The U.S. Supreme Court rejected the right of state governments on Monday to operate outside the confines of the federal bankruptcy code.

The nation’s top court ruled that liquidating Wallace’s Bookstores Inc. has the right to sue four state-run Virginia colleges to collect on alleged preferential transfers made within 90 days of Wallace’s Chapter 11 petition. The Supreme Court affirmed this right in a 5-4 decision that was written by John Paul Stevens for the majority. Clarence Thomas wrote the dissenting opinion.

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