Kirkland v. Rund, No. 14-55740 (9th Cir. 2016)
Annotate this CaseJohn Kirkland moved the bankruptcy court to compel arbitration of a bankruptcy trustee's adversary proceeding. The bankruptcy court denied John’s motion to compel arbitration and the district court affirmed. The court concluded that the bankruptcy court did not abuse its discretion in denying the motion to compel arbitration where the trustee's fraudulent conveyance, subordination, and disallowance causes of action were core proceedings, thereby giving the bankruptcy court discretion to weigh the competing bankruptcy and arbitration interests at stake. The bankruptcy court properly applied In re Thorpe Insulation Co., to determine that the arbitration provisions at issue conflicted with Bankruptcy Code purposes of having bankruptcy law issues decided by bankruptcy courts; of centralizing resolution of bankruptcy disputes; and of protecting parties from piecemeal litigation. The court rejected the trustee's claims regarding enforceability, and the Kirklands' claims regarding the plain language of some of the arbitration agreements. Accordingly, the court affirmed the judgment.
Court Description: Bankruptcy / Arbitration. The panel affirmed the district court’s decision affirming the bankruptcy court’s denial of a motion to compel arbitration in a bankruptcy trustee’s adversary proceeding seeking avoidance of fraudulent transfers. The panel held that the bankruptcy trustee’s fraudulent conveyance, subordination, and disallowance causes of action were core proceedings, thereby giving the bankruptcy court discretion to weigh the competing bankruptcy and arbitration interests at stake. The bankruptcy court properly determined that the arbitration provisions at issue conflicted with the Bankruptcy Code purposes of having bankruptcy law issues decided by bankruptcy courts; of centralizing resolution of bankruptcy disputes; and of protecting parties from piecemeal litigation. Accordingly, the bankruptcy court did not abuse its discretion in denying the motion to compel arbitration. The panel rejected the argument that the trustee’s fraudulent transfer claims were the constitutional equivalent of non-core claims because the defendant had requested a jury trial and had not consented to one before the bankruptcy court. The panel also agreed with the district court that the bankruptcy trustee was not bound by the arbitration agreements for purposes of the fraudulent transfer claims. 4 IN THE MATTER OF EPD INVESTMENT CO.
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