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Eqp. Acq. Resources v. IRS et al. (ND IL ED)(J. Squires)

In re Equipment Acquisition Resources, Inc., 09-039937
Equipment Acq. Resources, Inc. v. IRS, etc., 10 A 00099
Issued: June 22, 2011
Judge: John H. Squires

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The Upshot: The Bankruptcy Code was amended to remove the concept of sovereign immunity and get around 2 US Supreme Court cases: Hoffman v. Connecticut Dept. of Income Maintenance, 492 U.S. 96 (1989) and U.S. v. Nordic Village, Inc., 503 U.S. 30 (1992). Those cases held that the former §106(c) of the Code did not express with sufficient clarity Congress’s intent to abrogate sovereign immunity as to the federal government and states. But here the United States chose to focus its argument on §544(b) and maintain that sovereign immunity bars Debtor‘s claims because Illinois law does not allow unsecured creditors to maintain fraudulent transfer actions against the United States. The Court noted that “applicable law” generally means state law and that “[t]o require a trustee to demonstrate that the United States has waived sovereign immunity in every instance in which the trustee seeks to rely on state law for the purpose of §544 would render the general abrogation of sovereign immunity under §106 almost meaningless.”
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