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Editor: Rod Sullivan
Profession: Maritime Attorney

Category: Supreme Court Rulings

Since I posted my last essay about Central Virginia Community College v. Katz, No. 04-885 (2006) I've read other commentators who have asked the question "who cares?" Shouldn't States be treated like every other creditor when it comes to the Bankruptcy Code. Maybe they should, but they've voted not to be, and that decision, in a democracy, is more important than the issue decided by this Court. Here's why.

You've heard the radio advertisement from Lending Tree.com which says "When banks compete, you win!!!" Well, the same is true with States. When States compete with each other to make the best laws, and the best policy decisions for their citizens, you win.

A State Legislative enactment represents a policy choice. In Florida, the people of the State have made a policy decision that small family farmers without mortgages should not lose their farms when they file bankruptcy. Florida permits citizens to homestead 300 acres outside of the limits of a city, or 1/4 acre inside of the city limits, and make that property free from forfeiture in bankruptcy. Florida also permits citizens to insulate certain assets, like annuities (e.g. the annuities which are meant to pay an injured person's medical expenses from the settlement of a personal injury case), from forfeiture in bankruptcy. You may not like these policy choices which Florida has made, but until the ruling in Central Virginia Community College v. Katz, No. 04-885 (2006) that was our choice.

The 11th Amendment was meant to prevent the Supreme Court from using its judicial power to overturn those policy choices by judicial decision (I was tempted to say "fiat"). The decision of the State of Georgia to refuse to pay the claims of former Loyalists after the Revolution, (you know, the decision which resulted in Chisolm v. Georgia and the passage of the 11th Amendment to the Constitution) was a policy choice made by a freely elected State Legislature. When the Supreme Court decided that it had jurisdiction to hear a case against Georgia brought by the estate of a former Loyalist, it was pure politics.

Everyone knew that the Supreme Court was going substitute the personal politics of the Justices for the democratic decision of the Georgia Legislature, and call it a "Constitutional Issue." It was a political decision dressed to look like a legal decision. The Justices of the Supreme Court were Federalists. The Assembly of the State of Georgia was dominated by Republicans. The Federalists wanted closer ties to England, the Republicans wanted closer ties to France. The Federalists wanted to pay the claims of the Loyalists, the Republicans did not.

Do you want more proof of how political that decision was? Who was the Chief Justice of the Supreme Court when the decision in Chisolm was handed down? John Jay. When the 11th Amendment was passed, who went over to England to negotiate the claims of former Loyalists? John Jay. What was the result of those negotiations? Jay's Treaty. What happened when Jay's Treaty was adopted?

After the passage of Jay's Treaty, and after it was signed into law by George Washington, Alexander Hamilton, the former Secretary of the Treasury and aid to Washington, was stoned in the streets of New York. John Jay was so unpopular that he resigned as Chief Justice of the U.S. Supreme Court and was replaced by John Rutledge, a Federalist from South Carolina. Jay said afterwards that he could have travelled the length of the country by the light of the bonfires burning him in effigy.

Why was Alexander Hamilton stoned when he wasn't on the Supreme Court? Because he had promised the people of New York that if they adopted the Constitution, this wouldn't happen--States wouldn't be hauled into federal courts to pay debts. In Federalist #81, which Hamilton authored, he said:

"'There is no color to pretend that the state governments would, by the adoption of that plan [The Constitution], be divested of the privilege of paying their own debts in their own way, free from every constraint but that which flows from the obligations of good faith. The contracts between a nation and individuals are only binding on the conscience of the sovereign, and have no pretension to a compulsive force. They confer no right of action independent of the sovereign will. To what purpose would it be to authorize suits against States for the debts they owe? How could recoveries be enforced? It is evident that it could not be done without waging war against the contracting State; and to ascribe to the federal courts by mere implication, and in destruction of a pre-existing right of the state governments, a power which would involve such a consequence, would be altogether forced and unwarrantable.'" Hans, 134 U.S., at 13, 10 S. Ct. 504, 33 L. Ed. 2d 842 (quoting The Federalist No. 81, at 549).

A few years later, the country rose up, voted John Adams and the Federalists out of office and voted Thomas Jefferson and the Republicans in.

People in this county were passionate about the Constitution back then.

If you read histories about Jay's Treaty you will see a lot of confusing errata about seizure of American ships, impressment of seamen, etc. It was all related to the claims of Loyalists. The Loyalists who had claim were inforcing them by in rem proceedings against American ships. In an in rem proceeding, property, like ships, are "arrested" in foreign ports and then sold to satisfy outstanding debts. Seamen stranded when their ship's were arrested were "pressed into service" because they were stranded in foreign countries with no means of support.

That is the history behind it, now, lets fast forward to today.

Let's look at the decision of the current Justices in Central Virginia Community College v. Katz, No. 04-885 (2006)
Who wrote the decision in the Central Virginia case? Justice Stevens, the most liberal justice on the Court. Who agreed with him? The two Democrat Justices, Ginsburg and Breyer, and other more liberal judges, Souter and O'Connor. Who dissented? Thomas, Scalia, Kennedy, and Roberts. Some justices want to centralize power in Washington, others want to diffuse power throughout the country.

The decision in Central Virginia Community College v. Katz, No. 04-885 (2006) takes power away from the States and concentrates it in the hands of the federal courts. That is what both the 10th and 11th Amendments were designed to do-prevent the consolidation of power in Washington.

That's why you should care what the Supreme Court decided in the Central Virginia Community College case.