Editor’s Note: This is the Harvard Law School Bankruptcy Roundtable’s last scheduled post for the summer of 2025. The BRT intends to resume posting around mid-September. The BRT wishes all its readers an enjoyable remainder of the summer!
By Declan R. Kunkel (Law Clerk to the Hon. Amul R. Thapar)
In the recent Supreme Court case United States v. Miller, the Court resolved a nuanced but technical dispute in bankruptcy law: whether a trustee can use § 544(b)’s avoidance power against the government a separate, state-law waiver of sovereign immunity. In holding that a trustee does need a second waiver—apart from § 106(a)’s general waiver of sovereign immunity—the Court not only resolved a circuit split, but issued a holding with several noteworthy parts.
First, the Court affirmed that § 544(b) requires a true “actual creditor,” meaning a trustee can only act if an actual creditor could have recovered outside bankruptcy. While the Court referenced legislative history and bankruptcy treatises to support this interpretation, the plain text of the Code does not as clearly support that proposition. The better argument lies in history and structure—but the Court had previously rejected such tools in last term’s Purdue Pharma decision.
Second, the decision appears to cut back on the principle that Justice Holmes outlined in Moore v. Bay: that a trustee’s powers exceed those of any individual creditor. In Miller, dismissed Moore as limited to recovery, not avoidance, a distinction seen as novel and unsupported by precedent.
Third, the Court failed to address whether sovereign immunity even applies to in rem proceedings like bankruptcy, where prior rulings (e.g., Katz) suggest immunity concerns are diminished. By interpreting § 544(b) as requiring a creditor who could sue independently—and thus requiring another sovereign immunity waiver—the Court has curtailed the effectiveness of bankruptcy trustees in recovering assets and protecting creditor interests.
Fourth, the Court’s opinion reflects a curious reading of the bankruptcy code. By imposing a second, sovereign immunity hurdle, the Court created inconsistencies with other Code sections like § 548 and § 549, which do not require a separate waiver and allow broader trustee recovery.
Finally, at bottom, although a § 544(b) avoidance action borrows its content from state law, the trustee’s suit is still a federal law claim. And in Miller, the Court confronted just such a federal action: a trustee, operating under a federal waiver of sovereign immunity, borrowed a state law cause of action to bring his federal suit and met all the requirements for that claim. In holding that the trustee needed a second waiver of sovereign immunity, the court derived a requirement that can follow from the Code’s text but has several broader implications.
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