SCOTUS issues sovereign immunity opinion on the Bankruptcy Clause

In Central Virginia Community College v. Katz, the High Court considered whether a proceeding initiated by a bankruptcy trustee to set aside preferential transfers by the debtor to state agencies is barred by sovereign immunity. The Court held that sovereign immunity is no bar because the Bankruptcy Clause reflects the States desire "to subordinate to the pressing goal of harmonizing bankruptcy law sovereign immunity defenses that might have been asserted in bankruptcy proceedings."

In so holding, the Court noted that the decision appeared to go against prior precedent:

We acknowledge that statements in both the majority and the dissenting opinions in Seminole Tribe of Fla. v. Florida, 517 U. S. 44 (1996), reflected an assumption that the holding in that case would apply to the Bankruptcy Clause. See also Hoffman v. Connecticut Dept. of Income Maintenance, 492 U. S. 96, 105 (1989) (O'CONNOR, J., concurring). Careful study and reflection have convinced us, however, that that assumption was erroneous. For the reasons stated by Chief Justice Marshall in Cohens v. Virginia, 6 Wheat. 264 (1821), we are not bound to follow our dicta in a prior case in which the point now at issue was not fully debated.

Justice Thomas entered a very forceful dissent:

Nothing in the history of the Bankruptcy Clause suggests that, by including that clause in Article I, the founding generation intended to waive the latter aspect of sovereignty. These two attributes of sovereignty often do not run togethe--and for purposes of enacting a uniform law of bankruptcy, they need not run together.

For example, Article I also empowers Congress to regulate interstate commerce and to protect copyrights and patents. These provisions, no less than the Bankruptcy Clause, were motivated by the Framers' desire for nationally uniform legislation. See James Madison, Preface to Debates in the Convention of 1787, reprinted in 3 M. Farrand, Records of the Federal Convention of 1787, pp. 539, 547-548 (1911) (hereinafter Farrand's Debates) (noting lack of national regulation of commerce and uniform bankruptcy law as defects under the Articles of Confederation); M. Farrand, The Framing of the Constitution of the United States 48 (1913) (noting that the Articles of Confederation failed to provide for uniform national regulation of naturalization, bankruptcy, copyrights, and patents). Thus, we have recognized that "[t]he need for uniformity in the construction of patent law is undoubtedly important." Florida Prepaid, 527 U. S., at 645. Nonetheless, we have refused, in addressing patent law, to give the need for uniformity the weight the majority today assigns it in the context of bankruptcy, instead recognizing that this need 'is a factor which belongs to the Article I patent-power calculus, rather than to any determination of whether a state plea of sovereign immunity deprives a patentee of property without due process of law." Ibid.