Supreme Court Copyright Decision that is Important for Bankruptcy Practitioners

Allen v. Cooper, 589 U.S. ___, 2020 WL 1325815 (2020)

On March 23, 2020, the United States Supreme Court struck down the Copyright Remedy Clarification Act of 1990 (“CRCA”), holding that Congress had no authority under either Article I of the U.S. Constitution or Section 5 of the Fourteenth Amendment to abrogate sovereign immunity for States that infringe on protected copyrights.  Allen v. Cooper, 589 U.S. ___, 2020 WL 1325815 (2020).  To read the full decision, click here.

While the demise of the CRCA may not at first blush appear relevant to bankruptcy practitioners, the Court’s opinion includes a discussion with significant implications for the practice of Bankruptcy law.  Plaintiff in Allen v. Cooper asked the Court to adopt the ruling in Central Virginia Community College v. Katz, 546 U.S. 356 (2006), finding that Congress either had the authority to abrogate state sovereign immunity with regard to copyright claims or that the States waived their sovereign immunity rights as to intellectual property at the time of the plan of the Constitutional Convention.  Namely, Allen asked the Court to hold that the States understood in 1789 that Article I of the Constitution gave Congress the authority to codify uniform laws affecting copyrights and patents, including the authority to bind the States in federal courts as to these laws.

Despite expectations by some legal commentators that the Court in Allen v. Cooper would reject Allen’s argument and signal a future overturning of Katz, the Court affirmed that the Bankruptcy Clause is “unique” among Article I Clauses, suggesting that the Supreme Court would likely affirm Katz in future cases involving the Bankruptcy Clause.

Reversal of Katz would have a significant impact on bankruptcy proceedings in the United States, as it would deprive bankruptcy court jurisdiction over the States in many circumstances.  States are major creditors in bankruptcy cases, so their ability to assert sovereign immunity would likely change the bankruptcy landscape.