United States v. Miller: Section 106(a) Waives Sovereign Immunity Only for the §544 Cause of Action—Not for the State-Law “Applicable Law” Under §544(b)

Introduction

In United States v. Miller, 604 U.S. ___ (2025), the Supreme Court resolved a circuit conflict about the scope of the federal government’s sovereign-immunity waiver in bankruptcy avoidance actions brought under 11 U.S.C. §544(b). The case arose from a trustee’s attempt to claw back $145,000 that a company’s insiders diverted to pay their personal federal income taxes, invoking Utah’s fraudulent transfer statute as the “applicable law” for a §544(b) claim.

The central question was whether §106(a) of the Bankruptcy Code—which abrogates sovereign immunity “with respect to” several listed Code provisions, including §544—also waives sovereign immunity for any underlying state-law cause of action that supplies the “applicable law” required by §544(b)(1). Put differently: does §106(a) merely allow federal courts to hear a §544(b) claim against the United States, or does it go further and neutralize the sovereign immunity that would otherwise bar the state-law claim a trustee “borrows” through §544(b)?

Justice Jackson, writing for an eight-Justice majority, held that §106(a)’s waiver is jurisdictional only. It authorizes courts to hear §544 claims against the government but does not alter §544(b)’s substantive “actual creditor” requirement or waive sovereign immunity for the state-law cause of action nested within §544(b). Justice Gorsuch dissented.

Summary of the Opinion

The Court reversed the Tenth Circuit and held that §106(a) abrogates sovereign immunity only as to the federal cause of action under §544 itself, not as to the state-law claims that provide §544(b)’s “applicable law.” Because §544(b) requires a trustee to identify an “actual creditor” who could have avoided the transfer under applicable law outside bankruptcy, and because sovereign immunity would bar such a state-law action against the United States, the trustee’s §544(b) claim fails absent an external waiver of sovereign immunity for that state-law claim.

The Court emphasized that sovereign-immunity waivers are “merely jurisdictional” and do not create new substantive liabilities or alter existing ones. Section 106(a)(5) expressly confirms that nothing in §106 “shall create any substantive claim for relief or cause of action not otherwise existing.” The majority rejected the argument that §106(a)’s phrase “with respect to” expands the waiver to the state-law elements of §544(b), citing text, structure, and established narrow-construction principles for sovereign-immunity waivers. The Court also distinguished contexts in which Congress expressly authorizes claims against the government (e.g., Kirtz) from §106(a), which does not.

The Court noted that §106(a) retains practical effect for §544 by permitting (i) §544(a) claims that do not depend on an “actual creditor,” including avoidance of certain federal tax liens under 26 U.S.C. §6323, and (ii) §544(b) suits against states that have consented to liability under their own fraudulent transfer statutes. The Court declined to consider alternative grounds the trustee proposed for affirmance and remanded.

Detailed Analysis

Precedents and Authorities Cited and Their Role

FDIC v. Meyer, 510 U.S. 471 (1994); United States v. Mitchell, 463 U.S. 206 (1983): The Court relied on these to underscore that sovereign immunity is jurisdictional and that a waiver is a prerequisite to jurisdiction, not a source of substantive rights. This frames §106(a) as a gatekeeping provision that opens the courthouse door but does not rewrite the claim’s elements or expand liability.
United States v. Navajo Nation, 556 U.S. 287 (2009): Cited for the proposition that jurisdictional waivers (like the Tucker Act) do not themselves create substantive rights. The Court analogized §106(a) to such jurisdictional waivers.
FAA v. Cooper, 566 U.S. 284 (2012); Financial Oversight & Mgmt. Bd. for P.R. v. Centro de Periodismo Investigativo, Inc., 598 U.S. 339 (2023): Reinforced the canon that waivers of sovereign immunity must be unmistakably clear and are construed narrowly. Any ambiguity favors the sovereign.
Davis v. Michigan Dep’t of Treasury, 489 U.S. 803 (1989); Dubin v. United States, 599 U.S. 110 (2023); Lamar, Archer & Cofrin, LLP v. Appling, 584 U.S. 709 (2018): Addressed the contextual interpretation of phrases like “with respect to” and “in relation to.” The Court deemed such terms context-sensitive and declined to read “with respect to” broadly in §106(a) given the statutory scheme and sovereign-immunity canons.
Presley v. Etowah County Comm’n, 502 U.S. 491 (1992): Illustrates that context can defeat broad readings of relational phrases when such readings would “work an unconstrained expansion” of a statute—in this case, an unwarranted expansion of a sovereign-immunity waiver.
Department of Agriculture Rural Development Rural Housing Service v. Kirtz, 601 U.S. 42 (2024): Distinguished. In Kirtz, Congress expressly authorized claims for damages against the government under the FCRA, making the waiver of immunity evident in the cause of action itself. Section 106(a) contains no such explicit authorization and includes an express “no new substantive rights” clause.
United States v. Nordic Village, Inc., 503 U.S. 30 (1992); Hoffman v. Connecticut Dep’t of Income Maintenance, 492 U.S. 96 (1989): Legislative history invoked these as the decisions Congress sought to overcome in the 1994 amendments by clarifying monetary recovery against governmental units. Even so, the amendments did not transform §106(a) into a liability-creating provision or expand it beyond its jurisdictional role.
Davis v. Willey, 263 F. 588 (N.D. Cal. 1920); Moore v. Bay, 284 U.S. 4 (1931); Collier on Bankruptcy: Support the long-settled understanding that §544(b) places the trustee in the shoes of an actual creditor and subjects the trustee to the same defenses; Moore’s broader recovery principle concerns the scope of recovery once avoidance is established, not the threshold for avoidance itself.

The Court’s Legal Reasoning

Sovereign-immunity waivers are jurisdictional, not liability-creating. The Court framed §106(a) as a provision that allows courts to hear enumerated Code claims against governmental units but does not change what must be proven to win those claims. Section 106(a)(5) expressly provides that nothing in §106 creates a substantive claim or cause of action not otherwise existing under the Code, Bankruptcy Rules, or nonbankruptcy law. Extending §106(a) to the state-law elements of §544(b) would contravene that textual limitation.
Section 544’s structure preserves the “actual creditor” requirement in subsection (b). Section 544(a) expressly allows avoidance “whether or not such a creditor exists,” but §544(b) ties the trustee’s rights to those of an actual unsecured creditor under “applicable law.” Reading §106(a) to erase the need to identify a creditor who could prevail outside bankruptcy would collapse the careful distinction Congress drew between §544(a) and (b) and disrupt decades of practice.
“With respect to” in §106(a) does not expand the waiver to embedded state-law claims. While relational phrases can sometimes have a broad reach, their meaning is context-bound. The jurisdictional nature of sovereign-immunity waivers, the narrow-construction canon, and §106(a)(5)’s no-new-rights clause confirm that “with respect to §544” means the waiver attaches to the federal §544 cause of action—not to whatever external state-law cause of action a trustee might borrow to satisfy §544(b).
Legislative history confirms continuity, not expansion. Congress intended a “limited waiver” to achieve approximately the same result as outside bankruptcy. The 1994 amendments aimed to clarify monetary recovery and overrule Nordic Village and Hoffman, not to alter §544(b)’s substantive requirements or to abrogate sovereign immunity for state-law claims that do not themselves authorize suit against the United States.
Section 106(a) still has meaningful work to do “with respect to” §544. Even under the government’s narrower reading, §106(a) permits trustees to bring §544(a) claims against the United States (notably, to avoid certain federal tax liens under 26 U.S.C. §6323 without identifying an actual creditor) and to pursue §544(b) claims against state governments that have consented to being sued under their fraudulent-transfer statutes.
Unresolved issues are left for the lower courts. The Court did not decide whether a trustee can satisfy §544(b)’s “actual creditor” requirement by identifying an actual creditor who could void the transfer by suing non-immune third parties (e.g., insiders) rather than the United States; nor did it reach the government’s alternative arguments concerning preemption or the Appropriations Clause.

The Dissent

Justice Gorsuch argued that the majority “confuses” sovereign immunity with the existence of a cause of action. In his view:

A valid substantive fraudulent-transfer claim exists under Utah law (the elements are satisfied). The only question is whether the United States may assert sovereign immunity as an affirmative defense when the trustee proceeds via §544(b).
Because §106(a)(1) waives sovereign immunity “with respect to” §544, the defense should be unavailable in the trustee’s action, even if it would defeat the same claim when brought directly in state court by a private creditor. Stripping a defense does not modify or create elements, nor does it create a new substantive claim; it simply removes a bar that Congress chose to waive in bankruptcy.
He aligned with the Fourth, Ninth, and Tenth Circuits’ pre-Miller view that trustees may avoid fraudulent transfers to the United States under §544(b) in light of §106(a)’s waiver.

Impact and Implications

Practical constraint on clawbacks from the United States under §544(b). Trustees can no longer rely on §106(a) to overcome sovereign immunity where the “applicable law” is a state fraudulent-transfer statute that does not itself authorize suit against the United States. As a result, §544(b) is generally unavailable to recover transfers made to the federal government (e.g., insider-caused payments to the IRS) unless a separate, unmistakably clear waiver applies to that state-law claim.
Increased reliance on §548 and §544(a). Trustees may pivot to §548 (fraudulent transfers under the Code) where timing permits (two-year lookback) or to §544(a) to avoid certain liens without the “actual creditor” constraint, including potential avoidance of federal tax liens subject to 26 U.S.C. §6323. Still, these provisions do not replicate §544(b)’s reach for older transactions.
Litigation strategies will adjust. Expect more focus on (i) identifying non-governmental transferees or insiders as defendants, (ii) pleading “indirect transfer” theories, and (iii) exploring whether an “actual creditor” could void the transfer by suing non-immune parties (an issue the Court left open). Trustees may also investigate whether any applicable federal law expressly authorizes avoidance suits against the United States for particular transactions.
State defendants and consent regimes. Section 106(a) continues to grant jurisdiction for §544(b) claims against states that have consented to suit under their fraudulent-transfer statutes. The decision may prompt states to revisit the scope of their waivers.
Clarified interpretive approach to §106(a). The opinion reaffirms that §106(a) is a jurisdictional waiver to be read narrowly, cabined by §106(a)(5)’s “no new rights” clause, and that broad relational phrases like “with respect to” will not be read to expand sovereign-immunity waivers absent unmistakably clear language.
Unresolved questions on remand and beyond. Lower courts will now consider the trustee’s alternative “actual creditor can sue someone else” theory and may encounter additional defenses (e.g., preemption, Appropriations Clause) the Supreme Court did not reach.

Complex Concepts Simplified

Sovereign Immunity: The doctrine that the government cannot be sued without its consent. A waiver must be “unmistakably clear.” A waiver gives courts jurisdiction to hear the claim; it does not itself impose liability or change what must be proved to win.
Section 106(a): A Bankruptcy Code provision that abrogates sovereign immunity “with respect to” a list of Code sections, including §544. It includes §106(a)(5), which forbids creating new substantive claims or causes of action through the waiver.
Section 544: Gives trustees avoidance powers that mimic those of creditors.
- §544(a): Allows avoidance “whether or not” such a creditor exists (no “actual creditor” requirement), commonly used to avoid certain liens.
- §544(b)(1): Allows avoidance of transfers that are “voidable under applicable law” by an actual unsecured creditor. The trustee must identify an actual creditor who could have prevailed outside bankruptcy under that law.
“Applicable Law” under §544(b): Usually a state fraudulent-transfer statute (e.g., UFTA/UVTA), which allows creditors to void certain transfers made with actual or constructive fraudulent intent. The “actual creditor” requirement prevents trustees from using §544(b) to reach transactions that no real-world creditor could unwind.
Jurisdictional vs. Substantive: A jurisdictional provision (like a sovereign-immunity waiver) lets a court hear a case; a substantive provision defines the elements of a claim and defenses. The Court held §106(a) is jurisdictional and does not alter §544(b)’s substantive requirements.
Utah Fraudulent Transfer Law (as relevant here): Allows voiding a transfer made when the debtor was insolvent and received less than reasonably equivalent value. In Miller, those elements were undisputed; the stumbling block was sovereign immunity.

Conclusion

United States v. Miller draws a clear line: Section 106(a) waives sovereign immunity so that courts may hear §544 claims against governmental units, but it does not waive immunity for the state-law causes of action trustees “borrow” under §544(b). The trustee must still identify an actual creditor who could have successfully avoided the transfer under “applicable law” outside bankruptcy; if sovereign immunity would defeat that creditor’s state-law claim against the United States, the trustee’s §544(b) claim cannot proceed. The decision preserves the traditional, limited role of sovereign-immunity waivers, reinforces the structural distinction between §544(a) and §544(b), and channels trustees toward alternative pathways (like §548 or §544(a)) or toward different defendants when attempting to recover assets for the estate.

By emphasizing text, structure, and longstanding canons favoring narrow construction of immunity waivers, the Court provides a precedent that will significantly shape avoidance litigation against governmental transferees. At the same time, it leaves room for further development in the lower courts on whether an “actual creditor” may satisfy §544(b) by proceeding against non-immune actors and on other unresolved defenses. Miller thus both narrows and clarifies the field: trustees cannot use §106(a) to transform state-law liabilities where none otherwise exist, but they retain robust tools to protect and augment the bankruptcy estate within the limits Congress prescribed.

Case Details: United States v. Miller, No. 23-824, argued Dec. 2, 2024, decided Mar. 26, 2025. Opinion by Justice Jackson; Chief Justice Roberts and Justices Thomas, Alito, Sotomayor, Kagan, Kavanaugh, and Barrett joined. Justice Gorsuch dissented. Decision: Reversed.