Supreme Court Limits Trustee Avoidance Powers In U.S. v. Miller

The U.S. Supreme Court has significantly curtailed bankruptcy trustees' powers in United States v. Miller, 145 S. Ct. 839 (2025). In an 8–1 decision, the Court held that the federal government's sovereign immunity is not waived under Section 106(a) for state-law-based avoidance actions brought under Section 544(b) of the Bankruptcy Code.

This ruling reshapes how trustees can pursue recovery of fraudulent transfers involving the federal government.

Case Background

All Resort Group, a Utah-based company, used roughly $145,000 of its funds to pay off its shareholders' personal federal tax liabilities. After the company filed for bankruptcy, trustee David Miller sought to recover those payments under Section 544(b), relying on Utah's Uniform Fraudulent Transfer Act.