MEMORANDUM OPINION AND ORDER

HONORABLE RICHARD D. TAYLOR, UNITED STATES BANKRUPTCY JUDGE.

The debtors, Freddy and Amber May, filed their Class Action Complaint ("Complaint") on May 4, 2018. The defendants, Midland Funding, LLC and Midland Credit Management, Inc. ("Midland"), filed Defendants' Motion to Compel Arbitration and to Strike Class Allegations and Memorandum in Support ("Motion") on June 25, 2018, which drew Plaintiffs' Memorandum in Opposition to Defendants' Motion to Compel Arbitration and Strike Class Allegations ("Response") on July 25, 2018, each supplemented by sur-replies. Reserving all other matters, the court heard the Motion and Response solely as to the request for arbitration on August 30, 2018, and took the matter under advisement. For the reasons stated herein, Midland's request for arbitration is denied.

I. Jurisdiction

This court has jurisdiction over this matter under 28 U.S.C. §§ 1334 and 157. This is a related and core proceeding under 28 U.S.C. § 157(b)(2)(A), (B), (C), (O), and (c)(1). The following opinion and order constitute findings of fact and conclusions of law in accordance with Federal Rule of Bankruptcy Procedure 7052.1

II. Background and Analysis

Freddy May2 opened a Lowe's credit card account financed through Synchrony Bank ("Synchrony") on May 5, 2013. According to the debtors, Synchrony received notice of their bankruptcy filing and then "transferred data about those debts to Midland under a written agreement." (Complaint, May 4, 2018, ECF No. 1, at ¶ 15.) Thereafter, Midland filed a proof of claim for an amount in excess of the scheduled debt. Despite representations that the proof of claim amount did not include interest or other charges, the debtors assert that Midland "knows that interest and fees are in the claim amount, [but] Midland direct[s] its employees to file Proofs of Claim that assert no interest or fees are in the claim amount." (Compl., at ¶ 25.) The debtors contend that this practice violates three provisions of Federal Rule of Bankruptcy Procedure 3001: (1) section (a) for "failing to file a Proof of Claim that conform[s] substantially to the Official Form because it failed to accurately disclose that interest, fees, expenses, or charges were included in the claim amount"; (2) section (c)(1) based on the alleged failure of Midland to adequately provide the written document underlying its claim;3 and (3) section (c)(2) for failure "to file with its Proof of Claim an itemized statement of the interest, fees, expenses or charges that were incurred."4 (Compl., at ¶¶ 29-30, 55-56.) Further, debtors assert that the aggregate of these alleged transgressions violate the Fair Debt Collection Practices Act, 15 U.S.C. § 1692.

The debtors seek damages primarily in the context of statutory damages and fees attendant to a class action. (Compl., at 11.) The bankruptcy specific prayer is in the nature of injunctive relief preventing inaccurate proofs of claim being filed in the future, requiring an amended proof of claim with supporting documentation in the instant case, and disallowing the claim if not properly amended. (Compl., at 12.)

Midland asks the court to compel arbitration of all issues raised in the Complaint. During argument, the debtors conceded that a valid arbitration clause exists between the debtors and Synchrony and that the dispute in question would, absent any bankruptcy implications, fall within its ambit as a collection related controversy. The debtors also conceded during argument that they knew of no statutory or legal authority that would restrain alienability of an arbitration clause.5 While conceding those points, the debtors interpose two hurdles to arbitration: (1) that Midland did not succeed to Synchrony's right to compel arbitration, and (2) if Midland does have the right to request arbitration, this court should decline to do so. Each argument is addressed in turn.

1. Transfer of Rights

The debtors question whether Midland purchased and enjoys Synchrony's right to enforce arbitration. Specifically, the debtors assert that the transfer documentation

(Response, July 25, 2018, ECF No. 14, at 7.) The debtors advance this argument in two subparts: first, whether Midland adequately provided a full and complete copy of the actual contract between Synchrony and Midland, and, second, whether the full terms of that agreement encompass the transfer or assignment of the right to compel arbitration.

Midland adequately addressed the first issue by tendering to the court an unredacted purchase agreement (defined and discussed in greater length below). The court reviewed the unredacted version in camera and submits that the redactions do not incidentally or materially affect the issue of what rights were transferred under the agreement and do not inform the basis of the findings and conclusions stated herein.

Remaining is the question of whether Midland succeeded to Synchrony's contractual rights regarding arbitration. Jodi Anderson, through her affidavit and on behalf of Synchrony, indicates that on May 5, 2013, separate debtor, Freddy May, opened a Lowe's credit card account. On or about May 7, 2013, Synchrony sent both a Lowe's plastic card and a credit card agreement that contains the provisions concerning arbitration. Thereafter, Mr. May made charges on his account. The last charge was posted on December 4, 2016, and the last payment was received on November 17, 2016. Synchrony charged off the account due to nonpayment on February 26, 2017. Thereafter, "[a]ccording to Synchrony's records, Synchrony sold all rights, title and interest in the Account to [Midland] on or about March 22, 2017." (Affidavit of Jodi Anderson, June 25, 2018, ECF No. 8-1, at ¶ 10.) The credit card agreement information supplied to Mr. May included a clause under the heading "Assignment" that provided that Synchrony "may sell, assign or transfer any or all of our rights or duties under this Agreement or your account, including our rights to payment. We do not have to give you prior notice of such action." (Aff. of Jodi Anderson, at 5.) Again, the debtors concede that a valid arbitration clause exists and, absent any bankruptcy implications, collection disputes would be within its ambit. Further, the debtors concede that they know of no statutory or other legal authority that would suggest that arbitration rights cannot be transferred to another party. The debtors merely argue that contractually Synchrony did not transfer or assign its arbitration rights to Midland; rather, the debtors argue Synchrony transferred only its right to receive payment on the accounts receivable.

An examination of the contractual terms that contemplated and subsequently effectuated the transfer of the account from Synchrony to Midland compels a different conclusion. Specifically, Synchrony as Seller and, inter alia, Midland as Buyer, executed a Forward Flow Accounts Purchase Agreement ("Purchase Agreement") dated August 30, 2016.

The operative transfer provision for the "Purchase and Sale of Accounts" provides: "[o]n each Transfer Date, Seller shall sell and Buyer shall buy all right (including the right to legally enforce, file suit, collect, settle or take any similar action with respect to such Account), title and interest in and to the Accounts identified in a Notification File[.]" (Purchase Agreement, Aug. 22, 2018, ECF No. 26-1, at § 2.1.) On sale, title to the account passes to Midland as the Purchase Agreement states "upon the purchase by Buyer of the Accounts hereunder from Seller, Buyer shall acquire unencumbered title in and to the Accounts, on each Transfer Date, except for such encumbrances, liens and claims caused or created by Buyer." (Purchase Agreement, at § 4.1(d).) See also, the Bill of Sale template attached to the Purchase Agreement as Exhibit A that provides:

(Bill of Sale, Aug. 22, 2018, ECF No. 26-1, at 40.)

Contrary to the debtors' assertion that Midland purchased only the receivable, the "Account" definition is conjunctive, defined as "any charged-off credit card account and associated receivable owned by Seller that is being sold to Buyer pursuant to the terms of this Agreement with respect to which there is an Account Balance." (Purchase Agreement, at § 1.1) (emphasis added). Clearly stated, the Purchase Agreement contemplates the transfer of both the account itself and the associated receivable, not just the receivable. Commensurately and consistent with the more expansive definition of an "Account," an "Account Balance" is separately defined to mean "any credit account that is being sold to Buyer pursuant to the terms of this Agreement, as such balance exists as of the Cut-Off Date, to the extent such balance is set forth on the applicable Notification File." (Purchase Agreement, at § 1.1) (emphasis added).

Continuing, the Purchase Agreement contemplates a Transfer Date on which the seller sends the applicable Notification File to Midland. The Purchase Agreement defines "Notification File" as

(Purchase Agreement, at § 2.1.) The Required Information and the Additional Information are set forth on Exhibits H-1 and H-2 to the Purchase Agreement and include information one would typically need for collection purposes. But, in the event that Midland requires additional information, Midland may "submit to Seller reasonable requests for Account Documents, which requests shall follow the procedures set forth in Exhibit B hereto and, to the extent such information is in the possession of Seller, Seller shall provide it subject to and in accordance with the provisions below in this Section 5.3." (Purchase Agreement, at § 5.3(a)(i).) The Purchase Agreement defines an "Account Document" as

(Purchase Agreement, at § 1.1) (emphasis added).

As testified to by Jodi Anderson, the arbitration provision is contained in the credit card agreement originally sent to Mr. May. Additionally, Synchrony must provide, as a matter of course, certain other documents. "Within thirty (30) days of the applicable Transfer Date, Seller will provide the Required Account Documents for each Account to Buyer." (Purchase Agreement, at § 5.3(a)(iv).) The term "Required Account Documents" is expansive, meaning

(Purchase Agreement, at § 1.1) (emphasis added). In his affidavit on behalf of Midland, Sean Mulcahy indicates that the account, when transferred to Midland on March 22, 2017, included from Synchrony a copy of the credit card agreement that governed the account. (Affidavit of Sean Mulcahy, June 25, 2018, ECF No. 8-2, at ¶¶ 7-8.) This credit card agreement included the terms concerning arbitration.

Further, account servicing is clearly delineated between the parties pre- and post-transfer, in the Purchase Agreement.

(Purchase Agreement, at § 5.1.) Further, the Purchase Agreement contemplates that Midland will be servicing the account post-transfer, providing "[a]ll actions or omissions by Buyer with respect to the Accounts, including (but not limited to) all servicing, billing, processing, collections, and recovery operations and any communications or notices to Account Debtors, shall conform in all respects to any and all Applicable Laws." (Purchase Agreement, at § 5.2.) Commensurately, Synchrony is relieved from its servicing responsibilities post-transfer. See, Purchase Agreement, at § 5.7(a), denoting "(a) [e]xcept as stated herein, Seller shall have no obligation to perform any servicing activities with respect to Accounts from and after the applicable Transfer Date."

The Purchase Agreement is governed by New York law. (Purchase Agreement, at § 12.6.) Under New York law, "[c]onstruction of an unambiguous contract is a matter of law," and should be enforced according to its terms. Beal Sav. Bank v. Sommer, 8 N.Y.3d 318, 834 N.Y.S.2d 44, 865 N.E.2d 1210, 1213 (2007). Quite simply, the Purchase Agreement, by its clear and express terms, transfers the account, not just the attendant accounts receivable.

2. Arbitration

This class action purports to address alleged pervasive violations of Federal Rule of Bankruptcy Procedure 3001 through the filing of proofs of claims that contain "false statements concerning whether interest or fees [are] embedded in their claim amounts." (Compl., at ¶ 2.) Specifically, Midland filed a proof of claim for an amount in excess of the scheduled debt. According to the debtors, Midland "knows that interest and fees are in the claim amount, [but] Midland direct[s] its employees to file Proofs of Claim that assert no interest or fees are in the claim amount." (Compl., at ¶ 25.) The debtors contend that this practice violates Federal Rule of Bankruptcy Procedure 3001: (1) section (a) for "failing to file a Proof of Claim that conform[s] substantially to the Official Form because it failed to accurately disclose that interest, fees, expenses, or charges were included in the claim amount"; (2) section (c)(1) based on the alleged failure of Midland to adequately provide the written document underlying its claim; and (3) section (c)(2) for failure "to file with its Proof of Claim an itemized statement of the interest, fees, expenses or charges that were incurred." (Compl., at ¶¶ 29-30, 55-56.) Further, debtors assert that the aggregate of these alleged transgressions violate the Fair Debt Collection Practices Act.

The debtors seek damages primarily in the context of statutory damages and fees attendant to a class action. (Compl., at 11.) The bankruptcy specific prayer is in the nature of injunctive relief preventing inaccurate proofs of claim being filed in the future, requiring an amended proof of claim with supporting documentation in the instant case, and disallowing the claim if not properly amended. (Compl., at 12.) In considering whether arbitration is appropriate, this opinion does not address the merits of any of the asserted causes of action or relief requested.

The debtors argue that "a bankruptcy court should not compel arbitration in core proceedings where arbitration would create an inherent conflict with the purposes of the Bankruptcy Code." (Resp., at 1.) Thus, the sole remaining issue is whether on that basis this court has the discretion to deny Midland's request for arbitration.

Despite the somewhat adhesive nature of form contracts generally, they nevertheless represent voluntary contractual relationships between parties that, presumably, should be enforced according to their terms, including arbitration clauses. In Gavilon Grain, the district court recognized the following:

Gavilon Grain, LLC v. Rice, No. 2:17-cv-40-DPM, 2017 WL 3508721, at *2 (E.D. Ark. Aug. 16, 2017). The Gavilon Grain court went on to recognize "an unmistakably strong line of cases in the last three decades [where] the Supreme Court has implemented this pro-arbitration policy, turning back almost every effort to temper it." E.g., Am. Express Co. v. Italian Colors Rest., 570 U.S. 228, 133 S.Ct. 2304, 186 L.Ed.2d 417 (2013); CompuCredit Corp. v. Greenwood, 565 U.S. 95, 132 S.Ct. 665, 181 L.Ed.2d 586 (2012); AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011); Green Tree Fin. Corp.-Alabama v. Randolph, 531 U.S. 79, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000); Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991).

Equally, however, the United States Supreme Court has recognized an exception.

Blok v. The College Network, Inc. and Southeast Fin. Fed. Credit Union (In re Christine A. Blok), Ch. 13 Case No. 5:11-bk-70960, Adv. No. 5:11-ap-07104, slip op. at 5 (Bankr. W.D. Ark. Jan. 11, 2012).

The McMahon analysis requires that Congress's intention to override the Federal Arbitration Act in a particular instance be discerned from either the text of Rule 3001, the commensurate legislative history,6 or by identifying an inherent conflict between arbitration and the Bankruptcy Code in this instance.

During argument, the parties conceded that neither the text nor the legislative history contains language that reflects a specific intent to override a valid arbitration agreement in these circumstances. Accordingly, this concession reduces the court's analysis to whether the underlying purposes of the Bankruptcy Code inherently conflict with arbitration in the context of a dispute base on Rule 3001.7

Initially pertinent, but not dispositive, is whether this is a core proceeding. As stated in Blok, "[o]ther circuits have noted that even in the case of core proceedings, bankruptcy courts do not have discretion to refuse to compel arbitration without a finding that there is an inherent conflict between the bankruptcy code and the Arbitration Act or that arbitration will jeopardize the objectives of the bankruptcy code." Blok, Adv. No. 5:11-ap-07104, slip op. at 5 (citing MBNA Am. Bank v. Hill, 436 F.3d 104, 108 (2d Cir. 2006); Ins. Co. of N. Am. v. NGC Settlement Trust & Asbestos Claims Mgmt. Corp. (In re Nat'l Gypsum Co.), 118 F.3d 1056, 1069 (5th Cir. 1997)). See also Continental Ins. Co. v. Thorpe Insulation Co. (In re Thorpe Insulation Co.), 671 F.3d 1011, 1020-21 (9th Cir. 2012) (internal citations omitted).

The claims litigation count is without a doubt core as arising in or under the Bankruptcy Code as contemplated by 11 U.S.C. §§ 1334 and 157 and 28 U.S.C. § 157(b)(2)(A), (B), (C), and (O). Conversely, the Fair Debt Collection Practices Act cause of action is facially non-core and, at best, is only related to this proceeding as having a conceivable effect on the debtors' estate.

Blok, Adv. No. 5:11-ap-07104, slip op. at 4 (citing Dogpatch Prop., Inc. v. Dogpatch U.S.A., Inc. et al. (In re Dogpatch U.S.A., Inc.), 810 F.2d 782, 786 (8th Cir. 1987) (quoting Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3rd Cir. 1984)). Given that at least one cause of action is unquestionably core, a McMahon analysis is appropriate. Whether that analysis is independent of or subsumes the second count under the Fair Debt Collection Practices Act is discussed below.

Claims and the proof of claim process have a purpose in bankruptcy without equivalent in nonbankruptcy proceedings. Rule 3001 and the related official proof of claim form detail and require a great deal of specific information concerning claims. They include a copy of the underlying agreement, evidence of perfection, a "itemized statement of the interest, fees, expenses, or charges," necessary to cure defaults on debts secured by property, and, with respect to open-end or revolving consumer credit, a list of very specific items. FED. R. BANKR. P. 3001(c)(2)(A) (2018). The failure to provide the information required in Rule 3001 could exclude this information as evidence and possibly afford "other appropriate relief," including "reasonable expenses and attorney's fees." FED. R. BANKR. P. 3001(c)(2)(D)(ii) (2018). Filing of a proof of claim "shall constitute prima facie evidence of the validity and amount of the claim." FED. R. BANKR. P. 3001(f) (2018). The debtor or any other interested party must file an objection and bears the burden of rebutting the prima facie presumption with the ultimate burden thereafter shifting to the claimant. FED. R. BANKR. P. 3001(f), 3007 (2018).

At first glance, these facets of the claims process would appear to be the normal incidences of evidentiary proof that one might expect in either an arbitration or judicial proceeding to collect a debt. But neither event, arbitration nor litigation, typically occur without an accompanying dispute as to either liability or amount. The filing of a petition in bankruptcy creates an entirely different scenario, and the proofs of claim serve a number of purposes, many without an existence outside of bankruptcy. Ideally, the honest but unfortunate debtor would, through his schedules, disclose all of his assets, all of his debts, his complete financial circumstances prior to and at bankruptcy, his exemptions, and, by virtue of the chapter chosen, his desire for a Chapter 7 discharge or reorganization. The aggregate proofs of claim should, again ideally, seamlessly conform to the debtor's schedules and disclosures. Generally, no initiating contest exists as to liability and, frequently, none as to amount.

The disclosures and commensurate proof of claim process are unique to bankruptcy. Proofs of claim serve a number of purposes that only arise in the context of a bankruptcy proceeding — reconciling the accuracy of schedules; confirming and amplifying prepetition transactions disclosed in the statement of financial affairs; determining priority — a significant aspect of all bankruptcy proceedings; confirming secured versus unsecured debt and the commensurate values that must be addressed; and establishing the identities and amounts to be distributed either under a plan or through residual distributions to unsecured creditors in a Chapter 7 liquidation. Short of disclosing and administering all assets, nothing more complementary, integral, or significant in a bankruptcy proceeding exists than the full disclosure, prioritization, and treatment of debt. The entire proof of claim process is designed to serve bankruptcy specific goals; thus, the question is whether the service of these policies sufficiently dictate that bankruptcy courts and not arbitrators resolve issues integral to and arising solely from that process.

A similar circumstance presented itself before the United States Bankruptcy Court for the Northern District of Alabama. Ellswick v. Quantum3 Group, LLC (In re Ellswick), No. 15-40048-JJR, 2016 WL 3582586 (Bankr. N.D. Ala. June 24, 2016). In Ellswick, the debtor objected to a proof of claim on the basis of state law concerning advances on postdated checks and the Federal Truth in Lending Act. The debtor initiated the request for arbitration but at or about the same time filed an adversary proceeding alleging that the creditor's proof of claim violated Rule 3001 on the basis of a false representation that equally gave rise to a claim under the Fair Debt Collection Practices Act. Later, the debtor asked to compel arbitration in the adversary proceeding. The court declined to do so on the basis of waiver given the passage of time and participation in the litigation process prior to requesting arbitration. Alternatively, the court denied arbitration under a McMahon "inherent conflict" analysis, stating:

Ellswick, 2016 WL 3582586, at *3. The court additionally noted:

Ellswick, 2016 WL 3582586, at *4-5.

In this instant case, the entirety of the debtors' claim arose postpetition out of a purely bankruptcy centric procedure, proofs of claim, and the cause of actions would have had no existence outside of bankruptcy. This analysis also applies to the FDCPA claim as its genesis is solely the alleged fraudulent conduct in the context of asserted fraudulent representations on the proof of claim.

While those factors alone may be dispositive, courts have suggested other considerations as guidance in whether to exercise discretion in these instances.

Slipped Disc Inc., dba Disc Go Round v. CD Warehouse, Inc. (In re Slipped Disc Inc.), 245 B.R. 342, 345-46 (Bankr. N.D. Iowa, 2000) (citation omitted). Nothing suggests that this matter can be handled by an arbitrator any faster than this bankruptcy court. And, presumably, a bankruptcy court inherently has a better understanding of the necessary integrity and fundamental significance of the proof of claim process. The effect on other creditors and the property of the estate is a function of a quantum of proof; those broader implications are more properly decided by bankruptcy court than an arbitrator.

In Gavilon Grain, the district court reversed the bankruptcy court's decision to deny arbitration because the underlying issue of whether any debt was owed was non-core.

Gavilon Grain, 2017 WL 3508721, at *6.

Here, however, no dispute existed prebankruptcy arising out of the contractual relationship between the parties. Rather, the issues presented arose specifically as a result of postpetition actions by the creditor in the context of employing purely bankruptcy specific processes to participate in this bankruptcy case and about which the debtors believe the creditor engaged in fraudulent conduct.

III. Conclusion

Certainly, circumstances exist where a McMahon analysis would compel arbitration that both complements and benefits the bankruptcy process. Conversely, unconstrained enforcement of arbitration clauses would encourage and permit creditors to opt for a favorably perceived and parallel proceeding that would fragment, moot, and deprive all parties of the benefits of a single integrated forum designed specifically to address the accommodation and reorganization of debt. Arbitration is simply not appropriate in this circumstance. The central issue, claims litigation, is specifically core. The "related to" count under the Fair Debt Collection Practices Act arises solely as a result of the alleged improprieties in the course of completing and filing a proof of claim. No part of either count would or could exist independent of or outside this bankruptcy case. Whether there is a pervasive fraudulent policy and practice as debtors suggest is a matter of scrutiny and offense to a bankruptcy court, not an arbitrator.

The request for arbitration contained in the Motion is denied. The request for dismissal will be set by subsequent notice. Thereafter, if appropriate, the court will consider the class action issues raised in the Complaint.

IT IS SO ORDERED.