ohio Attorney General, Columbus, OH, Richard N. Coglianese (briefed), Office of the Attorney General, Employment Law Section, Columbus, OH, Elise W. Porter (briefed), Office of the Attorney General, Columbus, OH, for Amicus Curiae.

Before: KENNEDY and MOORE, Circuit Judges; DOWD, District Judge.[*]

MOORE, J., delivered the opinion of the court, in which DOWD, D.J., joined. KENNEDY, J., delivered a separate concurring opinion.


MOORE, Circuit Judge.

The Tennessee Student Assistance Corporation ("TSAC") appeals from the Bankruptcy Appellate Panel's decision denying TSAC's motion to dismiss for lack of jurisdiction. After receiving a discharge in her Chapter 7 bankruptcy proceedings, plaintiff Pamela Hood filed for a hardship discharge from her student loans and named TSAC in the complaint. The bankruptcy court denied TSAC's motion to dismiss on the grounds of sovereign immunity, and the Bankruptcy Appellate Panel affirmed that decision. TSAC now appeals, arguing that the Constitution's Bankruptcy Clause, Art. I, sec. 8, does not give Congress the power to abrogate states' sovereign immunity in 11 U.S.C. § 106(a). Applying the analysis that the Supreme Court set forth in Seminole Tribe, we conclude that Article I, section 8 of the Constitution gives Congress the power to abrogate states' sovereign immunity. Accordingly, we AFFIRM and REMAND.


On June 4, 1999, Pamela Hood received a discharge on her no-asset Chapter 7 bankruptcy petition. Because 11 U.S.C. § 523(a)(8) prohibits discharge of student debts held by governmental bodies except upon showing of "an undue hardship," on September 14 of that year Hood filed an adversary proceeding for a hardship discharge of her student loans. TSAC, whom Hood had named as a defendant, moved to dismiss the complaint on the grounds of sovereign immunity. The Bankruptcy Court for the Western District of Tennessee denied the motion to dismiss, holding that Congress acted pursuant to a valid grant of constitutional authority when it abrogated the states' sovereign immunity in 11 U.S.C. § 106(a).

A unanimous Bankruptcy Appellate Panel affirmed and ruled that "as a part of the plan of the Constitutional Convention, the

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States ceded to Congress their sovereignty over bankruptcy discharge matters." Hood v. Tennessee Student Assistance Corp. (In re Hood), 262 B.R. 412, 413 (6th Cir. B.A.P. 2001). Although the panel acknowledged that Seminole Tribe of Florida v. Florida, 517 U.S. 44, 116 S.Ct. 1114, 134 L.Ed.2d 252 (1996), could be interpreted as precluding Congress from ever abrogating states' sovereign immunity under any of its Article I powers, the panel interpreted The Federalist No. 81 and No. 32 to distinguish bankruptcy, along with naturalization, from the rest of the Article I powers. See Hood, 262 B.R. at 417-419. The panel noted that, with respect to bankruptcy and naturalization, the Constitution granted Congress the power to establish "uniform Laws," U.S. Const. Art. I, § 8, cl. 4 (emphasis added), not mere laws. Hood, 262 B.R. at 417. According to the panel, The Federalist No. 32 shows that Congress's power to make uniform laws required states to surrender their own power to make such laws and thus an important degree of their sovereignty. Id. at 418-19. Because limits on sovereignty are by their very nature limits on sovereign immunity, the panel concluded that Congress's power to make laws on bankruptcy carries with it the power to abrogate states' sovereign immunity. Id. Congress clearly exercised that power in 11 U.S.C. § 106(a), which specifically abrogated the states' sovereign immunity with respect to actions under § 523.

TSAC timely appealed. We have jurisdiction under 28 U.S.C. § 158 and Federal Rule of Appellate Procedure 6. We review the decision of the bankruptcy court directly, reviewing its factual findings for clear error and its legal conclusions de novo. Harker v. Troutman (In re Troutman Enters.), 286 F.3d 359, 363 (6th Cir. 2002).


Until 1976, a debtor could discharge his or her student loan debts in ordinary bankruptcy proceedings, whether or not the creditor was a state or state agency. If a state wished to assert an interest in a debtor's assets, the state had to file a claim, thereby waiving its sovereign immunity under New York v. Irving Trust Co., 288 U.S. 329, 333, 53 S.Ct. 389, 77 L.Ed. 815 (1933). In the Education Amendments of 1976, however, Congress gave public entities that issued student loans a significant benefit: Congress prohibited the discharge of student loan debts in ordinary, non-adversary bankruptcy proceedings unless the loan had been in repayment for more than five years. For all loans that had been in repayment for less than five years, however, Congress prohibited discharge unless the debtor initiated a separate adversary proceeding and demonstrated that repaying the state would "impose an undue hardship." Education Amendments of 1976, Pub.L. No. 94-482, § 439A(a), 90 Stat.2081, 2141 (1976) (codified at 20 U.S.C. § 1087-3 (1976)) (repealed in 1978 and replaced with current 11 U.S.C. § 523(a)(8)). Having received the benefit of a special adversary proceeding that makes it more difficult for debtors to discharge their student loan debts, TSAC here seeks to exploit that benefit by asserting its sovereign immunity and preventing discharge altogether. In other words, TSAC asks if it can have its cake and eat it, too. We conclude that it cannot.

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

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by Citizens or Subjects of any Foreign State.

U.S. Const, amend XL This bar to federal jurisdiction also extends to suits against a state by its own citizens. See Hans v. Louisiana, 134 U.S. 1, 10, 10 S.Ct. 504, 33 L.Ed. 842 (1890). Thus private suits against states may proceed only if the state waives its sovereign immunity or if Congress, acting pursuant to a valid constitutional authority, abrogates the state's sovereign immunity.

A. Waiver of Sovereign Immunity

At oral argument, for the first time in these proceedings, Hood suggested that TSAC may have waived its sovereign immunity; in a subsequent letter brief to the court, Hood suggested that material not appearing in the Bankruptcy Court's docket sheet demonstrated that TSAC had in fact waived its sovereign immunity. Specifically, Hood argues that TSAC's sovereign immunity was waived when Sallie Mae, the initial creditor for Hood's student loans, submitted a proof of claim in Hood's original, non-adversary discharge proceeding and assigned its proof of claim to TSAC. Neither TSAC nor Sallie Mae took any further action on the claim in that proceeding, and the proof of claim was never entered on the court's docket sheet.

Hood waived this argument by failing to raise it before the Bankruptcy Court, the Bankruptcy Appellate Panel, or in her briefs before this court. " 'It is well-settled that this court will not consider arguments raised for the first time on appeal unless our failure to consider the issue will result in a plain miscarriage of justice.'" Overstreet v. Lexington-Fayette Urban County Gov't, 305 F.3d 566, 578 (6th Cir. 2002) (quoting Bailey v. Floyd County Bd. of Educ, 106 F.3d 135, 143 (6th Cir. 1997)). None of the circumstances that occasionally justify abandoning this usual rule are present here. As an initial matter, failing to consider Hood's waived argument hardly results in a plain miscarriage of justice; indeed, Judge Kennedy's consideration of the issue that was waived leads her to the same conclusion that we reach on the issue that was properly preserved. Nor do we believe that the issue "is presented with sufficient clarity and completeness" and that "its resolution will materially advance the progress of . . . already protracted litigation" such that it warrants special consideration under Pinney Dock & Transport Co. v. Penn Central Corp., 838 F.2d 1445, 1461 (6th Cir. ), cert. denied, 488 U.S. 880, 109 S.Ct. 196, 102 L.Ed.2d 166 (1988). To the contrary, resolution of the waiver issue no more advances the progress of this litigation than does resolution of the abrogation issue, and resolution of the waiver issue requires reliance on extra-record evidence regarding the significance of an undocketed proof of claim that Sallie Mae filed after its officer had executed a document assigning its interest to TSAC. See also Wright v. Holbrook, 794 F.2d 1152, 1156 (6th Cir. 1986) (refusing to hear an argument first raised in a reply brief on appeal and noting that consideration of such arguments is inappropriate "when resolution of the issue is not obvious").

The concurring opinion would nonetheless have us rule on the waiver issue in order to avoid addressing the abrogation question. However, in an effort to avoid ruling on one constitutional question, Judge Kennedy is forced to address another: she rules that a state may waive its sovereign immunity simply by doing nothing. That is, the concurring opinion concludes that Sallie Mae waived Tennessee's sovereign immunity when Sallie Mae assigned a proof of claim to TSAC and the...

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