The Historical Argument for State Sovereign Immunity in Bankruptcy Proceedings

Abstract

This article addresses an anomaly in bankruptcy and sovereign immunity jurisprudence by drawing upon historical sources from America’s Founding Era and earlier. In the 2006 decision Central Virginia Community College v. Katz, the Supreme Court departed from its previous sovereign immunity decisions to hold that states lack the protection of sovereign immunity in proceedings arising under the Bankruptcy Clause. This article argues that the Katz decision unnecessarily upsets established sovereign immunity doctrine through a flawed interpretation of the Framers’ conception of the congressional bankruptcy power and state sovereign immunity in a federal system. It reveals this jurisprudential error through a detailed study of the historical development of bankruptcy law as well as the constitutional bankruptcy power’s origins, historical context, and contemporary application.