484 B.R. 56
Bankr. D.N.J.2012Background
- MicroBilt, Inc. and CL Verify, LLC (Plaintiffs) file Second Amended Adversary Complaint against FIS, Chex, and Certegy asserting tortious interference and automatic stay violations.
- Chex Systems, Inc. and Certegy argue all claims are subject to binding arbitration under multiple agreements (Resale Agreement, ISO Agreement, and Data Reseller Agreement).
- Resale Agreement between MicroBilt and Chex contains a broad arbitration clause for disputes arising out of or relating to the Agreement; ISO and DRA contain similar ADR/arbitration language.
- MicroBilt/MicroBilt’s predecessor entities underwent bankruptcy, with Plan of Reorganization and asset transfers affecting the contractual relationships at issue.
- Court previously permitted amendment of the Complaint; Defendants move to compel arbitration and/or dismiss for failure to state claims, as appropriate.
- Court abstains sua sponte from hearing the remaining non-arbitrable claims, directing arbitration on arbitrable claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the disputes fall within arbitration agreements. | Plaintiffs contend claims arise outside arbitration scope. | Defendants contend all claims fall within arbitration clauses of Resale, ISO, and DRA. | Arbitration applies; disputes fall within contract-based arbitration. |
| Whether Counts I–II (tortious interference) are arbitrable. | Interference claims are not tied to contract scope. | Claims arise out of/relate to the Resale/ISO/DRA agreements and are arbitrable. | Counts I–II fall within arbitration provisions and are arbitrable. |
| Whether Counts III–IV (automatic stay violations) are arbitrable and affect estate administration. | Stay-violation claims should be resolved in court to protect the estate. | Stay claims are related to contract breaches and should be arbitrated; they do not impede estate administration. | Counts III–IV are arbitrable and can be pursued in arbitration; abstention appropriate for remaining claims. |
| Whether the court should abstain from hearing remaining non-arbitrable claims. | Remaining claims should proceed in federal court. | Abstention avoids duplication and waste; remaining claims are intertwined with arbitrable issues. | The court abstains and directs arbitration for arbitrable claims. |
Key Cases Cited
- Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (Supreme Court 1985) (arbitration close to entire scope of international/commercial disputes; enforceability)
- Pritzker v. Merrill Lynch, Pierce, Fenner & Smith, 7 F.3d 1110 (3d Cir. 1993) (FAA scope and arbitration review framework)
- PaineWebber, Inc. v. Hartmann, 921 F.2d 507 (3d Cir. 1990) (arb. clause validity and questions of enforceability)
- Green Tree Financial Corp.-Alabama v. Randolph, 531 U.S. 79 (U.S. 2000) (doubtful issues regarding arbitration resolved in favor of arbitration)
- Great Western Mortgage Corp. v. Peacock, 110 F.3d 222 (3d Cir. 1997) (arbitration scope; threshold inquiry is existence/validity of agreement)
- Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (U.S. 1983) (scope of arbitrability; doubts resolved in favor of arbitration)
- MBNA Am. Bank, N.A. v. Hill, 436 F.3d 104 (2d Cir. 2006) (arbitration avoidance and stay considerations)
- In re TexStyle, LLC, 2012 WL 1345646 (Bankr.S.D.N.Y. 2012) (stay-violation claim intertwined with contract claims; arbitration favored)