Isaac Archer

Central Virginia Community College v. KatzUnited States Supreme Court2001

FACTS:

WBI, WBC, and their subsidiaries, providers of textbooks and class materials to colleges and universities, filed a petition for federal bankruptcy under Chapter 11 of the Bankruptcy Code. Their Liquidating Supervisor, Bernard Katz, is taken to court by several Virginia state institutions of higher learning on the grounds of preferential transfers. Central Virginia Community College and other Virginia state institutions received transfers that Katz, on behalf of WBI, WBC, and others sought to recover.

LEGAL ISSUE:

The questions before the United States Supreme Court is whether a state can refuse, on an assertion of sovereign immunity, to comply with a federal bankruptcy court’s order to return a debtor’s preferential transfer.

RULE:

According to the dissenting opinion of Justice Thomas, similar to Article 1 of the Constitution, the Bankruptcy Clause does not have an easily discernible intention to abrogate state sovereign immunity. In fact, nothing in the text of the Bankruptcy Clause suggests an abrogation of limitation of the States’ sovereign immunity.

APPLICATION:

The Justice applied the rule by concluded that the adoption of the Constitution merely established federal power to legislate in the area of bankruptcy law, and does not manifest an additional intention to waive the States’ sovereign immunity against suit.

CONCLUSION:

For the foregoing reasons, the States’ maintained their sovereign immunity against the suit. Coincidently, the adoption of the Constitution merely establishes the federal power to legislate in the area of bankruptcy law.