|
The United States Bankruptcy Court in Alabama has ruled that while many “noncore” bankruptcy issues may be arbitrated, matters of court authority, including whether or not an injunction has been violated, must be determined by a bankruptcy judge. In re Norman, Bankruptcy No. 04-11682, 2006 WL 2818814 (Bankr. M.D. Ala. Sept. 29, 2006).
Norman filed for bankruptcy in 2004, and the Court issued a discharge injunction shortly thereafter. However, Norman claimed that Defendant Applied Card Bank (Bank) violated the injunction by reporting Norman’s indebtedness to credit reporting agencies as “charged off account,” for the purpose of collecting discharged debt. The Bank moved to dismiss and to compel arbitration.
The Court held that the alleged violation of the Bankruptcy Court injunction was non-arbitrable. Certain bankruptcy proceedings are “noncore,” meaning that they are “typically two party disputes which do not directly affect other creditors and thus could be effectively arbitrated.” Grant v. Cole, 281 B.R. 721, 724 (Bankr.S.D.Ala. 2000). By contrast, allowing an arbitrator to decide whether or not a court order has been violated would usurp the power of the courts and allow non-judicial third parties to punish abuses of the judicial system. See Shearson/American Express, Inc. v. McMahon, 482 U.S. 220 (1987). As such, the Court denied both the motion to dismiss and the motion to compel arbitration.
Subscribe to a free weekly update on ADR case law and
legislation
|