Brown v. Goldman Sachs Bank USA (In re Brown) (Case No. 23-70426: A.P. No. 24-07009)
This adversary proceeding was brought by two debtors as a class action against Goldman Sachs Bank seeking damages for alleged violations of the automatic stay. Goldman Sachs responded by filing a motion to compel arbitration asserting that the debtors signed agreements with the creditor that contained enforceable provisions requiring such claims to be arbitrated. The debtors assert that their claims are constitutionally core claims that stem from their bankruptcies and that the bankruptcy court has discretion to retain the claims. While the Court recognized the federal policy favoring arbitration, it also recognized the competing considerations between the Federal Arbitration Act and the Bankruptcy Code. The Fourth Circuit has stated that the party seeking to prevent enforcement of an arbitration agreement must show that Congress has evinced an intention to preclude a waiver of judicial remedies for the statutory rights at issue. One factor that the Court considers in determining this intent is whether an inherent conflict exists between arbitration and the statute’s underlying purposes. Finding that there was an inherent conflict between the Federal Arbitration Act and the Bankruptcy Code provision at issue in this case, the Court denied Goldman Sachs Bank’s motion to compel arbitration. The Court found that the claims were constitutionally core as the logical outgrowth of the authority giving rise to the Bankruptcy Code itself. Further, the Court exercised its discretion to maintain the claims in this case before the bankruptcy court as being more consistent with the goals of the Bankruptcy Code as the automatic stay is one of the fundamental debtor protections under the Code.