In this case, the court considered this issue: May a bankruptcy trustee avoid a debtor’s tax payment to the United States under 11 U-S-C § 544(b) when no actual creditor could have obtained relief under the applicable state fraudulent-transfer law outside of bankruptcy?
The case was decided on March 26, 2025.
The Supreme Court held that Section 106(a) of the Bankruptcy Code abrogates sovereign immunity for the federal cause of action created by §544(b), but it does not take the additional step of abrogating sovereign immunity for whatever state-law claim supplies the “applicable law” for a trustee’s §544(b) claim.
The opinion is presented here in its entirety, but with citations omitted. If you appreciate this episode, please subscribe. Thank you.
