Wallace’s Bookstores, Inc. (Wallace’s) submitted a Chapter 11 bankruptcy petition. Prior to the filing, Wallace’s transacted with Central Virginia Community College and other Virginia educational institutions (defendants), which are deemed to be state actors for purposes of sovereign immunity. Bernard Katz (plaintiff) was appointed as the liquidating supervisor of Wallace’s estate. Katz moved the bankruptcy court to set aside certain transfers, alleged to be preferential, from Wallace’s to the defendants. The Virginia schools moved to dismiss the motion on the basis of sovereign immunity. The bankruptcy court denied the motions to dismiss; its decision was affirmed by both the district court and the Court of Appeals for the Sixth Circuit. The Sixth Circuit’s decision was based on its prior determination that Congress abrogated state sovereign immunity in bankruptcy proceedings. The Virginia institutions petitioned the Supreme Court for certiorari.