College Columns December 2021 - Page 27

The Splits continued from page 26
waiver of Section 106 ( a )( 1 ). While the Seventh Circuit acknowledged the policy arguments furthering an equitable distribution to creditors , it stated that it “ cannot credit arguments about congressional intent when they run counter to a provision ’ s unambiguous text ,” id . at 747 , and found its conclusion to be “ consistent with the judicial presumption that when it comes to sovereign immunity ties go to the government .” Id . at 750 . Further , in acknowledging that the ruling left Section 106 ( a )( 1 ) to apply to Section 544 ( a ), but not Section 544 ( b )( 1 ), the Seventh Circuit concluded that “ Congress simply listed undivided Code sections if any part of that section included something for which sovereign immunity should be waived .” Id . at 749 .
The Ninth Circuit in Zazzali addressed the issue under the Idaho Uniform Fraudulent Transfer Act . In reaching an opposite result , the Ninth Circuit focused on reading Section 544 ( b )( 1 ) “ in concert with other sections of the Bankruptcy Code ” and providing a “ holistic ” approach to reconciling these two sections with each other and with other sections of the Bankruptcy Code . Zazzali , 869 F . 3d at 1010 . The Ninth Circuit noted that even the government agreed that Section 106 ( a )( 1 ) “ unambiguously abrogates the federal government ’ s sovereign immunity ‘ with respect to Section 544 ,’” id . at 1010 , and concluded that “ a trustee need only identify an unsecured
creditor , who , but for sovereign immunity , could bring an avoidance action against the IRS .” Id . Countering the arguments of the Seventh Circuit , the Ninth Circuit emphasized that if Congress had intended to limit the application of Section 106 ( a )( 1 ) to only Section 544 ( a ) and not Section 544 ( b ) ( 1 ), it knew how to do so as demonstrated in Sections 546 ( c )( 1 ) and 541 ( b )( 4 ), id . at 1012 , and focused both on the definition of “ person ” in the Bankruptcy Code that clearly contemplated suits against the government , which worked to put the government on “ equal footing with all other creditors ” in a bankruptcy case consistent with the policy of equal distributions to creditors . Id . at 1016 . Thus , the Ninth Circuit determined that because “ Congress ’ waiver of sovereign immunity is unequivocal under Section 106 ( a )( 1 )” and because “ Section 106 ( a )( 1 ) was enacted after Section 544 ( b )( 1 )” with an continued on page 28
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