Zayler v. Department of Agriculture (In re Supreme Beef Processors, Inc.)

PATRICK E. HIGGINBOTHAM, Circuit Judge,

concurring:

This is not an easy case, and I offer no words to make it so. Rather, in my view, the best footing for resolution lies with its clouding uncertainty — as I will explain. At its heart the dispute is whether the FTCA selectively incorporates state tort law, extinguishing the unincorporated husk, or whether the FTCA merely waives sovereign immunity, leaving a remedy under certain conditions. To my eye, resolving that question largely decides the case. This is true because any claim brought under 106(c) must have been “property of the estate”; that is, the claim must have existed pre-petition. There is the traditional view, sovereign immunity destroys the remedy, not the cause of action.1 There is the response that the revival of previously barred state tort claims would create “property of the estate” that never existed outside of bankruptcy.

While this response arguably is question begging, it is not demonstrably wrong. Indeed, its main hurdle is the text of section 106(c) itself, which provides for an offset against the government “notwithstanding any assertion of sovereign immunity.” The argument must explain what (other than a clear waiver of immunity) these words could possibly mean. The proffered solution is more clever than grounded and mirrors our approach in Meyers ex rel. Benzing v. Texas, which held that the State of Texas waived only its immunity from suit, not its immunity from liability, when it removed a case from state to federal court.2 Likewise, the argument continues, the clear waiver expressed in section 106(c) is a waiver only of “forum immunity,” not of substantive immunity.

This solution has conceptual difficulties. As Meyers ex rel. Benzing recognized, other circuits have held that “the federal government’s sovereign immunity, unlike that of the states, is a defense to liability but not an immunity from suit.”3 The two *258 Constitutional Clauses in which the argument locates federal sovereign immunity, the Appropriations Clause and the Property Clause, support only immunity from liability.

Another, perhaps the best possible source of the federal government’s immunity from suit in its own courts is Article Ill’s grant to Congress of the power to control our jurisdiction. Early references to federal sovereign immunity agree with this reading, locating immunity in the silence of the Judiciary Act, not the text of the Constitution.4

Whatever the answer to this contested question, neither the Supreme Court nor the Bankruptcy Code “clearly distinguishes between [federal] sovereign immunity from suit and immunity from liability.” Nor does Collier on Bankruptcy support this proposition, as the opinion suggests.5 So if we are to rest decision on this useful conceptual dichotomy, we should name its source.

Even assuming away this conceptual problem and accepting two-part immunity as law, we are yet at sea. If Congress merely wanted to provide jurisdiction over FTCA claims to the Bankruptcy courts (waive forum immunity), it chose a most subtle means to make that simple purpose manifest. All other provisions waiving only forum immunity clearly sound in venue and jurisdiction.6 And the reality that if Congress intended this result, it likely would have amended 28 U.S.C. 1334 (the bankruptcy jurisdictional statute), not the substantive provisions of 11 U.S.C. 106, is troubling. Add to the mix another reality: legislative history is no friend to the argument that section 106 anticipates only that the same result prevail within Bankruptcy as would have prevailed outside of Bankruptcy. The Senate Report notes:

Section 106 provides for a limited waiver of sovereign immunity in Bankruptcy cases ---- The policy followed here is designed to achieve approximately the same result that would prevail outside of bankruptcy .... There is, however, a limited change from the result that would prevail in the absence of bankruptcy; the change is two-fold and is within Congress’ power vis-a-vis both the federal government and the states. First, the filing of a proof of claim against the estate by a governmental unit is a waiver by that governmental unit of sovereign immunity with respect to compulsory counterclaims, as defined in the federal rules of civil procedure .... Second, the estate may offset against the allowed claim of a governmental unit, up to the amount of the governmental unit’s claim, any claim that the debtor, and thus the estate, has against the governmental unit.

This Senate report suggests that Bankruptcy does indeed provide a cause of ac *259 tion for recoupment or offset that would not have been otherwise available.

So it is that the dissent’s argument that the waiver in section 106 is unequivocal has purchase, but only until that waiver is viewed within the statutory matrix. For although, in the interest of fairness, section 106 plainly exposes the government to suit when it files a claim in Bankruptcy, it is another thing to say that section 106 upsets the FTCA’s detailed statutory provisions which expressly carve out a withholding of sovereignty. It would be surprising if Congress intended to silently outflank such an important remedial statute, exposing government officials to suit for their every exercise of discretion. Immunity for the exercise of discretion has been viewed as essential to the administration of government policy: a view that sustains the judicially crafted federal common law of immunity for its employees— from qualified to absolute.

Compare this impression of the statutory matrix to the Court’s evolving section 1988 doctrine. In Sea Clammers, the Court held that the “comprehensive enforcement mechanisms” found in relevant environmental statutes implied a Congressional intent to preclude a remedy under the more general provisions of section 1983.7 Such might be the case here. Congress might have intended that the waiver in section 106 apply only generically, to claims not covered by some other and relatively explicit statutory scheme. Or, as the majority urges, Congress might have intended that the waiver provide only a forum.8 Nor is that the end of deep water.

There is force in the argument that,9 because all offsets are capped at zero recovery for the government, immunity from liability does not attach. No affirmative judgment against the public fisc can issue under section 106(c). It’s true, of course, that practically speaking a penny saved by the debtor is a penny earned. But if practical effect were the standard, then injunctions would also implicate the public fisc.

But this zero-recovery argument ultimately fails. It does not apply to section 106(b), and would create an odd statutory scheme under which a defendant could bring any state tort claim as an offset under section 106(c), but could bring only FTCA actions in recoupment under 106(b). That scheme would sorely tax the text of 106(b) and (e), and, as I have already pointed out, frustrates the larger congressional scheme.

This said, all the writings collectively make plain that ambiguity remains in the waiver of immunity. A Congressional waiver of immunity must be unequivocal.10 By the clear-statement rule, resort to legislative history, which we turn to with textual ambiguity, is foreclosed, even if it offered answers, which it does not. And it is the clear statement rule that closes this case. While the argument of the dissent is strong, the clear statement rule demands that it do more. The majority, concurring, and dissenting opinions search for definitive readings of the statutory matrix and *260 in the effort offer creative solutions that, while not fully successful, expose ambiguity. Other courts, in their search for con-cinnity, have done the same.11 And ambiguity is resolved in favor of the sovereign. Either way, and with all respect, the writings overstate their case, and move with more certainty than is warranted. Rather than creatively stretching for non-existent certainty, I would accept the uncertainty, apply the clear statement rule, and reach the same conclusion as the majority. To my eyes, my colleagues move beyond interstitial interpretation of this statutory array to the making of policy choices that ought be left to Congress.

. See, e.g., Pennhurst, 465 U.S. at 112, 104 S.Ct. 900 (noting that the "doctrine of sovereign immunity and the requirement that a plaintiff state a cause of action” should not be "confused.”).

. 410 F.3d 236 (5th Cir.2005).

.Only the Ninth Circuit has squarely held this. The Seventh Circuit's holding is more nuanced than Meyers suggests. In certain sue and be sued cases, the Supreme Court has suggested that federal immunity is an immunity from suit. See, e.g., F.D.I.C. v. Meyer, *258 510 U.S. 471, 483, 114 S.Ct. 996, 127 L.Ed.2d 308 (1994).

. Cohens v. Virginia, 19 U.S. (6 Wheat.) 264, 411-12, 5 L.Ed. 257 (1821) ("The universally received opinion is, that no suit can be commenced or prosecuted against the United States; that the judiciary act does not authorize such suits.”).

. If anything, Colliers supports the dissent, noting in section 106.06[3], "to the extent that judgment is entered under 106(b), the limitations on punitive damages of 106(a) do not apply.” This suggests that punitive damages might be available under 106(b), a suggestion which rejects the incorporation of the FTCA into 106(b) and (c).

.See, e.g., 28 U.S.C. § 1346 ("the district courts ... shall have exclusive jurisdiction of civil actions on claims against the United States ....”); 28 U.S.C.A. § 1605(a) ("A foreign state shall not be immune from the jurisdiction of courts of the United States or of the States.”).

. Middlesex County Sewerage Authority v. National Sea Clammers Association, 453 U.S. 1, 20-21, 101 S.Ct. 2615, 69 L.Ed.2d 435 (1981).

. See Chrome Plate, Inc. v. District Director of Internal Revenue, 442 F.Supp. 1023 (a pre-waiver case that forced a bankruptcy trustee to bring his valid Tucker Act counterclaim in the Court of Claims).

. Recall that Congress has waived sovereign immunity from actions in federal courts (not state courts) seeking relief other that money damages. 5 U.S.C. § 702.

. Lane v. Pena, 518 U.S. 187, 116 S.Ct. 2092, 135 L.Ed.2d 486 (1996).

. See, e.g., Ashbrook v. Block, 917 F.2d 918, 924 (6th Cir.1990) (holding that section 106 repealed by implication only the FTCA's exhaustion requirement); In re TPI Intern. Airways, Inc., 141 B.R. 512, 518 (Bkrtcy.S.D.Ga.,1992) (holding that section 106 repeals all FTCA protections except for the discretionary function exception); Anderson v. Federal Deposit Ins. Corp., 918 F.2d 1139, 1144 (4th Cir.1990) (concluding that section 106 repealed all FTCA protections).