California State Lands Commission v. Eugene Davis, Liquidating Trustee of the Venoco Liquidating Trust, et al.

In Central Virginia Community College v. Katz, 546 U.S. 356 (2006), this Court held that the States’ ratification of the Bankruptcy Clause operated as a limited consent to suit in the bankruptcy courts. The scope of this “limited” consent to suit was “chiefly” to “a narrow jurisdiction exercised in bankruptcy proceedings . . . in rem—a narrow jurisdiction that does not implicate state sovereignty to nearly the same degree as other kinds of jurisdiction” and to “proceedings necessary to effectuate the in rem jurisdiction of the bankruptcy courts.” 546 U.S. at 378. In the fifteen years since Katz, the Court has not defined this limited waiver of sovereign immunity. Much less has it had occasion to apply Katz to a proceeding as far removed from a bankruptcy court’s jurisdiction as this one. In this case, a liquidating trustee has brought a claim against the California State Lands Commission (the “Commission”) for inverse condemnation of land located in California and held in a post-confirmation liquidating trust. The inverse condemnation is alleged to have commenced post-confirmation—after the property at issue had been transferred out of the debtors’ estate and into the trust—and is premised on actions taken to prevent pollutant releases which present a substantial risk to the public health, safety and the environment. The questions presented are:

1. Whether the States’ consent to suit in the bankruptcy courts, found to exist in Katz, reaches a QUESTIONS PRESENTED—Continued suit brought against a State, after the effective date of a debtor’s plan of liquidation, seeking money damages from a State treasury on a claim that does not arise under federal bankruptcy law, insolvency law, or a claim that was historically brought “as a core aspect of the administration of bankruptcy estates.” 546 U.S. at 372.

2. Whether this Court should reconsider Central Virginia Community College v. Katz.