Supremacy Clause

bankruptcy booksEd note: This post originally appeared on Bankruptcy Law Insights.

The perception that public employee pension obligations cannot be impaired in bankruptcy suffered a damaging blow several months ago in the City of Detroit bankruptcy case, and has now been fatally wounded by the recent ruling of Judge Christopher Klein in the Chapter 9 case of Stockton, California. Although Judge Klein’s decision is not likely to lead to a spate of municipal bankruptcy filings in an effort to escape burdensome pension liabilities (indeed, it may not even lead to the actual diminishment of pension claims in the Stockton case itself), this is an important decision. Unless reversed on appeal, it will alter the legal landscape for distressed municipalities. Together with the similar Detroit decision, the Stockton ruling will affect negotiations among municipalities, employee unions, pension system representatives and financial creditors across the country.

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Hazleton, Pennsylvania, is a lovely little town (or so Lat tells me — his aunt used to live there). But it’s not bigger than the federal government or the Constitution of the United States of America.

That’s the lesson the Third Circuit handed down today with its decision in the Lozano v. Hazleton case. At issue: Hazleton city ordinances making it illegal for undocumented immigrants to work or even rent a house in Hazleton.

Apparently, the Third Circuit still believes in federal supremacy. From the opinion:

Although our reasoning differs from that of the district court, we agree that the provisions of the ordinances which we have jurisdiction to review are pre-empted by federal immigration law and unconstitutional under the Supremacy Clause.

Did you hear that, Arizona? Your quixotic quest to deal with illegal immigrants without consulting the Constitution is almost over…

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