Port of Corpus Christi Authority of Nueces County, Texas v. Sherwin Alumina Company, LLC, et al.

The Port of Corpus Christi Authority of Nueces County, Texas (the “Port Authority”), an arm of the State of Texas, owned an easement for roadway access over a portion of one of the debtors’ property. In confirming the debtors’ plan for reorganization, the Bankruptcy Court purported to divest the Port Authority of that property interest without the Port Authority’s consent and without consideration. A Fifth Circuit panel held that the Bankruptcy Court’s in rem jurisdiction over the debtors’ property allowed it to extinguish the Port Authority’s property interest burdening that res without implicating the Port Authority’s sovereign immunity. The court en banc denied rehearing by an 8 to 8 vote. The interplay between the Bankruptcy Code and state sovereign immunity has provoked sharp disagreement in the Court’s two latest cases: Central Virginia Community College v. Katz, 546 U.S. 356 (2006) (5-4); Tennessee Student Assistance Corp. v. Hood, 541 U.S. 440 (2004) (7-2). Justice Thomas dissented in both. The Question Presented is: whether a bankruptcy court’s in rem jurisdiction over a debtor’s property allows it to exercise in rem jurisdiction over the separate property of an arm of the State without that entity’s consent and without violating the Port Authority’s sovereign immunity? (i)