In Re Pamela L. Hood, Debtor. Pamela L. Hood v. Tennessee Student Assistance Corporation

319 F.3d 755, 289 B.R. 755, 49 Collier Bankr. Cas. 2d 1875, 2003 U.S. App. LEXIS 1755, 40 Bankr. Ct. Dec. (CRR) 225, 2003 WL 214962
CourtCourt of Appeals for the Sixth Circuit
DecidedFebruary 3, 2003
Docket01-5769
StatusPublished
Cited by106 cases

This text of 319 F.3d 755 (In Re Pamela L. Hood, Debtor. Pamela L. Hood v. Tennessee Student Assistance Corporation) is published on Counsel Stack Legal Research, covering Court of Appeals for the Sixth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In Re Pamela L. Hood, Debtor. Pamela L. Hood v. Tennessee Student Assistance Corporation, 319 F.3d 755, 289 B.R. 755, 49 Collier Bankr. Cas. 2d 1875, 2003 U.S. App. LEXIS 1755, 40 Bankr. Ct. Dec. (CRR) 225, 2003 WL 214962 (6th Cir. 2003).

Opinions

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.

I. BACKGROUND

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 [759]*759States 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. 82 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. 82 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).

II. ANALYSIS

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 [760]*760by Citizens or Subjects of any Foreign State.

U.S. Const, amend XI. 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.

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319 F.3d 755, 289 B.R. 755, 49 Collier Bankr. Cas. 2d 1875, 2003 U.S. App. LEXIS 1755, 40 Bankr. Ct. Dec. (CRR) 225, 2003 WL 214962, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-pamela-l-hood-debtor-pamela-l-hood-v-tennessee-student-ca6-2003.