Hoffman v. Connecticut Department of Income Maintenance

• Decision Date: 23 June 1989
• Docket Number: No. 88-412,88-412
• Citation: 109 S.Ct. 2818,106 L.Ed.2d 76,492 U.S. 96
• Parties: Martin W. HOFFMAN, Trustee, Petitioner v. CONNECTICUT DEPARTMENT OF INCOME MAINTENANCE et al
• Court: U.S. Supreme Court

492 U.S. 96

109 S.Ct. 2818

106 L.Ed.2d 76

Martin W. HOFFMAN, Trustee, Petitioner

v CONNECTICUT DEPARTMENT OF INCOME MAINTENANCE et al.

No. 88-412.

Argued April 19, 1989.

Decided June 23, 1989.

Syllabus

Section 106(c) of the Bankruptcy Code provides that "notwithstanding any assertion of sovereign immunity" any provision of the Code that contains " 'credi or,' 'entity,' or 'governmental unit' applies to governmental units," § 106(c)(1); and that "a determination by the court of an issue arising under such a provision binds governmental units," § 106(c)(2). Petitioner Hoffman, the bankruptcy trustee in two unrelated Chapter 7 proceedings, filed separate adversarial proceedings in the Bankruptcy Court. One was a "turnover" proceeding under § 542(b) against respondent Connecticut Department of Income Maintenance to recover Medicaid payments owed for services rendered by a bankrupt convalescence home. The other, filed against respondent Connecticut Department of Revenue Services, sought under § 547(b) to avoid the payment of state taxes, interest, and penalties as a preference and to recover an amount already paid. Respondents moved to dismiss both actions as barred by the Eleventh Amendment. The Bankruptcy Court denied the motions on the ground that Congress, in enacting § 106(c), had abrogated the States' Eleventh Amendment immunity from actions under §§ 542(b) and 547(b), which contain the "trigger" words enumerated in § 106(c)(1), and that Congress had authority to do so under the Bankruptcy Clause of the Constitution. The state respondents appealed to the District Court, and respondent United States intervened. The District Court reversed without reaching the issue of congressional authority. The Court of Appeals affirmed, concluding that § 106(c)'s plain language abrogates sovereign immunity only to the extent necessary to determine a State's rights in the debtor's estate and does not abrogate such immunity from recovery of an avoided preferential transfer of money or from a turnover proceeding.

Held: The judgment is affirmed.

850 F.2d 50 (CA2, 1988), affirmed.

Justice WHITE, joined by THE CHIEF JUSTICE, Justice O'CONNOR, and Justice KENNEDY, concluded that in enacting § 106(c) Congress did not abrogate the Eleventh Amendment immunity of the States. Congress has not made an intention to abrogate unmistakably clear in the provision's language. The narrow scope of the waivers of sovereign im- munity as to certain particular claims in §§ 106(a) and (b) make it unlikely that Congress adopted in § 106(c) a broad abrogation of immunity making States subject to all provisions of the Code containing any of the trigger words. If it did, § 106(c) would apply to over 100 Code provisions. Section 106(c)(2), joined to subsection (c)(1) by the conjunction "and," narrows the type of relief to which the section applies, since, unlike §§ 106(a) and (b), it does not provide an express authorization for monetary recovery from the States. Thus, a State that files no proof of claim would be bound, like other creditors, by a discharge of debts, including unpaid taxes, but would not be subject to monetary recovery. Under this construction, the language "notwithstanding any assertion of sovereign immunity" waives the immunity of the Federal Government so that it is bound by the Bankruptcy Court's determination of issues even when it did not appear and subject itself to such court's jurisdiction. In contrast, under petitioner's argument that the sections containing the trigger words supply the authorization for monetary recovery, § 106(c) would have exactly the same effect if subsection (c)(2) had been omitted. This Court is not persuaded that the use of the word "determine" in the Code's jurisdictional provision, 28 U.S.C. § 157(b)(1), is to the contrary. That provision authorizes bankruptcy judges to determine "cases" and "proceedings," not issues, and to "enter appropriate orders and judgments," not merely to bind governmental units by their determinations. Petitioner's reliance on § 106(c)'s legislative history and the policies underlying the Bankruptcy Code is also misplaced, since they are not based on the text of the statute and thus cannot be used to determine whether Congress intended to abrogate the Eleventh Amendment. Pp. 100-104.

Justice SCALIA, although concluding that petitioner's actions are barred by the Eleventh Amendment, would affirm the Court of Appeals' judgment on the ground that Congress had no power to abrogate the States' Eleventh Amendment immunity. It makes no sense to affirm the constitutional principle that the judicial power of the United States does not extend to a suit directly against a State by one of its citizens unless the State itself consents to be sued and to hold at the same time that Congress can override the principle by statute in the exercise of its Article I powers. P. 105.

WHITE, J., announced the judgment of the Court and delivered an opinion, in which REHNQUIST, C.J., and O'CONNOR and KENNEDY, JJ., joined. O'CONNOR, J., filed a concurring opinion, post, p. 105. SCALIA, J., filed an opinion concurring in the judgment, post, p. 105. MARSHALL, J., filed a dissenting opinion, in which BRENNAN, BLACKMUN, and STEVENS, JJ. joined, post, p. 106. STEVENS, J., filed a dissenting opinion, in which BLACKMUN, J., joined, post, p. 111.

Martin W. Hoffman, Hartford, Conn., for petitioner.

Thomas W. Merrill, Washington, D.C., for federal respondent.

Clarine Nardi Riddle, for state respondent.

Justice WHITE announced the judgment of the Court and delivered an opinion in which THE CHIEF JUSTICE, Justice O'CONNOR, and Justice KENNEDY join.

The issue presented by this case is whether § 106(c) of the Bankruptcy Code, 11 U.S.C. § 106(c), authorizes a bankruptcy court to issue a money judgment against a State that has not filed a proof of claim in the bankruptcy proceeding.

Petitioner Martin W. Hoffman is the bankruptcy trustee for Willington Convalescent Home, Inc. (Willington), and Edward Zera in two unrelated Chapter 7 proceedings. On behalf of Willington, he filed an adversarial proceeding in United States Bankruptcy Court—a "turnover" proceeding under 11 U.S.C. § 542(b) against respondent Connecticut Department of Income Maintenance. Petitioner sought to recover $64,010.24 in payments owed to Willington for services it had rendered during March 1983 under its Medicaid contract with Connecticut. Willington closed in April 1983. At that time, it owed respondent $121,408 for past Medicaid overpayments that Willington had received, but respondent filed no proof of claim in the Chapter 7 proceeding.

Petitioner likewise filed an adversarial proceeding in United States Bankruptcy Court on behalf of Edward Zera against respondent Connecticut Department of Revenue Services. Zera owed the State of Connecticut unpaid taxes, penalties, and interest, and in the month prior to Zera's filing for bankruptcy the Revenue Department had issued a tax warrant resulting in a payment of $2,100.62. Petitioner sought to avoid the payment as a preference and recover the amount paid. See 11 U.S.C. § 547(b).

Respondents moved to dismiss both actions as barred by the Eleventh Amendment. In each case the Bankruptcy Court denied the motions to dismiss, reasoning that Congress in § 106(c) had abrogated the States' Eleventh Amendment immunity from actions under §§ 542(b) and 547(b) of the Bankruptcy Code and that Congress had authority to do so under the Bankruptcy Clause of the United States Constitution, Art. I, § 8, cl. 4. Respondents appealed to the United States District Court, and the United States intervened because of the challenge to the constitutionality of § 106. The District Court reversed without reaching the issue of congressional authority. 72 B.R. 1002 (Conn.1987). The court held that § 106(c), when read with the other provisions of § 106, did not unequivocally abrogate Eleventh Amendment immunity.

The United States Court of Appeals for the Second Circuit affirmed the District Court. 850 F.2d 50 (1988). The Court of Appeals concluded that the plain language of § 106(c) abrogates sovereign immunity "only to the extent necessary for the bankruptcy court to determine a state's rights in the debtor's estate." Id., at 55. The section does not, according to the ourt of Appeals, abrogate a State's Eleventh Amendment immunity from recovery of an avoided preferential transfer of money or from a turnover proceeding. The Court of Appeals specifically rejected petitioner's reliance on the legislative history of § 106(c) because that expression of congressional intent was not contained in the language of the statute as required by Atascadero State Hospital v. Scanlon, 473 U.S. 234, 242, 105 S.Ct. 3142, 3147, 87 L.Ed.2d 171 (1985). Because the actions brought by petitioner were not within the scope of § 106(c), the court held that they were barred by the Eleventh Amendment.

The Second Circuit's decision conflicts with the decisions of the Third Circuit in Vazquez v. Pennsylvania Dept. of Public Welfare, 788 F.2d 130, 133, cert. denied, 479 U.S. 936, 107 S.Ct. 414, 93 L.Ed.2d 365 (1986), and the Seventh Circuit in McVey Trucking, Inc. v. Secretary of State of Illinois, 812 F.2d 311, 326-327, cert. denied, 484 U.S. 895, 108 S.Ct. 227, 98 L.Ed.2d 186 (1987). We granted certiorari to resolve the conflict, 488 U.S. 1003, 109 S.Ct. 781, 102 L.Ed.2d 773 (1989), and we now affirm.

Section 106 provides as follows:

"(a) A governmental unit is deemed to have waived sovereign immunity with respect to any claim against such governmental unit that is property of the estate and that arose out of the same transaction or occurrence out of which such governmental unit's claim arose.

"(b) There shall be offset against an allowed claim or interest of a governmental unit any claim against such governmental unit that is property of the estate.

"(c) Except as provided in subsections (a) and (b) of this section and notwithstanding...