Central Va. Community College v. Katz, 546 U.S. 356 (2006)
Primary Holding
Congress has the authority to abrogate state sovereign immunity in bankruptcy proceedings, allowing a bankruptcy trustee to pursue actions against state agencies to recover preferential transfers made by a debtor.
In the case of Central Virginia Community College v. Katz, the Supreme Court decided that Congress can allow bankruptcy trustees to take legal action against state agencies to recover money that was unfairly transferred before a company went bankrupt. This is important because it helps ensure that all creditors, including those owed money by state agencies, have a fair chance to recover what they are owed during bankruptcy proceedings. For consumers, this ruling means that if a business owes you money and has made questionable payments to state agencies before going bankrupt, there may be a way to get that money back. This case is relevant if you are a creditor dealing with a bankrupt company that has ties to state entities.
AI-generated plain-language summary to help you understand this case
In Central Virginia Community College v. Katz, the underlying dispute arose from the bankruptcy proceedings of Wallace’s Bookstores, Inc., which had previously conducted business with the petitioners, Central Virginia Community College and other Virginia institutions of higher education. After Wallace’s Bookstores filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the Eastern District of Kentucky, Bernard Katz, the court-appointed liquidating supervisor for the bankrupt estate, initiated actions to recover alleged preferential transfers made to the petitioners while the debtor was insolvent. The petitioners, asserting their sovereign immunity as state entities, filed motions to dismiss these proceedings, which were denied by the Bankruptcy Court. The procedural history of the case involved the denial of the petitioners' motions being affirmed by both the District Court and the Court of Appeals for the Sixth Circuit. The Sixth Circuit had previously determined that Congress had abrogated state sovereign immunity in bankruptcy proceedings, referencing the Supreme Court's decision in Tennessee Student Assistance Corporation v. Hood. The Supreme Court granted certiorari to address whether Congress's attempt to abrogate state sovereign immunity in the context of bankruptcy, specifically under 11 U.S.C. §106(a), was valid. Relevant background context includes the constitutional provision that grants Congress the authority to establish uniform bankruptcy laws, which has implications for state sovereign immunity. The case builds on prior Supreme Court rulings, particularly the Hood decision, which upheld the application of the Bankruptcy Code in proceedings initiated by debtors against state agencies. The Court's examination in Katz focuses on the nature of bankruptcy jurisdiction, which is fundamentally in rem, and its limited impact on state sovereignty compared to other legal jurisdictions.
Whether a bankruptcy trustee's proceeding to set aside preferential transfers made to state agencies is barred by the states' sovereign immunity.
The judgment is reversed.
- Court
- Supreme Court
- Decision Date
- October 31, 2005
- Jurisdiction
- federal
- Case Type
- landmark
- Majority Author
- Stevens
- Damages Awarded
- N/A
- Data Quality
- high
Rousey v. Jacoway, 544 U.S. 320 (2005)
Consumer LostIndividual Retirement Accounts (IRAs) can be exempted from the bankruptcy estate under 11 U.S.C. § 522(d)(10)(E), allowing debtors to retain these assets rather than having them divided among creditors.
Northern Ins. Co. of N. Y. v. Chatham County, 547 U.S. 189 (2006)
Consumer WonSovereign immunity extends to counties and municipalities, allowing them to assert immunity from suit based on the principle of state immunity, even if they do not qualify as an "arm of the State" under the Eleventh Amendment.
Marshall v. Marshall, 547 U.S. 293 (2006)
Consumer WonThe Supreme Court held that the Ninth Circuit's broad interpretation of the probate exception, which excluded federal jurisdiction over matters related to the validity of a decedent's estate planning instruments, was unwarranted and not supported by Congressional intent or prior Supreme Court decisions.
San Remo Hotel, L. P. v. City and County of San Francisco, 545 U.S. 323 (2005)
Consumer LostFederal courts cannot create an exception to the full faith and credit statute, 28 U.S.C. §1738, for claims brought under the Takings Clause of the Fifth Amendment, thereby affirming that state court decisions on takings claims must be respected in federal court.