Perez v. Campbell
402 U.S. 637 (1971)
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Rule of Law:
A state law that conditions the restoration of a driver's license on the payment of a tort judgment, even after that judgment has been discharged in bankruptcy, is invalid under the Supremacy Clause because it frustrates the 'fresh start' objective of the federal Bankruptcy Act.
Facts:
- On July 8, 1965, Adolfo Perez was involved in an automobile accident in Tucson, Arizona, while driving an uninsured car registered in his name.
- The other driver's parents, the Pinkertons, sued Adolfo and his wife, Emma Perez, in state court for personal injuries and property damage.
- On November 8, 1967, the Perezes confessed judgment, and a state court entered a judgment against them for $2,425.98.
- The Perezes then filed for voluntary bankruptcy in federal court, scheduling the judgment debt owed to the Pinkertons.
- On July 8, 1968, a federal court granted the Perezes a discharge in bankruptcy, legally releasing them from their obligation to pay the judgment.
- Despite the bankruptcy discharge, Arizona's Motor Vehicle Division suspended the Perezes' driver's licenses and vehicle registrations for nonpayment of the judgment.
- The relevant Arizona statute, § 28-1163(B), explicitly stated that a discharge in bankruptcy shall not relieve a judgment debtor from the requirements of the state's financial responsibility law.
Procedural Posture:
- Adolfo and Emma Perez filed a complaint in the U.S. District Court for the District of Arizona against state officials, seeking declaratory and injunctive relief.
- The District Court, a trial court of first instance, granted the state officials' motion to dismiss the complaint for failure to state a claim upon which relief could be granted, citing Kesler and Reitz.
- The Perezes, as appellants, appealed the dismissal to the U.S. Court of Appeals for the Ninth Circuit, an intermediate appellate court.
- The Court of Appeals affirmed the District Court's judgment in favor of the state officials, the appellees.
- The U.S. Supreme Court granted the Perezes' petition for a writ of certiorari to review the judgment of the Court of Appeals.
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Issue:
Does an Arizona statute, which provides that a discharge in bankruptcy does not relieve a judgment debtor from the suspension of their driver's license for failure to pay a car accident judgment, conflict with the federal Bankruptcy Act and thus violate the Supremacy Clause of the Constitution?
Opinions:
Majority - Mr. Justice White
Yes. The Arizona statute conflicts with the federal Bankruptcy Act and is therefore rendered invalid by the Supremacy Clause because any state legislation which frustrates the full effectiveness of federal law cannot stand. The Court's function is to determine whether a challenged state statute stands as an obstacle to the accomplishment of the full purposes and objectives of Congress, which in the case of the Bankruptcy Act is to give debtors a 'new opportunity in life and a clear field for future effort.' The Arizona law frustrates this purpose by providing creditors with leverage to collect a debt that has been discharged. This decision overrules the prior holdings in Reitz v. Mealey and Kesler v. Department of Public Safety, which erroneously focused on the purpose of the state legislation (highway safety) rather than its actual effect on the operation of federal law. Because the effect of the Arizona statute is to interfere with the fresh start provided by federal bankruptcy law, it is unconstitutional.
Concurrence - Mr. Justice Blackmun
Yes as to petitioner Emma Perez, but No as to petitioner Adolfo Perez. For Adolfo Perez, who was the negligent driver, the state has a legitimate and compelling interest in highway safety that justifies the tangential effect on his bankruptcy discharge; the precedents of Reitz and Kesler were correctly decided and should be upheld on the principle of stare decisis. However, for Emma Perez, who was not involved in the accident and whose liability is purely vicarious due to community property laws, the statute serves no safety purpose and is merely a punitive debt collection tool. As applied to her, the statute interferes with the paramount federal interest in her bankruptcy discharge and therefore violates the Supremacy Clause.
Analysis:
This decision significantly shifted Supremacy Clause jurisprudence by explicitly rejecting the 'purpose' test from Kesler and Reitz in favor of an 'effects' test based on Hines v. Davidowitz. The ruling established that a state law, regardless of its stated purpose, is unconstitutional if its practical effect stands as an obstacle to the objectives of a federal statute. This strengthened the 'fresh start' policy of the Bankruptcy Act against state financial responsibility laws and broadened the application of the 'obstacle preemption' doctrine for future cases involving conflicts between state and federal law.
