On January 23, the U.S. Supreme Court decided by a 5-4 margin that states are subject to suits seeking recovery of preferential transfers in bankruptcy proceedings. In other words, the sovereign immunity that typically shields states from lawsuits does not apply to suits brought under 11 U.S.C. ?? 547(b) and 550(a). The bare-bones rationale was this: The question is not whether Congress has abrogated states' sovereign immunity in the bankruptcy context; rather, the Bankruptcy Clause of the Constitution treats states like any other creditor. For example, states are bound by bankruptcy discharges; therefore, it logically follows that they are subject to other provisions of the Bankruptcy Code, including those giving debtors and trustees the power to avoid and recover preferential transfers. The Court took note of some of its recent and past decisions relating to sovereign immunity but determined that those had no bearing because, since the Bankruptcy Clause was first drafted at the Constitutional Convention, the intention of Congress has been to treat states like ordinary creditors. Therefore, the Court reasoned, this decision did not mark a departure from established sovereign immunity jurisprudence. The court was divided along somewhat predictable lines. Justice Stevens wrote the majority opinion and was joined by Justices O'Connor, Souter, Ginsburg and Breyer. Justice Thomas wrote a dissent in which Chief Justice Roberts and Justices Scalia and Kennedy joined. The full opinion is available at http://a257.g.akamaitech.net/7/257/2422/23jan20061100/www.supremecourtus.gov/opinions/05pdf/04-885.pdf Mac