Tennessee Student Assistance Corporation v. Hood

PETITIONER: Tennessee Student Assistance Corporation
RESPONDENT: Pamela L. Hood
LOCATION: Polk County Courthouse

DOCKET NO.: 02-1606
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: United States Court of Appeals for the Sixth Circuit

CITATION: 541 US 440 (2004)
GRANTED: Sep 30, 2003
ARGUED: Mar 01, 2004
DECIDED: May 17, 2004

ADVOCATES:
Associate Solicitor General - for petitioner
Daryl J. Brand - argued the cause for Petitioner
Leonard H. Gerson - argued the cause and filed a brief for respondent
Leonard H. Gerson - argued the cause for Respondent

Facts of the case

Pamela Hood had an outstanding debt to the Tennessee Student Assistance Corporation, a loan-granting institution established by the state, when she filed for bankruptcy. The state objected to her request that the debt be forgiven ("discharged" in the terms of bankruptcy law) by the federal bankruptcy court, arguing that to discharge the debt would violate the state's sovereign immunity (that is, its right not to be sued). Hood countered that the Federal Rules of Bankruptcy Procedure allow student loan debts to be discharged if the bankruptcy filer can demonstrate that they will suffer "undue hardship" if the debt is not forgiven, and that this congressional permission is a constitutional waiver of state sovereign immunity because it falls under the power granted to Congress by the Bankruptcy Clause (Article I, Section 8 of the U.S. Constitution).

The bankruptcy court sided with Hood, finding that Congress had acted constitutionally in waiving the states' sovereign immunity. The Sixth Circuit Bankruptcy Appellate Panel affirmed, as did a normal panel of the Sixth Circuit.

Question

Does the Bankruptcy Clause (Article I Section 8 of the U.S. Constitution) give Congress the power to waive a state's sovereign immunity in matters pertaining a federal bankruptcy court's forgiveness of debt owed to the state?

Media for Tennessee Student Assistance Corporation v. Hood

Audio Transcription for Oral Argument - March 01, 2004 in Tennessee Student Assistance Corporation v. Hood

Audio Transcription for Opinion Announcement - May 17, 2004 in Tennessee Student Assistance Corporation v. Hood

William H. Rehnquist:

I have the opinion of the Court to announce in No. 02-1606, Tennessee Student Assistance Corporation versus Hood.

The respondent here, Pamela Hood signed promissory notes for educational loans guaranteed by the petitioner, the Tennessee Student Assistance Corporation, TSAC for short, a governmental corporation.

Later, she filed a no-asset Chapter 7 bankruptcy petition in the United States Bankruptcy Court in Tennessee.

She was granted a general discharge.

Hood did not list her student loans in the bankruptcy proceeding and thus, under the Bankruptcy Code, the general discharge did not cover them.

Hood later reopened her bankruptcy petition for the limited purpose of seeking a determination by the Bankruptcy Court that her student loans were dischargeable as an undo hardship pursuant to provision of federal law.

As prescribed by the rules of bankruptcy procedure, Hood filed an adversary proceeding which was commenced by the service of a complaint and a summons of TSAC.

In response, TSAC filed a motion to dismiss the complaint for lack of jurisdiction asserting Eleventh amendment sovereign immunity.

The Bankruptcy Court denied the motion holding that Section 106 Act was okay.

The Bankruptcy Appellate Panel of the Sixth Circuit of the United States Court of Appeals for the Sixth Circuit affirmed on substantially the same grounds.

We granted certiorari and now affirm the judgment of the Court of Appeals but on different grounds.

Although the Eleventh Amendment generally precludes private suits against unconsenting states, states are not immune from all judicial actions.

Our cases indicate that at least where the Bankruptcy Court’s jurisdiction over the Reese is unquestioned, the exercise of its in rem jurisdiction to discharge a debt does not infringue state sovereignty that student loan debt is presumably non-dischargeable and requires an individualized adjudication, it does not alter the jurisdiction of the court.

Indeed, we have previously endorsed individualized determination of state’s interest within the Federal Courts in rem jurisdiction, as the undo hardship determination sought by Hood, in this case, falls within the Bankruptcy Court’s in rem jurisdiction.

We hold it is not a suit against the state for purposes of the Eleventh Amendment.

So, even if we were to hold that Congress lacked the power to abrogate state sovereign immunity under the bankruptcy clause as TSAC urges us to do, the Bankruptcy Court would still have the authority to make the undo hardship determination sought by Hood.

We therefore, decline to decide whether a Bankruptcy Court’s exercise of personal jurisdiction over a state would be valid under the Eleventh Amendment.

The judgment of the Court of Appeals is affirmed.

Justice Souter has filed a concurring opinion in which Justice Ginsburg has joined; Justice Thomas filed a dissenting opinion in which Justice Scalia has joined.