S. 610 Chemical Weapons Convention Implementation Act of 1997

To implement the obligations of the United States under the Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and on Their Destruction, known as `the Chemical Weapons Convention' and opened for signature and signed by the United States on January 13, 1993.
MEMORANDUM

Re: Section 603 of Chemical Weapons Convention Implementation
Act

Editor's Note:

Other Commentary on Section 603 of S. 610:

• Big Changes in Stay Exemptions
  Brewing: The Chemical Weapons Convention Implementation Act of 1997, a criticism of the
  proposal by Prof. Bruce A. Markell, June 25, 1997
• Brewing a Tempest in a
  Teapot: A Response to Professor Markell, in support of the proposal by Karen Cordry, July
  1, 1997
• Memorandum to Sen.
  Grassley in support of the proposal prepared by Heidi Heitkamp, June 23, 1997
• A response to Karen
  Cordry by Prof. Markell Includes proposed section

  addressing automatic stay concerns of S. 610

  , July 1997
• A response to Prof.
  Markell by Karen Cordry, July 18, 1997
• Memorandum prepared by
  the ABI, June 1997

Also included in this response: A letter to Rep. Lee H. Hamilton
and a proposed section addressing concerns regarding the automatic
stay.

Karen Cordry has written a spirited defense of proposed revisions to the exemptions from the
automatic stay. I have the following brief points in reply:

• I fully support exemptions to the stay for chemical weapons teams. That, however is not
  the
  issue.
• There are two types of issues that divide Ms. Cordry and me: process issues; and
  substantive
  issues.
• The process issues involve how we should go about amending the Bankruptcy Code. I
  do
  not believe that lobbyist-supported and lobbyist-drafted language should go into the Code without
  any hearings on the matter, and without giving other interested parties a chance to comment.
  Further, the National Bankruptcy
  Review Commission debated this very topic last fall, and took no action after that debate.
  The Commission revived the topic this June, but has still not acted. Thus, if Congress enacts
  Section 603, not only will the normal hearing and comment process be short-circuited, but
  Congress will ignore the deliberations of the body it created to advise it on the necessity of
  proposed changes to the Code.
• On the process issue, my colleague Douglass Boshkoff and I have written to
  Representative
  Lee Hamilton, who is the sponsor of the companion bill in the House (H.R.
  1590). We have urged him not to add language similar to Section 603 to the
  House bill, or to any final bill approved by the House. We have also drafted language which
  addresses the narrow concern presented by the Chemical Weapons Convention which could be
  used instead of Section 603. That letter is reprinted below, as well as
  the proposed alternative language. Anyone who wishes to write to
  Representative Hamilton may do so using the address on our letter.
• The substantive issue is Ms. Cordry's assertion that the changes are "inevitable" and that
  without the unfettered ability of government agencies to unilaterally seize a debtor's property "a
  civilized society cannot function." I note that the provisions at issue have been in the Code for
  almost 20 years, and the world as we know it has not ended yet.
• There is a further substantive point. The proposed language is badly drafted. The
  inclusion
  of an exception to §362(a)(6) is a key (but not only) example of the overbreadth. Section
  362(a)(6) stays any action "to collect, assess or recover a [pre-petition] claim against the debtor .
  . . ." If the bill becomes law, then a government entity could use its police or regulatory power to
  collect or recover a debt if it is doing so pursuant to its police and regulatory power. That is what
  the language says. As I stated before, I don't know what this means, but I submit that it means
  more than a "simple clarif[ication] that the extremely broad language in that section should not be
  used to bar legitimate governmental actions . . . ." And I will wager that members of Ms.
  Cordry's organization will likely say that it means more than that as well. Given that it would be
  relatively easy to draft language which specifically addresses the Chemical Weapon Convention
  concerns, one wonders why this overbroad and confusing language is being proposed.
• In addition, in Ms. Heitkamp's memorandum explaining the bill, the assertion is made, in bold type,
  that: "The proposal, however, specifically excludes the enforcement of monetary judgments from
  the police and regulatory power exception." I disagree. The relevant language states that there
  are exemptions for:
  

the commencement or continuation of an action or proceeding by a governmental unit . . .to
enforce such governmental unit's . . . police and regulatory power, including the
enforcement of a judgment other than a money judgment, obtained in an action or
proceeding by the governmental unit to enforce such governmental unit's . . . police or regulatory
power."

I do not see how this language "specifically excludes" money judgments. Indeed, it does the
opposite. Under the Code, "includes" is not limiting. Section 102(1). Thus the
bold-faced language above does not limit the general language by excluding anything. It
is
an explanatory appositive. At best, Ms. Heitkamp's statement is bad interpretation; at worst it is
dissembling.

• Ms. Cordry's response
  also seems to assume that once a state or government passes a law, of whatever type, bankruptcy
  courts must enforce it unless it is unconstitutional. That is not my understanding of the law. For
  example, bankruptcy courts can (although for good reasons they often don't) enjoin bad faith
  criminal prosecutions for writing bad checks if the purpose of that prosecution is to aid private
  recovery. See Collier on Bankruptcy ¶105.03[3][c]. I suspect a bankruptcy court
  could also apply the same reasoning (using Younger v. Harris reasoning) to a civil
  forfeiture statute that was drafted and being used for the purpose of augmenting tax coffers,
  rather than protecting the public.
• Ms. Cordry likewise raises the Supremacy and Due Process Clauses to my analysis of
  the
  Court's Seminole decision. Talking about Seminole in an abbreviated forum such
  as this is problematic, but let me try again: Seminole may (and time will tell) have two
  components: a jurisdictional bar, and a federalism overlay. Initially, if all the decision did was to
  move the dispute to state instead of federal court, I would grumble about the erosion of the goal
  of having the bankruptcy court as the single forum to resolve disputes, but I wouldn't object too
  loud. State courts are competent. But that is part of the problem. Once you get into state court,
  you are suing the sovereign that established that court. Competent state court judges will then
  notice that there are state sovereign immunity concerns, particularly with money judgments. In
  short, even if the state court has jurisdiction over the state, the state may have a complete and
  total affirmative defense: sovereign immunity. If the state has not seen fit to waive sovereign
  immunity, I think the bankrutpcy estate is in a quandry. Does it then have to go into federal court
  alleging that the failure to waive sovereign immunity is unconstitutional? Does it appeal that
  decision to the State Supreme Court? If the Eleventh Amendment means what it says, where is
  the jurisdiction for the any federal district court (or indeed, the U.S. Supreme Court) to hear the
  case against the state? How is a harmed debtor to collect? Even if my immunity analysis is
  flawed (and I hope it is) haven't we just increased the cost of proving that the state has proceeded
  unconstitutionally, thereby ensuring practical immunity for the state in cases involving amounts
  where the cost of litigation is less than the amount at issue? Especially in an area where we are
  concerned with insolvent estates, I question the wisdom of this approach.
• Finally, Ms. Cordry suggests that if the bankruptcy bar does not like civil forfeiture laws
  (which appear to be the focus of much of this debate), then they should go to Congress to get
  them changed. I agree with that suggestion. I suspect, however, that Ms. Cordry would like to
  get advance notice of the proposed changes so that she could express her organization's view to
  Congress (even though some changes are inevitable), would expect Congress to at least listen to
  agencies created to study the legislation, and would not expect to see the changes for the first
  time after they had been opportunistically tacked-on to an unrelated bill. At least I think those
  would be her expectations.

The Honorable Lee H. Hamilton,

Member, United States House of Representatives

9th Congressional District, Indiana

2314 Rayburn House Office Building

Washington, DC 20515-1409

Re: Changes to Bankruptcy Code (title 11, U.S.C.) Contained in H.R. 1590 (Chemical
Weapons Convention Implementation Act of 1997)

Dear Representative Hamilton:

We teach bankruptcy and commercial law at Indiana University School of
Law—Bloomington. We write to you in your capacity as sponsor of H.R. 1590, the
Chemical Weapons Convention Implementation Act of 1997 ("Chemical Weapons Convention.").

As you know, the Senate passed a similar bill on May 23 (S. 610), and that bill was
introduced in the House on June 10, 1997.

We write to point out that S. 610 contains a provision (Section 603) amending title 11 (the
Bankruptcy Code) in ways wholly unrelated to the needs of assuring compliance with the
Chemical Weapons Convention. One of us has written on Section 603, and we include that article
with this letter. To summarize, however, Section 603 purports to modify bankruptcy's automatic
stay—a provision necessary for orderly liquidation and efficient reorganization—to
allow entities charged with enforcing the Chemical Weapons Convention to dispense with
bankruptcy court approval for any actions taken when dealing with debtors in bankruptcy.

While it certainly does this, it does far more. In addition, it would permit federal, state and
local governments to seize or take control of any property of a debtor in bankruptcy so long as
the seizure was for "police or regulatory power," regardless of whether the
governmental entities' activity has any relation to the Chemical Weapons Convention.
This power is new, controversial and would amend a provision of title 11 that has been unchanged
since the adoption of the current Bankruptcy Code in 1978.

Although we think the proposed amendment unwise, our concerns are more fundamental.
We do not think Congress should amend the Bankruptcy Code in such a piecemeal basis. In
1994, Congress created the National Bankruptcy Review Commission in part to address this
problem, and that body debated the advisability of similar changes as recently as June 20, 1997. It
has yet to reach a consensus. Moreover, the Senate held no hearings, and as far as we know,
invited no comment beyond that of the National Association of Attorneys General who suggested
the amendment. Changes of the type proposed by Section 603, especially when the National
Bankruptcy Review Commission is debating similar changes, deserve better and wider input from
interested parties.

To the extent the bankruptcy concerns addressed by Section 603 are valid, we include a
revised section which only permits relief from the automatic stay for purposes of enforcing the
Chemical Weapons Convention. We believe this section addresses all legitimate concerns.

In summary, we urge you to resist efforts to change H.R. 1590 bill to conform to Section 603
of S. 610. To the extent that some modification of the automatic stay is necessary, we urge you
to go no further than the text we have supplied.

Thank you for your time.

Very truly yours,
Douglass Boshkoff

Robert McKinney Professor of Law (Emeritus)

Bruce A. Markell

Professor of Law