In Re Kathryn Bliemeister, Debtor, State of Arizona, Ex Rel Industrial Commission of Arizona v. Kathryn Bliemeister, and Stanley Fogler, Trustee

We must decide whether the State of Arizona waived any sovereign immunity it might have had available to it and consented to suit in a federal bankruptcy court adversary proceeding. We hold that the State made a tactical decision to waive its immunity in this instance and that the debtor’s obligation to the State was properly discharged. We therefore affirm.

I

Kathryn Bliemeister (Bliemeister) and her former husband owned a mechanic’s shop. On October 8, 1993, Raymond Cole, Jr., began working at the shop as a new employee. Within a few hours of starting his employment, Cole lost part of his finger in an accident. Because Bliemeister’s business did not have workers’ compensation insurance, as required by Arizona Revised Statutes § 23-961, Cole applied to the Industrial Commission of Arizona (ICA) for medical benefits and partial disability compensation, which he subsequently received. The State later sought reimbursement from Bliemeister for money paid to Cole, plus penalties, totaling $9,273.22, per its Final Award, dated September 13, 1996.

The State requested payment from Bliemeister in a letter dated October 7, 1998. Approximately three weeks later, Bliemeister…