United States v. Miller (Bankruptcy)

Send us Fan MailIn United States v. Miller, the Supreme Court reversed the Tenth Circuit and held that a bankruptcy trustee cannot use §544(b) of the Bankruptcy Code to claw back funds from the federal government under a state fraudulent-transfer law, due to sovereign immunity. The case arose after shareholders of a failed Utah business used $145,000 of company money to pay personal federal tax debts. The bankruptcy trustee sought to “avoid” that transfer under Utah law, invoking §544(b), which permits a trustee to assert the rights of an “actual creditor” to void certain transfers. The government argued the claim was barred because sovereign immunity prevents such a state-law suit against the United States.The lower courts sided with the trustee, reasoning that §106(a) of the Bankruptcy Code waived sovereign immunity for actions brought under §544. But the Supreme Court disagreed. Writing for the Court, Justice Jackson held that §106(a)’s waiver applies only to the federal claim under §544—not to the state-law cause of action it incorporates. The Court emphasized that waivers of sovereign immunity must be unambiguous and strictly construed. Since Utah law could not otherwise be used to sue the federal government outside bankruptcy, the trustee’s claim failed.Justice Jackson delivered the opinion of the Court, joined by Chief Justice Roberts and Justices Thomas, Alito, Sotomayor, Kagan, Kavanaugh, and Barrett. Justice Gorsuch filed a dissenting opinion.Support the show