Michael Ackerman v. Jose Eber
687 F.3d 1123
| 9th Cir. | 2012Background
- Ackerman and Kuriloff sued in bankruptcy court to determine dischargeability under 523(a)(2),(4),(6) after arbitration against Eber was stayed by bankruptcy.
- Eber filed for Chapter 7; arbitration relating to prepetition disputes was stayed.
- Ackerman and Kuriloff sought to compel arbitration of liability and damages while preserving dischargeability questions for the bankruptcy court.
- Bankruptcy court denied arbitration; district court and this court affirmed the denial.
- Eber obtained a discharge under §727 and the stay dissolved into a §524 injunction, leaving dischargeability separately enforceable.
- The issue centers on how FAA arbitration interacts with core bankruptcy dischargeability claims under §523(a).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FAA arbitration can be compelled for core dischargeability claims. | Ackerman and Kuriloff argue non-core vs core distinction allows arbitration. | Eber argues arbitration would conflict with core bankruptcy objectives. | Arbitration denied; conflict with Bankruptcy Code objectives supports denial. |
| Does McMahon framework permit arbitration when dischargeability is involved? | Plaintiffs frame claims as non-core to avoid core-dischargeability issues. | Bankruptcy court may avoid arbitration if it would jeopardize dischargeability. | Court endorsed McMahon framework; no inherent conflict found supporting arbitration. |
| Is collateral estoppel a barrier to arbitration in dischargeability cases? | Collateral estoppel concerns apply if arbitration decides dischargeability. | No appropriate prior arbitration judgment existed; risk of collateral estoppel preemption. | Collateral estoppel concerns acknowledged but not barred arbitration pre-dischargeability. |
| Did KPMG Cocchi require arbitration before nondischargeability determination? | KPMG demands arbitration blanket approach for mixed claims. | KPMG is distinguishable; this is a bankruptcy-case dischargeability issue. | Distinguished; KPMG not controlling in this bankruptcy context. |
| Are core proceedings under §157(b)(2)(I) properly treated as non-arbitrable? | Core status means central bankruptcy issue; arbitration would undermine centralization. | Core nature does not automatically bar arbitration; McMahon factors apply. | Arbitration of dischargeability not permitted where it would conflict with core bankruptcy objectives. |
Key Cases Cited
- Thorpe Insulation Co. v. Continental Ins. Co. (In re Thorpe Insulation), 671 F.3d 1011 (9th Cir. 2012) (confirms bankruptcy policy favors centralization and limits arbitration where core bankruptcy issues are implicated)
- United States Lines, Inc. v. American S.S. Owners Mut. Prot. & Indem. Ass’n, Inc. (In re United States Lines, Inc.), 197 F.3d 631 (2d Cir. 1999) (arbitration should defer to bankruptcy centralization when core issues are involved)
- In re Elec. Mach. Enter., Inc., 479 F.3d 791 (11th Cir. 2007) (bankruptcy courts lack discretion to deny arbitration of non-core matters; core matters require conflict check under McMahon)
- MBNA Am. Bank, N.A. v. Hill, 436 F.3d 104 (2d Cir. 2006) (establishes framework for core vs non-core arbitration discretion in bankruptcy)
- In re Aldrich, 34 B.R. 776 (9th Cir. BAP 1983) (explains interaction of §362, §523, and §524 regarding discharge and injunctions)
- Grogan v. Garner, 498 U.S. 279 (1991) (collateral estoppel principles apply to dischargeability proceedings under §523(a))
- KPMG LLP v. Cocchi, 132 S. Ct. 23 (2011) (distinguishable; concerns a different context; not controlling in bankruptcy dischargeability arbitration)
- In re Hermoyian, 435 B.R. 456 (E.D. Mich. 2010) (distinguishable fact pattern; not controlling in this case)
- In re Stasz, 352 F. App’x 154 (9th Cir. 2009) (application of collateral estoppel in dischargeability context)