Taylor v. Allied Title Lending, LLC (In re Taylor), 594 B.R. 643

Background

Debtor (Taylor) executed an Allied Cash Advance open‑end credit agreement for $1,500 that charged 0.75% per day (≈273.75% APR) plus a $100 origination fee; the agreement contained an opt‑out arbitration clause.
Taylor filed chapter 13 and Allied filed a proof of claim in the bankruptcy for the loan balance; transfers of the claim between Allied and Cerastes occurred during the case.
Taylor filed an adversary complaint seeking to disallow Allied’s claim under 11 U.S.C. § 502(b)(1), asserting the loan was void under Virginia consumer finance and usury laws, and seeking class certification for similarly situated debtors (Counts II and III central to dispute).
Allied moved to compel arbitration of Counts II and III and to have those claims treated as non‑core; the Court stayed the case to certify state‑law questions to the Virginia Supreme Court, which declined certification.
The Virginia Attorney General intervened to pursue statutory enforcement and disallowance on behalf of the Commonwealth; the Court granted intervention.
The Bankruptcy Court denied Allied’s motion to compel arbitration, holding Counts II and III are constitutionally core and arbitration would conflict with bankruptcy purposes and impede the Attorney General’s statutory enforcement authority.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Counts II and III must be stayed and sent to arbitration under the Credit Agreement	Taylor: Counts challenge allowance of Allied’s proof of claim; they are core and must be adjudicated in bankruptcy court	Allied: Arbitration clause is enforceable under the FAA; class claims are non‑core and should be arbitrated	Denied: Counts II and III are constitutionally core; arbitration would conflict with bankruptcy purposes, so court refused to compel arbitration
Whether Counts II and III are constitutionally core (Stern analysis)	Taylor: Claims attack validity of loan and therefore directly affect allowance/disallowance of claim (core)	Allied: Class claims are not among § 157(b)(2) core categories and are properly arbitrable	Held: Counts II and III are constitutionally core because resolution would necessarily resolve allowance of Allied’s proof of claim
Whether arbitration should be enforced against intervening Virginia Attorney General	Taylor/Commonwealth: AG has statutory authority to litigate; cannot be compelled to arbitrate absent agreement	Allied: Arbitration clause should bind claims relating to the agreement	Held: Denied: Waffle House principle — an agency/sovereign that has not agreed to arbitrate cannot be forced to relinquish statutory enforcement authority
Whether referring core claims to arbitration conflicts with the Bankruptcy Code’s purposes	Taylor: Arbitration would undermine centralized, efficient claims resolution and reorganization	Allied: FAA preemption and federal policy favor arbitration; arbitration would not unduly impede bankruptcy process	Held: Referring these constitutionally core objections to arbitration would inherently conflict with Bankruptcy Code objectives and was rejected

Key Cases Cited

Moses v. CashCall, 781 F.3d 63 (4th Cir. 2015) (refusal to compel arbitration where claim to declare loan void was constitutionally core)
Stern v. Marshall, 564 U.S. 462 (2011) (distinguishes statutorily core from constitutionally core bankruptcy claims)
EEOC v. Waffle House, 534 U.S. 279 (2002) (agency enforcement authority cannot be abrogated by arbitration absent agreement)
AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) (FAA enforces arbitration agreements as contracts and federal policy favors arbitration)
Green Tree Financial Corp.-Ala. v. Randolph, 531 U.S. 79 (2000) (Congressional intent may preclude arbitration of certain statutory rights)
Katchen v. Landy, 382 U.S. 323 (1966) (bankruptcy’s centralized, prompt administration of estate is paramount)
Executive Benefits Ins. Agency v. Arkison, 573 U.S. 25 (2014) (post‑Stern jurisdictional framework for bankruptcy courts)