Thomas B. McNamara, United States Bankruptcy Court Judge.
Does bankruptcy eclipse arbitration? Arbitration proceedings pending before bankruptcy
The Debtor, Touchstone Home Health LLC (the "Debtor"), provides home healthcare services. Years before it filed for bankruptcy, the Debtor engaged Santangelo Law Offices, P.C. (the "Law Firm") to protect the Debtor's intellectual property rights. The parties entered into a contract spelling out the terms of the attorney-client relationship, including the payment of fees and costs for legal services. Further, the parties agreed that any disputes that might arise between the Debtor and the Law Firm would be resolved by binding arbitration. Two years later, the Debtor became disenchanted with the legal services provided by the Law Firm and the fees charged. The Debtor fired the Law Firm and hired new attorneys.
Notwithstanding its termination as legal counsel, the Law Firm asserted that the Debtor failed to pay the Law Firm's outstanding bill. Receiving no satisfaction of the alleged obligation, the Law Firm commenced an arbitration proceeding against the Debtor in accordance with the parties' contractual arrangement. As is common in these sorts of fee disputes, the Debtor responded by accusing the Law Firm of legal malpractice. The parties completed all fact discovery and designated their expert witnesses. At the Law Firm's request, the arbitrator dismissed the Debtor's legal malpractice counterclaim. The only steps remaining in the arbitration process were for the arbitrator to rule on a pending motion for sanctions brought by the Law Firm and to issue a decision on the merits after conducting a final hearing. But, just a day before an important deadline in the arbitration, the Debtor filed for bankruptcy protection. The bankruptcy petition caused the arbitration to be stayed under Section 362(a)(1).
Promptly after the bankruptcy filing, the Law Firm filed a "Motion for Relief from Stay for Cause and to Enforce Arbitration Agreement Pursuant to Federal Arbitration Act." (Docket No. 46, the "Motion.") The Law Firm sought authorization to complete the arbitral process and liquidate its claim. The Debtor filed its "Response to Motion for Relief from Stay and to Enforce Arbitration Agreement filed by Santangelo Law Offices, P.C." (Docket No. 51, the "Response.") The Debtor opposed the Motion and advocated that the Court should decide the legal fees dispute in the context of the bankruptcy claims allowance and disallowance process under Section 502.
So, how should the Law Firm's claim against its former client be liquidated?
This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334. The issues raised in the Motion and Response constitute a core proceeding under 28 U.S.C. §§ 157(b)(2)(A) (matters concerning administration of the estate), (G) (motions to terminate, annul, or modify the automatic stay), and (O) (other proceedings affecting the liquidation of assets of the estate). This Court has jurisdiction to enter final judgment with respect to the Motion and Response. Venue is proper in this Court pursuant to 28 U.S.C. §§ 1408 and 1409.
The Debtor filed for protection under Chapter 11 of the Bankruptcy Code on February 16, 2017. (Docket No. 1.) The Law Firm filed the Motion shortly thereafter. The Law Firm requested relief from stay "to proceed with the liquidation of claims involving the debtor or the debtor's estate pursuant to certain proceedings presently pending in an arbitration proceeding between Movant and Debtor before Arbitrator Dean Hermes, in Fort Collins, Colorado." (Docket No. 46-11.) The Debtor opposed the Motion and contended, among other things, that "cause does not exist for stay relief under Section 362(d)(1) and the Curtis factors." (Docket No. 51 at 9.) The Debtor proposes that the dispute between the Debtor and the Law Firm be resolved strictly within the confines of the bankruptcy process.
The Court conducted a Preliminary Hearing on the Motion and the Response in accordance with L.B.R. 4001-1(c)(1). The Court received oral offers of proof and exhibits. After considering various objections, the Court admitted into evidence Exhibits 1-4 and 6-14 offered by the Law Firm, as well as, Exhibit A offered by the Debtor. (Docket No. 61.)
The Debtor provides home healthcare services. Sometime during late 2012, the
The Debtor and the Law Firm entered into an "Agreement for Legal Services," dated December 21, 2012 (Ex. 1, the "Agreement"). The Agreement appears typical for the engagement of legal counsel in a commercial matter. Although the Agreement did not refer to THP by name, the parties limited the scope of the legal retention to intellectual property matters. (Id. ¶¶ 1 and 2.) In return for the Law Firm's providing legal services, the Debtor agreed to pay fees and costs according to an "attached Fee and Retainer Account Schedule." (Id. ¶ 3.) The "Standard Hourly Rates" for lawyers varied from $270 to $480 per hour depending on the experience of counsel. (Id. at Fee and Retainer Account Schedule.) The Law Firm promised to bill costs at "actual or estimated amounts." (Id.)
The Agreement provided various remedies if the Debtor failed to timely pay billed legal fees and costs. The Law Firm's remedies included, among other things, withdrawing from further representation, requiring the Debtor to pledge collateral as security, requiring the Debtor to obtain personal guarantees, converting the relationship to cash-in-advance payments, and filing legal action against the Debtor. The Debtor committed to pay "a service/interest charge" for any past-due amounts and authorized the Law Firm to recover fees and costs incurred in collection of "any amounts due." (Id. ¶ 3.)
Importantly, the Debtor and the Law Firm also agreed to a forum and venue for resolution of any disputes that might arise between them related to their attorney-client relationship (the "Arbitration Clause"). The Arbitration Clause states:
(Id. ¶ 4 (emphasis added).)
Having been engaged to assist the Debtor on intellectual property matters, the Law Firm began its legal work with a demand to THP. (Ex. 3 at 188-90.) Unsuccessful in resolving the matter consensually, the Law Firm filed a "Verified Complaint" for the Debtor against THP with the Larimer County District Court in the case captioned: Touchstone Home Health, LLC v. Touchstone Health Partners, Case No. 2013-CV-20788 (Larimer County District Court, Colorado) (the "Intellectual Property Lawsuit"). (Id. at 153-68.) The Debtor (through the Law Firm) asserted causes of action for trademark infringement,
Thereafter, the Debtor and THP battled in hotly-contested litigation. (Id. at 208-14.) Since the case did not settle early, the Debtor retained a California-based expert witness to assist in prosecution. (Response, Affidavit of Justin Yeater ¶¶ 8-16 [hereinafter, "Yeater Aff. ___"].) The Law Firm continued to represent the Debtor in the Intellectual Property Lawsuit until January 12, 2015, at which time the state trial court permitted new legal counsel to substitute for the Law Firm. (Id. at 124 and 211.) The Debtor asserts that it terminated the Law Firm based upon the lack of success and mounting legal fees and costs, which greatly exceeded the Debtor's expectations. The Debtor's management testified that the Law Firm advised the Debtor that legal fees would be in the range of $2,000 to $100,000 for pursuing THP. (Yeater Aff. ¶¶ 8-16.) But the costs were much, much more.
During the approximately two years that the Law Firm represented the Debtor, the Law Firm billed the Debtor monthly for legal services by sending invoices. (Id. at 47-144.) The Debtor paid approximately $74,325. (Id. at 147.) But, as of April 11, 2016, the Law Firm claimed that the Debtor owed an additional $251,029 in delinquent attorneys' fees, costs, interest and charges. (Id.)
After the Debtor engaged new legal counsel, the Debtor eventually reached a resolution with THP and entered into a "First Amended Settlement Agreement" to resolve the Intellectual Property Lawsuit. (Id. at 216-18.) Under the settlement, the Debtor received a payment of $450,000 from THP. (Id.) The Debtor asserts that such settlement amount was far less than the Law Firm had predicted the Debtor would recover. In any event, the Debtor did not use any of the settlement funds to pay the Law Firm.
After the Debtor terminated the Law Firm in early 2015, the Law Firm continued to assert that it was owed substantial attorneys' fees, costs, and interest for its work. The Debtor contested any such obligation. As a result of the impasse, and shortly after the settlement between the Debtor and THP, the Law Firm initiated an arbitration proceeding under the Agreement by sending a "Demand for Arbitration," dated July 16, 2015, wherein it demanded "approximately $226,400" for legal fees, costs, and interest. (Ex. 3 at 220; and Ex. 6 at 2.) The arbitration demand was not well-received. The Debtor responded by filing an "Answer and Counterclaim," through which the Debtor denied any liability and also claimed that the Law Firm engaged in "legal malpractice." (Ex. 3 at 220-22.) Unfortunately, the parties could not agree on an arbitrator. So, for the better part of a year, the Debtor and the Law Firm fought over arbitrator selection. (Yeater Aff. ¶¶ 26-27.)
(Id. at 3.) Consistent with the Arbitration Clause, the Arbitrator confirmed that the Arbitration Hearing would be conducted in Fort Collins, Colorado. (Id.)
The Arbitration did not proceed smoothly. For starters, the parties engaged in discovery battles. The Arbitrator conducted a contested discovery hearing, during which he overruled the Debtor's objections and ordered disclosure of the settlement agreement between the Debtor and THP. (Ex. 14.) Later, the Law Firm filed a motion to compel. Although the Arbitrator determined that the Debtor's responses to various requests for admission were sufficient, the Arbitrator overruled the Debtor's objections to an interrogatory and compelled a complete answer. In doing so, he found that "Touchstone's [Debtor's] answer to Interrogatory No. 6 is evasive and incomplete and [I] deem that it failed to answer." (Id. at 5.) The Arbitrator's written decision on discovery issues is both thorough and well-reasoned.
Meanwhile, the parties made their expert disclosures in the Arbitration. (Ex. 3.) The Law Firm designated Robert Brunelli and Peter B. Nagel, as well as the Law Firm's principal, Luke Santangelo, and another lawyer from the Law Firm, David Kerr. (Id.) The Debtor designated Thomas P. Howard as an expert. (Ex. A; Yeater Aff. ¶ 29.) The parties completed all fact and expert discovery, except possible depositions of expert witnesses.
Next, the parties proceeded with dispositive motions in the Arbitration. The Law Firm filed a motion to dismiss the Debtor's
As the hearing date for the Arbitration approached, something very strange happened. The Debtor claimed that the dispute had been settled. But, the Law Firm disputed this, asserting that the Debtor had engaged in a fanciful scheme to fabricate a settlement by using a fake FedEx driver to obtain a signature from the Law Firm on a delivery slip, which signature was then superimposed or forged on a settlement agreement that the Law Firm had not even seen. Trying to get to the bottom of it all, the Arbitrator held a status conference. (Ex. 2V ¶ 1.) Then, he conducted a hearing and determined that "no settlement occurred between the parties." (Id. ¶¶ 1-6.) The Arbitrator issued a confirming "Minute Order" a few days later. (Id.)
Shortly thereafter, the Law Firm submitted a "Motion for Sanctions" in the Arbitration.
The Debtor filed for protection under Chapter 11 of the Bankruptcy Code on February 16, 2017. (Docket No. 1.) Notably, the Debtor made the bankruptcy filing just one day before the fourth deadline for the Debtor to respond to the Law Firm's motion for sanctions in the Arbitration and about month before the evidentiary hearing on the matter. By the time the Debtor sought bankruptcy protection, the Arbitration was virtually trial-ready. Only two things remained to be done in the Arbitration: first, the Arbitrator needed to decide the motion for sanctions; and second, if the Arbitrator did not issue dispositive sanctions against the Debtor, the Arbitrator needed to conduct the final hearing and issue a decision on the merits.
The Court finds that the Arbitrator was proceeding in a diligent and efficient manner to complete the Arbitration prior to the bankruptcy. It was the Debtor's bankruptcy filing (and multiple requests for extensions of time) that interfered with timely resolution of the Arbitration. Indeed, it is apparent that if the Debtor had not filed for bankruptcy, the dispute likely would have been decided by the Arbitrator many months ago. Furthermore, the Court concludes that the bankruptcy filing itself
In any event, to protect itself in the bankruptcy process, the Law Firm filed a Proof of Claim asserting unpaid fees and costs of $560,193. (Claim No. 4, the "Claim.") The Debtor objected to the Claim and requested resolution in the bankruptcy process. (Docket No. 49.) The Law Firm opposed the Debtor's objection and argued, among other things, that the fee dispute must be resolved through arbitration. (Docket No. 62.)
Meanwhile, the Debtor is struggling in the Chapter 11 bankruptcy process. The Debtor employs about 20 people and serves 80 patients. The Law Firm's Claim is the largest claim against the Debtor. The Debtor proffered that it had cash reserves of about $60,000 and could not afford to arbitrate the Claim. (Yeater Aff. ¶ 36.) The Debtor asserts that it should be able to liquidate the Claim in this Court, and that doing so in this forum would be more cost-effective than proceeding with the arbitration.
The Law Firm contends that the Federal Arbitration Act, 9 U.S.C. § 1 et seq. (the "FAA"), "mandates the arbitration of the fee dispute" between the Debtor and the Law Firm. (Motion at 4.) No doubt the Law Firm is correct that federal law strongly favors the arbitration of disputes in accordance with arbitration agreements. Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 107 S.Ct. 2332, 96 L.Ed.2d 185 (1987).
9 U.S.C. § 2. According to the U.S. Supreme Court, Section 2 of the FAA "is a congressional declaration of a liberal federal policy favoring arbitration agreements, notwithstanding any state substantive or procedural policies to the contrary." Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). The FAA requires that federal courts must, upon request, stay federal litigation if the disputed issue is arbitrable under an arbitration agreement. 9 U.S.C. § 3. If parties fail or refuse to arbitrate in accordance with an arbitration contract, they may be compelled to arbitrate, as the Law Firm requests in this case. 9 U.S.C. § 4. To further encourage arbitration of disputes, the FAA also provides that arbitration awards may be confirmed in federal court and thereby receive treatment similar to federal court judgments. 9 U.S.C. § 9.
The U.S. Supreme Court repeatedly has confirmed the liberal reach of the FAA and that federal litigation generally should be stayed while arbitration is compelled — even if the underlying dispute includes claims based upon federal statutes. See e.g. Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 403-4, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967) (claim of fraud in the inducement of arbitration clause itself generally was a question for arbitrators to decide, not federal courts); Scherk v. Alberto-Culver Co., 417 U.S. 506, 519-20, 94 S.Ct. 2449, 41 L.Ed.2d 270 (1974) (statutory claims under the Securities and Exchange Act of 1934 must be arbitrated and arbitration agreement must be "respected and enforced"); Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc., 473 U.S. 614, 626-640, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985) (federal antitrust claims are subject to arbitration under FAA); McMahon, 482 U.S. 220, 107 S.Ct. 2332 (statutory claims under RICO and Securities Exchange Act of 1934 are subject to arbitration under FAA). Under the FAA, federal courts must "rigorously enforce agreements to arbitrate, even if the result is `piecemeal' litigation, at least absent a countervailing policy manifested in another federal statute." Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 221, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985).
All of the foregoing federal law unequivocally favoring enforcement of written arbitration contracts begs the threshold question of whether the FAA applies to any particular arbitration agreement. The Debtor argues that the FAA is not applicable to this case since "[t]he FAA is limited to maritime cases or disputes involving interstate commerce." (Response at 6.) The Debtor contends that "the Court cannot compel arbitration of the disputed [] fees under the FAA where the [Law] Firm's claim in no way implicate[s] interstate commerce." (Id. at 6.)
The Debtor is correct that the FAA does not universally govern all arbitration contracts. Instead, the statute is limited to contracts "evidencing a transaction involving commerce...." 9 U.S.C. § 2 (emphasis added). What does that phrase mean? Fortunately, the FAA expressly defines
A trilogy of U.S. Supreme Court decisions — cited both by the Law Firm and the Debtor — helps define the ultra-broad scope of the interstate commerce requirement under the FAA: Allied-Bruce Terminix Co., Inc. v. Dobson, 513 U.S. 265, 274-5, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995); Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 121 S.Ct. 1302, 149 L.Ed.2d 234 (2001); and Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 123 S.Ct. 2037, 156 L.Ed.2d 46 (2003). The Allied-Bruce Terminix case involved a contract for the treatment and protection of an Alabama residence against termites. None of the parties "contemplated" a transaction involving interstate commerce. Relying on the "primarily local" nature of the transaction, the state trial court and the Alabama Supreme Court both determined that the FAA did not apply because the contract did not implicate interstate commerce. The U.S. Supreme Court decided otherwise, reversed, and held that the "commerce" requirement is "broad and is indeed the functional equivalent of `affecting' [interstate commerce]." Allied-Bruce Terminix, 513 U.S. at 274-5, 115 S.Ct. 834. Searching for conduct "affecting" interstate commerce under the termite eradication agreement, the U.S. Supreme Court observed that the defendant companies had multistate operations and some of "the termite-treating and house-repairing material" used by the defendant companies on the local residence "came from outside Alabama." Allied-Bruce Terminix, 513 U.S. at 282, 115 S.Ct. 834. These exceedingly slim connections to interstate commerce caused a majority of U.S. Supreme Court to rule that the FAA applied.
Some years later, the U.S. Supreme Court faced another FAA question in the context of an employment contract between a California resident working at a California consumer electronics store. Circuit City, 532 U.S. 105, 121 S.Ct. 1302. The main issue was whether an employment agreement (which contained an arbitration provision) was exempt from the FAA. Although the decision focused on the statutory exemption for certain employment contracts,
The last of the U.S. Supreme Court trilogy of cases construing the scope of the FAA involved review of another Alabama dispute. Alafabco, 539 U.S. 52, 123 S.Ct. 2037. The question was whether a debt-restructuring contract executed in Alabama by an Alabama bank and an Alabama builder was governed by the FAA. As in Allied-Bruce Terminix, the Alabama Supreme Court had determined that Alabama
The lesson of Allied-Bruce Terminix, Circuit City, and Alafabco is that the interstate commerce hurdle under the FAA is extremely low. Almost anything will do. Put another way by a leading arbitration treatise:
Thomas H. Oehmke and Joan M. Brovins, OEHMKE COMMERCIAL ARBITRATION § 3.6 (Thompson Reuters 3d. Ed. Supp. 2016) [hereinafter, "OEHMKE ARBITRATION § ___"].
Given the broad reading mandated by the U.S. Supreme Court under the FAA, many — perhaps most — commercial contracts likely affect interstate commerce. The same is true for many attorney-client engagement agreements. Such contracts may satisfy the interstate commerce requirement of the FAA if:
See, e.g., Meierhenry Sargent LLP v. Williams, 2017 WL 1653312 (D.S.D. May 1, 2015) (FAA applied to attorney retention agreement for legal services to be performed in South Dakota for Minnesota residents and listing cases in which FAA held to be applicable to attorney fee agreements); Lucey v. Meyer, 401 S.C. 122, 736 S.E.2d 274 (App. 2012) (FAA applied since attorney engaged in extensive out-of-state travel in connection with representation); Default Proof Credit Card Sys., Inc. v. Friedland, 992 So.2d 442 (Fla. Ct. Crim. App. 2008) (FAA applied since underlying lawsuit involved a federal intellectual property cause of action, representation was by attorneys in different states than client, and signatories to contract were in different states).
Although the relationship between the Debtor and the Law Firm clearly was Colorado-focused, there was at least one important interstate dimension of the work performed under the Agreement. At the recommendation of the Law Firm, the Debtor retained a California-based expert witness for the Intellectual Property Lawsuit. The Debtor's Chief Financial Officer testified as follows by affidavit:
(Yeater Aff. ¶¶ 17-18.)
The facts show that the Law Firm contacted and recommended an out-of-state expert witness, the Debtor retained the California expert, and the Debtor paid him. All of the foregoing occurred within the context of the legal services provided under the Agreement. This very slender interstate reed is sufficient to satisfy the extremely low interstate threshold necessary to trigger application of the FAA. Allied-Bruce Terminix, 513 U.S. at 274-75, 115 S.Ct. 834; Circuit City, 532 U.S. at 109, 121 S.Ct. 1302; Alafabco, 539 U.S. at 57-58, 123 S.Ct. 2037. Thus, the FAA governs arbitration under the Arbitration Clause.
Arbitration is strongly favored at both the federal and state levels. Why? Undoubtedly, part of the allure of arbitration is the sanctity of contracts — especially commercial contracts. If both parties freely and voluntarily agree in advance to resolve any contractual disputes by arbitration, such provision should be enforced. Arbitration is generally a prompt, efficient, and fair mechanism for dispute resolution. AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 344-45, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011) ("The point of affording parties discretion in designing arbitration processes is to allow for efficient, streamlined procedures.... And the informality of arbitral proceedings is itself desirable, reducing the cost and increasing the speed of dispute resolution."); Mitsubishi Motors, 473 U.S. at 628, 105 S.Ct. 3346 ("[Arbitration] trades the procedures and opportunity for review of the courtroom for the simplicity, informality, and expedition of arbitration."). The parties are free to negotiate and agree on many important issues including: the selection of an arbitrator (who may have specialized expertise in the subject matter of the contract); the number of arbitrators; the pre-hearing procedural rules; the arbitral institution (unless the parties elect ad hoc arbitration); the confidentiality of proceedings; the location for hearings; the scope and limitations on discovery; the conduct of hearings; the form of arbitral decision; and the time for resolution. See OEHMKE ARBITRATION § 1.1 (identifying "oft-cited benefits of arbitration"). Arbitration also has the collateral effect of assisting in relieving crowded federal and state court dockets. While arbitration is not some sort of dispute resolution panacea,
Uniform federal bankruptcy law
Grogan v. Garner, 498 U.S. 279, 286, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991) (quoting Local Loan Co. v. Hunt, 292 U.S. 234, 244, 54 S.Ct. 695, 78 S.Ct. 1230 (1934)). Thus, in the individual context, the "honest but unfortunate debtor" who satisfies the requirements of the Bankruptcy Code stands to gain a "fresh start" through discharge. Id. at 286-87, 111 S.Ct. 654; Marrama v. Citizens Bank of Mass., 549 U.S. 365, 367, 127 S.Ct. 1105, 166 L.Ed.2d 956 (2007) ("The principal purpose of the Bankruptcy Code is to grant a `fresh start' to the `honest but unfortunate debtor.'"). For Chapter 11 corporate filings, like this case, the goal is reorganization. 11 U.S.C. § 1101 et seq. And, "the fundamental purpose of [Chapter 11] reorganization is to prevent a debtor from going into liquidation, with an attendant loss of jobs and possible misuse of economic resources." NLRB v. Bildisco & Bildisco, 465 U.S. 513, 528, 104 S.Ct. 1188, 79 L.Ed.2d 482 (1984). To be successful in Chapter 11, "debtor and creditors try to negotiate a plan that will govern the distribution of valuable assets from the debtor's estate...." Czyzewski v. Jevic Holding Corp., ___ U.S. ___, 137 S.Ct. 973, 978, 197 L.Ed.2d 398 (2017) (listing "a few fundamentals" in Chapter 11 bankruptcy cases). The Bankruptcy Code sets forth a comprehensive system of priorities that ensures equality of distribution between similarly situated creditors. Id. at 980; Clarke v. Rogers, 228 U.S. 534, 548, 33 S.Ct. 587, 57 S.Ct. 953 (1913) ("Equality between creditors is necessarily the ultimate aim of the bankrupt[cy] law").
The modern bankruptcy system depends, in significant part, upon centralization. See Appel v. Gable (In re B & L Oil Co.), 834 F.2d 156, 159 n.8 (10th Cir. 1987) (addressing venue transfer and noting that "centralizing proceedings in one court" "furthers important goals in the efficient administration of bankruptcy cases"). The debtor and creditors are initially brought into a single forum — the bankruptcy court. 28 U.S.C. §§ 1334(a) and (b) ("the district court [of which the bankruptcy court is a unit] shall have original and exclusive jurisdiction of all cases under title 11 ... and original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11"). It is there that debtors file their schedules of assets and liabilities, officers are appointed and compensated, bankruptcy cases are administered, creditors submit their claims, parties seek allowance or disallowance of claims, trustees or debtors in possession pursue avoidance actions, and parties engage in the reorganization process. See id., 28 U.S.C. § 157 (itemizing "core proceedings"); 11 U.S.C. §§ 301, 321-331, 361-366, 501-503, 541-551, 1101-1146. The imposition of an automatic stay during the pendency of the bankruptcy case stops the "race to the courthouse" and further promotes centralization in the bankruptcy court. 11 U.S.C. § 362(a); SEC v. Miller, 808 F.3d 623, 630 (2d Cir. 2015) ("The automatic stay ... serves `one of the core purposes of bankruptcy,' by enabling `the bankruptcy court to centralize all disputes concerning property of the debtor's estate so that reorganization can proceed efficiently, unimpeded by uncoordinated proceedings in other arenas.'").
But, while arbitration and bankruptcy serve some different general purposes, there is at least one commonality with respect to claims liquidation. Arbitration is a summary process designed to reach a prompt conclusion. Bankruptcy claims adjudication is similar in the sense that it does not typically involve a full-blown lawsuit. It is designed to be fairly quick so
What happens when arbitration and bankruptcy meet? This is a difficult question that neither the U.S. Supreme Court nor the Circuit Court of Appeals for the Tenth Circuit has addressed directly. In the absence of binding precedent, the Court turns elsewhere for guidance. Appellate courts in several other jurisdictions have considered the interplay of the FAA and the Bankruptcy Code. All have relied on an analogous U.S. Supreme Court decision, McMahon, 482 U.S. 220, 107 S.Ct. 2332, which did not involve bankruptcy.
In McMahon, securities brokerage customers filed a federal lawsuit against a broker notwithstanding an arbitration provision in their customer account contracts. The customers claimed that the securities firm fraudulently churned their accounts in violation of two federal statutes: the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961 et seq. ("RICO"); and the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b) (the "Exchange Act"). The brokerage moved to compel arbitration under the FAA. On appeal, the U.S. Supreme Court considered whether the brokerage could compel arbitration of federal statutory claims. Writing for the majority, Justice O'Connor paid homage to the "federal policy favoring arbitration" and noted that the FAA "standing alone ... mandates enforcement of agreements to arbitrate statutory claims." 482 U.S. at 226, 107 S.Ct. 2332. However, the U.S. Supreme Court also recognized the possibility that the FAA could conflict with, and potentially be subordinate to, other federal statutes:
Id. at 226-27, 107 S.Ct. 2332 (internal citations omitted). After analyzing RICO and the Exchange Act, the U.S. Supreme Court ultimately determined that Congress did not intend to prohibit arbitration of claims under such federal statutes. Instead, the brokerage could compel arbitration of the RICO and Exchange Act claims under the FAA. Id. at 238 and 242, 107 S.Ct. 2332; see also Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477, 483-85, 109 S.Ct. 1917, 104 L.Ed.2d 526 (1989) (relying on McMahon framework and determining that defendant could compel arbitration of claim under Securities Act of 1933).
Although McMahon did not involve the Bankruptcy Code, six U.S. Circuit Courts of Appeals (and a host of district and bankruptcy courts) have determined that the McMahon framework applies to FAA arbitration issues arising in bankruptcy cases.
The word "arbitration" does not appear anywhere in the Bankruptcy Code. Neither does the FAA. And, the legislative history of the Bankruptcy Code contains merely a single passing reference to arbitration as part of a discussion of the automatic stay.
So, under the McMahon analysis, neither the text nor the legislative history of the Bankruptcy Code evidences congressional intent to override the FAA. Appellate precedent uniformly rejects overriding the FAA based on the text or the legislative history of the Bankruptcy Code. In such respect, the Eber decision is typical:
Eber, 687 F.3d at 1129. See also Thorpe Insulation, 671 F.3d at 1020 ("Neither the text nor the legislative history of the
Since neither the text nor the legislative history of the Bankruptcy Code reveals congressional intent to override the FAA, the only remaining McMahon inquiry requires an assessment of whether there is an "inherent conflict" between arbitration and the Bankruptcy Code in the context of particular causes of action. To decide such question, most courts start by considering whether the claims at issue in the arbitration are core or noncore claims.
The Bankruptcy Code defines statutory "core proceedings" under 28 U.S.C. § 157(b)(2) by way of a non-exclusive listing. Core proceedings include, among others: matters concerning administration of the estate; allowance or disallowance of claims; counterclaims by the estate; avoidance actions (preference and fraudulent conveyance claims); motions for relief from stay; determinations of dischargeability and objections to discharge; confirmation of plans; determinations of the validity, extent, or priority of liens; orders for obtaining credit, turning over property, approving use or lease of property; and "other proceedings affecting the liquidation of the assets of the estate or the adjustment of the debtor-creditor ... relationship." Id. Most core proceedings derive exclusively from the Bankruptcy Code itself and constitute the heartland of insolvency cases. In broad strokes, noncore claims consist of claims between the parties that exist outside of bankruptcy and do not depend on the Bankruptcy Code.
The distinction between core and noncore claims is relevant to the arbitration inquiry. That is because "[i]t is generally accepted that a bankruptcy court has no discretion to refuse to compel the arbitration of matters not involving `core' bankruptcy proceedings...." Gandy, 299 F.3d at 495 (emphasis added). Put slightly differently, noncore claims in insolvency proceedings must be arbitrated if the requirements of the FAA are met. See Thorpe Insulation, 671 F.3d at 1021; Whiting-Turner, 479 F.3d at 796; MBNA Am., 436 F.3d at 108; Crysen/Montenay, 226 F.3d at 166; Hays, 885 F.2d at 1156. The reason is that "noncore proceedings... are unlikely to present a conflict sufficient to override by implication the presumption in favor of arbitration." U.S. Lines, 197 F.3d at 640.
The intersection of core proceedings and arbitration is much less definitive. Core proceedings implicate "more pressing bankruptcy concerns, but even a determination that a proceeding is core will not automatically give the bankruptcy court discretion to stay arbitration." Id.; see also Mintze, 434 F.3d at 231. To the contrary, even for core claims:
In this case, the Debtor characterizes the dispute between the parties as one related to "claims objection" and, therefore, "core." The Court agrees that objections to claims are matters related to "allowance or disallowance of claims against the estate." However, it is important to note that the Law Firm is not seeking relief from the stay to establish that its claim is allowed under Section 502, but rather to prosecute a breach of contract claim and to liquidate damages in connection with prosecution of that claim. While liquidation may, in some cases, be part of allowance under Section 502, liquidation is not the same as allowance of a claim. See, e.g., G-I Holdings, Inc., 323 B.R. 583, 607 (Bankr. D.N.J. 2005) ("bankruptcy court jurisdiction over the claims allowance process is distinct from liquidation for purposes of distribution"); In re Chateaugay Corp., 111 B.R. 67, 74 (Bankr. S.D.N.Y. 1990) ("Allowing or disallowing claims is clearly a separate and distinct function from liquidating or estimating that claim."); In re Comstock Fin. Servs., Inc., 111 B.R. 849, 856-857 (Bankr. C.D. Cal. 1990) (explaining that "liquidation" is merely one step in the allowance process).
In any event, rather than merely relying on the labels "core" and "noncore," it makes most sense to focus on "the underlying nature of the proceeding, i.e., whether the proceeding derives exclusively from provisions of the Bankruptcy Code and, if so, whether arbitration of the proceeding would conflict with the purposes of the [Bankruptcy] Code." Nat'l Gypsum, 118 F.3d at 1067. The dispute between the Law Firm and the Debtor definitely does not derive exclusively from the Bankruptcy Code. Instead, unlike many core proceedings, the underlying controversy between the Law Firm and the Debtor stems from Colorado state law. It is a breach of contract claim that existed before the Debtor filed for bankruptcy, as evidenced by the commencement of the Arbitration. In that sense, although the dispute is statutorily "core," it is nevertheless a much weaker type of "core" than a proceeding arising directly from the Bankruptcy Code — such as an action for nondischargeability of debt or an avoidance action to recover a bankruptcy preference.
In a case involving arbitration and a series of different types of "core" claims, Kittay v. Landegger (In re Hagerstown Fiber Ltd. P'ship), 277 B.R. 181 (Bankr. S.D.N.Y. 2002), the court explained by characterizing the claims as "procedurally core" or "substantively core":
Id. at 203 (internal citations omitted). See also Togut v. RBC Dain Correspondent Servs. (In re S.W. Bach & Co.), 425 B.R. 78, 90-92 (Bankr. S.D.N.Y. 2010) (distinguishing "procedurally core" and "substantively core" claims); Andre Albertini, Arbitration in Bankruptcy: Which Way Forward, 90 AMER. BANKR. L. J. 599, 610-13 (2016) (recognizing distinction between "substantially core" and "procedurally core" proceedings; "all core proceedings are created equal, but some proceedings are more core than others").
Thus, under the FAA, the Debtor has the burden of showing that arbitration of the procedurally core claim asserted by the Law Firm for fees under the Agreement somehow conflicts directly with the Bankruptcy Code. Such determination "requires a particularized inquiry into the nature of the claim and the facts of the specific bankruptcy." MBNA Am., 436 F.3d at 108.
Recognizing that inherent conflict between arbitration and the Bankruptcy Code is the key issue, the Debtor argues that "compelling arbitration of the disputed... fees conflicts with the purpose of the Bankruptcy Code to provide a centralized forum to adjudicate creditor claims and pay such claims pursuant to a Chapter 11 plan." (Response at 8 (emphasis added).) In addition to making a centralization argument, the Debtor also asserts that "plan confirmation cannot proceed until the ... claim is resolved" and the Debtor "can liquidate the disputed fee claim before [the Bankruptcy Court] in a much more cost-efficient manner" as compared to the Arbitration. (Id.) The Debtor suggests that it "cannot continue operations and cannot reorganize if [the Debtor] is forced to continue defending itself in the arbitration proceedings." (Id. at 8-9.)
The Debtor is correct that the Bankruptcy Code establishes a process for allowance or disallowance of claims. After the commencement of a bankruptcy case, a creditor may file a proof of claim. 11 U.S.C. § 501; Fed. R. Bankr. P. 3001-3005. The filing of a proof of claim subjects a creditor to the bankruptcy court's jurisdiction. Langencamp v. Culp, 498 U.S. 42, 44-45, 111 S.Ct. 330, 112 L.Ed.2d 343 (1990); Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 58-59 n.14, 109 S.Ct. 2782, 106 L.Ed.2d 26 (1990); Katchen v. Landy, 382 U.S. 323, 336, 86 S.Ct. 467, 15 L.Ed.2d 391 (1966). Once filed, proofs of claim are "deemed allowed, unless a party in interest... objects." 11 U.S.C. § 502(a); see also Fed. R. Bankr. P. 3007. If an objection to a
But the bankruptcy claims allowance and disallowance process is not the only way to liquidate a claim in a bankruptcy case. Instead, creditors routinely request relief from stay for cause under Section 362(d)(1) to liquidate claims outside of bankruptcy through pending federal and state court proceedings. See In re Curtis, 40 B.R. 795, 799-800 (Bankr. D. Utah 1984) (setting forth factors for relief from stay to continue state court proceedings). Moreover, such requests are granted every day in bankruptcy courts across the country. See Jim's Maint. & Sons, Inc. v. Target Corp. (In re Jim's Maint. & Sons, Inc.), 418 Fed.Appx. 726 (10th Cir. 2011) (unpublished) (approving Curtis factors by implication and affirming relief from stay for continuance of federal litigation); Dampier v. Credit Invs., Inc. (In re Dampier), 2015 WL 6756446, at *2 (10th Cir. BAP Nov. 5, 2016) (unpublished) (noting that "[i]n the absence of a comprehensive Tenth Circuit test, a list of factors identified in In re Curtis is often relied on by courts in their determination of whether stay relief should be granted" and affirming order granting relief from stay to allow state court litigation to proceed); Robert & Joan Dennen Tr. v. Dennen (In re Dennen), 539 B.R. 182, 186 (Bankr. D. Colo. 2015) (same; cause existed for relief from stay to allow state court litigation to proceed). Allowing liquidation of claims through existing federal or state court cases does not inherently conflict with the Bankruptcy Code.
Permitting liquidation of proofs of claim through arbitration is similar — except that the reason for favoring arbitration is even stronger than the rationale supporting deference to pending federal and state litigation. That is because, as in this case, the parties contractually agreed to arbitration prior to bankruptcy. And, federal law strongly favors arbitration. It is true that allowing arbitration goes against the general principle of centralization in bankruptcy cases. However, there is no express bankruptcy prohibition against allowing arbitration. Indeed, Section 362(d)(1) provides a ready mechanism for permitting arbitration to proceed if warranted under the circumstances. The U.S. Supreme Court has confirmed on multiple occasions that arbitration is generally a prompt, efficient, and fair mechanism for dispute resolution. AT&T Mobility, 563 U.S. at 344-45, 131 S.Ct. 1740; Mitsubishi Motors, 473 U.S. at 628, 105 S.Ct. 3346. Thus, claims liquidation arbitration supports the objectives of the bankruptcy system rather than conflicting with them because it provides a mechanism for quick, economical, and fair dispute resolution.
The lack of inherent conflict between arbitration and the Bankruptcy Code is demonstrated by many bankruptcy decisions approving liquidation of claims through arbitration.
Nat'l Gypsum, 118 F.3d at 1068 (citing a series of decisions allowing relief from stay for arbitration to liquidate claims).
Closer to home, a Colorado decision illustrates the absence of conflict between arbitration and the Bankruptcy Code. In D.E. Frey Group, Inc. v. FAS Holdings, Inc. (In re D.E. Frey Group, Inc.), 387 B.R. 799 (D. Colo. 2008), the court stated quite unequivocally:
Id. at 806.
Two cases in such line stand out for their more fulsome analysis and discussion of the arbitration issues: In re BFW Liquidation, LLC, 459 B.R. 757 (Bankr. N.D. Ala. 2011); and In re Farmland Indus., Inc., 309 B.R. 14 (Bankr. W.D. Mo. 2004). In its Motion, the Law Firm relies extensively on BFW Liquidation — and rightly so. In that case, a creditor union fund filed a proof of claim against a Chapter 11
BFW Liquidation, 459 B.R. at 778. Thus, the decision explains how claims liquidation arbitration is consistent with bankruptcy purposes (i.e., a summary proceeding to decide how much is owed). Ultimately, the BFW Liquidation court granted the motion for relief from stay and compelled arbitration to liquidate the creditor's claim.
The Farmland Industries case reached the same result. A creditor filed a proof of claim against a Chapter 11 debtor for more than $28 million based upon alleged breach of pre-petition contracts. The debtor objected. Thereafter, the creditor moved for relief from stay to liquidate its claims through arbitration in compliance with contractual arbitration clauses. Engaging in the McMahon analysis, the Farmland Industries court recognized the weight of precedent:
Farmland Indus., 309 B.R. at 19 (citations omitted). And, the Farmland Industries court confirmed that in the context of the specific claims allowance dispute at issue, "the enforcement of the parties' arbitration agreement in bankruptcy is not overridden by a contrary Congressional command ... or from an inherent conflict between the parties' arbitration agreement and the underlying purposes of the Bankruptcy Code." Id. Thus, the relief from stay to liquidate the claim through arbitration was appropriate and ordered. Id. at 19-21.
For the contrary position, the Debtor relies heavily on Jalbert v. Zurich Am. Ins. Co. (In re Payton Constr. Corp.), 399 B.R. 352 (Bankr. D. Mass. 2009). In that case, the trustee of a liquidating trust under a confirmed Chapter 11 plan objected to an insurer's administrative expense claim and asserted a variety of counterclaims. Applying McMahon, the Jalbert court determined that there was "an inherent conflict between arbitration and the bankruptcy laws' underlying purposes ... and that Congress intended to preclude a waiver of judicial remedies for such matters." Id. at 364. Jalbert certainly presents a very thorough and articulate counterpoint to the majority approach. And, the Court candidly recognizes that additional contrary authority also exists. See In re Martinez, 2007 WL 1174186, at *7 (Bankr. S.D. Tex. April 19, 2007) (denying arbitration to liquidate claims and concluding that "arbitrating the Debtor's objection to claim would contravene the Bankruptcy Code's
The contrary authority is distinguishable. For example, in Mirant (which Martinez relied upon almost exclusively) the creditor had not commenced arbitration on its $1 billion claim prior to the bankruptcy case. Mirant, 316 B.R. at 237. Further, the court was concerned that numerous other large claims based upon agreements containing arbitration clauses likely would surface resulting in "multiple arbitration proceedings." Id. at 241. The Mirant court seemed unwilling to cede control given the size of the claim at issue (and other anticipated claims) as well as the impact in the bankruptcy. In the principal decision cited by the Debtors, Jalbert, the creditor also had not started arbitration proceedings pre-petition. Further, the underlying issues were not limited merely to the liquidation of claim by arbitration. Instead, counterclaims for turnover, fraudulent transfer, and avoidance under bankruptcy law were in play. Faced with a hodge-podge of claims — some of which depended exclusively on bankruptcy law and some not — the court opted to keep the claims together rather than splitting up the case (i.e., arbitrating the proof of claim objection while keeping the bankruptcy-oriented claims in the bankruptcy court). Additionally, the Jalbert court emphasized that arbitration would require proceedings "in a distant forum and under unfamiliar rules, at appreciable expense ... and with considerable delay." Jalbert, 399 B.R. at 364. None of those considerations are present in this case. Given the different factual context of this case as compared to the Jalbert, Mirant, and Martinez circumstances, the Court simply ends in a different place.
To summarize, the Court finds that the Debtor has not meet its burden to establish an inherent conflict between arbitration of the Law Firm's Claim and the Bankruptcy Code. Prior to bankruptcy, the Law Firm and the Debtor were engaged in a state-law fee dispute based upon the Agreement. The Agreement contains a broad Arbitration Clause. It provides a method for arbitrator selection, a location for hearing, confidentiality, general procedural rules, limitations on the scope of discovery, and a commitment to prompt resolution. The Agreement evidences an informal process designed to be fair and expeditious. There is no question but that the underlying fee dispute is arbitrable under the Agreement. Well before the bankruptcy started, the Law Firm started the Arbitration. The parties selected the Arbitrator. He presided over numerous hearings and is quite familiar with the parties and the dispute. The remaining fee issue is not particularly complex and does not involve multiple parties or claims. The Arbitration was almost ready for the final hearing. The evidence established that the Debtor repeatedly delayed the Arbitration. Then, the Debtor engaged in last-minute forum shopping to avoid completion of the Arbitration (which likely would have been finished months ago but for the Debtor's bankruptcy filing).
The Debtor has shown no inherent structural conflict between claims liquidation arbitration and the Bankruptcy Code. Instead, the Debtor focuses on time and expense (and the resulting impact on reorganization). While the Court accepts the Debtor's proffer that the Arbitration process has been expensive before the bankruptcy, there is no competent evidence to suggest that completion of the Arbitration will take longer or be more
Under the McMahon test, the lack of an inherent conflict between arbitration and the Bankruptcy Code in this case dictates that the Court must order arbitration under the FAA. Discretionary considerations only come into play if the Debtor establishes an inherent conflict (which it has not). If an inherent conflict is shown, the bankruptcy court still has discretion to decide whether to compel arbitration. Cashcall, 781 F.3d at 71. However, even if the Court could exercise its discretion in this case, discretionary considerations point strongly toward arbitration.
Although there is no binding precedent in this jurisdiction establishing a discretionary consideration framework for liquidation of claims by arbitration, the Court relies (at least in part) on two sources: (a) Curtis, 40 B.R. at 799-800, which contains a list of factors applicable to decisions concerning relief from stay to permit continuance of federal or state litigation
The Debtor and the Law Firm entered into the Agreement. The Agreement contains a broad Arbitration Clause. The Arbitration Clause covers disputes over attorneys' fees. The Debtor does not dispute the general arbitrability of the Law Firm's Claim. This factor favors arbitration.
The Law Firm served a "Demand for Arbitration" on July 16, 2015. However, due to delays in appointment of the Arbitrator, the Arbitrator declared that the Arbitration was "effectively commenced" as of May 18, 2016. Thus, depending on which date is used, the Arbitration started 9 or 19 months before the Debtor filed for bankruptcy protection on February 16, 2017. This factor favors arbitration.
The Arbitration has progressed substantially. The parties appointed the Arbitrator
The Arbitrator is an attorney based in Fort Collins, Colorado, which is the location for the final hearing. He may have some knowledge concerning typical legal rates in Northern Colorado. However, neither party has introduced any evidence showing that the Arbitrator has specialized knowledge concerning attorney fee disputes. This factor favors adjudication in the Court.
The dispute concerns the Law Firm's assertion of attorneys' fees. The Law Firm filed the Claim. Thereafter, the Debtor objected to the Claim. Thus, the dispute concerns "allowance or disallowance of claims" and is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2)(B). Although the dispute is a core proceeding, the underlying Claim is based entirely on Colorado contract law and the Agreement. The dispute arises independently from bankruptcy law. Accordingly, the matter is a very weak type of core claim that may be characterized as "procedurally core" but not as "substantively core." Since the issue is a very weak form of core matter, this factor is neutral.
The purpose of the Arbitration is to liquidate the Claim. The Debtor may owe the Law Firm the full amount of the Claim, or nothing, or something in between. Liquidating the amount of the Claim would fully resolve the underlying dispute. This factor favors arbitration.
The Arbitration would not interfere with the bankruptcy case. The subject of the Arbitration is very discrete: the amount of the Law Firm's Claim. If the matter is not resolved through the Arbitration, it would need to be resolved by the Court. The Claim could be decided by arbitration as quickly and efficiently as in this Court, perhaps more so given the Court's heavy docket. So, resolution by arbitration would facilitate the overall bankruptcy process and reorganization by liquidating an important claim. This factor favors arbitration.
The interests of judicial economy and efficiency would be best-served by Arbitration. As set forth above, the Arbitrator was selected long ago and the Arbitration is at an advanced stage. The Arbitrator knows the parties and the factual and legal issues. The final hearing originally was scheduled to be completed in February 2017. The Debtor delayed the proceedings. However, there is no reason to doubt that the final hearing cannot be scheduled in short order.
The parties agreed to arbitration in their contract. The Arbitration is virtually trial-ready. The Court is concerned that the Debtor has engaged in some last-minute forum shopping that raises equitable considerations. It is apparent that the Debtor filed for bankruptcy primarily to stop the Arbitration and change the decision-maker. That is not the right reason for bankruptcy. This factor favors arbitration.
Accordingly, based on the foregoing factors, the Court would exercise its discretion in favor of arbitration if arbitration were not mandated. The Court also bears in mind that "[b]ankruptcy courts should be reluctant to entertain questions which may equally well be resolved elsewhere." First State Bank & Tr. Co. of Guthrie, Okla. v. Sand Springs State Bank of Sand Springs, Okla., 528 F.2d 350, 354 (10th Cir. 1976).
Section 362(a)(1) establishes an automatic stay in bankruptcy cases and generally prohibits:
The automatic stay stopped the Arbitration. But, the Law Firm seeks relief from the automatic stay for cause under Section 362(d)(1) which states:
Relief from stay proceedings are summary in nature and determined on an expedited basis. "It is not a full determination of the merits." U.S. Bank, N.A. v. Brumfiel (In re Brumfiel), 514 B.R. 637, 645 (Bankr. D. Colo. 2014). For the reasons stated above, relief from stay for cause is warranted under Section 362(d)(1) to allow liquidation of the Claim through arbitration.
The Court, therefore,
ORDERS that the Motion is GRANTED. The Law Firm is authorized to continue the Arbitration for purposes of liquidating
(Yeater Aff. ¶ 36.) The Court gives little weight to such proffer as it is not factual. Instead, it is merely speculative. Having conducted many hearings and issued several prior written decisions, the Arbitrator is much more familiar with the underlying dispute than the Court. And, the Arbitration Clause requires an efficient procedure for resolution in a timely fashion. The Debtor's assertion that resolution of the Claim in the Court would take only one day and cost just $10,000 is unsupported. The parties designated five expert witnesses in the Arbitration. The parties together submitted affidavits from six witnesses as part of the Motion and Response: Justin Yeater; Barb Hoback; Luke Santangelo; Travis Whitsitt; Lynda Martinez; and Jane Warren. The documentary record tendered for the Motion is voluminous. So, it seems quite unlikely that the claims objection process in the Court would take just a day. Further, common sense suggests that the same testimony and the same witnesses would be presented if the Claim were liquidated in the Arbitration or by the Court. In the end, there is no sound basis for the Court to conclude that completing the Arbitration would be more expensive and time-consuming than judicial resolution by the Court. In fact, since the Court would have to start from scratch, it stands to reason that the trial-ready Arbitration likely would be a less expensive and more expeditious means of liquidating the claim.
