In many bankruptcies, a state will be included among the creditors seeking payment from the debtor; the debtor will often, in turn, have claims against the state. In this Note, Troy McKenzie analyzes the limitations on bankruptcy court jurisdiction over claims involving states as a result of the Supreme Court’s interpretation of the Eleventh Amendment in Seminole Tribe v. Florida. He suggests that the courts and Congress still possess tools to minimize those limitations. First, he argues that the most important precedent on Eleventh Amendment sovereign immunity in bankruptcy, Gardner v. New Jersey, supports the conclusion that, when a state files a claim against a debtor, bankruptcy courts retain jurisdiction over any proceeding initiated by the debtor-whether transactionally related to the state’s claim or not-that must be resolved in order to adjudicate the state’s claim. Second, because a bankruptcy court’s ability to remedy some state violations of bankruptcy law is limited when the state has not filed a claim against the debtor, McKenzie argues that Congress should give states bankruptcy related incentives to waive their sovereign immunity in bankruptcy cases. In exchange for the preferential treatment of certain state claims afforded by the Bankruptcy Code, Congress may require states to enact a waiver of sovereign immunity in bankruptcy in the interest of securing the orderly and equitable operation of the national bankruptcy system.
Troy A. McKenzie
In recent years, aggregate litigation has moved in the direction of multidistrict litigation followed by mass settlement without certification of a class action—a form sometimes referred to as the “quasi-class action.” Driven by increased restrictions on class certification, particularly in mass tort cases, the rise of the quasi-class action has been controversial. In particular, critics object that it overempowers lawyers and devalues the consent of individual claimants in the name of achieving “closure” in litigation. This Article presents two claims.
First, the debate about the proper scope and form of aggregate litigation too frequently relies on the class action as the touchstone for legitimacy. References to the class action, however, are more often misleading than helpful. The basic assumptions behind the class action are different in degree and in kind from the reality of the quasi-class action. Overreliance on the class action as the conceptual framework for aggregation carries the significant risk of unintentionally shackling courts in their attempts to coordinate litigation. The very reason the quasi-class action emerged—the ossification of the class action model of litigation—suggests that courts and commentators should look for another reference model when assessing what is proper or improper in quasi-class actions.
Second, bankruptcy serves as a better model for judging when to use, and how to order, nonclass aggregation of mass tort litigation. The entirety of bankruptcy practice need not be imported to realize that bankruptcy may provide a useful lens for viewing aggregation more generally. That lens helps to clarify some of the most troubling concerns about the quasi-class action, such as the proper role of lawyers and the place of claimant consent. Bankruptcy serves as a superior reference model because it starts with an assumption that collective resolution is necessary but tem- pers the collective with individual and subgroup consent and with institutional structures to counterbalance the risk of excessive empowerment of lawyers or particular claimants.