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#1778

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF KANSAS

In Re:

IRA JACK GIFFORD, LINDA KAY GIFFORD,

DEBTOR(S)

NO. 86-41035-7

CHAPTER 7



ORDER VACATING JULY 9, 1992, ORDER AWARDING DAMAGES

AND FEES FOR CONTEMPT AGAINST THE UNITED STATES

This proceeding is before the Court on a long-pending motion to reconsider an earlier order that had awarded damages and attorney fees against the United States as a sanction for violating the discharge injunction, 11 U.S.C.A. §524(a). The United States appears by Assistant United States Attorney D. Brad Bailey. The debtors appear by counsel Frank D. Taff. The Court has reviewed the relevant pleadings and is now ready to rule.

Relying on an earlier decision concluding that the government's sovereign immunity from monetary damages had been waived for violations of the discharge injunction, In re Shafer, No. 81-40127-13, Order Finding United States in Contempt (Bankr.D.Kan. Sept. 12, 1989), the Court entered the sanctions order on July 9, 1992. The government did not file the present motion until October 19, 1992, long after the appeal time had run. The failure to appeal the order would ordinarily bar the motion. However, in September 1992, United States District Court Judge Crow reversed this Court's order in Shafer, holding that sovereign immunity had not been waived. In re Shafer, 146 B.R. 477, amended by 148 B.R. 617 (D.Kan. 1992). The Court has two questions about applying Judge Crow's decision in this case: (1) whether the absence of a waiver of sovereign immunity deprived this Court of subject matter jurisdiction to impose sanctions on the government, see 11 Wright & Miller, Fed.Prac. & Pro. Civil, §2862 (1973) (court's lack of subject-matter jurisdiction may be raised at any time and makes judgment void); and (2) if so, whether res judicata nevertheless makes this Court's erroneous sovereign immunity ruling binding on the government, 11 Wright & Miller, §2862 at 201 (court's unappealed determination that it has subject matter jurisdiction is ordinarily res judicata on that issue).

The extent of the government's sovereign immunity does define a court's subject matter jurisdiction. "It is axiomatic that the United States may not be sued without its consent and that the existence of consent is a prerequisite for jurisdiction." United States v. Mitchell, 463 U.S. 206, 212 (1983). The terms of the government's consent to be sued in any court define that court's jurisdiction to entertain the suit. United States v. Dalm, 494 U.S. 596, 608 (1990). Judge Crow has determined that sovereign immunity barred imposing a monetary sanction against the government for violating the discharge injunction. Therefore, the Court did not have subject matter jurisdiction to impose the sanction it did in this case.

Nevertheless, when a court decides the question of its subject matter jurisdiction, the general rule is that:

a court has jurisdiction to determine its own jurisdiction. . . . [A] court's determination that it has jurisdiction of the subject matter is res judicata on that issue, if the jurisdictional question actually was litigated and decided, or if a party had an opportunity to contest subject matter jurisdiction and failed to do so.

Despite the general rule, in United States v. United States Fidelity & Guaranty Co., 309 U.S. 506 (1940), the Supreme Court considered the impact of the doctrine of sovereign immunity on the rules of res judicata and concluded that sovereign immunity controls. The facts were as follows.

In a federal bankruptcy reorganization proceeding in Missouri, the United States filed a claim for royalties on behalf of certain Indian Nations, and the debtor cross-claimed for credits against the Nations. The district court determined the amount of the Nations' claim, awarded the debtor credits for more, and entered a judgment for the debtor to recover the balance. No appeal was ever taken. Later, when the United States sued a bond company for the same royalties involved in the Missouri case, the trustee for the Missouri debtor intervened and asserted the Missouri judgment as determinative of the United States' claim. The government responded that the Missouri judgment was void for lack of jurisdiction to the extent it gave a credit against the Indian Nations in excess of their claim against the debtor. See 309 U.S. at 510-11.

The Supreme Court agreed with the government, and held that the Missouri court's judgment was void because sovereign immunity had not been waived. 309 U.S. at 512-13. The Court added that immunity was not waived by the failure to object to the Missouri court's jurisdiction because "this immunity cannot be waived by officials." 309 U.S. at 513. That is, the Court ruled that the general rule of res judicata bows to the doctrine of sovereign immunity. Somewhat more recently, the Supreme Court cited U.S. Fidelity & Guaranty to support the statement that the doctrine of sovereign immunity may "in some contexts" override the general rule of the finality of a jurisdictional determination. Durfee v. Duke, 375 U.S. 106, 114 (1963). This Court has been unable to locate any case identifying circumstances when sovereign immunity would not control.

Consequently, the order entered in this case before Judge Crow's decision in Shafer was not within the Court's subject-matter jurisdiction, is void, and is not preserved by res judicata. The government's motion to reconsider must be granted. The July 9, 1992, order is hereby vacated.

IT IS SO ORDERED.

Dated at Topeka, Kansas, this _____ day of June, 1994.













__________________________________

JAMES A. PUSATERI

CHIEF BANKRUPTCY JUDGE

 

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