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Nearly a decade ago, Leonard Gerson watched quietly as courts struggled with a question having major impact on federal bankruptcy law. Over the years, however, that quiet observation has grown into a professional passion for this small-firm practitioner, and will culminate in the U.S. Supreme Court this term. Gerson, with 14-attorney Angel & Frankel in New York, is set to argue Tennessee Student Assistance Corp. v. Hood, a case that pits the federal bankruptcy code against the U.S. Constitution. At stake could be a basic foundation of bankruptcy law versus states’ sovereign immunity rights. Representing the plaintiff-debtor, Gerson will assert that a premise dating back to Alexander Hamilton’s contribution to the Federalist Papers prohibits states from claiming 11th Amendment immunity against a key provision of the bankruptcy code. By contrast, his opponents — and there are many — will argue that if the U.S. Supreme Court disallows Tennessee sovereign immunity in this case, it will create vast uncertainty in the law and violate Article I of the Constitution. The Hood case pertains to state-assisted student loans, and whether the debtor can sue a state to discharge such debt. But it also has the potential to change significantly how most debt is discharged in bankruptcy proceedings through the sale of a debtors’ assets, Gerson asserts. In many cases, debtors’ property is encumbered with state taxes. If the bankruptcy court lacks jurisdiction to consider a debtor’s petition to extinguish those taxes, it could hinder free and clear property sales used to pay off creditors, he said. Proponents of the 11th Amendment immunity argument, which include 47 other states and the U.S. Department of Education, assert that the 6th U.S. Circuit Court of Appeals erred when it found in favor of Pamela Hood, the debtor. Hood owed about $4,000 in student loans and filed an action against the state to clear the debt. A Tennessee bankruptcy court judge refused to dismiss the suit and the 6th Circuit affirmed. The Tennessee state attorney general’s office said last week that it would not comment on pending litigation and referred to its petition for a writ of certiorari filed with the U.S. Supreme Court. In it, Tennessee argues that the high court should follow decisions in five other circuit courts and its own 1996 opinion, Seminole Tribe of Florida v. Florida, 517 U.S. 44 (1996). Seminole, according to the Tennessee attorney general’s office, recognized that Congress’ powers could not create federal jurisdiction over states in suits to enforce bankruptcy, copyright and antitrust laws. The issues are “complex and difficult,” said Gerson, who has worked as an amicus attorney in several cases involving sovereign immunity and bankruptcy law, and has argued some of those cases before circuit courts. His interest in the issue was piqued in 1994, when � 106 of the Bankruptcy Reform Act was enacted. The section abrogated sovereign immunity with respect to 60 different sections of the Bankruptcy Code, and dissolved much of the protection from bankruptcy actions that states enjoyed. After the U.S. Supreme Court 1996 decision came out in Seminole Tribe v. Florida, Gerson decided to enter the fray. He filed an amicus brief on behalf of the New York County Lawyers’ Association’s business bankruptcy law committee in a case before the 5th U.S. Circuit Court of Appeals, which led to his involvement in the other sovereign immunity cases. Gerson has argued on the clash between the Bankruptcy Code and sovereign immunity as an amicus party in the 3rd, 5th, 8th, 10th and 11th Circuits, and has appeared before the judges in three of those courts. He explained that although the 3rd and 5th Circuits ruled that � 106 was unconstitutional, a “change in tone” came from the 8th, 10th and 11th Circuit Courts. Instead of ruling on the constitutionality of � 106, the courts found that the states had waived immunity in those cases. Such a change in tone is what Gerson hopes will open the door for his arguments in Washington. FORMER URBAN PLANNER Part historian, part litigator, Gerson, 57, earned his law degree from Rutgers University at age 40, after working as an urban planner. He can play hardball at times, said attorney Kirk Brett, who described Gerson as a “very smart lawyer.” Brett, a partner with Duval & Stachenfeld in New York, represented the creditor side of the table opposite Gerson in the Chapter 11 case of Applied Theory, an Internet access and Web hosting company. He said his opinion of him changed during the course of negotiations in the Applied Theory case. “When I first met him, I thought he was tough. He knew when to shut the door, and to shut it politely, but hard.” He added, “When things cooled down, he knew how to shift gears and be reasonable.” In Gerson’s current case, Tennessee Student Assistance Corp. v. Hood, the lower court relied upon an article he wrote for the American Bankruptcy Law Journal in 2000, which led to his meeting with local counsel to present Hood’s case to the Supreme Court. He expects to argue the case in January or February, an opportunity he attributes to a “system of openness” that has transformed a former observer into an advocate before the nation’s highest court. “I was able to get access to Circuit Courts all over the country. It reflects something very positive in the legal system,” he said. Gerson has not begun to formally plan his argument, but he cites the work he has devoted thus far to the issue as good preliminary preparation. He has handled a full caseload at Angel & Frankel, a bankruptcy boutique firm, while working nights and weekends on amicus briefs during the last several years and now, Hood’s case. He said that his firm has been generous in giving him time to concentrate on the case, and added that the New York County Lawyers’ Association has fully supported his efforts. Not only did Gerson say that arguing in front of some of the greatest legal minds in the country has been the “best experience” of his life, but he said it has made him smarter. “Numerous times the questions posed by the Circuit Court panels ended up leading me to conclusions that helped me solve problems,” he said.

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