Supreme Court Decides United States v. Miller

On March 26, 2025, the United States Supreme Court decided United States v. Miller, No. 23-824, resolving a circuit split and holding that in an action brought under § 544(b) of the bankruptcy code, § 106(a)’s sovereign immunity waiver applies only to the § 544(b) claim itself and not to any state-law claims nested within the federal bankruptcy claim.

Two provisions of the Bankruptcy Code were at issue in the case.

First, the bankruptcy trustee of a Utah-based business whose shareholders misappropriated and transferred to the IRS approximately $145,000 in company funds to satisfy personal federal tax liabilities filed an “avoidance” suit under 11 U.S.C. § 544(b) against the United States, seeking to claw back the misappropriated funds. Section 544(b)(1) allows a bankruptcy trustee to “avoid any transfer of an interest of the debtor . . . that is voidable under applicable law by a creditor holding an unsecured claim.” In addition, 11 U.S.C. § 106(a)(1) provides that the Government’s “sovereign immunity is abrogated . . . with respect to” a list of Code provisions, including § 544.

The Trustee invoked Utah’s fraudulent-transfer statute as the source of “applicable law” for the § 544(b) claim, which gives creditors a cause of action to invalidate certain transfers by a debtor. The Government opposed that action on the ground that § 544(b) required the Trustee to identify a specific creditor capable of prevailing against the Government in a nonbankruptcy action — i.e., a creditor whose claim would not be barred by the Government’s sovereign immunity. The Bankruptcy Court rejected that argument, and the District Court and Tenth Circuit affirmed. The Supreme Court reversed, holding that, in order to prevail under § 544(b), a trustee must identify an “actual creditor” who could have voided the transaction under applicable law outside of bankruptcy proceedings. 

Second, the Court held that § 106(a)’s sovereign-immunity waiver applies only to the § 544(b) claim itself and not to any state-law claims nested within that federal claim. In reaching that conclusion, the Court reasoned that § 106(a) is properly understood as a jurisdictional provision — which typically empowers courts to hear claims against the Government but does not create substantive rights against the Government — and its text, context, and structure make plain that it does not operate to modify § 544’s substantive requirements. Looking to the text, the Court noted that § 106(a)(5) expressly states that it does not “create any substantive claim for relief or cause of action not otherwise existing” under some other source of law. The Court also pointed out that § 106(a)’s waiver did not work to alter the substantive obligations of trustees under any of the other provisions listed.

The Court rejected the Trustee’s remaining arguments, holding that its decision would not render § 106(a)’s sovereign immunity waiver meaningless, noting that other provisions allow trustees to bring avoidance claims against the Government and permit waiver against not only federal but state governments with respect to § 544 claims. The Court also rejected the Trustee’s reliance on Department of Agriculture Rural Development Rural Housing Service v. Kirtz, 601 U.S. 42 (2024), explaining that that decision reaffirmed that a waiver of sovereign immunity must be “unmistakably clear in the language of the statute” and noting that § 106(a) does not contain an “unmistakably clear” waiver of immunity for state-law claims nested within § 544(b) claims.

Justice Jackson delivered the opinion of the Court, in which Chief Justice Roberts and Justices Thomas, Alito, Sotomayor, Kagan, Kavanagh, and Barrett joined in full. Justice Gorsuch filed a dissenting opinion.