States Back Federal Reading of Sovereign Immunity in Bankruptcy

A US Supreme Court bankruptcy case is putting the sovereign immunity of states on the line, a group of 23 state attorneys general said in an amicus brief.

The states are backing a federal government argument asking the high court to reverse a ruling from the US Court of Appeals for the Tenth Circuit, which allowed a Chapter 7 liquidating trustee to claw back $145,000 from the Internal Revenue Service because it was fraudulently transferred.

Allowing the trustee to claw back the funds from the IRS would mean overriding the federal government’s claim to sovereign immunity—putting the states at risk ...