Miller v. United States
- Summarized by Leo Weiss , Office of the U.S. Trustee
- 9 months 3 weeks ago
- Case Type:
- Business
- Case Status:
- Reversed
- Citation:
- 21-4135 (10th Circuit, May 01,2025) Not Published
- Tag(s):
-
- Ruling:
- On remand from the Supreme Court, vacating the Circuit's prior opinion, the Circuit Court held that the Chapter 7 trustee was barred from recovery on a fraudulent conveyance, claim under Utah state law ,from the United States for taxes paid by corporate debtor for its shareholders' personal tax liabilities because 11 U.S.C. § 106(a) does not provide a waiver of the Government's sovereign immunity under state law where the trustee does not meet the "actual creditor" requirement of 11 U.S.C. § 544(b)(1) that an actual creditor would be able to avoid the transfer outside of bankruptcy...
- Procedural context:
- Opinion issued on remand from the Supreme Court which vacated the Tenth Circuit's order affirming the bankruptcy and district court opinions which held that §106(a) abrogated the United States sovereign immunity where the underlying fraudulent conveyance action was based upon Utah state law and not 11 U.S.C. § 544.. The Supreme Court held that § 106(a) does not extend to state law claims under § 544(b)(1) where the trustee cannot show that an "actual creditor" could recover on the claim outside of bankruptcy.. The Tenth Circuit followed the Supreme Court's mandate and reversed the bankruptcy court on remand.
- Facts:
- In 2014, the debtor, All Resorts Group, Inc., paid personal tax debts of two of its principals totaling
$145,138.78 to the Internal Revenue Service. Debtor filed a Chapter 11 bankruptcy in 2017 which was later converted to a Chapter 7 case. The Chapter 7 trustee, David Miller, brought a fraudulent transfer claim under the Utah Fraudulent Transfer Act.
The United States conceded that the transfer met the requirements for an avoidable fraudulent conveyance under 11 U.S.C. § 544(b)(1). However, it argued that sovereign immunity barred recovery on the claim.
Miller argued that 11 U.S.C. § 106(a) waived the United States sovereign immunity for claims under § 544(b)(1). The United States argued that a waiver of sovereign immunity for § 544(b)(1) claims required the trustee to meet an "actual creditor requirement," i.e., that an "actual creditor" could succeed on a claim against the government outside of bankruptcy.. The bankruptcy held that a §106(a) waiver of sovereign immunity under state law did not include an actual creditor requirement, The district court affirmed the bankruptcy court and adopted its opinion. On, appeal, the Tenth Circuit affirmed. The Supreme Court granted certiorari and held that while §106(a) does waive sovereign immunity for fraudulent conveyances under federal law, sovereign immunity is not waived for fraudulent conveyance actions premised upon state law absent an actual creditor being able to avoid the transfer outside of bankruptcy..
- Judge(s):
- Carson, Baldock and Ebel
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