Docket 23-824
United States v. Miller
DecidedMar 26, 2025
8-1decision
Source: CourtListener.
Bankruptcy trustees cannot use federal immunity waiver to sue the U.S. under state fraud laws
Impact3/10
What it does
The Court held that §106(a)'s waiver of sovereign immunity applies only to the federal bankruptcy claim created by §544(b) itself, not to the state-law claims embedded within it. Because a bankruptcy trustee suing under §544(b) must show that an actual creditor could have voided the transfer under state law — and sovereign immunity would still block any such state-law suit against the federal government — trustees cannot use §544(b) to claw back money paid to the federal government under state fraudulent-transfer statutes. The ruling reverses the Tenth Circuit's decision and sends the case back to lower courts.
Who benefits
The federal government, which retains its sovereign immunity defense against bankruptcy trustees who attempt to recover tax payments or other transfers made to the U.S. Treasury using state fraudulent-transfer laws.
Who is affected
Bankruptcy trustees managing estates of failed businesses whose assets were transferred to the federal government (e.g., to pay shareholders' personal tax debts), who lose the ability to claw back those funds using state fraudulent-transfer statutes under §544(b).
Practical impact
Bankruptcy trustees can no longer use §544(b) and state fraudulent-transfer laws to recover money that a debtor's insiders paid to the federal government — for example, using company funds to pay personal tax debts — because sovereign immunity still blocks the underlying state-law claim against the U.S. Trustees may still pursue the government under §544(a), which has no actual-creditor requirement, in cases involving certain tax liens. The case is sent back to lower courts to consider whether the trustee can pursue an alternative legal theory that does not require suing the federal government directly.
Majority — Jackson
Joined by: Roberts, Thomas, Alito, Sotomayor, Kagan, Kavanaugh, Barrett
The majority held that waivers of sovereign immunity are purely jurisdictional — they allow courts to hear cases against the government, but they do not create new legal rights or change the requirements a plaintiff must meet to win. The Court reasoned that §106(a) itself says it does not "create any substantive claim for relief or cause of action not otherwise existing," which directly contradicts the trustee's argument that the waiver should also eliminate the sovereign immunity barrier embedded in the state-law element of his claim. The majority further noted that §544(b) was deliberately designed to give trustees only the same rights as an actual creditor under state law — no more, no less — and that reading §106(a) to erase the actual-creditor requirement would overturn decades of bankruptcy law and practice. The Court also applied the established rule that any ambiguity in the scope of a sovereign immunity waiver must be resolved in the government's favor, and found that the phrase "with respect to" in §106(a) cannot, in context, be stretched to cover state-law claims nested inside the federal bankruptcy claim.
Dissent reasoning
In dissent, Justice Gorsuch argued that the majority conflates two separate legal questions: whether a valid fraudulent-transfer claim exists on the merits, and whether the government can defeat that claim by raising sovereign immunity as an affirmative defense. He reasoned that no one in the case disputed that a genuine fraudulent transfer occurred under Utah law — the only question was whether the government could use sovereign immunity to block the trustee's suit. Because §106(a)(1) expressly bars the government from raising sovereign immunity in proceedings under §544, Gorsuch argued it simply removes that affirmative defense without altering any element of the underlying claim or creating any new substantive right. He concluded that the majority's ruling confuses the doctrine of sovereign immunity with the separate question of whether a plaintiff has stated a valid cause of action, and agreed with the majority of federal appeals courts that had allowed such suits to proceed.
Constitutional question
Does the Bankruptcy Code's sovereign immunity waiver in §106(a) — which lifts the federal government's protection from lawsuits "with respect to" certain bankruptcy provisions including §544 — also waive immunity for the underlying state-law claims that a trustee must rely on to win a §544(b) avoidance suit?