The Yale Law Journal

May 2010

Bankruptcy as Constitutional Property: Using Statutory Entitlement Theory To Abrogate State Sovereign Immunity

Joseph Pace

119 Yale L.J. 1568 (2010). 

In the decade following Seminole Tribe’s ruling that Article I is not a grant of authority to abrogate state sovereign immunity, scholars and courts overwhelmingly agreed that the Eleventh Amendment barred Congress from subjecting states to suit in bankruptcy proceedings. The Court has since backpedaled, holding in Katz that the states ceded their sovereign immunity when they ratified the Bankruptcy Clause. Katz, however, leaves much unsettled—including whether the ratifying states intended to cede their immunity defenses to suits seeking monetary damages. There is also reason to doubt Katz’s durability: beyond the serious flaws in its reasoning, Eleventh Amendment precedents perish and reanimate with the changing composition of the Court, and mere days after Katz was handed down, Justice O’Connor, who provided the fifth vote for the majority, was replaced by Justice Alito. The prospect that Katz may be overruled or cabined has caused anxiety for scholars and practioners who convincingly argue that the bankruptcy system cannot effectively function unless the states, like private creditors, are subject to the binding jurisdiction of bankruptcy tribunals.

In an effort to insure against Katz’s rollback, this Note offers a new theory for how Congress could invoke its enforcement powers under Section 5 of the Fourteenth Amendment to authorize suits against the state for bankruptcy violations. Borrowing from the case law on statutory entitlements and procedural due process, the Note argues that like welfare, public education, and government employment, bankruptcy protections are property interests cognizable under the Due Process Clause. Because these property interests are conferred by the federal government and binding on the states, a state that tramples on an individual's bankruptcy rights in violation of federal law effects an unconstitutional deprivation of property without due process.