|TENNESSEE STUDENT ASSISTANCE CORPORATION V. HOOD (02-1606) 541 U.S. 440 (2004)
319 F.3d 755, affirmed and remanded.
[ Rehnquist ]
[ Souter ]
[ Thomas ]
The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader.
See United States v. Detroit Timber & Lumber Co., 200 U.S. 321, 337.
TENNESSEE STUDENT ASSISTANCE CORPORATION v. HOOD
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
Respondent Hood had an outstanding balance on student loans guaranteed by petitioner Tennessee Student Assistance Corporation (TSAC), a state entity, at the time she filed a Chapter 7 bankruptcy petition. Hoods general discharge did not cover her student loans, as she did not list them and they are only dischargeable if a bankruptcy court determines that excepting the debt from the order would be an undue hardship on the debtor, 11 U.S.C. § 523(a)(8). Hood subsequently reopened the petition, seeking an undue hardship determination. As prescribed by Federal Rules of Bankruptcy Procedure 7001(6), 7003, and 7004, she filed a complaint and, later, an amended complaint, and served them with a summons on TSAC and others. The Bankruptcy Court denied TSACs motion to dismiss the complaint for lack of jurisdiction, holding that 11 U.S.C. § 106(a) abrogated the States Eleventh Amendment sovereign immunity. The Sixth Circuit Bankruptcy Appellate Panel affirmed, as did the Sixth Circuit, which held that the Bankruptcy Clause gave Congress the authority to abrogate state sovereign immunity in §106(a). This Court granted certiorari to determine whether the Bankruptcy Clause grants Congress such authority.
Held: Because the Bankruptcy Courts discharge of a student loan debt does not implicate a States Eleventh Amendment immunity, this Court does not reach the question on which certiorari was granted. Pp. 413.
(a) States may
be bound by some judicial actions without their consent. For
example, the Eleventh Amendment
does not bar federal jurisdiction over in rem admiralty
actions when the State does not possess the res.
California v. Deep Sea Research, Inc., 523 U.S. 491,
508. A debts discharge by a bankruptcy court is similarly an in rem proceeding. The court has exclusive jurisdiction over a debtors property, wherever located, and over the estate. Once debts are discharged, a creditor who did not submit a proof of claim will be unable to collect on his unsecured loans. A bankruptcy court is able to provide the debtor a fresh start, even if all of his creditors do not participate, because the courts jurisdiction is premised on the debtor and his estate, not on the creditors. Because the courts jurisdiction is premised on the res, however, a nonparticipating creditor cannot be personally liable. States, whether or not they choose to participate in the proceeding, are bound by a bankruptcy courts discharge order no less than other creditors, see, e.g., New York v. Irving Trust Co., 288 U.S. 329, 333. And when the bankruptcy courts jurisdiction over the res is unquestioned, the exercise of its in rem jurisdiction to discharge the debt does not infringe a States sovereignty. TSAC argues, however, that the individualized process by which student loan debts are discharged unconstitutionally infringes its sovereignty. If a debtor does not affirmatively secure §523(a)(8)s undue hardship determination, States choosing not to submit themselves to the courts jurisdiction might receive some benefit: The debtors personal liability on the loan may survive the discharge. TSAC misunderstands the proceedings fundamental nature when it claims that Congress, by making a student loan debt presumptively nondischargeable and singling it out for an individualized determination, has authorized a suit against a State. The bankruptcy courts jurisdiction is premised on the res, not the persona; that States were granted the presumptive benefit of nondischargeability does not alter the courts underlying authority. A debtor does not seek damages or affirmative relief from a State or subject an unwilling State to a coercive judicial process by seeking to discharge his debts. Indeed, this Court has endorsed individual determinations of States interests within the federal courts in rem jurisdiction, e.g., Deep Sea Research, supra. Although bankruptcy and admiralty are specialized areas of the law, there is no reason why the exercise of federal courts in rem bankruptcy jurisdiction is more threatening to state sovereignty than the exercise of their in rem admiralty jurisdiction. Pp. 49.
(b) With regard to the procedure used in this case, the Bankruptcy Rules require a debtor to file an adversary proceeding against the State to discharge student loan debts. While this is part of the original bankruptcy case and within the bankruptcy courts in rem jurisdiction, it requires the service of a summons and a complaint, see Rules 7001(6), 7003, and 7004. The issuance of process is normally an indignity to a States sovereignty, because its purpose is to establish personal jurisdiction; but the courts in rem jurisdiction allows it to adjudicate the debtors discharge claim without in personam jurisdiction over the State. Section 523(a)(8) does not require a summons, and absent Rule 7001(6) a debtor could proceed by motion, which would raise no constitutional concern. There is no reason why service of a summons, which in this case is indistinguishable in practical effect from a motion, should be given dispositive weight. Dismissal of the complaint is not appropriate here where the court has in rem jurisdiction and has not attempted to adjudicate any claims outside of that jurisdiction. This case is unlike an adversary proceeding by a bankruptcy trustee seeking to recover property in the States hands on the grounds that the transfer was a voidable preference. Even if this Court were to hold that Congress lacked the ability to abrogate state sovereign immunity under the Bankruptcy Clause, the Bankruptcy Court would still have authority to make the undue hardship determination Hood seeks. Thus, this Court declines to decide whether a bankruptcy courts exercise of personal jurisdiction over a State would be valid under the Eleventh Amendment. If the Bankruptcy Court on remand exceeds its in rem jurisdiction, TSAC would be free to challenge the courts authority. Pp. 1013.
319 F.3d 755, affirmed and remanded.
Rehnquist, C. J., delivered the opinion of the Court, in which Stevens, OConnor, Kennedy, Souter, Ginsburg, and Breyer, JJ., joined. Souter, J., filed a concurring opinion, in which Ginsburg, J., joined. Thomas, J., filed a dissenting opinion, in which Scalia, J., joined.