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The Eleventh Amendment preserves the rights of states to assert immunity from suits in federal courts. However, the sovereign immunity states enjoy is not absolute. The exceptions to that immunity generally fall into three categories: a state can expressly consent to suit in federal court by voluntarily invoking jurisdiction of the federal courts; Congress can abrogate states’ immunity from suit by unequivocally expressing its intent to do so per valid constitutional authority; and, by ratifying the U.S. Constitution, the states consented to certain waivers of their sovereign immunity. Section 106 of the Bankruptcy Code sets forth a listing of bankruptcy actions that are not subject to a state’s assertion of the sovereign immunity defense. Until Central Virginia Community College v. Katz, 546 U.S. 356, 378 (2006), issues relating to sovereign immunity of states in bankruptcy cases were generally addressed under the second exception of statutory abrogation. In Katz, the U.S. Supreme Court determined that the third exception to sovereign immunity could encompass the bankruptcy clause found in Article I of the U.S. Constitution and held that the waiver extends to property of the debtor and the in rem jurisdiction of the bankruptcy court.
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Delaware District Court Could Guide Supreme Court Purdue Pharma Decision
By Michael L. Cook
A bankruptcy court properly held that derivative claims based on “piercing the corporate veil theory of liability [were] released under” a confirmed reorganization plan, but that direct “claims for negligent undertaking” were not released and “could be asserted” in state court against the debtors’ equity sponsors.
Court Caps Landlord's Bankruptcy Claim Against Lease Guarantor
By Andrew C. Kassner and Joseph N. Argentina Jr.
A big issue in real estate and retail bankruptcies, among others, involves the disposition of commercial real estate leases, given the potential magnitude of landlord damage claims under state law resulting from a tenant’s default under a long-term lease.
Delaware Bankruptcy Court Rejects Equity Holder's Challenge to Revoke Confirmation Order
By Lawrence J. Kotler
The equity owner asserted that the confirmation order previously entered by the court should be revoked based on the equity owner’s claim that value was lost due to improper sale and marketing efforts by the debtors and its professionals both pre- and post-bankruptcy and, as such, they should have been “in the money” and entitled to a distribution under the confirmed plan.
By George Williams
One of the major catalysts of the “Crypto Winter” that began in 2022 was the collapse of Terraform Labs’s native token LUNA in May 2022. Now two years and a dozen crypto-related bankruptcies later, Terraform Labs has filed for Chapter 11 protection.