Sovereign Immunity is No Defense to a § 544(b)(1) Claim

In United States v. Equipment Acquisition Resources, Inc. (In re Equipment Acquisition Resources, Inc.), 485 B.R. 586 (N.D. Ill. 2013), the District Court for the Northern District of Illinois affirmed a bankruptcy court’s ruling that 11 U.S.C. § 106(a)(1) eliminates the IRS’s ability to assert sovereign immunity as a defense to any § 544 claim.  The case involved an s-corporation’s transfers to shareholders for payment of pass-through tax liability.  After filing bankruptcy, the debtor in possession asserted a state law constructive fraudulent transfer claim against the IRS through 544(b)(1).  The IRS defended by arguing, among other things, that § 106(a)(1) did not eliminate its sovereign immunity defense to the state law fraudulent transfer claim (albeit through § 544) because sovereign immunity would have barred any such claim prior to the bankruptcy.  Id. at 593.  The Equipment Acquisition Resources court quickly rejected the argument.  The court noted that, by including § 544 in § 106(a)(1), Congress knowingly brought state law claims within the category of suits for which the sovereign immunity defense has been eliminated.  Id.  The court affirmed the bankruptcy court’s ruling that § 106(a)(1) abrogates the sovereign immunity defense to any claim pursuant to § 544

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One Reply to “Sovereign Immunity is No Defense to a § 544(b)(1) Claim”

  1. A lot. More today than a year ago.Because of Obamacare, no company in America ofrefs stand alone children’s health insurance.Why? Obamacare dictates that it is guaranteed issue, without rate ups, regardless of health. Therefore, there is no reason to purchase it until there is a claim needing to be paid.That’s not health insurance. That’s a confiscatory tax on health insurance companies. Fortunately, they aren’t slaves yet, so they exercised the F U clause in the contract with the purple bellies from Washington and just refused to do business where they are guaranteed to lose money.How do you fix the problem of un- and under-insured? By making health insurance affordable.How do you make it affordable? By removing ALL government mandates, loser pays tort reform, encouraging competition between providers (enforce existing anti-trust laws), eliminate the AMA monopoly on billing codes, and eliminate the connection between employment and health insurance.Do these things and we’ll see health insurance cost less than auto insurance. More people will be covered, more people will be healthy.

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