Amicus Curiae Brief — Timothy L. Blixseth, Petitioner v. Montana Department of Revenue

No. 24-940

In the

Supreme Court of the United States

TIMOTHY L. BLIXSETH,

Petitioner,

v.

MONTANA DEPARTMENT OF REVENUE,

Respondent.

On Petition for a Writ of Certiorari to the

United States Court of A ppeals for the Ninth Circuit

AMICI CURIAE BRIEF OF THE

HON. J. RICH LEONARD (RET.) AND LAW

PROFESSORS LAURA COORDES, DIANE

LOURDES DICK, ISHAQ KUNDAWALA, NANCY

B. RAPOPORT, AND RICHARD SQUIRE

IN SUPPORT OF PETITIONER

David L. Bury, Jr.

Counsel of Record

Thomas B. Norton

E. Tate Crymes

Stone & Baxter, LLP

577 Third Street

Macon, GA 31201

(478) 750-9898

dbury@stoneandbaxter.com

Counsel for Amici Curiae

379589

A

(800) 274-3321 • (800) 359-6859

i

TABLE OF CONTENTS

Page

TABLE OF CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . i

TABLE OF CITED AUTHORITIES . . . . . . . . . . . . . . . iv

INTEREST OF AMICI CURIAE . . . . . . . . . . . . . . . . . . 1

SUMMARY OF THE ARGUMENT . . . . . . . . . . . . . . . 1

ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

I.

Independent of the Katz and § 106(a)

abrogation issues, this Court should grant

certiorari to determine the extent to

which a state waives sovereign immunity

when it files an involuntary bankruptcy

and seeks relief under the comprehensive

scheme for involuntary bankruptcy . . . . . . . . . . . 4

A. This Court regularly grants certiorari

to consider novel and impor tant

sovereign immunity waiver issues . . . . . . . . 5

B. When a state files an involuntary

p et it ion , it volu nt a r i ly i nvoke s

bankruptcy jurisdiction and waives

it s s ove r e i g n i m mu n it y i n t he

bankruptcy, at least to some extent . . . . . . . 7

C. The extent of a state’s waiver depends

on the nature of the proceeding in

which it occurs . . . . . . . . . . . . . . . . . . . . . . . . 8

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Table of Contents

Page

D. W h e n a s t a t e i n voke s § 3 0 3 ’s

comprehensive scheme for involuntary

bankruptcies, it waives its sovereign

immunity as to the entire scheme,

including § 303(i) damages . . . . . . . . . . . . . . 9

1.

Equating involuntary petitions and

proofs of claim, the Ninth Circuit

forced an incompatible claims

analysis on Montana’s petition . . . . . . . . 9

2. With its involuntary petition, a

state waives sovereign immunity

for § 303’s entire scheme, including

§ 303(i) damages . . . . . . . . . . . . . . . . . . 11

E. A state’s waiver extends, post-dismissal,

to § 303(i) damage claims . . . . . . . . . . . . . . 13

II. Given the centuries-old role of involuntary

bankruptcies, this Court should grant

cer tiorar i to clar ify that the entire

involuntary bankruptcy scheme (including

its damages provisions) is included in

Katz’s bankruptcy exception . . . . . . . . . . . . . . . . 15

III. The Ninth Circuit’s decision could be read

as sanctioning the “inconsistency, anomaly

and unfairness” that this Court sought to

prevent in Lapides, with harmful effects

in and outside of bankruptcy . . . . . . . . . . . . . . . 18

iii

Table of Contents

Page

A. The decision could position states

to undermine judicial process in

involuntary bankruptcies and position

them to do so outside of bankruptcy . . . . . 19

B. The decision could enhance states’

leverage for threatening and filing

i nvolu nt a r y p et it ion s a nd non bankruptcy litigation . . . . . . . . . . . . . . . . . . 21

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

iv

TABLE OF CITED AUTHORITIES

Page

Cases

Biomedical Patent Mgmt. Corp. v. California,

505 F.3d 1328 (Fed. Cir. 2007) . . . . . . . . . . . . . . . . . . 14

Cent. Virginia Cmty. Coll. v. Katz,

546 U.S. 356 (2006) . . . . . . . . . . . . 2, 3, 4, 15, 16, 17, 18

Chambers v. NASCO, Inc.,

501 U.S. 32 (1991) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Clark v. Barnard,

108 U.S. 436 (1883) . . . . . . . . . . . . . . . . . . . . . 3, 7, 8, 11

Coll. Sav. Bank v.

Fla. Prepaid Postsecondary Educ. Expense Bd.,

527 U.S. 666 (1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Degen v. United States,

517 U.S. 820 (1996) . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Fin. Oversight & Mgmt. Bd. v.

Cooperativa De Ahorro Y Credito Abraham Rosa

(In re Fin. Oversight & Mgmt. Bd.),

52 F.4th 465 (1st Cir. 2022) . . . . . . . . . . . . . . . . . . . . . 21

Gardner v. New Jersey,

329 U.S. 565 (1947) . . . . . . . . . . . . . . . . . . . . 3, 5, 11, 12

Gunter v. Atl. Coast Line R.R.,

200 U.S. 273 (1906) . . . . . . . . . . . . . . . . . 3, 8, 11, 12, 14

v

Cited Authorities

Page

In re Gibraltor Amusements, Ltd.,

291 F.2d 22 (2d Cir. 1961) . . . . . . . . . . . . . . . . . . . . . . 22

In re McDonald,

489 U.S. 180 (1989) . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

In re Morris,

12 B.R. 321 (Bankr. N.D. Ill. 1981) . . . . . . . . . . . . . . 16

In re Reid,

773 F.2d 945 (7th Cir. 1985) . . . . . . . . . . . . . . . . . . . . 21

Lapides v. Bd. of Regents,

535 U.S. 613 (2002) . . . . . . . . . . . . . . . 2, 3, 7, 13, 18, 19

McMillan v. Maestri (In re McMillan),

543 B.R. 808 (Bankr. N.D. Tex. 2016) . . . . . . . . . . . . 22

Miller v. Donald,

541 F.3d 1091 (11th Cir. 2008) . . . . . . . . . . . . . . . . . . 20

New Hampshire v. Ramsey,

366 F.3d 1 (1st Cir. 2004) . . . . . . . . . . . . . . . . . . . . . . 14

Pierce v. First Commer. Leasing Corp.

(In re Pierce),

No. 05-102, 2006 Bankr. LEXIS 4589

(Bankr. M.D. Ala. Oct. 24, 2006) . . . . . . . . . . . . . . . . 15

Reyes-Colón v. Banco Popular de P.R.,

110 F.4th 54 (1st Cir. 2024) . . . . . . . . . . . . . . . . . . . . . 13

vi

Cited Authorities

Page

Shepherd v. ABC,

62 F.3d 1469 (D.C. Cir. 1995) . . . . . . . . . . . . . . . . . . . 19

Stern v. Marshall,

564 U.S. 462 (2011) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

United States v. Miller,

604 U.S.

(2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

Vas-Cath Corp. v.

Curators of the Univ. of Missouri,

473 F.3d 1376 (Fed. Cir. 2007) . . . . . . . . . . . . . . . . . . 14

Wisconsin Dep’t of Corrections v. Schacht,

524 U.S. 381 (1998) . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Wiswall v. Campbell,

93 U.S. 347 (1876) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Constitutional Provisions

U.S. Const. amend. XI . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 8

Statutes, Rules and Regulations

11 U.S.C. § 106(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 5

11 U.S.C. § 303 . . . . . . . . . . . 1, 3, 4, 6, 9, 10, 12, 15, 20, 24

11 U.S.C. § 303(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

vii

Cited Authorities

Page

11 U.S.C. §§ 303(a)-(k) . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

11 U.S.C. § 303(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10, 11

11 U.S.C. § 303(b)(i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

11 U.S.C. § 303(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

11 U.S.C. § 303(i) . . . . . . . . . . 2, 9, 10, 13, 14, 15, 16, 18, 22

11 U.S.C. § 501 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

11 U.S.C. § 506 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

11 U.S.C. § 507 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

11 U.S.C. § 510 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

11 U.S.C. § 523 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

11 U.S.C. § 544 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Bankruptcy Act of 1898 . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Fed. R. Bankr. P. 1003 . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Fed. R. Bankr. P. 1004 . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Fed. R. Bankr. P. 1010 . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

viii

Cited Authorities

Page

Fed. R. Bankr. P. 1011 . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Fed. R. Bankr. P. 1011(b) . . . . . . . . . . . . . . . . . . . . . . . . . 10

Fed. R. Bankr. P. 1013 . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Fed. R. Bankr. P. 1018 . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Fed. R. Bankr. P. 3001-3022 . . . . . . . . . . . . . . . . . . . . . . 12

Other Authorities

Amir Shachmurove, Consequences of a Relic’s

Codification: The Dubious Case for Bad Faith

Dismissals of Involuntary Bankruptcy Petitions,

26 Am. Bankr. Inst. L. Rev. 115 (2018) . . . . . . . . . . . 22

Jason J. Kilborn & Adrian Walters, Involuntary

Bankr uptcy as Debt Collection: MultiJurisdictional Lessons in Choosing the

Right Tool for the Job, 87 Am. Bankr. L.J. 123

(2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16, 23

John C. McCoid, II, The Origins of Voluntary

Bankruptcy, 5 Bankr. Dev. J. 361 (1988) . . . . . . . . . 16

1

INTEREST OF AMICI CURIAE

Your amici curiae are the Hon. J. Rich Leonard (ret.)

who served as a U.S. Magistrate Judge from 1981–1992

and U.S. Bankruptcy Judge in the Eastern District of

North Carolina from 1992–2013, and now serves as the

Dean of the Norman Adrian Wiggins School of Law at

Campbell University, and Law Professors Laura Coordes

(Arizona State University, Sandra Day O’Connor College

of Law); Diane Lourdes Dick (University of Iowa College

of Law); Ishaq Kundawala (Mercer University School of

Law); Nancy B. Rapoport (William S. Boyd School of Law,

University of Nevada, Las Vegas); and Richard Squire

(Fordham Law School).1

A diverse group of nationally recognized scholars,

including some who have previously participated before

this Court as amici, they have devoted a large part of

their careers to teaching, studying, and writing about the

Bankruptcy Code’s history, structure, text, and policy

objectives. Thus, they have an interest in its interpretation

and implementation. They also have an interest in

protecting the bankruptcy system and the integrity of

the judicial process that is essential to it.

SUMMARY OF THE ARGUMENT

In 2011, the State of Montana forced Timothy Blixseth

into an involuntary bankruptcy under 11 U.S.C. § 303.

1. No counsel for a party authored the brief in whole or in part

or made a monetary contribution intended to fund the preparation

or submission of the brief. No person other than amici curiae

or counsel made such a monetary contribution. Counsel for the

parties received timely notice of amici’s intent to file this brief.

2

In 2013, the bankruptcy court dismissed Montana’s

petition because it was improper. And then, for over eleven

years, the parties litigated the dismissal and Blixseth’s

entitlement to damages under § 303(i) for the improper

filing. Reversing the Bankruptcy Appellate Panel, the

Ninth Circuit determined that, due to Montana’s sovereign

immunity, it cannot be liable for § 303(i) damages.

Blixseth is now asking this Court to consider at

least two issues. First, whether Congress, pursuant to

§ 106(a), properly abrogated states’ sovereign immunity

to § 303(i) damages. That challenging issue implicates

Cent. Virginia Cmty. Coll. v. Katz, 546 U.S. 356 (2006),

and a multi-circuit split on § 106(a)’s constitutionality.

Second, whether Montana waived its sovereign immunity

to § 303(i) damages when it initiated the involuntary

bankruptcy. That issue is easier.

Both issues present matters of first impression that

this Court has never addressed. However, amici are

less concerned about which issue this Court takes up

and more concerned that, left undisturbed, the Ninth

Circuit’s decision could be interpreted as sanctioning the

“inconsistency, anomaly and unfairness” that this Court

sought to prevent in Lapides v. Bd. of Regents, 535 U.S.

613, 620 (2002). Amici describe in Section III, infra, how

the Ninth Circuit’s decision could position states, when

they voluntarily invoke federal jurisdiction, to misuse

judicial process and obtain the benefits of substantive

federal law without its burdens.

Amici will focus on two narrow but dispositive issues

to suggest how to conform the decision to this Court’s

sovereign immunity decisions.

3

First, this Court’s Clark, Gunter, Gardner, and

Lapides decisions provide that the nature of a proceeding

determines the extent of a state’s waiver of sovereign

immunity when it voluntarily seeks relief from a federal

court under federal law. Rather than considering the

unique nature of an involuntary bankruptcy proceeding,

however, the Ninth Circuit equated proofs of claims

and involuntary petitions and, thus, imposed a claimscounterclaim limit on the waiver.

That limitation makes sense for proofs of claim and

other claims-oriented civil actions but is inapplicable to

involuntary bankruptcy proceedings. Further, § 303 is

unique because it contemplates post-petition and postdismissal damages for a debtor. Rather than stating a

claim, a state that files an involuntary petition against a

debtor waives its sovereign immunity to the full extent

necessary for a court to rule on the petition and consider

damages for an improper petition. Anything less would

violate Lapides’s prohibitions.

Second, while amici are mostly focused on waiver,

and less focused on the more difficult Katz issue, they

are puzzled that the Ninth Circuit excluded involuntary

bankruptcy and its damages provisions from Katz’s

bankruptcy exception to sovereign immunity. After

all, that exception is based on and limited to what the

Framers understood about bankruptcy at the Convention.

Because the Framers’ sole understanding about

bankruptcy was involuntary bankruptcy, amici cannot

think of a bankruptcy feature that was more critical to

the Framers than involuntary bankruptcy. Thus, just as

“those who crafted the Bankruptcy Clause would have

understood it to give Congress the power to authorize

4

courts to avoid preferential transfers and to recover the

transferred property,” Katz, 546 U.S. at 372, they would

have understood it to authorize Congress to determine

involuntary bankruptcy’s pleading requirements and

hold all petitioners accountable when they violate such

requirements.

Although amici understand that this Court is not

primarily concerned with error correction, the Ninth

Circuit’s decision is not a one-off error that is limited to

this case. It is a clear departure from this Court’s waiver

decisions, could pose problems inside and outside of

bankruptcy, and warrants review.

ARGUMENT

I.

Independent of the Katz and § 106(a) abrogation

issues, this Court should grant certiorari to

determine the extent to which a state waives

sovereign immunity when it files an involuntary

bankruptcy and seeks relief under the comprehensive

scheme for involuntary bankruptcy.

Regardless of whether this Court also addresses the

trickier issues of Katz and § 106(a)’s constitutionality,

this Court can reverse on the independent issue of

waiver. Contrary to the Ninth Circuit’s decision, when a

state chooses to file an involuntary bankruptcy petition,

it waives its sovereign immunity as to the entirety of

the comprehensive scheme for involuntary bankruptcy,

including its § 303(i) damages provisions, and not just the

parts of § 303 that benefit it.

5

A.

This Court regularly grants certiorari to

consider novel and important sovereign

immunity waiver issues.

This Court regularly considers whether and to what

extent a state has waived its sovereign immunity in

litigation, including in bankruptcy. It cannot take up every

waiver case. Rather, guided by the importance of state

and federal sovereign immunity, 2 it frequently intervenes

when (i) a new litigation waiver issue presents itself and

(ii) not intervening might sanction a departure from its

waiver decisions.

First, this case’s waiver issue is a novel issue that

this Court has never been asked to address. Most of this

Court’s waiver decisions involve states invoking federal

jurisdiction indirectly or defensively. However, this case

could be the most significant example of a state voluntarily

and directly invoking jurisdiction for its strategic benefit.

And likely because it is a matter of first impression, the

Ninth Circuit and bankruptcy court viewed the “waiver

by proof of claim” outcome in Gardner v. New Jersey, 329

U.S. 565 (1947), as an irresistible starting point for an

ultimately too-literal application of Gardner. Thus, this

waiver issue is also prone to misconstruction.

Second, this case’s waiver issue is an important one.

This Court has addressed litigation waiver in narrow

2. On March 26, 2025, this Court issued its opinion in United

States v. Miller, 604 U.S.

(2025), deciding whether § 106(a)

abrogates federal sovereign immunity for state claims under

11 U.S.C. § 544. While federal sovereign immunity analysis

is different from state sovereign immunity analysis and not

applicable here, Miller further illustrates that sovereign immunity

is a critical issue for this Court.

6

bankruptcy contexts for proofs of claim, dischargeability

disputes, and preference actions. Those issues were

important enough that this Court reviewed them,

but they arose as mere subcomponents of a broader

bankruptcy process. However, this case involves § 303,

one of the Bankruptcy Code’s central, jurisdiction-making

provisions.

The issue starts by asking if a state waives sovereign

immunity when it files an involuntary petition and initiates

the bankruptcy process. It then asks whether that waiver

continues after the petition is dismissed. Typically, that

is not a novel question because dismissal usually cuts off

jurisdiction and sovereign immunity waivers. However,

that question has never been addressed in the bankruptcy

context, where dismissal is a precondition to § 303(i)

damages, a “case” can involve a myriad of “proceedings,”

and the jurisdictional rules are so different that this

Court is often asked to interpret them. See, e.g., Stern

v. Marshall, 564 U.S. 462 (2011). Thus, the issue also

asks when seemingly separate proceedings are just one

continuous proceeding under § 303.

So rather than being isolated to a subcomponent of

the bankruptcy process, the suggested waiver in this case

occurred when Montana initiated the bankruptcy process

against Blixseth and, thus, occurred at the genesis of the

court’s core subject matter jurisdiction over the case and

all of its subparts.

The issue could not be more novel or fundamental.

7

B. When a state files an involuntary petition, it

voluntarily invokes bankruptcy jurisdiction

and waives its sovereign immunity in the

bankruptcy, at least to some extent.

Montana concedes that a “limited, voluntary waiver

of its Eleventh Amendment immunity occurred with

the filing of the Involuntary Petition.” App. 95a (quoting

Montana) (internal quotations omitted). This Court has

never addressed that issue specifically. However, its

waiver decisions suggest that there would at least be

a limited waiver of sovereign immunity when a state

voluntarily invokes jurisdiction by forcing a debtor into

bankruptcy. Blixseth summarizes those waiver decisions

in his petition, but they warrant an overview here.

Long ago, this Court held that “the immunity from

suit belonging to a State . . . is a personal privilege which

it may waive at pleasure.” Clark v. Barnard, 108 U.S.

436, 447 (1883). Similarly, it reiterated that a waiver

occurs if a state “voluntarily invokes our jurisdiction”

or “makes a ‘clear declaration’ that it intends to submit

itself to our jurisdiction.” Coll. Sav. Bank v. Fla. Prepaid

Postsecondary Educ. Expense Bd., 527 U.S. 666, 675-76

(1999) (internal citations omitted). See also Lapides, 535

U.S. at 620 (waiver occurred when state “voluntarily

invoked the federal court’s jurisdiction” via removal).

However, determining the extent of the waiver

requires additional analysis.

8

C.

The extent of a state’s waiver depends on the

nature of the proceeding in which it occurs.

A state waives sovereign immunity only to the extent

that it voluntarily invokes federal court jurisdiction.

See id. at 618-19. In turn, the extent to which it invokes

jurisdiction depends on the nature of, and the issues raised

in, the proceeding.

In Clark, the state “appeared in the cause and

presented and prosecuted a claim to the fund in

controversy.” Clark, 108 U.S. at 448. Thus, it made “itself

a party to the litigation to the full extent required for its

complete determination.” Ibid. In Gunter, this Court held

that “where a State voluntarily becomes a party to a cause

. . . it will be bound thereby and cannot escape the result

of its own voluntary act by invoking the prohibitions of

the Eleventh Amendment.” Gunter v. Atl. Coast Line R.R.,

200 U.S. 273, 284 (1906) (citing Clark, 108 U.S. at 447).

Thus, a state’s waiver will be to the full extent of the

“rights” that “it submitted” for a “judicial determination.”

Ibid. That is, its waiver is only as broad as the procedural

and substantive rules and issues that it invokes when

it seeks relief. See Gardner, 329 U.S. at 573 (claimant

“must abide the consequences of [the claims allowance]

procedure”) (citing Wiswall v. Campbell, 93 U.S. 347,

351 (1876) (one “submitting himself to the jurisdiction

of the bankrupt court” is “bound by what is judicially

determined in the legitimate course of the proceeding”

and his “remedies for the purpose of this proof [of claim]

are prescribed by the law”).

9

D.

When a state invokes § 303’s comprehensive

scheme for involuntary bankruptcies, it waives

its sovereign immunity as to the entire scheme,

including § 303(i) damages.

With little analysis, the Ninth Circuit equated proofs

of claim and involuntary petitions. As a result, it failed to

consider the unique nature of an involuntary proceeding,

which submits for adjudication all issues related to the

petition, including the issue of damages for a petition that

is filed improperly.

1.

Equating involuntar y petitions and

proofs of claim, the Ninth Circuit forced

an incompatible claims analysis on

Montana’s petition.

The Ninth Circuit assumed that an involuntary

bankruptcy petition is just like a proof of claim. It could

have been influenced by the bankruptcy court’s emphasis

on proofs of claim and counterclaims. See App. 92a-93a,

95a-96a. Whatever the reason, it employed a narrow,

claims-oriented analysis.

It first observed that the “State never filed a proof of

claim, so any litigation waiver must be predicated upon

the existence of a claim arising out of the adversary

proceeding brought by the State.” 3 App. 10a. It then

characterized Montana’s involuntary petition as one

3. It was Blixseth who filed an adversary proceeding, not the

State. Presumably, then, the Ninth Circuit was looking for the

“existence of a claim arising out of the [involuntary] proceeding

brought by the State.” App. 10a.

10

merely alleging a “debt of unpaid taxes from an improper

tax deduction.” Id. 11a-12a (asking whether Blixseth had

“claims arising from the factual predicate” of Montana’s

“alleged tax deficiency” claim). See also id. 10a (Montana’s

alleged debt was a “§ 303(b) claim”).

Having reduced an involuntary petition to a statement

of a claim, it then asked whether Blixseth’s § 303(i)

damages claim was the “equivalent of a compulsory

counterclaim” to Montana’s “claim.” Ibid. It concluded

that it was not because the § 303(i) claim “cannot arise out

of the same factual predicate that supports the § 303(b)

claim.” Ibid.

Although that analysis is applicable to proofs of claims

and claims-based civil actions, it is incompatible with

involuntary proceedings. That is because a petitioner

does not state a claim when it files an involuntary petition.

First, the only effect of the petition is the commencement

of an “involuntary case” against the debtor. 11 U.S.C.

§§ 303(a)-(b). Second, if the petition is not dismissed,

then the petitioner is entitled to an “order for relief.” See

generally id. § 303 (relief limited to order for relief).4 The

order for relief only indicates that the debtor is a proper

debtor under the Bankruptcy Code.

4. See also, e.g., Fed. R. Bankr. P. 1011(b) (debtor can assert

a “claim against a petitioning creditor” only “for the purpose of

defeating the petition”).

11

Montana’s petition best illustrates how an involuntary

petition cannot state a claim. In their petition, the states

made three sworn allegations:

• “Petitioner[s] are eligible to file this petition

pursuant to 11 U.S.C. § 303 (b).”

• “The debtor is a person against whom an

order for relief may be entered under” the

Bankruptcy Code.

• “The debtor is generally not paying such

debtor’s debts as they become due, unless

such debts are the subject of a bona fide

dispute as to liability or amount.”

App. 157a.

They then “request[ed] that an order for relief be

entered against the debtor under” § 303(b), and nothing

more. Id. 158a. They also provided “creditor information,”

including the “nature” and “amount” of their claims. Ibid.

However, rather than submitting a claim for adjudication,

they provided that information solely to establish their

eligibility to file the petition.

2.

With its involuntary petition, a state

waives sovereign immunity for § 303’s

entire scheme, including § 303(i) damages.

Again, Clark, Gunter, and Gardner recognize, but

also limit, a state’s waiver of its sovereign immunity to the

full extent of the applicable procedural and substantive

rules and issues that it invokes when it seeks relief. Clark,

12

108 U.S. at 448; Gunter, 200 U.S. at 284; Gardner, 329

U.S. at 573. Thus, comparing what a claimant invokes

with a proof of claim to what a petitioner invokes with an

involuntary petition establishes that a state-petitioner

waives sovereign immunity to the full extent of § 303,

including its damages and indemnity provisions.

First, consistent with this Court’s waiver decisions,

supra, a state that files a proof of claim voluntarily

invokes bankruptcy jurisdiction and waives its sovereign

immunity to the full extent necessary for a complete

adjudication of its claim and related counterclaims and

issues. In that context, a claims focus makes sense, not

because all waivers are about claims, but because the

proceeding itself (whether a civil action or bankruptcy

claim proceeding) is all about claims. In turn, a complete

adjudication must invoke the entirety of bankruptcy’s

procedural and substantive claim rules. 5

Second, it follows by analogy that a state that files

an involuntary petition voluntarily invokes bankruptcy

jurisdiction and waives its sovereign immunity to the full

extent necessary for a complete adjudication of its petition

and related issues. In that context, a claims focus has no

place because, before the order for relief, an involuntary

bankruptcy proceeding is not about claims. It is solely

about determining whether the petition is proper. In turn,

a complete adjudication invokes all of the procedural and

substantive rules for involuntary bankruptcy, not just the

parts that benefit the state.6

5. See, e.g., §§ 501, 506, 507, 510, 523; Fed. R. Bankr. P. 30013022.

6. See, e.g., § 303(a)-(k); Fed. R. Bankr. P. 1003, 1004, 1010,

1011, 1013, 1018.

13

Just as a state-claimant should anticipate a debtor

filing counterclaims, a state-petitioner should fairly

anticipate a debtor seeking statutory damages for an

improper petition. The former is true because a proof of

claim submits the parties’ claims for adjudication. The

latter is true because an involuntary petition submits for

adjudication all issues related to the petition, including

whether statutory damages and indemnity are warranted

if a state files an improper petition.

This appeal to avoiding “inconsistency, anomaly,

and unfairness,” Lapides, 535 U.S. at 620, is stronger

for an involuntary petition than it is for a proof of claim.

When a state files a claim, it merely makes a protective

intervention in one part of a larger bankruptcy. When a

state files an involuntary petition, it creates the entire

bankruptcy case without any compulsion to do so. And it

is always in control of whether it becomes liable, either by

filing a proper petition or not filing one at all.

E. A state’s waiver extends, post-dismissal, to

§ 303(i) damage claims.

Blixseth correctly argues that a § 303(i) “claim is

simply an ancillary part of the involuntary bankruptcy

proceeding.” Pet. at 18. That issue of separateness

warrants deeper emphasis.

First, unlike in most dismissed civil actions, a

bankruptcy court will not only retain jurisdiction to enforce

core § 303(i) claims after it dismisses an involuntary

petition, but the dismissal is also a precondition to hearing

a debtor’s § 303(i) claims. See, e.g., Reyes-Colón v. Banco

Popular de P.R., 110 F.4th 54, 66 (1st Cir. 2024) (holding

14

that it is well-settled that a court has post-dismissal

jurisdiction to hear § 303(i) damages claims, regardless

of whether the court expressly retains jurisdiction in the

dismissal order).

Second, the Federal Circuit suggests how Gunter

would treat this separateness issue. It explains that in

Gunter the “disputes between the railroad and the State

were part of one continuous action, a point that was

critical to the Supreme Court’s determination that the

State could not assert immunity in the ‘later’ action.”

Biomedical Patent Mgmt. Corp. v. California, 505 F.3d

1328, 1336 (Fed. Cir. 2007) (emphasis in original).7 The

“continuous proceeding” in Gunter was the initial suit

obtaining injunctive relief against a state and the later

proceeding to enforce it. Gunter, 200 U.S. at 281, 292

(sovereign immunity not applicable to enforcement action

because court was merely “acting in a matter ancillary”

to the original case).

Thus, when a state asks a bankruptcy court to rule on

its petition, it knows that the court can dismiss its petition

without losing jurisdiction over § 303(i) claims. It follows,

then, that, when a debtor seeks § 303(i) damages via an

adversary proceeding, that is not a new or independent

action against a state. It merely arises in, is ancillary to,

7. It also cites other helpful cases. See Biomedical, 505 F.3d

at 1337-38. Vas-Cath Corp. v. Curators of the Univ. of Missouri,

473 F.3d 1376, 1382 (Fed. Cir. 2007) (waiver extends to a later

phase of a continuous proceeding); New Hampshire v. Ramsey, 366

F.3d 1, 16 (1st Cir. 2004) (waiver in an administrative proceeding

continued to court’s review of that proceeding because state

invoked “grievance procedures (knowing that those procedures

ultimately provided for federal judicial review) . . .”).

15

or is a continuation of the involuntary proceeding that the

state initiated. 8

II. Given the centuries-old role of involuntar y

bankruptcies, this Court should grant certiorari

to clarify that the entire involuntary bankruptcy

scheme (including its damages provisions) is

included in Katz’s bankruptcy exception.

This Court can correct the Ninth Circuit’s error and

avoid the policy issues addressed below by considering the

easier litigation waiver issue, supra. Amici will not, then,

dwell on Katz except to state that they are puzzled that the

Ninth Circuit excluded § 303’s comprehensive involuntary

bankruptcy scheme (including § 303(i) damages) from

Katz’s historically-justified bankruptcy exception.

In Cent. Virginia Cmty. Coll. v. Katz, 546 U.S.

356 (2006), this Court bypassed the Congressional

abrogation issue and held that “States agreed in the plan

of the Convention not to assert any sovereign immunity

defense they might have had in proceedings brought

pursuant to ‘Laws on the subject of Bankruptcies.’”

546 U.S. at 377. They did so as “necessary to effectuate

the in rem jurisdiction of the bankruptcy courts.” Id. at

378.

8. See Pierce v. First Commer. Leasing Corp. (In re Pierce),

No. 05-102, 2006 Bankr. LEXIS 4589, at *5 (Bankr. M.D. Ala. Oct.

24, 2006) (collecting many examples of debtors raising § 303(i)

claims by motion in the involuntary proceeding rather than via an

adversary proceeding). Thus, there is no meaningful difference

between the involuntary proceeding and the adversary proceeding.

16

Infor med by the Framers’ understanding of

bankruptcy at the time of the Convention, this Court

limited the sovereign immunity exception to bankruptcy’s

“[c]ritical features”: (1) “exercise of exclusive jurisdiction

over all of the debtor’s property”; (2) the “equitable

distribution of that property among the debtor’s

creditors”; and (3) the “ultimate discharge that gives the

debtor a ‘fresh start’ by releasing [it] from further liability

for old debts.” Id. at 363-64.

Focused on those features, the Ninth Circuit

determined that § 303(i) damage claims do not “effectuate”

the bankruptcy court’s exclusive jurisdiction, “concern”

property of the bankruptcy estate, or “further” the

debtor’s discharge. Id. 17a-18a. Thus, it held that Montana

enjoyed sovereign immunity against those claims. Id.

19a. As a mechanical application of Katz, the holding is

understandable.

However, if one accepts Katz’s emphasis on the

Framers’ understanding of bankruptcy, then involuntary

bankruptcy represented the entirety of their bankruptcy

understanding at the Convention. See In re Morris,

12 B.R. 321, 331 (Bankr. N.D. Ill. 1981) (until the 19th

Century, bankruptcy was always “an involuntary

proceeding brought by creditors”).9 To borrow this Court’s

characterization of preference actions in Katz, 546 U.S.

at 372, involuntary bankruptcy has been a “core aspect

of the administration of bankrupt estates since at least

9. See also Jason J. Kilborn & Adrian Walters, Involuntary

Bankruptcy as Debt Collection: Multi-Jurisdictional Lessons in

Choosing the Right Tool for the Job, 87 Am. Bankr. L.J. 123, 128

(2013); John C. McCoid, II, The Origins of Voluntary Bankruptcy,

5 Bankr. Dev. J. 361, 361 (1988).

17

the 18th century.” While its requirements varied across

centuries, the scheme always imposed pleading and other

requirements to limit creditors’ access to its remedies.

And Katz does not support picking and choosing

which of those requirements should be included. After

all, this Court did not flyspeck in Katz the individual

provisions now applicable to preference actions. Instead, it

concluded that “those who crafted the Bankruptcy Clause

would have understood it to give Congress the power to

authorize courts to avoid preferential transfers and to

recover the transferred property.” Ibid. Reworded for

§ 303, those who crafted the Bankruptcy Clause would

have understood it to authorize Congress to determine

involuntary bankruptcy’s pleading requirements and hold

state-petitioners accountable when they violated them.

Critically then, this Court did not conclude in Katz

that the states abrogated their sovereign immunity only

as to the precise statutory version of a particular “critical

feature” of bankruptcy at the Convention. Instead,

it saw abrogation at the conceptual level, even if the

concept would evolve (e.g., the general concept of in rem

jurisdiction; a bankruptcy estate; an automatic stay; a

claims allowance and distribution procedure; a discharge

and discharge challenge procedure; a preference action;

etc.). Involuntary bankruptcy was not just the core

bankruptcy concept for the Framers. At the time and for

many decades later, it was the sole source of jurisdiction

for all other critical post-petition bankruptcy features.

Finally, this Court viewed “orders directing turnover

of preferential transfers” as “ancillary to the bankruptcy

courts’ in rem jurisdiction,” and, thus, included them

18

in Katz’s bankruptcy exception. Id. at 373. By contrast,

involuntary bankruptcy was, at the time of the Convention,

the sole basis for in rem jurisdiction and ancillary

orders that further it. Thus, as a “critical feature” of

bankruptcy, involuntary bankruptcy must fall under the

Katz exception. Even today, § 303(i) damages effectuate

bankruptcy jurisdiction by better enabling courts to

protect and limit jurisdiction.

III. The Ninth Circuit’s decision could be read as

sanctioning the “inconsistency, anomaly and

unfairness” that this Court sought to prevent in

Lapides, with harmful effects in and outside of

bankruptcy.

To decide whether a state has sovereign immunity

to § 303(i) damages, this Court can consider the

Congressional abrogation issue, the litigation waiver issue,

or both issues. Amici are less concerned about which issue

this Court considers and more concerned about whether it

leaves both issues unaddressed. Lapides frames amici’s

concerns.

This Court has never been so emphatic about sovereign

immunity policy considerations than it was in Lapides. In

fact, lower courts repeatedly rely on Lapides’s principal

rationale about avoiding “inconsistency, anomaly, and

unfairness” when states raise sovereign immunity. See

Lapides, 535 U.S. at 620. Courts do so to prevent states

from using sovereign immunity unfairly. They also do so to

protect the integrity of judicial process and enforce rules

that are calibrated to ensure and limit access to courts.

Inconsistent with Lapides, the Ninth Circuit suggests

that a state can voluntarily and in its sole discretion invoke

19

the involuntary bankruptcy process to obtain its benefits

but then use sovereign immunity to shield itself from any

liability for misusing that process. It makes that suggestion

even though the process expressly contemplates statutory

liability for misuse. Thus, the decision could position states

to use sovereign immunity to “achieve unfair tactical

advantage[s]” after they invoke jurisdiction. See id. at 621

(internal quotations and citations omitted).

This Court has made sure that its rules do not position

parties to misuse them, rather than focusing on whether

parties might be prone to misusing them. Ibid (citing

Wisconsin Dep’t of Corrections v. Schacht, 524 U.S. 381,

393-94 (1998) (Kennedy, J., concurring)).

So rather than suggesting that states will misuse

sovereign immunity, per se, amici are concerned that the

Ninth Circuit’s decision could position states to do so, in

at least two ways.

A. The decision could position states to undermine

judicial process in involuntary bankruptcies

and position them to do so outside of bankruptcy.

This Court’s docket is lined with examples of litigants,

especially governmental litigants, who insist on testing

the statutory and inherent powers of federal courts to

protect the judicial process.

Through a combination of rules and inherent powers,

courts may and must “protect their integrity and prevent

abuses of the judicial process.” Shepherd v. ABC, 62 F.3d

1469, 1474 (D.C. Cir. 1995) (citing Chambers v. NASCO,

Inc., 501 U.S. 32, 46 (1991)). See also Degen v. United

20

States, 517 U.S. 820, 823 (1996) (courts “have certain

inherent authority to protect their proceedings and

judgments in the course of discharging their traditional

responsibilities”) (collecting cases); Miller v. Donald,

541 F.3d 1091, 1096 (11th Cir. 2008) (without access

conditions and restrictions on judicial process, “[f]rivolous

and vexatious law suits threaten the availability of a

well-functioning judiciary to all litigants”) (citing In re

McDonald, 489 U.S. 180, 184 (1989)).

The Ninth Circuit’s decision does not explicitly strip

bankruptcy courts of their inherent power to protect the

bankruptcy process. However, it does appear to strip them

of their statutory powers under § 303 to prevent states’

potential one-sided use of the involuntary bankruptcy

process. Relying on this decision, may a state now file an

involuntary bankruptcy case to reap all of it benefits but

then use sovereign immunity to shield itself from all of

the debtor protections that § 303 imposes, including its

pleading requirements and damages provisions?

In stripping courts of certain § 303 deterrents, the

decision could also position states to rely on sovereign

immunity to misuse judicial process in other bankruptcy

and in non-bankruptcy contexts. Even the most earnest

state could use the decision to test its immunity to

similar statutory deterrents. In fact, if states’ sovereign

immunity extends as far as the Ninth Circuit suggests,

then the decision might also position states to resist courts’

inherent powers, too.

Amici are unaware of any decision of this Court

that has permitted a state to voluntarily invoke federal

jurisdiction and then later use sovereign immunity as

21

a defense to its conduct in the judicial process. To the

contrary, this Court’s waiver decisions have, as discussed

above, repeatedly protected the judicial process by

prohibiting its misuse.

B. The decision could enhance states’ leverage for

threatening and filing involuntary petitions

and non-bankruptcy litigation.

Not only could the Ninth Circuit’s decision position

states to misuse judicial process without liability, but

it could also enhance their leverage to threaten and file

involuntary bankruptcies and to exploit the purpose of

other substantive federal laws.

In involuntary bankruptcy, the stakes could not be

higher for debtors and other forced participants. An

involuntary bankruptcy, as a “case,” potentially exposes

unwilling debtors and their other creditors to a vast and

onerous procedure that is unknown in typical litigation.

Fin. Oversight & Mgmt. Bd. v. Cooperativa De Ahorro

Y Credito Abraham Rosa (In re Fin. Oversight &

Mgmt. Bd.), 52 F.4th 465, 482 (1st Cir. 2022). Worse, an

involuntary petition can be an “extreme remedy with

serious consequences to the alleged debtor, such as loss of

credit standing, inability to transfer assets and carry on

business affairs, and public embarrassment.” In re Reid,

773 F.2d 945, 946 (7th Cir. 1985).

There are legitimate uses of involuntary bankruptcies,

but a potential for misuse has always been a concern.

Specifically, there was a fear that they might be used “to

frighten or force debtors into a compliance with their

wishes and into acts of injustice to other creditors and

22

to themselves.” Amir Shachmurove, Consequences of a

Relic’s Codification: The Dubious Case for Bad Faith

Dismissals of Involuntary Bankruptcy Petitions, 26 Am.

Bankr. Inst. L. Rev. 115, 122 (2018) (quoting President

Ulysses Grant in 1873). Similarly, in 1898, Rep. John

Lewis characterized involuntary bankruptcy as a “weapon

in the hands of the creditor to press collections of debt

harshly, to intimidate, and to destroy.” Ibid. And as

Judge Friendly explains, the Bankruptcy Act of 1898 was

intent on preserving creditor rights while also protecting

debtors from “harassment of ill-considered or oppressive

involuntary petitions, including those by a single creditor

interest.” In re Gibraltor Amusements, Ltd., 291 F.2d 22,

28-29 (2d Cir. 1961) (Friendly, J., dissenting).

Congress added § 303(i) and § 303(e) to the involuntary

bankruptcy scheme as additional deterrents against

improper filings. McMillan v. Maestri (In re McMillan),

543 B.R. 808, 818 (Bankr. N.D. Tex. 2016) (provisions

were designed to “discourage frivolous petitions” as well

as “spiteful petitions, based on a desire to embarrass the

debtor . . . or to put the debtor out of business without

good cause . . . .”) (internal quotation marks and citations

omitted). Together, they provide that a debtor may seek

not only a judgment for damages that it suffers from an

involuntary case, but also an indemnity bond to cover

those damages. 11 U.S.C. §§ 303(i), (e).

However, the Ninth Circuit relies on state sovereign

immunity to eliminate those deterrents when a state is the

petitioner. And to the extent that the decision makes states

immune to statutory liability for even egregious pleading

violations, it could also reduce a state’s incentive to use

involuntary petitions for legitimate bankruptcy purposes.

23

Two troubling examples:

Example 1: The Code requires three petitioning

creditors so that a single creditor cannot use involuntary

bankruptcy as an improper collection tool. 11 U.S.C.

§ 303(b)(i). However, the decision could incentivize a state

to file an improper single-petitioner involuntary petition.

It might get dismissed, even quickly, but a state could, as

Montana is alleged to have done, wage a long, expensive

appeal without any statutory risk of liability.

Example 2: The Code requires that a petitioning

creditor’s claim not be “contingent” or the “subject of

a bona fide dispute.” Ibid. However, the decision could

incentivize a state to intentionally file a single-creditor

petition solely on the basis of a disputed or unaccrued

claim. Even with a quick dismissal, a state could mire the

debtor in appeals with no statutory liability for doing so.

Although there are few examples of states misusing

involuntary petitions, these are not hypothetical concerns.

First, there is this case. Montana filed the involuntary

petition in 2011; the court dismissed it in 2013; and the

parties have been litigating the dismissal for over 11 years.

App. 4a-5a. That is a long and expensive battle.

Second, other, more involuntary-oriented bankruptcy

systems illustrate more broadly amici’s concerns about

undermining deterrents to improper filings. See generally

Kilborn & Walters, supra note 9, at 123, 138 (tracing how

less deterrent-oriented jurisdictions, like England, where

involuntary bankruptcy is employed far more frequently,

have creditors, especially governmental creditors, “using

the threat of a bankruptcy order to coerce payment from

24

the debtor, potentially to the disadvantage of competing

creditors and without the protective intermediation of the

courts charged with regulating ordinary collections”).

Thus, the Ninth Circuit’s decision could enhance a

state’s leverage to threaten a debtor with involuntary

bankruptcy if it excuses a state from the statutory

incentive to threaten bankruptcy only in good faith.

If a state threatens bankruptcy to conform a debtor’s

behavior to the state’s interests, then the debtor must

assume that the threat is real, even if it is clearly meritless

under § 303. Whereas private parties must conform their

conduct to § 303’s requirements, the decision essentially

moots the requirements for states by making them

immune to liability. In short, the decision could position

states to employ a “super threat” that is inconsistent with

bankruptcy’s purpose.

The decision could also extend states’ use of

bankruptcy threats to an increase in state-initiated

filings. The filings do not have to increase for the decision

to warrant review. Thus, it is not enough to suggest that

involuntary bankruptcy cases are so rarely filed that this

Court can recognize the Ninth Circuit’s error but still

tolerate it without a review. Rather, the prospect that the

decision could increase improper filings makes review

even more warranted.

Further, if the decision increases a state’s leverage to

exploit one substantive area of the law like bankruptcy,

then a state could try to extend the decision to exploit

non-bankruptcy substantive areas, too.

25

CONCLUSION

The petition for a writ of certiorari should be granted.

Respectfully submitted,

David L. Bury, Jr.

Counsel of Record

Thomas B. Norton

E. Tate Crymes

Stone & Baxter, LLP

577 Third Street

Macon, GA 31201

(478) 750-9898

dbury@stoneandbaxter.com

Counsel for Amici Curiae