United States v. Miller

Background

A bankruptcy trustee was appointed to manage the estate of All Resort Group, a failed Utah transportation business. Two shareholders used about $145,000 of company money to pay their personal federal tax bills. The trustee sued the United States under the Bankruptcy Code’s §544(b), relying on Utah’s fraudulent-transfer law as the “applicable law” to try to claw back those payments. Lower courts held that §106(a) of the Code waived the Government’s sovereign immunity not only for the federal §544(b) claim but also for the nested state-law claim, and the Tenth Circuit affirmed.

Reasoning

The Court focused on whether §106(a)’s waiver of sovereign immunity turns into a new substantive right that defeats state-law defenses. It explained that waivers like §106(a) are jurisdictional—to let federal courts hear claims against the Government—but do not themselves create new causes of action or change the elements of existing claims. The Court relied on §106(a)(5), the structure of §544, and the need to read waivers narrowly. It concluded §106(a) waives immunity for the federal §544(b) cause of action itself but does not waive immunity for the underlying state fraudulent-transfer claims. The Court also contrasted §544(b) with §544(a), noting subsection (a) has no actual-creditor requirement, reinforcing that Congress tied subsection (b) to the rights of real creditors outside bankruptcy.

Real world impact

The ruling makes it more difficult for trustees to use §544(b) to recover payments the debtor made to the federal government when state law claims would be barred by sovereign immunity. Trustees may still pursue other avoidance tools, including §544(a) in some situations, and can sue States that have consented to suit. The decision reverses the Tenth Circuit and sends the case back for further proceedings on alternative arguments.

Dissents or concurrances

A dissent argued Congress intended the waiver to allow the trustee to pursue the full claim against the Government; the dissenter would have allowed the trustee’s action to proceed.