TP, Inc. v. Bank of America, N.A. (In re TP, Inc.)
479 B.R. 373
Bankr. E.D.N.C.2012Background
- TP entered into a Master Loan Agreement and Promissory Note with BOA on January 10, 2003, containing arbitration clauses, unchanged by subsequent extensions and amendments.
- Jonathan P. Joyner, a BOA senior vice president, worked with TP regarding its loans.
- BOA filed a state court action on July 7, 2009 for breach of the Promissory Note, obtained attachments and garnishments, and a consent order dismissed counterclaims pro se without prejudice on October 8, 2009.
- TP and related entities filed bankruptcy on March 1, 2010, staying the state court action against TP but not against non-debtors.
- TP initiated an adversary proceeding in March 2011; BOA moved to dismiss or stay based on arbitration provisions; mediation followed, then Stern v. Marshall prompted further briefing in 2012.
- The court must determine (i) whether arbitration covers TP’s claims and (ii) whether BOA waived arbitration rights before considering arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of arbitration provision | Arbitration clause broadly covers all disputes between the parties. | Arbitration should apply to covered claims and be consistent with core proceedings rules. | Arbitration covers all asserted causes of action. |
| BOA's waiver of arbitration rights | BOA waited two years to seek arbitration, causing prejudice. | Delay alone does not prove waiver; prejudice must be shown. | BOA did not waive arbitration rights; no prejudice shown sufficient for waiver. |
| Core vs non-core status under Stem/Stern | TP's state-law claims are disputes ancillary to bankruptcy and may be core. | Resolution should consider whether claims are core or non-core and may require arbitration where appropriate. | Some claims are core (e.g., fraud in the inducement) and remain in court; others are non-core and referred to arbitration. |
| Impact of Stern v. Marshall on final orders | State-law counterclaims may be core if necessary to determine creditor’s claim. | Stern limits final orders in non-bankruptcy-based matters; assess constitutional grounds. | Stem framework applied; Stern governs which core matters may be finally decided by the bankruptcy court. |
| Disposition of claims after arbitration decision | All core issues should be decided in bankruptcy court; non-core issues should go to arbitration. | Non-core claims should be referred to arbitration while preserving core determinations for the court. | Core claims retained; non-core claims stayed and referred to arbitration. |
Key Cases Cited
- Patten Grading & Paving, Inc. v. Skanska USA Bldg., Inc., 380 F.3d 200 (4th Cir. 2004) (strong policy favoring arbitration in construing scope)
- Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (U.S. Supreme Court 1983) (doubts about arbitrability resolved in favor of arbitration)
- MicroStrategy, Inc. v. Lauricia, 268 F.3d 244 (4th Cir. 2001) (actual prejudice required for waiver; delay alone not enough)
- Fraser v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 817 F.2d 250 (4th Cir. 1987) (prejudice from litigation conduct in assessing waiver)
- Zimmer v. CooperNeff Advisors, Inc., 523 F.3d 224 (3d Cir. 2008) (prejudice as touchstone for waiver of the right to arbitrate)
- Nino v. Jewelry Exchange, Inc., 609 F.3d 191 (3d Cir. 2010) (delay in pursuing arbitration and prejudice considerations)