In many bankruptcies, a state will be included among the creditors seeking payment from the debtor; the debtor will often, in turn, have claims against the state. In this Note, Troy McKenzie analyzes the limitations on bankruptcy court jurisdiction over claims involving states as a result of the Supreme Court’s interpretation of the Eleventh Amendment in Seminole Tribe v. Florida. He suggests that the courts and Congress still possess tools to minimize those limitations. First, he argues that the most important precedent on Eleventh Amendment sovereign immunity in bankruptcy, Gardner v. New Jersey, supports the conclusion that, when a state files a claim against a debtor, bankruptcy courts retain jurisdiction over any proceeding initiated by the debtor-whether transactionally related to the state’s claim or not-that must be resolved in order to adjudicate the state’s claim. Second, because a bankruptcy court’s ability to remedy some state violations of bankruptcy law is limited when the state has not filed a claim against the debtor, McKenzie argues that Congress should give states bankruptcy related incentives to waive their sovereign immunity in bankruptcy cases. In exchange for the preferential treatment of certain state claims afforded by the Bankruptcy Code, Congress may require states to enact a waiver of sovereign immunity in bankruptcy in the interest of securing the orderly and equitable operation of the national bankruptcy system.
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