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UNLV Gaming Law Journal

Abstract

One of the most vital and contentious proceedings between a casino debtor and a regulatory agency is a post-petition license revocation hearing. Much debate exists about whether the license qualifies as property of the estate and whether the regulatory agency can be exempted from the protections inherent in the Bankruptcy Code due to the use of police and regulatory power. However, maybe the most contentious and impactful debate is whether the regulatory agency is free from the bankruptcy court’s jurisdiction due to the Eleventh Amendment’s guarantee of sovereign immunity.

At the center of the tension concerning sovereign immunity lies 11 U.S.C. § 106(a), which authorizes the bankruptcy court to abrogate state sovereign immunity. In the past fifteen years, the United States Supreme Court issued three key decisions concerning the federal government’s ability to abrogate statutorily states’ sovereign immunity pursuant to its Article I power and the bankruptcy court’s unique position in the long standing controversy. The states’ ability to assert their sovereign immunity in bankruptcy proceedings is particularly relevant to casino bankruptcies due to the heavy involvement of the state gaming regulator. With the Bankruptcy Code in question, state governmental units and the jurisdiction of the bankruptcy court are in direct conflict.

This Note outlines the historical context, relevant Supreme Court decisions, and the cloudy, ill-defined area in which bankruptcy courts are authorized to abrogate states’ sovereign immunity. Additionally, this Note explores the analysis courts use when determining whether a regulatory agency’s power to revoke licenses is exempted from the automatic stay. Lastly, this Note argues that the three recent Supreme Court cases restored order to the bankruptcy court’s ability to pierce the sovereign immunity of a regulatory agency during a license revocation hearing of a casino debtor.

Publication Citation

3 UNLV Gaming L.J. 111 (2012)

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