Our Federalism Changes Course: The Supreme Court Limits State Sovereign Immunity in Bankruptcy Actions

Although sovereign immunity jurisprudence is not the most highly publicized topic of debate in the mainstream media, it has recently become a major source of contention on the Supreme Court. The flurry of sovereign immunity litigation that has reached the high court in the last decade has yielded mostly 5-4 decisions that have expanded the state\u27s ability to assert immunity as a defense. Given this trend, few could have predicted the outcome of the court\u27s decision in Central Virginia Community College v. Katz. In Katz, the 5-4 decision broke the other direction, and the court held that states had waived their immunity with regard to certain actions that arise out of laws enacted pursuant to the Bankruptcy Clause. Katz was an interesting departure from recent sovereign immunity decisions, and it provides some insight regarding recent personnel changes on the high court. Decided only four months after Chief Justice Roberts was seated and on the day of Justice O\u27Connor\u27s departure, Katz left a wake of substantial uncertainty regarding the future of state sovereign immunity. Some have predicted that if the opinion had been delayed by a few weeks, Justice O\u27Connor\u27s replacement, Justice Alito, would have joined the dissenters. Amidst this sort of speculation, it is likely that a sharply divided Supreme Court will revisit this issue in the near future, and its newest member may be called upon to decide whether Katz represents an emerging trend, a limited exception, or a dead letter. This Note argues that Katz currently represents a limited exception to the general principles of state sovereign immunity. The lack of a clear directive to the lower bankruptcy courts is likely to result in an increase in litigation and non-uniform application, which should lead the Supreme Court to reconsidered the decision in the near future. Combined with the recent change in the composition of the Court, Katz raises interesting questions regarding the sovereign immunity debate, but the long-term impact of Katz remains uncertain