In re Barrett Refining Corp.
| Decision Date | 05 June 1998 |
| Docket Number | No. 96-10919-BH.,96-10919-BH. |
| Parties | In re BARRETT REFINING CORPORATION, Debtor. |
| Court | U.S. Bankruptcy Court — Western District of Oklahoma |
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Stephen W. Elliott and Scott C. Sublett, Kline & Kline, Oklahoma City, OK, for Barrett Refining Corporation.
Chuck D. Barlow and Betty Ruth Fox, Jackson, OK, for Mississippi Commission on Environmental Quality and Mississippi Department of Environmental Quality.
Joe E. Edwards and Joel W. Harmon, Day, Edwards, Federman, Propester & Christensen, Oklahoma City, OK, for Unsecured Creditors' Committee.
The Mississippi Commission on Environmental Quality and the Mississippi Department of Environmental Quality (hereinafter, collectively, "Mississippi") have objected to, inter alia, the jurisdiction of this court.1 The issue to be decided concerns the Eleventh Amendment of the Constitution of the United States which states:
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.
The debtor, Barrett Refining Corporation, is an Oklahoma Corporation which operated a crude oil refinery in the State of Mississippi. Mississippi brought charges against Barrett for pollution, resulting in the assessment of a demand for remediation of the pollution and fines and penalties of $750,000, which, in turn, resulted in Mississippi's claim in this court. Subsequently, Barrett filed this Chapter 11 petition in the Western District of Oklahoma.
Mississippi then filed its proof of claim for remediation of the pollution and the fines and penalties. Included in Mississippi's proof of claim was a statement that the filing was not a consent to jurisdiction of this court nor a waiver of any rights. Barrett then proposed a plan which included references to 11 U.S.C. § 106.2 This section abrogates sovereign immunity on the part of governmental units as to certain sections of the Bankruptcy Code and provides further that governmental units waive sovereign immunity by filing a proof of claim.
Barrett's proposed plan includes the following provisions concerning Mississippi: 1) the claim for remediation of the pollution is allowed priority treatment and will be paid in full and 2) all other claims by Mississippi are classified as unsecured and will receive the same treatment as that class.
The Supreme Court then decided Seminole Tribe of Florida v. Florida, 517 U.S. 44, 116 S.Ct. 1114, 134 L.Ed.2d 252 (1996), which raised several questions about state sovereign immunity and the Eleventh Amendment.
Subsequently, Mississippi filed this motion and Barrett and the Unsecured Creditors' Committee have both responded.
Mississippi makes the following assertions:
1) The fines and penalties must also be allowed the same priority treatment as the remediation claim and cannot be subordinated or discharged, and, further, this court lacks jurisdiction over Mississippi for the following reasons:
A) 11 U.S.C. § 106 is unconstitutional pursuant to Seminole; and
B) Mississippi has not waived sovereign immunity by filing a proof of claim; or
2) In the alternative, to permit Mississippi to withdraw its proof of claim, pursuant to Fed. R. Bankr.P. 3006, and for a declaration that any action by Mississippi to enforce the fines and penalties will not violate the automatic stay; or
3) In the further alternative, for this court to abstain from deciding this issue pursuant to 28 U.S.C. § 1334(c) and for the United States District Court to withdraw the reference of this case, pursuant to 28 U.S.C. § 157(d), for the following reasons:
A) The issue is not a core proceeding;
B) The issue involves matters of constitutional law, sovereign immunity, and environmental protection.
Mississippi's request to withdraw the reference has already been denied by the District Court. In its order, the Court ruled that Mississippi's motion was untimely, as it was 55 days late, and that the matter under consideration appeared to be a core proceeding. The District Court also noted that Mississippi was a claimant and that neither Barrett nor the Unsecured Creditors' Committee had asserted any claims against Mississippi. Although the District Court did not address the issue of abstention, its order specifically addressed Mississippi's grounds for requesting abstention, rejected them, and upheld the federal bankruptcy jurisdiction and the referral of this case to this court.
Mississippi's claims should be analyzed in accordance with the following questions:
1) Is 11 U.S.C. § 106 unconstitutional?
A) Is 11 U.S.C. § 106 contrary to the Eleventh Amendment?
(1) Is a bankruptcy case a "suit" under the Eleventh Amendment?
(2) Is a bankruptcy case comparable to an admiralty suit?
B) Is 11 U.S.C. § 106 constitutional in light of Seminole?
(1) Does Seminole, on its face, apply to bankruptcy cases?
(2) Is the federal statute considered in Seminole comparable to 11 U.S.C. § 106?
(3) Does Seminole apply Eleventh Amendment immunity to states in bankruptcy cases because the Bankruptcy Code is based on Article I of the Constitution?
(4) Does Seminole conflict with the position that bankruptcy cases are not suits subject to the Eleventh Amendment?
2) Did Mississippi waive sovereign immunity by filing its proof of claim and participating in the case?
A) What constitutes a waiver of state sovereign immunity under the Eleventh Amendment?
B) What constitutes a valid waiver of state sovereign immunity under 11 U.S.C. § 106?
C) How do the Eleventh Amendment and 11 U.S.C. § 106 interface?
D) Do the actions of Mississippi, including the filing of its proof of claim, constitute a valid waiver of sovereign immunity?
3) Should Mississippi be allowed to withdraw its proof of claim and, if so, what is the affect of withdrawal?
The catalyst for the enactment of the Eleventh Amendment was the decision by the Supreme Court in Chisholm v. Georgia, 2 U.S. (2 Dall.) 419, 1 L.Ed. 440 (1793). Chisholm was a suit in assumpsit (i.e., a breach of contract) by Chisholm who was the executor of a deceased citizen of South Carolina against the State of Georgia. Both Chisholm and the deceased were citizens of South Carolina. During the Revolutionary War, the deceased had provided Georgia war supplies and Georgia had not paid the debt by the time of his death. Chisholm then brought an original action in the Supreme Court. Georgia, however, refused to appear, claiming that the Supreme Court did not have jurisdiction. The Court ruled in Chisholm's favor, four to one, but withheld final judgment, providing the State of Georgia the opportunity to appear.
Justice James Wilson, one of the affirmative votes, who, as a signer of both the Declaration of Independence and the Constitution and formerly a delegate to the Federal Constitutional Convention,3 was eminently qualified to write for the Court. He presented three grounds in support of his affirmative vote. First, he explained that "sovereignty", with regard to a state and the people within the state, is such that the state is subordinate to the people. Indeed, states and governments are made to serve man. A state is merely a conglomeration of individuals. Thus, as individuals are bound by the law and subject to the jurisdiction of the courts, why should a state (merely a conglomeration of individuals) not also be bound by the laws and the jurisdiction of the courts? Id., 2 U.S. at 453-58.
Further, stated Justice Wilson, the concept of "sovereignty" necessarily involves subjects. He noted that, in the United States, there are no subjects, but, rather, there are citizens. Indeed, in the Constitution, itself, there are no references to American "subjects", "immunity", or even to "sovereignty." Thus, he concluded that in our political system there are no sovereigns. Moreover, power, which is the essence of sovereignty, rests with the and Georgia voluntarily became a part of the United States, thereby yielding its previous sovereign immunity. Therefore, with respect to the purposes of the Union, the State of Georgia is not a sovereign state. Moreover, sovereignty is a concept linked with the monarchs of Europe, to include Great Britain. There are no monarchs in the United States or in the State of Georgia. Thus, concluded Justice Wilson, sovereignty is not a principle applicable to the states and Georgia is subject to the jurisdiction of the federal courts. Id. at 453-58.
Even with regard to monarchs in other political systems in an historical context, Justice Wilson acknowledged that it was possible to bring suit against them. For example, in ancient Saxon England, it was possible to sue the king. The same was true in Prussia under Frederic, where all men were held to be equal to obtain justice. Id. at 459-61. Justice Wilson specifically responded to the argument that English law, which, at that current time, had monarchs and sovereign immunity, was the source of this concept of sovereign immunity. But that current English monarchy was a despotic government. Id. at 462. Thus, the English law was not a suitable reference or authority for and should not apply to the United States, as the United States was not nor was it intended to be a despotic government.
Justice Wilson also wrote that because the Constitution empowered the United States with forming a more perfect union, establishing justice, ensuring domestic tranquility, providing for the common defense, and securing the blessings of liberty; it was a necessary condition that the United States be vested with judicial authority and not just legislative and executive authority. And further, because ...
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...waives its right to sovereign immunity "if the state consents to the jurisdiction of the particular court." In re Barrett Ref. Corp., 221 B.R. 795, 808 (Bankr.W.D.Okla.1998). Waiver is a voluntary act "made by either invoking federal jurisdiction or by a clear declaration." McGinty v. New Y......