United States v. Nordic Village, Inc

• Citation: 503 U.S. 30,112 S.Ct. 1011,117 L.Ed.2d 181
• Decision Date: 25 February 1992
• Docket Number: No. 90-1629,90-1629
• Parties: UNITED STATES, Petitioner v. NORDIC VILLAGE, INC., David O. Simon, Trustee
• Court: United States Supreme Court

503 U.S. 30

112 S.Ct. 1011

117 L.Ed.2d 181

UNITED STATES, Petitioner

v NORDIC VILLAGE, INC., David O. Simon, Trustee.

No. 90-1629.

Argued Dec. 9, 1991.

Decided Feb. 25, 1992.

Syllabus

After respondent Nordic Village, Inc., filed a petition for relief under Chapter 11 of the Bankruptcy Code, one of its officers withdrew funds from the company's corporate account. He sent part of the money to the Internal Revenue Service (IRS), directing it to apply the funds against his individual tax liability, which it did. In a subsequent adversary proceeding, the Bankruptcy Court permitted Nordic Village's trustee to recover the transfer and entered a monetary judgment against the IRS. The District Court affirmed, as did the Court of Appeals, which rejected a jurisdictional defense that sovereign immunity barred the judgment.

Held:

1. Section 106(c) of the Code does not waive the United States' sovereign immunity from an action seeking monetary recovery in bankruptcy. Pp. 32-37.

(a) Hoffman v. Connecticut Dept. of Income Maintenance, 492 U.S. 96, 109 S.Ct. 2818, 106 L.Ed.2d 76, does not control this case, since the plurality and the dissent therein were evenly divided over the issue whether § 106(c) authorizes a monetary recovery against a State, and since the deciding vote of the concurrence, denying amenability to suit, rested upon the Eleventh Amendment, which is applicable only to the States. However, the plurality's reasoning is relevant and is relied on here. Pp. 32-33.

(b) Section 106(c) does not "unequivocally express" a waiver of the Government's immunity from actions for monetary relief, as is necessary for such a waiver to be effective. See, e.g., Irwin v. Department of Veterans Affairs, 498 U.S. ----, ----, 111 S.Ct. 453, 457, 112 L.Ed.2d 435. In contrast to § 106(a) and (b), which plainly waive immunity with regard to monetary relief as to specified claims, § 106(c) is susceptible of at least two plausible interpretations that do not authorize monetary relief. Legislative history has no bearing on this point, for the "unequivocal expression" of waiver must be an expression in statutory text. Hoffman, supra, 492 U.S., at 104, 109 S.Ct., at 2824. Pp. 33-37.

2. Respondent's several alternative grounds for affirming the judgment below—that 28 U.S.C. § 1334(d)'s broad jurisdictional grant provides the necessary waiver, that a bankruptcy court's in rem jurisdiction overrides sovereign immunity, and that a waiver of sovereign immunity is supported by trust law principles—are unpersuasive. Pp. 37-39.

915 F.2d 1049 (CA6 1990), reversed.

SCALIA, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and WHITE, O'CONNOR, KENNEDY, SOUTER, and THOMAS, JJ., joined. STEVENS, J., filed a dissenting opinion, in which BLACKMUN, J., joined.

Richard H. Seamon, Washington, D.C., for petitioner.

Marvin A. Sicherman, Cleveland, Ohio, for respondents.

Justice SCALIA delivered the opinion of the Court.

This case presents a narrow question: Does § 106(c) of the Bankruptcy Code waive the sovereign immunity of the United States from an action seeking monetary recovery in bankruptcy?

I

Respondent Nordic Village, Inc. filed a petition for relief under Chapter 11 of the Bankruptcy Code in March 1984. About four months later, Josef Lah, an officer and shareholder of Nordic Village, drew a $26,000 check on the company's corporate account, $20,000 of which was used to obtain a cashier's check in that amount payable to the Internal Revenue Service (IRS). Lah delivered this check to the IRS and directed it to apply the funds against his individual tax liability, which it did.

In December 1984, the trustee appointed for Nordic Village commenced an adversary proceeding in the Bankruptcy Court for the Northern District of Ohio, seeking to recover, among other transfers, the $20,000 paid by Lah to the IRS. The Bankruptcy Court permitted the recovery. The unauthorized, postpetition transfer, the court determined, could be avoided under § 549(a) and recovered from the IRS under § 550(a) of the Bankruptcy Code. It entered a judgment against the IRS in the amount of $20,000, which the district court affirmed.

A divided panel of the United States Court of Appeals for the Sixth Circuit affirmed. 915 F.2d 1049 (1990). It upheld the reasoning of the lower courts and rejected a jurisdictional defense (raised for the first time on appeal) that sovereign immunity barred the judgment entered against the Government. We granted certiorari. 501 U.S. ----, 111 S.Ct. 2823, 115 L.Ed.2d 994 (1991).

II

Section 106 of the Bankruptcy Code provides:

"(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 any assertion of sovereign immunity—

"(1) a provision of this title that contains 'creditor,' 'entity,' or 'governmental unit' applies to governmental units; and

"(2) a determination by the court of an issue arising under such a provision binds governmental units." 11 U.S.C. § 106.

Three Terms ago we construed this provision in Hoffman v. Connecticut Dept. of Income Maintenance, 492 U.S. 96, 109 S.Ct. 2818, 106 L.Ed.2d 76 (1989). The issue there was whether § 106(c) authorizes a monetary recovery against a State. We held that it does not, though the Justices supporting that judgment failed to agree as to why. A plurality of the Court determined that § 106(c) does not permit a bankruptcy court to issue mone- tary relief against a State. Id., at 102, 109 S.Ct., at 2823 (WHITE, J., joined by REHNQUIST, C.J., and O'CONNOR and KENNEDY, JJ.). That conclusion, the plurality said, was compelled by the language of § 106(c), the relationship between that subsection and the rest of the statute, and the requirement that congressional abrogation of the States' Eleventh Amendment immunity be clearly expressed. The concurrence found it unnecessary to construe the statute, concluding that Congress lacks authority under the Bankruptcy Clause to abrogate the States' immunity from money-damages actions. Id., at 105, 109 S.Ct., at 2824 (SCALIA, J., concurring in judgment). Like the Court of Appeals here, the dissent determined that the language of § 106(c), particularly that of paragraph (c)(1), supplies the necessary waiver. Id., at 106, 109 S.Ct., at 2825 (Marshall, J., joined by Brennan, BLACKMUN, and STEVENS, JJ.).

Contrary to the Government's suggestion, Hoffman does not control today's decision. It is true, to be sure, that Congress made clear in § 106 that (insofar as is within Congress's power) State and Federal Sovereigns are to be treated the same for immunity purposes. See 11 U.S.C. § 101(27) (1982 ed., Supp. II) (" 'governmental unit' means United States [and] State"). Since, however, the Court in Hoffman was evenly divided over what that treatment was as to the States; and since the deciding vote of the concurrence, denying amenability to suit, rested upon a ground (the Eleventh Amendment) applicable only to the States and not to the Federal Government, see FHA v. Burr, 309 U.S. 242, 244, 60 S.Ct. 488, 490, 84 L.Ed. 724 (1940); the holding in Hoffman has no binding force here. The separate opinions dealing with the statutory question are relevant, however, and we shall in fact rely on the reasoning of the plurality.

III

Waivers of the Government's sovereign immunity, to be effective, must be " ' "unequivocally expressed." ' " Irwin v Department of Veterans Affairs, 498 U.S. ----, ----, 111 S.Ct. 453, 457, 112 L.Ed.2d 435 (1990) (quoting United States v. Mitchell, 445 U.S. 535, 538, 100 S.Ct. 1349, 1351, 63 L.Ed.2d 607 (1980), and United States v. King, 395 U.S. 1, 4, 89 S.Ct. 1501, 1503, 23 L.Ed.2d 52 (1969)). Contrary to respondent's suggestion, moreover, they are not generally to be "liberally construed." We have on occasion narrowly construed exceptions to waivers of sovereign immunity where that was consistent with Congress's clear intent, as in the context of the "sweeping language" of the Federal Tort Claims Act, United States v. Yellow Cab Co., 340 U.S. 543, 547, 71 S.Ct. 399, 402, 95 L.Ed. 523 (1951), see, e.g., id., at 554-555, 71 S.Ct., at 406-407, Block v. Neal, 460 U.S. 289, 298, 103 S.Ct. 1089, 1094, 75 L.Ed.2d 67 (1983), United States v. Aetna Casualty & Surety Co., 338 U.S. 366, 383, 70 S.Ct. 207, 216, 94 L.Ed. 171 (1949), or as in the context of equally broad "sue and be sued" clauses, see, e.g., Franchise Tax Board of California v. United States Postal Service, 467 U.S. 512, 517-519, 104 S.Ct. 2549, 2552-2553, 81 L.Ed.2d 446 (1984), FHA v. Burr, supra, 309 U.S., at 245, 60 S.Ct., at 490. These cases do not, however, eradicate the traditional principle that the Government's consent to be sued "must be 'construed strictly in favor of the sovereign,' McMahon v. United States, 342 U.S. 25, 27 [72 S.Ct. 17, 19, 96 L.Ed. 26] (1951), and not 'enlarge[d] . . . beyond what the language requires,' " Ruckelhaus v. Sierra Club, 463 U.S. 680, 685, 103 S.Ct. 3274, 3278, 77 L.Ed.2d 938 (1983) (quoting Eastern Transp. Co. v. United States, 272 U.S. 675, 686, 47 S.Ct. 289, 291, 71 L.Ed. 472 (1927)), a rule of construction that we have had occasion to reaffirm once already this Term, see Ardestani v. INS, 502 U.S. ----, ---- - ----, 112 S.Ct. 515, ---- - ----, 116 L.Ed.2d 496 (1991).

Subsections (a) and (b) of § 106 meet this "unequivocal expression" requirement with respect to monetary liability. Addressing "claim[s]," which the Code defines as "right[s] to payment," 11 U.S.C. § 101(4)(A), they plainly waive sovereign immunity with regard to monetary relief in two settings: compulsory...