Plain-English summary
Court says federal waiver of sovereign immunity for trustee's §544(b) claim doesn't revive state-law claims against the
The Supreme Court held that Section 106(a) of the Bankruptcy Code waives federal sovereign immunity for a trustee's federal avoidance action under 11 U.S.C. §544(b), but that waiver does not extend to state-law claims embedded within that federal cause of action when brought against the United States. The Court reversed the Tenth Circuit and limited the trustee's ability to press state-law avoidance claims against the government.
Why this matters
The ruling narrows when and how bankruptcy trustees can use state-law avoidance rules to recover assets from the federal government. That affects the government’s exposure in bankruptcy cases and may change how trustees pursue recoveries when the debtor transferred assets involving federal actors or property.
Who may feel it
- Bankruptcy trustees and bankruptcy estates
- The United States and federal agencies
- Unsecured creditors whose state-law avoidance rights trustees step into
- Debtors with connections to federal funds or property
Key questions
- Does Section 106(a) of the Bankruptcy Code waive the United States’ sovereign immunity for a trustee's avoidance claim under 11 U.S.C. §544(b)?
- If so, does that waiver permit a trustee to bring state-law claims (the underlying state-law avoidance causes of action) against the United States when pursuing a §544(b) action?