196 Cal. App. 4th 554
Cal. Ct. App.2011Background
- M&M filed a complaint and a petition to compel arbitration based on an asset purchase agreement with Pacific American that includes a broad arbitration clause.
- Pacific opposed, asserting M&M lacked standing to enforce the arbitration clause because only the bankruptcy trustee could pursue claims belonging to the estate.
- M&M entered Chapter 7 bankruptcy in 2005; the estate petition listed certain accounts receivable but did not schedule contingent claims against Pacific American, Peter Huh, or Paul Huh.
- The Silver action involved Pacific and others; a related trial occurred with a judgment in favor of Pacific and the Huhs, with Michael Silver appealing only certain post-judgment matters.
- M&M’s complaint against Pacific alleged approx. $700,000 in receivables were wrongfully withheld; M&M asserted the dispute fell within the arbitration clause.
- The trial court denied M&M’s petition to compel arbitration; on appeal, the central issue was whether M&M or the trustee had standing to arbitrate.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Who has standing to compel arbitration? | M&M argues it retains standing because the claims were scheduled. | Pacific contends only the bankruptcy trustee has standing to pursue estate claims. | trustee has standing; M&M lacks standing |
| Did abandonment of claims occur at bankruptcy closing? | M&M asserts the trustee abandoned the claims when the estate closed, reverting rights to M&M. | Pacific argues claims were not adequately scheduled and thus not abandoned. | no abandonment; claims remained with trustee |
| Did M&M properly schedule the asset as a property interest to divest the estate of the claim? | M&M lists the receivables as property but not tied to Pacific under the asset purchase. | Schedule was vague; not sufficiently specific to mark the asset as part of the estate. | schedule inadequately described the asset; not sufficient to abandon |
| Effect of non-abandonment on arbitration rights. | If not abandoned, M&M should retain rights to arbitrate. | Without abandonment, trustee retains substantive rights to arbitrate. | right to arbitrate remains with trustee |
Key Cases Cited
- Bouton v. USAA Casualty Ins. Co., 167 Cal.App.4th 412 (Cal. Ct. App. 2008) (preliminary standing to compel arbitration may be decided in petition proceedings)
- City of Hope v. Bryan Cave, L.L.P., 102 Cal.App.4th 1356 (Cal. Ct. App. 2002) (standing to arbitrate and existence of arbitration agreement prerequisites)
- Stein v. United Artists Corp., 691 F.2d 885 (9th Cir. 1982) (debtor’s scheduling duties and property of the estate; abandonment implications)
- Cusano v. Klein, 264 F.3d 936 (9th Cir. 2001) (sufficiency of schedules and abandonment standards in bankruptcy)
- Moses v. Howard University Hospital, 606 F.3d 789 (D.C. Cir. 2010) (estate as representative of debtor’s claims and standing to pursue)
- Parker v. Wendy’s Internat., Inc., 365 F.3d 1268 (11th Cir. 2004) (trustee generally has standing to pursue pre-petition causes of action belonging to the estate)