United States v. Miller, Docket No. 23-824

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In United States v. Miller, the Supreme Court zeroed in on a fine detail in bankruptcy law. Section 106(a) says you can sue the federal government in certain bankruptcy fights. But the justices made clear that waiver only applies to the federal claim created by the bankruptcy code. It does not reach the state-law claims that a trustee might borrow to build that case.

Summary of the Case

All Resort Group, a Utah‐based business, became insolvent after its shareholders diverted $145,000 of corporate funds to pay personal federal tax obligations. When the company filed bankruptcy, its trustee, David L. Miller, sued the United States under 11 U.S.C. § 544(b). Section 544(b) allows a trustee to avoid transfers “voidable under applicable law” — here, Utah’s fraudulent-transfer statute. The Government argued that sovereign immunity barred any state-law suit to invalidate federal tax payments. The Bankruptcy Court, District Court, and Tenth Circuit each held that § 106(a)’s waiver of sovereign immunity “with respect to” § 544 extended both to the federal § 544(b) cause of action and to the underlying Utah statutory elements, allowing the trustee’s claim to proceed.

Opinion of the Court

Justice Jackson, joined by Chief Justice Roberts and Justices Thomas, Alito, Sotomayor, Kagan, Kavanaugh, and Barrett, reversed. The Court explained that sovereign-immunity waivers are jurisdictional. They permit courts to hear suits against the United States but do not themselves create or expand substantive rights. Section 106(a)(1) therefore waives immunity only for the federal § 544(b) claim, not for nested state-law causes of action. Section 106(a)(5) unambiguously provides that nothing in § 106 “shall create any substantive claim for relief or cause of action not otherwise existing”. Moreover, § 544(b) expressly requires the trustee to identify an “actual creditor” capable of avoiding the transfer under external law—a requirement Congress omitted in § 544(a). Construing § 106(a) to obliterate that element would undermine decades of practice and run headlong into the canon that waivers of sovereign immunity must be construed narrowly.

Separate Opinions

There were no separate concurrences. The Court declined to decide an alternative theory pressed by the trustee—that an “actual creditor” under Utah law might have avoided the transfers by suing the individual shareholders rather than the United States—and remanded that question for further proceedings.

Dissenting Opinions

Justice Gorsuch dissented. He argued that § 106(a)(1)’s unqualified waiver of sovereign immunity “with respect to” § 544 must permit trustees to bring any § 544(b) claim free from immunity defenses, including those to the state-law elements. Denying that remedy, in his view, conflates the defense of sovereign immunity with the merits of the underlying claim and departs from Congress’s intent to let trustees “step into the shoes” of creditors under “applicable law”.

Bankruptcy, State Governments and Immunity Claims

Section 544(b) empowers trustees to avoid transfers that unsecured creditors could void under external “applicable law,” typically state fraudulent-transfer statutes. That “actual-creditor” requirement aligns the trustee’s powers with those of private creditors and limits disruptive clawbacks. By contrast, § 544(a) allows avoidance without an actual-creditor prerequisite, reflecting a deliberate congressional design. Section 106(a) waives sovereign immunity jurisdictionally to permit avoidance actions against government-held tax liens under § 544(a) (where no actual creditor is needed) and § 544(b) suits against consenting state governments. It does not, however, alter § 544(b)’s substantive contours or negate state-law conditions for avoidance; a result compelled by the text, structure, and longstanding rule that immunity waivers must be construed narrowly.