Justia Arbitration & Mediation Opinion Summaries

Debtor appealed the bankruptcy court's order granting creditor relief from the automatic stay to proceed with arbitration of its claim against debtor's bankruptcy estate. At issue was whether the bankruptcy court erred by not ruling on the issue of whether the agreement to arbitrate between the parties was obtained by fraud and whether the bankruptcy court should have tailored its order to require creditor's claim to be arbitrated by allegedly, then-pending class action arbitration. The court held that the bankruptcy court correctly determined that debtor's challenge to the contract between the parties was subject to arbitration where debtor's failure to raise an independent challenge before the bankruptcy court to the agreement to arbitrate was basis alone to affirm the bankruptcy court's order. The court also held that debtor failed to appreciate that separately alleging that an agreement to arbitrate was obtained through fraud was different from offering a separate basis for the fraud and the only fraud debtor alleged was that creditor misrepresented that it was affiliated with Ford Motor, Co., that this fraud induced the arbitration, and that this fraud induced the contract as a whole. Consequently, there was no need for the bankruptcy court to intervene or, in this case, deny creditor's motion for relief from the stay. The court further held that the bankruptcy court was not required to tailor its order to require arbitration in the class action arbitration in Texas where the arbitration panel in Texas declined to certify the class and the issue was therefore, moot. Accordingly, the court affirmed the bankruptcy court's order granting creditor relief from the automatic stay to proceed with the arbitration of its claim against debtor's bankruptcy estate.