SCOTUS Will Consider FAA in BR

The U.S. Supreme Court added a new case to its oral argument docket this term, granting a petition for certiorari review filed by Goldman Sachs in a case over whether, and under what circumstances, a bankruptcy court can override the Federal Arbitration Act (FAA) and refuse to honor a valid agreement to arbitrate disputes with respect to Section 362(k) claims. The case began when a couple filed for bankruptcy. Both listed credit card debts with Goldman Sachs as one of their bank debts. The Bankruptcy Code imposes an automatic stay, barring creditors from attempting to collect debts. However, when the bank repeatedly continued to seek payment from them, they filed an adversary proceeding in the bankruptcy case, contending the bank willfully violated the automatic stay provision. Goldman Sachs asked the bankruptcy court to put the adversary proceeding on hold and require the debtors to arbitrate their dispute under the clause in their credit agreement. The bankruptcy court denied that request, and both the federal district court and the U.S. Court of Appeals for the 4th Circuit upheld that ruling. A divided three-judge panel concluded that requiring them to arbitrate their claim would interfere and conflict with the strong and established policies and purposes of the Bankruptcy Code. The bank maintains disagreements over the intersection of arbitration and bankruptcy law will persist if a circuit split is not rectified because of the ubiquity of arbitration clauses in consumer credit agreements. The 4th Circuit ruling conflicts with a decision by the 2nd Circuit finding that Section 362(k) does not displace the FAA, unless resolution of the claim is integral to the bankruptcy court’s ability to preserve and equitably distribute assets of the estate or directly implicates matters central to the purposes and policies of the Bankruptcy Code. According to SCOTUSblog, after considering Goldman’s petition for review at four consecutive conferences, the justices reportedly granted it and the case likely will be argued next year, with a decision to follow in the summer. See more here-- https://tinyurl.com/ycy2hdr4 and https://tinyurl.com/5n7z7urn