Opinion ID: 3064379
Heading Depth: 3
Heading Rank: 3

Heading: The Existence of a “Federal Interest”

Text: [11] Having determined that Butner controls, we briefly consider the Trustee’s arguments that the federal interest exception identified in Butner applies to override the normal rule of state law deference.7 Butner, 440 U.S. at 55 (explaining that state law controls “[u]nless some federal interest requires a different result”). The Trustee identifies two such “federal interests.” First, she proposes an interest in bankruptcy estate augmentation. However, as discussed in greater depth above, recognizing such a generic interest in expanding 7 Although Butner, rather than Drye, provides the proper rule for application in the first instance, it should be noted that Drye may still hold relevance in the bankruptcy context. As the Court explained in Butner, deference to a state’s definition of “property” may be disregarded when a contrary federal interest exists. Where such an interest is identified, Butner drops out of the equation; therefore, the logic of Drye would likely control. This also highlights the conceptual differences between Drye and Butner. In the bankruptcy context, a federal interest will not always exist; in contrast, tax collection is an omnipresent federal interest in the tax lien context. IN RE COSTAS 1393 the debtor’s property would, at least in this case, interfere with Butner’s three goals of avoiding uncertainty, forum shopping, and windfall recoveries. As such, this interest is insufficient. [12] Second, the Trustee points out that § 548 is a federal rule of avoidance and, as such, constitutes an interest sufficient to override the normal state definitions of “property.” While we agree that Congress certainly could have trumped state law with a specific federal law provision, the use of the general term “property” in § 548 belies any intent to do so. Congress premised § 548’s application on the existence of “property” or “an interest . . . in property.” Nothing suggests that these terms merit a special gloss simply because they appear in a federal avoidance provision. As such, we decline to depart from the normal interpretive rules of Butner.