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Framing the issue as one of due process and not equal protection, the U.S. Supreme Court ruled on May 17 that the state of Tennessee must stay in and defend a suit accusing it of denying the disabled access to its courts in violation of Title II of the Americans With Disabilities Act. Tennessee v. Lane, No. 02-1667. A full story on the court’s decision appears on Page 1 of the print edition. BANKRUPTCY LAW In a second May 17 ruling arising from the Tennessee federal courts, the justices held that because discharge of student loan liability does not implicate the state’s 11 th Amendment immunity, they need not address the certiorari question of whether Congress had the authority to abrogate sovereign immunity through the U.S. Bankruptcy Code. Tenn. Student Assistance Corp. v. Hood, No. 02-1606. After getting a Chapter 7 discharge, Pamela Hood petitioned the bankruptcy court to reopen her case so that she could add the Tennessee state agency servicing her student loans as a creditor, and commence a discharge-for-undue-hardship proceeding against it. The bankruptcy court denied the agency’s motion to dismiss the proceeding. That ruling was in turn upheld by the 6 th Circuit Bankruptcy Appellate Court and then the 6 th Circuit itself. The circuit court ruled that the U.S. Constitution’s bankruptcy clause gave Congress the right to abrogate the states’ sovereign immunity. The Supreme Court said, however, that because the bankruptcy court’s authority is derived from the debtor and her estate and not from her creditors, an exercise of the court’s in rem jurisdiction to discharge a student loan is not a suit against the state for 11 th Amendment purposes. Chief Justice William H. Rehnquist authored the court’s decision, joined by justices John Paul Stevens, Sandra Day O’Connor, Anthony M. Kennedy, David H. Souter, Ruth Bader Ginsburg and Stephen G. Breyer. Souter, joined by Ginsburg, concurred separately. Justice Clarence Thomas, joined by Justice Antonin Scalia, dissented. In another bankruptcy decision, a fragmented court set forth what four of the justices believe is the proper method for calculating the interest owed to a secured creditor when ruling on a “cram down” Chapter 13 debt adjustment plan. Till v. SCS Credit Corp., No. 02-1016. Under his plan, debtor Lee M. Till sought to pay off a $4,000 truck loan by paying the note holder over three years at an annual interest rate of 9.5%. The note holder objected, arguing that under the original loan agreement, it was entitled to a rate of 21%. The 7 th Circuit held that the lender was entitled to its 21% rate, but that that rate was rebuttable, subject to evidence produced by the debtor at an evidentiary hearing. Reversing and remanding, the Supreme Court’s plurality endorsed the concept of a formula approach, building off the prime lending rate (here 8%), and factoring additional interest to compensate the lender for the inherent risk of having to wait for a bankrupt borrower to repay the loan. It rejected rate formulas advocated by the note holder and the 7 th Circuit, reasoning that they are too complex and impose significant evidentiary costs on the debtor. The bankruptcy court, Stevens wrote, was obligated to select a rate “high enough to compensate the creditor for its risk but not so high as to doom the plan.” Souter, Ginsburg and Breyer joined in Stevens’ opinion. Concurring separately, Thomas opined that while the 9.5% rate will adequately compensate this creditor, the Bankruptcy Code does not require the proper interest rate to reflect the risk of nonpayment, but only the time value of money. Scalia dissented, joined by Rehnquist, O’Connor and Kennedy. CIVIL PRACTICE A partnership engaged in federal diversity litigation cannot cure a diversity defect after commencement of the action by jettisoning the partners that destroy diversity, the high court ruled on May 17. Grupo Dataflux v. Atlas Global Group L.P., No. 02-1689. Atlas Global, a limited partnership created under Texas law, sued Grupo Dataflux S.A., a Mexican corporation, in a Texas federal court. After the trial, but before the entry of judgment, Grupo Dataflux successfully moved to dismiss for lack of subject-matter jurisdiction. Before the 5 th Circuit, Atlas won a reversal, arguing that the Mexican partners had left before the trial began, and that diversity existed thereafter. Rejecting that reasoning, the justices ruled that subject-matter jurisdiction depends on the state of facts that existed at the time of filing. Scalia wrote the court’s 5-4 majority opinion. Ginsburg, joined by Stevens, Souter and Breyer dissented. CRIMINAL PRACTICE Title 18 U.S.C. 666(a)(2) makes it a crime to bribe a state or local official whose governmental entity receives at least $10,000 a year in federal funds. Holding that money is fungible and that bribed officials are untrustworthy stewards of public funds, the justices on May 17 ruled that the prosecution need not show an express connection between the act of bribery and the state agency’s receipt of federal funds in order to press charges under the statute. Sabri v. U.S., No. 03-44. The decision affirms an 8 th Circuit ruling that the absence of an express requirement was not fatal, and that under the Constitution’s necessary and proper clause, the measure was valid. The court’s opinion was written by Souter. Joined by Scalia, Kennedy filed an opinion concurring in part. Thomas concurred in the judgment.

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