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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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Seventh Circuit Applies Safe Harbor to Private Securities Transaction
By Michael L. Cook
“… [T]he term ‘securities contract’ as used in [Bankruptcy Code] §546(e) unambiguously includes contracts involving privately held securities,” The Seventh Circuit held in Petr v. BMO Harris Bank, N.A.
By Lawrence J. Kotler and Elisa Hyder
In Lafferty v. Off-Spec Solutions, the U.S. Bankruptcy Appellate Panel of the Ninth Circuit held that the discharge exceptions under Section 523(a) do not apply to corporate debtors under Subchapter V of Chapter 11 of the Bankruptcy Code.
Merchant Cash Advances Could Be More Trouble Than They’re Worth
By Joseph Pack and Jessey Krehl
As small-business owners have continued to struggle in an uncertain economy, a growing number have begun the dangerous practice of relying on merchant cash advances — essentially seeking financial shelter in a lion’s den.
Biotech Industry Bankruptcy Case Update: ‘Zymergen’ and ‘Humanigen’
By Edward E. Neiger, Marianna Udem and Joo Hee Park
This Bankruptcy Case Update focuses on the recent biotech industry bankruptcy cases of Zymergen and Humanigen.