United States v. Nordic Village, Inc.
503 U.S. 30 (1992)
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Rule of Law:
A waiver of the United States government's sovereign immunity from suits for monetary relief must be unequivocally expressed in the statutory text. If a statute is ambiguous and susceptible to a plausible interpretation that does not authorize monetary recovery, it will not be construed as a waiver.
Facts:
- In March 1984, Nordic Village, Inc. filed a petition for relief under Chapter 11 of the Bankruptcy Code.
- About four months later, Josef Lah, an officer of Nordic Village, drew a check for $26,000 on the company's corporate account.
- Lah used $20,000 of the funds to obtain a cashier's check payable to the Internal Revenue Service (IRS).
- Lah delivered this $20,000 check to the IRS.
- Lah directed the IRS to apply the funds against his own individual, personal tax liability.
- The IRS applied the $20,000 to Lah's personal tax account as directed.
Procedural Posture:
- The trustee for Nordic Village commenced an adversary proceeding against the IRS in the U.S. Bankruptcy Court for the Northern District of Ohio to recover the $20,000 transfer.
- The Bankruptcy Court permitted the recovery and entered a judgment against the IRS.
- The U.S. District Court affirmed the Bankruptcy Court's judgment.
- The United States (appellant) appealed to the U.S. Court of Appeals for the Sixth Circuit, where the trustee (appellee) prevailed.
- A divided panel of the Sixth Circuit affirmed the lower courts' judgments.
- The United States petitioned the Supreme Court for a writ of certiorari, which was granted.
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Issue:
Does § 106(c) of the Bankruptcy Code waive the sovereign immunity of the United States from an action seeking monetary recovery?
Opinions:
Majority - Justice Scalia
No. Section 106(c) of the Bankruptcy Code does not contain the unequivocal and unambiguous waiver of sovereign immunity required to permit a suit against the United States for monetary recovery. Waivers of the government's sovereign immunity must be strictly construed in favor of the sovereign and cannot be enlarged beyond what the statutory language requires. While subsections (a) and (b) of § 106 clearly waive immunity for monetary claims in specific counterclaim situations, subsection (c) is ambiguous. The Court identified at least two plausible alternative interpretations of § 106(c) that do not authorize monetary relief. One reading suggests subsection (c) only permits declaratory and injunctive relief, not monetary awards, which gives meaning to all parts of the statute without rendering (a) and (b) superfluous. A second plausible reading is that the introductory clause, 'Except as provided in subsections (a) and (b),' makes those subsections the exclusive means for obtaining monetary relief from the government. Because the statute is susceptible to plausible readings that do not authorize monetary claims, it is not an 'unequivocal expression' of waiver, and legislative history cannot be used to create the clarity that is absent from the text.
Dissenting - Justice Stevens
Yes. Section 106(c) of the Bankruptcy Code does waive the sovereign immunity of the United States from an action seeking monetary recovery. The literal text of the statute is straightforward and unquestionably waives sovereign immunity. Section 550(a), which permits the recovery of funds, contains the trigger word 'entity,' which § 106(c)(1) explicitly applies to 'governmental units' like the United States. The legislative history unambiguously confirms that Congress intended to waive sovereign immunity for avoidance actions. The majority reaches an unjust result by inventing 'plausible' alternative constructions to evade the statute's clear meaning, driven by an excessive and misguided adherence to the obsolete, judge-made doctrine of sovereign immunity. This doctrine allows the government to retain improperly acquired funds at the expense of a bankrupt company's innocent creditors.
Analysis:
This decision solidifies the 'clear statement rule' for waivers of federal sovereign immunity, establishing an extremely high bar for plaintiffs seeking monetary relief from the government. By holding that any plausible ambiguity in a statute must be construed in favor of the sovereign, the Court significantly limited the power of bankruptcy trustees to recover funds from the United States under the Code's general avoidance provisions. The ruling emphasizes textualism, rejecting the use of legislative history to clarify ambiguous statutes in the sovereign immunity context. This decision effectively required Congress to legislate with extreme precision if it intends to waive immunity, and it led to subsequent legislative action (the Bankruptcy Reform Act of 1994) to explicitly abrogate this ruling and waive sovereign immunity in such cases.
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